Upload
others
View
1
Download
0
Embed Size (px)
Citation preview
FY 2008 Year End ReviewNovember 5, 2008
New York
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.
For comparison purposes, the company makes reference to net earnings per diluted share results in the fourth quarters and full fiscal years 2006 and 2007 that are not consistent with accounting principles generally accepted in the United States (GAAP). These results are reflected and reconciled to GAAP in the table titled “GAAP to Non-GAAP Reconciliation – EPS FY 2007 & FY 2006” included in the financial section of this presentation. The company references these results to allow a better comparison between ongoing operations in the current and prior periods. The company's reference to these results should be considered in addition to results that are prepared under current accounting standards but should not be considered a substitute for results that are presented as consistent with GAAP.
Welcome
Agenda
Financials
Oncology Systems
Proton Therapy
Security and Inspection Products
X-Ray and Flat Panel Products
Summary
Financials
Elisha Finney, Sr. VP and CFO
VMS FY08 Profile
Orders: $2.3 B
Sales: $2.1 B
EPS: $2.31
Operating Earnings % 20%
Employees: 4,783
NYSE Symbol: VAR
Note:(1) FY08 Operating Earnings includes amounts for total share-based compensation expense and its related tax benefits.(2) FY08 EPS includes $0.21 net earnings per diluted share for share-based compensation expense.(3) The operating results exclude discontinued operations.
($M) VMS OS XRP Other
Net Orders 725 15% 611 17% 94 19% 21 (32%)
Revenues 593 15% 483 13% 83 25% 27 20%
Gross Margin (1) 44% 45% 41% 37%R&D (1) 39SG&A (1) 88Op Earnings (1) 136 23% ROS (+19%) Interest Income 2EPS (1) (2) $0.68 (127M diluted shares)
Note:(1) Includes amounts for total share-based compensation expense and its related tax benefits.(2) Q408 includes $0.06 net earnings per diluted share for share-based compensation expense.(3) The operating results for the Other segment and Total VMS excludes discontinued operations.
Fourth Quarter 2008 Results
FY08 Year to Date(ended 09/26/08)
Orders increased 15%OSB +14%; XRP +24%
Revenues increased 18%OSB +16%; XRP +19%
Note:The operating results for Q407 and Q408 exclude discontinued operations.
0
500
1000
1500
2000
2500
Q406YTD
Q407YTD
Q408YTD
Orders Revenues
FY08In millions
Operating margin up 1 point to 20%
Operating Earnings up 24% to $419M
Net Earnings up 22% to $295M
Notes: (1) FY08 Operating Earnings includes amounts for total share-based
compensation expense and its related tax benefits.(2) FY08 EPS includes $0.21 net earnings per diluted share for total share-based
compensation expense.(3) The operating results exclude discontinued operations for all periods
presented.
050
100150200250300350400450
Q406YTD
Q407YTD
Q408YTD
Op Earnings Net Earnings
FY08 Year to Date (ended 09/26/08)
FY08
Backlog $1,888M(as of 09/26/08)
0200400600800
100012001400160018002000
FY 2005 FY 2006 FY 2007 FY 2008
Q1Q2Q3Q4
Note: Backlog for FY08 and FY07 excludes discontinued operations.
Q4 FY08 Balance Sheet / Cash FlowConservative balance sheet:
$ 397M cash
$ 40M total debt
$1,027M shareholder equity
*DSO 74 days – down 14 days from year ago quarter
Strong cash flow:$82M cash flow from operations Spent $85M to repurchase 1.5M shares during the quarter
*Days Sales Outstanding
Fiscal 2009 Outlook(As of end of Fourth Quarter, Fiscal 2008)
Revenues growth estimated at ~ 10% to 13% for FY 2009
EPS growth from continuing operations estimated at ~ $2.58 to $2.63
Revenues growth estimated at ~ 10% to 12% for the First Quarter of FY
2009
EPS growth from continuing operations estimated at ~ $.51 to $.53 for
the First Quarter of FY 2009
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.
Dow Wilson, EVPPresident, Oncology Systems
Oncology Systems
What we’re going to tell you
Q4/Year Summary
2008 Key Accomplishments
Market Update
Strategy Going Forward
Oncology Business Growth
$412M
21%
$340M
7%
$319M
9%
$293M
18%
Income
% Growth
$1,672M
16%
$1,440M
8%
$1,336M
16%
$1,156M
11%
Sales
% Growth
$1,871M
14%
$1,636M
7%
$1,535M
13%
$1,355M
14%
Orders
% Growth
FY08FY07FY06FY05
*FY’06 onward included Stock Cost. FY’05 does not include any stock cost
2008 Net Orders Summary
4Q V% 2008 V%
Domestic 15% 13%
International 19% 16%
Total $611 17% $1.9B 14%
Terrific Quarter: Strong US & Int’l
Orders Growth Broad-based
Service BrachytherapySoftware
20%
20%
23%
Oncology Systems Income Statement
Q4FY08 Q4 FY08 YTDNet Orders 611 17% 1,871 14%
Revenues 483 13% 1,672 16%
Gross Margin * 45% 2 pts 43% 1 ptR&D * 27 99SG&A * 60 211Op Earnings * 132 21% 412 21% ROS * 27% 2 pts 25% 1 pt
* (Includes amounts for total share-based compensation expense.)
