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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549







FORM 10-K







(Mark One)



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



For the fiscal year ended October 2, 2009



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 No. 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)



Securities registered pursuant to Section 12(b) of the Act:



|                              |  |                                                          
|----------------------------- |  | ---------------------------------------------------------
|(Title of each class)         |  | (Name of each exchange on which registered)              
|Common Stock, $0.01 par value |  | The Nasdaq Stock Market LLC (NASDAQ Global Select Market)



Securities registered pursuant to Section 12(g) of the Act:

None



Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No   ̈



Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ̈    No  x



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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x



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



|                           |  |                             
|-------------------------- |  | ----------------------------
|Large accelerated filer  x |  | Accelerated filer   ̈        
|Non-accelerated filer   ̈   |  | Smaller reporting company   ̈



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



The
aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant based upon the closing sale price of the Common Stock on April 3, 2009, as reported by the Nasdaq Global Select Market, was approximately
$698,111,000.



The number of shares of the
registrants Common Stock outstanding as of November 20, 2009 was approximately 29,012,000.



|                                                                                                                                                            |  |          
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------
|Documents Incorporated by Reference:                                                                                                                        |  |          
|Document Description                                                                                                                                        |  | 10-K Part
|Certain sections, identified by caption, of the definitive Proxy Statement for the registrants 2010 Annual Meeting of
Stockholders (the Proxy Statement) |  | III      









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VARIAN, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR
ENDED OCTOBER 2, 2009



TABLE OF CONTENTS



|         |  |                                                                                                              |  |     
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|         |  |                                                                                                              |  | Page
|PART I   |  |                                                                                                              |  |     
|         |  |                                                                                                             
|Item 1.  |  | Business                                                                                                     |  | 4   
|         |  |                                                                                                             
|         |  | Executive Officers                                                                                           |  | 11  
|         |  |                                                                                                             
|         |  | Investor Information                                                                                         |  | 11  
|         |  |                                                                                                             
|Item 1A. |  | Risk Factors                                                                                                 |  | 11  
|         |  |                                                                                                             
|Item 1B. |  | Unresolved Staff Comments                                                                                    |  | 18  
|         |  |                                                                                                             
|Item 2.  |  | Properties                                                                                                   |  | 18  
|         |  |                                                                                                             
|Item 3.  |  | Legal Proceedings                                                                                            |  | 19  
|         |  |                                                                                                             
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                          |  | 19  
|         |  |                                                                                                             
|PART II  |  |                                                                                                              |  |     
|         |  |                                                                                                             
|Item 5.  |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 20  
|         |  |                                                                                                             
|Item 6.  |  | Selected Financial Data                                                                                      |  | 21  
|         |  |                                                                                                             
|Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 22  
|         |  |                                                                                                             
|Item 7A. |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |  | 39  
|         |  |                                                                                                             
|Item 8.  |  | Financial Statements and Supplementary Data                                                                  |  | 41  
|         |  |                                                                                                             
|Item 9.  |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                         |  | 41  
|         |  |                                                                                                             
|Item 9A. |  | Controls and Procedures                                                                                      |  | 41  
|         |  |                                                                                                             
|Item 9B. |  | Other Information                                                                                            |  | 42  
|         |  |                                                                                                             
|PART III |  |                                                                                                              |  |     
|         |  |                                                                                                             
|Item 10. |  | Directors, Executive Officers and Corporate Governance                                                       |  | 43  
|         |  |                                                                                                             
|Item 11. |  | Executive Compensation                                                                                       |  | 43  
|         |  |                                                                                                             
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 44  
|         |  |                                                                                                             
|Item 13. |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 44  
|         |  |                                                                                                             
|Item 14. |  | Principal Accounting Fees and Services                                                                       |  | 44  
|         |  |                                                                                                             
|PART IV  |  |                                                                                                              |  |     
|         |  |                                                                                                             
|Item 15. |  | Exhibits, Financial Statement Schedules                                                                      |  | 45  



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PART I



Caution Regarding Forward-Looking Statements



Throughout this Report, and particularly in
Item 1Business, Item 1ARisk Factors and Item 7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 on 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, whether and when backlog will result in actual sales, and capital
expenditures in fiscal year 2010.



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. 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: the pace and extent of
improvements in global economic conditions; whether we will succeed in new product development, release, commercialization, performance and acceptance; whether we can achieve growth in sales for life science, environmental, energy, and/or applied
research and other applications; whether we can achieve sales growth in Europe, North America and/or Latin America; risks arising from the timing of shipments, installations and the recognition of revenues on certain research 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 various 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/or earnings; whether we will see continued investment in capital equipment, in particular given global liquidity and credit conditions; demand from customers that operate in cyclical industries; the
extent to which global liquidity and credit conditions impact the collectability of accounts receivable from our customers; the extent and timing of government funding for research; the actual costs, timing and benefits of restructuring activities
(such as the employee reductions and other actions announced in January 2009 and our Northern California operations consolidation) and other efficiency improvement activities (such as our global procurement, lower-cost manufacturing and outsourcing
initiatives); the timing and amount of share-based compensation; the ability of our company and Agilent Technologies, Inc. (Agilent) to complete the announced acquisition of our company by Agilent (the Merger); the affect on
our business operations and financial results of the announcement, the pendency, and activities relating to the completion of the Merger; the affect of certain restrictions on our ability to conduct our business under the Merger agreement with
Agilent; and other risks detailed from time to time in our filings with the U.S. Securities and Exchange Commission (the SEC). We undertake no special obligation to update any forward-looking statements, whether in response to new
information, future events or otherwise.



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|Item 1. | Business
|------- | --------



GENERAL



Overview and History



Varian, Inc., together with its subsidiaries (collectively, the Company), designs, develops, manufactures, markets, sells and services scientific instruments (including analytical instruments,
research products and related software, consumable products, accessories and services) and vacuum products (and related accessories and services). For financial reporting purposes, our operations are grouped into two corresponding segments:
Scientific Instruments and Vacuum Technologies. These segments, their products and the applications in which they are used are described below.



Varian, Inc. became a separate, public company on April 2, 1999. Until that date, our business was operated as the Instruments business
of Varian Associates, Inc. (VAI). The Instruments business (which included the business units that designed, developed, manufactured, marketed, sold and serviced scientific instruments and vacuum products, and a business unit that
provided contract electronics manufacturing services) was contributed by VAI to us. On that date, VAI distributed to holders of its common stock one share of our common stock 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 common stock outstanding on April 2, 1999 (the Distribution). VAI retained its Health Care
Systems business and changed its name to Varian Medical Systems, Inc. (VMS). These transactions were accomplished under the terms of an Amended and Restated Distribution Agreement dated as of January 14, 1999 by and among us, VAI
and VSEA (the Distribution Agreement).



On July 26, 2009, Varian, Agilent Technologies, Inc., a Delaware corporation (Agilent) and Cobalt Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Agilent (Merger Sub), entered into an
Agreement and Plan of Merger (the Merger Agreement), pursuant to which Merger Sub will, subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, merge with and into Varian and Varian will survive the
merger and continue as a wholly owned subsidiary of Agilent (the Merger). Pursuant to the terms of the Merger Agreement and subject to the conditions thereof, at the effective time of the Merger (the Effective Time), each
share of common stock of Varian issued and outstanding immediately prior to the Effective Time will be converted into the right to receive $52.00 in cash, without interest. On October 5, 2009, Varians stockholders approved the Merger. The
Merger remains subject to regulatory approvals and the satisfaction or waiver of certain other closing conditions.



Business Segments and Products



For financial reporting purposes, we have two business segments: Scientific Instruments and Vacuum Technologies, which are described below.



The products and activities of these two segments
are related in certain important respects, particularly product applications. In many ways, we view, manage, operate and describe our Company as being comprised of a single business. Described below are our products by segment, but then separately
described are the primary applications for those products.



Scientific Instruments Products



Our Scientific Instruments segment designs, develops, manufactures, markets, sells and services products used in a broad range of life science (such as pharmaceutical), environmental, energy, and applied research and other applications
requiring identification, quantification and analysis of the elemental, molecular, physical or biological composition or structure of liquids, solids or gases. These products include analytical instruments (primarily mass spectrometers,
chromatography instruments, optical spectroscopy instruments and dissolution testing equipment), research products (including nuclear magnetic resonance (NMR), spectroscopy systems, magnetic resonance (MR) imaging systems,
Fourier Transform mass spectrometry (FTMS) systems, X-ray crystallography systems and superconducting magnets used in certain of these and other scientific instruments), consumable products



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(including columns for gas and liquid chromatography and products for the preparation of samples prior to analysis by gas and liquid chromatography) and related software, accessories and
services.



Mass spectrometry (MS) is a
technique for analyzing the individual chemical components of substances by ionizing them and determining their mass-to-charge ratios. Our MS products incorporate various technologies for measuring mass, including single-quadrupole,
triple-quadrupole and ion trap mass spectrometers, FTMS systems and mass spectrometer leak detection systems. We combine our mass spectrometers with other instruments to create high-performance instruments such as liquid chromatograph mass
spectrometers (LC/MS), liquid chromatograph nuclear magnetic resonance mass spectrometers (LC-NMR/MS), gas chromatograph mass spectrometers (GC/MS) and inductively coupled plasma mass spectrometers
(ICP-MS). We also offer related software and accessories for these and other similar instruments.



Chromatography is a technique for separating, identifying and quantifying the individual chemical components of substances based on the
physical and chemical characteristics specific to each component. Our chromatography instruments include gas chromatographs (GC), high-performance liquid chromatographs (HPLC), gel permeation chromatographs (GPC),
flash chromatography instruments and sample automation products. For certain applications, mass spectrometers are sold as a detector for GC or HPLC systems. We also offer related software and accessories for these and other similar instruments.



Optical spectroscopy is a technique for analyzing
the individual chemical components of substances based on the absorption or emission of electromagnetic radiation of specific wavelengths of light. Our optical spectroscopy instruments include atomic absorption (AA) spectrometers,
inductively coupled plasma-optical emissions spectrometers (ICP-OES), inductively coupled plasma-mass spectrometers (ICP-MS), fluorescence spectrophotometers, ultraviolet-visible (UV-Vis) spectrophotometers,
Fourier Transform infrared (FT-IR) spectrophotometers, near-infrared (NIR) spectrophotometers, Raman spectrometers and sample automation products. We also offer related software and accessories for these and other similar
instruments.



Dissolution testing is a technique
for in-vitro analysis of the rate of release of a drug under controlled conditions. Our dissolution products include dissolution apparatus and other testers, software and accessories used in analyzing the rate of release and testing the physical
characteristics of different dosage forms. Our UV-Vis spectrophotometers are often used with these products.



Certain of our software products are used to automate, process, collect, manage, analyze and store data generated by analytical instruments,
and are often used for regulatory compliance purposes with respect to such data. These products include chromatography data systems that allow users to control LC and GC instruments from multiple suppliers on a single platform and other software
products tailored to specific instruments and applications.



Magnetic resonance is a non-destructive instrumental technique that uses electromagnetic fields to interact with the magnetic property of atomic nuclei in order to determine and analyze the molecular
content and structure of liquids and solids. Our NMR spectroscopy systems are used in the study of liquids containing chemical substances, including proteins, nucleic acids (DNA and RNA) and carbohydrates. They are also used for the analysis of
solid materials such as membranes, crystals, plastics, rubbers, ceramics and polymers. Our MR imaging systems are used to obtain non-invasive images of primarily biological materials and to probe the chemical processes within these materials. Our MR
imaging systems include human and other imaging systems used in research. We also offer probes, imaging gradient coils, consoles, software and other accessories to customers seeking to enhance NMR and MR imaging performance. Our research products
also include Fourier Transform mass spectrometer (FTMS) systems, which is a technique for determining the function and structural characterization of proteins and other biomolecules. Superconducting magnets are used in our NMR
spectroscopy, MR imaging, FTMS and other scientific (including life science) systems. We also sell these magnets directly to original equipment manufacturers (OEMs) (such as manufacturers of high-field MR imaging systems) and end-users.



X-ray crystallography is an analytical technique
that uses a beam of X-rays to determine the arrangement of atoms within a crystal. X-ray crystallography is used in pharmaceutical and other research



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laboratories to determine the structure of both small and large molecules (such as proteins). We also offer related software, accessories and consumable products for these systems.



Certain of our software products are used to automate, process,
collect, manage and store data generated by research products. These products include NMR and MR imaging data acquisition, processing, analysis and display software for our complete line of NMR and MR imaging systems, FTMS and X-ray crystallography
systems, and other software products tailored to specific instruments and applications.



Our consumable products are used in numerous laboratory applications and include: sample preparation consumables such as solid phase extraction (SPE) and filtration products used in tube
formats to clean up and extract complex samples for toxicology and environmental applications and in 96-well plate formats for drug discovery and clinical research applications; micro volume SPE pipette tips used in protein research; polymeric
particles used in the synthesis and purification of therapeutic compounds, and for clinical diagnostic applications; HPLC and GC columns used to separate target analytes prior to UV detection or mass spectrometry analysis; HPLC columns and media
used in health science applications for the analysis of thermally labile compounds; GC columns used in various applications for the analysis and purification of thermally stabile compounds; GPC columns and standards for the analysis of polymers;
flash chromatography consumables used in early stage drug research; and other HPLC and GC stationary phase chemistries and column dimensions for a wide range of life science and other applications. Consumable products also include scientific
instrument parts and supplies such as filters and fittings for GC and HPLC systems; xenon lamps and cuvettes for UV-Vis-NIR, fluorescence, FT-IR and Raman spectroscopy instruments; and graphite furnace tubes, hollow cathode lamps and specialized
sample introduction glassware for our AA, ICP-OES and ICP-MS products. Other consumable products include on-site screening and laboratory-based kits for drugs of abuse testing (DAT) on urine or saliva samples, such as in criminal justice
and toxicology testing.



Vacuum Technologies
Products



Our Vacuum Technologies segment
designs, develops, manufactures, markets, sells and services a broad range of products used to create, control, measure and test vacuum environments in life science, environmental, energy, and applied research and other applications where
ultra-clean, high-vacuum environments are needed. Vacuum Technologies customers are typically OEMs that manufacture equipment for these applications. Products include a wide range of high and ultra-high vacuum pumps (diffusion, turbomolecular
and ion getter), intermediate vacuum pumps (rotary vane, sorption and dry scroll), vacuum instrumentation (vacuum control instruments, sensor gauges and meters) and vacuum components (valves, flanges and other mechanical hardware). Its products also
include helium mass spectrometry and helium-sensing leak detection instruments used to identify and measure leaks in hermetic or vacuum environments. In addition to product sales, we also offer a wide range of services including an exchange and
rebuild program, assistance with the design and integration of vacuum systems, applications support and training in basic and advanced vacuum technologies.



Information Rich Detection Products



We refer to certain of the products described above as information rich detectors (IRD). IRD products include mass
spectrometers, NMR systems, MR imaging systems, X-ray crystallography systems and FT-IR instruments. All of these products provide users with multi-dimensional layers of information and/or higher sensitivity, which are critical to the ability to
optimize analyses and processes. IRD instruments typically provide broad-based qualitative capabilities for screening of compounds in complex mixtures, precise quantitative information for determining the relative concentrations of the compounds and
dimensions of structural information for confirming the identity of the analytes. Our IRD products also include superconducting magnets and vacuum pumps, consumables and other components and products used either in or with our IRD instruments or
sold directly to OEMs and end-users for use in IRD products; we also provide various services in connection with our IRD products.



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Customers and Applications



Our products are sold principally for use in life science
applications (including the study of biological processes and the testing of biological materials), environmental applications (including food safety and testing of air, water and soil), energy applications (including raw materials), and applied
research and other applications. Many of our products are used in more than one of these applications.



Almost all of the Scientific Instruments products described above are or can be used in life science applications, such as by pharmaceutical
companies in drug development, manufacturing (including process control) and quality control; and by research hospitals and universities in basic chemistry, biological, biochemistry and health care research. Life science customers include branded
and generic pharmaceutical companies, biotechnology and toxicology companies, governmental agencies and numerous academic institutions and research hospitals. The Vacuum Technologies products described above similarly are or can be used in a broad
range of life science applications, such as in mass spectrometers for analytical analysis and in linear accelerators for cancer therapy. In fiscal years 2009, 2008 and 2007, sales into life science applications accounted for approximately 40% to 45%
of our total sales (these are estimates based on assumptions of how our products are likely to be used by customers, and are provided only as an indication of a historical trend).



Almost all of the Scientific Instruments products described above are or can also be used in environmental,
energy, applied research and other applications, such as by environmental laboratories in performing chemical analyses of water, soil, air, solids, and food and other products; by petroleum and natural gas companies in performing chemical analyses
in exploration, refining, quality control, distribution and research; in alternative energy, such as biofuels and solar energy; by agricultural, chemical, mining and metallurgy and food and beverage processing companies in conducting research and
quality control; and by governmental, academic and other research laboratories in forensic analysis, materials science and general research. The Vacuum Technologies products described above are or can be used in a broad range of applications, such
as in the manufacture of flat-panel displays, solar energy panels, CRT tubes, decorative coating, functional coatings, disks for memory storage, architectural glass, optical lenses and automobile components; in food packaging; in the testing of
aircraft components, automobile airbags, refrigeration components and industrial processing equipment; in high-energy physics research; in various nuclear energy applications: in nanotechnology applications such as surface scanning and nanomaterials
fabrication; and in the manufacture and test of semiconductors and fabrication of metrology equipment.



Marketing and Sales



We market and sell most of our products through our own direct sales organizations, although in certain countries and for certain products and services, sales are made through various sales representative
and distributor arrangements. To support this marketing and sales structure, we have sales and service offices in numerous locations around the world.



We sell our products on a global basis. Sales outside of North America accounted for 69%, 68% and 66% of sales for fiscal years 2009, 2008
and 2007, respectively. As a result, our customers increasingly require service and support on a worldwide basis. We have sales and service offices located throughout North America, Europe, Asia Pacific and Latin America. We have invested
substantial financial and management resources to develop and maintain international infrastructure to meet the needs of our customers worldwide.



Demand for our products depends on many factors, including the level of capital expenditures of our customers, the rate of economic growth in
applications and geographies where we sell our products and competitive considerations. No single customer accounted for 10% or more of our sales in fiscal years 2009, 2008 and 2007.



We experience some cyclical patterns in sales of our products. Generally, sales and earnings in the first
quarter of our fiscal year are lower when compared to the preceding fourth fiscal quarter, primarily because there are fewer working days in the first fiscal quarter (October to December). Sales and earnings



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in our third fiscal quarter are usually flat to down sequentially compared to the second fiscal quarter, in part because there are a number of holidays in the early part of the quarter,
especially in Europe, and the June quarter-end has no significant customer year ends to influence orders. Our fourth fiscal quarter sales and earnings are often the highest in the fiscal year compared to the other three quarters, primarily because
many government- and research-related customers spend budgeted money before their own fiscal years end. This cyclical pattern can be influenced by other factors, including the timing of revenue recognition on large systems, general economic
conditions, acquisitions, new product introductions and products requiring long manufacturing and installation lead times (such as NMR, MR imaging and FTMS systems and superconducting magnets).



We believe that we differentiate our products from those of our
competitors by our responsiveness to customer requirements, as determined through market research. Although specific customer requirements can vary depending on applications, customers generally demand superior performance, ease of use, high
quality, high productivity and low cost of ownership. We have responded to these customer demands by regularly introducing new products focused on these requirements.



Backlog



Our recorded backlog was $236 million at October 2, 2009, $235 million at October 3, 2008 and $241 million at September 28,
2007. Orders exceeded revenues in fiscal year 2009, however, the resulting increase in backlog was largely offset by the impact of the stronger U.S dollar on the value of orders denominated in other currencies. The decrease in backlog from
September 28, 2007 to October 3, 2008 was primarily due to a net reduction in unfulfilled orders for magnets from third-party OEMs even though orders for these magnets increased in fiscal year 2008 compared to the prior year. This decrease
was partially offset by strong order volume for analytical instruments and to a lesser extent the impact of the weaker U.S. dollar on orders denominated in other currencies.



We include in backlog purchase orders or production releases under blanket purchase orders that have firm
delivery dates. Recorded backlog is impacted by foreign currency fluctuations on orders denominated in non-U.S. dollars. In addition, recorded backlog might not result in sales because of cancellations or other factors (although such events have
historically been infrequent).



Most of our
products are shipped soon after they are ordered by customers, with the time between order receipt and shipment being as short as a few days for some products and less than a fiscal quarter for most others. However, other products, in particular
certain magnet-based products, can have significantly longer lead times, sometimes in excess of one year. Significant shipments often occur in the last month of each quarter, in part because of how customers place orders and schedule shipments.



We believe that over 85% of orders included in
our backlog at October 2, 2009 will result in revenue before the end of fiscal year 2010.



Competition



Competition in our industries is primarily based upon the performance capabilities of products, technical support and after-sales service, the manufacturers reputation as a technological leader and
product pricing. We believe that performance capabilities are the most important of these criteria.



The markets in which we compete are highly competitive and are characterized by the application of advanced technology. There are numerous
companies that specialize in, and a number of larger companies that devote a significant portion of their resources to, the development, manufacture, sale and service of products that compete with those that we manufacture, sell or service. Many of
our competitors are well-known manufacturers with a high degree of technical proficiency. In addition, competition is intensified by the ever-changing nature of the technologies in the industries in which we are engaged. The markets for our products
are characterized by specialized manufacturers that often have strength in segments or niches of these markets. While the absence of reliable statistics makes it difficult to determine our relative market position in our industry segments, we are
one of the principal manufacturers in our primary fields.



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We compete with many companies. Our Scientific Instruments segment competes primarily with
Agilent, Bruker, JEOL, PerkinElmer, Shimadzu, Thermo Fisher Scientific, Waters and other smaller suppliers. Our Vacuum Technologies segment competes primarily with Adixen (Alcatel), Edwards, INFICON, Oerlikon Leybold, Pfeiffer, Ulvac and other
smaller suppliers.



Manufacturing



Our principal manufacturing activities consist of precision
assembly, test, calibration and certain specialized machining activities. For most of our products, we subcontract a portion of the assembly and machining, but perform all other assembly, test and calibration functions. For some products, we have
subcontracted all manufacturing operations.



