-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, B4xzOQXJMsfOOGr2cvXWS14OWPwXf19WQyGGTGK5xVk7/TUPpNxref4cjj+W3Vns p93OmJaZkLSoFnnY+zCGPQ== 0000891618-95-000044.txt : 19950515 0000891618-95-000044.hdr.sgml : 19950515 ACCESSION NUMBER: 0000891618-95-000044 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19941230 FILED AS OF DATE: 19950209 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VARIAN ASSOCIATES INC /DE/ CENTRAL INDEX KEY: 0000203527 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 942359345 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07598 FILM NUMBER: 95507429 BUSINESS ADDRESS: STREET 1: 3050 HANSEN WAY CITY: PALO ALTO STATE: CA ZIP: 94304-1000 BUSINESS PHONE: 4154934000 MAIL ADDRESS: STREET 1: 3050 HANSEN WAY CITY: PALO ALTO STATE: CA ZIP: 94304-1000 FORMER COMPANY: FORMER CONFORMED NAME: VARIAN DELAWARE INC DATE OF NAME CHANGE: 19761123 10-Q 1 QTRLY ENDING 12/30/94 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 30, 1994 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: 1-7598 EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER: VARIAN ASSOCIATES, INC. STATE OR OTHER JURISDICTION IRS EMPLOYER INCORPORATION OR ORGANIZATION: IDENTIFICATION NO.: DELAWARE 94-2359345
Address of principal executive offices: 3050 Hansen Way, Palo Alto, California 94304-1000 Telephone No., including area code: (415) 493-4000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- --------------------- Common Stock, New York Stock Exchange $1 par value Pacific Stock Exchange Preferred Stock New York Stock Exchange Purchase Rights Pacific Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- An index of exhibits filed with this Form 10-Q is located on page 13. Indicate the number of shares outstanding of each of the issuer's classes of common stock as of January 27, 1995: 33,714,000 shares of $1 par value common stock. 2 PART 1. FINANCIAL INFORMATION VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF EARNINGS UNAUDITED
FIRST QUARTER ENDED ----------------------------- (DOLLARS IN THOUSANDS DECEMBER 30, DECEMBER 31, EXCEPT PER SHARE AMOUNTS) 1994 1993 ------------ ------------ SALES $401,127 $323,750 -------- -------- OPERATING COSTS AND EXPENSES Cost of sales 271,044 219,645 Research and development 21,580 18,425 Marketing 47,094 41,707 General and administrative 27,539 24,097 -------- -------- TOTAL OPERATING COSTS AND EXPENSES 367,257 303,874 -------- -------- OPERATING EARNINGS 33,870 19,876 Interest expense, net 930 1,062 -------- -------- EARNINGS BEFORE TAXES 32,940 18,814 Taxes on earnings 12,190 7,150 -------- -------- NET EARNINGS $ 20,750 $ 11,664 ======== ======== AVERAGE SHARES OUTSTANDING INCLUDING COMMON STOCK EQUIVALENTS (1) 34,981 35,644 ======== ======== EARNINGS PER SHARE - FULLY DILUTED (1) $ 0.59 $ 0.33 ======== ======== Dividends Declared Per Share (1) $ 0.06 $ 0.05 Order Backlog 864,600 737,500
(1) Note: Prior period restated for two-for-one stock split effected in the form of a stock dividend in Q2 FY94. See accompanying notes to the consolidated financial statements. -2- 3 VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS UNAUDITED
DECEMBER 30, SEPTEMBER 30, (DOLLARS IN THOUSANDS EXCEPT PAR VALUES) 1994 1994 ------------ ------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 77,398 $ 78,872 Accounts receivable 327,564 338,448 Inventories Raw materials and parts 125,811 104,212 Work in process 69,084 60,296 Finished goods 23,693 14,668 ---------- --------- Total Inventories 218,588 179,176 Other current assets 79,829 72,243 ---------- --------- TOTAL CURRENT ASSETS 703,379 668,739 Property, Plant, and Equipment 585,702 574,402 Accumulated depreciation and amortization (349,061) (339,082) ---------- --------- NET PROPERTY, PLANT, AND EQUIPMENT 236,641 235,320 Other Assets 60,055 58,364 ---------- --------- TOTAL ASSETS $1,000,075 $ 962,423 ========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 46,413 $ 4,816 Accounts payable - trade 78,475 78,094 Accrued expenses 234,003 248,751 Product warranty 42,447 41,682 Advance payments from customers 63,626 58,440 ---------- --------- TOTAL CURRENT LIABILITIES 464,964 431,783 Long-Term Debt 60,334 60,399 Deferred Taxes 20,759 20,788 ---------- --------- TOTAL LIABILITIES 546,057 512,970 ---------- --------- STOCKHOLDERS' EQUITY Preferred stock Authorized 1,000,000 shares, par value $1, issued none - - Common stock Authorized 99,000,000 shares, par value $1, issued and outstanding 33,733,000 shares at December 30,1994 and 33,979,000 shares at September 30, 1994 33,733 33,979 Retained earnings 420,285 415,474 ---------- --------- TOTAL STOCKHOLDERS' EQUITY 454,018 449,453 ---------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,000,075 $ 962,423 ========== =========
