<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 21, 1999
VARIAN ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-7598 94-2359345
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
3050 Hansen Way, Palo Alto, CA 94304-1000
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 493-4000
Inapplicable
(Former name or former address, if changed since last report)
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Item 5. Other Events.
On January 21, 1999, Varian Associates, Inc., a Delaware corporation (the
"Registrant"), announced lower first-quarter results. A copy of the
Registrant's press release is attached hereto as Exhibit 99 and incorporated
herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit Number Exhibit Description
99 Press Release of Varian Associates, Inc.
issued on January 21, 1999.
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SIGNATURES
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 hereunto duly authorized.
VARIAN ASSOCIATES, INC.
(Registrant)
Date: January 25, 1999 By: /S/ Joseph B. Phair
------------------------
Joseph B. Phair
Vice President, General
Counsel and Secretary
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EXHIBIT INDEX
Exhibit Number Exhibit Description
99 Press Release of Varian Associates, Inc.
issued on January 21, 1999.
<PAGE>
Exhibit Number 99
FOR INFORMATION CONTACT:
Gary Simpson (650) 424-5782
[email protected]
For Immediate Release
January 21, 1999
VARIAN ASSOCIATES REPORTS LOWER FIRST-QUARTER RESULTS
PALO ALTO, Calif., -- Varian Associates, Inc., today announced lower orders and
sales and a small operating profit for the first quarter of fiscal 1999, before
a $3.6 million charge for reorganization costs. The company said its results
trailed the year-ago quarter due to a variety of factors, including continued
slow demand and an unprofitable quarter for its semiconductor equipment
operations, unfavorable foreign currency results, and some shipment slippages
due to supplier and customer delays. Varian's health care and instruments
operations were profitable but at levels that were below the year-ago quarter.
First-quarter orders for the total company amounted to $306 million, down 20%
from the prior year's $385 million. Sales for the quarter were $282 million, off
18% from 1998's $345 million. Backlog for the quarter of $571 million was 11%
below the year-ago total.
The lower revenues resulted in operating earnings of $1.0 million before the
reorganization charge. After the charge, the company had a net loss of $2.4
million ($.08/share) compared to net earnings of $19.7 million ($.64/share) in
the first quarter of 1998. While marketing, general, and administrative (MG&A)
costs of $100 million included $3.6 million for the planned reorganization, they
were still 1% below the prior year's MG&A total due to lower administrative and
research and development spending.
Chairman and Chief Executive J. Tracy O'Rourke attributed the quarterly orders
decline to the lingering slump in demand for semiconductor manufacturing
equipment as that industry continues to suffer from slow market conditions world
wide. He noted, however, that the company's health care and instruments segments
both had higher bookings than in the year-ago period.
O'Rourke said the quarter's sales were adversely affected by customer-requested
delivery delays in the Health Care Systems segment and production material
shipment delays in one of the
<PAGE>
company's Instruments product lines.
Operations
Health Care Systems: first-quarter orders totaled $125 million, up 4% from the
prior year, with higher bookings for cancer therapy equipment more than
offsetting lower orders for X-ray tube products. Sales of $105 million were up
7% from the year-ago quarter, with oncology equipment again accounting for the
growth.
Backlog for this business totaled $375 million, up 2% from the prior year and 7%
from the previous quarter. Operating profit for this segment was down
substantially from the 1998 quarter due to lower gross margins and higher MG&A
costs.
O'Rourke said he expects this business to record continued sales growth in the
quarters immediately ahead. However, he cautioned that earnings will be affected
by transaction costs and cost allocations related to the anticipated spin off of
Varian's Semiconductor Equipment and Instruments segments this spring and the
resulting treatment of those activities as discontinued operations for the
remaining health care business.
Instruments: orders for the first quarter rose 4% over the prior year to $135
million, with Varian's analytical products accounting for most of the gain.
Sales of $130 million were down 5% from the year-ago period, due primarily to
lower shipments in the vacuum products and nuclear magnetic resonance product
lines. O'Rourke said the former was hurt by the chip industry slowdown, while
shipments in the latter were limited by the previously mentioned supplier
delays.
Operating margins for this business declined from the year-ago quarter due to
the lower volume. However, backlog rose 10% from the opening quarter of 1998 due
to strong demand for the company's analytical instrument offerings.
