Varian, Inc. Reports Third Quarter 2008 Results

- Sales Up 8%

PALO ALTO, Calif., July 23 /PRNewswire-FirstCall/ -- Varian, Inc.
(NasdaqGS: VARI) today reported third fiscal quarter 2008 revenues of $244.4
million, representing an increase of 7.6% over revenues of $227.1 million in
the third quarter of fiscal year 2007. Sales grew for both industrial (which
includes environmental, food and energy) and life science applications. The
company continued to experience solid sales growth in Europe, Asia Pacific and
Latin America, while sales in North America remained essentially flat.
Non-GAAP (adjusted) net earnings for the third quarter of fiscal year 2008
decreased 6.7% to $17.7 million, or $0.60 diluted earnings per share, compared
to $19.0 million, or $0.61 diluted earnings per share, in the third quarter of
fiscal year 2007. On a GAAP basis, net earnings in the third quarter of
fiscal year 2008 were $11.4 million, or $0.38 diluted earnings per share,
compared to $14.6 million, or $0.47 diluted earnings per share, in the third
quarter of fiscal year 2007.
Adjusted operating earnings decreased 6.0% to $25.9 million in the third
quarter of fiscal year 2008, compared to $27.5 million in the third quarter
last year. Adjusted operating profit margin was 10.6% in the third quarter of
fiscal year 2008, compared to 12.1% in the prior-year quarter. On a GAAP
basis, operating earnings were $17.4 million and operating profit margin was
7.1% in the third quarter of fiscal year 2008, compared to $20.7 million and
9.1% in the same quarter a year ago.
Although the company started the quarter with a strong backlog and then
experienced solid orders, revenues were $11 million to $13 million lower than
the company expected, which significantly impacted earnings and operating
margins. The revenue shortfall was primarily due to delayed deliveries and
installations of a few large systems and delayed shipments resulting from
transitioning manufacturing locations for certain products. Were it not for
these delays, the company would have achieved its revenue objective for the
quarter.
The revenue shortfall was the most significant factor contributing to the
company's lower than expected earnings and operating margins. Margins were
also negatively impacted in the quarter by higher transition costs related to
relocating the manufacturing activities described above, the continued
weakening of the U.S. dollar, which was favorable to revenue but unfavorable
to operating margins, and to a lesser extent the transition effect of
acquisitions completed in the quarter.
"During the third quarter, the company experienced an unusual confluence
of events which impacted revenues, and as a result our profitability. Most
significantly, we experienced delivery and installation delays on several
large systems," said Garry W. Rogerson, President and Chief Executive Officer.
"We made progress in our efforts to consolidate factories and to transition
manufacturing to lower cost locations or outsourcing partners. Although these
initiatives are having a short-term negative impact on revenues and margins,
we continue to believe they are critical to achieving our long-term strategic
goals."
