<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended September 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transistion period from to
-------- --------
COMMISSION FILE NUMBER: 1-7598
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER:
VARIAN ASSOCIATES, INC.
STATE OR OTHER JURISDICTION OF IRS EMPLOYER
INCORPORATION OR ORGANIZATION: IDENTIFICATION NO.:
DELAWARE 94-2359345
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES:
3050 Hansen Way, Palo Alto, California 94304-1000
(415) 493-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock, New York Stock Exchange
$1 par value Pacific Stock Exchange
Preferred Stock New York Stock Exchange
Purchase Rights Pacific Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G)OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES /X/ NO / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of the Registrant's voting stock held by
non-affiliates as of December 1, 1994 was $1,155,602,000.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of December 1, 1994: 33,933,000 shares of $1 par value common
stock.
An index of exhibits filed with this Form 10-K is located on pages 22
through 23.
DOCUMENTS INCORPORATED BY REFERENCE:
<TABLE>
<CAPTION>
DOCUMENT DESCRIPTION 10-K PART
- - - -------------------- ---------
<S> <C>
Certain sections, identified by caption and page number, of the
Registrant's Annual Report to Stockholders for the fiscal year ended
September 30, 1994 (the "Annual Report") .................................... I, II, IV
Certain sections, identified by caption, of the Proxy Statement for
Registrant's 1995 Annual Meeting of Stockholders (the "Proxy Statement") .... III
</TABLE>
<PAGE> 2
PART I
Item 1. Business
Varian Associates, Inc. together with its subsidiaries (hereinafter referred to
as the "Company" or the "Registrant") is a high- technology enterprise which
was founded in 1948. It is engaged in the research, development, manufacture,
and marketing of products and services for the fields of communications, health
care, industrial production, scientific and industrial research, defense, and
environmental monitoring. The Company's principal products are health care
systems, analytical instruments, semiconductor production equipment, and
electron devices. Its foreign subsidiaries engage in some of the
aforementioned businesses and market the Company's products outside the United
States. As of September 30, 1994, the Company employed approximately 8,100
people worldwide.
The Company sells its products throughout the world and has 37 field sales
offices in the U.S. and 52 sales offices in other countries. In general, its
markets are quite competitive, characterized by the application of advanced
technology and by the development of new products and applications. Many of
the Company's competitors are large, well-known manufacturers, and no reliable
information is generally available on their sales of similar products.
There were no material changes in the kinds of products produced or in the
methods of distribution since the beginning of the fiscal year. The Company
anticipates adequate availability of raw materials.
The Company's sales to customers outside of the U.S. for 1994 were $732
million. The profitability of such sales is subject to greater fluctuation
than U.S. sales because of generally higher marketing costs and changes in the
relative value of currencies. Additional information concerning the method of
accounting for the Company's foreign currency translation is set forth under
the caption "Foreign Currency Translation" on page 26 of the Annual Report,
which information is incorporated herein by reference.
The Company's operations are grouped into four segments. These segments, their
products, and the markets they serve are described in the following paragraphs.
The Health Care Systems business manufactures and markets linear accelerators,
cancer treatment planning systems, and data management systems for radiotherapy
centers. It also designs and manufactures a wide range of X-ray generating
tubes for the medical diagnostic imaging market worldwide. Linear accelerators
are used in cancer therapy and for industrial radiographic applications. The
Company's leading CLINAC(R) series of medical linear accelerators, marketed to
hospitals and clinics worldwide, generates therapeutic X-rays and electron
beams for cancer treatment. LINATRON(R) linear accelerators are used in
industrial applications to X-ray heavy metallic structures for quality control.
The Company is active in four primary medical X-ray imaging market segments:
CT scanner; diagnostic radiographic/fluoroscopic; special procedures; and
mammography. Backlog for the Health Care Systems business amounted to $281
million and $274 million in fiscal 1994 and 1993, respectively.
2
<PAGE> 3
Item 1. (continued)
The Instruments business manufactures, sells, and services a variety of
scientific instruments for analyzing chemical substances including metals,
inorganic materials, organic compounds, polymers, natural substances, and
biochemicals. The products include liquid and gas chromatographs, gas
chromatograph/mass spectrometers, NMR spectrometers, ultraviolet visible-near
infrared spectrometers, atomic absorption spectrometers, inductively coupled
plasma spectrometers, inductively coupled plasma/mass spectrometers, data
systems, and small, disposable tools used to prepare chemical samples for
analysis. Typical applications are biochemical and organic chemical research,
measurement of the chemical composition of mixtures, studies of the chemical
structure of pure compounds, quality control of manufactured materials,
chemical analysis of natural products, and environmental monitoring and
measurement. The major markets served are environmental laboratories;
pharmaceutical and chemical industries; chemical, life science, and academic
research; government laboratories; and specific areas of the health care
industry. Backlog for this business amounted to $78 million and $84 million in
fiscal 1994 and 1993, respectively.
The Company's Semiconductor Equipment business manufactures processing systems
which are essential to making integrated circuits. A world leader in the
development, manufacture, and application of ion implantation and
sputter-coating systems, Varian equipment is operating in every major wafer
fabrication facility in the world, and its latest models are being used to
develop tomorrow's state- of-the-art devices. Backlog for this business
amounted to $245 million and $105 million in fiscal 1994 and 1993,
respectively. The discontinuance of the semiconductor equipment distribution
agreement with Tokyo Electron Limited in the U.S. and Europe was completed as
planned effective September 30, 1994. Semiconductor equipment orders and sales
growth will be moderated by discontinuation of the distribution of TEL
products. The impact on Semiconductor Equipment earnings is expected to be
minimal under the terms of the termination, which includes payments to the
Company for certain future TEL sales.
The Company's Electron Devices business holds world leadership positions in
microwave tube and power amplifiers used in satellite communications, radar,
radio and television broadcasting, and other communications applications, as
well as electronic countermeasures and medical diagnostics. Approximately
one-third of the segment's sales are for defense applications, including
electronic countermeasures, radar, and missile guidance. About one-half of its
sales are for communication applications, including radio and television
broadcasting and satellite communications. Industrial markets are also served.
Replacements and spares represent approximately 40 percent of the tube sales,
particularly those used for communications and defense applications. Backlog
for this segment amounted to $155 million and $142 million in fiscal 1994 and
1993, respectively. On October 20, 1994, the Company announced that it will
seek a buyer for the Electron Devices operations. The sale will not go forward
unless the selling price recognizes the increased profitability and improving
value attained in the business in recent years.
Additional information regarding the Company's lines of business and
international operations are incorporated herein by reference from the
information provided under the captions "Industry Segments" and "Geographic
Segments" on pages 34-35 of the Annual Report.
3
<PAGE> 4
Item 1. (continued)
The Company maintains in-house patent attorneys, holds numerous patents in the
United States and in other countries, and has many patent applications pending
in the U.S. and in other countries. The Company considers the development of
patents through creative research and the maintenance of an active patent
program to be advantageous in the conduct of its business, but does not regard
the holding of patents as essential to its operations. The Company grants
licenses to reliable manufacturers on various terms and cross-licensing
arrangements with other parties. Information regarding the Company's research
and development costs is incorporated herein by reference from the information
provided under the caption "Research and Development" on page 28 of the Annual
Report.
The Company's operations are subject to various federal, state and/or local
laws regulating the discharge of materials to the environment or otherwise
relating to the protection of the environment. The Company is also involved in
various stages of environmental investigation and/or remediation under the
direction of or in consultation with federal, state and/or local agencies at
certain current or former Company facilities (see the information provided
under the captions "Management's Discussion and Analysis" and "Contingencies"
on pages 19-20 and 33, respectively, of the Annual Report, which information is
incorporated herein by reference). The Company has established reserves for
these matters, which reserves management believes are adequate. Based on
information currently available, management believes that the Company's
compliance with laws which have been adopted regulating the discharge of
materials to the environment or relating to the protection of the environment
is otherwise not reasonably likely to have a material adverse effect on the
capital expenditures, earnings or competitive position of the Company. Also,
estimated capital expenditures for environmental control facilities are not
expected to be material in fiscal 1995, nor are they expected to be material in
fiscal 1996.
Executive Officers of the Registrant
The following table sets forth the names and ages of the Registrant's executive
officers, together with positions and offices held within the last five years
by such executive officers. Officers are appointed to serve until the meeting
of the Board of Directors following the next Annual Meeting of Stockholders and
until their successors have been elected and have qualified. Ages are as of
December 19, 1994.
<TABLE>
<CAPTION>
Name Age Position Term
---- --- -------- ----
<S> <C> <C> <C>
J. Tracy O'Rourke 59 Chairman of the Board and Chief Executive Officer 1990-Present
(Director) Executive Vice President and Chief Operating Officer, 1989-1990
Rockwell International Corporation (a diversified
electronics company)
Richard A. Aurelio 50 Executive Vice President 1992-Present
President, Semiconductor Equipment 1991-1992
Executive Vice President, ASM Lithography (a 1987-1991
semiconductor manufacturing company)
</TABLE>
4
<PAGE> 5
Item 1. (continued)
<TABLE>
<S> <C> <C> <C>
Allen J. Lauer 57 Executive Vice President 1990-Present
Senior Vice President and President, Instruments 1989-1990
Richard M. Levy 56 Executive Vice President 1990-Present
Senior Vice President and President, Medical Equipment 1989-1990
Al D. Wilunowski 48 Executive Vice President 1990-Present
Vice President and President, Electron Devices 1989-1990
Timothy E. Guertin 45 Corporate Vice President 1992-Present
President, Medical Equipment 1990-Present
General Manager, Medical Equipment 1989-1990
Allen K. Jones 47 Vice President 1991-Present
Treasurer 1990-Present
Director, Investor Relations and Financial Services 1987-1990
Robert A. Lemos 53 Vice President, Finance and Chief Financial Officer 1986-Present
Joseph B. Phair 47 Secretary 1991-Present
Vice President and General Counsel 1990-Present
Associate General Counsel and Director, Legal 1987-1990
Department Operations
Wayne P. Somrak 49 Vice President 1991-Present
Controller 1985-Present
</TABLE>
There is no family relationship between any of the executive officers.
5
<PAGE> 6
Item 2. Properties
The Company's executive offices and principal research and manufacturing
facilities are located in Palo Alto, California, on 71 acres of land held under
leaseholds which expire in the years 2012 through 2058. These facilities are
owned by the Company, and provide floor space totaling 1,160,000 square feet.
The following is a summary of the Company's properties at September 30, 1994:
<TABLE>
<CAPTION>
Land (Acres) Buildings (000's Sq. Ft.)
------------ -------------------------
Owned Leased Owned Leased
----- ------ ----- ------
<S> <C> <C> <C> <C>
United States 142 91 2,446 559
International 35 6 422 331
--- -- ----- ---
177 97 2,868 890
=== == ===== ===
</TABLE>
Utilization of facilities by segment is shown in the following table:
<TABLE>
<CAPTION>
Buildings (000's Sq. Ft.)
-------------------------------------------------------------
Manufacturing, Administrative
and Research & Development
--------------------------
Marketing
U.S. Non-U.S. Total and Service Total
---- -------- ----- ------------ -----
<S> <C> <C> <C> <C> <C>
Health Care Systems 419 40 459 171 672
Instruments 299 192 491 364 855
Semiconductor Equipment 286 41 327 139 466
Electron Devices 912 110 1,022 59 1,039
Other Operations 50 0 50 0 50
----- --- ----- --- -----
Total Operations 1,966 383 2,349 733 3,082
===== === ===== ===
Other 676
-----
Total 3,758
=====
</TABLE>
Other Operations includes manufacturing support.
The capacity of these facilities is sufficient to meet current demand. The
Company owns substantially all of the machinery and equipment in use in its
plants. It is the Company's policy to maintain its plants and equipment in
excellent condition and at a high level of efficiency.
6
<PAGE> 7
Item 2. (continued)
Manufacturing sites by geographical location are as follows:
Health Care Systems California, Illinois, South Carolina, Utah,
England, Finland, Switzerland
Instruments California, Massachusetts, Australia, Italy
Semiconductor Equipment California, Massachusetts, Korea
Electron Devices California, Massachusetts, Arizona, Canada
Company-owned and staffed sales offices throughout the world are located in
North and South America: Brazil, Canada, Mexico, United States; Europe:
Austria, Belgium, Denmark, France, Italy, the Netherlands, Spain, Sweden,
Switzerland, Finland, England, Germany; and Pacific Basin: Australia, People's
Republic of China, Hong Kong, India, Japan, Korea, Singapore.
Item 3. Legal Proceedings
Information required by this Item is incorporated herein by reference from the
information provided under the caption "Contingencies" on page 33 of the Annual
Report.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters
The information required by this Item is incorporated herein by reference from
the information provided under the caption "Common Stock Prices (Unaudited)" on
page 36 of the Annual Report, and the information provided under the caption
"Long-Term Debt" on page 29 of the Annual Report.
The Company's common stock is listed on the New York and Pacific Stock
Exchanges under the trading symbol VAR.
There were 6,253 holders of record of the Company's common stock on December 1,
1994.
7
<PAGE> 8
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEARS
- - - ------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) 1994 1993 1992 1991 1990
- - - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Sales $ 1,552.5 1,311.0 1,288.0 1,377.9 1,264.8
---------- ---------- ---------- ---------- ----------
Earnings from Continuing Operations
before Taxes $ 128.0 73.9 62.3 92.8 20.7
Taxes on earnings $ 48.6 28.1 23.7 35.3 8.1
---------- ---------- ---------- ---------- ----------
Earnings from Continuing Operations $ 79.4 45.8 38.6 57.5 12.6
Loss from Discontinued Operations,
Net of Benefits $ - - - - (16.7)
--------- ---------- ---------- ---------- ----------
Earnings (Loss) before Cumulative Effect of 79.4 45.8 38.6 57.5 (4.1)
Change in Accounting for Income Taxes
Cumulative Effect of Accounting Change $ - - - (7.8) -
---------- ---------- ---------- ---------- ----------
NET EARNINGS (LOSS) $ 79.4 45.8 38.6 49.7 (4.1)
========== ========== ========= ========== ==========
EARNINGS (LOSS) PER SHARE - FULLY DILUTED
Earnings Continuing Operations $ 2.22 1.26 1.02 1.47 0.32
Loss Discontinued Operations $ - - - - (0.42)
---------- ---------- ---------- ---------- ----------
Earnings (Loss) Per Share Before
Cumulative Effect of Change in Accounting
for Income Taxes $ 2.22 1.26 1.02 1.47 (0.10)
Cumulative Effect of Accounting Change $ - - - (0.20) -
---------- ---------- ---------- ---------- ----------
NET EARNINGS (LOSS) PER SHARE $ 2.22 1.26 1.02 1.27 (0.10)
========== ========== ========== ========== ==========
DIVIDENDS DECLARED PER SHARE $ 0.230 0.195 0.175 0.153 0.130
========== ========== ========== ========== ==========
FINANCIAL POSITION AT YEAR END
Total assets $ 962.4 878.7 878.7 869.8 923.6
Long-term debt (excluding current portion) $ 60.4 60.5 49.7 68.0 76.8
</TABLE>
Note: Certain amounts in prior years have been restated to reflect discontinued
operations.
This selected financial data should be read in conjunction with the
related consolidated financial statements and notes thereto, incorporated
herein by reference pursuant to Item 8.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by this Item is incorporated herein by reference from
the information provided under the caption "Management's Discussion and
Analysis" on pages 19-20 of the Annual Report.
