<PAGE>

                      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 30, 2001

                                      OR

[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                             EXCHANGE ACT OF 1934

             For the transition period from ________ to _________

                       Commission File Number 000-25393

                               ----------------

                                 VARIAN, INC.

            (Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S>                                         <C>
                 Delaware                                   77-0501995
       (State or Other Jurisdiction                        (IRS Employer
     of Incorporation or Organization)                Identification Number)
</TABLE>

<TABLE>
<S>                                         <C>
  3120 Hansen Way, Palo Alto, California                    94304-1030
 (Address of Principal Executive Offices)                   (Zip Code)
</TABLE>

                                (650) 213-8000
             (Registrant's Telephone Number, Including Area Code)

   Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes[X] No[_]

The number of shares of the Registrant's common stock outstanding as of April
27, 2001 was 33,033,306.
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
 <C>      <S>                                                               <C>
 Part I.  Financial Information..........................................     3

 Item 1.  Financial Statements...........................................     3

          Consolidated Statements of Earnings............................     3

          Consolidated Balance Sheets....................................     4

          Consolidated Statements of Cash Flows..........................     5

          Notes to the Consolidated Financial Statements.................     6

 Item 2.  Management's Discussion and Analysis of Financial Condition and
          Results of Operations..........................................    12

 Item 3.  Quantitative and Qualitative Disclosure about Market Risk......    18

 Part II. Other Information..............................................    20

 Item 4.  Submission of Matters to a Vote of Security Holders............    20

 Item 6.  Exhibits and Reports on Form 8-K...............................    20
</TABLE>

              RISK FACTORS RELATING TO FORWARD-LOOKING STATEMENTS

  This Quarterly Report on Form 10-Q contains "forward-looking" statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to risks and uncertainties that
could cause actual results of Varian, Inc. (the "Company") to differ
materially from management's current expectations. Those risks and
uncertainties include, without limitation: new product development and
commercialization; growth in life science, health care and industrial sales
continuing to be sufficient to offset the decline in demand from semiconductor
and telecommunications customers; demand and acceptance for the Company's
products; competitive products and pricing; economic conditions in the
Company's product and geographic markets; foreign currency fluctuations if
they adversely impact revenue growth and earnings; market investment in
capital equipment; and other risks detailed from time to time in the Company's
filings with the Securities and Exchange Commission.

                                       2
<PAGE>

                                    PART I.
                             FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                     Varian, Inc. and Subsidiary Companies
                      Consolidated Statements of Earnings
                    (In thousands, except per share amounts)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                              Quarter Ended   Six Months Ended
                                            ----------------- -----------------
                                            Mar. 30, Mar. 31, Mar. 30, Mar. 31,
                                              2001     2000     2001     2000
                                            -------- -------- -------- --------
<S>                                         <C>      <C>      <C>      <C>
Sales...................................... $194,186 $177,310 $385,444 $337,262
Cost of sales..............................  119,576  109,676  239,092  207,631
                                            -------- -------- -------- --------
Gross profit...............................   74,610   67,634  146,352  129,631
                                            -------- -------- -------- --------
Operating expenses
  Sales and marketing......................   33,453   31,301   64,455   61,106
  Research and development.................    9,256    8,549   17,100   15,531
  General and administrative...............   10,625   10,679   22,100   21,016
                                            -------- -------- -------- --------
  Total operating expenses.................   53,334   50,529  103,655   97,653
                                            -------- -------- -------- --------
Operating earnings.........................   21,276   17,105   42,697   31,978
Interest expense, net......................      113      553      577    1,244
                                            -------- -------- -------- --------
Earnings before income taxes...............   21,163   16,552   42,120   30,734
Income tax expense.........................    8,254    6,314   16,427   11,987
                                            -------- -------- -------- --------
Net earnings............................... $ 12,909 $ 10,238 $ 25,693 $ 18,747
                                            ======== ======== ======== ========
Net earnings per share:
  Basic.................................... $   0.39 $   0.33 $   0.78 $   0.60
                                            ======== ======== ======== ========
  Diluted.................................. $   0.37 $   0.30 $   0.75 $   0.56
                                            ======== ======== ======== ========
Shares used in per share calculations:
  Basic....................................   32,946   31,498   32,903   31,154
                                            ======== ======== ======== ========
  Diluted..................................   34,475   33,770   34,468   33,232
                                            ======== ======== ======== ========
</TABLE>


        See accompanying Notes to the Consolidated Financial Statements.

                                       3
<PAGE>

                     Varian, Inc. and Subsidiary Companies
                          Consolidated Balance Sheets
               (In thousands, except share and par value amounts)

<TABLE>
<CAPTION>
                                                           Mar. 30,   Sept. 29,
                                                             2001       2000
                                                          ----------- ---------
                                                          (Unaudited)
<S>                                                       <C>         <C>
ASSETS

Current assets
  Cash and cash equivalents..............................  $ 55,894   $ 39,708
  Accounts receivable, net...............................   161,986    168,513
  Inventories............................................   124,880    105,450
  Deferred taxes.........................................    20,845     21,044
  Other current assets...................................    11,276     10,734
                                                           --------   --------
  Total current assets...................................   374,881    345,449
Property, plant, and equipment, net......................    84,344     80,632
Other assets.............................................    95,374     86,238
                                                           --------   --------
Total assets.............................................  $554,599   $512,319
                                                           ========   ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
  Current portion of long-term debt......................  $  6,366   $  6,384
  Notes payable..........................................     9,792         --
  Accounts payable.......................................    54,759     52,193
  Accrued liabilities....................................   143,740    133,825
                                                           --------   --------
  Total current liabilities..............................   214,657    192,402
Long-term debt...........................................    42,615     45,516
Deferred taxes...........................................     6,669      6,669
Other liabilities........................................    10,321     11,626
                                                           --------   --------
Total liabilities........................................   274,262    256,213
                                                           --------   --------
Contingencies (Note 8)

Stockholders' equity
  Preferred stock--par value $.01, authorized--1,000,000
   shares; issued--none..................................        --         --
  Common stock--par value $.01, authorized--99,000,000
   shares; issued and outstanding--32,989,003 shares at
   March 30, 2001 and 32,834,000 shares at Sept. 29,
   2000..................................................   225,206    222,838
  Retained earnings......................................    81,637     55,944
  Other comprehensive loss...............................   (26,506)   (22,676)
                                                           --------   --------
  Total stockholders' equity.............................   280,337    256,106
                                                           --------   --------
Total liabilities and stockholders' equity...............  $554,599   $512,319
                                                           ========   ========
</TABLE>

        See accompanying Notes to the Consolidated Financial Statements.

