0000950109-95-003375.txt : 19950824 0000950109-95-003375.hdr.sgml : 19950824 ACCESSION NUMBER: 0000950109-95-003375 CONFORMED SUBMISSION TYPE: SC 13E4 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19950823 SROS: NYSE SUBJECT COMPANY: 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: SC 13E4 SEC ACT: 1934 Act SEC FILE NUMBER: 005-07640 FILM NUMBER: 95566153 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 FILED BY: 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: SC 13E4 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 SC 13E4 1 SCHEDULE 13E-4 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 23, 1995 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- SCHEDULE 13E-4 ISSUER TENDER OFFER STATEMENT (PURSUANT TO SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934) VARIAN ASSOCIATES, INC. (NAME OF ISSUER AND PERSON FILING STATEMENT) ---------------- COMMON STOCK, PAR VALUE $1.00 PER SHARE (TITLE OF CLASS OF SECURITIES) ---------------- 922204102 (CUSIP NUMBER OF CLASS OF SECURITIES) ---------------- JOSEPH B. PHAIR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY VARIAN ASSOCIATES, INC. 3050 HANSEN WAY PALO ALTO, CALIFORNIA 94304-1000 (415) 493-4000 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT) COPY TO: RICHARD V. SMITH ORRICK, HERRINGTON & SUTCLIFFE THE OLD FEDERAL RESERVE BANK BUILDING 400 SANSOME STREET SAN FRANCISCO, CALIFORNIA 94111 (415) 392-1122 AUGUST 23, 1995 (DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS) CALCULATION OF FILING FEE -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Transaction Valuation* Amount of Filing Fee -------------------------------------------------------------------------------- $174,000,000 $34,800 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- (*) Determined pursuant to Rule O-11(b)(1). Assumes the purchase of 3,000,000 shares at $58.00 per share. [_] Check box if any part of the fee is offset as provided by Rule O-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Not applicable. Form or Registration No.: Not applicable. Filing Party: Not applicable. Date Filed: Not applicable. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ITEM 1. SECURITY AND ISSUER. (a) The name of the issuer is Varian Associates, Inc., a Delaware corporation (the "Company"), that has its principal executive offices at 3050 Hansen Way, Palo Alto, California 94304-1000. The information set forth on page 1 and in "Certain Information Concerning the Company" in Section 10 of the Offer to Purchase (as defined below) is incorporated herein by reference. (b) This Schedule relates to the offer by the Company to purchase up to 3,000,000 outstanding shares of Common Stock, par value $1.00 per share (the "Shares") (including the associated preferred stock purchase rights issued pursuant to the Rights Agreement, dated as of August 25, 1986, as amended, between the Company and The First National Bank of Boston, as the Rights Agent), at a price not greater than $58 nor less than $51 per share, net to the seller in cash, all upon the terms and subject to the conditions set forth in the Offer to Purchase, dated August 23, 1995 (the "Offer to Purchase"), and related Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively. The information set forth on pages 1, 3 and 4, and under "Number of Shares; Proration" in Section 1, of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in "Price Range of Shares; Dividends" in Section 8 of the Offer to Purchase is incorporated herein by reference. (d) Not applicable. ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATIONS. (a) The information set forth under "Source and Amount of Funds" in Section 11 of the Offer to Purchase is incorporated herein by reference. (b) Not applicable. ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE. (a) to (j) The information set forth under "Purpose of the Offer; Certain Effects of the Offer" in Section 9 and "Certain Information Concerning the Company" in Section 10 of the Offer to Purchase is incorporated herein by reference. ITEM 4. INTEREST IN SECURITIES OF THE ISSUER. The information set forth under "Transactions and Agreements Concerning the Shares" in Section 12 of the Offer to Purchase is incorporated herein by reference. ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE ISSUER'S SECURITIES. The information set forth under "Transactions and Agreements Concerning the Shares" in Section 12 of the Offer to Purchase is incorporated herein by reference. ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth under "Fees and Expenses" in Section 15 of the Offer to Purchase is incorporated herein by reference. ITEM 7. FINANCIAL INFORMATION. (a) and (b) The information set forth under "Certain Information Concerning the Company" in Section 10 of the Offer to Purchase is incorporated herein by reference. ITEM 8. ADDITIONAL INFORMATION. (a) to (e) None or not applicable. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Form of Offer to Purchase, dated August 23, 1995. (a)(2) Form of Letter of Transmittal, dated August 23, 1995, together with Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(3) Form of Letter to Stockholders from J. Tracy O'Rourke, Chairman of the Board and Chief Executive Officer of the Registrant, dated August 23, 1995. (a)(4) Form of Notice of Guaranteed Delivery. (a)(5) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees, dated August 23, 1995. (a)(6) Form of Letter to Clients, dated August 23, 1995. (a)(7) Form of Summary Advertisement, dated August 23, 1995. (a)(8) Form of Press Release, dated August 23, 1995. (b) Not applicable. (c) None. (d) None. (e) Not applicable. (f) None. (g)(1) Pages 21 to 37 of the Registrant's Annual Report to Stockholders for the Year Ended September 30, 1994. (g)(2) The Registrant's Third Quarter Report 1995.
2 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Varian Associates, Inc. By /s/ Robert A. Lemos ------------------------------------- Robert A. Lemos Vice President, Finance and Chief Financial Officer Dated: August 23, 1995 3 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- (a)(1) Form of Offer to Purchase, dated August 23, 1995. (a)(2) Form of Letter of Transmittal, dated August 23, 1995, together with Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(3) Form of Letter to Stockholders from J. Tracy O'Rourke, Chairman of the Board and Chief Executive Officer of the Registrant, dated August 23, 1995. (a)(4) Form of Notice of Guaranteed Delivery. (a)(5) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees, dated August 23, 1995. (a)(6) Form of Letter to Clients, dated August 23, 1995. (a)(7) Form of Summary Advertisement, dated August 23, 1995. (a)(8) Form of Press Release, dated August 23, 1995. (g)(1) Pages 21 to 37 of the Registrant's Annual Report to Stockholders for the Year Ended September 30, 1994. (g)(2) The Registrant's Third Quarter Report 1995.
EX-99.A.1 2 OFFER TO PURCHASE EXHIBIT a.1 Varian Associates, Inc. Offer to Purchase for Cash Up to 3,000,000 Shares of its Common Stock (Including the Associated Preferred Stock Purchase Rights) At a Purchase Price Not Greater Than $58 Nor Less Than $51 Per Share THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 20, 1995, UNLESS THE OFFER IS EXTENDED. -------------- Varian Associates, Inc., a Delaware corporation (the "Company"), invites its stockholders to tender shares of its Common Stock, par value $1.00 per share (the "Shares") (including the associated preferred stock purchase rights (the "Rights") issued pursuant to the Rights Agreement, dated as of August 25, 1986, as amended, between the Company and The First National Bank of Boston, as the Rights Agent), at prices not greater than $58 nor less than $51 per Share, net to the seller in cash, specified by such stockholders, upon the terms and subject to the conditions set forth herein and in the related Letter of Transmittal (which together constitute the "Offer"). Unless the context otherwise requires, all references to Shares shall include the associated Rights. The Company will determine a single per Share price (not greater than $58 nor less than $51 per Share) that it will pay for the Shares validly tendered pursuant to the Offer and not withdrawn (the "Purchase Price"), taking into account the number of Shares so tendered and the prices specified by the tendering stockholders. The Company will select the Purchase Price that will enable it to purchase 3,000,000 Shares (or such lesser number of Shares as are validly tendered at prices not greater than $58 nor less than $51 per Share) pursuant to the Offer. The Company will purchase all Shares validly tendered at prices at or below the Purchase Price and not withdrawn, upon the terms and subject to the conditions of the Offer, including the provisions thereof relating to proration and conditional tenders described herein. Shares tendered at prices in excess of the Purchase Price and Shares not purchased because of proration and conditional tenders will be returned. Stockholders must complete the section of the Letter of Transmittal relating to the price at which they are tendering Shares in order to validly tender Shares. -------------- Shares tendered and purchased by the Company will not receive or otherwise be entitled to the regular quarterly cash dividend of $.07 per Share to be paid by the Company on October 20, 1995 to holders of record on October 2, 1995, unless the Offer is extended beyond, or Shares are accepted for payment after, October 2, 1995 for any reason whatsoever. Shares which are tendered but not purchased as a result of proration or otherwise will remain entitled to receipt of the dividend to be paid on October 20, 1995. See Section 8. -------------- THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7. -------------- IMPORTANT Any stockholder desiring to tender all or any portion of his or her shares should either (1) complete and sign the Letter of Transmittal or a facsimile thereof in accordance with the instructions in the Letter of Transmittal, mail or deliver it and any other required documents to the Depositary, and either deliver the certificates for Shares to the Depositary along with the Letter of Transmittal or deliver such Shares pursuant to the procedure for book-entry transfer set forth in Section 3 hereof or (2) request his or her broker, dealer, commercial bank, trust company or nominee to effect the transaction for him or her. A stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or nominee must contact such broker, dealer, commercial bank, trust company or nominee if he or she desires to tender such Shares. Any stockholder who desires to tender Shares and whose certificates for such Shares are not immediately available, or who cannot comply in a timely manner with the procedure for book-entry transfer, should tender such Shares by following the procedures for guaranteed delivery set forth in Section 3 hereof. -------------- NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES. EACH STOCKHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER ANDAT WHAT PRICE. THE COMPANY HAS BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE OFFICER INTENDS TO TENDER SHARES PURSUANT TO THE OFFER. -------------- The Shares are listed and principally traded on the New York Stock Exchange (the "NYSE"). On August 22, 1995, the last trading day prior to the commencement of the Offer, the last reported sale price of the Shares on the NYSE Composite Tape was $52 7/8 per Share. Stockholders are urged to obtain current market quotations for the Shares. Questions or requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal or other tender offer materials may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. -------------- The Dealer Manager for the Offer is: MORGAN STANLEY & CO. Incorporated August 23, 1995 NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. TABLE OF CONTENTS
SECTION ------- PAGE 1. Number of Shares; Proration............................... 4 2. Tenders by Holders of Fewer Than 100 Shares............... 5 3. Procedure for Tendering Shares............................ 6 4. Withdrawal Rights......................................... 8 Acceptance for Payment of Shares and Payment of Purchase 5. Price..................................................... 8 6. Conditional Tender of Shares.............................. 9 7. Certain Conditions of the Offer........................... 10 8. Price Range of Shares; Dividends.......................... 11 9. Purpose of the Offer; Certain Effects of the Offer........ 12 10. Certain Information Concerning the Company................ 14 11. Source and Amount of Funds................................ 17 12. Transactions and Agreements Concerning the Shares......... 17 13. Certain Federal Income Tax Consequences................... 17 14. Extension of Tender Period; Termination; Amendments....... 21 15. Fees and Expenses......................................... 22 16. Miscellaneous............................................. 22 Certain Transactions Involving Shares..................... Schedule A The Company's Current Report on Form 8-K (other than the exhibits thereto)......................................... Annex I The Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (other than the exhibits thereto).................................................. Annex II
2 To the Holders of Common Stock of Varian Associates, Inc.: Varian Associates, Inc., a Delaware corporation (the "Company"), invites its stockholders to tender shares of its Common Stock, par value $1.00 per share (the "Shares") (including the associated preferred stock purchase rights (the "Rights") issued pursuant to the Rights Agreement, dated as of August 25, 1986, as amended, between the Company and The First National Bank of Boston, as the Rights Agent), at prices not greater than $58 nor less than $51 per Share, net to the seller in cash, specified by such stockholders, upon the terms and subject to the conditions set forth herein and in the related Letter of Transmittal (which together constitute the "Offer"). Unless the context otherwise requires, all references to Shares shall include the associated Rights. The Company will determine a single per Share price (not greater than $58 nor less than $51 per Share) that it will pay for the Shares validly tendered pursuant to the Offer and not withdrawn (the "Purchase Price"), taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The Company will select the Purchase Price that will enable it to purchase 3,000,000 Shares (or such lesser number of Shares as is validly tendered at prices not greater than $58 nor less than $51 per Share) pursuant to the Offer. The Company will purchase all Shares validly tendered at prices at or below the Purchase Price and not withdrawn on or prior to the Expiration Date (as defined in Section 1), upon the terms and subject to the conditions of the Offer, including the provisions relating to proration and conditional tenders described below. The Purchase Price will be paid in cash, net to the seller, with respect to all Shares purchased. Shares tendered at prices in excess of the Purchase Price and Shares not purchased because of proration or conditional tenders will be returned. THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE SECTION 7. Tendering stockholders will not be obligated to pay brokerage commissions, solicitation fees or, subject to the Instructions to the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Company. The Company will pay all charges and expenses of Morgan Stanley & Co. Incorporated (the "Dealer Manager"), The First National Bank of Boston (the "Depositary") and Georgeson & Company Inc. (the "Information Agent") incurred in connection with the Offer. See Section 15. HOWEVER, ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO A REQUIRED FEDERAL INCOME TAX BACKUP WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO SUCH STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTIONS 3 AND 13. Stockholders who are participants in the Dividend Reinvestment and Cash Stock Purchase Plan (the "Reinvestment Plan") available to owners of Shares through The First National Bank of Boston, which administers the Reinvestment Plan, may instruct The First National Bank of Boston to tender part or all of the Shares held in their accounts under the Reinvestment Plan. See Section 3. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES. EACH STOCKHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE. THE COMPANY HAS BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE OFFICER INTENDS TO TENDER SHARES PURSUANT TO THE OFFER. As of August 22, 1995, the Company had issued and outstanding 33,887,015 Shares and had reserved for issuance upon exercise of outstanding stock options 3,996,106 Shares. The 3,000,000 Shares that the Company is offering to purchase represent approximately 8.85% of the Shares then outstanding, or approximately 7.92% on a fully diluted basis (assuming the exercise of all outstanding stock options). 3 A tender of Shares pursuant to the Offer will include a tender of the associated Rights. No separate consideration will be paid for such Rights. See Section 8. The Shares are listed and principally traded on the New York Stock Exchange ("NYSE"). The Shares are also listed and traded on the Pacific Stock Exchange ("PSE"). The Shares trade under the symbol "VAR." See Section 8. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. Except where otherwise stated, Share information and per Share data contained herein have been restated to reflect a two-for-one stock split in the form of a 100% stock dividend effected on March 17, 1994. 1. NUMBER OF SHARES; PRORATION. Upon the terms and subject to the conditions described herein and in the Letter of Transmittal, the Company will purchase up to 3,000,0000 Shares that are validly tendered on or prior to the Expiration Date (and not properly withdrawn in accordance with Section 4) at a price (determined in the manner set forth below) not greater than $58 nor less than $51 per Share. The later of 12:00 midnight, New York City time, on Wednesday, September 20, 1995, or the latest time and date to which the Offer is extended, is referred to herein as the "Expiration Date." If the Offer is oversubscribed as described below, only Shares tendered at or below the Purchase Price on or prior to the Expiration Date will be eligible for proration. The Company will determine the Purchase Price taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The Company will select the Purchase Price that will enable it to purchase 3,000,000 Shares (or such lesser number of Shares as is validly tendered and not withdrawn at prices not greater than $58 nor less than $51 per Share) pursuant to the Offer. The Company reserves the right to purchase more than 3,000,000 Shares pursuant to the Offer, but does not currently plan to do so. The Offer is not conditioned on any minimum number of Shares being tendered. In accordance with Instruction 5 of the Letter of Transmittal, each stockholder who wishes to tender Shares must specify the price (not greater than $58 nor less than $51 per Share) at which such stockholder is willing to have the Company purchase such Shares. As promptly as practicable following the Expiration Date, the Company will determine the Purchase Price (not greater than $58 nor less than $51 per Share) that it will pay for Shares validly tendered pursuant to the Offer, taking into account the number of Shares so tendered and the prices specified by tendering stockholders. All Shares not purchased pursuant to the Offer, including Shares tendered at prices greater than the Purchase Price and Shares not purchased because of proration or conditional tenders, will be returned to the tendering stockholders at the Company's expense as promptly as practicable following the Expiration Date. Upon the terms and subject to the conditions of the Offer, if 3,000,000 or fewer Shares have been validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date, the Company will purchase all such Shares (including fractional Shares). Upon the terms and subject to the conditions of the Offer, if more than 3,000,000 Shares have been validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date, the Company will purchase Shares in the following order of priority: (a) all Shares validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date by any stockholder (an "Odd Lot Owner") who owned beneficially an aggregate of fewer than 100 Shares (including any Shares held in the Reinvestment Plan) as of the close of business on August 22, 1995 and who validly tenders all of such Shares (partial and conditional tenders will not qualify for this preference) and completes the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, the Notice of Guaranteed Delivery; and (b) after purchase of all of the foregoing Shares, subject to the conditional tender provisions described in Section 6, all other Shares validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date on a pro rata basis, if necessary (with appropriate adjustments to avoid purchases of fractional Shares, other than Shares held in the Reinvestment Plan). 4 If proration of tendered Shares is required, because of the difficulty in determining the number of Shares validly tendered (including Shares tendered by the guaranteed delivery procedure described in Section 3) and as a result of the "odd lot" procedure described in Section 2 and conditional tender procedure described in Section 6, the Company does not expect that it would be able to announce the final proration factor or to commence payment for any Shares purchased pursuant to the Offer until approximately seven NYSE trading days after the Expiration Date. Proration for each stockholder tendering Shares other than Odd Lot Owners will be based on the ratio of the number of Shares tendered by such stockholder to the total number of Shares tendered by all stockholders other than Odd Lot Owners at or below the Purchase Price. This ratio will be applied to stockholders tendering Shares other than Odd Lot Owners to determine the number of Shares that will be purchased from each stockholder pursuant to the Offer. Preliminary results of proration will be announced by press release as promptly as practicable after the Expiration Date. Holders of Shares may obtain such preliminary information from the Dealer Manager or the Information Agent and may also be able to obtain such information from their brokers. THE COMPANY EXPRESSLY RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO PURCHASE ADDITIONAL SHARES PURSUANT TO THE OFFER. If (i) the Company increases or decreases the price to be paid for Shares, increases the number of Shares being sought and such increase in the number of Shares being sought exceeds 2% of the outstanding Shares or decreases the number of Shares being sought and (ii) the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner described in Section 14, the Offer will be extended until the expiration of ten business days from the date of publication of such notice. The Company also expressly reserves the right, in its sole discretion, at any time or from time to time, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary. See Section 14. There can be no assurance, however, that the Company will exercise its right to extend the Offer. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time. Copies of this Offer to Purchase and the Letter of Transmittal are being mailed to record holders of Shares and will be furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on the Company's stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. 2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES. All Shares validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date by or on behalf of persons who each owned beneficially an aggregate of fewer than 100 Shares (including Shares held in the Reinvestment Plan and fractional Shares) as of the close of business on August 22, 1995, will be accepted before proration, if any, of the purchase of other tendered Shares. See Section 1. Partial or conditional tenders will not qualify for this preference, and it is not available to beneficial holders of 100 or more Shares, even if such holders have separate stock certificates for fewer than 100 Shares. By accepting the Offer, a stockholder owning beneficially fewer than 100 Shares will avoid the payment of brokerage commissions and the applicable odd lot discount payable in a sale of such Shares in a transaction effected on a securities exchange. As of August 22, 1995, there were approximately 6,223 holders of record of Shares. Approximately 48.0% these holders of record held individually fewer than 100 Shares and held in the aggregate approximately 95,367 Shares. Because of the large number of Shares held in the names of brokers and 5 nominees, the Company is unable to estimate the number of beneficial owners of fewer than 100 Shares or the aggregate number of Shares they own. Any stockholder wishing to tender all of his Shares pursuant to this Section should complete the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of Guaranteed Delivery. 3. PROCEDURE FOR TENDERING SHARES. To tender Shares validly pursuant to the Offer, either (a) a properly completed and duly executed Letter of Transmittal or facsimile thereof, together with any required signature guarantees and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and either (i) certificates for the Shares to be tendered must be received by the Depositary at one of such addresses or (ii) such Shares must be delivered pursuant to the procedures for book-entry transfer described below (and a confirmation of such delivery received by the Depositary), in each case on or prior to the Expiration Date, or (b) the tendering holder of Shares must comply with the guaranteed delivery procedure described below. IN ACCORDANCE WITH INSTRUCTION 5 OF THE LETTER OF TRANSMITTAL, IN ORDER TO TENDER SHARES PURSUANT TO THE OFFER, A STOCKHOLDER MUST INDICATE IN THE SECTION CAPTIONED "PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED" ON THE LETTER OF TRANSMITTAL THE PRICE (IN MULTIPLES OF $0.125) AT WHICH SUCH SHARES ARE BEING TENDERED. Stockholders wishing to tender Shares at more than one price must complete separate Letters of Transmittal for each price at which such Shares are being tendered. The same Shares cannot be tendered at more than one price. FOR A TENDER OF SHARES TO BE VALID, A PRICE BOX, BUT ONLY ONE PRICE BOX, ON EACH LETTER OF TRANSMITTAL MUST BE CHECKED. The Depositary will establish an account with respect to the Shares at The Depository Trust Company, Midwest Securities Trust Company and Philadelphia Depository Trust Company (collectively referred to as the "Book-Entry Transfer Facilities") for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in the system of any Book-Entry Transfer Facility may make delivery of Shares by causing such Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with the procedures of such Book-Entry Transfer Facility. Although delivery of Shares may be effected through book- entry transfer, a properly completed and duly executed Letter of Transmittal or facsimile thereof, together with any required signature guarantees and any other required documents, must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, or the tendering holder of Shares must comply with the guaranteed delivery procedure described below. Delivery of the Letter of Transmittal and any other required documents to a Book-Entry Transfer Facility does not constitute delivery to the Depositary. Except as otherwise provided below, all signatures on a Letter of Transmittal must be guaranteed by a firm that is a member of a registered national securities exchange or the National Association of Securities Dealers, Inc., or by a commercial bank or trust company having an office or correspondent in the United States which is a participant in an approved Signature Guarantee Medallion Program (each of the foregoing being referred to as an "Eligible Institution"). Signatures on a Letter of Transmittal need not be guaranteed if (a) the Letter of Transmittal is signed by the registered holder of the Shares tendered therewith and such holder has not completed the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (b) such Shares are tendered for the account of an Eligible Institution. See Instructions 1 and 6 of the Letter of Transmittal. If a stockholder desires to tender Shares pursuant to the Offer and cannot deliver certificates for such Shares and all other required documents to the Depositary on or prior to the Expiration Date or the procedure for book-entry transfer cannot be complied with in a timely manner, such Shares may nevertheless be tendered if all of the following conditions are met: (i) such tender is made by or through an Eligible Institution; 6 (ii) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Company (with any required signature guarantees) is received by the Depositary as provided below on or prior to the Expiration Date; and (iii) the certificates for such Shares (or a confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book- Entry Transfer Facilities), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other documents required by the Letter of Transmittal, are received by the Depositary no later than 5:00 p.m., New York City time, on the third NYSE trading day after the date of execution of the Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice. THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. TO AVOID FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31% OF THE GROSS PAYMENTS MADE PURSUANT TO THE OFFER, EACH STOCKHOLDER MUST NOTIFY THE DEPOSITARY OF SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY PROPERLY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. FOREIGN STOCKHOLDERS (AS DEFINED IN SECTION 13) MAY BE REQUIRED TO SUBMIT A PROPERLY COMPLETED FORM W-8, CERTIFYING NON-UNITED STATES STATUS, IN ORDER TO AVOID BACKUP WITHHOLDING. IN ADDITION, FOREIGN STOCKHOLDERS MAY BE SUBJECT TO 30% (OR LOWER TREATY RATE) WITHHOLDING ON GROSS PAYMENTS RECEIVED PURSUANT TO THE OFFER (AS DISCUSSED IN SECTION 13). For a discussion of certain federal income tax consequences to tendering stockholders, see Section 13. EACH STOCKHOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR. It is a violation of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for a person to tender Shares for his or her own account unless the person so tendering (i) has a net long position equal to or greater than the amount of (x) Shares tendered or (y) other securities immediately convertible into, exercisable, or exchangeable for the amount of Shares tendered and will acquire such Shares for tender by conversion, exercise or exchange of such other securities and (ii) will cause such Shares to be delivered in accordance with the terms of the Offer. Rule 14e-4 provides a similar restriction applicable to the tender or guarantee of a tender on behalf of another person. The tender of Shares pursuant to any one of the procedures described above will constitute the tendering stockholder's representation and warranty that (i) such stockholder has a net long position in the Shares being tendered within the meaning of Rule 14e-4 promulgated under the Exchange Act, and (ii) the tender of such Shares complies with Rule 14e-4. The Company's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering stockholder and the Company upon the terms and subject to the conditions of the Offer. All questions as to the Purchase Price, the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Company, in its sole discretion, and its determination shall be final and binding. The Company reserves the absolute right to reject any or all tenders of Shares that it determines are not in proper form or the acceptance for payment of or payment for Shares that may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any defect or irregularity in any tender of Shares. None of the Company, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notice of any defect or irregularity in tenders, nor shall any of them incur any liability for failure to give any such notice. A stockholder participating in the Reinvestment Plan who wishes to have The First National Bank of Boston, which administers the Reinvestment Plan, tender Shares held in such participants' accounts in the 7 Reinvestment Plan should so indicate by completing the box captioned "Dividend Reinvestment and Cash Stock Purchase Plan Shares" in the Letter of Transmittal. Participants in the Reinvestment Plan are urged to read Section 13 of the Letter of Transmittal carefully. Any Reinvestment Plan Shares tendered but not purchased will be returned to the participant's Reinvestment Plan account. If a participant tenders all of his or her Reinvestment Plan Shares and all such Shares are purchased by the Company pursuant to the Offer, such tender will be deemed to be authorization and written notice to The First National Bank of Boston of termination of such stockholder's participation in the Reinvestment Plan. 4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer may be withdrawn at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable, except that they may be withdrawn after October 19, 1995 unless theretofore accepted for payment as provided in this Offer to Purchase. If the Company extends the period of time during which the Offer is open, is delayed in accepting for payment or paying for Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Company's rights under the Offer, the Depositary may, on behalf of the Company, retain all Shares tendered, and such Shares may not be withdrawn except as otherwise provided in this Section 4, subject to Rule 13e-4(f)(5) under the Exchange Act, which provides that the issuer making the tender offer shall either pay the consideration offered, or return the tendered securities promptly after the termination or withdrawal of the tender offer. To be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and must specify the name of the person who tendered the Shares to be withdrawn and the number of Shares to be withdrawn. If the Shares to be withdrawn have been delivered to the Depositary, a signed notice of withdrawal with signatures guaranteed by an Eligible Institution (except in the case of Shares tendered by an Eligible Institution) must be submitted prior to the release of such Shares. In addition, such notice must specify, in the case of Shares tendered by delivery of certificates, the name of the registered holder (if different from that of the tendering stockholder) and the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn or, in the case of Shares tendered by book-entry transfer, the name and number of the account at one of the Book- Entry Transfer Facilities to be credited with the withdrawn Shares. Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 3 at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Company, in its sole discretion, which determination shall be final and binding. None of the Company, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defect or irregularity in any notice of withdrawal or incur any liability for failure to give any such notification. 5. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE PRICE. Upon the terms and subject to the conditions of the Offer and as promptly as practicable after the Expiration Date, the Company will determine the Purchase Price, taking into account the number of Shares tendered and the prices specified by tendering stockholders, announce the Purchase Price, and will (subject to the proration and conditional tender provisions of the Offer) accept for payment and pay for Shares validly tendered at or below the Purchase Price. Thereafter, payment for all Shares validly tendered on or prior to the Expiration Date and accepted for payment pursuant to the Offer will be made by the Depositary by check as promptly as practicable. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for Shares (or of a confirmation of a book-entry transfer of such Shares into the Depositary's account at one of the Book-Entry Transfer Facilities), a properly completed and duly executed Letter of Transmittal or facsimile thereof, and any other required documents. 8 For purposes of the Offer, the Company will be deemed to have accepted for payment (and thereby purchased) Shares that are validly tendered and not withdrawn as, if and when it gives oral or written notice to the Depositary of its acceptance for payment of such Shares. The Company will pay for Shares that it has purchased pursuant to the Offer by depositing the Purchase Price therefor with the Depositary. The Depositary will act as agent for tendering stockholders for the purpose of receiving payment from the Company and transmitting payment to tendering stockholders. Under no circumstances will interest be paid on amounts to be paid to tendering stockholders, regardless of any delay in making such payment. Certificates for all Shares not purchased will be returned (or, in the case of Shares tendered by book-entry transfer, such Shares will be credited to an account maintained with a Book-Entry Transfer Facility) as promptly as practicable without expense to the tendering stockholder. Payment for Shares may be delayed in the event of difficulty in determining the number of Shares properly tendered or if proration is required. See Section 1. In addition, if certain events occur, the Company may not be obligated to purchase Shares pursuant to the Offer. See Section 7. The Company will pay or cause to be paid any stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the Purchase Price is to be made to, or Shares not tendered or not purchased are to be registered in the name of, any person other than the registered holder, or if tendered Shares are registered in the name of any person other than the person signing the Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder, such other person or otherwise) payable on account of the transfer to such person will be deducted from the Purchase Price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted. See Instruction 7 to the Letter of Transmittal. 6. CONDITIONAL TENDER OF SHARES. Under certain circumstances and subject to the exceptions set forth in Section 1, the Company may prorate the number of Shares purchased pursuant to the Offer. As discussed in Section 13, the number of Shares to be purchased from a particular stockholder might affect the tax treatment of such purchase to such stockholder and such stockholder's decision whether to tender. EACH STOCKHOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR. Accordingly, a stockholder may tender Shares subject to the condition that a specified minimum number of such holder's Shares tendered pursuant to a Letter of Transmittal or Notice of Guaranteed Delivery must be purchased if any such Shares so tendered are purchased, and any stockholder desiring to make such a conditional tender must so indicate in the box captioned "Conditional Tender" in such Letter of Transmittal or, if applicable, the Notice of Guaranteed Delivery. Any tendering stockholders wishing to make a conditional tender must calculate and appropriately indicate such minimum number of Shares. If the effect of accepting tenders on a pro rata basis would be to reduce the number of Shares to be purchased from any stockholder (tendered pursuant to a Letter of Transmittal or Notice of Guaranteed Delivery) below the minimum number so specified, such tender will automatically be regarded as withdrawn (except as provided in the next paragraph) and all Shares tendered by such stockholder pursuant to such Letter of Transmittal or Notice of Guaranteed Delivery will be returned as promptly as practicable thereafter. If conditional tenders would otherwise be so regarded as withdrawn and would cause the total number of Shares to be purchased to fall below 3,000,000, then, to the extent feasible, the Company will select enough of such conditional tenders that would otherwise have been so withdrawn to permit the Company to purchase 3,000,000 Shares. In selecting among such conditional tenders, the Company will select by lot and will limit its purchase in each case to the designated minimum number of Shares to be purchased. 9 7. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer, the Company will not be required to accept for payment or pay for any Shares tendered, and may terminate or amend and may postpone (subject to the requirements of the Exchange Act for prompt payment for or return of Shares) the acceptance for payment of Shares tendered, if at any time after August 22, 1995 and at or before acceptance for payment of any Shares any of the following shall have occurred: (a) there shall have been threatened, instituted or pending any action or proceeding by any government or governmental, regulatory or administrative agency or authority or tribunal or any other person, domestic or foreign, or before any court, authority, agency or tribunal that (i) challenges the acquisition of Shares pursuant to the Offer or otherwise in any manner relates to or affects the Offer or (ii) in the sole judgment of the Company, could materially and adversely affect the business, condition (financial or other), income, operations or prospects of the Company and its subsidiaries, taken as a whole, or otherwise materially impair in any way the contemplated future conduct of the business of the Company or any of its subsidiaries or materially impair the Offer's contemplated benefits to the Company; (b) there shall have been any action threatened, pending or taken, or approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to the Offer or the Company or any of its subsidiaries, by any legislative body, court, authority, agency or tribunal which, in the Company's sole judgment, would or might directly or indirectly (i) make the acceptance for payment of, or payment for, some or all of the Shares illegal or otherwise restrict or prohibit consummation of the Offer, (ii) delay or restrict the ability of the Company, or render the Company unable, to accept for payment or pay for some or all of the Shares, (iii) materially impair the contemplated benefits of the Offer to the Company or (iv) materially affect the business, condition (financial or other), income, operations or prospects of the Company and its subsidiaries, taken as a whole, or otherwise materially impair in any way the contemplated future conduct of the business of the Company or any if its subsidiaries; (c) it shall have been publicly disclosed or the Company shall have learned that (i) any person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) has acquired or proposes to acquire beneficial ownership of more than 5% of the outstanding Shares whether through the acquisition of stock, the formation of a group, the grant of any option or right, or otherwise (other than as disclosed in a Schedule 13D or 13G on file with the Securities and Exchange Commission (the "Commission") on August 22, 1995) or (ii) any such person or group that on or prior to August 22, 1995 had filed such a Schedule with the Commission thereafter shall have acquired or shall propose to acquire whether through the acquisition of stock, the formation of a group, the grant of any option or right, or otherwise, beneficial ownership of additional Shares representing 2% or more of the outstanding Shares; (d) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market, (ii) any significant decline in the market price of the Shares, (iii) any change in the general political, market, economic or financial condition in the United States or abroad that could have a material adverse effect on the Company's business, condition (financial or other), income, operations, prospects or ability to obtain financing generally or the trading in the Shares, (iv) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or any limitation on, or any event which, in the Company's sole judgment, might affect, the extension of credit by lending institutions in the United States, (v) the commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States or (vi) in the case of any of the foregoing existing at the time of the commencement of the Offer, in the Company's sole judgment, a material acceleration or worsening thereof; (e) a tender or exchange offer with respect to some or all of the Shares (other than the Offer), or a merger, acquisition or other business combination proposal for the Company, shall have been proposed, announced or made by another person; 10 (f) there shall have occurred any event or events that have resulted, or may in the sole judgment of the Company result, in an actual or threatened change in the business, condition (financial or other), income, operations, stock ownership or prospects of the Company and its subsidiaries, taken as a whole; or (g) there shall have occurred any decline in the Dow Jones Industrial Average (4620.41 at the close of business on August 22, 1995) or the Standard & Poor's Composite 500 Stock Index (559.52 at the close of business on August 22, 1995) by an amount in excess of 10% measured from the close of business on August 22, 1995; and, in the sole judgment of the Company, such event or events make it undesirable or inadvisable to proceed with the Offer or with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances (including any action or inaction by the Company) giving rise to any such condition, and any such condition may be waived by the Company, in whole or in part, at any time and from time to time in its sole discretion. The failure by the Company at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. Any determination by the Company concerning the events described above will be final and binding on all parties. 8. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally traded on the NYSE. The Shares are also listed and traded on the PSE. The following table sets forth the high and low closing sales prices of the Shares on the NYSE Composite Tape and the cash dividends per Share for the Company's fiscal quarters indicated.
CASH DIVIDENDS HIGH* LOW* PER SHARE* ----- ---- -------------- Fiscal 1993: 1st Quarter.......................... $22 3/16 $16 7/8 $0.045 2nd Quarter.......................... 23 13/16 19 3/8 0.05 3rd Quarter.......................... 26 1/8 22 0.05 4th Quarter.......................... 26 3/16 24 1/8 0.05 Fiscal 1994: 1st Quarter.......................... 30 23 7/16 0.05 2nd Quarter.......................... 39 28 1/4 0.06 3rd Quarter.......................... 37 1/2 31 0.06 4th Quarter.......................... 38 5/8 34 1/8 0.06 Fiscal 1995: 1st Quarter.......................... 37 31 1/8 0.06 2nd Quarter.......................... 43 3/4 34 5/8 0.07 3rd Quarter.......................... 56 42 5/8 0.07 4th Quarter (to August 22, 1995)..... 57 1/4 51 1/2 --
-------- * Information provided has been restated to reflect a two-for-one stock split in the form of a 100% stock dividend effected on March 17, 1994. On August 22, 1995, the last full NYSE trading day prior to the commencement of the Offer, the last reported sale price of the Shares on the NYSE Composite Tape was $52 7/8 per Share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. Shares tendered and purchased by the Company will not receive or otherwise be entitled to the regular quarterly cash dividend of $.07 per Share to be paid by the Company on October 20, 1995 to holders of record on October 2, 1995, unless the Offer is extended beyond, or Shares are accepted for payment after, October 2, 1995 for any reason whatsoever. Shares which are tendered but not purchased as a result of proration or otherwise will remain entitled to receipt of the dividend to be paid on October 20, 1995. See Section 8. 11 Under a rights plan, every outstanding Share and every Share issuable by the Company (until certain events occur) includes a Right. Pursuant to a Rights Agreement, dated as of August 25, 1986, as amended (the "Rights Agreement"), between the Company and The First National Bank of Boston, as the Rights Agent, each Right entitles the registered holder to purchase from the Company a unit consisting of one two-hundredth of a share (a "Unit") of Series A Junior Participating Preferred Stock, par value $1.00 per share ("Preferred Stock"), at a purchase price of $62.50 per Unit, subject to adjustment. The Rights are not exercisable until the Distribution Date (as defined below) and will expire at the close of business on August 25, 1996, unless earlier redeemed by the Company. Prior to a Distribution Date, the Rights will be evidenced by the Shares and cannot be traded separately from such Shares. The Rights will separate from the Shares and a Distribution Date (the "Distribution Date") will occur upon the earlier of (a) 10 days following a public announcement that a person or group of affiliated or associated persons, other than certain exempt persons and other persons as set forth in the Rights Agreement, has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding Shares (including any other outstanding voting stock of the Company) (an "Acquiring Person"), or (b) 10 days (subject to adjustment by the Board of Directors of the Company) following the commencement of, or first public announcement of the intent to commence, a tender offer or exchange offer that could result, if successful, in a person or group, other than certain exempt persons as set forth in the Rights Agreement, beneficially owning 30% or more of such outstanding Shares and such other voting stock. The Rights will not become separately exercisable or separately tradeable as a result of the Offer. In the event that any person becomes an Acquiring Person (the "Trigger Event"), unless pursuant to a transaction approved by a majority of certain directors of the Company ("Continuing Directors") as set forth in the Rights Agreement, each holder of a Right will have the right to receive, upon exercise of such Right, the greater of (a) the number of shares of Preferred Stock (or, in certain circumstances, cash, property or other securities of the Company) for which such Right was exercisable immediately prior to such event, or (b) such number of shares of Preferred Stock (or, in certain circumstances, cash, property or other securities of the Company), based on the fair market value of such stock as calculated pursuant to the terms of the Rights Agreement on the date of such event, having a value equal to two times the exercise price of the Right. Notwithstanding any of the foregoing, following the occurrence of a Trigger Event, all Rights that are, or were, at the time of the Trigger Event beneficially owned by any Acquiring Person will be null and void. Unless approved by a majority of the Continuing Directors, in the event that, at any time following the Distribution Date, (a) the Company is acquired in a merger or other business combination transaction in which the Company is not the surviving corporation, (b) a person consolidates or merges with or into the Company, the Company is the surviving corporation and all or part of the Company's outstanding shares are changed into or exchanged for stock or securities of any other person or cash or other property or (c) 50% or more of the assets or earning power of the Company and its subsidiaries, taken as a whole, is sold or transferred, each holder of a Right shall thereafter have the right to receive, upon exercise of such Right, common stock of the acquiring company having a value equal to two times the exercise price of the Right. The foregoing description of the Rights is qualified in its entirety by reference to the Rights Agreement, a copy of which has been included as an exhibit to the Company's Registration Statement on Form 8-A dated August 29, 1986, and a copy of the amendment thereto to which has been included as an exhibit to the Company's Form 8 dated July 7, 1989, in each case filed with the Commission. Such reports and exhibits may be obtained from the Commission in the manner provided in Section 16. 9. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER. The Company believes that the purchase of its Shares at this time represents an attractive investment opportunity that will benefit the Company and its stockholders. The Offer will afford to stockholders who are considering the sale of all or a portion of their Shares the opportunity to determine the price at which they are willing to sell their Shares and, in the event the Company accepts such Shares for purchase, to dispose 12 of Shares without the usual transaction costs associated with a market sale. The Offer will also allow qualifying stockholders owning beneficially fewer than 100 Shares to avoid the payment of brokerage commissions and the applicable odd lot discount payable on a sale of Shares in a transaction effected on a securities exchange. Correspondingly, the costs to the Company for servicing the accounts of odd lot holders will be reduced. See Section 2. Stockholders who determine not to accept the Offer will obtain a proportionate increase in their ownership interest in the Company. After consummation of the Offer, increases or decreases in net income will likely be reflected in greater increases or decreases in earnings per Share than is presently the case because of the smaller number of Shares outstanding thereafter. If fewer than 3,000,000 Shares are purchased pursuant to the Offer, the Company may repurchase the remainder of such Shares on the open market, in privately negotiated transactions or otherwise. The Company is currently authorized to repurchase up to approximately 1,804,500 Shares (not including Shares to be repurchased pursuant to the Offer) pursuant to the Company's stock repurchase program, and the Company intends to resume repurchases under such program after the expiration of the Offer. See Section 12. In the future, the Company also may determine to purchase additional Shares on the open market, in privately negotiated transactions, through one or more tender offers or otherwise. Any such purchases may be on the same terms or on terms which are more or less favorable to stockholders than the terms of the Offer. However, Rule 13e-4 under the Exchange Act prohibits the Company and its affiliates from purchasing any Shares, other than pursuant to the Offer, until at least ten business days after the Expiration Date. Any future purchases of Shares by the Company would depend on many factors, including the market price of the Shares, the Company's business and financial position, and general economic and market conditions. Shares that the Company acquires pursuant to the Offer will become authorized but unissued Shares and will be available for issuance by the Company without further stockholder action (except as may be required by applicable law or the rules of the securities exchanges on which the Shares are listed). Such Shares could be issued without stockholder approval for, among other things, acquisitions, the raising of additional capital for use in the Company's business, stock dividends or in connection with employee stock, stock option and other plans, or a combination thereof. The Company has no current plans for the Shares it may acquire pursuant to the Offer or any other authorized but unissued Shares. As of August 22, 1995, the Company had issued and outstanding 33,887,015 Shares and had reserved for issuance upon exercise of outstanding stock options 3,996,106 Shares. The 3,000,000 Shares that the Company is offering to purchase represent approximately 8.85% of the Shares then outstanding. As of August 22, 1995, all directors and executive officers of the Company as a group owned beneficially an aggregate of 1,372,043.07 Shares (including an aggregate of 1,103,692 Shares that may be acquired pursuant to the exercise of outstanding stock options exercisable within 60 days of the date hereof). The Company has been advised that no director or executive officer intends to tender Shares pursuant to the Offer. If the Company purchases 3,000,000 Shares pursuant to the Offer and no director or executive officer of the Company tenders Shares, the percentage of outstanding Shares owned beneficially by all of the Company's directors and executive officers as a group would increase to approximately 3.93% of the Shares then outstanding (including for this purpose, Shares that may be acquired by such directors and executive officers pursuant to the exercise of outstanding stock options exercisable within 60 days of the date hereof). Except as disclosed in this Offer to Purchase, the Company has no plans or proposals which relate to or would result in: (a) the acquisition by any person of additional securities of the Company or the disposition of securities of the Company; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries; (d) any change in the present Board of Directors or management of the Company; (e) any material change in the present dividend rate or policy, or indebtedness or capitalization of the Company; (f) any other material change in the Company's corporate structure or business; (g) any change in the Company's Restated Certificate of Incorporation or By-Laws or any actions 13 which may impede the acquisition of control of the Company by any person; (h) a class of equity security of the Company being delisted from a national securities exchange; (i) a class of equity security of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or (j) the suspension of the Company's obligation to file reports pursuant to Section 15(d) of the Exchange Act. The Company does not believe that the Offer will result in delisting of the Shares on the NYSE or termination of registration of the Shares under the Exchange Act. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES. EACH STOCKHOLDER MUST MAKE HIS OR HER OWN DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND AT WHAT PRICE. THE COMPANY HAS BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE OFFICER INTENDS TO TENDER SHARES PURSUANT TO THE OFFER. 10.CERTAIN INFORMATION CONCERNING THE COMPANY. The Company together with its subsidiaries is a technology enterprise which was founded in 1948. It is engaged in the research, development, manufacture and marketing of products and services for the fields of health care, industrial production, scientific and industrial research and environmental monitoring. The Company's principal products are health care systems, analytical instruments and semiconductor production equipment. The Company's principal executive offices are located at 3050 Hansen Way, Palo Alto, California 94304-1000 and its telephone number is (415) 493-4000. Recent Developments On August 11, 1995, the Company completed the sale of its Electron Devices business ("EDB"). A brief summary of that transaction is contained in the Company's Current Report on Form 8-K (the "Form 8-K"), which Form 8-K (other than the exhibits thereto) is attached to this Offer to Purchase as Annex I and is incorporated herein by this reference. William F. Miller is expected to retire from the Board of Directors of the Company at the end of his term and upon election of a new director at the Annual Meeting of Stockholders in February 1996. Allen K. Jones, Vice President and Controller, is expected to leave the Company in October 1995 under an arrangement which will provide him with certain separation benefits. Wayne P. Somrak, currently Vice President, and Treasurer, is expected to thereafter assume Mr. Jones' position. Robert A. Lemos, Vice President, Finance, and Chief Financial Officer, is expected to then assume the additional position of Treasurer. Summary Consolidated Historical Financial Information The following selected financial data for the nine months ended June 30, 1995 and July 1, 1994 (unaudited) are derived from the unaudited consolidated financial statements of Varian Associates, Inc. and subsidiaries set forth in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (the "1995 Third Quarter 10-Q"), except for the reclassification of EDB, which was sold on August 11, 1995, as discontinued operations. In the opinion of management, all adjustments considered necessary for a fair statement of the results for the periods, which consisted only of normal recurring accruals, have been made. Results for the nine months are not necessarily indicative of the results for the entire year for most of the Company's businesses. The following selected financial data for each of the years ended September 30, 1994 and October 1, 1993 were derived from the audited consolidated financial statements of Varian Associates, Inc. and subsidiaries incorporated by reference in the Company's Annual Report on Form 10-K for the year ended September 30, 1994 (the "1994 10-K"), except for the reclassification of EDB, which was sold on August 11, 1995, as discontinued operations. The data should be read in conjunction with, and is qualified in its entirety by reference to, such audited consolidated financial statements and their related notes. The 1995 Third Quarter 10-Q (other than the exhibits thereto) is attached to this Offer to Purchase as Annex II. The 1995 Third Quarter 10-Q and the Form 8-K, in each case complete with exhibits, and the 1994 10-K may be obtained from the Commission in the manner provided in Section 16. 14 SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION (IN MILLIONS, EXCEPT RATIOS, PER SHARE AMOUNTS AND SHARES OUTSTANDING)
NINE MONTHS ENDED YEAR ENDED ----------------- ------------------------ JUNE 30, JULY 1, SEPTEMBER 30, OCTOBER 1, 1995 1994 1994 1993 -------- ------- ------------- ---------- (UNAUDITED) INCOME STATEMENT DATA: Sales............................... $1,169.0 $934.2 $1,313.4 $1,061.9 Earnings before taxes............... 116.2 71.6 109.1 60.1 Earnings from continuing operations. 73.2 44.4 67.6 37.3 Earnings from discontinued opera- tions.............................. 9.0 8.0 11.8 8.5 -------- ------ -------- -------- Net earnings........................ $ 82.2 $ 52.4 $ 79.4 $ 45.8 ======== ====== ======== ======== Earnings per share -- Earnings from continuing operations....................... $ 2.06 $ 1.24 $ 1.90 $ 1.03 Earnings from discontinued operations....................... 0.26 0.23 0.32 0.23 -------- ------ -------- -------- Net earnings...................... $ 2.32 $ 1.47 $ 2.22 $ 1.26 ======== ====== ======== ======== Average shares outstanding including common stock equivalents (in thousands)......... 35,480 35,703 35,676 36,292 Ratio of earnings from continuing operations to fixed charges................... 17.84x 13.79x 14.30x 6.27x AT AT ----------------- ------------------------ JUNE 30, JULY 1, SEPTEMBER 30, OCTOBER 1, 1995 1994 1994 1993 -------- ------- ------------- ---------- (UNAUDITED) BALANCE SHEET DATA: Working capital..................... $ 277.4 $235.7 $ 237.0 $ 208.5 Total assets........................ 1,069.1 937.5 962.4 878.7 Total assets, less goodwill......... 1,051.2 922.9 947.9 862.7 Total debt.......................... 93.3 99.3 65.2 83.3 Stockholders' equity................ 495.7 433.6 449.5 414.1 Stockholders' equity per share out- standing........................... $ 14.65 $12.64 $ 13.23 $ 11.94
NOTES TO SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION (1) The ratios of earnings from continuing operations to fixed charges were computed by dividing earnings from continuing operations before fixed charges and income taxes by the fixed charges. Earnings consist of income from continuing operations, to which has been added fixed charges and income taxes. Fixed charges consist of interest and debt expense and one- third of rent expense, which approximates the interest factor. (2) Share information and per share data have been restated to reflect a two-for-one stock split in the form of a 100% stock dividend effected on March 17, 1994. Summary Unaudited Consolidated Pro Forma Financial Information The following summary unaudited consolidated pro forma financial information gives effect to the purchase of Shares pursuant to the Offer, based on certain assumptions described in the Notes to Summary Unaudited Consolidated Pro Forma Financial Information. The Consolidated Statements of Earnings gives effect to the purchase of Shares pursuant to the Offer as if it had occurred on October 2, 1993 and October 1, 1994. Additionally, the consolidated statements of earnings have been restated to report the operations of EDB, which was sold on August 11, 1995, as discontinued operations. The summary unaudited consolidated pro forma financial information should be read in conjunction with the summary consolidated historical financial information and does not purport to be indicative of the results that would actually have been obtained had the purchase of the Shares pursuant to the Offer been completed at the dates indicated or that may be obtained in the future. 15 SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION (IN MILLIONS, EXCEPT RATIOS, PER SHARE AMOUNTS AND SHARES OUTSTANDING)