8
<PAGE> 9
Item 8. Financial Statements and Supplementary Data
The information required by this Item is incorporated herein by reference from
the Report of Independent Accountants on page 37 of the Annual Report and the
Consolidated Financial Statements, Notes to the Consolidated Financial
Statements, and Supplementary Data on pages 22-36 of the Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
Part III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item with respect to the Company's executive
officers is incorporated herein by reference from the information under Item 1
of Part I of this Report. The information required by this Item with respect
to the Company's directors is incorporated herein by reference from the
information provided under the caption "Election of Directors" of the Proxy
Statement which will be filed with the Commission. The information required by
Item 405 of Regulation S-K is incorporated herein by reference from the
information provided under the caption "Securities Exchange Act of 1934" of the
Proxy Statement.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference from
the information provided under the caption "Certain Executive Officer
Compensation and Other Information" of the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated herein by reference from
the information provided under the caption "Stock Ownership of Certain
Beneficial Owners" of the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated herein by reference from
the information provided under the captions "Management Indebtedness and
Certain Transactions", "Change in Control Arrangements" and "Arrangement with
Mr. Wilunowski" of the Proxy Statement.
9
<PAGE> 10
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) The following documents are filed as a part of this report:
(1) Financial Statements: The following financial
statements of the Registrant and its subsidiaries, and
Report of Independent Accountants, are incorporated
herein by reference from pages 22 through 35, and page
37 of the Annual Report:
Consolidated Financial Statements:
Consolidated Statements of Earnings for fiscal
years 1994, 1993, and 1992
Consolidated Balance Sheets at fiscal year-end
1994 and 1993
Consolidated Statements of Stockholders'
Equity for fiscal years 1994, 1993, and 1992
Consolidated Statements of Cash Flows for
fiscal years 1994, 1993, and 1992
Notes to the Consolidated Financial Statements
Report of Independent Accountants
10
<PAGE> 11
Item 14. (continued)
(2) Financial Statement Schedules: The following financial statement
schedules of the Registrant and its subsidiaries for fiscal years 1994,
1993, and 1992, and the related Reports of Independent Accountants are
filed as a part of this Report and should be read in conjunction with the
Consolidated Financial Statements of the Registrant and its subsidiaries
which are incorporated herein by reference.
<TABLE>
<CAPTION>
Schedule Page
- - - -------- ----
<S> <C> <C>
-- Report of Independent Accountants on Financial Statement Schedules 15
II Amounts Receivable from Related Parties and Underwriters, Promoters, 16
and Employees other than Related Parties
V Property, Plant and Equipment 17
VI Accumulated Depreciation, Depletion and Amortization of Property, 18
Plant and Equipment
VIII Valuation and Qualifying Accounts 19
IX Short-Term Borrowings 20
X Supplementary Income Statement Information 21
</TABLE>
All other required schedules are omitted because of the absence of conditions
under which they are required or because the required information is given in
the financial statements or the notes thereto.
(3) Exhibits:
3-a Registrant's Restated Certificate of
Incorporation, dated June 26, 1987
(incorporated herein by reference to
Registrant's Form 10-K for the year
ended October 1, 1993).
3-b Registrant's Bylaws, dated May 15, 1992
(incorporated herein by reference to
the Registrant's Form 10-K for the
year ended October 2, 1992).
4 Registrant's Rights Agreement with the First
National Bank of Boston, dated August
25, 1986, and Amendment No. 1 dated
July 7, 1989 (incorporated herein by
reference to Registrant's Form 10-K
for the year ended October 1, 1993).
10.1 Registrant's Omnibus Stock Plan
(incorporated herein by reference to
Exhibit 4 to the Registration
Statement on Form S-8; File No.
33-4-0460).
11
<PAGE> 12
Item 14 (continued)
10.2 Registrant's 1982 Non-Qualified Stock Option
Plan (incorporated herein by reference
to Exhibit 4.6 to the Registration
Statement on Form S-8; File No.
33-33660).
10.3 Registrant's Restricted Stock Plan
(incorporated herein by reference to
Exhibit 4 to the Registration Statement
on Form S-8; File No. 33-33661).
10.4 Registrant's Management Incentive Plan
(incorporated herein by reference
to Registrant's Form 10-K for the year
ended October 1, 1993).
10.5 Registrant's Supplemental Retirement Plan
(incorporated herein by
reference to Registrant's Form 10-K for
the year ended October 1, 1993).
10.6 Registrant's form of Indemnity Agreement
with Directors and Executive
Officers (incorporated herein by
reference to Registrant's Form 10-K
for the year ended October 1, 1993).
10.7 Registrant's form of Change in Control
Agreement with Executive Officers
other than the Chief Executive Officer
(incorporated herein by reference to
Registrant's Form 10-K for the year
ended October 1, 1993).
10.8 Registrant's Change in Control Agreement
with J. Tracy O'Rourke
(incorporated herein by reference to
Registrant's Form 10-K for the year
ended October 1, 1993).
10.9 Description of Certain Compensatory
Arrangements between Registrant
and Directors (incorporated herein by
reference to Registrant's Form 10-Q
for the quarter ended December 31,
1993).
10.10 Description of Certain Compensatory
Arrangements between Registrant and
Executive Officers.
10.11 Description of Certain Relocation
Arrangements between Registrant and
Executive Officers (incorporated herein
by reference to Registrant's Form 10-K
for the year ended October 1, 1993).
10.12 Registrant's November 14,1994 Incentive and
Separation Agreement with Al D.
Wilunowski.(1)
11 Computation of earnings per share.
__________________________________
(1) Confidential treatment is being requested for portions of this exhibit.
12
<PAGE> 13
Item 14. (continued)
13 Registrant's 1994 Annual Report to Stockholders
(furnished for the information of the Securities
and Exchange Commission only and not deemed to be
filed except for those portions expressly
incorporated by reference herein).
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
24 Power of Attorney by directors of the
Company authorizing certain
persons to sign this Annual Report on Form 10-K on
their behalf.
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fiscal quarter ended
September 30, 1994.
13
<PAGE> 14
Item 14. (continued)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Varian Associates, Inc. has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
VARIAN ASSOCIATES, INC.
(Registrant)
Dated: December 7, 1994 By: /s/ Robert A. Lemos
-------------------------------
Robert A. Lemos
Vice President, Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ J. Tracy O'Rourke Chairman of the Board and Chief Executive Officer December 9, 1994
- - - --------------------- (Principal Executive Officer)
J. Tracy O'Rourke
/s/ Robert A. Lemos Vice President, Finance and Chief Financial Officer December 7, 1994
- - - ------------------- (Principal Financial Officer)
Robert A. Lemos
/s/ Wayne P. Somrak Vice President and Controller (Principal Accounting December 7, 1994
- - - ------------------- Officer)
Wayne P. Somrak
Ruth M. Davis * Director
Samuel Hellman * Director
Terry R. Lautenbach * Director
Angus A. MacNaughton * Director
David W. Martin, Jr.* Director
John G. McDonald * Director
William F. Miller * Director
Gordon E. Moore * Director
David E. Mundell * Director
Donald O. Pederson * Director
Philip J. Quigley Director
Burton Richter * Director
Paul G. Stern * Director
Richard W. Vieser * Director
* By /s/ Robert A. Lemos December 7, 1994
------------------------------------------
Robert A. Lemos, Attorney-in-Fact **
</TABLE>
- - - ----------------------------------
** By authority of powers of attorney filed herewith.
14
<PAGE> 15
Report of Independent Accountants on
Financial Statement Schedules
To the Board of Directors and Stockholders of
Varian Associates, Inc.
Our report on the consolidated financial statements dated October 19,1994
appears on page 37 of the 1994 Annual Report to Stockholders of Varian
Associates, Inc. and subsidiary companies (which report and consolidated
financial statements are incorporated by reference in this Annual Report on
form 10-K). In connection with our audits of such financial statements, we
have also audited the Financial Statement Schedules listed in the index on page
11 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly, in all material respects, the information required to
be included therein.
/s/ Coopers & Lybrand L.L.P.
-----------------------------
Coopers & Lybrand L.L.P.
San Jose, California
October 19, 1994
15
<PAGE> 16
SCHEDULE II
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS,
AND EMPLOYEES OTHER THAN RELATED PARTIES (1)
for the fiscal years ended 1994, 1993 and 1992
(Dollars in Thousands)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT END
BEGINNING AMOUNTS OF PERIOD
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED CURRENT NONCURRENT
- - - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED 1994:
J. T. O'Rourke (2) $ 1,260 $ - $ - $ - $ 1,260
R. A. Aurelio (5) 500 - - - 500
-------- ------- ------- ------ ---------
$ 1,760 $ 0 $ 0 $ 0 $ 1,760
======== ======= ======= ====== =========
FISCAL YEAR ENDED 1993:
J. T. O'Rourke (2) $ 1,260 $ - $ - $ - $ 1,260
A. D. Wilunowski (4) 109 - 109 - -
R. A. Aurelio (5) 500 - - - 500
-------- ------- ------- ------ ---------
$ 1,869 $ 0 $ 109 $ 0 $ 1,760
======== ======= ======= ====== =========
FISCAL YEAR ENDED 1992:
J. T. O'Rourke (2) $ 1,260 $ - $ - $ - $ 1,260
R. A. Lemos (3) 52 - 52 - -
A. D. Wilunowski (4) - 123 14 12 97
R. A. Aurelio (5) 500 - - - 500
-------- ------- ------- ------ ---------
$ 1,812 $ 123 $ 66 $ 12 $ 1,857
======== ======= ======= ====== =========
</TABLE>
(1) As to column omitted the answer is "none".
(2) The amount receivable is composed of two notes, each secured by a deed of
trust on residential real property. One is for $700,000 and contains
provisions for interest based on appreciation of the real property. The
other is for $560,000 and is interest free. Both are payable after 30
years, within one year of termination of employment, or upon sale of the
property, whichever occurs first, but may be converted to an 8%, 15 year
note upon Mr. O'Rourke's retirement. The security for the loans may be
replaced with a different residence if Mr. O'Rourke is employed by the
Company at the time.
(3) The amount receivable is supported by notes with interest rates of 6.75%
and 7.04% due through 1992, with common stock of the Company pledged as
collateral.
(4) The amount receivable is supported by a note with interest rate of 6.89%
due through 1997, with common stock of the Company pledged as collateral.
(5) The amount receivable is composed of a note, secured by a deed of trust on
residential real property. The note contains provisions for interest based
on appreciation of the real property. It is payable within one year or
three years of termination of employment (depending on the circumstances)
or upon sale of the real property, whichever occurs first.
- 16 -
<PAGE> 17
SCHEDULE V
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
PROPERTY, PLANT, AND EQUIPMENT
for the fiscal years ended 1994, 1993 and 1992
(Dollars in Millions)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OTHER END OF
CLASSIFICATION OF PERIOD ADDITIONS RETIREMENTS CHANGES (1) PERIOD
- - - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED 1994:
Land and land leaseholds $ 11.3 $ 0.4 $ (0.9) $ - $ 10.8
Buildings 194.2 13.3 (6.6) 0.5 201.4
Machinery and equipment 331.1 41.6 (25.5) - 347.2
Construction in progress 7.7 7.3 - - 15.0
------- ------ -------- ------ -------
Total $ 544.3 $ 62.6 $ (33.0) $ 0.5 $ 574.4
======= ====== ======= ====== =======
FISCAL YEAR ENDED 1993:
Land and land leaseholds $ 9.9 $ 0.1 $ (0.2) $ 1.5 $ 11.3
Buildings 188.4 10.4 (4.0) (0.6) 194.2
Machinery and equipment 323.4 38.0 (29.9) (0.4) 331.1
Construction in progress 11.6 (3.4) - (0.5) 7.7
------- ------ -------- ------ -------
Total $ 533.3 $ 45.1 $ (34.1) $ 0.0 $ 544.3
======= ====== ======= ====== =======
FISCAL YEAR ENDED 1992:
Land and land leaseholds $ 9.4 $ 0.6 $ (0.1) $ - $ 9.9
Buildings 168.0 14.3 (1.3) 7.4 188.4
Machinery and equipment 305.3 43.9 (21.8) (4.0) 323.4
Construction in progress 24.8 (10.2) - (3.0) 11.6
------- ------ -------- ------ -------
Total $ 507.5 $ 48.6 $ (23.2) $ 0.4 $ 533.3
======= ====== ======= ====== =======
</TABLE>
(1) Miscellaneous reclassifications.
-17-
<PAGE> 18
SCHEDULE VI
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
PROPERTY, PLANT, AND EQUIPMENT
for the fiscal years ended 1994, 1993 and 1992
(Dollars in Millions)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OTHER END OF
CLASSIFICATION OF PERIOD ADDITIONS RETIREMENTS CHANGES (1) PERIOD
- - - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED 1994:
Land and land leaseholds $ 2.7 $ 0.3 $ (0.1) $ 0.4 $ 3.3
Buildings 88.9 9.1 (2.9) (0.3) 94.8
Machinery and equipment 222.3 38.6 (20.2) 0.3 241.0
------- ------ ------- ------- -------
Total $ 313.9 $ 48.0 $ (23.2) $ 0.4 $ 339.1
======= ====== ======= ======= =======
FISCAL YEAR ENDED 1993:
Land and land leaseholds $ 2.2 $ 0.4 $ (0.1) $ 0.2 $ 2.7
Buildings 82.9 8.5 (2.5) - 88.9
Machinery and equipment 210.0 36.4 (24.3) 0.2 222.3
------- ------ ------- ------- -------
Total $ 295.1 $ 45.3 $ (26.9) $ 0.4 $ 313.9
======= ====== ======= ======= =======
FISCAL YEAR ENDED 1992:
Land and land leaseholds $ 1.8 $ 0.4 $ - $ - $ 2.2
Buildings 71.7 8.6 (1.2) 3.8 82.9
Machinery and equipment 195.7 35.5 (17.3) (3.9) 210.0
------- ------ ------- ------- -------
Total $ 269.2 $ 44.5 $ (18.5) $ (0.1) $ 295.1
======= ====== ======= ======= =======
</TABLE>
(1) Miscellaneous reclassifications.
-18-
<PAGE> 19
SCHEDULE VIII
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS (1)
for the fiscal years ended 1994, 1993, and 1992
(Dollars in Thousands)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND ------------------------------- END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIPTION AMOUNT PERIOD
- - - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL NOTES
& ACCOUNTS RECEIVABLE:
Write-offs
Fiscal Year Ended 1994 $ 2,219 $ 762 & Adjustments $ 559 $ 2,422
======== ======== ======== ========
Write-offs
Fiscal Year Ended 1993 $ 2,202 $ 544 & Adjustments $ 527 $ 2,219
======== ======== ======== ========
Write-offs
Fiscal Year Ended 1992 $ 2,203 $ 789 & Adjustments $ 790 $ 2,202
======== ======== ======== ========
ESTIMATED LIABILITY FOR
PRODUCT WARRANTY:
Actual
Warranty
Fiscal Year Ended 1994 $ 35,615 $ 49,354 Expenditures $ 43,287 $ 41,682
======== ======== ======== ========
Actual
Warranty
Fiscal Year Ended 1993 $ 34,105 $ 41,773 Expenditures $ 40,263 $ 35,615
======== ======== ======== ========
Actual
Warranty
Fiscal Year Ended 1992 $ 33,950 $ 44,646 Expenditures $ 44,491 $ 34,105
======== ======== ======== ========
</TABLE>
(1) As to column omitted the answer is "none".
-19-
<PAGE> 20
SCHEDULE IX
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
SHORT-TERM BORROWINGS
for the fiscal years ended 1994, 1993 and 1992
(Dollars in Millions)
<TABLE>
<CAPTION>
WEIGHTED MAXIMUM AVERAGE AMT. WEIGHTED
BALANCE AVERAGE AMOUNT OUTSTANDING AVERAGE
CATEGORY OF AGGREGATE AT END INTEREST OUTSTANDING DURING INTEREST RATE
SHORT-TERM BORROWINGS (1) OF PERIOD RATE (2) DURING PERIOD PERIOD (3) DURING PERIOD (4)
- - - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AMOUNTS PAYABLE TO BANKS (5):
Fiscal Year-End 1994 $ 4.7 6.2 % $ 64.4 $ 30.3 4.0 %
==== ==== ==== ==== ====
Fiscal Year-End 1993 $ 16.3 3.6 % $ 53.9 $ 20.3 3.5 %
==== ==== ==== ==== ====
Fiscal Year-End 1992 $ 1.7 17.5 % $ 30.0 $ 13.9 4.7 %
==== ==== ==== ==== ====
</TABLE>
(1) "Notes payable" in the Company's consolidated balance sheet includes the
balances shown above and the current portion of long-term debt, amounting
to $0.1million, $6.5 million, and $8.6 million at fiscal year-end 1994,
1993, and 1992, respectively.