                                       4
<PAGE>

                     Varian, Inc. and Subsidiary Companies
                     Consolidated Statements of Cash Flows
                                 (In thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                            Six Months Ended
                                                            ------------------
                                                            Mar. 30,  Mar. 31,
                                                              2001      2000
                                                            --------  --------
<S>                                                         <C>       <C>
Cash flows from operating activities
Net earnings..............................................  $ 25,693  $ 18,747
Adjustments to reconcile net earnings to net cash provided
 by operating activities:
 Depreciation and amortization............................    10,153     9,317
 (Gain) loss on disposition of property, plant, and
  equipment...............................................       (81)      (29)
 Changes in assets and liabilities:
  Accounts receivable, net................................     8,804    (5,392)
  Inventories.............................................   (14,920)  (23,009)
  Other current assets....................................    (1,617)      367
  Accounts payable........................................    (3,574)   17,484
  Accrued liabilities.....................................    10,937    13,028
  Other liabilities.......................................      (797)    2,932
  Other assets............................................       839      (932)
                                                            --------  --------
Net cash provided by operating activities.................    35,437    32,513
                                                            --------  --------

Cash flows from investing activities
Proceeds from sale of property, plant, and equipment......       545       286
Purchase of property, plant, and equipment................   (12,107)  (10,558)
Purchase of businesses, net of cash acquired..............   (16,061)   (7,095)
                                                            --------  --------

Net cash used in investing activities.....................   (27,623)  (17,367)
                                                            --------  --------

Cash flows from financing activities
Issuance of debt..........................................    11,438        --
Repayment of debt.........................................    (3,343)   (3,337)
Issuance of common stock..................................     2,368    21,752
Purchase of common stock..................................        --    (2,548)
Transfers (to) from Varian Medical Systems, Inc...........    (1,190)    1,095
                                                            --------  --------
Net cash provided by financing activities.................     9,273    16,962
                                                            --------  --------
Effects of exchange rate changes on cash..................      (901)     (928)
                                                            --------  --------
Net increase in cash and cash equivalents.................    16,186    31,180
Cash and cash equivalents at beginning of period..........    39,708    23,348
                                                            --------  --------
Cash and cash equivalents at end of period................  $ 55,894  $ 54,528
                                                            ========  ========
Supplemental cash flow information
Income taxes paid.........................................  $ 11,510  $  2,453
Interest paid.............................................  $  1,707  $  1,928
</TABLE>

        See accompanying Notes to the Consolidated Financial Statements.

                                       5
<PAGE>

                     VARIAN, INC. AND SUBSIDIARY COMPANIES

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

Note 1. Interim Consolidated Financial Statements

  These interim consolidated financial statements of Varian, Inc. and its
subsidiary companies (collectively, the "Company") have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The year ended September 29, 2000 balance sheet data was derived
from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. These interim
consolidated financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's Form 10-K
for the year ended September 29, 2000 filed with the Securities and Exchange
Commission. In the opinion of the Company's management, the interim
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 fiscal quarter and six months ended March
30, 2001 are not necessarily indicative of the results to be expected for a
full year or for any other periods.

  During the fiscal quarter ended December 29, 2000, the Company acquired
substantially all of the assets of Imagine Manufacturing Solutions, Inc. and
R&S Technology, Inc. During the fiscal quarter ended March 30, 2001, the
Company acquired all of the outstanding capital stock of Bear Instruments,
Inc. These acquisitions, which did not have a material effect on the Company's
operations or financial position, were accounted for using the purchase method
of accounting.

Note 2. Description of Business and Basis of Presentation

  The Company is a major supplier of scientific instruments and consumable
laboratory supplies, vacuum technology products and services, and electronics
manufacturing services. These businesses primarily serve life science, health
care, semiconductor processing, communications, industrial, and academic
customers. Until April 2, 1999, the business of the Company was operated as
the Instrument Business ("IB") 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 for each share of VAI (the "Distribution").

  The Company's fiscal years reported are the 52-week periods ending on the
Friday nearest September 30. Fiscal year 2001 will comprise the 52-week period
ending September 28, 2001, and fiscal year 2000 was comprised of the 52-week
period ended September 29, 2000. The fiscal quarters ended March 30, 2001 and
March 31, 2000 each comprise 13 weeks, and the six-month periods ended March
30, 2001 and March 31, 2000 each comprise 26 weeks.

Note 3. Balance Sheet Detail

<TABLE>
<CAPTION>
                                                              Mar. 30, Sept. 29,
                                                                2001     2000
                                                              -------- ---------
<S>                                                           <C>      <C>
(In thousands)
INVENTORIES
Raw materials and parts...................................... $ 69,830 $ 55,649
Work in process..............................................   13,111   10,912
Finished goods...............................................   41,939   38,889
                                                              -------- --------
                                                              $124,880 $105,450
                                                              ======== ========
</TABLE>

                                       6
<PAGE>

                     VARIAN, INC. AND SUBSIDIARY COMPANIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 4. Forward Exchange Contracts

  Effective September 30, 2000, the Company adopted Statement of Financial
Accounting Standards ("SFAS") 133, "Accounting for Derivative Instruments and
Hedging Activities," which was amended by SFAS 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities." SFAS 133 and 138
require derivatives to be measured at fair value and to be recorded as assets
or liabilities on the balance sheet. The accounting for gains or losses
resulting from changes in the fair values of those derivatives would be
dependent upon the use of the derivative and whether it qualifies for hedge
accounting. The adoption of SFAS 133 and 138 did not have a material effect on
the Company's financial statements for the fiscal quarter and the six months
ended March 30, 2001.

  The Company's forward exchange contracts generally range from one to 12
months in original maturity. Forward exchange contracts outstanding as of
March 30, 2001 that hedge the balance sheet and certain purchase commitments
were effective March 30, 2001, and accordingly there were no significant
unrealized gains or losses associated with such contracts and the fair value
of these contracts approximates their notional values. Forward exchange
contracts that were outstanding as of March 30, 2001 are summarized as
follows:

<TABLE>
<CAPTION>
                                                              Notional Notional
                                                               Value     Value
                                                                Sold   Purchased
                                                              -------- ---------
<S>                                                           <C>      <C>
(In thousands)
Australian Dollar............................................ $    --   $25,966
Euro.........................................................      --    12,864
Canadian Dollar..............................................   3,966        --
British Pound................................................   4,769        --
Japanese Yen.................................................   1,553        --
                                                              -------   -------
  Total...................................................... $10,288   $38,830
                                                              =======   =======
</TABLE>

                                       7
<PAGE>

                     VARIAN, INC. AND SUBSIDIARY COMPANIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note 5. Net Earnings Per Share

  Basic earnings per share are calculated based on net earnings and the
weighted-average number of shares outstanding during the reported period.
Diluted earnings per share include dilution from potential common stock shares
issuable pursuant to the exercise of outstanding stock options determined
using the treasury stock method.

