<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 29, 1995
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, 1995 was $1,490,292,000.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of December 1, 1995: 31,420,000 shares of $1 par value common
stock.
An index of exhibits filed with this Form 10-K is located on pages 16 through
17.
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 29, 1995 (the "Annual Report") ....................................... I, II, IV
Certain sections, identified by caption, of the Proxy Statement for the
Registrant's 1996 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 health care, industrial
production, scientific and industrial research, and environmental monitoring.
The Company's principal products are health care systems, analytical
instruments, and semiconductor production equipment. Its foreign subsidiaries
engage in some of the aforementioned businesses and market the Company's
products outside the United States. As of September 29, 1995, the Company
employed approximately 6,900 people worldwide.
The Company sells its products throughout the world and has 34 field sales
offices in the U.S. and 53 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 other than the
completion of the sale of the Electron Devices business as described under the
caption "Discontinued Operation" on page 32 of the Annual Report, which
information is incorporated herein by reference. The Company anticipates
adequate availability of raw materials.
The Company's sales to customers outside of the U.S. for 1995 were $797 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 24 of the Annual Report, which
information is incorporated herein by reference.
The Company's operations are grouped into three 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,
simulators for planning cancer treatments, brachytherapy systems and data
management systems for radiation oncology 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 $293 million and $281 million in fiscal
1995 and 1994, respectively.
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
2
<PAGE> 3
Item 1. (continued)
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. The Instruments business includes a facility located in Tempe,
Arizona, that fabricates circuit boards and sub-assemblies for customers inside
and outside the Company. This facility was formerly a part of the Electron
Devices business which was sold as of August 11, 1995. Backlog for the
Instruments business amounted to $111 million and $97 million in fiscal 1995 and
1994, 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 sputtercoating
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 $248 million and
$245 million in fiscal 1995 and 1994, respectively. The discontinuance of the
semiconductor equipment distribution agreement with Tokyo Electron Limited in
the U.S. and Europe was completed effective September 30, 1994.
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 32-33 of the Annual Report.
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 pages 25-26 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
17-19 and 30-32 , 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
3
<PAGE> 4
Item 1. (continued)
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 1996,
nor are they expected to be material in fiscal 1997.
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 18, 1995.
<TABLE>
<CAPTION>
Name Age Position Term
- ---- --- -------- ----
<S> <C> <C> <C>
J. Tracy O'Rourke (Director) 60 Chairman of the Board and Chief Executive 1990-Present
Officer
Richard A. Aurelio 51 Executive Vice President 1992-Present
President, Semiconductor Equipment 1991-1992
Executive Vice President, ASM Lithography (a 1987-1991
semiconductor manufacturing company)
Allen J. Lauer 58 Executive Vice President 1990-Present
Richard M. Levy 57 Executive Vice President 1990-Present
Timothy E. Guertin 46 Corporate Vice President 1992-Present
President, Medical Equipment 1990-Present
Robert A. Lemos 54 Vice President, Finance and Chief Financial 1986-Present
Officer
Treasurer 1995-Present
Joseph B. Phair 48 Secretary 1991-Present
Vice President and General Counsel 1990-Present
Wayne P. Somrak 50 Vice President 1991-Present
Treasurer 1995
Controller 1985-1994,
1995-Present
</TABLE>
There is no family relationship between any of the executive officers.
4
<PAGE> 5
Item 2. Properties
The Company's executive offices and principal research and manufacturing
facilities are located in Palo Alto, California, on 55 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 735,400 square feet. The
following is a summary of the Company's properties at September 29, 1995:
<TABLE>
<CAPTION>
Land (Acres) Buildings (000's Sq. Ft.)
------------ -------------------------
Owned Leased Owned Leased
----- ------ ----- ------
<S> <C> <C> <C> <C>
United States 102 55 1,556 475
International 24 - 312 325
--- -- ----- ---
126 55 1,868 800
=== == ===== ===
</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 487 52 539 163 702
Instruments 397 197 594 357 951
Semiconductor Equipment 349 52 401 148 549
Other Operations 50 - 50 - 50
----- --- ----- --- -----
Total Operations 1,283 301 1,584 668 2,252
===== === ===== ===
Other 416
-----
Total 2,668
=====
</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.
5
<PAGE> 6
Item 2. (continued)
Manufacturing sites by geographical location are as follows:
Health Care Systems California, Illinois, South Carolina, Utah,
England, Finland, France, Switzerland
Instruments California, Massachusetts, Arizona,
Australia, Italy
Semiconductor Equipment California, Massachusetts, Korea
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, Taiwan.
Item 3. Legal Proceedings
Information required by this Item is incorporated herein by reference from the
information provided under the caption "Contingencies" on pages 30-32 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 34 of the Annual Report, and the information provided under the caption
"Long-Term Debt" on page 27 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 6,083 holders of record of the Company's common stock on December 1,
1995.
6
<PAGE> 7
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEARS
- --------------------------------------------------------------------------------------------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Sales $1575.7 1313.4 1061.9 1025.2 1055.3
------- ------ ------ ------ ------
Earnings from Continuing Operations
before Taxes $ 165.3 109.1 60.1 59.3 70.1
Taxes on earnings $ 59.5 41.5 22.8 22.6 26.6
------- ------ ------ ------ ------
Earnings from Continuing Operations $ 105.8 67.6 37.3 36.7 43.5
Earnings from Discontinued Operations,
Net of Taxes $ 33.5 11.8 8.5 1.9 14.0
------- ------ ------ ------ ------
Earnings (Loss) before Cumulative Effect of
Change in Accounting for Income Taxes 139.3 79.4 45.8 38.6 57.5
Cumulative Effect of Accounting Change $ - - - - (7.8)
------- ------ ------ ------ ------
NET EARNINGS $ 139.3 79.4 45.8 38.6 49.7
======= ====== ====== ====== ======
EARNINGS PER SHARE - FULLY DILUTED
Earnings Continuing Operations $ 3.01 1.90 1.03 0.97 1.11
Earnings Discontinued Operations $ 0.95 0.32 0.23 0.05 0.36
------- ------ ------ ------ ------
Earnings Per Share Before Cumulative Effect
of Change in Accounting for Income Taxes $ 3.96 2.22 1.26 1.02 1.47
Cumulative Effect of Accounting Change $ - - - - (0.20)
------- ------ ------ ------ ------
Net Earnings Per Share $ 3.96 2.22 1.26 1.02 1.27
======= ====== ====== ====== ======
DIVIDENDS DECLARED PER SHARE $ 0.270 0.230 0.195 0.175 0.153
======= ====== ====== ====== ======
FINANCIAL POSITION AT YEAR END
TOTAL ASSETS $1003.8 962.4 878.7 878.7 869.8
Long-term debt (excluding current portion) $ 60.3 60.4 60.5 49.7 68.0
</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.
7
<PAGE> 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 17-19 of the Annual Report.
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 35 of the Annual Report and the
Consolidated Financial Statements, Notes to the Consolidated Financial
Statements, and Supplementary Data on pages 20-34 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.
8
<PAGE> 9
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" and "Change in Control Arrangements" of the Proxy Statement.
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 20 through 33 and page 35 of the Annual
Report:
Consolidated Financial Statements:
Consolidated Statements of Earnings for fiscal
years 1995, 1994, and 1993
Consolidated Balance Sheets at fiscal year-end 1995
and 1994
Consolidated Statements of Stockholders' Equity
for fiscal years 1995, 1994, and 1993
Consolidated Statements of Cash Flows for fiscal
years 1995, 1994, and 1993
Notes to the Consolidated Financial Statements
Report of Independent Accountants
9
<PAGE> 10
Item 14. (continued)
(2) Financial Statement Schedules The following financial statement schedule
of the Registrant and its subsidiaries for fiscal years 1995, 1994, and
1993, 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 14
Schedules
II Valuation and Qualifying Accounts 15
</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
3-b Registrant's Bylaws (incorporated herein by reference
to the Registrant's Form 10-K for the year ended
October 2, 1992).
4.1 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).
4.2 Second Amendment to Registrant's Rights Agreement,
dated as of November 3, 1995 (incorporated herein
by reference to Registrant's Form 8-A/A
Registration Statement filed with the Securities
and Exchange Commission on November 6, 1995).
10.1 Registrant's Omnibus Stock Plan (incorporated herein by
reference to Registrant's Form 10-Q for the quarter
ended March 31, 1995).
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
<PAGE> 11
Item 14. (continued)
10.4 Registrant's Management Incentive Plan (incorporated
herein by reference to Registrant's Form 10-Q for
the quarter ended March 31, 1995).
10.5 Registrant's Supplemental Retirement Plan (incorporated
herein by reference to Registrant's Form 10-Q for
the quarter ended June 30, 1995).
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
(incorporated herein by reference to Registrant's
Form 10-K for the year ended September 30, 1994).
10.11 Description of Certain Relocation Arrangements between
Registrant and Executive Officers (incorporated
herein by reference to Registrant's Form 10-Q for
the quarter ended December 30, 1994).
10.12 Registrant's September 14,1994 Incentive and
Separation Agreement with Al D. Wilunowski
(incorporated herein by reference to Registrant's
Form 10-K for the year ended September 30,
1994).(1)
11 Computation of earnings per share.
- --------
(1) Confidential treatment was requested of and granted by the Commission with
respect to portions of this exhibit.
11
<PAGE> 12
Item 14. (continued)
13 Registrant's 1995 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 for the fiscal year ended
September 29, 1995.
27.1 Restated Financial Data Schedule for the fiscal year
ended September 30, 1994.
27.2 Restated Financial Data Schedule for the quarter ended
December 30, 1994
27.3 Restated Financial Data Schedule for the quarter ended
March 31, 1995.
27.4 Restated Financial Data Schedule for the quarter ended
June 30, 1995.
(b) Reports on Form 8-K:
A report on Form 8-K was filed on August 23, 1995, regarding the
Registrant's sale of its Electron Devices business to a company
formed at the direction of Leonard Green & Partners, L.P.
12
<PAGE> 13
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 14, 1995 By: /s/ Robert A. Lemos
--------------------
Robert A. Lemos
Vice President, Finance,
Chief Financial Officer,
and Treasurer
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 December 14, 1995
- --------------------- Officer (Principal Executive Officer)
J. Tracy O'Rourke
/s/ Robert A. Lemos Vice President, Finance, Chief Financial December 14, 1995
- ------------------- Officer and Treasurer (Principal Financial
Robert A. Lemos Officer)
/s/ Wayne P. Somrak Vice President and Controller (Principal December 14, 1995
- ------------------- Accounting 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
Wayne R. Moon* Director
Gordon E. Moore * Director
David E. Mundell * Director
Donald O. Pederson * Director
Philip J. Quigley Director
Burton Richter * Director
Richard W. Vieser * Director
* By /s/ Robert A. Lemos December 14, 1995
---------------------
Robert A. Lemos, Attorney-in-Fact
</TABLE>
- -------------------------------------
** By authority of powers of attorney filed herewith.
13
<PAGE> 14
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 18,1995
appears on page 35 of the 1995 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 Schedule listed in the index on page 10 of this
Form 10-K.