"The company generated almost $30 million in cash flow from operations in
the quarter," said Rogerson. "Our ability to generate substantial cash flow
demonstrates the continued fundamental strength of our business."
For a complete reconciliation of non-GAAP (adjusted) financial information
used in this press release to the most directly comparable GAAP financial
information, please refer to the attached Reconciliations of GAAP to Adjusted
Results, Actual and Projected.
Results by Segment
Scientific Instruments revenues for the third quarter of fiscal year 2008
were $200.7 million, representing an increase of 7.3% over revenues of $187.0
million in the third quarter of the prior fiscal year. Adjusted operating
profit margin was 9.6% in the third quarter of fiscal year 2008 compared to
12.2% in the third quarter of the prior fiscal year. On a GAAP basis,
operating profit margin was 6.1% in the third quarter of fiscal year 2008,
compared to 9.3% in the same quarter a year ago. The decrease in operating
profit margins was primarily the result of the factors described above.
Vacuum Technologies revenues increased 9.0% to $43.7 million in the third
quarter of fiscal year 2008, compared to $40.1 million in the third quarter of
fiscal year 2007. Adjusted operating profit margin was 18.3% in the third
quarter of fiscal year 2008, compared to 19.8% in the third quarter of the
prior fiscal year. On a GAAP basis, operating profit margin was 17.7% in the
third quarter of fiscal year 2008, compared to 19.5% in the prior-year
quarter. The decrease in operating profit margins was primarily the result of
the continued weakening of the U.S. dollar.
Outlook
"We remain pleased with the continuing customer demand for our products.
We're also making progress toward our long-term goals with respect to our
manufacturing strategy, although we expect the initiatives underway in this
area to have some residual negative impact on revenue and profitability in the
fourth quarter," said Rogerson. "As we look to fiscal 2009, we remain
encouraged by the momentum of our new products in our focused applications of
environmental, energy and pharmaceutical, and the expected benefits of our
manufacturing strategy."
Varian, Inc. revised its guidance for fiscal year 2008. Adjusted diluted
earnings per share are now expected to be $2.74 plus or minus $0.05 for fiscal
year 2008, compared to prior guidance of $2.84 to $2.98. On a GAAP basis,
diluted earnings per share are expected to be $2.05 plus or minus $0.09 for
fiscal year 2008, compared to prior guidance of $2.23 to $2.41.
The company's GAAP diluted earnings per share for the full fiscal year
2008 are expected to include the following items: -- Share-based
compensation expense of approximately $0.23,
-- An acquisition-related in-process research and development charge of
$0.05,
-- Acquisition-related intangible amortization of approximately $0.18 to
$0.20,
-- Acquisition-related inventory write-up amortization of approximately
$0.03 to $0.05 related to the acquisitions of IonSpec, the Analogix
business and Oxford Diffraction,
-- Impairment of a private company equity investment of $0.06, and
-- Restructuring and other related costs of approximately $0.10 to $0.14.