(2) The weighted average interest rate for fiscal year-end 1992 of 17.5%
represents overnight Italian Lira interest rate for one of the Company's
subsidiaries overdraft. United States dollar equivalent based on foreign
exchange forward points is approximately 5%.
(3) Average amounts outstanding based on balances at the end of each of the 12
months in the fiscal year.
(4) Weighted average interest rates based on the balance and applicable
interest rate for each amount payable at the end of each of the 12 months
in the fiscal year.
(5) The Company had total unused committed lines of credit of $50 million at
each fiscal year-end 1994, 1993, and 1992. Total borrowing is subject to
limitations included in long-term debt agreements. No compensating
balances were maintained in 1994, 1993, or 1992 under credit agreements in
effect during these years.
- 20 -
<PAGE> 21
SCHEDULE X
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
for the fiscal years ended 1994, 1993, and 1992
(Dollars in thousands)
<TABLE>
<CAPTION>
- - - -------------------------------------------------------------------------------------------------
Item 1994 1993 1992
- - - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maintenance and repairs $ 28,616 $ 28,168 $ 28,775
</TABLE>
Depreciation expense is included in Schedule VI.
Amounts for advertising costs, amortization of intangible assets and other
deferrals, taxes other than payroll and income taxes, and royalties are not
presented as such amounts are less than 1% of total sales.
-21-
<PAGE> 22
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
- - - ------
<S> <C>
3-a Registrant's Restated Certificate of Incorporation, dated June 26, 1987
(incorporated herein by reference to Registrant's Form 10-K for the year ended
October 1, 1993).
3-b Registrant's Bylaws, dated May 15, 1992 (incorporated herein by reference to the
Registrant's Form 10-K for the year ended October 2, 1992).
4 Registrant's Rights Agreement with the First National Bank of Boston, dated August
25, 1986, and Amendment No. 1 dated July 7,1989 (incorporated herein by reference to
Registrant's Form 10-K for the year ended October 1, 1993).
10.1 Registrant's Omnibus Stock Plan (incorporated herein by reference to Exhibit 4 to
the Registration Statement on Form S-8; File No. 33-4-0460).
10.2 Registrant's 1982 Non-Qualified Stock Option Plan (incorporated herein by reference
to Exhibit 4.6 to the Registration Statement on Form S-8; File No. 33-33660).
10.3 Registrant's Restricted Stock Plan (incorporated herein by reference to Exhibit 4
to the Registration Statement on Form S-8; File No. 33-33661).
10.4 Registrant's Management Incentive Plan (incorporated herein by reference to
Registrant's Form 10-K for the year ended October 1, 1993).
10.5 Registrant's Supplemental Retirement Plan (incorporated herein by reference to
Registrant's Form 10-K for the year ended October 1, 1993).
10.6 Registrant's form of Indemnity Agreement with Directors and Executive Officers
(incorporated herein by reference to Registrant's Form 10-K for the year ended
October 1, 1993).
10.7 Registrant's form of Change in Control Agreement with Executive Officers other than
the Chief Executive Officer (incorporated herein by reference to Registrant's Form
10-K for the year ended October 1, 1993).
10.8 Registrant's Change in Control Agreement with J. Tracy O'Rourke (incorporated herein
by reference to Registrant's Form 10-K for the year ended October 1, 1993).
</TABLE>
22
<PAGE> 23
INDEX OF EXHIBITS
<TABLE>
<S> <C>
10.9 Description of Certain Compensatory Arrangements between Registrant and Directors
(incorporated herein by reference to Registrant's Form 10-Q for the quarter ended
December 31, 1993).
10.10 Description of Certain Compensatory Arrangements between Registrant and Executive
Officers.
10.11 Description of Certain Relocation Arrangements between Registrant and Executive
Officers (incorporated herein by reference to Registrant's Form 10-K for the year
ended October 1, 1993).
10.12 Registrant's November 14,1994 Incentive and Separation Agreement with Al D.
Wilunowski.(1)
11 Computation of earnings per share.
13 Registrant's 1994 Annual Report to Stockholders (furnished for the information of
the Securities and Exchange Commission only and not deemed to be filed except for
those portions expressly incorporated by reference herein).
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
24 Power of Attorney by directors of the Company authorizing certain persons to sign
this Annual Report on Form 10-K on their behalf.
27 Financial Data Schedule
</TABLE>
__________________________________
(1) Confidential treatment is being requested for portions of this exhibit.
23
<PAGE> 1
EXHIBIT 10.10
AMENDED AND RESTATED
DESCRIPTION OF CERTAIN COMPENSATORY ARRANGEMENTS
BETWEEN REGISTRANT AND EXECUTIVE OFFICERS
SUPPLEMENTAL DISABILITY INSURANCE
The Registrant's group disability income insurance plan for all
employees has a limitation on the actual dollar amount of replacement income
which can be provided to any single employee. The Registrant accordingly
secures additional disability income insurance policies for Mr. O'Rourke.
REGISTRANT'S EXECUTIVE CAR PROGRAM
The Registrant's officers are eligible to participate in the amended
and restated Executive Car Program described in Attachment A to this Exhibit
10.10.
REGISTRANT'S EXECUTIVE FINANCIAL COUNSELING PROGRAM
The Registrant reimburses its officers as follows for the costs they
incur for financial counseling, tax planning and tax return preparation,
subject to a $6,500 annual limit except for J. Tracy O'Rourke, Chairman of the
Board and Chief Executive Officer (who is reimbursed for all such costs). The
Registrant has made available (for an annual retainer fee) a financial
counseling firm to provide such services to the Registrant's officers.
USE OF LEASED AIRCRAFT
J. Tracy O'Rourke, Chairman of the Board and Chief Executive Officer,
is permitted to use the Registrant's leased aircraft for personal travel.
REIMBURSEMENT FOR TAXES
The Registrant reimburses its officers for taxes required to be paid
by the officers on the following perquisites: group term life and disability
insurance; use of the Registrant's leased aircraft; participation in the
Registrant's Executive Car Program; and participation in the Registrant's
Executive Financial Counseling Program.
1
<PAGE> 2
Exhibit 10.10 (continued)
REGISTRANT'S EXECUTIVE HEALTH PROGRAM
The Registrant's officers are eligible to participate in the Executive
Health Program, under which those officers are reimbursed for the costs of an
annual medical examination, subject to a $600 annual limit.
2
<PAGE> 3
ATTACHMENT A - EXHIBIT 10.10
- PRIVATE -
VARIAN EXECUTIVE CAR PROGRAM
1. PURPOSE
It is Varian's policy to provide automobiles for the use of selected key
management employees who are required to travel frequently on Company
business and need efficient, reliable transportation available
immediately.
2. ELIGIBILITY
The Vice President, Human Resources, will determine which employees will
be assigned vehicles under this policy, using the following criteria:
The employee must:
(a) have a major management responsibility;
(b) be on call at any time;
(c) have a substantial need for auto transportation to travel
to other Varian operations, other companies, universities,
conferences, professional meetings, community and trade
associations, etc.; and
(d) need to provide transportation for other employees and
outside visitors on Company business.
(e) be in a grade "Q" or above, although there may be some
exceptions made for significant management positions in
grade "P".
Overall, the need for an employee to have efficient, reliable
transportation available immediately must be of economic benefit to
Varian.
Assignment of a car is not permanent. If an employee's role and/or
responsibilities change to where an assigned car is no longer
appropriate, assignment of a car may be discontinued.
3. SELECTION OF VEHICLE
The Vice President, Human Resources, will establish the appropriate lease
capitalization levels as well as the criteria for selecting Company cars,
including optional equipment, that will be furnished under this policy.
3
<PAGE> 4
Exhibit 10.10 Attachment A (Continued)
Fuel-efficient cars are encouraged, but any car selected should be large
enough to accommodate four adults comfortably.
Selection of a car and optional equipment within the established criteria
and lease cost limitation is made through the Corporate Traffic
Department which will handle the lease and will arrange for delivery
through a local dealer.
Employees may exceed their lease capitalization levels by 100% at their
own expense. Any excess will be treated as an employee receivable and
will be deducted from the employee's paycheck over the term of the lease.
4. AVAILABILITY AND USE OF CAR
Whenever possible, assigned drivers will make their cars available to
members of their staff or other Varian employees for business use.
4.1 Garaging: The assigned driver is to provide protected
parking at the driver's residence.
4.2 Vehicle Operations: The assigned driver is responsible
for adequate protection of the Company car, ensuring that only
licensed operators drive it. Traffic citations and resultant
fines are the employee's responsibility and are not reimbursable.
4.3 Accident Reporting: The assigned driver is responsible
for reporting all accidents in a timely manner and submitting a
completed Varian Accident Report (Form 4470-09-01) to both
Corporate Traffic and Corporate Risk Management. The assigned
driver is also responsible for contacting Corporate Traffic for
instructions as to disposition and repair of the car. In order
to protect Varian's interests, an assigned driver is responsible
for contacting Varian's adjuster as soon as possible following
an accident that causes personal injury or damage to property of
others. Each assigned driver is provided with a claim kit which
should be kept in the car's glove compartment. The kit contains
accident report forms, explains procedures to be followed, and
lists toll-free telephone numbers for contacts.
4.4 Personal Operation: Company cars may be used for personal
driving by the employee, the employee's spouse, and other
immediate family members who hold a valid driver's license.
Use of a company car by non-family members is permitted
at the discretion of
4
<PAGE> 5
Exhibit 10.10, Attachment A (Continued)
the employee, provided the user possesses a valid driver's license.
4.5 Loss Control Program: The assignment of a company
vehicle is a privilege that requires drivers to maintain good
driving records. Therefore, the company will conduct a confidential
annual screening of the employees' driving records to ensure that
such records are maintained in good order. The point system used
by the California Department of Motor Vehicles will be the
governing criteria, unless the criteria of the jurisdiction in
which the vehicle is operated is more stringent. If the guideline
is exceeded, Risk Management will coordinate a confidential review
of the record with the employee's supervisor, Human Resources, and
the Legal Department. If the decision is made to remove the
company vehicle, the employee must return it promptly and in good
condition. Thereafter, at management's discretion, the employee
may be placed on a car allowance program. An employee may also be
reinstated to the program, at management's discretion, once
his/her driving record falls within the acceptable Department of
Motor Vehicles guidelines.
To comply with the company's loss control program,
employees are asked to complete the attached form and return it to
Risk Management as soon as they are notified of participation in
the program. This provision does not apply to Company Officers.
5. INSURANCE
The following coverages are provided by Varian or its insurance carriers
for accidents involving Company cars.
5.1 Public Liability: This coverage protects the Company and
the employee (including licensed drivers in the employee's immediate
family) against claims resulting from personal injuries to others or
damage to the property of others.
5.2 Collision/Comprehensive: For accidents that occur during
business driving, Varian pays the entire cost of repairs. For accidents
that occur during personal use of a Company car, the employee is
responsible for the first $200.00 of repair costs regardless of fault.
The employee will be reimbursed the $200.00 if Varian collects from the
other party involved.
5.3 Personal Injury: Injuries incurred by an employee while
driving (or riding as a passenger) on Company business are covered under
Workers' Compensation benefits. Injuries incurred by an employee when
the Company car is being used for personal driving and injuries incurred
by family members, whether the car is being used for business or
5
<PAGE> 6
Exhibit 10.10, Attachment A (Continued)
personal reasons, will be covered by whichever Company-sponsored or
private health plan the injured person is covered.
5.4 Personal Property: Varian carries insurance to cover the
loss of Company property by theft or damage. Employees should take all
possible steps to avoid theft by concealing briefcases and other property
from view and always locking cars when unattended. This insurance does
not cover an employee's or family member's personal property which should
be insured under a Homeowner's or Personal Articles Floater policy.
5.5 Driving to Canada or Mexico: Canadian authorities require
a certificate of insurance before a car is allowed across the border.
This certificate may be obtained from the Corporate Risk Management
Office.
Travel across the Mexican border requires Mexican insurance
for collision, comprehensive, and liability coverages which may be
obtained at the border. Varian reimburses an employee for the expense if
travel is business related. The expense is not reimbursed if travel is
for personal reasons.
6. OPERATING EXPENSES
Varian will reimburse employees for all normal operating expenses such as
fuel, lubricating oils, fluids and necessary car washes.
Reimbursement may be obtained by submitting a monthly expense report with
appropriate receipts attached. These expense reports should be submitted
to the appropriate Controller for approval.
7. SERVICE AND REPAIRS
Company cars must be maintained in presentable, reliable and safe
operating condition and available for intended use. Varian will pay for
periodic maintenance and service for lubrications, wheel alignments,
tune-ups, replacement of tires and batteries, repairs, etc. Normal wear
and tear is expected; however, excessive costs will not be paid to
maintain cars in "showroom condition."
A Company car should be returned to the dealer through which the car was
obtained for any adjustments or repairs covered under the factory
warranty. When the factory warranty expires, a driver identification
card will be provided which is honored for service, repairs, and
replacement parts at designated repair establishments. Contact the
Corporate Fleet Administrator on any question regarding major service and
repairs.
6
<PAGE> 7
Exhibit 10.10, Attachment A (Continued)
8. TAXABILITY
For tax purposes, the company considers all expenses and lease costs, up
to the lease capitalization cost limit, to be personal expenses which
will be reported as additional income on the employee's W-2. To make
this program effectively tax neutral to an employee, the company will
apply a tax gross-up to this income. This gross-up will be determined
annually by the Tax Department.
Example: Assume $1,000 of taxable compensation and a gross-up of
$650 (65% of $1,000):
<TABLE>
<S> <C>
Taxable payment including gross-up - $1,650
Federal tax on $1,650 @ 33% $545
State tax on $1,650 @ 9.3% 153
Federal tax benefit of deduction for
State tax of $153 @ 33% (50)
----
Total tax $648
====
</TABLE>
9. SERVICE LIFE
An executive car is normally retained in service for 30 months or 55,000
miles, whichever occurs first. It is the employee's responsibility to
notify Corporate Human Resources when their car will be turned in and to
initiate the process of ordering a replacement vehicle.
10. PURCHASE OPTION
An assigned driver has the option of purchasing the car, at the time it
would otherwise be taken out of service, at a price to be determined on
the fair market value or a predetermined depreciation schedule, depending
on the terms of the individual's participation in the plan. The price
information will be provided to the employee by the leasing company, and
the purchase of the car will be coordinated directly between the leasing
company and the employee.
Any repairs that are performed in the 12 months prior to the vehicle's
purchase will be amortized at 8% per month; the unamortized cost of these
repairs will be added to the fair market value to establish the vehicle's
sale price.
7
<PAGE> 8
Exhibit 10.10, Attachment A (Continued)
11. ADMINISTRATION
The Vice President of Human Resources has overall responsibility for the
Executive Car Program, and the Director of Human Resources will be
responsible for administering all aspects of the program, working with
the Corporate Fleet Administrator who may be reached on Palo Alto
extension 5251.
8
<PAGE> 1
EXHIBIT 10.12
INCENTIVE AND SEPARATION AGREEMENT
This Incentive and Separation Agreement ("Agreement"), dated as of
September 14, 1994, is by and between Varian Associates, Inc., a Delaware
corporation ("Company") and Al D. Wilunowski ("Employee").
