10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 December 28, 2007

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 000-25393

VARIAN, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	77-0501995
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)
3120 Hansen Way, Palo Alto, California	94304-1030
(Address of Principal Executive Offices)	(Zip Code)

(650) 213-8000

(Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer  x Accelerated filer  ¨ Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The number of shares of the registrant’s common stock outstanding as of February 1, 2008 was 30,289,787.

VARIAN, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED DECEMBER 28, 2007

TABLE OF CONTENTS

		Page
PART I	Financial Information
Item 1.	Financial Statements:
	Unaudited Condensed Consolidated Statement of Earnings	3
	Unaudited Condensed Consolidated Balance Sheet	4
	Unaudited Condensed Consolidated Statement of Cash Flows	5
	Notes to the Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	30
PART II	Other Information
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 6.	Exhibits	31

2

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

VARIAN, INC. AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS

(In thousands, except per share amounts)

	Fiscal Quarter Ended
	December 28, 2007			December 29, 2006
Sales
Products	$	204,175		$	189,143
Services		33,256			28,795
Total sales		237,431			217,938
Cost of sales
Products		111,157			102,020
Services		18,972			16,219
Total cost of sales		130,129			118,239
Gross profit		107,302			99,699
Operating expenses
Selling, general and administrative		65,980			61,201
Research and development		17,180			15,610
Total operating expenses		83,160			76,811
Operating earnings		24,142			22,888
Interest income (expense)
Interest income		1,937			1,269
Interest expense		(449	)		(534	)
Total interest income, net		1,488			735
Earnings before income taxes		25,630			23,623
Income tax expense		8,046			8,268
Net earnings	$	17,584		$	15,355
Net earnings per share:
Basic	$	0.58		$	0.50
Diluted	$	0.57		$	0.49
Shares used in per share calculations:
Basic		30,330			30,601
Diluted		30,900			31,058

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

3

VARIAN, INC. AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands, except par value amounts)

	December 28, 2007		September 28, 2007
ASSETS
Current assets
Cash and cash equivalents	$	197,680	$	196,396
Accounts receivable, net		175,431		187,429
Inventories		157,843		140,533
Deferred taxes		38,288		38,068
Prepaid expense and other current assets		17,114		17,332
Total current assets		586,356		579,758
Property, plant and equipment, net		108,715		110,792
Goodwill		203,579		193,760
Intangible assets, net		33,623		31,572
Other assets		20,398		20,951
Total assets	$	952,671	$	936,833
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	6,250	$	6,250
Accounts payable		71,712		72,588
Deferred profit		11,384		13,641
Accrued liabilities		161,574		159,109
Total current liabilities		250,920		251,588
Long-term debt		18,750		18,750
Deferred taxes		4,028		4,050
Other liabilities		40,935		44,358
Total liabilities		314,633		318,746
Commitments and contingencies (Notes 5, 6, 8, 9, 10, 11, 12 and 14)
Stockholders’ equity
Preferred stock—par value $0.01, authorized—1,000 shares; issued—none		—		—
Common stock—par value $0.01, authorized—99,000 shares; issued and outstanding— 30,430 shares at December 28, 2007 and 30,345 shares at September 28, 2007		362,328		351,330
Retained earnings		207,598		199,471
Accumulated other comprehensive income		68,112		67,286
Total stockholders’ equity		638,038		618,087
Total liabilities and stockholders’ equity	$	952,671	$	936,833

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

4

VARIAN, INC. AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

	Fiscal Quarter Ended
	December 28, 2007			December 29, 2006
Cash flows from operating activities
Net earnings	$	17,584		$	15,355
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		6,834			6,793
Gain on disposition of property, plant and equipment		(222	)		(34	)
Share-based compensation expense		1,719			2,845
Deferred taxes		765			(797	)
Changes in assets and liabilities, excluding effects of acquisitions:
Accounts receivable, net		13,773			10,068
Inventories		(15,152	)		(5,663	)
Prepaid expenses and other current assets		272			(1,084	)
Other assets		(24	)		286
Accounts payable		(1,372	)		(337	)
Deferred profit		(2,254	)		(125	)
Accrued liabilities		(3,319	)		(4,467	)
Other liabilities		(1,501	)		(448	)
Net cash provided by operating activities		17,103			22,392
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		341			119
Purchase of property, plant and equipment		(3,459	)		(2,054	)
Purchase of businesses, net of cash acquired		(9,987	)		(3,000	)
Net cash used in investing activities		(13,105	)		(4,935	)
Cash flows from financing activities
Repayment of debt		—			(1,250	)
Repurchase of common stock		(15,102	)		(37,055	)
Issuance of common stock		9,518			2,353
Excess tax benefit from share-based plans		2,390			1,173
Transfers to Varian Medical Systems, Inc.		(212	)		(207	)
Net cash used in financing activities		(3,406	)		(34,986	)
Effect of exchange rate changes on cash and cash equivalents		692			4,677
Net increase (decrease) in cash and cash equivalents		1,284			(12,852	)
Cash and cash equivalents at beginning of period		196,396			154,155
Cash and cash equivalents at end of period	$	197,680		$	141,303

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

5

VARIAN, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Unaudited Interim Condensed Consolidated Financial Statements

These unaudited interim condensed consolidated financial statements of Varian, Inc. and its subsidiary companies (collectively, the “Company”) have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. The September 28, 2007 balance sheet data was derived from audited financial statements, but does not include all disclosures required in audited financial statements by U.S. GAAP. These unaudited interim condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 28, 2007 filed with the SEC. In the opinion of the Company’s management, the unaudited interim condensed 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 fiscal quarter ended December 28, 2007 are not necessarily indicative of the results to be expected for a full year or for any other periods.

The preparation of financial statements in conformity with U.S. GAAP 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.

Note 2. Description of Business and Basis of Presentation

The Company designs, develops, manufactures, markets, sells and services scientific instruments (including related software, consumable products, accessories and services) and vacuum products (and related accessories and services). These businesses primarily serve life science, industrial (which includes environmental, food and energy), academic and research customers.

Until April 2, 1999, the business of the Company was operated as the Instruments Business of Varian Associates, Inc. (“VAI”). On that date, VAI distributed to the holders of its common stock one share of common stock of the Company and one share of common stock of Varian Semiconductor Equipment Associates, Inc. (“VSEA”), which was formerly operated as the Semiconductor Equipment business of VAI, for each share of VAI (the “Distribution”). VAI retained its Health Care Systems business and changed its name to Varian Medical Systems, Inc. (“VMS”). Transfers made to VMS under the terms of the Distribution are reflected as financing activities in the Unaudited Condensed Consolidated Statement of Cash Flows.

Note 3. Summary of Significant Accounting Policies

Fiscal Periods. The Company’s fiscal years reported are the 52- or 53-week periods ending on the Friday nearest September 30. Fiscal year 2008 will comprise the 53-week period ending October 3, 2008, and fiscal year 2007 was comprised of the 52-week period ended September 28, 2007. The fiscal quarters ended December 28, 2007 and December 29, 2006 each comprised 13 weeks.

6

VARIAN, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Comprehensive Income. A summary of the components of the Company’s comprehensive income follows:

	Fiscal Quarter Ended
	December 28, 2007		December 29, 2006
(in thousands)
Net earnings	$	17,584	$	15,355
Other comprehensive income:
Currency translation adjustment		824		14,766
Total other comprehensive income		824		14,766
Total comprehensive income	$	18,408	$	30,121

Note 4. Balance Sheet Detail

	Fiscal Quarter End
	December 28, 2007		September 28, 2007
(in thousands)
Inventories
Raw materials and parts	$	76,938	$	64,130
Work in process		23,489		24,842
Finished goods		57,416		51,561
Total	$	157,843	$	140,533

Note 5. Forward Exchange Contracts

The Company enters into foreign exchange forward contracts to minimize the short-term impact of foreign currency fluctuations on assets and liabilities denominated in non-functional currencies. These contracts are accounted for under SFAS 133, Accounting for Derivative Instruments and Hedging Activities. Typically, gains and losses on these contracts are substantially offset by transaction losses and gains on the underlying balances being hedged. During the fiscal quarter ended December 28, 2007, net foreign currency gains relating to these arrangements were $0.3 million. During the fiscal quarter ended December 29, 2006, net foreign currency losses relating to these arrangements were $0.3 million. These amounts were recorded in selling, general and administrative expenses.

From time to time, the Company also enters into foreign exchange forward contracts to minimize the impact of foreign currency fluctuations on forecasted transactions. These contracts are designated as cash flow hedges under SFAS 133. At December 28, 2007, there were no outstanding foreign exchange forward contracts designated as cash flow hedges of forecasted transactions. During the fiscal quarters ended December 28, 2007 and December 29, 2006, no foreign exchange gains or losses from hedge ineffectiveness were recognized.

7

VARIAN, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s foreign exchange forward contracts generally range from one to 12 months in original maturity. A summary of all foreign exchange forward contracts that were outstanding as of December 28, 2007 follows:

	Notional Value Sold		Notional Value Purchased
(in thousands)
Australian dollar	$	—	$	36,849
Euro		—		26,532
British pound		—		9,363
Canadian dollar		2,912		—
Japanese yen		2,309		—
Total	$	5,221	$	72,744

Note 6. Acquisitions

On November 11, 2007, the Company acquired certain assets and assumed certain liabilities of Analogix, Inc. (the “Analogix Business”) for approximately $11 million in cash and assumed net debt, subject to certain net asset adjustments. Under the terms of the acquisition, the Company might make additional purchase price payments of up to $4 million over a three-year period, depending on the performance of the Analogix Business and certain operational milestones. The Analogix Business designs, manufactures, markets, sells and services consumables and instrumentation for automated compound purification using flash chromatography, and became part of the Scientific Instruments segment.

Contingent Consideration Arrangements. The Company is, from time to time, obligated to pay additional cash purchase price amounts in the event that certain financial or operational milestones are met by acquired businesses. As of December 28, 2007, up to a maximum of $33.3 million could be payable through December 2010 under contingent consideration arrangements relating to acquired businesses. Amounts subject to these arrangements can be earned over the respective measurement period, depending on the performance of the acquired business relative to certain financial and/or operational targets.

The following table summarizes key terms of outstanding contingent consideration arrangements as of December 28, 2007:

Acquired business	Remaining Amount Available (maximum)	Measurement period	Measurement period end date
Analogix	$  4.0 million	3 years	December 2010
IonSpec	$14.0 million	3 years	February 2009
Polymer Labs	$15.3 million	3 years	December 2008

8

VARIAN, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 7. Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for each of the Company’s reporting segments in the first quarter of fiscal year 2008 were as follow:

	Scientific Instruments			Vacuum Technologies		Total Company
(in thousands)
Balance as of September 28, 2007	$	192,794		$	966	$	193,760
Fiscal year 2008 acquisitions		5,927					5,927
Contingent payments on prior-year acquisitions		4,000			—		4,000
Foreign currency impacts and other adjustments		(108	)		—		(108	)
Balance as of December 28, 2007	$	202,613		$	966	$	203,579

The following intangible assets have been recorded and are being amortized by the Company:

	December 28, 2007
	Gross		Accumulated Amortization			Net
(in thousands)
Intangible assets
Existing technology	$	16,483	$	(8,647	)	$	7,836
Patents and core technology		33,524		(11,593	)		21,931
Trade names and trademarks		2,455		(1,710	)		745
Customer lists		12,090		(9,659	)		2,431
Other		3,043		(2,363	)		680
Total	$	67,595	$	(33,972	)	$	33,623

	September 28, 2007
	Gross		Accumulated Amortization			Net
(in thousands)
Intangible assets
Existing technology	$	16,611	$	(8,235	)	$	8,376
Patents and core technology		29,908		(10,752	)		19,156
Trade names and trademarks		2,458		(1,623	)		835
Customer lists		11,866		(9,408	)		2,458
Other		3,025		(2,278	)		747
Total	$	63,868	$	(32,296	)	$	31,572

9

VARIAN, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Amortization expense relating to intangible assets was $1.9 million and $2.3 million during the fiscal quarters ended December 28, 2007 and December 29, 2006, respectively. At December 28, 2007, estimated amortization expense for the remainder of fiscal year 2008 and for each of the five succeeding fiscal years and thereafter follows:

	Estimated Amortization Expense
(in thousands)
Nine months ending October 3, 2008	$	5,798
Fiscal year 2009		6,665
Fiscal year 2010		6,160
Fiscal year 2011		3,711
Fiscal year 2012		2,885
Fiscal year 2013		2,574
Thereafter		5,830
Total	$	33,623

Note 8. Restructuring Activities

Summary of Restructuring Plans. Between fiscal years 2003 and 2007, the Company committed to several restructuring plans in order to adjust its organizational structure, improve operational efficiencies and eliminate redundant or excess costs resulting from acquisitions or dispositions during those periods.