  For the fiscal quarter and six months ended March 30, 2001, options to
purchase 667,531 and 468,644, respectively, potential common stock shares with
exercise prices greater than the weighted-average market value of such common
stock were excluded from the calculation of diluted earnings per share. For
the fiscal quarter and six months ended March 31, 2000, options to purchase
7,113 and 12,484, respectively, potential common stock shares with exercise
prices greater than the weighted-average market value of such common stock
were excluded from the calculation of diluted earnings per share.

A reconciliation follows:
(In thousands except per share amounts)

<TABLE>
<CAPTION>
                                                                  Six Months
                                                 Quarter Ended       Ended
                                                --------------- ---------------
                                                 Mar.    Mar.    Mar.    Mar.
                                                  30,     31,     30,     31,
                                                 2001    2000    2001    2000
                                                ------- ------- ------- -------
<S>                                             <C>     <C>     <C>     <C>
Basic
Net earnings................................... $12,909 $10,238 $25,693 $18,747
Weighted average shares outstanding............  32,946  31,498  32,903  31,154
Net earnings per share......................... $  0.39 $  0.33 $  0.78 $  0.60
                                                ======= ======= ======= =======

Diluted
Net earnings................................... $12,909 $10,238 $25,693 $18,747
Weighted average shares outstanding              32,946  31,498  32,903  31,154
Net effect of dilutive stock options...........   1,529   2,272   1,565   2,078
                                                ------- ------- ------- -------
Total shares...................................  34,475  33,770  34,468  33,232
Net earnings per share......................... $  0.37 $  0.30 $  0.75 $  0.56
                                                ======= ======= ======= =======
</TABLE>

Note 6. Comprehensive Income

  Comprehensive income is comprised of net income and the currency translation
adjustment. Comprehensive income was $5.4 million and $4.7 million for the
fiscal quarters ended March 30, 2001 and March 31, 2000, respectively and
$21.9 million and $4.5 million for the six months ended March 30, 2001 and
March 31, 2000, respectively.

Note 7. Debt and Credit Facilities

  In December 2000, the Company established a 364-day bank credit facility in
Japan in the amount of 1.2 billion yen. The credit facility is for working
capital purposes for its wholly-owned Japanese subsidiary. As of March 30,
2001, 1.2 billion yen ($9.8 million) was outstanding under this credit
facility with an annual interest rate of 1.8%. This credit facility contains
certain covenants that limit future borrowings of the Company and requires the
maintenance by the Company of certain levels of working capital and operating
results.

Note 8. Contingencies

  Environmental Matters. The Company's operations are subject to various
foreign, federal, state, and local laws regulating the discharge of materials
into the environment or otherwise relating to the protection of the

                                       8
<PAGE>

                     VARIAN, INC. AND SUBSIDIARY COMPANIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 upon
the Company's capital expenditures, earnings, or competitive position.

  Under the terms of the Distribution, the Company and Varian Semiconductor
Equipment Associates, Inc. ("VSEA") each agreed to indemnify Varian Medical
Systems, Inc. ("VMS") for one-third of certain environmental investigation and
remediation costs (after adjusting for any insurance proceeds and tax benefits
recognized or realized by VMS for such costs), as further described below.

  VMS has been named by the U.S. Environmental Protection Agency or third
parties as a potentially responsible party under the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, at
eight sites where VAI is alleged to have shipped manufacturing waste for
recycling, treatment, or disposal. VMS is also involved in various stages of
environmental investigation, monitoring, and/or remediation under the
direction of, or in consultation with, foreign, federal, state, and/or local
agencies at certain current VMS or former VAI facilities, or is reimbursing
third parties which are undertaking such investigation, monitoring, and/or
remediation activities.

  For certain of these sites and facilities, various uncertainties make it
difficult to assess the likelihood and scope of further investigation or
remediation activities or to estimate the future costs of such activities if
undertaken. As of March 30, 2001, it was nonetheless estimated that the
Company's share of the future exposure for environmental-related investigation
and remediation costs for these sites and facilities ranged in the aggregate
from $1.6 million to $5.1 million (without discounting to present value). The
time frame over which these costs are expected to be incurred varies with each
site and facility, ranging up to approximately 30 years as of March 30, 2001.
No amount in the foregoing range of estimated future costs is believed to be
more probable of being incurred than any other amount in such range, and the
Company therefore accrued $1.6 million as of March 30, 2001.

  As to other sites and facilities, sufficient knowledge has been gained to be
able to better estimate the scope and costs of future environmental
activities. As of March 30, 2001, it was estimated that the Company's share of
the future exposure for environmental-related investigation and remediation
costs for these sites and facilities ranged in the aggregate from $8.0 million
to $18.3 million (without discounting to present value). The time frame over
which these costs are expected to be incurred varies with each site and
facility, ranging up to approximately 30 years as of March 30, 2001. As to
each of these sites and facilities, it was determined that a particular amount
within the range of estimated costs was a better estimate of the future
environmental liability than any other amount within the range, and that the
amount and timing of these future costs were reliably determinable. Together,
these amounts totaled $14.1 million at March 30, 2001. The Company therefore
accrued $6.3 million as of March 30, 2001, which represents the best estimate
of its share of these future costs discounted at 4%, net of inflation. This
accrual is in addition to the $1.6 million described in the preceding
paragraph.

  Lawsuits for recovery of environmental investigation and remediation costs
already incurred, and to be incurred in the future, were filed by VAI against
various insurance companies and other third parties. Following settlements
with various insurance companies, VMS is still pursuing lawsuits against an
insurance company and certain other third parties for the benefit of itself,
VSEA, and the Company. In addition, an insurance company has agreed to pay a
portion of VAI's (now VMS') future environmental-related expenditures for
which the Company has an indemnity obligation, and the Company therefore has a
$1.6 million receivable in Other Assets as of March 30, 2001 for the Company's
share of such recovery. The Company has not reduced any environmental-related
liability in anticipation of recovery on claims made against third parties.

  The Company's management believes that its reserves for the foregoing and
certain other environmental-related matters are adequate, but as the scope of
its obligation becomes more clearly defined, these reserves may

                                       9
<PAGE>

                     VARIAN, INC. AND SUBSIDIARY COMPANIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
be modified, and related charges or credits against earnings may be made.
Although any ultimate liability arising from environmental-related matters
described herein could result in significant expenditures that, if aggregated
and assumed to occur within a single fiscal year, would be material to the
Company's financial 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's management believes that the costs of these environmental-
related matters are not reasonably likely to have a material adverse effect on
the Company's financial position or results of operations.

