-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EhZdC0KIYYNiyGkstjsSGiEQeMIhzqEokXUsGfjPZxCrmZyQq9jKILmmEB6CM0Py B/17wXJ9ErQiGPJN6Y4QdA== 0000891618-97-000349.txt : 19970211 0000891618-97-000349.hdr.sgml : 19970211 ACCESSION NUMBER: 0000891618-97-000349 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961227 FILED AS OF DATE: 19970207 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VARIAN ASSOCIATES INC /DE/ CENTRAL INDEX KEY: 0000203527 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] 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: 97520532 BUSINESS ADDRESS: STREET 1: 3100 HANSEN WAY STREET 2: MAIL STOP E 224 CITY: PALO ALTO STATE: CA ZIP: 94304-1030 BUSINESS PHONE: 4154934000 MAIL ADDRESS: STREET 1: 3100 HANSEN WAY STREET 2: MAIL STOP E 224 CITY: PALO ALTO STATE: CA ZIP: 94304-1030 FORMER COMPANY: FORMER CONFORMED NAME: VARIAN DELAWARE INC DATE OF NAME CHANGE: 19761123 10-Q 1 FORM 10-Q FOR PERIOD ENDED 12/27/96 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 27, 1996 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 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 ----- ----- An index of exhibits filed with this Form 10-Q is located on page 14. Number of shares of Common Stock, par value $1 per share, outstanding as of the close of business on January 24, 1997: 30,597,000 shares. 2 PART 1. FINANCIAL INFORMATION VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF EARNINGS UNAUDITED
FIRST QUARTER ENDED - ----------------------------------------------------------------------------- (DOLLARS IN THOUSANDS DECEMBER 27, DECEMBER 29, EXCEPT PER SHARE AMOUNTS) 1996 1995 - ----------------------------------------------------------------------------- SALES $ 321,959 $ 351,247 ----------- ----------- OPERATING COSTS AND EXPENSES Cost of sales 210,060 218,115 Research and development 26,382 24,517 Marketing 48,798 46,724 General and administrative 15,895 23,205 ----------- ----------- TOTAL OPERATING COSTS AND EXPENSES 301,135 312,561 ----------- ----------- OPERATING EARNINGS 20,824 38,686 Interest expense/(income), net 1,093 (1,220) ----------- ----------- EARNINGS BEFORE TAXES 19,731 39,906 Taxes on earnings 6,910 14,370 ----------- ----------- NET EARNINGS $ 12,821 $ 25,536 =========== =========== AVERAGE SHARES OUTSTANDING INCLUDING COMMON STOCK EQUIVALENTS 31,599 32,266 =========== =========== NET EARNINGS PER SHARE $ 0.41 $ 0.79 =========== =========== Dividends Declared Per Share $ 0.08 $ 0.07 Order Backlog $ 634,302 $ 725,403
See accompanying notes to the consolidated financial statements. -2- 3 VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS UNAUDITED
- -------------------------------------------------------------------------------------------------------------- DECEMBER 27, SEPTEMBER 27, (DOLLARS IN THOUSANDS EXCEPT PAR VALUES) 1996 1996 - -------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 76,899 $ 82,675 Accounts receivable 332,281 380,330 Inventories Raw materials and parts 118,375 112,322 Work in process 46,216 53,682 Finished goods 37,193 23,878 ----------- ----------- Total inventories 201,784 189,882 Other current assets 92,534 91,010 ----------- ----------- TOTAL CURRENT ASSETS 703,498 743,897 Property, Plant, and Equipment 481,006 473,852 Accumulated depreciation and amortization (268,757) (261,766) ----------- ----------- NET PROPERTY, PLANT, AND EQUIPMENT 212,249 212,086 Other Assets 86,157 62,938 ----------- ----------- TOTAL ASSETS $ 1,001,904 $ 1,018,921 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 23,312 $ 4,362 Accounts payable - trade 62,258 75,745 Accrued expenses 217,431 264,565 Product warranty 48,622 49,251 Advance payments from customers 64,377 56,071 ----------- ----------- TOTAL CURRENT LIABILITIES 416,000 449,994 Long-Term Accrued Expenses 28,157 29,007 Long-Term Debt 79,258 60,258 Deferred Taxes 11,816 11,753 ----------- ----------- TOTAL LIABILITIES 535,231 551,012 ----------- ----------- STOCKHOLDERS' EQUITY Preferred stock Authorized 1,000,000 shares, par value $1, issued none - - Common stock Authorized 99,000,000 shares, par value $1, issued and outstanding 30,597,000 shares at December 27, 1996 and 30,646,000 shares at September 27, 1996 30,597 30,646 Retained earnings 436,076 437,263 ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 466,673 467,909 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,001,904 $ 1,018,921 =========== ===========
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 27, DECEMBER 29, (DOLLARS IN THOUSANDS) 1996 1995 - --------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net Cash Provided/(Used)by Operating Activities $ 7,305 $ (48,660) INVESTING ACTIVITIES Purchase of property, plant, and equipment (15,514) (14,647) Purchase of businesses, net of cash acquired (25,341) - Other, net 2,089 (967) ----------- ----------- Net Cash Used by Investing Activities (38,766) (15,614) FINANCING ACTIVITIES Net borrowings on short-term obligations 12,950 28,343 Proceeds from long-term borrowings 25,000 - Proceeds from common stock issued to employees 6,108 10,710 Purchase of common stock (17,705) (23,592) Other, net (2,460) (2,252) ----------- ----------- Net Cash Provided by Financing Activities 23,893 13,209 EFFECTS OF EXCHANGE RATE CHANGES ON CASH 1,792 (37) ----------- ----------- Net Decrease in Cash and Cash Equivalents (5,776) (51,102) Cash and Cash Equivalents at Beginning of Period 82,675 122,728 ----------- ----------- Cash and Cash Equivalents at End of Period $ 76,899 $ 71,626 =========== ===========
