<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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
Telephone No., including area code:
(415) 493-4000
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
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO
----- -----
An index of exhibits filed with this Form 10-Q is located on page 13.
Number of shares of Common Stock, par value $1 per share, outatanding
as of the close of business on July 28, 1995: 33,859,000 shares.
<PAGE> 2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
----------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS JUNE 30, JULY 1, JUNE 30, JULY 1,
EXCEPT PER SHARE AMOUNTS) 1995 1994 1995 1994
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES $ 458,907 $ 393,054 $ 1,350,403 $ 1,111,338
------------ ------------ ------------ --------------
OPERATING COSTS AND EXPENSES
Cost of sales 303,242 262,599 903,926 747,006
Research and development 26,421 19,513 72,470 59,418
Marketing 54,520 48,225 153,950 136,058
General and administrative 23,593 27,530 87,344 83,150
------------ ------------ ------------ --------------
Total operating costs and expenses 407,776 357,867 1,217,690 1,025,632
------------ ------------ ------------ --------------
OPERATING EARNINGS 51,131 35,187 132,713 85,706
Interest expense, net 748 (991) 2,258 1,136
------------ ------------ ------------ --------------
EARNINGS BEFORE TAXES 50,383 36,178 130,455 84,570
Taxes on Earnings 18,640 13,750 48,270 32,140
------------ ------------ ------------ --------------
NET EARNINGS $ 31,743 $ 22,428 $ 82,185 $ 52,430
============ ============ ============ ==============
Average Shares Outstanding Including
Common Stock Equivalents 35,431 35,528 35,480 35,703
============ ============ ============ ==============
EARNINGS PER SHARE - FULLY DILUTED $ 0.90 $ 0.63 $ 2.32 $ 1.47
============ ============ ============ ==============
----------------------------------------------------------------------------------------------------------------------
Dividends Declared Per Share $ 0.07 $ 0.06 $ 0.20 $ 0.17
Order Backlog $ 764,000 $ 803,500
----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
-2-
<PAGE> 3
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
JUNE 30, SEPTEMBER 30,
(DOLLARS IN THOUSANDS EXCEPT PAR VALUES) 1995 1994
----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 90,120 $ 78,872
Accounts receivable 378,462 338,448
Inventories
Raw materials and parts 131,578 104,212
Work in process 65,763 60,296
Finished goods 28,591 14,668
----------- ----------
Total Inventories 225,932 179,176
Other current assets 75,199 72,243
----------- ----------
TOTAL CURRENT ASSETS 769,713 668,739
Property, Plant, and Equipment 602,524 574,402
Accumulated depreciation and amortization (364,334) (339,082)
----------- ----------
NET PROPERTY, PLANT, AND EQUIPMENT 238,190 235,320
Other Assets 61,181 58,364
----------- ----------
TOTAL ASSETS $ 1,069,084 $ 962,423
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 32,968 $ 4,816
Accounts payable - trade 83,493 78,094
Accrued expenses 266,175 248,751
Product warranty 48,349 41,682
Advance payments from customers 61,264 58,440
----------- ----------
TOTAL CURRENT LIABILITIES 492,249 431,783
Long-Term Debt 60,329 60,399
Deferred Taxes 20,773 20,788
----------- ----------
TOTAL LIABILITIES 573,351 512,970
----------- ----------
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 33,833,000 shares at
June 30, 1995 and 33,979,000 shares at
September 30, 1994 33,833 33,979
Retained earnings 461,900 415,474
----------- ----------
TOTAL STOCKHOLDERS' EQUITY 495,733 449,453
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,069,084 $ 962,423
=========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
-3-
<PAGE> 4
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------------------------------------------------------------
JUNE 30, JULY 1,
(DOLLARS IN THOUSANDS) 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Cash Provided by Operating Activities $ 68,659 $ 56,801
INVESTING ACTIVITIES
Purchase of property, plant, and equipment (40,551) (41,001)
Purchase of businesses, net of cash acquired (12,705) 250
Other, net 6,313 5,064
--------- --------
Net Cash Used by Investing Activities (46,943) (35,687)
FINANCING ACTIVITIES
Net borrowings on short-term obligations 28,152 15,996
Proceeds from common stock issued to employees 22,582 18,984
Purchase of common stock (51,719) (46,029)
Other, net (6,838) (5,902)
--------- --------
Net Cash Used by Financing Activities (7,823) (16,951)
EFFECTS OF EXCHANGE RATE CHANGES ON CASH (2,645) (664)
--------- --------
Net Increase in Cash and Cash Equivalents 11,248 3,499
Cash and Cash Equivalents at Beginning of Period 78,872 73,307
--------- --------
Cash and Cash Equivalents at End of Period $ 90,120 $ 76,806
========= ========
</TABLE>
See accompanying notes to the consolidated financial statements.