Webcast Conference Call
Varian, Inc. will be providing a live webcast (in listen-only mode) of its
investor conference call to review its third quarter results later today, July
23, 2008, at 2:00 p.m. Pacific time. The call may be heard via the Internet
by going to http://www.varianinc.com and clicking on the Live Webcast link at
the top of the right side of the page.
Non-GAAP (Adjusted) Financial Measures
This press release includes non-GAAP (which we refer to as "adjusted")
financial measures for cost of sales, selling, general and administrative
expenses, research and development expenses, purchased in-process research and
development, operating earnings, operating profit margins, impairment of
private company equity investments, income tax expense, net earnings and
diluted earnings per share. These non-GAAP financial measures exclude
share-based compensation expense, impairment of private company equity
investments, acquisition-related intangible and inventory write-up
amortization and in-process research and development charges, and
restructuring and other related costs. Reconciliations of each of these
non-GAAP financial measures to the most directly comparable GAAP financial
measures are detailed in the Reconciliations of GAAP to Adjusted Results
attached to this press release. We believe that presentation of these
non-GAAP financial measures provides useful information to investors regarding
our results of operations.
We believe that excluding acquisition-related intangible and inventory
write-up amortization and in-process research and development charges provides
supplemental information and an alternative presentation useful to investors'
understanding of the company's core operating results and trends. In
addition, investors have indicated to us that they analyze the benefits of
acquisitions based on the cash return on the investment made, and thus
consider financial measures excluding acquisition-related intangible and
inventory write-up amortization and in-process research and development
charges as important, useful information.
We similarly believe that excluding share-based compensation expense,
restructuring and other related costs (principally related to facility
closures and employee terminations to improve operational efficiency), and
impairment of private company equity investments provides supplemental
information and an alternative presentation useful to investors' understanding
of the company's core operating results and trends, especially when comparing
those results on a consistent basis to results for previous periods and
anticipated results for future periods. Investors have indicated that they
consider financial measures of our results of operations excluding share-based
compensation expense, restructuring and other related costs, and impairment of
private company equity investments as important supplemental information
useful to their understanding of our historical results and estimating of our
future results.
We also believe that, in excluding share-based compensation expense,
acquisition-related intangible and inventory write-up amortization and
in-process research and development charges, restructuring and other related
costs, and impairment of private company equity investments, our non-GAAP
financial measures provide investors with transparency into what is used by
management to measure and forecast our results of operations, to compare on a
consistent basis our results of operations for the current period to that of
prior periods, to compare our results of operations on a more consistent basis
against that of other companies, in making financial and operating decisions
and to establish certain management compensation.
Although we believe, for the foregoing reasons, that our presentation of
non-GAAP financial measures provides useful supplemental information to
investors regarding our results of operations, our non-GAAP financial measures
should only be considered in addition to, and not as a substitute for or
superior to, our financial measures prepared in accordance with GAAP.
Caution Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements are based
on management's current expectations, are not guarantees of future
performance, and involve certain risks and uncertainties that could cause the
company's actual results to differ materially from management's current
expectations and the forward-looking statements made in this press release.
Those risks and uncertainties include, but are not limited to, the following:
whether we will succeed in new product development, commercialization,
performance and acceptance; whether we can achieve continued growth in sales
for industrial and/or life science applications; whether we can achieve
continued sales growth in Europe and Asia Pacific and/or stronger growth in
sales in the U.S.; risks arising from the timing of shipments, installations
and the recognition of revenue on certain research products, including nuclear
magnetic resonance (NMR), magnetic resonance (MR) imaging and
fourier-transform mass spectrometer (FTMS) systems and superconducting
magnets; the impact of shifting product mix on profit margins; competitive
products and pricing; economic conditions in the company's product and
geographic markets; whether we will see continued and timely delivery of key
raw materials and components by suppliers; foreign currency fluctuations that
could adversely impact revenue growth and earnings; whether we will see
continued investment in capital equipment, in particular given global
liquidity and credit concerns; whether we will see reduced demand from
customers that operate in cyclical industries; the impact of any delay or
reduction in government funding for research; our ability to successfully
evaluate, negotiate and integrate acquisitions; the actual costs, timing and
benefits of restructuring activities (such as our Northern California facility
consolidation) and other efficiency improvement activities (such as our global
procurement and outsourcing initiatives); the timing and amount of discrete
tax events; the timing and amount of share-based compensation; and other risks
detailed from time to time in the company's filings with the Securities and
Exchange Commission. We undertake no special obligation to update any
forward-looking statements, whether in response to new information, future
events or otherwise.
About Varian, Inc.
Varian, Inc. is a leading worldwide supplier of scientific instruments and
vacuum technologies for life science and industrial applications. The company
provides complete solutions, including instruments, vacuum products,
laboratory consumable supplies, software, training and support through its
global distribution and support systems. Varian, Inc. employs approximately
4,000 people worldwide and operates manufacturing facilities in North America,
Europe and Asia Pacific. Varian, Inc. had fiscal year 2007 sales of $921
million, and its common stock is traded on the NASDAQ Global Select Market
under the symbol "VARI." Further information is available on the company's Web
site: http://www.varianinc.com.
For Information Contact:
Investor Relations
Varian, Inc.
650.424.5471
ir@varianinc.com