See accompanying notes to the consolidated financial statements. -3- 4 VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
FIRST QUARTER ENDED --------------------------- DECEMBER 30, DECEMBER 31, (DOLLARS IN THOUSANDS) 1994 1993 ------------ ------------ OPERATING ACTIVITIES Net Cash Used by Operating Activities $ (5,776) $(13,175) INVESTING ACTIVITIES Purchase of property, plant, and equipment (12,135) (8,788) Purchase of businesses, net of cash acquired (9,995) 250 Other, net 708 (136) -------- -------- Net Cash Used by Investing Activities (21,422) (8,674) FINANCING ACTIVITIES Net borrowings on short-term obligations 41,597 23,301 Purchase of common stock (18,936) (14,406) Other, net 2,686 3,755 -------- -------- Net Cash Provided by Financing Activities 25,347 12,650 EFFECTS OF EXCHANGE RATE CHANGES ON CASH 377 588 -------- -------- Net Decrease in Cash and Cash Equivalents (1,474) (8,611) Cash and Cash Equivalents at Beginning of Period 78,872 73,307 -------- -------- Cash and Cash Equivalents at End of Period $ 77,398 $ 64,696 ======== ========
See accompanying notes to the consolidated financial statements. -4- 5 VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Unaudited (Dollars in Millions) NOTE 1: The consolidated financial statements include the accounts of Varian Associates, Inc. and its subsidiaries and have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest Form 10-K annual report. In the opinion of management, the consolidated financial statements include all normal recurring adjustments necessary to present fairly the information required to be set forth therein. The results of operations for the first quarter ended December 30, 1994, and December 31, 1993, are not necessarily indicative of the results to be expected for a full year or for any other periods. NOTE 2: Inventories are valued at the lower of cost or market (realizable value) using the last-in, first-out (LIFO) cost for the U.S. inventories of the Health Care Systems (except for X-ray Tube Products), Instruments, and Semiconductor Equipment segments. All other inventories are valued principally at average cost. Approximately half of total gross inventories are valued using the LIFO method. If the first-in, first-out (FIFO) method had been used for those operations valuing inventories on a LIFO basis, inventories would have been higher than reported by $49.6 at December 30, 1994, $49.0 at September 30, 1994, $51.4 at December 31, 1993, and $50.8 at October 1, 1993. NOTE 3: The Company enters into forward exchange contracts to mitigate the effects of operational (sales orders and purchase commitments) and balance sheet exposures to fluctuations in foreign currency exchange rates. When the Company's foreign exchange contracts hedge operational exposure, the effects of movements in currency exchange rates on these instruments are recognized in income when the related revenue and expenses are recognized. When foreign exchange contracts 5 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 3 (Continued) hedge balance sheet exposure, such effects are recognized in income when the exchange rate changes. Because the impact of movements in currency exchange rates on foreign exchange contracts generally offsets the related impact on the underlying items being hedged, these instruments do not subject the Company to risk that would otherwise result from changes in currency exchange rates. At December 30, 1994, the Company had forward exchange contracts with maturities of twelve months or less to sell foreign currencies totaling $67.5 million ($3.4 million of Australian dollars, $1.4 million of Belgian francs, $12.9 million of British pounds, $2.1 million of Canadian dollars, $14.2 million of Deutsche marks, $14.7 million of French francs, $2.3 million of Italian lira, $12.3 million of Japanese yen, $2.4 million of Swedish krona and $1.8 million of Swiss francs,) and to buy foreign currencies totaling $41.1 million ($1.0 million of Canadian dollars, $9.1 million of British pounds and $31.0 million of Japanese yen). NOTE 4: In February 1990, a purported class action was brought by Panache Broadcasting of Pennsylvania, Inc. on behalf of all purchasers of electron tubes in the U.S. against the Company and a joint- venture partner, alleging that the activities of their joint venture in the power-grid tube industry violated antitrust laws. The complaint seeks injunctive relief and unspecified damages which may be trebled