NINE MONTHS ENDED YEAR ENDED JUNE 30, 1995 SEPTEMBER 30, 1994 ----------------------------- ----------------------------- PRO FORMA PRO FORMA ------------------ ------------------ ASSUMED ASSUMED ASSUMED ASSUMED $51 PER $58 PER $51 PER $58 PER SHARE SHARE SHARE SHARE UNAUDITED PURCHASE PURCHASE PURCHASE PURCHASE HISTORICAL PRICE PRICE HISTORICAL PRICE PRICE ---------- -------- -------- ---------- -------- -------- INCOME STATEMENT DATA: Sales................... $1,169.0 $1,169.0 $1,169.0 $1,313.4 $1,313.4 $1,313.4 Earnings before taxes... 116.2 116.2 116.2 109.1 109.1 109.1 Earnings from continuing operations............. 73.2 73.2 73.2 67.6 67.6 67.6 Earnings from discontin- ued operations......... 9.0 9.0 9.0 11.8 11.8 11.8 -------- -------- -------- -------- -------- -------- Net earnings............ $ 82.2 $ 82.2 $ 82.2 $ 79.4 $ 79.4 $ 79.4 ======== ======== ======== ======== ======== ======== Earnings per share -- Earnings from continuing operations........... $ 2.06 $ 2.25 $ 2.25 $ 1.90 $ 2.07 $ 2.07 Earnings from discontinued operations........... 0.26 0.28 0.28 0.32 0.36 0.36 -------- -------- -------- -------- -------- -------- Net earnings.......... $ 2.32 $ 2.53 $ 2.53 $ 2.22 $ 2.43 $ 2.43 ======== ======== ======== ======== ======== ======== Average shares outstand- ing including common stock equiva- lents (in thousands)......... 35,480 32,480 32,480 35,676 32,676 32,676 Ratio of earnings from continuing operations to fixed charges................ 17.84x 17.84x 17.84x 14.30x 14.30x 14.30x AT JUNE 30, 1995 AT SEPTEMBER 30, 1994 ----------------------------- ----------------------------- PRO FORMA PRO FORMA ------------------ ------------------ ASSUMED ASSUMED ASSUMED ASSUMED $51 PER $58 PER $51 PER $58 PER SHARE SHARE SHARE SHARE UNAUDITED PURCHASE PURCHASE PURCHASE PURCHASE HISTORICAL PRICE PRICE HISTORICAL PRICE PRICE ---------- -------- -------- ---------- -------- -------- BALANCE SHEET DATA: Working capital......... $ 277.4 $ 123.7 $ 102.7 $ 237.0 $ 83.3 $ 62.3 Total assets............ 1,069.1 915.4 894.4 962.4 808.7 787.7 Total assets, less good- will................... 1,051.2 897.5 876.5 947.9 794.2 773.2 Total debt.............. 93.3 93.3 93.3 65.2 65.2 65.2 Stockholders' equity.... 495.7 342.0 321.0 449.5 295.8 274.8 Stockholders' equity per share outstanding............ $ 14.65 $ 11.09 $ 10.41 $ 13.23 $ 9.55 $ 8.87
NOTES TO SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION The following assumptions regarding the Offer were made in determining the pro forma financial information: (1) The information assumes that excess cash proceeds from the sale of EDB, which closed on August 11, 1995, were used to fund the purchase of Shares pursuant to the Offer. (2) The information assumes 3,000,000 Shares are purchased and retired at $51 per Share and at $58 per Share, with the purchase being financed with cash proceeds from the sale of EDB, which sale was assumed to have occurred at the beginning of the periods presented, and cash on hand. There can be no assurance that the Company will purchase 3,000,000 Shares or the price at which Shares will be purchased. 16 (3) Expenses directly related to the Offer are assumed to be $0.7 million and are charged against additional paid-in capital. (4) The ratios of earnings from continuing operations to fixed charges were computed by dividing earnings from continuing operations before fixed charges and income taxes by the fixed charges. Earning consist of income from continuing operations, to which has been added fixed charges and income taxes. Fixed charges consist of interest and debt expense and one third of rent expense, which approximates the interest factor. (5) Share information and per share data have been restated to reflect a two-for-one stock split in the form of a 100% stock dividend effected on March 17, 1994. 11. SOURCE AND AMOUNT OF FUNDS. Assuming that the Company purchases 3,000,000 Shares pursuant to the Offer at a price of $58 per Share, the total amount required by the Company to purchase such Shares will be $174 million, exclusive of fees and other expenses. The Company expects to fund the purchase of such Shares from the net proceeds from the sale of EDB and cash on hand. See Section 10. 12. TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES. The Company currently maintains a program for the repurchase of Shares, such purchases to be effected on the open market, in privately negotiated transactions or otherwise. On November 19, 1993, 2,000,000 Shares (calculated on a pre-stock split basis) were authorized for repurchase pursuant to such program. Due to a two-for-one split in the form of a 100% stock dividend effected in March 1994, the November 1993 authorization was replaced by the authorization in February 1994 to repurchase up to 4,000,000 Shares pursuant to the program. Between November 22, 1993 and June 30, 1995, the Company purchased a total of 2,898,700 Shares. The daily average price of Shares so purchased ranged from a high of $55.04 to a low of $25.69 per Share, and the average price paid per Share was approximately $36.87. The Company has not acquired any Shares under the repurchase program since June 30, 1995. Under the present Board authorization, the Company may repurchase up to approximately 1,804,500 Shares (not including Shares to be repurchased pursuant to the Offer) pursuant to the Company's repurchase program. On June 30, 1995, quarterly purchases of 95 Shares, 88 Shares, 145 Shares and 190 Shares were made at a price of approximately $36.76 per Share through the Company's 1985 Employee Stock Purchase Plan on behalf of Richard A. Aurelio, Executive Vice President, Allen K. Jones, Vice President and Controller, Robert A. Lemos, Vice President, Finance and Chief Financial Officer, and Richard M. Levy, Executive Vice President, respectively. On July 7, 1995, less than one Share was purchased at a price of $55.675 per Share for the Reinvestment Plan account of Ruth M. Davis, a director of the Company. Except as set forth above and on Schedule A hereto, based upon the Company's records and upon information provided to the Company by its directors and executive officers, neither the Company nor, to the Company's knowledge, any of its associates, subsidiaries, directors, executive officers or any associate of any such director or executive officer, or any director or executive officer of its subsidiaries, has engaged in any transactions involving the Shares during the 40 business days preceding the date hereof. Neither the Company nor, to the Company's knowledge, any of its directors or executive officers is a party to any contract, arrangement, understanding or relationship relating directly or indirectly to the Offer with any other person with respect to the Shares. 13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. In General. The following summary describes certain United States federal income tax consequences relating to the Offer. The summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), and existing final, temporary and proposed Treasury Regulations, Revenue Rulings and judicial decisions, all of which are subject to prospective and retroactive changes. The summary deals only with Shares held as capital assets within the meaning of Section 1221 of the Code and does not address tax consequences that may be relevant to investors in special tax situations, such as certain financial institutions, tax-exempt organizations, life insurance companies, dealers in securities or currencies, or stockholders holding the Shares 17 as part of a conversion transaction, as part of a hedge or hedging transaction, or as a position in a straddle for tax purposes. The Company will not seek a ruling from the Internal Revenue Service (the "IRS") with regard to the United States federal income tax treatment of the Offer and, therefore, there can be no assurance that the IRS will agree with the conclusions set forth below. Accordingly, each stockholder should consult its own tax advisor with regard to the Offer and the application of United States federal income tax laws, as well as the laws of any state, local or foreign taxing jurisdiction, to its particular situation. Characterization of the Sale. A sale of Shares by a stockholder of the Company pursuant to the Offer will be a taxable transaction for United States federal income tax purposes and may also be a taxable transaction under applicable state, local and foreign tax laws. The United States federal income tax consequences to a stockholder may vary depending upon the stockholder's particular facts and circumstances. Under Section 302 of the Code, a sale of Shares by a stockholder to the Company pursuant to the Offer will be treated as a "sale or exchange" of such Shares for United States federal income tax purposes (rather than as a distribution by the Company with respect to the Shares held by the tendering stockholder) if the receipt of cash upon such sale (i) is "substantially disproportionate" with respect to the stockholder, (ii) results in a "complete redemption" of the Shares owned by the stockholder, or (iii) is "not essentially equivalent to a dividend" with respect to the stockholder (each as described below). If any of the above three tests is satisfied, and the sale of the Shares is therefore treated as a "sale or exchange" of such Shares for United States federal income tax purposes, the tendering stockholder will recognize gain or loss equal to the difference between the amount of cash received by the stockholder pursuant to the Offer and the stockholder's tax basis in the Shares sold pursuant to the Offer. Any such gain or loss will be capital gain or loss, and will be long term capital gain or loss if the Shares have been held for more than one year. If none of the above three tests is satisfied, the tendering stockholder would be treated as having received a dividend includible in gross income in an amount equal to the entire amount of cash received by the stockholder pursuant to the Offer (without reduction for the tax basis of the Shares sold pursuant to the Offer), no loss would be recognized, and the tendering stockholder's basis in the Shares sold pursuant to the Offer would be added to such stockholder's basis in its remaining Shares, if any. In determining whether any of the three tests under Section 302 of the Code is satisfied, stockholders must take into account not only the Shares which are actually owned by the stockholder, but also Shares which are constructively owned by the stockholder within the meaning of Section 318 of the Code. Under Section 318 of the Code, a stockholder may constructively own Shares actually owned, and in some cases constructively owned, by certain related individuals or entities and Shares which the stockholder has the right to acquire by exercise of an option or by conversion. Contemporaneous dispositions or acquisitions of Shares by a stockholder or related individuals or entities may be deemed to be part of a single integrated transaction which will be taken into account in determining whether any of the three tests under Section 302 of the Code has been satisfied. Each stockholder should be aware that because proration may occur in the Offer, even if all the Shares actually and constructively owned by a stockholder are tendered pursuant to the Offer, fewer than all of such Shares may be purchased by the Company. Thus, proration may affect whether a sale by a stockholder pursuant to the Offer will meet any of the three tests under Section 302 of the Code. See Section 6 for information regarding each stockholder's option to make a conditional tender of a minimum number of Shares. A stockholder should consult its own tax advisor regarding whether to make a conditional tender of a minimum number of Shares, and the appropriate calculation thereof. Section 302 Tests. The receipt of cash by a stockholder will be "substantially disproportionate" if the percentage of the outstanding Shares actually and constructively owned by the stockholder immediately following the sale of Shares pursuant to the Offer (treating as not outstanding all Shares purchased pursuant to the Offer) is less than 80% of the percentage of the outstanding Shares actually and constructively owned by such stockholder immediately before the sale of Shares pursuant to the Offer (treating as outstanding all Shares purchased pursuant to the Offer). Stockholders should consult their tax advisors with respect to the application of the "substantially disproportionate" test to their particular situation. 18 The receipt of cash by a stockholder will be a "complete redemption" of all the Shares owned by the stockholder if either (i) all of the Shares actually and constructively owned by the stockholder are sold pursuant to the Offer, or (ii) all of the Shares actually owned by the stockholder are sold pursuant to the Offer and, with respect to Shares constructively owned by the stockholder which are not sold pursuant to the Offer, the stockholder is eligible to waive (and effectively waives) constructive ownership of all such Shares under procedures described in Section 302(c) of the Code. Even if the receipt of cash by a stockholder fails to satisfy the "substantially disproportionate" test or the "complete redemption" test, a stockholder may nevertheless satisfy the "not essentially equivalent to a dividend" test, if the stockholder's sale of Shares pursuant to the Offer results in a "meaningful reduction" in the stockholder's interest in the Company. Whether the receipt of cash by a stockholder will be "not essentially equivalent to a dividend" will depend upon the individual stockholder's facts and circumstances. The IRS has indicated in published rulings that even a small reduction in the proportionate interest of a small minority stockholder in a publicly held corporation who exercises no control over corporate affairs may constitute such a "meaningful reduction." The IRS held in Rev. Rul. 76-385, 1976-2 C.B. 92, that a reduction in the percentage ownership interest of a stockholder in a publicly held corporation from .0001118% to .0001081% (a reduction to 96.7% of the stockholder's prior percentage ownership interest) would constitute a "meaningful reduction." Under this ruling, it is likely that a small minority stockholder who exercises no control over the Company, and all of whose actual and constructively owned Shares are tendered at or below the Purchase Price, would satisfy the "not essentially equivalent to a dividend" test notwithstanding proration in the Offer. Stockholders expecting to rely on the "not essentially equivalent to a dividend" test should consult their own tax advisors as to its application in their particular situation. Corporate Stockholder Dividend Treatment. Under current law, if a sale of Shares by a corporate stockholder is treated as a dividend, the corporate stockholder may be entitled to claim a deduction equal to 70% of the dividend under Section 243 of the Code, subject to applicable limitations. However, identical bills (H.R. 1551, S.750) have been introduced by the chairmen and ranking minority members of the House Ways and Means Committee and the Senate Finance Committee that would have the effect of prohibiting corporate stockholders from treating non-pro rata redemptions as dividends. Rather, corporate stockholders generally would be required to treat such redemptions as sales or exchanges, and no dividends-received deduction would be available. However, losses would not be permitted. The legislation is proposed to be effective for redemptions after May 3, 1995. Corporate stockholders are urged to consult with their tax advisors concerning the likelihood that proposals such as these will be enacted with retroactive effect to May 3, 1995, and therefore that the dividends-received deduction would be unavailable to amounts received by corporate stockholders pursuant to the Offer. There also are provisions of current law that are likely to affect the availability of the dividends-received deduction for corporate stockholders. Corporate stockholders should consider the effect of Section 246(c) of the Code, which disallows the 70% dividends-received deduction with respect to stock that is held for 45 days or less. For this purpose, the length of time a taxpayer is deemed to have held stock may be reduced by periods during which the taxpayer's risk of loss with respect to the stock is diminished by reason of the existence of certain options or other transactions. Moreover, under Section 246A of the Code, if a corporate stockholder has incurred indebtedness directly attributable to an investment in Shares, the 70% dividends-received deduction may be reduced by a percentage generally computed based on the amount of such indebtedness and the total adjusted tax basis in the Shares. In addition, it is expected that any amount received by a corporate stockholder pursuant to the Offer that is treated as a dividend would constitute an "extraordinary dividend" under Section 1059 of the Code. For this purpose, all dividends received by a stockholder within, and having their ex-dividend date within, an 85-day period (expanded to a 365-day period in the case of dividends received in such period that in the aggregate exceed 20% of the stockholder's adjusted tax basis in the Shares) are aggregated and also treated as extraordinary dividends. Accordingly, a corporate stockholder would be required under Section 1059(a) of the Code to reduce its basis (but not below zero) in its Shares by the non-taxed portion of the dividend (i.e., the portion of the dividend for which a deduction is allowed), and if such portion exceeds the stockholder's tax basis for its Shares, to treat the excess as gain from the sale of such Shares in the year in which a sale or disposition of such Shares occurs (which, in certain 19 circumstances, may be the year in which Shares are sold pursuant to the Offer). Corporate stockholders should consult their own tax advisors as to the application of Section 1059 of the Code to the Offer, as well as the effect of pending legislation discussed above. Additional Tax Considerations. The distinction between long-term capital gains and ordinary income is relevant because certain individuals are subject to taxation at a reduced rate on the excess of net long-term capital gains over net short-term capital losses. In addition, legislation currently under active consideration would provide for reduced taxation of net long-term capital gains. See Legislative Proposals below. Stockholders are urged to consult their own tax advisors regarding any possible impact on their obligation to make estimated tax payments as a result of the recognition of any capital gain (or the receipt of any ordinary income) caused by the sale of any Shares to the Company pursuant to the Offer. Foreign Stockholders. The Company will withhold United States federal income tax at a rate of 30% from gross proceeds paid pursuant to the Offer to a foreign stockholder or his agent, unless the Company determines that a reduced rate of withholding is applicable pursuant to a tax treaty or that an exemption from withholding is applicable because such gross proceeds are effectively connected with the conduct of a trade or business by the foreign stockholder within the United States. For this purpose, a foreign stockholder is any stockholder that is not (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States, or (iii) any estate or trust the income of which is subject to United States federal income taxation regardless of its source. Without definite knowledge to the contrary, the Company will determine whether a stockholder is a foreign stockholder by reference to the stockholder's address. A foreign stockholder may be eligible to file for a refund of such tax or a portion of such tax if such stockholder (i) meets the "complete redemption," "substantially disproportionate" or "not essentially equivalent to a dividend" tests described above, (ii) is entitled to a reduced rate of withholding pursuant to a treaty and the Company withheld at a higher rate, or (iii) is otherwise able to establish that no tax or a reduced amount of tax was due. In order to claim an exemption from withholding on the ground that gross proceeds paid pursuant to the Offer are effectively connected with the conduct of a trade or business by a foreign stockholder within the United States or that the foreign stockholder is entitled to the benefits of a tax treaty, the foreign stockholder must deliver to the Depositary (or other person who is otherwise required to withhold United States tax) a properly executed statement claiming such exemption or benefits. Such statements may be obtained from the Depositary. Foreign stockholders are urged to consult their own tax advisors regarding the application of United States federal income tax withholding, including eligibility for a withholding tax reduction or exemption and the refund procedures. Backup Withholding. See Section 3 with respect to the application of the United States federal income tax backup withholding. Legislative Proposals. In April 1995 the House of Representatives passed H.R. 1215, a major tax reduction bill that constitutes part of the "Contract With America" announced by Republican members of the House of Representatives. The House bill includes a reduction in the tax on net long-term capital gains for both individuals and corporations, as well as indexing of the basis of capital assets for inflation. Under the bill, non-corporate taxpayers would be permitted a deduction for 50% of net capital gains (i.e., the excess of net long-term capital gains over net short-term capital losses). In addition, the deduction for net long-term capital losses could not exceed 50% of the excess of net long-term capital losses over net short-term capital gains. Under the House bill, these changes generally would be effective for transactions occurring in 1995. The Congress also has passed a budget resolution for fiscal 1996 providing for approximately $245 billion in tax cuts over seven years financed from anticipated savings from balancing the federal budget over a similar period. The form that those tax cuts would take has not yet been decided. In addition, there currently is significant interest in the Congress in making major changes in the income tax laws, including "flat tax", consumption tax, and value-added tax proposals, some of which would replace the current income tax. The impact of pending and future budget and tax legislation on the United States federal tax system, including possible effects on taxation of the Offer, is uncertain. Stockholders are advised to consult their own tax advisors as to these matters. 20 Corporate stockholders should also consider the effect of pending legislative proposals that, if enacted in their current form, would deny the dividends- received deduction to corporate stockholders that participate in the Offer, discussed above under the heading Corporate Stockholder Dividend Treatment. THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT APPLY TO SHARES ACQUIRED IN CONNECTION WITH THE EXERCISE OF STOCK OPTIONS OR PURSUANT TO OTHER COMPENSATION ARRANGEMENTS WITH THE COMPANY. THE TAX CONSEQUENCES OF A SALE PURSUANT TO THE OFFER MAY VARY DEPENDING UPON, AMONG OTHER THINGS, THE PARTICULAR CIRCUMSTANCES OF THE TENDERING STOCKHOLDER. NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE, LOCAL OR FOREIGN TAX CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY THE OFFER. STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF SALES MADE BY THEM PURSUANT TO THE OFFER, THE EFFECT OF THE STOCK OWNERSHIP ATTRIBUTION RULES MENTIONED ABOVE AND THE EFFECT OF TAX LEGISLATIVE PROPOSALS. 14. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS. The Company expressly reserves the right, in its sole discretion and at any time or from time to time, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary. There can be no assurance, however, that the Company will exercise its right to extend the Offer. During any such extension, all Shares previously tendered will remain subject to the Offer, except to the extent that such Shares may be withdrawn as set forth in Section 4. The Company also expressly reserves the right, in its sole discretion, (i) to terminate the Offer and not accept for payment any Shares not theretofore accepted for payment or, subject to Rule 13- 4(f)(5) under the Exchange Act, which requires the Company either to pay the consideration offered or to return the Shares tendered promptly after the termination or withdrawal of the Offer, to postpone payment for Shares upon the occurrence of any of the conditions specified in Section 7 hereof by giving oral or written notice of such termination to the Depositary and making a public announcement thereof and (ii) at any time or from time to time amend the Offer in any respect. Amendments to the Offer may be effected by public announcement. Without limiting the manner in which the Company may choose to make public announcement of any termination or amendment, the Company shall have no obligation (except as otherwise required by applicable law) to publish, advertise or otherwise communicate any such public announcement, other than by making a release to the Dow Jones News Service, except in the case of an announcement of an extension of the Offer, in which case the Company shall have no obligation to publish, advertise or otherwise communicate such announcement other than by issuing a notice of such extension by press release or other public announcement, which notice shall be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Material changes to information previously provided to holders of the Shares in this Offer or in documents furnished subsequent thereto will be disseminated to holders of Shares in compliance with Rule 13e-4(e)(2) promulgated by the Commission under the Exchange Act. If the Company materially changes the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, the Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(2) under the Exchange Act. Those rules require that the minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer (other than a change in price, change in dealer's soliciting fee or change in percentage of securities sought) will depend on the facts and circumstances, including the relative materiality of such terms or information. In a published release, the Commission has stated that in its view, an offer should remain open for a minimum of five business days from the date that notice of such a material change is first published, sent or given. The Offer will continue or be extended for at least ten business days from the time the Company publishes, sends or gives to holders of Shares a notice that it will (a) increase or decrease the price it will pay for Shares or the amount of the Dealer Manager's soliciting fee or (b) increase (except for an increase not exceeding 2% of the outstanding Shares) or decrease the number of Shares it seeks. 21 15. FEES AND EXPENSES. Morgan Stanley & Co. Incorporated will act as Dealer Manager for the Company in connection with the Offer. The Company has agreed to pay the Dealer Manager, upon acceptance for payment of Shares pursuant to the Offer, a fee of 0.15% of the Purchase Price of the aggregate number of Shares purchased by the Company pursuant to the Offer. The Dealer Manager will also be reimbursed by the Company for its reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses, including liabilities under the federal securities laws, in connection with the Offer. The Dealer Manager has rendered, is currently rendering and is expected to continue to render various investment banking and other advisory services to the Company. It has received, and will continue to receive, customary compensation from the Company for such services. The Company has retained The First National Bank of Boston as Depositary and Georgeson & Company Inc. as Information Agent in connection with the Offer. The Information Agent may contact stockholders by mail, telephone, telex, telegraph and personal interviews, and may request brokers, dealers and other nominee stockholders to forward materials relating to the Offer to beneficial owners. The Depositary and the Information Agent will receive reasonable and customary compensation for their services and will also be reimbursed for certain out-of- pocket expenses. The Company has agreed to indemnify the Depositary and the Information Agent against certain liabilities, including certain liabilities under the federal securities laws, in connection with the Offer. Neither the Information Agent nor the Depositary has been retained to make solicitations or recommendations in connection with the Offer. The Company will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer (other than the fee of the Dealer Manager). The Company will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and customary handling and mailing expenses incurred by them in forwarding materials relating to the Offer to their customers. 16. MISCELLANEOUS. The Company is subject to the informational requirements of the Exchange Act and in accordance therewith files reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Certain information as of particular dates concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is filed with the Commission. The Company has also filed an Issuer Tender Offer Statement on Schedule 13E-4 with the Commission, which includes certain additional information relating to the Offer. Such reports, as well as such other material, may be inspected and copies may be obtained at the Commission's public reference facilities at 450 Fifth Street, N.W., Washington, D.C., and should also be available for inspection and copying at the regional offices of the Commission located at 7 World Trade Center, 13th Floor, New York, New York 10048, and Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such material may be obtained by mail, upon payment of the Commission's customary fees, from the Commission's Public Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549. Such reports, proxy statements and other information also should be available for inspection at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York and the Pacific Stock Exchange, 301 Pine Street, San Francisco, California. The Company's Schedule 13E-4 may not be available at the Commission's regional offices. The Offer is being made to all holders of Shares. The Company is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to a valid state statute. If the Company becomes aware of any valid state statute prohibiting the making of the Offer, the Company will make a good faith effort to comply with such statute. If, after such good faith effort, the Company cannot comply with such statute, the Offer will not be made to, nor will tenders be accepted from or on behalf of, holders of Shares in such state. In those jurisdictions whose securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Company by the Dealer Manager or one or more registered brokers or dealers licensed under the laws of such jurisdictions. VARIAN ASSOCIATES, INC. August 23, 1995 22 SCHEDULE A CERTAIN TRANSACTIONS INVOLVING SHARES The Company has made the following purchases of Shares during the 40 business-day period preceding the commencement of the Offer on the dates, in the amounts and at the prices indicated below pursuant to its stock repurchase program. All such purchases were effected on the NYSE.
