##### Table of Contents







UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 March 28, 2008



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period fromto



Commission File Number 000-25393







VARIAN, INC.

(Exact Name of Registrant as Specified in its Charter)







|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 77-0501995                       
|(State or Other Jurisdiction of Incorporation or Organization) |  | (IRS Employer Identification No.)
|                                                               | 
|3120 Hansen Way, Palo Alto, California                         |  | 94304-1030                       
|(Address of Principal Executive Offices)                       |  | (Zip Code)                       



(650) 213-8000

(Telephone Number)



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   ̈



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act (Check one):



|                           |  |                      |  |                         
|-------------------------- |  | -------------------- |  | ------------------------
|Large accelerated filer  x |  | Accelerated filer   ̈ |  | Non-accelerated filer   ̈



Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   ̈    No  x



The number of shares of the registrants common stock outstanding as of
May 2, 2008 was 29,529,663.









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##### Table of Contents

VARIAN, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 28, 2008



TABLE OF CONTENTS



|         |  |                                                                                       |  |     
|-------- |  | ------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                       |  | Page
|         |  |                                                                                      
|PART I   |  | Financial Information                                                                 |  |     
|         |  |                                                                                      
|Item 1.  |  | Financial Statements:                                                                 |  |     
|         |  |                                                                                      
|         |  | Unaudited Condensed Consolidated Statement of Earnings                                |  | 3   
|         |  |                                                                                      
|         |  | Unaudited Condensed Consolidated Balance Sheet                                        |  | 4   
|         |  |                                                                                      
|         |  | Unaudited Condensed Consolidated Statement of Cash Flows                              |  | 5   
|         |  |                                                                                      
|         |  | Notes to the Unaudited Condensed Consolidated Financial Statements                    |  | 6   
|         |  |                                                                                      
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 23  
|         |  |                                                                                      
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 36  
|         |  |                                                                                      
|Item 4.  |  | Controls and Procedures                                                               |  | 37  
|         |  |                                                                                      
|PART II  |  | Other Information                                                                     |  |     
|         |  |                                                                                      
|Item 1A. |  | Risk Factors                                                                          |  | 39  
|         |  |                                                                                      
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 39  
|         |  |                                                                                      
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  | 40  
|         |  |                                                                                      
|Item 6.  |  | Exhibits                                                                              |  | 40  



2



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##### Table of Contents

PART I

FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------



VARIAN, INC. AND SUBSIDIARY COMPANIES



UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS

(In thousands, except per share
amounts)



|                                                          |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|--------------------------------------------------------- |  | -------------------- | ------- | - | ---------------- | - | ------- | ------------- |  | - | ------------- | - |  | - | ------- | -
|                                                          |  | Fiscal Quarter Ended |         |   | Six Months Ended |  
|                                                          |  | March 28,2008        |         |   | March 30,2007    |   |         | March 28,2008 |  |   | March 30,2007 |  
|Sales                                                     |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Products                                                  |  | $                    | 214,648 |   |                  | $ | 199,537 |               |  | $ | 418,823       |   |  | $ | 388,680 |  
|Services                                                  |  |                      | 33,517  |   |                  |   | 30,393  |               |  |   | 66,773        |   |  |   | 59,188  |  
|                                                          |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Total sales                                               |  |                      | 248,165 |   |                  |   | 229,930 |               |  |   | 485,596       |   |  |   | 447,868 |  
|                                                          |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Cost of sales                                             |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Products                                                  |  |                      | 115,953 |   |                  |   | 108,119 |               |  |   | 227,110       |   |  |   | 210,139 |  
|Services                                                  |  |                      | 19,336  |   |                  |   | 16,316  |               |  |   | 38,308        |   |  |   | 32,535  |  
|                                                          |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Total cost of sales                                       |  |                      | 135,289 |   |                  |   | 124,435 |               |  |   | 265,418       |   |  |   | 242,674 |  
|                                                          |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Gross profit                                              |  |                      | 112,876 |   |                  |   | 105,495 |               |  |   | 220,178       |   |  |   | 205,194 |  
|                                                          |  |                      |         |  
|Operating expenses                                        |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Selling, general and administrative                       |  |                      | 67,603  |   |                  |   | 65,255  |               |  |   | 133,583       |   |  |   | 126,456 |  
|Research and development                                  |  |                      | 18,190  |   |                  |   | 16,103  |               |  |   | 35,370        |   |  |   | 31,713  |  
|                                                          |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Total operating expenses                                  |  |                      | 85,793  |   |                  |   | 81,358  |               |  |   | 168,953       |   |  |   | 158,169 |  
|                                                          |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Operating earnings                                        |  |                      | 27,083  |   |                  |   | 24,137  |               |  |   | 51,225        |   |  |   | 47,025  |  
|Impairment of private company equity investment (Note 14) |  |                      | (3,018  | ) |                  |   |        |               |  |   | (3,018        | ) |  |   |        |  
|Interest income                                           |  |                      | 1,751   |   |                  |   | 1,368   |               |  |   | 3,688         |   |  |   | 2,637   |  
|Interest expense                                          |  |                      | (435    | ) |                  |   | (456    | )             |  |   | (884          | ) |  |   | (990    | )
|                                                          |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Earnings before income taxes                              |  |                      | 25,381  |   |                  |   | 25,049  |               |  |   | 51,011        |   |  |   | 48,672  |  
|Income tax expense                                        |  |                      | 9,594   |   |                  |   | 8,767   |               |  |   | 17,640        |   |  |   | 17,035  |  
|                                                          |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Net earnings                                              |  | $                    | 15,787  |   |                  | $ | 16,282  |               |  | $ | 33,371        |   |  | $ | 31,637  |  
|                                                          |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Net earnings per share:                                   |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Basic                                                     |  | $                    | 0.53    |   |                  | $ | 0.54    |               |  | $ | 1.11          |   |  | $ | 1.04    |  
|                                                          |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Diluted                                                   |  | $                    | 0.52    |   |                  | $ | 0.53    |               |  | $ | 1.09          |   |  | $ | 1.02    |  
|                                                          |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Shares used in per share calculations:                    |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Basic                                                     |  |                      | 29,830  |   |                  |   | 30,420  |               |  |   | 30,080        |   |  |   | 30,504  |  
|                                                          |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  
|Diluted                                                   |  |                      | 30,243  |   |                  |   | 30,932  |               |  |   | 30,598        |   |  |   | 30,956  |  
|                                                          |  |                      |         |   |                  |   |         |               |  |   |               |   |  |   |         |  



See accompanying Notes
to the Unaudited Condensed Consolidated Financial Statements.



3



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VARIAN, INC. AND SUBSIDIARY COMPANIES



UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands, except par value amounts)



|                                                                                                                                                       |  |               |         |                   |   |        
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------- | ----------------- | - | -------
|                                                                                                                                                       |  | March 28,2008 |         | September 28,2007
|ASSETS                                                                                                                                                 |  |               |         |                   |   |        
|Current assets                                                                                                                                         |  |               |         |                   |   |        
|Cash and cash equivalents                                                                                                                              |  | $             | 157,423 |                   | $ | 196,396
|Accounts receivable, net                                                                                                                               |  |               | 201,328 |                   |   | 187,429
|Inventories                                                                                                                                            |  |               | 172,446 |                   |   | 140,533
|Deferred taxes                                                                                                                                         |  |               | 38,415  |                   |   | 38,068 
|Prepaid expense and other current assets                                                                                                               |  |               | 19,158  |                   |   | 17,332 
|                                                                                                                                                       |  |               |         |                   |   |        
|Total current assets                                                                                                                                   |  |               | 588,770 |                   |   | 579,758
|Property, plant and equipment, net                                                                                                                     |  |               | 113,389 |                   |   | 110,792
|Goodwill                                                                                                                                               |  |               | 208,118 |                   |   | 193,760
|Intangible assets, net                                                                                                                                 |  |               | 32,445  |                   |   | 31,572 
|Other assets                                                                                                                                           |  |               | 18,756  |                   |   | 20,951 
|                                                                                                                                                       |  |               |         |                   |   |        
|Total assets                                                                                                                                           |  | $             | 961,478 |                   | $ | 936,833
|                                                                                                                                                       |  |               |         |                   |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                   |  |               |         |                   |   |        
|                                                                                                                                                       |  |              
|Current liabilities                                                                                                                                    |  |               |         |                   |   |        
|Current portion of long-term debt                                                                                                                      |  | $             | 6,250   |                   | $ | 6,250  
|Accounts payable                                                                                                                                       |  |               | 79,252  |                   |   | 72,588 
|Deferred profit                                                                                                                                        |  |               | 9,290   |                   |   | 13,641 
|Accrued liabilities                                                                                                                                    |  |               | 168,546 |                   |   | 159,109
|                                                                                                                                                       |  |               |         |                   |   |        
|Total current liabilities                                                                                                                              |  |               | 263,338 |                   |   | 251,588
|Long-term debt                                                                                                                                         |  |               | 18,750  |                   |   | 18,750 
|Deferred taxes                                                                                                                                         |  |               | 4,039   |                   |   | 4,050  
|Other liabilities                                                                                                                                      |  |               | 42,835  |                   |   | 44,358 
|                                                                                                                                                       |  |               |         |                   |   |        
|Total liabilities                                                                                                                                      |  |               | 328,962 |                   |   | 318,746
|                                                                                                                                                       |  |               |         |                   |   |        
|Commitments and contingencies (Notes 5, 6, 8, 9, 10, 11, 12 and 15)                                                                                    |  |               |         |                   |   |        
|                                                                                                                                                       |  |              
|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29,481 shares at March 28, 2008 and 30,345
shares at September 28, 2007 |  |               | 357,214 |                   |   | 351,330
|Retained earnings                                                                                                                                      |  |               | 179,607 |                   |   | 199,471
|Accumulated other comprehensive income                                                                                                                 |  |               | 95,695  |                   |   | 67,286 
|                                                                                                                                                       |  |               |         |                   |   |        
|Total stockholders equity                                                                                                                             |  |               | 632,516 |                   |   | 618,087
|                                                                                                                                                       |  |               |         |                   |   |        
|Total liabilities and stockholders equity                                                                                                             |  | $             | 961,478 |                   | $ | 936,833
|                                                                                                                                                       |  |               |         |                   |   |        



See accompanying Notes
to the Unaudited Condensed Consolidated Financial Statements.



4



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VARIAN, INC. AND SUBSIDIARY COMPANIES



UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)



|                                                                                    |  |                  |         |   |               |   |         |  
|----------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ------------- | - | ------- | -
|                                                                                    |  | Six Months Ended |        
|                                                                                    |  | March 28,2008    |         |   | March 30,2007 |  
|Cash flows from operating activities                                                |  |                  |         |   |               |   |         |  
|Net earnings                                                                        |  | $                | 33,371  |   |               | $ | 31,637  |  
|Adjustments to reconcile net earnings to net cash provided by operating activities: |  |                  |         |   |               |   |         |  
|Depreciation and amortization                                                       |  |                  | 13,279  |   |               |   | 14,072  |  
|Gain on disposition of property, plant and equipment                                |  |                  | (298    | ) |               |   | (207    | )
|Impairment of private company equity investment                                     |  |                  | 3,018   |   |               |   |        |  
|Share-based compensation expense                                                    |  |                  | 4,822   |   |               |   | 5,714   |  
|Deferred taxes                                                                      |  |                  | (1,656  | ) |               |   | (1,146  | )
|Changes in assets and liabilities, excluding effects of acquisitions:               |  |                  |         |   |               |   |         |  
|Accounts receivable, net                                                            |  |                  | (1,732  | ) |               |   | 1,330   |  
|Inventories                                                                         |  |                  | (23,718 | ) |               |   | (7,004  | )
|Prepaid expenses and other current assets                                           |  |                  | (992    | ) |               |   |        |  
|Other assets                                                                        |  |                  | (35     | ) |               |   | (75     | )
|Accounts payable                                                                    |  |                  | 3,287   |   |               |   | (3,763  | )
|Deferred profit                                                                     |  |                  | (4,474  | ) |               |   | (455    | )
|Accrued liabilities                                                                 |  |                  | 3,813   |   |               |   | (8,001  | )
|Other liabilities                                                                   |  |                  | 1,047   |   |               |   | 2,265   |  
|                                                                                    |  |                  |         |   |               |   |         |  
|Net cash provided by operating activities                                           |  |                  | 29,732  |   |               |   | 34,367  |  
|                                                                                    |  |                  |         |   |               |   |         |  
|Cash flows from investing activities                                                |  |                  |         |   |               |   |         |  
|Proceeds from sale of property, plant and equipment                                 |  |                  | 787     |   |               |   | 3,154   |  
|Purchase of property, plant and equipment                                           |  |                  | (9,208  | ) |               |   | (5,970  | )
|Purchase of businesses, net of cash acquired                                        |  |                  | (15,209 | ) |               |   | (4,781  | )
|Private company equity investments                                                  |  |                  | (18     | ) |               |   |        |  
|                                                                                    |  |                  |         |   |               |   |         |  
|Net cash used in investing activities                                               |  |                  | (23,648 | ) |               |   | (7,597  | )
|                                                                                    |  |                  |         |   |               |   |         |  
|Cash flows from financing activities                                                |  |                  |         |   |               |   |         |  
|Repayment of debt                                                                   |  |                  |        |   |               |   | (1,250  | )
|Repurchase of common stock                                                          |  |                  | (71,523 | ) |               |   | (51,955 | )
|Issuance of common stock                                                            |  |                  | 13,233  |   |               |   | 20,209  |  
|Excess tax benefit from share-based plans                                           |  |                  | 2,963   |   |               |   | 5,747   |  
|Transfers to Varian Medical Systems, Inc.                                           |  |                  | (422    | ) |               |   | (348    | )
|                                                                                    |  |                  |         |   |               |   |         |  
|Net cash used in financing activities                                               |  |                  | (55,749 | ) |               |   | (27,597 | )
|                                                                                    |  |                  |         |   |               |   |         |  
|Effect of exchange rate changes on cash and cash equivalents                        |  |                  | 10,692  |   |               |   | 6,974   |  
|                                                                                    |  |                  |         |   |               |   |         |  
|Net (decrease) increase in cash and cash equivalents                                |  |                  | (38,973 | ) |               |   | 6,147   |  
|Cash and cash equivalents at beginning of period                                    |  |                  | 196,396 |   |               |   | 154,155 |  
|                                                                                    |  |                  |         |   |               |   |         |  
|Cash and cash equivalents at end of period                                          |  | $                | 157,423 |   |               | $ | 160,302 |  
|                                                                                    |  |                  |         |   |               |   |         |  



See accompanying Notes
to the Unaudited Condensed Consolidated Financial Statements.



5



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VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



|Note 1. | Unaudited Interim Condensed Consolidated Financial Statements
|------- | -------------------------------------------------------------



These unaudited interim condensed consolidated financial statements of Varian, Inc. and its subsidiary companies (collectively, the Company)
have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations. The September 28, 2007 balance sheet data was derived from audited financial
statements, but does not include all disclosures required in audited financial statements by U.S. GAAP. These unaudited interim condensed consolidated financial statements should be read in conjunction with the financial statements and the notes
thereto included in the Companys Annual Report on Form 10-K for the fiscal year ended September 28, 2007 filed with the SEC. In the opinion of the Companys management, the unaudited interim condensed 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 six months ended March 28, 2008 are not necessarily indicative of the results to
be expected for a full year or for any other periods.



The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.



|Note 2. | Description of Business and Basis of Presentation
|------- | -------------------------------------------------



The Company designs, develops, manufactures, markets, sells and services scientific instruments (including related software, consumable products,
accessories and services) and vacuum products (and related accessories and services). These businesses primarily serve life science, industrial (which includes environmental, food and energy), academic and research customers.



Until April 2, 1999, the business of the Company was operated as the
Instruments Business of Varian Associates, Inc. (VAI). On that date, VAI distributed to the holders of its common stock one share of common stock of the Company and one share of common stock of Varian Semiconductor Equipment Associates,
Inc. (VSEA), which was formerly operated as the Semiconductor Equipment business of VAI, for each share of VAI (the Distribution). VAI retained its Health Care Systems business and changed its name to Varian Medical Systems,
Inc. (VMS). Transfers made to VMS under the terms of the Distribution are reflected as financing activities in the Unaudited Condensed Consolidated Statement of Cash Flows.



|Note 3. | Summary of Significant Accounting Policies
|------- | ------------------------------------------



Fiscal Periods. The Companys fiscal years reported are the 52- or 53-week periods ending on the Friday nearest September 30. Fiscal year
2008 will comprise the 53-week period ending October 3, 2008, and fiscal year 2007 was comprised of the 52-week period ended September 28, 2007. The fiscal quarters and six months ended March 28, 2008 and March 30, 2007 each
comprised 13 weeks and 26 weeks, respectively.



