<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 27, 1996
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:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock, New York Stock Exchange
$1 par value Pacific Stock Exchange
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, 1996 was $1,498,011,000.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of December 1, 1996: 30,703,000 shares of $1 par
value common stock.
An index of exhibits filed with this Form 10-K is located on pages 15
through 16.
DOCUMENTS INCORPORATED BY REFERENCE:
DOCUMENT DESCRIPTION 10-K PART
- -------------------- ---------
Certain sections, identified by caption and page number, of the
Registrant's Annual Report to Stockholders for the fiscal year ended
September 27, 1996 (the "Annual Report")............................. I, II, IV
Certain sections, identified by caption, of the Proxy Statement
for the Registrant's 1997 Annual Meeting of Stockholders (the "Proxy
Statement").......................................................... III
<PAGE> 2
PART I
Item 1. Business
Varian Associates, Inc. together with its subsidiaries (hereinafter referred to
as "Varian", 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 health care, industrial
production, scientific and industrial research, and environmental monitoring.
The Company's principal business segments are health care systems, 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 27, 1996, the Company employed approximately
6,700 people worldwide.
The Company sells its products throughout the world and has 28 field sales
offices in the U.S. and 54 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, but there
is no competitor which competes across all of the Company's segments.
There were no material changes in the kinds of products produced or in the
methods of distribution since the beginning of the fiscal year. The Company
anticipates adequate availability of raw materials.
The Company's sales to customers outside of the U.S. for 1996 were $918 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 headings
"Foreign Currency Translation" and "Forward Exchange Contracts", on pages 26 and
30, respectively, 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, sells, and services 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 manufactures tubes
for four primary medical X-ray imaging applications: CT scanner; diagnostic
radiographic/fluoroscopic; special procedures; and mammography. Backlog for the
Health Care Systems business amounted to $341 million and $293 million in fiscal
1996 and 1995, 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 chromatographs, gas
chromatograph/mass spectrometers, NMR spectrometers, ultraviolet visible
2
<PAGE> 3
Item 1. (continued)
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 found in 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 segments 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 also manufactures vacuum products and
accessories for industrial and scientific applications. Its vacuum products and
helium leak detectors are utilized in such applications as semiconductor and
automotive manufacturing, high-energy physics, surface analysis, space research,
and petrochemical refining. The Instruments business includes a facility which
fabricates circuit boards and sub-assemblies for customers inside and outside
the Company. Backlog for the Instruments business amounted to $110 million and
$111 million in fiscal 1996 and 1995, respectively.
The Company's Semiconductor Equipment business manufactures, sells, and services
processing systems which are essential to making integrated circuits. Primary
products are ion implantation and sputter coating systems used in wafer
fabrication facilities. Backlog for this business amounted to $203 million and
$248 million in fiscal 1996 and 1995, respectively.
Additional information regarding the Company's lines of business and
international operations are incorporated herein by reference from the
information provided under the headings "Industry Segments" and "Geographic
Segments" on pages 36-37 of the Annual Report.
The Company employs 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 any particular patent as essential to its operations. The Company
grants licenses to reliable manufacturers on various terms and enters into
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 heading "Research and Development" on
page 28 of the Annual Report.
The Company's operations are subject to various federal, state, and/or local
laws regulating the discharge of materials to the environment or otherwise
relating to the protection of the environment. The Company is also involved in
various stages of environmental investigation and/or remediation under the
direction of or in consultation with federal, state, and/or local agencies at
certain current or former Company facilities (see the information provided under
the headings "Management's Discussion and Analysis" and "Contingencies" on pages
17-21 and 33-35, respectively, of the Annual Report, which information is
incorporated herein by reference). The Company has established what it believes
to be adequate reserves for these matters. Based on information currently
available, management believes that the Company's compliance with laws which
have been adopted regulating the discharge of materials to the environment or
relating to the protection of the environment is otherwise not reasonably likely
to have a material adverse effect on the capital expenditures, earnings or
competitive position of the Company. Also, estimated capital expenditures for
environmental control facilities are not expected to be material in fiscal 1997,
nor are they expected to be material in fiscal 1998.
3
<PAGE> 4
Item 1. (continued)
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 16, 1996.
<TABLE>
<CAPTION>
Name Age Position Term
<S> <C> <C> <C>
J. Tracy O'Rourke 61 Chairman of the Board and Chief Executive 1990-Present
(Director) Officer
Richard A. Aurelio 52 Executive Vice President 1992-Present
President, Semiconductor Equipment 1991-1992
Allen J. Lauer 59 Executive Vice President 1990-Present
Richard M. Levy 58 Executive Vice President 1990-Present
Timothy E. Guertin 47 Corporate Vice President 1992-Present
President, Oncology Systems 1990-Present
Robert A. Lemos 55 Vice President, Finance and Chief Financial 1986-Present
Officer
Treasurer 1995-Present
Joseph B. Phair 49 Secretary 1991-Present
Vice President and General Counsel 1990-Present
Wayne P. Somrak 51 Vice President 1991-Present
Controller 1995-Present,
1985-1994
Treasurer 1995
</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 740,502 square feet. The
following is a summary of the Company's properties at September 27, 1996:
<TABLE>
<CAPTION>
Land (Acres) Buildings (000's Sq. Ft.)
------------ -------------------------
Owned Leased Owned Leased
----- ------ ----- ------
<S> <C> <C> <C> <C>
United States 100 55 1,606 424
International 27 - 350 298
--- -- ----- ---
127 55 1,956 722
=== == ===== ===
</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 493 42 535 178 713
Instruments 393 195 588 354 942
Semiconductor Equipment 391 52 443 160 603
Other Operations 56 - 56 - 56
----- --- ----- --- -----
Total Operations 1,333 289 1,622 692 2,314
===== === ===== ===
Other 364
---
Total 2,678
=====
</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, Venezuela, 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 heading "Contingencies" on pages 33-35 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 heading "Common Stock Prices (Unaudited)" on
page 38 of the Annual Report, and the information provided under the heading
"Long-Term Debt" on pages 29-30 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 6,265 holders of record of the Company's common stock on December 1,
1996.
