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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ____________________________________________________________
FORM 10-Q
 ____________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 3, 2020
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
  _________________________________________________ 
VARIAN MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
 ____________________________________________________________ 
Delaware94-2359345
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
3100 Hansen Way, Palo Alto, California
94304-1038
(Address of principal executive offices)(Zip Code)
(650) 493-4000
(Registrant’s telephone number, including area code)
___________________________________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1 par value VARNew York Stock Exchange
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  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ý    No  ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.  
Large Accelerated Filer   Accelerated filer
Non-Accelerated filer   Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No 
As of January 31, 2020, the registrant had 90,665,845 shares of common stock, par value $1 per share, outstanding.

1


VARIAN MEDICAL SYSTEMS, INC.
FORM 10-Q for the Quarter Ended January 3, 2020
INDEX
 
Part I.
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
Part II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2


PART I
FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)

 Three Months Ended
 January 3,December 28,
(In millions, except per share amounts)20202018
Revenues:
Product$421.0  $400.2  
Service407.9  340.8  
Total revenues828.9  741.0  
Cost of revenues:   
Product271.9  266.6  
Service190.2  158.3  
Total cost of revenues462.1  424.9  
Gross margin366.8  316.1  
Operating expenses:   
Research and development67.1  60.9  
Selling, general and administrative177.0  141.1  
Acquisition-related expenses12.7  2.4  
Total operating expenses256.8  204.4  
Operating earnings110.0  111.7  
Interest income3.0  3.9  
Interest expense(4.7) (1.2) 
Other income, net4.4  23.0  
Earnings before taxes112.7  137.4  
Taxes on earnings23.8  33.5  
Net earnings88.9  103.9  
Less: Net earnings attributable to noncontrolling interests0.7  0.7  
Net earnings attributable to Varian$88.2  $103.2  
Net earnings per share - basic$0.97  $1.13  
Net earnings per share - diluted$0.96  $1.12  
Shares used in the calculation of net earnings per share:
Weighted average shares outstanding - basic90.9  91.0  
Weighted average shares outstanding - diluted91.7  92.0  

See accompanying notes to the condensed consolidated financial statements.
3


VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(Unaudited)
 
 Three Months Ended
 January 3,December 28,
(In millions)20202018
Net earnings$88.9  $103.9  
Other comprehensive earnings (loss), net of tax:
Defined benefit pension and post-retirement benefit plans:
Amortization of prior service cost included in net periodic benefit cost, net of tax benefit of $0.0* and $0.0*, respectively
(0.2) (0.2) 
Amortization of net actuarial loss included in net periodic benefit cost, net of tax expense of $(0.2) and $(0.1), respectively
0.9  0.5  
 0.7  0.3  
Derivative instruments:      
Change in unrealized loss, net of tax benefit of $0.0* and $0.0, respectively
(0.1)   
Reclassification adjustments, net of tax benefit of $0.2 and $0.0, respectively
(0.6)   
(0.7)   
Currency translation adjustment5.1  (4.0) 
Other comprehensive earnings (loss)5.1  (3.7) 
Comprehensive earnings94.0  100.2  
Less: Comprehensive earnings attributable to noncontrolling interests0.7  0.7  
Comprehensive earnings attributable to Varian$93.3  $99.5  
 
* Tax expense or benefit related to the periods presented are not material.

See accompanying notes to the condensed consolidated financial statements.
4


VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 January 3,September 27,
(In millions, except par values)20202019
Assets  
Current assets:  
Cash and cash equivalents$721.9  $531.4  
Trade and unbilled receivables, net of allowance for doubtful accounts of $47.0 and $46.5 at January 3, 2020 and September 27, 2019, respectively
1,079.2  1,106.3  
Inventories597.4  551.5  
Prepaid expenses and other current assets248.5  206.2  
Total current assets2,647.0  2,395.4  
Property, plant and equipment, net330.3  311.5  
Operating lease right-of-use assets114.1  —  
Goodwill612.4  612.2  
Intangible assets290.9  300.7  
Deferred tax assets85.7  84.7  
Other assets370.3  397.2  
Total assets$4,450.7  $4,101.7  
Liabilities and Equity
Current liabilities:
Accounts payable$215.3  $248.5  
Accrued liabilities471.2  459.5  
Deferred revenues817.9  766.0  
Short-term borrowings542.0  410.0  
Total current liabilities2,046.4  1,884.0  
Long-term lease liabilities93.7  —  
Other long-term liabilities453.3  440.1  
Total liabilities2,593.4  2,324.1  
Commitments and contingencies (Note 8)
Equity:      
Varian stockholders' equity:
Preferred stock of $1 par value: 1.0 shares authorized; none issued and outstanding
    