AVERAGE PRICE DATE NO. OF SHARES PER SHARE ---- ------------- --------- 6/27/95 20,600 $53.3647 6/28/95 20,600 53.7846 6/29/95 37,300 53.6750 6/30/95 23,400 55.0499
Facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal and certificates for Shares should be sent or delivered by each stockholder of the Company or his or her broker, dealer, bank or trust company to the Depositary at one of its addresses set forth below. The Depositary: THE FIRST NATIONAL BANK OF BOSTON By Mail: By Facsimile By Overnight Courier: Transmission: P.O. Box 1889 Shareholder Services Division Mail Stop 45-01-19 (617) 575-2233 150 Royall Street, Mail Stop Boston, Massachusetts 45-01-19 02105 Canton, Massachusetts 02021 By Hand: Confirm by By Hand: Telephone: 100 Federal Street, Floor BancBoston Trust Company of 1-B (617) 575-2700 New York Boston, Massachusetts 55 Broadway, 3rd Floor Attn: Receipt and Delivery New York, New York Window Any questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at the respective telephone numbers and addresses listed below. Requests for additional copies of this Offer to Purchase, the Letter of Transmittal or other tender offer materials may be directed to the Information Agent or the Dealer Manager, and such copies will be furnished promptly at the Company's expense. Stockholders may also contact their local broker, dealer, commercial bank or trust company for assistance concerning the Offer. The Information Agent: [LOGO OF GEORGESON & COMPANY INC. APPEARS HERE] Wall Street Plaza New York, New York 10005 Banks and Brokers Call Collect: (212) 440-9800 ALL OTHERS CALL TOLL FREE: 1-800-223-2064 The Dealer Manager: MORGAN STANLEY & CO. Incorporated 1251 Avenue of the Americas New York, New York 10020 (415) 576-2247 (call collect) ANNEX I SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 11, 1995 VARIAN ASSOCIATES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 1-7598 94-2359345 (STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.) 3050 HANSEN WAY PALO ALTO, CALIFORNIA 94304-1000 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (415) 493-4000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) NOT APPLICABLE (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On June 9, 1995, CPII Acquisition Corp., a Delaware corporation ("Buyer") (formerly, Communications & Power Industries Holding Corporation), entered into a Stock Sale Agreement (the "Stock Sale Agreement") with Varian Associates, Inc., a Delaware corporation ("Registrant"), pursuant to which Buyer agreed to purchase substantially all of Registrant's Electron Devices business (the "Business"). The Business, one of Registrant's four core businesses, develops, manufactures and distributes microwave tubes, power grid tubes, microwave amplifiers, modulators and various other power supply equipment. Buyer was formed at the direction of Leonard Green & Partners, L.P. on behalf of its equity investment fund, Green Equity Investors II, L.P. In order to facilitate the sale of the Business to Buyer, pursuant to the Stock Sale Agreement, Registrant formed a new wholly owned subsidiary, Communications & Power Industries, Inc., a Delaware corporation ("CPI"), on June 12, 1995. On August 10, 1995, pursuant to the Stock Sale Agreement, Registrant contributed substantially all of the U.S.-based assets of the Business to CPI in exchange for all the authorized stock of CPI. On August 11, 1995 (the "Closing Date"), the sale of the Business was completed. Buyer acquired on the Closing Date all of the outstanding stock of CPI from Registrant. Also on the Closing Date, various affiliates of CPI acquired from affiliates of Registrant substantially all of the assets of the Business located in foreign jurisdictions. In addition, Registrant and Buyer entered into amendments to the Stock Sale Agreement (together with the Stock Sale Agreement, the "Amended Agreement"), copies of which are attached hereto as Exhibits 2.1 and 2.2 and incorporated herein by reference. Pursuant to the Amended Agreement, among other things, Communications & Power Industries Holding Corporation, a Delaware corporation owning all of the outstanding stock of Buyer ("Holding"), became a party to the Amended Agreement. In accordance with the Amended Agreement, Buyer and its affiliates paid to Registrant and its affiliates on the Closing Date $196,200,000 (the "Purchase Price") in cash in consideration of the sale of the stock of CPI and the foreign-based assets of the Business. Holding, Buyer and their affiliates also assumed as of the Closing Date certain specified liabilities of Registrant and its affiliates related to the Business, including certain liabilities with respect to product warranties and personal injuries associated with products of the Business. Except as specifically provided in the Amended Agreement, Registrant and its affiliates generally retained all liabilities of the Business arising from the operations, activities and transactions of the Business up through the Closing Date, including various environmental related liabilities. The Amended Agreement provides that the Purchase Price is subject to adjustment for changes, among other things, in the book value of the Business since March 31, 1995. Such an adjustment to the Purchase Price will be determined after completion of a closing balance sheet of the Business as at the Closing Date which will be audited by Buyer's auditors. Such closing balance sheet must be delivered by Buyer to Registrant within 60 days of the Closing Date (or such longer period of time as may be reasonably required). As with any other dispute among the parties with respect to the Amended Agreement, any unresolved dispute concerning a possible adjustment to the Purchase Price will be subject to binding arbitration. In the Amended Agreement, Registrant made various representations and warranties as to itself and the Business and has agreed to indemnify Buyer for any breaches thereof. Claims for breaches of such representations and warranties must be brought before December 31, 1996. Registrant's maximum indemnification obligation for such losses is an amount equal to 10% of the Purchase Price ($19,620,000), which is subject to adjustment as discussed above. Except with respect to certain environmental matters, all other indemnification obligations of Registrant under the Amended Agreement generally have no time or dollar limitations. Such indemnification provisions cover, among other matters, breaches of agreements and covenants of Registrant contained in the Amended Agreement and certain other agreements, various liabilities retained by Registrant and its affiliates with respect to the operation of the Business through the Closing Date and liabilities arising from certain environmental claims and matters. 2 On the Closing Date, Registrant entered into various agreements with Buyer pursuant to the Amended Agreement, including (a) a noncompetition agreement prohibiting Registrant and its affiliates from competing with the Business for a period of ten years; (b) subleases of certain properties both to and from Buyer; (c) agreements relating to the purchase and sale of products; (d) an agreement whereby Registrant will provide certain transitional services to Buyer; and (e) agreements whereby Registrant granted to Buyer various licenses relating to certain intellectual property of Registrant which Buyer will use in the Business. Registrant also guaranteed certain promissory notes executed by various management investors in favor of Holding. On August 23, 1995, Registrant commenced an offer (the "Offer") to purchase from its stockholders up to 3,000,000 shares of its common stock ("Shares"). Registrant will determine a single per Share price (not greater than $58 nor less than $51 per Share) that it will pay for the Shares validly tendered pursuant to the Offer and not withdrawn (the "Purchase Price"), taking into account the number of Shares so tendered and the prices specified by tendering stockholders. Registrant will select the Purchase Price that will enable it to purchase 3,000,000 Shares (or such lesser number of Shares as are validly tendered at prices not greater than $58 nor less than $51 per Share) pursuant to the Offer. Registrant will purchase all Shares validly tendered at prices at or below the Purchase Price and not withdrawn on or prior to the expiration date of the Offer, upon the terms and subject to the conditions of the Offer. The Purchase Price will be paid in cash, net to the seller, with respect to all Shares purchased. The Offer will expire on September 20, 1995 unless extended. Registrant will use the proceeds from the sale of the Business and cash on hand to purchase Shares in the Offer. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Business Acquired. Not applicable (b) Pro Forma Financial Information. The following unaudited pro forma condensed consolidated financial statements are filed with this report: Pro Forma Condensed Consolidated Balance Sheet as at June 30, 1995.......................................................... Page F-1 Pro Forma Condensed Consolidated Statements of Earnings: Year Ended September 30, 1994................................. Page F-2 Nine Months Ended June 30, 1995............................... Page F-3
The Pro Forma Condensed Consolidated Balance Sheet of Registrant as at June 30, 1995 reflects the financial position of Registrant after giving effect to the disposition of the assets and assumption of the liabilities discussed in Item 2 and assumes the disposition took place on June 30, 1995. The Pro Forma Condensed Consolidated Statements of Earnings for the fiscal year ended September 30, 1994 and the nine months ended June 30, 1995 assume that the disposition occurred on October 2, 1993, and are based on the operations of Registrant for the year ended September 30, 1994 and the nine months ended June 30, 1995. Such pro forma financial statements also reflect the purchase of 3,000,000 Shares pursuant to the Offer referred to in Item 2 at a purchase price of $56 per Share (the last reported sale price of the Shares on the New York Stock Exchange on June 30, 1995). The unaudited pro forma condensed consolidated financial statements have been prepared by Registrant based upon assumptions deemed proper by it. The unaudited pro forma condensed consolidated financial statements presented herein are shown for illustrative purposes only and are not necessarily indicative of the future financial position or future results of operations of Registrant, or of the financial position or results of operations of Registrant that would have actually occurred had the transaction been in effect as of the date or for the periods presented. In addition, it should be noted that Registrant's financial statements will reflect the disposition only from August 11, 1995, the Closing Date. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical financial statements and related notes of Registrant. 3 (c) Exhibits.
NO. DESCRIPTION --- ----------- 2.1 First Amendment to Stock Sale Agreement, dated as of August 11, 1995, by and among Registrant, Holding and Buyer. (Registrant hereby agrees to furnish supplementally to the Securities and Exchange Commission upon request a copy of any omitted schedule, all of which are listed in Sections 14 to 17 of the First Amendment to Stock Sale Agreement.) 2.2 Second Amendment to Stock Sale Agreement, dated as of August 11, 1995, by and among Registrant, Holding and Buyer.
4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. VARIAN ASSOCIATES, INC. Date: August 23, 1995 By: /s/ Robert A. Lemos ---------------------------------- Robert A. Lemos Vice President, Finance and Chief Financial Officer 5 PRO FORMA FINANCIAL INFORMATION VARIAN ASSOCIATES, INC. AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1995 (UNAUDITED)
PRO FORMA ADJUSTMENTS ------------------- HISTORICAL EDB (A) OTHER PRO FORMA ---------- --------- -------- --------- (DOLLARS IN THOUSANDS) ASSETS CURRENT ASSETS Cash and cash equivalents....... $ 90,120 $ 9,437 $ 37,637(b) $ 118,320 Accounts receivable............. 378,462 40,258 338,204 Inventories..................... 225,932 44,305 181,627 Other current assets............ 75,199 11,998 10,719(c) 73,920 ---------- --------- -------- --------- TOTAL CURRENT ASSETS........... 769,713 105,998 48,356 712,071 Property, Plant, and Equipment... 602,524 185,708 416,816 Accumulated depreciation and amortization.................... (364,334) (129,113) (235,221) ---------- --------- --------- Net Property, Plant and Equipment..................... 238,190 56,595 181,595 Other Assets.................... 61,181 2,289 58,892 ---------- --------- -------- --------- TOTAL ASSETS................... $1,069,084 $ 164,882 $ 48,356 $ 952,558 ========== ========= ======== ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes Payable................... $ 32,968 $ -- $ $ 32,968 Accounts Payable--Trade......... 83,493 6,599 3,286(d) 80,180 Accrued expenses................ 266,175 22,260 48,345(d) 292,260 Product warranty................ 48,349 4,491 43,858 Advance payments from customers. 61,264 3,764 57,500 ---------- --------- -------- --------- TOTAL CURRENT LIABILITIES...... 492,249 37,114 51,631 506,766 Long-Term Debt................... 60,329 -- 60,329 Deferred Taxes................... 20,773 4,961 14,961(d) 30,773 ---------- --------- -------- --------- TOTAL LIABILITIES............... 573,351 42,075 66,592 597,868 TOTAL STOCKHOLDERS' EQUITY....... 495,733 122,807 (18,236) 354,690 ---------- --------- -------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........... $1,069,084 $ 164,882 $ 48,356 $ 952,558 ========== ========= ======== =========
-------- (a) To eliminate the assets and liabilities included in the balance sheet of the Company's Electron Devices business ("EDB") as of June 30, 1995. (b) To reflect the $196.2 million net proceeds from the sale of EDB, the $168.0 million purchase of 3,000,000 shares of the Company's common stock pursuant to the Company's tender offer at a purchase price of $56.00 per share (the last reported sale price of the Company's common stock on the New York Stock Exchange on June 30, 1995), and the retention of $9.4 million of cash held by EDB. (c) To reflect deferred tax asset retained by the Company. (d) To reflect transaction costs, liabilities retained by the Company, and income tax liabilities related to the transaction. F-1 PRO FORMA FINANCIAL INFORMATION VARIAN ASSOCIATES, INC. AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE YEAR ENDED SEPTEMBER 30, 1994 (UNAUDITED) (DOLLARS AND SHARES IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
PRO FORMA ADJUSTMENTS ---------------- HISTORICAL EDB (A) OTHER PRO FORMA ---------- -------- ------- ---------- SALES............................... $1,552,477 $246,890 $ $1,305,587 ---------- -------- ------- ---------- OPERATING COSTS AND EXPENSES Cost of sales...................... 1,031,956 186,996 844,960 Research and development........... 81,326 7,619 73,707 Marketing.......................... 187,332 19,476 167,856 General and administrative......... 121,873 17,380 3,485(b) 107,978 ---------- -------- ------- ---------- Total operating costs and expenses. 1,422,487 231,471 3,485 1,194,501 ---------- -------- ------- ---------- OPERATING EARNINGS.................. 129,990 15,419 (3,485) 111,086 Interest expense, net.............. 1,992 1,992 ---------- -------- ------- ---------- EARNINGS BEFORE TAXES............... 127,998 15,419 (3,485) 109,094 Taxes on Earnings.................. 48,640 5,859 (1,324)(b) 41,457 ---------- -------- ------- ---------- NET EARNINGS........................ $ 79,358 $ 9,560 $(2,161) $ 67,637 ========== ======== ======= ========== Average Shares Outstanding Including Common Stock Equivalents........... 35,676 (3000)(c) 32,676 EARNINGS PER SHARE--FULLY DILUTED... $2.22 $2.07
-------- (a) To eliminate the profit and loss of EDB for the entire period. (b) To reflect costs that would not have been eliminated due to the sale of EDB. (c) To reflect the purchase of shares of the Company's common stock pursuant to its tender offer as if the transaction had been completed at the beginning of the period. F-2 PRO FORMA FINANCIAL INFORMATION VARIAN ASSOCIATES, INC. AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE MONTHS ENDED JUNE 30, 1995 (UNAUDITED) (DOLLARS AND SHARES IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
PRO FORMA ADJUSTMENTS ---------------- HISTORICAL EDB (A) OTHER PRO FORMA ---------- -------- ------- ---------- SALES............................... $1,350,403 $192,304 $ $1,158,099 ---------- -------- ------- ---------- OPERATING COSTS AND EXPENSES Cost of sales...................... 903,926 142,959 760,967 Research and development........... 72,470 6,366 66,104 Marketing.......................... 153,950 14,834 139,116 General and administrative......... 87,344 16,500 2,640(b) 73,484 ---------- -------- ------- ---------- Total operating costs and expenses. 1,217,690 180,659 2,640 1,039,671 ---------- -------- ------- ---------- OPERATING EARNINGS.................. 132,713 11,645 (2,640) 118,428 Interest expense, net.............. 2,258 2,258 ---------- -------- ------- ---------- EARNINGS BEFORE TAXES............... 130,455 11,645 (2,640) 116,170 Taxes on Earnings.................. 48,270 4,309 (977)(b) 42,984 ---------- -------- ------- ---------- NET EARNINGS........................ $ 82,185 $ 7,336 $(1,663) $ 73,186 ========== ======== ======= ========== Average Shares Outstanding Including Common Stock Equivalents........... 35,480 (3,000)(c) 32,480 EARNINGS PER SHARE--FULLY DILUTED... $2.32 $2.25
-------- (a) To eliminate the profit and loss of EDB for the entire period. (b) To reflect costs that would not have been eliminated due to the sale of EDB. (c) To reflect the purchase of shares of the Company's common stock pursuant to its tender offer as if the transaction had been completed at the beginning of the period. F-3 ANNEX II 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 June 30, 1995 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to VARIAN ASSOCIATES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 1-7598 94-2359345 (STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER OF INCORPORATION OR FILE NUMBER) IDENTIFICATION NO.) ORGANIZATION) 3050 HANSEN WAY PALO ALTO, CALIFORNIA 94304-1000 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (415) 493-4000 (TELEPHONE NUMBER, INCLUDING AREA CODE) 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 --- --- Number of shares of Common Stock, par value $1 per share, outstanding as of the close of business on July 28, 1995: 33,859,000 shares. PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF EARNINGS UNAUDITED
THIRD QUARTER ENDED NINE MONTHS ENDED ---------------------- ------------------------- JUNE 30, JULY 1, JUNE 30, JULY 1, 1995 1994 1995 1994 ---------------------- ------------ ------------ (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) SALES......................... $ 458,907 $ 393,054 $ 1,350,403 $ 1,111,338 ---------- ---------- ------------ ------------ OPERATING COSTS AND EXPENSES Cost of sales............... 303,242 262,599 903,926 747,006 Research and development.... 26,421 19,513 72,470 59,418 Marketing................... 54,520 48,225 153,950 136,058 General and administrative.. 23,593 27,530 87,344 83,150 ---------- ---------- ------------ ------------ Total operating costs and expenses................... 407,776 357,867 1,217,690 1,025,632 ---------- ---------- ------------ ------------ OPERATING EARNINGS............ 51,131 35,187 132,713 85,706 Interest expense, net....... 748 (991) 2,258 1,136 ---------- ---------- ------------ ------------ EARNINGS BEFORE TAXES......... 50,383 36,178 130,455 84,570 Taxes on Earnings........... 18,640 13,750 48,270 32,140 ---------- ---------- ------------ ------------ NET EARNINGS.................. $ 31,743 $ 22,428 $ 82,185 $ 52,430 ========== ========== ============ ============ Average Shares Outstanding Including Common Stock Equivalents.................. 35,431 35,528 35,480 35,703 ========== ========== ============ ============ EARNINGS PER SHARE--FULLY DILUTED...................... $ 0.90 $ 0.63 $ 2.32 $ 1.47 ========== ========== ============ ============ Dividends Declared Per Share.. $ 0.07 $ 0.06 $ 0.20 $ 0.17 Order Backlog................. $ 764,000 $ 803,500
See accompanying notes to the consolidated financial statements. 2 VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS UNAUDITED
JUNE 30, SEPTEMBER 30, 1995 1994 ---------- ------------- (DOLLARS IN THOUSANDS EXCEPT PAR VALUES) ASSETS Current Assets Cash and cash equivalents........................... $ 90,120 $ 78,872 Accounts receivable................................. 378,462 338,448 Inventories Raw materials and parts............................ 131,578 104,212 Work in process.................................... 65,763 60,296 Finished goods..................................... 28,591 14,668 ---------- --------- Total Inventories.................................. 225,932 179,176 Other current assets................................ 75,199 72,243 ---------- --------- Total Current Assets............................... 769,713 668,739 Property, Plant, and Equipment....................... 602,524 574,402 Accumulated depreciation and amortization............ (364,334) (339,082) ---------- --------- Net Property, Plant, and Equipment................. 238,190 235,320 Other Assets......................................... 61,181 58,364 ---------- --------- Total Assets....................................... $1,069,084 $ 962,423 ========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes payable...................................... $ 32,968 $ 4,816 Accounts payable--trade............................ 83,493 78,094 Accrued expenses................................... 266,175 248,751 Product warranty................................... 48,349 41,682 Advance payments from customers.................... 61,264 58,440 ---------- --------- Total Current Liabilities........................ 492,249 431,783 Long-Term Debt....................................... 60,329 60,399 Deferred Taxes....................................... 20,773 20,788 ---------- --------- Total Liabilities................................ 573,351 512,970 ---------- --------- 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 33,833,000 shares at June 30, 1995 and 33,979,000 shares at September 30, 1994....... 33,833 33,979 Retained earnings.................................. 461,900 415,474 ---------- --------- Total Stockholders' Equity....................... 495,733 449,453 ---------- --------- Total Liabilities and Stockholders' Equity....... $1,069,084 $ 962,423 ========== =========
See accompanying notes to the consolidated financial statements. 3 VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
NINE MONTHS ENDED ------------------------ JUNE 30, JULY 1, 1995 1994 ----------- ----------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Net Cash Provided by Operating Activities........... $ 68,659 $ 56,801 INVESTING ACTIVITIES Purchase of property, plant, and equipment............ (40,551) (41,001) Purchase of businesses, net of cash acquired.......... (12,705) 250 Other, net............................................ 6,313 5,064 ----------- ----------- Net Cash Used by Investing Activities............... (46,943) (35,687) FINANCING ACTIVITIES Net borrowings on short-term obligations.............. 28,152 15,996 Proceeds from common stock issued to employees........ 22,582 18,984 Purchase of common stock.............................. (51,719) (46,029) Other, net............................................ (6,838) (5,902) ----------- ----------- Net Cash Used by Financing Activities............... (7,823) (16,951) EFFECTS OF EXCHANGE RATE CHANGES ON CASH.............. (2,645) (664) ----------- ----------- Net Increase in Cash and Cash Equivalents........... 11,248 3,499 Cash and Cash Equivalents at Beginning of Period.... 78,872 73,307 ----------- ----------- Cash and Cash Equivalents at End of Period.......... $ 90,120 $ 76,806 =========== ===========
See accompanying notes to the consolidated financial statements. 4 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 third quarter and nine months ended June 30, 1995, and July 1, 1994, 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 $50.2 at June 30, 1995, $49.0 at September 30, 1994, $51.4 at July 1, 1994, 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 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 June 30, 1995, the Company had forward exchange contracts with maturities of twelve months or less to sell foreign currencies totaling $69.1 million ($0.5 million of Finnish marks, $11.6 million of British pounds, $1.5 million of Canadian dollars, $16.3 million of Deutsche marks, $15.7 million of French francs, $6.3 million of Italian lira, $14.1 million of Japanese yen, $2.2 million of Swedish krona and $0.9 million of Swiss francs,) and to buy foreign currencies totaling $15.0 million ( $10.8 million of British pounds and $4.2 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. 5 VARIAN ASSOCIATES, INC. AND SUBSIDIARY COMPANIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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. 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 June 12, 1995, the Company announced an agreement with Leonard Green & Partners, L.P., (LGP) under which the Company will sell its Electron Devices business to a company formed at the direction of LGP for approximately $200 million in cash, plus the assumption of certain liabilities. The transaction is subject to certain customary conditions and the arrangement of financing, and is expected to close in August 1995. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On July 20, Varian reported the highest third-quarter earnings in the Company's history. Net profits rose to $31.8 million, 42% above last year's $22.4 million. Earnings per share were $0.90 compared to $0.63 in the third quarter of 1994. Orders were $417 million versus $441 million in the year-ago period. For the quarter, order receipts rose 16% from the prior year when adjusted for the effect of a distribution agreement with Tokyo Electron Ltd. (TEL) which ended at the close of fiscal 1994. Third quarter sales climbed to $459 million, growing 17% over the $393 million of a year ago. Backlog of $764 million was down 5% from $804 million in the 1994 quarter. For the first nine months of fiscal 1995, orders were $1.35 billion versus 1994's $1.29 billion, an increase of 19% on a TEL-adjusted basis. Sales for the period reached $1.35 billion compared to last year's $1.11 billion. Earnings for the nine months were $82.2 million ($2.32/share) up 57% over the prior year's $52.4 million ($1.47/share). The higher results were due largely to continued strong performances by the Company's Semiconductor Equipment and Health Care Systems businesses. Orders for Varian's Health Care Systems business rose 6% year-to-date. Sales for the nine months were up 15%, and operating margins improved. Backlog declined 5% from 1994's level. The X-ray Tube Products side of this business continued to experience strong demand for its high-end products, with particularly good interest from the Japanese market. Orders for the Company's Instruments business grew 3% during the nine-months on improved market conditions in the U.S. and the Far East, driven by strong demand for vacuum products. Sales were slightly higher for the year to date, reaching $276 million, a 3% increase over the year-ago period. Backlog declined 4% from the previous quarter. Instrument markets worldwide continue to be extremely competitive. Operating margins for this business declined from the year-ago period. Nine-month orders for Varian's Semiconductor Equipment business rose 54% over the year-ago period, after the previously noted adjustment for the dissolved Tokyo Electron Ltd. distribution agreement. Sales grew 49% over the 1994 level. Backlog rose 53% over the prior year on a TEL-adjusted basis. Operating margins continue in the double-digit range, reaching twice the level of those achieved in the first nine months of the prior year. The strong year- to-date demand for the Company's chip-making equipment was worldwide, with particularly heavy orders from Korea and other Pacific Rim nations. Interest in Varian's ion implantation products was especially strong, particularly for leading edge, medium-current systems and the new VIIsion high-current system. Varian's Electron Devices business posted higher orders and sales, up 4% and 9%, respectively, over the year-ago period while backlog rose 2%. Operating margins for this business improved modestly during the quarter. FINANCIAL CONDITION The Company's financial condition remained strong during the first nine months of fiscal 1995. Operating activities provided cash of $68.7 million in the first nine months of fiscal 1995 compared to $56.8 million in the same period last year. Investing activities used $46.9 million in the first nine months of fiscal 1995, $12.7 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 $35.7 million, mainly for the purchase of property, plant and equipment. Financing activities used $7.8 million and $17.0 million during the first nine months of 1995 and 1994, respectively. Total debt as a percentage of total capital increased to 15.8% at the end of the third quarter of fiscal 1995 as compared with 12.7% at fiscal year end. The ratio of current assets to current liabilities increased slightly to 1.56 to 1 at June 30, 1995, from 1.55 to 1 at fiscal year end, 1994. The Company has available $50 million in unused committed lines of credit. 7 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 June 12, 1995, the Company announced an agreement with Leonard Green & Partners, L.P., (LGP) under which the Company will sell its Electron Devices business to a company formed at the direction of LGP for approximately $200 million in cash, plus the assumption of certain liabilities. The transaction is subject to certain customary conditions and the arrangement of financing, and is expected to close in August 1995. The Company anticipates that most of the proceeds from the sale will be used to repurchase outstanding shares of stock. 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. 8 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 June 30, 1995, and the related consolidated statements of earnings for the quarters and nine months ended June 30, 1995 and July 1, 1994, and the condensed consolidated statements of cash flows for the nine months ended June 30, 1995 and July 1, 1994. 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 July 19, 1995 9 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 10.5 Registrant's Supplemental Retirement Plan, as amended and effective as of July 1, 1994. 