6
<PAGE> 7
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEARS
- --------------------------------------------------------------------------------------------------------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Sales....................................... $1,599.4 1,575.7 1,313.4 1,061.9 1,025.2
-------- ------- ------- ------- -------
Earnings from Continuing Operations
before taxes............................... $ 189.2 165.3 109.1 60.1 59.3
Taxes on earnings....................... $ 67.1 59.5 41.5 22.8 22.6
-------- ------- ------- -------- ------
Earnings from Continuing Operations......... $ 122.1 105.8 67.6 37.3 36.7
Earnings from Discontinued Operations,
Net of Taxes........................... $ -- 33.5 11.8 8.5 1.9
-------- ------- -------- ------- ------
NET EARNINGS................................ $ 122.1 139.3 79.4 45.8 38.6
======== ======= ======== ======= ======
EARNINGS PER SHARE - FULLY DILUTED
Earnings Continuing Operations......... $ 3.81 3.01 1.90 1.03 0.97
Earnings Discontinued Operations....... $ -- 0.95 0.32 0.23 0.05
-------- ------- -------- ------- ------
NET EARNINGS PER SHARE...................... $ 3.81 3.96 2.22 1.26 1.02
======== ======= ======== ======= ======
DIVIDENDS DECLARED PER SHARE............... $ 0.310 0.270 0.230 0.195 0.175
======== ======= ======== ======= ======
FINANCIAL POSITION AT YEAR END
Total assets............................... $1,018.9 1,003.8 962.4 878.7 878.7
Long-term debt
(excluding current portion).............. $ 60.3 60.3 60.4 60.5 49.7
</TABLE>
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 heading "Management's Discussion and
Analysis" on pages 17-21 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 39 of the Annual Report and the
Consolidated Financial Statements, Notes to the Consolidated Financial
Statements, and Supplementary Data on pages 22-38 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 heading "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 heading "Section 16(a) Beneficial Ownership Reporting Compliance" 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 heading "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 heading "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 headings "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 22
through 37 and page 39 of the Annual Report:
Consolidated Financial Statements:
Consolidated Statements of Earnings for fiscal years
1996, 1995, and 1994
Consolidated Balance Sheets at fiscal year-end 1996
and 1995
Consolidated Statements of Stockholders' Equity for
fiscal years 1996, 1995, and 1994
Consolidated Statements of Cash Flows for fiscal years
1996, 1995, and 1994
Notes to the Consolidated Financial Statements
Report of Independent Accountants
(2) Financial Statement Schedule The following financial statement
schedule of the Registrant and its subsidiaries for fiscal years
1996, 1995, and 1994, and the related Report 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.
Schedule Page
-- Report of Independent Accountants on
Financial Statement Schedule 13
II Valuation and Qualifying Accounts 14
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.
9
<PAGE> 10
Item 14. (continued)
(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).
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).
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
<PAGE> 11
Item 14. (continued)
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).
11 Computation of earnings per share.
13 Registrant's 1996 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 27,
1996 (EDGAR filing only).
(b) Reports on Form 8-K:
A report on Form 8-K was filed on August 27, 1996, regarding the
Registrant's Preferred Stock Purchase Rights which expired and
became unexercisable on August 25, 1996.
11
<PAGE> 12
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 3, 1996 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 3, 1996
---------------------- Officer (Principal Executive Officer)
J. Tracy O'Rourke
/s/ Robert A. Lemos Vice President, Finance, Chief Financial December 3, 1996
------------------- Officer and Treasurer (Principal Financial
Robert A. Lemos Officer)
/s/ Wayne P. Somrak Vice President and Controller (Principal December 3, 1996
------------------- Accounting Officer)
Wayne P. Somrak
Ruth M. Davis * Director
Robert W. Dutton * Director
Samuel Hellman * Director
Terry R. Lautenbach * Director
Angus A. MacNaughton * Director
David W. Martin, Jr. * Director
John G. McDonald * Director
Wayne R. Moon * Director
Gordon E. Moore * Director
David E. Mundell * Director
Donald O. Pederson * Director
Burton Richter * Director
Elizabeth E. Tallett * Director
Richard W. Vieser * Director
</TABLE>
* By /s/ Robert A. Lemos December 3, 1996
---------------------
Robert A. Lemos, Attorney-in-Fact **
- --------
** By authority of powers of attorney filed herewith.
12
<PAGE> 13
Report of Independent Accountants on
Financial Statement Schedule
To the Board of Directors and Stockholders of
Varian Associates, Inc.
Our report on the consolidated financial statements has been incorporated by
reference in this form 10-K from page 39 of the 1996 Annual Report to
Stockholders of Varian Associates, Inc. and subsidiary companies. In connection
with our audits of such financial statements, we have also audited the related
Financial Statement Schedule listed in the index on page 9 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, presents 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 16, 1996
13
<PAGE> 14
SCHEDULE II
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS (1)
for the fiscal years ended 1996, 1995, and 1994
(Dollars in Thousands)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COSTS AND
DESCRIPTION OF PERIOD EXPENSES
- ------------------------------------------------------------
<S> <C> <C>
ALLOWANCE FOR DOUBTFUL NOTES
& ACCOUNTS RECEIVABLE:
Fiscal Year Ended 1996 $ 2,316 $ 876
======= =======
Fiscal Year Ended 1995 $ 2,422 $ 330
======= =======
Fiscal Year Ended 1994 $ 2,219 $ 762
======= =======
ESTIMATED LIABILITY FOR
PRODUCT WARRANTY:
Fiscal Year Ended 1996 $48,076 $52,680
======= =======
Fiscal Year Ended 1995 $41,682 $61,954
======= =======
Fiscal Year Ended 1994 $35,615 $49,354
======= =======
</TABLE>
<TABLE>
<CAPTION>
DEDUCTIONS BALANCE AT
-------------------------- END OF
DESCRIPTION AMOUNT PERIOD
- --------------------------------------------
<S> <C> <C>
Write-offs
& Adjustments $ 883 $ 2,309
======= =======
Write-offs
& Adjustments $ 436 $ 2,316
======= =======
Write-offs
& Adjustments $ 559 $ 2,422
======= =======
Actual
Warranty
Expenditures $51,505 $49,251
======= =======
Actual
Warranty
Expenditures $55,560 $48,076
======= =======
Actual
Warranty
Expenditures $43,287 $41,682
======= =======
</TABLE>
(1) As to column omitted the answer is "none".
-14-
<PAGE> 15
INDEX OF EXHIBITS
Exhibit
Number
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).
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)
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).
15
<PAGE> 16
INDEX OF EXHIBITS
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).
11 Computation of earnings per share.
13 Registrant's 1996 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 27, 1996
(EDGAR filing only).
16
<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
1
<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.
2
<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.
3
<PAGE> 4
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
4
<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) 1996 1995 1994
- ------------------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Actual weighted average shares outstanding for the period 31,024 33,648 34,391
Dilutive employee stock options 1,051 1,554 1,285
---------- ---------- ----------
Weighted average shares outstanding for the period 32,075 35,202 35,676
========== ========== ==========
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
- -------------------------------------------------
Earnings from continuing operations $ 122.1 $ 105.8 $ 67.6
Earnings from discontinued operations -- 33.5 11.8
---------- ---------- ----------
Earnings applicable to fully diluted earnings per share $ 122.1 $ 139.3 $ 79.4
========== ========== ==========
Earnings per share based on SEC interpretive release
No. 34-9083:
Earnings from continuing operations $ 3.81 $ 3.01 $ 1.90
Earnings from discontinued operations -- 0.95 0.32
---------- ---------- ----------
Earnings per share - Fully Diluted(1) $ 3.81 $ 3.96 $ 2.22
========== ========== ==========
</TABLE>
(1) There is no significant difference between fully diluted earnings per share
and primary earnings per share.
<PAGE> 1
EXHIBIT 13
VARIAN ASSOCIATES, INC.
FY 1996 ANNUAL REPORT
TO STOCKHOLDERS
<PAGE> 2
Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
In fiscal 1996, the Company earned $122.1 million, up 15% from the
$105.8 million earned from continuing operations in 1995. Earnings per share of
$3.81 rose 27% above the prior year's $3.01 from continuing operations. Fiscal
1996 orders totaled $1.625 billion, 2% above 1995's $1.597 billion. Sales for
the year were $1.599 billion, 2% ahead of the year-ago's $1.576 billion.
