SALT LAKE CITY, May 3, 2018 /PRNewswire/ -- Varex Imaging
Corporation (Nasdaq: VREX) today announced its financial results
for the second quarter of fiscal year 2018.
Quarterly Highlights
- Revenues increased 30% to $201
million
- Gross margin was 35% | Adjusted gross margin* was 36%
- Operating earnings margin was 9% | Adjusted operating earnings
margin* was 12%
- Net earnings were $0.32 per
diluted share | Adjusted net earnings* were $0.45 per diluted share
"We had a strong quarter led by higher sales of our products for
the CT, oncology and industrial markets. Our revenues increased
significantly from the same quarter a year ago and, for comparative
purposes, were up 5% year-over-year if revenues from the acquired
imaging business had been included in the prior year quarter.
Revenues from dental 3-D imaging digital detectors returned to
historical levels in the second quarter," said Sunny Sanyal, Chief Executive Officer of Varex
Imaging Corporation.
Second Quarter Fiscal Year 2018 Results
Revenues for the second quarter of fiscal year 2018 increased
30% to $201 million compared to
revenues of $155 million in the prior
year quarter. Medical segment revenues increased 26% to
$159 million in the second quarter of
fiscal year 2018 from $126 million in
the prior year quarter. Industrial segment revenues increased 47%
to $43 million in the second quarter
of fiscal year 2018 from $29 million
in the prior year quarter.
Gross margin for the second quarter of fiscal year 2018 was
$70 million or 35% of revenues
compared to a gross margin of $58 million or 37% of revenues
in the prior year quarter. Adjusted gross margin* for the second
quarter of fiscal year 2018 was $73 million or 36% of revenues
compared to $58 million or 38% of
revenues in the prior year quarter. The decline in gross margin and
adjusted gross margin* rates was primarily due to higher
manufacturing costs related to industrial products as well as a
shift in product mix in the medical segment.
R&D investment in the second quarter of fiscal year 2018 was
11% of revenues compared to 9% of revenues in the prior year
quarter with the increase primarily related to customer projects
for X-ray sources. SG&A expenses were 15% of revenues compared
to 13% of revenues in the prior year quarter. The increase was due
to a combination of higher stock-based compensation, first-year
Sarbanes-Oxley preparation costs, insurance premiums, and HR and IT
initiatives.
For the second quarter of fiscal year 2018, operating earnings
were $17 million and operating margin
was 9% compared to operating earnings of $24
million and operating margin of 15% in the prior year
quarter. Adjusted operating earnings* were $24 million and adjusted operating margin* was
12% in the second quarter of fiscal year 2018 compared to adjusted
operating earnings* of $26 million
and adjusted operating margin* of 17% in the prior year quarter.
The decline in operating margin and adjusted operating margin*
reflected the lower gross margin rate and higher R&D investment
that included the acceleration of planned innovation projects using
a portion of the benefits of a lower corporate tax rate.
Interest expense for the second quarter of fiscal year 2018 was
$6 million compared to $1 million in the prior year quarter. Other
income in the second quarter of fiscal year 2018 was $4 million primarily due to income from
investments in privately-held companies. The company's effective
tax rate was 21.5% for the second quarter of fiscal year 2018
compared to an effective tax rate of 33% in the prior year
quarter.
Net earnings for the second quarter of fiscal year 2018 were
$12 million, or $0.32 per diluted share, compared to net earnings
of $15 million, or $0.40 per diluted share, in the prior year
quarter. Adjusted net earnings* for the second quarter of fiscal
year 2018 were $17 million, or
$0.45 per diluted share, compared to
$16 million, or $0.43 per diluted share, in the prior year
quarter.
Year-To-Date Fiscal Year 2018
Revenues for the first six months of fiscal year 2018 increased
21% to $377 million compared to
revenues of $312 million in same
period of the prior year. Medical segment revenues increased 16% to
$298 million and industrial segment
revenues increased 45% to $80
million.