The following table sets forth changes in the Company’s aggregate liability relating to all restructuring plans (including the Fiscal Year 2007 Plan described below) during the first quarter of fiscal year 2008 as well as total restructuring expense and other related costs recorded since the inception of those plans:

	Employee- Related			Facilities- Related			Total
(in thousands)
Balance at September 28, 2007	$	2,222		$	707		$	2,929
Charges to expense, net		453			761			1,214
Cash payments		(181	)		(131	)		(312	)
Foreign currency impacts and other adjustments		24			(24	)		—
Balance at December 28, 2007	$	2,518		$	1,313		$	3,831
Total expense since inception of plans
(in millions)
Restructuring expense							$	18.8
Other restructuring-related costs (1)							$	6.2

(1) These costs related primarily to employee retention and relocation costs and accelerated depreciation of assets disposed upon the closure of facilities. Of the $6.2 million in other restructuring-related costs, $0.8 million was recorded in the first quarter of fiscal year 2008.

10

VARIAN, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fiscal Year 2007 Plan. During the third quarter of fiscal year 2007, the Company committed to a plan to combine and optimize the development and assembly of most of its NMR and mass spectrometry products, to further centralize related administration and other functions and to reallocate certain resources toward more rapidly growing product lines and geographies. As part of the plan, the Company is creating an information rich detection (“IRD”) center in Walnut Creek, California, where NMR operations currently located in Palo Alto, California will be integrated with mass spectrometry operations already located in Walnut Creek. The Company will invest in a new 45,000 square foot building and a substantial remodel of an existing building there to house the IRD center.

As a result of the plan, a number of employee positions have been or will be relocated or eliminated and certain facilities will be consolidated. These actions primarily impact the Scientific Instruments segment and involve the elimination of between approximately 40 and 60 positions. The Company expects these activities to be completed during the first half of fiscal year 2009.

Restructuring and other related costs associated with this plan include one-time termination benefits, retention payments, costs to relocate facilities (including decommissioning costs, moving costs and temporary facility/storage costs), accelerated depreciation of fixed assets to be disposed as a result of facilities actions and lease termination costs.

The following table sets forth changes in the Company’s restructuring liability relating to the foregoing plan during the first quarter of fiscal year 2008:

	Employee- Related			Facilities- Related			Total
(in thousands)
Balance at September 28, 2007	$	2,222		$	—		$	2,222
Charges to expense, net		453			761			1,214
Cash payments		(181	)		(77	)		(258	)
Foreign currency impacts and other adjustments		24			(20	)		4
Balance at December 28, 2007	$	2,518		$	664		$	3,182
Total expense since inception of plan
(in millions)
Restructuring expense							$	3.5
Other restructuring-related costs							$	2.8

The restructuring charges of $1.2 million recorded during the first quarter of fiscal year 2008 related to employee termination benefits and costs associated with the closure of leased facilities. The Company also incurred $0.8 million in other restructuring-related costs which were comprised of $0.6 million in employee retention costs and $0.2 million in facilities-related costs including decommissioning costs and non-cash charges for accelerated depreciation of assets to be disposed upon the closure of facilities.

Note 9. Warranty and Indemnification Obligations

Product Warranties. The Company’s products are generally subject to warranties. Liabilities for the estimated future costs of repair or replacement are established and charged to cost of sales at the time the related sale is recognized. The amount of liability to be recorded is based on management’s best estimates of future warranty costs after considering historical and projected product failure rates and product repair costs.

11

VARIAN, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Changes in the Company’s estimated liability for product warranty during the fiscal quarters ended December 28, 2007 and December 29, 2006 follow:

	Fiscal Quarter Ended
	December 28, 2007			December 29, 2006
(in thousands)
Beginning balance	$	12,454		$	11,042
Charges to costs and expenses		1,167			656
Warranty expenditures and other adjustments		(1,095	)		(381	)
Ending balance	$	12,526		$	11,317

Indemnification Obligations. FASB Interpretation No. (“FIN”) 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, requires a guarantor to recognize a liability for and/or disclose obligations it has undertaken in relation to the issuance of the guarantee. Under this guidance, arrangements involving indemnification clauses are subject to the disclosure requirements of FIN 45 only.

The Company is subject to certain indemnification obligations to VMS (formerly VAI) and VSEA in connection with the Instruments business as conducted by VAI prior to the Distribution (described in Note 2). These indemnification obligations cover a variety of aspects of the Company’s business, including, but not limited to, employee, tax, intellectual property, litigation and environmental matters. Certain of the agreements containing these indemnification obligations are disclosed as exhibits to the Company’s Annual Report on Form 10-K. The estimated fair value of these indemnification obligations is not considered to be material.

The Company is subject to certain indemnification obligations to Jabil in connection with the Company’s sale of its Electronics Manufacturing Business to Jabil. These indemnification obligations cover certain aspects of the Company’s conduct of the Electronics Manufacturing Business prior to its sale to Jabil, including, but not limited to, employee, tax, litigation and environmental matters. The agreement containing these indemnification obligations is disclosed as an exhibit to the Company’s Annual Report on Form 10-K. The estimated fair value of these indemnification obligations is not considered to be material.

The Company’s By-Laws require it to indemnify its officers and directors, as well as those who act as directors and officers of other entities at the request of the Company, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceedings arising out of their services to the Company. In addition, the Company has entered into separate indemnity agreements with each director and officer that provide for indemnification of these directors and officers under certain circumstances. The form of these indemnity agreements is disclosed as an exhibit to the Company’s Annual Report on Form 10-K. The indemnification obligations are more fully described in these indemnity agreements and the Company’s By-Laws. The Company purchases insurance to cover claims or a portion of any claims made against its directors and officers. Since a maximum obligation is not explicitly stated in the Company’s By-Laws or these indemnity agreements and will depend on the facts and circumstances that arise out of any future claims, the overall maximum amount of the obligations cannot reasonably be estimated. Historically, the Company has not made payments related to these indemnification obligations and the estimated fair value of these indemnification obligations is not considered to be material.

As is customary in the Company’s industry and as provided for in local law in the U.S. and other jurisdictions, many of the Company’s standard contracts provide remedies to customers and other third parties with whom the Company enters into contracts, such as defense, settlement or payment of judgment for

12

VARIAN, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

intellectual property claims related to the use of its products. From time to time, the Company also agrees to indemnify customers, suppliers, contractors, lessors, lessees and others with whom it enters into contracts, against loss, expense and/or liability arising from various triggering events related to the sale and the use of the Company’s products and services, the use of their goods and services, the use of facilities and other matters covered by such contracts, usually up to a specified maximum amount. In addition, from time to time, the Company sometimes also agrees to indemnify these parties against claims related to undiscovered liabilities, additional product liability or environmental obligations. Claims made under such indemnification obligations have been insignificant and the estimated fair value of these indemnification obligations is not considered to be material.

Note 10. Debt and Credit Facilities

Credit Facilities. The Company maintains relationships with banks in many countries from whom it sometimes obtains bank guarantees and short-term standby letters of credit. These guarantees and letters of credit relate primarily to advance payments and deposits made to the Company’s subsidiaries by customers for which separate liabilities are recorded in the consolidated financial statements. As of December 28, 2007, a total of $21.5 million of these bank guarantees and letters of credit were outstanding. No amounts had been drawn by beneficiaries under these or any other outstanding guarantees or letters of credit as of that date.

Long-term Debt. As of both December 28, 2007 and September 28, 2007, the Company had a $25.0 million term loan outstanding with a U.S. financial institution at a fixed interest rate of 6.7%. The term loan contains certain covenants that limit future borrowings and the payment of cash dividends and require the maintenance of certain levels of working capital and operating results. The Company was in compliance with all restrictive covenants of the term loan agreement at December 28, 2007.

The following table summarizes future principal payments on borrowings under long-term debt outstanding as of December 28, 2007:

	Nine Months Ending Oct. 3, 2008		Fiscal Years
			2009		2010		2011		2012		2013		Thereafter		Total
(in thousands)
Long-term debt (including current portion)	$	6,250	$	—	$	6,250	$	—	$	6,250	$	—	$	6,250	$	25,000

Note 11. Defined Benefit Retirement Plans

Net Periodic Pension Cost. The components of net periodic pension cost relating to the Company’s defined benefit retirement plans follow:

	Fiscal Quarter Ended
	December 28, 2007			December 29, 2006
(in thousands)
Service cost	$	343		$	334
Interest cost		723			626
Expected return on plan assets		(653	)		(512	)
Amortization of prior service cost and actuarial gains and losses		—			111
Net periodic pension cost	$	413		$	559

13

VARIAN, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Employer Contributions. During the fiscal quarter ended December 28, 2007, the Company made contributions totaling $0.4 million to its defined benefit pension plans. The Company currently anticipates contributing an additional $1.0 million to these plans in the remaining nine months of fiscal year 2008.

Note 12. Contingencies

Environmental Matters. The Company’s operations are subject to various federal, state and local laws in the U.S. as well as laws in other countries regulating the discharge of materials into the environment or otherwise relating to the protection of the environment. These regulations increase the costs and potential liabilities of the Company’s operations. However, the Company does not currently anticipate that its compliance with these regulations will have a material effect on the Company’s capital expenditures, earnings or competitive position.

The Company and VSEA are each obligated (under the terms of the Distribution described in Note 2) to indemnify VMS for one-third of certain costs (after adjusting for any insurance proceeds and tax benefits recognized or realized by VMS for such costs) relating to environmental matters. In that regard, VMS 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 nine sites where VAI is alleged to have shipped manufacturing waste for recycling, treatment, or disposal. In addition, VMS is overseeing and, as applicable, reimbursing third parties for environmental investigation, monitoring and/or remediation activities, in most cases under the direction of, or in consultation with, federal, state and/or local agencies in the U.S. at certain current VMS or former VAI facilities. The Company and VSEA are each obligated to indemnify VMS for one-third of these environmental investigation, monitoring and/or remediation costs (after adjusting for any insurance proceeds and taxes).

For certain of these sites and facilities, various uncertainties make it difficult to assess the likelihood and scope of further environmental-related activities or claims or to estimate the future costs of such activities or claims if undertaken or asserted. As of December 28, 2007, it was nonetheless estimated that the Company’s share of the future exposure for environmental-related costs for these sites and facilities ranged in the aggregate from $1.1 million to $2.6 million (without discounting to present value). The time frame over which these costs are expected to be incurred varies with each site and facility, ranging up to approximately 5 years as of December 28, 2007. No amount in the foregoing range of estimated future costs is believed to be more probable of being incurred than any other amount in such range and the Company therefore had an accrual of $1.2 million as of December 28, 2007.

As to certain sites and facilities, sufficient knowledge has been gained to be able to better estimate the scope and certain costs of future environmental-related activities. As of December 28, 2007, it was estimated that the Company’s share of the future exposure for these environmental-related costs for these sites and facilities ranged in the aggregate from $3.0 million to $12.9 million (without discounting to present value). The time frame over which these costs are expected to be incurred varies with each site and facility, ranging up to approximately 22 years as of December 28, 2007. As to each of these sites and facilities, it was determined that a particular amount within the range of certain estimated costs was a better estimate of the future environmental-related cost than any other amount within the range and that the amount and timing of these future costs were reliably determinable. Together, these amounts totaled $5.9 million at December 28, 2007. The Company therefore had an accrual of $4.1 million as of December 28, 2007, which represents the best estimate of its share of these future environmental-related costs discounted at 4%, net of inflation. This accrual is in addition to the $1.2 million described in the preceding paragraph.