We
believe that the ability to manufacture reliable products in a cost-effective manner is critical to meeting the just-in-time delivery and other demanding requirements of our OEM and end-user customers. We monitor and analyze product lead
times, warranty data, process yields, supplier performance, field data on mean time between failures, inventory turns, repair response times and other indicators so that we can continuously improve our manufacturing processes.



We are continuously looking for opportunities to outsource
manufacturing to third parties who can provide the same quality at lower costs, and to consolidate our own manufacturing into fewer and lower-cost locations. These initiatives raise certain risks and uncertainties, which are discussed in
Item 1ARisk FactorsRestructuring and Other Efficiency Improvement Activities.



As of October 2, 2009, we operated 12 significant manufacturing facilities located throughout the world. Our Scientific Instruments
segment had manufacturing facilities in Walnut Creek, California; Lake Forest, California; Ft. Collins, Colorado; Cary, North Carolina; Melbourne, Australia; Grenoble, France; Middelburg, Netherlands; Wroclaw, Poland; Church Stretton, United
Kingdom; and Yarnton, United Kingdom. Our Vacuum Technologies segment had manufacturing facilities in Lexington, Massachusetts, and Turin, Italy.



All of our significant manufacturing facilities, other than our facility in Wroclaw, Poland, have been certified as complying with the
International Organization for Standardization Series 9000 Quality Standards (ISO 9000).



Raw Materials



Our manufacturing operations require a wide variety of raw materials, electronic and mechanical components, chemical and biochemical materials and other supplies, some of which are occasionally in short
supply. In addition, use of certain of our products requires reliable and cost-effective supply of certain raw materials. For example, end-users of our magnet-based products require helium to operate those products. Helium can be, and at various
times has been, difficult to source and more expensive. If we or our customers cannot obtain sufficient quantities of helium, it could prevent us from shipping and installing superconducting magnets, which could result in our inability to recognize
revenues on magnet-based products. Although we have taken and will continue to take steps to reduce the volume of helium required for the manufacture and use of these products, shortages of helium could result in even higher helium prices, and thus
higher operating costs for magnet-based products, which could impact demand for those products as well as our profit margins on those products and related services. Changes in the availability or price of certain other key raw materials (such as
copper) or components could increase our costs or our customers costs to acquire and operate our products, which could have an adverse effect on our financial condition or results of operations.



We manufacture some components used in our products. Other
components, including certain consumables materials and electronic components and subassemblies, are purchased from other manufacturers. Most of the raw materials, components and supplies we purchase are available from a number of different
suppliers; however, a number of itemssuch as wire used in superconducting magnets, electronic subassemblies and final assemblies used in scientific instrumentsare purchased from limited or single sources of supply. Disruption of these
sources could cause delays or reductions in shipment of our products or increases in our costs, which could have an adverse effect on our financial condition or results of operations.



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Research and Development



We are actively engaged in basic and applied research, development and engineering programs designed to develop
new products and to improve existing products. During fiscal years 2009, 2008 and 2007, we spent $56.4 million, $71.8 million and $65.2 million, respectively, on research, development and related engineering activities. Over this period, the focus
of our research and development activities has been shifting more toward IRD and consumable products. We intend to continue to conduct extensive research and development activities, with a continued emphasis on IRD products such as magnet-based
products, mass spectrometers (including vacuum products for use in our mass spectrometers and those of other OEMs) and certain consumable products. There can be no assurance that we will be able to develop and market new products on a cost-effective
and timely basis, that such products will compete favorably with products developed by others or that our existing technology will not be superseded by new discoveries or developments.



Customer Service and Support



We believe that our customer service and support are an integral part of our competitive strategy. As part of our support services, our
applications and technical support staff provide individual assistance in supporting customers specific applications needs, solving analysis problems and integrating vacuum components. We offer training courses and periodically send our
customers information on applications development.



Our products generally include a 90-day to one-year warranty, but in some countries and for some products we offer longer warranties. For most of our products, service contracts may be purchased by customers to cover equipment no longer
under warranty. Service work not performed under warranty or service contract is generally performed on a time-and-materials basis. We install and service our products primarily through our own field service organization, although certain
distributors and sales representatives are contracted to perform some field services.



Patent and Other Intellectual Property Rights



We have a policy of seeking patent, copyright, trademark and trade secret protection in the U.S. and other countries for developments,
improvements and inventions originating within our organization that are incorporated in our products or that fall within our fields of interest. As of October 2, 2009, we owned over 380 patents in the U.S. and over 600 patents in other
countries, and had numerous patent applications on file with various patent agencies worldwide. We intend to continue to file patent applications as we deem appropriate.



We rely on a combination of copyright, trade secret and other legal, as well as contractual, restrictions on disclosure,
copying and transferring title to protect our proprietary rights. We have trademarks, both registered and unregistered, that are maintained and enforced to provide customer recognition for our products in the marketplace. We also have agreements
with third parties that provide for licensing of patented or proprietary technology. These agreements frequently include royalty-bearing licenses and technology cross-licenses.



Environmental Matters



Our 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 actual and potential liabilities of our operations. However, our compliance with these regulations is not expected
to have a material effect upon our capital expenditures, results of operations, financial condition or competitive position. For additional information on environmental matters, see Item 1ARisk FactorsEnvironmental Matters
andGovernmental Regulations.



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Employees



At October 2, 2009, we had approximately 3,500 full-time and temporary employees and contract workers worldwideapproximately
1,200 in North America, 1,400 in Europe, 800 in Asia Pacific and 100 in Latin America.



Executive Officers



The following table sets forth the names and ages of our executive officers, together with positions and offices held within the last five
years by such executive officers.



|                   |  |     |  |                                                                                                    |  |                               
|------------------ |  | --- |  | -------------------------------------------------------------------------------------------------- |  | ------------------------------
|Name               |  | Age |  | Position (Business Experience)                                                                     |  | Period                        
|Garry W. Rogerson  |  | 57  |  | Chairman and Chief Executive Officer President and Chief Executive Officer                         |  | 2008-Present2004-2008         
|                   |  |     | 
|A. W. Homan        |  | 50  |  | Senior Vice President, General Counsel and Secretary Vice President, General Counsel and Secretary |  | 2006-Present1999-2006         
|                   |  |     | 
|G. Edward McClammy |  | 60  |  | Senior Vice President and Chief Financial Officer                                                  |  | 2008-Present                  
|                   |  |     |  | Senior Vice President, Chief Financial Officer and Treasurer                                       |  | 2002-2008                     
|                   |  |     | 
|Martin ODonoghue  |  | 51  |  | Senior Vice President, Scientific Instruments Vice President, Scientific Instruments               |  | 2006-Present2003-2006         
|                   |  |     | 
|Sergio Piras       |  | 60  |  | Senior Vice President, Vacuum Technologies Vice President, Vacuum Technologies                     |  | 2006-Present2000-2006         
|                   |  |     | 
|Gordon B. Tredger  |  | 49  |  | Vice President, Analytical Instruments President, Argonaut Technologies, Inc.                      |  | 2006-Present2005-2006         
|                   |  |     |  | Senior Vice President, Instrumentation & Integration, Argonaut Technologies, Inc.                  |  | 2002-2005                     
|                   |  |     | 
|Sean M. Wirtjes    |  | 40  |  | Vice President, Finance and Treasurer Vice President and Controller Controller                     |  | 2008-Present2006-20082004-2006
|                   |  |     | 
|Robert W. Dean II  |  | 44  |  | Controller                                                                                         |  | 2008-Present                  
|                   |  |     |  | Director of Finance, Center of Excellence, Applied Materials, Inc.                                 |  | 2007-2008                     
|                   |  |     |  | Director, Operations Finance, Applied Materials, Inc.                                              |  | 2006-2007                     
|                   |  |     |  | Director, Regional Finance and Business Administration, Applied Materials, Inc.                    |  | 2004-2006                     



Investor Information



Financial and other information relating to us can be accessed on the Investors page at our website. This can be reached from our main Internet website (http://www.varianinc.com) by clicking on
Investors. On the Investors page at our website, we make available, free of charge, copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing them with or furnishing them to the SEC.



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



The Announcement and Pendency of our Agreement to be Acquired by Agilent.On July 26, 2009, we entered
into an Agreement and Plan of Merger (the Merger Agreement) with Agilent Technologies, Inc. (Agilent) pursuant to which a wholly-owned subsidiary of Agilent will, subject to the satisfaction or waiver of the conditions
contained in the Merger Agreement, merge with and into the Company, and the Company will be the successor or surviving corporation of the merger and will become a wholly owned subsidiary of Agilent (the Merger). Pursuant to the terms of
the Merger Agreement and subject to the



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satisfaction or waiver of the closing conditions set forth in the Merger Agreement, at the effective time of the Merger (the Effective Time), each share of the Companys common
stock issued and outstanding immediately prior to the Effective Time will be converted into the right to receive $52.00 in cash, without interest. The announcement and pendency of the Merger has adversely affected our business. Revenues and
profitability are being adversely affected by customers uncertainty and employee and other disruptions as well as intensified competition from our competitors as they attempt to take advantage of the uncertainties. In addition, we have
incurred legal and other expenses in connection with the pending Merger. All of these factors are likely to continue to adversely affect our business and have an adverse effect on our financial condition or results of operations.



Under the terms of the Merger Agreement, we have agreed to
operate our business in the ordinary course consistent with past practice, as well as to refrain from taking certain actions in the conduct of our business without Agilents prior written consent until the consummation of the Merger. Actions
that may require Agilents consent include, but are not limited to, new indebtedness, capital expenditures, loans and investments, manufacturing and customer agreements, acquisitions, issuance of securities, and the repurchase of shares of the
Companys common stock. These restrictions could adversely affect our business and have an adverse affect on our financial condition or results of operations.



There is no assurance that the Merger with Agilent will occur. If the Merger is not completed, the share price
of our common stock will change to the extent that the current market price of the Companys common stock reflects an assumption that the Merger will be completed. In addition, under circumstances defined in the Merger Agreement, we might be
required to pay a termination fee of $46 million. Finally, any disruptions to our business resulting from the announcement and pendency of the Merger will likely continue in the event the Merger is not completed.



Overall Economic Conditions.As a
result of current economic uncertainties, including with respect to global capital and credit markets and overall economic growth, our customers could experience financial difficulties and as a result modify, delay or cancel plans to purchase our
products or services or be unable to pay us on accounts receivable that are owed to the Company. In addition, our suppliers (including our key suppliers, discussed below), could experience credit or other financial difficulties that could result in
delays in their ability to supply us with necessary raw materials, components or finished products. Any of these factors could have an adverse effect on our financial condition or results of operations.



In addition, we might find it more difficult or expensive to
secure additional capital or credit to pursue actions we would consider beneficial to the Company or our stockholders, such as acquisitions, capital investments and/or repurchases of our common stock which could have an adverse effect on our
financial condition or results of operations.



Customer Demand.    Demand for our products depends upon, among other factors, the level of capital expenditures by current and prospective customers, the rate of economic growth in the markets in which we
compete, the level of government funding for research and the competitiveness of our products and services. Changes in any of these factors could have an adverse effect on our financial condition or results of operations.



We must continue to assess and predict customer needs,
regulatory requirements and evolving technologies. We must develop new products, including enhancements to existing products, new services and new applications, successfully commercialize, manufacture, market and sell these products and protect our
intellectual property in these products. If we are unsuccessful in these areas, our financial condition or results of operations could be adversely affected.



Variability of Operating Results.    We experience some cyclical patterns in sales of our products. Generally,
sales and earnings in the first quarter of our fiscal year are lower when compared to the preceding fourth fiscal quarter, in part, because there are fewer working days in our first fiscal quarter (October to December). Sales and earnings in our
third fiscal quarter are usually flat to down sequentially compared to the second fiscal quarter, primarily because there are a number of holidays in the early part of the quarter, especially in Europe, and the June quarter-end has no significant
customer year ends to influence orders. Our fourth fiscal quarter sales and earnings are often the highest in the fiscal year



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compared to the other three quarters, primarily because many government- and research-related customers spend budgeted money before their own fiscal years end. This cyclical pattern can be
influenced by other factors, including the timing of revenue recognition on large systems, general economic conditions, acquisitions, new product introductions and products requiring long manufacturing and installation lead times (such as NMR, MR
imaging and FTMS systems and superconducting magnets). Consequently, our results of operations may fluctuate significantly from quarter to quarter, which can make it difficult to anticipate, compare and measure our results of operations on a
quarterly basis.



Most of our products are shipped
soon after they are ordered by customers, with the time between order receipt and shipment being as short as a few days for some products and less than a fiscal quarter for most others. However, other products, in particular certain magnet-based
products, can have significantly longer lead times, sometimes in excess of one year. Significant shipments often occur in the last month of each quarter, in part because of how customers place orders and schedule shipments. This can make it
difficult for us to forecast our results of operations.



Certain of our magnet-based products (including NMR, MR imaging and FTMS systems, NMR probes, superconducting magnets and other related components) sell on long lead-times, sometimes in excess of one year. Certain of these systems and
components sell for high prices; are complex; require development of new technologies and, therefore, significant research and development resources; are often intended for evolving research applications; often have customer-specific features,
capabilities and acceptance criteria; and can be difficult to manufacture and require long lead times. If we are unable to meet these challenges, it could have an adverse effect on our financial condition or results of operations. In addition, all
of these factors can make it difficult for us to forecast the timing of revenue recognition and the gross profit on these products.



Changes in our effective tax rate can also create variability in our operating results. Our effective tax rate can be adversely affected by
earnings being lower than anticipated in countries having lower statutory rates and higher than anticipated in countries having higher statutory rates, by changes in the valuation of deferred tax assets or liabilities, by changes in tax laws or
interpretations thereof or by other discrete tax events. In addition, we are subject to examination of our income tax returns by the U.S. Internal Revenue Service and other tax authorities. We regularly assess the likelihood of adverse outcomes
resulting from these examinations to determine the adequacy of our income tax reserves and expense. Should actual events or results differ from our current expectations, charges against or credits to our income tax reserves and/or expense may become
necessary or changes in our unrecognized tax benefits could result. Any such adjustments or changes could have an adverse effect on our financial condition or results of operations. All of this can make it difficult for us to forecast our effective
tax rate.



Competition.    The industries in which we operate are highly competitive. We compete against numerous companies, both U.S. and non-U.S., most with global operations. Some of our competitors have greater financial
resources than we have, which may enable them to respond more quickly to new or emerging technologies, take advantage of acquisition opportunities, achieve economies of scale and other cost reductions, compete on price or devote greater resources to
research and development, engineering, manufacturing, marketing, sales or managerial activities. Some also have greater name recognition and geographic and market presence or lower cost structures than we do. In addition, weaker demand and excess
capacity in our industries could cause greater price competition as our competitors seek to maintain sales volumes and market share. For the foregoing reasons, competition could result in lower revenues due to lost sales or price reductions, lower
profit margins and loss of market share, which could have an adverse effect on our financial condition or results of operations.



Although no single customer accounted for 10% or more of our sales in fiscal year 2009, we do have important customers, the loss of which
could have an adverse effect on our results of operations.



New Product Development.    Technological innovation and new product development are important to maintain the competitive position of our products and to grow our sales and profit margins. We have historically
dedicated a significant portion of our resources to research and development efforts as a means of generating new products and improving existing products, and intend to continue to conduct extensive research and development activities, with an
emphasis on information rich detection products such as



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magnet-based products, mass spectrometers (including vacuum products for use in mass spectrometers) and certain consumable products. However, there can be no assurance that we will be able to
improve existing products and/or develop new products on a cost-effective and timely basis, that such products will compete favorably with products developed by others or that our existing technology will not be superseded by new discoveries or
developments. If we fail to improve existing products and/or develop new products on a timely basis, we could experience lower revenues and/or lower profit margins, which could have an adverse effect on our financial condition or results of
operations.



Key Suppliers and Raw
Materials.    Some items we purchase for the manufacture of our products, including wire used in superconducting magnets, electronic subassemblies and final assemblies used in scientific instruments, are purchased from
limited or single sources of supply. We are undertaking to further outsource manufacturing of certain parts, components, subsystems and even finished products, often to single sources. Disruption of these sources could cause delays or reductions in
shipments of our products or increases in our costs, which could have an adverse effect on our financial condition or results of operations.



In addition, the manufacturing and/or use of certain of our products require raw materials for which supply and price can fluctuate
significantly. For example, end-users of our magnet-based products require helium to operate those products. Helium can be, and at various times has been, difficult to source and more expensive. If we or our customers cannot obtain sufficient
quantities of helium, it could prevent us from shipping and installing superconducting magnets, which could result in our inability to recognize revenues on magnet-based products. In addition, shortages of helium could result in even higher helium
prices and thus higher operating costs for magnet-based products, which could impact demand for those products. Changes in the availability or price of certain other key raw materials or components could increase our costs or our customers
costs to acquire and operate our products, which could have an adverse effect on our financial condition or results of operations.



Business Interruption.    Our facilities, operations and systems could be impacted by fire, flood, terrorism or
other natural or man-made disasters. In particular, we have significant facilities in areas prone to earthquakes and fires, such as our production facilities and headquarters in California. Due to their limited availability, broad exclusions and
prohibitive costs, we do not have insurance policies that would cover losses resulting from an earthquake. If any of our facilities or surrounding areas were to be significantly damaged in an earthquake, fire, flood or other disaster, it could
disrupt our operations, delay shipments and cause us to incur significant repair or replacement costs, which could have an adverse effect on our financial condition or results of operations.



Our employees based in certain countries outside of the U.S. are
subject to factory-specific and/or industry-wide collective bargaining agreements. Of these, certain of our employees in Australia are subject to collective bargaining agreements that were recently renewed and will need to be again renewed before
April 2012. A work stoppage, strike or other labor action at this or other of our facilities could have an adverse effect on our financial condition or results of operations.



Intellectual Property.    Our success depends on our intellectual property. We rely
on a combination of patents, copyrights, trademarks, trade secrets, confidentiality agreements and licensing arrangements to establish and protect that intellectual property, but these protections might not be available in all countries, might not
be enforceable, might not fully protect our intellectual property and might not provide meaningful competitive advantages. Moreover, we might be required to spend significant resources to police and enforce our intellectual property rights, and we
might not detect infringements of those intellectual property rights. If we fail to protect our intellectual property and enforce our intellectual property rights, our competitive position could suffer, which could have an adverse effect on our
financial condition or results of operations.



Other third parties might claim that we infringe their intellectual property rights, and we may be unaware of intellectual property rights that we are infringing. Any litigation regarding intellectual property of others could be costly and
could divert personnel and resources from our operations. Claims of intellectual property infringement might also require us to develop non-infringing alternatives or enter into royalty-bearing license agreements. We might also be required to pay
damages or be enjoined from



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developing, manufacturing or selling infringing products. We sometimes rely on licenses to mitigate these risks, but we cannot be assured that these licenses will be available in the future or on
favorable terms. These risks could have an adverse effect on our financial condition or results of operations.



Acquisitions.    We have acquired companies and operations and made minority equity investments in private
companies, and may acquire companies and operations (and make minority equity investments in private companies) in the future, as part of our growth strategy. These acquisitions must be carefully evaluated and negotiated if they are to be
successful. Once completed, acquired operations must be carefully integrated to realize expected synergies, efficiencies and financial results. Some of the challenges in doing this include retaining key employees, managing operations in new
geographic areas, retaining key customers, integrating data systems, assessing (and if necessary implementing or improving) internal control over financial reporting and managing transaction costs. All of this must be done without diverting
management and other resources from other operations and activities. With respect to minority equity investments, we often have limited ability to control how their business is conducted. Additionally, goodwill, acquisition-related intangible assets
and minority equity investments in private companies are subject to regular impairment testing and potential impairment charges. For all of these reasons, minority equity investments or our failure to successfully evaluate, negotiate and integrate
acquisitions could have an adverse effect on our financial condition or results of operations.



Restructuring and Other Efficiency Improvement Activities.    We have undertaken restructuring activities (such as the employee reductions and other actions announced in January
2009 and our Northern California operations consolidation) and other efficiency improvement activities (such as our global procurement, lower-cost manufacturing and outsourcing initiatives), and may undertake similar activities in the future, that
we expect to result in certain costs and eventual cost savings. These costs and cost savings are based on estimates at the time of plan commitment as to the timing of activities to be completed and the timing and amount of related costs to be
incurred. We could experience delays, business disruptions and employee turnover in connection with restructuring and other efficiency improvement activities and our estimates of the costs to complete and savings achieved by these activities could
be inaccurate and/or change. As a result, these activities could have an adverse impact on our financial condition or results of operations.



Non-U.S. Operations.    A significant portion of our manufacturing activities, customers, suppliers and employees
are outside of the U.S. As a result, we are subject to various risks, including the following: duties, tariffs and taxes; restrictions on currency conversions, fund transfers or profit repatriations; import, export and other trade restrictions;
protective labor regulations and union contracts; compliance with local laws and regulations, as well as U.S. laws and regulations (such as the Foreign Corrupt Practices Act) as they relate to our non-U.S. operations; travel and transportation
difficulties; and adverse developments in political or economic environments in countries where we operate. These risks could have an adverse effect on our financial condition or results of operations.



Currency Exchange Rates.    The U.S.
dollar value of our sales and product and operating costs varies with currency exchange rate fluctuations. In order of magnitude, our sales are mainly denominated in U.S. dollars, Euros, British pounds and Japanese yen, while our costs are mainly
denominated in U.S. dollars, Euros, Australian dollars and British pounds. Because we manufacture and sell in the U.S. and many other countries, the impact that currency exchange rate fluctuations have on us is dependent on the interaction of a
number of variables. These variables include, but are not limited to, the relationships between various foreign currencies, the relative amount of our revenues and costs that are denominated in U.S. dollars or in U.S. dollar-linked currencies,
customer resistance to currency-driven price changes and the suddenness and severity of changes in certain foreign currency exchange rates. In addition, we hedge most of our balance sheet exposures denominated in other-than-local currencies based
upon forecasts of those exposures; in the event that these forecasts are overstated or understated during periods of currency volatility, foreign exchange losses could result. For all of these reasons, currency exchange fluctuations could have an
adverse effect on our financial condition or results of operations.



Credit Risk.We extend trade credit to many of our customers. We generally perform credit evaluations of these customers before extending credit. To some extent, we utilize
letters of credit to mitigate credit risks. While we believe that we take appropriate steps to manage customer credit risk, our



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customers could experience financial difficulties, in particular given current economic conditions, that could result in delays or difficulties in collecting on accounts receivable that
are owed to the Company. This could have an adverse effect on our financial condition or results of operations.