-4-
<PAGE> 5
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
(Dollars in Millions)
NOTE 1: The consolidated financial statements include the accounts of Varian
Associates, Inc. and its subsidiaries and have been prepared by the
Company, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. It is suggested that these
financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest Form
10-K annual report. In the opinion of management, the consolidated
financial statements include all normal recurring adjustments necessary
to present fairly the information required to be set forth therein. The
results of operations for the third quarter and nine months ended June
30, 1995, and July 1, 1994, are not necessarily indicative of the
results to be expected for a full year or for any other periods.
NOTE 2: Inventories are valued at the lower of cost or market (realizable
value) using the last-in, first-out (LIFO) cost for the U.S.
inventories of the Health Care Systems (except for X-ray Tube
Products), Instruments, and Semiconductor Equipment segments. All other
inventories are valued principally at average cost. Approximately half
of total gross inventories are valued using the LIFO method. If the
first-in, first-out (FIFO) method had been used for those operations
valuing inventories on a LIFO basis, inventories would have been higher
than reported by $50.2 at June 30, 1995, $49.0 at September 30, 1994,
$51.4 at July 1, 1994, and $50.8 at October 1, 1993.
NOTE 3: 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 revenue and
expenses are recognized. When foreign exchange contracts
5
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3 (Continued)
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 June 30, 1995, the
Company had forward exchange contracts with maturities of twelve months
or less to sell foreign currencies totaling $69.1 million ($0.5 million
of Finnish marks, $11.6 million of British pounds, $1.5 million of
Canadian dollars, $16.3 million of Deutsche marks, $15.7 million of
French francs, $6.3 million of Italian lira, $14.1 million of Japanese
yen, $2.2 million of Swedish krona and $0.9 million of Swiss francs,)
and to buy foreign currencies totaling $15.0 million ( $10.8 million of
British pounds and $4.2 million of Japanese yen).
NOTE 4: In February 1990, a purported class action was brought by Panache
Broadcasting of Pennsylvania, Inc. on behalf of all purchasers of
electron tubes in the U.S. against the Company and a joint-venture
partner, alleging that the activities of their joint venture in the
power-grid tube industry violated antitrust laws. The complaint seeks
injunctive relief and unspecified damages which may be trebled under
the antitrust laws. In February 1993, the U.S. District Court in
Chicago granted the Company's motion to dismiss the complaint with
leave to amend. Panache Broadcasting filed an amended complaint in
March 1993. A Federal magistrate has recommended that the court grant
in part and deny in part the Company's motion to dismiss that
complaint. No determination has been made regarding the plaintiff's
request to certify the purported class. The Company believes that it
has meritorious defenses to the Panache lawsuit.
In addition to the above-referenced matter, the Company is currently a
defendant in a number of legal actions and could incur an uninsured
liability in one or more of them. In the opinion of management, the
outcome of the above litigation will not have a material adverse effect
on the financial condition of the Company.
The Company has also been named by the U.S. Environmental Protection
Agency or third parties as a potentially responsible party under the
Comprehensive Environmental Response Compensation and Liability Act of
1980, as amended, at six sites to which Varian is alleged to have
shipped manufacturing waste for disposal. The Company is also involved
in various stages of environmental investigation and/or remediation
under the direction of, or in consultation with, local and/or state
agencies at certain current or former Company facilities.
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4 (Continued)
Uncertainty as to (a) the extent to which the Company caused, if at
all, the conditions being investigated, (b) the extent of environmental
contamination and risks, (c) the applicability of changing and complex
environmental laws, (d) the number and financial viability of other
potentially responsible parties, (e) the stage of the investigation
and/or remediation, (f) the unpredictability of investigation and/or
remediation costs (including as to when they will be incurred), (g)
applicable clean-up standards,(h) the remediation (if any) which will
ultimately be required, and (i) available technology make it difficult
to assess the likelihood and scope of further investigation or
remediation activities or to estimate the future costs of such
activities if undertaken. In addition, the Company believes that it has
rights to contribution and/or reimbursement from financially viable,
potentially responsible parties and/or insurance companies, and has
filed a lawsuit against 36 insurance companies with respect to most of
the above-referenced sites. The Company has established reserves for
these environmental matters, which reserves management believes are
adequate. Based on information currently available, management believes
that the costs of these matters are otherwise not reasonably likely to
have a material adverse effect on the financial condition of the
Company.