Cost Control Drives Margin Improvement
3% Material price reduction
12% Conversion cost productivity
Scrap down 50%
Test cell time 14% reduction
Generated free capacity of 2 new cells
Terrific Operational Year
RapidArc is Big Driver
300+ Orders
RapidArc Update
~ 30 Installs
Pricing on target
Wide variety of tumor sites under treatment
Prostate, H&N, Lung, Stereotactic
Global acceptance
Upgrade opportunity (RA + OBI)
Web siteIncreased 2,100 to 5,000 visitors to web per day722 RapidArc treatment page visitors500+ Letters to ‘Dear Cancer’
Nationwide Public Relations~ 60 media stories~ 4 million Impressions
Targeted Advertising~ 4800 ad placementsNew YorkBostonFlorida
RapidArc Promotional Successes
RapidArc TV Commercial
Major Inroads in SRS Market
VAR was #3 in SRSLaunched Novalis Tx in Sept. 2007
Fastest treatment timesMost versatileLower cost per treatmentRapidArc radiosurgery
Now Unit Share Leader in SRS Market
Great Execution in New Product Engine(besides RapidArc)
Large field IMRTGatingHD120 high res collimatorOBI advanced imaging – speed and qualityMany ARIA features – data base conversion times down almost 90%Portability of ARIA into all Txenvironments
Commitment to Continuous Improvement and Innovation
OBI Improvement – Image Quality
HD120 Performance & Reliability
Highest Industry UptimeHighest Industry Uptime
98.61%
98.80% 98.76%
98.90%
97.90%
98.00%
98.10%
98.20%
98.30%
98.40%
98.50%
98.60%
98.70%
98.80%
98.90%
99.00%
2005 2006 2007 2008 YTD
Driving Installation Productivity
WW System InstallationClinac / OBI / CBCTMLC / PV
Customer Satisfaction DriversFaster installs
On-time clinical implementation
Faster revenue generation
Process predictability
Quality improvement
25.6%
FY06 FY08
Cost Reduction
2008 Market Overview
Drivers
Cancer DemographicsNew capabilities
RapidArc + IGRT + SRSStrong International growth
JapanChinaBrazil
Very solid US Market2007 2008
$3B$3.5B
Market
11%
2008 Share Summary
+2 points of market share in ’08
DriversHigher throughput
Lower cost/treatment
Value of versatility
Marketable differentiation
Integration and breadth of product line
International Market Under-Equipped
Aging Population/Under-Equipped Market
US: 36M over 65 (4000 linacs)
EU25: 78M over 65 (2500 linacs)
China: 102M > 65 (700 linacs + 300 cobalt)
US Will Continue Growing
DriversGrowing, aging populationHealthcare cost pressures
Rising needs: 2005 to 201513→15 machines per million pop.3600 → 4700 machines- 1100 new installations - 3600 replacements
0-64 65+
0-64 65+
12%
15%
2000 – 282 Million
U.S. Population2015 – 323 Million
Sources: US Census, IMV Rad. Onc. Census Report
Treatment Improvement Opportunities5-yr Overall Cancer Survival
0
10
20
30
40
50
60
70
80
90
100
1940 1950 1960 1970 1980 1990 2000
Year
Surv
ival
Rat
e %
Prostate
Male bladder
Hodgkin's
Breast
Uterine
Cervix
Larynx
Sarcomas
Colorectal
Pharynx
Brain
Esophageal
Lung
Pancreas
Glioblastoma
Credit Issue?