Common stock of $1 par value: 189.0 shares authorized; 90.7 and 90.8 shares issued and outstanding at January 3, 2020 and September 27, 2019, respectively
90.7  90.8  
Capital in excess of par value870.4  845.6  
Retained earnings983.2  934.0  
Accumulated other comprehensive loss(97.0) (102.1) 
Total Varian stockholders' equity1,847.3  1,768.3  
Noncontrolling interest10.0  9.3  
Total equity1,857.3  1,777.6  
Total liabilities and equity$4,450.7  $4,101.7  

See accompanying notes to the condensed consolidated financial statements.
5


VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months Ended
 January 3,December 28,
(In millions)20202018
Cash flows from operating activities:  
Net earnings$88.9  $103.9  
Adjustments to reconcile net earnings to net cash provided by operating activities:      
Share-based compensation expense14.9  10.5  
Depreciation15.0  12.8  
Amortization of intangible assets and inventory step-up10.2  4.7  
Gain on sale of equity investments(1.4) (22.0) 
Change in fair value of contingent consideration8.8    
Other, net2.7  3.7  
Changes in assets and liabilities, net of effects of acquisitions:   
Trade and unbilled receivables29.5  2.9  
Inventories(44.9) (32.4) 
Prepaid expenses and other assets6.3  8.6  
Accounts payable(32.7) 13.5  
Accrued liabilities and other long-term liabilities(42.1) (12.5) 
Deferred revenues57.4  47.2  
Net cash provided by operating activities112.6  140.9  
Cash flows from investing activities:      
Purchases of property, plant and equipment(22.6) (14.0) 
Acquisitions, net of cash acquired(1.7) (25.5) 
Sale of equity investments9.2  29.9  
Other, net  (3.5) 
Net cash used in investing activities(15.1) (13.1) 
Cash flows from financing activities:      
Repurchases of common stock(43.8) (34.8) 
Proceeds from issuance of common stock to employees19.7  22.0  
Tax withholdings on vesting of equity awards(3.6) (4.4) 
Borrowings under credit facility agreement11.0    
Repayments under credit facility agreement (11.0) —  
Net borrowings under the credit facility agreements with maturities less than 90 days132.0    
Other(0.9)   
Net cash provided by (used in) financing activities103.4  (17.2) 
Effects of exchange rate changes on cash, cash equivalents, and restricted cash(2.8) 1.7  
Net increase in cash, cash equivalents, and restricted cash198.1  112.3  
Cash, cash equivalents, and restricted cash at beginning of period 544.1  516.4  
Cash, cash equivalents, and restricted cash at end of period $742.2  $628.7  

See accompanying notes to the condensed consolidated financial statements.
6


VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
 Common Stock    
(In millions)SharesAmountCapital in Excess of Par ValueRetained EarningsAccumulated Other Comprehensive LossTotal Varian Stockholders' EquityNoncontrolling InterestsTotal Equity
Balance at September 27, 201990.8  $90.8  $845.6  $934.0  $(102.1) $1,768.3  $9.3  $1,777.6  
Net earnings—  —  —  88.2  —  88.2  0.7  88.9  
Other comprehensive earnings—  —  —  —  5.1  5.1  —  5.1  
Issuance of common stock0.3  0.3  20.7  —  —  21.0  —  21.0  
Tax withholdings on vesting of equity awards    (3.6) —  —  (3.6) —  (3.6) 
Share-based compensation expense—  —  14.7  —  —  14.7  —  14.7  
Repurchases of common stock(0.4) (0.4) (7.0) (39.0) —  (46.4) —  (46.4) 
Balances at January 3, 202090.7  $90.7  $870.4  $983.2  $(97.0) $1,847.3  $10.0  $1,857.3  

Balances at September 28, 201891.2  $91.2  $778.1  $780.4  $(65.3) $1,584.4  $4.3  $1,588.7  
Net earnings—  —  —  103.2  —  103.2  0.7  103.9  
Other comprehensive loss—  —  —  —  (3.7) (3.7) —  (3.7) 
Issuance of common stock0.3  0.3  21.7  —  —  22.0  —  22.0  
Tax withholdings on vesting of equity awards—  —  (4.4) —  —  (4.4) —  (4.4) 
Share-based compensation expense—  —  10.5  —  —  10.5  —  10.5  
Repurchases of common stock(0.3) (0.3) (6.6) (27.9) —  (34.8) —  (34.8) 
Other—  —    (0.2) —  (0.2) —  (0.2) 
Balances at December 28, 201891.2  $91.2  $799.3  $855.5  $(69.0) $1,677.0  $5.0  $1,682.0  

See accompanying notes to the condensed consolidated financial statements.