6



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VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Comprehensive Income. A summary of the components of the Companys comprehensive income
follows:



|                                 |  |                      |        |                  |   |               |  |               |        |  |   |       
|-------------------------------- |  | -------------------- | ------ | ---------------- | - | ------------- |  | ------------- | ------ |  | - | ------
|                                 |  | Fiscal Quarter Ended |        | Six Months Ended
|                                 |  | March 28,2008        |        | March 30,2007    |   | March 28,2008 |  | March 30,2007
|(in thousands)                   |  |                      |        |                  |   |               |  |               |        |  |   |       
|Net earnings                     |  | $                    | 15,787 |                  | $ | 16,282        |  | $             | 33,371 |  | $ | 31,637
|Other comprehensive income:      |  |                      |        |                  |   |               |  |               |        |  |   |       
|Currency translation adjustment  |  |                      | 27,583 |                  |   | 4,001         |  |               | 28,407 |  |   | 18,767
|                                 |  |                      |        |                  |   |               |  |               |        |  |   |       
|Total other comprehensive income |  |                      | 27,583 |                  |   | 4,001         |  |               | 28,407 |  |   | 18,767
|                                 |  |                      |        |                  |   |               |  |               |        |  |   |       
|Total comprehensive income       |  | $                    | 43,370 |                  | $ | 20,283        |  | $             | 61,778 |  | $ | 50,404
|                                 |  |                      |        |                  |   |               |  |               |        |  |   |       



|Note 4. | Balance Sheet Detail
|------- | --------------------



|                        |  |                    |         |                   |   |        
|----------------------- |  | ------------------ | ------- | ----------------- | - | -------
|                        |  | Fiscal Quarter End
|                        |  | March 28,2008      |         | September 28,2007
|(in thousands)          |  |                    |         |                   |   |        
|Inventories             |  |                    |         |                   |   |        
|Raw materials and parts |  | $                  | 79,880  |                   | $ | 64,130 
|Work in process         |  |                    | 28,517  |                   |   | 24,842 
|Finished goods          |  |                    | 64,049  |                   |   | 51,561 
|                        |  |                    |         |                   |   |        
|Total                   |  | $                  | 172,446 |                   | $ | 140,533
|                        |  |                    |         |                   |   |        



|Note 5. | Forward Exchange Contracts
|------- | --------------------------



The Company enters into foreign exchange forward contracts to minimize the short-term impact of foreign currency fluctuations on assets and liabilities
denominated in non-functional currencies. These contracts are accounted for under Statement of Financial Accounting Standards (SFAS) 133, Accounting for Derivative Instruments and Hedging Activities. Typically, gains and losses on
these contracts are substantially offset by transaction losses and gains on the underlying balances being hedged. During the fiscal quarter and six months ended March 28, 2008, net foreign currency gains relating to these arrangements were $0.6
million and $0.9 million, respectively. During the fiscal quarter and six months ended March 30, 2007, net foreign currency losses relating to these arrangements were $0.5 million and $0.8 million, respectively. These amounts were recorded in
selling, general and administrative expenses.



From time to
time, the Company also enters into foreign exchange forward contracts to minimize the impact of foreign currency fluctuations on forecasted transactions. These contracts are designated as cash flow hedges under SFAS 133. At March 28, 2008,
there were no outstanding foreign exchange forward contracts designated as cash flow hedges of forecasted transactions. During the fiscal quarters and six months ended March 28, 2008 and March 30, 2007, no foreign exchange gains or losses
from hedge ineffectiveness were recognized.



7



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VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



The Companys foreign exchange forward contracts generally range from one to 12 months in
original maturity. A summary of all foreign exchange forward contracts that were outstanding as of March 28, 2008 follows:



|                  |  |                   |       |                        |   |       
|----------------- |  | ----------------- | ----- | ---------------------- | - | ------
|                  |  | NotionalValueSold |       | NotionalValuePurchased
|(in thousands)    |  |                   |       |                        |   |       
|Euro              |  | $                 |      |                        | $ | 30,788
|Australian dollar |  |                   |      |                        |   | 44,803
|British pound     |  |                   |      |                        |   | 9,716 
|Japanese yen      |  |                   | 5,586 |                        |   |      
|Canadian dollar   |  |                   | 3,569 |                        |   |      
|                  |  |                   |       |                        |   |       
|Total             |  | $                 | 9,155 |                        | $ | 85,307
|                  |  |                   |       |                        |   |       



|Note 6. | Acquisitions
|------- | ------------



On November 11, 2007, the Company acquired certain assets and assumed certain liabilities of Analogix, Inc. (the Analogix Business) for
approximately $11 million in cash and assumed net debt, subject to certain net asset adjustments. Under the terms of the acquisition, the Company might make additional purchase price payments of up to $4 million over a three-year period, depending
on the performance of the Analogix Business and certain operational milestones. The Analogix Business designs, manufactures, markets, sells and services consumables and instrumentation for automated compound purification using flash chromatography,
and became part of the Scientific Instruments segment.



Contingent Consideration Arrangements. The Company is, from time to time, obligated to pay additional cash purchase price amounts in the event that certain financial or operational milestones are met by acquired businesses. As of
March 28, 2008, up to a maximum of $33.3 million could be payable through December 2010 under contingent consideration arrangements relating to acquired businesses. Amounts subject to these arrangements can be earned over the respective
measurement period, depending on the performance of the acquired business relative to certain financial and/or operational targets.



The following table summarizes key terms of outstanding contingent consideration arrangements as of March 28, 2008:



|                  |  |                                     |  |                    |  |                            
|----------------- |  | ----------------------------------- |  | ------------------ |  | ---------------------------
|Acquired business |  | Remaining Amount Available(maximum) |  | Measurement period |  | Measurement period end date
|Analogix          |  | $  4.0 million                      |  | 3 years            |  | December 2010              
|IonSpec           |  | $14.0 million                       |  | 3 years            |  | April 2009                 
|Polymer Labs      |  | $15.3 million                       |  | 3 years            |  | December 2008              



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VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



|Note 7. | Goodwill and Other Intangible Assets
|------- | ------------------------------------



Changes in the carrying amount of goodwill for each of the Companys reporting segments in the first six months of fiscal year 2008 were as follow:



|                                               |  |                       |         |                    |   |              |  |   |        
|---------------------------------------------- |  | --------------------- | ------- | ------------------ | - | ------------ |  | - | -------
|                                               |  | ScientificInstruments |         | VacuumTechnologies |   | TotalCompany
|(in thousands)                                 |  |                       |         |                    |   |              |  |   |        
|Balance as of September 28, 2007               |  | $                     | 192,794 |                    | $ | 966          |  | $ | 193,760
|Fiscal year 2008 acquisitions                  |  |                       | 5,772   |                    |   |             |  |   | 5,772  
|Contingent payments on prior-year acquisitions |  |                       | 4,057   |                    |   |             |  |   | 4,057  
|Foreign currency impacts and other adjustments |  |                       | 4,529   |                    |   |             |  |   | 4,529  
|                                               |  |                       |         |                    |   |              |  |   |        
|Balance as of March 28, 2008                   |  | $                     | 207,152 |                    | $ | 966          |  | $ | 208,118
|                                               |  |                       |         |                    |   |              |  |   |        



As required by SFAS
142, Goodwill and Other Intangible Assets, the Company performs an annual goodwill impairment assessment. This assessment is performed in the second quarter of each fiscal year. During the fiscal quarter ended March 28, 2008, the Company
completed its annual impairment test and determined that there was no impairment of goodwill.



The following intangible assets have been recorded and are being amortized by the Company:



|                            |  |                |        |                         |   |         |     |  |   |       
|--------------------------- |  | -------------- | ------ | ----------------------- | - | ------- | --- |  | - | ------
|                            |  | March 28, 2008
|                            |  | Gross          |        | AccumulatedAmortization |   |         | Net
|(in thousands)              |  |                |        |                         |   |         |     |  |   |       
|Intangible assets           |  |                |        |                         |   |         |     |  |   |       
|Existing technology         |  | $              | 16,786 |                         | $ | (9,259  | )   |  | $ | 7,527 
|Patents and core technology |  |                | 34,224 |                         |   | (12,763 | )   |  |   | 21,461
|Trade names and trademarks  |  |                | 2,457  |                         |   | (1,800  | )   |  |   | 657   
|Customer lists              |  |                | 12,238 |                         |   | (10,081 | )   |  |   | 2,157 
|Other                       |  |                | 3,174  |                         |   | (2,531  | )   |  |   | 643   
|                            |  |                |        |                         |   |         |     |  |   |       
|Total                       |  | $              | 68,879 |                         | $ | (36,434 | )   |  | $ | 32,445
|                            |  |                |        |                         |   |         |     |  |   |       



|                            |  |                    |        |                         |   |         |     |  |   |       
|--------------------------- |  | ------------------ | ------ | ----------------------- | - | ------- | --- |  | - | ------
|                            |  | September 28, 2007
|                            |  | Gross              |        | AccumulatedAmortization |   |         | Net
|(in thousands)              |  |                    |        |                         |   |         |     |  |   |       
|Intangible assets           |  |                    |        |                         |   |         |     |  |   |       
|Existing technology         |  | $                  | 16,611 |                         | $ | (8,235  | )   |  | $ | 8,376 
|Patents and core technology |  |                    | 29,908 |                         |   | (10,752 | )   |  |   | 19,156
|Trade names and trademarks  |  |                    | 2,458  |                         |   | (1,623  | )   |  |   | 835   
|Customer lists              |  |                    | 11,866 |                         |   | (9,408  | )   |  |   | 2,458 
|Other                       |  |                    | 3,025  |                         |   | (2,278  | )   |  |   | 747   
|                            |  |                    |        |                         |   |         |     |  |   |       
|Total                       |  | $                  | 63,868 |                         | $ | (32,296 | )   |  | $ | 31,572
|                            |  |                    |        |                         |   |         |     |  |   |       



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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Amortization expense relating to intangible assets was $2.0 million and $3.8 million during the
fiscal quarter and six months ended March 28, 2008, respectively. Amortization expense relating to intangible assets was $2.0 million and $4.3 million during the fiscal quarter and six months ended March 30, 2007, respectively. At
March 28, 2008, estimated amortization expense for the remainder of fiscal year 2008 and for each of the five succeeding fiscal years and thereafter follows:



|                                  |  |                              |       
|--------------------------------- |  | ---------------------------- | ------
|                                  |  | EstimatedAmortizationExpense
|(in thousands)                    |  |                              |       
|Six months ending October 3, 2008 |  | $                            | 3,905 
|Fiscal year 2009                  |  |                              | 6,804 
|Fiscal year 2010                  |  |                              | 6,299 
|Fiscal year 2011                  |  |                              | 3,814 
|Fiscal year 2012                  |  |                              | 2,974 
|Fiscal year 2013                  |  |                              | 2,662 
|Thereafter                        |  |                              | 5,987 
|                                  |  |                              |       
|Total                             |  | $                            | 32,445
|                                  |  |                              |       



|Note 8. | Restructuring Activities
|------- | ------------------------



Summary of Restructuring Plans.Between fiscal years 2003 and 2007, the Company committed to several restructuring plans in order to
adjust its organizational structure, improve operational efficiencies and eliminate redundant or excess costs resulting from acquisitions or dispositions during those periods.



The following table sets forth changes in the Companys aggregate liability relating to all restructuring plans
(including the Fiscal Year 2007 Plan described below) during the first and second quarters of fiscal year 2008 as well as total restructuring expense and other related costs recorded since the inception of those plans:



|                                               |  |                  |        |      |                    |   |       |       |  |   |        |  
|---------------------------------------------- |  | ---------------- | ------ | ---- | ------------------ | - | ----- | ----- |  | - | ------ | -
|                                               |  | Employee-Related |        |      | Facilities-Related |   |       | Total | 
|(in thousands)                                 |  |                  |        |      |                    |   |       |       |  |   |        |  
|Balance at September 28, 2007                  |  | $                | 2,222  |      |                    | $ | 707   |       |  | $ | 2,929  |  
|Charges to expense, net                        |  |                  | 453    |      |                    |   | 761   |       |  |   | 1,214  |  
|Cash payments                                  |  |                  | (181   | )    |                    |   | (131  | )     |  |   | (312   | )
|Foreign currency impacts and other adjustments |  |                  | 24     |      |                    |   | (24   | )     |  |   |       |  
|                                               |  |                  |        |      |                    |   |       |       |  |   |        |  
|Balance at December 28, 2007                   |  |                  | 2,518  |      |                    |   | 1,313 |       |  |   | 3,831  |  
|Charges to expense, net                        |  |                  | 51     |      |                    |   |      |       |  |   | 51     |  
|Cash payments                                  |  |                  | (1,020 | )    |                    |   | (65   | )     |  |   | (1,085 | )
|Foreign currency impacts and other adjustments |  |                  | 36     |      |                    |   | 138   |       |  |   | 174    |  
|                                               |  |                  |        |      |                    |   |       |       |  |   |        |  
|Balance at March 28, 2008                      |  | $                | 1,585  |      |                    | $ | 1,386 |       |  | $ | 2,971  |  
|                                               |  |                  |        |      |                    |   |       |       |  |   |        |  
|                                               |  |                  |       
|Total expense since inception of plans         |  |                  |        |      |                    |   |       |       |  |   |        |  
|(in millions)                                  |  |                  |        |      |                    |   |       |       |  |   |        |  
|Restructuring expense                          |  |                  | $      | 18.9 |                   
|                                               |  |                  |        |      |                    |   |       |       |  |   |        |  
|Other restructuring-related costs(1)           |  |                  | $      | 6.7  |                   
|                                               |  |                  |        |      |                    |   |       |       |  |   |        |  



|(1) | These costs related primarily to employee retention and relocation costs and accelerated depreciation of assets disposed upon the closure of facilities. Of the $6.7 million in other
restructuring-related costs, $0.5 million and $1.3 million were recorded in the fiscal quarter and six months ended March 28, 2008, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Fiscal Year 2007 Plan. During the third quarter of fiscal year 2007, the Company committed to
a plan to combine and optimize the development and assembly of most of its NMR and mass spectrometry products, to further centralize related administration and other functions and to reallocate certain resources toward more rapidly growing product
lines and geographies. As part of the plan, the Company is creating an information rich detection (IRD) center in Walnut Creek, California, where NMR operations currently located in Palo Alto, California will be integrated with mass
spectrometry operations already located in Walnut Creek. The Company will invest in a new 45,000 square foot building and a substantial remodel of an existing building there to house the IRD center.



As a result of the plan, a number of employee positions have been or will be
relocated or eliminated and certain facilities will be consolidated. These actions primarily impact the Scientific Instruments segment and involve the elimination of between approximately 40 and 60 positions. The Company expects these activities to
be completed during the first half of fiscal year 2009.



Restructuring and other related costs associated with this plan include one-time termination benefits, retention payments, costs to relocate facilities (including decommissioning costs, moving costs and temporary facility/storage costs),
accelerated depreciation of fixed assets to be disposed as a result of facilities actions and lease termination costs.



The following table sets forth changes in the Companys restructuring liability relating to the foregoing plan during the first and second quarters
of fiscal year 2008:



|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  
|---------------------------------------------- |  | ---------------- | ------ | --- | ------------------ | - | --- | ----- |  | - | ------ | -
|                                               |  | Employee-Related |        |     | Facilities-Related |   |     | Total | 
|(in thousands)                                 |  |                  |        |     |                    |   |     |       |  |   |        |  
|Balance at September 28, 2007                  |  | $                | 2,222  |     |                    | $ |    |       |  | $ | 2,222  |  
|Charges to expense, net                        |  |                  | 453    |     |                    |   | 761 |       |  |   | 1,214  |  
|Cash payments                                  |  |                  | (181   | )   |                    |   | (77 | )     |  |   | (258   | )
|Foreign currency impacts and other adjustments |  |                  | 24     |     |                    |   | (20 | )     |  |   | 4      |  
|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  
|Balance at December 28, 2007                   |  |                  | 2,518  |     |                    |   | 664 |       |  |   | 3,182  |  
|Charges to expense, net                        |  |                  | 51     |     |                    |   |    |       |  |   | 51     |  
|Cash payments                                  |  |                  | (1,020 | )   |                    |   | (44 | )     |  |   | (1,064 | )
|Foreign currency impacts and other adjustments |  |                  | 36     |     |                    |   | 136 |       |  |   | 172    |  
|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  
|Balance at March 28, 2008                      |  | $                | 1,585  |     |                    | $ | 756 |       |  | $ | 2,341  |  
|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  
|                                               |  |                  |       
|Total expense since inception of plan          |  |                  |        |     |                    |   |     |       |  |   |        |  
|(in millions)                                  |  |                  |        |     |                    |   |     |       |  |   |        |  
|Restructuring expense                          |  |                  | $      | 3.6 |                   
|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  
|Other restructuring-related costs              |  |                  | $      | 3.3 |                   
|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  



The restructuring
charges of $0.1 million and $1.3 million recorded during the fiscal quarter and six months ended March 28, 2008, related to employee termination benefits and costs associated with the closure of leased facilities. The Company also incurred $0.5
million and $1.3 million in other restructuring-related costs during the fiscal quarter and six months ended March 28, 2008, respectively. These costs were related to employee retention costs and facilities-related costs including
decommissioning costs and non-cash charges for accelerated depreciation of assets to be disposed upon the closure of facilities.