VARIAN, INC. AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(In thousands, except per share amounts)

Third Quarter FY 2008 and Third Quarter FY 2007

Fiscal Quarter Ended
-------------------------------
June 27, June 29,
2008 2007
---------- ----------
Sales $244,449 $227,095
Cost of sales 138,266 (1) 125,176 (8)
---------- ----------
Gross profit 106,183 101,919
---------- ----------

Operating expenses
Selling, general and administrative 68,797 (2) 64,366 (9)
Research and development 18,519 (3) 16,879 (10)
Purchased in-process
research and development 1,488 (4) -
---------- ----------
Total operating expenses 88,804 81,245
---------- ----------

Operating earnings 17,379 (5) 20,674 (11)

Interest income 1,200 1,622
Interest expense (390) (454)
---------- ----------

Earnings before income taxes 18,189 21,842
Income tax expense 6,823 (6) 7,291 (12)
---------- ----------
Net earnings $11,366 (7) $14,551 (13)
========== ==========

Net earnings per diluted share $0.38 (7) $0.47 (13)
========== ==========

Diluted shares outstanding 29,728 30,983
========== ==========

NON-GAAP (ADJUSTED) FINANCIAL MEASURES (see also attached reconciliations
of GAAP to Adjusted results for each of these measures):

(1) $135,025 on an adjusted basis excluding $1,978 in acquisition-related
intangible amortization, $646 in acquisition-related inventory
write-up amortization, $525 in restructuring and other related costs
and $92 in share-based compensation expense.
(2) $65,378 on an adjusted basis excluding $399 in acquisition-related
intangible amortization, $904 in restructuring and other related
costs and $2,116 in share-based compensation expense.
(3) $18,165 on an adjusted basis excluding $258 in restructuring and
other related costs and $96 in share-based compensation expense.
(4) $0 on an adjusted basis excluding $1,488 related to an
acquisition-related in-process research and development charge.
(5) $25,881 on an adjusted basis excluding the adjustments described in
items (1) - (4) above.
(6) $8,987 on an adjusted basis excluding the tax impact of the
adjustments described in items (1) - (3) above.
(7) $17,704 and $0.60 per diluted share, respectively, on an adjusted
basis excluding the adjustments (net of related tax effects)
described in items (1) - (4) above.
(8) $123,075 on an adjusted basis excluding $1,306 in acquisition-related
intangible amortization, $700 in restructuring and other related
costs and $95 in share-based compensation expense.
(9) $60,033 on an adjusted basis excluding $506 in acquisition-related
intangible amortization, $1,919 in restructuring and other related
costs and $1,908 in share-based compensation expense.
(10) $16,466 on an adjusted basis excluding $287 in restructuring and
other related costs and $126 in share-based compensation expense.
(11) $27,521 on an adjusted basis excluding the adjustments described in
items (8) - (10) above.
(12) $9,721 on an adjusted basis excluding the tax impact of the
adjustments described in items (8) - (10) above.
(13) $18,968 and $0.61 per diluted share, respectively, on an adjusted
basis excluding the adjustments (net of related tax effects)
described in items (8) - (10) above.

VARIAN, INC. AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(In thousands, except per share amounts)

First Nine Months FY 2008 and First Nine Months FY 2007

Nine Months Ended
-------------------------------
June 27, June 29,
2008 2007
---------- ----------
Sales $730,045 $674,963
Cost of sales 403,684 (1) 367,850 (9)
---------- ----------
Gross profit 326,361 307,113
---------- ----------

Operating expenses
Selling, general and administrative 202,380 (2) 190,822 (10)
Research and development 53,889 (3) 48,592 (11)
Purchased in-process research
and development 1,488 (4) -
---------- ----------
Total operating expenses 257,757 239,414
---------- ----------

Operating earnings 68,604 (5) 67,699 (12)

Impairment of private company
equity investment (3,018)(6) -
Interest income 4,888 4,259
Interest expense (1,274) (1,444)
---------- ----------

Earnings before income taxes 69,200 70,514
Income tax expense 24,463 (7) 24,326 (13)
---------- ----------
Net earnings $44,737 (8) $46,188 (14)
========== ==========

Net earnings per diluted share $1.48 (8) $1.49 (14)
========== ==========

Diluted shares outstanding 30,309 31,028
========== ==========

NON-GAAP (ADJUSTED) FINANCIAL MEASURES (see also attached reconciliations
of GAAP to Adjusted results for each of these measures):

