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Forward-Looking Statements
Except for historical information, the information that follows contains certain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include the matters described in the risk factors section of our information statement and other risks detailed from time to time in the company’s filings with the Securities and Exchange Commission.
For comparison purposes, the company makes reference to net earnings per diluted share results in the fourth quarters and full fiscal years 2006 and 2007 that are not consistent with accounting principles generally accepted in the United States (GAAP). These results are reflected and reconciled to GAAP in the table titled “GAAP to Non-GAAP Reconciliation – EPS FY 2007 & FY 2006” included in the financial section of this presentation. The company references these results to allow a better comparison between ongoing operations in the current and prior periods. The company's reference to these results should be considered in addition to results that are prepared under current accounting standards but should not be considered a substitute for results that are presented as consistent with GAAP.
VARIAN MEDICAL SYSTEMS | A partner for life
Strategic Goals
Sustained profitable growthTechnical and clinical preeminenceSafety, integrity, and complianceTalented, productive, and inspired workforce
VARIAN MEDICAL SYSTEMS | A partner for life
VARIAN MEDICAL SYSTEMS | A partner for life
Best medicineBest-in-class capabilitiesClinical outcomes Patient comfort
Preeminence
VARIAN MEDICAL SYSTEMS | A partner for life
Best medicineBest-in-class capabilitiesClinical outcomes Patient comfort
Best economicsVersatilityThroughputAffordability
Preeminence
VARIAN MEDICAL SYSTEMS | A partner for life
Best medicineBest-in-class capabilitiesClinical outcomes Patient comfort
Best economicsVersatilityThroughputAffordability
Greatest ease-of-useReliability and serviceIntegration and automationTraining and Education
Preeminence
VARIAN MEDICAL SYSTEMS | A partner for life
The Program
Profitable GrowthElisha Finney
X-Ray ProductsRobert Kluge
SecurityLester Boeh
Oncology SystemsDow Wilson
Booth Tour
ASTRO IR Day
VARIAN MEDICAL SYSTEMS | A partner for life
($M) VMS OS XRP Other
Net Orders 2,075 14% 1,636 7% 273 13% 166 292%
Revenues 1,777 11% 1,440 8% 257 13% 79 135%
Gross Margin 41% 42% 40% 28%
R&D 117
SG&A 282
Op Earnings 335 19% ROS (+ 8%)
Interest Income 7EPS $1.83 (131M diluted shares)
Fiscal Year 2007 Results
GAAP to Non-GAAP ReconciliationEPS FY 2007 & FY 2006
(1) Represents fiscal year 2007 revenues and expenses associated with ACCEL Instruments GmbH and Bio-Imaging Research, Inc., which were acquired in fiscal year 2007.
(2) Represents fiscal year 2006 one-time tax benefits from the repatriation of foreign earnings under the Job Creations Act of 2004and a deferred tax asset adjustment and an amount related to the release of a reserve for certain contingencies with the saleof the Company’s Electron Device Business in 1995.
Q4 07 Q4 06%
Change FY 07 FY 06%
Change
EPS $0.61 $0.62 -- $1.83 $1.81 --
ACCEL/BIR (1) $0.02 -- -- $0.06 -- --
Tax/Disc Ops (2) -- ($0.08) -- -- ($0.16) --
Proforma EPS $0.63 $0.54 17.0% $1.89 $1.65 15.0%
VARIAN MEDICAL SYSTEMS | A partner for life
VARIAN MEDICAL SYSTEMS | A partner for life
Backlog Record $1,699M(As of 09/28/07)
0
200
400
600
800
1000
1200
1400
1600
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FY 2004 FY 2005 FY 2006 FY 2007
Q1Q2Q3Q4
VARIAN MEDICAL SYSTEMS | A partner for life
Q4 FY07 Balance Sheet / Cash Flow
Conservative balance sheet$263M cash$90M total debt$821M shareholder equity
*DSO 88 days – down 6 days from year ago quarter
Strong cash flow$137M record cash flow from operations Spent $85M to repurchase 2M shares during the quarter
(11M shares remain under current share repurchase authorization)
*Days Sales Outstanding
VARIAN MEDICAL SYSTEMS | A partner for life
Fiscal 2008 Outlook(As of end of Fourth Quarter, Fiscal 2007)
Revenues growth estimated at ~ 10% to 11% for FY 2008
EPS estimated at ~ $2.04 to $2.06 for FY 2008 including ACCEL dilution
Revenues growth estimated at ~ 12% to 13% for the First Quarter of FY 2008
EPS estimated at ~ $0.39 to $0.40 for the First Quarter of FY 2008 including
ACCEL dilution
Note:(1) Fiscal 2008 Outlook includes the impact of the acquisition of ACCEL Instruments and BIR.(2) Varian updates its outlook once per quarter when it reports financial results. This information is for reference purposes only and is not an affirmation
of or an update to the outlook that Varian reported at the close of last quarter.