NOTE 5: On June 12, 1995, the Company announced an agreement with Leonard
Green & Partners, L.P., (LGP) under which the Company will sell its
Electron Devices business to a company formed at the direction of LGP
for approximately $200 million in cash, plus the assumption of
certain liabilities. The transaction is subject to certain
customary conditions and the arrangement of financing, and is
expected to close in August 1995.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On July 20, Varian reported the highest third-quarter earnings in the
Company's history. Net profits rose to $31.8 million, 42% above last year's
$22.4 million. Earnings per share were $0.90 compared to $0.63 in the third
quarter of 1994. Orders were $417 million versus $441 million in the year-ago
period. For the quarter, order receipts rose 16% from the prior year when
adjusted for the effect of a distribution agreement with Tokyo Electron Ltd.
(TEL) which ended at the close of fiscal 1994. Third quarter sales climbed to
$459 million, growing 17% over the $393 million of a year ago. Backlog of $764
million was down 5% from $804 million in the 1994 quarter. For the first nine
months of fiscal 1995, orders were $1.35 billion versus 1994's $1.29 billion, an
increase of 19% on a TEL-adjusted basis. Sales for the period reached $1.35
billion compared to last year's $1.11 billion. Earnings for the nine months were
$82.2 million ($2.32/share) up 57% over the prior year's $52.4 million
($1.47/share). The higher results were due largely to continued strong
performances by the Company's Semiconductor Equipment and Health Care Systems
businesses.
Orders for Varian's Health Care Systems business rose 6% year-to-date.
Sales for the nine months were up 15%, and operating margins improved. Backlog
declined 5% from 1994's level. The X-ray Tube Products side of this business
continued to experience strong demand for its high-end products, with
particularly good interest from the Japanese market.
Orders for the Company's Instruments business grew 3% during the
nine-months on improved market conditions in the U.S. and the Far East, driven
by strong demand for vacuum products. Sales were slightly higher for the year to
date, reaching $276 million, a 3% increase over the year-ago period. Backlog
declined 4% from the previous quarter. Instrument markets worldwide continue to
be extremely competitive. Operating margins for this business declined from the
year-ago period.
Nine-month orders for Varian's Semiconductor Equipment business rose
54% over the year-ago period, after the previously noted adjustment for the
dissolved Tokyo Electron Ltd. distribution agreement. Sales grew 49% over the
1994 level. Backlog rose 53% over the prior year on a TEL-adjusted basis.
Operating margins continue in the double-digit range, reaching twice the level
of those achieved in the first nine months of the prior year. The strong
year-to-date demand for the Company's chip-making equipment was worldwide, with
particularly heavy orders from Korea and other Pacific Rim nations. Interest in
Varian's ion implantation products was especially strong, particularly for
leading edge, medium-current systems and the new VIIsion high-current system.
Varian's Electron Devices business posted higher orders and sales, up
4% and 9%, respectively, over the year-ago period while backlog rose 2%.
Operating margins for this business improved modestly during the quarter.
FINANCIAL CONDITION
The Company's financial condition remained strong during the first nine months
of fiscal 1995. Operating activities provided cash of $68.7 million in the first
nine months of fiscal 1995
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
compared to $56.8 million in the same period last year. Investing activities
used $46.9 million in the first nine months of fiscal 1995, $12.7 million for
the purchase of businesses, and the remainder used mainly for the purchase of
property, plant and equipment. Investing activities in the same period last year
used $35.7 million, mainly for the purchase of property, plant and equipment.