RECITALS
WHEREAS, the Company has decided to explore the possibility of selling
the Company's Electron Devices Business ("Business") and has requested that
Employee continue to manage the on-going operations of the Business and, if a
decision is made to sell the Business, to assist the Company with the sale of
the Business; and
WHEREAS, Employee's position with the Company will be eliminated if
the Business is sold; and
WHEREAS, Employee and the Company have discussed the foregoing and on
the basis of each party's own considerations have reached a mutual
understanding, as provided for in this Agreement, for Employee's assistance
with the sale of the Business and the eventual voluntary termination of
Employee's employment with the Company; and
WHEREAS, both Employee and the Company intend that this Agreement will
mutually, amicably and finally resolve and compromise all issues and claims
relating to or involving Employee's employment by the Company and the voluntary
termination of that employment if and when the Business is sold.
NOW THEREFORE, in consideration of and subject to all of the terms and
conditions set forth in this Agreement, Employee and the Company agree as
follows:
1. EMPLOYMENT.
1.1 PRIOR TO SALE OF BUSINESS. Until such time that (a) the
Business is sold and/or discontinued, (b) Employee voluntarily resigns, or (c)
Employee is terminated for cause as defined by Company policies ("Cause"),
Employee will continue in his current capacity as Executive Vice President, in
accordance with the current terms and conditions of his employment, subject to
Company policies and procedures, and with compensation and benefits provided in
the ordinary course. Employee acknowledges that this Agreement does not
guarantee Employee continued employment or the terms of that employment, and
the Company maintains the absolute right to manage the Business and determine
the terms of any sale and/or discontinuation of the Business.
1.2 UPON SALE OF THE BUSINESS. If Employee is still actively
employed by the Company on the date that sale and/or discontinuation of the
Business is closed and/or completed ("Final
1
<PAGE> 2
EXHIBIT 10.12
INCENTIVE AND SEPARATION AGREEMENT (Continued)
Work Day"), (a) Employee will become an inactive employee and will cease to be
an Executive Vice President, officer or active employee of the Company, and (b)
Employee will tender his voluntary and unqualified resignation of employment
with the Company, which will be accepted by the Company as of the Final Work
Day to be effective on the date when Employee receives the final salary payment
provided for in Section 3.1 ("Separation Date"). During the period from the
Final Work Day to the Separation Date ("Salary Continuation Period"), Employee
will not be expected to perform regular work for the Company, but will (i)
provide the Company with information and assistance regarding Employee's prior
acts and responsibilities, which information and assistance will be provided
without any additional compensation, and (ii) refrain from taking any action
detrimental to the Company.
1.3 REEMPLOYMENT. During the Salary Continuation Period, Employee
will use his best efforts to locate and accept Reemployment, and Employee will
immediately notify the Company in writing upon obtaining any Reemployment.
"Reemployment" means (a) full-time employment other than with the Company, (b)
full-time self-employment, or (c) performance for compensation of twenty (20)
hours or more per week of consulting services.
2. INCENTIVE COMPENSATION.
2.1 FIXED BONUS. In consideration of Employee's assistance in a
sale of the Business, if a decision is made to sell the Business, the Company
will pay to Employee a fixed bonus of $200,000 on the Final Work Day. This
fixed bonus will not be paid if the Company does not sell and/or discontinue
the Business or if prior to such date Employee voluntarily terminates his
employment with the Company or his employment is terminated by the Company for
Cause.
2.2 INCENTIVE BONUS. In consideration of Employee's assistance in a
sale of the Business, if a decision is made to sell the Business, the Company
will pay to Employee an incentive bonus based on the aggregate sale price for
the Business, according to the following formula:
<TABLE>
<CAPTION>
Aggregate Sale Price Incentive Bonus
-------------------- ---------------
<S> <C>
[ * ] $25,000
$50,000
$100,000
$150,000
$200,000
</TABLE>
For purposes of this Section 2.2, the aggregate sale price will be
calculated on the basis of the final gross aggregate sale price for the
Business as adjusted in the ordinary course after the closing of the sale
transaction(s) and without regard to any disputes or whether the Company has
received full payment of such aggregate sale price.
This incentive bonus will not be paid if prior to the Final Work Day
Employee voluntarily
- - - -----------
* Confidential treatment has been requested with respect to the omitted
language of Section 2.2 of this page. Please be aware that the omitted
material has been separately filed with the Securities and Exchange
Commission.
2
<PAGE> 3
EXHIBIT 10.12
INCENTIVE AND SEPARATION AGREEMENT (Continued)
terminates his employment with the Company or his employment is terminated by
the Company for Cause.
3. OTHER COMPENSATION AND BENEFITS.
3.1 SALARY. If Employee is employed by a buyer of the Business,
Employee's salary will end as of the Final Work Day. If Employee (a) is not
employed by a buyer of the Business, or (b) is so employed but such employment
is involuntarily terminated within six (6) months of its commencement, then for
a period of one (1) year from and after the Final Work Day or the termination
of such employment, as the case may be, the Company will pay to Employee the
same salary he was earning as of the Final Work Day; provided, however, that
such salary will be reduced by the amount of any severence payments made to
Employee in the event of termination of employment with a buyer. In the event
of Employee's Reemployment (other than by a buyer of the Business) during this
one-year period, the Company will promptly pay to Employee in a lump-sum the
balance of the annual base salary which he would otherwise have been paid
during the one-year period based on the foregoing. If at the end of the
one-year period after the Final Work Day Employee has not obtained
Reemployment, the Company will continue to pay to Employee the annual base
salary he was earning as of the Final Work Day, (a) for a period of six (6)
additional months, or (b) until Employee obtains Reemployment, whichever first
occurs.
3.2 MIP AWARDS. Employee will be eligible for awards under the
Company's Management Incentive Plan ("MIP") for fiscal years 1994 and 1995.
Employee will be eligible for an award under the MIP for any fiscal year
subsequent to fiscal year 1995 which begins prior to the Final Work Day;
provided, however, that any such award will be pro-rated for the period prior
to the Final Work Day. Any award for a fiscal year in which the sale and/or
discontinuation of the Business is closed and/or completed will be based 100%
on corporate performance objectives.
3.3 LTI AWARDS. Employee will be eligible for an award under the
Long-Term Incentive feature of the Company's Omnibus Stock Plan ("LTI") for the
fiscal 1992-1994 cycle. Employee will be eligible for awards under the LTI for
any fiscal cycles subsequent to the fiscal 1992-1994 cycle which begin prior to
the Final Work Day; provided, however, that any such awards will be pro-rated
for the period prior to the Final Work Day. Any award for a fiscal cycle in
which the sale and/or discontinuation of the Business is closed and/or
completed will be based 100% on corporate performance objectives.
3.4 RESTRICTED STOCK. Restricted stock will be treated as follows:
3.4.1 Employee will be eligible for restricted stock grants
under the performance-based restricted stock feature of the Company's Omnibus
Stock Plan for fiscal years 1994 and 1995. Employee will be eligible for a
performance-based restricted stock grant for any fiscal year subsequent to
fiscal year 1995 which begins prior to the Final Work Day; provided, however,
that any such award will be pro-rated for the period prior to the Final Work
Day.
3
<PAGE> 4
EXHIBIT 10.12
INCENTIVE AND SEPARATION AGREEMENT (Continued)
3.4.2 Effective on the Final Work Day, all restricted stock
granted or to be granted to Employee which has not yet been released from
restrictions will vest and will be released from any remaining restrictions.
3.5 STOCK OPTIONS. Stock options granted by the Company to Employee
will be treated as follows:
3.5.1 Effective on the Final Work Day, all stock options
granted by the Company to Employee which are not yet exercisable will become
exercisable.
3.5.2 All stock options which Employee has not exercised as
of the Separation Date will only be exercisable (a) for a period of three (3)
months after the Separation Date, or (b) until those options normally expire
according to their terms, whichever first occurs.
3.6 CASH PROFIT-SHARING PLAN. Employee will be eligible for
allocations under the Company's Cash Profit-Sharing Plan for fiscal years 1994
and 1995. Employee will be eligible for an allocation under that Plan for any
fiscal year subsequent to fiscal year 1995 which begins prior to the Final Work
Day; provided, however, that any such allocation will be pro-rated so as to be
based only on the period prior to the Final Work Day.
3.7 EXECUTIVE CAR PROGRAM. Until the Separation Date, Employee will
be eligible to participate in the Company's Executive Car Program on the same
terms as would otherwise apply if he were an officer. On the Separation Date,
Employee may either return or purchase in accordance with the terms of the
Program the vehicle which is then provided to him under the Program.
3.8 EMPLOYEE STOCK PURCHASE PLAN. Until the Separation Date,
Employee will be eligible to continue to participate in the Company's Employee
Stock Purchase Plan on the same terms as would otherwise apply if he were an
active employee.
3.9 EXECUTIVE FINANCIAL COUNSELING PROGRAM. Until the Separation
Date, Employee will be eligible to continue to participate in the Company's
Executive Financial Counseling Program on the same terms as would otherwise
apply if he were an officer.
3.10 TAX REIMBURSEMENTS. Until the Separation Date, Employee will be
eligible to continue to be eligible to receive reimbursements ("gross-ups") for
taxes applicable to certain perquisites on the same terms as would otherwise
apply if he were an officer.
3.11 RETIREMENT PROGRAM. Until the Separation Date, Employee will be
eligible to continue to participate in the Company's Retirement and
Profit-Sharing Program ("Retirement Program") according to the terms of the
Retirement Program. If it is determined that applicable regulations or the
terms of the Retirement Program do not permit Employee to continue
participation in the Retirement Program during the Salary Continuation Period,
the Company will
4
<PAGE> 5
EXHIBIT 10.12
INCENTIVE AND SEPARATION AGREEMENT (Continued)
make contributions to Employee's Supplemental Retirement Plan account in
amounts equivalent to what would have been contributed to Employee's Retirement
Program account had he been eligible to continue to participate in the
Retirement Program.
3.12 SUPPLEMENTAL RETIREMENT PROGRAM. Until the Separation Date,
Employee will be eligible to continue to participate in the Company's
Supplemental Retirement Plan on the same terms as would otherwise apply if he
were an officer.
3.13 HEALTH INSURANCE. Until the Separation Date, Employee will be
eligible to continue to participate in the Company's group health insurance
plan(s) for himself and his eligible dependents on the same terms as would
otherwise apply if he were an active employee. The Company will provide
Employee with information about continuation of health care coverage (COBRA
coverage) after the Separation Date.
3.14 LIFE INSURANCE. Until the Separation Date, Employee will be
eligible to continue to participate in the Company's group term life insurance
plan on the same terms as would otherwise apply if he were an active employee.
The Company will provide Employee with information about conversion of that
life insurance coverage after the Separation Date.
3.15 DISABILITY INSURANCE. Employee will not be eligible to continue
to participate in the Company's group disability insurance plan after the
Final Work Day.
3.16 PERSONAL PAID LEAVE. Employee will not accrue any Personal Paid
Leave ("PPL") after the Final Work Day. The accrued and unpaid balance of
Employee's PPL will be paid to Employee promptly after the Separation Date.
3.17 OTHER BENEFITS. After the Final Work Day, Employee will only be
eligible and entitled to participate in the compensation and benefit programs
provided for in this Section 3.
3.18 WITHHOLDINGS AND DEDUCTIONS. The Company will deduct from any
payments made to Employee pursuant to this Agreement (a) all legally required
withholdings and deductions, including for taxes, (b) applicable Employee
contributions to the Company benefit plans in which Employee continues to
participate, and (c) appropriate amounts for advances or obligations owed by
Employee to the Company, including, without limitation, travel advances and
loans, consistent with the Company's policies and practices. Employee will
pay to the Company when due any amounts due for taxes relating to restricted
stock releases, stock option exercises and other non-cash benefits for which
the Company is required to collect taxes from Employee.
4. OTHER TERMS, CONDITIONS AND ACKNOWLEDGEMENTS.
4.1 OUTPLACEMENT. Within ninety (90) days after the Final Work Day,
Employee will give the Company written notice of his election to either (a) use
outplacement services secured by the Company, or (b) receive an amount equal to
fifteen percent (15%) of the annual base
5
<PAGE> 6
EXHIBIT 10.12
INCENTIVE AND SEPARATION AGREEMENT (Continued)
salary he was earning on his Final Work Day. If Employee elects to use
outplacement services, the Company will provide to Employee a list of
outplacement firms with which the Company has existing relationships, Employee
will select a firm from that list to provide outplacement services to Employee,
and the Company will pay the charges of that outplacement firm. If Employee
elects to receive the amount described above, the Company will pay it to
Employee within fourteen (14) days after receiving Employee's election.
4.2 DELIVERY OF MATERIALS AND CONFIDENTIALITY. On the Final Work
Day, Employee will deliver to the Company's Vice President, Human Resources all
Company identification badges, entry cards, security documents, credit cards
and other property, books and records which are proprietary to the Company.
Employee acknowledges and reaffirms the terms of the confidentiality Agreement
executed previously by Employee, a form of which is attached as Exhibit A,
which prohibits disclosure of certain Company's information even after the
Separation Date.
4.3 NON-DISCLOSURE. Until such time that this Agreement is publicly
disclosed, Employee will not disclose or communicate the terms of this
Agreement to (a) any persons other than those within his immediate family
and/or his counselor(s), each of whom will be advised by him to keep such
communication and the terms of this Agreement confidential, and (b) the
Company's legal or other specifically authorized representatives, unless
otherwise compelled by legal process. Any other disclosure by Employee, his
family or his counselor(s) will be deemed a disclosure by Employee constituting
a material breach of the Agreement. Upon proof of such a disclosure, the
Company may recover the amount of $20,000 in liquidated damages and not as a
penalty or forfeiture. In addition, upon proof by the Company before the
Separation Date of such a disclosure, the Company may immediately terminate
this Agreement and discontinue all benefits hereunder, other than those
required by law. Employee expressly agrees that this provision is reasonable
under the circumstances that exist when he executes this Agreement and further
represents that the benefits and other consideration conferred by this
Agreement are sufficient to bind his release under Section 5, even under
circumstances where the Company terminates this Agreement before the Separation
Date.
4.4 CLAIMS. Employee is not aware of any basis which Employee may
have to claim any amounts from the Company for obligations other than those
provided for in this Agreement, and Employee is not presently aware of any
injury or illness incurred while in Company's employment.
4.5 CHANGE IN CONTROL AGREEMENT; INDEMNITY AGREEMENT. The Change
in Control Agreement between Employee and the Company will terminate on the
Final Work Day and will not be reinstated for any reason. The September 20,
1989 Indemnity Agreement between Employee and the Company will continue
according to its terms.
4.6 SUBSEQUENT REGULATORY CHANGES. In the event that any
governmental regulation applicable to a Company compensation or benefit plan
under which payments or benefits are to be provided to Employee under this
Agreement would prohibit any such payment or benefit, or
6
<PAGE> 7
EXHIBIT 10.12
INCENTIVE AND SEPARATION AGREEMENT (Continued)
would jeopardize the regulatory qualification or status of any such plan if
such payment or benefit is provided to Employee, the Company will not be
obligated to make such payment or to provide such benefit to Employee;
provided, however, that the Company will to the extent permitted under such
regulations provide Employee with comparable compensation.
4.7 UNEMPLOYMENT INSURANCE. Employee will not file or make any
claim for unemployment insurance for any period after the Final Work Day.
5. RELEASE.
5.1 RELEASE OF CLAIMS. On behalf of himself, his heirs and
successors, Employee forever releases and discharges the Company, its
employees, directors, agents and affiliates, from any all known or unknown
claims or obligations, whether in contract, covenant, tort or based on or
through any federal, state or local statute, regulation or ordinance relating
to or arising out of Employee's relationship with the Company or the
termination of that employment. This release includes, without limitation, a
waiver of all claims (a) for "wrongful discharge," (b) for breach of any
express or implied contract of employment, (c) for severance pay or other
compensation other than as provided for in this Agreement, (d) for statutory
workers' compensation insurance that Employee may make based on accidents or
alleged injuries occurring after the Final Work Day, (e) for unemployment
insurance for any period after the Final Work Day, (f) under Title VII of the
Civil Rights Acts of 1964 and 1991, (g) under the Age Discrimination in
Employment Act of 1967, (h) under the Employee Retirement Income Security Act
of 1974, and (i) under the California Fair Employment and Housing Act;
provided, however, that this release does not include any claims Employee may
have, but of which he is currently unaware, (1) for statutory workers'
compensation insurance, and (2) for indemnification under the provisions of the
California Labor Code, Delaware law, the Company's Bylaws, the Company's
Restated Articles of Incorporation or the Indemnity Agreement referred to in
Section 4.6.