See accompanying notes to the consolidated financial statements. -4- 5 VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES NOTES TO THE 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 27, 1996, are not necessarily indicative of the results to be expected for a full year or for any other periods. NOTE 2: Inventories are valued at the lower of cost or market (net realizable value) using the last-in, first-out (LIFO) cost for the U.S. inventories of the Health Care Systems (except for X-ray Tube Products), Instruments, and Semiconductor Equipment segments. All other inventories are valued principally at average cost. If the first-in, first-out (FIFO) method had been used for those operations valuing inventories on a LIFO basis, inventories would have been higher than reported by $47.0 at December 27, 1996, $46.8 at September 27, 1996, $46.5 at December 29, 1995, and $45.6 at September 29, 1995. NOTE 3: The Company enters into forward exchange contracts to mitigate the effects of operational (sales orders and purchase commitments) and balance sheet exposures to fluctuations in foreign currency exchange rates. When the Company's foreign exchange contracts hedge operational exposure, the effects of movements in currency exchange rates on these instruments are recognized in income when the related revenue and expenses are recognized. When foreign exchange contracts hedge balance sheet exposure, such effects are recognized in income when the exchange rate changes. Because the impact of movements in currency exchange rates on foreign exchange contracts generally offsets the related impact on the 5 6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 3 (Continued) underlying items being hedged, these instruments do not subject the Company to risk that would otherwise result from changes in currency exchange rates. At December 27, 1996, the Company had forward exchange contracts with maturities of twelve months or less to sell foreign currencies totaling $75.8 million ($22.2 million of French francs, $16.4 million of Japanese yen, $13.2 million of Canadian dollars, $9.1 million of Italian lira, $4.2 million of Austrian schillings, $3.4 million of Dutch gilders, $2.4 million of German marks, $2.0 million of Norwegian krone, $1.8 million of Spanish pesetas, and $1.1 million of Belgium francs) and to buy foreign currencies totaling $11.7 million ($4.9 million of Swiss francs, $4.5 million of Australian dollars, $2.2 million of British pounds, and $0.1 million of Swedish krona). NOTE 4: In February 1990, a purported class action was brought by Panache Broadcasting of Pennsylvania, Inc. on behalf of all purchasers of electron tubes in the U.S. against the Company and a joint-venture partner, alleging that the activities of their joint venture in the power-grid tube industry violated antitrust laws. The complaint seeks injunctive relief and unspecified damages, which may be trebled under the antitrust laws. In February 1993, the U.S. District Court in Chicago granted in part and denied in part the Company's motion to dismiss the complaint. Panache Broadcasting filed an amended complaint in March 1993. In October 1995, the Court affirmed a federal Magistrate's recommendation to grant in part and deny in part the Company's motion to dismiss the amended complaint. Also in October 1995, the Magistrate recommended denial of plaintiff's request to certify the purported class and recommended certification of a different and narrower class than that defined by plaintiff. The Company is appealing that proposed class certification to the District Court, and 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. 6 7 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 4 (Continued) 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 nine sites where the Company is alleged to have shipped manufacturing waste for recycling or disposal. The Company is also involved in various stages of environmental investigation and/or remediation under the direction of, or in consultation with, federal, state, and/or local agencies at certain current or former Company facilities. 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) that 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. Nevertheless, the Company continues to estimate the amounts of these future costs in periodically establishing reserves, based partly on progress made in determining the magnitude of such costs, experience gained from sites on which remediation is ongoing or has been completed, and the timing and extent of remedial actions required by the applicable governmental authorities. As of December 27, 1996, the Company estimated that the present value of the Company's future exposure for environmental related investigation and remediation expenditures, including operating and maintenance costs, ranged from approximately $31.1 million to $52.5 million. The time frame over which the Company expects