An insurance company has agreed to pay a portion of certain of VAI’s (now VMS’) future environmental-related costs for which the Company has an indemnification obligation and the Company therefore has a

14

VARIAN, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

long-term receivable of $1.0 million (discounted at 4%, net of inflation) in other assets as of December 28, 2007, for the Company’s share of such recovery. The Company has not reduced any environmental-related liability in anticipation of recoveries from third parties.

The Company believes that its reserves for the foregoing and other environmental-related matters are adequate, but as the scope of its obligation becomes more clearly defined, these reserves may be modified and related charges against or credits to 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 statements, the likelihood of such occurrence is considered remote. Based on information currently available and its best assessment of the ultimate amount and timing of environmental-related events, the Company believes that the costs of environmental-related matters are not reasonably likely to have a material adverse effect on the Company’s financial condition or results of operations.

Legal Proceedings. The Company is involved in pending legal proceedings that are ordinary, routine and incidental to its business. While the ultimate outcome of these legal matters is not determinable, the Company believes that these matters are not reasonably likely to have a material adverse effect on the Company’s financial condition or results of operations.

Note 13. Stockholders’ Equity and Stock Plans

Share-Based Compensation Expense. The Company accounts for share-based awards in accordance with the provisions of SFAS 123(R), Share-Based Payment, which was adopted during the fiscal quarter ended December 30, 2005 using the modified prospective application method.

The following table summarizes the amount of share-based compensation expense by award type as well as the effect of this expense on net earnings and net earnings per share:

	Fiscal Quarter Ended
	December 28, 2007			December 29, 2006
(in thousands, except per share amounts)
Share-based compensation expense by award type:
Employee and non-employee director stock options	$	(968	)	$	(2,078	)
Employee stock purchase plan		(310	)		(195	)
Restricted (nonvested) stock (1)		(441	)		(572	)
Total share-based compensation expense (effect on earnings before income taxes)		(1,719	)		(2,845	)
Effect on income tax expense		564			1,023
Effect on net earnings	$	(1,155	)	$	(1,822	)
Effect on net earnings per share:
Basic	$	(0.04	)	$	(0.06	)
Diluted	$	(0.04	)	$	(0.06	)

(1) Includes $81,000 in the fiscal quarter ended December 28, 2007 related to shares granted in connection with the Company’s fiscal 2007 restructuring plan.

15

VARIAN, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Share-based compensation expense has been included in the Company’s unaudited condensed consolidated statement of earnings as follows:

	Fiscal Quarter Ended
	December 28, 2007		December 29, 2006
(in thousands)
Cost of sales	$	124	$	108
Selling, general and administrative		1,461		2,609
Research and development		134		128
Total	$	1,719	$	2,845

Employee Stock Options. During the fiscal quarter ended December 28, 2007, the Company granted 256,000 stock options to employees having a weighted-average exercise price of $69.44 and an estimated grant date fair value (net of expected forfeitures) of $5.3 million. During the fiscal quarter ended December 29, 2006, the Company granted 305,000 stock options to employees having a weighted-average exercise price of $45.06 and an estimated grant date fair value (net of expected forfeitures) of $3.9 million.

As of December 28, 2007, the unrecorded deferred share-based compensation balance related to stock options was $8.9 million. This amount will be recognized as expense using the straight-line attribution method over an estimated weighted-average amortization period of 1.5 years.

Restricted (Nonvested) Stock. During December 2007 and December 2006, the Company granted under the Omnibus Stock Plan (“OSP”) 42,250 and 47,200 shares, respectively, of restricted (nonvested) common stock to employees. The restricted stock granted during the fiscal quarters ended December 28, 2007 and December 29, 2006 had aggregate values of $2.9 million and $2.1 million, respectively, representing the fair market value of the restricted shares on their grant dates. These amounts are being recognized by the Company as share-based compensation expense ratably over their respective three-year vesting periods. During the fiscal quarter ended December 28, 2007, the Company recognized $0.4 million in share-based compensation expense relating to restricted stock grants, which included $0.1 million related to shares granted in connection with the Company’s Fiscal Year 2007 restructuring plan. During the fiscal quarter ended December 29, 2006, the Company recognized $0.6 million in share-based compensation expense relating to restricted stock grants.

As of December 28, 2007, there was a total of $4.3 million in unrecognized compensation expense related to restricted stock granted under the OSP. This expense is expected to be recognized over a weighted-average amortization period of 1.9 years.

Employee Stock Purchase Plan. During the fiscal quarters ended December 28, 2007 and December 29, 2006, employees purchased approximately 20,000 shares for $0.9 million and 25,000 shares for $0.9 million, respectively. As of December 28, 2007, a total of approximately 248,000 shares remained available for issuance under the ESPP.

Stock Repurchase Programs. In January 2007, the Company’s Board of Directors approved a stock repurchase program under which the Company was authorized to utilize up to $100 million to repurchase shares of its common stock. This repurchase program is effective through December 31, 2008. During the fiscal quarter ended December 28, 2007, the Company repurchased and retired 209,000 shares under this authorization at an aggregate cost of $14.3 million. As of December 28, 2007, the Company had remaining authorization to repurchase $36.1 million of its common stock under this program.

16

VARIAN, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Other Stock Repurchases. During the fiscal quarter ended December 28, 2007, the Company retired 12,000 shares tendered to it by employees in settlement of employee tax withholding obligations due from those employees upon the vesting of restricted stock.

Note 14. Income Taxes

Effective September 29, 2007 the Company adopted FIN 48, Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement No 109, which addresses accounting for, and disclosure of, uncertain tax positions. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As a result of the adoption of FIN 48, the Company reduced its liability for unrecognized tax benefits and increased deferred tax assets by $2.4 million and $0.6 million, respectively. These adjustments were aggregated and accounted for as a cumulative effect of a change in accounting principle, which resulted in an increase to retained earnings of $3.0 million. The total amount of unrecognized tax benefits excluding interest thereon as of the date of adoption was $6.9 million, substantially all of which would impact the effective tax rate if realized. The Company’s policy to include interest and penalties related to income taxes within income tax expense did not change as a result of implementing FIN 48. As of the date of adoption of FIN 48, the Company had accrued $0.7 million in income taxes payable for the payment of interest and penalties related to unrecognized tax benefits.

The Company’s U.S. federal, state and local income tax returns and non-U.S. income tax returns are subject to audit by relevant tax authorities. The Company’s income tax reporting periods beginning after fiscal year 2003 for the U.S. and after fiscal year 2001 for the Company’s major non-U.S. jurisdictions remain generally open to audit by relevant tax authorities. During the first quarter of fiscal year 2008, total unrecognized tax benefits were reduced by $1.3 million due to the lapse of certain statutes of limitations in the period and increased by $0.2 million due to current-year uncertain tax positions. These amounts resulted in a corresponding benefit in income tax expense in the period. In addition, income tax expense for the first quarter of fiscal year 2008 also included a net benefit of $0.1 million for a reduction in accrued interest and penalties.

At December 28, 2007, the total amount of unrecognized tax benefits was $5.8 million, substantially all of which would impact the effective tax rate if realized. Income taxes payable at December 28, 2007 included accrued interest and penalties of $0.5 million.

Although the timing and outcome of income tax audits is highly uncertain, the Company does not believe that its total unrecognized tax benefits will materially change in the next twelve months.

Note 15. Net Earnings Per Share

Basic earnings per share are calculated based on net earnings and the weighted-average number of shares of common stock outstanding during the reported period. Diluted earnings per share are calculated similarly, except that the weighted-average number of common shares outstanding during the period are increased by the number of additional shares of common stock that would have been outstanding if dilutive potential shares of common stock had been issued. The dilutive effect of potential common stock (including outstanding stock options, unvested restricted stock, ESPP shares and non-employee director stock units) is reflected in diluted earnings per share by application of the treasury stock method, which includes consideration of share-based compensation as required by SFAS 123(R).

For the fiscal quarters ended December 28, 2007 and December 29, 2006, options to purchase 256,000 and 23,000 shares, respectively, were excluded from the calculation of diluted earnings per share as their effect was anti-dilutive.

17

VARIAN, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A reconciliation of weighted-average basic shares outstanding to weighted-average diluted shares outstanding follows:

	Fiscal Quarter Ended
	December 28, 2007	December 29, 2006
(in thousands)
Weighted-average basic shares outstanding	30,330	30,601
Net effect of dilutive potential common stock	570	457
Weighted-average diluted shares outstanding	30,900	31,058

Note 16. Industry Segments

For financial reporting purposes, the Company’s operations are grouped into two business segments: Scientific Instruments and Vacuum Technologies. The Scientific Instruments segment designs, develops, manufactures, markets, sells and services equipment and related software, consumable products, accessories and services for a broad range of life science and industrial (which includes environmental, food and energy) applications requiring identification, quantification and analysis of the composition or structure of liquids, solids or gases. The Vacuum Technologies segment designs, develops, manufactures, markets, sells and services vacuum products and related accessories and services used to create, contain, control, measure and test vacuum environments in a broad range of life science and industrial applications requiring ultra-clean or high-vacuum environments. These segments were determined in accordance with SFAS 131, Disclosures about Segments of an Enterprise and Related Information.

General corporate costs include shared costs of legal, tax, accounting, treasury, insurance and other management costs. A portion of the indirect and common costs has been allocated to the segments through the use of estimates. Also, transactions between segments are accounted for at cost and are not included in sales. Accordingly, the following information is provided for purposes of achieving an understanding of operations, but might 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 might not be meaningful.

	Sales				Pretax Earnings
	Fiscal Quarter Ended				Fiscal Quarter Ended
	December 28, 2007		December 29, 2006		December 28, 2007			December 29, 2006
(in millions)
Scientific Instruments	$	197.0	$	176.9	$	19.8		$	18.9
Vacuum Technologies		40.4		41.0		7.7			8.4
Total industry segments		237.4		217.9		27.5			27.3
General corporate		—		—		(3.4	)		(4.4	)
Interest income		—		—		1.9			1.2
Interest expense		—		—		(0.4	)		(0.5	)
Total	$	237.4	$	217.9	$	25.6		$	23.6

18

VARIAN, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 17. Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 applies to previous accounting pronouncements that require or permit fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The Company does not expect the adoption of SFAS 157 to have a material impact on its financial condition or results of operations.

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement 115, which provides companies with an option to measure eligible financial assets and liabilities in their entirety at fair value. The fair value option may be applied instrument by instrument, and may be applied only to entire instruments. If a company elects the fair value option for an eligible item, changes in the item’s fair value must be reported as unrealized gains and losses in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is evaluating the options provided under SFAS 159 and their potential impact on its financial condition and results of operations if implemented.

In December 2007, the FASB issued SFAS 141 (revised 2007), Business Combinations, (“SFAS 141(R)”). SFAS 141(R) retains the fundamental requirements of the original pronouncement requiring that the purchase method be used for all business combinations, but also provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree. It also requires the recognition of assets acquired and liabilities assumed arising from contingencies, the capitalization of in-process research and development at fair value, and the expensing of acquisition-related costs as incurred. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the requirements of SFAS 141(R) and does not expect its adoption in the first quarter of fiscal year 2010 to have a material impact on the Company’s financial condition or results of operations. However, in the event that the Company completes acquisitions subsequent to its adoption of SFAS 141(R), the application of its provisions will likely have a material impact on the Company’s results of operations, although the Company is not currently able to estimate that impact.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. SFAS 160 requires that ownership interests in subsidiaries held by parties other than the parent, and the amount of consolidated net income, be clearly identified, labeled and presented in the consolidated financial statements. It also requires once a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value. Sufficient disclosures are required to clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. It is effective for fiscal years beginning after December 15, 2008, and requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements are applied prospectively. The Company does not expect the adoption of SFAS 160 to have a material impact on its financial condition or results of operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Caution Regarding Forward-Looking Statements

Throughout this Report, and particularly in this Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations, there are forward-looking statements that are based upon our current expectations, estimates, and projections, and that reflect our beliefs and assumptions based upon information available to us at the date of this Report. In some cases, you can identify these statements by words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” and other similar terms. These forward-looking statements include (but are not limited to) those relating to the timing and amount of anticipated restructuring costs and related cost savings, as well as our expected effective annual tax rate and anticipated capital expenditures in fiscal year 2008.