Financing activities used $7.8 million and $17.0 million during the first nine
months of 1995 and 1994, respectively. Total debt as a percentage of total
capital increased to 15.8% at the end of the third quarter of fiscal 1995 as
compared with 12.7% at fiscal year end. The ratio of current assets to current
liabilities increased slightly to 1.56 to 1 at June 30, 1995, from 1.55 to 1 at
fiscal year end, 1994. 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. The Company continues to face various
risks associated with its business operations including uncertain general
worldwide economic conditions, lingering worldwide recessionary conditions, new
product acceptance, and uncertainty regarding possible legislation and private
initiatives in the U.S. to control health care costs. Such conditions could
affect the Company's future performance.
On June 12, 1995, the Company announced an agreement with Leonard Green
& Partners, L.P., (LGP) under which the Company will sell its Electron Devices
business to a company formed at the direction of LGP for approximately $200
million in cash, plus the assumption of certain liabilities. The transaction is
subject to certain customary conditions and the arrangement of financing, and
is expected to close in August 1995. The Company anticipates that most of the
proceeds from the sale will be used to repurchase outstanding shares of stock.
As discussed in the Annual Report Form 10-K for the fiscal year ended
September 30, 1994, the Company is involved in certain environmental matters.
The Company has established reserves for these environmental matters, which
reserves management believes are adequate. Based on information currently
available, management continues to believe that the costs of these matters,
individually or in the aggregate, are otherwise not reasonably likely to have a
material adverse effect on the financial condition or results of operations of
the Company.
9
<PAGE> 10
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Varian Associates, Inc.:
We have reviewed the consolidated balance sheet of Varian Associates, Inc. and
subsidiary companies as of June 30, 1995, and the related consolidated
statements of earnings for the quarters and nine months ended June 30, 1995 and
July 1, 1994, and the condensed consolidated statements of cash flows for the
nine months ended June 30, 1995 and July 1, 1994. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the aforementioned financial statements for them to be in conformity
with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
------------------------------
COOPERS & LYBRAND L.L.P.
San Jose, California
July 19, 1995
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10.5 Registrant's Supplemental Retirement Plan,
as amended and effective as of July 1, 1994.
Exhibit 11 Computation of Earnings Per Share.
Exhibit 15 Letter Regarding Unaudited Interim Financial
Information.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K:
A report on Form 8-K was filed on June 13, 1995, regarding the
Registrant's agreement with Leonard Green & Partners, L.P.,
(LGP) under which the Company agreed to sell its Electron
Devices business to a company formed at the direction of LGP.
11
<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VARIAN ASSOCIATES, INC.
------------------------------
Registrant
August 8, 1995
------------------------------
Date
/s/ Allen K. Jones
------------------------------
Allen K. Jones
Vice President and Controller
(Chief Accounting Officer)
12
<PAGE> 13
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Page
------- ----
<S> <C> <C>
10.5 Registrant's Supplemental Retirement Plan 14
11 Computation of Earnings Per Share 20
15 Letter Regarding Unaudited Interim Financial Information 21
27 Financial Data Schedule 22
</TABLE>
13
<PAGE> 1
EXHIBIT 10.5
SUPPLEMENTAL RETIREMENT PLAN
OF
VARIAN ASSOCIATES, INC.
(As Amended and Restated Effective July 1, 1994)
SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN.
The Plan was established by the Company effective October 1, 1983, and
is amended and restated effective July 1, 1994. The purpose of the Plan is to
provide deferred compensation consisting of (a) allocations that exceed the
amounts that the Dollar Limitations permit to be allocated under the Retirement
Program but that are otherwise calculated by reference to the Retirement Program
and (b) allocations of Pension Contributions that would be made under the
Retirement Program if the Retirement Program included in its definition of
"Earnings" amounts representing Management Incentive Bonuses.
SECTION 2. ELIGIBILITY AND PARTICIPATION.
Participation in the Plan shall be limited to the following:
(a) Participants in the Retirement Program (i) whose actual allocations
of Pension Contributions under the Retirement Program are less than they would
have been if Management Incentive Bonuses were included in the Retirement
Program's definition of "Earnings" and (ii) who are Officers of the Company, or
such other employees of the Company as are (A) designated by the Committee and
(B) whose combined rate of annual salary and target Management Incentive Bonus
is not less than two times the amount described in section (414)(q)(1)(C) of the
Code, adjusted as prescribed by the Code to reflect changes in the cost of
living; and
(b) Participants in the Retirement Program whose actual allocations
under the Retirement Program are restricted by a Dollar Limitation.
SECTION 3. PLAN BENEFITS.