In our opinion, the financial statement schedule 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 18, 1995
14
<PAGE> 15
SCHEDULE II
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS (1)
for the fiscal years ended 1995, 1994, and 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
DEDUCTIONS
BALANCE AT CHARGED TO ----------------------------- 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 1995 $ 2,422 $ 330 & Adjustments $ 436 $ 2,316
======= ======= ======= =======
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
======= ======= ======= =======
ESTIMATED LIABILITY FOR
PRODUCT WARRANTY:
Actual
Warranty
Fiscal Year Ended 1995 $41,682 $61,954 Expenditures $55,560 $48,076
======= ======= ======= =======
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
======= ======= ======= =======
</TABLE>
(1) As to column omitted the answer is "none".
-15-
<PAGE> 16
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
- -------
<S> <C>
3-a Registrant's Restated Certificate of Incorporation.
3-b Registrant's Bylaws (incorporated herein by reference to the
Registrant's Form 10-K for the year ended October 2, 1992).
4.1 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).
4.2 Second Amendment to Registrant's Rights Agreement, dated as of
November 3, 1995 (incorporated herein by reference to Registrant's
Form 8-A/A Registration Statement filed with the Securities and
Exchange Commission on November 6, 1995).
10.1 Registrant's Omnibus Stock Plan (incorporated herein by reference to
Registrant's Form 10-Q for the quarter ended March 31, 1995).
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-Q for the quarter ended March 31,
1995).
10.5 Registrant's Supplemental Retirement Plan (incorporated herein by
reference to Registrant's Form 10-Q for the quarter ended June 30,
1995).
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>
16
<PAGE> 17
<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 (incorporated herein by reference to
Registrant's Form 10-K for the year ended September 30, 1994).
10.11 Description of Certain Relocation Arrangements between Registrant and
Executive Officers (incorporated herein by reference to Registrant's
Form 10-Q for the quarter ended December 30, 1994).
10.12 Registrant's September 14,1994 Incentive and Separation Agreement
with Al D. Wilunowski (incorporated herein by reference to
Registrant's Form 10-K for the year ended September 30, 1994). (1)
11 Computation of earnings per share.
13 Registrant's 1995 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 for the fiscal year ended September 29, 1995.
27.1 Restated Financial Data Schedule for the fiscal year ended September
30, 1994.
27.2 Restated Financial Data Schedule for the quarter ended December 30,
1994
27.3 Restated Financial Data Schedule for the quarter ended March 31, 1995.
27.4 Restated Financial Data Schedule for the quarter ended June 30, 1995.
</TABLE>
- -----------
(1) Confidential treatment was requested of and granted by the Commission with
respect to portions of this exhibit.
17
<PAGE> 1
EXHIBIT 3-a
RESTATED CERTIFICATE OF INCORPORATION OF
VARIAN ASSOCIATES, INC.
This corporation was originally incorporated under the name "VARIAN
DELAWARE, INC." on January 22, 1976.
ARTICLE I
This name of this corporation is
VARIAN ASSOCIATES, INC.
ARTICLE II
Its registered office is located at No. 1209 Orange Street, City of
Wilmington, County of New Castle, State of Delaware. The name of its registered
agent at that address is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by
this corporation is to engage in research, development, manufacture, service and
sale of electronic and related products and to engage in any other act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
This corporation shall be authorized to issue two classes of stock to
be designated, respectively, "Common" and "Preferred." The total number of
shares which this corporation shall have authority to issue shall be one hundred
million (100,000,000). The total number of shares of Common Stock shall be
ninety-nine million (99,000,000) and the par value of each share of Common Stock
shall be One Dollar ($1). The total number of shares of Preferred Stock shall be
one million (1,000,0000) and the par value of each share of Preferred Stock
shall be One Dollar ($1).
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby expressly vested with authority to fix
by resolution or resolutions the designations and the powers, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof (including, without
limitation, the voting powers if any, the dividend rate, conversion rights,
redemptive price, or liquidation preference of any series of Preferred Stock),
to fix the number of shares constituting any such series, and to increase or
decrease the number of shares of any such
18
<PAGE> 2
Exhibit 3-a (continued)
series (but not below the number of shares thereof then outstanding). In case
the number of shares of any such series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution or resolutions originally fixing the number of shares
of such series.
The number of authorized shares of any class or classes of stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the stock
of the corporation entitled to vote in the election of directors.
ARTICLE V
The number of directors which shall constitute the whole Board of
Directors of this corporation shall be 15. The directors shall be divided into
three classes, Class I, Class II and Class III. The number of directors in each
class shall be 5. Directors of each class shall serve for a term ending on the
third annual meeting of stockholders following the annual meeting at which such
class was elected, except that the term of office of the initial Class I
directors shall expire on the date of the annual meeting in 1977, the term of
office of the initial Class II directors shall expire on the date of the annual
meeting in 1978, the term of office of the initial Class III directors shall
expire on the date of the annual meeting in 1979. The foregoing notwithstanding,
each director shall serve until his successor shall have been duly elected and
qualified, unless he shall die, resign or be removed.
At each annual election the directors chosen to succeed those which
terms then expire shall be identified as being of the same class as the
directors they succeed. If for any reason the number of directors in the various
classes shall not conform with the formula set forth in the preceding paragraph,
the Board of Directors may redesignate any director into a different class in
order that the balance of directors in such classes shall conform thereto.
At all elections of directors of this corporation, each holder of
Common Stock shall be entitled to as many votes as shall equal the number of
votes which, except for this provision as to cumulative voting, he would be
entitled to cast for the election of directors with respect to his shares of
Common Stock, multiplied by the number of directors to be elected, and he may
cast all of such votes for a single nominee for director or may distribute them
among the number to be voted for, or for any two or more of them as he sees fit.
Eight (8) directors shall constitute a quorum for the transaction of
business, and if at any meeting of the Board of Directors there shall be less
than a quorum of (8), a majority of those present may adjourn the meeting from
time to time. Every act or decision done or made by a majority of the whole
Board of Directors, acting at a meeting duly held at which a quorum is present,
or acting by written consent, shall be regarded as the act of the Board of
Directors unless a greater number be required by law or by this Certificate of
Incorporation.
19
<PAGE> 3
Exhibit 3-a (continued)
ARTICLE VI
In furtherance and not in limitation of the powers conferred by law,
the Board of Directors is expressly authorized, by resolution passed by a
majority of the whole board, to make, amend, alter or repeal the Bylaws of this
corporation.
ARTICLE VII
This corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation in any manner now
or hereafter prescribed by law, and all rights herein conferred upon the
stockholders are granted subject to this reservation.
ARTICLE VIII
Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor of stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
ARTICLE IX
Meetings of stockholders may be held outside the State of Delaware, if
the Bylaws so provide. The books of this corporation may be kept (subject to any
provision of law) outside the State of Delaware. Elections of directors need not
be by ballot unless the Bylaws of this corporation shall so provide.
20
<PAGE> 4
Exhibit 3-a (continued)
ARTICLE X
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for any matter in respect of which such director
shall be liable under Section 174 of the General corporation Law of the State of
Delaware or shall be liable by reason that, in addition to any and all other
requirements for such liability, be (i) shall have breached his duty of loyalty
to the corporation or its stockholders, (ii) shall not have acted in good faith
or, in failing to act, shall not have acted in good faith, (iii) shall have
acted in a manner involving intentional misconduct or a knowing violation of the
law, or (iv) hall have derived an improper personal benefit. Neither the
amendment nor repeal of this Article X, nor the adoption of any provision of the
certificate or incorporation inconsistent with this Article X shall eliminate or
reduce the effect of this article X in respect of the matter occurring, or any
cause of action, suit or claim that but for this Article X would accrue or
arise, prior to such amendment, repeal or adoption of an inconsistent provision.
THIS RESTATED CERTIFICATE OF INCORPORATION OF VARIAN ASSOCIATES, INC.
was adopted by the Board of Directors of this corporation in accordance with
Section 245 of the General Corporation Law of the State of Delaware. It only
restates and integrates and does not further amend the provisions of this
corporation's Restated Certificate of Incorporation as heretofore amended, and
there is no discrepancy between those provisions and the provisions of this
Restated Certificate of Incorporation.
VARIAN ASSOCIATES, INC.
Dated: June 26, 1987
By: /s/ Thomas D. Sege
---------------------------------
Thomas D. Sege
Chairman of the Board
Attest: /s/ William R. Moore
-----------------------------
William R. Moore
Secretary
21
<PAGE> 5
Exhibit 3-a (continued)
CERTIFICATE OF CORRECTION FILED
TO CORRECT A CERTAIN ERROR IN THE
RESTATED CERTIFICATE OF INCORPORATION OF
VARIAN ASSOCIATES, INC.
FILED IN THE OFFICE OF THE SECRETARY OF
STATE OF DELAWARE ON JUNE 29, 1987
Varian Associates, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. The name of the corporation is Varian Associates, Inc.
2. A Restated Certificate of Incorporation of Varian Associates,
Inc. was filed by the Secretary of State of Delaware on June 29, 1987, and said
Restated Certificate of Incorporation requires correction as permitted by
subsection (f) of Section 103 of the General Corporation Law of the State of
Delaware.
3. The inaccuracy or defect of said Restated Certificate of
Incorporation to be corrected was the inadvertent omission from Article IV of
said Restated Certificate of Incorporation of the provisions of the Certificate
of Designations of Series A Junior Participating Preferred Stock of Varian
Associates, Inc., dated August 26, 1986, and filed with the Secretary of State
of Delaware on September 2, 1986, which provides for the designation and amount
of Series A Junior Participating Preferred Stock of the corporation and the
powers, preferences and relative, participating, optional or other special
rights of the shares of such series of Preferred Stock, and the qualifications,
limitations or restrictions thereof.
4. Article IV of said Restated Certificate of Incorporation is
corrected to add to the end of the existing text of said Article IV the
following:
Pursuant to the authority vested in the Board of Directors of the
Company in accordance with the provisions of its Restated Certificate of
Incorporation, a series of Preferred Stock of the Company be, and hereby is,
created and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional or other special rights of
the shares of such series, and the qualifications, limitations or
restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting such series shall be
280,000.