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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



|Note 9. | Warranty and Indemnification Obligations
|------- | ----------------------------------------



Product Warranties. The Companys products are generally subject to warranties. Liabilities for the estimated future costs of repair or
replacement are established and charged to cost of sales at the time the related sale is recognized. The amount of liability to be recorded is based on managements best estimates of future warranty costs after considering historical and
projected product failure rates and product repair costs.



Changes in the Companys estimated liability for product warranty during the six months ended March 28, 2008 and March 30, 2007 follow:



|                                            |  |                  |        |   |               |   |        |  
|------------------------------------------- |  | ---------------- | ------ | - | ------------- | - | ------ | -
|                                            |  | Six Months Ended |       
|                                            |  | March 28,2008    |        |   | March 30,2007 |  
|(in thousands)                              |  |                  |        |   |               |   |        |  
|Beginning balance                           |  | $                | 12,454 |   |               | $ | 11,042 |  
|Charges to costs and expenses               |  |                  | 1,972  |   |               |   | 2,743  |  
|Warranty expenditures and other adjustments |  |                  | (1,451 | ) |               |   | (2,040 | )
|                                            |  |                  |        |   |               |   |        |  
|Ending balance                              |  | $                | 12,975 |   |               | $ | 11,745 |  
|                                            |  |                  |        |   |               |   |        |  



Indemnification
Obligations. Financial Accounting Standards Board (FASB) Interpretation No. (FIN) 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, requires a guarantor to recognize a liability for and/or disclose obligations it has undertaken in relation to the issuance of the guarantee. Under this guidance, arrangements involving indemnification clauses are subject to the
disclosure requirements of FIN 45 only.



The Company is
subject to certain indemnification obligations to VMS (formerly VAI) and VSEA in connection with the Instruments business as conducted by VAI prior to the Distribution (described in Note 2). These indemnification obligations cover a variety of
aspects of the Companys business, including, but not limited to, employee, tax, intellectual property, litigation and environmental matters. Certain of the agreements containing these indemnification obligations are disclosed as exhibits to
the Companys Annual Report on Form 10-K. The estimated fair value of these indemnification obligations is not considered to be material.



The Company is subject to certain indemnification obligations to Jabil in connection with the Companys sale of its Electronics Manufacturing
Business to Jabil. These indemnification obligations cover certain aspects of the Companys conduct of the Electronics Manufacturing Business prior to its sale to Jabil, including, but not limited to, tax and environmental matters. The
agreement containing these indemnification obligations is disclosed as an exhibit to the Companys Annual Report on Form 10-K. The estimated fair value of these indemnification obligations is not considered to be material.



The Companys By-Laws require it to indemnify its officers and
directors, as well as those who act as directors and officers of other entities at the request of the Company, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceedings
arising out of their services to the Company. In addition, the Company has entered into separate indemnity agreements with each director and officer that provide for indemnification of these directors and officers under certain circumstances. The
form of these indemnity agreements is disclosed as an exhibit to the Companys Annual Report on Form 10-K. The indemnification obligations are more fully described in these indemnity agreements and the Companys By-Laws. The Company
purchases insurance to cover claims or a portion of any claims made against its directors and officers. Since a maximum obligation is not explicitly stated in the Companys By-Laws



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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



or these indemnity agreements and will depend on the facts and circumstances that arise out of any future claims, the overall maximum amount of the
obligations cannot reasonably be estimated. Historically, the Company has not made payments related to these indemnification obligations and the estimated fair value of these indemnification obligations is not considered to be material.



As is customary in the Companys industry and as provided for in
local law in the U.S. and other jurisdictions, many of the Companys standard contracts provide remedies to customers and other third parties with whom the Company enters into contracts, such as defense, settlement or payment of judgment for
intellectual property claims related to the use of its products. From time to time, the Company also agrees to indemnify customers, suppliers, contractors, lessors, lessees and others with whom it enters into contracts, against loss, expense and/or
liability arising from various triggering events related to the sale and the use of the Companys products and services, the use of their goods and services, the use of facilities and other matters covered by such contracts, usually up to a
specified maximum amount. In addition, from time to time, the Company sometimes also agrees to indemnify these parties against claims related to undiscovered liabilities, additional product liability or environmental obligations. Claims made under
such indemnification obligations have been insignificant and the estimated fair value of these indemnification obligations is not considered to be material.



|Note 10. | Debt and Credit Facilities
|-------- | --------------------------



Credit Facilities. The Company maintains relationships with banks in many countries from whom it sometimes obtains bank guarantees and short-term
standby letters of credit. These guarantees and letters of credit relate primarily to advance payments and deposits made to the Companys subsidiaries by customers for which separate liabilities are recorded in the unaudited condensed
consolidated financial statements. As of March 28, 2008, a total of $21.6 million of these bank guarantees and letters of credit were outstanding. No amounts had been drawn by beneficiaries under these or any other outstanding guarantees or
letters of credit as of that date.



Long-term Debt. As
of both March 28, 2008 and September 28, 2007, the Company had a $25.0 million term loan outstanding with a U.S. financial institution at a fixed interest rate of 6.7%. The term loan contains certain covenants that limit future borrowings
and the payment of cash dividends and require the maintenance of certain levels of working capital and operating results. The Company was in compliance with all restrictive covenants of the term loan agreement at March 28, 2008.



The following table summarizes future principal payments on borrowings under
long-term debt outstanding as of March 28, 2008:



|                                           |  |                            |       |              |   |       |  |      |       |      |   |            |  |   |       |  |   |   |  |   |       |  |   |       
|------------------------------------------ |  | -------------------------- | ----- | ------------ | - | ----- |  | ---- | ----- | ---- | - | ---------- |  | - | ----- |  | - | - |  | - | ----- |  | - | ------
|                                           |  | SixMonthsEndingOct. 3,2008 |       | Fiscal Years |   | Total
|                                           |  | 2009                       |       | 2010         |   | 2011  |  | 2012 |       | 2013 |   | Thereafter | 
|(in thousands)                             |  |                            |       |              |   |       |  |      |       |      |   |            |  |   |       |  |   |   |  |   |       |  |   |       
|Long-term debt (including current portion) |  | $                          | 6,250 |              | $ |      |  | $    | 6,250 |      | $ |           |  | $ | 6,250 |  | $ |  |  | $ | 6,250 |  | $ | 25,000
|                                           |  |                            |       |              |   |       |  |      |       |      |   |            |  |   |       |  |   |   |  |   |       |  |   |       



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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



|Note 11. | Defined Benefit Retirement Plans
|-------- | --------------------------------



Net Periodic Pension Cost. The components of net periodic pension cost relating to the Companys defined benefit retirement plans follow:



|                                                                  |  |                      |      |   |                  |   |      |               |  |   |               |   |  |   |        |  
|----------------------------------------------------------------- |  | -------------------- | ---- | - | ---------------- | - | ---- | ------------- |  | - | ------------- | - |  | - | ------ | -
|                                                                  |  | Fiscal Quarter Ended |      |   | Six Months Ended |  
|                                                                  |  | March 28,2008        |      |   | March 30,2007    |   |      | March 28,2008 |  |   | March 30,2007 |  
|(in thousands)                                                    |  |                      |      |   |                  |   |      |               |  |   |               |   |  |   |        |  
|Service cost                                                      |  | $                    | 343  |   |                  | $ | 334  |               |  | $ | 686           |   |  | $ | 668    |  
|Interest cost                                                     |  |                      | 723  |   |                  |   | 626  |               |  |   | 1,446         |   |  |   | 1,252  |  
|Expected return on plan assets                                    |  |                      | (653 | ) |                  |   | (512 | )             |  |   | (1,306        | ) |  |   | (1,024 | )
|Amortization of prior service cost and actuarial gains and losses |  |                      |     |   |                  |   | 111  |               |  |   |              |   |  |   | 222    |  
|                                                                  |  |                      |      |   |                  |   |      |               |  |   |               |   |  |   |        |  
|Net periodic pension cost                                         |  | $                    | 413  |   |                  | $ | 559  |               |  | $ | 826           |   |  | $ | 1,118  |  
|                                                                  |  |                      |      |   |                  |   |      |               |  |   |               |   |  |   |        |  



Employer
Contributions. During the fiscal quarter and six months ended March 28, 2008, the Company made contributions totaling $0.3 million and $0.7 million to its defined benefit pension plans. The Company currently anticipates contributing an
additional $0.7 million to these plans in the remaining six months of fiscal year 2008.



|Note 12. | Contingencies
|-------- | -------------



Environmental Matters. The Companys operations are subject to various federal, state and local laws in the U.S. as well as laws in other
countries regulating the discharge of materials into the environment or otherwise relating to the protection of the environment. These regulations increase the costs and potential liabilities of the Companys operations. However, the Company
does not currently anticipate that its compliance with these regulations will have a material effect on the Companys capital expenditures, earnings or competitive position.



The Company and VSEA are each obligated (under the terms of the Distribution described in Note 2) to indemnify VMS for
one-third of certain costs (after adjusting for any insurance recoveries and tax benefits recognized or realized by VMS for such costs) relating to (a) environmental investigation, monitoring and/or remediation activities at certain facilities
previously operated by VAI and third-party claims made in connection with environmental conditions at those facilities, and (b) U.S. Environmental Protection Agency or third-party claims alleging that VAI or VMS is a potentially responsible
party under the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended (CERCLA) in connection with certain sites to which VAI allegedly shipped manufacturing waste for recycling, treatment or disposal
(the CERCLA sites). With respect to the facilities formerly operated by VAI, VMS is overseeing the environmental investigation, monitoring and/or remediation activities, in most cases under the direction of or in consultation with
federal, state and/or local agencies, and handling third-party claims. VMS is also handling claims relating to the CERCLA sites. The Company is also undertaking environmental investigation and/or monitoring activities at one of its facilities under
the direction of or in consultation with governmental agencies.



Various uncertainties make it difficult to estimate future costs for certain of these environmental-related activities, specifically external legal expenses, VMS internal oversight costs, third-party claims and a former VAI facility
where the likelihood and scope of further environmental-related activities are difficult to assess. As of March 28, 2008, it was nonetheless estimated that the Companys future exposure for these environmental-related costs ranged in the
aggregate from $1.2 million to $2.6 million. The time frame over which these costs are



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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



expected to be incurred varies with each type of cost, ranging up to approximately 22 years as of March 28, 2008. No amount in the foregoing range of
estimated future costs is discounted, and no amount in the range is believed to be more probable of being incurred than any other amount in such range. The Company therefore had an accrual of $1.2 million as of March 28, 2008 for these
future environmental-related costs.



Sufficient knowledge has
been gained to be able to better estimate other costs for future environmental-related activities. As of March 28, 2008, it was estimated that the Companys future costs for these environmental-related activities ranged in the aggregate
from $2.9 million to $12.8 million. The time frame over which these costs are expected to be incurred varies, ranging up to approximately 22 years as of March 28, 2008. As to each of these ranges of cost estimates, it was determined that a
particular amount within the range was a better estimate than any other amount within the range. Together, these amounts totaled $5.8 million at March 28, 2008. Because both the amount and timing of the recurring portion of these costs were
reliably determinable, that portion is discounted, at 4%, net of inflation. The Company therefore had an accrual of $4.0 million as of March 28, 2008, which represents its best estimate of these future environmental-related costs after
discounting estimated recurring future costs. This accrual is in addition to the $1.2 million described in the preceding paragraph.



The Company has not reduced any environmental-related liability in anticipation of recoveries from third parties. However, an insurance company has agreed
to pay a portion of certain of VAIs (now VMS) future environmental-related costs, for which the Company has an indemnification obligation, and the Company therefore has a long-term receivable of $1.0 million (discounted at 4%, net
of inflation) in other assets as of March 28, 2008, for the Companys share of that insurance recovery.



The Company believes that its reserves for the foregoing and other environmental-related matters are adequate, but as the scope of its obligation becomes
more clearly defined, these reserves may be modified and related charges against or credits to earnings may be made. Although any ultimate liability arising from environmental-related matters could result in significant expenditures that, if
aggregated and assumed to occur within a single fiscal year, would be material to the Companys financial statements, the likelihood of such occurrence is considered remote. Based on information currently available and its best assessment of
the ultimate amount and timing of environmental-related events, the Company believes that the costs of environmental-related matters are not reasonably likely to have a material adverse effect on the Companys financial condition or results of
operations.



Legal Proceedings. The Company is involved
in pending legal proceedings that are ordinary, routine and incidental to its business. While the ultimate outcome of these legal matters is not determinable, the Company believes that these matters are not reasonably likely to have a material
adverse effect on the Companys financial condition or results of operations.



|Note 13. | Stockholders Equity and Stock Plans
|-------- | ------------------------------------



Share-Based Compensation Expense. The Company accounts for share-based awards in accordance with the provisions of SFAS 123(R), Share-Based
Payment.



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VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



The following table summarizes the amount of share-based compensation expense by award type as well
as the effect of this expense on net earnings and net earnings per share:



|                                                                                |  |                      |        |   |                  |   |        |               |  |   |               |   |  |   |        |  
|------------------------------------------------------------------------------- |  | -------------------- | ------ | - | ---------------- | - | ------ | ------------- |  | - | ------------- | - |  | - | ------ | -
|                                                                                |  | Fiscal Quarter Ended |        |   | Six Months Ended |  
|                                                                                |  | March 28,2008        |        |   | March 30,2007    |   |        | March 28,2008 |  |   | March 30,2007 |  
|(in thousands, except per share amounts)                                        |  |                      |        |   |                  |   |        |               |  |   |               |   |  |   |        |  
|Share-based compensation expense by award type:                                 |  |                      |        |   |                  |   |        |               |  |   |               |   |  |   |        |  
|Employee and non-employee director stock options                                |  | $                    | (1,823 | ) |                  | $ | (1,902 | )             |  | $ | (2,791        | ) |  | $ | (3,980 | )
|Employee stock purchase plan                                                    |  |                      | (253   | ) |                  |   | (308   | )             |  |   | (563          | ) |  |   | (503   | )
|Restricted (nonvested) stock(1)                                                 |  |                      | (802   | ) |                  |   | (534   | )             |  |   | (1,243        | ) |  |   | (1,106 | )
|Non-employee director stock units                                               |  |                      | (225   | ) |                  |   | (125   | )             |  |   | (225          | ) |  |   | (125   | )
|                                                                                |  |                      |        |   |                  |   |        |               |  |   |               |   |  |   |        |  
|Total share-based compensation expense (effect on earnings before income taxes) |  |                      | (3,103 | ) |                  |   | (2,869 | )             |  |   | (4,822        | ) |  |   | (5,714 | )
|Effect on income tax expense                                                    |  |                      | 762    |   |                  |   | 1,062  |               |  |   | 1,326         |   |  |   | 2,085  |  
|                                                                                |  |                      |        |   |                  |   |        |               |  |   |               |   |  |   |        |  
|Effect on net earnings                                                          |  | $                    | (2,341 | ) |                  | $ | (1,807 | )             |  | $ | (3,496        | ) |  | $ | (3,629 | )
|                                                                                |  |                      |        |   |                  |   |        |               |  |   |               |   |  |   |        |  
|                                                                                |  |                      |        |  
|Effect on net earnings per share:                                               |  |                      |        |   |                  |   |        |               |  |   |               |   |  |   |        |  
|Basic                                                                           |  | $                    | (0.08  | ) |                  | $ | (0.06  | )             |  | $ | (0.12         | ) |  | $ | (0.12  | )
|                                                                                |  |                      |        |   |                  |   |        |               |  |   |               |   |  |   |        |  
|Diluted                                                                         |  | $                    | (0.07  | ) |                  | $ | (0.06  | )             |  | $ | (0.11         | ) |  | $ | (0.12  | )
|                                                                                |  |                      |        |   |                  |   |        |               |  |   |               |   |  |   |        |  



|(1) | Includes $81 and $162 in the fiscal quarter and six months ended March 28, 2008, respectively, related to shares granted in connection with the Companys Fiscal Year 2007
restructuring plan.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Share-based compensation
expense has been included in the Companys unaudited condensed consolidated statement of earnings as follows:



|                                    |  |                      |       |                  |   |               |  |               |       |  |   |      
|----------------------------------- |  | -------------------- | ----- | ---------------- | - | ------------- |  | ------------- | ----- |  | - | -----
|                                    |  | Fiscal Quarter Ended |       | Six Months Ended
|                                    |  | March 28,2008        |       | March 30,2007    |   | March 28,2008 |  | March 30,2007
|(in thousands)                      |  |                      |       |                  |   |               |  |               |       |  |   |      
|Cost of sales                       |  | $                    | 108   |                  | $ | 111           |  | $             | 232   |  | $ | 219  
|Selling, general and administrative |  |                      | 2,878 |                  |   | 2,632         |  |               | 4,339 |  |   | 5,241
|Research and development            |  |                      | 117   |                  |   | 126           |  |               | 251   |  |   | 254  
|                                    |  |                      |       |                  |   |               |  |               |       |  |   |      
|Total                               |  | $                    | 3,103 |                  | $ | 2,869         |  | $             | 4,822 |  | $ | 5,714
|                                    |  |                      |       |                  |   |               |  |               |       |  |   |      



Stock Options.Under the Omnibus Stock Plan (OSP), the Company periodically grants stock options to officers, directors and employees. The exercise price for stock options granted under the OSP may not be less than 100% of the fair market value at
the date of the grant. Options granted are exercisable at the times and on the terms established by the Compensation Committee, but not later than ten years after the date of grant (except in the event of death, after which an option is exercisable
for three years). Options granted generally become exercisable in cumulative installments of one-third each year commencing one year following the date of grant.