However, after adjustments for the effects of an equipment distribution
agreement with Tokyo Electron Ltd. (TEL) which is no longer in effect, sales
were up 8% from the previous year. Order backlog was $619 million compared to
$651 million at the close of 1995. International sales accounted for 57% of
total sales in 1996 compared to 51% in the prior year.
In the fourth quarter of 1996, the Company earned $29.2 million versus
the year-ago's $32.6 million earned from continuing operations. Earnings per
share declined to $0.92 from $0.94 from continuing operations in the year-ago
period. Fourth-quarter orders of $408 million were down 5% from 1995's $431
million, but 17% above the level of the prior quarter. Sales for 1996's fourth
quarter rose to $413 million, up 2% from $407 million in the final quarter of
fiscal 1995.
While signs of a slowdown in demand in the semiconductor equipment
industry first became evident around mid-year, the pace of new orders for the
Company's equipment fell off sharply in the fourth quarter. Nonetheless,
Varian's Semiconductor Equipment business not only remained profitable but
improved its operating margins in the face of the deteriorating market
conditions. The Company's Instruments business continued to improve its
performance and made a solid contribution to the year's record results. Varian's
Health Care operations were negatively impacted in the U.S. by the effects of
ongoing industry cost containment efforts; however, orders for that business
rebounded sharply in the fourth quarter.
The Company's Health Care Systems orders rose to a record $534 million,
up 5% from the prior year's level. The gain was driven by strong fourth-quarter
demand, as quarterly bookings for this business surpassed the $200 million mark
for the first time to end the period at $203 million. While both the oncology
systems and X-ray tube product lines contributed to the growth, increased orders
for cancer therapy equipment were the primary driver as bookings for these
products rose 137% over the third quarter. Fourth-quarter oncology orders were
strong in the U.S. market which had lagged growth abroad throughout the year.
Domestic orders for the Company's cancer therapy products accounted for 68% of
fourth-quarter oncology volume. Fourth-quarter orders for medical linear
accelerators declined from 1995's fourth quarter.
Health Care Systems sales for the year declined 4% to $464 million.
Sales for the X-ray tube product line rose from 1995 levels for both the fourth
quarter and the year; however, those gains were offset by lower shipments of
oncology products.
Fourth-quarter operating margins for Health Care Systems improved over
the third quarter but fell substantially short of the prior year due to the
lower volume and continued investments in offshore infrastructure and new
product development programs. Backlog grew 17% from the year-ago level to a
record $341 million.
Orders for Varian's Semiconductor Equipment business declined 5% from
the prior year to $628 million. Fourth-quarter bookings were 49% below 1995 due
to the previously noted worldwide downturn in the industry. The drop in demand
was evident in lower orders for both the thin film and ion implantation product
lines in the year's final quarter. However, bookings for ion implantation
products improved slightly for the year overall.
Fourth-quarter Semiconductor Equipment sales were flat, with both
product lines shipping at approximately the same level as in 1995. Sales for the
year declined 1% from the prior year, but rose 15% after adjusting for the
terminated TEL distribution agreement.
17
<PAGE> 3
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
Operating profits for this business improved over the prior year from
$99 million in 1995 to $135 million in 1996. Backlog of $203 million declined
26% from the previous quarter and 18% from the prior year level due to the
softening industry demand conditions.
Instruments business orders rose to $493 million, up 11% from the
previous year. While fourth-quarter bookings for nuclear magnetic resonance
instrument products were below the prior year's record level, the decline was
more than offset by strong orders for the Company's vacuum and analytical
product lines.
Sales for this business rose 9% for the fourth quarter and 11% for the
year, with improved shipments in nearly all product areas. Backlog ended the
year at essentially the same level as year-end 1995.
Instruments business operating profit improved significantly for both
the fourth quarter and the year. While all product lines contributed to the
better margins, the improvement was particularly evident in the analytical area.
For the Company overall, spending on research and development rose,
increasing $19.2 million to $110.1 million, or 7% of revenue, compared with 6%
of revenue in 1995 and 1994.
Net interest expense in 1996 declined to $0.8 million compared to $1.6
million and $2.0 million in 1995 and 1994, respectively.
The continuing operations effective tax rate for 1996 was 35.5%,
compared to 36% for 1995 and 38% for 1994. (See Notes to the Consolidated
Financial Statements.)
In March 1995, the FASB issued SFAS 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which will
become effective for the Company's fiscal year 1997. Its adoption will not have
a material effect on the financial statements of the Company.
In October 1995, the FASB issued SFAS 123, Accounting for Stock-Based
Compensation. The Company is required to adopt SFAS 123 in fiscal 1997 and, upon
adoption, will elect to continue to measure compensation cost for its employee
stock compensation plans using the intrinsic value based method of accounting
prescribed in APB 25. Accordingly, its adoption will not have a material effect
on the financial statements of the Company.
In October 1996, the AICPA issued SOP 96-1, Environmental Remediation
Liabilities. SOP 96-1 is effective for fiscal 1998. The Company will be studying
the implications of the statement, but the impact of its implementation on the
financial statements of the Company has not yet been determined.
See Summary of Significant Accounting Policies in Notes to the
Consolidated Financial Statements.
FINANCIAL CONDITION
The Company's financial condition remained strong during 1996.
Operating activities provided cash of $77.4 million compared to $117.4 million
in 1995. Investing activities in 1996 used $73.4 million, mainly for the
purchase of $67.7 million in property and equipment and the purchase of a
business for $4.4 million. Investing activities in 1995 provided $125.6 million
inclusive of $191.3 million in proceeds from the sale of the Electron Devices
business which was offset by the purchase of property, plant, and equipment of
$65.4 million and the purchase of businesses of $12.7 million. Financing
activities in 1996 used $46.5 million, with $39.5 million used to buy back
shares of the Company's stock, including shares purchased to offset the issuance
of stock to employees, and $9.3 million used for payment of dividends. Financing
activities in 1995 used $196.9 million, with $184.9 million to buy back shares
of the Company's stock, including shares purchased to offset the issuance of
stock to employees, and $8.8 million used for payment of dividends.
18
<PAGE> 4
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
Total debt as a percent of total capital decreased to 12.1% from 13.6%
a year ago. Cash and cash equivalents of $82.7 million exceeded short- and
long-term debt of $64.6 million at fiscal year-end 1996. The ratio of current
assets to current liabilities was 1.65 and 1.51 at fiscal year-end 1996 and
1995, respectively. Quarterly dividends were increased from $0.07 to $0.08 per
share in the second quarter of fiscal 1996. The Company has $50 million
available in unused committed lines of credit.
OUTLOOK
The fiscal 1996 highs for orders, sales, and profits were achieved when
the market environment for a number of the Company's operations was obviously
deteriorating as the year came to an end. Although continuation of the Company's
aggressive new product development and productivity programs will contribute to
the fiscal 1997 performance, it does not expect to surpass 1996's record results
in 1997. The Health Care Systems segment's extraordinary momentum of the fourth
quarter is not expected to be the norm in 1997, and soft demand in the
semiconductor industry will likely produce lower orders and sales for that
segment in the quarters immediately ahead. However, barring some unforeseen
shift in the world economic picture, fiscal 1997 should still be a strong year
for Varian.