  Legal Proceedings. Under the terms of the Distribution, the Company agreed
to defend and indemnify VSEA and VMS for costs, liabilities, and expenses with
respect to legal proceedings related to the Instruments Business of VAI, and
agreed to reimburse VMS for one-third of certain costs and expenses (after
adjusting for any insurance proceeds and tax benefits recognized or realized
by VMS for such costs and expenses) that are paid after April 2, 1999 and
arise from actual or potential claims or legal proceedings relating to
discontinued, former, or corporate operations of VAI. From time to time, the
Company is involved in a number of its own legal actions and could incur an
uninsured liability in one or more of them. While the ultimate outcome of all
of the foregoing legal matters is not determinable, management believes that
these matters are not reasonably likely to have a material adverse effect on
the Company's financial position or results of operations.

Note 9. Industry Segments

  The Company's operations are grouped into three business segments:
Scientific Instruments, Vacuum Technologies, and Electronics Manufacturing.
Scientific Instruments is a supplier of instruments, consumable laboratory
supplies, and after sales support used in studying the chemical composition
and structure of myriad substances and for imaging. These products are tools
for scientists engaged in drug discovery, life sciences, genetic engineering,
health care, environmental analysis, quality control, and academic research.
Vacuum Technologies provides products and solutions to create, maintain,
contain, and measure an ultra-clean or high-vacuum environment for industrial
and scientific applications. Vacuum Technologies products are used in
semiconductor manufacturing equipment, life science and other analytical
instruments, industrial manufacturing, and quality control. Electronics
Manufacturing provides contract manufacturing services for technology
companies with low-volume and high-mix requirements.

  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 may not be indicative of the
financial results of the reported segments were they independent
organizations. In addition, comparisons of the Company's operations to similar
operations of other companies may not be meaningful.

                                      10
<PAGE>

                     VARIAN, INC. AND SUBSIDIARY COMPANIES

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                               Industry Segments
                                 (In millions)

<TABLE>
<CAPTION>
                                               Quarter Ended     Quarter Ended
                                             ----------------- -----------------
                                             Mar. 30, Mar. 31, Mar. 30, Mar. 31,
                                               2001     2000     2001     2000
                                             -------- -------- -------- --------
                                                                Pretax   Pretax
                                              Sales    Sales   Earnings Earnings
<S>                                          <C>      <C>      <C>      <C>
Scientific Instruments......................  $110.0   $102.0   $13.0    $11.3
Vacuum Technologies ........................    40.9     34.8     8.6      5.8
Electronics Manufacturing...................    43.2     40.5     2.1      3.0
                                              ------   ------   -----    -----
Total industry segments.....................   194.1    177.3    23.7     20.1
General corporate...........................      --       --    (2.5)    (3.1)
Interest expense, net.......................      --       --    (0.1)    (0.5)
                                              ------   ------   -----    -----
Total.......................................  $194.1   $177.3   $21.1    $16.5
                                              ======   ======   =====    =====

                               Industry Segments
                                 (In millions)

<CAPTION>
                                             Six Months Ended  Six Months Ended
                                             ----------------- -----------------
                                             Mar. 30, Mar. 31, Mar. 30, Mar. 31,
                                               2001     2000     2001     2000
                                             -------- -------- -------- --------
                                                                Pretax   Pretax
                                              Sales    Sales   Earnings Earnings
<S>                                          <C>      <C>      <C>      <C>
Scientific Instruments......................  $216.7   $196.3   $24.9    $22.6
Vacuum Technologies ........................    82.5     66.7    17.7     10.3
Electronics Manufacturing...................    86.2     74.3     4.9      5.7
                                              ------   ------   -----    -----
Total industry segments.....................   385.4    337.3    47.5     38.6
General corporate...........................      --       --    (4.8)    (6.7)
Interest expense, net.......................      --       --    (0.6)    (1.2)
                                              ------   ------   -----    -----
Total.......................................  $385.4   $337.3   $42.1    $30.7
                                              ======   ======   =====    =====
</TABLE>

Note 10. Recent Accounting Pronouncements

  In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") 101, "Revenue Recognition," which provides
guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the Securities and Exchange Commission. SAB
101 outlines the basic criteria that must be met to recognize revenue and
provides guidance for disclosures related to revenue recognition policies. SAB
101 is effective no later than the fourth quarter of fiscal years beginning
after December 15, 1999, and requires companies to report any changes in
revenue recognition as a cumulative change in accounting principle at the time
of implementation in accordance with Accounting Principles Board Opinion 20,
"Accounting Changes." In October 2000, the Securities and Exchange Commission
issued SAB 101 Frequently Asked Questions and Answers, which the Company is
utilizing to determine the impact that adoption will have on its consolidated
financial statements. Because the Company has complied with generally accepted
accounting principles for historical revenue recognition, any change in
revenue recognition resulting from SAB 101 will be reported as a change in
accounting principle in the fourth quarter of fiscal year 2001 with
restatements, if material, of the first, second, and third quarters of fiscal
year 2001. While SAB 101 would not affect the fundamental aspects of the
Company's operations as measured by shipments and cash flows, the
implementation of SAB 101 could result in some changes to the timing of the
Company's revenue recognition practices in certain situations, and therefore
could have an effect on the Company's reported results of operations.

                                      11
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

  Until April 2, 1999, the business of Varian, Inc. (the "Company") was
operated as the Instruments Business ("IB") of Varian Associates, Inc.
("VAI"). IB included the business units that designed, manufactured, sold, and
serviced scientific instruments and vacuum technologies, and a business unit
that provided contract electronics manufacturing. VAI contributed IB to the
Company; then on April 2, 1999, VAI distributed to the holders of record of
VAI common stock on March 24, 1999 one share of common stock of the Company
for each share of VAI common stock outstanding on April 2, 1999 (the
"Distribution"). At the same time, VAI contributed its Semiconductor Equipment
business to Varian Semiconductor Equipment Associates, Inc. ("VSEA") and
distributed to the holders of record of VAI common stock on March 24, 1999 one
share of common stock of VSEA for each share of VAI common stock outstanding
on April 2, 1999. VAI retained its Health Care Systems business and changed
its name to Varian Medical Systems, Inc., ("VMS") effective as of April 3,
1999. These transactions were accomplished under the terms of an Amended and
Restated Distribution Agreement dated as of January 14, 1999 by and among the
Company, VAI, and VSEA (the "Distribution Agreement").

  The Company's fiscal years reported are the 52-week periods ending on the
Friday nearest September 30. Fiscal year 2001 will comprise the 52-week period
ending September 28, 2001, and fiscal year 2000 was comprised of the 52-week
period ended September 29, 2000. The fiscal quarters ended March 30, 2001 and
March 31, 2000 each comprise 13 weeks, and the six-month periods ended March
30, 2001 and March 31, 2000 each comprise 26 weeks.