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VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



The following table summarizes stock option activity under the OSP for the six months ended
March 28, 2008:



|                                  |  |                |   |  |                                |       |                                   |   |    
|--------------------------------- |  | -------------- | - |  | ------------------------------ | ----- | --------------------------------- | - | ---
|                                  |  | Shares         |   |  | Weighted-AverageExercise Price |       | AggregateGrant DateFair Value (1)
|                                  |  | (in thousands) |   |  |                                |       | (in millions)                    
|Outstanding at September 28, 2007 |  | 1,783          |   |  | $                              | 38.43 |                                   |   |    
|Granted                           |  | 276            |   |  | $                              | 68.38 |                                   | $ | 5.4
|Exercised                         |  | (317           | ) |  | $                              | 35.14 |                                   |   |    
|Cancelled or expired              |  | (2             | ) |  | $                              | 41.72 |                                   |   |    
|                                  |  |                |   |  |                                |       |                                   |   |    
|Outstanding at March 28, 2008     |  | 1,740          |   |  | $                              | 43.77 |                                   |   |    
|                                  |  |                |   |  |                                |       |                                   |   |    



|(1) | After estimated forfeitures.
|--- | ----------------------------



As of March 28, 2008, the unrecorded deferred share-based compensation balance related to stock options was $7.1 million. This amount will be
recognized as expense using the straight-line attribution method over an estimated weighted-average amortization period of 1.3 years.



Restricted (Nonvested) Stock.Under the OSP, the Company also periodically grants restricted (nonvested) common stock to employees. Such grants are
valued as of the grant date. These amounts are recognized by the Company as share-based compensation expense ratably over their respective vesting periods, which range from one to three years.



The following table summarizes restricted (nonvested) common stock activity
under the OSP for the six months ended March 28, 2008:



|                                               |  |                |   |  |                                      |       |                               |   |    
|---------------------------------------------- |  | -------------- | - |  | ------------------------------------ | ----- | ----------------------------- | - | ---
|                                               |  | Shares         |   |  | Weighted-AverageGrant DateFair Value |       | AggregateGrant DateFair Value
|                                               |  | (in thousands) |   |  |                                      |       | (in millions)                
|Outstanding and unvested at September 28, 2007 |  | 111            |   |  | $                                    | 43.92 |                               |   |    
|Granted                                        |  | 42             |   |  | $                                    | 69.44 |                               | $ | 2.9
|Vested                                         |  | (41            | ) |  | $                                    | 39.62 |                               |   |    
|                                               |  |                |   |  |                                      |       |                               |   |    
|Outstanding and unvested at March 28, 2008     |  | 112            |   |  | $                                    | 55.07 |                               |   |    
|                                               |  |                |   |  |                                      |       |                               |   |    



As of March 28,
2008, there was a total of $3.5 million in unrecognized compensation expense related to restricted stock granted under the OSP. This expense is expected to be recognized over a weighted-average amortization period of 1.5 years.



Non-Employee Director Stock Units. Under the terms of the OSP, on the
first business day following each annual meeting of the Companys stockholders, each person then serving as a non-employee director is automatically granted stock units having an initial value of $45,000 (beginning in fiscal year 2008) and
$25,000 (prior to fiscal year 2008). The stock units will vest upon termination of the directors service on the Board of Directors and will then be satisfied by issuance of shares of the Companys common stock. Each non-employee director
who holds stock units will not have rights as a stockholder with respect to the shares issuable thereunder until such shares are paid out. The stock units are not transferable, except to the non-employee directors designated beneficiary or
estate in the event of his or her death. During the fiscal quarters ended March 28, 2008



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VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



and March 30, 2007, the Company granted stock units with an aggregate value of $225,000 and $125,000, respectively, to non-employee members of its Board
of Directors (of which there were five) and recognized the total value as share-based compensation expense at the time of grant.



Employee Stock Purchase Plan.During the fiscal quarter and six months ended March 28, 2008, employees purchased approximately 21,000 shares
for $1.2 million and 41,000 shares for $2.1 million, respectively. During the fiscal quarter and six months ended March 30, 2007, employees purchased approximately 29,000 shares for $1.1 million and 55,000 shares for $2.0 million, respectively.
As of March 28, 2008, a total of approximately 226,000 shares remained available for issuance under the ESPP.



Stock Repurchase Programs. In February 2008, the Companys Board of Directors approved a new stock repurchase program under which the Company
was authorized to utilize up to $100 million to repurchase shares of its common stock. This repurchase program is effective through December 31, 2009. During the fiscal quarter ended March 28, 2008, the Company repurchased and retired
376,000 shares under this authorization at an aggregate cost of $20.2 million. As of March 28, 2008, the Company had remaining authorization to repurchase $79.8 million of its common stock under this program.



In January 2007, the Companys Board of Directors approved a stock
repurchase program under which the Company was authorized to utilize up to $100 million to repurchase shares of its common stock. This repurchase program is effective through December 31, 2008. During the six months ended March 28, 2008,
the Company repurchased and retired 876,000 shares under this authorization at an aggregate cost of $50.4 million, which completed this repurchase program.



Other Stock Repurchases.During the six months ended March 28, 2008, the Company repurchased and retired 12,000 shares tendered to it
by employees in settlement of employee tax withholding obligations due from those employees upon the vesting of restricted stock.



|Note 14. | Investments in Privately Held Companies
|-------- | ---------------------------------------



The Company has equity investments in privately held companies which, because of its ownership interest and other factors, are carried at cost. The
Company monitors these investments for impairment.



During the
second quarter of fiscal year 2008, the Company became aware of information which raised substantial doubt about the ability of a small, privately held company in which the Company holds a cost-method equity investment to continue as a going
concern. Based on this information, the Company determined that the fair value of its investment had declined and that the decline was other-than-temporary. As a result, the Company wrote off the entire $3.0 million carrying value of its investment
via an impairment charge in the period.



|Note 15. | Income Taxes
|-------- | ------------



Effective September 29, 2007, the Company adopted FIN 48, Accounting for Uncertainty in Income TaxesAn Interpretation of FASB Statement No
109, which addresses accounting for, and disclosure of, uncertain tax positions. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to
be taken in a tax return. As a result of the adoption of FIN 48, the Company reduced its liability for unrecognized tax benefits and increased deferred tax assets by $2.4 million and $0.6 million, respectively. These adjustments were aggregated and
accounted for as a cumulative effect of a change in accounting principle, which resulted in an increase to retained earnings of $3.0 million. The total amount of unrecognized tax benefits excluding interest thereon as of the date of adoption was
$6.9 million, substantially all of which would impact the effective tax rate if realized. The Companys policy to



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VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



include interest and penalties related to income taxes within income tax expense did not change as a result of implementing FIN 48. As of the date of
adoption of FIN 48, the Company had accrued $0.7 million in income taxes payable for the payment of interest and penalties related to unrecognized tax benefits.



The Companys U.S. federal, state and local income tax returns and non-U.S. income tax returns are subject to audit by relevant tax authorities.
The Companys income tax reporting periods beginning after fiscal year 2003 for the U.S. and after fiscal year 2001 for the Companys major non-U.S. jurisdictions remain generally open to audit by relevant tax authorities.



During the fiscal quarter ended March 28, 2008, total unrecognized tax
benefits were increased by $0.2 million due to additions for current-year unrecognized tax benefits. This increase resulted in a corresponding tax expense in the fiscal quarter ended March 28, 2008. During the six months ended
March 28, 2008, total unrecognized tax benefits were decreased by $0.9 million due to the lapse of certain statutes of limitations in the first quarter, which resulted in a $1.3 million reduction, partially offset by additions for current-year
unrecognized tax benefits. This net decrease resulted in a corresponding tax benefit in the six months ended March 28, 2008.



At March 28, 2008, the total amount of unrecognized tax benefits was $6.0 million, substantially all of which would impact the effective tax rate if
realized. Income taxes payable at March 28, 2008, included accrued interest and penalties of $0.7 million. Although the timing and outcome of income tax audits is highly uncertain, it is possible that certain unrecognized tax benefits could
decrease in the next twelve months due to lapse of certain statutes of limitation and result in a reduction in the annual effective tax rate of up to 1%. Any such reduction could be impacted by other changes in unrecognized tax benefits.



|Note 16. | Net Earnings Per Share
|-------- | ----------------------



Basic earnings per share are calculated based on net earnings and the weighted-average number of shares of common stock outstanding during the reported
period. Diluted earnings per share are calculated similarly, except that the weighted-average number of common shares outstanding during the period are increased by the number of additional shares of common stock that would have been outstanding if
dilutive potential shares of common stock had been issued. The dilutive effect of potential common stock (including outstanding stock options, unvested restricted stock, ESPP shares and non-employee director stock units) is reflected in diluted
earnings per share by application of the treasury stock method, which includes consideration of share-based compensation as required by SFAS 123(R).



For the fiscal quarter and six months ended March 28, 2008, options to purchase 265,000 and 256,000 shares, respectively, were excluded from the
calculation of diluted earnings per share as their effect was anti-dilutive. For the fiscal quarter and six months ended March 30, 2007, options to purchase 26,000 and 30,000 shares, respectively, were excluded from the calculation of diluted
earnings per share as their effect was anti-dilutive.



A
reconciliation of weighted-average basic shares outstanding to weighted-average diluted shares outstanding follows:



|                                              |  |                      |  |                  |  |               |  |              
|--------------------------------------------- |  | -------------------- |  | ---------------- |  | ------------- |  | -------------
|                                              |  | Fiscal Quarter Ended |  | Six Months Ended
|                                              |  | March 28,2008        |  | March 30,2007    |  | March 28,2008 |  | March 30,2007
|(in thousands)                                |  |                      |  |                  |  |               |  |              
|Weighted-average basic shares outstanding     |  | 29,830               |  | 30,420           |  | 30,080        |  | 30,504       
|Net effect of dilutive potential common stock |  | 413                  |  | 512              |  | 518           |  | 452          
|                                              |  |                      |  |                  |  |               |  |              
|Weighted-average diluted shares outstanding   |  | 30,243               |  | 30,932           |  | 30,598        |  | 30,956       
|                                              |  |                      |  |                  |  |               |  |              



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VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



|Note 17. | Industry Segments
|-------- | -----------------



For financial reporting purposes, the Companys operations are grouped into two business segments: Scientific Instruments and Vacuum Technologies.
The Scientific Instruments segment designs, develops, manufactures, markets, sells and services equipment and related software, consumable products, accessories and services for a broad range of life science and industrial (which includes
environmental, food and energy) applications requiring identification, quantification and analysis of the composition or structure of liquids, solids or gases. The Vacuum Technologies segment designs, develops, manufactures, markets, sells and
services vacuum products and related accessories and services used to create, contain, control, measure and test vacuum environments in a broad range of life science and industrial applications requiring ultra-clean or high-vacuum environments.
These segments were determined in accordance with SFAS 131, Disclosures about Segments of an Enterprise and Related Information.



General corporate costs include shared costs of legal, tax, accounting, treasury, insurance and other management costs. A portion of the indirect and
common costs has been allocated to the segments through the use of estimates. Also, transactions between segments are accounted for at cost and are not included in sales. Accordingly, the following information is provided for purposes of achieving
an understanding of operations, but might 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
might not be meaningful.



|                                                |  |                      |       |   |                  |   |       |               |  |   |               |   |  |   |       |  
|----------------------------------------------- |  | -------------------- | ----- | - | ---------------- | - | ----- | ------------- |  | - | ------------- | - |  | - | ----- | -
|                                                |  | Sales                |       |   | Sales            |  
|                                                |  | Fiscal Quarter Ended |       |   | Six Months Ended |  
|                                                |  | March 28,2008        |       |   | March 30,2007    |   |       | March 28,2008 |  |   | March 30,2007 |  
|(in millions)                                   |  |                      |       |   |                  |   |       |               |  |   |               |   |  |   |       |  
|Scientific Instruments                          |  | $                    | 204.4 |   |                  | $ | 190.3 |               |  | $ | 401.4         |   |  | $ | 367.2 |  
|Vacuum Technologies                             |  |                      | 43.8  |   |                  |   | 39.6  |               |  |   | 84.2          |   |  |   | 80.7  |  
|                                                |  |                      |       |   |                  |   |       |               |  |   |               |   |  |   |       |  
|Total industry segments                         |  | $                    | 248.2 |   |                  | $ | 229.9 |               |  | $ | 485.6         |   |  | $ | 447.9 |  
|                                                |  |                      |       |   |                  |   |       |               |  |   |               |   |  |   |       |  
|                                                |  |                     
|                                                |  | Pretax Earnings      |       |   | Pretax Earnings  |  
|                                                |  | Fiscal Quarter Ended |       |   | Six Months Ended |  
|                                                |  | March 28,2008        |       |   | March 30,2007    |   |       | March 28,2008 |  |   | March 30,2007 |  
|(in millions)                                   |  |                      |       |   |                  |   |       |               |  |   |               |   |  |   |       |  
|Scientific Instruments                          |  | $                    | 22.5  |   |                  | $ | 21.8  |               |  | $ | 42.3          |   |  | $ | 40.7  |  
|Vacuum Technologies                             |  |                      | 8.8   |   |                  |   | 7.6   |               |  |   | 16.5          |   |  |   | 16.0  |  
|                                                |  |                      |       |   |                  |   |       |               |  |   |               |   |  |   |       |  
|Total industry segments                         |  |                      | 31.3  |   |                  |   | 29.4  |               |  |   | 58.8          |   |  |   | 56.7  |  
|General corporate                               |  |                      | (4.2  | ) |                  |   | (5.3  | )             |  |   | (7.6          | ) |  |   | (9.7  | )
|Impairment of private company equity investment |  |                      | (3.0  | ) |                  |   |      |               |  |   | (3.0          | ) |  |   |      |  
|Interest income                                 |  |                      | 1.7   |   |                  |   | 1.4   |               |  |   | 3.7           |   |  |   | 2.6   |  
|Interest expense                                |  |                      | (0.4  | ) |                  |   | (0.5  | )             |  |   | (0.9          | ) |  |   | (1.0  | )
|                                                |  |                      |       |   |                  |   |       |               |  |   |               |   |  |   |       |  
|Total pretax earnings                           |  | $                    | 25.4  |   |                  | $ | 25.0  |               |  | $ | 51.0          |   |  | $ | 48.6  |  
|                                                |  |                      |       |   |                  |   |       |               |  |   |               |   |  |   |       |  



|Note 18. | Subsequent Event
|-------- | ----------------



On April 4, 2008, the Company acquired Oxford Diffraction Ltd. (Oxford Diffraction) for approximately $37 million in cash and assumed net
debt, subject to certain net asset adjustments. Under the terms of the acquisition, the Company might make additional purchase price payments of up to $10 million over a three-year



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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



period, depending on the future financial performance of the Oxford Diffraction business. Oxford Diffraction designs, manufactures, markets, sells and
services instruments and consumables for x-ray crystallography, an analytical technique used by scientists in pharmaceutical research and other research laboratories to determine the structure of both small molecules and large molecules such as
proteins. Oxford Diffraction became part of the Scientific Instruments segment.



|Note 19. | Recent Accounting Pronouncements
|-------- | --------------------------------



In September 2006, the FASB issued SFAS 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 applies to previous accounting pronouncements that require or permit fair value measurements. SFAS 157 is effective for fiscal years
beginning after November 15, 2007, with certain exceptions which are described below. In February 2008, the FASB issued FASB Staff Position (FSP) 157-1,Application of FASB Statement No. 157 to FASB Statement No. 13 and
Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 (FSP 157-1), which amends SFAS 157 to exclude certain leasing transactions from its scope.
Also in February 2008, the FASB issued FSP 157-2, Effective Date of FASB Statement No. 157,which delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities to fiscal years beginning after
November 15, 2008, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Company does not expect the adoption of SFAS 157 to have a material impact on its
financial condition or results of operations.



