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Varian, Inc. Reports Fourth Quarter 2006 Results
Palo Alto, CA, November 1:
Varian, Inc. (Nasdaq:VARI)
today reported fourth quarter 2006 revenues of $219.6 million, representing an
increase of 10.9% over revenues of $198.1 million in the fourth quarter of
fiscal year 2005. The growth in sales was broad-based. Demand was particularly
strong for industrial applications and within the Pacific Rim and Europe.
Non-GAAP (adjusted) net earnings for the fourth quarter of
fiscal year 2006 increased 13.0% to $18.2 million, compared to $16.1 million in
the fourth quarter of fiscal year 2005. Adjusted diluted earnings per share were
$0.58 in the fourth quarter of fiscal year 2006, representing an increase of
16.0% compared to the $0.50 adjusted diluted earnings per share reported in the
prior-year quarter. On a GAAP basis, net earnings in the fourth quarter of
fiscal year 2006 were $14.7 million, or $0.47 diluted earnings per share,
compared to $14.6 million, or $0.46 diluted earnings per share, in the fourth
quarter of fiscal year 2005. The company's GAAP net earnings and diluted
earnings per share for the fourth quarter of fiscal year 2006 reflect a pretax
charge of $2.5 million, or $0.05 per diluted share, for share-based compensation
expense recorded under the provisions of FAS 123( R ). The company's results for
periods prior to fiscal year 2006 (including the fourth quarter and full fiscal
year 2005) do not include compensation expense relating to stock options or
shares issued under the company's employee stock purchase plan.
Adjusted operating earnings increased 18.7% to $27.4 million
in the fourth quarter of fiscal year 2006, compared to $23.1 million in the
fourth quarter last year. Adjusted operating profit margin was 12.5% in the
fourth quarter of fiscal year 2006, compared to 11.7% in the prior-year quarter.
The improvements in adjusted operating earnings and adjusted operating profit
margin were primarily the result of sales volume leverage, a mix shift toward
higher-margin products and lower Sarbanes-Oxley Act Section 404 compliance
costs. On a GAAP basis, operating earnings were $22.3 million and operating
profit margin was 10.2% in the fourth quarter of fiscal year 2006 (which
includes a 1.1% negative impact of adopting FAS 123( R )), compared to $21.0
million and 10.6%, respectively, in the same quarter a year ago.
Adjusted free cash flow, which is defined as operating cash
flow plus the excess tax benefit from share-based compensation expense (a
component of operating cash flow prior to the adoption of FAS 123( R )) less net
fixed asset purchases, was $37.0 million for the fourth quarter. For the full
fiscal year, adjusted free cash flow was $61.7 million, which represents 123% of
GAAP net earnings.
Garry W. Rogerson, President and CEO, commented, "Our breadth
and depth of products, our global reach, and our ability to focus on key growth
applications all contributed to another solid financial performance for the
quarter and the year."
Fiscal year 2006 sales totaled $834.7 million, an increase of
8.0% compared to the $772.8 million reported in fiscal year 2005. Adjusted net
earnings in fiscal year 2006 increased 17.4% to $65.0 million, compared to $55.3
million in the prior fiscal year. Adjusted diluted earnings per share were $2.07
in fiscal year 2006, representing an increase of 28.6% compared to the $1.61
adjusted diluted earnings per share reported for fiscal year 2005. On a GAAP
basis, net earnings were $50.1 million, or $1.59 diluted earnings per share, in
fiscal year 2006, compared to $46.7 million, or $1.36 diluted earnings per
share, in fiscal year 2005. The company's GAAP net earnings and diluted earnings
per share for fiscal year 2006 reflect a pretax charge of $8.7 million, or $0.18
per diluted share, for share-based compensation expense recorded under the
provisions of FAS 123( R ).
Throughout this release, all revenues, operating earnings,
operating profit margins, net earnings and earnings per share are presented on a
continuing operations basis (i.e., excluding the divested Electronics
Manufacturing business) unless otherwise noted.
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 and Projected.
Results by Segment
Scientific Instruments revenues for the fourth quarter of
fiscal year 2006 were $183.0 million, representing an increase of 11.8% over
revenues of $163.7 million in the fourth quarter of the prior fiscal year. The
prior-year revenues do not include sales from PL International Limited (Polymer
Laboratories), which was acquired and became part of the company's Scientific
Instruments segment in November 2005. Polymer Laboratories generated revenues of
approximately $24 million for the twelve months ended September 30, 2005.