7


VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The long-term growth and value creation strategy of Varian Medical Systems, Inc. (“VMS”) and subsidiaries (collectively, the “Company”) is to transform the Company from the global leader in radiation therapy to the global leader in multi-disciplinary, integrated cancer care solutions that leverages its clinical experience and strengths in technology development and new product innovation. The Company offers solutions in radiation therapy and medical oncology, as well as interventional oncology, an emerging area of cancer care. The Company designs, manufactures, sells and services hardware and software products for treating cancer with radiotherapy, stereotactic radiosurgery, stereotactic body radiotherapy, and brachytherapy, and offers products for interventional oncology procedures and treatments, including cryoablation, microwave ablation and embolization. Software solutions include treatment planning, informatics, clinical knowledge exchange, patient care management, practice management and decision support for comprehensive cancer clinics, radiotherapy centers and medical oncology practices. The Company also develops, designs, manufactures, sells and services proton therapy products and systems for cancer treatment.

The Company has expanded its services offerings to include clinical practice services that assist within the clinical workflow. These services focus on decision support and/or cancer care knowledge augmentation aimed at facilitating improved accessibility and affordability to care while maintaining a fundamental level of clinical quality. Further, the Company operates ten multi-disciplinary cancer centers and one specialty hospital in India and one multi-disciplinary cancer center in Sri Lanka.
Basis of Presentation
The condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet as of September 27, 2019, was derived from audited financial statements as of that date, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These condensed consolidated financial statements and the accompanying notes are unaudited and should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 27, 2019 (the “2019 Annual Report”).

In the opinion of management, the condensed consolidated financial statements herein include adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the Company’s financial position as of January 3, 2020, and September 27, 2019, results of operations and statements of comprehensive earnings for the three months ended January 3, 2020, and December 28, 2018, statements of cash flows for the three months ended January 3, 2020, and December 28, 2018, and statements of equity for the three months ended January 3, 2020, and December 28, 2018. The results of operations for the three months ended January 3, 2020, are not necessarily indicative of the operating results to be expected for the full fiscal year or any future period.
Reclassifications
Certain reclassifications have been made to the amounts in the prior year in order to conform to the current year's presentation.
Fiscal Year
The fiscal years of the Company as reported are the 52- or 53-week periods ending on the Friday nearest September 30. Fiscal year 2020 was the 53-week period ending October 2, 2020. Fiscal year 2019 was the 52-week period that ended on September 27, 2019. The fiscal quarter ended January 3, 2020 was a 14-week period, and the fiscal quarter ended December 28, 2018, was a 13-week period.
Principles of Consolidation
The condensed consolidated financial statements include those of VMS and its wholly-owned and majority-owned or controlled subsidiaries. Intercompany balances, transactions and stock holdings have been eliminated in consolidation.
8

VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
Consolidation of Variable Interest Entities
For entities in which the Company has variable interests, the Company focuses on identifying which entity has the power to direct the activities that most significantly impact the variable interest entity’s economic performance and which enterprise has the obligation to absorb losses or the right to receive benefits from the variable interest entity. If the Company is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity will be included in the Company’s condensed consolidated financial statements. At January 3, 2020 and September 27, 2019, the Company consolidated its non-controlling interest in a joint venture, included within its Oncology Systems business, related to the Cancer Treatment Services International ("CTSI") operations.
Use of Estimates
The preparation of financial statements in conformity with 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.
Significant Accounting Policies
With the exception of the change for the accounting of leases as a result of the adoption of Accounting Standard Codification Topic 842, there have been no material changes to the Company's significant accounting policies provided in Note 1, "Summary of Significant Accounting Policies," within Item 8 of the Company's Annual Report on Form 10-K for the year ended September 27, 2019.

Leases

The Company determines if an arrangement is or contains a lease at the inception of an arrangement. The Company's operating lease right-of-use ("ROU") assets represents the right to use an underlying asset over the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets may also include initial direct costs incurred and prepaid lease payments, less lease incentives. Lease liabilities and their corresponding ROU assets are recognized based on the present value of lease payments over the lease term, discounted using the Company's incremental borrowing rate ("IBR"). The Company recognizes operating leases with lease terms of more than twelve months in operating lease right-of-use assets, accrued liabilities, and long-term lease liabilities on its Condensed Consolidated Balance Sheets.

