Varian Medical Systems (VAR) has reported a 77.08 percent plunge in profit for the quarter ended Dec. 30, 2016. The company has earned $20.40 million, or $0.22 a share in the quarter, compared with $89 million, or $0.91 a share for the same period last year. On the other hand, adjusted net income for the quarter stood at $70.30 million, or $0.75 a share compared with $97.20 million or $0.99 a share, a year ago.
Revenue during the quarter went up marginally by 0.82 percent to $763.30 million from $757.10 million in the previous year period. Gross margin for the quarter expanded 292 basis points over the previous year period to 43.82 percent. Total expenses were 94.97 percent of quarterly revenues, up from 84.59 percent for the same period last year. That has resulted in a contraction of 1038 basis points in operating margin to 5.03 percent.
Operating income for the quarter was $38.40 million, compared with $116.70 million in the previous year period.
However, the adjusted operating income for the quarter stood at $106.20 million compared to $127.60 million in the prior year period. At the same time, adjusted operating margin contracted 294 basis points in the quarter to 13.91 percent from 16.85 percent in the last year period.
"Varian generated strong global order growth and margin gains in our oncology business as well as sales momentum in the imaging components business while recording an impairment of CPTC's indebtedness to Varian," said Dow Wilson, chief executive officer of Varian Medical Systems. "We remain on track with our previously announced plans to separate and establish the imaging components business as a new public company, Varex Imaging, at the end of this month."
For the second-quarter, Varian Medical Systems forecasts revenue to grow in the range of 4 percent to 5 percent. Varian Medical Systems forecasts revenue to grow in the range of 4 percent to 5 percent for the fiscal year 2017. On an adjusted basis, the company expects diluted earnings per share to be in the range of $0.84 to $0.90 for the second-quarter. For fiscal year 2017, the company expects diluted earnings per share to be in the range of $2.94 to $3.06 on adjusted basis.
Working capital declines
Varian Medical Systems has witnessed a decline in the working capital over the last year. It stood at $897.20 million as at Dec. 30, 2016, down 14.65 percent or $153.96 million from $1,051.16 million on Jan. 01, 2016. Current ratio was at 1.59 as on Dec. 30, 2016, down from 1.66 on Jan. 01, 2016.
Cash conversion cycle (CCC) has decreased to 124 days for the quarter from 179 days for the last year period. Days sales outstanding went up to 94 days for the quarter compared with 93 days for the same period last year.
Days inventory outstanding has decreased to 70 days for the quarter compared with 125 days for the previous year period. At the same time, days payable outstanding went up to 40 days for the quarter from 38 for the same period last year.
Debt comes down
Varian Medical Systems has recorded a decline in total debt over the last one year. It stood at $607.20 million as on Dec. 30, 2016, down 16.62 percent or $121.05 million from $728.25 million on Jan. 01, 2016. Total debt was 16.48 percent of total assets as on Dec. 30, 2016, compared with 19.54 percent on Jan. 01, 2016. Debt to equity ratio was at 0.35 as on Dec. 30, 2016, down from 0.45 as on Jan. 01, 2016.
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