We caution investors that forward-looking statements are only our current expectations about future events. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and assumptions that are difficult to predict. Our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking statements. Some of the important factors that could cause our results to differ are discussed in Item 1A—Risk Factors in our Annual Report on Form 10-K for the fiscal year ended September 28, 2007. We encourage you to read that section carefully.

Other risks and uncertainties that could cause actual results to differ materially from those in our forward-looking statements include, but are not limited to, the following: whether we will succeed in new product development, release, commercialization, performance and acceptance; whether we can achieve continued growth in sales for industrial applications and/or stronger growth in sales for life science applications; whether we can achieve continued sales growth in Europe and Asia Pacific and/or growth in sales in the U.S.; risks arising from the timing of shipments, installations and the recognition of revenues on certain magnet-based products, including nuclear magnetic resonance (“NMR”) spectroscopy systems, magnetic resonance (“MR”) imaging systems and fourier transform mass spectrometry (“FTMS”) systems and superconducting magnets; the impact of shifting product mix on profit margins; competitive products and pricing; economic conditions in our product and geographic markets; whether we will see continued and timely delivery of key raw materials and components by suppliers; foreign currency fluctuations that could adversely impact revenue growth and earnings; whether we will see continued investment in capital equipment; whether we will see reduced demand from customers that operate in cyclical industries; the impact of any delay or reduction in government funding for research; our ability to successfully evaluate, negotiate and integrate acquisitions; the actual costs, timing and benefits of restructuring activities (such as our Northern California facilities consolidation) and other efficiency improvement activities (such as our global procurement and outsourcing initiatives); variability in our effective income tax rate (due to factors including the timing and amount of discrete tax events and changes to unrecognized tax benefits); and other risks detailed from time to time in our filings with the U.S. Securities and Exchange Commission (the “SEC”). We disclaim any intent or obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise.

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Results of Operations

First Quarter of Fiscal Year 2008 Compared to First Quarter of Fiscal Year 2007

Segment Results

For financial reporting purposes, our operations are grouped into two reportable business segments: Scientific Instruments and Vacuum Technologies. The following table presents comparisons of our sales and operating earnings for each of those segments and in total for the first quarters of fiscal years 2008 and 2007:

	Fiscal Quarter Ended
	December 28, 2007					December 29, 2006					Increase (Decrease)
	$			% of Sales		$			% of Sales		$			%
(dollars in millions)
Sales by Segment:
Scientific Instruments	$	197.0		83.0	%	$	176.9		81.2	%	$	20.1		11.4	%
Vacuum Technologies		40.4		17.0			41.0		18.8			(0.6	)	(1.6	)
Total company	$	237.4		100.0	%	$	217.9		100.0	%	$	19.5		8.9	%
Operating Earnings by Segment:
Scientific Instruments	$	19.8		10.1	%	$	18.9		10.7	%	$	0.9		5.0	%
Vacuum Technologies		7.7		19.1			8.4		20.4			(0.7	)	(7.8	)
Total segments		27.5		11.6			27.3		12.5			0.2		1.0
General corporate		(3.4	)	(1.4	)		(4.4	)	(2.0	)		1.0		(22.3	)
Total company	$	24.1		10.2	%	$	22.9		10.5	%	$	1.2		5.5	%

Scientific Instruments. The increase in Scientific Instruments sales was primarily attributable to higher sales volume, in particular from mass spectrometers and other analytical instruments. Sales increased into both industrial (which includes environmental, food and energy) and life science applications.

Scientific Instruments operating earnings for the first quarter of fiscal year 2008 included restructuring and other related costs of $2.0 million, acquisition-related intangible amortization of $1.8 million, share-based compensation expense of $0.8 million and amortization of $0.5 million related to inventory written up primarily in connection with the acquisition of IonSpec Corporation (“IonSpec”). In comparison, Scientific Instruments operating earnings for the first quarter of fiscal year 2007 included restructuring and other related costs of $0.1 million, acquisition-related intangible amortization of $2.2 million, share-based compensation expense of $1.0 million and amortization of $0.3 million related to inventory written up in connection with the acquisition of IonSpec. Excluding the impact of these items, operating earnings were flat as a percentage of sales. Higher costs relating to sales commissions on strong orders, new product introductions and other initiatives during the first quarter of fiscal year 2008 offset the positive impact of sales volume leverage (as the higher sales volume improved the absorption rate of fixed and semi-variable costs) and a favorable mix shift toward higher-margin products including mass spectrometers and consumables.

Vacuum Technologies. Vacuum Technologies had a very strong quarter in the first quarter of fiscal 2007 with revenues and operating profit margins highest of any quarter in that fiscal year. Compared to this strong year-ago quarter, sales remained relatively flat. A slight increase into industrial applications was more than offset by a decrease into the life sciences applications. Sales increased sequentially by 5.5% compared to the $38.3 million recorded in the fourth quarter of fiscal 2007.

Vacuum Technologies operating earnings for the first quarters of fiscal year 2008 and 2007 include the impact of share-based compensation expense of $0.1 million and $0.7 million, respectively. Excluding the impact

21

of these items, the decrease in Vacuum Technologies operating earnings as a percentage of sales reflects the unusually strong results in the first quarter of fiscal year 2007.

Consolidated Results

The following table presents comparisons of our sales and other selected consolidated financial results for the first quarters of fiscal years 2007 and 2006:

	Fiscal Quarter Ended
	December 28, 2007					December 29, 2006					Increase (Decrease)
	$			% of Sales		$			% of Sales		$		%
(dollars in millions, except per share data)
Sales	$	237.4		100.0	%	$	217.9		100.0	%	$	19.5	8.9	%
Gross profit		107.3		45.2			99.7		45.7			7.6	7.6
Operating expenses:
Selling, general and administrative		66.0		27.8			61.2		28.0			4.8	7.8
Research and development		17.2		7.2			15.6		7.2			1.6	10.1
Total operating expenses		83.2		35.0			76.8		35.2			6.4	8.3
Operating earnings		24.1		10.2			22.9		10.5			1.2	5.5
Interest income		1.9		0.8			1.3		0.6			0.6	52.7
Interest expense		(0.4	)	(0.2	)		(0.5	)	(0.3	)		0.1	15.9
Income tax expense		(8.0	)	(3.4	)		(8.3	)	(3.8	)		0.3	2.7
Net Earnings	$	17.6		7.4	%	$	15.4		7.0	%	$	2.2	14.5	%
Net earnings per diluted share	$	0.57				$	0.49				$	0.08

Sales. As discussed under the heading Segment Results above, sales by the Scientific Instruments and Vacuum Technologies segments in the first quarter of fiscal year 2008 increased (decreased) by 11.4% and (1.6)%, respectively, compared to the prior-year quarter. On a consolidated basis, sales grew 8.9% in the first quarter of fiscal year 2008, with solid sales growth for both industrial (which includes environmental, food and energy) and life science applications.

For geographic reporting purposes, we use four regions—North America (excluding Mexico), Europe (including the Middle East and Africa), Asia Pacific (including India) and Latin America (including Mexico). Sales by geographic region in the first quarters of fiscal years 2008 and 2007 were as follows:

	Fiscal Quarter Ended
	December 28, 2007				December 29, 2006				Increase (Decrease)
	$		% of Sales		$		% of Sales		$		%
(dollars in millions)
Sales by Geographic Region:
North America	$	80.6	34.0	%	$	74.7	34.3	%	$	5.9	7.9	%
Europe		96.2	40.5			94.1	43.2			2.1	2.2
Asia Pacific		47.8	20.1			41.1	18.8			6.7	16.4
Latin America		12.8	5.4			8.0	3.7			4.8	59.4
Total company	$	237.4	100.0	%	$	217.9	100.0	%	$	19.5	8.9	%

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The sales increase in North America was primarily driven by higher sales of low-volume, high-selling price magnet-based products and, to a lesser extent, analytical instruments, which were partially offset by lower sales of vacuum products. The increase in sales in Europe was primarily attributable to stronger demand for our analytical instruments and consumables, but was partially offset by lower sales of low-volume, high-selling price magnet-based products and vacuum products. The increases in sales in Asia Pacific and Latin America were primarily attributable to stronger demand across a broad range of products, in particular analytical instruments and vacuum products. The weaker U.S. dollar also had a positive effect on the reported sales increases in Europe, Asia Pacific and Latin America.

As described above, the increase in North American sales was more pronounced and the increase in European sales was less pronounced compared to the prior-year quarter due to the timing of sales of certain low-volume, high-selling price magnet-based products. We do not consider these geographic shifts to be indicative of any particular trend for magnet-based products as a whole, but rather to be reflective of the variability in results that these low-volume, high-selling price magnet-based products can create.

Gross Profit. Gross profit for the first quarter of fiscal year 2008 reflects the impact of $1.4 million in amortization expense relating to acquisition-related intangible assets, $0.5 million in amortization expense related to inventory written up primarily in connection with the IonSpec acquisition, $0.5 million in restructuring and other related costs and share-based compensation expense of $0.1 million. In comparison, gross profit for the first quarter of fiscal year 2007 reflects the impact of $1.3 million in amortization expense relating to acquisition-related intangible assets, $0.3 million in amortization expense related to inventory written up in connection with the IonSpec acquisition and share-based compensation expense of $0.1 million. Excluding the impact of these items, the gross profit percentage was relatively flat.

Selling, General and Administrative. Selling, general and administrative expenses for the first quarter of fiscal year 2008 included $0.4 million in amortization expense relating to acquisition-related intangible assets, $1.2 million in restructuring and other related costs and $1.4 million in share-based compensation expense. In comparison, selling, general and administrative expenses for the first quarter of fiscal year 2007 included $0.9 million in amortization expense relating to acquisition-related intangible assets, $0.1 million in restructuring and other related costs and $2.6 million in share-based compensation expense. Excluding the impact of these items, selling, general and administrative expenses as a percentage of sales were relatively flat. Higher costs relating to sales commissions on strong orders, new product introductions and other initiatives during the first quarter of fiscal year 2008 offset the positive impact of sales volume leverage (as the higher sales volume improved the absorption rate of fixed and semi-variable costs) and a favorable mix shift toward higher-margin products including mass spectrometers and consumables.

Research and Development. Research and development expenses for the first quarter of fiscal year 2008 reflect the impact of share-based compensation expense of $0.1 million and $0.3 million in restructuring and other related costs. In comparison, research and development expenses for the first quarter of fiscal year 2007 reflect the impact of share-based compensation expense of $0.1 million. Excluding the impact of these items, research and development expenses were flat as a percentage of sales.

Restructuring Activities. Between fiscal years 2003 and 2007, we committed to several restructuring plans in order to adjust our organizational structure, improve operational efficiencies and eliminate redundant or excess costs resulting from acquisitions or dispositions during those periods. From the respective inception dates of these plans through December 28, 2007, we have incurred a total of $18.8 million in restructuring expense and a total of $6.2 million in other costs related directly to those plans (comprised primarily of employee retention and relocation costs and accelerated depreciation of assets disposed upon the closure of facilities). During the first quarter of fiscal year 2008, there was no significant activity under these plans except for the fiscal year 2007 plan as described below.

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Fiscal Year 2007 Plan. During the third quarter of fiscal year 2007, we committed to a plan to combine and optimize the development and assembly of most of our NMR and mass spectrometry products, to further centralize related administration and other functions and to reallocate certain resources toward more rapidly growing product lines and geographies. As part of the plan, we are creating an information rich detection (“IRD”) center in Walnut Creek, California, where NMR operations currently located in Palo Alto, California will be integrated with mass spectrometry operations already located in Walnut Creek. Merging our IRD talent base into this single location will capitalize on our strength in NMR and mass spectrometry and enhance our ability to develop innovative IRD solutions that are more powerful, complementary, routine and user-friendly. Underscoring our commitment to IRD and the benefits that a combined location and organization will provide, we will invest in a new 45,000 square foot building and a substantial remodel of an existing building there to house the IRD center.

As a result of the plan, a number of employee positions have been or will be relocated or eliminated and certain facilities will be consolidated. These actions primarily impact the Scientific Instruments segment and involve the elimination of between approximately 40 and 60 positions. We expect these activities to be completed during the first half of fiscal year 2009.