Adjusted operating profit margin was 12.3% in the fourth quarter of fiscal year
2006, compared to 11.5% in the prior-year quarter. The increase in the segment's
adjusted operating profit margin was primarily the result of sales volume
leverage and a mix shift toward higher-margin products. On a GAAP basis,
operating profit margin was 10.3% in the fourth quarter of fiscal year 2006
(which includes a 0.5% negative impact of adopting FAS 123( R )), compared to
10.3% in the same quarter a year ago.
For the full fiscal year 2006, Scientific Instruments revenues
increased 8.4% to $686.0 million, compared to $632.9 million in fiscal year
2005. Adjusted operating profit margin was 11.3% in fiscal year 2006, compared
to 10.9% in the fiscal year 2005. On a GAAP basis, operating profit margin was
8.8% in fiscal year 2006 (which includes a 0.5% negative impact of adopting FAS
123( R )), compared to 8.0% in the prior fiscal year.
Vacuum Technologies revenues increased 6.4% to $36.6 million
in the fourth quarter of fiscal year 2006, compared to $34.4 million in the
fourth quarter of fiscal year 2005. Adjusted operating profit margin was 20.7%
in the fourth quarter of fiscal year 2006, compared to 22.1% in the fourth
quarter of the prior fiscal year. On a GAAP basis, operating profit margin was
19.9% in the fourth quarter of fiscal year 2006 (which includes a 0.8% negative
impact of adopting FAS 123( R )), compared to 22.1% in the prior-year quarter.
For the full fiscal year 2006, Vacuum Technologies revenues
totaled $148.7 million, an increase of 6.3% compared to the $139.9 million
reported in fiscal year 2005. Adjusted operating profit margin was 20.3% in
fiscal year 2006, compared to 18.2% in the prior fiscal year. On a GAAP basis,
operating profit margin was 19.6% in fiscal year 2006 (which includes a 0.7%
negative impact of adopting FAS 123( R )), compared to 18.2% in fiscal year
2005.
For the combined segments, adjusted operating profit margin
before unallocated corporate costs was 13.7% in the fourth quarter of fiscal
year 2006, compared to 13.3% in the prior-year quarter. On a GAAP basis,
operating profit margin before unallocated corporate costs was 11.9% in the
fourth quarter of fiscal year 2006 (which includes a 0.5% negative impact of
adopting FAS 123( R )), compared to 12.3% in the fourth quarter of fiscal year
2005.
For the full fiscal year 2006, adjusted operating profit
margin before unallocated corporate costs was 12.9% for the combined segments,
compared to 12.2% in the prior fiscal year. On a GAAP basis, operating profit
margin before unallocated corporate costs was 10.7% in fiscal year 2006 (which
includes a 0.5% negative impact of adopting FAS 123( R )), compared to 9.8% in
fiscal year 2005.
Outlook
For the first time, Varian, Inc. provided earnings per share
guidance for fiscal year 2007. Adjusted diluted earnings per share for fiscal
year 2007 are expected to be $2.34 plus or minus $0.06. On a GAAP basis, diluted
earnings per share are expected to be $1.92 plus or minus $0.06 for fiscal year
2007.
The company's GAAP diluted earnings per share for fiscal year
2007 are expected to include the following items:
- Share-based compensation expense of approximately $0.20,
- Acquisition-related intangible amortization of
approximately $0.19, and
- Amortization of approximately $0.03 related to inventory
written up in connection with the acquisitions of Magnex Scientific Limited
and IonSpec Corporation.
Varian, Inc. will be holding a conference call later today,
November 1, 2006, at 2:00 p.m. Pacific time. The call may be heard via the
Internet by going to www.varianinc.com, clicking on the Investors link at the
bottom of the right side of the page, and then clicking on the Live Webcast
link.
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, operating earnings, operating profit margins, income tax expense,
earnings and diluted earnings per share from continuing operations, and free
cash flow. With the exception of free cash flow, these non-GAAP financial
measures exclude share- based compensation expense, acquisition-related
intangible and inventory write-up amortization and in-process research and
development charges, restructuring and other related costs, defined benefit
pension plan curtailment gains and settlement losses, and certain discrete
income tax events. Free cash flow is defined as operating cash flow plus the
excess tax benefit from share-based compensation expense (a component of
operating cash flow prior to the adoption of FAS 123( R )) less net fixed asset
purchases. Reconciliations of each of these non-GAAP financial measures to the
most directly comparable 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 cash flows.