VARIAN MEDICAL SYSTEMS | A partner for life
X-ray Tubes
Flat-panel digital X-rayimage detectors
Varian X-ray Products
VARIAN MEDICAL SYSTEMS | A partner for life
Third year of double-digit sales growth (13%)• Continued growth of panel business• Solid growth in high-tier CT tubes
X-Ray Products Highlights
VARIAN MEDICAL SYSTEMS | A partner for life
Third year of double-digit sales growth (13%)• Continued growth of panel business• Solid growth in high-tier CT tubes
FY08/09 New Product Introductions• 14x17 and 17x17 Radiographic• 30x30 Fluoro• Mammo
X-Ray Products Highlights
VARIAN MEDICAL SYSTEMS | A partner for life
Third year of double-digit sales growth (13%)• Continued growth of panel business• Solid growth in high-tier CT tubes
FY08/09 New Product Introductions• 14x17 and 17x17 Radiographic• 30x30 Fluoro• Mammo
Salt Lake City factory expansioncompleteddpiX joint venture fab expansionin process
X-Ray Products Highlights
VARIAN MEDICAL SYSTEMS | A partner for life
Transition to digital imaging• Imaging panels rapidly
replacing image intensifiers
• DR and CR imagingpanels replacing film
• DR will replace CR asDR costs drop
Digital imaging impactingX-ray Tube requirements
• Higher power in a smaller package
Growth Drivers
Estimated World FPD Market(Wholesale Value)
Market Overview
0
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1000
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2000
2500
$M
FY05 FY06 FY07 FY08 FY09 FY10 FY11
Mammo
Fluoro / Dental
RAD
CR
VARIAN MEDICAL SYSTEMS | A partner for life
VARIAN MEDICAL SYSTEMS | A partner for life
Industry transition to digital imaging is a key growth driver
Varian has invested in new products and production capacity and is well positioned to grow
X-Ray Products Summary
VARIAN MEDICAL SYSTEMS | A partner for life
Focusing Energy on Safer Ports and BordersLester Boeh
VP, Emerging Businesses
Security & Inspection Products
VARIAN MEDICAL SYSTEMS | A partner for life
SIP Growth Drivers
FY-07Net orders up 105%Revenues up 70%EBIT up 10 pointsBorder security growingGrowth in all regionsInnovation in NDT
VARIAN MEDICAL SYSTEMS | A partner for life
Cargo Inspection Market Strategy
Systems Integrator
Source Detector Imaging Software Systems Integration
Global Sales/Service
Smiths Detection VAR
Rapiscan VAR
AS&E VAR
L3 VAR
SAIC VAR
NUCTECH
VARIAN MEDICAL SYSTEMS | A partner for life
Security & Inspection Opportunity
$0
$50
$100
$150
$200
$250
$300
FY07 FY08 FY09 FY10 FY11
NDT Port & Border Air Cargo
Millions
VARIAN MEDICAL SYSTEMS | A partner for life
New Directions in Cancer Care
Dow WilsonPresident , Oncology SystemsASTRO IR DayOct. 30, 2007
Oncology Systems
Technology for more effective cancer therapies
VARIAN MEDICAL SYSTEMS | A partner for life
VARIAN MEDICAL SYSTEMS | A partner for life
Today’s Oncology Agenda
• Brief 2007 Recap• ASTRO Overview…RapidArc Launch
VARIAN MEDICAL SYSTEMS | A partner for life
Oncology Orders, 2007
VARIAN MEDICAL SYSTEMS | A partner for life
International $673M $731M 8.5%
Domestic $862M $905M 5.1%
Total $1,535M $1,636M 6.6%
2006 2007 V%
Orders Growth = $101M
VARIAN MEDICAL SYSTEMS | A partner for life
Tale of Two Halves
VARIAN MEDICAL SYSTEMS | A partner for life
1.7%
10.6%
Orders 1H’07 Orders 2H’07
$691 $703
2006 2007
$844
$933
2006 2007
$ in Millions
VARIAN MEDICAL SYSTEMS | A partner for life
Q4 2007 Orders
International $170M -4.2% $214M 26.6%
Domestic $300M 25.1% $308M 2.5%
Total $470M 12.7% $522M 11.2%
Q4’06 V% Q4’07 V%
VARIAN MEDICAL SYSTEMS | A partner for life
