Varian Medical Systems, Inc. (Varian Medical), a diagnostic imaging company, has reported revenues of $553.6 million for the second quarter of fiscal 2009, up 7%, compared with the revenues of $518.4 million in the year-ago quarter. It has also reported net earnings of $67.8 million, or $0.54 per diluted per share, for the second quarter of fiscal 2009, compared with net earnings of $71.3 million, or $0.56 per diluted per share, in the year-ago quarter.
Compared to continuing operations in the year-ago quarter, second quarter revenues up 7% to $554 million, net orders rose 2% to $524 million, and the backlog rose 12% to $1.9 billion.
Net orders grew in our Oncology Systems and Security and Inspection Products businesses but fell in our X-Ray Products business, said Tim Guertin, president and chief executive officer of Varian Medical. Revenues from continuing operations increased in all three businesses, and our gross margin improved by nearly three%age points, contributing to higher earnings versus the year-ago quarter. However, we began to feel the effects of the global recession during the quarter which resulted in modest net orders growth. Currency fluctuations negatively impacted orders and revenue growth in the quarter.
The company ended the second quarter of fiscal 2009 with $375 million in cash and cash equivalents and $43 million of debt.
Oncology Systems’ revenues for the second quarter of fiscal 2009 totaled $445 million, up 6% from the second quarter of last fiscal year. This business recorded second-quarter net orders of $434 million, up 5% from the same period last year. Net orders were up 4% in North America and up 7% in international markets.
Oncology Systems’ order growth was driven primarily by our service business and international demand, said Guertin. Oncology order growth was 10% on a constant currency basis. The North American order growth rate was slowed by tightened capital budgets and tougher credit requirements. A shift toward North American deliveries and a richer product mix including RapidArc contributed to significant growth in gross margins for this business.
Revenues for the X-Ray Products business, including tubes and digital flat-panel detectors for filmless X-ray imaging, were $86 million for the second quarter of fiscal 2009, up 15% from the year-ago quarter. Net orders for this business were $69 million, down 17% from the year-ago quarter.
X-ray Product orders were impacted by customers who are now adjusting inventory levels to reflect slower imaging equipment sales in a recessionary environment, said Guertin. Orders for high-tier CT and mammography tubes declined. Decreases in dental and veterinary imaging panel orders offset significant growth in orders for our emerging line of radiographic panels. Higher revenues combined with operational improvements and reductions in quality cost led to a substantial margin increase for this business.
The company’s Security and Inspection Products (SIP) business, proton therapy business, and Ginzton Technology Center reported combined second quarter of fiscal 2009 revenues of $23 million, up 3% from the year-ago quarter. Net orders for the quarter were $21 million, up 9% versus the year-ago quarter due exclusively to the SIP business.
The company completed the sale of the ACCEL research instruments business to Bruker Corporation during the quarter and recognized an $11.5 million loss net of taxes from discontinued operations. The company’s proton therapy business will continue operating under the name Varian Particle Therapy.
Our outlook for the balance of the fiscal year is more cautious due to tighter capital budgets and credit, currency fluctuations, a longer order-to-delivery cycle in Oncology, and weaker demand for X-ray products, Guertin said. We now believe that fiscal year 2009 revenues from continuing operations could grow by about 5 to 8%. With the help of cost control measures that the company has put in place for fiscal year 2009 and beyond, we believe that net earnings per diluted share from continuing operations for the fiscal year could grow to between $2.50 and $2.60 compared to $2.31 from continuing operations in last fiscal year. For the third quarter of fiscal year 2009, revenues could grow in the range of 5 to 7%, with higher growth in operating earnings. Including a higher expected tax rate and lower interest income, third quarter net earnings per diluted share from continuing operations should be in the range of $0.61 to $0.65.