We believe that excluding acquisition-related intangible and
inventory write-up amortization and in-process research and development charges
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 in-process research and development charges as
important, useful information.
We similarly believe that excluding share-based compensation
expense, restructuring and other related costs (principally related to facility
closures and employee terminations to improve operational efficiency), defined
benefit pension plan curtailment gains and settlement losses, and certain
discrete income tax events 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 share-based compensation expense, restructuring
and other related costs, defined benefit pension plan curtailment gains and
settlement losses, and certain discrete income tax events as important
supplemental information useful to their understanding of our historical results
and estimating of our future results.
We also believe that, in excluding share-based compensation
expense, acquisition-related intangible and inventory write-up amortization and
in- process research and development charges, restructuring and other related
costs, defined benefit pension plan curtailment gains and settlement losses, and
certain discrete income tax events, 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.
In the case of defined benefit pension plan curtailment gains
and settlement losses and certain discrete income tax events, we also consider
these to be unusual events.
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 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.
Caution Regarding Forward-Looking Statements
This press 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, as amended, including those relating to
anticipated earnings per share, share-based compensation expense and certain
amortization expenses for the full fiscal year 2007. These forward-looking
statements are based on management's current expectations, are not guarantees of
future performance, and involve certain risks and uncertainties that could cause
the company's actual results to differ materially from management's current
expectations and the forward-looking statements made in this press release.
Those risks and uncertainties include, but are not limited to, the following:
whether we will succeed in new product development, commercialization,
performance and acceptance; whether we can achieve continued growth in sales for
both life science and industrial applications; risks arising from the timing of
shipments, installations and the recognition of revenues on fourier- transform
mass spectrometers (FTMS) and certain magnetic resonance (MR) products,
including nuclear magnetic resonance (NMR) and MR imaging systems and
superconducting magnets; whether we can increase margins on newer MR products;
the impact of shifting product mix on profit margins; competitive products and
pricing; economic conditions in the company's product and geographic markets;
whether we will see continued and timely delivery of key raw materials and
components by suppliers; foreign currency fluctuations that could adversely
impact revenue growth and earnings; whether we will see continued market
investment in capital equipment; whether we will see reduced demand from
customers that operate in cyclical industries; the impact of any delay or
reduction in government funding for research; our ability to successfully
integrate acquisitions; and other risks detailed from time to time in the
company's filings with the Securities and Exchange Commission. We disclaim any
intent or obligation to update publicly any forward-looking statements, whether
in response to new information, future events or otherwise.
About Varian, Inc.
Varian, Inc. is a leading worldwide supplier of scientific
instruments and vacuum technologies for life science and industrial
applications. The company provides complete solutions, including instruments,
vacuum components, laboratory consumable supplies, software, training and
support through its global distribution and support systems. Varian, Inc.
employs approximately 3,700 people and operates manufacturing facilities in 14
locations in North America, Europe and the Pacific Rim. Varian, Inc. had fiscal
year 2006 sales of $835 million, and its common stock is traded on the NASDAQ
Global Select Market under the symbol, "VARI." Further information is available
on the company's Web site: www.varianinc.com.
For Information Contact:
Investor Relations
Varian, Inc.