Section 2. Dividends and Distributions.
(A) Subject to the provisions for adjustment hereinafter set forth,
the holders of shares of Series A Preferred Stock shall be entitled to
receive, when, as
22
<PAGE> 6
Exhibit 3-a (continued)
and if declared by the Board of Directors out of funds legally available
for the purpose, (i) cash dividends in an amount per share (rounded to the
nearest cent) equal to 100 times the aggregate per share amount of all
cash dividends declared or paid on the Common Stock, $1.00 par value per
share, of the Company ("the Common Stock") and (ii) a preferential cash
dividend (the "Preferential Dividends"), if any, on the first day of
January, April, July and October of each year (each a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A
Preferred Stock, in an amount equal to $10 per share of Series A Preferred
Stock less the per share amount of all cash dividends declared on the
Series A Preferred Stock pursuant to clause (i) of this sentence since the
immediately preceding Quarterly Dividend Payment Date or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Preferred Stock. In the event the
Company shall, at any time after the issuance of any share or fraction of
a share of Series A Preferred Stock, make any distribution on the shares
of Common Stock of the Company, whether by way of a dividend or a
reclassification of stock, a recapitalization, reorganization or partial
liquidation of the Company or otherwise, which is payable in cash or any
debt security, debt instrument, real or personal property or any other
property (other than cash dividends subject to the immediately preceding
sentence, a distribution of shares of Common Stock or other capital stock
of the Company or a distribution of rights or warrants to acquire any such
share, including any debt security convertible into or exchangeable for
any such share, at a price less than the Fair Market Value of such share),
then and in each such event the Company shall simultaneously pay on each
then outstanding share of Series A Preferred Stock of the Company a
distribution, in like kind, of 100 times such distribution paid on a share
of Common Stock (subject to the provisions for adjustment hereinafter set
forth). The dividends and distributions on the Series A Preferred Stock to
which holders thereof are entitled pursuant to clause (i) of the first
sentence of this paragraph and pursuant to the second sentence of this
paragraph are hereinafter referred to as "Participating Dividends" and the
multiple of such cash and non-cash dividends on the Common Stock
applicable to the determination of the Participating Dividends, which shall
be 100 initially but shall be adjusted from time to time as hereinafter
provided, is hereinafter referred to as the "Dividend Multiple". In the
event the Company shall at any time after September 3, 1986 declare or pay
any dividend or make any distribution on Common Stock payable in shares of
Common Stock, or effect a subdivision or split or a combination,
consolidation or reverse split of the outstanding shares of Common Stock
into a greater or lesser number of shares of Common Stock, then in each
such case the Dividend Multiple thereafter applicable to the determination
of the amount of Participating Dividends which holders of shares of Series
A Preferred Stock shall be entitled to receive shall be the Dividend
Multiple applicable immediately prior to such event multiplied by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
23
<PAGE> 7
Exhibit 3-a (continued)
(B) The Company shall declare each Participating Dividend at the same
time it declares any cash or non-cash dividend or distribution on the Common
Stock in respect of which a Participating Dividend is required to be paid.
No cash or non-cash dividend or distribution on the Common Stock in respect
of which a Participating Dividend is required to be paid shall be paid or
set aside for payment on the Common Stock unless a Participating Dividend in
respect of such dividend or distribution on the Common Stock shall be
simultaneously paid, or set aside for payment, on the Series A Preferred
Stock.
(C) Preferential Dividends shall begin to accrue on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issuance of any shares of Series A Preferred
Stock. Accrued but unpaid Preferential Dividends shall cumulate but shall
not bear interest. Preferential Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provisions for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the stockholders of the
Company. The number of votes which a holder of Series A Preferred Stock is
entitled to cast, as the same may be adjusted from time to time as
hereinafter provided, is hereinafter referred to as the "Vote Multiple". In
the event the Company shall at any time after September 3, 1986 declare or
pay any dividend on Common Stock payable in shares of Common Stock, or
effect a subdivision or split or a combination, consolidation or reverse
split of the outstanding shares of Common Stock into a greater or lesser
number of shares of Common Stock, then in each such case the Vote Multiple
thereafter applicable to the determination of the number of votes per share
to which holders of shares of Series A Preferred Stock shall be entitled
after such event shall be the Vote Multiple immediately prior to such event
multiplied by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in the Restated Certificate
of Incorporation or by law, the holders of shares of Series A Preferred
Stock and the holders of shares of Common Stock shall vote together as one
class on all matters submitted to a vote of stockholders of the Company.
(C) In the event that the Preferential Dividends accrued on the
Series A Preferred Stock for four or more quarterly dividend periods,
whether consecutive or not, shall not have been declared and paid or set
apart for payment, the holders of record of Preferred Stock of the Company
of all series (including the Series A Preferred Stock), other than any
series in respect of which such right is expressly
24
<PAGE> 8
Exhibit 3-a (continued)
withheld by the Restated Certificate of Incorporation or the authorizing
resolutions included in the Certificate of Designations therefor, shall have
the right, at the next meeting of stockholders called for the election of
directors, to elect two members to the Board of Directors, which directors
shall be in addition to the number required by the By-laws prior to such
event, to serve until the next Annual Meeting and until their successors are
elected and qualified or their earlier resignation, removal or incapacity or
until such earlier time as all accrued and unpaid Preferential Dividends
upon the outstanding shares of Series A Preferred Stock shall have been paid
(or set aside for payment) in full. The holders of shares of Series A
Preferred Stock shall continue to have the right to elect directors as
provided by the immediately preceding sentence until all accrued and unpaid
Preferential Dividends upon the outstanding shares of Series A Preferred
Stock shall have been paid (or set aside for payment) in full. Such
directors may be removed and replaced by such stockholders, and vacancies in
such directorships may be filled only by such stockholders (or by the
remaining director elected by such stockholders, if there be one) in the
manner permitted by law; provided, however, that any such action by
stockholders shall be taken at a meeting of stockholders and shall not be
taken by written consent thereto.
(D) Except as otherwise required by the Restated Certificate of
Incorporation or by law or set forth herein, holders of Series A Preferred
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for the taking of any corporate action.
Section 4. Certain Restrictions.
(A) Whenever Preferential Dividends or Participating Dividends are in
arrears or the Company shall be in default of payment thereof, thereafter
and until all accrued and unpaid Preferential Dividends and Participating
Dividends, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid or set aside for payment in full, and in
addition to any and all other rights which any holder of shares of Series A
Preferred Stock may have in such circumstances, the Company shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration, any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series
A Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity as to
dividends with the Series A Preferred Stock, unless dividends are paid
ratably on the Series A Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled if
the full dividends accrued thereon were to be paid;
25
<PAGE> 9
Exhibit 3-a (continued)
(iii) except as permitted by subparagraph (iv) of this
paragraph 4(A), redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, provided that the Company may at any time
redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Company ranking junior (both
as to dividends and upon liquidation, dissolution or winding up) to the
Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock (either as to dividends or
upon liquidation, dissolution or winding up), except in accordance with
a purchase offer made to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Company shall not permit any Subsidiary (as hereinafter
defined) of the Company to purchase or otherwise acquire for consideration
any shares of stock of the Company unless the Company could, under paragraph
(A) of this Section 4, purchase or otherwise acquire such shares at such
time and in such manner. A "Subsidiary" of the Company shall mean any
corporation or other entity of which securities or other ownership interests
having ordinary voting power suffi cient to elect a majority of the board of
directors or other persons performing similar functions are beneficially
owned, directly or indirectly, by the Company or by any corporation or other
entity that is otherwise controlled by the Company.
(C) The Company shall not issue any shares of Series A Preferred
Stock except upon exercise of Rights issued pursuant to that certain Rights
Agreement dated as of August 5, 1986 between the Company and The First
National Bank of Boston, a copy of which is on file with the Secretary of
the Company at its principal executive office and shall be made available to
stockholders of record without charge upon written request therefor
addressed to said Secretary. Notwithstanding the foregoing sentence, nothing
contained in the provisions hereof shall prohibit or restrict the Company
from issuing for any purpose any series of Preferred Stock with rights and
privileges similar to, different from, or greater than, those of the Series
A Preferred Stock.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All
such shares upon their retirement and cancellation shall become authorized
but unissued shares of Preferred Stock, without designation as to series,
and such shares may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors.
26
<PAGE> 10
Exhibit 3-a (continued)
Section 6. Liquidation, Dissolution or Winding Up. Upon any voluntary
or involuntary liquidation, dissolution or winding up of the Company, no
distribution shall be made (i) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock unless the holders of shares of Series A
Preferred Stock shall have received, subject to adjustment as hereinafter
provided, (A) $125 per share plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, or (B) if greater than the amount specified in clause (i)(A)
of this sentence, an amount equal to 100 times the aggregate amount to be
distributed per share to holders of Common Stock, as the same may be
adjusted as hereinafter provided, and (ii) to the holders of stock ranking
on a parity upon liquidation, dissolution or winding up with the Series A
Preferred Stock, unless simultaneously therewith distributions are made
ratably on the Series A Preferred Stock and all other shares of such parity
stock in proportion to the total amounts to which the holders of shares of
Series A Preferred Stock are entitled under clause (i)(A) of this sentence
and to which the holders of such parity shares are entitled, in each case
upon such liquidation, dissolution or winding up. The amount to which
holders of Series A Preferred Stock may be entitled upon liquidation,
dissolution or winding up of the Company pursuant to clause (i)(B) of the
foregoing sentence is hereinafter referred to as the "Participating
Liquidation Amount" and the multiple of the amount to be distributed to
holders of shares of Common Stock upon the liquidation, dissolution or
winding up of the Company applicable pursuant to said clause to the
determination of the Participating Liquidation Amount, as said multiple may
be adjusted from time to time as hereinafter provided, is hereinafter
referred to as the "Liquidation Multiple". In the event the Company shall at
any time after September 3, 1986 declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of
Common Stock into a greater or lesser number of shares of Common Stock, then
in each such case the Liquidation Multiple thereafter applicable to the
determination of the Participating Liquidation Amount to which holders of
Series A Preferred Stock shall be entitled after such event shall be the
Liquidation Multiple applicable immediately prior to such event multiplied
by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 7. Certain Reclassifications and Other Events.