Q1 Backlog – Firm – No delays to date
Financing availableOften multiple banks competing for business
Good ROI, cash flow
Lower cost/patient
More scrutiny and cautionRadiotherapy – revenue generator
Radiotherapy/Radiosurgery Market
Key Assumptions
• Cancer demographics
• Healthcare avoids credit crunchand complete spending freeze
• USA reimbursement down
• Same competitive environment
• Expanding use of radiotherapy& radiosurgery
4.0 4.44.9
5.4
Market AAGR ~10%
2012201120102009
$ Market in Billions
Oncology Strategy
Innovate with PurposeFocus on clinical outcomeDevelop and expand radiation applicationsDeliver lowest cost/treatmentHighest throughputDevelop exciting, marketable products
Continue global growth. Grow volumeDifferentiate with best software and services
Lead in service satisfactionFocus on simplicity, excitement and integration
Particle Therapy
Lester BoehVP, Emerging Businesses
Particle Therapy Overview
Successful Treatment Planning and Patient Information Management software provider to the particle therapy community for about 10 yearsWith the acquisition of Accel Instruments in January 2007, Varian is entering the treatment delivery segmentMarket interest remains high despite unrest in the credit markets
FY-08 Highlights
Proton system productization activities are on schedule and on budgetCommissioning of the Munich facility is on schedule and targeting first patient treatment in March 2009Performance of the cyclotron at the Paul Scherrer Institute (PSI) in Switzerland exceeding expectationsManufacturing facility in Germany is now open and production is ramping up
FY-09 and Beyond
Ramp-up of patient treatments at the Munich facility
Next system ready for shipment in Spring 2009
Materials for additional systems already in the pipeline
Product development roadmap includes integration to a higher level than anything else in the PT segment, cone-beam CT imaging (CBCT), patient motion management and improved clinical efficiency
Security & Inspection Products
Lester Boeh,VP, Emerging Businesses
SIP Overview
Two main markets; Cargo Inspection (Cargo) & Non-Destructive Testing (NDT)
Cargo - Key content supplier to systems integrators who then provide a complete system to an end user. Primary customers include
Smiths Detection
Rapiscan
AS&E
L3
SAIC and others
NDT – Supplier of complete inspection system in a variety of industries world-wide including industrial imaging, automotive, aerospace and foundries
Oncology Strategy Meeting-Financial 3-24
7
Oncology Strategy Meeting-Financial 3-24
9
SIP Business Growth
$92M
70%
$54M
74%
$31M
3%
$30M
3%
Sales
%
$94M
10%
$86M
110%
$41M
41%
$29M
(4%)
Orders
%
FY08FY07FY06FY05
FY-08 Highlights
Contract from US Customs and Border Protection (CBP) for several IntellX inspection facilities for use along the US borderDeployment of the Mi product family, enabling automatic detection of WMD’s, nuclear materials and materials discriminationDelivery of over 20 imaging physics packages for ports and borders in the Middle EastDelivery of the first of two high-energy inspection systems for use on the NASA Space Shuttle Reusable Solid Rocket Motor (Booster) programGrand opening of the new SIP manufacturing facility
FY-09 and Beyond
Complete deployment of the Mi product family in all segmentsRelease field upgrade package for materials discrimination capabilityExpand Cargo product offering in standard packages has enabled improved imaging capability at a more attractive system costIncreased volumes have enabled greater cost reduction opportunities and margin improvement for FY-09Substantial service growth through larger installed base and higher service contract capture rateNew imaging algorithms enabling improved image quality and more automated image analysis
X-Ray Products
X-ray Product Lines
Medical X-ray TubesDiagnostic X-rayCT Scanner TubesMammography Tubes
Industrial X-ray TubesFlat Panel Imaging Systems
Dynamic Imaging PanelsRadiographic Imaging Panels
30304030CB
2520V4030E
1313
2520E+
2020
3030+4343R 4336R
Flat Panel Detectors X-Ray Tubes
CT, Interventional Radiology, Angiography, Cardiovascular,
Mammography
High Capacity CT Tube
Key XRP Advantages
Strongest Independent Supplier of Imaging Panels and X-ray Tubes
Strong Local Support with Offices Worldwide
Best Technology of Independent Suppliers
Excellent Cost Structure
XRP Business Growth
$73M
21%
$61M
40%
$44M
11%
$39M
26%
Income
%
$305M
19%
$257M
13%
$228M
17%
$195M
18%
Sales
%
$337M
24%
$273M
13%
$242M
19%
$204M
11%
Orders
%
FY08FY07FY06FY05
FY08 Milestones
Completed Several New Products which will Increase 09 Sales
New High Tier CT TubeNew Family of Large Radiographic Panels
Signed Multiple Agreements with New Customers for Imaging PanelsAcquired our China Distributor and Established X-Ray Tube Reload and Repair Capability in China
SummaryX-ray Products is Well Positioned for Double-Digit Growth in FY09
Tim GuertinPresident and CEO
Summary
Varian’s 5-Year Growth Opportunity
0
500
1000
1500
2000
2500
3000
3500
4000
4500
FY08 FY09 FY10 FY11 FY12 FY13
ACCEL/Proton
Security
Xray Products
Oncology
Millions USD
Stock Performance Comparison
October 29, 2008
VAR TOMO ARAY HOLX DJII SP50 COMP
-16.83%
-85.07%
-64.91%
-37.52%-36.66%-32.22%
-66.99%
-90.0%
-80.0%
-70.0%
-60.0%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%%
Cha
nge
Ticker
YTD Percentage Change
Summary
VAR is a great investment opportunity
3 great growth trendsCancer treatment
Filmless x-ray
Security
Strong balance sheet and cash flows
Ten year stock performance – Top 1%
FY 2008 Year End ReviewNovember 5, 2008
New York