650.213.8000, Ext. 3752
ir@varianinc.com
VARIAN, INC. AND SUBSIDIARY COMPANIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(In thousands, except per share amounts)
Fourth Quarter FY 2006 and Fourth Quarter FY 2005
Fiscal Quarter Ended
-----------------------
Sept. 29, Sept. 30,
2006 (A) 2005
---------- ----------
Sales
$219,597 $198,090
Cost of sales
118,671 (1) 109,539 (7)
---------- ----------
Gross profit
100,926 88,551
---------- ----------
Operating expenses
Selling, general and administrative
63,004 (2) 54,721 (8)
Research and development
15,612 (3) 12,848
---------- ----------
Total operating expenses
78,616 67,569
---------- ----------
Operating earnings
22,310 (4) 20,982 (9)
Interest income (expense)
Interest income
1,220 1,254
Interest expense
(597) (533)
---------- ----------
Total interest income, net
623 721
---------- ----------
Earnings from continuing operations
before income taxes
22,933 21,703
Income tax expense
8,256 (5) 7,133 (10)
---------- ----------
Earnings from continuing operations
14,677 (6) 14,570 (11)
---------- ----------
Discontinued operations
Earnings from operations of disposed
Electronics Manufacturing
business, net of taxes
- 184
Gain on sale of Electronics
Manufacturing business, net of taxes
- (164)
---------- ----------
Earnings from discontinued operations
- 20
---------- ----------
Net earnings
$14,677 $14,590
========== ==========
Net earnings per diluted share
Continuing operations
$0.47 (6) $0.46 (11)
Discontinued operations
- 0.00
---------- ----------
Net earnings
$0.47 $0.46
========== ==========
Diluted shares outstanding
31,284 32,015
========== ==========
-------------------------------------------------------------
Note (A): The results for the fiscal quarter ended
September 29, 2006
reflect share-based compensation expense as a result of the
adoption of
FAS 123( R ) on a prospective basis in the first quarter of
fiscal year
2006. Accordingly, the results for prior periods
(including the fiscal
quarter ended September 30, 2005) do not reflect such
expense.
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (see also attached
reconciliations
of GAAP to Adjusted results for each of these measures):
(1) $116,702 on an adjusted basis excluding
$1,420 in acquisition-
related intangible
amortization, $400 in acquisition-related
inventory write-up
amortization and $149 in share-based compensation
expense.
(2) $59,975 on an adjusted basis excluding $869
in acquisition-related
intangible amortization,
($33) in restructuring and other related
costs and $2,193 in
share-based compensation expense.
(3) $15,474 on an adjusted basis excluding $138
in share-based
compensation expense.
(4) $27,446 on an adjusted basis excluding the
adjustments described in
items (1) - (3) above.
(5) $9,908 on an adjusted basis excluding the tax
impact of the
adjustments described in
items (1) - (3) above.
(6) $18,161 and $0.58 per share, respectively, on
an adjusted basis
excluding the adjustments
(net of related tax effects) described in
items (1) - (3) above.
(7) $108,179 on an adjusted basis excluding $996
in acquisition-related
intangible amortization
and $364 in acquisition-related inventory
write-up amortization.
(8) $53,936 on an adjusted basis excluding $673
in acquisition-related
intangible amortization
and $112 in restructuring and other related
costs.
(9) $23,127 on an adjusted basis excluding the
adjustments described in
items (7) and (8) above.
(10) $7,778 on an adjusted basis excluding the tax
impact of the
adjustments described in
items (7) and (8) above.
(11) $16,070 and $0.50 per share, respectively, on an
adjusted basis
excluding the adjustments
(net of related tax effects) described in
items (7) and (8) above.
VARIAN, INC. AND SUBSIDIARY COMPANIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(In thousands, except per share amounts)
Full Year FY 2006 and Full Year FY 2005
Fiscal Year Ended
-----------------------
Sept. 29, Sept. 30,
2006 (A) 2005
---------- ----------
Sales
$834,705 $772,795
Cost of sales
460,356 (1) 436,136 (8)
---------- ----------
Gross profit
374,349 336,659
---------- ----------
Operating expenses
Selling, general and administrative 241,049
(2) 221,776 (9)
Research and development
59,730 (3) 53,942
Purchased in-process research
and development
756 (4) 700 (10)
---------- ----------
Total operating expenses
301,535 276,418
---------- ----------
Operating earnings
72,814 (5) 60,241 (11)
Interest income (expense)
Interest income
4,022 5,416
Interest expense
(2,172) (2,204)
---------- ----------
Total interest income, net
1,850 3,212
---------- ----------
Earnings from continuing operations
before income taxes
74,664 63,453
Income tax expense
24,595 (6) 16,766 (12)
---------- ----------
Earnings from continuing operations
50,069 (7) 46,687 (13)
---------- ----------
Discontinued operations
Earnings from operations of disposed
Electronics Manufacturing
business, net of taxes
- 5,385
Gain on sale of Electronics
Manufacturing business, net of taxes
- 73,885
---------- ----------
Earnings from discontinued operations
- 79,270
---------- ----------
Net earnings
$50,069 $125,957
========== ==========
Net earnings per diluted share
Continuing operations
$1.59 (7) $1.36 (13)
Discontinued operations
- 2.31
---------- ----------
Net earnings
$1.59 $3.67
========== ==========
Diluted shares outstanding
31,424 34,355
========== ==========
-------------------------------------------------------------
Note (A): The results for the fiscal year ended
September 29, 2006
reflect share-based compensation expense as a result of the
adoption of
FAS 123( R ) on a prospective basis in the first quarter of
fiscal year
2006. Accordingly, the results for prior periods
(including the fiscal
year ended September 30, 2005) do not reflect such expense.