(a) Reserve Account. The Company shall establish on its books a special
unfunded Reserve Account for each Participant. As of each Valuation Date, the
Company shall credit interest on the balance in each Reserve Account (not
including any amounts credited under Subsections (b)
14
<PAGE> 2
EXHIBIT 10.5 (CONTINUED)
and (c) below during the calendar quarter then ending). The interest credited to
the Reserve Account shall be at a rate equivalent to:
(i) For periods prior to October 1, 1992, the return rate
provided by the Retirement Program's Fixed Income Fund;
(ii) For periods after September 30, 1992, but prior to July
1, 1994, the return rate provided by the Retirement Program's
Interest Income Fund; and
(iii) For periods after June 30, 1994, the return rate
provided by the long term Applicable Federal Rate (AFR)
compounded quarterly.
(b) Pension Contributions. As of the Valuation Date coinciding
with or next following the date when the Company makes a "Pension Contribution"
under the Retirement Program, the Company shall credit to a Participant's
Reserve Account an amount determined as follows:
(i) First, the hypothetical amount of the Participant's
"Pension Contribution" since the preceding Valuation Date shall be
calculated, based on the assumptions (A) that the Dollar Limitations do
not apply and (B) in the case of a Participant described in Section
2(a), that any Management Incentive Bonuses received by the Participant
since the preceding Valuation Date (or that would have been received if
not deferred) are included in Earnings for purposes of determining
"Pension Contributions" under the Retirement Program;
(ii) Second, the amount calculated under Paragraph (i) above
shall be reduced (but not below zero) since the preceding Valuation
Date by the actual amount of the Participant's "Pension Contribution";
and
(iii) The remainder (if any) shall be the amount credited to
the Participant's Reserve Account under this Subsection (b).
(c) Retirement Profit-Sharing Contributions. As of the Valuation
Date coinciding with or next following the date when the Company makes a
"Retirement Profit-Sharing Contribution" under the Retirement Program, the
Company shall credit to a Participant's Reserve Account an amount determined
as follows:
(i) First, the hypothetical amount of the Participant's
share of the "Retirement Profit-Sharing Contribution" shall be
calculated, based on the assumption that the Dollar Limitations do not
apply;
(ii) Second, the amount calculated under Paragraph (i) above
shall be reduced (but not below zero) by the actual amount of the
Participant's share of the "Retirement Profit-Sharing Contribution";
and
15
<PAGE> 3
EXHIBIT 10.5 (CONTINUED)
(iii) The remainder (if any) shall be the amount credited to
the Participant's Reserve Account under this Subsection (c).
(d) Distributions. Following the termination of a Participant's
employment with the Company and its subsidiaries, the Company shall pay to the
Participant the balance credited to his or her Reserve Account. Payments from
the Reserve Account shall be made in cash, at such time(s) and in such form
(including a lump sum or periodic installments) as the Committee shall determine
or redetermine in its sole discretion. Any unpaid balance remaining in a Reserve
Account shall continue to be credited with interest at the rate specified in
Subsection (a) above. In the event of a Participant's death before the entire
Reserve Account has been distributed to him or her, the unpaid balance remaining
in the Participant's Reserve Account shall be paid to his or her beneficiary or
beneficiaries under the Retirement Program, at such time(s) and in such form as
the Committee shall determine in its sole discretion.
SECTION 4. NO FUNDING.
The Plan shall be unfunded and shall represent an unsecured obligation
of the Company. Benefits hereunder shall be paid only from the general assets of
the Company, and the Participants shall have no rights to any segregated funds
or property of the Company.
SECTION 5. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee shall
make such rules, interpretations, and computations as it may deem appropriate.
Any decision of the Committee with respect to the Plan, including (without
limitation) any determination of eligibility to participate in the Plan and any
calculation of benefits hereunder, shall be conclusive and binding on all
persons.
SECTION 6. CLAIMS AND REVIEW PROCEDURES.
(a) Application for Benefits. Any application for benefits under
the Plan shall be submitted to the Committee at the Company's principal
office. Such application shall be in writing and on the prescribed form, if
any, and shall be signed by the applicant.