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 June 13, 1995, regarding the Registrant's agreement with Leonard Green & Partners, L.P., (LGP) under which the Company agreed to sell its Electron Devices business to a company formed at the direction of LGP. 10 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. /s/ Allen K. Jones _____________________________________ Allen K. Jones Vice President and Controller (Chief Accounting Officer) August 8, 1995 11 EX-99.A.2 3 LETTER OF TRANSMITTAL EXHIBIT a.2 LETTER OF TRANSMITTAL To Accompany Shares of Common Stock (Including the Associated Preferred Stock Purchase Rights) of Varian Associates, Inc. Tendered Pursuant to the Offer to Purchase Dated August 23, 1995 -------------------------------------------------------------------------------- THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 20, 1995, UNLESS THE OFFER IS EXTENDED. -------------------------------------------------------------------------------- To: THE FIRST NATIONAL BANK OF BOSTON, Depositary By Mail: By Facsimile By Overnight Courier: Transmission: P.O. Box 1889 Shareholder Services Division Mail Stop 45-01-19 (617) 575-2233 150 Royall Street, Mail Stop Boston, Massachusetts 45-01-19 02105 By Hand: Confirm by Canton, Massachusetts 02021 Telephone: By Hand: 100 Federal Street, Floor (617) 575-2700 BancBoston Trust Company of 1-B New York Boston, Massachusetts 55 Broadway, 3rd Floor Attn: Receipt and Delivery New York, New York Window -------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED -------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN EXACTLY AS NAME(S) SHARES TENDERED APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY) -------------------------------------------------------------------------------- CERTIFICATE TOTAL NUMBER NUMBER OF NUMBER(S)* OF SHARES SHARES REPRESENTED TENDERED** BY CERTIFICATE(S)* -------------------------------------------- -------------------------------------------- -------------------------------------------- -------------------------------------------- -------------------------------------------- -------------------------------------------- TOTAL SHARES: -------------------------------------------------------------------------------- *Need not be completed by stockholders tendering by book-entry transfer. **Unless otherwise indicated, it will be assumed that all Shares represented by any certificate delivered to the Depository are being tendered. See Instruction 4. -------------------------------------------------------------------------------- DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THE LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be used if certificates are to be forwarded herewith or if delivery of Shares (as defined below) is to be made by book- entry transfer to the Depositary's account at The Depository Trust Company ("DTC"), Midwest Securities Trust Company ("MSTC") or Philadelphia Depository Trust Company ("PDTC") (hereinafter collectively referred to as the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 3 of the Offer to Purchase (as defined below). Stockholders who cannot deliver their Shares and all other documents required hereby to the Depositary by the Expiration Date (as defined in the Offer to Purchase) must tender their Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2. Delivery of documents to the Company or to a Book-Entry Transfer Facility does not constitute a valid delivery. (BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY) [_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution _______________________________________________ Check Applicable Box: [_] DTC [_] MSTC [_] PDTC Account No. _________________________________________________________________ Transaction Code No. ________________________________________________________ [_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Tendering Stockholder(s) _________________________________________ Date of Execution of Notice of Guaranteed Delivery __________________________ Name of Institution that Guaranteed Delivery ________________________________ If delivery is by book-entry transfer: Name of Tendering Institution _______________________________________________ Account No. at [_] DTC [_] MSTC [_] PDTC Transaction Code No. ________________________________________________________ NOTE: SIGNATURES MUST BE PROVIDED ON PAGE 6 BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to Varian Associates, Inc., a Delaware corporation (the "Company"), the above-described shares of its Common Stock, par value $1.00 per share (the "Shares") (including the associated preferred stock purchase rights (the "Rights") issued pursuant to the Rights Agreement, dated as of August 25, 1986, as amended, between the Company and The First National Bank of Boston, as the Rights Agent), pursuant to the Company's offer to purchase up to 3,000,000 Shares at a price per Share hereinafter set forth, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated August 23, 1995 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together constitute the "Offer"). Unless the context otherwise requires, all references to Shares shall include the associated Rights. Subject to, and effective upon, acceptance for payment of and payment for the Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to all the Shares that are being tendered hereby (and any and all other Shares or other securities issued or issuable in respect thereof on or after August 23, 1995 (collectively, "Distributions")) and constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares and all Distributions, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver certificates for such Shares and all Distributions, or transfer ownership of such Shares and all Distributions on the account books maintained by any of the Book-Entry Transfer Facilities, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Company, (b) present such Shares and all Distributions for registration and 2 transfer on the books of the Company and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms of the Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and all Distributions and that, when and to the extent the same are accepted for payment by the Company, the Company will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges, encumbrances, conditional sales agreements or other obligations relating to the sale or transfer thereof, and the same will not be subject to any adverse claims. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or the Company to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby and all Distributions. All authority herein conferred or agreed to be conferred shall not be affected by, and shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute the undersigned's acceptance of the terms and conditions of the Offer, including the undersigned's representation and warranty that (i) the undersigned has a net long position in the Shares being tendered within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended, and (ii) the tender of such Shares complies with Rule 14e-4. The Company's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Offer. The undersigned understands that the Company will determine a single per Share price (not greater than $58 nor less than $51 per Share) (the "Purchase Price") that it will pay for Shares validly tendered and not withdrawn pursuant to the Offer taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The undersigned understands that the Company will select the Purchase Price that will enable it to purchase 3,000,000 Shares (or such lesser number of Shares as are validly tendered at prices not greater than $58 nor less than $51 per Share) pursuant to the Offer. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 2 or 3 of the Offer to Purchase and in the instructions hereto will constitute an agreement between the undersigned and the Company upon the terms and subject to the conditions of the Offer. The undersigned also understands that unless the Rights are redeemed or become separately transferable in accordance with their terms, by tendering Shares the undersigned will also be tendering the associated Rights and that no separate consideration will be paid for such Rights. Unless otherwise indicated under "Special Payment Instructions," please issue the check for the purchase price of any Shares purchased, and/or return any Shares not tendered or not purchased, in the name(s) of the undersigned (and, in the case of Shares tendered by book-entry transfer, by credit to the account at the Book-Entry Transfer Facility designated above). Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price of any Shares purchased and/or any certificates for Shares not tendered or not purchased (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s). In the event that both "Special Payment Instructions" and "Special Delivery Instructions" are completed, please issue the check for the purchase price of any Shares purchased and/or return any Shares not tendered or not purchased in the name(s) of, and mail said check and/or any certificates to, the person(s) so indicated. The undersigned recognizes that the Company has no obligation, pursuant to the "Special Payment Instructions," to transfer any Shares from the name of the registered holder(s) thereof if the Company does not accept for payment any of the Shares so tendered. 3 -------------------------------------------------------------------------------- PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED (SEE INSTRUCTION 5) -------------------------------------------------------------------------------- CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES. -------------------------------------------------------------------------------- [_] $51.000 [_] $52.000 [_] $53.000 [_] $54.000 [_] $55.000 [_] $56.000 [_] $57.000 [_] $51.125 [_] $52.125 [_] $53.125 [_] $54.125 [_] $55.125 [_] $56.125 [_] $57.125 [_] $51.250 [_] $52.250 [_] $53.250 [_] $54.250 [_] $55.250 [_] $56.250 [_] $57.250 [_] $51.375 [_] $52.375 [_] $53.375 [_] $54.375 [_] $55.375 [_] $56.375 [_] $57.375 [_] $51.500 [_] $52.500 [_] $53.500 [_] $54.500 [_] $55.500 [_] $56.500 [_] $57.500 [_] $51.625 [_] $52.625 [_] $53.625 [_] $54.625 [_] $55.625 [_] $56.625 [_] $57.625 [_] $51.750 [_] $52.750 [_] $53.750 [_] $54.750 [_] $55.750 [_] $56.750 [_] $57.750 [_] $51.875 [_] $52.875 [_] $53.875 [_] $54.875 [_] $55.875 [_] $56.875 [_] $57.875 [_] $58.000
-------------------------------------------------------------------------------- ODD LOTS (SEE INSTRUCTION 9) This section is to be completed ONLY if Shares are being tendered by or on behalf of a person owning beneficially an aggregate of fewer than 100 Shares as of the close of business on August 22, 1995. The undersigned either (check one box): [_] was the beneficial owner of an aggregate of fewer than 100 Shares (including Shares held in the Reinvestment Plan (as such term is defined in the Offer to Purchase)) as of the close of business on August 22, 1995, all of which are being tendered, or [_] is a broker, dealer, commercial bank, trust company or other nominee that (i) is tendering, for the beneficial owners thereof, Shares with respect to which it is the record owner, and (ii) believes, based upon representations made to it by each such beneficial owner, that such beneficial owner owned beneficially an aggregate of fewer than 100 Shares (including Shares held in the Reinvestment Plan) as of the close of business on August 22, 1995 and is tendering all of such Shares. -------------------------------------------------------------------------------- 4 -------------------------------------------------------------------------------- DIVIDEND REINVESTMENT AND CASH STOCK PURCHASE PLAN SHARES (SEE INSTRUCTION 13) This section is to be completed ONLY if Shares held in the Reinvestment Plan are to be tendered. [_] By checking this box, the undersigned represents that the undersigned is a participant in the Reinvestment Plan and hereby tenders the following number of Shares held in the Reinvestment Plan account of the undersigned: ________ Shares* * The undersigned understands and agrees that all Shares held in the Reinvestment Plan account(s) of the undersigned will be tendered if the above box is checked and the space above is left blank. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 6, 7 AND 8) (SEE INSTRUCTIONS 6, 7 AND 8) To be completed ONLY if the check To be completed ONLY if the check for the purchase price of Shares for the purchase price of Shares purchased and/or certificates for purchased and/or certificates for Shares not tendered or not Shares not tendered or not purchased are to be issued in the purchased are to be mailed to name of someone other than the someone other than the undersigned undersigned. or to the undersigned at an address other than that shown Issue [_] check and/or below the undersigned's [_] certificate(s) to: signature(s). Name Mail [_] check and/or ------------------------------ [_] certificates to: ------------------------------ Name (Please Print) ------------------------------ Address ------------------------------ --------------------------- (Please Print) --------------------------- Address (Include Zip Code) --------------------------- --------------------------- ----------------------------------- (Include Zip Code) (Taxpayer Identification or Social Security No.) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- CONDITIONAL TENDER A tendering stockholder may condition his or her tender of Shares upon the purchase by the Company of a specified minimum number of the Shares tendered hereby, all as described in the Offer to Purchase, particularly in Section 6 thereof. Unless at least such minimum number of Shares is purchased by the Company pursuant to the terms of the Offer, none of the Shares tendered hereby will be purchased. It is the tendering stockholder's responsibility to calculate such minimum number of Shares, and each stockholder is urged to consult his or her own tax advisor. Unless this box has been completed and a minimum specified, the tender will be deemed unconditional. Minimum number of Shares that must be purchased, if any are purchased: ________ Shares -------------------------------------------------------------------------------- 5 -------------------------------------------------------------------------------- SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 11 HEREOF) ----------------------------------------------------------------------- Signature(s) of Owner(s) ----------------------------------------------------------------------- Dated _______________, 1995 Name(s) --------------------------------------------------------------------- ----------------------------------------------------------------------------- (Please Print) ----------------------------------------------------------------------------- Capacity (full title) ------------------------------------------------------- Address --------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- (Include Zip Code) Area Code and Telephone No. ------------------------------------------------- Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 6.) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 6) Name of Firm ---------------------------------------------------------------- Authorized Signature -------------------------------------------------------- Dated _______________, 1995 -------------------------------------------------------------------------------- 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a firm that is a member of a registered national securities exchange or the National Association of Securities Dealers, Inc., or by a commercial bank or trust company having an office or correspondent in the United States which is a participant in an approved Signature Guarantee Medallion Program (an "Eligible Institution"). Signatures on this Letter of Transmittal need not be guaranteed (a) if this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in one of the Book-Entry Transfer Facilities whose name appears on a security position listing as the owner of Shares) tendered herewith and such holder(s) have not completed the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on this Letter of Transmittal or (b) if such Shares are tendered for the account of an Eligible Institution. See Instruction 6. 2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES. This Letter of Transmittal is to be used either if certificates are to be forwarded herewith or if delivery of Shares is to be made by book-entry transfer pursuant to the procedures set forth in Section 3 of the Offer to Purchase. Certificates for all physically delivered Shares, or a confirmation of a book-entry transfer into the Depositary's account at one of the Book-Entry Transfer Facilities of all Shares delivered electronically, as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the front page of this Letter of Transmittal on or prior to the Expiration Date (as defined in the Offer to Purchase). Stockholders who cannot deliver their Shares and all other required documents to the Depositary on or prior to the Expiration Date must tender their Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (a) such tender must be made by or through an Eligible Institution, (b) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Company (with any required signature guarantees) must be received by the Depositary on or prior to the Expiration Date and (c) the certificates for all physically delivered Shares, or a confirmation of a book-entry transfer into the Depositary's account at one of the Book-entry Transfer Facilities of all Shares delivered electronically, as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other documents required by this Letter of Transmittal must be received by the Depositary within three New York Stock Exchange, Inc. trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase. THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF CERTIFICATES FOR SHARES ARE SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. Except as specifically permitted by Section 6 of the Offer to Purchase, no alternative or contingent tenders will be accepted. Fractional Shares will be purchased, unless proration of tendered Shares is required (in which case only fractional Shares held by participants in the Reinvestment Plan (as such term is defined in the Offer to Purchase) will be purchased). See Section 1 of the Offer to Purchase. By executing this Letter of Transmittal (or a facsimile thereof), the tendering stockholder waives any right to receive any notice of the acceptance for payment of the Shares. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate schedule attached hereto. 4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If fewer than all the Shares represented by any certificate delivered to the Depositary are to be tendered, fill in the number of Shares that are to be tendered in the box entitled "Number of Shares Tendered." In such case, a new certificate for the remainder of the Shares represented by the old certificate will be sent to the person(s) signing 7 this Letter of Transmittal, unless otherwise provided in the "Special Payment Instructions" or "Special Delivery Instructions" boxes on this Letter of Transmittal, as promptly as practicable following the expiration or termination of the Offer. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. INDICATION OF PRICE AT WHICH SHARES ARE BEING TENDERED. For Shares to be validly tendered, the stockholder must check the box indicating the price per Share at which he or she is tendering Shares under "Price (In Dollars) Per Share at Which Shares Are Being Tendered" on this Letter of Transmittal. Only one box may be checked. If more than one box is checked or if no box is checked, there is no valid tender of Shares. A stockholder wishing to tender portions of his or her Share holdings at different prices must complete a separate Letter of Transmittal for each price at which he or she wishes to tender each such portion of his or her Shares. The same Shares cannot be tendered (unless previously validly withdrawn as provided in Section 4 of the Offer to Purchase) at more than one price. 6. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares hereby, the signature(s) must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Shares hereby is held of record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in different names on different certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of certificates or separate stock powers are required unless payment of the Purchase Price is to be made to, or Shares not tendered or not purchased are to be registered in the name of, any person other than the registered holder(s). Signatures on any such certificates or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, certificates must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name(s) of the registered holder(s) appear(s) on the certificates for such Shares. Signature(s) on any such certificates or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. If this Letter of Transmittal or any certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Company of the authority of such person so to act must be submitted. 7. STOCK TRANSFER TAXES. The Company will pay or cause to be paid any stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or Shares not tendered or not purchased are to be registered in the name of, any person other than the registered holder(s), or if tendered Shares are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted. See Section 5 of the Offer to Purchase. EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY TO AFFIX TRANSFER TAX STAMPS TO THE CERTIFICATES REPRESENTING SHARES TENDERED HEREBY. 8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the purchase price of any Shares purchased is to be issued in the name of, and/or any Shares not tendered or not purchased are to be returned 8 to, a person other than the person(s) signing this Letter of Transmittal or if the check and/or any certificates for Shares not tendered or not purchased are to be mailed to someone other than the person(s) signing this Letter of Transmittal or to an address other than that shown above in the box captioned "Description of Shares Tendered," then the boxes captioned "Special Payment Instructions" and/or "Special Delivery Instructions" on this Letter of Transmittal should be completed. Stockholders tendering Shares by book-entry transfer will have any Shares not accepted for payment returned by crediting the account maintained by such stockholder at the Book-Entry Transfer Facility from which such transfer was made. 9. ODD LOTS. As described in the Offer to Purchase, if fewer than all Shares validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date are to be purchased, the Shares purchased first will consist of all Shares tendered by any stockholder who owned beneficially an aggregate of fewer than 100 Shares (including Shares held in the Reinvestment Plan) as of the close of business on August 22, 1995 who validly and unconditionally tendered all such Shares at or below the Purchase Price. Partial or conditional tenders of Shares will not qualify for this preference. This preference will not be available unless the box captioned "Odd Lots" in this Letter of Transmittal and the Notice of Guaranteed Delivery, if any, is completed. 10. SUBSTITUTE FORM W-9 AND FORM W-8. The tendering stockholder is required to provide the Depositary with either a correct Taxpayer Identification Number ("TIN") on Substitute Form W-9, which is provided under "Important Tax Information" below, or a properly completed Form W-8. Failure to provide the information on either Substitute Form W-9 or Form W-8 may subject the tendering stockholder to 31% federal income tax backup withholding on the payment of the Purchase Price. The box in Part 2 of Substitute Form W-9 may be checked if the tendering stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future. If the box in Part 2 is checked and the Depositary is not provided with a TIN by the time of payment, the Depositary will withhold 31% on all payments of the Purchase Price thereafter until a TIN is provided to the Depositary. 11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective telephone numbers and addresses listed below. Requests for additional copies of the Offer to Purchase, this Letter of Transmittal or other tender offer materials may be directed to the Information Agent or the Dealer Manager and such copies will be furnished promptly at the Company's expense. Stockholders may also contact their local broker, dealer, commercial bank or trust company for assistance concerning the Offer. 12. IRREGULARITIES. All questions as to the Purchase Price, the form of documents and the validity, eligibility (including time of receipt) and acceptance of any tender of Shares will be determined by the Company, in its sole discretion, and its determination shall be final and binding. The Company reserves the absolute right to reject any or all tenders of Shares that it determines are not in proper form or the acceptance for payment of or payment for Shares that may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any of the conditions to the Offer or any defect or irregularity in any tender of Shares and the Company's interpretation of the terms and conditions of the Offer (including these instructions) shall be final and binding. Unless waived, any defects or irregularities in connection with tenders must be cured within such time as the Company shall determine. None of the Company, the Dealer Manager, the Depositary, the Information Agent or any other person shall be under any duty to give notice of any defect or irregularity in tenders, nor shall any of them incur any liability for failure to give any such notice. Tenders will not be deemed to have been made until all defects and irregularities have been cured or waived. 13. REINVESTMENT PLAN. If a tendering stockholder desires to have tendered pursuant to the Offer Shares which such stockholder has accumulated through August 22, 1995 under the Reinvestment Plan, the box captioned "Dividend Reinvestment and Cash Stock Purchase Plan Shares" should be completed. A participant in the Reinvestment Plan may complete such box on only one Letter of Transmittal submitted by such participant. If a participant submits more than one Letter of Transmittal and completes such box on 9 more than one Letter of Transmittal, the participant will be deemed to have elected to tender all Shares which such participant has accumulated under the Reinvestment Plan through August 22, 1995 at the lowest of the prices specified in such Letters of Transmittal. If a stockholder authorizes a tender of his or her Shares held in the Reinvestment Plan, all such Shares held in such stockholder's Reinvestment Plan account(s), including fractional Shares, will be tendered, unless otherwise specified in the appropriate space in the box captioned "Dividend Reinvestment and Cash Stock Purchase Plan Shares." In the event that the box captioned "Dividend Reinvestment and Cash Stock Purchase Plan Shares" is not completed, no Shares held in the tendering stockholder's Reinvestment Plan account will be tendered. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF) TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE). IMPORTANT TAX INFORMATION Under federal income tax law, a stockholder whose tendered Shares are accepted for payment is required to provide the Depositary (as payer) with either such stockholder's correct TIN on Substitute Form W-9 below or a properly completed Form W-8. If such stockholder is an individual, the TIN is his or her social security number. For businesses and other entities, the number is the employer identification number. If the Depositary is not provided with the correct TIN or properly completed Form W-8, the stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such stockholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding. The Form W-8 can be obtained from the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If federal income tax backup withholding applies, the Depositary is required to withhold 31% of any payments made to the stockholder. Backup withholding is not an additional tax. Rather, the federal income tax liability of persons subject to federal income tax backup withholding will be reduced by the amount of the tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. PURPOSE OF SUBSTITUTE FORM W-9 AND FORM W-8 To avoid backup withholding on payments that are made to a stockholder with respect to Shares purchased pursuant to the Offer, the stockholder is required to notify the Depositary of his or her correct TIN by completing the Substitute Form W-9 on page 11 hereof certifying that the TIN provided on Substitute Form W-9 is correct and that (1) the stockholder has not been notified by the Internal Revenue Service that he or she is subject to federal income tax backup withholding as a result of failure to report all interest or dividends or (2) the Internal Revenue Service has notified the stockholder that he or she is no longer subject to federal income tax backup withholding. Foreign stockholders must submit a properly completed Form W-8 in order to avoid the applicable backup withholding; provided, however, that backup withholding will not apply to foreign stockholders subject to 30% (or lower treaty rate) withholding on gross payments received pursuant to the Offer. WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the social security number or employer identification number of the registered owner of the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. 10 PAYER'S NAME: THE FIRST NATIONAL BANK OF BOSTON -------------------------------------------------------------------------------- SUBSTITUTE PART 1-PLEASE PROVIDE YOUR TIN _________________________ FORM W-9 TIN IN THE BOX AT RIGHT Social Security Number or AND CERTIFY BY SIGNING AND Employer Identification Number DATING BELOW. ----------------------------- DEPARTMENT OF NAME (Please Print) THE TREASURY ----------------------------- PART 2 INTERNAL REVENUE ADDRESS Awaiting SERVICE TIN [_] ----------------------------- CITY STATE ZIP CODE PAYER'S REQUEST FOR TAXPAYER ------------------------------------------------------------ IDENTIFICATION Part 3--CERTIFICATION-UNDER THE PENALTIES OF PERJURY, I NUMBER (TIN) AND CERTIFY THAT (1) the number shown on this form is my CERTIFICATION correct taxpayer identification number (or a TIN has not been issued to me but I have mailed or delivered an application to receive a TIN or intend to do so in the near future), (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends or the IRS has notified me that I am no longer subject to backup withholding and (3) all other information provided on this form is true, correct and complete. SIGNATURE ___________________________________ DATE ________ You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. -------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF THE SUBSTITUTE FORM W-9. -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all payments of the purchase price made to me thereafter will be withheld until I provide a number. Signature _____________________________ Date: ____________, 1995 -------------------------------------------------------------------------------- 11 The Information Agent: [LOGO OF GEORGESON & COMPANY INC. APPEARS HERE] Wall Street Plaza New York, New York 10005 Banks and Brokers Call Collect: (212) 440-9800 ALL OTHERS CALL TOLL FREE: 1-800-223-2064 The Dealer Manager: MORGAN STANLEY & CO. Incorporated 1251 Avenue of the Americas New York, New York 10020 (415) 576-2247 (call collect) 12 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE. Purpose of Form.--A person who is required to file an information return with the IRS must obtain your correct TIN to report income paid to you, real estate transactions, mortgage interest you paid, the acquisition or abandonment of secured property, or contributions you made to an IRA. Use Form W-9 to furnish your correct TIN to the requester (the person asking you to furnish your TIN) and, when applicable, (1) to certify that the TIN you are furnishing is correct (or that you are waiting for a number to be issued), (2) to certify that you are not subject to backup withholding, and (3) to claim exemption from backup withholding if you are an exempt payee. Furnishing your correct TIN and making the appropriate certifications will prevent certain payments from being subject to backup withholding. Note: If a requester gives you a form other than a W-9 to request your TIN, you must use the requester's form. How To Obtain a TIN.--If you do not have a TIN, apply for one immediately. To apply, get Form SS-5, Application for a Social Security Card (for individuals), from your local office of the Social Security Administration, or Form SS-4, Application for Employer Identification Number (for businesses and all other entities), from your local IRS office. To complete Form W-9 if you do not have a TIN, write "Applied for" in the space for the TIN in Part I (or check box 2 of Substitute Form W-9), sign and date the form, and give it to the requester. Generally, you must obtain a TIN and furnish it to the requester by the time of payment. If the requester does not receive your TIN by the time of payment, backup withholding, if applicable, will begin and continue until you furnish your TIN to the requester. Note: Writing "Applied for" (or checking box 2 of the Substitute Form W-9) on the form means that you have already applied for a TIN OR that you intend to apply for one in the near future. As soon as you receive your TIN, complete another Form W-9, include your TIN, sign and date the form, and give it to the requester. What Is Backup Withholding?--Persons making certain payments to you are required to withhold and pay to the IRS 31% of such payments under certain conditions. This is called "backup withholding." Payments that could be subject to backup withholding include interest, dividends, broker and barter exchange transactions, rents, royalties, nonemployee compensation, and certain payments from fishing boat operators, but do not include real estate transactions. If you give the requester your correct TIN, make the appropriate certifications, and report all your taxable interest and dividends on your tax return, your payments will not be subject to backup withholding. Payments you receive will be subject to backup withholding if: 1. You do not furnish your TIN to the requester, or 2. The IRS notifies the requester that you furnished an incorrect TIN, or 3. You are notified by the IRS that you are subject to backup withholding because you failed to report all your interest and dividends on your tax return (for reportable interest and dividends only), or 4. You do not certify to the requester that you are not subject to backup withholding under 3 above (for reportable interest and dividend accounts opened after 1983 only), or 5. You do not certify your TIN. This applies only to reportable interest, dividend, broker, or barter exchange accounts opened after 1983, or broker accounts considered inactive in 1983. Except as explained in 5 above, other reportable payments are subject to backup withholding only if 1 or 2 above applies. Certain payees and payments are exempt from backup withholding and information reporting. See Payees and Payments Exempt From Backup Withholding, below, and Example Payees and Payments under Specific Instructions, below, if you are an exempt payee. Payees and Payments Exempt From Backup Withholding.