NON-GAAP (ADJUSTED) FINANCIAL MEASURES (see also attached
reconciliations
of GAAP to Adjusted results for each of these measures):
(1) $450,549 on an adjusted basis excluding
$5,061 in acquisition-
related intangible
amortization, $4,298 in acquisition-related
inventory write-up
amortization and $448 in share-based compensation
expense.
(2) $229,821 on an adjusted basis excluding
$3,285 in acquisition-
related intangible
amortization, $220 in restructuring and other
related costs and $7,723
in share-based compensation expense.
(3) $59,189 on an adjusted basis excluding $541
in share-based
compensation expense.
(4) $0 on an adjusted basis excluding $756
related to an acquisition-
related in-process
research and development charge.
(5) $95,146 on an adjusted basis excluding the
adjustments described in
items (1) - (4) above.
(6) $32,006 on an adjusted basis excluding the
tax impact of the
adjustments described in
items (1) - (3) above.
(7) $64,990 and $2.07 per share, respectively, on
an adjusted basis
excluding the adjustments
(net of related tax effects) described in
items (1) - (4) above.
(8) $427,944 on an adjusted basis excluding
$3,860 in acquisition-
related intangible
amortization and $4,332 in acquisition-related
inventory write-up
amortization.
(9) $210,782 on an adjusted basis excluding
$2,631 in acquisition-
related intangible
amortization, $6,886 in restructuring and other
related costs and a
pension settlement loss of $1,477.
(10) $0 on an adjusted basis excluding $700 related to
an acquisition-
related in-process
research and development charge.
(11) $80,127 on an adjusted basis excluding the
adjustments described in
items (8) - (10) above.
(12) $28,004 on an adjusted basis excluding ($4,800)
related to tax
credits due to changes in
tax law and the tax impact of the
adjustments described in
items (8) and (9) above.
(13) $55,335 and $1.61 per share, respectively, on an
adjusted basis
excluding the adjustments
(net of related tax effects) described in
items (8) - (10) and (12)
above.
VARIAN, INC. AND SUBSIDIARY COMPANIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
September 29, September 30,
2006
2005
---------- ----------
ASSETS
Current assets
Cash and cash equivalents
$154,155 $188,494
Accounts receivable, net
177,037 154,525
Inventories
133,662 114,427
Deferred taxes
33,235 26,842
Prepaid expenses and other current assets
15,728 21,744
---------- ----------
Total current assets
513,817 506,032
Property, plant and equipment, net
112,528 102,290
Goodwill
181,563 149,934
Intangible assets, net
39,143 28,245
Other assets
14,543
9,494
---------- ----------
Total assets
$861,594 $795,995
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt
$2,500 $2,500
Accounts payable
73,138 61,435
Deferred profit
13,796 11,587
Accrued liabilities
169,063 165,626
---------- ----------
Total current liabilities
258,497 241,148
Long-term debt
25,000 27,500
Deferred taxes
3,721
5,888
Other liabilities
22,336 21,937
---------- ----------
Total liabilities
309,554 296,473
---------- ----------
Stockholders' equity
Preferred stock - par value $0.01, authorized
- 1,000 shares; issued - none
-
-
Common stock-par value $0.01, authorized
- 99,000 shares; issued and outstanding
- 30,870 shares at September 29, 2006
and 31,016 shares at September 30, 2005
319,090 282,923
Retained earnings
204,182 202,318
Accumulated other comprehensive income
28,768 14,281
---------- ----------
Total stockholders' equity
552,040 499,522
---------- ----------
Total liabilities and stockholders' equity
$861,594 $795,995
========== ==========
VARIAN, INC. AND SUBSIDIARY COMPANIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Fiscal Quarter Ended Fiscal Year Ended
