<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 2, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSISTION PERIOD FROM__________TO____________
COMMISSION FILE NUMBER: 1-7598
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER:
VARIAN ASSOCIATES, INC.
STATE OR OTHER JURISDICTION OF IRS EMPLOYER
INCORPORATION OR ORGANIZATION: IDENTIFICATION NO.:
DELAWARE 94-2359345
Address of principal executive offices:
3050 Hansen Way, Palo Alto, California 94304-1000
Telephone No., including area code:
(650) 493-4000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceeding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
An index of exhibits filed with this Form 10-Q is located on page 18.
Number of shares of Common Stock, par value $1 per share, outstanding as of the
close of business on January 30, 1998: 30,024,000 shares.
<PAGE> 2
PART 1. FINANCIAL INFORMATION
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
- --------------------------------------------------------------------
(DOLLARS IN THOUSANDS JANUARY 2, DECEMBER 27,
EXCEPT PER SHARE AMOUNTS) 1998 1996
- --------------------------------------------------------------------
<S> <C> <C>
SALES $ 344,843 $ 321,959
--------- ---------
OPERATING COSTS AND EXPENSES
Cost of sales 213,387 210,060
Research and development 27,320 26,382
Marketing 49,299 48,798
General and administrative 24,402 15,895
--------- ---------
TOTAL OPERATING COSTS AND EXPENSES 314,408 301,135
--------- ---------
OPERATING EARNINGS 30,435 20,824
Interest expense (1,606) (1,820)
Interest income 1,258 727
--------- ---------
EARNINGS BEFORE TAXES 30,087 19,731
Taxes on earnings 10,380 6,910
--------- ---------
NET EARNINGS $ 19,707 $ 12,821
========= =========
AVERAGE SHARES OUTSTANDING - BASIC 30,086 30,702
========= =========
AVERAGE SHARES OUTSTANDING - DILUTED 30,934 31,537
========= =========
NET EARNINGS PER SHARE - BASIC $ 0.66 $ 0.42
========= =========
NET EARNINGS PER SHARE - DILUTED $ 0.64 $ 0.41
========= =========
- --------------------------------------------------------------------
Dividends Declared Per Share $ 0.09 $ 0.08
Order Backlog $ 640,582 $ 634,302
- --------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
-2-
<PAGE> 3
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
JANUARY 2, SEPTEMBER 26,
1998 1997
(DOLLARS IN THOUSANDS EXCEPT PAR VALUES) (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 85,645 $ 142,298
Accounts receivable 363,647 418,978
Inventories
Raw materials and parts 118,907 97,220
Work in process 43,820 37,431
Finished goods 29,822 24,947
----------- -----------
Total inventories 192,549 159,598
Other current assets 98,615 92,596
----------- -----------
TOTAL CURRENT ASSETS 740,456 813,470
----------- -----------
Property, Plant, and Equipment 466,038 460,251
Accumulated depreciation and amortization (271,978) (264,612)
----------- -----------
NET PROPERTY, PLANT, AND EQUIPMENT 194,060 195,639
----------- -----------
Other Assets 131,744 95,224
=========== ===========
TOTAL ASSETS $ 1,066,260 $ 1,104,333
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 21,909 $ 18,668
Accounts payable - trade 59,636 83,771
Accrued expenses 248,089 269,067
Product warranty 39,511 37,620
Advance payments from customers 57,839 55,184
----------- -----------
TOTAL CURRENT LIABILITIES 426,984 464,310
Long-Term Accrued Expenses 42,252 35,752
Long-Term Debt 67,090 73,186
Deferred Taxes 6,448 6,508
----------- -----------
TOTAL LIABILITIES 542,774 579,756
----------- -----------
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
30,025,000 shares at January 2, 1998 and 30,108,000 shares at
September 26, 1997 30,025 30,108
Retained earnings 493,461 494,469
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 523,486 524,577
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,066,260 $ 1,104,333
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
-3-
<PAGE> 4
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
- -----------------------------------------------------------------------------------------------
JANUARY 2, DECEMBER 27,
(DOLLARS IN THOUSANDS) 1998 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Cash Provided by Operating Activities $ 8,574 $ 7,305
--------- ---------
INVESTING ACTIVITIES
Purchase of property, plant, and equipment (9,278) (15,514)
Purchase of businesses, net of cash acquired (37,272) (25,341)
Other, net 4,102 2,089
--------- ---------
Net Cash Used by Investing Activities (42,448) (38,766)
--------- ---------
FINANCING ACTIVITIES
Net borrowings on short-term obligations 3,248 12,950
Proceeds from long-term borrowings -- 25,000
Principal payments on long-term debt (6,103)
Proceeds from common stock issued to employees 8,127 6,108
Purchase of common stock (26,219) (17,705)
Other, net (2,706) (2,460)
--------- ---------
Net Cash (Used)/ Provided by Financing Activities (23,653) 23,893
--------- ---------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH 874 1,792
--------- ---------
Net Decrease in Cash and Cash Equivalents (56,653) (5,776)
Cash and Cash Equivalents at Beginning of Period 142,298 82,675
--------- ---------
Cash and Cash Equivalents at End of Period $ 85,645 $ 76,899
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
-4-
<PAGE> 5
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
NOTE 1: The consolidated financial statements include the accounts of
Varian Associates, Inc. and its subsidiaries and have been prepared by
the Company, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. The year ended
September 26, 1997 balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles. It is suggested that these
financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest Form
10-K annual report. In the opinion of management, the consolidated
financial statements include all normal recurring adjustments
necessary to present fairly the information required to be set forth
therein. The results of operations for the first quarter ended January
2, 1998, are not necessarily indicative of the results to be expected
for a full year or for any other periods.