--The following is a list of payees exempt from backup withholding and for which no information reporting is required. For interest and dividends, all listed payees are exempt except item (9). For broker transactions, payees listed in (1) through (13) and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A are generally exempt from backup withholding only if made to payees described in items (1) through (7), except a corporation that provides medical and health care services or bills and collects payments for such services is not exempt from backup withholding or information reporting. Only payees described in items (2) through (6) are exempt from backup withholding for barter exchange transactions, patronage dividends, and payments by certain fishing boat operators. (1) A corporation. (2) An organization exempt from tax under section 501(a), or an IRA, or a custodial account under section 403(b)(7). (3) The United States or any of its agencies or instrumentalities. (4) A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. (5) A foreign government or any of its political subdivisions, agencies, or instrumentalities. (6) An international organization or any of its agencies or instrumentalities. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the United States or a possession of the United States. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section 664 or described in section 4947. Payments of dividend and patronage dividends generally not subject to backup withholding include the following: . Payments to nonresident aliens subject to withholding under section 1441. . Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident partner. . Payments of patronage dividends not paid in money. . Payments made by certain foreign organizations. Payments of interest generally not subject to backup withholding include the following: . Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct TIN to the payer. . Payments of tax-exempt interest (including exempt-interest dividends under section 852). . Payments described in section 6049(b)(5) to nonresident aliens. . Payments on tax-free covenant bonds under section 1451. . Payments made by certain foreign organizations. . Payments Mortgage interest paid by you. 2 Payments that are not subject to information reporting are also not subject to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A, and 6050N, and their regulations. PENALTIES Failure to Furnish TIN.--If you fail to furnish your correct TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. Civil Penalty for False Information With Respect to Withholding.--If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty. Criminal Penalty for Falsifying Information.--Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. Misuse of TINs.--If the requester discloses or uses TlNs in violation of Federal law, the requester may be subject to civil and criminal penalties. SPECIFIC INSTRUCTIONS Name.--If you are an individual, you must generally provide the name shown on your social security card. However, if you have changed your last name, for instance, due to marriage, without informing the Social Security Administration of the name change, please enter your first name, the last name shown on your social security card, and your new last name. If you are a sole proprietor, you must furnish your individual name and either your SSN or EIN. You may also enter your business name or "doing business as" name on the business name line. Enter your name(s) as shown on your social security card and/or as it was used to apply for your EIN on Form SS-4. SIGNING THE CERTIFICATION. 1. Interest, Dividend, and Barter Exchange Accounts Opened Before 1984 and Broker Accounts Considered Active During 1983. You are required to furnish your correct TIN, but you are not required to sign the certification. 2. Interest, Dividend, Broker, and Barter Exchange Accounts Opened After 1983 and Broker Accounts Considered Inactive During 1983. You must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to the requester, you must cross out item 2 in the certification before signing the form. 3. Real Estate Transactions. You must sign the certification. You may cross out item 2 of the certification. 4. Other Payments. You are required to furnish your correct TIN, but you are not required to sign the certification unless you have been notified of an incorrect TIN. Other payments include payments made in the course of the requester's trade or business for rents, royalties, goods (other than bills for merchandise), medical and health care services, payments to a nonemployee for services (including attorney and accounting fees), and payments to certain fishing boat crew members. 5. Mortgage Interest Paid by You, Acquisition or Abandonment of Secured Property, or IRA Contributions. You are required to furnish your correct TIN, but you are not required to sign the certification. 6. Exempt Payees and Payments. If you are exempt from backup withholding, you should complete this form to avoid possible erroneous backup withholding. Enter your correct TIN in Part I, write "EXEMPT" in the block in Part II, and sign and date the form. If you are a nonresident alien or foreign entity not subject to backup withholding, give the requester a complete Form W-8, Certificate of Foreign Status. 7. TIN "Applied for." Follow the instructions under How To Obtain a TIN, on page 1, and sign and date this form. Signature.--For a joint account, only the person whose TIN is shown in Part I should sign. 3 Privacy Act Notice.--Section 6109 requires you to furnish your correct TIN to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, or contributions you made to an IRA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. You must provide your TIN whether or not you are required to file a tax return. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a TIN to a payer. Certain penalties may also apply. WHAT NAME AND NUMBER TO GIVE THE REQUESTER For this type of account: Give name and SSN of: 1. Individual The individual 2. Two or more individuals (joint account) The actual owner of the account or, if combined funds, the first individual on the account(1) 3. Custodian account of a minor (Uniform Gift The minor(2) to Minors Act) 4. a. The usual revocable savings trust (grantor the grantor-trustee(1) is also trustee) b. So-called trust account that is not a legal The actual owner(1) or valid trust under state law 5. Sole proprietorship The owner(3) For this type of account: Give name and EIN of: 6. Sole proprietorship The owner(3) 7. A valid trust, estate, or pension trust Legal entity(4) 8. Corporate The corporation 9. Association, club, religious, charitable, The organization educational, or other tax-exempt organization 10. Partnership The partnership 11. A broker or registered nominee The broker or nominee 12. Account with the Department of Agriculture The public entity in the name of a public entity (such as a state or local government, school district or prison) that receives agriculture program payments
-------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's SSN. (3) Show your individual name. You may also enter your business name. You may use your SSN or EIN. (4) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title.) Note: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 4 EX-99.A.3 4 LETTER TO STOCKHOLDERS EXHIBIT a.3 [LETTERHEAD OF VARIAN APPEARS HERE] August 23, 1995 Dear Stockholder: Varian Associates, Inc. is offering to purchase up to 3,000,000 shares of its common stock (representing approximately 8.85% of the currently outstanding shares), at a price not greater than $58 nor less than $51 per share. The Company is conducting the offer through a procedure commonly referred to as a "dutch auction." This procedure allows you to select the price within that range at which you are willing to sell all or a portion of your shares to the Company. Based upon the number of shares tendered and the prices specified by the tendering stockholders, the Company will determine the single per-share price within that range that will allow it to buy 3,000,000 shares (or such lesser number of shares that are properly tendered). All of the shares that are properly tendered at prices at or below that purchase price (and are not withdrawn) will--subject to possible proration, conditional tenders and provisions relating to the tender of "odd lots"--be purchased for cash at that purchase price, net to the selling stockholder. All other shares that have been tendered and not purchased will be returned to the stockholder. If you do not wish to participate in the offer, you do not need to take any action. The offer is explained in detail in the enclosed Offer to Purchase and Letter of Transmittal. If you want to tender your shares, the instructions on how to do so are also explained in detail in the enclosed materials. I encourage you to read carefully these materials before making any decision with respect to the offer. The Company believes that the purchase of its shares of common stock at this time represents an attractive business opportunity that will benefit Varian and its stockholders. However, neither the Company nor its Board of Directors makes any recommendation to any stockholder whether to tender all or any shares. Neither I nor any other director or executive officer intends to tender shares pursuant to the offer. Sincerely, /s/ J. Tracy O'Rourke J. Tracy O'Rourke Chairman of the Board and Chief Executive Officer EX-99.A.4 5 NOTICE OF GUARANTEED DELIVERY EXHIBIT a.4 VARIAN ASSOCIATES, INC. Notice of Guaranteed Delivery of Shares of Common Stock (Including the Associated Preferred Stock Purchase Rights) This form, or a form substantially equivalent to this form, must be used to accept the Offer (as defined below) if certificates for the shares of Common Stock of Varian Associates, Inc. are not immediately available, if the procedure for book-entry transfer cannot be completed on a timely basis, or if time will not permit all other documents required by the Letter of Transmittal to be delivered to the Depositary on or prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase defined below). Such form may be delivered by hand or transmitted by mail, or (for Eligible Institutions only) by facsimile transmission, to the Depositary. See Section 3 of the Offer to Purchase. THE ELIGIBLE INSTITUTION, WHICH COMPLETES THIS FORM, MUST COMMUNICATE THE GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE LETTER OF TRANSMITTAL AND CERTIFICATES FOR SHARES TO THE DEPOSITARY WITHIN THE TIME SHOWN HEREIN. FAILURE TO DO SO COULD RESULT IN A FINANCIAL LOSS TO SUCH ELIGIBLE INSTITUTION. To: THE FIRST NATIONAL BANK OF BOSTON, Depositary By Mail: By Facsimile By Overnight Courier: P.O. Box 1889 Transmission: Shareholder Services Mail Stop 45-01-19 (617) 575-2233 Division Boston, Massachusetts 02105 150 Royall Street, Mail Stop 45-01-19 Canton, Massachusetts 02021 By Hand: Confirm by Telephone: By Hand: 100 Federal Street, (617) 575-2700 BancBoston Trust Company Floor 1-B of New York Boston, Massachusetts 55 Broadway, 3rd Floor Attn: Receipt and New York, New York Delivery Window DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. Ladies and Gentlemen: The undersigned hereby tenders to Varian Associates, Inc., a Delaware corporation (the "Company"), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated August 23, 1995 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged, the number of shares of Common Stock, par value $1.00 per share (the "Shares") (including the associated preferred stock purchase rights (the "Rights") issued pursuant to the Rights Agreement, dated as of August 25, 1986, as amended, between the Company and The First National Bank of Boston, as Rights Agent), of the Company listed below, pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Number of Shares: ------------------------------------- Certificate Nos.: (if available) ------------------------------------- ------------------------------------- Signature(s) ------------------------------------- If Shares will be tendered by book- ------------------------------------- entry transfer: Name(s) (Please Print) Name of Tendering Institution: ------------------------------------- ------------------------------------- Address Account No. __________ at (check one) ------------------------------------- [_] The Depository Trust Company [_] Midwest Securities Trust Company ------------------------------------- [_] Philadelphia Depository Trust Area Code and Telephone Number Company PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED -------------------------------------------------------------------------------- CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES. -------------------------------------------------------------------------------- [_] $51.000 [_] $52.000 [_] $53.000 [_] $54.000 [_] $55.000 [_] $56.000 [_] $57.000 [_] $51.125 [_] $52.125 [_] $53.125 [_] $54.125 [_] $55.125 [_] $56.125 [_] $57.125 [_] $51.250 [_] $52.250 [_] $53.250 [_] $54.250 [_] $55.250 [_] $56.250 [_] $57.250 [_] $51.375 [_] $52.375 [_] $53.375 [_] $54.375 [_] $55.375 [_] $56.375 [_] $57.375 [_] $51.500 [_] $52.500 [_] $53.500 [_] $54.500 [_] $55.500 [_] $56.500 [_] $57.500 [_] $51.625 [_] $52.625 [_] $53.625 [_] $54.625 [_] $55.625 [_] $56.625 [_] $57.625 [_] $51.750 [_] $52.750 [_] $53.750 [_] $54.750 [_] $55.750 [_] $56.750 [_] $57.750 [_] $51.875 [_] $52.875 [_] $53.875 [_] $54.875 [_] $55.875 [_] $56.875 [_] $57.875 [_] $58.000
CONDITIONAL TENDER ODD LOTS UNLESS THIS BOX HAS BEEN COM- To be completed ONLY if Shares PLETED AND A MINIMUM SPECIFIED, are being tendered or on behalf of THE TENDER WILL BE DEEMED UNCONDI- persons owning beneficially an ag- TIONAL (see Sections 6 and 13 of gregate of fewer than 100 Shares the Offer to Purchase). as of the close of business on Au- gust 22, 1995. Minimum number of Shares that must be purchased, if any are The undersigned either (check purchased: one): ____________ Shares [_] was the beneficial owner of an aggregate of fewer than 100 Shares (including Shares held in the Reinvestment Plan (as such term is defined in the Of- fer to Purchase)) as of the close of business on August 22, 1995, all of which are ten- dered, or [_] is a broker, dealer, commercial bank, trust company or other nominee that (i) is tendering, for the beneficial owners thereof, Shares with respect to which it is the record owner, and (ii) believes, based upon representations made to it by each such beneficial owner, that such beneficial owner owned an aggregate of fewer than 100 Shares (including Shares held in the Reinvestment Plan) as of the close of busi- ness on August 22, 1995 and is tendering all of such Shares. 2 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a member of a registered national securities exchange or the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States, guarantees (a) that the above-named person(s) has a net long position in the Shares (and associated Rights) being tendered within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended, (b) that such tender of Shares complies with Rule 14e-4 and (c) to deliver to the Depositary at one of its addresses set forth above certificate(s) for the Shares tendered hereby, in proper form for transfer, or a confirmation of the book-entry transfer of the Shares tendered hereby into the Depositary's account at The Depository Trust Company, Midwest Securities Trust Company or Philadelphia Depository Trust Company, in each case together with a properly completed and duly executed Letter(s) of Transmittal (or facsimile(s) thereof), with any required signature guarantee(s) and any other required documents, all within three New York Stock Exchange, Inc. trading days after the date hereof. ------------------------------------- ------------------------------------- Name of Firm Authorized Signature ------------------------------------- ------------------------------------- Address Name ------------------------------------- ------------------------------------- City, State, Zip Code Title ------------------------------------- Area Code and Telephone Number Dated: _______________________ , 1995 DO NOT SEND STOCK CERTIFICATES WITH THIS FORM. YOUR STOCK CERTIFICATES MUST BE SENT WITH THE LETTER OF TRANSMITTAL. 3 EX-99.A.5 6 LETTER TO BROKERS EXHIBIT a.5 MORGAN STANLEY & CO. INCORPORATED 1251 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10020 VARIAN ASSOCIATES, INC. OFFER TO PURCHASE FOR CASH UP TO 3,000,000 SHARES OF ITS COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS) THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 20, 1995, UNLESS THE OFFER IS EXTENDED. August 23, 1995 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: In our capacity as Dealer Manager (the "Dealer Manager"), we are enclosing the material listed below relating to the offer of Varian Associates, Inc., a Delaware corporation (the "Company"), to purchase up to 3,000,000 shares of its Common Stock, par value $1.00 per share (the "Shares") (including the associated preferred stock purchase rights issued pursuant to the Rights Agreement, dated as of August 25, 1986, as amended, between the Company and The First National Bank of Boston, as the Rights Agent), at prices not greater than $58 nor less than $51 per Share, net to the seller in cash, specified by tendering stockholders, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated August 23, 1995 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"). The Company will determine a single price (not greater than $58 nor less than $51 per Share) that it will pay for Shares validly tendered pursuant to the Offer (the "Purchase Price"), taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The Company will select the Purchase Price that will enable it to purchase 3,000,000 Shares (or such lesser number of Shares as are validly tendered at prices not greater than $58 nor less than $51 per Share) pursuant to the Offer. The Company will purchase all Shares validly tendered at prices at or below the Purchase Price and not withdrawn, upon the terms and subject to the conditions of the Offer, including the provisions relating to proration and conditional tenders described in the Offer to Purchase. The Purchase Price will be paid in cash, net to the seller, with respect to all Shares purchased. Shares tendered at prices in excess of the Purchase Price and Shares not purchased because of proration and conditional tenders will be returned. THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED. The Offer is, however, subject to other conditions. See Section 7 of the Offer to Purchase. We are asking you to contact your clients for whom you hold Shares registered in your name (or in the name of your nominee) or who hold Shares registered in their own names. Please bring the Offer to their attention as promptly as possible. The Company will, upon request, reimburse you for reasonable and customary handling and mailing expenses incurred by you in forwarding any of the enclosed materials to your clients. For your information and for forwarding to your clients, we are enclosing the following documents: 1. The Offer to Purchase, which includes as annexes thereto the Company's Quarterly Report on Form 10-Q for the third quarter of the Company's 1995 fiscal year and the Company's Current Report on Form 8-K (in each case, other than the exhibits thereto), dated August 23, 1995. 2. The Letter of Transmittal for your use and for the information of your clients. 3. A letter to stockholders of the Company from the Chairman of the Board and Chief Executive Officer of the Company. 4. The Notice of Guaranteed Delivery to be used to accept the Offer if the Shares and all other required documents cannot be delivered to the Depositary by the Expiration Date (as defined in the Offer to Purchase). 5. A letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space for obtaining such clients' instructions with regard to the Offer. 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9 providing information relating to backup federal income tax withholding. 7. A return envelope addressed to The First National Bank of Boston, the Depositary. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 20, 1995, UNLESS THE OFFER IS EXTENDED. The Company will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer (other than the Dealer Manager). The Company will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and customary handling and mailing expenses incurred by them in forwarding materials relating to the Offer to their customers. The Company will pay all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, subject to Instruction 7 of the Letter of Transmittal. As described in the Offer to Purchase, if more than 3,000,000 Shares have been validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date, as defined in Section 1 of the Offer to Purchase, the Company will purchase Shares in the following order of priority: (a) all Shares validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date by any stockholder who owned beneficially an aggregate of fewer than 100 Shares (including any Shares held in the Dividend Reinvestment and Cash Stock Purchase Plan (the "Reinvestment Plan")) as of the close of business on August 22, 1995 and who validly tenders all of such Shares (partial and conditional tenders will not qualify for this preference) and completes the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, the Notice of Guaranteed Delivery; and (b) after purchase of all the foregoing Shares, subject to the conditional tender provisions described in Section 6 of the Offer to Purchase, all other Shares validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date on a pro rata basis, if necessary (with appropriate adjustments to avoid purchases of fractional Shares, other than Shares held in the Reinvestment Plan). NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES. STOCKHOLDERS MUST MAKE THEIR OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. THE COMPANY HAS BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE OFFICER INTENDS TO TENDER SHARES PURSUANT TO THE OFFER. Any questions or requests for assistance or additional copies of the enclosed materials may be directed to Georgeson & Company Inc. (the "Information Agent") or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of the enclosed Offer to Purchase. Very truly yours, MORGAN STANLEY & CO. INCORPORATED NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE AGENT OF THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 2 EX-99.A.6 7 LETTER TO CLIENTS EXHIBIT a.6 VARIAN ASSOCIATES, INC. Offer to Purchase for Cash Up to 3,000,000 Shares of its Common Stock (Including the Associated Preferred Stock Purchase Rights) THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 20, 1995, UNLESS THE OFFER IS EXTENDED To Our Clients: Enclosed for your consideration are the Offer to Purchase, dated August 23, 1995 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer") setting forth an offer by Varian Associates, Inc., a Delaware corporation (the "Company"), to purchase up to 3,000,000 shares of its Common Stock, par value $1.00 per share (the "Shares") (including the associated preferred stock purchase rights issued pursuant to the Rights Agreement, dated as of August 25, 1986, as amended, between the Company and The First National Bank of Boston, as the Rights Agent), at prices not greater than $58 nor less than $51 per Share, net to the seller in cash, specified by tendering stockholders, upon the terms and subject to the conditions of the Offer. The Company will determine a single per Share price (not greater than $58 nor less than $51 per Share) that it will pay for the Shares validly tendered pursuant to the Offer and not withdrawn (the "Purchase Price"), taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The Company will select the Purchase Price that will enable it to purchase 3,000,000 Shares (or such lesser number of Shares as are validly tendered at prices not greater than $58 nor less than $51 per Share) pursuant to the Offer. The Company will purchase all Shares validly tendered at prices at or below the Purchase Price and not withdrawn, upon the terms and subject to the conditions of the Offer, including the provisions thereof relating to proration and conditional tenders. We are the holder of record of Shares held for your account. A tender of such Shares can be made only by us as the holder of record and pursuant to your instructions. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish us to tender any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer to Purchase and the Letter of Transmittal. Your attention is invited to the following: (1) You may tender Shares at prices (in multiples of $.125), not greater than $58 nor less than $51 per Share, as indicated in the attached instruction form, net to you in cash. (2) The Offer is for up to 3,000,000 Shares, constituting approximately 8.85% of the total Shares outstanding as of August 22, 1995. Although it has no present intention of so doing, the Company reserves the right to purchase more than 3,000,000 Shares pursuant to the Offer. The Offer is not conditioned upon any minimum number of Shares being tendered. (3) The Offer, proration period and withdrawal rights will expire at 12:00 Midnight, New York City time, on Wednesday, September 20, 1995, unless the Offer is extended. Your instructions to us should be forwarded to us in ample time to permit us to submit a tender on your behalf. If you would like to withdraw your Shares that we have tendered, you can withdraw them so long as the Offer remains open or any time after the expiration of forty business days from the commencement of the Offer if they have not been accepted for payment. (4) As described in the Offer to Purchase, if more than 3,000,000 Shares have been validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date, as defined in Section 1 of the Offer to Purchase, the Company will purchase Shares in the following order of priority: (a) all Shares validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date by any stockholder who owned beneficially an aggregate of fewer than 100 Shares (including any Shares held in the Dividend Reinvestment and Cash Stock Purchase Plan (the "Reinvestment Plan")) as of the close of business on August 22, 1995 and who validly tenders all of such Shares (partial and conditional tenders will not qualify for this preference) and completes the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, the Notice of Guaranteed Delivery; and (b) after purchase of all the foregoing Shares, subject to the conditional tender provisions described in Section 6 of the Offer to Purchase, all other Shares validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date on a pro rata basis, if necessary (with appropriate adjustments to avoid purchases of fractional Shares, other than Shares held in the Reinvestment Plan). See Section 1 of the Offer to Purchase for a discussion of proration. (5) Any stock transfer taxes applicable to the sale of Shares to the Company pursuant to the Offer will be paid by the Company, except as otherwise provided in Instruction 7 of the Letter of Transmittal. (6) If you owned beneficially an aggregate of fewer than 100 Shares (including Shares held in the Reinvestment Plan) as of the close of business on August 22, 1995, and you instruct us to tender at or below the Purchase Price on your behalf all such Shares on or prior to the Expiration Date and check the box captioned "Odd Lots" in the instruction form, all such Shares will be accepted for purchase before proration, if any, of the purchase of other tendered Shares. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES. STOCKHOLDERS MUST MAKE THEIR OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. THE COMPANY HAS BEEN ADVISED THAT NO DIRECTOR OR EXECUTIVE OFFICER INTENDS TO TENDER SHARES PURSUANT TO THE OFFER. If you wish to have us tender any or all of your Shares held by us for your account upon the terms and subject to the conditions set forth in the Offer, please so instruct us by completing, executing, detaching and returning to us the instruction form on the detachable part hereof. An envelope to return your instructions to us is enclosed. If you authorize tender of your Shares, all such Shares will be tendered unless otherwise specified on the detachable part hereof. Your instructions should be forwarded to us in ample time to permit us to submit a tender on your behalf by the expiration of the Offer. A tendering stockholder may condition the tender of Shares upon the purchase by the Company of a specified minimum number of Shares tendered, all as described in Section 6 of the Offer to Purchase. Unless such specified minimum is purchased by the Company pursuant to the terms of the Offer to Purchase and the related Letter of Transmittal, none of the Shares tendered by the stockholder will be purchased. If you wish us to condition your tender upon the purchase of a specified minimum number of Shares, please complete the box entitled "Conditional Tender" on the instruction form. It is the tendering stockholder's responsibility to calculate such minimum number of Shares, and you are urged to consult your own tax advisor. The Offer is being made to all holders of Shares. The Company is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to a valid state statute. If the Company becomes aware of any valid state statute prohibiting the making of the Offer, the Company will make a good faith effort to comply with such statute. If, after such good faith effort, the Company cannot comply with such statute, the Offer will not be made to, nor will tenders be accepted from or on behalf of, holders of Shares in such state. In those jurisdictions whose securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Company by Morgan Stanley & Co. Incorporated, as the Dealer Manager, or one or more registered brokers or dealers licensed under the laws of such jurisdictions. 2 Instructions With Respect to Offer to Purchase for Cash Up to 3,000,000 Shares of Common Stock (Including the Associated Preferred Stock Purchase Rights) of Varian Associates, Inc. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated August 23, 1995, and the related Letter of Transmittal (which together constitute the "Offer") in connection with the Offer by Varian Associates, Inc., a Delaware corporation (the "Company"), to purchase up to 3,000,000 shares of its Common Stock, par value $1.00 per share (the "Shares") (including the associated preferred stock purchase rights), at prices not greater than $58 nor less than $51 per Share, net to the undersigned in cash, specified by the undersigned. This will instruct you to tender to the Company the number of Shares indicated below (or, if no number is indicated below, all Shares) which are held by you for the account of the undersigned, at the price per Share indicated below, upon the terms and subject to the conditions of the Offer. CONDITIONAL TENDER By completing this box, the undersigned conditions the tender authorized hereby on the following minimum number of Shares being purchased if any are purchased: _________ Shares Unless this box is completed, the tender authorized hereby will be made unconditionally. PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED -------------------------------------------------------------------------------- CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES. -------------------------------------------------------------------------------- [_] $51.000 [_] $52.000 [_] $53.000 [_] $54.000 [_] $55.000 [_] $56.000 [_] $57.000 [_] $51.125 [_] $52.125 [_] $53.125 [_] $54.125 [_] $55.125 [_] $56.125 [_] $57.125 [_] $51.250 [_] $52.250 [_] $53.250 [_] $54.250 [_] $55.250 [_] $56.250 [_] $57.250 [_] $51.375 [_] $52.375 [_] $53.375 [_] $54.375 [_] $55.375 [_] $56.375 [_] $57.375 [_] $51.500 [_] $52.500 [_] $53.500 [_] $54.500 [_] $55.500 [_] $56.500 [_] $57.500 [_] $51.625 [_] $52.625 [_] $53.625 [_] $54.625 [_] $55.625 [_] $56.625 [_] $57.625 [_] $51.750 [_] $52.750 [_] $53.750 [_] $54.750 [_] $55.750 [_] $56.750 [_] $57.750 [_] $51.875 [_] $52.875 [_] $53.875 [_] $54.875 [_] $55.875 [_] $56.875 [_] $57.875 [_] $58.000