O'Rourke said he expects this business to enjoy continued sales growth in the
current year. However, he said earnings may be reduced depending on the timing
and extent of restructuring plans that are currently being developed.
Semiconductor Equipment: first-quarter orders for the company's chip
manufacturing equipment of $50 million were off 58% from the year-ago period,
but slipped just 2% below those of the prior quarter. While sales of $47 million
were also off sharply, falling 57% from the year-ago quarter, shipments rose 13%
from the previous period.
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Backlog totaled $81 million, down 48% from the end of 1998's first quarter, but
was up marginally on a sequential basis. O'Rourke said this segment sustained a
significant operating loss in the first quarter, but noted that it was more than
30% better than the pre-restructuring loss of the previous quarter.
While the slowing orders decline and sales gains over the fourth quarter are
encouraging, O'Rourke said the timing and extent of an eventual industry rebound
for this segment is still unclear. Consequently, he said the near-term outlook
for this business is one of continued low sales and operating losses until the
expected market rebound occurs.
Reorganization Remains On Schedule
O'Rourke said the reorganization which will transform Varian Associates into
three separate public companies is progressing according to plan. A definitive
proxy statement was filed with the Securities and Exchange Commission last week
and has been mailed to stockholders. The proposal will be presented for
shareholder approval at the company's annual meeting of stockholders on February
18, 1999.
With stockholder approval and a favorable ruling from the Internal Revenue
Service, he said spin off of the Semiconductor Equipment and Instruments
segments should be accomplished in early April.
Except for historical information, this news release contains certain 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 ability
to increase operating margins on higher sales; the continued improvement of the
various instruments markets the company serves; the impact of economic
conditions in Korea and other Asian markets on sales in those areas,
particularly semiconductor equipment sales; the impact of managed care
initiatives in the U.S. on capital expenditures and resulting pricing pressure
on medical equipment; the timing of renewed growth in worldwide semiconductor
equipment demand; successful implementation by the company and certain third
parties of corrective action to address the impact of the Year 2000; completion
of the planned reorganization on the current schedule within current budgets;
the ability to sell certain surplus assets in connection with the
reorganization; the
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ability of the three post-reorganization companies to realize anticipated costs
savings resulting from the reorganization; and other risks detailed from time to
time in the company's filings with the Securities and Exchange Commission.
A summary of income and other financial information follows.
# # #
Varian Associates, Inc., is based in Palo Alto, California and has manufacturing
facilities in North America, Europe, Asia and Australia, and sales and
service offices worldwide.
Press announcements and other information about the company are available on the
World Wide Web at the URL http://www.varian.com.
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VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED
(In thousands except per share amounts)
<TABLE>
<CAPTION>
First Quarter Ended
----------------------------------------------------------------------------------------------------
JAN 1, JAN 2,
FY 1999 FY 1998
----------------------------------------------------------------------------------------------------
<S> <C> <C>
SALES $ 282,312 $ 344,843
--------------- -------------
Operating Costs and Expenses
Cost of sales 184,532 213,387
Research and development 24,301 27,320
Marketing 52,314 49,299
General and administrative 20,198 24,402
Reorganization costs 3,559 -
--------------- -------------
Total Operating Costs and Expenses 284,904 314,408
--------------- -------------
OPERATING (LOSS) EARNINGS (2,592) 30,435
Interest expense (2,662) (1,606)
Interest income 1,527 1,258
--------------- -------------
(LOSS) EARNINGS BEFORE TAXES (3,727) 30,087
Taxes on (loss) earnings (1,290) 10,380
=============== =============
NET (LOSS) EARNINGS $ (2,437) $ 19,707
=============== =============
Average Shares Outstanding - Basic 29,848 30,086
=============== =============
Average Shares Outstanding - Diluted 29,848 30,934
=============== =============
Net (Loss) Earnings Per Share - Basic $ (0.08) $ 0.66
=============== =============
Net (Loss) Earnings Per Share - Diluted $ (0.08) $ 0.64
=============== =============
</TABLE>
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OTHER DATA:
------------------------------------------------------------------------------
Order Backlog $ 571,176 $ 640,582
Shareholders' Equity Per Actual Share $ 18.59 $ 17.44
------------------------------------------------------------------------------
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VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
---------------------------
UNAUDITED
END OF QUARTER
(Dollars in Millions)
<TABLE>
<CAPTION>
FY 1998 FY 1999
- ----------------------------------------------------------------------------------------------------------------------
1st 2nd 3rd 4th 1st
ASSETS Qtr. Qtr. Qtr. Qtr. Qtr.