NOTE 2: Inventories are valued at the lower of cost or market (net
realizable value) using the last-in, first-out (LIFO) cost for the
U.S. inventories of the Health Care Systems (except for X-ray Tube
Products), Instruments, and Semiconductor Equipment segments. All
other inventories are valued principally at average cost. If the
first-in, first-out (FIFO) method had been used for those operations
valuing inventories on a LIFO basis, inventories would have been
higher than reported by $48.9 million at January 2, 1998 and $48.4
million at September 26, 1997.
NOTE 3: The Company enters into forward exchange contracts to mitigate the
effects of operational (sales orders and purchase commitments) and
balance sheet exposures to fluctuations in foreign currency exchange
rates. When the Company's foreign exchange contracts hedge operational
exposure, the effects of movements in currency exchange rates on these
instruments are recognized in income when the related revenue and
expenses are recognized. When foreign exchange contracts 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
5
<PAGE> 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3 (Continued)
underlying items being hedged, these instruments do not subject the
Company to risk that would otherwise result from changes in currency
exchange rates. Gains and losses on hedges of existing assets or
liabilities are included in the carrying amounts of those assets or
liabilities and are ultimately recognized in income as part of those
carrying amounts. Gains and losses related to qualifying hedges of
firm commitments also are deferred and are recognized in income or as
adjustments of carrying amounts when the hedged transaction occurs.
Any deferred gains or losses are included in accrued expenses in the
balance sheet. If a hedging instrument is sold or terminated prior to
maturity, gains and losses continue to be deferred until the hedged
item is recognized in income. If a hedging instrument ceases to
qualify as a hedge, any subsequent gains and losses are recognized
currently in income. At January 2, 1998, the Company had forward
exchange contracts with maturities of twelve months or less to sell
foreign currencies totaling $131.2 million ($42.3 million of Japanese
yen, $18.0 million of French francs, $11.4 million of German marks,
$10.8 million of Canadian dollars, $9.6 million of Italian lira, $9.4
million of British pounds, $7.7 million of Spanish pesetas, $5.5
million of Belgium francs, $3.4 million of Swiss francs, $2.8 million
of Dutch guilders, $2.7 million of Norwegian krone, $2.2 million of
Australian dollars, $1.8 million of Korean won, $1.1 million of
Portuguese escudos, $1.0 million of Taiwan dollars, $0.7 million of
Finnish marks, $0.5 million of European Currency units, and $0.3
million of Danish krone) and to buy foreign currencies totaling $30.7
million ($10.4 million of Japanese yen, $7.3 million of Australian
dollars, $3.9 million of British pounds, $2.6 million of Italian lira,
$1.9 million of French francs, $1.3 million of Canadian dollars, $1.0
million of Belgian francs, $1.0 million of Spanish pesetas, $0.7
million of Dutch guilders, and $0.6 million of German marks).
NOTE 4: In February 1990, a purported class action was brought by Panache
Broadcasting of Pennsylvania, Inc. on behalf of all purchasers of
electron tubes in the U.S. against the Company and a joint-venture
partner, alleging that the activities of their joint venture in the
power-grid tube industry violated antitrust laws. The complaint seeks
injunctive relief and unspecified damages, which may be trebled under
the antitrust laws. In February 1993, the U.S. District Court in
Chicago granted 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 management believes that the Company has meritorious
defenses to the Panache lawsuit.
6
<PAGE> 7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4: (Continued)
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 (including the Panache lawsuit) will
not have a material adverse effect on the consolidated financial
statements of the Company.
The Company has been named by the U.S. Environmental Protection Agency
or third parties as a potentially responsible party under the
Comprehensive Environmental Response Compensation and Liability Act of
1980, as amended, at eight sites 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 (including facilities disposed of in connection with the
Company's sale of its Electron Devices business during 1995, and the
sale of the Company's Thin Film Systems operations during 1997).
For certain of these facilities, various uncertainties 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. As of January 2, 1998, the Company
nonetheless estimated that the Company's future exposure for
environmental related investigation and remediation costs for these
sites ranged in the aggregate from $17.1 million to $44.4 million. The
time frame over which the Company expects to incur such costs varies
with each site, ranging up to 30 years as of January 2, 1998.
Management believes that no amount in the foregoing range of estimated
future costs is more probable of being incurred than any other amount
in such range and therefore accrued $17.1 million in estimated
environmental costs as of January 2, 1998. The amount accrued has not
been discounted to present value.
