SALT LAKE CITY, May 7, 2019 /PRNewswire/ -- Varex Imaging
Corporation (Nasdaq: VREX) today announced its financial results
for the second quarter of fiscal year 2019.
Quarterly Highlights
- Revenues were $196 million
- Gross margin was 33% | Adjusted gross margin* was 34%
- Operating earnings margin was 7% | Adjusted operating earnings
margin* was 12%
- Net earnings were $0.15 per
diluted share | Adjusted net earnings* were $0.34 per diluted share
"We had solid performance in the second quarter of fiscal year
2019 led by continued strong product sales for the industrial,
mammography and oncology markets. Our year to date revenues and
adjusted gross margin remain on track with expectations," said
Sunny Sanyal, Chief Executive
Officer of Varex. "We also continued to make good progress with
reducing our operating expenses and cost synergies from operational
consolidation of acquired imaging businesses are proceeding per
plan. In addition, we completed the previously announced
acquisition of Direct Conversion last week, which we believe will
expand our addressable market by approximately $200 million over the coming years," Sanyal
added.
Second Quarter Fiscal Year 2019 Results
Revenues for the second quarter of fiscal year 2019 decreased 3%
to $196 million from $201 million in the prior year quarter. Medical
segment revenues decreased 6% to $149
million and Industrial segment revenues increased 10% to
$47 million from the prior year
quarter.
Gross margin for the second quarter of fiscal year 2019 was
$64 million, or 33% of revenues,
compared to $70 million, or 35% of
revenues, in the prior year quarter. Adjusted gross margin* was
$66 million, or 34% of revenues,
compared to $73 million, or 36% of revenues, in the prior year
quarter.
For the second quarter of fiscal year 2019, R&D investment
decreased to 9.6% of revenues, a $3
million decline from the prior year quarter. SG&A
expense were 15.9% of revenues and included approximately
$5 million of additional expenses for
litigation, restructuring and impairment.
For the second quarter of fiscal year 2019, operating earnings
were $15 million and operating margin
was 7% compared to operating earnings of $17
million and operating margin of 9% in the prior year
quarter. Adjusted operating earnings* were $23 million and adjusted operating margin* of 12%
compared to adjusted operating earnings* of $24 million and adjusted operating margin* of 12%
in the prior year quarter.
Net earnings for the second quarter of fiscal year 2019 were
$6 million, or $0.15 per diluted share, compared to net earnings
of $12 million, or $0.32 per diluted share, in the prior year
quarter. Adjusted net earnings* for the second quarter of fiscal
year 2019 were $13 million, or
$0.34 per diluted share, compared to
$17 million, or $0.45 per diluted share, in the prior year
quarter.
Year-To-Date Fiscal Year 2019
Revenues for the first six months of fiscal year 2019 was
$382 million compared to revenues of
$377 million in the prior year
period. Medical segment revenues decreased 2% to $293 million and Industrial segment revenues
increased 11% to $89 million.
Gross margin for the first six months of fiscal year 2019 was
$124 million, or 33% of revenues,
compared to $132 million, or 35% of
revenues, in the prior year period. Adjusted gross margin* was
$132 million or 35% of revenues compared to $136 million
or 36% of revenues.
Balance Sheet
At the end of the second quarter of fiscal year 2019, cash and
cash equivalents were $31 million.
During the second quarter of fiscal year 2019, the company reduced
its total debt outstanding by $29
million to end the quarter at $346
million, including fully paying-off its revolving line of
credit. Cash flow from operations was $33
million for the second quarter of fiscal year 2019.
Varex Outlook
On April 29, 2019, the company
completed the previously disclosed acquisition of 97.4% of the
outstanding shares of common stock of Direct Conversion AB (publ)
and five months of its financial results will be included in fiscal
year 2019. Varex expects Direct Conversion to add approximately
$7 million to $8 million of revenues with gross margins above
the company's current level, but no impact to adjusted earnings per
share due to their level of R&D spending and added interest
expense.
As a result, the company now expects revenues to be in the range
of $760 million to $785 million for fiscal year 2019. Varex is
maintaining its expectations that adjusted net earnings per diluted
share will be in the range of $1.25
and $1.55.
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 "Reconciliation between GAAP and Adjusted
Non-GAAP Financial Measures" below for a reconciliation of
non-GAAP items to the comparable GAAP measures.