======================================================================================================================
<S> <C> <C> <C> <C> <C>
Cash & cash equivalents $ 85.6 $ 85.4 $ 151.1 $ 149.7 $ 131.5
Accounts receivable 363.6 389.1 365.9 392.6 352.5
Inventories 192.5 205.9 208.9 204.5 221.4
Other current assets 98.8 100.8 106.2 93.0 97.2
Property, plant & equipment, net 194.0 199.4 199.0 214.2 210.8
Other assets 131.8 130.1 131.1 164.3 160.5
----------- ---------- ----------- ----------- ----------
Total Assets $ 1,066.3 $ 1,110.7 $ 1,162.2 $ 1,218.3 $ 1,173.9
=========== ========== =========== =========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Current notes payable $ 21.9 $ 41.5 $ 36.6 $ 46.8 $ 46.2
Other current liabilities 405.1 423.3 424.6 458.1 421.8
Long-term accrued liabilities 42.3 39.7 38.0 44.8 43.8
Long-term debt 67.1 67.1 111.1 111.1 106.2
Deferred income taxes 6.4 7.1 7.1 0.0 0.0
Shareholders' equity 523.5 532.0 544.8 557.5 555.9
----------- ---------- ----------- ----------- ----------
Total Liabilities &
Shareholders' Equity $ 1,066.3 $ 1,110.7 $ 1,162.2 $ 1,218.3 $ 1,173.9
=========== ========== =========== =========== ==========
</TABLE>
Note: If the first-in first-out (FIFO) method had been used, inventories would
have been higher than reported by $44.8M at Q1 of fiscal year 1999,
and $48.9M at Quarter 1 FY1998.
<PAGE>
VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES
ORDERS, SALES, BACKLOG
----------------------
UNAUDITED
BY QUARTER
(Dollars in Millions)
<TABLE>
<CAPTION>
FY 1998 FY 1999
- ---------------------------------------------------------------------------------------------------------------------------
1st 2nd 3rd 4th Total 1st
Qtr. Qtr. Qtr. Qtr. Year Qtr.
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Health Care Systems
Orders $ 120.7 131.9 155.7 195.1 603.4 125.4
Sales $ 98.2 131.0 131.3 179.3 539.8 104.9
Backlog $ 368.4 353.4 (2) 357.3 (3) 352.2 (4) 352.2 375.2 (5)
Instruments Business
Orders $ 130.2 132.2 130.9 154.0 547.3 135.3
Sales $ 136.4 136.1 126.9 143.1 542.5 130.0
Backlog $ 117.6 (1) 114.0 114.8 (3) 125.3 125.3 129.8
Semiconductor Equipment Business
Orders $ 120.0 71.0 45.4 51.3 287.7 50.2
Sales $ 109.6 105.1 81.4 42.0 338.1 47.4
Backlog $ 156.3 (1) 114.8 (2) 78.7 80.2 (4) 80.2 81.0 (5)
Total Company
Orders $ 384.6 333.5 315.1 411.9 1445.1 306.0
Sales $ 344.8 372.9 340.0 364.4 1422.1 282.3
Backlog $ 640.6 578.2 529.6 547.9 547.9 571.2
</TABLE>
Note: Details will not add to Total Company due to eliminations and other.
(1) First quarter 1998 backlog includes backlog adjustments of $8.1 million and
$4.6 million for Instruments Business and Semiconductor Equipment Business,
respectively.
(2) Second quarter 1998 backlog includes backlog adjustments of $15.9 million
and $7.4 million for Health Care Systems and Semiconductor Equipment
Business, respectively.
(3) Third quarter 1998 backlog includes backlog adjustments of $20.4 million
and $3.2 million for Health Care Systems and Instruments Business,
respectively.
(4) Fourth quarter 1998 backlog includes backlog adjustments of $21.0 million
and $7.9 million for Health Care Systems and Semiconductor Equipment
Business, respectively.
(5) First quarter 1999 backlog includes backlog adjustments of $2.6 million and
$2.1 million for Health Care Systems and Semiconductor Equipment Business,
respectively.