We have cash and surplus funds that we invest, primarily in demand deposits, short-term U.S. Treasury securities and money market funds. We
also purchase foreign exchange forward contracts in order to minimize the short-term impact of foreign currency fluctuations, which contracts are placed primarily with major financial institutions. We also accept letters of credit from financial
institutions to ensure payment for sales of our products. Although we believe that our cash and cash equivalents, our foreign exchange forward contracts and letters of credit provided to us, are invested or placed with secure financial institutions,
there is no assurance that these financial institutions will not default on their obligations to us, especially given global financial market conditions. Loss of principal on demand deposits or invested funds or a default on a foreign exchange
forward contract or letter of credit could have an adverse effect on our financial condition or results of operations.



Key Personnel.    Our success depends upon the efforts and abilities of key personnel, including research and
development, engineering, manufacturing, finance, administrative, marketing, sales and management personnel. The availability of qualified personnel and the cost to attract, motivate and retain them can vary significantly based on factors such as
the strength of the general economy. However, even in weak economic periods, there is still intense competition for personnel with certain expertise in the geographic areas where we compete for personnel. In addition, certain employees have
significant institutional and proprietary technical knowledge, which could be difficult to quickly replace. Failure to attract, motivate and retain qualified personnel, who generally do not have employment agreements or post-employment
non-competition agreements, could have an adverse effect on our financial condition or results of operations.



Certain Employee Benefit Plans.    Many of our U.S. employees participate in health care plans under which we are
self-insured. We maintain a stop-loss insurance policy that covers the cost of certain individually large claims under these plans. Each year, our expenses under these plans are recorded based on actuarial estimates of the number and costs of
expected claims, administrative costs and stop-loss premiums. These estimates are then adjusted at the end of each plan year to reflect actual costs incurred. Actual costs under these plans are subject to variability depending primarily upon
participant enrollment and demographics, the actual number and costs of claims made and whether and how much the stop-loss insurance we purchase covers the cost of these claims. In the event that our cost estimates differ from actual costs, our
financial condition and results of operations could be adversely impacted.



We also maintain defined benefit pension plans for our employees in several countries outside of the U.S. As required by the Financial Accounting Standards Board (FASB) Accounting Standards
Codification topic (ASC) 715-30, Defined Benefit Plans-Pension, we utilize a number of assumptions including the expected long-term rate of return on plan assets and the discount rate in order to determine our defined benefit
pension plan costs each year. These assumptions are set based on relevant long-term debt, equity and other market conditions in the countries in which the plans are maintained. We adjust these assumptions each year in response to corresponding
changes in underlying market conditions and expectations. Changes in these market conditions and expectations result in corresponding changes in our defined benefit pension plan assumptions, liabilities and costs. We could also curtail these plans,
which could result in us incurring curtailment/settlement charges. In addition, changes in relevant government regulations in the countries in which our defined benefit pension plans are located and/or changes in the accounting rules applicable to
these plans could also impact our defined benefit pension plan liabilities and costs. Any such changes could have an adverse effect on our financial condition or results of operations.



Environmental Matters.    Our 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 our
operations. However, we do not currently anticipate that our compliance with these regulations will have a material effect on our capital expenditures, earnings or competitive position.



As is described in Item 1Business, we and VSEA are each obligated (under the terms of the
Distribution Agreement) to indemnify VMS for one-third of certain costs (after adjusting for any insurance



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proceeds 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.



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 October 2, 2009, it was nonetheless
estimated that our future exposure for these environmental-related costs ranged in the aggregate from $1.0 million to $2.6 million. The time frame over which these costs are expected to be incurred varies with each type of cost, ranging up to
approximately 30 years as of October 2, 2009. 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. We
therefore had an accrual of $1.0 million as of October 2, 2009 for these future environmental-related costs.



Sufficient knowledge has been gained to be able to better estimate other costs of future environmental-related activities. As of
October 2, 2009, it was estimated that our future costs for these environmental-related activities ranged in the aggregate from $2.6 million to $12.7 million. The time frame over which these costs are expected to be incurred varies, ranging up
to approximately 30 years as of October 2, 2009. 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 $5.5 million at October 2, 2009. 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. We therefore had an accrual of $4.0 million as
of October 2, 2009, which represents our best estimate of these future environmental-related costs after discounting estimated recurring future costs. This accrual is in addition to the $1.0 million described in the preceding paragraph.



At October 2, 2009, our reserve for
environmental-related costs, based upon future environmental-related costs estimated by us as of that date, was calculated as follows:



|                                          |  |                |      |                    |   |                             |  |   |     | 
|----------------------------------------- |  | -------------- | ---- | ------------------ | - | --------------------------- |  | - | --- | 
|                                          |  | RecurringCosts |      | Non-RecurringCosts |   | TotalAnticipatedFuture Cost | 
|(in millions)                             |  |                |      |                    |   |                             | 
|Fiscal Year                               |  |                |      |                    |   |                             |  |   |     | 
|2010                                      |  | $              | 0.4  |                    | $ | 0.4                         |  | $ | 0.8 | 
|2011                                      |  |                | 0.2  |                    |   | 0.4                         |  |   | 0.6 | 
|2012                                      |  |                | 0.3  |                    |   | 0.3                         |  |   | 0.6 | 
|2013                                      |  |                | 0.2  |                    |   | 0.2                         |  |   | 0.4 | 
|2014                                      |  |                | 0.2  |                    |   | 0.2                         |  |   | 0.4 | 
|Thereafter                                |  |                | 3.2  |                    |   | 0.6                         |  |   | 3.8 | 
|                                          |  |                |      |                    |   |                             |  |   |     | 
|Total costs                               |  | $              | 4.5  |                    | $ | 2.1                         |  |   | 6.6 | 
|                                          |  |                |      |                    |   |                             |  |   |     | 
|Less imputed interest                     |  |                | (1.6 | )                 
|                                          |  |                |      |                   
|Reserve amount                            |  |                | 5.0  |                   
|Less current portion                      |  |                | (0.8 | )                 
|                                          |  |                |      |                   
|Long-term (included in Other liabilities) |  | $              | 4.2  |                   
|                                          |  |                |      |                   



The
foregoing amounts are only estimates of anticipated future environmental-related costs, and the amounts actually spent in the years indicated may be greater or less than such estimates. The aggregate



17



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range of cost estimates reflects various uncertainties inherent in many environmental investigation, monitoring and remediation activities and the large number of sites where such investigation,
monitoring and remediation activities are being undertaken.



We have 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 we have an indemnification obligation, and we therefore have a long-term receivable of $1.0 million (discounted at 4%, net of inflation) in other assets as of October 2, 2009 for our share of that
insurance recovery.



Management believes that our
reserves for the foregoing and other environmental-related matters are adequate, but as the scope of our 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 our financial statements, the likelihood of such
occurrence is considered remote. Based on information currently available and our best assessment of the ultimate amount and timing of environmental-related events, management believes that the costs of environmental-related matters are not
reasonably likely to have a material adverse effect on our financial condition or results of operations.



Governmental Regulations.    Our businesses are subject to many governmental regulations in the U.S. and other
countries, including with respect to protection of the environment, employee health and safety, labor matters, product safety, medical devices, import, export, competition and sales to governmental entities. These regulations are complex and change
frequently. We incur significant costs to comply with governmental regulations, costs to comply with new or changed regulations could be significant, and failure to comply could result in suspension of or restrictions on our operations, product
recalls, fines, other civil and criminal penalties, private party litigation and damage to our reputation, which could have an adverse effect on our financial condition or results of operations.



In January 2003, the European Union (EU) adopted
Directive 2002/96/EC on Waste Electrical and Electronic Equipment (the WEEE Directive) and Directive 2002/95/EC on Restriction on the Certain Hazardous Substances in Electrical and Electronic Equipment (the RoHS Directive).
The WEEE Directive requires EU-member countries to adopt implementing legislation imposing certain responsibilities on producers (manufacturers and importers) in the EU of electrical and electronic equipment with respect to the collection and
disposal of waste from that equipment and the RoHS Directive bans in the EU the use of certain hazardous materials in electrical and electronic equipment. All EU-member countries where we manufacture or import products have adopted implementing
legislation under these Directives. As a result of the WEEE Directive, we are incurring (or will incur) waste collection and disposal costs to comply with implementing legislation under the WEEE Directive; these costs have not been significant
to-date and we do not expect them to be significant in the future, but if they are, our financial condition or results of operations could be materially adversely affected. As a result of the RoHS Directive, certain raw materials and components
sourced from third parties are no longer available, or will in the future become unavailable, for use in the manufacture of the Companys products; we have not experienced significant supply disruptions and have not incurred significant costs
as a result of the RoHS Directive and we do not expect such disruptions or costs to be significant in the future, but if they are, our financial condition or results of operations could be materially adversely affected. In addition, legislation
similar to the WEEE and RoHS Directives have been or could be enacted in other countries outside the EU (such as China), which could have an adverse effect on our financial condition or results of operations.



|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------



None.



|Item 2. | Properties
|------- | ----------



As of October 2, 2009, we had manufacturing, warehouse, research and development, sales, service and administrative facilities that had
an aggregate floor space of approximately 501,000 square feet in the U.S. and 933,000 square feet outside of the U.S., for a total of approximately 1,434,000 square feet



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worldwide. Of these facilities, aggregate floor space of approximately 588,000 square feet was leased, and we owned the remainder. We believe that our facilities and equipment generally are well
maintained, in good operating condition, suitable for our purposes and adequate for current operations. In the first quarter of fiscal year 2009, we entered into an agreement with VMS under which we agreed to surrender to them the sublease for our
facility in Palo Alto, California which has a total floor space of 210,000 square feet. As of October 2, 2009, we have surrendered approximately 150,000 square feet of floor space to VMS. We expect to fully vacate this facility by the third
quarter of fiscal year 2010.



As of
October 2, 2009, we owned or leased 12 significant manufacturing facilities located throughout the world. Our Scientific Instruments segment had manufacturing facilities in Walnut Creek, California; Lake Forest, California; Ft. Collins,
Colorado; Cary, North Carolina; Melbourne, Australia; Grenoble, France; Middelburg, Netherlands; Wroclaw, Poland; Church Stretton, United Kingdom; and Yarnton, United Kingdom. Our Vacuum Technologies segment had manufacturing facilities in
Lexington, Massachusetts; and Turin, Italy. We also owned or leased 49 sales and service facilities located throughout the world, 45 of which were located outside of the U.S., including in Argentina, Australia, Brazil, Canada, China, France,
Germany, Hong Kong, India, Italy, Japan, Korea, Mexico, Netherlands, Russia, Singapore, Spain, Sweden, Switzerland, Taiwan and the United Kingdom.



|Item 3. | Legal Proceedings
|------- | -----------------



We are involved in pending legal proceedings that are ordinary, routine and incidental to our business. While the ultimate outcome of these
and other legal matters is not determinable, we believe that these matters are not reasonably likely to have a material adverse effect on our financial condition or results of operations.



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



At our Special Meeting of Stockholders held on October 5, 2009, our stockholders considered and voted on two matters: (1) the
proposal to adopt the Agreement and Plan of Merger, dated as of July 26, 2009, among Varian, Agilent and Merger Sub, as it may be amended from time to time, pursuant to which Varian will be acquired by Agilent; and (2) the proposal to
adjourn or postpone the special meeting to a later date or time, if necessary or appropriate, to solicit additional proxies in the event there are insufficient votes to adopt the Agreement and Plan of Merger. Our stockholders voting on these
matters was as follows:



|                                                                                         |  |            |  |              |  |            
|---------------------------------------------------------------------------------------- |  | ---------- |  | ------------ |  | -----------
|                                                                                         |  | VotesFor   |  | VotesAgainst |  | Abstentions
|Proposal OneAdoption of Agreement and Plan of Merger                                    |  | 24,183,831 |  | 122,046      |  | 29,174     
|Proposal TwoAdjournment or Postponement of Special Meeting, if Necessary or Appropriate |  | 22,174,169 |  | 2,129,528    |  | 31,353     



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##### Table of Contents

PART II



|Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | ------------------------------------------------------------------------------------------------------------



(a) Our high and low common stock selling prices in each of the
four quarters of fiscal years 2009 and 2008 follow:



|     |  |                                              |       |               |   |              |  |               |       |  |   |      
|---- |  | -------------------------------------------- | ----- | ------------- | - | ------------ |  | ------------- | ----- |  | - | -----
|     |  | Fiscal Year 2009 Common Stock Selling Prices
|     |  | FirstQuarter                                 |       | SecondQuarter |   | ThirdQuarter |  | FourthQuarter
|High |  | $                                            | 39.42 |               | $ | 32.74        |  | $             | 40.65 |  | $ | 51.85
|Low  |  | $                                            | 28.38 |               | $ | 19.93        |  | $             | 24.28 |  | $ | 35.71
|     | 
|     |  | Fiscal Year 2008 Common Stock Selling Prices
|     |  | FirstQuarter                                 |       | SecondQuarter |   | ThirdQuarter |  | FourthQuarter
|High |  | $                                            | 73.89 |               | $ | 67.94        |  | $             | 59.76 |  | $ | 54.42
|Low  |  | $                                            | 64.21 |               | $ | 50.61        |  | $             | 49.15 |  | $ | 40.75



Our
common stock is traded on the NASDAQ Global Select Market under the trading symbol VARI.



We have never paid cash dividends on our capital stock and do not currently anticipate paying any cash dividends in the foreseeable future.



There were 2,321 holders of record of our common stock on November 20, 2009.



(b) Not applicable.



(c) Stock Repurchases.During the
fiscal quarter ended October 2, 2009, the Company repurchased and retired 500 shares tendered to it by employees in settlement of employee tax withholding obligations due from those employees upon the vesting of restricted stock.



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##### Table of Contents

|Item 6. | Selected Financial Data
|------- | -----------------------



|                                                        |  |                   |       |             |   |               |  |               |       |                  |   |       |  |   |      
|------------------------------------------------------- |  | ----------------- | ----- | ----------- | - | ------------- |  | ------------- | ----- | ---------------- | - | ----- |  | - | -----
|                                                        |  | Fiscal Year Ended
|                                                        |  | Oct. 2,2009       |       | Oct. 3,2008 |   | Sept. 28,2007 |  | Sept. 29,2006 |       | Sept. 30,2005(1)
|(in millions, except per share amounts)                 |  |                   |       |             |   |               |  |               |       |                  |   |       |  |   |      
|Statement of Earnings Data                              |  |                   |       |             |   |               |  |               |       |                  |   |       |  |   |      
|Sales                                                   |  | $                 | 806.7 |             | $ | 1,012.5       |  | $             | 920.6 |                  | $ | 834.7 |  | $ | 772.8
|Earnings from continuing operations before income taxes |  | $                 | 59.1  |             | $ | 102.7         |  | $             | 96.8  |                  | $ | 74.7  |  | $ | 63.5 
|Income tax expense                                      |  | $                 | 20.5  |             | $ | 37.6          |  | $             | 33.2  |                  | $ | 24.6  |  | $ | 16.8 
|Earnings from continuing operations                     |  | $                 | 38.6  |             | $ | 65.1          |  | $             | 63.6  |                  | $ | 50.1  |  | $ | 46.7 
|Earnings from discontinued operations(2)                |  |                   |      |             |   |              |  |               |      |                  |   |      |  | $ | 79.3 
|Net earnings                                            |  | $                 | 38.6  |             | $ | 65.1          |  | $             | 63.6  |                  | $ | 50.1  |  | $ | 126.0
|Net earnings per basic share:                           |  |                   |       |             |   |               |  |               |       |                  |   |       |  |   |      
|Continuing operations                                   |  | $                 | 1.34  |             | $ | 2.20          |  | $             | 2.09  |                  | $ | 1.62  |  | $ | 1.39 
|Discontinued operations(2)                              |  |                   |      |             |   |              |  |               |      |                  |   |      |  |   | 2.35 
|                                                        |  |                   |       |             |   |               |  |               |       |                  |   |       |  |   |      
|Net earnings                                            |  | $                 | 1.34  |             | $ | 2.20          |  | $             | 2.09  |                  | $ | 1.62  |  | $ | 3.74 
|                                                        |  |                   |       |             |   |               |  |               |       |                  |   |       |  |   |      
|Net earnings per diluted share:                         |  |                   |       |             |   |               |  |               |       |                  |   |       |  |   |      
|Continuing operations                                   |  | $                 | 1.34  |             | $ | 2.17          |  | $             | 2.05  |                  | $ | 1.59  |  | $ | 1.36 
|Discontinued operations(2)                              |  |                   |      |             |   |              |  |               |      |                  |   |      |  |   | 2.31 
|                                                        |  |                   |       |             |   |               |  |               |       |                  |   |       |  |   |      
|Net earnings                                            |  | $                 | 1.34  |             | $ | 2.17          |  | $             | 2.05  |                  | $ | 1.59  |  | $ | 3.67 
|                                                        |  |                   |       |             |   |               |  |               |       |                  |   |       |  |   |      
|                                                        | 
|                                                        |  | Fiscal Year End  
|                                                        |  | Oct. 2,2009       |       | Oct. 3,2008 |   | Sept. 28,2007 |  | Sept. 29,2006 |       | Sept. 30,2005   
|Balance Sheet Data                                      |  |                   |       |             |   |               |  |               |       |                  |   |       |  |   |      
|Total assets                                            |  | $                 | 944.2 |             | $ | 902.0         |  | $             | 936.8 |                  | $ | 861.6 |  | $ | 796.0
|Long-term debt (excluding current portion)              |  | $                 | 12.5  |             | $ | 18.8          |  | $             | 18.8  |                  | $ | 25.0  |  | $ | 27.5 





|(1) |  | The results for fiscal year 2005 do not reflect share-based compensation expense whereas the results for fiscal years 2006 through 2009 do reflect such expense.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | Until March 11, 2005, we operated an electronics manufacturing business, which was a contract manufacturer of electronic assemblies and subsystems such as printed
circuit boards for OEMs. On that date, we sold our Electronics Manufacturing business to Jabil Circuit, Inc. As a result, this business has been treated as a discontinued operation in the fiscal year ended September 30, 2005.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------



Our fiscal years reported are the 52- or 53-week periods that
end on the Friday nearest September 30. Fiscal year 2009 was comprised of the 52-week period that ended on October 2, 2009. Fiscal year 2008 was comprised of the 53-week period that ended on October 3, 2008. Fiscal year 2007 was
comprised of the 52-week period that ended on September 28, 2007. While fiscal year 2008 revenue and earnings benefited from the extra week, the benefit was substantially less than a proportionate amount.



On July 26, 2009 we entered into an Agreement and Plan of
Merger with Agilent (the Merger Agreement), pursuant to which we will, subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, be acquired by Agilent Technologies, Inc. (Agilent) for $52.00
per share in cash. At a special meeting held on October 5, 2009, our stockholders approved the Merger Agreement. The Merger remains subject to regulatory approvals and other closing conditions. Under the terms of the Merger Agreement, we have
agreed to operate our business in the ordinary course consistent with past practice, as well as to refrain from taking certain actions in the conduct of our business without Agilents prior written consent until the consummation of the Merger.
Actions that may require Agilents consent include, but are not limited to, new indebtedness, capital expenditures, loans and investments, manufacturing and customer agreements, acquisitions, issuance of securities, and the repurchase of shares
of the Companys common stock.



The
discussion below should be read in conjunction with our Consolidated Financial Statements and the accompanying Notes to the Financial Statements included in Item 15 of this report. In addition, this discussion contains forward-looking
statements and should be read together with the risks to our business as described in Part ICaution Regarding Forward-Looking Statements and Item 1ARisk Factors.



Revision of Prior Period Financial Statements



During the fiscal quarter ended July 3, 2009, we
identified a clerical error related to the calculation of the fiscal year 2008 income tax provision. The impact of this error was an understatement of income tax expense and an overstatement of consolidated net earnings of $1.3 million during the
fiscal quarter and fiscal year ended October 3, 2008. The error also resulted in an overstatement of current deferred tax assets and retained earnings of $1.3 million at October 3, 2008, January 2, 2009 and April 3, 2009. We
assessed the materiality of this error and concluded that the previously issued financial statements are not materially misstated. We have corrected the immaterial error by revising the prior period financial statements. Accordingly, the
October 3, 2008 consolidated balance sheet and the consolidated statements of earnings and of stockholders equity and comprehensive income for the fiscal year ended October 3, 2008 presented herein have been revised to correct for
the immaterial error. The revision did not impact net cash provided by operating activities or net cash used in investing activities or financing activities for the fiscal year ended October 3, 2008.



Results of Operations



Fiscal Year 2009 Compared to Fiscal Year 2008



Segment Results



For financial reporting purposes, our operations are grouped
into two reportable business segments: Scientific Instruments and Vacuum Technologies.



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The following table presents comparisons of our sales and operating earnings for each of
those segments and in total for fiscal years 2009 and 2008:



|                               |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |       |   
|------------------------------ |  | ----------------- | ----- | - | ------------------ | ----- | - | - | - | ------- | --------- |  | ----- | - |  | - | ------ | - |  | ----- | --
|                               |  | Fiscal Year Ended |       |   | Increase(Decrease) |      
|                               |  | October 2,2009    |       |   | October 3,2008     |       |  
|                               |  | $                 |       |   | % ofSales          |       |   | $ |   |         | % ofSales |  |       | $ |  |   | %      |  
|(dollars in millions)          |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |  
|Sales by Segment:              |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |       |   
|Scientific Instruments         |  | $                 | 675.3 |   |                    | 83.7  | % |   | $ | 838.7   |           |  | 82.8  | % |  | $ | (163.4 | ) |  | (19.5 | )%
|Vacuum Technologies            |  |                   | 131.4 |   |                    | 16.3  |   |   |   | 173.8   |           |  | 17.2  |   |  |   | (42.4  | ) |  | (24.4 | ) 
|                               |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |       |   
|Total company                  |  | $                 | 806.7 |   |                    | 100.0 | % |   | $ | 1,012.5 |           |  | 100.0 | % |  | $ | (205.8 | ) |  | (20.3 | )%
|                               |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |       |   
|Operating Earnings by Segment: |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |       |   
|Scientific Instruments         |  | $                 | 53.9  |   |                    | 8.0   | % |   | $ | 80.7    |           |  | 9.6   | % |  | $ | (26.8  | ) |  | (33.2 | )%
|Vacuum Technologies            |  |                   | 25.7  |   |                    | 19.5  |   |   |   | 34.4    |           |  | 19.8  |   |  |   | (8.7   | ) |  | (25.4 | ) 
|                               |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |       |   
|Total segments                 |  |                   | 79.6  |   |                    | 9.9   |   |   |   | 115.1   |           |  | 11.4  |   |  |   | (35.5  | ) |  | (30.9 | ) 
|General corporate              |  |                   | (20.6 | ) |                    | (2.5  | ) |   |   | (13.6   | )         |  | (1.4  | ) |  |   | (7.0   | ) |  | (51.0 | ) 
|                               |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |       |   
|Total company                  |  | $                 | 59.0  |   |                    | 7.3   | % |   | $ | 101.5   |           |  | 10.0  | % |  | $ | (42.5  | ) |  | (41.9 | )%
|                               |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |       |   



Scientific Instruments.    The decrease in Scientific Instruments sales was primarily attributable to lower sales volume of a broad range of products and the negative impact of the stronger U.S. dollar on reported
revenues. The lower volume was primarily due to the impact of the continued global economic weakness on capital equipment spending and to a lesser extent on specific items impacting the comparability of the fourth quarter of fiscal year 2009 with
the fourth quarter of fiscal year 2008. Those items included an extra week in fiscal 2008 and the negative impact of customers uncertainty and employee and other disruptions related to the announcement and pendency of the acquisition by
Agilent. Sales from businesses acquired in fiscal year 2008 positively impacted reported sales by less than 1%.