Conference Call Information
Varex will conduct its earnings conference call for the second
quarter of fiscal year 2019 today at 3:00
p.m. Mountain Time. The conference call will be webcast live
and can be accessed at the company's website at
investors.vareximaging.com. Access will also be available by
dialing 1-877-524-8416 from anywhere in the U.S. or by dialing
1-412-902-1028 from non-U.S. locations. The webcast of this call
will be archived on the company's website and a replay of the call
will be available from today through May
21st at 1-877-660-6853 from anywhere in the U.S. or
1-201-612-7415 from non-U.S. locations. The replay conference call
access code is 13690009.
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
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
21E of the Securities Exchange Act of 1934. Statements concerning
industry or market outlook; customer demand and acceptance of
products or technology; R&D costs; potential impact of tariffs,
revenues, product volumes, synergies; the contribution of Direct
Conversion AB (publ) to our addressable market or revenues;
earnings guidance for fiscal year 2019, or other expected future
financial results or performance; and any statements using the
terms "believe," "expect," "intend," "outlook," "future,"
"anticipate," "will," "could," "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 restructuring charges being more than expected; the
continued impact of tariffs or a global trade war on the company's
products and customer purchasing patterns; our ability to obtain
the intended benefits and synergies of acquisitions; global
economic conditions; demand for and delays in delivery of products
of the company or its customers; litigation costs; 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; the
company's ability to maintain or increase margins; the ability to
remediate material weaknesses in internal control; and the other
risks listed from time to time in our 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 for per share
amounts)
|
March 29, 2019
|
|
March 30, 2018
|
|
March 29, 2019
|
|
March 30, 2018
|
Revenues:
|
|
|
|
|
|
|
|
Medical
|
$
|
148.9
|
|
|
$
|
158.5
|
|
|
$
|
292.8
|
|
|
$
|
297.7
|
|
Industrial
|
46.9
|
|
|
42.7
|
|
|
88.7
|
|
|
79.7
|
|
Total
revenues
|
195.8
|
|
|
201.2
|
|
|
381.5
|
|
|
377.4
|
|
Gross
margin:
|
|
|
|
|
|
|
|
Medical
|
46.1
|
|
|
53.5
|
|
|
91.2
|
|
|
99.9
|
|
Industrial
|
18.3
|
|
|
16.6
|
|
|
33.2
|
|
|
31.7
|
|
Total gross
margin
|
64.4
|
|
|
70.1
|
|
|
124.4
|
|
|
131.6
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
Research and
development
|
18.8
|
|
|
22.0
|
|
|
37.6
|
|
|
41.8
|
|
Selling, general and
administrative
|
31.1
|
|
|
30.9
|
|
|
61.9
|
|
|
59.1
|
|
Operating
expenses
|
49.9
|
|
|
52.9
|
|
|
99.5
|
|
|
100.9
|
|
Operating
earnings:
|
14.5
|
|
|
17.2
|
|
|
24.9
|
|
|
30.7
|
|
Interest
income
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
Interest
expense
|
(5.5)
|
|
|
(5.6)
|
|
|
(10.6)
|
|
|
(11.1)
|
|
Other (expense)
income, net
|
(1.3)
|
|
|
4.1
|
|
|
(2.5)
|
|
|
3.1
|
|
Interest and other
expense, net
|
(6.7)
|
|
|
(1.5)
|
|
|
(13.0)
|
|
|
(7.9)
|
|
Earnings before
taxes
|
7.8
|
|
|
15.7
|
|
|
11.9
|
|
|
22.8
|
|
Taxes (benefit) on
earnings
|
1.9
|
|
|
3.4
|
|
|
3.0
|
|
|
(1.1)
|
|
Net
earnings
|
5.9
|
|
|
12.3
|
|
|
8.9
|
|
|
23.9
|
|