-------------------- --------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2006 2005
2006 2005
--------- --------- --------- ---------
Cash flows from
operating activities
Net earnings
$14,677 $14,590 $50,069
$125,957
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Loss (gain) on sale
of Electronics
Manufacturing business
- 164
- (73,885)
Depreciation and amortization 7,663
6,053 27,470 26,249
(Gain) loss on disposition
of property, plant
and equipment
(9) (105)
92 12
Purchased in-process
research and development
- -
756 700
Share-based
compensation expense
2,480 75
8,712 415
Tax benefit from stock
option exercises
2,302 1,186
8,245 9,113
Excess tax benefit
from share-based
compensation expense
(2,060) (A) - (7,700) (A)
-
Deferred taxes
(12,577) 2,126 (16,663)
(5,553)
Changes in assets and
liabilities, excluding
effects of acquisitions
and divestitures:
Accounts receivable, net
(10,228) (12,181) (12,473)
5,398
Inventories
8,659 5,984 (8,451)
6,304
Prepaid expenses and other
current assets
(390) (1,617) 4,875
(2,212)
Other assets
17 (368)
140 543
Accounts payable
10,097 3,749 10,004
3,615
Deferred profit
1,063 962
800 (414)
Accrued liabilities
16,746 8,646
5,932 (18,398)
Other liabilities
544 2,149
1,434 1,431
--------- --------- --------- ---------
Net cash provided by
operating activities
38,984 (A) 31,413 73,242 (A) 79,275
--------- --------- --------- ---------
Cash flows from investing
activities
Proceeds from sale of
property, plant
and equipment
147 270
797 765
Purchase of property, plant
and equipment
(4,159) (4,497) (20,085)
(23,080)
Purchase of businesses, net
of cash acquired
(1,539) (420) (71,454)
(28,698)
Private company
equity investments
(652) -
(652) (4,000)
Proceeds from sale of short-
term investments
- -
- 35,000
Purchase of
short-term investments
- -
- (10,000)
Proceeds from sale of
Electronics Manufacturing
business, net of transaction
costs and taxes
- (21,196)
- 150,791
--------- --------- --------- ---------
Net cash (used in) provided
by investing activities
(6,203) (25,843) (91,394)
120,778
--------- --------- --------- ---------
Cash flows from
financing activities
Repayments of debt
- -
(2,500) (7,106)
Repurchase of common stock (13,922)
(38,412) (63,055) (178,786)
Issuance of common stock
6,728 2,846 34,060
18,363
Excess tax benefit
from share-based
compensation expense
2,060 (A) -
7,700 (A) -
Transfers to Varian Medical
Systems, Inc.
(143) (124)
(649) (882)
--------- --------- --------- ---------
Net cash used in
financing activities
(5,277)(A) (35,690) (24,444)(A) (168,411)
--------- --------- --------- ---------
Effects of exchange rate
changes on cash and
cash equivalents
1,936 (590)
8,257 (3,130)
--------- --------- --------- ---------
Net increase (decrease) in
cash and cash equivalents
29,440 (30,710) (34,339)
28,512
Cash and cash equivalents at
beginning of period
124,715 219,204 188,494
159,982
--------- --------- --------- ---------
Cash and cash equivalents at
end of period
$154,155 $188,494 $154,155
$188,494
========= ========= ========= =========
-------------------------------------------------------------
Note (A): Net cash flows from operating activities for
the fiscal quarter
and year ended September 29, 2006 reflect the
reclassification
of the excess tax benefit from share-based compensation
expense to
financing activities as a result of the adoption of FAS 123(
R ) on a
prospective basis in the first quarter of fiscal year 2006.
Accordingly,
net cash flows from operating activities for prior periods
(including the
fiscal quarter and year ended September 30, 2005) do not
reflect such
reclassification.