(A) In the event that holders of shares of Common Stock of the
Company receive after September 3, 1986 in respect of their shares of Common
Stock any share of capital stock of the Company (other than any share of
Common Stock of the Company), whether by way of reclassification,
recapitalization, reorganization, dividend or other distribution or
otherwise (a "Transaction"), then and in each such event the dividend
rights, voting rights and rights upon the liquida tion, dissolution or
winding up of the Company of the shares of Series A Preferred Stock shall be
adjusted so that after such event the holders of Series A Preferred Stock
shall be entitled, in respect of each share of Series A Preferred
27
<PAGE> 11
Exhibit 3-a (continued)
Stock held, in addition to such rights in respect thereof to which such
holder was entitled immediately prior to such adjustment, to (i) such
additional dividends as equal the Dividend Multiple in effect immediately
prior to such Transaction multiplied by the additional dividends which the
holder of a share of Common Stock shall be entitled to receive by virtue of
the receipt in the Transaction of such capital stock, (ii) such additional
voting rights as equal the Vote Multiple in effect immediately prior to such
Transaction multiplied by the additional voting rights which the holder of a
share of Common Stock shall be entitled to receive by virtue of the receipt
in the Transaction of such capital stock and (iii) such additional
distributions upon liquidation, dissolution or winding up of the Company as
equal the Liquidation Multiple in effect immediately prior to such
Transaction multiplied by the additional amount which the holder of a share
of Common Stock shall be entitled to receive upon liquidation, dissolution
or winding up of the Company by virtue of the receipt in the Transaction of
such capital stock, as the case may be, all as provided by the terms of such
capital stock.
(B) In the event that holders of shares of Common Stock of the
Company receive after September 3, 1986 in respect of their shares of Common
Stock any right or warrant to purchase Common Stock (including as such a
right, for all purposes of this paragraph, any security convertible into or
exchangeable for Common Stock) at a purchase price per share less than the
Fair Market Value (as hereinafter defined) of a share of Common Stock on the
date of issuance of such right or warrant, then and in each such event the
dividend rights, voting rights and rights upon the liquidation, dissolution
or winding up of the Company of the shares of Series A Preferred Stock shall
each be adjusted so that after such event the Dividend Multiple, the Vote
Multiple and the Liquidation Multiple shall each be the product of the
Dividend Multiple, the Vote Multiple and the Liquidation Multiple, as the
case may be, in effect immediately prior to such event multiplied by a
fraction the numerator of which shall be the number of shares of Common
Stock outstanding immediately before such issuance of rights or warrants
plus the maximum number of shares of Common Stock which could be acquired
upon exercise in full of all such rights or warrants and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
before such issuance of rights or warrants plus the number of shares of
Common Stock which could be purchased, at the Fair Market Value of the
Common Stock at the time of such issuance, by the maximum aggregate
consideration payable upon exercise in full of all such rights or warrants.
(C) In the event that holders of shares of Common Stock of the
Company receive after September 3, 1986 in respect of their shares of Common
Stock any right or warrant to purchase capital stock of the Company (other
than shares of Common Stock), including as such a right, for all purposes of
this paragraph, any security convertible into or exchangeable for capital
stock of the Company (other than Common Stock), at a purchase price per
share less than the Fair Market Value of such shares of capital stock on the
date of issuance of such right or warrant, then and in each such event the
dividend rights, voting rights and rights upon liquidation, dissolution or
winding up of the Company of the shares of Series A Preferred Stock shall
each be adjusted so that after such event each holder
28
<PAGE> 12
Exhibit 3-a (continued)
of a share of Series A Preferred Stock shall be entitled, in respect of each
share of Series A Preferred Stock held, in addition to such rights in
respect thereof to which such holder was entitled immediately prior to such
event, to receive (i) such additional dividends as equal the Dividend
Multiple in effect immediately prior to such event multiplied, first, by the
additional dividends to which the holder of a share of Common Stock shall be
entitled upon exercise of such right or warrant by virtue of the capital
stock which could be acquired upon such exercise and multiplied again by the
Discount Fraction (as hereinafter defined) and (ii) such additional voting
rights as equal the Vote Multiple in effect immediately prior to such event
multiplied, first, by the additional voting rights to which the holder of a
share of Common Stock shall be entitled upon exercise of such right or
warrant by virtue of the capital stock which could be acquired upon such
exercise and multiplied again by the Discount Fraction and (iii) such
additional distributions upon liquidation, dissolution or winding up of the
Company as equal the Liquidation Multiple in effect immediately prior to
such event multiplied, first, by the additional amount which the holder of a
share of Common Stock shall be entitled to receive upon liquidation,
dissolution or winding up of the Company upon exercise of such right or
warrant by virtue of the capital stock which could be acquired upon such
exercise and multiplied again by the Discount Fraction. For purposes of this
paragraph, the "Discount Fraction" shall be a fraction the numerator of
which shall be the difference between the Fair Market Value of a share of
the capital stock subject to a right or warrant distributed to holders of
shares of Common Stock of the Company as contemplated by this paragraph
immediately after the distribution thereof and the purchase price per share
for such share of capital stock pursuant to such right or warrant and the
denominator of which shall be the Fair Market Value of a share of such
capital stock immediately after the distribution of such right or warrant.
(D) For purposes of this Section 7, the "Fair Market Value" of a
share of capital stock of the Company (including a share of Common Stock) on
any date shall be deemed to be the average of the daily closing price per
share thereof over the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided, however,
that, in the event that such Fair Market Value of any such share of capital
stock is determined during a period which includes any date that is within
30 Trading Days after (i) the ex-dividend date for a dividend or
distribution on stock payable in shares of such stock or securities
convertible into shares of such stock, or (ii) the effective date of any
subdivision, split, combination, consolidation, reverse stock split or
reclassification of such stock, then, and in each such case, the Fair Market
Value shall be appropriately adjusted by the Board of Directors of the
Company to take into account ex-dividend or post-effective date trading. The
closing price for any day shall be the last sale price, regular way, or, in
case, no such sale takes place on such day, the average of the closing bid
and asked prices, regular way (in either case, as reported in the applicable
transaction reporting system with respect to securities listed or admitted
to trading on the New York Stock Exchange), or, if the shares are not listed
or admitted to trading on the New York Stock Exchange, as reported in the
applicable transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares are listed or
admitted to trading or,
29
<PAGE> 13
Exhibit 3-a (continued)
if the shares are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average
of the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or such other system then in use, or if on any
such date the shares are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the shares selected by the Board of Directors of the
Company. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares are listed or admitted to
trading is open for the transaction of business or, if the shares are not
listed or admitted to trading on any national securities exchange, on which
the New York Stock Exchange or such other national securities exchange as
may be selected by the Board of Directors of the Company is open. If the
shares are not publicly held or not so listed or traded on any day within
the period of 30 Trading Days applicable to the determination of Fair Market
Value thereof as aforesaid, "Fair Market Value" shall mean the fair market
value thereof per share as determined in good faith by the Board of
Directors of the Company. In either case referred to in the foregoing
sentence, the determination of Fair Market Value shall be described in a
statement filed with the Secretary of the Company.
Section 8. Consolidation, Merger. etc. In case the Company shall enter
into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each
outstanding share of Series A Preferred Stock shall at the same time be
similarly exchanged for or changed into the aggregate amount of stock,
securities, cash and/or other property (payable in like kind), as the case
may be, for which or into which each share of Common Stock is changed or
exchanged multiplied by the highest of the Vote Multiple, the Dividend
Multiple or the Liquidation Multiple in effect immediately prior to such
event.
Section 9. Effective Time of Adjustments.
(A) Adjustments to the Series A Preferred Stock required by the
provisions hereof shall be effective as of the time at which the event
requiring such adjustments occurs.
(B) The Company shall give prompt written notice to each holder of a
share of Series A Preferred Stock of the effect of any adjustment to the
voting rights, dividend rights or rights upon liquidation, dissolution or
winding up of the Company of such shares required by the provisions hereof.
Notwithstanding the foregoing sentence, the failure of the Company to give
such notice shall not affect the validity of or the force or effect of or
the requirement for such adjustment.
Section 10. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable at the option of the Company or any holder thereof.
Notwithstanding the foregoing sentence of this Section, the Company may
acquire
30
<PAGE> 14
Exhibit 3-a (continued)
shares of Series A Preferred Stock in any other manner permitted by law, the
provisions hereof and the Restated Certificate of Incorporation of the
Company.
Section 11. Ranking. Unless otherwise provided in the Restated
Certificate of Incorporation of the Company or a Certificate of Designations
relating to a subsequent series of preferred stock of the Company, the
Series A Preferred Stock shall rank junior to all other series of the
Company's Preferred Stock as to the payment of dividends and the
distribution of assets on liquidation, dissolution or winding up and senior
to the Common Stock.
Section 12. Amendment. The provisions hereof and the Restated
Certificate of Incorporation of the Company shall not be amended in any
manner which would adversely affect the rights, privileges or powers of the
Series A Pre ferred Stock without, in addition to any other vote of
stockholders required by law, the affirmative vote of the holders to
two-thirds or more of the outstanding shares of Series A Preferred Stock,
voting together as a single class.
IN WITNESS WHEREOF, the undersigned officer of the corporation has
hereunto set his hand this 3rd day of November, 1995.
VARIAN ASSOCIATES, INC.
By: /s/ Joseph B. Phair
------------------------------
Joseph B. Phair
Vice President, General
Counsel and Secretary
31
<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) 1995 1994 1993
- ------------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Actual weighted average shares outstanding for the period (1) 33,648 34,391 35,372
Dilutive employee stock options (1) 1,554 1,285 920
------- ------- -------
Weighted average shares outstanding for the period (1) 35,202 35,676 36,292
======= ======= =======
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
- -------------------------------------------------------------
Earnings from continuing operations $ 105.8 $ 67.6 $ 37.3
Earnings from discontinued operations 33.5 11.8 8.5
------- ------- -------
Earnings applicable to fully diluted earnings per share $ 139.3 $ 79.4 $ 45.8
======= ======= =======
Earnings per share based on SEC interpretive release
No. 34-9083:
Earnings from continuing operations $ 3.01 $ 1.90 $ 1.03
Earnings from discontinued operations 0.95 0.32 0.23
------- ------- -------
Earnings per share - Fully Diluted (1) (2) $ 3.96 $ 2.22 $ 1.26
======= ======= =======
</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 1995 ANNUAL REPORT
TO STOCKHOLDERS
<PAGE> 2
Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
In fiscal 1995, the Company earned $105.8 million from continuing
operations, up 56% from the $67.6 million earned in 1994. Earnings per share
from continuing operations rose to $3.01, a 58% increase from the prior year's
$1.90. Orders for the year grew 9% to $1.597 billion from 1994's $1.471 billion.
Sales of $1.576 billion were up by 20% from the year-ago's $1.313 billion.