As to other facilities, the Company has gained sufficient knowledge to
be able to better estimate the scope and costs of future environmental
activities. As of January 2,1998, the Company estimated that the
Company's future exposure for environmental related investigation and
remediation costs for these sites ranged in the aggregate from $46.2
million to $71.7 million. The time frame over which the Company
expects to incur such costs varies with each site, ranging up to 30
years as of January 2, 1998. As to each of these sites, management
determined that a particular amount within the range of estimated
costs was a better estimate of the future environmental liability than
any other amount within the range, and that the amount and timing of
these future costs were reliably determinable. Together, these amounts
totaled $53.9 million at January 2, 1998. The Company accordingly
accrued $22.5 million, which represents this best estimate of the
future costs discounted at 4%, net of inflation. This reserve is in
addition to the $17.1 million described above.
7
<PAGE> 8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4 (Continued)
The foregoing amounts 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
aggregate range of cost estimates reflects various uncertainties
inherent in many environmental investigation and remediation activities
and the large number of sites where the Company is undertaking such
investigation and remediation activities. The Company believes that
most of these cost ranges will narrow as investigation and remediation
activities progress.
The Company believes that its reserves are adequate, but as the scope
of its obligations becomes more clearly defined, these reserves may be
modified and related charges against earnings may be made. Although
any ultimate liability arising from environmental related matters
described herein could result in significant expenditures that, if
aggregated and assumed to occur within a single fiscal year, would be
material to the Company's financial statements, the likelihood of such
occurrence is considered remote. Based on information currently
available to management and its best assessment of the ultimate amount
and timing of environmental related events, the Company's management
believes that the costs of these environmental related matters are not
reasonably likely to have a material adverse effect on the
consolidated financial statements of the Company.
The Company evaluates its liability for environmental related
investigation and remediation in light of the liability and financial
wherewithal of potentially responsible parties and insurance companies
with respect to which the Company believes that it has rights to
contribution, indemnity and/or reimbursement. Claims for recovery of
environmental investigation and remediation costs already incurred,
and to be incurred in the future, have been asserted against various
insurance companies and other third parties. In 1992, the Company
filed a lawsuit against 36 insurance companies with respect to most of
the above-referenced sites. The Company received certain cash
settlements during 1995 and 1996 from defendants in that lawsuit, and
has a $0.5 million receivable in Other Current Assets at January 2,
1998. The Company has also reached an agreement with another insurance
company under which the insurance company has agreed to pay a portion
of the Company's past and future environmental related expenditures,
and the Company therefore has a $5.5 million receivable in Other
Assets at January 2, 1998. Although the Company intends to
aggressively pursue additional insurance recoveries, the Company has
not reduced any liability in anticipation of recovery with respect to
claims made against third parties.
8
<PAGE> 9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5: The Company adopted SFAS 128, "Earnings per Share" during the first
quarter of fiscal year 1998. Accordingly, net earnings per share were
computed under two methods, basic and diluted, and prior periods were
restated to conform to the new presentation and calculation. The
impact of restatement was not significant.
NOTE 6: Non-cash investing activities included deferred payments of $7.0
million, net present value, as additional purchase price of a business
not yet settled in cash. Non-cash investing activities also included
the acquisition of a business in exchange for $5.2 million of accounts
receivable.
NOTE 7: Included in other assets at January 2, 1998 and September 26, 1997 is
goodwill of $87.0 million and $45.9 million, respectively (net of
accumulated amortization of $7.1 million and $6.5 million,
respectively), which is the excess of the cost of acquired businesses
over the sum of the amounts assigned to identifiable assets acquired
less liabilities assumed. Goodwill is amortized on a straight-line
basis over periods ranging from 10 to 40 years.
Whenever events or changes in circumstances indicate that the carrying
amounts of long-lived assets and goodwill related to those assets may
not be recoverable, the Company would estimate the future cash flows,
undiscounted and without interest charges, expected to result from the
use of those assets and their eventual disposition. If the sum of the
future cash flows is less than the carrying amount of those assets,
the Company would recognize an impairment loss based on the excess of
the carrying amount over the fair value of the assets.
NOTE 8: Earnings per Share
<TABLE>
<CAPTION>
First Quarter Ended January 2, 1998 First Quarter Ended December 27, 1996
------------------------------------- -----------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net Income $ 19,707 30,086 $ 0.66 $ 12,821 30,702 $ 0.42
EFFECT OF DILUTIVE SECURITIES
Employee Stock Options 848 (0.02) 835 (0.01)
DILUTED EPS
------------------------------------- -------------------------------------
Net Income $ 19,707 30,934 $ 0.64 $ 12,821 31,537 $ 0.41
===================================== =====================================
</TABLE>
Options to purchase 35,686 shares at $60.37 were outstanding during
the first quarter ended January 2, 1998 but were not included in the
computation of diluted EPS because the options' exercise price was
greater than the average market price of the shares. The options,
which expire between 2006 and 2007 were still outstanding at the end
of the first quarter.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On January 22, 1998, the Company reported solid gains in orders, sales, and
earnings for the first quarter of fiscal 1998 compared to the year-ago quarter.