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. This includes 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 nine sites where 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
$5.2 million in 1996 compared with $2.3 million in 1995.
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 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. These estimates are 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. The Company's estimates of the present value of future exposure for
environmental related investigation and remediation expenditures, including
operating and maintenance costs, ranged from approximately $32.2 million to
$52.5 million as of September 27, 1996, and from approximately $35.7 million to
$56.0 million as of September 29, 1995. The time frame over which the Company
expects to incur such costs varies with each site, ranging up to 29 years as of
September 27, 1996. Management believes that no amount in the foregoing range of
estimated future costs is more probable of being incurred than any other amount
in that range.
19
<PAGE> 5
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
At September 27, 1996, the Company's reserve for environmental
liabilities, based upon future environmental related costs estimated as of that
date, was calculated as follows:
<TABLE>
<CAPTION>
(Dollars in millions)
- ----------------------------------------------------------------------------------
Recurring Total
Costs Non-Recurring Anticipated
Year Costs Future Costs
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
1997 $ 1.6 $ 1.6 $3.2
1998 1.7 2.8 4.5
1999 2.0 0.6 2.6
2000 2.1 0.3 2.4
2001 2.1 0.2 2.3
Thereafter 52.4 4.9 57.3
-------------------------------------------
Total costs $61.9 $10.4 $72.3
Less imputed interest (at 7%) (40.1)
-----
Reserve amount $32.2
=====
</TABLE>
The amounts set forth in the foregoing table are only estimates of
anticipated future environmental related costs, and the amounts actually spent
in the years indicated may be greater or less than such estimates. The Company
believes that its reserves are adequate, but as the scope of its obligations
becomes more clearly defined, this reserve may be modified and related charges
against earnings may be made.
Although any ultimate liability arising from environmental related
matters 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 an occurrence is considered remote.
Based on information currently available and its best assessment of the ultimate
amount and timing of environmental related events, Varian's management believes
that the costs of these matters are not reasonably likely to have a material
adverse effect on the financial condition of the Company.
Varian evaluates its liability for environmental related investigation
and remediation in light of the liability and financial wherewithal of
potentially responsible parties and insurance companies where 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 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
settlements with certain defendant insurance carriers), the Company recorded an
$18.0 million receivable in Other Current Assets at September 29, 1995, all but
$0.2 million of which was received during fiscal 1996. Although the Company
intends to aggressively pursue additional insurance recoveries from remaining
defendants in that lawsuit, 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.
Except for historical information, this discussion contains forward
looking statements that involve risks and uncertainties that could cause actual
results to differ materially from those
20
<PAGE> 6
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
projected. Such risks and uncertainties include: product demand and market
acceptance risks; the effect of general economic conditions and foreign currency
fluctuations; the impact of competitive products and pricing; new product
development and commercialization; the impact of slower growth in worldwide
semiconductor demand; the effect of the continuing shift in growth from domestic
to international health care customers, and the impact of managed-care
initiatives in the United States; the continued improvement of the various
instruments markets the Company serves; the ability to increase operating
margins on higher sales; and other risks detailed from time to time in the
Company's filings with the U.S. Securities and Exchange Commission.
21
<PAGE> 7
Exhibit 13
CONSOLIDATED STATEMENTS OF EARNINGS
Varian Associates, Inc. and Subsidiary Companies
<TABLE>
<CAPTION>
Fiscal Years
- ------------------------------------------------------------------------------------------------------------
(Dollars in thousands except per share amounts) 1996 1995 1994
============================================================================================================
<S> <C> <C> <C>
SALES $1,599,361 $1,575,742 $1,313,447
---------- ---------- ----------
OPERATING COSTS AND EXPENSES
Cost of sales 995,668 1,024,539 853,955
Research and development 110,140 90,964 73,706
Marketing 200,333 187,148 168,975
General and administrative 103,128 106,170 105,726
---------- ---------- ----------
Total operating costs and expenses 1,409,269 1,408,821 1,202,362
---------- ---------- ----------
OPERATING EARNINGS 190,092 166,921 111,085
Interest expense (6,375) (6,936) (6,345)
Interest income 5,526 5,315 4,353
EARNINGS FROM CONTINUING OPERATIONS ---------- ---------- ----------
BEFORE TAXES 189,243 165,300 109,093
Taxes on earnings 67,180 59,510 41,456
---------- ---------- ----------
EARNINGS FROM CONTINUING OPERATIONS $ 122,063 $ 105,790 $ 67,637
EARNINGS FROM DISCONTINUED OPERATIONS
NET OF TAXES - 33,496 11,721
---------- ---------- ----------
NET EARNINGS $ 122,063 $ 139,286 $ 79,358
========== ========== ==========
EARNINGS PER SHARE - FULLY DILUTED
Continuing operations $ 3.81 $ 3.01 $ 1.90
Discontinued operations - 0.95 0.32
---------- ---------- ----------
NET EARNINGS PER SHARE $ 3.81 $ 3.96 $ 2.22
========== ========== ==========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
-22-
<PAGE> 8
Exhibit 13
CONSOLIDATED BALANCE SHEETS
Varian Associates, Inc. and Subsidiary Companies
<TABLE>
<CAPTION>
Fiscal Year-End
------------------------------
(Dollars in thousands except par values) 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 82,675 $ 122,728
Accounts receivable 380,330 346,330
Inventories 189,882 171,702
Other current assets 91,010 116,958
---------- ----------
Total Current Assets 743,897 757,718
---------- ----------
Property, Plant, and Equipment 473,852 431,303
Accumulated depreciation and amortization (261,766) (239,422)
---------- ----------
Net Property, Plant, and Equipment 212,086 191,881
---------- ----------
Other Assets 62,938 54,183
---------- ----------
TOTAL ASSETS $1,018,921 $1,003,782
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 4,362 $ 1,755
Accounts payable - trade 75,745 82,851
Accrued expenses 264,565 316,419
Product warranty 49,251 48,076
Advance payments from customers 56,071 51,600
---------- ----------
Total Current Liabilities 449,994 500,701
Long-Term Accrued Expenses 29,007 29,026
Long-Term Debt 60,258 60,329
Deferred Taxes 11,753 18,797
---------- ----------
Total Liabilities 551,012 608,853
---------- ----------
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 30,646,000 shares (1996), 31,052,000
shares (1995) 30,646 31,052
Retained earnings 437,263 363,877
---------- ----------
Total Stockholders' Equity 467,909 394,929
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,018,921 $1,003,782
========== ==========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
-23-
<PAGE> 9
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, 1993 $17,342 $ - $396,719 $ - $ 414,061
Net earnings for the year - - 79,358 - 79,358
Issuance of stock under omnibus
stock, stock option, 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, stock option, 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
Net earnings for the year - - 122,063 - 122,063
Issuance of stock under omnibus
stock, stock option, and employee
stock purchase plans (including
tax benefit of $10,084) 1,213 38,623 - - 39,836
Purchase of common stock - - - (79,296) (79,296)