In February
2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement 115, which provides companies with an option to measure eligible financial assets and
liabilities in their entirety at fair value. The fair value option may be applied instrument by instrument, and may be applied only to entire instruments. If a company elects the fair value option for an eligible item, changes in the
items fair value must be reported as unrealized gains and losses in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is evaluating the options provided under
SFAS 159 and their potential impact on its financial condition and results of operations if implemented.



In December 2007, the FASB issued SFAS 141 (revised 2007), Business Combinations, (SFAS 141(R)). SFAS 141(R) retains the fundamental
requirements of the original pronouncement requiring that the purchase method be used for all business combinations but also provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and
any noncontrolling interest in the acquiree. It also requires the recognition of assets acquired and liabilities assumed arising from contingencies, the capitalization of in-process research and development at fair value, and the expensing of
acquisition-related costs as incurred.SFAS 141(R) is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the requirements of SFAS 141(R) and does not expect its adoption in the first
quarter of fiscal year 2010 to have a material impact on the Companys financial condition or results of operations. However, in the event that the Company completes acquisitions subsequent to its adoption of SFAS 141(R), the application of its
provisions will likely have a material impact on the Companys results of operations, although the Company is not currently able to estimate that impact.



In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB
No. 51. SFAS 160 requires that ownership interests in subsidiaries held by parties other than the parent and the amount of consolidated net income be clearly identified, labeled and presented in the consolidated financial statements. It
also requires once a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value. Sufficient



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VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



disclosures are required to clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is
effective for fiscal years beginning after December 15, 2008, and requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements are applied prospectively. The Company does
not expect the adoption of SFAS 160 to have a material impact on its financial condition or results of operations.



In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement
No. 133,which requires additional disclosures about the objectives and strategies of the derivative instruments and hedging activities, the method of accounting for such instruments under SFAS 133 and its related interpretations, and
a tabular disclosure of the effects of such instruments and related hedged items on the Companys financial condition and results of operations. SFAS 161 is effective for fiscal years beginning after November 15, 2008. The Company
does not expect the adoption of SFAS 161 to have a material impact on its financial condition or results of operations.



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------



Caution Regarding Forward-Looking Statements



Throughout this Report, and particularly in this Item 2Managements Discussion and Analysis of Financial
Condition and Results of Operations, there are forward-looking statements that are based upon our current expectations, estimates, and projections and that reflect our beliefs and assumptions based upon information available to us at the date of
this Report. In some cases, you can identify these statements by words such as may, might, will, should, expects, plans, anticipates, believes,
estimates, predicts, potential, or continue, and other similar terms. These forward-looking statements include (but are not limited to) those relating to the timing and amount of anticipated
restructuring costs and related cost savings, as well as our expected effective annual tax rate and anticipated capital expenditures in fiscal year 2008.



We caution investors that forward-looking statements are only our current expectations about future events. These forward-looking statements are not
guarantees of future performance and are subject to risks, uncertainties, and assumptions that are difficult to predict. Our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking
statements. Some of the important factors that could cause our results to differ are discussed in Item 1ARisk Factors in our Annual Report on Form 10-K for the fiscal year ended September 28, 2007. We encourage you to read
that section carefully.



Other risks and uncertainties that
could cause actual results to differ materially from those in our forward-looking statements include, but are not limited to, the following: whether we will succeed in new product development, release, commercialization, performance and acceptance;
whether we can achieve continued growth in sales for industrial and life science applications; risks arising from the timing of shipments, installations and the recognition of revenues on certain magnet-based products, including nuclear magnetic
resonance (NMR) spectroscopy systems, magnetic resonance (MR) imaging systems and fourier transform mass spectrometry (FTMS) systems and superconducting magnets; the impact of shifting product mix on profit
margins; competitive products and pricing; economic conditions in our 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 facilities consolidation) and other efficiency improvement activities (such as our global procurement and outsourcing initiatives); variability in our effective income tax rate (due to factors including the timing and amount of discrete
tax events and changes to unrecognized tax benefits); and other risks detailed from time to time in our filings with the U.S. Securities and Exchange Commission (the SEC). We disclaim any intent or obligation to update publicly any
forward-looking statements, whether in response to new information, future events or otherwise.



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##### Table of Contents

Results of Operations



Second Quarter of Fiscal Year 2008 Compared to Second Quarter of Fiscal Year 2007



Segment Results



For financial reporting purposes, our operations are grouped into two reportable business segments: Scientific Instruments and Vacuum Technologies. The
following table presents comparisons of our sales and operating earnings for each of those segments and in total for the second quarters of fiscal years 2008 and 2007:



|                               |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |      |  |       |  
|------------------------------ |  | -------------------- | ----- | - | ------------- | ----- | - | ------------------ | - | ----- | --------- |  | ----- | - |  | - | ---- |  | ----- | -
|                               |  | Fiscal Quarter Ended |       |   |               |       |   |                   
|                               |  | March 28,2008        |       |   | March 30,2007 |       |   | Increase(Decrease) |  
|                               |  | $                    |       |   | % ofSales     |       |   | $                  |   |       | % ofSales |  |       | $ |  | % |     
|(dollars in millions)          |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |      |  |       |  
|Sales by Segment:              |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |      |  |       |  
|Scientific Instruments         |  | $                    | 204.4 |   |               | 82.4  | % |                    | $ | 190.3 |           |  | 82.8  | % |  | $ | 14.1 |  | 7.4   | %
|Vacuum Technologies            |  |                      | 43.8  |   |               | 17.6  |   |                    |   | 39.6  |           |  | 17.2  |   |  |   | 4.2  |  | 10.5  |  
|                               |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |      |  |       |  
|Total company                  |  | $                    | 248.2 |   |               | 100.0 | % |                    | $ | 229.9 |           |  | 100.0 | % |  | $ | 18.3 |  | 7.9   | %
|                               |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |      |  |       |  
|                               |  |                      |       |   |               |      
|Operating Earnings by Segment: |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |      |  |       |  
|Scientific Instruments         |  | $                    | 22.5  |   |               | 11.0  | % |                    | $ | 21.8  |           |  | 11.4  | % |  | $ | 0.7  |  | 3.3   | %
|Vacuum Technologies            |  |                      | 8.8   |   |               | 20.1  |   |                    |   | 7.6   |           |  | 19.3  |   |  |   | 1.2  |  | 15.0  |  
|                               |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |      |  |       |  
|Total segments                 |  |                      | 31.3  |   |               | 12.6  |   |                    |   | 29.4  |           |  | 12.8  |   |  |   | 1.9  |  | 6.3   |  
|General corporate              |  |                      | (4.2  | ) |               | (1.7  | ) |                    |   | (5.3  | )         |  | (2.3  | ) |  |   | 1.1  |  | (20.6 | )
|                               |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |      |  |       |  
|Total company                  |  | $                    | 27.1  |   |               | 10.9  | % |                    | $ | 24.1  |           |  | 10.5  | % |  | $ | 3.0  |  | 12.2  | %
|                               |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |      |  |       |  



Scientific
Instruments. The increase in Scientific Instruments sales was primarily attributable to higher sales volume across a broad range of our products, including analytical instruments and consumable products. Sales increased for both industrial
(which includes environmental, food and energy) and life science applications.



Scientific Instruments operating earnings for the second quarter of fiscal year 2008 included acquisition-related intangible amortization of $1.9 million, amortization of $0.1 million related to inventory written up
in connection with the acquisition of certain assets and liabilities of Analogix, Inc. (the Analogix Business), restructuring and other related costs of $0.5 million and share-based compensation expense of $0.9 million. In comparison,
Scientific Instruments operating earnings for the second quarter of fiscal year 2007 included acquisition-related intangible amortization of $2.0 million, amortization of $0.2 million related to inventory written up in connection with the
acquisition of IonSpec Corporation (IonSpec), restructuring and other related costs of $0.1 million and share-based compensation expense of $0.8 million. Excluding the impact of these items, the decrease in operating earnings as a
percentage of sales was primarily attributable to the timing of costs relating to new product introductions and cost reduction and efficiency initiatives, which were partially offset by the positive impact of favorable sales mix, sales volume
leverage and cost reduction activities favorably impacting selling, general and administrative expenses.



Vacuum Technologies. The increase in Vacuum Technologies sales was driven by higher sales volume, particularly of turbomolecular pumps. Sales into
industrial applications increased strongly while sales into life science applications increased modestly.



Vacuum Technologies operating earnings for the second quarters of fiscal years 2008 and 2007 include the impact of share-based compensation expense of
$0.2 million and $0.1 million, respectively. Excluding the impact of these items, the increase in Vacuum Technologies operating earnings as a percentage of sales is primarily due to sales volume leverage (as the higher sales volume improved the
absorption rate of fixed and semi-variable costs).



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##### Table of Contents

Consolidated Results



The following table presents comparisons of our sales and other selected consolidated financial results for the second quarters of fiscal years 2008 and
2007:



|                                                |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |       |   |  |       |   
|----------------------------------------------- |  | -------------------- | ----- | - | ------------- | ----- | - | ------------------ | - | ----- | --------- |  | ----- | - |  | - | ----- | - |  | ----- | --
|                                                |  | Fiscal Quarter Ended |       |   |               |       |   |                    |  
|                                                |  | March 28,2008        |       |   | March 30,2007 |       |   | Increase(Decrease) |  
|                                                |  | $                    |       |   | % ofSales     |       |   | $                  |   |       | % ofSales |  |       | $ |  |   | %     |  
|(dollars in millions, except per share data)    |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |       |   |  |       |   
|Sales                                           |  | $                    | 248.2 |   |               | 100.0 | % |                    | $ | 229.9 |           |  | 100.0 | % |  | $ | 18.3  |   |  | 7.9   | % 
|                                                |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |       |   |  |       |   
|Gross profit                                    |  |                      | 112.9 |   |               | 45.5  |   |                    |   | 105.5 |           |  | 45.9  |   |  |   | 7.4   |   |  | 7.0   |   
|                                                |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |       |   |  |       |   
|                                                |  |                      |       |   |               |      
|Operating expenses:                             |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |       |   |  |       |   
|Selling, general and administrative             |  |                      | 67.6  |   |               | 27.3  |   |                    |   | 65.3  |           |  | 28.4  |   |  |   | 2.3   |   |  | 3.6   |   
|Research and development                        |  |                      | 18.2  |   |               | 7.3   |   |                    |   | 16.1  |           |  | 7.0   |   |  |   | 2.1   |   |  | 13.6  |   
|                                                |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |       |   |  |       |   
|Total operating expenses                        |  |                      | 85.8  |   |               | 34.6  |   |                    |   | 81.4  |           |  | 35.4  |   |  |   | 4.4   |   |  | 5.5   |   
|                                                |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |       |   |  |       |   
|                                                |  |                      |       |   |               |      
|Operating earnings                              |  |                      | 27.1  |   |               | 10.9  |   |                    |   | 24.1  |           |  | 10.5  |   |  |   | 3.0   |   |  | 12.2  |   
|Impairment of private company equity investment |  |                      | (3.0  | ) |               | (1.2  | ) |                    |   |      |           |  |      |   |  |   | (3.0  | ) |  | 100.0 |   
|Interest income                                 |  |                      | 1.7   |   |               | 0.7   |   |                    |   | 1.4   |           |  | 0.6   |   |  |   | 0.3   |   |  | 28.0  |   
|Interest expense                                |  |                      | (0.4  | ) |               | (0.2  | ) |                    |   | (0.5  | )         |  | (0.2  | ) |  |   | 0.1   |   |  | (4.6  | ) 
|Income tax expense                              |  |                      | (9.6  | ) |               | (3.8  | ) |                    |   | (8.7  | )         |  | (3.8  | ) |  |   | (0.9  | ) |  | 9.4   |   
|                                                |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |       |   |  |       |   
|Net Earnings                                    |  | $                    | 15.8  |   |               | 6.4   | % |                    | $ | 16.3  |           |  | 7.1   | % |  | $ | (0.5  | ) |  | (3.0  | )%
|                                                |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |       |   |  |       |   
|Net earnings per diluted share                  |  | $                    | 0.52  |   |               |       |   |                    | $ | 0.53  |           |  |       |   |  | $ | (0.01 | ) |  |       |   
|                                                |  |                      |       |   |               |       |   |                    |   |       |           |  |       |   |  |   |       |   |  |       |   



Sales. As
discussed under the heading Segment Results above, sales by the Scientific Instruments and Vacuum Technologies segments in the second quarter of fiscal year 2008 increased by 7.4% and 10.5%, respectively, compared to the prior-year quarter.
On a consolidated basis, sales grew 7.9% in the second quarter of fiscal year 2008. This growth was broad-based, with increases in sales of products for both industrial (which includes environmental, food and energy) and life science applications.
The weaker U.S. dollar also had a positive effect on the reported sales increases.



For geographic reporting purposes, we use four regionsNorth America (excluding Mexico), Europe (including the Middle East and Africa), Asia Pacific (including India) and Latin America (including Mexico). Sales
by geographic region in the second quarters of fiscal years 2008 and 2007 were as follow:



|                            |  |                      |       |           |               |   |   |                    |           |  |       |   |  |   |      |  |      |  
|--------------------------- |  | -------------------- | ----- | --------- | ------------- | - | - | ------------------ | --------- |  | ----- | - |  | - | ---- |  | ---- | -
|                            |  | Fiscal Quarter Ended |       |           |               |   |   |                   
|                            |  | March 28,2008        |       |           | March 30,2007 |   |   | Increase(Decrease) |          
|                            |  | $                    |       | % ofSales |               |   | $ |                    | % ofSales |  |       | $ |  | % |     
|(dollars in millions)       |  |                      |       |           |               |   |   |                    |           |  |       |   |  |   |      |  |      |  
|Sales by Geographic Region: |  |                      |       |           |               |   |   |                    |           |  |       |   |  |   |      |  |      |  
|North America               |  | $                    | 72.7  |           | 29.3          | % |   | $                  | 71.3      |  | 31.0  | % |  | $ | 1.4  |  | 2.0  | %
|Europe                      |  |                      | 105.0 |           | 42.3          |   |   |                    | 94.6      |  | 41.2  |   |  |   | 10.4 |  | 11.0 |  
|Asia Pacific                |  |                      | 53.8  |           | 21.7          |   |   |                    | 50.1      |  | 21.8  |   |  |   | 3.7  |  | 7.2  |  
|Latin America               |  |                      | 16.7  |           | 6.7           |   |   |                    | 13.9      |  | 6.0   |   |  |   | 2.8  |  | 20.5 |  
|                            |  |                      |       |           |               |   |   |                    |           |  |       |   |  |   |      |  |      |  
|Total company               |  | $                    | 248.2 |           | 100.0         | % |   | $                  | 229.9     |  | 100.0 | % |  | $ | 18.3 |  | 7.9  | %
|                            |  |                      |       |           |               |   |   |                    |           |  |       |   |  |   |      |  |      |  



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The sales increase in North America was primarily driven by higher sales of analytical instruments, which
were partially offset by lower sales of low-volume, high-selling price magnet-based products and, to a lesser extent, vacuum products. The increase in sales in Europe was attributable to stronger demand for a broad range of products in both our
Scientific Instruments and Vacuum Technologies segments. The increase in sales in Asia Pacific was primarily attributable to stronger demand for our analytical instruments and vacuum products. The sales increase in Latin America was primarily
attributable to stronger demand for our analytical instruments.



As described above, the sales increase in North America was less pronounced compared to the prior-year quarter due to the timing of sales of certain low-volume, high-selling price magnet-based products. We do not consider this geographic
shift to be indicative of any particular trend for magnet-based products as a whole, but rather to be reflective of the variability in results that these low-volume, high-selling price magnet-based products can create.



Gross Profit. Gross profit for the second quarter of fiscal year
2008 reflects the impact of $1.5 million in amortization expense relating to acquisition-related intangible assets, $0.1 million in amortization expense related to inventory written up primarily in connection with the acquisition of the Analogix
Business, $0.2 million in restructuring and other related costs and share-based compensation expense of $0.1 million. In comparison, gross profit for the second quarter of fiscal year 2007 reflects the impact of $1.3 million in amortization expense
relating to acquisition-related intangible assets, $0.2 million in amortization expense related to inventory written up in connection with the IonSpec acquisition and share-based compensation expense of $0.1 million. Excluding the impact of these
items, gross profit as a percentage of sales decreased slightly, primarily as a result of the weaker U.S. dollar (which increased reported revenues but lowered reported gross profit margins).



Selling, General and Administrative. Selling, general and
administrative expenses for the second quarter of fiscal year 2008 included $0.4 million in amortization expense relating to acquisition-related intangible assets, $0.2 million in restructuring and other related costs and $2.8 million in share-based
compensation expense. In comparison, selling, general and administrative expenses for the second quarter of fiscal year 2007 included $0.7 million in amortization expense relating to acquisition-related intangible assets, $0.1 million in
restructuring and other related costs and $2.6 million in share-based compensation expense. Excluding the impact of these items, the decrease in selling, general and administrative expenses as a percentage of sales was primarily the result of sales
volume leverage and cost reduction activities. The benefit from these positive factors was partially offset by higher costs relating to new product introductions and cost reduction and efficiency initiatives during the second quarter of fiscal year
2008.