Scientific Instruments operating earnings for fiscal year 2009 included $2.2 million of costs resulting from the pending acquisition by
Agilent, acquisition-related intangible amortization of $7.2 million, amortization of $0.1 million related to inventory written up to fair value in connection with the acquisition of Oxford Diffraction Limited (Oxford Diffraction) and
restructuring and other related costs of $8.9 million. In comparison, Scientific Instruments operating earnings for fiscal year 2008 included an acquisition-related in-process research and development charge of $1.7 million, acquisition-related
intangible amortization of $8.4 million, amortization of $1.4 million related to inventory written up to fair value in connection with certain acquisitions and restructuring and other related costs of $5.5 million. Excluding the impact of these
items, Scientific Instruments operating earnings decreased as a percentage of sales due to the negative impact of lower sales volume during fiscal year 2009, partially offset by the positive impact from efficiency improvements implemented in recent
years, the benefits of cost reduction activities implemented in the second quarter of fiscal year 2009 and the stronger U.S. dollar (which was unfavorable to reported sales but favorable to reported operating margins).



Vacuum Technologies.    The decrease
in Vacuum Technologies sales was driven mainly by lower sales volume of products for both industrial and life science applications, primarily due to the negative impacts of continued global economic weakness on capital equipment spending and the
stronger U.S. dollar on reported revenues.



Vacuum
Technologies operating earnings for fiscal year 2009 included the impact of restructuring and other related costs of $0.8 million. Excluding the impact of these costs, the slight increase in Vacuum Technologies operating earnings as a percentage of
sales was primarily due to the positive impact of efficiency improvements implemented in recent years, cost reduction activities implemented during the second quarter of fiscal year 2009 and the stronger U.S. dollar, largely offset by the negative
impact of lower sales volume.



23



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##### Table of Contents

Consolidated Results



The following table presents comparisons of our sales and other selected consolidated financial results for
fiscal years 2009 and 2008:



|                                                |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |        |   
|----------------------------------------------- |  | ----------------- | ----- | - | ------------------ | ----- | - | - | - | ------- | --------- |  | ----- | - |  | - | ------ | - |  | ------ | --
|                                                |  | Fiscal Year Ended |       |   | Increase(Decrease) |      
|                                                |  | October 2,2009    |       |   | October 3,2008     |       |  
|                                                |  | $                 |       |   | % ofSales          |       |   | $ |   |         | % ofSales |  |       | $ |  |   | %      |  
|(dollars in millions, except per share data)    |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |  
|Sales                                           |  | $                 | 806.7 |   |                    | 100.0 | % |   | $ | 1,012.5 |           |  | 100.0 | % |  | $ | (205.8 | ) |  | (20.3  | )%
|                                                |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |        |   
|Gross profit                                    |  |                   | 354.7 |   |                    | 44.0  |   |   |   | 452.4   |           |  | 44.7  |   |  |   | (97.7  | ) |  | (21.6  | ) 
|                                                |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |        |   
|Operating expenses:                             |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |        |   
|Selling, general and administrative             |  |                   | 239.3 |   |                    | 29.7  |   |   |   | 277.4   |           |  | 27.4  |   |  |   | (38.1  | ) |  | (13.8  | ) 
|Research and development                        |  |                   | 56.4  |   |                    | 7.0   |   |   |   | 71.8    |           |  | 7.1   |   |  |   | (15.4  | ) |  | (21.4  | ) 
|Purchased in-process research and development   |  |                   |      |   |                    |      |   |   |   | 1.7     |           |  | 0.2   |   |  |   | (1.7   | ) |  | (100.0 | ) 
|                                                |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |        |   
|Total operating expenses                        |  |                   | 295.7 |   |                    | 36.7  |   |   |   | 350.9   |           |  | 34.7  |   |  |   | (55.2  | ) |  | (15.8  | ) 
|                                                |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |        |   
|Operating earnings                              |  |                   | 59.0  |   |                    | 7.3   |   |   |   | 101.5   |           |  | 10.0  |   |  |   | (42.5  | ) |  | (41.9  | ) 
|Impairment of private company equity investment |  |                   |      |   |                    |      |   |   |   | (3.0    | )         |  | (0.3  | ) |  |   | 3.0    |   |  | 100.0  |   
|Interest income                                 |  |                   | 1.6   |   |                    | 0.2   |   |   |   | 5.9     |           |  | 0.6   |   |  |   | (4.3   | ) |  | (72.2  | ) 
|Interest expense                                |  |                   | (1.5  | ) |                    | (0.2  | ) |   |   | (1.7    | )         |  | (0.2  | ) |  |   | 0.2    |   |  | 10.3   |   
|Income tax expense                              |  |                   | (20.5 | ) |                    | (2.5  | ) |   |   | (37.6   | )         |  | (3.7  | ) |  |   | 17.1   |   |  | 45.4   |   
|                                                |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |        |   
|Net earnings                                    |  | $                 | 38.6  |   |                    | 4.8   | % |   | $ | 65.1    |           |  | 6.4   | % |  | $ | (26.5  | ) |  | (40.7  | )%
|                                                |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |        |   
|Net earnings per diluted share                  |  | $                 | 1.34  |   |                    |       |   |   | $ | 2.17    |           |  |       |   |  | $ | (0.83  | ) |  |        |   
|                                                |  |                   |       |   |                    |       |   |   |   |         |           |  |       |   |  |   |        |   |  |        |   



Sales.    As discussed under the heading Segment Results above, sales by our Scientific Instruments and Vacuum Technologies segments in fiscal year 2009 decreased by 19.5% and 24.4%, respectively, compared
to fiscal year 2008. On a consolidated basis, sales declined 20.3% in fiscal year 2009. This decrease was primarily related to lower sales volume of a broad range of products and the negative impact of the stronger U.S. dollar on reported
revenues. The lower volume was primarily due to the impact of continued global economic weakness on capital equipment spending and to a lesser extent on specific items impacting the comparability of the fourth quarter of fiscal year 2009 with the
fourth quarter of fiscal year 2008. Those items included an extra week in fiscal 2008 and the negative impact of customers uncertainty and employee and other disruptions related to the announcement and pendency of the acquisition by Agilent.
Reported sales were negatively impacted by the stronger U.S. dollar, which strengthened approximately 6% on a weighted-average basis compared to other currencies in which we sell products and services. Sales from businesses acquired in fiscal year
2008 positively impacted reported sales by less than 1%.



For geographic reporting purposes, we refer to 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 fiscal years 2009 and 2008 were as
follows:



|                      |  |                   |       |           |                    |   |   |   |           |  |       |   |  |   |        |   |  |       |   
|--------------------- |  | ----------------- | ----- | --------- | ------------------ | - | - | - | --------- |  | ----- | - |  | - | ------ | - |  | ----- | --
|                      |  | Fiscal Year Ended |       |           | Increase(Decrease) |  
|                      |  | October 2,2009    |       |           | October 3,2008     |   |  
|                      |  | $                 |       | % ofSales |                    |   | $ |   | % ofSales |  |       | $ |  |   | %      |  
|(dollars in millions) |  |                   |       |           |                    |   |   |   |           |  |       |   |  |   |        |  
|Geographic Region     |  |                   |       |           |                    |   |   |   |           |  |       |   |  |   |        |   |  |       |   
|North America         |  | $                 | 253.8 |           | 31.5               | % |   | $ | 324.8     |  | 32.1  | % |  | $ | (71.0  | ) |  | (21.9 | )%
|Europe                |  |                   | 313.5 |           | 38.9               |   |   |   | 409.0     |  | 40.4  |   |  |   | (95.5  | ) |  | (23.4 | ) 
|Asia Pacific          |  |                   | 194.3 |           | 24.0               |   |   |   | 216.6     |  | 21.4  |   |  |   | (22.3  | ) |  | (10.3 | ) 
|Latin America         |  |                   | 45.1  |           | 5.6                |   |   |   | 62.1      |  | 6.1   |   |  |   | (17.0  | ) |  | (27.3 | ) 
|                      |  |                   |       |           |                    |   |   |   |           |  |       |   |  |   |        |   |  |       |   
|Total company         |  | $                 | 806.7 |           | 100.0              | % |   | $ | 1,012.5   |  | 100.0 | % |  | $ | (205.8 | ) |  | (20.3 | )%
|                      |  |                   |       |           |                    |   |   |   |           |  |       |   |  |   |        |   |  |       |   



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Sales volume decreased in all geographic regions for both Scientific Instruments and Vacuum
Technologies products primarily due to the impact of continued global economic weakness on capital equipment spending. In addition, reported sales outside North America were unfavorably impacted by the strengthening of the U.S. dollar compared to
fiscal year 2008.



Gross
Profit.    Gross profit for fiscal year 2009 reflects the impact of $6.1 million in amortization expense relating to acquisition-related intangible assets, amortization of $0.1 million related to inventory written up to fair
value in connection with the Oxford Diffraction acquisition and $4.1 million in restructuring and other related costs. In comparison, gross profit for fiscal year 2008 reflects the impact of $6.5 million in amortization expense relating to
acquisition-related intangible assets, amortization of $1.4 million related to inventory written up to fair value primarily in connection with certain acquisitions and $1.6 million in restructuring and other related costs. Excluding the impact of
these items, gross profit as a percentage of sales decreased slightly. The negative impact of lower sales volume was largely offset by the positive impact of efficiency improvements (such as those resulting from lower-cost manufacturing and
outsourcing initiatives, global procurement initiatives, and facility relocations/closures) implemented in recent years, the benefits from cost reduction activities implemented in the second quarter of fiscal year 2009, and the favorable impact of
the stronger U.S. dollar (which was favorable to reported gross profit margins but unfavorable to reported sales).



Selling, General and Administrative.    Selling, general and administrative expenses for fiscal year 2009 included
$9.2 million of costs resulting from the pending acquisition by Agilent, $1.1 million in amortization expense relating to acquisition-related intangible assets and $4.8 million in restructuring and other related costs. In comparison, selling,
general and administrative expenses for fiscal year 2008 included $1.8 million in amortization expense relating to acquisition-related intangible assets and $2.6 million in restructuring and other related costs. Excluding the impact of these items,
the increase in selling, general and administrative expenses as a percentage of sales was primarily due to the negative impact of lower sales volume, partially offset by the favorable impact of the stronger U.S. dollar and cost savings achieved from
restructuring activities implemented in recent years (including benefits from cost reduction activities implemented in the second quarter of fiscal year 2009).



Research and Development.    Research and development expenses for fiscal year 2009 reflect the impact of $0.8
million in restructuring and other related costs. In comparison, research and development expenses for fiscal year 2008 reflect the impact of $1.3 million in restructuring and other related costs. Excluding the impact of these items, the decrease in
research and development expenses as a percentage of sales was primarily due to the favorable impact of the stronger U.S. dollar in fiscal year 2009 and higher costs associated with new product introductions and product transition activities in
fiscal year 2008.



Purchased In-Process
Research and Development.    In connection with the Oxford Diffraction acquisition in fiscal year 2008, we recorded a one-time charge of $1.7 million to immediately expense acquired in-process research and development related
to projects that were in-process at the time of acquisition.



Restructuring Activities.    We have committed to several restructuring plans in order to improve operational efficiencies, centralize functions, reallocate resources and reduce
operating costs.Several of these plans were either initiated or still in process during fiscal year 2009. From the respective inception dates of these plans through October 2, 2009, we have incurred a total of $12.2 million in
restructuring expense and a total of $9.9 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).



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##### Table of Contents

The following table sets forth changes in our aggregate liability relating to all
restructuring plans during fiscal year 2009:



|                                               |  |                  |        |   |                    |   |       |       |  |   |        |  
|---------------------------------------------- |  | ---------------- | ------ | - | ------------------ | - | ----- | ----- |  | - | ------ | -
|                                               |  | Employee-Related |        |   | Facilities-Related |   |       | Total | 
|(in thousands)                                 |  |                  |        |   |                    |   |       |       | 
|Balance at October 3, 2008                     |  | $                | 1,840  |   |                    | $ | 1,044 |       |  | $ | 2,884  |  
|Charges to (reversals of) expense, net         |  |                  | 6,283  |   |                    |   | (296  | )     |  |   | 5,987  |  
|Cash payments                                  |  |                  | (7,768 | ) |                    |   | (294  | )     |  |   | (8,062 | )
|Foreign currency impacts and other adjustments |  |                  | 224    |   |                    |   | (56   | )     |  |   | 168    |  
|                                               |  |                  |        |   |                    |   |       |       |  |   |        |  
|Balance at October 2, 2009                     |  | $                | 579    |   |                    | $ | 398   |       |  | $ | 977    |  
|                                               |  |                  |        |   |                    |   |       |       |  |   |        |  



In fiscal
year 2009, we recorded $3.7 million in other costs related directly to these plans comprised primarily of employee retention and relocation costs and accelerated depreciation of assets to be disposed upon the closure of facilities.



Fiscal Year 2009 Second Quarter
Plan.    During the second quarter of fiscal year 2009, we committed to a plan to reduce our cost structure, primarily through headcount reductions, due to continuing uncertainties in the global economic environment. The
plan primarily involved the elimination of approximately 240 regular employees (primarily in North America and Europe and, to a lesser extent, Asia Pacific and Latin America) and 80 temporary positions in both the Scientific Instruments and Vacuum
Technologies segments. In addition, the plan included the closure of one small research and development/manufacturing facility in North America (Lake Forest, California) and two sales offices in Europe (Sweden and Switzerland).



The restructuring costs associated with this plan include
one-time termination benefits for employees whose positions were eliminated and lease termination costs on vacated facilities. Other restructuring-related costs include employee retention and relocation costs and facility-related relocation costs
and accelerated depreciation of fixed assets to be disposed upon the closure of facilities. These costs are being recorded and included in cost of sales, selling, general and administrative expenses and research and development expenses.



The following table sets forth changes in our restructuring
liability relating to the foregoing plan during fiscal year 2009 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 October 3, 2008                     |  | $                |       |     |                    | $ |    |       |  | $ |       |  
|Charges to expense, net                        |  |                  | 6,073  |     |                    |   | 21  |       |  |   | 6,094  |  
|Cash payments                                  |  |                  | (5,892 | )   |                    |   | (12 | )     |  |   | (5,904 | )
|Foreign currency impacts and other adjustments |  |                  | 197    |     |                    |   | 1   |       |  |   | 198    |  
|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  
|Balance at October 2, 2009                     |  | $                | 378    |     |                    | $ | 10  |       |  | $ | 388    |  
|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  
|Total expense since inception of plan          |  |                  |        |     |                    |   |     |       |  |   |        |  
|(in millions)                                  |  |                  |        |     |                    |   |     |       |  |   |        |  
|Restructuring expense                          |  |                  | $      | 6.1 |                   
|                                               |  |                  |        |     |                   
|Other restructuring-related costs              |  |                  | $      | 0.9 |                   
|                                               |  |                  |        |     |                   



The
restructuring expense of $6.1 million recorded during fiscal year 2009 related to employee termination benefits, of which $5.5 million impacted the Scientific Instruments segment and $0.6 million impacted the Vacuum Technologies segment. We also
incurred $0.9 million in other restructuring-related costs during the period, which primarily impacted the Scientific Instruments segment and were comprised of $0.6 million in employee-related costs and a $0.3 million non-cash charge for accelerated
depreciation of assets to be disposed upon the closure of facilities. These costs are expected to be settled by the end of fiscal year 2010.



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Fiscal Year 2009 First Quarter Plan.    During the first quarter
of fiscal year 2009, we committed to a separate plan to reduce our employee headcount in order to reduce operating costs and increase margins. The plan involved the termination of approximately 30 employees, mostly located in Europe. The
restructuring costs related to this plan primarily consist of one-time termination benefits which are expected to be settled by the end of fiscal year 2010. This restructuring plan did not involve any non-cash components. Costs relating to
restructuring activities recorded under this plan have been included in cost of sales, selling, general and administrative expenses and research and development expenses.



The following table sets forth changes in our restructuring liability relating to the foregoing plan during fiscal year 2009
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 October 3, 2008                     |  | $                |        |                    | $ |      |  | $ |       |  
|Charges to expense, net                        |  |                  | 1,354   |                    |   |      |  |   | 1,354  |  
|Cash payments                                  |  |                  | (1,309) |                    |   |      |  |   | (1,309 | )
|Foreign currency impacts and other adjustments |  |                  | 39      |                    |   |      |  |   | 39     |  
|                                               |  |                  |         |                    |   |       |  |   |        |  
|Balance at October 2, 2009                     |  | $                | 84      |                    | $ |      |  | $ | 84     |  
|                                               |  |                  |         |                    |   |       |  |   |        |  
|Total expense since inception of plan          |  |                  |         |                   
|(in millions)                                  |  |                  |         |                   
|Restructuring expense                          |  | $                | 1.4     |                   
|                                               |  |                  |         |                   
|Other restructuring-related costs              |  | $                | 0.1     |                   
|                                               |  |                  |         |                   



The
restructuring expense of $1.4 million recorded during fiscal year 2009 related to employee termination benefits of which $1.2 million impacted the Scientific Instruments segment and $0.2 million impacted the Vacuum Technologies segment. We also
incurred $0.1 million in other employee-related costs during the period which impacted the Scientific Instruments segment.



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 nuclear magnetic resonance (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, we created an information rich detection (IRD) center in Walnut Creek, California, where NMR operations that were previously located in Palo Alto, California were
integrated with mass spectrometry operations already located in Walnut Creek. We are investing in a substantial remodel of an existing building and invested in a new 45,000 square foot building there to house the IRD center.



As a result of the plan, a number of employee positions were
relocated or eliminated and certain facilities were consolidated. These actions primarily impacted the Scientific Instruments segment and involved the elimination of between approximately 40 and 60 positions.



Restructuring and other related costs associated with this plan
include one-time termination benefits, retention and relocation 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. These costs are currently estimated to be between $12.5 million and $15.0 million, of which $1.3 million was incurred in fiscal year 2009 and $5.5 million was incurred in fiscal year 2008.
The estimated remaining costs are expected to be recorded and settled through the fourth quarter of fiscal year 2010 except for certain lease termination-related costs, which might be settled as late as the fourth quarter of fiscal year 2012. Costs
relating to restructuring activities recorded under this plan have been included in cost of sales, selling, general and administrative expenses and research and development expenses. Upon its completion, this plan is expected to result in certain
operational improvements and efficiencies, which we anticipate will result in a reduction of our overall cost structure and annual operating expenses.



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The following table sets forth changes in our restructuring liability relating to the
foregoing plan during fiscal year 2009 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 October 3, 2008                     |  | $                | 1,840  |     |                    | $ | 551  |       |  | $ | 2,391  |  
|Reversals of expense, net                      |  |                  | (1,144 | )   |                    |   | (317 | )     |  |   | (1,461 | )
|Cash payments                                  |  |                  | (567   | )   |                    |   | (220 | )     |  |   | (787   | )
|Foreign currency impacts and other adjustments |  |                  | (12    | )   |                    |   | (14  | )     |  |   | (26    | )
|                                               |  |                  |        |     |                    |   |      |       |  |   |        |  
|Balance at October 2, 2009                     |  | $                | 117    |     |                    | $ |     |       |  | $ | 117    |  
|                                               |  |                  |        |     |                    |   |      |       |  |   |        |  
|Total expense since inception of plan          |  |                  |        |     |                   
|(in millions)                                  |  |                  |        |     |                   
|Restructuring expense                          |  |                  | $      | 2.9 |                   
|                                               |  |                  |        |     |                   
|Other restructuring-related costs              |  |                  | $      | 8.2 |                   
|                                               |  |                  |        |     |                   



The
reversals of restructuring expense of $1.5 million recorded during fiscal year 2009 related to changes in estimates relating to certain employee termination benefits and the early cancellation of our lease agreement for a vacated facility. Of the
$8.2 million in other restructuring-related costs, we recorded $2.8 million during fiscal year 2009, which were comprised of $1.7 million in employee retention costs and $1.1 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.



Restructuring Cost Savings.    The following table sets forth the estimated annual cost savings for each plan when
they were initiated as well as where those cost savings were expected to be realized:



|                                                                                                                                                                                                              |  |                             
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------
|Restructuring Plan                                                                                                                                                                                            |  | Estimated AnnualCost
Savings
|Fiscal Year 2007 Plan (Scientific Instrumentsto combine and optimize the development and assembly on certain products and
to centralize functions and reallocate resources to rapidly growing product lines) |  | $3 million - $5 million     
|Fiscal Year 2009 First Quarter Plan (Scientific Instrumentsto reduce headcount and operating costs and increase operating
margins)                                                                           |  | $2 million - $3 million     
|Fiscal Year 2009 Second Quarter Plan (Scientific Instruments and Vacuum Technologiesto reduce cost structure
due to global economic uncertainties, primarily through headcount reduction)                    |  | $20 million - $24 million   
|                                                                                                                                                                                                             



These
estimated cost savings are expected to impact cost of sales, selling, general and administrative expenses and research and development expenses. Some of these cost savings have been and will continue to be reinvested in other parts of our business,
for example, as part of our continued emphasis on IRD and consumable products. In addition, unrelated cost increases in other areas of our operations have and could in the future offset some or all of these cost savings. Although it is difficult to
quantify with any precision our actual cost savings to date from these activities, many of which are still ongoing, we currently believe that the ultimate savings realized will not differ materially from these estimates.