Less: Net earnings
attributable to noncontrolling interests
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
0.3
|
|
Net earnings
attributable to Varex
|
$
|
5.8
|
|
|
$
|
12.2
|
|
|
$
|
8.8
|
|
|
$
|
23.6
|
|
Net earnings per common share attributable to
Varex
|
|
|
|
|
|
|
|
Basic
|
$
|
0.15
|
|
|
$
|
0.32
|
|
|
$
|
0.23
|
|
|
$
|
0.62
|
|
Diluted
|
$
|
0.15
|
|
|
$
|
0.32
|
|
|
$
|
0.23
|
|
|
$
|
0.62
|
|
Weighted average common shares
outstanding
|
|
|
|
|
|
|
|
Basic
|
38.2
|
|
|
37.8
|
|
|
38.1
|
|
|
37.8
|
|
Diluted
|
38.5
|
|
|
38.4
|
|
|
38.4
|
|
|
38.3
|
|
VAREX IMAGING
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Unaudited)
|
|
(In millions, except share
amounts)
|
March 29, 2019
|
|
September 28, 2018
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
31.0
|
|
|
$
|
51.9
|
|
Accounts receivable,
net
|
124.5
|
|
|
154.0
|
|
Inventories,
net
|
261.2
|
|
|
235.1
|
|
Prepaid expenses and
other current assets
|
20.6
|
|
|
17.1
|
|
Total current
assets
|
437.3
|
|
|
458.1
|
|
Property, plant and
equipment, net
|
137.1
|
|
|
144.9
|
|
Goodwill
|
243.6
|
|
|
243.6
|
|
Intangible
assets
|
65.8
|
|
|
73.8
|
|
Investments in
privately-held companies
|
52.0
|
|
|
51.0
|
|
Other
assets
|
29.8
|
|
|
16.5
|
|
Total
assets
|
$
|
965.6
|
|
|
$
|
987.9
|
|
Liabilities,
redeemable noncontrolling interests and equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
62.3
|
|
|
$
|
66.3
|
|
Accrued
liabilities
|
51.7
|
|
|
47.5
|
|
Current maturities of
long-term debt
|
29.4
|
|
|
25.0
|
|
Deferred
revenues
|
12.9
|
|
|
13.2
|
|
Total current
liabilities
|
156.3
|
|
|
152.0
|
|
Long-term
debt
|
316.7
|
|
|
364.8
|
|
Deferred tax
liabilities
|
19.0
|
|
|
23.2
|
|
Other long-term
liabilities
|
27.6
|
|
|
8.5
|
|
Total
liabilities
|
519.6
|
|
|
548.5
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
10.8
|
|
|
11.1
|
|
Equity:
|
|
|
|
Preferred stock, $.01
par value: 20,000,000 shares authorized, none issued
|
—
|
|
|
—
|
|
Common stock, $.01
par value:
|
|
|
|
Authorized shares -
150,000,000
|
|
|
|
Shares issued and
outstanding - 38,249,440 and 38,026,597 at March 29, 2019 and
September 28, 2018, respectively.
|
0.4
|
|
|
0.4
|
|
Additional paid-in
capital
|
363.1
|
|
|
357.6
|
|
Accumulated other
comprehensive income
|
2.1
|
|
|
5.8
|
|
Retained
earnings
|
67.7
|
|
|
62.4
|
|
Total Varex
equity
|
433.3
|
|
|
426.2
|
|
Noncontrolling
interests
|
1.9
|
|
|
2.1
|
|
Total
equity
|
435.2
|
|
|
428.3
|
|
Total liabilities,
redeemable noncontrolling interests and equity
|
$
|
965.6
|
|
|
$
|
987.9
|
|
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 29, 2019
|
|
March 30, 2018
|
|
March 29, 2019
|
|
March 30, 2018
|
GROSS MARGIN
RECONCILIATION
|
|
|
|
|
|
|
|
Revenues
|
$
|
195.8
|
|
|
$
|
201.2
|
|
|
$
|
381.5
|
|
|
$
|
377.4
|
|
Gross
margin
|
$
|
64.4
|
|
|
$
|
70.1
|
|
|
$
|
124.4
|
|
|
$
|
131.6
|
|
Amortization of
intangible assets
|
1.9
|
|
|
2.4
|
|
|
3.8
|
|
|
4.8
|
|
Restructuring
charges
|
—
|
|
|
—
|
|
|
4.2
|
|
|
—
|
|
Adjusted gross
margin
|
$
|
66.3
|
|
|
$
|
72.5
|
|
|
$
|
132.4
|
|
|
$
|
136.4
|
|
Gross margin
%
|
32.9
|
%
|
|
34.8
|
%
|
|
32.6
|
%
|
|
34.9
|
%
|
Adjusted gross
margin %
|
33.9
|
%
|
|
36.0
|
%
|
|
34.7
|
%
|
|
36.1
|
%
|
|
|
|
|
|
|
|
|
OPERATING EARNINGS
RECONCILIATION
|
|
|
|
|
|
|
|
Operating
earnings
|
$
|
14.5
|
|
|
$
|
17.2
|
|
|
$
|
24.9
|
|
|
$
|
30.7