Retirement of treasury stock (1,619) (38,623) (39,054) 79,296 -
Dividends declared
($0.31 per share) - - (9,623) - (9,623)
------- -------- -------- --------- ---------
BALANCES, FISCAL YEAR-END, 1996 $30,646 $ - $437,263 $ - $ 467,909
======= ======== ======== ========= =========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
-24-
<PAGE> 10
Exhibit 13
CONSOLIDATED STATEMENTS OF CASH FLOWS
Varian Associates, Inc. and Subsidiary Companies
<TABLE>
<CAPTION>
Fiscal Years
----------------------------------
(Dollars in thousands) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Cash Provided by Operating Activities $ 77,353 $ 117,390 $120,251
INVESTING ACTIVITIES
Proceeds from sale of property, plant, and equipment 4,781 4,394 18,320
Proceeds from sale of Electron Devices - 191,347 -
Purchase of property, plant, and equipment (67,736) (65,404) (62,584)
Purchase of businesses, net of cash acquired (4,396) (12,686) 133
Other (5,999) 7,985 (7,252)
-------- --------- --------
Net Cash Provided (Used) by Investing Activities (73,350) 125,636 (51,383)
-------- --------- --------
FINANCING ACTIVITIES
Net borrowings (payments) on short-term obligations 2,607 (3,061) (12,042)
Principal payments on long-term debt (71) (70) (6,071)
Proceeds from common stock issued to employees 39,836 42,504 27,592
Purchase of common stock (79,296) (227,372) (63,669)
Dividends paid (9,341) (8,819) (7,590)
Other (282) (123) 392
-------- --------- --------
Net Cash Used by Financing Activities (46,547) (196,941) (61,388)
-------- --------- --------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH 2,491 (2,229) (1,915)
-------- --------- --------
Net Increase (Decrease) in Cash and Cash Equivalents (40,053) 43,856 5,565
Cash and Cash Equivalents at Beginning of Year 122,728 78,872 73,307
-------- --------- --------
Cash and Cash Equivalents at End of Year $ 82,675 $ 122,728 $ 78,872
======== ========= ========
DETAIL OF NET CASH PROVIDED BY OPERATING ACTIVITIES
Net Earnings $122,063 139,286 $ 79,358
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation 42,918 49,997 48,029
Gain on sale of Electron Devices - (40,965) -
Deferred taxes 1,113 (27,083) (8,283)
Amortization of intangibles 3,155 5,634 4,484
Changes in assets and liabilities:
Accounts receivable (38,677) (37,595) (40,765)
Inventories (17,415) (33,009) (17,374)
Other current assets 17,847 (19,362) 550
Accounts payable - trade (6,516) 10,711 18,226
Accrued expenses (50,742) 42,639 37,929
Product warranty 1,137 10,678 5,871
Advance payments from customers 5,411 (6,159) (3,503)
Long-term accrued expenses (19) 29,026 -
Other (2,922) (6,408) (4,271)
-------- --------- --------
Net Cash Provided by Operating Activities $ 77,353 $ 117,390 $120,251
======== ========= ========
</TABLE>
See accompanying Notes to the Consolidated Financial Statements.
-25-
<PAGE> 11
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.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Foreign Currency Translation
For non-U.S. operations, the U.S. dollar is the functional currency. Monetary
assets and liabilities of foreign subsidiaries are translated into U.S. dollars
at current exchange rates. Nonmonetary assets such as inventories and property,
plant and equipment are translated at historical rates. Income and expense items
are translated at effective rates of exchange prevailing during each year,
except that inventories and depreciation charged to operations are translated at
historical rates. The aggregate exchange loss included in general and
administrative expenses for 1996, 1995, and 1994 was $1.1 million, $0.8 million,
and $0.1 million, respectively.
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. The carrying amounts of cash and cash equivalents approximate
estimated fair value because of the short maturities of those financial
instruments.
Accounts Receivable
Accounts receivable are stated net of allowances for doubtful accounts of $2.3
million at the end of fiscal years 1996 and 1995.
26
<PAGE> 12
Notes to the Consolidated Financial Statements (continued)
Financial instruments that potentially expose the Company to concentrations of
credit risk consist principally of trade accounts receivable. Concentrations of
credit risk with respect to trade accounts receivable are limited due to the
large number of customers comprising the Company's customer base and their
dispersion across many different industries and geographies.
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 used, inventories would have been
higher than reported by $46.8 million in fiscal 1996, $45.6 million in fiscal
1995, and $49.0 million in fiscal 1994. The main components of inventories are
as follows:
<TABLE>
<CAPTION>
(Dollars in Millions) 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and parts $ 112.3 $ 98.4
Work in process 53.7 52.6
Finished goods 23.9 20.7
------------- --------------
Total Inventories $ 189.9 $ 171.7
============= ==============
</TABLE>
The Company's inventories include high technology parts and components that may
be specialized in nature or subject to rapid technological obsolescence. While
the Company has programs to minimize the required inventories on hand and
considers technological obsolescence in estimating the required allowance to
reduce recorded amounts to market values, such estimates could change in the
future.
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. When assets are retired or otherwise disposed of, the assets
and related accumulated depreciation are removed from the accounts. Gains or
losses resulting from retirements or disposals are included in earnings from
continuing operations.
The main components of property, plant, and equipment are as follows:
<TABLE>
<CAPTION>
(Dollars in Millions) 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Land and land leaseholds $ 11.3 $ 10.1
Buildings 160.4 145.3
Machinery and equipment 291.7 259.9
Construction in progress 10.5 16.0
-------------- --------------
Total Property, Plant, and Equipment $ 473.9 $ 431.3
============== ==============
</TABLE>
27
<PAGE> 13
Notes to the Consolidated Financial Statements (continued)
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
The Company's provision for income taxes comprises its estimated tax liability
currently payable and the change in its deferred income taxes. Deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
Research and Development
Company-sponsored research and development costs related to both present and
future products are expensed currently. Costs related to research and
development contracts are included in inventory and charged to cost of sales
upon recognition of related revenue. Total expenditures on research and
development for fiscal 1996, 1995, and 1994, were $116.5 million, $94.7 million,
and $74.8 million, respectively, of which $6.4 million, $3.7 million, and $1.1
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 1996, 1995, and 1994, was 32,075, 35,202, and 35,676
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 the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of
In March 1995, the FASB issued SFAS 121, Accounting for the 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. The Company is required to adopt SFAS 123 in fiscal 1997 and, upon
adoption, will elect to continue to measure compensation cost for its employee
stock compensation plans using the intrinsic value based method of accounting
prescribed in APB 25. Accordingly, its adoption will not have a material effect
on the financial statements of the Company.
28
<PAGE> 14
Notes to the Consolidated Financial Statements (continued)
Accounting for Environmental Remediation Liabilities
In October 1996, the AICPA issued SOP 96-1, Environmental Remediation
Liabilities. SOP 96-1 is effective for fiscal 1998. The Company will be studying
the implications of the statement, but the impact of its implementation on the
financial statements of the Company has not yet been determined.
Reclassification
Certain amounts in prior years have been reclassified to conform with the 1996
presentation. These reclassifications did not change previously reported total
assets, liabilities, stockholders' equity or earnings from continuing
operations.