Results of Operations

Second Quarter of Fiscal Year 2001 Compared to Second Quarter of Fiscal Year
2000

  Sales. Sales were $194.1 million in the second quarter of fiscal year 2001,
an increase of 9.5% from sales of $177.3 million in the second quarter of
fiscal year 2000. Sales by the Scientific Instruments, Vacuum Technologies,
and Electronics Manufacturing segments increased by 7.9%, 17.6% and 6.7%,
respectively.

  Geographically, sales in North America of $114.8 million, Europe of $45.7
million and the rest of the world of $33.6 million in the second quarter of
fiscal year 2001 represented increases (decreases) of 11.5%, (6.3%), and
31.9%, respectively, as compared to the second quarter of fiscal year 2000.
The increase in North America was due to the sales growth in all three
segments. Scientific Instruments grew 12.8%, Vacuum Technologies grew 17.7%
and Electronics Manufacturing grew 6.7%. The decrease in Europe was primarily
due to the sharp decline in the European currencies compared to the second
quarter of fiscal year 2000. The increase in the rest of the world was
primarily due to strong sales growth in Scientific Instruments.

  Gross Profit. Gross profit was $74.7 million (representing 38.4% of sales)
in the second quarter of fiscal year 2001, compared to $67.6 million
(representing 38.1% of sales) in the second quarter of fiscal year 2000. The
$7.0 million increase in gross profit resulted primarily from the increase in
sales in the second quarter of fiscal year 2001 compared to the second quarter
of fiscal year 2000. The increase in gross profit as a percent of sales
primarily reflects the revenue shift to Scientific Instruments and Vacuum
Technologies which have higher gross profit percentages than Electronics
Manufacturing, which has lower gross profit percentages (but also lower
operating expenses).

  Sales and Marketing. Sales and marketing expenses were $33.5 million
(representing 17.2% of sales) in the second quarter of fiscal year 2001,
compared to $31.3 million (representing 17.7% of sales) in the second quarter
of fiscal year 2000. The $2.2 million increase was primarily to support the
sales growth. The decrease in the sales and marketing expenses as a percent of
sales resulted primarily from the Company's ability to leverage these expenses
as sales increased and the favorable effect on these expenses of the weaker
euro and Australian dollar.

                                      12
<PAGE>

  Research and Development. Research and development expenses were $9.3
million (representing 4.8% of sales) in the second quarter of fiscal year
2001, compared to research and development expenses of $8.5 million
(representing 4.8% of sales) in the second quarter of fiscal year 2000.
Research and development expenditures remained consistent with the growth in
sales.

  General and Administrative. General and administrative expenses were $10.6
million (representing 5.5% of sales) in the second quarter of fiscal year
2001, compared to $10.7 million (representing 6.0% of sales) in the second
quarter of fiscal year 2000. The decrease as a percent of sales resulted
primarily from growth in the revenues while controlling the growth in these
costs.

  Net Interest Expense. Net interest expense was $0.1 million (representing
0.1% of sales) for the second quarter of fiscal year 2001, compared to $0.5
million (representing 0.3% of sales) for the second quarter of fiscal year
2000. The reduction in net interest expense resulted mainly from income on
invested cash.

  Taxes on Earnings. The effective income tax rate was 39.0% for the second
quarter of fiscal year 2001, compared to 38.1% for the second quarter of
fiscal year 2000. The 38.1% rate for the second quarter of fiscal year 2000
reflected the adjustment needed to bring the first half of fiscal year 2000
effective income tax rate to the expected rate of 39.0% for fiscal year 2000.

  Net Earnings. Net earnings were $12.9 million ($0.37 diluted net earnings
per share) in the second quarter of fiscal year 2001, compared to net earnings
of $10.2 million ($0.30 diluted net earnings per share) in the second quarter
of fiscal year 2000. The net earnings improvement resulted primarily from
higher sales and from operating expenses growing at a lower rate than sales.

  Segments. Scientific Instruments sales of $110.0 million in the second
quarter of fiscal year 2001 increased 7.9% over the second quarter of fiscal
year 2000 sales of $102.0 million. The revenue growth was primarily driven by
demand for life science products in NMR, liquid chromatography, molecular
spectroscopy and tablet dissolution, as well as gas chromatography products
used for natural gas analysis, but was negatively impacted by the strong U.S.
dollar. Earnings from operations in the second quarter of fiscal year 2001 of
$13.0 million (11.8% of sales) increased from $11.3 million (11.1% of sales)
in the second quarter of fiscal year 2000. The increase in earnings and the
percent of sales primarily reflects the product mix shift to higher margin
products for life science applications in addition to controlling expenses as
revenues increased.

  Vacuum Technologies sales of $40.9 million in the second quarter of fiscal
year 2001 increased 17.6% above the second quarter of fiscal year 2000 sales
of $34.8 million. The revenue growth was primarily driven by broad demand for
industrial, research, and life science applications. The slowing in demand for
semiconductor applications, which began in the first quarter of fiscal 2001,
continued in the second quarter. This slowing in demand was offset by strong
demand for the Company's vacuum products for other applications. The Company
expects revenues for semiconductor applications to decrease further in the
third quarter of fiscal year 2001, but expects continued growth for other
applications. Earnings from operations in the second quarter of fiscal year
2001 of $8.6 million (21.0% of sales) were up from the $5.8 million (16.5% of
sales) in the second quarter of fiscal year 2000. The improved earnings
resulted from the increased sales, improved product mix, and favorable impact
of the stronger U.S. dollar on the segment's Torino, Italy factory, which sold
approximately 50% of its output into the U.S.

  Electronics Manufacturing sales in the second quarter of fiscal year 2001 of
$43.2 million increased 6.7% from the second quarter of fiscal year 2000 sales
of $40.5 million. Electronics Manufacturing continued to experience a slowing
of demand, which began in the first quarter of fiscal 2001, from some of its
communications customers. This slowing in demand was offset by strong demand
from new customers and customers brought to the business by the acquisition in
October 2000 of the operations of Imagine Manufacturing Solutions, Inc.
Earnings from operations in the second quarter of fiscal year 2001 of $2.1
million (4.9% of sales) decreased from $3.0 million (7.6% of sales) in the
second quarter of fiscal year 2000. The decrease in earnings from operations
is primarily the result of the costs of integrating an acquisition and the
start-up costs of new customers.


                                      13
<PAGE>

First Half of Fiscal Year 2001 Compared to First Half of Fiscal Year 2000

  Sales. Sales were $385.4 million in the first half of fiscal year 2001, an
increase of 14.3% from sales of $337.3 million in the first half of fiscal
year 2000. Sales by the Scientific Instruments, Vacuum Technologies, and
Electronics Manufacturing segments increased by 10.4%, 23.8%, and 16.0%,
respectively.