ODD LOTS [_] By checking this box, the undersigned represents that the undersigned owned beneficially an aggregate of fewer than 100 Shares (including Shares held in the Dividend Reinvestment and Cash Stock Purchase Plan) as of the close of business on August 22, 1995 and is tendering all of such Shares. Number of Shares to be Tendered: SIGN HERE __________________________________________ ___________ Shares* Signature(s) Dated: ____________, 1995 Name _____________________________________ Address __________________________________ __________________________________________ __________________________________________ Social Security or Taxpayer ID No. -------- *Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. EX-99.A.7 8 SUMMARY ADVERTISEMENT EXHIBIT a.7 This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer to Purchase, dated August 23, 1995, and the related Letter of Transmittal. The Offer is being made to all holders of Shares; provided, that the Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares in any jurisdiction in which making or accepting the Offer would violate that jurisdiction's laws. In those jurisdictions whose securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Company by Morgan Stanley & Co. Incorporated or one or more registered brokers or dealers licensed under the laws of such jurisdictions. Notice of Offer to Purchase for Cash by VARIAN ASSOCIATES, INC. Up to 3,000,000 Shares of its Common Stock (Including the Associated Preferred Stock Purchase Rights) at a Purchase Price Not Greater Than $58 Nor Less Than $51 Per Share Varian Associates, Inc., a Delaware corporation (the "Company"), invites its stockholders to tender shares of its Common Stock, par value $1.00 per share (the "Shares")(including the associated preferred stock purchase rights issued pursuant to the Rights Agreement, dated as of August 25, 1986, as amended, between the Company and The First National Bank of Boston, as the Rights Agent), at prices not greater than $58 nor less than $51 per Share, net to the seller in cash, specified by such stockholders, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated August 23, 1995 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer"). The Offer is not conditioned upon any minimum number of Shares being tendered. The Offer is, however, subject to other conditions. See Section 7 of the Offer to Purchase. -------------------------------------------------------------------------------- THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 20, 1995, UNLESS THE OFFER IS EXTENDED. -------------------------------------------------------------------------------- The Company will determine a single per Share price (not greater than $58 nor less than $51 per Share) that it will pay for Shares validly tendered pursuant to the Offer and not withdrawn (the "Purchase Price"), taking into account the number of Shares so tendered and the prices specified by tendering stockholders. The Company will select the Purchase Price that will enable it to buy 3,000,000 Shares (or such lesser number of Shares as are validly tendered at prices not greater than $58 nor less than $51 per Share) pursuant to the Offer. The Company will purchase all Shares validly tendered at prices at or below the Purchase Price and not withdrawn, upon the terms and subject to the conditions of the Offer, including the provisions relating to proration and conditional tenders described below. The Purchase Price will be paid in cash, net to the seller, with respect to all Shares purchased. Shares rendered at prices in excess of the Purchase Price and Shares not purchased because of proration and conditional tenders will be returned. Shares tendered and purchased by the Company will not receive or otherwise be entitled to the regular quarterly cash dividend of $.07 per Share to be paid by the Company on October 20, 1995 to holders of record on October 2, 1995, unless the Offer is extended beyond, or Shares are accepted for payment after, October 2, 1995 for any reason whatsoever. Shares which are tendered but not purchased as a result of proration or otherwise will remain entitled to receipt of the dividend to be paid on October 20, 1995. Upon the terms and subject to the conditions of the Offer, if more than 3,000,000 Shares have been validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date (as defined in the Offer to Purchase), the Company will purchase Shares in the following order of priority: (a) first, all Shares validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date by any stockholder who owned beneficially an aggregate of fewer than 100 Shares (including any Shares held in the Dividend Reinvestment and Cash Stock Purchase Plan (the "Reinvestment Plan")) as of the close of business on August 22, 1995 and who validly tenders all of such Shares (partial and conditional tenders will not qualify for this preference) and completes the box captioned "Odd Lots" on the Letter of Transmittal and, if applicable, the Notice of Guaranteed Delivery; and (b) then, after purchase of all the foregoing Shares, subject to the conditional tender provisions described in Section 6 of the Offer to Purchase, all other Shares validly tendered at or below the Purchase Price and not withdrawn on or prior to the Expiration Date on a pro rata basis, if necessary (with appropriate adjustments to avoid purchases of fractional Shares, other than Shares held in the Reinvestment Plan). The Company believes that the purchase of its Shares at this time represents an attractive investment opportunity that will benefit the Company and its remaining stockholders. The Offer will afford to stockholders who are considering the sale of all or a portion of their Shares the opportunity to determine the price (not greater than $58 nor less than $51 per Share) at which they are willing to sell their Shares and, in the event the Company accepts such Shares, to dispose of Shares without the usual transaction costs associated with a market sale. The Offer will also allow qualifying stockholders owning beneficially fewer than 100 Shares to avoid the payment of brokerage commissions and the applicable odd lot discount payable on a sale of Shares in a transaction effected on a securities exchange. Neither the Company nor its Board of Directors makes any recommendation to any stockholder as to whether to tender all or any Shares. Each stockholder must make his or her own decision as to whether to tender shares and, if so, how many Shares to tender and at what price. The Company has been informed that no director or executive officer intends to tender Shares pursuant to the Offer. The Company reserves the right, at any given time or from time to time, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary, followed by a public announcement thereof no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Tenders of Shares made pursuant to the Offer may be withdrawn at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable, except that they may be withdrawn after October 19, 1995 unless theretofore accepted for payment by the Company as provided in the Offer to Purchase. For a withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of the addresses or the facsimile number set forth on the back cover of the Offer to Purchase and must specify the name of the person who tendered the Shares to be withdrawn and the number of Shares to be withdrawn. If the Shares to be withdrawn have been delivered to the Depositary, a signed notice of withdrawal with signatures guaranteed by an Eligible Institution (as defined in Section 3 of the Offer to Purchase) (except in the case of Shares tendered by an Eligible Institution) must be submitted prior to the release of such Shares. In addition, such notice must specify, in the case of Shares tendered by delivery of certificates, the name of the registered holder (if different from that of the tendering stockholder) and the serial numbers shown on the particular certificates evidencing the Shares to be withdrawn or, in the case of Shares tendered by book-entry transfer, the name and number of the account at one of the Book-Entry Transfer Facilities (as defined in the Offer to Purchase) to be credited with the withdrawn Shares. Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 3 of the Offer to purchase at any time prior to the Expiration Date. The Company will be deemed to have purchased tendered Shares as, if and when it gives oral or written notice to the Depositary of its acceptance for payment of Shares. The information required to be disclosed by Rule 13e-4(d)(1) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. 2 Copies of the Offer to Purchase and the related Letter of Transmittal are being mailed to record holders of Shares and will be furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on the Company's stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. The Offer to Purchase and the related Letter of Transmittal contain important information that should be read before any decision is made with respect to the Offer. Any questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective telephone numbers and addresses listed below. Requests for additional copies of the Offer to Purchase, the Letter of Transmittal or other tender offer materials may be directed to the Information Agent or the Dealer Manager, and such copies will be furnished promptly at the Company's expense. Stockholders may also contact their local broker, dealer, commercial bank or trust company for assistance concerning the Offer. The Information Agent for the Offer is: GEORGESON & COMPANY INC. -------------- Wall Street Plaza New York, New York 10005 Banks and Brokers Call Collect: (212) 440-9800 All Other Call Toll Free: 1-800-223-2064 The Dealer Manager for the Offer is: MORGAN STANLEY & CO. Incorporated 1251 Avenue of the Americans New York, New York 10020 (415) 576-2247 (collect) August 23, 1995 3 EX-99.A.8 9 PRESS RELEASE EXHIBIT a.8 [LOGO OF VARIAN APPEARS HERE] NEWS RELEASE VARIAN ASSOCIATES, INC., 3050 HANSEN WAY, PALO ALTO, CALIFORNIA 94304-1000 FOR INFORMATION CONTACT: Gary Simpson (415) 424-5782 gary.simpson@whq.varian.com For Immediate Release: August 23, 1995 VARIAN ASSOCIATES' BOARD AUTHORIZES DUTCH AUCTION SELF TENDER OFFER TO BUY UP TO 3,000,000 COMMON SHARES Palo Alto, Calif. -- Varian Associates, Inc., today announced that its Board of Directors has authorized a "dutch auction" self tender offer to purchase up to 3 million shares of its common stock. The company said the offer will commence immediately and will expire at midnight, New York City time, on September 20, 1995 unless extended. Under the terms of the offer, Varian will invite stockholders to tender shares at prices between $51.00 and $58.00 per share, with the precise amount to be specified by the tendering stockholders. Based upon the number of shares tendered and the prices specified, Varian will determine the single per-share price within that price range that will allow the company to buy 3 million shares, or whatever lesser number are properly tendered. -more- -2- The company will use the proceeds from the recently completed sale of its Electron Devices business to purchase the shares tendered under the offer. Varian's common stock closed at $52-7/8 on the New York Stock Exchange composite tape on August 22, 1995. Morgan Stanley & Co. Incorporated is acting as dealer manager for the offer. Georgeson & Company Inc. is acting as the information agent. # # # Palo Alto-based Varian Associates, Inc., is a diversified, $1.5 billion, high-technology company with core businesses in health care systems, semiconductor equipment, and analytical instruments that provide products and services to worldwide markets. Press announcements and other information about Varian are available on the Internet via the World Wide Web using a tool such as Netscape or NCSA Mosaic. Type http://www.varian.com at the prompt. EX-99.G.1 10 ANNUAL REPORT EXHIBIT g.1 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS The management of Varian Associates, Inc. (the Company) is responsible for the integrity of the financial statements of the Company and its subsidiaries. This responsibility involves preparation of financial statements in accordance with generally accepted accounting principles and reporting data which objectively reflect the assets, liabilities, revenues, and expenses of the Company and its subsidiaries. In accumulating and controlling its financial data, the Company establishes and maintains accounting systems designed to ensure adequate internal controls. Management believes a high level of internal control is maintained by the selection and continual training of qualified personnel, by the establishment and communication of accounting and business policies, and by internal audits. In establishing internal controls, management evaluates the cost of such systems against the benefits received. Management believes the internal control systems in use are adequate to prevent significant misuse of Company assets or misstatement of financial reports. Coopers & Lybrand, independent accountants, are engaged to render an opinion on the consolidated financial statements. Their opinion expresses an informed judgment on whether management's financial statements, considered in their entirety, present fairly in all material respects, in conformity with generally accepted accounting principles, the Company's financial condition, operating results and cash flows. It is based on procedures described in the second paragraph of their report, which include obtaining an understanding of the Company's systems and procedures and performing tests and other procedures sufficient to provide reasonable assurance that the financial statements are neither materially misleading nor contain material errors. The audits make extensive tests of Company procedures. It is neither practical nor necessary for them to scrutinize a large portion of the Company's transactions. The Board of Directors, through its Audit and Corporate Responsibility Committee consisting of five independent directors, is responsible for engaging the independent accountants and assuring that management fulfills its responsibilities in the preparation of the financial statements. The Audit and Corporate Responsibility Committee discusses audit and financial reporting matters with both management and Coopers & Lybrand. To ensure complete independence, Coopers & Lybrand meets with the Audit and Corporate Responsibility Committee with and without the presence of management representatives. With the established system of internal accounting controls, internal audit, and the independent audit by Coopers & Lybrand, the integrity and objectivity of the Company's financial statements are maintained. /s/ Robert A. Lemos /s/ Wayne P. Somrak --------------------------------- ----------------------------- Robert A. Lemos Wayne P. Somrak Vice President, Finance and Chief Vice President and Controller Financial Officer Consolidated Statements of Earnings Varian Associates, Inc. and Subsidiary Companies
Fiscal Years --------------------------------------- (Dollars in thousands except per share amounts) 1994 1993 1992 ============================================================================================ Sales $1,552,477 $1,310,984 $1,288,024 ---------- ---------- ---------- Operating Costs and Expenses Cost of sales 1,031,956 876,480 871,667 Research and development 81,326 73,932 76,653 Marketing 187,332 173,443 172,688 General and administrative 121,873 108,765 101,490 ---------- ---------- ---------- Total operating costs and expenses 1,422,487 1,232,620 1,222,498 ---------- ---------- ---------- Operating Earnings 129,990 78,364 65,526 Interest expense (6,345) (6,555) (5,853) Interest income 4,353 2,064 2,683 ---------- ---------- ---------- Earnings Before Taxes 127,998 73,873 62,356 Taxes on earnings 48,640 28,070 23,700 ---------- ---------- ---------- Net Earnings $ 79,358 $ 45,803 $ 38,656 ========== ========== ========== Earnings Per Share - Fully Diluted $ 2.22 $ 1.26 $ 1.02 ========== ========== ==========
See accompanying Notes to the Consolidated Financial Statements. Consolidated Balance Sheets Varian Associates, Inc. and Subsidiary Companies
Fiscal Year-End ------------------------ (Dollars in thousands except par values) 1994 1993 --------------------------------------------------------------------------------------- Assets Current Assets Cash and cash equivalents $ 78,872 $ 73,307 Accounts receivable 338,448 290,513 Inventories 179,176 161,413 Other current assets 72,243 65,493 --------- --------- Total Current Assets 668,739 590,726 --------- --------- Property, Plant, and Equipment 574,402 544,316 Accumulated depreciation and amortization (339,082) (313,841) --------- --------- Net Property, Plant, and Equipment 235,320 230,475 --------- --------- Other Assets 58,364 57,506 --------- --------- Total Assets $ 962,423 $ 878,707 ========= ========= Liabilities and Stockholders' Equity Current Liabilities Notes payable $ 4,816 $ 22,858 Accounts payable - trade 78,094 58,654 Accrued expenses 248,751 203,848 Product warranty 41,682 35,615 Advance payments from customers 58,440 61,282 --------- --------- Total Current Liabilities 431,783 $ 382,257 Long-Term Debt 60,399 60,470 Deferred Taxes 20,788 21,919 --------- --------- Total Liabilities 512,970 464,646 --------- --------- 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 33,979,000 shares (1994), 34,684,000 shares (1993) 33,979 17,342 Retained earnings 415,474 396,719 --------- --------- Total Stockholders' Equity 449,453 414,061 --------- --------- Total Liabilities and Stockholders' Equity $ 962,423 $ 878,707 ========= =========
See accompanying Notes to the Consolidated Financial Statements. Consolidated Statements of Stockholders' Equity Varian Associates, Inc. and Subsidiary Companies
Capital in Treasury (Dollars in thousands except Common Excess of Retained Stock per share amounts) Stock Par Value Earnings at Cost Total --------------------------------------------------------------------------------------------------------------------- Balances, Fiscal Year-End, 1991 $ 19,119 $ 76,530 $ 330,829 $ - $ 426,478 Net earnings for the year - - 38,656 - 38,656 Issuance of stock under omnibus stock and employee stock purchase plans (including tax benefit of $1,179) 536 15,546 - - 16,082 Purchase of common stock - - - (54,468) (54,468) Retirement of treasury stock (1,495) (52,973) - 54,468 - Dividends declared ($0.175 per share) - - (6,492) - (6,492) -------- --------- ---------- --------- --------- Balances, Fiscal Year-End, 1992 18,160 39,103 362,993 - 420,256 Net earnings for the year - - 45,803 - 45,803 Issuance of stock under omnibus stock and employee stock purchase plans (including tax benefit of $3,845) 775 26,292 - - 27,067 Purchase of common stock - - - (72,228) (72,228) Retirement of treasury stock (1,593) (65,395) (5,240) 72,228 - Dividends declared ($0.195 per share) - - (6,837) - (6,837) -------- --------- ---------- --------- --------- Balances, Fiscal Year-End, 1993 17,342 - 396,719 - 414,061 Net earnings for the year - - 79,358 - 79,358 Issuance of stock under omnibus stock and employee stock purchase plans (including tax benefit of $4,821) 839 26,753 - - 27,592 Purchase of common stock - - - (63,669) (63,669) Retirement of treasury stock (1,423) (26,753) (35,493) 63,669 - Dividends declared ($0.23 per share) - - (7,889) - (7,889) Two-for-one stock split 17,221 - (17,221) - - -------- --------- ---------- --------- --------- Balances, Fiscal Year-End, 1994 $ 33,979 $ - $ 415,474 $ - $ 449,453 ======== ========= ========== ========= =========
See accompanying Notes to the Consolidated Financial Statements. Consolidated Statements of Cash Flows Varian Associates, Inc. and Subsidiary Companies
Fiscal Years -------------------------------------- (Dollars in thousands) 1994 1993 1992 ------------------------------------------------------------------------------------------------------------------------------ Operating Activities Net Cash Provided by Operating Activities $ 120,251 $ 89,815 $ 130,812 Investing Activities Proceeds from sale of property, plant, and equipment 18,320 5,228 2,735 Purchase of property, plant, and equipment (62,584) (45,102) (48,605) Purchase of businesses, net of cash acquired 133 (11,879) - Other (7,252) (6,099) (6,361) ---------- --------- --------- Net Cash Used by Investing Activities (51,383) (57,852) (52,231) ---------- --------- --------- Financing Activities Net borrowings (payments) on short-term obligations (12,042) 12,549 1,232 Proceeds from long-term borrowings - 60,000 - Principal payments on long-term debt (6,071) (49,238) (18,512) Proceeds from common stock issued to employees 27,592 27,067 16,082 Purchase of common stock (63,669) (72,228) (54,468) Dividends paid (7,590) (6,761) (6,373) Other 392 512 (801) ---------- --------- --------- Net Cash Used by Financing Activities (61,388) (28,099) (62,840) ---------- --------- --------- Effects of Exchange Rate Changes on Cash (1,915) 2,700 (3,363) ---------- --------- --------- Net Increase in Cash and Cash Equivalents 5,565 6,564 12,378 Cash and Cash Equivalents at Beginning of Year 73,307 66,743 54,365 ---------- --------- --------- Cash and Cash Equivalents at End of Year $ 78,872 $ 73,307 $ 66,743 ========== ========= ========= Detail of Net Cash Provided by Operating Activities Net Earnings $ 79,358 45,803 $ 38,656 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation 48,029 45,266 44,465 Deferred taxes (8,283) 2,900 1,062 Amortization of intangibles 4,484 4,429 4,477 Changes in assets and liabilities: Accounts receivable (40,765) (26,214) (4,760) Inventories (17,374) 16,003 10,263 Other current assets 550 (1,646) 3,935 Accounts payable - trade 18,226 1,972 (3,376) Accrued expenses 37,929 (5,955) 20,394 Product warranty 5,871 2,056 75 Advance payments from customers (3,503) 1,629 10,315 Other (4,271) 3,572 5,306 ---------- --------- -------- Net Cash Provided by Operating Activities $ 120,251 $ 89,815 $130,812 ========== ========= ========
See accompanying Notes to the Consolidated Financial Statements. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fiscal Year ------------ The Company's fiscal years reported are the 52- or 53- week periods which end on the Friday nearest September 30. Principles of Consolidation --------------------------- The consolidated financial statements include those of the Company and its subsidiaries. Significant intercompany balances, transactions, and stock holdings have been eliminated in consolidation. Investments in less-than- majority-owned affiliated companies are stated at equity in the net assets of these companies. Foreign Currency Translation ---------------------------- Assets and liabilities of subsidiaries outside of the United States representing cash and amounts receivable or payable are translated into U.S. dollars at the exchange rates in effect at year end. Other accounts including inventories and property, plant and equipment are translated at historical exchange rates. Revenue and expense items are translated at effective rates of exchange prevailing during each year, except that inventories are charged to cost of sales and depreciation is expensed at historical exchange rates. The aggregate exchange gain (loss) included in general and administrative expenses for 1994, 1993, and 1992 was $(0.1) million, $(8.3) million, and $4.5 million, respectively. 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 revenues 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 underlying items being hedged, these instruments do not subject the Company to risk that would otherwise result from changes in currency exchange rates. At fiscal year-end 1994, the Company had forward exchange contracts with maturities of twelve months or less to sell foreign currencies totaling $9.1 million ($5.4 million of British pounds and $3.7 million of Canadian dollars) and to buy foreign currencies totaling $71.8 million ($14.7 million of British pounds and $57.1 million of Japanese yen). Revenue Recognition ------------------- Sales and related cost of sales are recognized primarily upon shipment of products. Sales and related cost of sales under long-term contracts to commercial customers and the U.S. Government are recognized primarily as units are delivered. Statements of Cash Flows ------------------------ The Company considers currency on hand, demand deposits, and all highly liquid investments with an original maturity of three months or less to be cash and cash equivalents. Accounts Receivable ------------------- Accounts receivable are stated net of allowances for doubtful accounts of $2.4 million at the end of fiscal year 1994 and $2.2 million at the end of fiscal year 1993. Inventories ----------- Inventories are valued at the lower of cost or market (realizable value) using last-in, first-out (LIFO) cost for the U.S. inventories of the Health Care Systems, except X-ray Tube Products, Instruments, and Semiconductor Equipment Notes to the Consolidated Financial Statements (continued) ---------------------------------------------------------- segments. All other inventories are valued principally at average cost. Approximately half of total gross inventories are valued using LIFO method. If the first-in, first-out (FIFO) method had been used, inventories would have been higher than reported by $49.0 million in fiscal 1994, $50.8 million in fiscal 1993, and $52.0 million in fiscal 1992. The main components of inventories are as follows:
(Dollars in Millions) 1994 1993 -------------------------------------------------- Raw materials and parts $ 104.2 $ 89.7 Work in process 60.3 44.7 Finished goods 14.7 27.0 -------- -------- Total Inventories $ 179.2 $ 161.4 ======== ========
Property, Plant, and Equipment ------------------------------ Property, plant, and equipment are stated at cost. Major improvements are capitalized, while maintenance and repairs are expensed currently . Plant and equipment are depreciated over their estimated useful lives using the straight- line method for financial reporting purposes and accelerated methods for tax purposes. Leasehold improvements are amortized using the straight-line method over their estimated useful lives, or the remaining term of the lease, whichever is less. The main components of property, plant, and equipment are as follows:
(Dollars in Millions) 1994 1993 --------------------------------------------------------------- Land and land leaseholds $ 10.8 $ 11.3 Buildings 201.4 194.2 Machinery and equipment 347.2 331.1 Construction in progress 15.0 7.7 -------- -------- Total Property, Plant, and Equipment $ 574.4 $ 544.3 ======== ========
Taxes on Earnings ----------------- Effective the beginning of fiscal year 1994, the Company adopted Statement of Financial Accounting Standards No.109 (SFAS 109), Accounting for Income Taxes. The Company elected to adopt this new standard by restating the prior three years. Retained earnings for all years restated was decreased by $7.8 million as a result of adoption, and the income tax provision did not change for any of the three years restated. Adopting SFAS 109 has not caused a significant change in the Company's provision for income taxes. The adoption has not caused a change in the Company's reconciliation of the effective tax rate with the federal statutory rate or a change in the significant components of the income tax expense. Postemployment Benefits ------------------------ During 1994, the Company adopted SFAS 112, Employers' Accounting for Postemployment Benefits. Its adoption did not have a material effect on the financial statements of the Company. Postretirement Benefits Other Than Pensions ------------------------------------------- The Company adopted SFAS 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, during 1994. Its adoption did not have a material effect on the financial statements of the Company. Notes to the Consolidated Financial Statements (continued) ---------------------------------------------------------- Research and Development ------------------------ Company-sponsored research and development costs related to both present and future products are expensed currently. Costs related to research and development contracts are included in inventory and charged to cost of sales upon recognition of related revenue. Total expenditures on research and development for fiscal 1994, 1993, and 1992, were $93.1 million, $83.4 million, and $86.4 million, respectively, of which $11.8 million, $9.5 million, and $9.7 million, respectively, were funded by customers. Computation of Earnings Per Share (Shares in thousands) ------------------------------------------------------- Earnings-per-share computations are based on the weighted average common shares outstanding and common share equivalents (dilutive stock options). The average number of common shares and common share equivalents used in the computation of earnings per share in 1994, 1993, and 1992, was 35,676, 36,292, and 37,912 shares, respectively. There is no significant difference between fully diluted earnings per share and primary earnings per share. Stock Split ----------- On February 17, 1994, the Board of Directors declared a two-for-one stock split in the form of a stock dividend, issued on March 17, 1994, to stockholders of record on March 3, 1994. All share and per share information has been restated to reflect the stock split on a retroactive basis. ACCRUED EXPENSES
(Dollars in Millions) 1994 1993 ------------------------------------------------------------- Taxes, including taxes on earnings $ 52.5 $ 40.6 Payroll and employee benefits 90.8 68.3 Estimated loss contingencies 17.9 14.9 Deferred income 23.1 15.4 Other 64.5 64.6 --------- -------- Total Accrued Expenses $ 248.8 $ 203.8 ========= ========
SHORT-TERM DEBT Short-term notes payable and the current portion of long-term debt amounted to $4.8 million and $22.9 million at the end of fiscal years 1994 and 1993, respectively. Total debt is subject to limitations included in long-term debt agreements. At fiscal year-end 1994, the Company had total unused committed lines of credit amounting to $50 million. Notes to the Consolidated Financial Statements (continued) ---------------------------------------------------------- LONG-TERM DEBT
(Dollars in Millions) 1994 1993 -------------------------------------------------------------- Unsecured term loan, 7.29% due in semi-annual installments of $6.0 payable 1998-2002 $ 60.0 $ 60.0 Unsecured term loan, 9.9% - 6.0 Other debt 0.5 1.0 ------- ------- Long-term borrowings 60.5 67.0 Less current portion 0.1 6.5 ------- ------- Long-term Debt $ 60.4 $ 60.5 ======= =======
The unsecured term loans contain covenants which limit future borrowings and require the Company to maintain certain levels of working capital and operating results. At fiscal year-end 1994, the Company was in compliance with all restrictive covenants of the loan agreements, including a restriction on payment of cash dividends. Approximately $44.8 million of retained earnings were unrestricted for payment of cash dividends. The annual maturities of long-term debt (in millions) for fiscal years 1995 through 1999, are as follows: $0.1, $0.1, $0.1, $12.1, and $12.1. Interest paid (in millions) on short and long-term debt was $6.4, $6.4, and $6.1, in fiscal 1994, 1993, and 1992, respectively. OMNIBUS STOCK AND EMPLOYEE STOCK PURCHASE PLANS (SHARES IN THOUSANDS) During fiscal 1991, the Company adopted the Omnibus Stock Plan (the Plan) under which shares of common stock can be issued to officers, directors, and key employees. The maximum number of shares of common stock available for awards under the Plan during each fiscal year (including incentive stock options) is 5% of the total outstanding shares of the Company on the last business day of the preceding fiscal year. The maximum number of shares of the common stock available for incentive stock option grants under the Plan is 6,000. The exercise price for incentive and nonqualified stock options granted under the Plan may not be less than 100% and 50%, respectively, of the fair market value at the date of the grant. Options granted will be exercisable at such times and be subject to such restrictions and conditions as determined by the Organization and Compensation Committee of the Company's Board of Directors, but no option shall be exercisable later than ten years from the date of grant. Restricted stock grants may be awarded at prices ranging from 0% to 50% of the fair market value of the stock and may be subject to restrictions on transferability and continued employment as determined by the Organization and Compensation Committee. Options granted are generally exercisable in cumulative installments of one- third each year, commencing one year following date of grant, and expire if not exercised within seven or ten years from date of grant. Notes to the Consolidated Financial Statements (continued) ---------------------------------------------------------- Option activity under the Plans is presented below.
