Varex Imaging Announces Financial Results For Fourth Quarter And Fiscal Year 2017

11/09/17

SALT LAKE CITY, Nov. 9, 2017 /PRNewswire/ -- Varex Imaging Corporation (Nasdaq: VREX) today announced its financial results for the fourth quarter and fiscal year 2017.

FISCAL YEAR HIGHLIGHTS

  • Revenues increased 13% to $698 million, including $61 million from the acquired imaging business
  • Gross margin was 36% | Adjusted gross margin* was 38%
  • Operating earnings margin was 12% | Adjusted operating earnings margin* was 15%
  • Net earnings were $1.36 per diluted share | Adjusted net earnings* were $1.80 per diluted share


QUARTERLY HIGHLIGHTS

  • Revenues increased 25% to $216 million, including $35 million from the acquired imaging business
  • Gross margin was 36% | Adjusted gross margin* was 38%
  • Operating earnings margin was 12% | Adjusted operating earnings margin* was 16%
  • Net earnings were $0.39 per diluted share | Adjusted net earnings* were $0.59 per diluted share

"Fiscal year 2017 was a transformational year for Varex. We successfully completed our spin-off into a new publicly traded company and closed a major acquisition of the imaging business from PerkinElmer while maintaining our focus on growing revenue and providing excellent customer service. Our strong performance in the fourth quarter and the fiscal year reinforces our belief that our emphasis and commitment to X-ray imaging components has enabled us to serve our customers better and provide greater value to our stockholders," said Sunny Sanyal, Chief Executive Officer of Varex Imaging Corporation.


FISCAL YEAR 2017 RESULTS
Revenues for fiscal year 2017 increased 13% to $698 million from revenues of $620 million in the prior year. This growth reflects a 3% increase ($17 million) in revenues from our organic business and the addition of $61 million in revenues in the last five months of the year from the acquired imaging business, which was a 5% increase in revenues from the same five-month period in the prior year.

Gross margin for fiscal year 2017 was $253 million or 36% of revenues compared to a gross margin of $248 million or 40% of revenues in the prior year. Adjusted gross margin* for fiscal year 2017 was $264 million or 38% of revenues compared to $250 million or 40% of revenues in the prior year. The lower gross margin and adjusted gross margin* was in part due to a mix shift toward lower margin products and pricing pressure on digital detectors.

Medical segment revenues increased 10% to $557 million in fiscal year 2017 from $506 million a year ago due primarily to the addition of the acquired imaging business. The Medical segment gross margin was 35% in fiscal year 2017 compared to 39% in the prior year. The decline in gross margin was primarily due to acquisition-related costs and a mix shift to lower margin products.

Industrial segment revenues increased 24% to $141 million in fiscal year 2017 from $114 million a year ago due primarily to contribution from the acquired imaging business and higher sales of security products. The Industrial segment gross margin was 42% in fiscal year 2017 compared to 46% in the prior year. The decline in gross margin was primarily due to acquisition-related costs.

For fiscal year 2017, R&D investment was 10% of revenues with the majority of activity focused on development projects related to CT X-ray tubes and next generation digital detectors. R&D investment in fiscal year 2016 was 9% of revenues. SG&A expenses were 15% of revenues compared to 14% of revenues in the prior year.

For fiscal year 2017, operating earnings were $84 million and operating margin was 12% compared to operating earnings of $109 million and operating margin of 18% in the prior year. Adjusted operating earnings* were $108 million and adjusted operating margin* was 15% compared to adjusted operating earnings* of $117 million and adjusted operating margin* of 19% a year ago. The decline in operating margin and adjusted operating margin* was in part due to lower gross margin and higher R&D investment.

Net earnings for fiscal year 2017 were $52 million, or $1.36 per diluted share, compared to net earnings of $69 million, or $1.82 per diluted share, in the prior year. Adjusted net earnings* for fiscal year 2017 were $68 million, or $1.80 per diluted share, compared to $74 million, or $1.96 per diluted share, in the same period of the prior year. The decline in net earnings and adjusted net earnings* was in part due to higher interest expense and lower operating earnings that was partially offset by significantly lower tax expense due to utilization of foreign net operating losses.
 

FOURTH QUARTER FISCAL YEAR 2017 RESULTS
Revenues increased 25% to $216 million in the fourth quarter of fiscal year 2017 from revenues of $172 million in the year-ago quarter. This growth reflects a 6% increase ($10 million) in revenues from our organic business and the addition of $35 million in revenues from the acquired imaging business.