(1) $396,096 on an adjusted basis excluding $4,884 in acquisition-related
intangible amortization, $1,236 in acquisition-related inventory
write-up amortization, $1,175 in restructuring and other related
costs and $293 in share-based compensation expense.
(2) $192,472 on an adjusted basis excluding $1,239 in acquisition-related
intangible amortization, $2,308 in restructuring and other related
costs and $6,361 in share-based compensation expense.
(3) $52,826 on an adjusted basis excluding $753 in restructuring and
other related costs and $310 in share-based compensation expense.
(4) $0 on an adjusted basis excluding $1,488 related to an
acquisition-related in-process research and development charge.
(5) $88,651 on an adjusted basis excluding the adjustments described in
items (1) - (4) above.
(6) $0 on an adjusted basis excluding $3,018 related to the impairment of
a private company equity investment.
(7) $31,512 on an adjusted basis excluding the tax impact of the
adjustments described in items (1) - (3) and (6) above.
(8) $60,753 and $2.01 per share, respectively, on an adjusted basis
excluding the adjustments (net of related tax effects) described in
items (1) - (4) and (6) above.
(9) $362,450 on an adjusted basis excluding $3,931 in acquisition-related
intangible amortization, $455 in acquisition-related inventory
write-up amortization, $700 in restructuring and other related costs
and $314 in share-based compensation expense.
(10) $179,493 on an adjusted basis excluding $2,082 in acquisition-related
intangible amortization, $2,098 in restructuring and other related
costs and $7,149 in share-based compensation expense.
(11) $47,925 on an adjusted basis excluding $287 in restructuring and
other related costs and $380 in share-based compensation expense.
(12) $85,095 on an adjusted basis excluding the adjustments described in
items (9) - (11) above.
(13) $30,506 on an adjusted basis excluding the tax impact of the
adjustments described in items (9) - (11) above.
(14) $57,404 and $1.85 per share, respectively, on an adjusted basis
excluding the adjustments (net of related tax effects) described in
items (9) - (11) above.

VARIAN, INC. AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except par value amounts)

June 27, September 28,
2008 2007
------------- -------------
ASSETS

Current assets
Cash and cash equivalents $128,215 $196,396
Accounts receivable, net 189,192 187,429
Inventories 184,790 140,533
Deferred taxes 38,175 38,068
Prepaid expenses and other current assets 19,277 17,332
------------- -------------
Total current assets 559,649 579,758
Property, plant and equipment, net 114,975 110,792
Goodwill and intangible assets, net 273,094 225,332
Other assets 20,376 20,951
------------- -------------
Total assets $968,094 $936,833
============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Current portion of long-term debt $ - $6,250
Accounts payable 78,603 72,588
Deferred profit 10,531 13,641
Accrued liabilities 173,007 159,109
------------- -------------
Total current liabilities 262,141 251,588
Long-term debt 18,750 18,750
Deferred taxes 7,302 4,050
Other liabilities 44,206 44,358
------------- -------------
Total liabilities 332,399 318,746
------------- -------------

Stockholders' equity
Preferred stock - par value $0.01,
authorized - 1,000 shares; issued - none - -
Common stock - par value $0.01,
authorized - 99,000 shares; issued and
outstanding - 29,350 shares at
June 27, 2008 and 30,345
shares at September 28, 2007 360,067 351,330
Retained earnings 182,981 199,471
Accumulated other comprehensive income 92,647 67,286
------------- -------------
Total stockholders' equity 635,695 618,087
------------- -------------
Total liabilities and stockholders' equity $968,094 $936,833
============= =============

VARIAN, INC. AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)

Fiscal Quarter Ended Nine Months Ended
--------------------- -------------------
June 27, June 29, June 27, June 29,
2008 2007 2008 2007
--------- --------- -------- ---------
Cash flows from
operating activities
Net earnings $11,366 $14,551 $44,737 $46,188
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 7,938 7,091 21,217 21,163
(Gain) loss on disposition of
property, plant and equipment (154) 11 (452) (196)
Impairment of private company
equity investment - - 3,018 -
Purchased in-process research and
development 1,488 - 1,488 -
Share-based compensation expense 2,385 2,176 7,207 7,890
Deferred taxes 1,116 (656) (540) (1,802)
Changes in assets and liabilities,
excluding effects of acquisitions:
Accounts receivable, net 12,467 915 10,735 2,245
Inventories (7,328) (2,699) (31,046) (9,703)
Prepaid expenses and other
current assets 1,482 (436) 490 (436)
Other assets (691) (137) (726) (212)
Accounts payable (2,065) (2,725) 1,222 (6,488)
Deferred profit 508 (2,814) (3,966) (3,269)
Accrued liabilities (613) 8,273 3,200 272
Other liabilities 1,994 1,348 3,041 3,613
--------- --------- -------- ---------
Net cash provided by
operating activities 29,893 24,898 59,625 59,265
--------- --------- -------- ---------