However, after adjustments for the effect of an equipment distribution agreement
with Tokyo Electron, Ltd. (TEL), which ended in 1994, the increase in orders was
24% while sales rose 26%. Order backlog stood at $651 million at the close of
the year. Net earnings from discontinued operations for the year totaled $33.5
million ($0.95/share), comprising of a $25.3 million ($0.72/share) gain on the
sale of its Electron Devices business, and $8.2 million ($0.23/share) from
discontinued operations. Each of Varian's three core businesses contributed to
the improved volume due largely to the continued strong performances by the
Company's Semiconductor Equipment and Health Care Systems businesses.
For the second year in a row, the Company's largest business,
Semiconductor Equipment, posted higher results over the prior year. Orders and
sales rose to $658 million and $659 million respectively. After adjustments for
ending the previously noted distribution arrangement with Tokyo Electron, Ltd.,
orders were up 56% and sales grew 65% over the year-ago levels. The Company took
full advantage of increased demand for new chipmaking equipment, as orders for
its Thin Film Systems unit were up 76% over 1994, and bookings for its Ion
Implantation lines rose 48%. The higher demand was principally driven by
interest in the Company's newly introduced or improved sputtering systems as
well as its new VIISion high current ion implanter and its E220 and E500 medium
current systems. Operating profit for the Semiconductor Equipment business rose
to $99 million from the prior year's $36 million. Backlog grew to $248 million,
which was an increase of 65% for Varian-made products after adjusting for the
1994 TEL distribution arrangement.
Varian's Health Care Systems business closed the year with
fourth-quarter orders exceeding the $150 million mark for the first time. Annual
orders and sales rose for both of its major business lines, oncology systems and
X-ray tube products, with most of the momentum coming in the X-ray sector.
Health Care Systems' operating profit improved over the prior year from $86
million in 1994 to $90 million in 1995. Backlog also rose from the 1994 level to
$293 million. Stronger demand for Oncology Systems' products outside the U.S.
and higher orders for related software and ancillary products offset continued
domestic pricing pressures and flat demand.
Orders and sales for Varian's Instruments business rose from 1994
levels. The growth is attributed to higher demand for the Company's vacuum
equipment, products from its Tempe Electronics Center, and newly introduced
nuclear magnetic resonance instruments, while tempered by slow or stagnant
demand for its analytical lines (particularly in Europe). Backlog increased from
the year-ago level, with all product areas except the analytical sector
contributing to the gain. Operating profits for this business were substantially
below the prior year, due primarily to the weak analytical volume and related
restructuring activities.
Research and development expense increased $17.3 million to $91.0
million, representing 5.8% of revenue, comparable with 1994 and 1993.
Net interest expense in 1995 declined to $1.6 million compared to $2.0
million and $4.5 million in 1994 and 1993 respectively.
The continuing operations effective tax rate for 1995 was 36%, and 38%
in each of the preceding two years. See Notes to the Consolidated Financial
Statements.
The Financial Accounting Standards Board (FASB) and the American
Institute of Certified Public Accountants (AICPA) have issued statements which
the Company has not yet adopted. These statements are Statement of Financial
Accounting Standards No. 121, (SFAS 121), Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets To Be Disposed Of; Statement of
Financial Accounting Standards No. 123, (SFAS 123), Accounting for Stock Based
Compensation; and American Institute of Certified Public Accountants Statement
of Position No. 94-6, (SOP 94-6), Disclosure of Certain Significant Risks and
Uncertainties. The adoption of these statements will not have a material effect
on the financial statements of the Company. See Summary of Significant
Accounting Policies in Notes to the Consolidated Financial Statements.
17
<PAGE> 3
Management's Discussion and Analysis (continued)
FINANCIAL CONDITION
The Company's financial condition remained strong during 1995.
Operating activities provided cash of $117.4 million compared to $120.3 million
in 1994. Investing activities provided $125.6 million inclusive of $191.3
million proceeds from the sale of the Electron Devices business, offset by the
purchase of property, plant, and equipment of $65.4 million and the purchase of
businesses of $12.7 million. Financing activities used $184.9 million to buy
back shares of the Company's stock, and to offset the issuance of stock to
employees. Total debt as a percent of total capital increased to 13.6% from
12.7% a year ago. Cash and cash equivalents increased to $122.7 million from
$78.9 a year ago, exceeding all short- and long-term debt of $62.1 million. The
ratio of current assets to current liabilities was 1.51 and 1.55 at fiscal
year-end 1995 and 1994, respectively. Quarterly dividends were increased from
$.06 to $.07 per share in the second quarter of fiscal 1995. The Company has
available $50 million in unused committed lines of credit.
OUTLOOK
Despite the favorable financial results described above, future revenue
and profitability remain difficult to predict. Although the semiconductor
industry's extraordinary growth rate of the past two years may moderate to some
degree in 1996, the Company anticipates continued gains in sales and earnings in
its Semiconductor Equipment business. The debate over health care costs and
related pressures for cost containment in U.S. health care appear likely to
continue for the foreseeable future. The Health Care Systems business however is
continuing to emphasize development of increasingly efficient and effective
products, and expects continued strong sales in international markets and of
software and ancillary products. In addition, the Company continues to face
various general risks associated with its business operations, including
uncertain general worldwide economic conditions and new product acceptance. Such
conditions could affect the Company's future performance.
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,
water, 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 eight sites to which the Company is alleged to have shipped
manufacturing waste for recycling or disposal. 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 and former Company facilities (including facilities disposed of
in connection with the Company's sale of its Electron Devices business during
1995). Expenditures for environmental investigation and remediation amounted to
$2.3 million in 1995 compared with $3.5 million in 1994.
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) that 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.
Nevertheless, the Company continues to estimate the amounts of these
future costs in periodically establishing reserves, based partly on progress
made in determining the magnitude of such costs, experience gained from sites
on which remediation is ongoing or has been completed, and the timing and
extent of remedial actions required by the applicable governmental authorities.
As of September 29, 1995, the Company estimated that the present value of the
Company's future exposure for environmental related investigation and
remediation expenditures, including operating and maintenance costs, ranged
from approximately $35.7 million to $56.0 million. The time frame over which
the Company expects to incur such costs varies with each site, ranging up to 30
years. Management believes that no amount in the foregoing range of estimated
future costs is more probable of being incurred than any other amount in such
range.
18
<PAGE> 4
Management's Discussion and Analysis (continued)
At September 29, 1995, the Company's reserve for environmental
liabilities, based upon future environmental related costs estimated by the
Company as of such date, was calculated as follows:
(Dollars in millions)
<TABLE>
<CAPTION>
Recurring Non- Total
Costs recurring Costs Anticipated
Year Future costs
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1996 $ 2.2 $ 4.5 $ 6.7
1997 2.2 1.9 4.1
1998 2.2 1.7 3.9
1999 2.1 0.0 2.1
2000 2.2 0.0 2.2
Thereafter 52.9 5.6 58.5
------------------------------------------------
Total Costs $63.8 $13.7 $ 77.5
Less imputed interest (at 7%) (41.8)
------
Reserve amount $ 35.7
======
</TABLE>
The amounts set forth in the foregoing table are only estimates of
anticipated future environmental related costs. The amounts actually spent by
the Company in the years indicated may be greater or less than such estimates.
As a result of information developed and analyzed by the Company during
1995 as part of continuing investigations and in connection with the pending
environmental insurance coverage litigation referred to below, as well as the
Company's sale of its Electron Devices business in 1995, the Company increased
its reserve for environmental related costs at the end of 1995 to $35.7 million
compared to $3.6 million at the end of 1994. The reserve recorded at the end of
1995 included $5.0 million for environmental related costs attributable to
discontinued operations (i.e., the Electron Devices business). The Company
believes that its reserve is adequate. As the scope of the Company's obligations
becomes more clearly defined, this reserve may be modified and related charges
against the Company's earnings may be made.
Although any ultimate liability arising from an environmental related
matter described herein could result in significant expenditures that, if
aggregated and assumed to occur within a single fiscal year, would be material
to the Company's financial condition, the likelihood of such occurrence is
considered remote. Based on information currently available to management and
its best assessment of the ultimate amount and timing of environmental related
events, management believes that the costs of these environmental related
matters are not reasonably likely to have a material adverse effect on the
financial condition of the Company.
The Company evaluates its liability for environmental related
investigation and remediation in light of the liability and financial
wherewithal of potentially responsible parties and insurance companies with
respect to which the Company believes that it has rights to contribution,
indemnity and/or reimbursement.
Claims for recovery of environmental investigation and remediation
costs already incurred and to be incurred in the future have been asserted
against various insurance companies and other third parties. In 1992, the
Company filed a lawsuit against 36 insurance companies with respect to most of
the above-referenced sites. Due to recent developments with respect to this
litigation (including the California Supreme Court decision in Montrose Chemical
Corporation of California v. Admiral Insurance Company rendered in July 1995 and
recent settlements with certain defendant insurance carriers), the Company
received certain settlements during 1995 and recorded an $18.0 million
receivable in Other Current Assets at September 29, 1995. The Company expects to
recover at least this amount from the defendants in such litigation (net of
attorneys' fees). Except for this amount, due to the uncertainty as to ultimate
recoveries from third parties, the Company has neither recorded any asset nor
reduced any liability in anticipation of recovery with respect to claims made
against third parties. The Company believes that it has a strong case against
the defendant insurance carriers in its pending environmental insurance coverage
litigation. The Company intends to aggressively pursue additional insurance
recoveries from such defendants.