Impairment of Private Company Equity
Investment.During fiscal year 2008, we became aware of information which raised substantial doubt about the ability of a small, private company in which we held 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 that
period.



Interest
Income.The decrease in interest income was primarily due to lower interest rates on invested cash during fiscal year 2009 compared to fiscal year 2008.



Income Tax Expense.The effective income tax rate was 34.7% for fiscal year 2009,
compared to 36.6% for fiscal year 2008. The lower effective income tax rate in fiscal year 2009 was primarily due to



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lower U.S. state taxes, lower U.S. federal taxes on distributed and undistributed foreign earnings and lower non-deductible compensation expense. These factors were partially offset by the impact
in fiscal year 2009 of non-deductible costs associated with our pending acquisition by Agilent.



Net Earnings.    Net earnings for fiscal year 2009 reflect the after-tax impacts of $9.2 million of costs
resulting from the pending acquisition by Agilent, $7.2 million in acquisition-related intangible amortization, amortization of $0.1 million related to inventory written up to fair value in connection with the Oxford Diffraction acquisition and $9.7
million in restructuring and other related costs. Net earnings for fiscal year 2008 reflect a non-deductible acquisition-related in-process research and development charge of $1.7 million and the after-tax impacts of $3.0 million in an impairment of
a private company equity investment, $8.4 million in acquisition-related intangible amortization, $1.4 million in amortization related to inventory written up to fair value in connection with certain acquisitions and $5.5 million in restructuring
and other related costs. Excluding the after-tax impact of these items, the decrease in net earnings in fiscal year 2009 was primarily attributable to the negative impact of lower sales volume.



Outlook



The diversity of our products, the applications we serve and our worldwide distribution position
us well. However, we continue to operate in difficult global economic conditions. The uncertainty of these conditions, as well as customers uncertainty and employee and other disruptions related to the announcement and pendency of our
acquisition by Agilent, make it difficult for us to project our near-term results of operations. These conditions could further impact our business and have an adverse effect on our financial position, results of operations and/or cash
flows.In addition, we have incurred and will continue to incur legal and other expenses in connection with the pending acquisition by Agilent, which could have an adverse effect on our financial position, results
of operations and/or cash flows.



Fiscal Year 2008 Compared to Fiscal Year 2007



Segment Results



The following table presents comparisons of our sales and operating earnings for each of our segments and in total for fiscal years 2008 and 2007:



|                               |  |                   |         |   |                    |       |   |   |   |       |           |  |       |   |  |   |      |  |      |  
|------------------------------ |  | ----------------- | ------- | - | ------------------ | ----- | - | - | - | ----- | --------- |  | ----- | - |  | - | ---- |  | ---- | -
|                               |  | Fiscal Year Ended |         |   | Increase(Decrease) |      
|                               |  | October 3,2008    |         |   | September 28,2007  |       |  
|                               |  | $                 |         |   | % ofSales          |       |   | $ |   |       | % ofSales |  |       | $ |  | % |     
|(dollars in millions)          |  |                   |         |   |                    |       |   |   |   |       |           |  |       |   |  |   |      |  |      |  
|Sales by Segment:              |  |                   |         |   |                    |       |   |   |   |       |           |  |       |   |  |   |      |  |      |  
|Scientific Instruments         |  | $                 | 838.7   |   |                    | 82.8  | % |   | $ | 761.5 |           |  | 82.7  | % |  | $ | 77.2 |  | 10.1 | %
|Vacuum Technologies            |  |                   | 173.8   |   |                    | 17.2  |   |   |   | 159.1 |           |  | 17.3  |   |  |   | 14.7 |  | 9.3  |  
|                               |  |                   |         |   |                    |       |   |   |   |       |           |  |       |   |  |   |      |  |      |  
|Total company                  |  | $                 | 1,012.5 |   |                    | 100.0 | % |   | $ | 920.6 |           |  | 100.0 | % |  | $ | 91.9 |  | 10.0 | %
|                               |  |                   |         |   |                    |       |   |   |   |       |           |  |       |   |  |   |      |  |      |  
|Operating Earnings by Segment: |  |                   |         |   |                    |       |   |   |   |       |           |  |       |   |  |   |      |  |      |  
|Scientific Instruments         |  | $                 | 80.7    |   |                    | 9.6   | % |   | $ | 79.4  |           |  | 10.4  | % |  | $ | 1.3  |  | 1.5  | %
|Vacuum Technologies            |  |                   | 34.4    |   |                    | 19.8  |   |   |   | 32.0  |           |  | 20.1  |   |  |   | 2.4  |  | 7.6  |  
|                               |  |                   |         |   |                    |       |   |   |   |       |           |  |       |   |  |   |      |  |      |  
|Total segments                 |  |                   | 115.1   |   |                    | 11.4  |   |   |   | 111.4 |           |  | 12.1  |   |  |   | 3.7  |  | 3.3  |  
|General corporate              |  |                   | (13.6   | ) |                    | (1.4  | ) |   |   | (18.8 | )         |  | (2.1  | ) |  |   | 5.2  |  | 27.9 |  
|                               |  |                   |         |   |                    |       |   |   |   |       |           |  |       |   |  |   |      |  |      |  
|Total company                  |  | $                 | 101.5   |   |                    | 10.0  | % |   | $ | 92.6  |           |  | 10.1  | % |  | $ | 8.9  |  | 9.6  | %
|                               |  |                   |         |   |                    |       |   |   |   |       |           |  |       |   |  |   |      |  |      |  



Scientific Instruments.    The increase in Scientific Instruments sales was primarily attributable to higher sales volume across a broad range of our analytical instruments and consumable products, partially
offset by lower sales of research products. Sales increased for environmental, energy and life science applications. During fiscal year 2008, the U.S. dollar weakened compared to most other foreign currencies in which we sell products and services,
which also contributed to the increase in sales. Excluding sales from businesses acquired in fiscal year 2008, Scientific Instruments sales in the fiscal year increased by approximately 9% compared to fiscal year 2007.



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Scientific Instruments operating earnings for fiscal year 2008 include an
acquisition-related in-process research and development charge of $1.7 million, acquisition-related intangible amortization of $8.4 million, amortization of $1.4 million related to inventory written up to fair value in connection with acquisitions
and restructuring and other related costs of $5.5 million. In comparison, Scientific Instruments operating earnings for fiscal year 2007 include acquisition-related intangible amortization of $7.9 million, amortization of $1.3 million related to
inventory written up to fair value in connection with an acquisition and restructuring and other related costs of $4.3 million. Excluding the impact of these items, operating earnings were lower as a percentage of sales due to higher transition
costs related to the relocation of manufacturing activities for certain products, the weaker U.S. dollar (which was favorable to reported sales but unfavorable to reported operating margins) and higher costs relating to new product introductions.
These factors more than offset the positive impact of sales volume leverage.



Vacuum Technologies.    The increase in Vacuum Technologies sales was driven by higher sales volume over a broad range of products and services and the positive impact of the
weaker U.S. dollar.



The decrease in Vacuum
Technologies operating earnings as a percentage of sales was primarily the result of the weaker U.S. dollar, which was only partially offset by the positive impact of sales volume leverage.



Consolidated Results



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



|                                                |                |                   |         |                   |                    |       |   |  |   |           |   |  |       |   |  |   |      |   |  |        |  
|----------------------------------------------- | -------------- | ----------------- | ------- | ----------------- | ------------------ | ----- | - |  | - | --------- | - |  | ----- | - |  | - | ---- | - |  | ------ | -
|                                                |                | Fiscal Year Ended |         |                   | Increase(Decrease) |      
|                                                | October 3,2008 |                   |         | September 28,2007 |                    |      
|                                                |                |                  
|                                                | $              |                   |         | % ofSales         |                    |       | $ |  |   | % ofSales |   |  | $     |   |  | % |     
|                                                |                |                   |         |                   |                   
|(dollars in millions, except per share data)    |                |                   |         |                   |                    |       |   |  |   |           |   |  |       |   |  |   |      |   |  |        |  
|Sales:                                          |                | $                 | 1,012.5 |                   |                    | 100.0 | % |  | $ | 920.6     |   |  | 100.0 | % |  | $ | 91.9 |   |  | 10.0   | %
|                                                |                |                   |         |                   |                    |       |   |  |   |           |   |  |       |   |  |   |      |   |  |        |  
|Gross profit                                    |                |                   | 452.4   |                   |                    | 44.7  |   |  |   | 415.5     |   |  | 45.1  |   |  |   | 36.9 |   |  | 8.9    |  
|                                                |                |                   |         |                   |                    |       |   |  |   |           |   |  |       |   |  |   |      |   |  |        |  
|Operating expenses:                             |                |                   |         |                   |                    |       |   |  |   |           |   |  |       |   |  |   |      |   |  |        |  
|Selling, general and administrative             |                |                   | 277.4   |                   |                    | 27.4  |   |  |   | 257.8     |   |  | 28.0  |   |  |   | 19.6 |   |  | 7.7    |  
|Research and development                        |                |                   | 71.8    |                   |                    | 7.1   |   |  |   | 65.2      |   |  | 7.0   |   |  |   | 6.6  |   |  | 10.2   |  
|Purchased in-process research and development   |                |                   | 1.7     |                   |                    | 0.2   |   |  |   |          |   |  |      |   |  |   | 1.7  |   |  | 100.0  |  
|                                                |                |                   |         |                   |                    |       |   |  |   |           |   |  |       |   |  |   |      |   |  |        |  
|Total operating expenses                        |                |                   | 350.9   |                   |                    | 34.7  |   |  |   | 323.0     |   |  | 35.0  |   |  |   | 27.9 |   |  | 8.7    |  
|                                                |                |                   |         |                   |                    |       |   |  |   |           |   |  |       |   |  |   |      |   |  |        |  
|Operating earnings                              |                |                   | 101.5   |                   |                    | 10.0  |   |  |   | 92.5      |   |  | 10.1  |   |  |   | 9.0  |   |  | 9.6    |  
|Impairment of private company equity investment |                |                   | (3.0    | )                 |                    | (0.3  | ) |  |   |          |   |  |      |   |  |   | (3.0 | ) |  | (100.0 | )
|Interest income                                 |                |                   | 5.9     |                   |                    | 0.6   |   |  |   | 6.2       |   |  | 0.7   |   |  |   | (0.3 | ) |  | (3.6   | )
|Interest expense                                |                |                   | (1.7    | )                 |                    | (0.2  | ) |  |   | (1.9      | ) |  | (0.2  | ) |  |   | 0.2  |   |  | 11.8   |  
|Income tax expense                              |                |                   | (37.6   | )                 |                    | (3.7  | ) |  |   | (33.2     | ) |  | (3.7  | ) |  |   | (4.4 | ) |  | (13.3  | )
|                                                |                |                   |         |                   |                    |       |   |  |   |           |   |  |       |   |  |   |      |   |  |        |  
|Net earnings                                    |                | $                 | 65.1    |                   |                    | 6.4   | % |  | $ | 63.6      |   |  | 6.9   | % |  | $ | 1.5  |   |  | 2.4    | %
|                                                |                |                   |         |                   |                    |       |   |  |   |           |   |  |       |   |  |   |      |   |  |        |  
|Net earnings per diluted share                  |                | $                 | 2.17    |                   |                    |       |   |  | $ | 2.05      |   |  |       |   |  | $ | 0.12 |   |  |        |  
|                                                |                |                   |         |                   |                    |       |   |  |   |           |   |  |       |   |  |   |      |   |  |        |  



Sales.    As discussed under the heading Segment Results above, sales by the Scientific Instruments and Vacuum Technologies segments in fiscal year 2008 increased by 10.1% and 9.3%, respectively, compared
to fiscal year 2007. The growth in consolidated sales was broad-based, with increases in sales of products for environmental, energy and life science applications. The weaker U.S. dollar and acquisitions also had a positive effect on the reported
sales increases. Excluding sales from businesses acquired in fiscal year 2008, sales in fiscal year 2008 increased by approximately 9% compared to fiscal year 2007.



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Sales by geographic region in fiscal years 2008 and 2007 were as follows:



|                           |  |                   |         |           |                    |   |   |   |           |  |       |   |  |   |      |  |      |  
|-------------------------- |  | ----------------- | ------- | --------- | ------------------ | - | - | - | --------- |  | ----- | - |  | - | ---- |  | ---- | -
|                           |  | Fiscal Year Ended |         |           | Increase(Decrease) |  
|                           |  | October 3,2008    |         |           | September 28,2007  |   |  
|                           |  | $                 |         | % ofSales |                    |   | $ |   | % ofSales |  |       | $ |  | % |     
|(dollars in millions)      |  |                   |         |           |                    |   |   |   |           |  |       |   |  |   |      |  |      |  
|Sales by Geographic Region |  |                   |         |           |                    |   |   |   |           |  |       |   |  |   |      |  |      |  
|North America              |  | $                 | 324.8   |           | 32.1               | % |   | $ | 312.1     |  | 33.9  | % |  | $ | 12.7 |  | 4.1  | %
|Europe                     |  |                   | 409.0   |           | 40.4               |   |   |   | 376.8     |  | 40.9  |   |  |   | 32.2 |  | 8.6  |  
|Asia Pacific               |  |                   | 216.6   |           | 21.4               |   |   |   | 185.6     |  | 20.2  |   |  |   | 31.0 |  | 16.7 |  
|Latin America              |  |                   | 62.1    |           | 6.1                |   |   |   | 46.1      |  | 5.0   |   |  |   | 16.0 |  | 34.4 |  
|                           |  |                   |         |           |                    |   |   |   |           |  |       |   |  |   |      |  |      |  
|Total company              |  | $                 | 1,012.5 |           | 100.0              | % |   | $ | 920.6     |  | 100.0 | % |  | $ | 91.9 |  | 10.0 | %
|                           |  |                   |         |           |                    |   |   |   |           |  |       |   |  |   |      |  |      |  



The
increases in sales in Europe, Asia Pacific and North America were attributable to higher sales by both the Scientific Instruments and Vacuum Technologies segments. The sales increase in Latin America was driven by higher Scientific Instruments
sales, with Vacuum Technologies sales essentially flat in that region.



Gross Profit.    Gross profit for fiscal year 2008 includes $6.5 million in amortization expense relating to acquisition-related intangible assets, $1.4 million in amortization
expense related to inventory written up to fair value in connection with recent acquisitions and $1.6 million in restructuring and other related costs. In comparison, gross profit for fiscal year 2007 includes $5.3 million in amortization expense
relating to acquisition-related intangible assets, $1.3 million in amortization expense related to inventory written up to fair value in connection with an acquisition and $1.2 million in restructuring and other related costs. Excluding the impact
of these items, gross profit as a percentage of sales decreased slightly due to higher transition costs related to the relocation of manufacturing activities for certain products and the weaker U.S. dollar (which was favorable to reported sales but
unfavorable to reported gross profit margins).



Selling, General and Administrative.    Selling, general and administrative expenses for fiscal year 2008 include $1.8 million in amortization expense relating to acquisition-related intangible assets and $2.6
million in restructuring and other related costs. In comparison, selling, general and administrative expenses for fiscal year 2007 include $2.6 million in amortization expense relating to acquisition-related intangible assets and $2.4 million in
restructuring and other related costs. Excluding the impact of these items, the slight decrease in selling, general and administrative expenses as a percentage of sales was primarily the result of sales volume leverage and lower employee bonus
accruals, largely offset by the weaker U.S. dollar and higher costs relating to new product introductions.



Research and Development.    Research and development expenses for fiscal year 2008 include $1.3 million in
restructuring and other related costs. In comparison, research and development expenses for fiscal year 2007 include $0.8 million in restructuring and other related costs. Excluding the impact of these items, research and development expenses were
flat as a percentage of sales.



Purchased
In-Process Research and Development.    In connection with the Oxford Diffraction acquisition in the third quarter of fiscal year 2008, we recorded a one-time charge of $1.7 million to immediately expense acquired in-process
research and development related to projects that were in process at the time of the acquisition.



Restructuring Activities.    We have committed to several restructuring plans in order to improve operational
efficiencies, centralize functions, reallocate resources and reduce operating costs.



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The following table sets forth changes in our aggregate liability during fiscal year 2008
relating to all restructuring plans:



|                                               |  |                  |        |   |                    |   |       |       |  |   |        |  
|---------------------------------------------- |  | ---------------- | ------ | - | ------------------ | - | ----- | ----- |  | - | ------ | -
|                                               |  | Employee-Related |        |   | Facilities-Related |   |       | Total | 
|(in thousands)                                 |  |                  |        |   |                    |   |       |       |  |   |        |  
|Balance at September 28, 2007                  |  | $                | 2,222  |   |                    | $ | 707   |       |  | $ | 2,929  |  
|Charges to expense, net                        |  |                  | 1,291  |   |                    |   | 761   |       |  |   | 2,052  |  
|Cash payments                                  |  |                  | (1,702 | ) |                    |   | (408  | )     |  |   | (2,110 | )
|Foreign currency impacts and other adjustments |  |                  | 29     |   |                    |   | (16   | )     |  |   | 13     |  
|                                               |  |                  |        |   |                    |   |       |       |  |   |        |  
|Balance at October 3, 2008                     |  | $                | 1,840  |   |                    | $ | 1,044 |       |  | $ | 2,884  |  
|                                               |  |                  |        |   |                    |   |       |       |  |   |        |  



During
fiscal year 2008, we also recorded $3.4 million in other costs related directly to these plans which were comprised primarily of employee retention and relocation costs and accelerated depreciation of assets to be disposed upon the closure of
facilities).



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 nuclear magnetic resonance (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 during fiscal year 2008 relating to the foregoing plan:



|                                               |  |                  |        |   |                    |   |      |       |  |   |        |  
|---------------------------------------------- |  | ---------------- | ------ | - | ------------------ | - | ---- | ----- |  | - | ------ | -
|                                               |  | Employee-Related |        |   | Facilities-Related |   |      | Total | 
|(in thousands)                                 |  |                  |        |   |                    |   |      |       |  |   |        |  
|Balance at September 28, 2007                  |  | $                | 2,222  |   |                    | $ |     |       |  | $ | 2,222  |  
|Charges to expense, net                        |  |                  | 1,291  |   |                    |   | 761  |       |  |   | 2,052  |  
|Cash payments                                  |  |                  | (1,702 | ) |                    |   | (252 | )     |  |   | (1,954 | )
|Foreign currency impacts and other adjustments |  |                  | 29     |   |                    |   | 42   |       |  |   | 71     |  
|                                               |  |                  |        |   |                    |   |      |       |  |   |        |  
|Balance at October 3, 2008                     |  | $                | 1,840  |   |                    | $ | 551  |       |  | $ | 2,391  |  
|                                               |  |                  |        |   |                    |   |      |       |  |   |        |  



The
restructuring charges of $2.1 million recorded during fiscal year 2008 related to employee termination benefits and costs associated with the closure of leased facilities. We also incurred $3.4 million in other related costs during fiscal year 2008,
which were comprised of $2.2 million in employee retention costs and $1.2 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 fiscal year 2008, we became aware of information which raised substantial doubt about the ability of a small, private company in which we held 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 during
fiscal year 2008.



Income Tax
Expense.The effective income tax rate was 36.6% for fiscal year 2008, compared to 34.3% for fiscal year 2007. The higher effective income tax rate in fiscal year 2008 was primarily due to higher U.S. state taxes, higher
U.S. federal taxes on distributed and undistributed foreign earnings, higher non-deductible compensation expense and a non-deductible in-process research and development charge related to an acquisition. These factors were partially offset by the
benefit from a reduction in unrecognized tax benefits due to the lapse of certain statutes of limitations in fiscal year 2008 and lower taxes on retained foreign earnings.



Net Earnings.    Net earnings for fiscal year 2008 included a non-deductible in-process research
and development charge of $1.7 million and the after-tax impacts of an impairment of a private company equity



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investment of $3.0 million, $8.4 million in acquisition-related intangible amortization, $1.4 million in amortization related to inventory written up to fair value in connection with recent
acquisitions and $5.5 million in restructuring and other related costs. Net earnings for fiscal year 2007 included the after-tax impacts of $7.9 million in acquisition-related intangible amortization, $1.3 million in amortization related to
inventory written up to fair value in connection with the acquisition of IonSpec and $4.3 million in restructuring and other related costs. Excluding the after-tax impact of these items, the increase in net earnings in fiscal year 2008 was primarily
attributable to higher sales volume (including sales volume leverage on operating expenses), partially offset by higher transition costs related to the relocation of manufacturing activities for certain products and higher costs relating to new
product introductions.



Critical Accounting Policies



The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the U.S. requires us to exercise certain judgments in selecting and applying accounting policies and methods. The following is a summary of what we consider to be our most
critical accounting policiesthose that are most important to the portrayal of our financial condition and results of operations and that require our most difficult, subjective or complex judgmentsthe effects of those accounting policies
applied and the judgments made in their application.



Revenue Recognition.    We derive revenues from product sales (including accessory sales) and services. We recognize revenue on product sales and accessory sales when persuasive evidence of an arrangement exists,
the contract price is fixed or determinable, the product or accessory has been delivered, title and risk of loss have passed to the customer and collection of the resulting receivable is reasonably assured. Our sales are typically not subject to
rights of return and, historically, actual sales returns have not been significant. Product sales that do not involve unique customer acceptance terms or new specifications or technology with customer acceptance provisions, but that do involve
installation services, are accounted for as multiple-element arrangements, where the larger of the contractual billing holdback or the fair value of the installation service is deferred when the product is delivered and subsequently recognized when
the installation is complete. For certain other product sales that do involve unique customer acceptance terms or new specifications or technology with customer acceptance provisions, all revenue is deferred until all contractually required customer
acceptance provisions and product specifications have been satisfied. Revenue related to service contracts is recognized ratably over the term of the contracts. Unearned maintenance and service contract revenue is included in accrued liabilities on
the accompanying Consolidated Balance Sheet. Revenue related to incident-based paid service and training services is recognized when the related services are provided to the customer.