ACCRUED EXPENSES
<TABLE>
<CAPTION>
(Dollars in Millions) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Taxes, including taxes on earnings $ 35.3 $ 79.7
Payroll and employee benefits 108.8 104.4
Environmental 3.2 6.7
Estimated loss contingencies 34.0 36.8
Deferred income 23.7 22.5
Other 59.6 66.3
------ ------
Total Accrued Expenses $264.6 $316.4
====== ======
</TABLE>
SHORT-TERM DEBT
Short-term notes payable and the current portion of long-term debt amounted to
$4.4 million and $1.8 million at the end of fiscal years 1996 and 1995,
respectively. The weighted average interest rates on short-term borrowings were
3.7% and 3.4% at the end of fiscal years 1996 and 1995, respectively. Total debt
is subject to limitations included in long-term debt agreements.
At fiscal year-end 1996, 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.
LONG-TERM DEBT
<TABLE>
<CAPTION>
(Dollars in Millions) 1996 1995
- -------------------------------------------------------------------------------------------------
<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 0.4
----- -----
Long-term borrowings 60.4 60.4
Less current portion 0.1 0.1
----- -----
Long-term Debt $60.3 $60.3
===== =====
</TABLE>
29
<PAGE> 15
Notes to the Consolidated Financial Statements (continued)
The unsecured term loans contain covenants that limit future borrowings and
require the Company to maintain certain levels of working capital and operating
results. For fiscal year 1996, the Company was in compliance with all
restrictive covenants of the loan agreements, including a restriction on payment
of cash dividends. At September 27, 1996, approximately $120.8 million of
retained earnings were unrestricted for payment of cash dividends.
The annual maturities of long-term debt (in millions) for fiscal years 1997
through 2001, are as follows: $0.1, $12.1, $12.1, $12.1, and $12.1.
Interest paid (in millions) on short and long-term debt was $6.4, $6.9, and
$6.4, in fiscal 1996, 1995, and 1994, respectively.
Based on rates currently available to the Company for debt with similar terms
and remaining maturities, the carrying amounts of long-term debt and notes
payable approximate estimated fair value.
FORWARD EXCHANGE CONTRACTS
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 1996, the Company had forward exchange contracts with maturities
of twelve months or less to sell foreign currencies totaling $71.5 million
($15.7 million of Canadian dollars, $12.9 million of Japanese yen, $11.2 million
of French francs, $9.6 million of Australian dollars, $8.6 million of British
pounds, $6.3 million of Italian lira, $1.9 million of German marks, $1.1 million
of Swedish krona, $1.1 million of Belgian francs, $1.6 million of Dutch
guilders, and $1.5 million of Spanish pesetas) and to buy foreign currencies
totaling $6.8 million ($5.2 million of British pounds, $1.3 million of Swiss
francs, and $0.3 million of Japanese yen). The face values of these foreign
exchange contracts approximate estimated fair value.
OMNIBUS STOCK AND EMPLOYEE STOCK PURCHASE PLANS (SHARES IN THOUSANDS)
Prior to fiscal 1991, the Company had in place the 1982 Non-Qualified Stock
Option Plan under which options are still exercisable. 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. Options granted are generally exercisable in cumulative
installments of one-third each year, commencing one year following date of
grant,
30
<PAGE> 16
Notes to the Consolidated Financial Statements (continued)
and expire if not exercised within seven or ten years from 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.
Option activity under the Plans is presented below.
<TABLE>
<CAPTION>
1996 1995 1994
------------------------- ------------------------- -------------------------
(Dollars in Millions) Shares Dollars Shares Dollars Shares Dollars
- ----------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year 3,809 $ 88.0 3,999 $ 74.2 3,785 $ 60.6
Granted 1,159 56.3 1,111 40.3 1,161 29.5
Terminated or expired (62) (2.5) (116) (3.3) (63) (1.4)
Exercised (1,029) (22.5) (1,185) (23.2) (884) (14.5)
------ -------- ------ -------- ----- --------
End of Year 3,877 $ 119.3 3,809 $ 88.0 3,999 $ 74.2
====== ======== ====== ======== ===== ========
Shares exercisable 1,869 2,030 1,692
Available shares remaining 456 703 634
</TABLE>
Options were outstanding at prices ranging from $10.60 to $61.31 per share at
fiscal year-end 1996. Options were exercised at prices ranging from $10.60 to
$48.94 for fiscal 1996, $10.60 to $39.13 for fiscal 1995, and $10.60 to $24.25
for fiscal 1994.
During fiscal years 1996, 1995, and 1994, 69, 63, and 64 shares, respectively,
were awarded under restricted stock grants at no cost to the employees. The
restricted stock grants vest generally over a three year period. Compensation
expense from restricted stock was approximately $2.6 million, $2.0 million, and
$1.2 million, in fiscal years 1996, 1995, and 1994, 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 1996, 1995, and 1994, 111 shares, 205 shares, and 266 shares were issued
under the ESPP for $4.7 million, $7.0 million, and $7.0 million, respectively.
At fiscal year-end 1996, the Company had a balance of 3,014 shares reserved for
ESPP.
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 $23.6 million, $21.1 million, and $18.5
million, for fiscal 1996, 1995, and 1994, respectively.
31
<PAGE> 17
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. Taxes on earnings from continuing operations
are as follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
U.S. federal $42.3 $60.6 $27.4
Non-U.S 13.8 14.8 15.6
State and local 9.9 11.2 6.7
----- ----- -----
Total current 66.0 86.6 49.7
----- ----- -----
Deferred
U.S. federal 0.6 (26.6) (8.8)
Non-U.S 0.6 (0.5) 0.5
----- ----- -----
Total deferred 1.2 (27.1) (8.3)
----- ----- -----
Taxes on Earnings $67.2 $59.5 $41.4
===== ===== =====
</TABLE>
Significant items making up deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Product warranty $16.2 $15.6
Deferred compensation 10.1 10.7
Special provisions 23.1 24.9
Inventory adjustments 20.7 16.1
Deferred income 5.9 5.4
State income tax 1.7 3.9
Other 4.5 3.7
----- -----
82.2 80.3
Liabilities:
Accelerated depreciation 13.6 13.3
Unconsolidated affiliates 8.0 5.7
Other 0.3 (0.2)
----- -----
21.9 18.8
Net Deferred Tax Asset $60.3 $61.5
===== =====
</TABLE>
The classification of the net deferred tax asset on the Balance Sheet is as
follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Net current deferred tax asset (included in other
current assets) $72.1 $80.3
Net long-term deferred tax liability (11.8) (18.8)
----- -----
Net Deferred Tax Asset $60.3 $61.5
===== =====
</TABLE>
32
<PAGE> 18
Notes to the Consolidated Financial Statements (continued)
The effective tax rate on continuing operations differs from the U.S. federal
statutory tax rate as a result of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Federal statutory income tax rate 35.0 % 35.0 % 35.0 %
State and local taxes, net of federal tax benefit 3.4 4.4 4.0
Foreign taxes, net 0.4 (1.2) (0.9)
Foreign Sales Corporation (2.8) (2.4) (1.9)
Other (0.5) 0.2 1.8
------ ------ ------
Effective Tax Rate 35.5 % 36.0 % 38.0 %
====== ====== ======
</TABLE>
Income taxes paid are as follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes paid, net $63.6 $35.1 $25.2
State income taxes paid, net 9.8 11.7 6.2
Foreign income taxes paid, net 21.2 24.0 11.8
----- ----- -----
Total Paid $94.6 $70.8 $43.2
===== ===== =====
</TABLE>
LEASE COMMITMENTS
At fiscal year-end 1996, the Company was committed to minimum rentals under
noncancellable operating leases for fiscal years 1997 through 2001 and
thereafter, as follows, in millions: $9.1, $6.4, $4.9, $3.6, $2.5, and $2.9.