19
<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) 1995 1994 1993
===================================================================================================
<S> <C> <C> <C>
SALES $1,575,742 $1,313,447 $1,061,881
---------- ---------- ----------
OPERATING COSTS AND EXPENSES
Cost of sales 1,024,539 853,955 679,516
Research and development 90,964 73,706 66,365
Marketing 187,148 168,975 155,667
General and administrative 106,170 105,726 95,751
---------- ---------- ----------
Total operating costs and expenses 1,408,821 1,202,362 997,299
---------- ---------- ----------
OPERATING EARNINGS 166,921 111,085 64,582
Interest expense (6,936) (6,345) (6,555)
Interest income 5,315 4,353 2,064
EARNINGS FROM CONTINUING OPERATIONS
BEFORE TAXES ---------- ---------- ----------
165,300 109,093 60,091
Taxes on earnings 59,510 41,456 22,832
---------- ---------- ----------
EARNINGS FROM CONTINUING OPERATIONS $ 105,790 $ 67,637 $ 37,259
DISCONTINUED OPERATIONS - NET OF TAXES:
Earnings from operations 8,159 11,721 8,544
Gain from disposal 25,337 -- --
---------- ---------- ----------
TOTAL FROM DISCONTINUED OPERATIONS 33,496 11,721 8,544
========== ========== ==========
NET EARNINGS $ 139,286 $ 79,358 $ 45,803
========== ========== ==========
EARNINGS PER SHARE - FULLY DILUTED
CONTINUING OPERATIONS $ 3.01 $ 1.90 $ 1.03
DISCONTINUED OPERATIONS:
Earnings from operations 0.23 0.32 0.23
Gain from disposal 0.72 -- --
---------- ---------- ----------
TOTAL FROM DISCONTINUED OPERATIONS 0.95 0.32 0.23
---------- ---------- ----------
NET EARNINGS PER SHARE $ 3.96 $ 2.22 $ 1.26
========== ========== ==========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
-20-
<PAGE> 6
Exhibit 13
CONSOLIDATED BALANCE SHEETS
Varian Associates, Inc. and Subsidiary Companies
<TABLE>
<CAPTION>
Fiscal Year-End
--------------------------
(Dollars in thousands except par values) 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 122,728 $ 78,872
Accounts receivable 346,330 338,448
Inventories 171,702 179,176
Other current assets 116,958 72,243
---------- ----------
Total Current Assets 757,718 668,739
---------- ----------
Property, Plant, and Equipment 431,303 574,402
Accumulated depreciation and amortization (239,422) (339,082)
---------- ----------
Net Property, Plant, and Equipment 191,881 235,320
---------- ----------
Other Assets 54,183 58,364
---------- ----------
TOTAL ASSETS $1,003,782 $ 962,423
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 1,755 $ 4,816
Accounts payable - trade 82,851 78,094
Accrued expenses 316,419 248,751
Product warranty 48,076 41,682
Advance payments from customers 51,600 58,440
---------- ----------
Total Current Liabilities 500,701 431,783
Long-Term Accrued Expenses 29,026 --
Long-Term Debt 60,329 60,399
Deferred Taxes 18,797 20,788
---------- ----------
Total Liabilities 608,853 512,970
---------- ----------
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 31,052,000 shares (1995), 33,979,000
shares (1994) 31,052 33,979
Retained earnings 363,877 415,474
---------- ----------
Total Stockholders' Equity 394,929 449,453
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,003,782 $ 962,423
========== ==========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
-21-
<PAGE> 7
Exhibit 13
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
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, 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
Net earnings for the year -- -- 139,286 -- 139,286
Issuance of stock under omnibus
stock and employee stock
purchase plans (including tax
benefit of $10,548) 1,445 41,059 -- -- 42,504
Purchase of common stock -- -- -- (227,372) (227,372)
Retirement of treasury stock (4,372) (41,059) (181,941) 227,372 --
Dividends declared
($0.27 per share) -- -- (8,942) -- (8,942)
BALANCES, FISCAL YEAR-END, 1995 $31,052 $ -- $363,877 $ -- $ 394,929
======= ======== ======== ========= =========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
-22-
<PAGE> 8
Exhibit 13
CONSOLIDATED STATEMENTS OF CASH FLOWS
Varian Associates, Inc. and Subsidiary Companies
<TABLE>
<CAPTION>
Fiscal Years
--------------------------------------
(Dollars in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Cash Provided by Operating Activities $ 117,390 $120,251 $ 89,815
INVESTING ACTIVITIES
Proceeds from sale of property, plant, and equipment 4,394 18,320 5,228
Proceeds from sale of Electron Devices 191,347 -- --
Purchase of property, plant, and equipment (65,404) (62,584) (45,102)
Purchase of businesses, net of cash acquired (12,686) 133 (11,879)
Other 7,985 (7,252) (6,099)
--------- -------- --------
Net Cash Provided/(Used) by Investing Activities 125,636 (51,383) (57,852)
--------- -------- --------
FINANCING ACTIVITIES
Net borrowings (payments) on short-term obligations (3,061) (12,042) 12,549
Proceeds from long-term borrowings -- -- 60,000
Principal payments on long-term debt (70) (6,071) (49,238)
Proceeds from common stock issued to employees 42,504 27,592 27,067
Purchase of common stock (227,372) (63,669) (72,228)
Dividends paid (8,819) (7,590) (6,761)
Other (123) 392 512
--------- -------- --------
Net Cash Used by Financing Activities (196,941) (61,388) (28,099)
--------- -------- --------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH (2,229) (1,915) 2,700
--------- -------- --------
Net Increase in Cash and Cash Equivalents 43,856 5,565 6,564
Cash and Cash Equivalents at Beginning of Year 78,872 73,307 66,743
--------- -------- --------
Cash and Cash Equivalents at End of Year $ 122,728 $ 78,872 $ 73,307
========= ======== ========
DETAIL OF NET CASH PROVIDED BY OPERATING ACTIVITIES
Net Earnings $ 139,286 79,358 $ 45,803
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation 49,997 48,029 45,266
Gain on sale of Electron Devices (40,965) -- --
Deferred taxes (27,083) (8,283) 2,900
Amortization of intangibles 5,634 4,484 4,429
Changes in assets and liabilities:
Accounts receivable (37,595) (40,765) (26,214)
Inventories (33,009) (17,374) 16,003
Other current assets (19,362) 550 (1,646)
Accounts payable - trade 10,711 18,226 1,972
Accrued expenses 42,639 37,929 (5,955)
Product warranty 10,678 5,871 2,056
Advance payments from customers (6,159) (3,503) 1,629
Long-term accrued expenses 29,026 -- --
Other (6,408) (4,271) 3,572
--------- -------- --------
Net Cash Provided by Operating Activities $ 117,390 $120,251 $ 89,815
========= ======== ========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
-23-
<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 ended
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 1995,
1994, and 1993 was $(0.8) million, $(0.1) million, and $(8.3) 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 1995, the Company had forward exchange contracts with maturities
of twelve months or less to sell foreign currencies totaling $45.4 million
($15.9 million of French francs, $11.8 million of British pounds, $7.7 million
of Italian lira, $7.6 million of Japanese yen, $1.5 million of Canadian dollars
and $0.9 million of Swiss francs) and to buy foreign currencies totaling $20.7
million ( $6.0 million of Swiss francs, $5.8 million of British pounds, $4.2
million of Australian dollars, $2.8 million of Japanese yen, $1.1 million of
Swedish krona and $0.8 million of Deutsche marks).
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 $2.3
million at the end of fiscal year 1995 and $2.4 million at the end of fiscal
year 1994.
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
segments. All other inventories are valued principally at average cost. If the
first-in, first-out (FIFO) method had been
24
<PAGE> 10
Notes to the Consolidated Financial Statements (continued)
used, inventories would have been higher than reported by $45.6 million in
fiscal 1995, $49.0 million in fiscal 1994, and $50.8 million in fiscal 1993. The
main components of inventories are as follows:
<TABLE>
<CAPTION>
(Dollars in Millions) 1995 1994
- --------------------------------------------------------------
<S> <C> <C>
Raw materials and parts $ 98.4 $104.2
Work in process 52.6 60.3
Finished goods 20.7 14.7
------ ------
Total Inventories $171.7 $179.2
====== ======
</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) 1995 1994
- --------------------------------------------------------------
<S> <C> <C>
Land and land leaseholds $ 10.1 $ 10.8
Buildings 145.3 201.4
Machinery and equipment 259.9 347.2
Construction in progress 16.0 15.0
------ ------
Total Property, Plant, and Equipment $431.3 $574.4
====== ======
</TABLE>
Environmental Liabilities
Liabilities are recorded when environmental assessments and/or remedial efforts
are probable, and the costs can be reasonably estimated. Generally, the timing
of these accruals coincides with completion of a feasibility study or the
Company's commitment to a formal plan of action.
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.
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
25
<PAGE> 11
Notes to the Consolidated Financial Statements (continued)
recognition of related revenue. Total expenditures on research and development
for fiscal 1995, 1994, and 1993, were $94.7 million, $74.8 million, and $67.0,
million, respectively, of which $3.7 million, $1.1 million, and $0.6 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 1995, 1994, and 1993, was 35,202, 35,676, and 36,292
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.
Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets To Be
Disposed Of
In March 1995, the FASB issued SFAS 121, Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets To Be Disposed Of. It is effective for the
Company's fiscal year 1997. Its adoption will not have a material effect on the
financial statements of the Company.
Accounting for Stock Based Compensation
In October 1995, the FASB issued SFAS 123, Accounting for Stock Based
Compensation. It is effective for the Company's fiscal year 1997. Its adoption
will not have a material effect on the financial statements of the Company.
Disclosure of Certain Significant Risks and Uncertainties
In December 1994, The AICPA issued SOP 94-6, Disclosure of Certain Significant
Risks and Uncertainties. It is effective for the Company's fiscal year 1996. Its
adoption will not have a material effect on the financial statements of the
Company.
<TABLE>
<CAPTION>
ACCRUED EXPENSES
(Dollars in Millions) 1995 1994
- --------------------------------------------------------------
<S> <C> <C>
Taxes, including taxes on earnings $ 79.7 $ 52.5
Payroll and employee benefits 104.4 90.8
Environmental 6.7 3.9
Estimated loss contingencies 36.8 14.0
Deferred income 22.5 23.1
Other 66.3 64.5
------ ------
Total Accrued Expenses $316.4 $248.8
====== ======
</TABLE>
SHORT-TERM DEBT
Short-term notes payable and the current portion of long-term debt amounted to
$1.8 million and $4.8 million at the end of fiscal years 1995 and 1994,
respectively. The weighted average interest rates on short-term borrowings were
9.7% and 6.1% at the end of fiscal years 1995 and 1994, respectively. Total debt
is subject to limitations included in long-term debt agreements.
At fiscal year-end 1995, the Company had total unused committed lines of credit
amounting to $50 million.
LONG-TERM ACCRUED EXPENSES
Long-term accrued expenses are comprised of accruals for environmental costs not
expected to be expended within the next year. The current portion is recorded
within Accrued Expenses.
26
<PAGE> 12
Notes to the Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
LONG-TERM DEBT
(Dollars in Millions) 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C>
Unsecured term loan, 7.29% due in semiannual installments of $6.0
payable 1998-2002 $60.0 $60.0
Other debt 0.4 0.5
----- -----
Long-term borrowings 60.4 60.5
Less current portion 0.1 0.1
----- -----
Long-term Debt $60.3 $60.4
===== =====
</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 1995, the Company was in compliance with all
restrictive covenants of the loan agreements, including a restriction on payment
of cash dividends. At September 29, 1995, approximately $106.5 million of
retained earnings were unrestricted for payment of cash dividends.
The annual maturities of long-term debt (in millions) for fiscal years 1996
through 2000, are as follows: $0.1, $ 0.1, $12.1, $12.1, and $12.1.