Restructuring and other related costs associated with this plan include one-time employee termination benefits, employee retention payments, costs to relocate facilities (including decommissioning costs, moving costs and temporary facility/storage costs), accelerated depreciation of fixed assets to be disposed as a result of facilities actions and lease termination costs.

The following table sets forth changes in our restructuring liability relating to the foregoing plan during the first quarter of fiscal year 2008:

	Employee- Related			Facilities- Related			Total
(in thousands)
Balance at September 28, 2007	$	2,222		$	—		$	2,222
Charges to expense, net		453			761			1,214
Cash payments		(181	)		(77	)		(258	)
Foreign currency impacts and other adjustments		24			(20	)		4
Balance at December 28, 2007	$	2,518		$	664		$	3,182
Total expense since inception of plan
(in millions)
Restructuring expense							$	3.5
Other restructuring related costs							$	2.8

The restructuring charges of $1.2 million recorded during the first quarter of fiscal year 2008 related to employee termination benefits and costs associated with the closure of leased facilities. We also incurred $0.8 million in other restructuring-related costs which were comprised of $0.6 million in employee retention costs and $0.2 million in facilities-related costs including decommissioning costs and a non-cash charge for accelerated depreciation of assets to be disposed upon the closure of facilities.

Interest Income. The increase in interest income was primarily due to higher average invested cash balances and higher rates of interest on those balances during the first quarter of fiscal year 2008 compared to the first quarter of fiscal year 2007.

Income Tax Expense. The effective income tax rate was 31.4% for the first quarter of fiscal year 2008, compared to 35.0% for the first quarter of fiscal year 2007. The lower effective tax rate in the first quarter of

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fiscal year 2008 was primarily due to the release of $1.5 million in tax reserves resulting from the positive outcome of tax uncertainties during that period. Excluding the impact of this item, the effective income tax rate for the first quarter of fiscal year 2008 was higher than the rate for the first quarter of fiscal year 2007 due primarily to U.S. state taxes on intercompany dividends, a write-down of non-U.S. deferred tax assets resulting from an income tax rate reduction that was approved during the current quarter and the expiration of the U.S. federal research and development tax credit during the first quarter of fiscal year 2008.

We currently expect our effective income tax rate to be between 34.5% and 35.5% for the full fiscal year 2008.

Net Earnings. Net earnings for the first quarter of fiscal year 2008 reflect the impact of $1.6 million in share-based compensation expense, $1.8 million in acquisition-related intangible amortization, $2.0 million in restructuring and other related costs and $0.5 million in amortization related to inventory written up primarily in connection with the acquisition of IonSpec. Net earnings for the first quarter of fiscal year 2007 reflect the impact of $2.8 million in share-based compensation expense, $2.2 million in acquisition-related intangible amortization, $0.1 million in restructuring and other related costs and $0.3 million in amortization related to inventory written up in connection with the acquisition of IonSpec. Excluding the impact of these items, the increase in net earnings resulted primarily from higher sales volume, higher interest income and the impact of the lower effective income tax rate in the first quarter of fiscal year 2008.

Liquidity and Capital Resources

We generated $17.1 million of cash from operating activities in the first quarter of fiscal year 2008, compared to $22.4 million generated in the first quarter of fiscal year 2007. The decrease in cash from operating activities was primarily driven by a relative increase in inventories ($9.5 million), partially offset by a relative decrease in accounts receivable ($3.7 million) and higher net earnings ($2.2 million). The relative increase in inventories was primarily due to a build-up of inventory to support increased orders during the first quarter of fiscal 2008, new product introductions and the transition of certain products to new manufacturing locations. The relative decrease in accounts receivable was primarily due to higher collections in the first quarter of fiscal year 2008.

We used $13.1 million of cash for investing activities in the first quarter of fiscal year 2008, which compares to $4.9 million used for investing activities in the first quarter of fiscal year 2007. The increase in cash used for investing activities in the first quarter of fiscal year 2008 was primarily the result of the acquisition in November 2007 of certain assets and assumed certain liabilities of Analogix, Inc. (the “Analogix Business”).

We used $3.4 million of cash for financing activities in the first quarter of fiscal year 2008, which compares to $35.0 million used for financing activities in the first quarter of fiscal year 2007. The decrease in cash used for financing activities was primarily due to lower expenditures to repurchase and retire common stock (such expenditures were made in both periods as a result of a continued effort to utilize excess cash to reduce the number of outstanding common shares). Compared to the year-ago quarter, higher proceeds from the issuance of common stock due to higher stock option exercise volume also contributed to the net decrease in cash used for financing activities during the first quarter of fiscal year 2008.

We maintain relationships with banks in many countries from whom we sometimes obtain bank guarantees and short-term standby letters of credit. These guarantees and letters of credit relate primarily to advance payments and deposits made to our subsidiaries by customers for which separate liabilities are recorded in the consolidated financial statements. As of December 28, 2007, a total of $21.5 million of these bank guarantees and letters of credit were outstanding. No amounts had been drawn by beneficiaries under these or any other outstanding guarantees or letters of credit as of that date.

As of both December 28, 2007 and September 28, 2007, we had a $25.0 million term loan outstanding with a U.S. financial institution at a fixed interest rate of 6.7%. The term loan contains certain covenants that limit

25

future borrowings and the payment of cash dividends and require the maintenance of certain levels of working capital and operating results. We were in compliance with all restrictive covenants of the term loan agreement at December 28, 2007.

In connection with certain acquisitions, we have accrued but not yet paid a portion of the purchase price that has been retained to secure the respective sellers’ indemnification obligations.

The following table summarizes outstanding purchase price amounts retained and the date they will become payable (net of any indemnification claims) as of December 28, 2007:

Acquired Business	Retained Amount	Date Payable
Analogix Business	$1.3 million	November 2009
IonSpec	$0.7 million	February 2008

As of December 28, 2007, up to a maximum of $33.3 million could be payable through December 2010 under contingent consideration arrangements relating to acquired businesses. Amounts subject to these arrangements can be earned over the respective measurement period, depending on the performance of the acquired business relative to certain financial and/or operational targets.

The following table summarizes key terms of outstanding contingent consideration arrangements as of December 28, 2007:

Acquired Business	Remaining Amount Available (maximum)	Measurement Period	Measurement Period End Date
Analogix Business	$4.0 million	3 years	December 2010
IonSpec	$14.0 million	3 years	April 2009
Polymer Labs	$15.3 million	3 years	December 2008

In addition to the above amounts, we accrued $4.0 million in the first quarter of fiscal year 2008 for the final contingent consideration payment relating to the Magnex Scientific Limited (“Magnex”) business acquired in November 2004. This amount will be paid during the second quarter of fiscal year 2008.

The Distribution Agreement provides that we are responsible for certain litigation to which VAI was a party, and further provides that we will indemnify VMS and VSEA for one-third of the costs, expenses, and other liabilities relating to certain discontinued, former, and corporate operations of VAI, including certain environmental liabilities (see Note 12 of the Notes to the Unaudited Condensed Consolidated Financial Statements).

We had no material non-cancelable commitments for capital expenditures as of December 28, 2007. In the aggregate, we currently anticipate that our capital expenditures will be about 3.5% of sales for the full fiscal year 2008.

As discussed above, in April 2007, we committed to a plan (the “Fiscal Year 2007 Plan”) to combine and optimize the development and assembly of most of our NMR and mass spectrometry products, to further centralize related administration and other functions and to reallocate certain resources toward more rapidly growing product lines and geographies. In connection with this plan, we expect to make capital expenditures of up to $25 million, which began in the fourth quarter of fiscal year 2007 and will continue through the first half of fiscal year 2009. We expect that a significant portion of these expenditures will fall within our typical capital spending pattern (of approximately 3% of sales) measured over a two-year period. We also expect to incur total restructuring and other related costs associated with this plan of between $9.5 million and $14.5 million, of which $4.3 million was incurred in fiscal year 2007 and $2.0 million was incurred in the first quarter of fiscal

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year 2008. Some portion of these costs is expected to be settled through the second quarter of fiscal year 2009, except for certain lease termination-related costs, which might be settled as late as the fourth quarter of fiscal year 2012. A total of $8.0 million to $12.5 million of these costs are expected to result in cash expenditures.

In January 2007, our Board of Directors approved a stock repurchase program under which we are authorized to utilize up to $100 million to repurchase shares of our common stock. This repurchase program is effective until December 31, 2008. During the first quarter of fiscal year 2008, we repurchased and retired 209,000 shares under this repurchase program at an aggregate cost of $14.3 million. As of December 28, 2007, we had remaining authorization to repurchase $36.1 million of our common stock under this program.

Our liquidity is affected by many other factors, some based on the normal ongoing operations of the business and others related to the uncertainties of the industries in which we compete and global economies. Although our cash requirements will fluctuate based on the timing and extent of these factors, we believe that cash generated from operations, together with our current cash balance and borrowing capability, will be sufficient to satisfy commitments for capital expenditures and other cash requirements for the next 12 months.

Contractual Obligations and Other Commercial Commitments

The following table summarizes the amount and estimated timing of future cash expenditures relating to principal payments on outstanding long-term debt, minimum rentals due for certain facilities and other leased assets under long-term, non-cancelable operating leases and other long-term liabilities as of December 28, 2007:

	Nine Months Ending Oct. 3, 2008		Fiscal Years
			2009		2010		2011		2012		2013		Thereafter		Total
(in thousands)
Operating leases	$	6,943	$	6,826	$	4,665	$	2,524	$	2,153	$	1,795	$	3,814	$	28,720
Long-term debt (including current portion)		6,250		—		6,250		—		6,250		—		6,250		25,000
Other long-term liabilities		575		3,217		2,931		4,253		2,749		2,652		24,558		40,935
Total	$	13,768	$	10,043	$	13,846	$	6,777	$	11,152	$	4,447	$	34,622	$	94,655

As of December 28, 2007, we did not have any off-balance sheet commercial commitments that could result in a significant cash outflow upon the occurrence of some contingent event, except for contingent payments of up to a maximum of $33.3 million related to acquisitions as discussed under Liquidity and Capital Resources above, the specific amounts of which are not currently determinable.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 applies to previous accounting pronouncements that require or permit fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. We do not expect the adoption of SFAS 157 to have a material impact on our financial condition or results of operations.

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement 115, which provides companies with an option to measure eligible financial assets and liabilities in their entirety at fair value. The fair value option may be applied

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instrument by instrument, and may be applied only to entire instruments. If a company elects the fair value option for an eligible item, changes in the item’s fair value must be reported as unrealized gains and losses in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are evaluating the options provided under SFAS 159 and their potential impact on our financial condition and results of operations if implemented.

In December 2007, the FASB issued SFAS 141(revised 2007), Business Combinations, (“SFAS 141(R)”). SFAS 141(R) retains the fundamental requirements of the original pronouncement requiring that the purchase method be used for all business combinations, but also provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree. It also requires the recognition of assets acquired and liabilities assumed arising from contingencies, the capitalization of in-process research and development at fair value, and the expensing of acquisition-related costs as incurred. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the requirements of SFAS 141(R) and do not expect its adoption in the first quarter of fiscal year 2010 to have a material impact on our financial condition or results of operations. However, in the event that we complete acquisitions subsequent to our adoption of SFAS 141(R), the application of its provisions will likely have a material impact on our results of operations, although we are not currently able to estimate that impact.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. SFAS 160 requires that ownership interests in subsidiaries held by parties other than the parent, and the amount of consolidated net income, be clearly identified, labeled and presented in the consolidated financial statements. It also requires once a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value. Sufficient disclosures are required to clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. It is effective for fiscal years beginning after December 15, 2008, and requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements are applied prospectively. We do not expect the adoption of SFAS 160 to have a material impact on our financial condition or results of operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk. We enter into foreign exchange forward contracts to minimize the short-term impact of foreign currency fluctuations on assets and liabilities denominated in non-functional currencies. From time to time, we also enter into foreign exchange forward contracts to minimize the impact of foreign currency fluctuations on forecasted transactions. The success of our hedging activities depends on our ability to forecast balance sheet exposures and transaction activity in various foreign currencies. To the extent that these forecasts are overstated or understated during periods of currency volatility, we could experience unanticipated currency gains or losses. However, we believe that in most cases any such gains or losses would be substantially offset by losses or gains from the related foreign exchange forward contracts. We therefore believe that the direct effect of an immediate 10% change in the exchange rate between the U.S. dollar and all other currencies is not reasonably likely to have a material adverse effect on our financial condition or results of operations.