Research and Development. Research and
development expenses for the second quarter of fiscal year 2008 reflect the impact of restructuring and other related costs of $0.2 million and $0.1 million in share-based compensation expense. In comparison, research and development expenses for
the second quarter of fiscal year 2007 reflect the impact of share-based compensation expense of $0.1 million. Excluding the impact of these items, research and development expenses increased as a percentage of sales primarily due to higher costs
relating to new product introductions.



Restructuring
Activities. Between fiscal years 2003 and 2007, we committed to several restructuring plans in order to adjust our organizational structure, improve operational efficiencies and eliminate redundant or excess costs resulting from acquisitions or
dispositions during those periods.From the respective inception dates of these plans through March 28, 2008, we have incurred a total of $18.9 million in restructuring expense and a total of $6.7 million in other costs related directly
to those plans (comprised primarily of employee retention and relocation costs and accelerated depreciation of assets disposed upon the closure of facilities). During the second quarter of fiscal year 2008, there was no significant activity under
these plans except for the fiscal year 2007 plan as described below.



Fiscal Year 2007 Plan. During the third quarter of fiscal year 2007, we committed to a plan to combine and optimize the development and assembly of most of our NMR and mass spectrometry products, to further



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centralize related administration and other functions and to reallocate certain resources toward more rapidly growing product lines and geographies. As part
of the plan, we are creating an information rich detection (IRD) center in Walnut Creek, California, where NMR operations currently located in Palo Alto, California will be integrated with mass spectrometry operations already located in
Walnut Creek. Merging our IRD talent base into this single location will capitalize on our strength in NMR and mass spectrometry and enhance our ability to develop innovative IRD solutions that are more powerful, complementary, routine and
user-friendly. Underscoring our commitment to IRD and the benefits that a combined location and organization will provide, we are investing in a new 45,000 square foot building and a substantial remodel of an existing building there to house the IRD
center.



As a result of the plan, a number of employee
positions have been or will be relocated or eliminated and certain facilities will be consolidated. These actions primarily impact the Scientific Instruments segment and involve the elimination of between approximately 40 and 60 positions. We expect
these activities to be completed during the first half of fiscal year 2009.



Restructuring and other related costs associated with this plan include one-time employee termination benefits, employee retention payments, costs to relocate facilities (including decommissioning costs, moving costs
and temporary facility/storage costs), accelerated depreciation of fixed assets to be disposed as a result of facilities actions and lease termination costs.



The following table sets forth changes in our restructuring liability relating to the foregoing plan during the second quarter of fiscal year 2008 as well
as total restructuring expense and other restructuring-related costs recorded since the inception of the plan:



|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  
|---------------------------------------------- |  | ---------------- | ------ | --- | ------------------ | - | --- | ----- |  | - | ------ | -
|                                               |  | Employee-Related |        |     | Facilities-Related |   |     | Total | 
|(in thousands)                                 |  |                  |        |     |                    |   |     |       |  |   |        |  
|Balance at December 28, 2007                   |  | $                | 2,518  |     |                    | $ | 664 |       |  | $ | 3,182  |  
|Charges to expense, net                        |  |                  | 51     |     |                    |   |    |       |  |   | 51     |  
|Cash payments                                  |  |                  | (1,020 | )   |                    |   | (44 | )     |  |   | (1,064 | )
|Foreign currency impacts and other adjustments |  |                  | 36     |     |                    |   | 136 |       |  |   | 172    |  
|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  
|Balance at March 28, 2008                      |  | $                | 1,585  |     |                    | $ | 756 |       |  | $ | 2,341  |  
|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  
|                                               |  |                  |       
|Total expense since inception of plan          |  |                  |        |     |                    |   |     |       |  |   |        |  
|(in millions)                                  |  |                  |        |     |                    |   |     |       |  |   |        |  
|Restructuring expense                          |  |                  | $      | 3.6 |                   
|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  
|Other restructuring related costs              |  |                  | $      | 3.3 |                   
|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  



The restructuring
charges of $0.1 million recorded during the second quarter of fiscal year 2008 related to employee termination benefits. We also incurred $0.5 million in other restructuring-related costs which were comprised of $0.4 million in employee retention
costs and $0.1 million in facilities-related costs including decommissioning costs and a non-cash charge for accelerated depreciation of assets to be disposed upon the closure of facilities.



Impairment of Private Company Equity Investment. During the second
quarter of fiscal year 2008, we became aware of information which raised substantial doubt about the ability of a small, private company in which we hold a cost-method equity investment to continue as a going concern. Based on this information, we
determined that the fair value of our investment had declined and that the decline was other-than-temporary. As a result, we wrote off the entire $3.0 million carrying value of our investment via an impairment charge in the period.



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Income Tax Expense.The effective income tax rate was 37.8% for the second quarter of fiscal year
2008, compared to 35.0% for the second quarter of fiscal year 2007. The effective income tax rate for the second quarter of fiscal year 2008 was higher than the rate for the second quarter of fiscal year 2007 due primarily to certain taxes on
intercompany dividends and the expiration of the U.S. federal research and development tax credit in December 2007.



Net Earnings. Net earnings for the second quarter of fiscal year 2008 reflect the after-tax impacts of a $3.0 million impairment of a private
company equity investment, $1.9 million in acquisition-related intangible amortization, $0.1 million in amortization related to inventory written up in connection with the acquisition of the Analogix Business, $0.5 million in restructuring and other
related costs and $3.0 million in share-based compensation expense. Net earnings for the second quarter of fiscal year 2007 reflect the after-tax impacts of $2.0 million in acquisition-related intangible amortization, $0.2 million in amortization
related to inventory written up in connection with the acquisition of IonSpec, $0.1 million in restructuring and other related costs and $2.9 million in share-based compensation expense. Excluding the impact of these items, the increase in net
earnings in the second quarter of fiscal year 2008 resulted primarily from higher sales volume (including sales volume leverage on operating expenses), which was partially offset by a higher effective income tax rate.



Subsequent Event. On April 4, 2008, we acquired Oxford
Diffraction Ltd. (Oxford Diffraction) for approximately $37 million in cash and assumed net debt, subject to certain net asset adjustments. Under the terms of the acquisition, we might make additional purchase price payments of up to $10
million over a three-year period, depending on the future financial performance of the Oxford Diffraction business. Oxford Diffraction designs, manufactures, markets, sells and services instruments and consumables for x-ray crystallography, an
analytical technique used by scientists in pharmaceutical research and other research laboratories to determine the structure of both small molecules and large molecules such as proteins. Following its acquisition, Oxford Diffraction became part of
the Scientific Instruments segment.



First Six Months of
Fiscal Year 2008 Compared to First Six Months of Fiscal Year 2007



Segment Results



The following table presents
comparisons of our sales and operating earnings for each of our Scientific Instruments and Vacuum Technologies segments and in total for the first six months of fiscal years 2008 and 2007:



|                               |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |  |       |  
|------------------------------ |  | ---------------- | ----- | - | ------------------ | ----- | - | - | - | ----- | ------------- |  | ----- | - |  | - | ---- |  | ----- | -
|                               |  | Six Months Ended |       |   | Increase(Decrease) |      
|                               |  | March 28, 2008   |       |   | March 30, 2007     |       |  
|                               |  | $                |       |   | % of    Sales      |       |   | $ |   |       | % of    Sales |  |       | $ |  | % |     
|(dollars in millions)          |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |  |       |  
|Sales by Segment:              |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |  |       |  
|Scientific Instruments         |  | $                | 401.4 |   |                    | 82.7  | % |   | $ | 367.2 |               |  | 82.0  | % |  | $ | 34.2 |  | 9.3   | %
|Vacuum Technologies            |  |                  | 84.2  |   |                    | 17.3  |   |   |   | 80.7  |               |  | 18.0  |   |  |   | 3.5  |  | 4.4   |  
|                               |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |  |       |  
|Total company                  |  | $                | 485.6 |   |                    | 100.0 | % |   | $ | 447.9 |               |  | 100.0 | % |  | $ | 37.7 |  | 8.4   | %
|                               |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |  |       |  
|Operating Earnings by Segment: |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |  |       |  
|Scientific Instruments         |  | $                | 42.3  |   |                    | 10.5  | % |   | $ | 40.7  |               |  | 11.1  | % |  | $ | 1.6  |  | 4.1   | %
|Vacuum Technologies            |  |                  | 16.5  |   |                    | 19.6  |   |   |   | 16.0  |               |  | 19.9  |   |  |   | 0.5  |  | 3.1   |  
|                               |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |  |       |  
|Total segments                 |  |                  | 58.8  |   |                    | 12.1  |   |   |   | 56.7  |               |  | 12.7  |   |  |   | 2.1  |  | 3.8   |  
|General corporate              |  |                  | (7.6  | ) |                    | (1.6  | ) |   |   | (9.7  | )             |  | (2.2  | ) |  |   | 2.1  |  | (21.3 | )
|                               |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |  |       |  
|Total company                  |  | $                | 51.2  |   |                    | 10.5  | % |   | $ | 47.0  |               |  | 10.5  | % |  | $ | 4.2  |  | 8.9   | %
|                               |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |  |       |  



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Scientific Instruments. The increase in Scientific Instruments sales was primarily attributable to
higher sales volume, in particular from analytical instruments. Sales increased for both industrial (which includes environmental, food and energy) and life science applications.



Scientific Instruments operating earnings for the first six months of fiscal year 2008 included acquisition-related
intangible amortization of $3.7 million, amortization of $0.6 million related to inventory written up primarily in connection with the acquisitions of IonSpec and the Analogix Business, restructuring and other related costs of $2.5 million and
share-based compensation expense of $1.7 million. In comparison, Scientific Instruments operating earnings for the first six months of fiscal year 2007 included acquisition-related intangible amortization of $4.2 million, amortization of $0.5
million related to inventory written up in connection with the acquisition of IonSpec, restructuring and other related costs of $0.2 million and share-based compensation expense of $1.9 million. Excluding the impact of these items, operating
earnings were slightly lower as a percentage of sales. Higher costs relating to sales commissions on strong orders and the timing of new product introductions and other initiatives during the first six months of fiscal year 2008 more than offset the
positive impact of sales volume leverage.



Vacuum
Technologies. The increase in Vacuum Technologies sales was driven by higher sales volume of products. Higher sales into industrial applications were partially offset by slightly lower sales into life science applications during the first six
months of fiscal year 2008.



Vacuum Technologies operating
earnings for the first six months of fiscal years 2008 and 2007 include the impact of share-based compensation expense of $0.4 million and $0.9 million, respectively. Excluding the impact of these items, the decrease in Vacuum Technologies operating
earnings as a percentage of sales reflects the fact that the segment had an unusually strong quarter in the first quarter of fiscal year 2007, which positively impacted operating profit margins for the first six months of fiscal year 2007. This
decrease was partially offset by the positive impact of sales volume leverage in the first six months of fiscal year 2008.



Consolidated Results



The following table presents comparisons of our sales and other selected consolidated financial results for the first six months of fiscal years 2008 and
2007:



|                                                |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |   |  |       |  
|----------------------------------------------- |  | ---------------- | ----- | - | ------------------ | ----- | - | - | - | ----- | ------------- |  | ----- | - |  | - | ---- | - |  | ----- | -
|                                                |  | Six Months Ended |       |   | Increase(Decrease) |      
|                                                |  | March 28,2008    |       |   | March 30,2007      |       |  
|                                                |  | $                |       |   | % of    Sales      |       |   | $ |   |       | % of    Sales |  |       | $ |  |   | %    |  
|(dollars in millions, except per share data)    |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |   |  |       |  
|Sales                                           |  | $                | 485.6 |   |                    | 100.0 | % |   | $ | 447.9 |               |  | 100.0 | % |  | $ | 37.7 |   |  | 8.4   | %
|                                                |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |   |  |       |  
|Gross profit                                    |  |                  | 220.2 |   |                    | 45.3  |   |   |   | 205.2 |               |  | 45.8  |   |  |   | 15.0 |   |  | 7.3   |  
|                                                |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |   |  |       |  
|Operating expenses:                             |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |   |  |       |  
|Selling, general and administrative             |  |                  | 133.6 |   |                    | 27.5  |   |   |   | 126.5 |               |  | 28.2  |   |  |   | 7.1  |   |  | 5.6   |  
|Research and development                        |  |                  | 35.4  |   |                    | 7.3   |   |   |   | 31.7  |               |  | 7.1   |   |  |   | 3.7  |   |  | 11.5  |  
|                                                |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |   |  |       |  
|Total operating expenses                        |  |                  | 169.0 |   |                    | 34.8  |   |   |   | 158.2 |               |  | 35.3  |   |  |   | 10.8 |   |  | 6.8   |  
|                                                |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |   |  |       |  
|Operating earnings                              |  |                  | 51.2  |   |                    | 10.5  |   |   |   | 47.0  |               |  | 10.5  |   |  |   | 4.2  |   |  | 8.9   |  
|Impairment of private company equity investment |  |                  | (3.0  | ) |                    | (0.6  | ) |   |   |      |               |  |      |   |  |   | (3.0 | ) |  | 100.0 |  
|Interest income                                 |  |                  | 3.7   |   |                    | 0.8   |   |   |   | 2.6   |               |  | 0.6   |   |  |   | 1.1  |   |  | 39.9  |  
|Interest expense                                |  |                  | (0.9  | ) |                    | (0.2  | ) |   |   | (1.0  | )             |  | (0.2  | ) |  |   | 0.1  |   |  | (10.8 | )
|Income tax expense                              |  |                  | (17.6 | ) |                    | (3.6  | ) |   |   | (17.0 | )             |  | (3.8  | ) |  |   | (0.6 | ) |  | 3.6   |  
|                                                |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |   |  |       |  
|Net earnings                                    |  | $                | 33.4  |   |                    | 6.9   | % |   | $ | 31.6  |               |  | 7.1   | % |  | $ | 1.8  |   |  | 5.5   | %
|                                                |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |   |  |       |  
|Net earnings per diluted share                  |  | $                | 1.09  |   |                    |       |   |   | $ | 1.02  |               |  |       |   |  | $ | 0.07 |   |  |       |  
|                                                |  |                  |       |   |                    |       |   |   |   |       |               |  |       |   |  |   |      |   |  |       |  



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Sales. As discussed under the heading Segment Results above, sales by the Scientific
Instruments and Vacuum Technologies segments in the first six months of fiscal year 2008 increased by 9.3% and 4.4%, respectively, compared to the first six months of fiscal year 2007. On a consolidated basis, sales grew 8.4% in the first six months
of fiscal year 2008, with sales growth for both industrial (which includes environmental, food and energy) and life science applications. The weaker U.S. dollar also had a positive effect on the reported sales increases.



Sales by geographic region in the first six months of fiscal years 2008 and
2007 were as follow:



|                            |  |                  |       |           |               |   |   |                    |           |  |       |   |  |   |      |  |      |  
|--------------------------- |  | ---------------- | ----- | --------- | ------------- | - | - | ------------------ | --------- |  | ----- | - |  | - | ---- |  | ---- | -
|                            |  | Six Months Ended |       |           |               |   |   |                   
|                            |  | March 28,2008    |       |           | March 30,2007 |   |   | Increase(Decrease) |          
|                            |  | $                |       | % ofSales |               |   | $ |                    | % ofSales |  |       | $ |  | % |     
|(dollars in millions)       |  |                  |       |           |               |   |   |                    |           |  |       |   |  |   |      |  |      |  
|Sales by Geographic Region: |  |                  |       |           |               |   |   |                    |           |  |       |   |  |   |      |  |      |  
|North America               |  | $                | 153.3 |           | 31.6          | % |   | $                  | 146.0     |  | 32.6  | % |  | $ | 7.3  |  | 5.0  | %
|Europe                      |  |                  | 201.2 |           | 41.4          |   |   |                    | 188.8     |  | 42.1  |   |  |   | 12.4 |  | 6.6  |  
|Asia Pacific                |  |                  | 101.5 |           | 20.9          |   |   |                    | 91.2      |  | 20.4  |   |  |   | 10.3 |  | 11.3 |  
|Latin America               |  |                  | 29.6  |           | 6.1           |   |   |                    | 21.9      |  | 4.9   |   |  |   | 7.7  |  | 34.8 |  
|                            |  |                  |       |           |               |   |   |                    |           |  |       |   |  |   |      |  |      |  
|Total company               |  | $                | 485.6 |           | 100.0         | % |   | $                  | 447.9     |  | 100.0 | % |  | $ | 37.7 |  | 8.4  | %
|                            |  |                  |       |           |               |   |   |                    |           |  |       |   |  |   |      |  |      |  



The sales increase in
North America was primarily driven by higher sales of analytical instruments, which was partially offset by slightly lower sales of vacuum products. The increase in sales in Europe was primarily attributable to increased demand for our analytical
instruments, consumables and vacuum products, but was partially offset by lower sales of low-volume, high-selling price magnet-based products. The increases in sales in Asia Pacific and Latin America were primarily attributable to stronger demand
across a broad range of products, in particular analytical instruments and vacuum products.