It is further understood and agreed that as part of the consideration
and inducement for the execution of this Agreement which is intended to release
the Company and its related parties identified above of and from any and all
claims of every nature and kind whatsoever, known or unknown, suspected or
unsuspected, Employee also specifically waives the provisions of California
Civil Code Section 1542 and any similar provisions of the law of other
jurisdictions. Section 1542 provides:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his/her
favor at the time of executing the release, which if
known by him/her must have materially affected his/her
settlement with the debtor."
This Section 5.1 will be deemed renewed and restated by Employee on
the Final Work Day and on the Separation Date.
7
<PAGE> 8
EXHIBIT 10.12
INCENTIVE AND SEPARATION AGREEMENT (Continued)
5.2 NO CONTEST. If Employee or any person acting on Employee's
behalf in any way contests this Section 5, Employee will return to the Company
all payments made by the Company to Employee under Section 3 of this Agreement.
5.3 NO ADMISSIONS. Neither the proposal of this Agreement, its
execution nor its performance is or will in any way be considered an admission
of any liability by Employee or the Company.
6. MISCELLANEOUS.
6.1 ENTIRE AGREEMENT. Employee has read this entire Agreement,
understands its provisions, and is not executing this Agreement in reliance on
any promises, representations or inducements other than those contained in this
Agreement. Employee has had the opportunity to review this Agreement with
others of his own selection and acknowledges that this Agreement expresses in
plain English Employee's and Company's entire understanding with regard to the
subject matter of this Agreement. This Agreement constitutes the entire
understanding between the Company and Employee with respect to the subject
matter of this Agreement and supersedes all previous understandings or
agreements relating to the subject matter of this Agreement.
6.2 NOTICES. All notices provided under this Agreement will be in
writing, delivered by mail (postage prepaid), by facsimile or by hand, and will
be deemed to have been given when received by the intended recipient at the
following address (or at such other address as the intended recipient will have
specified in a written notice given to the other party):
If to the Company: If to Employee:
Varian Associates, Inc. Al D. Wilunowski
3050 Hansen Way [ * ]
Palo Alto, CA 94304-1000
Fax: (415) 858-2018
Attn: Vice President,
Human Resources
When notice is given by facsimile transmission, the sender will retain a
written confirmation of successful dispatch by the transmitting machine or
successful receipt from the receiving party.
6.3 HEADINGS AND INTERPRETATION. The headings in this Agreement are
for convenience of reference only, and will not be referred to in connection
with the interpretation of this Agreement. The language of this Agreement will
be interpreted without reference to which party prepared this Agreement or any
portion of this Agreement.
6.4 AMENDMENTS. This Agreement may not be amended or supplemented
except by means of a written agreement executed by both the Company and
Employee.
- - - -----------
* Confidential treatment has been requested with respect to the omitted
language of Section 6.2 of this page. Please be aware that the omitted
material has been separately filed with the Securities and Exchange
Commission.
8
<PAGE> 9
EXHIBIT 10.12
INCENTIVE AND SEPARATION AGREEMENT (Continued)
6.5 SEVERABILITY. If any one or more of the provisions or a portion
of any provisions of this Agreement is or will be deemed to be contrary to law,
invalid, illegal, unenforceable or unreasonable in any respect by any
governmental authority, court of law or arbitrator having competent
jurisdiction over the subject matter of this Agreement, the Company and
Employee, the remaining provisions, portions of such provisions or reasonable
scope of such provisions of this Agreement will be severable and enforceable in
accordance with their terms.
6.6 WAIVER. No failure or delay on the part of either the Company
or Employee to exercise any right or remedy under this Agreement will
constitute a waiver of such right or remedy; and no single or partial exercise
of any such right or remedy will preclude any other or further exercise of such
right or remedy or of any other right or remedy.
6.7 SURVIVORS AND PARTIES. This Agreement will inure to the benefit
of and be enforceable by Employee's heirs, successors and assigns. If Employee
should die while any amounts would still be payable to Employee hereunder if
Employee had continued to live, all amounts will be paid in accordance with the
terms of this Agreement to Employee's heirs, successors and assigns. Nothing
in this Agreement is intended to provide any rights or remedies to any person
other than to the Company and Employee and their respective heirs, successors
and assigns.
6.8 GOVERNING LAW. This Agreement will be construed in accordance
with and governed in all respects by the laws of the State of California
without regard to any provisions regarding conflicts of law.
6.9 DISPUTE RESOLUTION. Any dispute or claim relating to this
Agreement or any amendment of this Agreement, including without limitation as
to their existence, validity, interpretation, performance, breach or damages,
whether arising before or after the termination of this Agreement or any of its
provisions, will be settled only by binding arbitration pursuant to the
Commercial Rules of the American Arbitration Association. The written decision
of the arbitrator(s) will be final and binding, and will be enforceable in any
court of competent jurisdiction.
6.10 ADEA DISCLOSURE. The Discrimination and Employment Act of 1967
requires that Employee be specifically advised of the following: The Company
has advised Employee to consult with an attorney of Employee's own selection
prior to executing the Agreement. Employee has chosen to enter this Agreement
voluntarily. Employee understands that he is not waiving rights or claims
that may arise after the date this Agreement is signed. Employee was given
this Agreement on September 13, 1994, and was told at that time that he had up
to twenty-one (21) days to consider whether he wished to enter into it.
Employee understands that this Agreement does not become effective until seven
(7) days after he signs it. Employee has been told that during that seven-day
period, he may revoke this Agreement, and if he does so the Agreement will not
have become effective or enforceable.
9
<PAGE> 10
EXHIBIT 10.12
INCENTIVE AND SEPARATION AGREEMENT (Continued)
6.11 COMMITTEE APPROVAL. This Agreement will not be binding on the
Company unless and until it has been approved by the Organization and
Compensation Committee of the Company's Board of Directors. The Company will
request such approval within fourteen (14) days after this Agreement has been
executed by the Company and Employee, and the Company will promptly thereafter
notify Employee whether this Agreement has been approved by such Committee
6.12 TERM. In the event that the Company decides not to sell and/or
discontinue the Business, this Agreement will terminate on the date that such
decision is made. In the event of such termination, Employee will not be
entitled to any compensation or benefits provided for in this Agreement.
IN WITNESS WHEREOF, the Company and Employee have executed this
Agreement as of the date set forth above.
VARIAN ASSOCIATES, INC. AL D. WILUNOWSKI
/s/ Ernest M. Felago /s/ Al. D. Wilunowski
- - - --------------------------------------- -------------------------
By: Ernest M. Felago Date: September 13, 1994
Title: Vice President, Human Resources
Date: September 14, 1994
10
<PAGE> 11
EXHIBIT 10.12 - ATTACHMENT A
AGREEMENT
IN CONSIDERATION of my employment or the continuance of my employment by VARIAN
ASSOCIATES, INC., I agree as follows:
1. For the purpose of this Agreement the term "the Company" shall include
VARIAN ASSOCIATES, INC., its subsidiaries and/or its affiliates in which VARIAN
ASSOCIATES, INC. now or hereafter during the term of this Agreement owns more
than twenty percent of the stock eligible to vote for directors and the
assignees and licensees of VARIAN ASSOCIATES, INC., its subsidiaries and
affiliates.
2. I agree that all information and know-how, whether or not in writing,
of a private, secret or confidential nature concerning the Company's business
affairs, including its inventories, products, processes, projects,
developments, and plans are and shall be the property of the Company, and I
will not disclose the same to unauthorized persons or use the same for any
unauthorized purposes without written approval by an officer of the Company,
either during or after the term of my employment, until such time as such
information has become public knowledge. I also agree to treat all U.S.
Government classified information and material in the manner specified by
applicable Government regulations.
3. I agree that all files, letters, memos, reports, sketches, drawings,
laboratory notebooks or other written material containing matter of the type
set forth in paragraph 2 above which shall come into my custody or possession
shall be and are the exclusive property of the Company to be used by me only in
the performance of Company duties and that all such records or copies thereof
in my custody or possession shall be delivered to the Company upon termination
of my employment.
4. I agree that my obligation not to disclose or use proprietary or
confidential information of the types set forth in paragraphs 2 and 3 above
also extends to such types of information of customers of the Company or
suppliers to the Company who may have disclosed or entrusted such information
to the Company or me in the course of business.
5. I hereby assign and agree to assign to the Company or its designees
all my right, title and interest in and to all inventions, improvements,
discoveries, or technical developments, whether or not patentable, which I,
solely or jointly with others, may conceive or reduce to practice during the
term of my employment and which are conceived or first actually reduced to
practice (a) in the utilization by the Company of my services in a technical or
professional capacity in the areas of research, development, marketing,
management, engineering or manufacturing, or (b) pursuant to any project of
which I am a participant or member and that is either financed or directed by
the Company, or (c) at the Company's expense, in whole or in part. All other
inventions, improvements, discoveries or technical developments shall remain my
property.
6. I agree to promptly disclose to and to cooperate with the Company or
its designee, both during and after employment, with respect to the procurement
of patents for the establishment and maintenance of the Company's or its
designee's rights and interests in said inventions, improvements, discoveries
or developments, and to sign all papers which the Company may deem necessary or
desirable for the purpose of vesting the Company or its designee with such
rights, the expense thereof to be borne by the Company.
7. Since I am to assign to the Company certain inventions which I may
conceive or first actually reduce to practice after I enter the employ of the
Company, I have listed below all those inventions which I own at this time and
which I believe should be brought to the attention of the Company to avoid
future misunderstandings as to ownership.
11
<PAGE> 12
Exhibit 10.12, Attachment A (continued)
8. I agree that I will make no claim for pecuniary award or compensation
under the provisions of the Atomic Energy Act of 1954, as amended, with respect
to any invention or discovery made or conceived by me, solely or jointly with
others, in the course of or under any contracts that the Company now has or may
have pertaining to work for the Atomic Energy Commission during the term of my
employment.
9. This Agreement supercedes all prior discussions, representations and
understandings between the parties hereto relating to subject matter hereof,
and may not be waived or modified except by express written agreement executed
by employee and by an authorized representative of Varian.
DATE EMPLOYEE
------------------------------ -------------------------------
DATE WITNESS
------------------------------ -------------------------------
PRIOR INVENTIONS OWNED BY EMPLOYEE
(PLEASE USE REVERSE SIDE IF MORE SPACE IS REQUIRED)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_____________________________________________________________________
Please complete the ADDENDUM AGREEMENT on the reverse side.
12
<PAGE> 13
Exhibit 10.12, Attachment A (continued)
Continued from reverse side hereof.
PRIOR INVENTIONS OWNED BY EMPLOYEE (Continued)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Addendum to Agreement
This is to notify you that the Agreement you are signing in consideration of
employment or the continuation of employment with Varian Associates, Inc. does
not apply to an invention made by you for which no equipment, supplies,
facility, or trade secret information of Varian was used and which was
developed entirely on your own time, and (a) which does not relate (1) to the
business of Varian or (2) to Varian's actual or demonstrably anticipated
research or development, or (b) which does not result from any work performed
by you for Varian.
Employee Signature
-------------------------------
Employee Name (please print) Date
------------------------- -----------------
Employee Badge Number
--------------------
Department Name & Resp. No.
----------------------------------------------------
13
<PAGE> 1
EXHIBIT 11
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF EARNINGS PER SHARE IN ACCORDANCE
WITH INTERPRETIVE RELEASE NO. 34-9083
<TABLE>
<CAPTION>
(Shares in Thousands) 1994 1993 1992
- - - --------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
Actual weighted average shares outstanding for the period(1) 34,391 35,372 37,358
Dilutive employee stock options(1) 1,285 920 554
------- ------- -------
Weighted average shares outstanding for the period(1) 35,676 36,292 37,912
======= ======= =======
(Dollars in millions, except per share amounts)
- - - ---------------------------------------------------------------
Earnings applicable to fully diluted earnings per share $ 79.4 $ 45.8 $ 38.6
======= ======= =======
Earnings per share based on SEC interpretive release
No. 34-9083:
Earnings per share - Fully Diluted(1)(2) $ 2.22 $ 1.26 $ 1.02
======= ======= =======
</TABLE>
(1) Prior periods restated for two-for-one stock split effected in the form of
a stock dividend in March 1994.
(2) There is no significant difference between fully diluted earnings per share
and primary earnings per share.
<PAGE> 1
EXHIBIT 13
VARIAN ASSOCIATES, INC.
FY 1994 ANNUAL REPORT
TO STOCKHOLDERS
<PAGE> 2
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net earnings for 1994 grew 73% to $79.4 million ($2.22 per share),
compared to the $45.8 million ($1.26 per share) earned in the prior year.
1992's net earnings were $38.6 million ($1.02 per share). Earnings for the
fourth quarter of 1994 rose 50% over the prior year's quarter to $27.0 million
($0.76 per share).
Orders for the year reached a new high of $1.71 billion. Fourth
quarter orders of $421 million were up 16% from the year- ago quarter. Sales
for the year rose 18% to a record $1.55 billion, from the prior year's $1.31
billion, and also reached a quarterly high of $441 million. Backlog at the end
of the year was $775 million compared to $627 million and $561 million at years
ended 1993 and 1992, respectively.
Varian's four core businesses all benefited from the combination of
good order levels and improved efficiency.
Good worldwide demand for Varian's cancer therapy equipment and X-ray
tubes drove orders and sales for the Company's Health Care Systems business up
10% over 1993. Profits climbed 15% from the prior year. Backlog rose slightly
over last year's level. The good performance reflected both the Company's
continued strength in the radiation oncology market as well as strong results
from its X-ray tube business. In the latter sector, steps to strengthen its
distribution system and relationships with key original equipment manufacturers
more than offset soft demand for the diagnostic equipment that uses the tubes.
Demand for radiation therapy equipment continued to grow on a worldwide basis
due to its efficacy and cost-effectiveness. The Company's multi-year program
to expand its share of the overseas market resulted in 35% of 1994 orders
coming from international customers.
Instruments orders advanced slightly during the year, as strength in
the Company's vacuum products line overcame the effects of generally slow
demand in the analytical instrument market. Sales rose 6%, while operating
profits declined slightly from 1993, because of competitive industry pricing
conditions. Backlog also declined 6% from the prior year.
Orders for Varian's Semiconductor Equipment business rose 87% over
1993 to $610 million, as chip manufacturers worldwide continued to invest in
new equipment for the next generation of advanced devices. Sales climbed 64%
from 1993's level, and operating profits reached $36 million, rising from $1
million in 1993. Backlog more than doubled to $245 million at year's end. The
upswing in Semiconductor Equipment performance was based on strong global
demand for all of its major product lines. Continued market growth in the
U.S. and Korea was further strengthened by improving momentum in Europe and
recently in Japan. The discontinuance of the semiconductor equipment
distribution agreement with Tokyo Electron Limited in the U.S. and Europe was
completed as planned effective September 30, 1994. Semiconductor equipment
orders and sales growth will be moderated by discontinuation of the
distribution of TEL products. The impact on Semiconductor Equipment earnings
is expected to be minimal under the terms of the termination, which includes
payments to the Company for certain future TEL sales.
Orders for the Electron Devices business increased 7% during 1994,
with modest growth in both the commercial and defense sectors. Sales fell
slightly, but operating profits rose 50% over 1993, an increase for the second
year in a row. The profit improvement was evident across a wide variety of
product lines in 1994. Backlog advanced 9% from year-end 1993.