to incur such costs varies with each site, ranging up to 29 years at December 27, 1996. Management believes that no amount in the foregoing range of estimated future costs is more probable of being incurred than any other amount in such range and therefore has accrued $31.1 million in estimated environmental costs at December 27, 1996. The Company believes that the amount accrued is adequate, but as the scope of its obligations becomes more clearly defined, the accrued amount may be modified and related charges against earnings may be made. 7 8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 4: (Continued) Although any ultimate liability arising from environmental related matters described herein could result in significant expenditures that, if aggregated and assumed to occur within a single fiscal year, would be material to the Company's financial condition, the likelihood of such occurrence is considered remote. Based on information currently available to management and its best assessment of the ultimate amount and timing of environmental related events, management believes that the costs of these environmental related matters are not reasonably likely to have a material adverse effect on the financial condition of the Company. The Company evaluates its liability for environmental related investigation and remediation in light of the liability and financial wherewithal of potentially responsible parties and insurance companies with respect to which the Company believes that it has rights to contribution, indemnity and/or reimbursement. Claims for recovery of environmental investigation and remediation costs already incurred and to be incurred in the future have been asserted against various insurance companies and other third parties. In 1992, the Company filed a lawsuit against 36 insurance companies with respect to most of the above-referenced sites. The Company received certain settlements during 1995 and 1996 and has a $0.2 million receivable in Other Current Assets at December 27, 1996. Although the Company intends to aggressively pursue additional insurance recoveries from remaining defendants in that lawsuit, due to the uncertainty as to ultimate recoveries from third parties, the Company has neither recorded any asset nor reduced any liability in anticipation of recovery with respect to claims made against third parties. 8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On January 16, 1997, the Company reported lower orders, sales, and profits for the first quarter of fiscal 1997 compared to the record highs achieved in all three categories in the first quarter of fiscal 1996. First-quarter orders of $347 million were 20% below the previous year's $436 million. Sales for the quarter of $322 million were down 8% from last year's $351 million. Backlog of $634 million was 13% below the year-ago's $725 million , but grew 3% from the prior year's fourth quarter. Net earnings for the first quarter were $12.8 million compared to $25.5 million in the year-ago quarter. Earnings per share of $.41 fell below 1996's first quarter of $.79 per share. The lower first-quarter results reflect the varying conditions prevailing in the diverse markets served by the Company's three core business segments. Orders and sales for two of the businesses, Health Care Systems and Instruments, rose over the prior year's first quarter. However, the gains were not enough to offset the soft demand for the Company's Semiconductor Equipment operations where bookings and shipments were sharply below the first quarter of 1996 due to an industry down cycle. Orders for Varian's Health Care Systems business increased 1% from the year-ago quarter, with a 13% rise in oncology products bookings offsetting the lower orders for X-ray tube products. Backlog was up 16% from last year's first quarter and rose 3% from the prior quarter to a record $351 million. Sales rose 4% from the prior year with the oncology side of the business accounting for all of the revenue increase, while operating margins declined modestly from the year-ago quarter due to lower X-ray tube margins. Orders for cancer therapy equipment improved in the U.S. market, extending a recovery which began in the prior quarter. Orders for the Instruments business rose 4% over the year-ago quarter to a record $134 million with nearly all product lines contributing to the gain. The higher bookings pushed backlog to a record $122 million, which was 3% ahead of the prior year and up 11% from the previous quarter. First-quarter sales of $122 million were up 8% from the year-ago period, with the higher shipments spread across all product categories, particularly in the analytical sector which grew at nearly a double-digit rate. Operating margins for the Instruments business improved from the year-ago quarter, again, with nearly all product lines contributing to the advance. In contrast to its other two segments, the Company's Semiconductor Equipment business had a difficult quarter because of the industry slowdown in demand for chip-making equipment. First-quarter orders for this segment of $106 million dropped 50% from the year-ago period, but rose 29% from the prior quarter. The slow-down in demand was apparent