At December 28, 2007, there were no outstanding forward contracts designated as cash flow hedges of forecasted transactions. During the first quarter of fiscal year 2008, no foreign exchange gains or losses from cash flow hedge ineffectiveness were recognized.

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Our foreign exchange forward contracts generally range from one to 12 months in original maturity. A summary of all foreign exchange forward contracts that were outstanding as of December 28, 2007 follows:

	Notional Value Sold		Notional Value Purchased
(in thousands)
Australian dollar	$	—	$	36,849
Euro		—		26,532
British pound		—		9,363
Canadian dollar		2,912		—
Japanese yen		2,309		—
Total	$	5,221	$	72,744

Interest Rate Risk. We have no material exposure to market risk for changes in interest rates. We invest any excess cash primarily in short-term U.S. Treasury securities and money market funds, and changes in interest rates would not be material to our financial condition or results of operations. We enter into debt obligations principally to support general corporate purposes, including working capital requirements, capital expenditures and acquisitions. At December 28, 2007, our debt obligations had fixed interest rates.

Based upon rates currently available to us for debt with similar terms and remaining maturities, the carrying amounts of long-term debt approximate their estimated fair values.

Although payments under certain of our operating leases for our facilities are tied to market indices, we are not exposed to material interest rate risk associated with our operating leases.

Debt Obligations.

Principal Amounts and Related Weighted-Average Interest Rates By Year of Maturity

	Nine Months Ending Oct. 3, 2008			Fiscal Years
				2009			2010			2011			2012			2013			Thereafter			Total
(dollars in thousands)
Long-term debt (including current portion)	$	6,250		$	—		$	6,250		$	—		$	6,250		$	—		$	6,250		$	25,000
Average interest rate		6.7	%		—	%		6.7	%		—	%		6.7	%		—	%		6.7	%		6.7	%

Defined Benefit Retirement Plans. Most of our retirement plans, including all U.S.-based plans, are defined contribution plans. However, we also provide defined benefit pension plans in certain countries outside of the U.S. Our obligations under these defined benefit plans will ultimately be settled in the future and are therefore subject to estimation. Defined benefit pension accounting under SFAS 87, Employers’ Accounting for Pensions, is intended to reflect the recognition of future benefit costs over the employees’ estimated service periods based on the terms of the pension plans and the investment and funding decisions made by us.

For our defined benefit pension plans, we make assumptions regarding several variables including the expected long-term rate of return on plan assets and the discount rate in order to determine defined benefit pension plan expense for the year. This expense is referred to as “net periodic pension cost.” We assess the expected long-term rate of return on plan assets and discount rate assumption for each defined benefit plan based on relevant market conditions as prescribed by SFAS 87 and make adjustments to the assumptions as appropriate. On an annual basis, we analyze the rates of return on plan assets and discount rates used and determine that these rates are reasonable. For rates of return, this analysis is based on a review of the nature of the underlying assets,

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the allocation of those assets and their historical performance relative to the overall markets in the countries where the related plans are effective. Historically, our assumed asset allocations have not varied significantly from the actual allocations. Discount rates are based on the prevailing market long-term interest rates in the countries where the related plans are effective. As of September 28, 2007, the estimated long-term rate of return on our defined benefit pension plan assets ranged from 0.5% to 7.1% (weighted-average of 5.9%), and the assumed discount rate for our defined benefit pension plan obligations ranged from 2.0% to 5.7% (weighted-average of 5.5%).

If any of these assumptions were to change, our net periodic pension cost would also change. We incurred net periodic pension cost relating to our defined benefit pension plans of $2.3 million in fiscal year 2007, $2.3 million in fiscal year 2006 and $1.6 million in fiscal year 2005 (excluding a settlement loss), and expect our net periodic pension cost to be approximately $1.7 million in fiscal year 2008. A one percent decrease in the weighted-average estimated return on plan assets or assumed discount rate would increase our net periodic pension cost for fiscal year 2008 by $1.1 million or $0.4 million, respectively. As of September 28, 2007, our projected benefit obligation relating to defined benefit pension plans was $53.3 million. A one percent decrease in the weighted-average estimated discount rate would increase this obligation by $11.0 million.

Item 4. Controls and Procedures

Disclosure Controls and Procedures. Based on the evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our Chief Executive Officer and the Chief Financial Officer have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q (December 28, 2007), our disclosure controls and procedures were effective.

Inherent Limitations on the Effectiveness of Controls. The Company’s management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated, can only provide reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons or by collusion of two or more people. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting. There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the first quarter of our fiscal year 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1A. Risk Factors

See Item 1A—Risk Factors presented in our Annual Report on Form 10-K for the fiscal year ended September 28, 2007, which we encourage you to carefully consider.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c)    The following table summarizes information relating to our stock repurchases during the first quarter of fiscal year 2008:

Fiscal Month	Shares Repurchased (1)	Average Price Per Share (1)		Total Value of Shares Repurchased as Part of Publicly Announced Plan (2)(3)		Maximum Total Value of Shares that May Yet Be Purchased Under the Plan
(In thousands, except per share amounts)
Balance – September 28, 2007						$	50,392
September 29, 2007 – October 26, 2007	—	$	—	$	—		50,392
October 27, 2007 – November 23, 2007	45		68.14		3,073		47,319
November 24, 2007 – December 28, 2007	176		68.55		11,182	$	36,137
Total shares repurchased	221	$	68.47	$	14,255

(1) Includes 12,000 shares tendered to the Company by employees in settlement of employee tax withholding obligations due from those employees upon the vesting of restricted stock.

(2) In January 2007, our Board of Directors approved a stock repurchase program under which we were authorized to utilize up to $100 million to repurchase shares of our common stock. This repurchase program is effective through December 31, 2008.

(3) Excludes commissions on repurchases.

Item 6. Exhibits

(a) Exhibits.

			Incorporated by Reference
Exhibit No.		Exhibit Description	Form	Date	Exhibit Number	Filed Herewith
10.5	*	Varian, Inc. Omnibus Stock Plan, as amended and restated as of November 8, 2007	8-K	February 1, 2008	10.1
10.17	*	Form of Restricted Stock Agreement between Varian, Inc. and Executive Officers (used beginning November 8, 2007)				X
10.26	*	Description of Compensatory Arrangements Between Varian, Inc. and Non-Employee Directors	8-K	February 1, 2008	10.2
10.28	*	Description of Certain Compensatory Arrangements Between Varian S.p.A. and Sergio Piras				X
31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management contract or compensatory plan or arrangement.

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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 thereunto duly authorized.

	VARIAN, INC.
	(Registrant)
Date: February 4, 2008	By:	/s/ G. EDWARD MCCLAMMY
		G. Edward McClammy
		Senior Vice President, Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial Officer)

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EX-10.17

Exhibit 10.17

Form of Restricted Stock Agreement between Varian, Inc. and Executive Officers

(used beginning November 8, 2007)

VARIAN, INC.

OMNIBUS STOCK PLAN

RESTRICTED STOCK AGREEMENT

Varian, Inc. (the “Company”) hereby grants you, [NAME OF EMPLOYEE] (the “Employee”), shares of Restricted Stock (the “Shares”) under the Company’s Omnibus Stock Plan (the “Plan”). The date of this Agreement is [GRANT DATE] (the “Grant Date”). Subject to the provisions of Appendix A and of the Plan, the principal features of this grant are as follows:

Total Number of Shares of Restricted Stock: [NUMBER A]

Scheduled Vesting Dates:	Number of Shares:
[DATE]	[___% of NUMBER A]
[DATE]	[___% of NUMBER A]
[DATE]	[___% of NUMBER A]

Your signature below indicates your agreement and understanding that this grant is subject to all of the terms and conditions contained in Appendix A and the Plan. For example, important additional information on vesting and forfeiture of the Shares is contained in Paragraphs 4 through 6 of Appendix A. ACCORDINGLY, PLEASE BE SURE TO READ ALL OF APPENDIX A, WHICH CONTAINS THE SPECIFIC TERMS AND CONDITIONS OF THIS GRANT.

VARIAN, INC.		EMPLOYEE
By:
Name:	A. W. Homan	Name:
Title:	Secretary	Home Address:

APPENDIX A

TERMS AND CONDITIONS OF RESTRICTED STOCK

1. Grant of Restricted Stock. The Company hereby grants to the Employee under the Plan, for past services and as a separate incentive in connection with his or her employment and not in lieu of any salary or other compensation for his or her services, an award of [NUMBER A] Shares of Restricted Stock, on the terms and conditions set forth in this Agreement and the Plan. By accepting this award of Restricted Stock, the par value of each Share of Restricted Stock will be deemed paid by the Employee by past services rendered by the Employee, and will be subject to the appropriate tax withholdings.

2. Shares Held in Escrow. Unless and until the Shares of Restricted Stock vest in the manner set forth in Paragraphs 3, 4 or 5, the Shares shall be issued in the name of the Employee and held by the Secretary of the Company as escrow agent (the “Escrow Agent”), and shall not be sold, transferred or otherwise disposed of, and shall not be pledged or otherwise hypothecated. The Company may instruct the transfer agent for its common stock to place a legend on the certificates representing the Shares or otherwise note its records as to the restrictions on transfer set forth in this Agreement and the Plan. The certificate or certificates representing the Shares shall not be delivered by the Escrow Agent to the Employee unless and until the Shares have vested and all other terms and conditions in this Agreement have been satisfied.

3. Number of Shares; Changes in Stock. The number and class of Shares specified in Paragraph 1 above are subject to adjustment by the Committee in the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, split-up, Share combination or other change in the corporate structure of the Company affecting the Shares. In the event of any such merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, split-up, Share combination, or other change in the corporate structure of the Company affecting the Shares, by virtue of which the Employee shall, in his or her capacity as owner of unvested Shares awarded to him or her under this Agreement (the “Prior Shares”), be entitled to new or additional or different shares of stock or securities (other than rights or warrants to purchase securities), such new or additional or different shares or securities shall thereupon be considered to be unvested Shares of Restricted Stock and shall be subject to all of the conditions and restrictions which were applicable to the Prior Shares pursuant to this Agreement and the Plan. If the Employee receives rights or warrants with respect to any Prior Shares, such rights or warrants may be held or exercised by the Employee, provided that until such exercise any such rights or warrants and after such exercise any shares or other securities acquired by the exercise of such rights or warrants shall be considered to be unvested Shares of Restricted Stock and shall be subject to all of the conditions and restrictions which were applicable to the Prior Shares pursuant to the Plan and this Agreement. The Committee in its absolute discretion at any time may accelerate the vesting of all or any portion of such new or additional shares of stock or securities, rights or warrants to purchase securities or shares or other securities acquired by the exercise of such rights or warrants.

4. Vesting Schedule. Except as otherwise provided in this Agreement, the Shares will vest as to thirty-three and one-third percent (33-1/3%) of the Shares specified in Paragraph 1 above on the first anniversary date of the Grant Date, and as to an additional thirty-three and one-third percent (33-1/3%) on each succeeding anniversary date, until the right to exercise this option shall have vested with respect to one hundred percent (100%) of such Shares. On any scheduled vesting date, vesting actually will occur only if the Employee has been continuously employed by the Company or an Affiliate from the Grant Date until such scheduled vesting date. Notwithstanding the foregoing, in the event of the Employee’s Termination of Service due to death or Disability or Retirement (as defined pursuant to the Company’s or other employing Affiliate’s retirement policies as they may be established from time to time), if the vesting of any of the Shares specified in Paragraph 1 had not yet vested, then such unvested Shares will vest as follows:

(a) if the Employee’s death, Disability or Retirement occurs before the first anniversary of the Grant Date, the following the number of Shares shall then vest: the pro rata number of Shares determined by multiplying (i) the total number of Shares specified in Paragraph 1 by (ii) the percentage determined by dividing the number of full fiscal quarters elapsed following the Grant Date to the date of the Employee’s death, Disability or Retirement by 4; or

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(b) if the Employee’s death, Disability or Retirement occurs on or after the first anniversary of the Grant Date, all of such unvested Shares shall then vest.