  Geographically, sales in North America of $233.2 million, Europe of $91.9
million and the rest of the world of $60.3 million in the first half of fiscal
year 2001 represented increases (decreases) of 20.2%, (1.2%), and 20.2%
respectively, as compared to the first half of fiscal year 2000. The
significant increase in North America was due to the sales growth in all three
segments. Scientific Instruments grew 18.8%, Vacuum Technologies grew 30.5%,
and Electronics Manufacturing grew 16.0%. The decline in sales in Europe
resulted mainly from the sharp decline in the European currencies compared to
the first half of fiscal 2000. The increase in the rest of the world was
primarily due to strong sales growth in Scientific Instruments.

  Gross Profit. Gross profit was $146.4 million (representing 38.0% of sales)
in the first half of fiscal year 2001, compared to $129.6 million
(representing 38.4% of sales) in the first half of fiscal year 2000. The $16.7
million increase in gross profit resulted primarily from the higher sales
compared to the same period last year. Currency fluctuations contributed to
lower gross margins for Scientific Instruments but contributed to higher gross
margins for Vacuum Technologies compared to the same period last year.
Electronics Manufacturing had lower gross margins primarily as a result of the
costs of integrating an acquisition and the start-up costs of new customers.

  Sales and Marketing. Sales and marketing expenses were $64.5 million
(representing 16.7% of sales) in the first half of fiscal year 2001, compared
to $61.1 million (representing 18.1% of sales) in the first half of fiscal
year 2000. The $3.3 million increase was primarily to support the higher sales
volume. The decrease in sales and marketing expenses as a percent of sales
resulted primarily from the Company's ability to leverage these expenses as
sales increased and the favorable effect on these expenses of the weaker euro
and Australian dollar.

  Research and Development. Research and development expenses were $17.1
million (representing 4.4% of sales) in the first half of fiscal year 2001,
compared to research and development expenses of $15.5 million (representing
4.6% of sales) in the first half of fiscal year 2000. The reduction in
research and development expense as a percent of sales resulted primarily from
a revenue shift among segments with different research and development
structures and from favorable currency effects in certain countries where the
Company conducts research and development.

  General and Administrative. General and administrative expenses were $22.1
million (representing 5.7% of sales) in the first half of fiscal year 2001,
compared to $21.0 million (representing 6.2% of sales) in the first half of
fiscal year 2000. The decrease as a percent of sales resulted primarily from
growth in the revenues while controlling the growth in these costs.

  Net Interest Expense. Net interest expense was $0.6 million (representing
0.1% of sales) for the first half of fiscal year 2001 compared to $1.2 million
(representing 0.4% of sales) for the first half of fiscal year 2000. The
reduction in net interest expense resulted mainly from income on invested
cash.

  Taxes on Earnings. The effective income tax rate was 39.0% for the first
half of fiscal year 2001 and for the first half of fiscal year 2000.

  Net Earnings. Net earnings were $25.7 million ($0.75 diluted net earnings
per share) in the first half of fiscal year 2001, compared to net earnings of
$18.7 million ($0.56 diluted net earnings per share) in the first half of
fiscal year 2000. The net earnings improvement resulted primarily from higher
sales and from operating expenses growing at a lower rate than sales.

  Segments. Scientific Instruments sales of $216.7 million in the first half
of fiscal year 2001 increased 10.4% over the first half of fiscal year 2000
sales of $196.3 million. The revenue growth was primarily driven

                                      14
<PAGE>

by demand for life science products in NMR, liquid chromatography, molecular
spectroscopy and tablet dissolution, as well as gas chromatography products
used for natural gas analysis, but was negatively impacted by the strong U.S.
dollar. Earnings from operations in the first half of fiscal year 2001 of
$24.9 million (11.5% of sales) increased from $22.6 million (11.5% of sales)
in the first half of fiscal year 2000. The increase in earnings resulted
primarily from higher sales, with the leverage of operating expenses
offsetting the negative impact of the strong dollar on this segment's
profitability.

  Vacuum Technologies sales of $82.5 million in the first half of fiscal year
2001 increased 23.8% above the first half of fiscal year 2000 sales of $66.7
million. The revenue growth was primarily driven by broad demand for
industrial, research, and life science applications. During the first half of
fiscal year 2001, this segment experienced a slowing in demand for
semiconductor applications. This slowing in demand was offset by strong demand
for the Company's vacuum products for other applications. The Company expects
revenues for semiconductor applications to decrease further in the third
quarter of fiscal year 2001, but expects continued growth for other vacuum
product applications. Earnings from operations in the first half of fiscal
year 2001 of $17.7 million (21.5% of sales) were up from the $10.3 million
(15.4% of sales) in the first half of fiscal year 2000. The improved earnings
resulted from the increased sales, improved product mix, and favorable impact
of the stronger U.S. dollar on the segment's Torino, Italy factory, which sold
approximately 55% of its output into the U.S.

  Electronics Manufacturing sales in the first half of fiscal year 2001 of
$86.2 million increased 16.0% from the first half of fiscal year 2000 sales of
$74.3 million. Electronics Manufacturing experienced a slowing of demand from
some of its communications customers, which was offset by strong demand from
new customers and customers brought to the business by the acquisition in
October 2000 of the operations of Imagine Manufacturing Solutions, Inc.
Earnings from operations in the first half of fiscal year 2001 of $4.9 million
(5.6% of sales) decreased from $5.7 million (7.7% of sales) in the first half
of fiscal year 2000. The decrease in earnings from operations is primarily the
result of the cost of integrating an acquisition and the start-up costs of new
customers.

Liquidity and Capital Resources

  The Company generated $35.4 million of cash from operating activities in the
first half of fiscal year 2001, which compares to $32.5 million in the first
half of fiscal year 2000. The increase in cash from operating activities
resulted from improved net earnings partially offset by higher working capital
requirements.

  The Company used $27.6 million of cash for investing activities in the first
half of fiscal year 2001, which compares to $17.4 million in the first half of
fiscal year 2000. This increase in cash used for investing activities in the
first half of fiscal year 2001 was primarily due to a higher level of business
acquisition activity.

  The Company generated $9.3 million of cash from financing activities in the
first half of fiscal year 2001, which compares to $17.0 million in the first
half of fiscal year 2000. This decrease resulted primarily from a $19.4
million decline in proceeds from issuance of common stock under stock option
plans offset by the issuance of $11.4 million in debt.

  In December 2000, the Company established a 364-day bank credit facility in
Japan in the amount of 1.2 billion yen. The credit facility is for working
capital purposes for its wholly-owned Japanese subsidiary. As of March 30,
2001, 1.2 billion yen ($9.8 million) was outstanding under this credit
facility with an annual interest rate of 1.8%. This credit facility contains
certain covenants that limit future borrowings of the Company and requires the
maintenance by the Company of certain levels of working capital and operating
results.