Gross margin for the first six months of fiscal year 2018 was
$132 million or 35% of revenues
compared to a gross margin of $116 million or 37% of revenues
in the same period of the prior year. Adjusted gross margin* for
the first six months of fiscal year 2018 was $136 million or
36% of revenues compared to $118
million or 38% of revenues in the same period of the prior
year.
Balance Sheet
At the end of the second quarter of fiscal year 2018, cash and
cash equivalents were $55 million.
During the second quarter of fiscal year 2018, the company reduced
its total debt outstanding by $37
million to end the quarter at $417
million. Cash flow from operations was $46 million for the year to date period of fiscal
year 2018.
Varex Outlook
For fiscal year 2018, including contribution from a full year of
the acquired imaging business, the company reiterates its
expectations for revenues to grow by 13 to 14% from the prior
fiscal year.
The company continues to expect adjusted net earnings* to be in
the range of $1.82 to $1.92 per diluted share for fiscal year 2018.
Guidance for the company's net earnings per diluted share is
provided on an adjusted basis only. This adjusted financial measure
is forward-looking and the company is unable to provide a
meaningful or accurate GAAP forecast of net earnings per diluted
share without unreasonable effort due to the uncertainty of amounts
and timing of unusual items, such as integration or restructuring
costs.
Adjusted Non-GAAP Financial Measures
*Please refer to "Discussion of Adjusted Non-GAAP Financial
Measures" below for a description of items excluded from the
comparable GAAP measures.
Conference Call Information
Varex is scheduled to conduct its second quarter fiscal year
2018 conference call today at 3:00 p.m.
Mountain Time. This call will be webcast live and can be
accessed at the company's website at investors.vareximaging.com.
Investors can also access this teleconference by dialing
1-877-524-8416 from anywhere in the U.S. or by dialing
1-412-902-1028 from non-U.S. locations. A replay of this quarterly
teleconference will be available from May
3rd through May 17th and can be accessed at the company's
website or by calling 1-877-660-6853 from anywhere in the U.S. or
1-201-612-7415 from non-U.S. locations - Passcode: 13678618.
About Varex
Varex Imaging Corporation is a leading innovator, designer and
manufacturer of X-ray imaging components, which include X-ray
tubes, digital detectors and other image processing solutions that
are key components of X-ray imaging systems. With a 65+ year
history of successful innovation, Varex's products are used in
medical imaging as well as in industrial and security imaging
applications. Global OEM manufacturers incorporate the company's
X-ray sources, digital detectors, connecting devices and imaging
software in their systems to detect, diagnose and protect.
Headquartered in Salt Lake City,
Utah, Varex employs approximately 2,000 people located at
manufacturing and service center sites in North America, Europe, and Asia. For more information
about Varex, visit vareximaging.com.
Forward Looking Statements
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
12E of the Securities Exchange Act of 1934. Statements concerning
industry or market outlook; the impact of the acquisition of the
PerkinElmer imaging business on the company's financial results;
growth drivers; customer demand and acceptance of products or
technology; R&D costs; the company's future orders, revenues,
product volumes, synergies, or earnings guidance or other expected
future financial results or performance; and any statements using
the terms "expect," "intend," "outlook," "future," "anticipate,"
"will," "could," "believe," "estimate," "guidance," or similar
statements are forward-looking statements that involve risks and
uncertainties that could cause the company's actual results to
differ materially from those anticipated. While forward-looking
statements are based on assumptions and analyses made by us that we
believe to be reasonable under the circumstances, whether actual
results and developments will meet our expectations and predictions
depend on a number of risks and uncertainties which could cause our
actual results, performance, and financial condition to differ
materially from our expectations. Such risks and uncertainties
include the ability to effectively integrate the products of
PerkinElmer's imaging business into the company's product offerings
and sales and marketing operations, recognize the intended benefits
and synergies of the acquisition, and retain the services of key
acquired personnel; global economic conditions; demand for and
delays in delivery of products of the company or its customers; the
company's ability to develop, commercialize and deploy new
products; the impact of reduced or limited demand by purchasers of
certain X-ray products; the impact of competitive products and
pricing; and the other risks listed from time to time in the
company's filings with the U.S. Securities and Exchange Commission,
which by this reference are incorporated herein. Any
forward-looking statements made by us in this news release speaks
only as of the date on which it is made. Factors or events that
could cause our actual results to differ may emerge from time to
time, and it is not possible for us to predict all of them. The
company assumes no obligation to update or revise the
forward-looking statements in this release because of new
information, future events, or otherwise.