In all cases, the fair value of undelivered elements is deferred until those items are delivered to the
customer. Sales arrangements involving undelivered elements are primarily confined to the Scientific Instruments segment and involve product accessories, installation services and/or training services that are delivered after the related product has
been delivered. Product accessories generally enhance the functionality of the product but are not essential to the functionality of the product. In determining relative fair values for product accessories and training services, we utilize published
price list values as the basis for allocating the overall arrangement consideration. List prices are representative of fair value, as stand-alone sales of products, product accessories and training have occurred at list price. The fair value of
installation services is calculated by applying standard service billing rates to the estimate of the number of hours to install a specific product based on historical experience. Estimates of installation hours have historically been accurate.



In limited cases, product accessories ordered by
customers may not have an established list price, as the item may be a new or slightly modified accessory with no prior sales history. In these limited cases, we consider whether a comparable or substitute accessory that provides similar
functionality exists for which fair value has been established and then use that comparable or substitute accessorys list price in estimating the fair value of the undelivered elements. When the fair value of a delivered element has not been
established, we use the residual method to allocate revenue if the fair value of all undelivered elements is determinable. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement
consideration is allocated to the delivered elements and is recognized as revenue. If we are unable to determine the fair value of an undelivered element, all



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arrangement revenue is deferred until the undelivered element is delivered; however, such cases are infrequent and arise from a significant technological advance that creates products or product
accessories without a suitable comparable or substitute accessory from which to derive fair value.



We determine when and how much revenue may be recognized on a particular transaction in a particular period based on our best estimates of
the fair value of undelivered elements and our judgment of when our performance obligations have been met as outlined above. These judgments and estimates impact reported revenues.



Allowances for Doubtful Accounts Receivable.    We sell our products and extend
trade credit to a large number of customers. These customers are dispersed across many different industries and geographies and, historically, no single customer has accounted for 10% or more of our total revenues or trade accounts receivable. We
perform ongoing credit evaluations of our customers and generally do not require collateral from them. Allowances are established for amounts that are considered to be uncollectible. These allowances represent our best estimates and are based on our
judgment after considering a number of factors including third-party credit reports, actual payment history, customer-specific financial information and broader market and economic trends and conditions. In the event that actual uncollectible
amounts differ from these best estimates, changes in allowances for doubtful accounts might become necessary.



Inventory Valuation.    Inventories are stated at the lower of cost or market, with cost being computed on an
average-cost basis. Provisions are made to write down potentially excess, obsolete or slow-moving inventories to their net realizable value. These provisions are based on our best estimates after considering historical demand, projected future
demand (including current backlog), inventory purchase commitments, industry and market trends and conditions and other factors. In the event that actual excess, obsolete or slow-moving inventories differ from these best estimates, increases to
inventory reserves might become necessary.



Product Warranty.    Our products are generally subject to warranties and liabilities are therefore established for the estimated future costs of repair or replacement through charges to cost of sales at the time
the related sale is recognized. These liabilities are adjusted based on our best estimates of future warranty costs after considering historical and projected product failure rates and product repair costs. In the event that actual experience
differs from these best estimates, changes in our warranty liabilities might become necessary.



Environmental Liabilities.    As discussed more fully in Item 1Business and Item 1ARisk FactorsEnvironmental Matters, we entered
into a Distribution Agreement in connection with becoming a separate, public company on April 2, 1999. Under the terms of that Distribution Agreement, we are obligated to indemnify Varian Medical Systems, Inc. (VMS) for one-third of
certain environmental investigation, monitoring and/or remediation costs (after adjusting for any insurance proceeds and tax benefits recognized or realized by VMS for such costs). The liabilities recorded by us relating to these matters are based
on our best estimates after considering currently available information regarding the cost and timing of remediation efforts, related legal matters, insurance recoveries and other environmental-related events. As additional information becomes
available, these amounts are adjusted accordingly. Should the cost or timing of remediation efforts, legal matters, insurance recoveries or other environmental-related events (including any which may be currently unidentified) differ from our
current expectations and best estimates, changes to our reserves for environmental matters might become necessary.



Share-based Compensation.    We measure and recognize compensation expense for all share-based payment awards
including employee stock options and shares issued under our employee stock purchase plan based on estimated fair values. We estimate the value of share-based payments on the date of grant using the Black-Scholes model. The determination of the fair
value of, and the timing of expense relating to, share-based payment awards on the date of grant using the Black-Scholes model is affected by our stock price as well as assumptions regarding a number of variables including the expected term of
awards, expected stock price volatility and expected forfeitures.



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In determining the Companys expected stock price volatility assumption, we review
both the historical and implied volatility of the Companys common stock, with implied volatility based on publicly traded options on the Companys common stock. We determine the expected stock price volatility assumptions using
a combination of historical and implied volatility unless the volume or maturity of these publicly traded options does not satisfy the conditions to use implied volatility. Forfeitures are estimated at the time of grant and revised, if necessary, in
subsequent periods if actual forfeitures differ from those estimates. We estimate expected forfeitures, as well as the expected term of awards, based on historical experience. Future changes in these assumptions, our stock price or certain other
factors could result in changes in our share-based compensation expense in future periods.



Income Taxes.    We are subject to income taxes in the U.S. and numerous jurisdictions outside of the U.S. Significant judgment is required in evaluating our tax positions and
determining our provision for income taxes as well as in assessing the realizability of our deferred tax assets. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is
uncertain. We establish liabilities for unrecognized tax benefits, as well as reserves for related potential penalties and interest, based on the technical merits of our tax positions and the extent to which additional taxes, penalties and interest
will be due. These unrecognized tax benefits are established when, despite our belief that our tax return positions are fully supportable, certain positions can be challenged and may not be sustained on review by tax authorities. These balances are
adjusted in light of changing facts and circumstances. Our income tax expense includes the impact of new unrecognized tax benefits recorded as well as changes to existing unrecognized tax benefits that are considered appropriate. Should the ultimate
resolution of any tax-related uncertainties (including any which may be currently unidentified) differ from those we used to determine our recorded liabilities, charges against or credits to our unrecognized tax benefits and/or income tax provision
will become necessary.



Our judgments regarding
the realizability of deferred tax assets are based on, among other things, the relative weight of both positive and negative evidence regarding future taxable income, and may change due to changes in market conditions, tax laws, tax planning
strategies or other factors. Should our assumptions and consequently our estimates in this area change in the future, the amount of valuation allowances recorded relating to our deferred tax assets may be increased or decreased, which would result
in charges against or credits to our income tax provision.



Liquidity and Capital Resources



We generated $112.9 million of cash from operating activities in fiscal year 2009, compared to $79.0 million generated in fiscal year 2008. The increase in operating cash flows was primarily due to the favorable impact of decreased accounts
receivable and inventory balances, partially offset by decreased net earnings after adjustments for non-cash income and expenses and decreased inventory-related liabilities. The decrease in accounts receivable was primarily related to the timing of
collections and lower sales. Inventory balances have declined primarily due to reduced inventory purchases to align with current revenue levels.



We used $21.1 million of cash for investing activities in fiscal year 2009, which compares to $77.4 million used for investing activities in
fiscal year 2008. The decrease in cash used for investing activities was primarily the result of lower acquisition-related payments, and cash received for the surrender of a building sublease in fiscal year 2009. In October 2008, we entered into an
agreement with VMS under which we agreed to surrender to them the sublease for our facility in Palo Alto, California in exchange for $21.0 million in cash payments. We received a $5.0 million non-refundable first surrender payment under this
agreement in the first quarter of fiscal year 2009 and will receive the remaining $16.0 million when we fully surrender the facility in the third quarter of fiscal year 2010. In fiscal year 2008, the higher cash used for acquisition-related payments
consisted primarily of cash consideration for the acquisition of certain net assets of Analogix, Inc. (the Analogix Business) in November 2007 and of Oxford Diffraction in April 2008.



We generated $0.6 million of cash from financing activities in
fiscal year 2009, which compares to $94.6 million used for financing activities in fiscal year 2008. Cash used to repurchase and retire common stock was significantly lower in fiscal year 2009 (such expenditures were made in both periods as a result



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of an effort to reduce the number of outstanding common shares). Cash proceeds from the issuance of common stock were lower in fiscal year 2009 due to lower stock option exercise volume.



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 consolidated balance sheet. As of October 2, 2009, a total of $14.5 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.



As of October 2, 2009, we had an $18.8 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 October 2, 2009.



In connection with the Analogix Business acquisition, we have
accrued a portion of the purchase price that has been retained to secure the sellers indemnification obligations. As of October 2, 2009, we had retained an aggregate of $1.3 million, which will become payable (net of any indemnification
claims) during the first quarter of fiscal year 2010.



As of October 2, 2009, we had outstanding 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 operational targets.



The following table summarizes contingent consideration arrangements as of October 2, 2009:



|                           |  |                                   |   |  |                   |  |                            
|-------------------------- |  | --------------------------------- | - |  | ----------------- |  | ---------------------------
|Acquired Company/Business  |  | RemainingAmountAvailable(maximum) |   |  | MeasurementPeriod |  | Measurement Period End Date
|                           |  | (in millions                      | ) |  |                   |  |                            
|Oxford Diffraction Limited |  | $  7.0                            |   |  | 3 years           |  | April 2011                 
|Analogix Business          |  | 2.8                               |   |  | 3 years           |  | December 2010              
|Other                      |  | 0.3                               |   |  | 2 years           |  | July 2010                  
|                           |  |                                   |   |  |                   |  |                            
|Total                      |  | $10.1                             |   |  |                   |  |                            
|                           |  |                                   |   |  |                   |  |                            



We also
have an outstanding contingent consideration arrangement related to the purchase of certain assets. Remaining maximum contingent amounts under this arrangement were $2.6 million as of October 2, 2009.



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 13 of the Notes to the Consolidated Financial Statements).



We had no material cancelable or non-cancelable commitments for capital expenditures as of October 2, 2009. In the aggregate, we
currently anticipate that our capital expenditures will be approximately 2.0% to 3.0% of sales for fiscal year 2010.



In February 2008, our Board of Directors approved a stock repurchase program under which we are authorized to utilize up to $100 million to
repurchase shares of our common stock. This repurchase program is effective through December 31, 2009. As of October 2, 2009, we had remaining authorization to repurchase $37.5 million of our common stock under this repurchase program.
However, under the terms of the Merger Agreement with Agilent, the Company is generally prohibited from repurchasing any shares of its common stock without the prior consent of Agilent.



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Under the terms of the Merger Agreement, we have agreed to operate our business in the
ordinary course consistent with past practice, as well as to refrain from taking certain actions in the conduct of our business without Agilents prior written consent until the consummation of the acquisition. Actions that may require
Agilents consent include, but are not limited to, new indebtedness, capital expenditures, loans and investments, manufacturing and customer agreements, acquisitions, issuance of securities, and the repurchase of shares of the Companys
common stock.



Our liquidity is affected by many
other factors, including normal on-going operations of our business, the pending acquisition by Agilent and external economic conditions. Our liquidity has not been materially affected by the deterioration in the global financial markets or global
economic conditions in general. However, this deterioration could adversely impact the availability of credit to us as well as to our customers and suppliers.



We have no material exposure to market risk for changes in interest rates or investment valuations. Our outstanding debt carries a fixed
interest rate, and we invest our excess cash primarily in depository accounts and money market funds at various financial institutions. While we have not historically needed to borrow to support working capital or capital expenditure requirements,
there is no assurance that we might not need to borrow to support these requirements given global economic conditions and whether such financing would be available.



We nonetheless believe that cash generated from operations, together with our current cash and cash equivalents
balances and current borrowing capability, will be sufficient to satisfy our cash requirements for the next 12 months. There can be no assurance, however, that our business will continue to generate cash flows at current levels or that credit will
be available to us if and when needed. Future operating performance and our ability to obtain credit will be subject to future economic conditions and to financial, business and other factors, including the affect of the pendency of the acquisition
by Agilent.



Contractual Obligations and Other Commercial
Commitments



The following table summarizes
the amount and estimated timing of future cash expenditures relating to principal and interest 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 October 2, 2009:



|                                          |  |              |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |        |  |   |       
|----------------------------------------- |  | ------------ | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ---------- |  | ----- | ------ |  | - | ------ |  | - | ------
|                                          |  | Fiscal Years |        |     
|                                          |  | 2010         |        | 2011 |   | 2012   |  | 2013 |        | 2014 |   | Thereafter |  | Total
|(in thousands)                            |  |              |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |        |  |   |       
|Operating leases                          |  | $            | 6,817  |      | $ | 5,097  |  | $    | 2,958  |      | $ | 2,247      |  | $     | 1,713  |  | $ | 2,052  |  | $ | 20,884
|Long-term debt(including current portion) |  |              | 6,250  |      |   |       |  |      | 6,250  |      |   |           |  |       | 6,250  |  |   |       |  |   | 18,750
|Interest on long-term debt                |  |              | 1,152  |      |   | 838    |  |      | 733    |      |   | 419        |  |       | 314    |  |   |       |  |   | 3,456 
|Other long-term liabilities               |  |              |       |      |   | 5,115  |  |      | 3,121  |      |   | 2,612      |  |       | 2,582  |  |   | 27,825 |  |   | 41,255
|                                          |  |              |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |        |  |   |       
|Total                                     |  | $            | 14,219 |      | $ | 11,050 |  | $    | 13,062 |      | $ | 5,278      |  | $     | 10,859 |  | $ | 29,877 |  | $ | 84,345
|                                          |  |              |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |        |  |   |       



As of
October 2, 2009, 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 $10.1 million
related to acquisitions and $2.6 million related to the purchase of certain assets as discussed under Liquidity and Capital Resources above, the specific amounts of which are not currently determinable.



Recent Accounting Standards



In September 2006, the FASB issued new accounting standards for
fair value measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. In February 2008, the FASB delayed the effective date of the new accounting standard
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



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recurring basis (at least annually). We adopted the new accounting standard for fair value measurements effective October 4, 2008 with the exception of the application of the accounting
standard to nonrecurring nonfinancial assets and nonfinancial liabilities (see Note 3). We do not expect the adoption in the first quarter of fiscal year 2010 of the provisions deferred to have a material impact on our financial condition or results
of operations.



In December 2007, the FASB revised
the accounting standards for business combinations, which 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.It also requires that certain tax contingencies and adjustments to valuation allowances related to business combinations, which
previously were adjusted to goodwill, must be adjusted to income tax expense, regardless of the date of the original business combination. This revised accounting standard is effective for fiscal years beginning after December 15, 2008. We do
not expect our 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 the new guidance, the
application of its provisions will likely have a material impact on our results of operations, although we are not currently able to estimate the impact.



In April 2009, the FASB issued a new standard for business combinations that amends the accounting prescribed for assets and liabilities
arising from contingencies in business combinations. This accounting standard requires pre-acquisition contingencies to be recognized at fair value if fair value can be reasonably determined during the measurement period. If fair value cannot be
reasonably determined, the accounting standard requires measurement based on the recognition and measurement criteria for contingencies. This accounting standard is effective for fiscal years beginning after December 15, 2008. We do not expect
our 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, the application of its provisions
will likely have a material impact on our results of operations, although we are not currently able to estimate the impact.



In December 2007, the FASB issued a new accounting standard for non-controlling interests in consolidated financial statements, which
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. This accounting standard 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 in the first quarter of fiscal year 2010 to have a material impact on our financial condition or results of operations.



In April 2008, the FASB issued a new accounting standard for the
determination of the useful life of intangible assets, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. The intent of this new
accounting standard is to improve the consistency between the useful life of a recognized intangible asset under the accounting guidance for intangible assets and the period of expected cash flows used to measure the fair value of the asset under
the accounting guidance for business combinations. This accounting standard is effective for fiscal years beginning after December 15, 2008, and must be applied prospectively to intangible assets acquired after the effective date. Early
adoption is prohibited. Given that this applies to intangible assets acquired after the effective date, we do not expect our adoption in the first quarter of fiscal year 2010 to have a material impact on our financial condition or results of
operations.



In June 2008, the FASB issued a new
accounting standard for determining whether instruments granted in share-based transactions are participating securities. This new accounting standard states that



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unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities and shall be included in the computation of earnings per
share under the two-class method described in the guidance for earnings per share. This accounting standard is effective for fiscal years beginning after December 15, 2008, and interim periods within those years, on a retrospective basis. We do
not expect the adoption in the first quarter of fiscal year 2010 to have a material impact on our earnings per share.



In December 2008, the FASB issued additional disclosure requirements for plan assets of a defined benefit pension or other postretirement
plan. The required disclosures include a description of the Companys investment policies and strategies, the fair value of each major category of plan assets, the inputs and valuation techniques used to measure the fair value of plan assets,
the effect of fair value measurements using significant unobservable inputs on changes in plan assets and the significant concentrations of risk within plan assets. These additional disclosures are effective for fiscal years ending after
December 15, 2009. We do not expect the adoption of the new disclosure requirements in fiscal year 2010 to have a material impact on our financial condition or results of operations.



In October 2009, the FASB issued two new accounting standards that provide guidance for revenue recognition.
The first standard revises guidance for arrangements with multiple deliverables. This accounting standard replaces the term fair value in the revenue recognition allocation guidance with selling price and establishes a hierarchy for determining the
selling price of a deliverable. The selling price of each deliverable will first be based on vendor specific objective evidence (VSOE) if available, second on third-party evidence (TPE) if VSOE is not available and third on
estimated selling price if neither VSOE nor TPE are available. In addition, the residual method is no longer permitted as vendors are now required to allocate arrangement consideration using the relative selling price method. The second new
accounting standard excludes from the scope of software revenue recognition, software components contained in, and essential to the functionality of, tangible products. These new accounting standards require expanded qualitative and quantitative
disclosures and are effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. We do not expect the adoption of these accounting standards in the
first quarter of fiscal year 2011 to have a material impact on our financial condition or results of operations.



|Item 7A. | 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.



During the fiscal year ended October 2, 2009, we were not party to any foreign exchange forward contracts designated as cash flow hedges of forecasted transactions.



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Our foreign exchange forward contracts generally do not extend beyond one month in original
maturity. A summary of all foreign exchange forward contracts that were outstanding as of October 2, 2009 follows:



|                  |  |                   |  |                       
|----------------- |  | ----------------- |  | ----------------------
|                  |  | NotionalValueSold |  | NotionalValuePurchased
|(in thousands)    |  |                   |  |                       
|Australian dollar |  | $                |  | $  47,488             
|British pound     |  |                  |  | 13,106                
|Japanese yen      |  | 3,583             |  |                      
|Euro              |  | 3,073             |  |                      
|Canadian dollar   |  | 2,645             |  |                      
|Korean won        |  | 1,486             |  |                      
|Singapore dollar  |  | 834               |  |                      
|                  |  |                   |  |                       
|Total             |  | $  11,621         |  | $  60,594             
|                  |  |                   |  |                       



Interest Rate Risk.    We have no material exposure to market risk for changes in interest rates. We invest any excess cash primarily in depository accounts 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
October 2, 2009, 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 value. 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.



Debt Obligations.



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



|                                          |  |              |       |   |      |   |   |      |  |   |       |   |  |      |   |   |            |   |       |       |  |   |   |   |  |   |        |  
|----------------------------------------- |  | ------------ | ----- | - | ---- | - | - | ---- |  | - | ----- | - |  | ---- | - | - | ---------- | - | ----- | ----- |  | - | - | - |  | - | ------ | -
|                                          |  | Fiscal Years |       |   |      |  
|                                          |  | 2010         |       |   | 2011 |   |   | 2012 |  |   | 2013  |   |  | 2014 |   |   | Thereafter |   |       | Total | 
|(in thousands)                            |  |              |       |   |      |   |   |      |  |   |       |   |  |      |   |   |            |   |       |       | 
|Long-term debt(including current portion) |  | $            | 6,250 |   |      | $ |  |      |  | $ | 6,250 |   |  | $    |  |   |            | $ | 6,250 |       |  | $ |  |   |  | $ | 18,750 |  
|Average interest rate                     |  |              | 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 FASB Accounting Standard Codification (ASC)
715-30, Defined Benefit Plans-Pension, 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 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 and expectations relative to relevant 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-



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term interest rates in the countries where the related plans are effective. As of October 2, 2009, the estimated long-term rate of return on our defined benefit pension plan assets ranged
from 0.3% to 6.5% (weighted-average of 5.1%), and the assumed discount rate for our defined benefit pension plan obligations ranged from 1.8% to 5.6% (weighted-average of 5.4%).



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 $1.4 million in fiscal year 2009, $1.5 million in fiscal year 2008 and $2.3 million in fiscal year 2007, and expect our net periodic pension cost to be approximately $1.2 million
in fiscal year 2010. A 100 basis point decrease in the weighted-average estimated return on plan assets or assumed discount rate would increase our net periodic pension cost for fiscal year 2010 by $0.4 million or $0.5 million, respectively. As of
October 2, 2009, our projected benefit obligation relating to defined benefit pension plans was $50.6 million. A 100 basis point decrease in the weighted-average estimated discount rate would increase this obligation by $10.3 million.



During fiscal year 2009, the Company ceased
future benefit accruals to a defined benefit pension plan in the United Kingdom. In connection with this action, the Company recorded a curtailment loss of $0.1 million during fiscal year 2009.



|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------



The information required by this Item is submitted as a separate section to this Report. See Item 15Exhibits, Financial
Statement Schedules.



|Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------



None.



|Item 9A. | 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 Annual Report on Form 10-K (October 2, 2009), our disclosure controls and procedures were effective.



Inherent Limitations on the Effectiveness of Controls.    Our management, including
the Chief Executive Officer and Chief Financial Officer, do 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, 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.



Managements annual report on internal
control over financial reporting.    Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Our
management (including the Chief Executive Officer and the Chief Financial Officer) evaluated the effectiveness of our internal control over financial reporting as of October 2, 2009 based on the framework defined in Internal Control 
Integrated



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Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation under this framework, our management concluded that our internal control
over financial reporting was effective as of October 2, 2009.



Attestation report of independent registered public accounting firm.    PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited the
consolidated financial statements included in this Annual Report on Form 10-K, has also audited the effectiveness of our internal control over financial reporting as of October 2, 2009, as stated in their attestation report included on page F-2
of this Annual Report on Form 10-K.



Changes in
internal control over financial reporting.There was no change in our internal control over financial reporting that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.



|Item 9B. | Other Information
|-------- | -----------------



None.



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PART III



|Item 10. | Directors, Executive Officers and Corporate Governance
|-------- | ------------------------------------------------------



The information required by this Item with respect to our executive officers is incorporated herein by reference from the corresponding
information contained in Item 1 of Part I of this Report under the heading Executive Officers.