Spending on research and development continued at approximately 5% of
sales. Research and development expense in 1994 was $81.3 million, compared to
$73.9 million and $76.7 million in 1993 and 1992, respectively.
Net interest expense in 1994 declined to $2.0 million compared to $4.5
million and $3.2 million in 1993 and 1992, respectively.
The effective tax rate for 1994 was 38%, the same as both of the two
preceding years. See Summary of Significant Accounting Policies in Notes to
the Consolidated Financial Statements.
FINANCIAL CONDITION
The Company's financial condition remained strong during 1994. Operating
activities provided cash of $120.3 million compared to $89.8 million in 1993.
Investing activities used $51.4 million, and $57.9 million in 1994, and
19
<PAGE> 3
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
1993, respectively, mainly for the purchase of property, plant and equipment.
Financing activities used $61.4 million during 1994 as compared to $28.1
million during 1993. $36.1 million was used to buy back shares of the
Company's outstanding stock under a share reduction program, and to offset the
issuance of stock to employees. Net payments of $18.1 million decreased total
debt as a percentage of total capital to 12.7% at the end of fiscal 1994 as
compared with 16.8% a year ago. Cash and cash equivalents were $78.9 million
at year-end, exceeding all short- and long-term debt of $65.2 million. The
ratio of current assets to current liabilities remained at 1.55 to 1 at fiscal
year-end 1994, unchanged from fiscal year-end 1993. Quarterly dividends were
increased from $.05 to $.06 per share in the second quarter of fiscal 1994.
The Company has available $50 million in unused lines of credit.
OUTLOOK
Despite the favorable financial results described above, future
revenue and profitability remain difficult to predict. The Company continues
to face various risks associated with its business operations including
uncertain general worldwide economic conditions, lingering worldwide
recessionary conditions, new product acceptance, and uncertainty regarding
possible legislation and private initiatives in the U.S. to control health care
costs. Such conditions could affect the Company's future performance.
On October 20, 1994, the Company announced that it will seek a buyer
for the Electron Devices operations. The sale will not go forward unless the
selling price recognizes the increased profitability and improving value
attained in the business in recent years.
The Company's operations are subject to various federal, state, and/or
local laws regulating the discharge of materials to the environment or
otherwise relating to the protection of the environment, such as discharges to
soil, waters, and air, and the generation, handling, storage, transportation,
and disposal of waste and hazardous substances. These laws have the effect of
increasing costs and potential liabilities associated with the conduct of such
operations. The Company has also been named by the U.S. Environmental
Protection Agency or third parties as a potentially responsible party under the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, at seven sites to which Varian is alleged to have shipped
manufacturing waste for disposal. The Company is also involved in various
stages of environmental investigation and/or remediation under the direction
of, or in consultation with, local and/or state agencies at certain current or
former Company facilities. Uncertainty as to (a) the extent to which the
Company caused, if at all, the conditions being investigated, (b) the extent of
environmental contamination and risks, (c) the applicability of changing and
complex environmental laws, (d) the number and financial viability of other
potentially responsible parties, (e) the stage of the investigation and/or
remediation, (f) the unpredictability of investigation and/or remediation costs
(including as to when they will be incurred), (g) applicable clean-up
standards, (h) the remediation (if any) which will ultimately be required, and
(i) available technology make it difficult to assess the likelihood and scope
of further investigation or remediation activities or to estimate the future
costs of such activities if undertaken. In addition, the Company believes that
it has rights to contribution and/or reimbursement from financially viable,
potentially responsible parties and/or insurance companies, and has filed a
lawsuit against 36 insurance companies with respect to most of the
above-referenced sites. The Company has established reserves for these
environmental matters, which reserves management believes are adequate. Based
on information currently available, management believes that the costs of these
matters are otherwise not reasonably likely to have a material adverse effect
on the financial condition of the Company.
20
<PAGE> 4
EXHIBIT 13
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Varian Associates, Inc. (the Company) is responsible
for the integrity of the financial statements of the Company and its
subsidiaries. This responsibility involves preparation of financial statements
in accordance with generally accepted accounting principles and reporting data
which objectively reflect the assets, liabilities, revenues, and expenses of
the Company and its subsidiaries.
In accumulating and controlling its financial data, the Company
establishes and maintains accounting systems designed to ensure adequate
internal controls. Management believes a high level of internal control is
maintained by the selection and continual training of qualified personnel, by
the establishment and communication of accounting and business policies, and by
internal audits. In establishing internal controls, management evaluates the
cost of such systems against the benefits received. Management believes the
internal control systems in use are adequate to prevent significant misuse of
Company assets or misstatement of financial reports.
Coopers & Lybrand, independent accountants, are engaged to render an
opinion on the consolidated financial statements. Their opinion expresses an
informed judgment on whether management's financial statements, considered in
their entirety, present fairly in all material respects, in conformity with
generally accepted accounting principles, the Company's financial condition,
operating results and cash flows. It is based on procedures described in the
second paragraph of their report, which include obtaining an understanding of
the Company's systems and procedures and performing tests and other procedures
sufficient to provide reasonable assurance that the financial statements are
neither materially misleading nor contain material errors. The audits make
extensive tests of Company procedures. It is neither practical nor necessary
for them to scrutinize a large portion of the Company's transactions.
The Board of Directors, through its Audit and Corporate Responsibility
Committee consisting of five independent directors, is responsible for engaging
the independent accountants and assuring that management fulfills its
responsibilities in the preparation of the financial statements. The Audit and
Corporate Responsibility Committee discusses audit and financial reporting
matters with both management and Coopers & Lybrand. To ensure complete
independence, Coopers & Lybrand meets with the Audit and Corporate
Responsibility Committee with and without the presence of management
representatives.
With the established system of internal accounting controls, internal
audit, and the independent audit by Coopers & Lybrand, the integrity and
objectivity of the Company's financial statements are maintained.
/s/ Robert A. Lemos /s/ Wayne P. Somrak
- - - --------------------------- -----------------------------
Robert A. Lemos Wayne P. Somrak
Vice President, Finance and Vice President and Controller
Chief Financial Officer
21
<PAGE> 5
EXHIBIT 13
CONSOLIDATED STATEMENTS OF EARNINGS
Varian Associates, Inc. and Subsidiary Companies
<TABLE>
<CAPTION>
Fiscal Years
- - - ---------------------------------------------------------------------------------------------
(Dollars in thousands except per share amounts) 1994 1993 1992
=============================================================================================
<S> <C> <C> <C>
SALES $1,552,477 $1,310,984 $1,288,024
---------- ---------- ----------
OPERATING COSTS AND EXPENSES
Cost of sales 1,031,956 876,480 871,667
Research and development 81,326 73,932 76,653
Marketing 187,332 173,443 172,688
General and administrative 121,873 108,765 101,490
---------- ---------- ----------
Total operating costs and expenses 1,422,487 1,232,620 1,222,498
---------- ---------- ----------
OPERATING EARNINGS 129,990 78,364 65,526
Interest expense (6,345) (6,555) (5,853)
Interest income 4,353 2,064 2,683
---------- ---------- ----------
EARNINGS BEFORE TAXES 127,998 73,873 62,356
Taxes on earnings 48,640 28,070 23,700
---------- ---------- ----------
NET EARNINGS $ 79,358 $ 45,803 $ 38,656
========== ========== ==========
EARNINGS PER SHARE - FUllY DILUTED $ 2.22 $ 1.26 $ 1.02
========== ========== ==========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
22
<PAGE> 6
EXHIBIT 13
CONSOLIDATED BALANCE SHEETS
Varian Associates, Inc. and Subsidiary Companies
<TABLE>
<CAPTION>
Fiscal Year-End
------------------------
(Dollars in thousands except par values) 1994 1993
- - - ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 78,872 $ 73,307
Accounts receivable 338,448 290,513
Inventories 179,176 161,413
Other current assets 72,243 65,493
--------- ---------
Total Current Assets 668,739 590,726
--------- ---------
Property, Plant, and Equipment 574,402 544,316
Accumulated depreciation and amortization (339,082) (313,841)
--------- ---------
Net Property, Plant, and Equipment 235,320 230,475
--------- ---------
Other Assets 58,364 57,506
--------- ---------
TOTAL ASSETS $ 962,423 $ 878,707
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 4,816 $ 22,858
Accounts payable - trade 78,094 58,654
Accrued expenses 248,751 203,848
Product warranty 41,682 35,615
Advance payments from customers 58,440 61,282
--------- ---------
Total Current Liabilities 431,783 382,257
Long-Term Debt 60,399 60,470
Deferred Taxes 20,788 21,919
--------- ---------
Total Liabilities 512,970 464,646
--------- ---------
Stockholders' Equity
Preferred stock
Authorized 1,000,000 shares, par value $1, issued none - -
Common stock
Authorized 99,000,000 shares, par value $1, issued
and outstanding 33,979,000 shares (1994), 34,684,000
shares (1993) 33,979 17,342
Retained earnings 415,474 396,719
--------- ---------
Total Stockholders' Equity 449,453 414,061
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 962,423 $ 878,707
========= =========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
23
<PAGE> 7
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY EXHIBIT 13
Varian Associates, Inc. and Subsidiary Companies
<TABLE>
<CAPTION>
Capital in Treasury
(Dollars in thousands except Common Excess of Retained Stock
per share amounts) Stock Par Value Earnings at Cost Total
- - - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCES, FISCAL YEAR-END, 1991 $19,119 $ 76,530 $330,829 $ - $426,478
Net earnings for the year - - 38,656 - 38,656
Issuance of stock under omnibus
stock and employee stock
purchase plans (including tax
benefit of $1,179) 536 15,546 - - 16,082
Purchase of common stock - - - (54,468) (54,468)
Retirement of treasury stock (1,495) (52,973) - 54,468 -
Dividends declared
($0.175 per share) - - (6,492) - (6,492)
------- -------- -------- -------- --------
BALANCES, FISCAL YEAR-END, 1992 18,160 39,103 362,993 - 420,256
Net earnings for the year - - 45,803 - 45,803
Issuance of stock under omnibus
stock and employee stock
purchase plans (including tax
benefit of $3,845) 775 26,292 - - 27,067
Purchase of common stock - - - (72,228) (72,228)
Retirement of treasury stock (1,593) (65,395) (5,240) 72,228 -
Dividends declared
($0.195 per share) - - (6,837) - (6,837)
------- -------- -------- -------- --------
BALANCES, FISCAL YEAR-END, 1993 17,342 - 396,719 - 414,061
Net earnings for the year - - 79,358 - 79,358
Issuance of stock under omnibus
stock and employee stock
purchase plans (including tax
benefit of $4,821) 839 26,753 - - 27,592
Purchase of common stock - - - (63,669) (63,669)
Retirement of treasury stock (1,423) (26,753) (35,493) 63,669 -
Dividends declared
($0.23 per share) - - (7,889) - (7,889)
Two-for-one stock split 17,221 - (17,221) - -
------- -------- -------- -------- --------
BALANCES, FISCAL YEAR-END, 1994 $33,979 - $415,474 - $449,453
======= ======== ======== ======== ========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
24
<PAGE> 8
EXHIBIT 13
CONSOLIDATED STATEMENTS OF CASH FLOWS
Varian Associates, Inc. and Subsidiary Companies
<TABLE>
<CAPTION>
Fiscal Years
---------------------------------------------
(Dollars in thousands) 1994 1993 1992
- - - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Cash Provided by Operating Activities $120,251 $ 89,815 $130,812
INVESTING ACTIVITIES
Proceeds from sale of property, plant, and equipment 18,320 5,228 2,735
Purchase of property, plant, and equipment (62,584) (45,102) (48,605)
Purchase of businesses, net of cash acquired 133 (11,879) -
Other (7,252) (6,099) (6,361)
-------- -------- --------
Net Cash Used by Investing Activities (51,383) (57,852) (52,231)
-------- -------- --------
FINANCING ACTIVITIES
Net borrowings (payments) on short-term obligations (12,042) 12,549 1,232
Proceeds from long-term borrowings - 60,000 -
Principal payments on long-term debt (6,071) (49,238) (18,512)
Proceeds from common stock issued to employees 27,592 27,067 16,082
Purchase of common stock (63,669) (72,228) (54,468)
Dividends paid (7,590) (6,761) (6,373)
Other 392 512 (801)
-------- -------- --------
Net Cash Used by Financing Activities (61,388) (28,099) (62,840)
-------- -------- --------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH (1,915) 2,700 (3,363)
-------- -------- --------
Net Increase in Cash and Cash Equivalents 5,565 6,564 12,378
Cash and Cash Equivalents at Beginning of Year 73,307 66,743 54,365
-------- -------- --------
Cash and Cash Equivalents at End of Year $ 78,872 $ 73,307 $ 66,743
======== ======== ========
DETAIL OF NET CASH PROVIDED BY OPERATING ACTIVITIES
Net Earnings $ 79,358 45,803 $ 38,656
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation 48,029 45,266 44,465
Deferred taxes (8,283) 2,900 1,062
Amortization of intangibles 4,484 4,429 4,477
Changes in assets and liabilities:
Accounts receivable (40,765) (26,214) (4,760)
Inventories (17,374) 16,003 10,263
Other current assets 550 (1,646) 3,935
Accounts payable - trade 18,226 1,972 (3,376)
Accrued expenses 37,929 (5,955) 20,394
Product warranty 5,871 2,056 75
Advance payments from customers (3,503) 1,629 10,315
Other (4,271) 3,572 5,306
-------- -------- --------
Net Cash Provided by Operating Activities $120,251 $ 89,815 $130,812
======== ======== ========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
25
<PAGE> 9
EXHIBIT 13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year:
The Company's fiscal years reported are the 52- or 53- week periods which end
on the Friday nearest September 30.
Principles of Consolidation
The consolidated financial statements include those of the Company and its
subsidiaries. Significant intercompany balances, transactions, and stock
holdings have been eliminated in consolidation. Investments in
less-than-majority-owned affiliated companies are stated at equity in the net
assets of these companies.
Foreign Currency Translation:
Assets and liabilities of subsidiaries outside of the United States
representing cash and amounts receivable or payable are translated into U.S.
dollars at the exchange rates in effect at year end. Other accounts including
inventories and property, plant and equipment are translated at historical
exchange rates. Revenue and expense items are translated at effective rates of
exchange prevailing during each year, except that inventories are charged to
cost of sales and depreciation is expensed at historical exchange rates. The
aggregate exchange gain (loss) included in general and administrative expenses
for 1994, 1993, and 1992 was $(0.1) million, $(8.3) million, and $4.5 million,
respectively.
The Company enters into forward exchange contracts to mitigate the effects of
operational (sales orders and purchase commitments) and balance sheet exposures
to fluctuations in foreign currency exchange rates. When the Company's foreign
exchange contracts hedge operational exposure, the effects of movements in
currency exchange rates on these instruments are recognized in income when the
related revenues and expenses are recognized. When foreign exchange contracts
hedge balance sheet exposure, such effects are recognized in income when the
exchange rate changes. Because the impact of movements in currency exchange
rates on foreign exchange contracts generally offsets the related impact on the
underlying items being hedged, these instruments do not subject the Company to
risk that would otherwise result from changes in currency exchange rates. At
fiscal year-end 1994, the Company had forward exchange contracts with
maturities of twelve months or less to sell foreign currencies totaling $9.1
million ($5.4 million of British pounds and $3.7 million of Canadian dollars)
and to buy foreign currencies totaling $71.8 million ($14.7 million of British
pounds and $57.1 million of Japanese yen).
Revenue Recognition:
Sales and related cost of sales are recognized primarily upon shipment of
products. Sales and related cost of sales under long-term contracts to
commercial customers and the U.S. Government are recognized primarily as units
are delivered.
Statements of Cash Flows:
The Company considers currency on hand, demand deposits, and all highly liquid
investments with an original maturity of three months or less to be cash and
cash equivalents.