Rental expense for fiscal years 1996, 1995, and 1994, in millions, was $18.4,
$18.6, and $18.7, 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.
33
<PAGE> 19
Notes to the Consolidated Financial Statements (continued)
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
nine sites where 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 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.
Nevertheless, the Company continues to estimate the amounts of these future
costs in periodically establishing reserves. These estimates are 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.
The Company's estimates of the present value of future exposure for
environmental related investigation and remediation expenditures, including
operating and maintenance costs, ranged from approximately $32.2 million to
$52.5 million as of September 27, 1996, and from approximately $35.7 million to
$56.0 million as of September 29, 1995. The time frame over which the Company
expects to incur such costs varies with each site, ranging up to 29 years as of
September 27, 1996. Management believes that no amount in the foregoing range of
estimated future costs is more probable of being incurred than any other amount
in that range.
At September 27, 1996, the Company's reserve for environmental liabilities,
based upon future environmental related costs estimated by the Company as of
that date, was calculated as follows:
<TABLE>
<CAPTION>
(Dollars in millions)
- -----------------------------------------------------------------------------------
Total
Recurring Non-Recurring Anticipated
Year Costs Costs Future costs
- -----------------------------------------------------------------------------------
<C> <C> <C> <C>
1997 $ 1.6 $ 1.6 $ 3.2
1998 1.7 2.8 4.5
1999 2.0 0.6 2.6
2000 2.1 0.3 2.4
2001 2.1 0.2 2.3
Thereafter 52.4 4.9 57.3
----- ----- -----
Total costs $61.9 $10.4 $72.3
Less imputed interest (at 7%) (40.1)
-----
Reserve amount $32.2
=====
</TABLE>
The amounts set forth in the foregoing table are only estimates of anticipated
future environmental related costs, and the amounts actually spent in the years
indicated may be greater or less than such estimates. The
34
<PAGE> 20
Notes to the Consolidated Financial Statements (continued)
Company believes that its reserves are adequate, but as the scope of its
obligations becomes more clearly defined, this reserve may be modified and
related charges against earnings may be made.
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).
Although any ultimate liability arising from environmental related matters 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 an occurrence is considered remote. Based on
information currently available and its best assessment of the ultimate amount
and timing of environmental related events, Varian's management believes that
the costs of these matters are not reasonably likely to have a material adverse
effect on the financial condition of the Company.
Varian evaluates its liability for environmental related investigation and
remediation in light of the liability and financial wherewithal of potentially
responsible parties and insurance companies where 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 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
settlements with certain defendant insurance carriers), the Company recorded an
$18.0 million receivable in Other Current Assets at September 29, 1995, all but
$0.2 million of which was received during fiscal 1996. Although the Company
intends to aggressively pursue additional insurance recoveries from remaining
defendants in that lawsuit, 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.
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 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
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales $205.1 $239.0
Earnings Before Taxes 13.2 18.9
Taxes on Earnings 5.0 7.2
------ ------
Net Earnings from Discontinued Operations
Before Gain on Sale $ 8.2 $ 11.7
====== ======
</TABLE>
35
<PAGE> 21
Notes to the Consolidated Financial Statements (continued)
SUBSEQUENT EVENT
During October 1996, the Company obtained additional long term financing of
$25.0 million with an interest rate of 7.21%. Semiannual principal repayments of
$2.4 million begin in the year 2002. The unsecured note contains covenants that
limit future borrowings and require the Company to maintain certain levels of
working capital and operating results.
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. Sales to customers located in Korea were $177.9 million in fiscal
1996 and $183.8 million in fiscal 1995. For 1994 no single country outside the
United States accounted for more than 10% of total sales. For fiscal 1996, 1995
and 1994, 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 $496 million in
fiscal 1996, $420 million in fiscal 1995, and $286 million in fiscal 1994. Sales
under prime contracts from the U.S. Government were approximately $15 million in
fiscal 1996, $22 million in fiscal 1995, and $28 million in fiscal 1994.
36
<PAGE> 22
Exhibit 13
INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
Pretax Identifiable
Sales Earnings Assets
----------------------------------------------------------------------------------------------
(Dollars in millions) 1996 1995 1994 1996 1995 1994 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Health Care Systems $ 464 $ 482 $ 426 $ 68 $ 90 $ 86 $ 282
Instruments 481 432 408 33 18 36 248
Semiconductor Equipment 650 659 477 135 99 36 262
Eliminations & Other 4 3 2 (12) (11) (9) 10
------ ------ ------ ----- ----- ----- ------
Total Industry
Segments 1,599 1,576 1,313 224 196 149 802
General Corporate -- -- -- (34) (29) (38) 217
Interest, Net -- -- -- (1) (2) (2) --
------ ------ ------ ----- ----- ----- ------
Continuing Operations $1,599 $1,576 $1,313 $ 189 $ 165 $ 109 $1,019
====== ====== ====== ===== ===== ===== ======
</TABLE>
<TABLE>
<CAPTION>
Identifiable Capital
Assets Expenditures Depreciation
------------------------------------------------------------------------------------
(Dollars in millions) 1995 1994 1996 1995 1994 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Health Care Systems $ 254 $201 $13 $16 $11 12 11 $ 9
Instruments 235 226 19 21 21 13 12 11
Semiconductor Equipment 227 196 24 15 6 11 9 9
Eliminations & Other 9 8 1 -- 1 1 1 1
Total Industry
Segments 725 631 57 52 39 37 33 30
General Corporate 279 191 12 10 9 6 6 5
Interest, Net -- -- -- -- -- -- -- --
------ ---- --- --- --- --- --- ---
Continuing Operations $1,004 $822 $69 $62 $48 $43 $39 $35
====== ==== === === === === === ===
</TABLE>
GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
Sales to Intergeographic
Unaffiliated Sales to
Customers Affiliates
--------------------------------------------------------------------------------
(Dollars in millions) 1996 1995 1994 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $1,152 $1,175 $ 920 $ 256 $ 217 $ 253
International 444 398 392 61 54 56
Eliminations & Other 3 3 1 (317) (271) (309)
------ ------ ------ ----- ----- -----
Total Geographic
Segments 1,599 1,576 1,313 -- -- --
General Corporate -- -- -- -- -- --
Interest, Net -- -- -- -- -- --
------ ------ ------ ----- ----- -----
Continuing Operations $1,599 $1,576 $1,313 $ -- $ -- $ --
====== ====== ====== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Total Pretax
Sales Earnings
-----------------------------------------------------------------------------------
(Dollars in millions) 1996 1995 1994 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $ 1,408 $ 1,392 $ 1,173 $ 200 $ 165 $ 112
International 505 452 448 36 42 46
Eliminations & Other (314) (268) (308) (12) (11) (9)
------- ------- ------- ----- ----- -----
Total Geographic
Segments 1,599 1,576 1,313 224 196 149
General Corporate -- -- -- (34) (29) (38)
Interest, Net -- -- -- (1) (2) (2)
------- ------- ------- ----- ----- -----
Continuing Operations $ 1,599 $ 1,576 $ 1,313 $ 189 $ 165 $ 109
======= ======= ======= ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Identifiable
Assets
--------------------------------
(Dollars in millions) 1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
United States $ 514 $ 496 $429
International 278 220 193
Eliminations & Other 10 9 9
------ ------ ----
Total Geographic
Segments 802 725 631
General Corporate 217 279 191
Interest, Net -- -- --
------ ------ ----
Continuing Operations $1,019 $1,004 $822
====== ====== ====
</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
$918 million, $797 million, and $659 million, in 1996, 1995, and 1994,
respectively.