As described above, the sales increase in Europe was less pronounced compared to the first six months of fiscal year 2007 due to the timing of sales of certain low-volume, high-selling price magnet-based products. We
do not consider these geographic shifts to be indicative of any particular trend for magnet-based products as a whole, but rather to be reflective of the variability in results that these low-volume, high-selling price magnet-based products can
create.



Gross Profit. Gross profit for the first
six months of fiscal year 2008 reflects the impact of $2.9 million in amortization expense relating to acquisition-related intangible assets, $0.6 million in amortization expense related to inventory written up primarily in connection with the
IonSpec and Analogix Business acquisitions, $0.7 million in restructuring and other related costs and share-based compensation expense of $0.2 million. In comparison, gross profit for the first six months of fiscal year 2007 reflects the impact of
$2.6 million in amortization expense relating to acquisition-related intangible assets, $0.5 million in amortization expense related to inventory written up in connection with the IonSpec acquisition and share-based compensation expense of $0.2
million. Excluding the impact of these items, gross profit as a percentage of sales decreased slightly, primarily as a result of the weaker U.S. dollar (which increased reported revenues but lowered reported gross profit margins).



Selling, General and Administrative. Selling, general and
administrative expenses for the first six months of fiscal year 2008 included $0.8 million in amortization expense relating to acquisition-related intangible assets, $1.4 million in restructuring and other related costs and $4.2 million in
share-based compensation expense. In comparison, selling, general and administrative expenses for the first six months of fiscal year 2007 included $1.6 million in amortization expense relating to acquisition-related intangible assets, $0.2 million
in restructuring and other related costs and $5.2 million in share-based compensation expense. Excluding the impact of these items, the decrease in selling, general and administrative expenses as a percentage of sales was primarily the



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result of sales volume leverage and cost reduction activities. The benefit from these positive factors was partially offset by higher costs relating to sales
commissions on strong orders and the timing of new product introductions and other initiatives during the first six months of fiscal year 2008.



Research and Development. Research and development expenses for the first six months of fiscal year 2008 reflect the impact of $0.5 million in
restructuring and other related costs and share-based compensation expense of $0.2 million. In comparison, research and development expenses for the first six months of fiscal year 2007 reflect the impact of share-based compensation expense of $0.3
million. Excluding the impact of these items, research and development expenses were relatively flat as a percentage of sales.



Restructuring Activities. Between fiscal years 2003 and 2007, we committed to several restructuring plans in order to adjust our organizational
structure, improve operational efficiencies and eliminate redundant or excess costs resulting from acquisitions or dispositions during those periods.During the first six months of fiscal year 2008, there was no significant activity under
these plans except for the fiscal year 2007 plan as described below.



Fiscal Year 2007 Plan. During the third quarter of fiscal year 2007, we committed to a plan to combine and optimize the development and assembly of most of our NMR and mass spectrometry products, to further centralize related
administration and other functions and to reallocate certain resources toward more rapidly growing product lines and geographies.



The following table sets forth changes in our restructuring liability relating to the foregoing plan during the first six months of fiscal year 2008:



|                                               |  |                  |        |   |                    |   |      |       |  |   |        |  
|---------------------------------------------- |  | ---------------- | ------ | - | ------------------ | - | ---- | ----- |  | - | ------ | -
|                                               |  | Employee-Related |        |   | Facilities-Related |   |      | Total | 
|(in thousands)                                 |  |                  |        |   |                    |   |      |       |  |   |        |  
|Balance at September 28, 2007                  |  | $                | 2,222  |   |                    | $ |     |       |  | $ | 2,222  |  
|Charges to expense, net                        |  |                  | 504    |   |                    |   | 761  |       |  |   | 1,265  |  
|Cash payments                                  |  |                  | (1,201 | ) |                    |   | (121 | )     |  |   | (1,322 | )
|Foreign currency impacts and other adjustments |  |                  | 60     |   |                    |   | 116  |       |  |   | 176    |  
|                                               |  |                  |        |   |                    |   |      |       |  |   |        |  
|Balance at March 28, 2008                      |  | $                | 1,585  |   |                    | $ | 756  |       |  | $ | 2,341  |  
|                                               |  |                  |        |   |                    |   |      |       |  |   |        |  



The restructuring
charges of $1.3 million recorded during the first six months of fiscal year 2008 related to employee termination benefits and costs associated with the closure of leased facilities. We also incurred $1.3 million in other restructuring-related costs
which were comprised of $1.0 million in employee retention costs and $0.3 million in facilities-related costs including decommissioning costs and a non-cash charge for accelerated depreciation of assets to be disposed upon the closure of facilities.



Impairment of Private Company Equity Investment. During
the first six months of fiscal year 2008, we became aware of information which raised substantial doubt about the ability of a small, private company in which we hold a cost-method equity investment to continue as a going concern. Based on this
information, we determined that the fair value of our investment had declined and that the decline was other-than-temporary. As a result, we wrote off the entire $3.0 million carrying value via an impairment charge in the period.



Interest Income.The increase in interest income was primarily due to
a higher average invested cash balance during the first six months of fiscal year 2008 compared to the first six months of fiscal year 2007. We currently believe that our interest income will likely be lower in the last six months of fiscal year
2008 due to the use of cash for acquisitions and stock repurchases during the first six months of fiscal year 2008 and because of lower interest rates on invested cash balances.



Income Tax Expense.The effective income tax rate was 34.6% for the first six months of fiscal year 2008, compared to
35.0% for the first six months of fiscal year 2007. The lower effective tax rate in the first six months of fiscal year 2008 was primarily due to the release of $1.5 million in tax reserves resulting from the positive



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outcome of tax uncertainties, partially offset by certain taxes on intercompany dividends, a write-down of non-U.S. deferred tax assets resulting from an
income tax rate reduction and the expiration of the U.S. federal research and development tax credit in December 2007.



Net Earnings. Net earnings for the first six months of fiscal year 2008 reflect the after-tax impacts of an impairment of a private company
equity investment of $3.0 million, $3.7 million in acquisition-related intangible amortization, $0.6 million in amortization related to inventory written up primarily in connection with the acquisitions of IonSpec and the Analogix Business, $2.6
million in restructuring and other related costs and $4.7 million in share-based compensation expense. Net earnings for the first six months of fiscal year 2007 reflect the after-tax impacts of $4.2 million in acquisition-related intangible
amortization, $0.5 million in amortization related to inventory written up in connection with the acquisition of IonSpec, $0.2 million in restructuring and other related costs and $5.7 million in share-based compensation expense. Excluding the
impact of these items, the increase in net earnings resulted primarily from higher sales volume (including sales volume leverage on operating expenses), higher interest income and a lower effective income tax rate in the first six months of fiscal
year 2008.



Liquidity and Capital Resources



We generated $29.7 million of cash from operating activities in the first
six months of fiscal year 2008, compared to $34.4 million generated in the first six months of fiscal year 2007. The decrease in cash from operating activities was primarily driven by relative increases in inventories ($16.7 million) and accounts
receivable ($3.1 million) and a relative decrease in deferred profit ($4.0 million), partially offset by relative increases in accrued liabilities ($11.8 million) and accounts payable ($7.1 million) as well as higher net earnings excluding the
impact of an impairment of a private company equity investment. The relative increase in inventories was primarily due to a build-up of inventory to support increased orders, new product introductions and the transition of certain products to new
manufacturing locations. The relative increase in accounts receivable was primarily due to higher sales. The relative decrease in deferred profit was due to the timing of revenue recognition on certain large magnet-based systems during the first six
months of fiscal year 2008. The relative increase in accrued liabilities was primarily due to an increase in contract advances from customers during the first six months of fiscal year 2008. The relative increase in accounts payable was primarily
due to higher purchasing activity to support higher sales and the timing of vendor payments.



We used $23.6 million of cash for investing activities in the first six months of fiscal year 2008, which compares to $7.6 million used for investing activities in the first six months of fiscal year 2007. The
increase in cash used for investing activities in the first six months of fiscal year 2008 was primarily the result of the acquisition of the Analogix Business in November 2007 and higher net capital expenditures due primarily to the construction of
our IRD center in Walnut Creek, California.



We used $55.7
million of cash for financing activities in the first six months of fiscal year 2008, which compares to $27.6 million used for financing activities in the first six months of fiscal year 2007. The increase in cash used for financing activities was
primarily due to higher expenditures to repurchase and retire common stock (such expenditures were made in both periods as a result of a continued effort to utilize excess cash to reduce the number of outstanding common shares). The increase in cash
used for financing activities was partially offset by lower proceeds from the issuance of common stock due to lower stock option exercise volume during the first six months of fiscal year 2008 compared to the first six months of fiscal year 2007.



We maintain relationships with banks in many countries from
whom we sometimes obtain bank guarantees and short-term standby letters of credit. These guarantees and letters of credit relate primarily to advance payments and deposits made to our subsidiaries by customers for which separate liabilities are
recorded in the unaudited condensed consolidated financial statements. As of March 28, 2008, a total of $21.6 million of these bank guarantees and letters of credit were outstanding. No amounts had been drawn by beneficiaries under these or any
other outstanding guarantees or letters of credit as of that date.



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As of both March 28, 2008 and September 28, 2007, we had a $25.0 million term loan outstanding
with a U.S. financial institution at a fixed interest rate of 6.7%. The term loan contains certain covenants that limit future borrowings and the payment of cash dividends and require the maintenance of certain levels of working capital and
operating results. We were in compliance with all restrictive covenants of the term loan agreement at March 28, 2008.



In connection with certain acquisitions, we have accrued a portion of the purchase price that has been retained to secure the respective sellers
indemnification obligations.



The following table summarizes
outstanding purchase price amounts retained and the date they will become payable (net of any indemnification claims) as of March 28, 2008:



|                  |  |                 |  |              
|----------------- |  | --------------- |  | -------------
|Acquired Business |  | Retained Amount |  | Date Payable 
|Analogix Business |  | $1.3 million    |  | November 2009



In addition to the
above amount, the final $0.7 million retained in connection with the acquisition of IonSpec Corporation (IonSpec) in February 2006 was paid during the first six months of fiscal year 2008.



As of March 28, 2008, up to a maximum of $33.3 million could be payable
through December 2010 under contingent consideration arrangements relating to acquired businesses. Amounts subject to these arrangements can be earned over the respective measurement period, depending on the performance of the acquired business
relative to certain financial and/or operational targets.



The
following table summarizes key terms of outstanding contingent consideration arrangements as of March 28, 2008:



|                  |  |                                      |  |                    |  |                           
|----------------- |  | ------------------------------------ |  | ------------------ |  | --------------------------
|Acquired Business |  | Remaining Amount Available (maximum) |  | Measurement Period |  | Measurement Period EndDate
|Analogix Business |  | $4.0 million                         |  | 3 years            |  | December 2010             
|IonSpec           |  | $14.0 million                        |  | 3 years            |  | April 2009                
|Polymer Labs      |  | $15.3 million                        |  | 3 years            |  | December 2008             



In addition to the
above amounts, up to $10.0 million in contingent consideration could be payable over a three-year period relating to Oxford Diffraction, which was acquired in April 2008 for approximately $37 million in cash and assumed net debt.



During the first six months of fiscal year 2008, we paid $4.0 million for the
final contingent consideration payment related to the acquisition of Magnex Scientific Limited in November 2004.



The Distribution Agreement provides that we are responsible for certain litigation to which VAI was a party, and further provides that we will indemnify
VMS and VSEA for one-third of the costs, expenses and other liabilities relating to certain discontinued, former and corporate operations of VAI, including certain environmental liabilities (see Note 12 of the Notes to the Unaudited Condensed
Consolidated Financial Statements).



As of March 28, 2008,
we had cancelable commitments to a contractor for capital expenditures totaling approximately $22.4 million relating to the construction of our information rich detection center in Walnut Creek, California. In the event that these commitments are
canceled for reasons other than the contractors default, we may be responsible for reimbursement of actual costs incurred by the contractor. We had no material non-cancelable commitments for capital expenditures as of March 28, 2008. In
the aggregate, we currently anticipate that our capital expenditures will be about 3.5% of sales for the full fiscal year 2008.



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As discussed above under the heading Restructuring Activities, in April 2007, we committed to a
plan to combine and optimize the development and assembly of most of our NMR and mass spectrometry products, to further centralize related administration and other functions and to reallocate certain resources toward more rapidly growing product
lines and geographies. In connection with this plan, we expect to make capital expenditures of up to $25 million, which began in the fourth quarter of fiscal year 2007 and will continue through the first half of fiscal year 2009. We expect that a
significant portion of these expenditures will fall within our typical capital spending pattern (of approximately 3% of sales) measured over a two-year period. We also expect to incur total restructuring and other related costs associated with this
plan of between $10.0 million and $14.0 million, of which $4.3 million was incurred in fiscal year 2007 and $2.3 million was incurred in the first six months of fiscal year 2008. Some portion of these costs is expected to be settled through the
fourth quarter of fiscal year 2009, except for certain lease termination-related costs, which might be settled as late as the fourth quarter of fiscal year 2012. A total of $8.5 million to $12.5 million of these costs are expected to result in cash
expenditures.



In February 2008, our Board of Directors
approved a new stock repurchase program under which we were authorized to utilize up to $100 million to repurchase shares of our common stock. This repurchase program is effective through December 31, 2009. During the fiscal quarter ended
March 28, 2008, we repurchased and retired 376,000 shares under this authorization at an aggregate cost of $20.2 million. As of March 28, 2008, we had remaining authorization to repurchase $79.8 million of our common stock under this
repurchase program.



In January 2007, our Board of Directors
approved a stock repurchase program under which we were authorized to utilize up to $100 million to repurchase shares of our common stock. This repurchase program was effective until December 31, 2008. During the first six months of fiscal year
2008, we repurchased and retired 876,000 shares under this repurchase program at an aggregate cost of $50.4 million, which completed this repurchase program.



Our liquidity is affected by many other factors, some based on the normal ongoing operations of the business and others related to the uncertainties of
the industries in which we compete and global economies. Although our cash requirements will fluctuate based on the timing and extent of these factors, we believe that cash generated from operations, together with our current cash balance and
borrowing capability, will be sufficient to satisfy commitments for capital expenditures and other cash requirements for the next 12 months.



Contractual Obligations and Other Commercial Commitments



The following table summarizes the amount and estimated timing of future cash expenditures relating to principal payments on outstanding long-term debt,
minimum rentals due for certain facilities and other leased assets under long-term, non-cancelable operating leases and other long-term liabilities as of March 28, 2008:



|                                           |  |                            |        |              |      |        |      |   |        |  |      |       |            |   |        |  |   |       |  |   |        |  |   |       
|------------------------------------------ |  | -------------------------- | ------ | ------------ | ---- | ------ | ---- | - | ------ |  | ---- | ----- | ---------- | - | ------ |  | - | ----- |  | - | ------ |  | - | ------
|                                           |  | SixMonthsEndingOct. 3,2008 |        | Fiscal Years |      | Total 
|                                           |  |                            | 2009   |              | 2010 |        | 2011 |   | 2012   |  | 2013 |       | Thereafter |  
|(in thousands)                             |  |                            |        |              |      |        |      |   |        |  |      |       |            |   |        |  |   |       |  |   |        |  |   |       
|Operating leases                           |  | $                          | 5,295  |              | $    | 7,569  |      | $ | 5,231  |  | $    | 2,790 |            | $ | 2,230  |  | $ | 1,810 |  | $ | 3,836  |  | $ | 28,761
|Long-term debt (including current portion) |  |                            | 6,250  |              |      |       |      |   | 6,250  |  |      |      |            |   | 6,250  |  |   |      |  |   | 6,250  |  |   | 25,000
|Other long-term liabilities                |  |                            | 502    |              |      | 4,443  |      |   | 3,356  |  |      | 3,284 |            |   | 2,805  |  |   | 2,684 |  |   | 25,761 |  |   | 42,835
|                                           |  |                            |        |              |      |        |      |   |        |  |      |       |            |   |        |  |   |       |  |   |        |  |   |       
|Total                                      |  | $                          | 12,047 |              | $    | 12,012 |      | $ | 14,837 |  | $    | 6,074 |            | $ | 11,285 |  | $ | 4,494 |  | $ | 35,847 |  | $ | 96,596
|                                           |  |                            |        |              |      |        |      |   |        |  |      |       |            |   |        |  |   |       |  |   |        |  |   |       



As of March 28,
2008, we did not have any off-balance sheet commercial commitments that could result in a significant cash outflow upon the occurrence of some contingent event, except for contingent payments of up to a maximum of $33.3 million related to
acquisitions as discussed under Liquidity and Capital Resources above, the specific amounts of which are not currently determinable.