1994 1993 1992 --------------------- --------------------- --------------------- (Dollars in Millions) Shares Dollars Shares Dollars Shares Dollars --------------------- ------ ---------- ------ ---------- ------ ---------- Beginning of year 3,785 $ 60.6 3,871 $ 55.5 3,565 $ 46.2 Granted 1,161 29.5 1,153 22.6 919 17.6 Terminated or expired (63) (1.4) (82) (1.4) (79) (1.2) Exercised (884) (14.5) (1,158) (16.0) (534) (7.1) ----- ---------- ------ ---------- ----- ---------- End of Year 3,999 $ 74.2 3,784 $ 60.7 3,871 $ 55.5 ===== ========== ===== ========== ===== ========== Shares exercisable 1,692 1,476 1,661 Available shares remaining 634 735 1,368 ===== ====== =====
Options were outstanding at prices ranging from $10.60 to $38.31 per share at fiscal year-end 1994. Options were exercised at prices ranging from $10.60 to $24.25 for fiscal 1994, $10.60 to $23.72 for fiscal 1993, and $10.60 to $16.63 for fiscal 1992. During fiscal years 1994, 1993, and 1992, 64, 15, and 82, shares, respectively, were awarded under restricted stock grants at no cost to the employees. The restricted stock grants vest over a three year period. Compensation expense from restricted stock was approximately $1.2 million, $0.9 million, and $1.2 million, in fiscal years 1994, 1993, and 1992, respectively. The Employee Stock Purchase Plan (ESPP) covers substantially all employees in the United States and Canada. The participants' purchase price is the lower of 85% of the closing market price on the first or last trading day of the fiscal quarter. The discount is treated as equivalent to the cost of issuing stock for financial reporting purposes. During fiscal 1994, 1993, and 1992, 266 shares, 382 shares, and 466 shares, were issued under the ESPP for $7.0 million, $6.3 million, and $6.6 million, respectively. At fiscal year-end 1994, the Company had a balance of 3,330 shares reserved for ESPP. PREFERRED STOCK PURCHASE RIGHTS (SHARES IN THOUSANDS) At fiscal year-end, there were issued and outstanding 33,979 preferred stock purchase rights (one right for each outstanding common share). Each right entitles the holder to buy one two-hundredth of a share of the Company's Series A Junior Participating Preferred Stock for $62.50. Of the 1,000 shares of authorized preferred stock, 280 shares have been designated as Series A Junior Participating Preferred Stock, to be issued upon exercise of the rights. Upon issuance, these preferred shares will have certain voting, dividend, and liquidation preferences over the common stock, as described in the Rights Agreement of August 25, 1986, as amended. The rights are exercisable ten days after a person or group has acquired 15% or more of the Company's voting stock, or the tenth day (or such later date as may be determined by the Board of Directors) after the date of the commencement of announcement of a person's or group's intention to commence a tender or exchange offer whose consummation will result in the ownership of 30% or more of stock. If a person or group becomes the beneficial owner of 15% or more of Notes to the Consolidated Financial Statements (continued) ---------------------------------------------------------- the voting stock, each right would entitle the holder, other than the acquiring person or group, to buy shares of the Company's Series A Junior Participating Preferred Stock, having a market value of $125, for the exercise price of $62.50. If the Company were to be merged into another entity, or merged with another entity, and the common stock were changed into other securities or assets, each right would entitle the holder to purchase for the exercise price of $62.50 common stock of the acquiring company equal to a market value of twice the exercise price, or $125. The rights expire on August 25, 1996, but may be redeemed by the Board of Directors of the Company for $.025 per right at any time before they become exercisable. RETIREMENT PLANS The Company has defined contribution retirement plans covering substantially all of its domestic and Canadian employees. The Company's major obligation is to contribute an amount based on a percentage of each participant's base pay. The Company also contributes 5% of its consolidated earnings from continuing operations before taxes, as adjusted for discretionary items, as retirement plan profit sharing. Participants are entitled, upon termination or retirement, to their portion of the retirement fund assets, which are held by a third-party trustee. In addition, a number of the Company's foreign subsidiaries have defined benefit retirement plans for regular full-time employees. Total pension expense for all plans amounted to $23.1 million, $18.4 million, and $17.9 million, for fiscal 1994, 1993, and 1992, respectively. TAXES ON EARNINGS U.S. federal income tax returns for the years through 1992 have been settled with the Internal Revenue Service. It is believed that adequate provision has been made for all open years and unresolved issues. The detail of taxes on earnings is as follows:
(Dollars in millions) 1994 1993 1992 ------------------------------------------------------------- Current U.S. federal $ 33.3 $ 11.5 $ 7.2 Non-U.S. 15.8 11.7 13.0 State and local 7.8 2.0 2.4 ------- ------- ------- Total current 56.9 25.2 22.6 ------- ------- ------- Deferred U.S. federal (8.8) 2.4 0.2 Non-U.S. 0.5 0.5 0.9 ------- ------- ------- Total deferred (8.3) 2.9 1.1 ------- ------- ------- Taxes on Earnings $ 48.6 $ 28.1 $ 23.7 ======= ======= =======
Notes to the Consolidated Financial Statements (continued) ---------------------------------------------------------- Significant items making up deferred tax liabilities, reported separately as long-term liabilities, and deferred tax assets, included in other current assets, are as follows:
(Dollars in millions) 1994 1993 ------------------------------------------------------------------ Assets: Product Warranty $ 13,427 $ 11,313 Deferred Compensation 11,435 8,034 Special Provisions 6,595 6,591 Inventory Adjustments 17,741 11,560 Deferred Income 3,550 2,433 Insurance Reserves 1,183 3,293 Alternative minimum tax credit carryforward - 1,850 Other 1,309 3,014 --------- --------- 55,240 48,088 Liabilities: Accelerated Depreciation 20,522 21,966 Other 266 (47) --------- --------- 20,788 21,919 Net $ 34,452 $ 26,169 ========= =========
The reconciliation between the effective tax rates and the statutory federal income tax rates is shown in the following schedule:
1994 1993 1992 -------- --------- -------- Statutory federal income tax rate 35.0 % 34.8 % 34.0 % State and local taxes, net of federal tax benefit 4.0 1.7 2.6 Foreign taxes, net (0.6) 2.7 3.8 Foreign Sales Corporation (1.8) (3.7) (2.7) Other 1.4 2.5 0.3 -------- --------- -------- Effective Tax Rate 38.0 % 38.0 % 38.0 % ======== ========= ========
Income taxes paid (refunded) are as follows:
(Dollars in millions) 1994 1993 1992 ------------------------------------------------------------------------------- Federal income taxes paid (refunded), net $ 25.2 $ 4.5 $ (8.0) State income taxes paid, net 6.2 1.7 2.0 Foreign income taxes paid, net 11.8 14.9 8.0 -------- --------- -------- Total Paid $ 43.2 $ 21.1 $ 2.0 ======== ========= ========
Notes to the Consolidated Financial Statements (continued) ---------------------------------------------------------- LEASE COMMITMENTS At fiscal year-end 1994, the Company was committed to minimum rentals under noncancellable operating leases for fiscal years 1995 through 1999 and thereafter, as follows, in millions: $9.0, $6.8, $4.5, $3.9, $1.9, and $7.1. Rental expense for fiscal years 1994, 1993 and 1992, in millions, was $20.6, $23.8, and $24.3, respectively. CONTINGENCIES 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. The Company's motion to dismiss that complaint was granted in part and denied in part. 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 seven 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. 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. Notes to the Consolidated Financial Statements (continued) ---------------------------------------------------------- SUBSEQUENT EVENT 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. INDUSTRY SEGMENTS The Company's operations are grouped into four business segments: Health Care Systems, Instruments, Semiconductor Equipment, and Electron Devices. Indirect and common costs have been allocated through the use of estimates. Accordingly, the following information is provided for purposes of achieving an understanding of operations, but may 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 may not be meaningful. The Health Care Systems business includes linear accelerators used for cancer therapy, industrial testing, and inspection, as well as cancer treatment planning systems, and data management systems for medical facilities. It also designs and manufactures a broad range of X-ray generating tubes for the medical diagnostic imaging market worldwide. The Instruments business consists of analytical instruments widely used in the fields of chemistry, environmental monitoring, biology, life sciences, and metallurgy. It also manufactures high vacuum pumps, instrumentation, gauges and components. The Semiconductor Equipment business includes systems used for semiconductor wafer fabrication. The Electron Devices business covers a broad line of electron devices used in broadcasting, communications, and other commercial and military applications. Included in Eliminations and Other are certain insignificant support operations. The Company operates various manufacturing and marketing operations outside the United States. No single country outside the United States accounts for more than 10% of total sales or total assets. Sales between geographic areas are accounted for at cost plus prevailing markups arrived at through negotiations between independent profit centers. Related profits are eliminated in consolidation. Included in the total of United States sales are export sales of $304 million in fiscal 1994, $207 million in fiscal 1993, and $208 million in fiscal 1992. Sales under prime contracts from the U.S. Government were approximately $71 million in fiscal 1994, $69 million in fiscal 1993, and $79 million in fiscal 1992. Industry Segments
Pretax Identifiable Sales Earnings (Loss) Assets ---------------------------------------------------------------------- (Dollars in millions) 1994 1993 1992 1994 1993 1992 1994 1993 1992 ------------------------------------------------------------------------------------------------ Health Care Systems $ 426 $ 387 $374 $86 $75 $ 68 $201 $187 $171 Instruments 372 352 352 33 35 30 196 180 179 Semiconductor Equipment 477 291 275 36 1 (4) 196 148 146 Electron Devices 275 278 285 18 12 (1) 170 172 182 Eliminations & Other 2 3 2 (9) (7) (7) 8 9 12 ------ ------ ------ ---- ---- ----- ---- ---- ---- Total Industry Segments 1,552 1,311 1,288 164 116 86 771 696 690 General Corporate - - - (34) (38) (21) 191 183 189 Interest, Net - - - (2) (4) (3) - - - ------ ------ ------ ---- ---- ----- ---- ---- ---- Total Company $1,552 $1,311 $1,288 $128 $ 74 $ 62 $962 $879 $879 ====== ====== ====== ==== ==== ===== ==== ==== ==== Capital Expenditures Depreciation ----------------------------------------- (Dollars in millions) 1994 1993 1992 1994 1993 1992 ------------------------------------------------------------------- Health Care Systems $11 $ 8 $ 8 $ 9 $ 8 $ 8 Instruments 17 12 13 10 10 10 Semiconductor Equipment 6 5 10 9 9 9 Electron Devices 13 9 8 13 12 11 Eliminations & Other 1 1 - 1 1 1 --- --- --- --- --- --- Total Industry Segments 48 35 39 42 40 39 General Corporate 15 12 10 6 5 5 Interest, Net - - - - - - --- --- --- --- --- --- Total Company $63 $47 $49 $48 $45 $44 === === === === === === Geographic Segments Sales to Intergeographic Unaffiliated Sales to Total Customers Affiliates Sales ------------------- ------------------ -------------------- (Dollars in millions) 1994 1993 1992 1994 1993 1992 1994 1993 1992 -------------------------------------------------------------------------------------------- United States $1,098 $932 $879 $297 $223 $ 229 $1,395 $1,155 $1,108 International 453 378 408 61 56 52 514 434 460 Eliminations & Other 1 1 1 (358) (279) (281) (357) (278) (280) ------ ------ ------ ----- ---- ----- ------ ------ ------ Total Geographic Segments 1,552 1,311 1,288 - - - 1,552 1,311 1,288 General Corporate - - - - - - - - - Interest, Net - - - - - - - - - ------ ------ ------ ----- ---- ----- ------ ------ ------ Total Company $1,552 $1,311 $1,288 $ - $ - $ - $1,552 $1,311 $1,288 ====== ====== ====== ===== ==== ===== ====== ====== ====== Geographic Segments Pretax Identifiable Earnings (Loss) Assets ---------------- ----------------- (Dollars in millions) 1994 1993 1992 1994 1993 1992 -------------------------------------------------------------- United States $139 $106 $71 $538 $494 $ 456 International 34 17 22 225 193 222 Eliminations & Other (9) (7) (7) 8 9 12 ---- --- --- ---- --- ---- Total Geographic Segments 164 116 86 771 696 690 General Corporate (34) (38) (21) 191 183 189 Interest, Net (2) (4) (3) - - - ---- --- --- ---- --- ---- Total Company $128 $74 $62 $962 $879 $879 ==== === === ==== === ====
Total sales is based on the location of the operation furnishing goods and services. International sales based on final destination of products sold are $732 million, $561 million, and $587 million, in 1994, 1993, and 1992, respectively. Quarterly Financial Data (Unaudited)
1994 1993 -------------------------------------------- ------------------------------------------------- (Dollars in millions except First Second Third Fourth Total First Second Third Fourth Total per share amounts) Quarter Quarter Quarter Quarter Year Quarter Quarter Quarter Quarter Year --------------------------------------------------------------------------- ------------------------------------------------- Sales $323.8 394.5 393.0 441.2 1,552.5 $291.3 325.3 327.9 366.5 1,311.0 ------ ----- ----- ----- ------- ------ ----- ----- ----- ------- Gross Profit $104.1 129.8 130.4 156.2 520.5 $ 90.9 108.6 108.6 126.4 434.5 ------ ----- ----- ----- ------- ------ ----- ----- ----- ------- Net Earnings $ 11.7 18.3 22.4 27.0 79.4 $ 6.6 9.3 12.0 17.9 45.8 ====== ===== ===== ===== ======= ====== ===== ===== ===== ======= Net Earnings Per Share - Fully Diluted $ 0.33 0.51 0.63 0.76 2.22 $ 0.18 0.25 0.33 0.51 1.26 ====== ===== ===== ===== ======= ====== ===== ===== ===== =======
The four quarters for net earnings per share may not add for the year because of the different number of shares outstanding during the year. Common Stock Prices (Unaudited)
1994 1993 ----------------------------------- ----------------------------------------- First Second Third Fourth First Second Third Fourth Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter ---------------------------------------------------------------------- ------------------------------------------ Common Stock High $ 30 39 35 5/8 38 5/8 $ 22 3/8 23 7/8 26 3/4 27 Low $ 26 32 1/2 32 1/4 35 7/8 $ 16 7/8 19 22 23 7/8 Dividends Declared Per Share $ .050 .060 .060 .060 $ .045 .050 .050 .050
REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Varian Associates, Inc. We have audited the accompanying consolidated balance sheets of Varian Associates, Inc. and subsidiary companies as of September 30, 1994 and October 1, 1993, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the three fiscal years in the period ended September 30, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Varian Associates, Inc. and subsidiary companies as of September 30, 1994 and October 1, 1993, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended September 30, 1994 in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P. ------------------------------ COOPERS & LYBRAND L.L.P. San Jose, California October 19, 1994 EX-99.G.2 11 THIRD QUARTER REPORT EXHIBIT g.2 ------------------ Varian Associates, Inc. Bulk Rate 3050 Hansen Way U.S. Postage Palo Alto, California 94304-1000 PAID Redwood City, CA Permit No. 99 ------------------ [ART WORK APPEARS HERE] Third Quarter Report 1995 [LOGO OF VARIAN ASSOCIATES, INC. APPEARS HERE] Record Third-Quarter Earnings; Net Rose 42% On Strong Orders and Sales --------------------------------------- On July 20, Varian reported the highest third-quarter earnings in the company's 47-year history. Net profits rose to $31.8 million ($0.90/share), up 42% from last year's $22.4 million ($0.63/share). Orders exceeded $400 million for the seventh consecutive quarter at $417 million versus $441 million in the year-ago period. In fact, order receipts for the quarter rose 16% from the prior year when adjusted for the effect of a distribution agreement with Tokyo Electron Ltd. (TEL), which ended at the close of fiscal 1994. Third-quarter sales climbed to a new high of $459 million, growing 17% over the $393 million of a year ago. Backlog of $764 million was down 5% from $804 million in the 1994 quarter. For the first nine months of fiscal 1995, orders were $1.35 billion versus 1994's $1.29 billion, an increase of 19% on a TEL-adjusted basis. Sales for the period reached $1.35 billion compared to last year's $1.11 billion. Earnings for the nine months were $82.2 million ($2.32/share), up 57% over the prior year's $52.4 million ($1.47/share). Chairman and Chief Executive J. Tracy O'Rourke attributed the higher results largely to continued strong performances by the company's Semiconductor Equipment and Health Care Systems businesses. "The markets for these products, particularly semiconductor equipment, continue to be quite strong, allowing us to take full advantage of our significantly enhanced operational strengths," Mr. O'Rourke noted. "Our earnings achievements continue to demonstrate the benefits of our multi-year drive for Operational Excellence." Operations Orders for Varian's Health Care Systems business rose modestly year-to- date, marking the ninth straight quarter of over $100 million in bookings for these operations. Sales for the nine months were up 15%, and operating margins improved. Backlog declined slightly from 1994's level. The X-ray Tube Products side of this business continued to experience strong demand for its high-end products, with particularly good interest from the Japanese market. Health care providers are responding very positively to new Oncology Systems products that enable them to deliver enhanced treatments while reducing or controlling their costs. The outlook for Varian's health care activities remains good with the likelihood of continued sales and earnings growth. Orders for the company's Instruments business grew slightly during the nine months on improved market conditions in the U.S. and the Far East, driven by particularly strong demand for vacuum products. Sales were slightly higher for the year-to-date, while backlog declined. Instrument markets worldwide continue to be extremely competitive. Operating margins for this business declined from the year-ago period. Nine-month orders for Varian's Semiconductor Equipment business rose 54% over the year-ago period, after the previously noted adjustment for the dissolved Tokyo Electron Ltd. distribution agreement. Sales grew 49% over the 1994 level. Backlog rose 53% over the prior year on a TEL-adjusted basis. Operating margins continue in the double-digit range, and are more than twice the level of those achieved in the first nine months of the prior year. The strong year-to-date demand for the company's chip-making equipment was worldwide, with particularly heavy orders from Korea and other Pacific Rim nations. Interest in Varian's ion implantation products was especially robust, particularly for leading-edge, medium-current systems and the new VISion high- current system. The latter machine offers numerous advantages to semiconductor manufacturers, particularly in terms of reduced operating costs over the life of the system. With the multitude of new chip-manufacturing facilities currently under construction or being planned, demand for Varian systems should continue to be quite good through the end of the year and in the foreseeable future. As operating improvements continue to be made in this business, profitability should remain at a very respectable level. Varian's Electron Devices business posted higher orders and sales over the year-ago period, and backlog rose slightly. Operating margins for this business improved modestly during the quarter, and these activities continued to run smoothly. Outlook "It was gratifying to see Varian's record-setting performance continue into the second half," Mr. O'Rourke said. "We are taking better advantage of the robust growth in the semiconductor equipment market than in the past, and we believe there is still more room to improve. That, along with the continued contributions of our health care activities, is driving us toward a very strong close to fiscal 1995. Varian is well along on a course that should see it post substantial gains in revenues and profits over 1994's record levels." Third Quarter Business Briefs -------------------------------------------------------------------------------- Leonard Green & Partners Acquires Electron Devices In mid-August, Varian completed the sale of its Electron Devices business to an investor group led by an equity fund sponsored by Leonard Green & Partners (LGP) for approximately $200 million and the assumption of certain liabilities. According to Mr. O'Rourke, proceeds from the sale will be used primarily to repurchase shares of Varian stock. Los Angeles-based LGP is a private, merchant banking firm that specializes in organizing, structuring, and sponsoring management buyouts of established companies. The former Varian Electron Devices operations are now known as Communications & Power Industries, Inc. Former Varian Executive Vice President Al Wilunowski has joined the new company as its chief executive officer. Hospitals Save $1 Million in Group Purchase The first systems are now being installed under one of the largest single cancer therapy equipment purchase agreements ever negotiated by Varian Oncology Systems. Last year, members of the Premier Health Alliance committed to purchase multiple Clinac(R) linear accelerator and Ximatron(R) simulator systems, valued at a total of approximately $18 million. Nine U.S. hospitals participated in the arrangement, which has resulted in an aggregate savings of more than $1 million. According to Oncology Systems President Tim Guertin, interaction with top-level administrators, open communication, and the willingness to step beyond the bounds of typical purchasing strategies made the agreement possible. Varian and Samsung Move to Phase 3 of Joint Program Varian and its Korean affiliate, Varian Korea, Ltd. (VKL), have entered the third phase of a joint program with Samsung Electronics Co. Ltd to develop advanced process technologies for next-generation, dynamic random access memory (DRAM) semiconductor devices. With this agreement, Varian is able to develop fabrication tools qualified for processes that are one to two generations ahead of the marketplace. In the current phase, expected to be completed by mid-1996, the companies are developing and qualifying metallization processes that Samsung will use to manufacture 256-Mbit and 1-Gbit DRAM chips. Varian is concurrently altering its sputtering systems to meet the increased demands of the new processes. New Product Developments The U.S. Food and Drug Administration (FDA) granted registration for Varian's Dynamic Multileaf Collimator (MLC), a beam-shaping device for Oncology Systems' Clinac medical accelerators. Because its individual "leaves" can be moved during treatment, the MLC has the potential to allow physicians to deliver significantly higher amounts of radiation to tumors through multiple-shaped fields, resulting in less dose to healthy tissue and correspondingly lower complications. Varian is the first radiotherapy equipment manufacturer to receive FDA registration for this advanced MLC usage. Varian's earlier MLC version, which conforms the beam to the tumor but does not move during treatment, is already in use at more than 150 hospitals worldwide. [PHOTO APPEARS HERE] The Dynamic Multileaf Collimator has 52 motorized leaves that move under computer control to emulate the shape of tumors and deliver effective cancer treatments. During the quarter, the first /UNITY/INOVA research NMR spectrometers were shipped to customers. A state-of-the-art product introduced in March, the INOVA is aimed specifically at handling demanding applications in chemistry, biochemistry, and physics. The newest UNITY product will be used in such fields as biomolecular research for designing drugs to combat AIDS. With improvements in data acquisition complexity, accuracy, speed, and data management, the product is expected to be well-received by pharmaceutical, chemical, and academic researchers. Distinct from other manufacturers' spectrometer lines, this modular system can be purchased new or provided through an upgrade of UNITYplus, Varian's previous system. Faster Access to Quarterly Earnings Reports In the interest of making its quarterly results available to shareholders in a more timely and efficient manner, Varian is replacing its formal, printed quarterly report with several more desirable options. Beginning with the final quarter of fiscal 1995, shareholders may obtain a copy of the earnings (now scheduled for release on October 19) and supporting financial tables in any of the following ways. Those who would like the results by facsimile may request them to be sent the day they are reported by calling 1-800-544-4636. Same-day service is also available via the Internet on the World Wide Web at the URL"http://www.varian. com" (under Corporate Info, click on the financial information button). Those who prefer to continue receiving this information by mail may do so by writing the Investor Relations Department, 3100 Hansen Way, M/S E-327, Palo Alto, CA 94304, and specifying the address where it should be sent. Vice President and Chief Financial Officer Robert Lemos noted that the change will allow broader as well as more timely communication of the quarterly results. He said the fourth-quarter earnings, which were previously sent to shareholders as part of the annual report published in December, will now be covered in a separate, specific report which will be issued to those who wish to receive such information. Varian's Annual Report to Shareholders is also now available electronically on the World Wide Web, as well as in the traditional printed format. [LOGO OF OPERATIONAL EXCELLENCE APPEARS HERE] Consolidated Statements of Earnings (Unaudited) (Dollars and shares in thousands except per share amounts)
Third Quarter Ended Nine Months Ended ---------------------------- ------------------------------ June 30, July 1, June 30, July 1, FY 1995 FY 1994 FY 1995 FY 1994 ------------------------------------------------------------------------------------------------------------- Sales $ 458,907 $ 393,054 $1,350,403 $1,111,338 ---------- ---------- ---------- ---------- Operating Costs and Expenses Cost of sales 303,242 262,599 903,926 747,006 Research and development 26,421 19,513 72,470 59,418 Marketing 54,520 48,225 153,950 136,058 General and administrative 23,595 27,530 87,344 83,150 ---------- ---------- ---------- ---------- Total Operating Costs and Expenses 407,776 357,867 1,217,690 1,025,632 ---------- ---------- ---------- ---------- Operating Earnings 51,131 35,187 132,713 85,706 Interest expense, net 748 (991) 2,258 1,136 ---------- ---------- ---------- ---------- Earnings Before Taxes 50,383 36,178 130,455 84,570 Taxes on earnings 18,640 13,750 48,270 32,140 ---------- ---------- ---------- ---------- Net Earnings $ 31,743 $ 22,428 82,185 52,430 ========== ========== ========== ========== Average Shares Outstanding Including Common Stock Equivalents 35,431 35,528 35,480 35,703 ---------- ---------- ---------- ---------- Net Earnings Per Share $ 0.90 $ 0.63 2.32 1.47 ========== ========== ========== ==========
Consolidated Balance Sheets (Unaudited) (Dollars and shares in thousands except per share amounts)
June 30, July 1, 1995 1994 --------------------------------------------------------------------------- Assets Cash and cash equivalents $ 90,120 $ 76,806 Accounts receivable 378,462 314,266 Inventories 225,932 193,981 Other current assets 75,199 72,174 Property, plant and equipment, net 238,190 230,570 Other assets 61,181 49,724 ----------- ----------- Total Assets $ 1,069,084 $ 937,521 =========== =========== Liabilities and Stockholders' Equity Current notes payable $ 32,968 $ 38,854 Other current liabilities 459,281 382,729 Long-term liabilities 60,329 60,399 Deferred income taxes 20,773 21,950 Stockholders' equity 495,733 433,589 ----------- ----------- Total Liabilities and Stockholders' Equity $ 1,069,084 $ 937,521 =========== =========== Other Data Actual shares outstanding 33,833 34,290 Stockholders' equity per share $ 14.65 $ 12.64 Order backlog $ 764,000 $ 803,506 Employees 8,700 8,000