Certain Foreign Sales Corporation (FSC) expenses for 1995 and 1994 have been
reclassified in pretax earnings from International to United States to properly
offset the related revenues.
-37-
<PAGE> 23
Exhibit 13
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1996
-----------------------------------------------------
(Dollars in millions except First Second Third Fourth Total
per share amounts) Quarter Quarter Quarter Quarter Year
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $351.2 417.7 417.0 413.5 1,599.4
------ ----- ----- ----- -------
Gross Profit $133.1 154.2 157.1 159.3 603.7
------ ----- ----- ----- -------
Net Earnings
Continuing Operations $ 25.5 33.1 34.3 29.2 122.1
Discontinued Operations - - - - -
------ ----- ----- ----- -------
Net Earnings $ 25.5 33.1 34.3 29.2 122.1
====== ===== ==== ==== =======
Net Earnings Per Share -
Fully Diluted
Continuing Operations $ 0.79 1.03 1.07 0.92 3.81
Discontinued Operations - - - - -
------ ----- ---- ---- -------
Net Earnings Per Share -
Fully Diluted $ 0.79 1.03 1.07 0.92 3.81
====== ===== ==== ==== =======
</TABLE>
<TABLE>
<CAPTION>
1995
--------------------------------------------------
(Dollars in millions except First Second Third Fourth Total
per share amounts) Quarter Quarter Quarter Quarter Year
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $346.1 428.7 394.2 406.7 1,575.7
------ ----- ----- ----- -------
Gross Profit $115.3 143.2 137.8 154.9 551.2
------ ----- ----- ----- -------
Net Earnings
Continuing Operations $ 17.8 26.5 28.9 32.6 105.8
Discontinued Operations 3.0 3.1 2.9 24.5 33.5
------ ----- ----- ----- -------
Net Earnings $ 20.8 29.6 31.8 57.1 139.3
====== ===== ==== ==== =======
Net Earnings Per Share -
Fully Diluted
Continuing Operations 0.51 0.75 0.82 0.94 3.01
Discontinued Operations 0.08 0.10 0.08 0.71 0.95
------ ----- ----- ----- -------
Net Earnings Per Share -
Fully Diluted 0.59 0.85 0.90 1.65 3.96
====== ===== ==== ==== =======
</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>
1996
--------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
High $53 7/8 52 5/8 62 7/8 52 3/8
Low $42 1/2 43 1/4 49 1/4 40 1/2
Dividends Declared
Per Share $ .07 .08 .08 .08
</TABLE>
<TABLE>
<CAPTION>
1995
--------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
High $37 1/4 44 56 57 3/8
Low $30 7/8 34 1/2 42 1/4 50 5/8
Dividends Declared
Per Share $ .06 .07 .07 .07
</TABLE>
-38-
<PAGE> 24
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 27, 1996 and September
29, 1995, and the related consolidated statements of earnings, stockholders'
equity, and cash flows for each of the three fiscal years in the period ended
September 27, 1996. 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 27, 1996 and September
29, 1995, and the consolidated results of their operations and their cash flows
for each of the three fiscal years in the period ended September 27, 1996 in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
____________________________________________
COOPERS & LYBRAND L.L.P.
San Jose, California
October 16, 1996
39
<PAGE> 1
Exhibit 21
VARIAN ASSOCIATES, INC.
SUBSIDIARIES OF THE REGISTRANT
FISCAL 1996
<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%
Varian Biosynergy, Inc. Delaware 100%
Varian Technologies, Inc. Delaware 100%
Varian Japan, Ltd. Delaware 100%
Varian Pacific, Inc. Delaware 100%
Varian Instruments of Puerto Rico, Inc. Delaware 100%
Varian Ltd. 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%
Nippon Oncology Systems, Ltd. Japan 49%
</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 reports dated
October 16, 1996, on our audits of the consolidated financial statements and
financial statement schedule of Varian Associates, Inc. as of September 27, 1996
and September 29, 1995 and for each of the three fiscal years in the period
ended September 27, 1996, which reports are included or incorporated by
reference in this Form 10-K.
/s/ Coopers & Lybrand L.L.P.
-----------------------------
Coopers & Lybrand L.L.P.
San Jose, California
December 17, 1996
<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 27, 1996 ("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
______________ , 1996.
/s/ Ruth M. Davis /s/ Robert W. Dutton
- ----------------------------- ----------------------------
Ruth M. Davis Robert W. Dutton
/s/ Samuel Hellman /s/ Terry R. Lautenbach
- ----------------------------- ----------------------------
Samuel Hellman Terry R. Lautenbach
/s/ Angus A. MacNaughton /s/ David W. Martin
- ----------------------------- ----------------------------
Angus A. MacNaughton David W. Martin, Jr.
/s/ John G. McDonald /s/ Wayne R. Moon
- ----------------------------- ----------------------------
John G. McDonald Wayne R. Moon
/s/ Gordon E. Moore /s/ David E. Mundell
- ----------------------------- ----------------------------
Gordon E. Moore David E. Mundell
/s/ Donald O Pederson /s/ Burton Richter
- ----------------------------- ----------------------------
Donald O. Pederson Burton Richter
/s/ Elizabeth E. Tallett /s/ Richard W. Vieser
- ----------------------------- ----------------------------
Elizabeth E. Tallett 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 1996 Annual Report to
Stockholders.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-27-1996
<PERIOD-START> SEP-30-1996
<PERIOD-END> SEP-27-1996
<EXCHANGE-RATE> 1
<CASH> 82,675
<SECURITIES> 0
<RECEIVABLES> 382,639
<ALLOWANCES> 2,309
<INVENTORY> 189,882
<CURRENT-ASSETS> 743,897
<PP&E> 473,852
<DEPRECIATION> 261,766
<TOTAL-ASSETS> 1,018,921
<CURRENT-LIABILITIES> 449,994
<BONDS> 0
0
0
<COMMON> 30,646
<OTHER-SE> 437,263
<TOTAL-LIABILITY-AND-EQUITY> 1,018,921
<SALES> 1,599,361
<TOTAL-REVENUES> 1,599,361
<CGS> 995,668
<TOTAL-COSTS> 1,409,269
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,375
<INCOME-PRETAX> 189,243
<INCOME-TAX> 67,180
<INCOME-CONTINUING> 122,063
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 122,063
<EPS-PRIMARY> .00
<EPS-DILUTED> 3.81
</TABLE>