For Information Contact:
Howard Goldman
Director of Investor & Public Relations
Varex Imaging Corporation
801.978.5274 | howard.goldman@vareximaging.com
VAREX IMAGING
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
(In millions,
except per share amounts)
|
March 30,
2018
|
|
March 31,
2017
|
|
March 30,
2018
|
|
March 31,
2017
|
Revenues:
|
|
|
|
|
|
|
|
Medical
|
$
|
158.5
|
|
|
$
|
125.7
|
|
|
$
|
297.7
|
|
|
$
|
257.4
|
|
Industrial
|
42.7
|
|
|
29.1
|
|
|
79.7
|
|
|
54.8
|
|
Total
revenues
|
201.2
|
|
|
154.8
|
|
|
377.4
|
|
|
312.2
|
|
Gross
margin:
|
|
|
|
|
|
|
|
Medical
|
53.5
|
|
|
44.6
|
|
|
99.9
|
|
|
91.5
|
|
Industrial
|
16.6
|
|
|
13.0
|
|
|
31.7
|
|
|
24.9
|
|
Total gross
margin
|
70.1
|
|
|
57.6
|
|
|
131.6
|
|
|
116.4
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Research and
development
|
22.0
|
|
|
14.4
|
|
|
41.8
|
|
|
27.7
|
|
Selling, general and
administrative
|
30.9
|
|
|
19.7
|
|
|
59.1
|
|
|
46.8
|
|
Total operating
expenses
|
52.9
|
|
|
34.1
|
|
|
100.9
|
|
|
74.5
|
|
Operating
earnings
|
17.2
|
|
|
23.5
|
|
|
30.7
|
|
|
41.9
|
|
Interest
income
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
Interest
expense
|
(5.6)
|
|
|
(1.0)
|
|
|
(11.1)
|
|
|
(1.6)
|
|
Other income
(expense), net
|
4.1
|
|
|
(0.1)
|
|
|
3.1
|
|
|
0.3
|
|
Interest and other
income (expense), net
|
(1.5)
|
|
|
(1.1)
|
|
|
(7.9)
|
|
|
(1.2)
|
|
Earnings before
taxes
|
15.7
|
|
|
22.4
|
|
|
22.8
|
|
|
40.7
|
|
Taxes (benefit) on
earnings
|
3.4
|
|
|
7.4
|
|
|
(1.1)
|
|
|
14.5
|
|
Net
earnings
|
12.3
|
|
|
15.0
|
|
|
23.9
|
|
|
26.2
|
|
Less: Net earnings
attributable to noncontrolling interests
|
0.1
|
|
|
—
|
|
|
0.3
|
|
|
0.1
|
|
Net earnings
attributable to Varex
|
$
|
12.2
|
|
|
$
|
15.0
|
|
|
$
|
23.6
|
|
|
$
|
26.1
|
|
Net earnings per
common share attributable to Varex
|
|
|
|
|
|
|
|
Basic
|
$
|
0.33
|
|
|
$
|
0.40
|
|
|
$
|
0.62
|
|
|
$
|
0.70
|
|
Diluted
|
$
|
0.32
|
|
|
$
|
0.40
|
|
|
$
|
0.62
|
|
|
$
|
0.69
|
|
Weighted average
common shares outstanding
|
|
|
|
|
|
|
|
Basic
|
37.8
|
|
|
37.5
|
|
|
37.8
|
|
|
37.5
|
|
Diluted
|
38.4
|
|
|
37.8
|
|
|
38.3
|
|
|
37.8
|
|
VAREX IMAGING
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Unaudited)
|
|
(In millions,
except share amounts)
|
March 30,
2018
|
|
September 29,
2017
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
55.4
|
|
|
$
|
83.3
|
|
Accounts receivable,
net
|
129.2
|
|
|
163.6
|
|
Inventories,
net
|
245.3
|
|
|
234.5
|
|
Prepaid expenses and