First-quarter orders of $385 million rose 11% from the prior year, and were up
18% after adjustments for last June's sale of its Thin Film Systems (TFS)
business. Sales of $345 million grew 7%, but rose 21% over 1997's first quarter
after the TFS adjustment. Net earnings for the first quarter were up 54% to
$19.7 million from the year-ago's $12.8 million. Earnings per share of $0.64
climbed 56% above the $0.41 reported last year and increased 39% on a
TFS-adjusted basis. (All earnings per share amounts represent diluted earnings
per share as defined within Statement of Financial Accounting Standards No.
128.) Backlog of $641 million rose 9% from the level of last year's first period
after the TFS adjustment and was 4% above the end of the prior quarter. All
three of the Company's businesses contributed to the better quarterly
performance, with much of the momentum supplied by the double-digit orders
growth in the Health Care Systems business and record sales posted in the
quarter for the Instruments business. Although the financial situation in
certain Asian countries, particularly Korea, negatively impacted first quarter
results and is expected to have some negative impact on the Company's near-term
results, the Company continues to expect that financial results for 1998 will
surpass 1997 (after adjustment for the TFS sale).
First-quarter orders for the Company's Health Care Systems business
totaled $121 million, up 11% from the year-ago quarter, with both oncology
systems and x-ray tube products contributing to the gains. Demand was
particularly strong in the oncology systems segment for its ancillary products
which are designed to improve the effectiveness as well as the efficiency of
radiotherapy departments. First quarter sales of $98 million rose slightly over
the year-ago period's $97 million, while backlog increased to $368 million.
Operating margins were below the level of a year ago.
The Company's Semiconductor Equipment business enjoyed strong demand
during the quarter as orders grew 14% over the year-ago period and were up 45%
on a TFS-adjusted basis. Sales rose 9%, and were 70% over the prior year after
the TFS adjustment. Backlog of $156 million grew 4% on a TFS-adjusted basis.
Operating margins increased significantly from the prior year. Although
equipment orders from Korea ceased during the quarter as a result of financial
conditions there, orders from other Asian markets (such as Taiwan) grew
significantly.
Orders for the Company's Instruments business of $130 million were down
3% from the prior year's record first quarter; however, sales rose 12% to a new
high for the period of $136 million. Backlog of $118 million was 4% below the
year-ago figure. Operating margins improved from 1997's first quarter, with all
areas of its diverse product lines contributing to the gains.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
FINANCIAL CONDITION
The Company's financial condition remained strong during the first
quarter of fiscal 1998. Operating activities provided cash of $8.6 million in
the first quarter of fiscal 1998 and provided $7.3 million in the same period
last year. Investing activities used $42.4 million in the first quarter of
fiscal 1998, $37.3 million for the purchase of businesses and $9.3 million for
the purchase of property, plant and equipment. The purchase of businesses
caused Other Assets to increase $36.5 million to $131.7 million, due to the
recording of goodwill. Investing activities in the same period last year used
$38.8 million in the first quarter of fiscal 1997, $25.3 million for the
purchase of a business and $15.5 million for the purchase of property, plant and
equipment. Financing activities used $23.7 million in the first quarter of
fiscal 1998 and included $18.1 million used to buy back shares of the Company's
stock, including shares purchased to offset the issuance of stock to employees.
Financing activities in the first quarter of fiscal 1997 provided $23.9 million,
which included $25.0 million in long-term borrowing. Total debt as a percentage
of total capital decreased to 14.5% at the end of the first quarter of fiscal
1998 as compared with 14.9% at fiscal year end, 1997. The ratio of current
assets to current liabilities remained constant at 1.7 compared to fiscal year
end 1997. The Company has $50 million available in unused committed lines of
credit.
The Company adopted SFAS 128, "Earnings per Share" during the first
quarter of fiscal year 1998. Accordingly, net earning per share were computed
under two methods, basic and diluted, and prior periods were restated to conform
to the new presentation and calculation. The impact of restatement was not
significant.
ENVIRONMENTAL MATTERS
The Company has been named by the U.S. Environmental Protection Agency
or third parties as a potentially responsible party under the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, at
eight sites 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 (including facilities disposed of in connection with
the Company's sale of its Electron Devices business during 1995, and the sale of
the Company's Thin film Systems operations during 1997).
For certain of these facilities, various uncertainties 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. As of January 2, 1998, the Company nonetheless estimated that the
Company's future exposure for environmental related investigation and
remediation costs for these sites ranged in the aggregate from $17.1 million to
$44.4 million. The time frame over which the Company expects to incur such costs
varies with each site, ranging up to 30 years as of January 2, 1998. Management
believes that no amount in the foregoing range of estimated future costs is more
probable
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
of being incurred than any other amount in such range and therefore accrued
$17.1 million in estimated environmental costs as of January 2, 1998. The amount
accrued has not been discounted to present value.
