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Varian Medical Systems Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 7, 2012 04:33PM

Varian Medical Systems Inc. (VAR) filed Quarterly Report for the period ended 2012-06-29. Varian Medical Systems, Inc. has a market cap of $6.18 billion; its shares were traded at around $56.68 with a P/E ratio of 15.2 and P/S ratio of 2.4. Varian Medical Systems, Inc. had an annual average earning growth of 17.9% over the past 10 years. GuruFocus rated Varian Medical Systems, Inc. the business predictability rank of 4.5-star.



Highlight of Business Operations:

The $10.2 million increase in selling, general and administrative expenses for the third quarter of fiscal year 2012 compared to the third quarter of fiscal year 2011 was primarily attributable to: (a) a $2.5 million increase in bad debt expense; (b) a $2.1 million increase in fees for certain commission arrangements and product promotions, which were primarily tied to growth in Oncology Systems revenue; (c) a $1.7 million increase in selling, general and administrative expenses associated with the recently acquired Calypso and InfiMed; (d) a $1.4 million net increase in employee-related costs, in part for increased headcount to support our growing sales, marketing and other business activities particularly in international countries; and (e) a $1.3 million overall increase in legal expenses relating to ongoing litigation. These increases were partially offset by a favorable currency translation impact of $1.8 million as the foreign currency denominated selling, general and administrative expenses of our foreign operations were translated into U.S. dollars.

The $26.9 million increase in selling, general and administrative expenses for the first nine months of fiscal year 2012 compared to the first nine months of fiscal year 2011 was primarily attributable to: (a) a $5.1 million net increase in employee-related costs, in part for increased headcount to support our growing sales, marketing and other business activities particularly in international countries; (b) a $4.4 million increase in selling, general and administrative expenses associated with the recently acquired Calypso and InfiMed; (c) a $4.3 million net increase in legal expenses relating to ongoing litigation; (d) a $4.2 million increase in bad debt expense; (e) a $3.3 million decrease in the income recognized on our equity investment in dpiX Holding LLC; (f) a $2.6 million increase in restructuring charge primarily for a workforce reduction in North America that accompanied the realignment of resources to support sales and marketing activities in emerging market countries; and (g) a $2.1 million increase in fees for certain commission arrangements and product promotions, which were primarily tied to growth in Oncology Systems revenue. These increases were partially offset by the inclusion in the first nine months of fiscal year 2011 of a $5 million contingent liability charge for which there was no similar charge in the first nine months of fiscal year 2012.

Our effective tax rate was 29.3% for the three months ended June 29, 2012, compared to 29.9% in the same period of fiscal year 2011. For the nine months ended June 29, 2012, our effective tax rate was 28.2%, compared to 30.5% in the same period of fiscal year 2011. For both the three month and nine month periods, the decrease in our effective tax rate was primarily due to a shift in the geographic mix of earnings. This was partially offset by a smaller net benefit for discrete items

The trailing 12 months growth in net orders for Oncology Systems at the end of the third quarter of fiscal year 2012 and at the end of the previous three fiscal quarters were: an 6% total increase, with a 1% increase in North America and an 11% increase for the international region, as of June 29, 2012; an 8% total increase, with flat net orders in North America and a 16% increase for the international region, as of March 30, 2012; an 8% total increase, with a 1% decrease in North America and a 17% increase for the international region, as of December 30, 2011; an 8% total increase, with a 5% increase in North America and an 11% increase for the international region, as of September 30, 2011. We expect that Oncology Systems net orders will continue to experience regional fluctuations, even with an overall shift of orders towards the international region and emerging market countries. In addition, the availability of government programs that stimulate the purchase of healthcare products, such as the one in place in 2010 in Japan, , and, in the United States, uncertainty created by healthcare reform and actual and proposed reductions in Medicare reimbursement rates for radiotherapy and radiosurgery have in the past affected and could in the future affect the demand for our products and/or revenues recognized from period to period, and could therefore make it difficult to compare our financial results.

In the first nine months of fiscal year 2012, we generated net cash from operating activities of $301 million, compared to $327 million in the first nine months of fiscal year 2011. The $26 million decrease in net cash from operating activities during the first nine months of fiscal year 2012 compared to the first nine months of fiscal year 2011 was driven primarily by a net decrease of operating cash flows of $33 million related to changes to working capital items between the two periods and a decrease in non-cash items of $1 million, partially offset by an increase of $8 million in net earnings. The decrease in operating cash flows related to working capital items was primarily due to changes in accounts receivable, inventories, and prepaid expenses and other current assets.

Read the The complete Report



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