"This was the largest quarter in our history, even without the contribution from the acquisition, and was sequentially $46 million higher than revenues in the preceding quarter. We experienced good growth from our CT tubes, mammography, dental, surgery and security products," Sanyal continued.

Gross margin was $78 million or 36% of revenues in the fourth quarter of fiscal year 2017 compared to $69 millionor 40% of revenues in the prior year quarter. Adjusted gross margin* in the fourth quarter of fiscal year 2017 was $83 million or 38% of revenues compared to adjusted gross margin* of $70 million or 41% of revenues in the prior-year quarter. While the gross margin and the adjusted gross margin* reflected higher revenues, margin rates were unfavorably impacted by pricing pressures and a mix shift within digital detectors, which were partially offset by margin rate improvements in the X-ray tube, connect and control, and software product lines.

Net earnings for the fourth quarter of fiscal year 2017 were $15 million, or $0.39 per diluted share, compared to net earnings of $22 million, or $0.58 per diluted share, in the fourth quarter of the prior fiscal year. Adjusted net earnings* were $22 million, or $0.59 per diluted share, in the fourth quarter of fiscal year 2017 compared to adjusted net earnings* of $23 million, or $0.61 per diluted share, in the fourth quarter of the prior fiscal year. Net earnings and adjusted net earnings* were impacted by higher interest expense offset by significantly lower tax expense due to utilization of foreign net operating losses.
 

BALANCE SHEET
At the end of fiscal year 2017, cash and cash equivalents were $83 million. During the fourth quarter of fiscal year 2017, the company reduced its outstanding debt by $16 million to $494 million.


VAREX OUTLOOK
For fiscal year 2018, including contribution from a full year of the acquired imaging business, the company expects revenues to grow by 13% to 14% from the prior fiscal year. The company expects adjusted net earnings* to be in a range of $1.78 to $1.88 per diluted share for fiscal year 2018.

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 without unreasonable effort the company is unable to provide a meaningful or accurate GAAP forecast of net earnings per diluted share 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 "Discussion of Adjusted Non-GAAP Financial Measures" below for a description of items excluded from the comparable GAAP measure.


CONFERENCE CALL INFORMATION
Varex is scheduled to conduct its fourth quarter fiscal year 2017 conference call at 3:00 p.m. today. This call will be webcast live and can be accessed at the company's website at investors.vareximaging.com, then scrolling down to the Events & Presentations section and clicking on the link for this quarterly earnings call. Investors can also access this teleconference by dialing 1-877-524-8416 from anywhere in the U.S. or by dialing 1-412-902-1028 from non-U.S. locations. A replay of this quarterly teleconference will be available from November 9th through November 23rd and can be accessed at the company's website or by calling 1-877-660-6853 from anywhere in the U.S. or 1-201-612-7415 from non-U.S. locations - Passcode: 13672496.


ABOUT VAREX IMAGING
Varex Imaging Corporation is a leading innovator, designer and manufacturer of X-ray imaging components, which include tubes, digital flat panel detectors and other image processing solutions, which are key components of X-ray imaging systems. With a 65+ year history of successful innovation, Varex's components are used in medical imaging as well as in industrial and security imaging applications. Global OEM manufacturers of X-ray imaging systems use the company's X-ray sources, digital detectors, connecting devices and imaging software as components in their systems to detect, diagnose and protect. Varex employs approximately 1,900 people located at manufacturing and service center sites in North America, Europe, and Asia. For more information about Varex, 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 12E of the Securities Exchange Act of 1934. Statements concerning industry or market outlook; the impact of the acquisition of the PerkinElmer imaging business on the company's financial results; growth drivers; customer demand and acceptance of products or technology; the company's future orders, revenues, product volumes, synergies, or earnings guidance or other expected future financial results or performance; and any statements using the terms "expect," "intend," "outlook," "future," "anticipate," "will," "could," "should," "believe," "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 the ability to effectively integrate the products of PerkinElmer's imaging business into the company's product offerings and sales and marketing operations, recognize the intended benefits and synergies of the acquisition, and retain the services of key acquired personnel; global economic conditions; demand for and delays in delivery of products of the company or its customers; 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 outcome of the corporate tax reform being considered by the U.S. Congress; and the other risks listed from time to time in the company's 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 | [email protected]