Varian Inc. posted fourth-quarter sales of $196.5 million for the three months ended Oct. 2, down 30.5 percent compared with $282.5 million during the same period last year. Net earnings fell 90.5 percent to $1.9 million, compared with $20.4 million during Q3 2008:
Press Release
Varian, Inc. Reports Fourth Quarter 2009 Results
PALO ALTO, Calif., Nov. 4 /PRNewswire-FirstCall/ — Varian, Inc. (NasdaqGS: VARI) today reported fourth quarter fiscal year 2009 revenues of $196.5 million, a decrease of 30.4% from the fourth quarter of fiscal year 2008. Orders exceeded revenues by approximately $9 million in the fourth quarter of fiscal year 2009.
Non-GAAP (adjusted) diluted earnings per share for the fourth quarter of 2009 were $0.40, a decrease of 48.7% from the $0.78 in the fourth quarter of 2008. On a GAAP basis, diluted earnings per share in the fourth quarter of 2009 were $0.07 (including $0.28 of costs relating to the pending acquisition of the company by Agilent Technologies, Inc. (“Agilent”)), compared to $0.69 in the fourth quarter of 2008.
Adjusted operating profit margin was 8.4% in the fourth quarter of 2009, compared to 13.0% in the prior-year quarter. On a GAAP basis, operating profit margin was 2.6% in the fourth quarter of 2009, compared to 11.6% in the same quarter a year ago.
Revenues in the fourth quarter of fiscal year 2009 were essentially flat on a sequential basis, but were lower than the prior-year quarter, primarily due to the global economic downturn as well as specific items impacting the comparability of the fourth quarter of fiscal year 2009 with the fourth quarter of fiscal year 2008. Revenues in the fourth quarter of fiscal year 2008 benefitted from (1) an extra week and (2) exceptionally strong shipments related to overcoming manufacturing transition and execution issues experienced in the third quarter of fiscal year 2008. In addition, revenues in the fourth quarter of fiscal year 2009 were negatively impacted by customers’ uncertainty and other disruptions related to the announcement and pendency of the acquisition by Agilent. Compared to record adjusted operating profit margins in the prior-year quarter, adjusted operating margins in the fourth quarter of fiscal year 2009 were negatively impacted by the lower sales volumes, product mix and disruptions relating to the pending acquisition.
Free cash flow, which is defined as operating cash flow less net fixed asset purchases, was $29.7 million in the fourth quarter of 2009 and a record $94.3 million for the full fiscal year. The excellent free cash flow generated by the company in fiscal year 2009 demonstrates the fundamental strength and flexibility of the business through the challenging economic environment during that period.
Fiscal year 2009 sales totaled $806.7 million, a decrease of 20.3% compared to the $1.013 billion reported in fiscal year 2008. Adjusted net earnings in fiscal year 2009 decreased 26.2% to $58.0 million, compared to $78.7 million in the prior fiscal year. Adjusted diluted earnings per share were $2.01 in fiscal year 2009, representing a decrease of 23.3% compared to the $2.62 in fiscal year 2008. On a GAAP basis, net earnings were $38.6 million, or $1.34 diluted earnings per share, in fiscal year 2009, compared to $65.1 million, or $2.17 diluted earnings per share, in fiscal year 2008.
For a complete reconciliation of non-GAAP (adjusted) financial information used in this press release to the most directly comparable GAAP financial information, please refer to the attached Reconciliations of GAAP to Adjusted Results, Actual.
Results by Segment
Scientific Instruments revenues for the fourth quarter of 2009 were $164.7 million, a decrease of 30.3% from the fourth quarter of the prior year. Adjusted operating profit margin was 8.1% in the fourth quarter of 2009, compared to 12.7% in the fourth quarter of the prior year. On a GAAP basis, operating profit margin was 5.5% in the fourth quarter of 2009, compared to 11.1% in the same quarter a year ago.
For the full fiscal year 2009, Scientific Instruments revenues decreased 19.5% to $675.3 million, compared to $838.7 million in fiscal year 2008. Adjusted operating profit margin was 10.7% in fiscal year 2009, compared to 11.6% in fiscal year 2008. On a GAAP basis, operating profit margin was 8.0% in fiscal year 2009, compared to 9.6% in the prior fiscal year.