VARIAN, INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP TO ADJUSTED RESULTS - ACTUAL
UNAUDITED RESULTS OF OPERATIONS
(In thousands)
Fourth Quarter FY 2006 and Fourth Quarter FY 2005
and
Full Year FY 2006 and Full Year FY 2005
Fiscal Quarter Ended Fiscal Year Ended
--------------------- -------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2006 2005 2006
2005
--------- --------- --------- ---------
TOTAL COMPANY
-------------
Cost of Sales
U.S. GAAP as reported
$118,671 $109,539 $460,356 $436,136
Adjustments:
Share-based compensation expense
(149) -
(448) -
Acquisition-related
intangible amortization
(1,420) (996) (5,061) (3,860)
Acquisition-related inventory
write-up amortization
(400) (364) (4,298) (4,332)
--------- --------- --------- ---------
As adjusted
$116,702 $108,179 $450,549 $427,944
========= ========= ========= =========
Selling, General and
Administrative Expenses
U.S. GAAP as reported
$63,004 $54,721 $241,049 $221,776
Adjustments:
Share-based compensation expense
(2,193) - (7,723)
-
Acquisition-related
intangible amortization
(869) (673) (3,285) (2,631)
Pension settlement loss
- -
- (1,477)
Restructuring and other
related costs
33 (112) (220)
(6,886)
--------- --------- --------- ---------
As adjusted
$59,975 $53,936 $229,821 $210,782
========= ========= ========= =========
Research and Development
U.S. GAAP as reported
$15,612 $12,848 $59,730 $53,942
Adjustments:
Share-based compensation expense
(138) -
(541) -
--------- --------- --------- ---------
As adjusted
$15,474 $12,848 $59,189 $53,942
========= ========= ========= =========
Purchased In-Process Research
and Development
U.S. GAAP as reported
$- $-
$756 $700
Adjustments:
Acquisition-related in-process
research and development charges
- -
(756) (700)
--------- --------- --------- ---------
As adjusted
$- $-
$- $-
========= ========= ========= =========
VARIAN, INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP TO ADJUSTED RESULTS - ACTUAL
UNAUDITED RESULTS OF OPERATIONS
(In thousands, except margin data)
Fourth Quarter FY 2006 and Fourth Quarter FY 2005
and
Full Year FY 2006 and Full Year FY 2005
Fiscal Quarter Ended Fiscal Year Ended
---------------------- ----------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2006 2005 2006
2005
--------- --------- --------- ---------
TOTAL COMPANY (Continued)
-------------------------
Operating Earnings
U.S. GAAP as reported
$22,310 $20,982 $72,814
$60,241
Adjustments:
Share-based
compensation expense
2,480 -
8,712 -
Acquisition-related
in-process research and
development charges
- -
756 700
Acquisition-related
intangible amortization
2,289 1,669 8,346
6,491
Acquisition-related inventory
write-up amortization
400 364
4,298 4,332
Pension settlement loss
- -
- 1,477
Restructuring and other
related costs
(33) 112
220 6,886
--------- --------- --------- ---------
As adjusted
$27,446 $23,127 $95,146
$80,127
========= ========= ========= =========
Operating Margins
U.S. GAAP as reported
10.2 % 10.6 % 8.7 %
7.8 %
Adjustments:
Share-based
compensation expense
1.1 -
1.0 -
Acquisition-related in-process
research and
development charges
- -
0.1 0.1
Acquisition-related
intangible amortization
1.0 0.8
1.1 0.8
Acquisition-related inventory
write-up amortization
0.2 0.2
0.5 0.6
Pension settlement loss
- -
- 0.2
Restructuring and other
related costs
- 0.1
- 0.9
--------- --------- --------- ---------
As adjusted
12.5 % 11.7 % 11.4 %
10.4 %
========= ========= ========= =========
Income Tax Expense
U.S. GAAP as reported
$8,256 $7,133 $24,595
$16,766
Adjustments:
Tax credit due to changes in
tax law
- -
- 4,800
Tax impact of
other adjustments:
Share-based
compensation expense
939 -
3,172 -
Acquisition-related
intangible amortization
615 502
2,750 2,178
Acquisition-related inventory
write-up amortization
107 109
1,416 1,453
Pension settlement loss
- -
- 496
Restructuring and other
related costs
(9) 34
73 2,311
--------- --------- --------- ---------
As adjusted
$9,908 $7,778 $32,006
$28,004
========= ========= ========= =========
VARIAN, INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP TO ADJUSTED RESULTS - ACTUAL
UNAUDITED RESULTS OF OPERATIONS
(In thousands, except per share data)
Fourth Quarter FY 2006 and Fourth Quarter FY 2005
and
Full Year FY 2006 and Full Year FY 2005
Fiscal Quarter Ended Fiscal Year Ended