Interest paid (in millions) on short and long-term debt was $6.9, $6.4, and
$6.4, in fiscal 1995, 1994, and 1993, 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% 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.
Option activity under the Plans is presented below.
<TABLE>
<CAPTION>
1995 1994 1993
------------------ ------------------ -----------------
(Dollars in Millions) Shares Dollars Shares Dollars Shares Dollars
- -------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year 3,999 $ 74.2 $3,785 60.6 3,871 $ 55.5
Granted 1,111 40.3 1,161 29.5 1,153 22.6
Terminated or expired (116) (3.3) (63) (1.4) (82) (1.4)
Exercised (1,185) (23.2) (884) (14.5) (1,158) (16.0)
------ ------ ------ ------ ------ ------
End of Year 3,809 $ 88.0 3,999 $ 74.2 3,784 $ 60.7
====== ====== ====== ====== ====== ======
Shares exercisable 2,030 1,692 1,476
Available shares
remaining 703 634 735
====== ====== ======
</TABLE>
27
<PAGE> 13
Notes to the Consolidated Financial Statements (continued)
Options were outstanding at prices ranging from $10.60 to $54.69 per share at
fiscal year-end 1995. Options were exercised at prices ranging from $10.60 to
$39.13 for fiscal 1995, $10.60 to $24.25 for fiscal 1994, and $10.60 to $23.72
for fiscal 1993.
During fiscal years 1995, 1994, and 1993, 63, 64, and 15, 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 $2.0, million, $1.2 million, and $0.9
million, in fiscal years 1995, 1994, and 1993, 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 trading day of the fiscal quarter
or the first trading day of the next fiscal quarter. The discount is treated as
equivalent to the cost of issuing stock for financial reporting purposes. During
fiscal 1995, 1994, and 1993, 205 shares, 266 shares, and 382 shares were issued
under the ESPP for $7.0 million, $7.0 million, and $6.3 million, respectively.
At fiscal year-end 1995, the Company had a balance of 3,125 shares reserved for
ESPP.
PREFERRED STOCK PURCHASE RIGHTS (SHARES IN THOUSANDS)
At fiscal year-end, there were issued and outstanding 31,052 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 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 United States' 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 $25.4 million, $23.1 million, and $18.4
million, for fiscal 1995, 1994, and 1993, respectively.
28
<PAGE> 14
Notes to the Consolidated Financial Statements (continued)
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 from continuing operations is as follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
U.S. federal $ 60.6 $27.4 $ 6.1
Non-U.S. 14.8 15.6 12.2
State and local 11.2 6.7 1.6
------ ----- -----
Total current 86.6 49.7 19.9
------ ----- -----
Deferred
U.S. federal (26.6) (8.8) 2.4
Non-U.S. (0.5) 0.5 0.5
------ ----- -----
Total deferred (27.1) (8.3) 2.9
------ ----- -----
Taxes on Earnings $ 59.5 $41.4 $22.8
====== ===== =====
</TABLE>
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) 1995 1994
- -----------------------------------------------------------------
<S> <C> <C>
Assets:
Product Warranty $15,546 $13,427
Deferred Compensation 10,713 11,435
Special Provisions 24,928 6,595
Inventory Adjustments 16,123 17,741
Deferred Income 5,442 3,550
Insurance Reserves 1,075 1,183
State Income Tax 3,893 1,974
Other 2,611 (665)
------- -------
80,331 55,240
Liabilities:
Accelerated Depreciation 13,272 20,522
Unconsolidated Affiliates 5,715 143
Other (191) 123
------- -------
18,796 20,788
Net $61,535 $34,452
======= =======
</TABLE>
29
<PAGE> 15
Notes to the Consolidated Financial Statements (continued)
The effective tax rate on continuing operations differs from the applicable
statutory federal tax rate as a result of the following differences:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 34.8%
State and local taxes, net of federal tax benefit 4.4 4.0 1.7
Foreign taxes, net (1.2) (0.9) 3.5
Foreign Sales Corporation (2.4) (1.9) (4.1)
Other 0.2 1.8 2.1
---- ---- ----
Effective Tax Rate 36.0% 38.0% 38.0%
==== ==== ====
</TABLE>
Income taxes paid are as follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes paid, net $35.1 $25.2 $ 4.5
State income taxes paid, net 11.7 6.2 1.7
Foreign income taxes paid, net 24.0 11.8 14.9
----- ----- -----
Total Paid $70.8 $43.2 $21.1
===== ===== =====
</TABLE>
LEASE COMMITMENTS
At fiscal year-end 1995, the Company was committed to minimum rentals under
noncancellable operating leases for fiscal years 1996 through 2000 and
thereafter, as follows, in millions: $7.8, $5.3, $4.1, $3.0, $1.9, and $4.0.
Rental expense for fiscal years 1995, 1994 and 1993, in millions, was $18.6,
$18.7, and $20.8, 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 in part and denied in part the Company's motion to dismiss the
complaint. Panache Broadcasting filed an amended complaint in March 1993. In
October 1995, the Court affirmed a federal Magistrate's recommendation to grant
in part and deny in part the Company's motion to dismiss the amended complaint.
Also in October 1995, the Magistrate recommended denial of plaintiff's request
to certify the purported class and recommended certification of a different and
narrower class than that defined by plaintiff. The Company is appealing that
proposed class certification to the District Court, and 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
eight sites to which Varian is alleged to have shipped manufacturing waste for
recycling or disposal. 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. 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) that 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.
30
<PAGE> 16
Notes to the Consolidated Financial Statements (continued)
Nevertheless, the Company continues to estimate the amounts of these future
costs in periodically establishing reserves, based partly on progress made in
determining the magnitude of such costs, experience gained from sites on which
remediation is ongoing or has been completed, and the timing and extent of
remedial actions required by the applicable governmental authorities. As of
September 29, 1995, the Company estimated that the present value of the
Company's future exposure for environmental related investigation and
remediation expenditures, including operating and maintenance costs, ranged from
approximately $35.7 million to $56.0 million. The time frame over which the
Company expects to incur such costs varies with each site, ranging up to 30
years. Management believes that no amount in the foregoing range of estimated
future costs is more probable of being incurred than any other amount in such
range.
At September 29, 1995, the Company's reserve for environmental liabilities,
based upon future environmental related costs estimated by the Company as of
such date, was calculated as follows:
(Dollars in millions)
<TABLE>
<CAPTION>
Recurring Non- Total
Costs recurring Costs Anticipated
Year Future costs
- -------------------------------------------------------------------------------------
<C> <C> <C> <C>
1996 $ 2.2 $ 4.5 $ 6.7
1997 2.2 1.9 4.1
1998 2.2 1.7 3.9
1999 2.1 0.0 2.1
2000 2.2 0.0 2.2
Thereafter 52.9 5.6 58.5
------------------------------------------
Total costs $63.8 $13.7 $ 77.5
Less imputed interest (at 7%) (41.8)
------
Reserve amount $ 35.7
======
</TABLE>
The amounts set forth in the foregoing table are only estimates of anticipated
future environmental related costs. The amounts actually spent by the Company in
the years indicated may be greater or less than such estimates.
As a result of information developed and analyzed by the Company during 1995 as
part of continuing investigations and in connection with the pending
environmental insurance coverage litigation referred to below as well as the
Company's sale of its Electron Devices business in 1995, the Company increased
its reserve for environmental related costs at the end of 1995 to $35.7 million
compared to $3.6 million at the end of 1994. The reserve recorded at the end of
1995 included $5.0 million for environmental related costs attributable to
discontinued operations (i.e., the Electron Devices business). The Company
believes that its reserve is adequate. As the scope of the Company's obligations
becomes more clearly defined, such reserve may be modified and related charges
against the Company's earnings may be made.
Although any ultimate liability arising from an environmental related matter
described herein could result in significant expenditures that, if aggregated
and assumed to occur within a single fiscal year, would be material to the
Company's financial condition, the likelihood of such occurrence is considered
remote. Based on information currently available to management and its best
assessment of the ultimate amount and timing of environmental related events,
management believes that the costs of these environmental related matters are
not reasonably likely to have a material adverse effect on the financial
condition of the Company.
The Company evaluates its liability for environmental related investigation and
remediation in light of the liability and financial wherewithal of potentially
responsible parties and insurance companies with respect to which the Company
believes that it has rights to contribution, indemnity and/or reimbursement.
Claims for recovery of environmental investigation and remediation costs already
incurred and to be incurred in the future have been asserted against various
insurance companies and other third parties. In 1992, the Company filed a
lawsuit against 36 insurance companies with respect to most of the
above-referenced sites. Due to recent developments
31
<PAGE> 17
Notes to the Consolidated Financial Statements (continued)
with respect to this litigation (including the California Supreme Court decision
in Montrose Chemical Corporation of California v. Admiral Insurance Company
rendered in July 1995 and recent settlements with certain defendant insurance
carriers), the Company received certain settlements during 1995 and recorded an
$18.0 million receivable in Other Current Assets at September 29, 1995. The
Company expects to recover at least this amount from the defendants in such
litigation (net of attorneys' fees). Except for this amount, due to the
uncertainty as to ultimate recoveries from third parties, the Company has
neither recorded any asset nor reduced any liability in anticipation of recovery
with respect to claims made against third parties. The Company believes that it
has a strong case against the defendant insurance carriers in its pending
environmental insurance coverage litigation. The Company intends to aggressively
pursue additional insurance recoveries from such defendants.
DISCONTINUED OPERATION
On August 11, 1995 the Company completed the sale of the Electron Devices
business segment (not including the Tempe Electronics Center). The Tempe
facility was retained as part of the Instruments business segment. The
transaction was accounted for as a discontinued operation. The Company received
$191.3 million net proceeds in cash. Amounts in the Consolidated Statements of
Earnings for 1994 and 1993 have been reclassified to conform to the 1995
discontinued operations presentation. The gain on the sale was $25.3 million
(net of income taxes of $15.6 million). Summary operating results of
discontinued operations, excluding the above gain, are as follows.
<TABLE>
<CAPTION>
(Dollars in millions) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $205.1 $239.0 $249.1
Earnings Before Taxes 13.2 18.9 13.7
Taxes on Earnings 5.0 7.2 5.2
------ ------ ------
Net Earnings from Discontinued Operations
Before Gain on Sale $ 8.2 $ 11.7 $ 8.5
====== ====== ======
</TABLE>
INDUSTRY SEGMENTS
The Company's operations are grouped into three business segments: Health Care
Systems, Instruments, and Semiconductor Equipment. 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, components, and printed circuit boards.