As to other facilities, the Company has gained sufficient knowledge to
be able to better estimate the scope and costs of future environmental
activities. As of January 2, 1998, the Company estimated that the Company's
future exposure for environmental related investigation and remediation costs
for these sites ranged in the aggregate from $46.2 million to $71.7 million. The
time frame over which the Company expects to incur such costs varies with each
site, ranging up to 30 years as of January 2, 1998. As to each of these sites,
management determined that a particular amount within the range of estimated
costs was a better estimate of the future environmental liability than any other
amount within the range, and that the amount and timing of these future costs
were reliably determinable. Together, these amounts totaled $53.9 million at
January 2, 1998. The Company accordingly accrued $22.5 million, which represents
this best estimate of the future costs discounted at 4%, net of inflation. This
reserve is in addition to the $17.1 million described above.
The foregoing amounts 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 aggregate range of
cost estimates reflects various uncertainties inherent in many environmental
investigation and remediation activities and the large number of sites where the
Company is undertaking such investigation and remediation activities. The
Company believes that most of these cost ranges will narrow as investigation and
remediation activities progress.
The Company believes that its reserves are adequate, but as the scope
of its obligations becomes more clearly defined, these reserves may be modified
and related charges against earnings may be made. Although any ultimate
liability arising from environmental related matters described herein could
result in significant expenditures that, if aggregated and assumed to occur
within a single fiscal year, would be material to the Company's financial
condition, the likelihood of such occurrence is considered remote. Based on
information currently available to management and its best assessment of the
ultimate amount and timing of environmental related events, the Company's
management believes that the costs of these environmental related matters are
not reasonably likely to have a material adverse effect on the consolidated
financial statements of the Company.
The Company evaluates its liability for environmental related
investigation and remediation in light of the liability and financial
wherewithal of potentially responsible parties and insurance companies with
respect to which the Company believes that it has rights to contribution,
indemnity and/or reimbursement. Claims for recovery of environmental
investigation and remediation costs already incurred, and to be incurred in the
future, have been asserted against various insurance companies and other third
parties. In 1992, the Company filed a lawsuit against 36 insurance companies
with respect to most of the above-referenced sites. The Company received certain
cash settlements during 1995 and 1996 from defendants in that lawsuit, and has a
$0.5 million receivable in Other Current Assets at January 2, 1998. The Company
has also reached an agreement with another insurance company under which the
insurance company has agreed to pay a
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
portion of the Company's past and future environmental related expenditures, and
the Company therefore has a $5.5 million receivable in Other Assets at January
2, 1998. Although the Company intends to aggressively pursue additional
insurance recoveries, the Company has not reduced any liability in anticipation
of recovery with respect to claims made against third parties.
POTENTIAL IMPACT OF THE YEAR 2000 ISSUE
The "Year 2000 Issue" refers to computer programs which use two digits
rather than four to define a given year and which therefore might read a date
using "00" as the year 1900 rather than the year 2000. The Company is still
assessing the full potential impact of the Year 2000 Issue on the Company and
its products, and the Company has already initiated certain corrective actions.
With respect to the Company's internal computer systems and computer systems
which are part of current products, management believes that appropriate
corrective actions will be accomplished and that the costs of those corrective
actions are not reasonably likely to have a material effect on the Company's
results of operations or financial condition. There can be no assurance,
however, that those costs will not be higher than currently anticipated or that
all such corrective actions will be accomplished as scheduled, and if the
Company fails to accomplish those corrective actions it could have a material
effect on the Company's results of operations.
The Company is still assessing what might be the impact of the Year
2000 Issue on previously sold products, what corrective actions might be
required to address those products and what might be the costs of implementing
those corrective actions. Without further assessment, the Company is unable to
conclude that the effect of the Year 2000 Issue on previously sold products is
not reasonably likely to have a material effect on the Company's results of
operations.
The Company is also still assessing whether the Company's key suppliers
of goods or services and other relevant third parties are adequately addressing
the Year 2000 Issue and what might be the possible effects on the Company if
those parties are not adequately prepared for the year 2000. The failure of
those third parties to address the Year 2000 Issue could have a material effect
on the Company's results of operations, but the Company is unable at this time
to assess what might be the extent of such effect.
FORWARD LOOKING INFORMATION
Except for historical information, this Management's Discussion and
Analysis contains forward looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those
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 timing of renewed growth in worldwide
health care and semiconductor equipment demand; the impact of managed care
initiatives in the United States on capital expenditures and resulting pricing
pressures on medical equipment; the continued improvement of the various
instruments markets the Company serves; the ability to increase operating
margins on higher sales; the impact of
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
economic conditions in Korea and other Asian markets on the Company's sales in
those markets; successful implementation of corrective actions to address the
impact of the year 2000 on the Company; and other risks detailed from time to
time in the Company's filings with the Securities and Exchange Commission.
14
<PAGE> 15
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Varian Associates, Inc.:
We have reviewed the consolidated balance sheet of Varian Associates, Inc. and
its subsidiaries as of January 2, 1998, and the related consolidated statements
of earnings , and the condensed consolidated statements of cash flows for the
quarters ended January 2, 1998 and December 27, 1996. These financial statements
are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the aforementioned financial statements for them to be in conformity
with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
-------------------------------------
COOPERS & LYBRAND L.L.P.