Accounts Receivable:
Accounts receivable are stated net of allowances for doubtful accounts of $2.4
million at the end of fiscal year 1994 and $2.2 million at the end of fiscal
year 1993.
Inventories:
Inventories are valued at the lower of cost or market (realizable value) using
last-in, first-out (LIFO) cost for the U.S. inventories of the Health Care
Systems, except X-ray Tube Products, Instruments, and Semiconductor Equipment
26
<PAGE> 10
EXHIBIT 13
Notes to the Consolidated Financial Statements (continued)
segments. All other inventories are valued principally at average cost.
Approximately half of total gross inventories are valued using LIFO method. If
the first-in, first-out (FIFO) method had been used, inventories would have
been higher than reported by $49.0 million in fiscal 1994, $50.8 million in
fiscal 1993, and $52.0 million in fiscal 1992. The main components of
inventories are as follows:
<TABLE>
<CAPTION>
(Dollars in Millions) 1994 1993
- - - -----------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and parts $ 104.2 $ 89.7
Work in process 60.3 44.7
Finished goods 14.7 27.0
----------- -----------
Total Inventories $ 179.2 $ 161.4
=========== ===========
</TABLE>
Property, Plant, and Equipment:
Property, plant, and equipment are stated at cost. Major improvements are
capitalized, while maintenance and repairs are expensed currently . Plant and
equipment are depreciated over their estimated useful lives using the
straight-line method for financial reporting purposes and accelerated methods
for tax purposes. Leasehold improvements are amortized using the straight-line
method over their estimated useful lives, or the remaining term of the lease,
whichever is less.
The main components of property, plant, and equipment are as follows:
<TABLE>
<CAPTION>
(Dollars in Millions) 1994 1993
- - - -----------------------------------------------------------------------------------------------
<S> <C> <C>
Land and land leaseholds $ 10.8 $ 11.3
Buildings 201.4 194.2
Machinery and equipment 347.2 331.1
Construction in progress 15.0 7.7
---------- ----------
Total Property, Plant, and Equipment $ 574.4 $ 544.3
========== ==========
</TABLE>
Taxes on Earnings:
Effective the beginning of fiscal year 1994, the Company adopted Statement of
Financial Accounting Standards No.109 (SFAS 109), Accounting for Income Taxes.
The Company elected to adopt this new standard by restating the prior three
years. Retained earnings for all years restated was decreased by $7.8 million
as a result of adoption, and the income tax provision did not change for any of
the three years restated. Adopting SFAS 109 has not caused a significant
change in the Company's provision for income taxes. The adoption has not
caused a change in the Company's reconciliation of the effective tax rate with
the federal statutory rate or a change in the significant components of the
income tax expense.
Postemployment Benefits:
During 1994, the Company adopted SFAS 112, Employers' Accounting for
Postemployment Benefits. Its adoption did not have a material effect on the
financial statements of the Company.
Postretirement Benefits Other Than Pensions:
The Company adopted SFAS 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions, during 1994. Its adoption did not have a material effect
on the financial statements of the Company.
27
<PAGE> 11
EXHIBIT 13
Notes to the Consolidated Financial Statements (continued)
Research and Development:
Company-sponsored research and development costs related to both present and
future products are expensed currently. Costs related to research and
development contracts are included in inventory and charged to cost of sales
upon recognition of related revenue. Total expenditures on research and
development for fiscal 1994, 1993, and 1992, were $93.1 million, $83.4
million, and $86.4 million, respectively, of which $11.8 million, $9.5 million,
and $9.7 million, respectively, were funded by customers.
Computation of Earnings Per Share (Shares in thousands):
Earnings-per-share computations are based on the weighted average common shares
outstanding and common share equivalents (dilutive stock options). The average
number of common shares and common share equivalents used in the computation of
earnings per share in 1994, 1993, and 1992, was 35,676, 36,292, and 37,912
shares, respectively. There is no significant difference between fully diluted
earnings per share and primary earnings per share.
Stock Split:
On February 17, 1994, the Board of Directors declared a two-for-one stock split
in the form of a stock dividend, issued on March 17, 1994, to stockholders of
record on March 3, 1994. All share and per share information has been restated
to reflect the stock split on a retroactive basis.
ACCRUED EXPENSES
<TABLE>
<CAPTION>
(Dollars in Millions) 1994 1993
- - - ----------------------------------------------------------------------------------------------
<S> <C> <C>
Taxes, including taxes on earnings $ 52.5 $ 40.6
Payroll and employee benefits 90.8 68.3
Estimated loss contingencies 17.9 14.9
Deferred income 23.1 15.4
Other 64.5 64.6
------------ -----------
Total Accrued Expenses $ 248.8 $ 203.8
============ ===========
</TABLE>
SHORT-TERM DEBT
Short-term notes payable and the current portion of long-term debt amounted to
$4.8 million and $22.9 million at the end of fiscal years 1994 and 1993,
respectively. Total debt is subject to limitations included in long-term debt
agreements.
At fiscal year-end 1994, the Company had total unused committed lines of credit
amounting to $50 million.
28
<PAGE> 12
EXHIBIT 13
Notes to the Consolidated Financial Statements (continued)
LONG-TERM DEBT
<TABLE>
<CAPTION>
(Dollars in Millions) 1994 1993
- - - ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Unsecured term loan, 7.29% due in semi-annual installments of
$6.0 payable 1998-2002 $ 60.0 $ 60.0
Unsecured term loan, 9.9% - 6.0
Other debt 0.5 1.0
------- -------
Long-term borrowings 60.5 67.0
Less current portion 0.1 6.5
------- -------
Long-term Debt $ 60.4 $ 60.5
======= =======
</TABLE>
The unsecured term loans contain covenants which limit future borrowings and
require the Company to maintain certain levels of working capital and operating
results. At fiscal year-end 1994, the Company was in compliance with all
restrictive covenants of the loan agreements, including a restriction on
payment of cash dividends. Approximately $44.8 million of retained earnings
were unrestricted for payment of cash dividends.
The annual maturities of long-term debt (in millions) for fiscal years 1995
through 1999, are as follows: $0.1, $0.1, $0.1, $12.1, and $12.1.
Interest paid (in millions) on short and long-term debt was $6.4, $6.4, and
$6.1, in fiscal 1994, 1993, and 1992, respectively.
OMNIBUS STOCK AND EMPLOYEE STOCK PURCHASE PLANS (SHARES IN THOUSANDS)
During fiscal 1991, the Company adopted the Omnibus Stock Plan (the Plan) under
which shares of common stock can be issued to officers, directors, and key
employees. The maximum number of shares of common stock available for awards
under the Plan during each fiscal year (including incentive stock options) is
5% of the total outstanding shares of the Company on the last business day of
the preceding fiscal year. The maximum number of shares of the common stock
available for incentive stock option grants under the Plan is 6,000. The
exercise price for incentive and nonqualified stock options granted under the
Plan may not be less than 100% and 50%, respectively, of the fair market value
at the date of the grant. Options granted will be exercisable at such times
and be subject to such restrictions and conditions as determined by the
Organization and Compensation Committee of the Company's Board of Directors,
but no option shall be exercisable later than ten years from the date of grant.
Restricted stock grants may be awarded at prices ranging from 0% to 50% of the
fair market value of the stock and may be subject to restrictions on
transferability and continued employment as determined by the Organization and
Compensation Committee.
Options granted are generally exercisable in cumulative installments of
one-third each year, commencing one year following date of grant, and expire if
not exercised within seven or ten years from date of grant.
29
<PAGE> 13
EXHIBIT 13
Notes to the Consolidated Financial Statements (continued)
Option activity under the Plans is presented below.
<TABLE>
<CAPTION>
1994 1993 1992
---------------------- ----------------------- ----------------------
(Dollars in Millions) Shares Dollars Shares Dollars Shares Dollars
- - - ---------------------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year 3,785 $ 60.6 3,871 $ 55.5 3,565 $ 46.2
Granted 1,161 29.5 1,153 22.6 919 17.6
Terminated or expired (63) (1.4) (82) (1.4) (79) (1.2)
Exercised (884) (14.5) (1,158) (16.0) (534) (7.1)
----- ------- ----- ------- ----- -------
End of Year
3,999 $ 74.2 3,784 $ 60.7 3,871 $ 55.5
===== ======= ===== ======= ===== =======
Shares exercisable 1,692 1,476 1,661
Available shares
remaining 634 735 1,368
===== ===== =====
</TABLE>
Options were outstanding at prices ranging from $10.60 to $38.31 per share at
fiscal year-end 1994. Options were exercised at prices ranging from $10.60 to
$24.25 for fiscal 1994, $10.60 to $23.72 for fiscal 1993, and $10.60 to $16.63
for fiscal 1992.
During fiscal years 1994, 1993, and 1992, 64, 15, and 82, shares, respectively,
were awarded under restricted stock grants at no cost to the employees. The
restricted stock grants vest over a three year period. Compensation expense
from restricted stock was approximately $1.2 million, $0.9 million, and $1.2
million, in fiscal years 1994, 1993, and 1992, respectively.
The Employee Stock Purchase Plan (ESPP) covers substantially all employees in
the United States and Canada. The participants' purchase price is the lower of
85% of the closing market price on the first or last trading day of the fiscal
quarter. The discount is treated as equivalent to the cost of issuing stock
for financial reporting purposes. During fiscal 1994, 1993, and 1992, 266
shares, 382 shares, and 466 shares, were issued under the ESPP for $7.0
million, $6.3 million, and $6.6 million, respectively. At fiscal year-end
1994, the Company had a balance of 3,330 shares reserved for ESPP.
PREFERRED STOCK PURCHASE RIGHTS (SHARES IN THOUSANDS)
At fiscal year-end, there were issued and outstanding 33,979 preferred stock
purchase rights (one right for each outstanding common share). Each right
entitles the holder to buy one two-hundredth of a share of the Company's Series
A Junior Participating Preferred Stock for $62.50. Of the 1,000 shares of
authorized preferred stock, 280 shares have been designated as Series A Junior
Participating Preferred Stock, to be issued upon exercise of the rights. Upon
issuance, these preferred shares will have certain voting, dividend, and
liquidation preferences over the common stock, as described in the Rights
Agreement of August 25, 1986, as amended.
The rights are exercisable ten days after a person or group has acquired 15% or
more of the Company's voting stock, or the tenth day (or such later date as may
be determined by the Board of Directors) after the date of the commencement of
announcement of a person's or group's intention to commence a tender or
exchange offer whose consummation will result in the ownership of 30% or more
of stock. If a person or group becomes the beneficial owner of 15% or more of
30
<PAGE> 14
EXHIBIT 13
Notes to the Consolidated Financial Statements (continued)
the voting stock, each right would entitle the holder, other than the acquiring
person or group, to buy shares of the Company's Series A Junior Participating
Preferred Stock, having a market value of $125, for the exercise price of
$62.50. If the Company were to be merged into another entity, or merged with
another entity, and the common stock were changed into other securities or
assets, each right would entitle the holder to purchase for the exercise price
of $62.50 common stock of the acquiring company equal to a market value of
twice the exercise price, or $125.
The rights expire on August 25, 1996, but may be redeemed by the Board of
Directors of the Company for $.025 per right at any time before they become
exercisable.
RETIREMENT PLANS
The Company has defined contribution retirement plans covering substantially
all of its domestic and Canadian employees. The Company's major obligation is
to contribute an amount based on a percentage of each participant's base pay.
The Company also contributes 5% of its consolidated earnings from continuing
operations before taxes, as adjusted for discretionary items, as retirement
plan profit sharing. Participants are entitled, upon termination or
retirement, to their portion of the retirement fund assets, which are held by a
third-party trustee. In addition, a number of the Company's foreign
subsidiaries have defined benefit retirement plans for regular full-time
employees. Total pension expense for all plans amounted to $23.1 million,
$18.4 million, and $17.9 million, for fiscal 1994, 1993, and 1992,
respectively.
TAXES ON EARNINGS
U.S. federal income tax returns for the years through 1992 have been settled
with the Internal Revenue Service. It is believed that adequate provision has
been made for all open years and unresolved issues. The detail of taxes on
earnings is as follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1994 1993 1992
- - - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
U.S. federal $ 33.3 $ 11.5 $ 7.2
Non-U.S. 15.8 11.7 13.0
State and local 7.8 2.0 2.4
------- ------- ------
Total current 56.9 25.2 22.6
======= ======= ======
Deferred
U.S. federal (8.8) 2.4 0.2
Non-U.S. 0.5 0.5 0.9
------- ------- ------
Total deferred (8.3) 2.9 1.1
======= ======= ======
Taxes on Earnings $ 48.6 $ 28.1 $ 23.7
======= ======= ======
</TABLE>
31
<PAGE> 15
EXHIBIT 13
Notes to the Consolidated Financial Statements (continued)
Significant items making up deferred tax liabilities, reported separately as
long-term liabilities, and deferred tax assets, included in other current
assets, are as follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1994 1993
- - - --------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Product Warranty $ 13,427 $ 11,313
Deferred Compensation 11,435 8,034
Special Provisions 6,595 6,591
Inventory Adjustments 17,741 11,560
Deferred Income 3,550 2,433
Insurance Reserves 1,183 3,293
Alternative minimum tax credit carryforward - 1,850
Other 1,309 3,014
--------- ---------
55,240 48,088
Liabilities:
Accelerated Depreciation 20,522 21,966
Other 266 (47)
--------- ---------
20,788 21,919
Net $ 34,452 $ 26,169
========= =========
</TABLE>
The reconciliation between the effective tax rates and the statutory federal
income tax rates is shown in the following schedule:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0 % 34.8 % 34.0 %
State and local taxes, net of federal tax benefit 4.0 1.7 2.6
Foreign taxes, net (0.6) 2.7 3.8
Foreign Sales Corporation (1.8) (3.7) (2.7)
Other 1.4 2.5 0.3
---- ----- ----
Effective Tax Rate 38.0 % 38.0 % 38.0 %
==== ==== ====
</TABLE>
Income taxes paid (refunded) are as follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1994 1993 1992
- - - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes paid (refunded), net $ 25.2 $ 4.5 $ (8.0)
State income taxes paid, net 6.2 1.7 2.0
Foreign income taxes paid, net 11.8 14.9 8.0
------- ------ ------
Total Paid $ 43.2 $ 21.1 $ 2.0
======= ====== ======
</TABLE>
32
<PAGE> 16
EXHIBIT 13
Notes to the Consolidated Financial Statements (continued)
LEASE COMMITMENTS
At fiscal year-end 1994, the Company was committed to minimum rentals under
noncancellable operating leases for fiscal years 1995 through 1999 and
thereafter, as follows, in millions: $9.0, $6.8, $4.5, $3.9, $1.9, and $7.1.
Rental expense for fiscal years 1994, 1993 and 1992, in millions, was $20.6,
$23.8, and $24.3, respectively.
CONTINGENCIES
In February 1990, a purported class action was brought by Panache Broadcasting
of Pennsylvania, Inc. on behalf of all purchasers of electron tubes in the U.S.
against the Company and a joint-venture partner, alleging that the activities
of their joint venture in the power-grid tube industry violated antitrust laws.
The complaint seeks injunctive relief and unspecified damages which may be
trebled under the antitrust laws. In February 1993, the U.S. District Court in
Chicago granted the Company's motion to dismiss the complaint with leave to
amend. Panache Broadcasting filed an amended complaint in March 1993. The
Company's motion to dismiss that complaint was granted in part and denied in
part. No determination has been made regarding the plaintiff's request to
certify the purported class. The Company believes that it has meritorious
defenses to the Panache lawsuit.
In addition to the above-referenced matter, the Company is currently a
defendant in a number of legal actions and could incur an uninsured liability
in one or more of them. In the opinion of management, the outcome of the above
litigation will not have a material adverse effect on the financial condition
of the Company.