under the antitrust laws. In February 1993, the U.S. District Court in Chicago granted the Company's motion to dismiss the complaint with leave to amend. Panache Broadcasting filed an amended complaint in March 1993. A Federal magistrate has recommended that the court grant in part and deny in part the Company's motion to dismiss that complaint. No determination has been made regarding the plaintiff's request to certify the purported class. The Company believes that it has meritorious defenses to the Panache lawsuit. In addition to the above-referenced matter, the Company is currently a defendant in a number of legal actions and could incur an uninsured liability in one or more of them. In the opinion of management, the outcome of the above litigation will not have a material adverse effect on the financial condition of the Company. The Company has also been named by the U.S. Environmental Protection Agency or third parties as a potentially responsible party under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, at six sites to which Varian is alleged to have shipped manufacturing waste for disposal. The Company is also involved in various stages of environmental investigation and/or remediation under the direction of, or in consultation with, local and/or state agencies at certain current or former Company facilities. 6 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 4 (Continued) Uncertainty as to (a) the extent to which the Company caused, if at all, the conditions being investigated, (b) the extent of environmental contamination and risks, (c) the applicability of changing and complex environmental laws, (d) the number and financial viability of other potentially responsible parties, (e) the stage of the investigation and/or remediation, (f) the unpredictability of investigation and/or remediation costs (including as to when they will be incurred), (g) applicable clean-up standards,(h) the remediation (if any) which will ultimately be required, and (i) available technology make it difficult to assess the likelihood and scope of further investigation or remediation activities or to estimate the future costs of such activities if undertaken. In addition, the Company believes that it has rights to contribution and/or reimbursement from financially viable, potentially responsible parties and/or insurance companies, and has filed a lawsuit against 36 insurance companies with respect to most of the above-referenced sites. The Company has established reserves for these environmental matters, which reserves management believes are adequate. Based on information currently available, management believes that the costs of these matters are otherwise not reasonably likely to have a material adverse effect on the financial condition of the Company. NOTE 5: On October 20, 1994, the Company announced that it will seek a buyer for the Electron Devices operations. The sale will not go forward unless the selling price recognizes the increased profitability and improving value attained in the business in recent years. NOTE 6: All share and per share information has been restated to reflect a two-for-one stock split, effected in the form of a stock dividend, which was distributed in March 1994. 7 8 MANAGEMENT'S DISCUSSION AND ANALYSIS On January 19, Varian reported record earnings, sales, and orders for 1995's first quarter. The earnings and sales figures set new first-quarter highs, while orders rose to the best level in the Company's history. Net earnings for the quarter grew 78%, to $20.8 million, from the $11.7 million earned in the year-ago period. Earnings per share were $.59 compared to $.33 in 1994, a 79% increase. First-quarter sales of $401 million grew 24% over the $324 million of a year ago. Backlog of $865 million was 17% above last year's $738 million, and was $90 million above the final quarter of 1994. Orders of $494 million climbed 12% above last year's $440 million. Each of Varian's four core businesses participated in the strong orders growth. Orders for Health Care Systems were 16% above the prior year's first quarter. Although this is traditionally the slowest shipment period of the year for this business, sales climbed 20% on double-digit growth in both Oncology Systems and X-ray Tube Products. Backlog reached a new high at $310 million, up 5% over a year-ago, and 10% above the previous quarter. Operating margins grew 36%, from the year-ago period, driven primarily by the higher revenues from X-ray Tube products. The improved profitability reflects the increasing demand from Japanese original equipment manufacturers for