Cash flows from
investing activities
Proceeds from sale of property,
plant and equipment 478 39 1,265 3,193
Purchase of property, plant and
equipment (7,466) (4,909) (16,674) (10,879)
Purchase of businesses, net of
cash acquired (37,689) (285) (52,898) (5,066)
Private company equity investments - - (18) -
--------- --------- -------- ---------
Net cash used in
investing activities (44,677) (5,155) (68,325) (12,752)
--------- --------- -------- ---------
Cash flows from
financing activities
Repayments of debt (6,250) (1,250) (6,250) (2,500)
Repurchase of common stock (10,369) (17,627) (81,892) (69,582)
Issuance of common stock 2,528 6,539 15,761 26,748
Excess tax benefit from
share-based plans 188 1,323 3,151 7,070
Transfers to Varian Medical
Systems, Inc. (178) (33) (600) (381)
--------- --------- -------- ---------
Net cash used in
financing activities (14,081) (11,048) (69,830) (38,645)
--------- --------- -------- ---------
Effects of exchange rate changes
on cash and cash equivalents (343) 2,343 10,349 9,317
--------- --------- -------- ---------
Net (decrease) increase in cash
and cash equivalents (29,208) 11,038 (68,181) 17,185
Cash and cash equivalents at
beginning of period 157,423 160,302 196,396 154,155
--------- --------- -------- ---------
Cash and cash equivalents at end
of period $128,215 $171,340 $128,215 $171,340
========= ========= ======== ==========

VARIAN, INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP TO ADJUSTED RESULTS - ACTUAL
UNAUDITED RESULTS OF OPERATIONS
(In thousands)

Third Quarter FY 2008 and Third Quarter FY 2007
and
First Nine Months FY 2008 and First Nine Months FY 2007

Fiscal Quarter Ended Nine Months Ended
-------------------- -------------------
June 27, June 29, June 27, June 29,
2008 2007 2008 2007
--------- --------- --------- ---------
TOTAL COMPANY
-------------

Cost of Sales
U.S. GAAP as reported $138,266 $125,176 $403,684 $367,850
Adjustments:
Share-based
compensation expense (92) (95) (293) (314)
Acquisition-related
intangible amortization (1,978) (1,306) (4,884) (3,931)
Acquisition-related inventory
write-up amortization (646) - (1,236) (455)
Restructuring and other
related costs (525) (700) (1,175) (700)
--------- --------- --------- ---------
As adjusted $135,025 $123,075 $396,096 $362,450
========= ========= ========= =========

Selling, General
and Administrative
U.S. GAAP as reported $68,797 $64,366 $202,380 $190,822
Adjustments:
Share-based
compensation expense (2,116) (1,908) (6,361) (7,149)
Acquisition-related
intangible amortization (399) (506) (1,239) (2,082)
Restructuring and other
related costs (904) (1,919) (2,308) (2,098)
--------- --------- --------- ---------
As adjusted $65,378 $60,033 $192,472 $179,493
========= ========= ========= =========

Research and Development
U.S. GAAP as reported $18,519 $16,879 $53,889 $48,592
Adjustments:
Share-based
compensation expense (96) (126) (310) (380)
Restructuring and other
related costs (258) (287) (753) (287)
--------- --------- --------- ---------
As adjusted $18,165 $16,466 $52,826 $47,925
========= ========= ========= =========

Purchased In-Process
Research and Development
U.S. GAAP as reported $1,488 $ - $1,488 $ -
Adjustments:
Acquisition-related in-process
research and
development charge (1,488) - (1,488) -
--------- --------- --------- ---------
As adjusted $ - $ - $ - $ -
========= ========= ========= =========

VARIAN, INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP TO ADJUSTED RESULTS - ACTUAL
UNAUDITED RESULTS OF OPERATIONS
(In thousands, except margin data)

Third Quarter FY 2008 and Third Quarter FY 2007
and
First Nine Months FY 2008 and First Nine Months FY 2007