other current assets
|
15.8
|
|
|
13.9
|
|
Total current
assets
|
445.7
|
|
|
495.3
|
|
Property, plant and
equipment, net
|
146.3
|
|
|
148.3
|
|
Goodwill
|
242.2
|
|
|
241.9
|
|
Intangibles
assets
|
82.9
|
|
|
91.3
|
|
Investments in
privately-held companies
|
51.7
|
|
|
52.3
|
|
Other
assets
|
17.1
|
|
|
11.0
|
|
Total
assets
|
$
|
985.9
|
|
|
$
|
1,040.1
|
|
Liabilities,
Redeemable Noncontrolling Interests and Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
53.5
|
|
|
$
|
58.9
|
|
Accrued
liabilities
|
53.5
|
|
|
62.4
|
|
Current maturities of
long-term debt
|
20.0
|
|
|
20.0
|
|
Deferred
revenues
|
10.0
|
|
|
10.5
|
|
Total current
liabilities
|
137.0
|
|
|
151.8
|
|
Long-term
debt
|
397.1
|
|
|
463.9
|
|
Deferred tax
liabilities
|
19.6
|
|
|
29.5
|
|
Other long-term
liabilities
|
7.9
|
|
|
4.7
|
|
Total
liabilities
|
561.6
|
|
|
649.9
|
|
Commitments and
contingencies
|
|
|
|
Redeemable
noncontrolling interests
|
11.7
|
|
|
11.2
|
|
Equity:
|
|
|
|
Preferred stock, $.01
par value: 20,000,000 shares authorized, none issued
|
—
|
|
|
—
|
|
Common stock, $.01
par value:
|
|
|
|
Authorized shares -
150,000,000
|
|
|
|
Issued shares -
37,878,841 and 37,633,747
|
|
|
|
Outstanding shares -
37,878,841 and 37,633,747
|
0.4
|
|
|
0.4
|
|
Additional paid-in
capital
|
348.8
|
|
|
342.7
|
|
Accumulated other
comprehensive income
|
4.7
|
|
|
0.8
|
|
Retained
earnings
|
58.7
|
|
|
35.1
|
|
Total stockholders'
equity
|
412.6
|
|
|
379.0
|
|
Total liabilities,
redeemable noncontrolling interests and Varex stockholders'
equity
|
$
|
985.9
|
|
|
$
|
1,040.1
|
|
VAREX IMAGING
CORPORATION
|
RECONCILIATION
BETWEEN GAAP AND ADJUSTED NON-GAAP FINANCIAL
MEASURES
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
(In millions,
except per share amounts)
|
March 30,
2018
|
|
March 31,
2017
|
|
March 30,
2018
|
|
March 31,
2017
|
GROSS MARGIN
RECONCILIATION
|
|
|
|
|
|
|
|
Revenues
|
$
|
201.2
|
|
|
$
|
154.8
|
|
|
$
|
377.4
|
|
|
$
|
312.2
|
|
Gross
margin
|
$
|
70.1
|
|
|
$
|
57.6
|
|
|
$
|
131.6
|
|
|
$
|
116.4
|
|
Amortization of
intangible assets
|
2.4
|
|
|
0.6
|
|
|
4.8
|
|
|
1.1
|
|
Adjusted gross
margin
|
$
|
72.5
|
|
|
$
|
58.2
|
|
|
$
|
136.4
|
|
|
$
|
117.5
|
|
Gross margin
%
|
34.8
|
%
|
|
37.2
|
%
|
|
34.9
|
%
|
|
37.3
|
%
|
Adjusted gross
margin %
|
36.0
|
%
|
|
37.6
|
%
|
|
36.1
|
%
|
|
37.6
|
%
|
|
|
|
|
|
|
|
|
OPERATING EARNINGS
RECONCILIATION
|
|
|
|
|
|
|
|
Operating
earnings
|
$
|
17.2
|
|
|
$
|
23.5
|
|
|
$
|
30.7
|
|
|
$
|
41.9