San Jose, California
January 21, 1998
15
<PAGE> 16
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10.5 Registrant's Supplemental Retirement Plan, as amended
and restated effective as of January 1, 1998.
Exhibit 15 Letter Regarding Unaudited Interim Financial
Information.
Exhibit 27 Financial Data Schedule for the quarter ended January 2,
1998 (EDGAR filing only).
Exhibit 27.1 Restated Financial Data Schedule for the fiscal year
ended September 26, 1997 (EDGAR filing only).
Exhibit 27.2 Restated Financial Data Schedule for the fiscal year
ended September 29, 1995 (EDGAR filing only).
(b) Reports on Form 8-K:
A report on Form 8-K was filed on October 2, 1997, regarding the
Registrant's offer to purchase the radiotherapy service operation of
General Electric Company.
A report on Form 8-K was filed on December 9, 1997, regarding the
Company's December 5, 1997 purchase of the radiotherapy service
operation of General Electric Company.
16
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VARIAN ASSOCIATES, INC.
--------------------------------
Registrant
February 12, 1998
--------------------------------
Date
/s/ Wayne P. Somrak
--------------------------------
Wayne P. Somrak
Vice President and Controller
(Chief Accounting Officer)
17
<PAGE> 18
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
- --------
<S> <C>
10.5 Registrant's Supplemental Retirement Plan, as amended and restated
effective as of January 1, 1998.
15 Letter Regarding Unaudited Interim Financial Information.
27 Financial Data Schedule for the quarter ended January 2, 1998
(EDGAR filing only).
27.1 Restated Financial Data Schedule for the fiscal year ended September
26, 1997 (EDGAR filing only).
27.2 Restated Financial Data Schedule for the fiscal year ended September
29, 1995 (EDGAR filing only).
</TABLE>
18
<PAGE> 1
EXHIBIT 10.5
SUPPLEMENTAL RETIREMENT PLAN
OF
VARIAN ASSOCIATES, INC.
(As Amended and Restated Effective January 1, 1998)
SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN.
The Plan was established by the Company effective October 1, 1983, and
is amended and restated effective January 1, 1998. The purpose of the Plan is to
provide deferred compensation consisting of (a) allocations that exceed the
amounts that the Dollar Limitations permit to be allocated under the Retirement
Program but that are otherwise calculated by reference to the Retirement Program
and (b) allocations of Pension Contributions that would be made under the
Retirement Program if the Retirement Program included in its definition of
"Earnings" amounts representing Management Incentive Bonuses.
SECTION 2. ELIGIBILITY AND PARTICIPATION.
Participation in the Plan shall be limited to the following:
(a) Participants in the Retirement Program who are Officers of the
Company and whose actual allocations of Pension Contributions under the
Retirement Program are less than they would have been if Management Incentive
Bonuses were included in the Retirement Program's definition of "Earnings;" and
(b) Participants in the Retirement Program whose actual allocations
under the Retirement Program are restricted by a Dollar Limitation and who are
either (i) participants in the long-term incentive feature of the Company's
Omnibus Stock Plan or (ii) designated by the Committee.
SECTION 3. PLAN BENEFITS.
(a) Reserve Account. The Company shall establish on its books a special
unfunded Reserve Account for each Participant. As of each Valuation Date, the
Company shall credit interest on the balance in each Reserve Account (not
including any amounts credited under Subsections (b) and (c) below during the
calendar quarter then ending). The interest credited to the Reserve Account
shall be at a rate equivalent to:
(i) For periods prior to October 1, 1992, the return rate
provided by the Retirement Program's Fixed Income Fund;
(ii) For periods after September 30, 1992, but prior to July 1,
1994, the return rate provided by the Retirement Program's
Interest Income Fund; and
(iii) For periods after June 30, 1994, the return rate provided
by the long term
Page 1
<PAGE> 2
Applicable Federal Rate (AFR) compounded quarterly.
(b) Pension Contributions. As of the Valuation Date coinciding with or
next following the date when the Company makes a "Pension Contribution" under
the Retirement Program, the Company shall credit to a Participant's Reserve
Account an amount determined as follows:
(i) First, the hypothetical amount of the Participant's "Pension
Contribution" since the preceding Valuation Date shall be calculated,
based on the assumptions (A) that the Dollar Limitations do not apply
and (B) in the case of a Participant described in Section 2(a), that any
Management Incentive Bonuses received by the Participant since the
preceding Valuation Date (or that would have been received if not
deferred) are included in Earnings for purposes of determining "Pension
Contributions" under the Retirement Program;
(ii) Second, the amount calculated under Paragraph (i) above
shall be reduced (but not below zero) since the preceding Valuation Date
by the actual amount of the Participant's "Pension Contribution"; and
(iii) The remainder (if any) shall be the amount credited to the
Participant's Reserve Account under this Subsection (b).