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Recent Accounting Pronouncements



In September 2006, the FASB issued SFAS 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 applies to previous accounting pronouncements that require or permit fair value measurements. SFAS 157 is effective for
fiscal years beginning after November 15, 2007, with certain exceptions which are described below. In February 2008, the FASB issued FASB Staff Position (FSP) 157-1,Application of FASB Statement No. 157 to FASB Statement
No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13, which amends SFAS 157 to exclude certain leasing transactions from its scope. Also in
February 2008, the FASB issued FSP 157-2, Effective Date of FASB Statement No. 157,which delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities to fiscal years beginning after
November 15, 2008, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). We do not expect the adoption of SFAS 157 to have a material impact on our financial
condition or results of operations.



In February 2007, the FASB
issued SFAS 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement 115, which provides companies with an option to measure eligible financial assets and liabilities in their
entirety at fair value. The fair value option may be applied instrument by instrument, and may be applied only to entire instruments. If a company elects the fair value option for an eligible item, changes in the items fair value must be
reported as unrealized gains and losses in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are evaluating the options provided under SFAS 159 and their potential impact on
our financial condition and results of operations if implemented.



In December 2007, the FASB issued SFAS 141(revised 2007), Business Combinations, (SFAS 141(R)). SFAS 141(R) retains the fundamental requirements of the original pronouncement requiring that the purchase method be used for
all business combinations but also provides revised guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree. It also requires the recognition of assets
acquired and liabilities assumed arising from contingencies, the capitalization of in-process research and development at fair value, and the expensing of acquisition-related costs as incurred.SFAS 141(R) is effective for fiscal years
beginning after December 15, 2008. We are currently evaluating the requirements of SFAS 141(R) and do not expect its adoption in the first quarter of fiscal year 2010 to have a material impact on our financial condition or results of
operations. However, in the event that we complete acquisitions subsequent to our adoption of SFAS 141(R), the application of its provisions will likely have a material impact on our results of operations, although we are not currently able to
estimate that impact.



In December 2007, the FASB issued
SFAS 160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51. SFAS 160 requires that ownership interests in subsidiaries held by parties other than the parent and the amount of consolidated net
income be clearly identified, labeled and presented in the consolidated financial statements. It also requires once a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair
value. Sufficient disclosures are required to clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008, and
requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements are applied prospectively. We do not expect the adoption of SFAS 160 to have a material impact on our financial
condition or results of operations.



In March 2008, the FASB
issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133,which requires additional disclosures about the objectives and strategies of the derivative instruments and
hedging activities, the method of accounting for such instruments under SFAS 133 and its related interpretations, and a tabular disclosure of the effects of such instruments and



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related hedged items on our financial condition and results of operations. SFAS 161 is effective for fiscal years beginning after November 15,
2008. We do not expect the adoption of SFAS 161 to have a material impact on our financial condition or results of operations.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------



Foreign Currency Exchange Risk. We enter into foreign exchange forward contracts to minimize the short-term impact of foreign currency fluctuations
on assets and liabilities denominated in non-functional currencies. From time to time, we also enter into foreign exchange forward contracts to minimize the impact of foreign currency fluctuations on forecasted transactions. The success of our
hedging activities depends on our ability to forecast balance sheet exposures and transaction activity in various foreign currencies. To the extent that these forecasts are overstated or understated during periods of currency volatility, we could
experience unanticipated currency gains or losses. However, we believe that in most cases any such gains or losses would be substantially offset by losses or gains from the related foreign exchange forward contracts. We therefore believe that the
direct effect of an immediate 10% change in the exchange rate between the U.S. dollar and all other currencies is not reasonably likely to have a material adverse effect on our financial condition or results of operations.



At March 28, 2008, there were no outstanding forward contracts
designated as cash flow hedges of forecasted transactions. During the first six months of fiscal year 2008, no foreign exchange gains or losses from cash flow hedge ineffectiveness were recognized.



Our foreign exchange forward contracts generally range from one to 12 months
in original maturity. A summary of all foreign exchange forward contracts that were outstanding as of March 28, 2008 follows:



|                  |  |                   |       |                        |   |       
|----------------- |  | ----------------- | ----- | ---------------------- | - | ------
|                  |  | NotionalValueSold |       | NotionalValuePurchased
|(in thousands)    |  |                   |       |                        |   |       
|Euro              |  | $                 |      |                        | $ | 30,788
|Australian dollar |  |                   |      |                        |   | 44,803
|British pound     |  |                   |      |                        |   | 9,716 
|Japanese yen      |  |                   | 5,586 |                        |   |      
|Canadian dollar   |  |                   | 3,569 |                        |   |      
|                  |  |                   |       |                        |   |       
|Total             |  | $                 | 9,155 |                        | $ | 85,307
|                  |  |                   |       |                        |   |       



Interest Rate
Risk. We have no material exposure to market risk for changes in interest rates. We invest any excess cash primarily in short-term U.S. Treasury securities and money market funds, and changes in interest rates would not be material to our
financial condition or results of operations. We enter into debt obligations principally to support general corporate purposes, including working capital requirements, capital expenditures and acquisitions. At March 28, 2008, our debt
obligations had fixed interest rates.



Based upon rates
currently available to us for debt with similar terms and remaining maturities, the carrying amounts of long-term debt approximate their estimated fair values.



Although payments under certain of our operating leases for our facilities are tied to market indices, we are not exposed to material interest rate
risk associated with our operating leases.



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Debt Obligations.



Principal Amounts and Related Weighted-Average Interest Rates By Year of Maturity



|                                           |  |                            |       |   |              |      |   |       |      |   |       |      |  |   |      |   |  |            |       |   |  |   |   |   |  |   |       |   |  |   |        |  
|------------------------------------------ |  | -------------------------- | ----- | - | ------------ | ---- | - | ----- | ---- | - | ----- | ---- |  | - | ---- | - |  | ---------- | ----- | - |  | - | - | - |  | - | ----- | - |  | - | ------ | -
|                                           |  | SixMonthsEndingOct. 3,2008 |       |   | Fiscal Years |      |   | Total |     
|                                           |  |                            | 2009  |   |              | 2010 |   |       | 2011 |   |       | 2012 |  |   | 2013 |   |  | Thereafter |       |  
|(dollars in thousands)                     |  |                            |       |   |              |      |   |       |      |   |       |      |  |   |      |   |  |            |       |   |  |   |   |   |  |   |       |   |  |   |        |  
|Long-term debt (including current portion) |  | $                          | 6,250 |   |              | $    |  |       |      | $ | 6,250 |      |  | $ |     |   |  | $          | 6,250 |   |  | $ |  |   |  | $ | 6,250 |   |  | $ | 25,000 |  
|Average interest rate                      |  |                            | 6.7   | % |              |      |  | %     |      |   | 6.7   | %    |  |   |     | % |  |            | 6.7   | % |  |   |  | % |  |   | 6.7   | % |  |   | 6.7    | %



Defined Benefit
Retirement Plans. Most of our retirement plans, including all U.S.-based plans, are defined contribution plans. However, we also provide defined benefit pension plans in certain countries outside of the U.S. Our obligations under these
defined benefit plans will ultimately be settled in the future and are therefore subject to estimation. Defined benefit pension accounting under SFAS 87, Employers Accounting for Pensions, is intended to reflect the recognition of
future benefit costs over the employees estimated service periods based on the terms of the pension plans and the investment and funding decisions made by us.



For our defined benefit pension plans, we make assumptions regarding several variables including the expected long-term rate
of return on plan assets and the discount rate in order to determine defined benefit pension plan expense for the year. This expense is referred to as net periodic pension cost. We assess the expected long-term rate of return on plan
assets and discount rate assumption for each defined benefit plan based on relevant market conditions as prescribed by SFAS 87 and make adjustments to the assumptions as appropriate. On an annual basis, we analyze the rates of return on plan assets
and discount rates used and determine that these rates are reasonable. For rates of return, this analysis is based on a review of the nature of the underlying assets, the allocation of those assets and their historical performance relative to the
overall markets in the countries where the related plans are effective. Historically, our assumed asset allocations have not varied significantly from the actual allocations. Discount rates are based on the prevailing market long-term interest rates
in the countries where the related plans are effective. As of September 28, 2007, the estimated long-term rate of return on our defined benefit pension plan assets ranged from 0.5% to 7.1% (weighted-average of 5.9%), and the assumed discount
rate for our defined benefit pension plan obligations ranged from 2.0% to 5.7% (weighted-average of 5.5%).



If any of these assumptions were to change, our net periodic pension cost would also change. We incurred net periodic pension cost relating to our defined
benefit pension plans of $2.3 million in fiscal year 2007, $2.3 million in fiscal year 2006 and $1.6 million in fiscal year 2005 (excluding a settlement loss), and expect our net periodic pension cost to be approximately $1.7 million in fiscal year
2008. A one percent decrease in the weighted-average estimated return on plan assets or assumed discount rate would increase our net periodic pension cost for fiscal year 2008 by $1.1 million or $0.4 million, respectively. As of September 28,
2007, our projected benefit obligation relating to defined benefit pension plans was $53.3 million. A one percent decrease in the weighted-average estimated discount rate would increase this obligation by $11.0 million.



|Item 4. | Controls and Procedures
|------- | -----------------------



Disclosure Controls and Procedures. Based on the evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the Exchange Act)) required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, our Chief Executive Officer and the Chief Financial Officer have concluded that as of the end of the
period covered by this Quarterly Report on Form 10-Q (March 28, 2008), our disclosure controls and procedures were effective.



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Inherent Limitations on the Effectiveness of Controls. The Companys management, including
the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated,
can only provide reasonable, not absolute, assurance that the control systems objectives will be met. Further, the design of a control system must reflect the fact that the benefits of controls must be considered relative to their costs. Due
to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons or by collusion of two or more people. The design of
any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls
may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur
and not be detected.



Changes in Internal Control over
Financial Reporting. There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the second quarter of our fiscal year 2008 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART II



OTHER INFORMATION



|Item 1A. | Risk Factors
|-------- | ------------



SeeItem 1ARisk Factors presented in our Annual Report on Form 10-K for the fiscal year ended September 28, 2007, which we
encourage you to carefully consider.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------



(c)February 2008 Stock Repurchase Program.The following table summarizes information relating to our stock repurchases during the second quarter
of fiscal year 2008:



|                                         |  |                   |  |                        |       |                                                                          |   |                                                                     |  |   |       
|---------------------------------------- |  | ----------------- |  | ---------------------- | ----- | ------------------------------------------------------------------------ | - | ------------------------------------------------------------------- |  | - | ------
|Fiscal Month                             |  | SharesRepurchased |  | Average PricePer Share |       | Total Value of SharesRepurchased as Part ofPublicly AnnouncedPlan (1)(2) |   | Maximum Total Valueof Shares that May YetBe Purchased Under thePlan
|(In thousands, except per share amounts) |  |                   |  |                        |       |                                                                          |   |                                                                     |  |   |       
|Balance  December 28, 2007              |  |                   |  |                        |       |                                                                          |   |                                                                     |  | $ |      
|December 29, 2007  January 25, 2008     |  |                  |  | $                      |      |                                                                          | $ |                                                                    |  |   |      
|January 26, 2008  February 22, 2008     |  | 343               |  |                        | 54.00 |                                                                          |   | 18,517                                                              |  |   | 81,483
|February 23, 2007  March 28, 2008       |  | 33                |  |                        | 52.60 |                                                                          |   | 1,731                                                               |  | $ | 79,752
|                                         |  |                   |  |                        |       |                                                                          |   |                                                                     |  |   |       
|Total shares repurchased                 |  | 376               |  | $                      | 53.88 |                                                                          | $ | 20,248                                                              |  |   |       
|                                         |  |                   |  |                        |       |                                                                          |   |                                                                     |  |   |       



|(1) | In February 2008, our Board of Directors approved a stock repurchase program under which we were authorized to utilize up to $100 million to repurchase shares of our common stock.
This repurchase program is effective through December 31, 2009.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Excludes commissions on repurchases.
|--- | ------------------------------------



January 2007 Stock Repurchase Program.The following table summarizes information relating to our stock repurchases during the second quarter of
fiscal year 2008:



|                                         |  |                   |  |                        |       |                                                                          |   |                                                                     |  |   |       
|---------------------------------------- |  | ----------------- |  | ---------------------- | ----- | ------------------------------------------------------------------------ | - | ------------------------------------------------------------------- |  | - | ------
|Fiscal Month                             |  | SharesRepurchased |  | Average PricePer Share |       | Total Value of SharesRepurchased as Part ofPublicly AnnouncedPlan (1)(2) |   | Maximum Total Valueof Shares that May YetBe Purchased Under thePlan
|(In thousands, except per share amounts) |  |                   |  |                        |       |                                                                          |   |                                                                     |  |   |       
|Balance  December 28, 2007              |  |                   |  |                        |       |                                                                          |   |                                                                     |  | $ | 36,137
|December 29, 2007  January 25, 2008     |  |                  |  | $                      |      |                                                                          | $ |                                                                    |  |   | 36,137
|January 26, 2008  February 22, 2008     |  | 668               |  |                        | 54.10 |                                                                          |   | 36,137                                                              |  |   |      
|February 23, 2007  March 28, 2008       |  |                  |  |                        |      |                                                                          |   |                                                                    |  | $ |      
|                                         |  |                   |  |                        |       |                                                                          |   |                                                                     |  |   |       
|Total shares repurchased                 |  | 668               |  | $                      | 54.10 |                                                                          | $ | 36,137                                                              |  |   |       
|                                         |  |                   |  |                        |       |                                                                          |   |                                                                     |  |   |       



|(1) | In January 2007, our Board of Directors approved a stock repurchase program under which we were authorized to utilize up to $100 million to repurchase shares of our common stock.
This repurchase program is effective through December 31, 2008.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Excludes commissions on repurchases.
|--- | ------------------------------------



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|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------



At our Annual Meeting of Stockholders held on January 31, 2008, our stockholders considered and voted on three matters: (1) the election of two
Class III directors to the Board of Directors for three-year terms; (2) the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2008; and (3) the approval of
our amended and restated Omnibus Stock Plan. Our stockholders voting on these matters was as follows:



|                                                                       |  |            |  |              |  |               |  |            
|---------------------------------------------------------------------- |  | ---------- |  | ------------ |  | ------------- |  | -----------
|                                                                       |  | Votes For  |  | VotesAgainst |  | VotesWithheld |  | Abstentions
|Proposal OneElection of Directors:                                    |  |            |  |              |  |               |  |            
|Nominee: Garry W. Rogerson                                             |  | 27,985,860 |  |             |  | 835,986       |  |           
|Nominee: Elizabeth E. Tallett                                          |  | 24,904,570 |  |             |  | 3,907,276     |  |           
|                                                                       |  |            |  |             
|Proposal TwoRatification of Appointment of PricewaterhouseCoopers LLP |  | 28,372,670 |  | 332,924      |  |              |  | 106,252    
|                                                                       |  |            |  |             
|Proposal ThreeApproval of Amended and Restated Omnibus Stock Plan     |  | 22,531,080 |  | 3,894,694    |  |              |  | 260,181    



Pursuant to the rules
of The Nasdaq Stock Market, Inc., Proposals One and Two allowed certain brokers to vote without receipt of instructions from clients, so there were no broker non-votes. There were 2,125,891 broker non-votes on Proposal Three.



|Item 6. | Exhibits
|------- | --------



(a) Exhibits.



|           |  |                                                                                                                                                                |  |                          |  |               |  |  |  |  
|---------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ |  | ------------- |  |  |  | -
|ExhibitNo. |  | Exhibit Description                                                                                                                                            |  | Incorporated byReference |  | FiledHerewith
|           |  | Form                                                                                                                                                           |  | Date                     |  | ExhibitNumber | 
|           |  |                                                                                                                                                                |  |                          | 
|10.29*     |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Non-Employee DirectorsFor New Director/Chairman Grants (used beginning February 1, 2008) |  |                          |  |               |  |  |  | X
|           |  |                                                                                                                                                                |  |                          | 
|10.30*     |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Non-Employee DirectorsFor Annual Director Grants (used beginning February 1, 2008)       |  |                          |  |               |  |  |  | X
|           |  |                                                                                                                                                                |  |                          | 
|31.1       |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                            |  |                          |  |               |  |  |  | X
|           |  |                                                                                                                                                                |  |                          | 
|31.2       |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                            |  |                          |  |               |  |  |  | X
|           |  |                                                                                                                                                                |  |                          | 
|32.1       |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                            |  |                          |  |               |  |  |  |  
|           |  |                                                                                                                                                                |  |                          | 
|32.2       |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                            |  |                          |  |               |  |  |  |  



|* | Management contract or compensatory plan or arrangement.
|- | --------------------------------------------------------



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SIGNATURES



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, INC. (Registrant)
|                  |  |                          
|Date: May 6, 2008 |  | By:                       |  | /s/ G. EDWARD MCCLAMMY                                                                                                                   
|                  |  |                           |  | G. Edward McClammy Senior Vice President, Chief Financial Officer and
Treasurer (Duly Authorized Officer and Principal Financial Officer)



41