The information required by this Item with respect to our directors and nominees for director is incorporated herein by reference from the
corresponding information provided under the heading Proposal OneElection of Directors in our Proxy Statement (or, if our Proxy Statement is not filed with the SEC on or prior to January 30, 2010, will be set forth in an amendment
to this Report to be filed on or prior to January 30, 2010).



The information required by this Item with respect to our audit committee financial expert is incorporated herein by reference from the corresponding information provided under the heading Meetings and
Committees of the BoardAudit Committee in our Proxy Statement (or, if our Proxy Statement is not filed with the SEC on or prior to January 30, 2010, will be set forth in an amendment to this Report to be filed on or prior to
January 30, 2010).



The information required
by Item 405 of Regulation S-K is incorporated herein by reference from the corresponding information provided under the heading Section 16(a) Beneficial Ownership Reporting Compliance in our Proxy Statement (or, if our Proxy
Statement is not filed with the SEC on or prior to January 30, 2010, will be set forth in an amendment to this Report to be filed on or prior to January 30, 2010).



Our Corporate Governance Guidelines and the charters of the Audit Committee, Compensation Committee, Nominating
and Governance Committee and Stock Committee of our Board of Directors are available at our main Internet website, at http://www.varianinc.com, and can be accessed by clicking on Investors and then on Corporate Governance.
Upon request, we will provide to any person, at no charge, a copy of any of these materials. Such a request must be made in writing to our Secretary at Varian, Inc., 3120 Hansen Way, Palo Alto, CA 94304-1030.



We have adopted a code of ethics that applies to our Chief
Executive Officer, Chief Financial Officer and Controller. This code of ethics, which is included in our Code of Business Conduct and Ethics that applies to all officers, directors and employees, is posted on our website. The Code of Business
Conduct and Ethics may be found as follows:



| | 1. |  | From our main website, click on Investors.
| | -- |  | --------------------------------------------



| | 2. |  | Next, click on Corporate Governance.
| | -- |  | --------------------------------------



| | 3. |  | Finally, click on Code of Business Conduct and Ethics.
| | -- |  | --------------------------------------------------------



We intend to satisfy the disclosure requirement under Item 10 of Form 8-K, regarding any amendment to, or
waiver from, a provision of this Code of Business Conduct and Ethics with respect to directors and executive officers, by posting such information on our website, at the address and location specified above.



|Item 11. | Executive Compensation
|-------- | ----------------------



The information required by this Item is incorporated herein by reference from the corresponding information provided under the headings
Executive Compensation Information and Compensation Committee Report in our Proxy Statement (or, if our Proxy Statement is not filed with the SEC on or prior to January 30, 2010, will be set forth in an amendment to this Report to
be filed on or prior to January 30, 2010).



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|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- | ----------------------------------------------------------------------------------------------



The information required by this Item is incorporated herein by
reference from the corresponding information provided under the headings Equity Compensation Plan InformationandStock Ownership of Certain Beneficial Owners in our Proxy Statement (or, if our Proxy Statement is not filed with the SEC
on or prior to January 30, 2010, will be set forth in an amendment to this Report to be filed on or prior to January 30, 2010).



|Item 13. | Certain Relationships and Related Transactions, and Director Independence
|-------- | -------------------------------------------------------------------------



The information required by this Item is incorporated herein by reference from the corresponding information
provided under the headings Board Structure and Nominees and Related Party Transactions in our Proxy Statement (or, if our Proxy Statement is not filed with the SEC on or prior to January 30, 2010, will be set forth in an
amendment to this Report to be filed on or prior to January 30, 2010).



|Item 14. | Principal Accounting Fees and Services
|-------- | --------------------------------------



The information required by this Item with respect to our principal accounting firm is incorporated herein by reference from the
corresponding information provided under the heading Proposal TwoRatification of Appointment of Independent Registered Public Accounting Firmin our Proxy Statement (or, if our Proxy Statement is not filed with the SEC on or prior to
January 30, 2010, will be set forth in an amendment to this Report to be filed on or prior to January 30, 2010).



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PART IV



|Item 15. | Exhibits, Financial Statement Schedules
|-------- | ---------------------------------------



| | (a) |  | (1)  Consolidated Financial Statements: (see Index on page F-1 of this Report)
| | --- |  | ------------------------------------------------------------------------------



| |  |  | Report of Independent Registered Public Accounting Firm
| | - |  | -------------------------------------------------------



| |  |  | Consolidated Statement of Earnings for fiscal years 2009, 2008 and 2007
| | - |  | -----------------------------------------------------------------------



| |  |  | Consolidated Balance Sheet at fiscal year end 2009 and 2008
| | - |  | -----------------------------------------------------------



| |  |  | Consolidated Statement of Stockholders Equity and Comprehensive Income for fiscal years 2009, 2008 and 2007
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | Consolidated Statement of Cash Flows for fiscal years 2009, 2008 and 2007
| | - |  | -------------------------------------------------------------------------



| |  |  | Notes to the Consolidated Financial Statements
| | - |  | ----------------------------------------------



| | (2) |  | Consolidated Financial Statement Schedule: (see Index on page F-1 of this Report)
| | --- |  | ---------------------------------------------------------------------------------



The following Financial Statement Schedule for fiscal years 2009, 2008 and 2007 is filed as a part of this
Report and should be read in conjunction with our Consolidated Financial Statements.



|         |  |                                   
|-------- |  | ----------------------------------
|Schedule |  |                                   
|II       |  | Valuation and Qualifying Accounts.



All other
required schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the Consolidated Financial Statements or the Notes thereto.



| | (3) |  | Exhibits
| | --- |  | --------



|            |  |                                                                                                                                                                            |  |                           |  |                  |  |                  |  |              
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ---------------- |  | ---------------- |  | -------------
|            |  |                                                                                                                                                                            |  | Incorporated by Reference |  |                 
|Exhibit No. |  | Exhibit Description                                                                                                                                                        |  | Form                      |  | Date Filed       |  | ExhibitNumber(s) |  | FiledHerewith
|2.1         |  | Amended and Restated Distribution Agreement, dated as of January 14, 1999, among Varian Associates, Inc., Varian Semiconductor Equipment Associates, Inc. and Varian, Inc. |  | 10-Q                      |  | May 17, 1999     |  | 2.1              |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|2.2         |  | Agreement and Plan of Merger dated as of July 26, 2009, by and among Agilent Technologies, Inc., Varian, Inc. and Cobalt Acquisition Corp.                                 |  | 8-K                       |  | July 27, 2009    |  | 2.1              |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|3.1         |  | Restated Certificate of Incorporation of Varian, Inc.                                                                                                                      |  | 10-Q                      |  | May 17, 1999     |  | 3.1, 3.2         |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|3.2         |  | Amended and Restated By-Laws of Varian, Inc.                                                                                                                               |  | 8-K                       |  | February 9, 2009 |  | 3.1              |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|4.1         |  | Specimen Common Stock Certificate.                                                                                                                                         |  | 10-Q                      |  | May 12, 2009     |  | 4.1              |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|10.1        |  | Intellectual Property Agreement, dated as of April 2, 1999, among Varian Associates, Inc., Varian Semiconductor Equipment Associates, Inc. and Varian, Inc.                |  | 10-Q                      |  | May 17, 1999     |  | 10.2             |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|10.2        |  | Varian, Inc. Amended and Restated Note Purchase and Private Shelf Agreement and Assumption dated as of April 2, 1999.                                                      |  | 10-Q                      |  | May 17, 1999     |  | 10.6             |  |              



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|            |  |                                                                                                                                                                 |  |                           |  |                   |  |                  |  |              
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ----------------- |  | ---------------- |  | -------------
|            |  |                                                                                                                                                                 |  | Incorporated by Reference |  |                  
|Exhibit No. |  | Exhibit Description                                                                                                                                             |  | Form                      |  | Date Filed        |  | ExhibitNumber(s) |  | FiledHerewith
|10.3        |  | Asset Purchase Agreement, dated as of February 4, 2005, between Varian, Inc. and Jabil Circuit, Inc.                                                            |  | 8-K                       |  | March 17, 2005    |  | 2.1              |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.4        |  | Form of Indemnity Agreement between Varian, Inc. and its Directors and Officers.                                                                                |  | 10-K                      |  | December 9, 2004  |  | 10.5             |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.5*       |  | Varian, Inc. Omnibus Stock Plan, as amended and restated as of November 8, 2007.                                                                                |  | 8-K                       |  | February 1, 2008  |  | 10.1             |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.6*       |  | Varian, Inc. Management Incentive Plan, as amended and restated as of November 8, 2007.                                                                         |  | 8-K                       |  | November 13, 2007 |  | 10.9             |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.7*       |  | Varian, Inc. Supplemental Retirement Plan, as amended and restated as of November 13, 2008.                                                                     |  | 10-K                      |  | November 26, 2008 |  | 10.7             |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.8*       |  | Varian, Inc. Employee Stock Purchase Plan.                                                                                                                      |  | 10-Q                      |  | May 10, 2000      |  | 10.1             |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.9*       |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Executive Officers (used beginning April 2, 1999 and prior to November 10, 2003).          |  | 10-K                      |  | December 7, 2006  |  | 10.9             |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.10*      |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Executive Officers (used beginning November 10, 2003 and prior to November 11, 2004).      |  | 10-K                      |  | December 7, 2006  |  | 10.10            |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.11*      |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Executive Officers (used beginning November 11, 2004 and prior to December 4, 2006).       |  | 10-K                      |  | December 7, 2006  |  | 10.11            |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.12*      |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Executive Officers (used beginning December 4, 2006 and prior to November 8, 2007).        |  | 10-K                      |  | December 7, 2006  |  | 10.12            |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.13*      |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Executive Officers (used beginning November 8, 2007).                                      |  | 8-K                       |  | November 13, 2007 |  | 10.3             |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.14*      |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Non-Employee Directors.                                                                    |  | 10-K                      |  | December 9, 2004  |  | 10.12            |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.15*      |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Non-Employee DirectorsFor New Director/Chairman Grants (used beginning February 1,
2008). |  | 10-Q                      |  | May 6, 2008       |  | 10.29            |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.16*      |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Non-Employee DirectorsFor Annual Director Grants (used beginning February 1, 2008).       |  | 10-Q                      |  | May 6, 2008       |  | 10.30            |  |              



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|            |  |                                                                                                                                                 |  |                           |  |                    |  |                  |  |              
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ------------------ |  | ---------------- |  | -------------
|            |  |                                                                                                                                                 |  | Incorporated by Reference |  |                   
|Exhibit No. |  | Exhibit Description                                                                                                                             |  | Form                      |  | Date Filed         |  | ExhibitNumber(s) |  | FiledHerewith
|10.17*      |  | Form of Restricted Stock Agreement between Varian, Inc. and Executive Officers (used prior to December 4, 2006).                                |  | 10-K                      |  | December 7, 2006   |  | 10.14            |  |              
|            |  |                                                                                                                                                 |  |                           | 
|10.18*      |  | Form of Restricted Stock Agreement between Varian, Inc. and Executive Officers (used beginning December 4, 2006 and prior to November 8, 2007). |  | 10-K                      |  | December 7, 2006   |  | 10.15            |  |              
|            |  |                                                                                                                                                 |  |                           | 
|10.19*      |  | Form of Restricted Stock Agreement between Varian, Inc. and Executive Officers (used beginning November 8, 2007).                               |  | 10-Q                      |  | February 5, 2008   |  | 10.17            |  |              
|            |  |                                                                                                                                                 |  |                           | 
|10.20*      |  | Form of Restricted Stock Agreement between Varian, Inc. and Certain Executive Officers (used beginning March 13, 2009).                         |  | 8-K                       |  | March 17, 2009     |  | 10.1             |  |              
|            |  |                                                                                                                                                 |  |                           | 
|10.21*      |  | Form of Restricted Stock Agreement between Varian, Inc. and G. Edward McClammy (used beginning March 13, 2009).                                 |  | 8-K                       |  | March 17, 2009     |  | 10.2             |  |              
|            |  |                                                                                                                                                 |  |                           | 
|10.22*      |  | Form of Performance Share Agreement between Varian, Inc. and Executive Officers (used beginning November 8, 2007).                              |  | 8-K                       |  | November 13, 2007  |  | 10.1             |  |              
|            |  |                                                                                                                                                 |  |                           | 
|10.23*      |  | Form of Performance Share Agreement between Varian, Inc. and Executive Officers (used beginning October 6, 2008).                               |  | 8-K                       |  | September 15, 2008 |  | 10.2             |  |              
|            |  |                                                                                                                                                 |  |                           | 
|10.24*      |  | Form of Stock Unit Agreement between Varian, Inc. and Non-Employee Directors.                                                                   |  | 10-Q                      |  | February 8, 2005   |  | 10.23            |  |              
|            |  |                                                                                                                                                 |  |                           | 
|10.25*      |  | Change in Control Agreement, as amended and restated as of November 8, 2007, between Varian, Inc. and Garry W. Rogerson.                        |  | 8-K                       |  | November 13, 2007  |  | 10.4             |  |              
|            |  |                                                                                                                                                 |  |                           | 
|10.26*      |  | Amendment to Change in Control Agreement, dated as of September 8, 2009, between Varian, Inc. and Garry W. Rogerson.                            |  |                           |  |                    |  |                  |  | X            
|            |  |                                                                                                                                                 |  |                           | 
|10.27*      |  | Change in Control Agreement, as amended and restated as of November 8, 2007, between Varian, Inc. and G. Edward McClammy.                       |  | 8-K                       |  | November 13, 2007  |  | 10.5             |  |              
|            |  |                                                                                                                                                 |  |                           | 
|10.28*      |  | Amendment to Change in Control Agreement, dated as of September 8, 2009, between Varian, Inc. and G. Edward McClammy.                           |  |                           |  |                    |  |                  |  | X            
|            |  |                                                                                                                                                 |  |                           | 
|10.29*      |  | Change in Control Agreement, as amended and restated as of November 8, 2007, between Varian, Inc. and Martin ODonoghue.                        |  | 8-K                       |  | November 13, 2007  |  | 10.6             |  |              
|            |  |                                                                                                                                                 |  |                           | 
|10.30*      |  | Amendment to Change in Control Agreement, dated as of September 8, 2009, between Varian, Inc. and Martin ODonoghue.                            |  |                           |  |                    |  |                  |  | X            



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|            |  |                                                                                                                        |  |                           |  |                    |  |                  |  |              
|----------- |  | ---------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ------------------ |  | ---------------- |  | -------------
|            |  |                                                                                                                        |  | Incorporated by Reference |  |                   
|Exhibit No. |  | Exhibit Description                                                                                                    |  | Form                      |  | Date Filed         |  | ExhibitNumber(s) |  | FiledHerewith
|10.31*      |  | Change in Control Agreement, as amended and restated as of November 8, 2007, between Varian, Inc. and Sergio Piras.    |  | 8-K                       |  | November 13, 2007  |  | 10.7             |  |              
|            |  |                                                                                                                        |  |                           | 
|10.32*      |  | Amendment to Change in Control Agreement, dated as of September 18, 2009, between Varian, Inc. and Sergio Piras.       |  |                           |  |                    |  |                  |  | X            
|            |  |                                                                                                                        |  |                           | 
|10.33*      |  | Change in Control Agreement, as amended and restated as of November 8, 2007, between Varian, Inc. and Arthur W. Homan. |  | 8-K                       |  | November 13, 2007  |  | 10.8             |  |              
|            |  |                                                                                                                        |  |                           | 
|10.34*      |  | Amendment to Change in Control Agreement, dated as of September 8, 2009, between Varian, Inc. and Arthur W. Homan.     |  |                           |  |                    |  |                  |  | X            
|            |  |                                                                                                                        |  |                           | 
|10.35*      |  | Change in Control Agreement, as amended and restated as of November 8, 2007, between Varian, Inc. and Sean M. Wirtjes. |  | 10-K                      |  | November 21, 2007  |  | 10.25            |  |              
|            |  |                                                                                                                        |  |                           | 
|10.36*      |  | Amendment to Change in Control Agreement, dated as of September 14, 2009, between Varian, Inc. and Sean M. Wirtjes.    |  |                           |  |                    |  |                  |  | X            
|            |  |                                                                                                                        |  |                           | 
|10.37*      |  | Change in Control Agreement, dated as of September 15, 2008, between Varian, Inc. and Robert W. Dean II.               |  | 8-K                       |  | September 15, 2008 |  | 10.1             |  |              
|            |  |                                                                                                                        |  |                           | 
|10.38*      |  | Amendment to Change in Control Agreement, dated as of September 8, 2009, between Varian, Inc. and Robert W. Dean II.   |  |                           |  |                    |  |                  |  | X            
|            |  |                                                                                                                        |  |                           | 
|10.39*      |  | Change in Control Agreement, dated as of October 6, 2008, between Varian, Inc. and Gordon B. Tredger.                  |  | 10-K                      |  | November 26, 2008  |  | 10.30            |  |              
|            |  |                                                                                                                        |  |                           | 
|10.40*      |  | Amendment to Change in Control Agreement, dated as of September 8, 2009, between Varian, Inc. and Gordon B. Tredger.   |  |                           |  |                    |  |                  |  | X            
|            |  |                                                                                                                        |  |                           | 
|10.41*      |  | Description of Compensatory Arrangements between Varian, Inc. and Non-Employee Directors.                              |  | 10-Q                      |  | February 10, 2009  |  | 10.31            |  |              
|            |  |                                                                                                                        |  |                           | 
|10.42*      |  | Description of Certain Compensatory Arrangements between Varian, Inc. and Executive Officers.                          |  | 10-K                      |  | November 21, 2007  |  | 10.27            |  |              
|            |  |                                                                                                                        |  |                           | 
|10.43*      |  | Description of Certain Compensatory Arrangements between Varian S.p.A. and Sergio Piras.                               |  | 10-Q                      |  | February 5, 2008   |  | 10.28            |  |              
|            |  |                                                                                                                        |  |                           | 
|18.1        |  | Preferability letter regarding inventory accounting principle change.                                                  |  | 10-K                      |  | December 7, 2000   |  | 18.1             |  |              
|            |  |                                                                                                                        |  |                           | 
|21          |  | Subsidiaries of the Registrant.                                                                                        |  |                           |  |                    |  |                  |  | X            
|            |  |                                                                                                                        |  |                           | 
|23          |  | Consent of Independent Registered Public Accounting Firm.                                                              |  |                           |  |                    |  |                  |  | X            



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|            |  |                                                                                                     |  |                           |  |            |  |                  |  |              
|----------- |  | --------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ---------- |  | ---------------- |  | -------------
|            |  |                                                                                                     |  | Incorporated by Reference |  |           
|Exhibit No. |  | Exhibit Description                                                                                 |  | Form                      |  | Date Filed |  | ExhibitNumber(s) |  | FiledHerewith
|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. |  |                           |  |            |  |                  |  | X            
|            |  |                                                                                                     |  |                           | 
|32.2        |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |  |                           |  |            |  |                  |  | X            



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



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##### Table of Contents

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)
|                         |  |                          
|Dated: November 25, 2009 |  | By:                       |  | /s/ G. EDWARD MCCLAMMY
G. Edward McClammy Senior Vice President and Chief Financial Officer



Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.



|                                                  |  |                                                                                 |  |                  
|------------------------------------------------- |  | ------------------------------------------------------------------------------- |  | -----------------
|Signature                                         |  | Title                                                                           |  | Date             
|                                                  |  |                                                                                
|/s/ GARRY W. ROGERSON Garry W. Rogerson           |  | Chairman and Chief Executive Officer (Principal Executive Officer)              |  | November 25, 2009
|                                                  |  |                                                                                
|/s/ G. EDWARD MCCLAMMY G. Edward McClammy         |  | Senior Vice President and Chief Financial Officer (Principal Financial Officer) |  | November 25, 2009
|                                                  |  |                                                                                
|/s/ ROBERT W. DEAN II Robert W. Dean II           |  | Controller (Principal
Accounting Officer)                                       |  | November 25, 2009
|                                                  |  |                                                                                
|/s/ RICHARD U. DE SCHUTTER Richard U. De Schutter |  | Director                                                                        |  | November 25, 2009
|                                                  |  |                                                                                
|/s/ JAMES T. GLOVER James T. Glover               |  | Director                                                                        |  | November 25, 2009
|                                                  |  |                                                                                
|/s/ JOHN G. MCDONALD John G. McDonald             |  | Director                                                                        |  | November 25, 2009
|                                                  |  |                                                                                
|/s/ WAYNE R. MOON Wayne R. Moon                   |  | Director                                                                        |  | November 25, 2009
|                                                  |  |                                                                                
|/s/ ELIZABETH E. TALLETT Elizabeth E. Tallett     |  | Director                                                                        |  | November 25, 2009



50



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VARIAN, INC. AND SUBSIDIARY COMPANIES



ANNUAL REPORT ON FORM 10-K



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE



The following Consolidated Financial Statements
of the Registrant and its subsidiaries are required to be included in Item 8:



|                                                                                                             |  |     
|------------------------------------------------------------------------------------------------------------ |  | ----
|                                                                                                             |  | Page
|Report of Independent Registered Public Accounting Firm                                                      |  | F-2 
|                                                                                                             | 
|Consolidated Statement of Earnings for fiscal years 2009, 2008 and 2007                                      |  | F-3 
|                                                                                                             | 
|Consolidated Balance Sheet at fiscal year end 2009 and 2008                                                  |  | F-4 
|                                                                                                             | 
|Consolidated Statement of Stockholders Equity and Comprehensive Income for fiscal years 2009, 2008 and 2007 |  | F-5 
|                                                                                                             | 
|Consolidated Statement of Cash Flows for fiscal years 2009, 2008 and 2007                                    |  | F-6 
|                                                                                                             | 
|Notes to the Consolidated Financial Statements                                                               |  | F-7 



The
following Consolidated Financial Statement Schedule of the Registrant and its subsidiaries for fiscal years 2009, 2008 and 2007 is filed as a part of this Report as required to be included in Item 15(a) and should be read in conjunction with
the Consolidated Financial Statements of the Registrant and its subsidiaries:



|         |  |                                   |  |     
|-------- |  | --------------------------------- |  | ----
|Schedule |  |                                   |  | Page
|II       |  | Valuation and Qualifying Accounts |  | F-39



All other
required schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the Consolidated Financial Statements or the Notes thereto.