several advanced tubes Varian has developed. This side of the business was expanded during the quarter with the acquisition of Eureka X-ray Tube Products, which broadened its product line in several key areas. Demand for Varian's radiation therapy equipment continued to grow on a worldwide basis due to its cost-effectiveness and efficacy. The Company's multi-year program to expand its participation in promising health care sectors outside the U.S. was enhanced with the acquisition of Sopha Eurotubes Services, a French distributor of Oncology products which also operates an X-ray tube loading station in that country. Instruments business orders rose by 7% over the year-ago quarter, reflecting better demand in all product lines. A particularly strong demand in North America and a ramp-up in bookings from Pacific Rim countries contributed to the higher orders total. Backlog remained flat compared to the year-ago quarter, but was up 18% over 1994's fourth quarter. Sales rose by 2% while operating margins declined by 4% due to a temporary lag in NMR shipments caused by material shortages. Orders for Varian's Semiconductor Equipment business grew 12% over the year-ago quarter, prior to adjustments for the discontinuance of Tokyo Electron Limited (TEL) resale activity. Sales rose 60% and backlog was up 56% over last year's first quarter. Operating margins reached double-digit levels compared to the modest profit of a year ago with both of the segment's product lines contributing to the higher earnings. The current orders figures actually understate the strong interest in Varian Semiconductor Equipment products. The year-ago orders total included $53 million in equipment made by TEL and distributed by Varian under an arrangement which ended September 30. The higher first quarter 1995 orders include only Varian-made systems. A year-to-year comparison of Semiconductor Equipment orders, excluding TEL Products, would result in an increase in first quarter orders of 61%. The demand for the Company's chip-making systems is broad based, with particularly strong orders received from Pacific Rim customers accounting for over half of the total volume. However, demand will likely ease back to a more sustainable level as the year progresses. 8 9 MANAGEMENT'S DISCUSSION AND ANALYSIS CONTINUED Orders for the Electron Devices business grew 13% over the year-ago period due to higher demand for both microwave and power-grid tubes. Sales rose 8% from the prior year quarter and profitability improved 10% for the same period. Backlog was essentially the same as in the prior quarter, but up 11% over the year-ago period. FINANCIAL CONDITION The Company's financial condition remained strong during the first quarter of fiscal 1995. Operating activities consumed cash of $5.8 million in the first quarter of fiscal 1995 compared to $13.2 million in the same period last year. Investing activities in the first quarter of fiscal 1995 used $21.4 million, $10.0 million for the purchase of businesses, and the remainder used mainly for the purchase of property, plant and equipment. Investing activities in the same period last year used $8.7 million, mainly for the purchase of property, plant and equipment. Financing activities provided $25.3 million during 1995 as compared to $12.7 million during 1994. Total debt as a percentage of total capital decreased to 19.0% at the end of the first quarter of fiscal 1995 as compared with 20.4% a year ago. The ratio of current assets to current liabilities decreased to 1.51 to 1 at December 30, 1994, from 1.55 to 1 at fiscal year end, 1994. The Company has available $50 million in unused committed lines of credit. OUTLOOK Despite the favorable financial results described above, future revenue and profitability remain difficult to predict. The Company continues to face various risks associated with its business operations including uncertain general worldwide economic conditions, lingering worldwide recessionary conditions, new product acceptance, and uncertainty regarding possible legislation and private initiatives in the U.S. to control health care costs. Such conditions could affect the Company's future performance. On October 20, 1994, the Company announced that it will seek a buyer for the Electron Devices operations. The sale will not go forward unless the selling price recognizes the increased profitability and improving value attained in the business in recent years. As discussed in the Annual Report Form 10-K for the fiscal year ended September 30, 1994, the Company is involved in certain environmental matters. The Company has established reserves for these environmental matters, which reserves management believes are adequate. Based on information currently available, management continues to believe that the costs of these matters, individually or in the aggregate, are otherwise not reasonably likely to have a material adverse effect on the financial condition or results of operations of the Company. 