Fiscal Quarter Ended Nine Months Ended
-------------------- -------------------
June 27, June 29, June 27, June 29,
2008 2007 2008 2007
--------- --------- --------- ---------
TOTAL COMPANY (Continued)
-------------------------

Operating Earnings
U.S. GAAP as reported $17,379 $20,674 $68,604 $67,699
Adjustments:
Share-based
compensation expense 2,304 2,129 6,964 7,843
Acquisition-related
in-process research
and development charge 1,488 - 1,488 -
Acquisition-related
intangible amortization 2,377 1,812 6,123 6,013
Acquisition-related inventory
write-up amortization 646 - 1,236 455
Restructuring and other
related costs 1,687 2,906 4,236 3,085
--------- --------- --------- ---------
As adjusted $25,881 $27,521 $88,651 $85,095
========= ========= ========= =========

Operating Margins
U.S. GAAP as reported 7.1% 9.1% 9.4% 10.0%
Adjustments:
Share-based
compensation expense 0.9 0.9 1.0 1.2
Acquisition-related
in-process research
and development charge 0.6 - 0.2 -
Acquisition-related
intangible amortization 1.0 0.8 0.7 0.8
Acquisition-related inventory
write-up amortization 0.3 - 0.2 0.1
Restructuring and other
related costs 0.7 1.3 0.6 0.5
--------- --------- --------- ---------
As adjusted 10.6% 12.1% 12.1% 12.6%
========= ========= ========= =========

Impairment of Private Company
Equity Investment
U.S. GAAP as reported $ - $ - $3,018 $ -
Adjustments:
Impairment of private company
equity investment - - (3,018) -
--------- --------- --------- ---------
As adjusted $ - $ - $ - $ -
========= ========= ========= =========

VARIAN, INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP TO ADJUSTED RESULTS - ACTUAL
UNAUDITED RESULTS OF OPERATIONS
(In thousands, except per share data)

Third Quarter FY 2008 and Third Quarter FY 2007
and
First Nine Months FY 2008 and First Nine Months FY 2007

Fiscal Quarter Ended Nine Months Ended
-------------------- -------------------
June 27, June 29, June 27, June 29,
2008 2007 2008 2007
--------- --------- --------- ---------
TOTAL COMPANY (Continued)
-------------------------

Income Tax Expense
U.S. GAAP as reported $6,823 $7,291 $24,463 $24,326
Adjustments:
Tax impact of adjustments:
Share-based
compensation expense 659 777 1,922 2,863
Acquisition-related
intangible amortization 747 635 2,025 2,088
Acquisition-related inventory
write-up amortization 161 - 410 158
Impairment of private
company equity investment - - 1,154 -
Restructuring and
other related costs 597 1,018 1,538 1,071
--------- --------- --------- ---------
As adjusted $8,987 $9,721 $31,512 $30,506
========= ========= ========= =========

Net Earnings
U.S. GAAP as reported $11,366 $14,551 $44,737 $46,188
Adjustments:
Share-based
compensation expense 1,645 1,352 5,042 4,980
Acquisition-related
in-process research
and development charge 1,488 - 1,488 -
Acquisition-related
intangible amortization 1,630 1,177 4,098 3,925
Acquisition-related inventory
write-up amortization 485 - 826 297
Impairment of private
company equity investment - - 1,864 -
Restructuring and
other related costs 1,090 1,888 2,698 2,014
--------- --------- --------- ---------
As adjusted $17,704 $18,968 $60,753 $57,404
========= ========= ========= =========

Diluted Earnings Per Share
U.S. GAAP as reported $0.38 $0.47 $1.48 $1.49
Adjustments:
Share-based
compensation expense 0.06 0.04 0.17 0.16
Acquisition-related
in-process research
and development charge 0.05 - 0.05 -
Acquisition-related
intangible amortization 0.05 0.04 0.13 0.13
Acquisition-related inventory
write-up amortization 0.02 - 0.03 0.01
Impairment of private
company equity investment - - 0.06 -
Restructuring and
other related costs 0.04 0.06 0.09 0.06
--------- --------- --------- ---------
As adjusted $0.60 $0.61 $2.01 $1.85
========= ========= ========= =========