  The Distribution Agreement provides that the Company is responsible for
certain litigation to which VAI was a party, and further provides that the
Company 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
"Environmental Matters" below). The Distribution Agreement also

                                      15
<PAGE>

provided for the division among the Company, VSEA, and VMS of VAI's cash and
debt as of April 2, 1999. Under the Distribution Agreement, the Company was to
assume 50% of VAI's term loans and receive an amount of cash from VAI such
that it would have net debt (defined in the Distribution Agreement as the
amount outstanding under the term loans and notes payable, less cash and cash
equivalents) equal to approximately 50% of the net debt of the Company and
VMS, subject to such adjustment as was necessary to provide VMS with a net
worth (as defined in the Distribution Agreement) of between 40% and 50% of the
aggregate net worth of the Company and VMS, and subject to further adjustment
to reflect the Company's approximately 50% share of the estimated proceeds, if
any, to be received by VMS after the Distribution from the sale of VAI's long-
term leasehold interest at certain of its Palo Alto facilities, together with
certain related buildings and other corporate assets, and the Company's
obligation for approximately 50% of any estimated transaction expenses to be
paid by VMS after the Distribution (in each case reduced for estimated taxes
payable or tax benefits received from all sales and transaction expenses).
Since the amounts transferred immediately prior to the Distribution were based
on estimates, these and other adjustments were required following the
Distribution. As a result of these final adjustments, the Company recorded an
increase in stockholders' equity of $1.1 million in the second quarter of
fiscal year 2000. Management believes that no further adjustments are
necessary, and that if any are required, they will not have a material effect
on the Company's financial condition.

  The Company's 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 industry and global economies. The Company's current
business strategy contemplates possible acquisitions, further stock
repurchases, and/or facility expansions. Any of these activities could utilize
cash currently being generated by the Company. Although the Company's cash
requirements will fluctuate based on the timing and extent of these factors
and activities, management believes that cash generated from operations,
together with the Company's borrowing capability, will be sufficient to
satisfy commitments for capital expenditures and other cash requirements for
the next 12 months.

Environmental Matters

  The Company's operations are subject to various foreign, federal, state, and
local laws 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 upon the Company's capital
expenditures, earnings, or competitive position.

  Under the terms of the Distribution, the Company and VSEA each agreed to
indemnify VMS for one-third of certain environmental investigation and
remediation costs (after adjusting for any insurance proceeds and tax benefits
recognized or realized by VMS for such costs), as further described below.

  VMS has been named by the U.S. Environmental Protection Agency or third
parties as a potentially responsible party under the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, at
eight sites where VAI is alleged to have shipped manufacturing waste for
recycling, treatment, or disposal. VMS is also involved in various stages of
environmental investigation, monitoring, and/or remediation under the
direction of, or in consultation with, foreign, federal, state, and/or local
agencies at certain current VMS or former VAI facilities, or is reimbursing
third parties which are undertaking such investigation, monitoring, and/or
remediation activities.

 For certain of these sites and facilities, various uncertainties make it
difficult to assess the likelihood and scope of further investigation or
remediation activities or to estimate the future costs of such activities if
undertaken. As of March 30, 2001, it was nonetheless estimated that the
Company's share of the future exposure for environmental-related investigation
and remediation costs for these sites and facilities ranged in the aggregate
from $1.6 million to $5.1 million (without discounting to present value). The
time frame over which these costs are expected to be incurred varies with each
site and facility, ranging up to approximately 30 years as of March 30, 2001.
No amount in the foregoing range of estimated future costs is believed to be
more probable of being incurred than any other amount in such range, and the
Company therefore accrued $1.6 million as of March 30, 2001.

                                      16
<PAGE>

  As to other sites and facilities, sufficient knowledge has been gained to be
able to better estimate the scope and costs of future environmental
activities. As of March 30, 2001, it was estimated that the Company's share of
the future exposure for environmental-related investigation and remediation
costs for these sites and facilities ranged in the aggregate from $8.0 million
to $18.3 million (without discounting to present value). The time frame over
which these costs are expected to be incurred varies with each site and
facility, ranging up to approximately 30 years as of March 30, 2001. As to
each of these sites and facilities, it was determined that a particular amount
within the range of estimated costs was a better estimate of the future
environmental liability than any other amount within the range, and that the
amount and timing of these future costs were reliably determinable. Together,
these amounts totaled $14.1 million at March 30, 2001. The Company therefore
accrued $6.3 million as of March 30, 2001, which represents the best estimate
of its share of these future costs discounted at 4%, net of inflation. This
accrual is in addition to the $1.6 million described in the preceding
paragraph.

  Lawsuits for recovery of environmental investigation and remediation costs
already incurred, and to be incurred in the future, were filed by VAI against
various insurance companies and other third parties. Following settlements
with various insurance companies, VMS is still pursuing lawsuits against an
insurance company and certain other third parties for the benefit of itself,
VSEA, and the Company. In addition, an insurance company has agreed to pay a
portion of VAI's (now VMS') future environmental-related expenditures for
which the Company has an indemnity obligation, and the Company therefore has a
$1.6 million receivable in Other Assets as of March 30, 2001 for the Company's
share of such recovery. The Company has not reduced any environmental-related
liability in anticipation of recovery on claims made against third parties.

  The Company's management believes that its reserves for the foregoing and
certain 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 or credits against earnings may be made. Although any
ultimate liability arising from environmental-related matters described herein
could result in significant expenditures that, if aggregated and assumed to
occur within a single fiscal year, would be material to the Company's
financial 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's
management believes that the costs of these environmental-related matters are
not reasonably likely to have a material adverse effect on the Company's
financial position or results of operations.

Legal proceedings

  Under the terms of the Distribution, the Company agreed to defend and
indemnify VSEA and VMS for costs, liabilities, and expenses with respect to
legal proceedings related to the Instruments Business of VAI, and agreed to
reimburse VMS for one-third of certain costs and expenses (after adjusting for
any insurance proceeds and tax benefits recognized or realized by VMS for such
costs and expenses) that are paid after April 2, 1999 and arise from actual or
potential claims or legal proceedings relating to discontinued, former, or
corporate operations of VAI. From time to time, the Company is involved in a
number of its own legal actions and could incur an uninsured liability in one
or more of them. While the ultimate outcome of all of the foregoing legal
matters is not determinable, management believes that these matters are not
reasonably likely to have a material adverse effect on the Company's financial
position or results of operations.

Euro Conversion

  On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their existing currencies (legal
currencies) and one new common currency--the euro. The euro then began trading
on currency exchanges and began to be used in certain business transactions.
The transition period for the introduction of the euro occurs through June
2002. Beginning January 1, 2002, new euro-denominated bills and coins will be
issued. Simultaneously, legacy currencies will begin to be withdrawn from
circulation with the completion of the withdrawal scheduled for no later than
July 1, 2002. Because of the Company's significant sales and operating profits
generated in the European Union, the Company has initiated a

                                      17
<PAGE>

program to identify and address risks arising from the conversion to the euro
currency. These risks include, but are not limited to, converting information
technology systems to handle the new currency, evaluating the competitive
impact of one common currency due to, among other things, increased cross-
border price transparency, evaluating the Company's exposure to currency
exchange risks during and following the transition period to the euro, and
determining the impact on the Company's processes for preparing and
maintaining accounting and taxation records.