5. Forfeiture. Except as expressly provided in Paragraph 4, and notwithstanding any contrary provision of this Agreement, the balance of the Shares which have not vested at the time of the Employee’s Termination of Service shall thereupon be forfeited and automatically transferred to and reacquired by the Company at no cost to the Company. The Employee hereby appoints the Escrow Agent with full power of substitution, as the Employee’s true and lawful attorney-in-fact with irrevocable power and authority in the name and on behalf of the Employee to take any action and execute all documents and instruments, including, without limitation, stock powers which may be necessary to transfer the certificate or certificates evidencing such unvested Shares to the Company upon such Termination of Service.

6. Death of Employee. In the event that the Employee dies while in the employ of the Company and/or an Affiliate or prior to delivery of any Shares that vested prior to Employee’s death, any distribution or delivery under this Agreement shall be made to the Employee’s designated beneficiary, or if either no beneficiary survives the Employee or the Committee does not permit beneficiary designations, to the administrator or executor of the Employees’ estate. Any designation of a beneficiary by the Employee shall be effective only if such designation is made in a form and manner acceptable to the Committee. Any transferee must furnish the Company with (a) written notice of his or her status as transferee, (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to such transfer, and (c) written acceptance of the terms and conditions of this grant as set forth in this Agreement.

7. Payment of Taxes. The Company or the employing Affiliate will withhold a portion of the Shares that have an aggregate market value sufficient to pay federal, state and local income, employment and any other applicable taxes required to be withheld by the Company or the employing Affiliate with respect to the Shares, unless the Company, in its sole discretion, requires the Employee to make alternate arrangements satisfactory to the Company for such withholdings in advance of the arising of any withholding obligations. The number of Shares withheld pursuant to the foregoing sentence will be rounded up to the nearest whole Share, with no refund to the Employee for any value of the Shares withheld in excess of the tax obligation as a result of such rounding. Notwithstanding any contrary provision of this Agreement, no Shares will be delivered to the Employee unless and until satisfactory arrangements (as determined by the Company) have been made by the Employee with respect to the payment of any income and other taxes which the Company determines must be withheld or collected with respect to such Shares. In addition and to the maximum extent permitted by law, the Company or the employing Affiliate has the right to retain without notice from salary or other amounts payable to the Employee, cash having a sufficient value to satisfy any tax withholding obligations that the Company determines cannot be satisfied through the withholding of otherwise deliverable Shares. All income and other taxes related to the Shares are the sole responsibility of the Employee.

8. Rights as Stockholder. Neither the Employee nor any person claiming under or through the Employee shall have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares shall have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to the Escrow

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Agent or the Employee. Except as provided in Paragraph 11, after such issuance, recordation and delivery, the Employee shall have all the rights of a stockholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares.

9. No Effect on Service. The Employee’s employment with the Company and its Affiliates is on an at-will basis only. Accordingly, subject to any written, express employment agreement with the Employee, nothing in this Agreement or the Plan shall confer upon the Employee any right to continue to be employed by the Company or any Affiliate or shall interfere with or restrict in any way the rights of the Company or the Affiliate, which are hereby expressly reserved, to terminate the employment of the Employee at any time for any reason whatsoever, with or without good cause. Such reservation of rights can be modified only in an express written contract executed by a duly authorized officer of the Company or the Affiliate employing or otherwise engaging the Employee. For purposes of this Agreement, the transfer of the employment of the Employee between the Company and any one of its Affiliates (or between Affiliates) shall not be deemed a Termination of Service. Nothing herein contained shall affect the Employee’s right to participate in and receive benefits under and in accordance with the then current provisions of any pension, insurance or other employee welfare plan or program of the Company or any Affiliate.

10. Address for Notices. Any notice to be given to the Company under the terms of this Agreement shall be addressed to the Company, in care of its Secretary, at 3120 Hansen Way, Palo Alto, California 94304, or at such other address as the Company may hereafter designate in writing.

11. Grant is Not Transferable. Except as otherwise expressly provided herein, this grant and the rights and privileges conferred hereby may not be transferred, pledged, assigned or otherwise hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, pledge, assign, hypothecate or otherwise dispose of this grant, or of any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment or similar process, this grant and the rights and privileges conferred hereby immediately shall become null and void.

12. Binding Agreement. Subject to the limitation on the transferability of this grant contained herein, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

13. Conditions for Issuance of Certificates. The Shares deliverable to the Employee may be either previously authorized but unissued shares or issued shares which have been reacquired by the Company. The Company shall not be required to issue any certificate or certificates for the Shares prior to fulfillment of all the following conditions: (a) the admission of such Shares to listing on all stock exchanges on which such class of stock is then listed; and (b) the completion of any registration or other qualification of such Shares under any State or Federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable; and (c) the obtaining of any approval or other clearance from any State or Federal governmental agency, which the Committee shall, in its absolute discretion, determine to be necessary or advisable; and (d) the lapse of such reasonable period of time following the Grant Date as the Committee may establish from time to time for reasons of administrative convenience.

14. Plan Governs. This Agreement is subject to all of the terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan shall govern. Capitalized terms and phrases used and not defined in this Agreement shall have the meanings set forth in the Plan.

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15. Committee Authority. The Committee shall have all discretion, power, and authority to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon the Employee, the Company and all other interested persons, and shall be given the maximum deference permitted by law. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Agreement.

16. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to its principles of conflicts of law.

17. Captions. The captions provided herein are for convenience only and are not to serve as a basis for the interpretation or construction of this Agreement.

18. Agreement Severable. In the event that any provision in this Agreement shall be held invalid or unenforceable, such provision shall be severable from, and such invalidity or unenforceability shall not be construed to have any effect on, the remaining provisions of this Agreement.

19. Modifications to the Agreement. This Agreement constitutes the entire understanding of the parties on the subjects covered. The Employee expressly warrants that he or she is not executing this Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company.

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EX-10.28

Exhibit 10.28

DESCRIPTION OF CERTAIN COMPENSATORY ARRANGEMENTS

BETWEEN VARIAN S.P.A. AND SERGIO PIRAS

Sergio Piras, Senior Vice President, Vacuum Technologies, is employed by and serves as Managing Director of the Company’s wholly-owned subsidiary in Italy, Varian S.p.A., working from its facility in Torino, Italy. Due to his position with Varian S.p.A., Mr. Piras is classified as an “Industrial Dirigenti” (an industry executive) – as are certain other senior managers at Varian S.p.A. – and therefore subject to a national collective labor agreement for all industrial dirigenti in Italy (the “CCNL”). The CCNL mandates that certain compensatory arrangements and benefits be provided to dirigenti working for industrial companies in Italy, which arrangements and benefits may be different from what is provided to non-dirigenti employees. Following is a summary of the compensatory arrangements and benefits provided to Mr. Piras under the CCNL:

• The CCNL mandates a supplementary defined contribution retirement plan for industrial dirigenti, referred to as the Previndai Plan. Attached to this Exhibit 10.28 is a summary translation from Italian of the Previndai Plan rules. Under the CCNL and Previndai Plan, Mr. Piras is required to contribute to the Plan an amount equal to approximately 4% of his base salary and variable compensation (up to a maximum of €6,000), most of which is on a tax-deferred basis, which contribution the Company is required to match. Mr. Piras may elect to contribute up to an additional 2% of his base salary and variable compensation (on an after-tax basis). The Plan is administered by third-parties (appointed by Previndai’s governing board), and Mr. Piras chooses from available investment options how to invest his and the Company’s contributions to his Plan account. Mr. Piras may receive distributions from his Plan account only after his employment with the Company terminates and he ceases any other employment (i.e., he fully “retires”).

Under Italian law, the Company is also required (under a government-mandated program, referred to as “TFR”, applicable to all Italy employees) to accrue and eventually pay to Mr. Piras a lump-sum amount when his employment terminates (regardless of the reason for that termination). The annual amount required to be accrued for Mr. Piras’ TFR is equal to his annual base salary plus annual cash bonus divided by 13.5. Under Italian law, Mr. Piras may elect to transfer all or a portion of his TFR entitlement to his Previndai Plan account.

• The CCNL mandates that certain medical, life and disability insurance benefits be provided to industrial dirigenti. These benefits are (1) private group “dirigenti” medical coverage that reimburses Mr. Piras for approximately 60% of the costs of private medical care incurred by him or his dependants, subject to certain maximum reimbursements, with Mr. Piras paying a portion of the premium for this coverage; (2) supplemental group medical insurance that reimburses Mr. Piras for costs of private medical care incurred by him or his dependants to the extent not reimbursed under the basic private group medical insurance; (3) accidental death or disability insurance that would pay amounts equal to

five times annual base salary in the event of Mr. Piras’ death and six times annual base salary in the event of his total permanent disability; (4) basic life insurance that would pay approximately Euros 180,759 in the event of Mr. Piras’ death or total permanent disability; and (5) supplemental life insurance that would pay approximately Euros 16,240 in the event of Mr. Piras death or total permanent disability.

• The CCNL mandates that industrial dirigenti be paid supplemental per diem compensation of Euros 75 for business travel to the extent exceeding 12 hours in a day.

• The CCNL mandates that an industrial dirigenti be paid certain severance in the event of a voluntary termination of the dirigenti’s employment under certain circumstances. In the case of Mr. Piras, this amount is equal to 12 months of Mr. Piras’ base salary, which amount would be required to be paid to Mr. Piras in lieu of 12 months’ notice of termination of his employment by the Company. Mr. Piras may claim that a termination of his employment by the Company is “unjustified” and petition an Italian labor court or arbitration panel to therefore order the Company to pay him an additional amount ranging from 14 months to 22 months of his base salary plus monthly variable compensation.

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TRANSLATION OF PREVINDAI PLAN RULES

(as of June 28, 2007)

Article 1 – General Provisions

1. These regulations, adopted in application of By-Laws article 11, contain the rules for running the Social Insurance Fund with Capitalization for Executives of Industrial Companies (PREVINDAI) – Pension Fund, hereinafter the “Fund”, established in application of the trade-union agreement dated 3 October 1989 and conforming to subsequent agreements made between the contracting parties, currently Confindustria and Federmanager; it conforms to the provisions of legislative decree 5 December 2005, no. 252 and subsequent amendments – hereinafter the “Decree” – and to the Ministry of Economy and Finance Decree dated 10 May 2007 no. 62 on the adaptation of pre-existing funds as well as the consequent Covip Directive dated 23 May 2007.

2. The rules contained in these Regulations apply to Fund subscribers.

Article 2 – Executive Subscription

1. Subscription occurs through the employer who also subscribes it, committing them both to the Fund, also for the effects of article 4, paragraph 1; this is done on forms prepared by the Fund or a document with corresponding content and must be preceded by the delivery of the By-laws and the informative documents set out in the current regulations; the executive also effects the initial sector option at this time.

2. The subscription also has effect for the purpose of By-laws article 4, paragraph 5.

3. Upon subscription the Fund verifies the existence of the requirements for participation.

4. The explicit subscriber is responsible for the completeness and truth of the information supplied to the Fund.

Article 3 – Formal Fulfilments of Companies

1. In the event that a person who is not yet a member of the Fund is appointed or hired as an executive, the industrial companies and other parties referred to in by-laws article 4, paragraph 3, must communicate said person’s personal data if they adhere to the Fund.

2. The communications mentioned in the previous point must be made in accordance with the procedures and terms established by the Board of Directors and supplied with any item considered necessary by the latter.

3. Again following the procedures and terms established by the Board of Directors, industrial companies must also, and in any case, notify the Fund of every case where the working relationship is terminated with an executive who has subscribed to the Fund.

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4. Where subscription occurs through the tacit conferment of the Severance Indemnity (TFR), the Fund shall notify the subscriber, on the basis of data supplied by the employer, that subscription has occurred together with the information necessary to allow the latter to exercise his/her rights.