The Company’s finance leases primarily represent certain sale and leaseback-sublease arrangements. The Company has entered into sale-leaseback arrangements with a third-party finance company for certain equipment and simultaneously subleased the equipment to certain qualified customers. The Company’s leaseback arrangements have been accounted for as finance leases as they meet one or more of the finance lease classification criteria. The Company recognizes finance leases with lease terms of more than twelve months in property, plant, and equipment, net, accrued liabilities, and other long-term liabilities on its Condensed Consolidated Balance Sheets.

For purposes of calculating lease liabilities and the corresponding ROU assets, the Company's lease term may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option.

The Company generally does not have adequate information to determine the implicit rate in a lease, therefore the Company uses an estimated IBR. The Company does not maintain a public credit rating and its debt arrangements are unsecured, thus requiring significant judgment to calculate the IBR. The Company uses different data sets to estimate the IBR, including: (i) an estimated indicative credit rating of the Company; (ii) yields on comparable credit rating composite curves; (iii) foreign exchange rates; and (iv) an estimated adjustment for collateral. The Company also applies adjustments to account for considerations related to (i) tenor; and (ii) country credit rating that may not be fully incorporated by the aforementioned data sets.

Certain of the Company’s lease arrangements include variable lease payments. Variable lease payments, not dependent on an index or discount rate, are expensed as incurred and are not included within the ROU asset and lease liability calculation. Variable lease payments generally include common area maintenance, utilities, maintenance charges, property taxes, insurance, and contingent rent payments. Certain of the Company's arrangements contain clauses that provide for contingent rent payments based on a percentage of revenue share and/or earnings before interest, taxes, depreciation, and amortization.


9

VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
The Company combines lease and non-lease components as a single lease component for both its operating and finance leases. In addition, the Company does not record operating and finance lease assets and liabilities for short-term leases, which have an initial term of twelve months or less.

Recently Adopted Accounting Pronouncements
In the first quarter of fiscal year 2020, the Company adopted the Financial Accounting Standards Board ("FASB") standard on accounting for leases, "Leases." The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record ROU assets and corresponding lease liabilities on the balance sheet. The Company adopted this standard under the optional transition method, which applies the standard on the effective date, rather than the earliest comparative period presented in the financial statements. The Company elected: (1) the "package of practical expedients," which does not require the Company to reassess its prior conclusions about lease identification, lease classification, and initial direct costs under the new standard; (2) not to separate non-lease components from lease components; and (3) not to recognize ROU assets and lease liabilities for short-term leases. The Company has implemented internal controls and key system functionalities to enable the preparation of financial information. The primary impact for the Company was the balance sheet recognition of ROU assets and lease liabilities for operating leases as a lessee. See Note 8, "Commitments and Contingencies," for more information on the impact of this adoption on the Company's condensed consolidated financial statements.
In the first quarter of fiscal year 2020, the Company adopted FASB guidance that added the Overnight Index Swap rate based on the Secured Overnight Financing Rate ("SOFR") as a benchmark interest rate for hedge accounting purposes. The amendment recognizes SOFR as a likely LIBOR replacement and supports the marketplace transition by adding the new reference rate as a benchmark interest rate. The Company has not executed interest rate hedges but adopted the amendment prospectively as the Company may consider interest rate hedges in the future. The Company is monitoring the LIBOR to SOFR migration and will coordinate the transition of outstanding LIBOR based debt and any related interest rate derivatives with counterparties when the market is liquid to ensure an orderly and efficient transition.
In the first quarter of fiscal year 2020, the Company adopted FASB guidance that allows companies to reclassify disproportionate tax effects in accumulated other comprehensive income caused by the Tax Cuts and Jobs Act to retained earnings. The impact of adopting this amendment on the Company's condensed consolidated financial statements was not material.
Recent Accounting Standards or Updates Not Yet Effective
In December 2019, the FASB issued guidance which simplifies the accounting for income taxes by removing certain exceptions to the current guidance, and improving the consistent application of and simplification of other areas of the guidance. The standard is effective for the Company beginning in the first quarter of fiscal year 2022. Early adoption is permitted. The Company is evaluating the impact of adopting this guidance to its condensed consolidated financial statements.
In August 2018, the FASB amended its guidance for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This new standard also requires customers to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. This new standard becomes effective for the Company in the first quarter of fiscal year 2021, with early adoption permitted. This new standard can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is evaluating the impact of adopting this amendment to its condensed consolidated financial statements.

In August 2018, the FASB issued guidance which modifies the disclosure requirements for employers that have sponsor defined benefit pension or other post-retirement plans by removing and adding certain disclosures for these plans. The standard is effective for the Company beginning in the first quarter of fiscal year 2022. Early adoption is permitted. The Company is evaluating the impact of adopting this guidance to its condensed consolidated financial statements.