|
|
Amortization of
intangible assets (includes amortization impacts to cost of
revenues)
|
4.2
|
|
|
1.3
|
|
|
8.4
|
|
|
2.6
|
|
Separation
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
2.9
|
|
Restructuring
charges
|
1.7
|
|
|
—
|
|
|
1.7
|
|
|
0.1
|
|
Acquisition and
integration related costs
|
0.4
|
|
|
0.6
|
|
|
0.8
|
|
|
0.9
|
|
Other non-operational
costs
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
Total operating
earnings adjustments
|
$
|
6.5
|
|
|
$
|
1.9
|
|
|
$
|
11.1
|
|
|
$
|
6.5
|
|
Adjusted operating
earnings
|
$
|
23.7
|
|
|
$
|
25.4
|
|
|
$
|
41.8
|
|
|
$
|
48.4
|
|
Operating earnings
margin
|
8.5
|
%
|
|
15.2
|
%
|
|
8.1
|
%
|
|
13.4
|
%
|
Adjusted operating
earnings margin
|
11.8
|
%
|
|
16.4
|
%
|
|
11.1
|
%
|
|
15.5
|
%
|
|
|
|
|
|
|
|
|
NET EARNINGS AND
DILUTED NET EARNINGS PER SHARE RECONCILIATION
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
12.2
|
|
|
$
|
15.0
|
|
|
$
|
23.6
|
|
|
$
|
26.1
|
|
Total operating
earnings adjustments
|
$
|
6.5
|
|
|
$
|
1.9
|
|
|
$
|
11.1
|
|
|
$
|
6.5
|
|
Estimated annual
effective tax rate(1)
|
21.7
|
%
|
|
33.0
|
%
|
|
23.8
|
%
|
|
35.6
|
%
|
Tax effects of
operating earnings adjustments
|
$
|
(1.4)
|
|
|
$
|
(0.6)
|
|
|
$
|
(2.6)
|
|
|
$
|
(2.3)
|
|
Non-operational tax
adjustments
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(6.1)
|
|
|
$
|
—
|
|
Adjusted net
earnings
|
$
|
17.3
|
|
|
$
|
16.3
|
|
|
$
|
26.0
|
|
|
$
|
30.3
|
|
Diluted net
earnings per share
|
$
|
0.32
|
|
|
$
|
0.40
|
|
|
$
|
0.62
|
|
|
$
|
0.69
|
|
Adjusted diluted
net earnings per share
|
$
|
0.45
|
|
|
$
|
0.43
|
|
|
$
|
0.68
|
|
|
$
|
0.80
|
|
Dilutive
shares
|
38.4
|
|
|
37.8
|
|
|
38.3
|
|
|
37.8
|
|
|
|
(1)
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Estimated annual
effective tax rate applied for the six-month period ended March 30,
2018 excludes discrete items related to estimated impacts from U.S.
tax reform.
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Discussion of Adjusted Non-GAAP Financial Measures
This press release includes adjusted non-GAAP financial measures
derived from our Condensed Consolidated Statements of Earnings.
These measures are not presented in accordance with, nor are they a
substitute for U.S. generally accepted accounting principles, or
GAAP. These adjusted measures include: adjusted gross margin;
adjusted operating earnings; adjusted operating earnings margin;
adjusted net earnings; and adjusted net earnings per diluted share.