The Semiconductor Equipment business includes systems used for semiconductor
wafer fabrication. Included in Eliminations and Other are certain insignificant
support operations.
The Company operates various manufacturing and marketing operations outside the
United States. For fiscal 1995, sales to customers located in Korea were $183.8
million. For fiscal 1994 and 1993, no single country outside the United States
accounted for more than 10% of 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 $420 million in
fiscal 1995, $286 million in fiscal 1994, and $187 million in fiscal 1993. Sales
under prime contracts from the U.S. Government were approximately $22 million in
fiscal 1995, $28 million in fiscal 1994, and $14 million in fiscal 1993.
32
<PAGE> 18
EXHIBIT 13
INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
PRETAX IDENTIFIABLE CAPITAL
SALES EARNINGS (LOSS) ASSETS EXPENDITURES DEPRECIATION
---------------------------------------------------------------------------------------------------
(DOLLARS IN MILLIONS) 1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Health Care Systems $ 482 $ 426 $ 387 $ 90 $ 86 $ 75 $ 254 $201 $187 $ 16 $ 11 $ 8 $ 11 $ 9 $ 8
Instruments 432 408 381 18 36 37 235 226 198 21 21 13 12 11 11
Semiconductor Equipment 659 477 291 99 36 1 227 196 148 15 6 5 9 9 9
Eliminations & Other 3 2 3 (11) (9) (7) 9 8 9 - 1 1 1 1 1
------ ------ ------ ---- ---- ---- ------ ---- ---- ---- ---- ---- ---- ---- ----
Total Industry
Segments 1,576 1,313 1,062 196 149 106 725 631 542 52 39 27 33 30 29
General Corporate - - - (29) (38) (42) 279 191 182 10 9 8 6 5 4
Interest, Net - - - (2) (2) (4) - - - - - - - - -
------ ------ ------ ---- ---- ---- ------ ---- ---- ---- ---- ---- ---- ---- ----
Continuing Operations $1,576 $1,313 $1,062 $165 $109 $ 60 $1,004 $822 $724 $ 62 $ 48 $ 35 $ 39 $ 35 $ 33
====== ====== ====== ==== ==== ==== ====== ==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
SALES TO INTERGEOGRAPHIC
UNAFFILIATED SALES TO TOTAL PRETAX
CUSTOMERS AFFILIATES SALES EARNINGS (LOSS)
---------------------------------------------------------------------------------------------
(DOLLARS IN MILLIONS) 1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $1,175 $ 920 $ 738 $ 217 $ 253 $ 185 $1,392 $1,173 $ 923 $182 $124 $ 94
International 398 392 323 54 56 52 452 448 375 25 34 19
Eliminations & Other 3 1 1 (271) (309) (237) (268) (308) (236) (11) (9) (7)
------ ------ ------ ----- ----- ----- ------ ------ ------ ---- ---- ----
Total Geographic
Segments 1,576 1,313 1,062 - - - 1,576 1,313 1,062 196 149 106
General Corporate - - - - - - - - - (29) (38) (42)
Interest, Net - - - - - - - - - (2) (2) (4)
------ ------ ------ ----- ----- ----- ------ ------ ------ ---- ---- ----
Continuing Operations $1,576 $1,313 $1,062 $ - $ - $ - $1,576 $1,313 $1,062 $165 $109 $ 60
====== ====== ====== ===== ===== ===== ====== ====== ====== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
IDENTIFIABLE
ASSETS
--------------------
(DOLLARS IN MILLIONS) 1995 1994 1993
- ----------------------------------------------
<S> <C> <C> <C>
United States $ 496 $429 $375
International 220 193 158
Eliminations & Other 9 9 9
------ ---- ----
Total Geographic
Segments 725 631 542
General Corporate 279 191 182
Interest, Net - -
------ ---- ----
Continuing Operations $1,004 $822 $724
====== ==== ====
</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
$797 million, $659 million, and $482 million, in 1995, 1994, and 1993,
respectively.
-33-
<PAGE> 19
QUARTERLY FINANCIAL DATA (UNAUDITED) EXHIBIT 13
<TABLE>
<CAPTION>
1995 1994
------------------------------------------------ ------------------------------------------------
(Dollars in millions except First Second Third Fourth Total First Second Third Fourth Total
per share amounts) Quarter Quarter Quarter Quarter Year Quarter Quarter Quarter Quarter Year
- ------------------------------------------------------------------------------ ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $346.1 428.7 394.2 406.7 1,575.7 $267.6 334.2 332.4 379.2 1,313.4
------ ----- ----- ----- ------- ------ ----- ----- ----- -------
Gross Profit $115.3 143.2 137.8 154.9 551.2 $ 90.1 115.9 114.2 139.3 459.5
------ ----- ----- ----- ------- ------ ----- ----- ----- -------
Net Earnings
Continuing Operations 17.8 26.5 28.9 32.6 105.8 8.8 16.8 18.8 23.2 67.6
Discontinued Operations 3.0 3.1 2.9 24.5 33.5 2.9 1.5 3.6 3.8 11.8
Net Earnings $ 20.8 29.6 31.8 57.1 139.3 $ 11.7 18.3 22.4 27.0 79.4
====== ===== ===== ===== ======= ====== ===== ===== ===== =======
Net Earnings Per Share -
Fully Diluted
Continuing Operations 0.51 0.75 0.82 0.94 3.01 0.25 0.47 0.53 0.66 1.90
Discontinued Operations 0.08 0.10 0.08 0.71 0.95 0.08 0.04 0.10 0.10 0.32
------ ----- ----- ----- ------- ------ ----- ----- ----- -------
Net Earnings Per Share -
Fully Diluted $ 0.59 0.85 0.90 1.65 3.96 $ 0.33 0.51 0.63 0.76 2.22
====== ===== ===== ===== ======= ====== ===== ===== ===== =======
</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>
1995 1994
---------------------------------------------- ----------------------------------------------
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 $ 37 1/4 44 56 57 3/8 $ 30 39 39 1/4 38 7/8
Low $ 30 7/8 34 1/2 42 1/4 50 5/8 $ 23 3/8 28 1/4 30 3/4 33 1/2
Dividends Declared
Per Share $.06 .07 .07 .07 $.05 .06 .06 .06
</TABLE>
-34-
<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 29, 1995 and
September 30, 1994, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the three fiscal years in the
period ended September 29, 1995. 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 29, 1995 and
September 30, 1994, and the consolidated results of their operations and their
cash flows for each of the three fiscal years in the period ended September 29,
1995 in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------------
COOPERS & LYBRAND L.L.P.
San Jose, California
October 18, 1995
35
<PAGE> 1
EXHIBIT 21
VARIAN ASSOCIATES, INC.
SUBSIDIARIES OF THE REGISTRANT
FISCAL 1995
<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 Asia, Ltd. Delaware 100%
Varian China, Ltd. Delaware 100%
Vaian Ireland, Ltd. Delaware 100%
Varian Japan, 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 Medical France France 100%
Varian - Dosetek OY Finland 100%
Varian GmbH Germany 100%
Varian S.p.A. Italy 100%
Varian Technologies Korea, Ltd. Korea 100%
Varian, S.A. Mexico 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 Technologies, C.A. Venezuela 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 18, 1995, on our audits of the consolidated financial statements
and financial statement schedules of Varian Associates, Inc. as of September
29, 1995 and September 30, 1994 and for each of the three fiscal years in the
period ended September 29, 1995, which report is incorporated in this Form 10-K
by reference to the Company's 1995 Annual Report to Stockholders.
/s/ Coopers & Lybrand L.L.P.
-----------------------------------
Coopers & Lybrand L.L.P.
San Jose, California
December 21, 1995
<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 29, 1995 ("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 day of , 1995.
/s/ Ruth M. Davis /s/Samuel Hellman
- ----------------------------- ------------------------------
Ruth M. Davis Samuel Hellman
/s/ Terry R. Lautenbach
- ----------------------------- ------------------------------
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/ Wayne R. Moon
- ----------------------------- ------------------------------
William F. Miller Wayne R. Moon
/s/ Gordon E. Moore /s/ David E. Mundell
- ----------------------------- ------------------------------
Gordon E. Moore David E. Mundell
/s/ Donald O. Pederson
- ----------------------------- ------------------------------
Donald O. Pederson Philip J. Quigley
/s/ Burton Richter /s/ Richard W. Vieser
- ----------------------------- ------------------------------
Burton Richter Richard W. Vieser
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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 1995 ANNUAL REPORT TO
STOCKHOLDERS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-29-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-29-1995
<CASH> 122,728
<SECURITIES> 0
<RECEIVABLES> 348,646
<ALLOWANCES> 2,316
<INVENTORY> 171,702
<CURRENT-ASSETS> 757,718
<PP&E> 431,303
<DEPRECIATION> 239,422
<TOTAL-ASSETS> 1,003,782
<CURRENT-LIABILITIES> 500,701
<BONDS> 0
<COMMON> 31,052
0
0
<OTHER-SE> 363,877
<TOTAL-LIABILITY-AND-EQUITY> 1,003,782
<SALES> 1,575,742
<TOTAL-REVENUES> 1,575,742
<CGS> 1,024,539
<TOTAL-COSTS> 1,408,821
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,936
<INCOME-PRETAX> 165,300
<INCOME-TAX> 59,510
<INCOME-CONTINUING> 105,790
<DISCONTINUED> 33,496
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 139,286
<EPS-PRIMARY> 0
<EPS-DILUTED> 3.96
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<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> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 1,313,447
<TOTAL-REVENUES> 1,313,417
<CGS> 853,955
<TOTAL-COSTS> 1,202,362
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 109,093
<INCOME-TAX> 41,456
<INCOME-CONTINUING> 67,637
<DISCONTINUED> 11,721
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-29-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> DEC-30-1994
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
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<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 346,142
<TOTAL-REVENUES> 346,142
<CGS> 230,902
<TOTAL-COSTS> 316,919
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 28,293
<INCOME-TAX> 10,470
<INCOME-CONTINUING> 17,823
<DISCONTINUED> 2,927
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-29-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 774,779
<TOTAL-REVENUES> 774,779
<CGS> 516,355
<TOTAL-COSTS> 703,013
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 70,256
<INCOME-TAX> 25,998
<INCOME-CONTINUING> 44,258
<DISCONTINUED> 6,184
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-29-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 1,169,048
<TOTAL-REVENUES> 1,169,048
<CGS> 772,785
<TOTAL-COSTS> 1,050,619
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,259
<INCOME-PRETAX> 116,170
<INCOME-TAX> 42,985
<INCOME-CONTINUING> 73,185
<DISCONTINUED> 9,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