|
|
Amortization of
intangible assets (includes amortization impacts to cost of
revenues)
|
3.6
|
|
|
4.2
|
|
|
7.3
|
|
|
8.4
|
|
Separation and
related costs
|
0.8
|
|
|
—
|
|
|
1.2
|
|
|
—
|
|
Restructuring charges
(includes restructuring impact to cost of revenues)
|
1.1
|
|
|
1.7
|
|
|
6.2
|
|
|
1.7
|
|
Acquisition and
integration related costs
|
0.7
|
|
|
0.4
|
|
|
0.7
|
|
|
0.8
|
|
Impairment
charges
|
0.8
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
Other non-operational
costs
|
1.5
|
|
|
0.2
|
|
|
1.5
|
|
|
0.2
|
|
Total operating
earnings adjustments
|
$
|
8.5
|
|
|
$
|
6.5
|
|
|
$
|
17.7
|
|
|
$
|
11.1
|
|
Adjusted operating
earnings
|
$
|
23.0
|
|
|
$
|
23.7
|
|
|
$
|
42.6
|
|
|
$
|
41.8
|
|
Operating earnings
margin
|
7.4
|
%
|
|
8.5
|
%
|
|
6.5
|
%
|
|
8.1
|
%
|
Adjusted operating
earnings margin
|
11.7
|
%
|
|
11.8
|
%
|
|
11.2
|
%
|
|
11.1
|
%
|
|
|
|
|
|
|
|
|
EARNINGS BEFORE
TAXES RECONCILIATION
|
|
|
|
|
|
|
|
Earnings before taxes
|
$
|
7.8
|
|
|
$
|
15.7
|
|
|
$
|
11.9
|
|
|
$
|
22.8
|
|
Total operating
earnings adjustments
|
8.5
|
|
|
6.5
|
|
|
17.7
|
|
|
11.1
|
|
Acquisition and
integration related costs
|
0.6
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
Total earnings
before taxes adjustments
|
$
|
9.1
|
|
|
$
|
6.5
|
|
|
$
|
18.3
|
|
|
$
|
11.1
|
|
Adjusted earnings
before taxes
|
$
|
16.9
|
|
|
$
|
22.2
|
|
|
$
|
30.2
|
|
|
$
|
33.9
|
|
|
|
|
|
|
|
|
|
NET EARNINGS AND
DILUTED NET EARNINGS PER SHARE RECONCILIATION
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
5.8
|
|
|
$
|
12.2
|
|
|
$
|
8.8
|
|
|
$
|
23.6
|
|
Total earnings before
taxes adjustments
|
$
|
9.1
|
|
|
$
|
6.5
|
|
|
$
|
18.3
|
|
|
$
|
11.1
|
|
Estimated annual
effective tax rate(1)
|
21.6
|
%
|
|
21.7
|
%
|
|
22.1
|
%
|
|
23.8
|
%
|
Tax effects of
operating earnings adjustments
|
$
|
(1.9)
|
|
|
$
|
(1.4)
|
|
|
$
|
(4.0)
|
|
|
$
|
(2.6)
|
|
Non-operational tax
adjustments
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(6.1)
|
|
Adjusted net
earnings
|
$
|
13.0
|
|
|
$
|
17.3
|
|
|
$
|
23.1
|
|
|
$
|
26.0
|
|
Diluted net
earnings per share
|
$
|
0.15
|
|
|
$
|
0.32
|
|
|
$
|
0.23
|
|
|
$
|
0.62
|
|
Adjusted diluted
net earnings per share
|
$
|
0.34
|
|
|
$
|
0.45
|
|
|
$
|
0.60
|
|
|
$
|
0.68
|
|
Dilutive
shares
|
38.5
|
|
|
38.4
|
|
|
38.4
|
|
|
38.3
|
|
|
|
|
|
|
|
|
|
(1) Estimated annual
effective rate applied excludes discrete items related to estimated
impacts from U.S. tax reform.
|
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 and related
costs: We separated from
Varian Medical Systems on January 28,
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 fair value of
acquisition related hedges, 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.
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 non-ordinary
course litigation, legal settlements, environmental
settlements, governmental settlements including tax settlements and
other items of similar nature.
Tax effects of operating earnings
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. This application of our
effective tax rate excludes any discrete items, as defined in the
guidance for accounting for income taxes in interim periods, such
as those related to tax reform or any other Non-operational tax
adjustments.
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SOURCE Varex Imaging Corporation