  The Company believes that it is taking appropriate steps to prepare for the
euro conversion and to mitigate its effects on the Company's business, and
that the euro conversion is not likely to have a material adverse effect on
the Company's business or financial condition. However, the Company is still
assessing the risks that might arise from the euro conversion and the costs to
address those risks, and therefore cannot assure that the euro conversion will
not have a material adverse effect on the Company's business or financial
condition.

Recent Accounting Pronouncements

  In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") 101, "Revenue Recognition," which provides
guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the Securities and Exchange Commission. SAB
101 outlines the basic criteria that must be met to recognize revenue and
provides guidance for disclosures related to revenue recognition policies. SAB
101 is effective no later than the fourth quarter of fiscal years beginning
after December 15, 1999, and requires companies to report any changes in
revenue recognition as a cumulative change in accounting principle at the time
of implementation in accordance with Accounting Principles Board Opinion 20,
"Accounting Changes." In October 2000, the Securities and Exchange Commission
issued SAB 101 Frequently Asked Questions and Answers, which the Company is
utilizing to determine the impact that adoption will have on its consolidated
financial statements. Because the Company has complied with generally accepted
accounting principles for historical revenue recognition, any change in
revenue recognition resulting from SAB 101 will be reported as a change in
accounting principle in the fourth quarter of fiscal year 2001 with
restatements, if material, of the first, second, and third quarters of fiscal
year 2001. While SAB 101 would not affect the fundamental aspects of the
Company's operations as measured by shipments and cash flows, the
implementation of SAB 101 could result in some changes to the timing of the
Company's revenue recognition practices in certain situations, and therefore
could have an effect on the Company's reported results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

  Effective September 30, 2000, the Company adopted Statement of Financial
Accounting Standards ("SFAS") 133, "Accounting for Derivative Instruments and
Hedging Activities," which was amended by SFAS 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities." SFAS 133 and 138
require derivatives to be measured at fair value and to be recorded as assets
or liabilities on the balance sheet. The accounting for gains or losses
resulting from changes in the fair values of those derivatives would be
dependent upon the use of the derivative and whether it qualifies for hedge
accounting. The adoption of SFAS 133 and SFAS 138 did not have a material
effect on the Company's financial statements for the fiscal quarter and the
six months ended March 30, 2001.

Foreign Currency Exchange Risk.

  The Company typically hedges its currency exposures associated with certain
assets and liabilities denominated in non-functional currencies and with
anticipated foreign currency cash flows. As a result, the effect of an
immediate 10% change in exchange rates would not be material to the Company's
financial condition or results of operations. The Company's forward exchange
contracts have generally ranged from one to 12 months in original maturity,
and no forward exchange contract has had an original maturity greater than one
year. Forward exchange contracts outstanding as of March 30, 2001 that hedge
the balance sheet and certain purchase commitments were effective on March 30,
2001, and accordingly there were no significant unrealized gains or losses
associated with such contracts and the fair value of these contracts
approximates their notional values.

                                      18
<PAGE>

Forward Exchange Contracts Outstanding as of March 30, 2001

<TABLE>
<CAPTION>
                                                              Notional Notional
                                                               Value     Value
                                                                Sold   Purchased
                                                              -------- ---------
<S>                                                           <C>      <C>
(In thousands)
Australian Dollar............................................ $    --   $25,966
Euro.........................................................      --    12,864
Canadian Dollar..............................................   3,966        --
British Pound................................................   4,769        --
Japanese Yen.................................................   1,553        --
                                                              -------   -------
  Total...................................................... $10,288   $38,830
                                                              =======   =======
</TABLE>

Interest Rate Risk

  The Company has no material exposure to market risk for changes in interest
rates. The Company invests primarily in short-term U.S. Treasury securities
and money market funds, and changes in interest rates would not be material to
the Company's financial condition or results of operations. The Company
primarily enters into debt obligations to support general corporate purposes,
including working capital requirements, capital expenditures, and
acquisitions. At March 30, 2001, most of the Company's debt obligations had
fixed interest rates.

  The estimated fair value of the Company's debt obligations approximates the
principal amounts reflected below on rates currently available to the Company
for debt with similar terms and remaining maturities.

  Although payments under certain of the Company's operating leases for its
facilities are tied to market indices, the Company is not exposed to material
interest rate risk associated with its operating leases.

Debt Obligations

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

<TABLE>
<CAPTION>
                           Six Months
                             Ending                         Fiscal Years
                         -------------- ----------------------------------------------------------
                         Sept. 28, 2001  2002    2003    2004    2005    2006   Thereafter  Total
                         -------------- ------  ------  ------  ------  ------  ---------- -------
                                            (dollars in thousands)
<S>                      <C>            <C>     <C>     <C>     <C>     <C>     <C>        <C>
Notes payable...........     $9,792                                                        $ 9,792
Average interest rate...        1.8%                                                           1.8%
Long-term debt
 (including current
 portion)...............     $3,186     $6,406  $3,546  $3,343  $2,500  $2,500   $27,500   $48,981
Average interest rate...        7.0%       6.9%    5.3%    5.5%    7.2%    7.2%      6.7%      6.6%
</TABLE>

                                      19
<PAGE>

                                   PART II.

                               OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

  At the Company's Annual Meeting of Stockholders held on February 8, 2001,
the Company's stockholders considered and voted on the election of two Class
II directors to the Board of Directors for three-year terms. The voting on
each nominee for director was as follows:

  John G. McDonald: 29,797,410 votes for, 158,285 votes withheld, and 0 broker
non-votes/1/
  Wayne R. Moon: 29,792,658 votes for, 158,037 votes withheld, and 0 broker
non-votes/1/

/1/ Pursuant to the rules of The Nasdaq Market, Inc., this election of
directors constituted a routine matter allowing brokers to vote without
receipt of instructions from clients.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

  (a) Exhibits required to be filed by Item 601 of Regulation S-K:

  None.

  (b) Reports on Form 8-K filed during the fiscal quarter ended March 30,
2001:

  None.

                                      20
<PAGE>

                                  SIGNATURES

  Pursuant to the requirements of Section 13 or 15(d) 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)

                                                 /s/ G. Edward McClammy
                                          By __________________________________
                                                    G. Edward McClammy
                                              Vice President, Chief Financial
                                                   Officer and Treasurer
                                               (Duly Authorized Officer and
                                               Principal Financial Officer)

Dated: May 11, 2001

                                      21