(b) Denial of Applications. In the event that any application for
benefits is denied in whole or in part, the Committee shall notify the applicant
in writing of the right to a review of the denial. Such written notice shall set
forth, in a manner calculated to be understood by the applicant, specific
reasons for the denial, specific references to the Plan provisions on which the
denial was based, a description of any information or material necessary to
perfect the application, an explanation of why such material is necessary, and
an explanation of the Plan's review procedure. Such written notice shall be
given to the applicant within 90 days after the Committee receives the
application, unless special circumstances require an extension of time for
processing the application. In no event shall such an extension exceed a period
of 90 days from the end of the
16
<PAGE> 4
EXHIBIT 10.5 (CONTINUED)
initial 90-day period. If such an extension is required, written notice
thereof shall be furnished to the applicant before the end of the initial 90-day
period. Such notice shall indicate the special circumstances requiring an
extension of time and the date by which the Committee expects to render a
decision. If written notice is not given to the applicant within the period
prescribed by this Section 6(b), the application shall be deemed to have been
denied for purposes of Section 6(c) upon the expiration of such period.
(c) Request for Review. Any person whose application for benefits is
denied in whole or in part (or such person's duly authorized representative) may
appeal the denial by submitting to the Committee a request for a review of such
application within 90 days after receiving written notice of denial. The
Committee shall give the applicant or such representative an opportunity to
review pertinent documents (except legally privileged materials) in preparing
such request for review and to submit issues and comments in writing. The
request for review shall be in writing and shall be addressed to the Committee
at the Company's principal office. The request for review shall set forth all of
the ground on which it is based, all facts in support of the request, and any
other matters which the applicant deems pertinent. The Committee may require the
applicant to submit such additional facts, documents, or other material as it
may deem necessary or appropriate in making its review.
(d) Decision on Review. The Committee shall act upon each request for
review within 60 days after receipt thereof, unless special circumstances
require an extension of time for processing, but in no event shall the decision
on review be rendered more that 120 days after the Committee receives the
request for review. If such an extension is required, written notice thereof
shall be furnished to the applicant before the end of the initial 60-day period.
The Committee shall give prompt, written notice of its decision to the applicant
and to the Company. In the event that the Committee confirms the denial of the
application for benefits in whole or in part, such notice shall set forth, in a
manner calculated to be understood by the applicant, the specific reasons for
such denial and specific references to the Plan provisions on which the decision
is based. To the extent that the Committee overrules the denial of the
application for benefits, such benefits shall be paid to the applicant.
(e) Rules and Procedures. The Committee shall adopt such rules and
procedures, consistent with ERISA and the Plan, as it deems necessary or
appropriate in carrying out its responsibilities under this Section 6.
(f) Exhaustion of Administrative Remedies. No legal or equitable action
for benefits under the Plan shall be brought unless and until the claimant (i)
has submitted a written application for benefits in accordance with Section
6(a), (ii) has been notified that the application is denied, (iii) has filed a
written request for a review of the application in accordance with Section 6(c),
and (iv) has been notified in writing that the Committee has affirmed the denial
of the application; provided, however, that an action may be brought after the
Committee has failed to act on the claim within the time prescribed in Section
6(b) and Section 6(d), respectively.
17
<PAGE> 5
EXHIBIT 10.5 (CONTINUED)
SECTION 7. AMENDMENT AND TERMINATION.
The Company expects to continue the Plan indefinitely. Future
conditions, however, cannot be foreseen, and the Company shall have the
authority to amend or terminate the Plan at any time. In the event of an
amendment or termination of the Plan, the amount of a Participant's benefits
hereunder shall not be less than the amount to which the Participant would have
been entitled if his or her employment had terminated immediately prior to such
amendment or termination.
The Plan may be amended by the Board of Directors or by the Committee.
SECTION 8. EMPLOYMENT RIGHTS.
Nothing in the Plan shall be deemed to give any person a right to
remain in the employ of the Company or of any of its subsidiaries. The Company
and its subsidiaries reserve the right to terminate any person's employment,
with or without cause.
SECTION 9. NO ASSIGNMENT.
The rights of any person to payments or benefits under the Plan shall
not be transferable nor be made subject to option or assignment, either by
voluntary or involuntary assignment or by operation of law, including (without
limitation) bankruptcy, garnishment, attachment, or other creditor's process.
Any act in violation of this Section 9 shall be void.
SECTION 10. APPLICABLE LAW.
The validity, interpretation, construction, and performance of the Plan
shall be governed by ERISA, and by the laws of the State of California to the
extent that they have not been preempted by ERISA.
SECTION 11. DEFINITIONS.