in both the ion implantation and thin film coating product lines. However, orders for customer support products rose, as is typical in a downturn when the equipment is run harder than normal. Backlog was off 36% from fiscal 1996's first quarter, but just 2% below the level of the prior quarter. Semiconductor Equipment sales of $101 million were down 30% from the prior year's first quarter, 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED) with the ion implant sector accounting for the decline while thin film products shipments rose modestly. Because of the lower shipments, operating margins for these activities were well below the year-ago level; however, margins remained in double-digits. FINANCIAL CONDITION The Company's financial condition remained strong during the first quarter of fiscal 1997. Operating activities provided cash of $7.3 million in the first quarter of fiscal 1997 and used $48.7 million in the same period last year. Investing activities used $38.8 million in the first quarter of fiscal 1997, $25.3 million for the purchase of a business and $15.5 million for the purchase of property, plant and equipment. Investing activities in the same period last year used $15.6 million of which $14.6 million was used for the purchase of property, plant and equipment. Financing activities in the first quarter of fiscal 1997 provided $23.9 million, which included $25.0 million in long- term borrowing. Financing activities provided $13.2 million in the first quarter of fiscal 1996. Total debt as a percentage of total capital increased to 18.02% at the end of the first quarter of fiscal 1997 as compared with 12.13% at fiscal year end, 1996. The ratio of current assets to current liabilities increased to 1.69 to 1 at December 27, 1996, from 1.65 to 1 at fiscal year end, 1996. The Company has available $50 million in unused committed lines of credit. 10 11 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 27, 1996 and the related consolidated statements of earnings and the condensed consolidated statements of cash flows for the quarters ended December 27, 1996 and December 29, 1995. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the aforementioned financial statements for them to be in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P. --------------------------------- COOPERS & LYBRAND L.L.P. San Jose, California January 15, 1997 11 12 PART II. OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 11 Computation of Earnings Per Share. Exhibit 15 Letter Regarding Unaudited Interim Financial Information. Exhibit 27 Financial Data Schedule (EDGAR filing only) (b) Reports on Form 8-K: There were no reports on Form 8-K filed for the first quarter ended December 27, 1996. 12 13 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 6, 1997 ----------------------------------- Date /s/ Wayne P. Somrak ----------------------------------- Wayne P. Somrak Vice President and Controller (Chief Accounting Officer) 13 14 INDEX OF EXHIBITS Exhibit Number 11 Computation of Earnings Per Share 15 Letter Regarding Unaudited Interim Financial Information 27 Financial Data Schedule (EDGAR filing only) 14 EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE IN ACCORDANCE WITH INTERPRETIVE RELEASE NO. 34-9083 UNAUDITED
FIRST QUARTER ENDED DEC 27, DEC 29, (SHARES IN THOUSANDS) 1996 1995 - ----------------------------------------------------------------------------------------------------------------------- Actual weighted average shares outstanding for the period 30,702 31,079 Dilutive employee stock options 897 1,187 ----------- ----------- Weighted average shares outstanding for the period 31,599 32,266 =========== =========== (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Earnings applicable to fully diluted earnings per share $ 12,821 $ 25,536 =========== =========== Earnings per share based on SEC interpretive release No. 34-9083: Earnings per share - Fully Diluted (1) $ 0.41 $ 0.79 =========== ===========
(1) There is no significant difference between fully diluted earnings per share and primary earnings per share. EX-15 3 LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFO. 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 15, 1997 on our reviews of the interim financial information of Varian Associates, Inc. for the quarter ended December 27, 1996 included in this Form 10-Q is incorporated by reference in the Company's registration statements on Forms S-8, Registration Statement Numbers 33-46000, 33-33661, 33-33660, and 2-95139 and Forms S-8 and S-3, Registration Statement Number 33-40460. Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not be considered a part of the registration statements prepared or certified by us within the meaning of Sections 7 and 11 of that Act. /s/ Coopers & Lybrand L.L.P. ----------------------------------- COOPERS & LYBRAND L.L.P. San Jose, California February 6,1997 EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS SEP-26-1997 SEP-28-1996 DEC-27-1996 76,899 0 334,471 2,190 201,784 703,498 481,006 268,757 1,001,904 416,000 0 0 0 30,597 436,076 1,001,904 321,959 321,959 210,060 301,135 0 0 1,093 19,731 6,910 12,821 0 0 0 12,821 0 0.41
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