Article 4 – Payment of Contributions

1. The payment of contributions owed to the Fund according to the provisions of By-laws article 14, must be made by the company quarterly as well as, the part owed by the executive after social security tax is deducted from his/her pay, by the 20^th day of the month following the quarter to which the pay refers and upon which the social security contributions are calculated, barring deferment to the first useful working day, even if it falls on a local holiday or in the event it coincides with a Saturday or a national week-day holiday. The quarterly periods always start on the first day of January, April, July and October.

2. When paying contributions companies must provide the Fund, or the organization appointed by it, with lists of names indicating the contributions corresponding to each executive and any other necessary item, clearly showing the Severance Indemnity sum for each quarter, as a share or as a whole, allocated to complementary social security on the basis of the current regulations.

3. The procedures for the payment of contributions and filling in and transmission of the lists of names are established by the Board of Directors.

4. In the event of bankruptcy, deed of arrangement, compulsory administration liquidation and other insolvency procedures, and in general any time it is considered, on the basis of an examination of each individual situation, that the credit contribution cannot be recovered as a whole or in part, the Fund’s Board of Directors shall be able to accept, from the executive who requests it, the payment of the contributions due, even for the part due from the company, as well as any interests in arrears, with the simultaneous subrogation of the executive in the credit rights of the Fund pursuant to civil code article 1202, with the exception of the operativeness of the Fund referred to in legislative decree no. 80/92.

5. The subscriber may voluntarily continue to pay contributions to the Fund, determining the size of the contribution and also exceeding the retirement age provided for in the compulsory pension system, on the condition that on the retirement date s/he has accumulated at least a year’s worth of contributions to the supplementary social insurance schemes. The Board of Directors governs the procedures and terms for the payment of said contribution to the Fund.

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Article 5 – Leave of Absence

1. During periods of absence for any reason, the obligation to contribute to the Fund is limited to periods in which the executive continues to receive his/her pay from the subscriber company.

Article 6 – Acquisition of the Provision Established at Another Fund

1. In the event that an executive comes from another company where a fund or similar institution referred to under By-laws article 4, paragraph 3, first sentence is active, and from which transfer is allowed, as well as in the other cases of exercising the right to transfer the position to the Fund provided for by Decree article 14, the Fund, upon the request of the concerned party, acquires, for every effect, the executive’s accrued social security position and provides for the social security benefits pursuant to the conditions set out in the By-laws and these Regulations. Upon transfer from other funds, the subscriber can allocate the transferred position, breaking it down into more than one sector, according to the provision referred to in By-laws article 8, paragraph 2, letter i), and in compliance with any management restrictions of the original fund.

2. The same regulations apply to the collective transfer of positions formed within funds or similar institutions referred to in the aforementioned By-laws article 4, paragraph 3, first sentence, except for managerial restrictions or restrictions of a different nature connected to the transfer operation.

Article 7 – Management of Resources

1. With regard to the management of resources, the Fund can use agreements of both a financial and insurance nature, provided that their content is adequately publicized.

2. For the purpose of allocating the current overall contribution to the various sectors, paid under article 4, and/or of all or part of the already accrued position, the subscriber exercises the option between activated sectors, in compliance with the time limits referred to in article 3; the Board of Directors sets the minimum shares to be allocated to each sector, pursuant to By-laws article 8, paragraph 2, letter i).

3. In the event that no sector(s) has been chosen when explicit subscription occurs, or under the circumstances referred to in the previous article 6, the contribution, maintaining crediting to the single position, remains available to the Fund during the questioning procedure period, whose methods and duration are established by the Board of Directors, maintaining the maximum limit of three months; if this time limit expires to no effect, the contribution shall be automatically allocated to the insurance sector, with the options effects as set out in the next paragraph. The remaining explicitly conferred Severance Indemnity (TFR) shall be allocated on the basis of the option already made in relation to the contribution.

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4. At least a year must pass between the options referred to in this article. The new allocation shall be made in the technical timescale that also arises from the agreements provided for each sector, according to the procedures established by the Board of Directors.

5. For the purpose of total redemption, transfer to another fund and benefits, reference is made to the overall position. In the case of an advance and partial redemption on the split position, the subscriber must state the sectors from which to draw the sums.

6. In relation to subscribers that have allocated the accrued position to a sector(s) different to the allocation of the current contributions, the Board of Directors may establish, at the expense of the position(s) not increased by new contributions, a sum to share in the management costs, in relation to the greater managerial complexity of the overall position.

7. The terms and methods for the payment of premiums to the insurance Companies and for the transfer of resources to managers are established by the Board of Directors of the Fund upon signing the respective agreements.

Article 8 – Termination of the Working Relationship

1. In the event that the working relationship is terminated for reasons other than unexpected permanent total disability or death and before the requirements for settling the legal corresponding pension benefits become due, the executive – maintaining the rights referred to in the following articles 9 and 11 – may keep the provisions already made up until that moment at the Fund; s/he shall have the right to the benefits, according to the conditions provided for in the By-laws and these Regulations, upon attainment of the aforementioned requirements.

2. In the event the position referred to in the previous paragraph is maintained for over two years, the Board of Directors can establish, at the expense of the position of the concerned party, a sum to share in the management costs.

Article 9 – Transfer of the Position

1. In the event the subscriber loses the requirements for participating in Previndai, the member may transfer the accrued individual position to another supplementary pension scheme that she/he is eligible for in relation to new employment activity.

2. The subscriber, in keeping with the requirements for participation in the Fund, may transfer the accrued individual position to another supplementary pension scheme after a minimum period of two years of participating in the Fund.

3. In said aforementioned events, Previndai must satisfy the request within six months of the exercised option, defining the size of the position to transfer on the basis of the correct financial and actuarial criteria.

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Article 10 – Advance Loans

1. The subscriber may obtain an advance from the accrued individual position in the following cases and limits:

a. at any time: a sum of no more than 75 per cent, for health costs arising from serious situations relating to said subscriber, his/her spouse or children, for care and special operations admitted by the relevant public organizations;

b. after 8 years of subscription: a sum of no more than 75 per cent to buy a first house for said subscriber or his/her children, or to carry out ordinary, extraordinary, restoration, conservative renovation and building works on the first house as provided for under letters a), b), c) and d) of paragraph 1, article 3 of Presidential Decree 6 June 2001, no. 380. For the latter case, the administrative documents and costs to transmit are those set out in the provisions of article 1, paragraph 3 of law 449/97;

c. after 8 years of subscription: a sum of no more than 30 per cent to satisfy his/her additional needs.

2. In the event of an advance to purchase a first house, a provisional payout is allowed prior to the public Notary deed upon presentation of the preliminary sale contract by public deed or private authenticated agreement, with the obligation to repay the sum if the concerned party has not produced an authenticated copy of the notary purchase deed within nine months from the payout. For the implementation of these regulatory rules the Board adopts the necessary current regulations.

3. The overall sums received as advances may not exceed 75 per cent of the accrued individual position, increased by the advances received and not reinstated.

4. In order to determine the seniority necessary to exercise the right to take out an advance, all the subscriber’s periods of membership of accrued supplementary pension schemes are taken into account, for which the same has not exercised the right to total redemption of the individual position.

5. The subscriber may choose to reinstate sums received as advance loans at any time according to the procedures established by the Board of Directors.

6. The advances referred to in paragraph 1 letter a) are subject to the same transfer, attachment and distraint limits valid for compulsory social security institutions pensions.

7. The Fund provides for the fulfilments arising from the exercising of the aforementioned right by the member, promptly and in any case within the maximum time limit of three months from the request on the basis of health receipts relating to health costs, and six months from the date of receiving the request, for the others; the sum available is that which ensues in the first useful days of valorization of the pertaining sectors following the day on which the Fund has verified that the conditions exist for the right to be exercised.

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8. The provisions that specify the cases and regulate the operative procedures on advance loans are set out in a specially prepared document.

9. The transfer of the individual position involves the termination of participation in the Fund.

Article 11 – Redemption

1. The member who no longer has the requirements for participation in the Fund before retirement may:

a. Redeem 50 per cent of the accrued individual position, in the event that working activity is terminated involving unemployment for a period of time no less than 12 months and no longer than 48 months, or in the event of the employer’s recourse to mobility procedures and the ordinary or extraordinary temporary unemployment compensation;

b. redeem the entire accrued individual position in the event of permanent disability that involves the reduction in the capacity to work to less than a third, or following the termination of working activity involving unemployment for a period of time longer than 48 months. However, redemption is not allowed if such events occur within the five-year period prior to the accrual of the requirements of access to the supplementary pension benefits; in that case the provisions of By-laws article 18, paragraph 4 apply.

c. redeem the entire accrued individual position pursuant to article 14, paragraph 5 of the Decree in the event of the loss of requirements necessary for participation in Previndai, and if the conditions for exercising the rights of transfer referred to in Decree article 14, paragraph 2, letter (a) do not occur within a year; for the purpose of the exercising of said right, the executive must submit the request together with the liability declaration of non-participation in other forms of supplementary pension schemes.

2. Subscribers who attain the right to compulsory retirement and actually exercise it, terminating the working relationship without having matured the right to the supplementary pension benefits of the Fund, are immediately attributed the right to redemption of the entire individual position.

3. In the event of the death of the subscriber before the accrual of the pension benefits right, the regulation set out in article 18, paragraph 6 of the By-laws is applied.

4. No other forms of redemption of the position are provided for other than those cases stated above.

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5. The terms of fulfilment at the expense of the Fund are those referred to in article 10, paragraph 7.

6. Total redemption involves the termination of participation in the Fund.

Article 12 – Benefits Request

1. The executive subscriber, whose working relationship has been terminated and who, possessing the requirements for the recognition of the pension by law, has submitted the relative request, must send a special application to the Fund in order to obtain the overall social security benefits due. A special request must likewise be submitted by the executive referred to in By-laws article 18, paragraph 4 as well as by the executive subscriber’s survivors for the relevant social security benefits.

2. At the same time the request is made, the executive must expressly indicate if s/he intends to request the conversion of the life annuity into the corresponding capital, in conformity with and within the limits provided for by By-laws article 18, paragraph 5, and obtain the reversibility of the benefits, appointing a beneficiary of it.

3. The social security benefit due shall be paid within the time limit set by the Board of Directors of the Fund. The Board of Directors, in relation to specific needs, is entitled to adopt particular measures, including the adoption of a longer time limit than that generally set, and starting from the payment of the last contribution to the Fund.

4. The Board of Directors shall likewise establish terms and procedures for filing the social security benefits request, as well as time intervals, methods and procedures for the attainment of the latter.

Article 13 – Beneficiaries of Reversibility

1. The beneficiary of the reversibility benefit for the effects of By-laws article 18, second paragraph is the person designated by the executive at the time of the request for social security benefits referred to in article 12 of these Regulations.

Article 14 – Final and Transitional Provision

1. These Regulations come into force with immediate effect, with the exception of the continued operativeness of prior regulations in order to govern situations that already exist on the date these Regulations come into effect.

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Garry W. Rogerson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Varian, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 4, 2008

/s/ GARRY W. ROGERSON        

Garry W. Rogerson

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, G. Edward McClammy, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Varian, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 4, 2008

/s/ G. EDWARD MCCLAMMY        

G. Edward McClammy

Senior Vice President, Chief Financial Officer

and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report on Form 10-Q of Varian, Inc. for the period ended December 28, 2007, as filed with the Securities and Exchange Commission on the date of this certification (the “Report”), the undersigned hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Varian, Inc.

Dated: February 4, 2008

/s/ GARRY W. ROGERSON        

Garry W. Rogerson

President and Chief Executive Officer

A signed original of this written statement as required by Section 906 has been provided to Varian, Inc. and will be retained by Varian, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report on Form 10-Q of Varian, Inc. for the period ended December 28, 2007, as filed with the Securities and Exchange Commission on the date of this certification (the “Report”), the undersigned hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Varian, Inc.

Dated: February 4, 2008

/s/ G. EDWARD MCCLAMMY        

G. Edward McClammy

Senior Vice President, Chief Financial Officer

and Treasurer

A signed original of this written statement as required by Section 906 has been provided to Varian, Inc. and will be retained by Varian, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.