Vacuum Technologies revenues were $31.7 million in the fourth quarter of 2009, a decrease of 31.0% from the fourth quarter of 2008. Adjusted operating profit margin was 20.5% in the fourth quarter of 2009, compared to 22.0% in the fourth quarter of the prior year. On a GAAP basis, operating profit margin was 20.3% in the fourth quarter of 2009, compared to 22.0% in the prior-year quarter.
For the full fiscal year 2009, Vacuum Technologies revenues totaled $131.4 million, a decrease of 24.4% compared to the $173.8 million reported in fiscal year 2008. Adjusted operating profit margin was 20.1% in fiscal year 2009, compared to 19.8% in the prior fiscal year. On a GAAP basis, operating profit margin was 19.5% in fiscal year 2009, compared to 19.8% in fiscal year 2008.
Acquisition by Agilent
As previously announced, on July 26, 2009 the company entered into an Agreement and Plan of Merger with Agilent (the “Merger Agreement”), pursuant to which the company will, subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, be acquired by Agilent for $52.00 per share in cash. At a special meeting held on October 5, 2009, the company’s stockholders approved the Merger Agreement. The transaction remains subject to regulatory approvals and other closing conditions.
No Conference Call
Due to the pending acquisition by Agilent, the company will not be holding an investor conference call to review its fourth quarter and full fiscal year 2009 results.
Non-GAAP (Adjusted) Financial Measures
This press release includes non-GAAP (adjusted) financial measures for cost of sales, selling, general and administrative expenses, research and development expenses, purchased in-process research and development expenses, operating earnings, operating profit margins, impairment of private company equity investments, income tax expense, net earnings, diluted earnings per share and free cash flow. With the exception of free cash flow, these non-GAAP financial measures exclude acquisition-related intangible and inventory write-up amortization and purchased in-process research and development expenses, costs related to the pending acquisition by Agilent, restructuring and other related costs, and impairment of private company equity investments. Reconciliations of each of these non-GAAP financial measures to the most directly comparable GAAP financial measures are detailed in the Reconciliations of GAAP to Adjusted Results attached to this press release. We believe that presentation of these non-GAAP financial measures provides useful information to investors regarding our results of operations and our cash flows.
We believe that excluding acquisition-related intangible and inventory write-up amortization and purchased in-process research and development expenses provides supplemental information and an alternative presentation useful to investors’ understanding of the company’s core operating results and trends. In addition, investors have indicated to us that they analyze the benefits of acquisitions based on the cash return on the investment made, and thus consider financial measures excluding acquisition-related intangible and inventory write-up amortization and purchased in-process research and development expenses as important, useful information.
We similarly believe that excluding costs related to the pending acquisition by Agilent, restructuring and other related costs (principally related to facility closures and employee terminations to reduce costs and improve operational efficiency) and impairment of private company equity investments provides supplemental information and an alternative presentation useful to investors’ understanding of the company’s core operating results and trends, especially when comparing those results on a consistent basis to results for previous periods and anticipated results for future periods. Investors have indicated that they consider financial measures of our results of operations excluding restructuring and other related costs and impairment of private company equity investments as important supplemental information useful to their understanding of our historical results and estimating of our future results.
We also believe that, in excluding acquisition-related intangible and inventory write-up amortization and purchased in-process research and development expenses, costs related to the pending acquisition by Agilent, restructuring and other related costs, and impairment of private company equity investments, our non-GAAP financial measures provide investors with transparency into what is used by management to measure and forecast our results of operations, to compare on a consistent basis our results of operations for the current period to that of prior periods, to compare our results of operations on a more consistent basis against that of other companies, in making financial and operating decisions and to establish certain management compensation.
We believe that the presentation of free cash flow provides investors with useful information on what is used by management to measure cash management performance, in making financial and operating decisions and to establish certain management compensation. Although we believe, for the foregoing reasons, that our presentation of non-GAAP financial measures provides useful supplemental information to investors regarding our results of operations and our cash flows, our non-GAAP financial measures should only be considered in addition to, and not as a substitute for or superior to, our financial measures prepared in accordance with GAAP.
About Varian, Inc.
Varian, Inc. is a leading worldwide supplier of scientific instruments and vacuum technologies for life science, environmental, energy, and applied research and other applications. The company provides complete solutions, including instruments, vacuum products, laboratory consumable supplies, software, training and support through its global distribution and support systems. Varian, Inc.’s common stock is traded on the NASDAQ Global Select Market under the symbol “VARI”. Further information is available on the company’s Web site at http://www.varianinc.com.