(a) "Code" means the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code shall include such section, any
valid regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such section.
(b) "Committee" means the Organization and Compensation Committee of
the Company's Board of Directors.
(c) "Company" means Varian Associates, Inc., a Delaware corporation.
18
<PAGE> 6
EXHIBIT 10.5 (CONTINUED)
(d) "Dollar Limitation" means (i) the limitation described in section
401(a)(17) of the Code and (ii) the limitation described in section 415(c)(1)(A)
of the Code, adjusted in each case as prescribed by the Code.
(e) "Earnings" shall have the meaning given to such term in the
Retirement Program, except that Earnings for purposes of the Plan shall not be
subject to the limitation described in section 401(a)(17) of the Code, as
adjusted as prescribed by the Code.
(f) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended. Reference to a specific section of ERISA shall include such section,
any valid regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such section.
(g) "Management Incentive Bonus" means a bonus payment under the Varian
Associates, Inc. Management Incentive Plan, as amended from time to time.
(h) "Participant" means an individual who is eligible to participate in
the Plan pursuant to Section 2(a) and/or Section 2(b) and Subsection (d) above.
(i) "Plan" means this Supplemental Retirement Plan of Varian
Associates, Inc., as amended from time to time.
(j) "Reserve Account" means the unfunded bookkeeping account described
in Section 3(a).
(k) "Retirement Program" means the Varian Associates, Inc. Retirement
and Profit-Sharing Program, as amended from time to time.
(l) "Valuation Date" means the last day of each calendar quarter.
19
<PAGE> 1
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE IN ACCORDANCE
WITH INTERPRETIVE RELEASE NO. 34-9083
UNAUDITED
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
JUNE 30, JULY 1, JUNE 30, JULY 1,
(SHARES IN THOUSANDS) 1995 1994 1995 1994
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actual weighted average shares outstanding for the period 33,894 34,354 33,854 34,465
Dilutive employee stock options 1,537 1,174 1,626 1,238
---------- ---------- ---------- -----------
Weighted average shares outstanding for the period 35,431 35,528 35,480 35,703
========== ========== ========== ===========
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
-----------------------------------------------------------
Earnings applicable to fully diluted earnings per share $ 31,743 $ 22,428 $ 82,185 $ 52,430
========== ========== ========== ===========
Earnings per share based on SEC interpretive release
No. 34-9083:
Earnings per share - Fully Diluted (1) $ 0.90 $ 0.63 $ 2.32 $ 1.47
========== ========== ========== ===========
</TABLE>
(1) There is no significant difference between fully diluted earnings per share
and primary earnings per share.
- 20 -
<PAGE> 1
EXHIBIT 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Varian Associates, Inc.
Registrations on Forms S-8 and S-3
We are aware that our report dated July 19, 1995 on our review of the interim
financial information of Varian Associates, Inc. for the three-month and
nine-month periods ended June 30, 1995, included in this Form 10-Q is
incorporated by reference in the Company's registration statements on Forms S-8,
Registration Statement Numbers 33-46000, 33-33661, 33-33660, and 2-95139 and
Forms S-8 and S-3, Registration Statement Number 33-40460. Pursuant to Rule
436(c) under the Securities Act of 1933 this report should not be considered a
part of the registration statements prepared or certified by us within the
meaning of Sections 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
----------------------------
Coopers & Lybrand L.L.P
San Jose, California
August 8, 1995
21
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-29-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 90,120
<SECURITIES> 0
<RECEIVABLES> 380,910
<ALLOWANCES> 2,448
<INVENTORY> 225,932
<CURRENT-ASSETS> 769,713
<PP&E> 602,524
<DEPRECIATION> 364,334
<TOTAL-ASSETS> 1,069,084
<CURRENT-LIABILITIES> 492,249
<BONDS> 0
<COMMON> 33,833
0
0
<OTHER-SE> 461,900
<TOTAL-LIABILITY-AND-EQUITY> 1,069,084
<SALES> 1,350,403
<TOTAL-REVENUES> 1,350,403
<CGS> 903,926
<TOTAL-COSTS> 1,217,690
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,258
<INCOME-PRETAX> 130,455
<INCOME-TAX> 48,270
<INCOME-CONTINUING> 82,185
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,185
<EPS-PRIMARY> 0
<EPS-DILUTED> 2.32
</TABLE>