---------------------- -------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2006 2005
2006 2005
--------- --------- --------- ---------
TOTAL COMPANY (Continued)
-------------------------
Earnings From Continuing Operations
U.S. GAAP as reported
$14,677 $14,570 $50,069
$46,687
Adjustments:
Share-based compensation
expense
1,541 -
5,540 -
Acquisition-related in-process
research and development
charges
- -
756 700
Acquisition-related
intangible amortization
1,674 1,167 5,596
4,314
Acquisition-related inventory
write-up amortization
293 255
2,882 2,878
Pension settlement loss
- -
- 981
Restructuring and other
related costs
(24) 78
147 4,575
Tax credit due to changes in
tax law
- -
- (4,800)
-------- -------- -------- --------
As adjusted
$18,161 $16,070 $64,990
$55,335
======== ======== ======== ========
Diluted Earnings Per Share From
Continuing Operations
U.S. GAAP as reported
$0.47 $0.46 $1.59
$1.36
Adjustments:
Share-based compensation
expense
0.05 -
0.18 -
Acquisition-related in-process
research and development
charges
- -
0.02 0.02
Acquisition-related
intangible amortization
0.05 0.03
0.18 0.13
Acquisition-related inventory
write-up amortization
0.01 0.01
0.09 0.08
Pension settlement loss
- -
- 0.03
Restructuring and other
related costs
- -
0.01 0.13
Tax credit due to changes in
tax law
- -
- (0.14)
-------- -------- -------- --------
As adjusted
$0.58 $0.50 $2.07
$1.61
======== ======== ======== ========
Free Cash Flow
U.S. GAAP as reported -
Net cash provided by
operating activities
$38,984 $31,413 $73,242
$79,275
Adjustments:
Excess tax benefit from
share-based
compensation expense
2,060 -
7,700 -
Proceeds from sale of property,
plant and equipment
147 270
797 765
Purchase of property, plant
and equipment
(4,159) (4,497) (20,085) (23,080)
-------- -------- -------- --------
As adjusted
$37,032 $27,186 $61,654
$56,960
======== ======== ======== ========
VARIAN, INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP TO ADJUSTED RESULTS - ACTUAL
UNAUDITED RESULTS OF OPERATIONS
(In thousands, except margin data)
Fourth Quarter FY 2006 and Fourth Quarter FY 2005
and
Full Year FY 2006 and Full Year FY 2005
Fiscal Quarter Ended Fiscal Year Ended
---------------------- -------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2006 2005
2006 2005
--------- --------- --------- ---------
TOTAL COMPANY EXCLUDING
GENERAL (UNALLOCATED)
CORPORATE COSTS
-----------------------
Operating Earnings
U.S. GAAP as reported
$26,169 $24,449 $89,395
$76,120
Adjustments:
Share-based
compensation expense
1,203 -
4,562 -
Acquisition-related
in-process research
and development charges
- -
756 700
Acquisition-related
intangible amortization
2,289 1,669 8,346
6,491
Acquisition-related inventory
write-up amortization
400 364
4,298 4,332
Restructuring and other
related costs
(33) (65)
232 6,477
--------- --------- --------- ---------
As adjusted
$30,028 $26,417 $107,589 $94,120
========= ========= ========= =========
Operating Margins
U.S. GAAP as reported
11.9 % 12.3 % 10.7 %
9.8 %
Adjustments:
Share-based
compensation expense
0.5 -
0.5 -
Acquisition-related in-process
research and
development charges
- -
0.1 0.1
Acquisition-related
intangible amortization
1.1 0.8
1.1 0.8
Acquisition-related inventory
write-up amortization
0.2 0.2
0.5 0.7
Restructuring and other
related costs
- -
- 0.8
--------- --------- --------- ---------
As adjusted
13.7 % 13.3 % 12.9 %
12.2 %
========= ========= ========= =========
VARIAN, INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP TO ADJUSTED RESULTS - ACTUAL
UNAUDITED RESULTS OF OPERATIONS
(In thousands, except margin data)
Fourth Quarter FY 2006 and Fourth Quarter FY 2005
and
Full Year FY 2006 and Full Year FY 2005
Fiscal Quarter Ended Fiscal Year Ended
---------------------- -------------------
Sept. 29, Sept. 30, Sept. 29, Sept. 30,
2006 2005
2006 2005
--------- --------- --------- ---------
SCIENTIFIC INSTRUMENTS SEGMENT
------------------------------
Operating Earnings
U.S. GAAP as reported
$18,901 $16,852 $60,291
$50,728
Adjustments:
Share-based
compensation expense
894 -
3,451 -
Acquisition-related
in-process research
and development charges
- -
756 700
Acquisition-related
intangible amortization
2,289 1,669
8,346 6,491
Acquisition-related inventory
write-up amortization
400 364
4,298 4,332
Restructuring and other
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