We are providing a reconciliation above of each adjusted financial
measure used in this earnings release to the most directly
comparable GAAP financial measure. We are unable to provide without
unreasonable effort a reconciliation of adjusted guidance measures
to the corresponding GAAP measures on a forward-looking basis due
to the potential significant variability and limited visibility of
the excluded items discussed.
We utilize a number of different financial measures, both GAAP
and adjusted, in analyzing and assessing the overall performance of
our business, in making operating decisions, and forecasting and
planning for future periods. We consider the use of the adjusted
measures to be helpful in assessing the performance of the ongoing
operation of our business by excluding unusual and one-time costs.
We believe that disclosing adjusted financial measures provides
useful supplemental data that allows for greater transparency in
the review of our financial and operational performance. We also
believe that disclosing adjusted financial measures provides useful
information to investors and others in understanding and evaluating
our operating results and future prospects in the same manner as
management and in comparing financial results across accounting
periods and to those of peer companies.
Adjustments to GAAP measures include the following items:
Amortization of intangible assets: We do not acquire
businesses and assets on a predictable cycle. The amount of
purchase price allocated to intangible assets and the term of
amortization can vary significantly and are unique to each
acquisition or purchase. We believe that excluding amortization of
intangible assets allows the users of our financial statements to
better review and understand the historic and current results of
our operations, and also facilitates comparisons to peer
companies.
Purchase price accounting charges to cost of
revenues: We may incur charges to cost of revenues
as a result of acquisitions. We believe that excluding these
charges allows the users of our financial statements to better
understand the historic and current cost of our products, our gross
margin, and also facilitates comparisons to peer companies.
Separation costs: We separated from Varian
Medical Systems on January 30, 2017
and incurred non-operational expenses associated with the
separation. We believe that excluding separation costs allows the
users of our financial statements to better understand the historic
and current results of our operations, and also facilitates
comparisons to peer companies.
Restructuring charges: We incur restructuring
charges that result from events, which arise from unforeseen
circumstances and/or often occur outside of the ordinary course of
our on-going business. Although these events are reflected in our
GAAP financials, these unique transactions may limit the
comparability of our on-going operations with prior and future
periods.
Acquisition and integration related costs: We
incur expenses or benefits with respect to certain items associated
with our acquisitions, such as transaction costs, changes in the
fair value of contingent consideration liabilities, gain or expense
on settlement of pre-existing relationships, etc. We exclude such
expenses or benefits as they are related to acquisitions and have
no direct correlation to the operation of our on-going business. We
also incur expenses or benefits with respect to certain items
associated with our acquisitions, such as integration costs
relating to acquisitions for any costs incurred prior to closing
and up to 12 months after the closing date of the acquisition.
Impairment charges: We may incur impairment charges
that result from events, which arise from unforeseen circumstances
and/or often occur outside of the ordinary course of our on-going
business and such charges may limit the comparability of our
on-going operations with prior and future periods. We did not incur
any impairment charges during the periods presented.
Non-Operational Tax Adjustments: Certain tax items may be
non-recurring, unusual, infrequent and directly related to an event
that is distinct and non-reflective of the Company's normal
business operations, including the enactment of the Tax Cuts and
Jobs Act in December 2017. These may
include such items as the retroactive impact of significant changes
in tax laws, including changes to statutory tax rates and one-time
tax charges.
Other Non-Operational Costs: Certain items may be
non-recurring, unusual, infrequent and directly related to an event
that is distinct and non-reflective of the Company's normal
business operations. These may include such items as include legal
settlements, environmental settlements, governmental settlements
including tax settlements and other items of similar nature. We did
not include any other non-operational costs during the periods
presented.
Tax effect of Adjustments: We apply our GAAP
consolidated effective tax rate to our adjusted financial measures
as our historical annual consolidated effective tax rate has
remained fairly consistent, and is expected to remain consistent
for the foreseeable future. If applicable, this application of our
effective tax rate excludes any discrete items related to tax
reform any other Non-Operational Tax Adjustments including any tax
settlements.
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SOURCE Varex Imaging Corporation