The Company has also been named by the U.S. Environmental Protection Agency or
third parties as a potentially responsible party under the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, at
seven sites to which Varian is alleged to have shipped manufacturing waste for
disposal. The Company is also involved in various stages of environmental
investigation and/or remediation under the direction of, or in consultation
with, local and/or state agencies at certain current or former Company
facilities. Uncertainty as to (a) the extent to which the Company caused, if
at all, the conditions being investigated, (b) the extent of environmental
contamination and risks, (c) the applicability of changing and complex
environmental laws, (d) the number and financial viability of other potentially
responsible parties, (e) the stage of the investigation and/or remediation, (f)
the unpredictability of investigation and/or remediation costs (including as to
when they will be incurred), (g) applicable clean-up standards,(h) the
remediation (if any) which will ultimately be required, and (i) available
technology make it difficult to assess the likelihood and scope of further
investigation or remediation activities or to estimate the future costs of such
activities if undertaken. In addition, the Company believes that it has rights
to contribution and/or reimbursement from financially viable, potentially
responsible parties and/or insurance companies, and has filed a lawsuit against
36 insurance companies with respect to most of the above-referenced sites.
The Company has established reserves for these environmental matters, which
reserves management believes are adequate. Based on information currently
available, management believes that the costs of these matters are otherwise
not reasonably likely to have a material adverse effect on the financial
condition of the Company.
33
<PAGE> 17
EXHIBIT 13
Notes to the Consolidated Financial Statements (continued)
SUBSEQUENT EVENT
On October 20, 1994, the Company announced that it will seek a buyer for the
Electron Devices operations. The sale will not go forward unless the selling
price recognizes the increased profitability and improving value attained in
the business in recent years.
INDUSTRY SEGMENTS
The Company's operations are grouped into four business segments: Health Care
Systems, Instruments, Semiconductor Equipment, and Electron Devices. Indirect
and common costs have been allocated through the use of estimates.
Accordingly, the following information is provided for purposes of achieving an
understanding of operations, but may not be indicative of the financial results
of the reported segments were they independent organizations. In addition,
comparisons of the Company's operations to similar operations of other
companies may not be meaningful.
The Health Care Systems business includes linear accelerators used for cancer
therapy, industrial testing, and inspection, as well as cancer treatment
planning systems, and data management systems for medical facilities. It also
designs and manufactures a broad range of X-ray generating tubes for the
medical diagnostic imaging market worldwide. The Instruments business consists
of analytical instruments widely used in the fields of chemistry, environmental
monitoring, biology, life sciences, and metallurgy. It also manufactures high
vacuum pumps, instrumentation, gauges and components. The Semiconductor
Equipment business includes systems used for semiconductor wafer fabrication.
The Electron Devices business covers a broad line of electron devices used in
broadcasting, communications, and other commercial and military applications.
Included in Eliminations and Other are certain insignificant support
operations.
The Company operates various manufacturing and marketing operations outside the
United States. No single country outside the United States accounts for more
than 10% of total sales or total assets. Sales between geographic areas are
accounted for at cost plus prevailing markups arrived at through negotiations
between independent profit centers. Related profits are eliminated in
consolidation.
Included in the total of United States sales are export sales of $304 million
in fiscal 1994, $207 million in fiscal 1993, and $208 million in fiscal 1992.
Sales under prime contracts from the U.S. Government were approximately $71
million in fiscal 1994, $69 million in fiscal 1993, and $79 million in fiscal
1992.
34
<PAGE> 18
EXHIBIT 13
INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
Pretax
Sales Earnings (Loss)
------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1994 1993 1992
- - - ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Health Care Systems $ 426 $ 387 $ 374 $ 86 $ 75 $ 68
Instruments 372 352 352 33 35 30
Semiconductor Equipment 477 291 275 36 1 (4)
Electron Devices 275 278 285 18 12 (1)
Eliminations & Other 2 3 2 (9) (7) (7)
------ ------ ------ ---- ---- ----
Total Industry
Segments 1,552 1,311 1,288 164 116 86
General Corporate - - - (34) (38) (21)
Interest, Net - - - (2) (4) (3)
------ ------ ------ ---- ---- ----
Total Company $1,552 $1,311 $1,288 $128 $ 74 $ 62
====== ====== ====== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Identifiable Capital
Assets Expenditures Depreciation
---------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1994 1993 1992 1994 1993 1992
- - - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Health Care Systems $ 201 $ 187 $ 171 $ 11 $ 8 $ 8 $ 9 $ 8 $ 8
Instruments 196 180 179 17 12 13 10 10 10
Semiconductor Equipment 196 148 146 6 5 10 9 9 9
Electron Devices 170 172 182 13 9 8 13 12 11
Eliminations & Other 8 9 12 1 1 - 1 1 1
----- ----- ----- ---- ---- ---- ---- ---- ----
Total Industry
Segments 771 696 690 48 35 39 42 40 39
General Corporate 191 183 189 15 12 10 6 5 5
Interest, Net - - - - - - - - -
----- ----- ----- ---- ---- ---- ---- ---- ----
Total Company $ 962 $ 879 $ 879 $ 63 $ 47 $ 49 $ 48 $ 45 $ 44
===== ===== ===== ==== ==== ==== ==== ==== ====
</TABLE>
GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
Sales to Intergeographic
Unaffiliated Sales to Total
Customers Affiliates Sales
------------------------- -------------------- ----------------------
(Dollars in millions) 1994 1993 1992 1994 1993 1992 1994 1993 1992
- - - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $1,098 $ 932 $ 879 $ 297 $ 223 $ 229 $1,395 $1,155 $1,108
International 453 378 408 61 56 52 514 434 460
Eliminations & Other 1 1 1 (358) (279) (281) (357) (278) (280)
------ ------ ------ ----- ----- ----- ------ ------ ------
Total Geographic
Segments 1,552 1,311 1,288 - - - 1,552 1,311 1,288
General Corporate - - - - - - - - -
Interest, Net - - - - - - - - -
------ ------ ------ ----- ----- ----- ------ ------ ------
Total Company $1,552 $1,311 $1,288 $ - $ - $ - $1,552 $1,311 $1,288
====== ====== ====== ===== ===== ===== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Pretax Identifiable
Earnings (Loss) Assets
------------------ -------------------
(Dollars in millions) 1994 1993 1992 1994 1993 1992
- - - ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $139 $106 $ 71 $538 $494 $456
International 34 17 22 225 193 222
Eliminations & Other (9) (7) (7) 8 9 12
---- ---- ---- ---- ---- ----
Total Geographic
Segments 164 116 86 771 696 690
General Corporate (34) (38) (21) 191 183 189
Interest, Net (2) (4) (3) - - -
---- ---- ---- ---- ---- ----
Total Company $128 $ 74 $ 62 $962 $879 $879
==== ==== ==== ==== ==== ====
</TABLE>
Total sales is based on the location of the operation furnishing goods and
services. International sales based on final destination of products sold are
$732 million, $561 million, and $587 million, in 1994, 1993, and 1992,
respectively.
35
<PAGE> 19
EXHIBIT 13
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1994
---------------------------------------------------------
(Dollars in millions except First Second Third Fourth Total
per share amounts) Quarter Quarter Quarter Quarter Year
- - - -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ 323.8 394.5 393.0 441.2 1,552.5
------- ----- ----- ----- -------
Gross Profit $ 104.1 129.8 130.4 156.2 520.5
------- ----- ----- ----- -------
Net Earnings $ 11.7 18.3 22.4 27.0 79.4
======= ===== ===== ===== =======
Net Earnings Per Share -
Fully Diluted $ 0.33 0.51 0.63 0.76 2.22
======= ===== ===== ===== =======
</TABLE>
<TABLE>
<CAPTION>
1993
---------------------------------------------------------
(Dollars in millions except First Second Third Fourth Total
per share amounts) Quarter Quarter Quarter Quarter Year
- - - -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ 291.3 325.3 327.9 366.5 1,311.0
------- ----- ----- ----- -------
Gross Profit $ 90.9 108.6 108.6 126.4 434.5
------- ----- ----- ----- -------
Net Earnings $ 6.6 9.3 12.0 17.9 45.8
======= ===== ===== ===== =======
Net Earnings Per Share -
Fully Diluted $ 0.18 0.25 0.33 0.51 1.26
======= ===== ===== ===== =======
</TABLE>
The four quarters for net earnings per share may not add for the year
because of the different number of shares outstanding during the
year.
COMMON STOCK PRICES (UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
-------------------------------------- -----------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
- - - --------------------------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common Stock
High $ 30 39 35 5/8 38 5/8 $ 22 3/8 23 7/8 26 3/4 27
Low $ 26 32 1/2 32 1/4 35 7/8 $ 16 7/8 19 22 23 7/8
Dividends Declared
Per Share $.050 .060 .060 .060 $.045 .050 .050 .050
</TABLE>
36
<PAGE> 20
EXHIBIT 13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Varian Associates, Inc.
We have audited the accompanying consolidated balance sheets of Varian
Associates, Inc. and subsidiary companies as of September 30, 1994 and October
1, 1993, and the related consolidated statements of earnings, stockholders'
equity, and cash flows for each of the three fiscal years in the period ended
September 30, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Varian
Associates, Inc. and subsidiary companies as of September 30, 1994 and October
1, 1993, and the consolidated results of their operations and their cash flows
for each of the three fiscal years in the period ended September 30, 1994 in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
- - - -----------------------------
COOPERS & LYBRAND L.L.P.
San Jose, California
October 19, 1994
37
<PAGE> 1
EXHIBIT 21
VARIAN ASSOCIATES, INC.
SUBSIDIARIES OF THE REGISTRANT
FISCAL 1994
<TABLE>
<CAPTION>
ORGANIZED UNDER PERCENTAGE OF VOTING
LAWS OF SECURITIES OWNED
------------------ --------------------
<S> <C> <C>
VARIAN ASSOCIATES, INC. (REGISTRANT):
Varian Sample Preparation Products, Inc. California 100%
Varian Associates Limited California 100%
Varian Inter-American Corp. California 100%
Varian Investment Corporation California 100%
Varian Realty Inc. California 100%
Varian China, Ltd. Delaware 100%
Vaian Ireland, Ltd. Delaware 100%
Varian Japan, Ltd. Delaware 100%
Varian Microwave Equipment, Ltd. Delaware 100%
Varian Pacific, Inc. Delaware 100%
Varian Instruments of Puerto Rico, Inc. Delaware 100%
Varian Ltd. Delaware 100%
Varian Semiconductor Equipment Cp. Inc. Delaware 100%
Mansfield Insurance Company Vermont 100%
Varian Australia Pty., Ltd. Australia 100%
Varian Holdings (Australia) Pty. Limited Australia 100%
Varian Gesellschaft m.b.H Austria 100%
Varian Belgium, N.V. Belgium 100%
Varian Industria E Comercia Limitada Brazil 100%
Intralab Instrumentacao Analytica Ltda. Brazil 100%
Varian Canada, Inc. Canada 100%
Varian AS Denmark 100%
Varian S.A. France 100%
Varian - Dosetek OY Finland 100%
Varian GmbH Germany 100%
Varian S.p.A. Italy 100%
Varian, S.A. Mexico 100%
Varian Espana, S.A. Spain 100%
Varian AB Sweden 100%
Varian International AG Switzerland 100%
Varian Nederland B.V. The Netherlands 100%
Varian FSC B.V. The Netherlands 100%
Varian - TEM Limited England 100%
Varian Iberica, S.L. Spain 70%
Varian Korea, Ltd. Korea 61%
TEL-Varian, Ltd. Japan 50%
</TABLE>
All of the above subsidiaries are included in the Company's consolidated
financial statements. The names of certain consolidated subsidiaries have been
omitted because, considered in the aggregate as a single subsidiary, they would
not consitute a significant subsidiary.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
Varian Associates, Inc. on Forms S-8 (Nos. 33-46000, 33-33661, 33-33660,
2-95139, and 33-1425) and Forms S-8 and S-3, (No. 33-40460), of our report
dated October 19, 1994, on our audits of the consolidated financial statements
and financial statement schedules of Varian Associates, Inc. as of September
30, 1994 and October 1, 1993 and for each of the three fiscal years in the
period ended September 30, 1994, which report is incorporated in this Form 10-K
by reference to the Company's 1994 Annual Report to Stockholders.
/s/ Coopers & Lybrand L.L.P.
-----------------------------
Coopers & Lybrand L.L.P.
San Jose, California
December 21, 1994
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
The undersigned directors of Varian Associates, Inc., a Delaware
corporation ("Company"), hereby constitute and appoint Robert A. Lemos and
Joseph B. Phair, and each of them with full power to act without the other, the
undersigned's true and lawful attorney-in-fact, with full power of substitution
and resubstitution, for the undersigned and in the undersigned's name, place
and stead in the undersigned's capacity as a director of the Company, to
execute in the name and on behalf of the undersigned of the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1994 ("Report"),
under the Securities and Exchange Act of 1934, as amended, and to file such
Report, with exhibits thereto and other documents in connection therewith and
any and all amendments thereto, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact, and each of them, full power and
authority to do and perform each and every act and thing necessary or desirable
to be done and to take any other action of any type whatsoever in connection
with the foregoing which, in the opinion of such attorney-in-fact, may be of
benefit to, in the best interest of, or legally required of, the undersigned,
it being understood that the documents executed by such attorney-in-fact on
behalf of the undersigned pursuant to this Power of Attorney shall be in such
form and shall contain such terms and conditions as such attorney-in-fact may
approve in such attorney-in-fact's discretion. This Power of Attorney may be
executed in any number of counterparts, all of which together shall constitute
one and the same Power of Attorney.
IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of
November, 1994.
<TABLE>
<CAPTION>
<S> <C>
/s/ Ruth M. Davis /s/ Samuel Hellman
- - - --------------------------- ---------------------------
Ruth M. Davis Samuel Hellman
/s/ Terry R. Lautenbach /s/ Angus A. MacNaughton
- - - --------------------------- ---------------------------
Terry R. Lautenbach Angus A. MacNaughton
/s/ David W. Martin, Jr. /s/ John G. McDonald
- - - --------------------------- ---------------------------
David W. Martin, Jr. John G. McDonald
/s/ William F. Miller /s/ Gordon E. Moore
- - - --------------------------- ---------------------------
William F. Miller Gordon E. Moore
/s/ David E. Mundell /s/ Donald O. Pederson
- - - --------------------------- ---------------------------
David E. Mundell Donald O. Pederson
/s/ Burton Richter
- - - --------------------------- ---------------------------
Philip J. Quigley Burton Richter
/s/ Paul G. Stern /s/ Richard W. Vieser
- - - --------------------------- ---------------------------
Paul G. Stern Richard W. Vieser
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM VARIAN
ASSOCIATES INC., AND SUBSIDIARY COMPANIES, CONSOLIDATED BALANCE SHEETS,
CONSOLIDATED STATEMENTS OF EARNINGS AND NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS, ALL CONTAINED WITHIN EXHIBIT 13, REGISTRANT'S 1994 ANNUAL REPORT
TO STOCKHOLDERS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> OCT-02-1993
<PERIOD-END> SEP-30-1994
<CASH> 78,872
<SECURITIES> 0
<RECEIVABLES> 340,870
<ALLOWANCES> 2,422
<INVENTORY> 179,176
<CURRENT-ASSETS> 668,739
<PP&E> 574,402
<DEPRECIATION> 339,082
<TOTAL-ASSETS> 962,423
<CURRENT-LIABILITIES> 431,783
<BONDS> 0
<COMMON> 33,979
0
0
<OTHER-SE> 415,474
<TOTAL-LIABILITY-AND-EQUITY> 962,423
<SALES> 1,552,477
<TOTAL-REVENUES> 1,552,477
<CGS> 1,031,956
<TOTAL-COSTS> 1,422,487
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,345
<INCOME-PRETAX> 127,998
<INCOME-TAX> 48,640
<INCOME-CONTINUING> 79,358
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79,358
<EPS-PRIMARY> 0
<EPS-DILUTED> 2.22
</TABLE>