(c) Retirement Profit-Sharing Contributions. As of the Valuation Date
coinciding with or next following the date when the Company makes a "Retirement
Profit-Sharing Contribution" under the Retirement Program, the Company shall
credit to a Participant's Reserve Account an amount determined as follows:
(i) First, the hypothetical amount of the Participant's share of
the "Retirement Profit-Sharing Contribution" shall be calculated, based
on the assumption that the Dollar Limitations do not apply;
(ii) Second, the amount calculated under Paragraph (i) above
shall be reduced (but not below zero) by the actual amount of the
Participant's share of the "Retirement Profit-Sharing Contribution"; and
(iii) The remainder (if any) shall be the amount credited to the
Participant's Reserve Account under this Subsection (c).
(d) Distributions. Following the termination of a Participant's
employment with the Company and its subsidiaries, the Company shall pay to the
Participant the balance credited to his or her Reserve Account. Payments from
the Reserve Account shall be made in cash, at such time(s) and in such form
(including a lump sum or periodic installments) as the Committee shall determine
or redetermine in its sole discretion. Any unpaid balance remaining in a Reserve
Account shall continue to be credited with interest at the rate specified in
Subsection (a) above. In the event of a Participant's death before the entire
Reserve Account has been distributed to him or her, the unpaid balance remaining
in the Participant's Reserve Account shall be paid to his or her beneficiary or
beneficiaries under the Retirement Program, at such time(s) and in such form as
the Committee shall determine in its sole discretion.
SECTION 4. NO FUNDING.
The Plan shall be unfunded and shall represent an unsecured obligation
of the Company. Benefits hereunder shall be paid only from the general assets of
the Company, and the Participants shall have no rights to any segregated funds
or property of the Company.
Page 2
<PAGE> 3
SECTION 5. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee shall
make such rules, interpretations, and computations as it may deem appropriate.
Any decision of the Committee with respect to the Plan, including (without
limitation) any determination of eligibility to participate in the Plan and any
calculation of benefits hereunder, shall be conclusive and binding on all
persons.
SECTION 6. CLAIMS AND REVIEW PROCEDURES.
(a) Application for Benefits. Any application for benefits under the
Plan shall be submitted to the Committee at the Company's principal office. Such
application shall be in writing and on the prescribed form, if any, and shall be
signed by the applicant.
(b) Denial of Applications. In the event that any application for
benefits is denied in whole or in part, the Committee shall notify the applicant
in writing of the right to a review of the denial. Such written notice shall set
forth, in a manner calculated to be understood by the applicant, specific
reasons for the denial, specific references to the Plan provisions on which the
denial was based, a description of any information or material necessary to
perfect the application, an explanation of why such material is necessary, and
an explanation of the Plan's review procedure. Such written notice shall be
given to the applicant within 90 days after the Committee receives the
application, unless special circumstances require an extension of time for
processing the application. In no event shall such an extension exceed a period
of 90 days from the end of the initial 90-day period. If such an extension is
required, written notice thereof shall be furnished to the applicant before the
end of the initial 90-day period. Such notice shall indicate the special
circumstances requiring an extension of time and the date by which the Committee
expects to render a decision. If written notice is not given to the applicant
within the period prescribed by this Section 6(b), the application shall be
deemed to have been denied for purposes of Section 6(c) upon the expiration of
such period.
(c) Request for Review. Any person whose application for benefits is
denied in whole or in part (or such person's duly authorized representative) may
appeal the denial by submitting to the Committee a request for a review of such
application within 90 days after receiving written notice of denial. The
Committee shall give the applicant or such representative an opportunity to
review pertinent documents (except legally privileged materials) in preparing
such request for review and to submit issues and comments in writing. The
request for review shall be in writing and shall be addressed to the Committee
at the Company's principal office. The request for review shall set forth all of
the ground on which it is based, all facts in support of the request, and any
other matters which the applicant deems pertinent. The Committee may require the
applicant to submit such additional facts, documents, or other material as it
may deem necessary or appropriate in making its review.
(d) Decision on Review. The Committee shall act upon each request for
review within 60 days after receipt thereof, unless special circumstances
require an extension of time for processing, but in no event shall the decision
on review be rendered more that 120 days after the Committee receives the
request for review. If such an extension is required, written notice thereof
shall be furnished to the applicant before the end of the initial 60-day period.
The Committee shall give prompt, written notice of its decision to the applicant
and to the Company. In the event that the Committee confirms the denial of the
application for benefits in whole or in part, such notice shall set forth, in a
manner calculated to be understood by the applicant, the specific reasons for
such denial and specific references to the Plan provisions on which the
Page 3
<PAGE> 4
decision is based. To the extent that the Committee overrules the denial of the
application for benefits, such benefits shall be paid to the applicant.
(e) Rules and Procedures. The Committee shall adopt such rules and
procedures, consistent with ERISA and the Plan, as it deems necessary or
appropriate in carrying out its responsibilities under this Section 6.