In August 2018, the FASB issued guidance which changed the disclosure requirements for fair value measurements by removing, adding and modifying certain disclosures. The standard is effective for the Company beginning in the first quarter of fiscal year 2021. Early adoption is permitted. The Company is evaluating the impact of adopting this guidance to its condensed consolidated financial statements.

10

VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
In June 2016, the FASB issued an amendment to its accounting guidance related to the impairment of financial instruments. The amendment adds a new impairment model that is based on expected losses, rather than incurred losses. The amendment will be effective for the Company beginning in its first quarter of fiscal year 2021, with early adoption permitted beginning in the first quarter of fiscal year 2020. The Company is evaluating the impact of adopting this amendment to its condensed consolidated financial statements.
2. OTHER FINANCIAL INFORMATION 
Contracts with Customers
The following table provides the Company's unbilled receivables and deferred revenues from contracts with customers:
(In millions)January 3,
2020
September 27,
2019
Unbilled receivables - current$315.8  $346.7  
Unbilled receivables - long-term (1)
42.7  35.1  
Deferred revenues - current(817.9) (766.0) 
Deferred revenues - long-term (2)
(78.9) (73.1) 
Total net unbilled receivables (deferred revenues)$(538.3) $(457.3) 
(1)Included in other assets on the Company's Condensed Consolidated Balance Sheets.
(2)Included in other long-term liabilities on the Company's Condensed Consolidated Balance Sheets.
During the three months ended January 3, 2020, unbilled receivables decreased by $23.3 million, primarily due to the timing of billings in Oncology Systems, and deferred revenues increased by $57.7 million primarily due to the contractual timing of billings occurring before the revenues were recognized.
During the three months ended January 3, 2020 and December 28, 2018, the Company recognized revenues of $314.5 million, and $263.4 million, which were included in the deferred revenues balances at September 27, 2019 and September 28, 2018, respectively.
Unfulfilled Performance Obligations
The following table represents the Company's unfulfilled performance obligations as of January 3, 2020, and the estimated revenues expected to be recognized in the future related to these unfulfilled performance obligations:
Fiscal Years of Revenue Recognition
(In millions)Remainder of 202020212022Thereafter
Unfulfilled Performance Obligations$1,884.1  $2,003.2  $787.7  $2,122.9  
The table above includes both product and service unfulfilled performance obligations, which includes a component of service performance obligations that have not been invoiced. The fiscal years presented reflect management’s best estimate of when the Company will transfer control to the customer and may change based on timing of shipment, readiness of customers’ facilities for installation, installation requirements, and availability of products or customer acceptance terms.
Cash, Cash Equivalents, and Restricted Cash
The following table summarizes the Company's cash, cash equivalents and restricted cash:
(In millions)January 3,
2020
September 27,
2019
Cash and cash equivalents$721.9  $531.4  
Restricted cash - current (1)
3.7  4.2  
Restricted cash - long-term (2)
16.6  8.5  
  Total cash, cash equivalents, and restricted cash$742.2  $544.1  
(1)Included in prepaid expenses and other current assets on the Company's Condensed Consolidated Balance Sheets.
11

VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
(2)Included in other assets on the Company's Condensed Consolidated Balance Sheets.
Inventories
The following table summarizes the Company's inventories:
(In millions)January 3,
2020
September 27,
2019
Raw materials and parts$399.8  $376.5  
Work-in-process75.6  71.8  
Finished goods122.0  103.2  
Total inventories$597.4  $551.5  
Other Long-Term Liabilities
The following table summarizes the Company's other long-term liabilities:
(In millions)January 3,
2020
September 27,
2019
Income taxes payable$180.8  $180.3  
Deferred income taxes78.1  75.3  
Deferred revenues78.9  73.1  
Contingent consideration42.5  42.3  
Defined benefit pension plan30.4  31.1  
Other42.6  38.0  
Total other long-term liabilities$453.3  $440.1  
Other Income, Net
The following table summarizes the Company's other income, net:
Three Months Ended
(In millions)January 3,
2020
December 28,
2018
Gain on equity investments$1.4  $22.0  
Net foreign currency exchange gain2.4  1.3  
Other income (loss)0.6  (0.3) 
Total other income, net$4.4  $23.0  

12

VARIAN MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
3. FAIR VALUE
Assets/Liabilities Measured at Fair Value on a Recurring Basis
In the tables below, the Company has segregated all assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.
 Fair Value Measurements at January 3, 2020
Quoted Prices in
Active Markets
for Identical
Instruments
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Total
Type of Instruments(Level 1)(Level 2)(Level 3)Balance
(In millions)    
Assets:    
Cash equivalents: