From One Innovation to the next. Second Quarter FY2007 Overview

Transcription

1 From One Innovation to the next. Second Quarter FY2007 Overview

2 Forward-Looking Statements Except for historical information, the information that follows contains certain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include the matters described in the risk factors section of our information statement and other risks detailed from time to time in the company s filings with the Securities and Exchange Commission.

3 VMS FY06 Profile Orders: Sales: $1.8 B $1.6 B EPS: $1. 85 Operating Earnings % 22% Employees: 3,935 NYSE Symbol: VAR Note: (1) FY06 EPS excludes amounts for the incremental stock options and other share-based compensation expenses, a tax benefit related to the repatriation of foreign earnings, a deferred tax asset adjustment and discontinued operations (Non-GAAP) (2) FY06 Op Earnings excludes amounts for the incremental stock options and other share-based compensation expenses (Non-GAAP)

4 Business Segments - Orders FY06 % Oncology Systems $1,535M 85% Radiation Therapy Brachytherapy Radiosurgery X-Ray Products $ 242M 13% Tubes Flat Panel Imagers Other $ 43M 2% Ginzton Technology Center Security and Inspection Products TOTAL $ 1,820M 100%

5 Second Quarter FY07 (ended 03/30/07) In millions Q2 FY07 Orders increased 23% OSB +2%; XRP +16% Q205 Q206 Q207 Revenues increased 7% OSB +3%; XRP +8% Orders Revenues Note: OSB Orders and Revenues have been adjusted in FY05 to include BrachyTherapy and exclude Security Inspection Products

6 Second Quarter FY07 (ended 03/30/07) Q205 Q206 Q207 Q2 FY07 Operating Margin up 1 pt to 20% Operating Earnings up 9% to $86M Net Earnings up 9% to $61M Note: Q2 FY07 and Q2FY06 include amounts for total sharebased compensation expense and its related tax benefits (GAAP) Op Earnings Net Earnings

7 FY07 Year to Date (ended 03/30/07) In millions Q205 Q206 Q207 Q2 FY07 YTD Orders increased 13% OSB +2%; XRP +19% Revenues increased 11% OSB +8%; XRP +13% Orders Revenues Note: OSB Orders and Revenues have been adjusted in FY05 to include BrachyTherapy and exclude Security Inspection Products

8 FY07 Year to Date (ended 03/30/07) Q205 Q206 Q207 Q2 FY07 YTD Operating Margin flat at 19% Operating Earnings up 12% to $156M Net Earnings up 14% to $110M Op Earnings Net Earnings Note: Q2 FY07 and Q2 FY06 include amounts for total share-based compensation expense and its related tax benefits (GAAP)

9 ($M) VMS OS XTP Other Net Orders % 373 2% 68 16% % Revenues 443 7% 358 3% 66 8% % Gross Margin (1) 42% 43% 42% 20% R&D (1) 28 SG&A (1) 70 Op Earnings (1) 86 20% ROS (+9%) Interest Income 2 EPS (1) (2) $0.46 Q2 FY07 (132M diluted shares) Note: (1) Includes amounts for total share-based compensation expense and its related tax benefits. (2) Includes $0.06 net earnings per diluted share for share-based compensation expense.

10 ($M) VMS OS XTP Other Net Orders % 703 2% % % Revenues % 675 8% % % Gross Margin (1) 42% 42% 41% 24% R&D (1) 55 SG&A (1) 133 Op Earnings (1) % ROS (+12%) Interest Income 4 EPS (1) (2) $0.83 Q2 FY07 YTD (133M diluted shares) Note: (1) Includes amounts for total share-based compensation expense and its related tax benefits. (2) Includes $0.114 net earnings per diluted share for share-based compensation expense.

11 Varian Medical Systems Q2 FY07 Q2 FY07 YTD Net Orders % % Revenues 443 7% % Gross Margin (1) 42% 42% R&D (1) SG&A (1) Op Earnings (1) 86 9% % ROS 20% 19% Interest Income 2 4 EPS (1) (2) (3) $0.46 (+12%) $0.83 (+17%) Note: (1) Includes amounts for total share-based compensation expense and its related tax benefits. (2) Q207 includes $0.060 net earnings per diluted share for share-based compensation expense. (3) Q207 YTD Includes $0.114 net earnings per diluted share for share-based compensation expense.

12 Oncology Systems Q2 FY07 Q2 FY07 YTD Net Orders 373 2% 703 2% Revenues 358 3% 675 8% Gross Margin * 43% Flat 42% (1pt) R&D * SG&A * Op Earnings * 90 5% 159 8% ROS * 25% Flat 24% Flat Headcount 3,071 * (Includes amounts for total share-based compensation expense and its related tax benefits.)

13 X-Ray Products Q2 FY07 Q2 FY07 YTD Net Orders 68 16% % Revenues 66 8% % Gross Margin * 42% 7 pts 41% 6 pts R&D * 5 9 SG&A * 6 12 Op Earnings * 16 42% 32 46% ROS * 25% 6 pts 25% 6 pts Headcount 582 * (Includes amounts for total share-based compensation expense and its related tax benefits.)

14 Other Segment Q2 FY07 Q2 FY07 YTD Net Orders % % Revenues % % Gross Margin * 20% (1 pt) 24% (3 pts) R&D * 3 6 SG&A * 4 6 Op Earnings * (4) (5) ROS * (20%) (19%) Headcount 331 * (Includes amounts for total share-based compensation expense and its related tax benefits.)

15 Backlog Record $1,506M (As of 03/30/07) FY 2004 FY 2005 FY 2006 FY 2007 Q1 Q2 Q3 Q4

16 Q2 FY07 Balance Sheet / Cash Flow Conservative balance sheet $289M cash and marketable securities $64M total debt $815M shareholder equity Spent $76M on stock buy-back DSO 85 days up 3 days from year ago quarter (1) Strong cash flow $42M cash flow from operations (2) Repurchase 1.6M shares during the quarter 2.9M shares remaining under the previously announced 4.5M share repurchase program in effect through September 27, (1) Days Sales Outstanding (2) Cash flow from operations increased $12M from our earnings conference call on April 25, 2007 and what was previously shown on this slide due to a change in the classification of a payment from "Cash flow from operations" to "Financing activities" in our Statement of Cash Flows. The payment was for the repurchase of the 35% ownership interest in our Japanese subsidiary from Mitsubishi Electric Co. This will be reflected in the financial statements filed with our Quarterly Report on Form 10-Q for the second quarter of fiscal year 2007.

17 Fiscal 2007 Outlook (As of end of Second Quarter, Fiscal 2007) Revenues Growth Estimated in low double digits for FY 2007 EPS Estimated at ~ $1.79 to $1.81 for FY 2007 Revenues Growth Estimated at ~ 6% for the Third Quarter of FY 2007 EPS Estimated at ~ $0.35 to $0.36 for the Third Quarter of FY 2007 Note: (1) Fiscal 2007 Outlook includes the impact of the acquisition of ACCEL Instruments. (2) Varian updates its outlook once per quarter when it reports financial results. This information is for reference purposes only and is not an affirmation of or an update to the outlook that Varian reported at the close of last quarter.

18 From One Innovation to the next.