VARIAN, INC. AND SUBSIDIARY COMPANIES
RECONCILIATION OF GAAP TO ADJUSTED RESULTS - ACTUAL
UNAUDITED RESULTS OF OPERATIONS
(In thousands, except margin data)

Third Quarter FY 2008 and Third Quarter FY 2007
and
First Nine Months FY 2008 and First Nine Months FY 2007

Fiscal Quarter Ended Nine Months Ended
-------------------- -------------------
June 27, June 29, June 27, June 29,
2008 2007 2008 2007
--------- --------- --------- ---------
SCIENTIFIC INSTRUMENTS SEGMENT
------------------------------

Operating Earnings
U.S. GAAP as reported $12,199 $17,406 $54,509 $58,062
Adjustments:
Share-based
compensation expense 849 692 2,586 2,562
Acquisition-related
in-process research
and development charge 1,488 - 1,488 -
Acquisition-related
intangible amortization 2,377 1,812 6,123 6,013
Acquisition-related inventory
write-up amortization 646 - 1,236 455
Restructuring and
other related costs 1,687 2,906 4,236 3,085
--------- --------- --------- ---------
As adjusted $19,246 $22,816 $70,178 $70,177
========= ========= ========= =========

Operating Margins
U.S. GAAP as reported 6.1% 9.3% 9.1% 10.5%
Adjustments:
Share-based
compensation expense 0.4 0.4 0.4 0.5
Acquisition-related
in-process research
and development charge 0.7 - 0.2 -
Acquisition-related
intangible amortization 1.3 0.9 1.1 1.0
Acquisition-related inventory
write-up amortization 0.3 - 0.2 0.1
Restructuring and
other related costs 0.8 1.6 0.7 0.6
--------- --------- --------- ---------
As adjusted 9.6% 12.2% 11.7% 12.7%
========= ========= ========= =========

VACUUM TECHNOLOGIES SEGMENT
---------------------------

Operating Earnings
U.S. GAAP as reported $7,757 $7,838 $24,261 $23,853
Adjustments:
Share-based
compensation expense 247 115 645 977
--------- --------- --------- ---------
As adjusted $8,004 $7,953 $24,906 $24,830
========= ========= ========= =========

Operating Margins
U.S. GAAP as reported 17.7% 19.5% 19.0% 19.7%
Adjustments:
Share-based
compensation expense 0.6 0.3 0.5 0.9
--------- --------- --------- ---------
As adjusted 18.3% 19.8% 19.5% 20.6%
========= ========= ========= =========

GENERAL (UNALLOCATED) CORPORATE
-------------------------------
Operating Earnings
U.S. GAAP as reported $(2,577) $(4,570) $(10,166) $(14,216)
Adjustments:
Share-based
compensation expense 1,208 1,322 3,733 4,304
--------- --------- --------- ---------
As adjusted $(1,369) $(3,248) $(6,433) $(9,912)
========= ========= ========= =========

VARIAN, INC. AND SUBSIDIARY COMPANIES

RECONCILIATION OF GAAP TO ADJUSTED RESULTS - PROJECTED
RESULTS OF OPERATIONS

Fiscal Year Ending October 3, 2008

Range of Projected Results
----------------------------
TOTAL COMPANY
-------------
Projected Diluted Earnings Per Share
Projected U.S. GAAP $1.96 - $2.14
Adjustments:
Projected share-based compensation expense $0.23
Projected acquisition-related
in-process research and development charge $0.05
Projected acquisition-related
intangible amortization $0.18 - $0.20
Projected acquisition-related inventory
write-up amortization $0.03 - $0.05
Projected impairment of private company
equity investment $0.06
Projected restructuring and other related costs $0.10 - $0.14

Projected as adjusted $2.69 - $2.79

SOURCE Varian, Inc.

Investor Relations of Varian, Inc., +1-650-424-5471, ir@varianinc.com