(f) Exhaustion of Administrative Remedies. No legal or equitable action
for benefits under the Plan shall be brought unless and until the claimant (i)
has submitted a written application for benefits in accordance with Section
6(a), (ii) has been notified that the application is denied, (iii) has filed a
written request for a review of the application in accordance with Section 6(c),
and (iv) has been notified in writing that the Committee has affirmed the denial
of the application; provided, however, that an action may be brought after the
Committee has failed to act on the claim within the time prescribed in Section
6(b) and Section 6(d), respectively.
SECTION 7. AMENDMENT AND TERMINATION.
The Company expects to continue the Plan indefinitely. Future
conditions, however, cannot be foreseen, and the Company shall have the
authority to amend or terminate the Plan at any time. In the event of an
amendment or termination of the Plan, the amount of a Participant's benefits
hereunder shall not be less than the amount to which the Participant would have
been entitled if his or her employment had terminated immediately prior to such
amendment or termination.
The Plan may be amended by the Board of Directors or by the Committee.
SECTION 8. EMPLOYMENT RIGHTS.
Nothing in the Plan shall be deemed to give any person a right to remain
in the employ of the Company or of any of its subsidiaries. The Company and its
subsidiaries reserve the right to terminate any person's employment, with or
without cause.
SECTION 9. NO ASSIGNMENT.
The rights of any person to payments or benefits under the Plan shall
not be transferable nor be made subject to option or assignment, either by
voluntary or involuntary assignment or by operation of law, including (without
limitation) bankruptcy, garnishment, attachment, or other creditor's process.
Any act in violation of this Section 9 shall be void.
SECTION 10. APPLICABLE LAW.
The validity, interpretation, construction, and performance of the Plan
shall be governed by ERISA, and by the laws of the State of California to the
extent that they have not been preempted by ERISA.
Page 4
<PAGE> 5
SECTION 11. DEFINITIONS.
(a) "Code" means the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code shall include such section, any
valid regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such section.
(b) "Committee" means the Organization and Compensation Committee of the
Company's Board of Directors.
(c) "Company" means Varian Associates, Inc., a Delaware corporation.
(d) "Dollar Limitation" means (i) the limitation described in section
401(a)(17) of the Code and (ii) the limitation described in section 415(c)(1)(A)
of the Code, adjusted in each case as prescribed by the Code.
(e) "Earnings" shall have the meaning given to such term in the
Retirement Program, except that Earnings for purposes of the Plan shall not be
subject to the limitation described in section 401(a)(17) of the Code, as
adjusted as prescribed by the Code.
(f) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended. Reference to a specific section of ERISA shall include such section,
any valid regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such section.
(g) "Management Incentive Bonus" means a bonus payment under the Varian
Associates, Inc. Management Incentive Plan, as amended from time to time.
(h) "Participant" means an individual who is eligible to participate in
the Plan pursuant to Section 2(a) and/or Section 2(b) and Subsection (d) above.
(i) "Plan" means this Supplemental Retirement Plan of Varian Associates,
Inc., as amended from time to time.
(j) "Reserve Account" means the unfunded bookkeeping account described
in Section 3(a).
(k) "Retirement Program" means the Varian Associates, Inc. Retirement
and Profit-Sharing Program, as amended from time to time.
(l) "Valuation Date" means the last day of each calendar quarter.
Page 5
<PAGE> 1
EXHIBIT 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Varian Associates, Inc.
Registrations on Forms S-8 and S-3
We are aware that our report dated January 21, 1998 on our reviews of the
interim financial information of Varian Associates, Inc. for the quarters ended
January 2, 1998 and December 27, 1996 included in this Form 10-Q is incorporated
by reference in the Company's registration statements on Forms S-8, Registration
Statement Numbers 33-46000, 33-33661, 33-33660, and 2-95139 and Forms S-8 and
S-3, Registration Statement Number 33-40460. Pursuant to Rule 436(c) under the
Securities Act of 1933, this report should not be considered a part of the
registration statements prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
/s/ Coopers & Lybrand L.L.P.
-----------------------------
COOPERS & LYBRAND L.L.P.
San Jose, California
February 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-02-1998
<PERIOD-START> SEP-27-1997
<PERIOD-END> JAN-02-1998
<CASH> 85,645
<SECURITIES> 0
<RECEIVABLES> 363,647
<ALLOWANCES> 0
<INVENTORY> 192,549
<CURRENT-ASSETS> 740,456
<PP&E> 466,038
<DEPRECIATION> 271,978
<TOTAL-ASSETS> 1,066,260
<CURRENT-LIABILITIES> 426,984
<BONDS> 0
0
0
<COMMON> 30,025
<OTHER-SE> 493,461
<TOTAL-LIABILITY-AND-EQUITY> 1,066,260
<SALES> 344,843
<TOTAL-REVENUES> 344,843
<CGS> 213,387
<TOTAL-COSTS> 314,408
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,606
<INCOME-PRETAX> 30,087
<INCOME-TAX> 10,380
<INCOME-CONTINUING> 19,707
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,707
<EPS-PRIMARY> 0
<EPS-DILUTED> 0.64
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-26-1997
<PERIOD-START> SEP-28-1996
<PERIOD-END> SEP-26-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 3.67
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-29-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-29-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 3.97
</TABLE>