Strong in all geographies
VARIAN MEDICAL SYSTEMS | A partner for life
Installation Times
New Systems Upgrades
10
5
2006 IGRT 2007 IGRT
15
5
2006 OBI Upg 2007 OBI Upg
clinical days
clinical days
VARIAN MEDICAL SYSTEMS | A partner for life
weeks
weeks
Driving predictability & uptick in upgrades
VARIAN MEDICAL SYSTEMS | A partner for life
RapidArc* Objectives
• Single arc IMRT • IMRT quality
•Uniform target coverage•Improved normal tissue sparing
• Treat in 2 minutes or less•Highly efficient•Low peripheral dose
• Simple planning and delivery
VARIAN MEDICAL SYSTEMS | A partner for life
Treat in 2 Minutes or Less
• ~ 600 MU/ 2Gy• Variable gantry
speed• Variable dose rate• Inter-digitating MLC• Dynamic MLC
VARIAN MEDICAL SYSTEMS | A partner for life
RapidArc Efficiency – Head & Neck
RapidArc IMRT Conventional 7-field IMRT
1685 MU~ 12-15 minutes delivery time
496 MU~ 70 seconds delivery time
VARIAN MEDICAL SYSTEMS | A partner for life
RapidArc Low Dose Area Improvement
RapidArcSingle arc IMRT
RapidArcSingle arc IMRT
Conventional7-field IMRT
Conventional7-field IMRT 1685 MU1685 MU496 MU496 MU
VARIAN MEDICAL SYSTEMS | A partner for life
RapidArcSingle arc IMRT
RapidArcSingle arc IMRT
Conventional7-field IMRT
Conventional7-field IMRT 1685 MU1685 MU496 MU496 MU
RapidArc Low Dose Area Improvement
VARIAN MEDICAL SYSTEMS | A partner for life
Improved Critical Structure Sparing
RapidArc (solid)RapidArc (solid) IMRT (dashed)IMRT (dashed)
PTV 1PTV 1PTV 2PTV 2
BrainstemBrainstem
CordCordLt ParotidLt Parotid
Rt ParotidRt ParotidRt SMGRt SMG
LarynxLarynxMandibleMandible
VARIAN MEDICAL SYSTEMS | A partner for life
RapidArc Efficiency -- Prostate
RapidArc IMRT Conventional 5-field IMRT
915 MU~ 6 minutes
603 MU~ 70 seconds
VARIAN MEDICAL SYSTEMS | A partner for life
RapidArc – Hypofractionated Spine
RapidArc IMRT Conventional 11-field IMRT
3072 MU~ 20 minutes
2174 MU~ 4 minutes
VARIAN MEDICAL SYSTEMS | A partner for life
RapidArc Advantages
< 2 minute treatmentsEnhance patient comfortMore throughput
< 600 MU / 2 GyLow out of field doseLow leakage and scatter
Full volume treatment~ 25 x 40 cm2 cylinder
No compromiseKeep static fieldsKeep non-coplanarKeep electronsKeep motion managementUse kV IGRTSimple Planning
VARIAN MEDICAL SYSTEMS | A partner for life
Tomotherapy Inc.Helical Arcs
RapidArc ComparisonVarian Medical Systems
RapidArcNumber of projections 180
Helical pitch 1
Treatment Time <2 minutes
180
Volumetric
MLC type Continuous
5 mm
YesAperture
Effective # projections
Slice thickness (cm)
Leaf width (@ iso.)
Dose rate modulationOptimization
Number of projections 51
Helical pitch ~0.33
Treatment Time ~ 15-18 minutes
Effective # projections 51/0.33 = 153
Slice thickness (cm) 5.0, 2.5, 1.0
MLC type Binary
Leaf width (@ iso.) 6.25 mm
Dose rate modulation NoOptimization Fluence
VARIAN MEDICAL SYSTEMS | A partner for life
Elekta IMAT
RapidArc ComparisonVarian Medical Systems
RapidArcNumber of arcs 1
Treatment time 2-3 min
Monitor units / 2 Gy 500-700 MU
180
Yes
Leaf width (@ iso.) 5 mm
YesAperture
Effective projections
MLC Interdigitation
Dose rate modulationOptimization
Number of arcs 3-10
Treatment time 4-15 min
Monitor units / 2 Gy 1000-4000 MU
Effective projections 36-180
MLC Interdigitation No
Leaf width (@ iso.) 10 mm
Dose rate modulation NoOptimization Aperture
VARIAN MEDICAL SYSTEMS | A partner for life
RapidArc Summary
• Treat in 2 minutes or less
• Single arc IMRT • Uniform target coverage• Improved normal tissue
sparing• Reduced peripheral dose• Simple planning