9 10 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Varian Associates, Inc.: We have reviewed the consolidated balance sheet of Varian Associates, Inc. and subsidiary companies as of December 30, 1994, and the related consolidated statements of earnings and the condensed consolidated statements of cash flows for the quarters ended December 30, 1994 and December 31, 1993. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the aforementioned financial statements for them to be in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P. COOPERS & LYBRAND L.L.P. San Jose, California January 19, 1995 10 11 PART II. OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 10.11 Description of Certain Relocation Arrangements between Registrant and Executive Officers (incorporated herein by reference to Registrant's Form 10-K for the year ended October 1, 1993, except that the provision regarding mortgage assistance for Mr. Aurelio was deleted, effective January 1, 1995). Exhibit 11 Computation of Earnings Per Share. Exhibit 15 Letter Regarding Unaudited Interim Financial Information. Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K: A report on Form 8-K was filed on October 20, 1994, regarding the Registrant's announcement that it will seek a buyer for its Electron Devices operations. 11 12 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VARIAN ASSOCIATES, INC. ----------------------------- Registrant February 9, 1995 ----------------------------- Date /s/ Allen K. Jones ----------------------------- Allen K. Jones Vice President and Controller 12 13 INDEX OF EXHIBITS
Exhibit Number Page - ------ ---- 10.11 Description of Certain Relocation Arrangements Between Registrant and Executive Officers (incorporated herein by reference to Registrant's Form 10-K for the year ended October 1, 1993, except that the provision regarding mortgage assistance for Mr. Aurelio was deleted, effective January 1, 1995). 11 Computation of Earnings Per Share 14 15 Letter Regarding Unaudited Interim Financial Information 15 27 Financial Data Schedule 16
13 EX-11 2 1ST QTR 1 EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE IN ACCORDANCE WITH INTERPRETIVE RELEASE NO. 34-9083 UNAUDITED
FIRST QUARTER ENDED ---------------------- DEC 30, DEC 31, (Shares in Thousands) 1994 1993 ------- ------- Actual weighted average shares outstanding for the period (1) 33,869 34,554 Dilutive employee stock options (1) 1,112 1,090 ------- ------- Weighted average shares outstanding for the period (1) 34,981 35,644 ======= ======= (Dollars in thousands, except per share amounts) Earnings applicable to fully diluted earnings per share $20,750 $11,664 ======= ======= Earnings per share based on SEC interpretive release No. 34-9083: Earnings per share - Fully Diluted (1) (2) $ 0.59 $ 0.33 ======= =======
(1) Prior period restated for two-for-one stock split effected in the form of a stock dividend in March 1994. (2) There is no significant difference between fully diluted earnings per share and primary earnings per share. 14 EX-15 3 SEC LETTER ABOUT FORMS S-8 & S-3 1 EXHIBIT 15 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 RE: Varian Associates, Inc. Registrations on Forms S-8 and S-3 We are aware that our report dated January 19, 1995 on our review of the interim financial information of Varian Associates, Inc. for the quarter ended December 30, 1994 included in this Form 10-Q is incorporated by reference in the Company's registration statements on Forms S-8, Registration Statement Numbers 33-46000, 33-33661, 33-33660, and 2-95139 and Forms S-8 and S-3, Registration Statement Number 33-40460. Pursuant to Rule 436(c) under the Securities Act of 1933 this report should not be considered a part of the registration statements prepared or certified by us within the meaning of Sections 7 and 11 of that Act. /s/ Coopers & Lybrand L.L.P. Coopers & Lybrand L.L.P San Jose, California February 8, 1995 15 EX-27 4 FINANCIAL STATEMENT
5 1,000 3-MOS SEP-29-1995 OCT-1-1994 DEC-30-1994 77,398 0 329,982 2,418 218,588 703,379 585,702 349,061 1,000,075 464,964 0 33,733 0 0 420,285 1,000,075 401,127 401,127 271,044 367,257 0 0 930 32,940 12,190 20,750 0 0 0 20,750 0 0.59
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