F-1



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VARIAN, INC. AND SUBSIDIARY COMPANIES



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders of Varian, Inc.:



In our opinion, the consolidated financial
statements listed under Item 15(a)(1), present fairly, in all material respects, the financial position of Varian, Inc. and its subsidiaries at October 2, 2009 and October 3, 2008, and the results of their operations and their cash
flows for each of the three years in the period ended October 2, 2009 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed under
Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of October 2, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
The Companys management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Companys internal control over financial reporting based on our integrated
audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.



As discussed in Note 12 to the consolidated financial
statements, effective September 28, 2007, the Company adopted ASC 715 and changed its method of accounting for defined benefit plans.



As discussed in Note 15 to the consolidated financial statements, effective September 29, 2007, the Company adopted ASC 740 and changed its
method of accounting for uncertainty in income taxes.



A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.



Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



|                              
|------------------------------
|/s/ PRICEWATERHOUSECOOPERS LLP
|PricewaterhouseCoopers LLP    



San Jose, California

November 25, 2009



F-2



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VARIAN, INC. AND SUBSIDIARY COMPANIES



CONSOLIDATED STATEMENT OF EARNINGS

(In thousands, except per share amounts)



|                                                         |  |                   |         |   |                |   |           |                   |  |   |         |  
|-------------------------------------------------------- |  | ----------------- | ------- | - | -------------- | - | --------- | ----------------- |  | - | ------- | -
|                                                         |  | Fiscal Year Ended |        
|                                                         |  | October 2,2009    |         |   | October 3,2008 |   |           | September 28,2007 | 
|Sales                                                    |  |                   |         |   |                |   |           |                   |  |   |         |  
|Products                                                 |  | $                 | 676,129 |   |                | $ | 869,556   |                   |  | $ | 796,983 |  
|Services                                                 |  |                   | 130,615 |   |                |   | 142,959   |                   |  |   | 123,615 |  
|                                                         |  |                   |         |   |                |   |           |                   |  |   |         |  
|Total sales                                              |  |                   | 806,744 |   |                |   | 1,012,515 |                   |  |   | 920,598 |  
|                                                         |  |                   |         |   |                |   |           |                   |  |   |         |  
|Cost of sales                                            |  |                   |         |   |                |   |           |                   |  |   |         |  
|Products                                                 |  |                   | 377,941 |   |                |   | 476,555   |                   |  |   | 435,397 |  
|Services                                                 |  |                   | 74,113  |   |                |   | 83,506    |                   |  |   | 69,724  |  
|                                                         |  |                   |         |   |                |   |           |                   |  |   |         |  
|Total cost of sales                                      |  |                   | 452,054 |   |                |   | 560,061   |                   |  |   | 505,121 |  
|                                                         |  |                   |         |   |                |   |           |                   |  |   |         |  
|Gross profit                                             |  |                   | 354,690 |   |                |   | 452,454   |                   |  |   | 415,477 |  
|                                                         |  |                   |        
|Operating expenses                                       |  |                   |         |   |                |   |           |                   |  |   |         |  
|Selling, general and administrative                      |  |                   | 239,282 |   |                |   | 277,478   |                   |  |   | 257,754 |  
|Research and development                                 |  |                   | 56,425  |   |                |   | 71,810    |                   |  |   | 65,169  |  
|Purchased in-process research and development            |  |                   |        |   |                |   | 1,703     |                   |  |   |        |  
|                                                         |  |                   |         |   |                |   |           |                   |  |   |         |  
|Total operating expenses                                 |  |                   | 295,707 |   |                |   | 350,991   |                   |  |   | 322,923 |  
|                                                         |  |                   |         |   |                |   |           |                   |  |   |         |  
|Operating earnings                                       |  |                   | 58,983  |   |                |   | 101,463   |                   |  |   | 92,554  |  
|Impairment of private company equity investment (Note 2) |  |                   |        |   |                |   | (3,018    | )                 |  |   |        |  
|Interest income                                          |  |                   | 1,650   |   |                |   | 5,930     |                   |  |   | 6,152   |  
|Interest expense                                         |  |                   | (1,486  | ) |                |   | (1,656    | )                 |  |   | (1,878  | )
|                                                         |  |                   |         |   |                |   |           |                   |  |   |         |  
|Earnings before income taxes                             |  |                   | 59,147  |   |                |   | 102,719   |                   |  |   | 96,828  |  
|Income tax expense                                       |  |                   | 20,527  |   |                |   | 37,605    |                   |  |   | 33,212  |  
|                                                         |  |                   |         |   |                |   |           |                   |  |   |         |  
|Net earnings                                             |  | $                 | 38,620  |   |                | $ | 65,114    |                   |  | $ | 63,616  |  
|                                                         |  |                   |         |   |                |   |           |                   |  |   |         |  
|Net earnings per share:                                  |  |                   |         |   |                |   |           |                   |  |   |         |  
|Basic                                                    |  | $                 | 1.34    |   |                | $ | 2.20      |                   |  | $ | 2.09    |  
|                                                         |  |                   |         |   |                |   |           |                   |  |   |         |  
|Diluted                                                  |  | $                 | 1.34    |   |                | $ | 2.17      |                   |  | $ | 2.05    |  
|                                                         |  |                   |         |   |                |   |           |                   |  |   |         |  
|Shares used in per share calculation:                    |  |                   |         |   |                |   |           |                   |  |   |         |  
|Basic                                                    |  |                   | 28,785  |   |                |   | 29,620    |                   |  |   | 30,457  |  
|                                                         |  |                   |         |   |                |   |           |                   |  |   |         |  
|Diluted                                                  |  |                   | 28,936  |   |                |   | 30,072    |                   |  |   | 31,004  |  
|                                                         |  |                   |         |   |                |   |           |                   |  |   |         |  



See
accompanying Notes to the Consolidated Financial Statements.



F-3



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



CONSOLIDATED BALANCE SHEET

(In thousands, except par value amounts)



|                                                                                                                                                     |  |                |         |                |   |        
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | -------------- | - | -------
|                                                                                                                                                     |  | October 2,2009 |         | October 3,2008
|ASSETS                                                                                                                                               |  |                |         |                |   |        
|                                                                                                                                                     |  |               
|Current assets                                                                                                                                       |  |                |         |                |   |        
|Cash and cash equivalents                                                                                                                            |  | $              | 209,348 |                | $ | 103,895
|Accounts receivable, net                                                                                                                             |  |                | 159,958 |                |   | 199,420
|Inventories                                                                                                                                          |  |                | 136,704 |                |   | 161,039
|Deferred taxes                                                                                                                                       |  |                | 38,349  |                |   | 32,287 
|Prepaid expenses and other current assets                                                                                                            |  |                | 15,488  |                |   | 15,663 
|                                                                                                                                                     |  |                |         |                |   |        
|Total current assets                                                                                                                                 |  |                | 559,847 |                |   | 512,304
|Property, plant and equipment, net                                                                                                                   |  |                | 114,363 |                |   | 110,343
|Goodwill                                                                                                                                             |  |                | 216,223 |                |   | 218,208
|Intangible assets, net                                                                                                                               |  |                | 28,334  |                |   | 36,972 
|Other assets                                                                                                                                         |  |                | 25,420  |                |   | 24,089 
|                                                                                                                                                     |  |                |         |                |   |        
|Total assets                                                                                                                                         |  | $              | 944,187 |                | $ | 901,916
|                                                                                                                                                     |  |                |         |                |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                 |  |                |         |                |   |        
|                                                                                                                                                     |  |               
|Current liabilities                                                                                                                                  |  |                |         |                |   |        
|Current portion of long-term debt                                                                                                                    |  | $              | 6,250   |                | $ |       
|Accounts payable                                                                                                                                     |  |                | 63,368  |                |   | 70,923 
|Deferred profit                                                                                                                                      |  |                | 8,935   |                |   | 10,957 
|Accrued liabilities                                                                                                                                  |  |                | 171,103 |                |   | 167,173
|                                                                                                                                                     |  |                |         |                |   |        
|Total current liabilities                                                                                                                            |  |                | 249,656 |                |   | 249,053
|Long-term debt                                                                                                                                       |  |                | 12,500  |                |   | 18,750 
|Deferred taxes                                                                                                                                       |  |                | 2,505   |                |   | 4,341  
|Other liabilities                                                                                                                                    |  |                | 41,255  |                |   | 43,431 
|                                                                                                                                                     |  |                |         |                |   |        
|Total liabilities                                                                                                                                    |  |                | 305,916 |                |   | 315,575
|                                                                                                                                                     |  |                |         |                |   |        
|Commitments and contingencies (Notes 1, 5, 6, 8, 9, 10, 11, 12, 13 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28,971 shares at October 2,
2009 and 28,917 shares at October 3, 2008 |  |                | 368,324 |                |   | 356,192
|Retained earnings                                                                                                                                    |  |                | 220,068 |                |   | 184,678
|Accumulated other comprehensive income                                                                                                               |  |                | 49,879  |                |   | 45,471 
|                                                                                                                                                     |  |                |         |                |   |        
|Total stockholders equity                                                                                                                           |  |                | 638,271 |                |   | 586,341
|                                                                                                                                                     |  |                |         |                |   |        
|Total liabilities and stockholders equity                                                                                                           |  | $              | 944,187 |                | $ | 901,916
|                                                                                                                                                     |  |                |         |                |   |        



See
accompanying Notes to the Consolidated Financial Statements.



F-4



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

AND COMPREHENSIVE INCOME

(In thousands)



|                                                                                                         |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  |   |         |  
|-------------------------------------------------------------------------------------------------------- | ------ | ------------ | - | ------ | ---------------- | ------- | - | -------------------- | - | ------- | ----------------------------------- |  | - | -------- | - |  | ------------------------ | ------- | - |  | - | -------- | - |  | - | ------- | -
|                                                                                                         |        |              |   |        | RetainedEarnings |         |   | TreasuryStock atCost |   |         | AccumulatedOtherComprehensiveIncome |  |   | Total    |   |  | TotalComprehensiveIncome |        
|                                                                                                         |        | Common Stock |   |        |                  |         |   |                     
|                                                                                                         | Shares |              |   | Amount |                  |         |   |                      |   |        
|Balance, September 29, 2006                                                                              |        | 30,870       |   |        | $                | 319,090 |   |                      | $ | 204,182 |                                     |  |   |         |   |  | $                        | 28,768  |   |  | $ | 552,040  |   |  |   |         |  
|Net earnings                                                                                             |        |             |   |        |                  |        |   |                      |   | 63,616  |                                     |  |   |         |   |  |                          |        |   |  |   | 63,616   |   |  | $ | 63,616  |  
|Other comprehensive income:                                                                              |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  |   |         |  
|Currency translation adjustment, net of tax of ($5,689)                                                  |        |             |   |        |                  |        |   |                      |   |        |                                     |  |   |         |   |  |                          | 38,264  |   |  |   | 38,264   |   |  |   | 38,264  |  
|Minimum pension liability, net of tax of ($1,198)                                                        |        |             |   |        |                  |        |   |                      |   |        |                                     |  |   |         |   |  |                          | 2,504   |   |  |   | 2,504    |   |  |   | 2,504   |  
|                                                                                                         |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  |   |         |  
|Total comprehensive income                                                                               |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  | $ | 104,384 |  
|                                                                                                         |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  |   |         |  
|Adjustment for initial adoption of new accounting standard for pensions, net of tax of $649              |        |             |   |        |                  |        |   |                      |   |        |                                     |  |   |         |   |  |                          | (2,250  | ) |  |   | (2,250   | ) |  |   |         |  
|Issuance of common stock and stock units                                                                 |        | 1,156        |   |        |                  | 31,897  |   |                      |   |        |                                     |  |   |         |   |  |                          |        |   |  |   | 31,897   |   |  |   |         |  
|Share-based compensation expense                                                                         |        |             |   |        |                  | 9,946   |   |                      |   |        |                                     |  |   |         |   |  |                          |        |   |  |   | 9,946    |   |  |   |         |  
|Tax benefit from share-based plans                                                                       |        |             |   |        |                  | 8,769   |   |                      |   |        |                                     |  |   |         |   |  |                          |        |   |  |   | 8,769    |   |  |   |         |  
|Repurchase of common stock                                                                               |        | (1,681       | ) |        |                  |        |   |                      |   |        |                                     |  |   | (86,699  | ) |  |                          |        |   |  |   | (86,699  | ) |  |   |         |  
|Retirement of treasury stock                                                                             |        |             |   |        |                  | (18,372 | ) |                      |   | (68,327 | )                                   |  |   | 86,699   |   |  |                          |        |   |  |   |         |   |  |   |         |  
|                                                                                                         |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  |   |         |  
|Balance, September 28, 2007                                                                              |        | 30,345       |   |        |                  | 351,330 |   |                      |   | 199,471 |                                     |  |   |         |   |  |                          | 67,286  |   |  |   | 618,087  |   |  |   |         |  
|Net earnings                                                                                             |        |             |   |        |                  |        |   |                      |   | 65,114  |                                     |  |   |         |   |  |                          |        |   |  |   | 65,114   |   |  | $ | 65,114  |  
|Other comprehensive income:                                                                              |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  |   |         |  
|Currency translation adjustment, net of tax of $283                                                      |        |             |   |        |                  |        |   |                      |   |        |                                     |  |   |         |   |  |                          | (22,263 | ) |  |   | (22,263  | ) |  |   | (22,263 | )
|Minimum liability for defined benefit pension and other postretirement obligations, net of tax of ($653) |        |             |   |        |                  |        |   |                      |   |        |                                     |  |   |         |   |  |                          | 448     |   |  |   | 448      |   |  |   | 448     |  
|                                                                                                         |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  |   |         |  
|Total comprehensive income                                                                               |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  | $ | 43,299  |  
|                                                                                                         |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  |   |         |  
|Issuance of common stock and stock units                                                                 |        | 536          |   |        |                  | 18,228  |   |                      |   |        |                                     |  |   |         |   |  |                          |        |   |  |   | 18,228   |   |  |   |         |  
|Share-based compensation expense                                                                         |        |             |   |        |                  | 9,673   |   |                      |   |        |                                     |  |   |         |   |  |                          |        |   |  |   | 9,673    |   |  |   |         |  
|Tax benefit from share-based plans                                                                       |        |             |   |        |                  | 894     |   |                      |   |        |                                     |  |   |         |   |  |                          |        |   |  |   | 894      |   |  |   |         |  
|Repurchase of common stock                                                                               |        | (1,964       | ) |        |                  |        |   |                      |   |        |                                     |  |   | (106,859 | ) |  |                          |        |   |  |   | (106,859 | ) |  |   |         |  
|Retirement of treasury stock                                                                             |        |             |   |        |                  | (23,933 | ) |                      |   | (82,926 | )                                   |  |   | 106,859  |   |  |                          |        |   |  |   |         |   |  |   |         |  
|Adjustment for initial adoption of new accounting standard for tax                                       |        |             |   |        |                  |        |   |                      |   | 3,019   |                                     |  |   |         |   |  |                          |        |   |  |   | 3,019    |   |  |   |         |  
|                                                                                                         |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  |   |         |  
|Balance, October 3, 2008                                                                                 |        | 28,917       |   |        |                  | 356,192 |   |                      |   | 184,678 |                                     |  |   |         |   |  |                          | 45,471  |   |  |   | 586,341  |   |  |   |         |  
|Net earnings                                                                                             |        |             |   |        |                  |        |   |                      |   | 38,620  |                                     |  |   |         |   |  |                          |        |   |  |   | 38,620   |   |  | $ | 38,620  |  
|Other comprehensive income:                                                                              |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  |   |         |  
|Currency translation adjustment, net of tax of ($1,532)                                                  |        |             |   |        |                  |        |   |                      |   |        |                                     |  |   |         |   |  |                          | 5,791   |   |  |   | 5,791    |   |  |   | 5,791   |  
|Minimum liability for defined benefit pension and other postretirement obligations, net of tax of $437   |        |             |   |        |                  |        |   |                      |   |        |                                     |  |   |         |   |  |                          | (1,383  | ) |  |   | (1,383   | ) |  |   | (1,383  | )
|                                                                                                         |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  |   |         |  
|Total comprehensive income                                                                               |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  | $ | 43,028  |  
|                                                                                                         |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  |   |         |  
|Issuance of common stock and stock units                                                                 |        | 414          |   |        |                  | 8,139   |   |                      |   |        |                                     |  |   |         |   |  |                          |        |   |  |   | 8,139    |   |  |   |         |  
|Share-based compensation expense                                                                         |        |             |   |        |                  | 7,705   |   |                      |   |        |                                     |  |   |         |   |  |                          |        |   |  |   | 7,705    |   |  |   |         |  
|Tax benefit from share-based plans                                                                       |        |             |   |        |                  | 705     |   |                      |   |        |                                     |  |   |         |   |  |                          |        |   |  |   | 705      |   |  |   |         |  
|Repurchase of common stock                                                                               |        | (360         | ) |        |                  |        |   |                      |   |        |                                     |  |   | (7,647   | ) |  |                          |        |   |  |   | (7,647   | ) |  |   |         |  
|Retirement of treasury stock                                                                             |        |             |   |        |                  | (4,417  | ) |                      |   | (3,230  | )                                   |  |   | 7,647    |   |  |                          |        |   |  |   |         |   |  |   |         |  
|                                                                                                         |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  |   |         |  
|Balance, October 2, 2009                                                                                 |        | 28,971       |   |        | $                | 368,324 |   |                      | $ | 220,068 |                                     |  | $ |         |   |  | $                        | 49,879  |   |  | $ | 638,271  |   |  |   |         |  
|                                                                                                         |        |              |   |        |                  |         |   |                      |   |         |                                     |  |   |          |   |  |                          |         |   |  |   |          |   |  |   |         |  



See
accompanying Notes to the Consolidated Financial Statements.



F-5



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)



|                                                                                    |  |                    |         |   |                |   |          |                   |  |   |         |  
|----------------------------------------------------------------------------------- |  | ------------------ | ------- | - | -------------- | - | -------- | ----------------- |  | - | ------- | -
|                                                                                    |  | Fiscal Years Ended |        
|                                                                                    |  | October 2,2009     |         |   | October 3,2008 |   |          | September 28,2007 | 
|Cash flows from operating activities                                                |  |                    |         |   |                |   |          |                   |  |   |         |  
|Net earnings                                                                        |  | $                  | 38,620  |   |                | $ | 65,114   |                   |  | $ | 63,616  |  
|Adjustments to reconcile net earnings to net cash provided by operating activities: |  |                    |         |   |                |   |          |                   |  |   |         |  
|Depreciation and amortization                                                       |  |                    | 26,783  |   |                |   | 29,346   |                   |  |   | 29,248  |  
|Gain on disposition of property, plant and equipment                                |  |                    | (230    | ) |                |   | (474     | )                 |  |   | (452    | )
|Impairment of private company equity investment                                     |  |                    |        |   |                |   | 3,018    |                   |  |   |        |  
|Purchased in-process research and development                                       |  |                    |        |   |                |   | 1,703    |                   |  |   |        |  
|Share-based compensation expense                                                    |  |                    | 7,705   |   |                |   | 9,673    |                   |  |   | 9,946   |  
|Excess tax benefit from share-based plans                                           |  |                    | (705    | ) |                |   | (894     | )                 |  |   | (9,090  | )
|Deferred taxes                                                                      |  |                    | (12,211 | ) |                |   | (1,791   | )                 |  |   | (9,404  | )
|Unrealized loss (gain) on currency remeasurement                                    |  |                    | 525     |   |                |   | (5,286   | )                 |  |   | 8,826   |  
|Changes in assets and liabilities, excluding effects of acquisitions:               |  |                    |         |   |                |   |          |                   |  |   |         |  
|Accounts receivable, net                                                            |  |                    | 42,387  |   |                |   | (12,205  | )                 |  |   | 1,074   |  
|Inventories                                                                         |  |                    | 24,663  |   |                |   | (19,428  | )                 |  |   | 400     |  
|Prepaid expenses and other current assets                                           |  |                    | 403     |   |                |   | 3,300    |                   |  |   | (387    | )
|Other assets                                                                        |  |                    | 168     |   |                |   | (1,462   | )                 |  |   | (4,110  | )
|Accounts payable                                                                    |  |                    | (8,663  | ) |                |   | (1,072   | )                 |  |   | (4,733  | )
|Deferred profit                                                                     |  |                    | (2,103  | ) |                |   | (3,526   | )                 |  |   | (176    | )
|Accrued liabilities                                                                 |  |                    | (3,061  | ) |                |   | 14,053   |                   |  |   | 8,103   |  
|Other liabilities                                                                   |  |                    | (1,394  | ) |                |   | (1,048   | )                 |  |   | 6,996   |  
|                                                                                    |  |                    |         |   |                |   |          |                   |  |   |         |  
|Net cash provided by operating activities                                           |  |                    | 112,887 |   |                |   | 79,021   |                   |  |   | 99,857  |  
|                                                                                    |  |                    |         |   |                |   |          |                   |  |   |         |  
|Cash flows from investing activities                                                |  |                    |         |   |                |   |          |                   |  |   |         |  
|Proceeds from sale of property, plant and equipment                                 |  |                    | 6,454   |   |                |   | 1,735    |                   |  |   | 4,966   |  
|Purchase of property, plant and equipment                                           |  |                    | (25,073 | ) |                |   | (23,960  | )                 |  |   | (19,396 | )
|Acquisitions, net of cash acquired                                                  |  |                    | (2,449  | ) |                |   | (55,167  | )                 |  |   | (7,115  | )
|Private company equity investments                                                  |  |                    |        |   |                |   | (18      | )                 |  |   | (3,000  | )
|                                                                                    |  |                    |         |   |                |   |          |                   |  |   |         |  
|Net cash used in investing activities                                               |  |                    | (21,068 | ) |                |   | (77,410  | )                 |  |   | (24,545 | )
|                                                                                    |  |                    |         |   |                |   |          |                   |  |   |         |  
|Cash flows from financing activities                                                |  |                    |         |   |                |   |          |                   |  |   |         |  
|Repayment of debt                                                                   |  |                    |        |   |                |   | (6,250   | )                 |  |   | (2,500  | )
|Repurchase of common stock                                                          |  |                    | (7,647  | ) |                |   | (106,859 | )                 |  |   | (86,699 | )
|Issuance of common stock                                                            |  |                    | 8,139   |   |                |   | 18,228   |                   |  |   | 31,897  |  
|Excess tax benefit from share-based plans                                           |  |                    | 705     |   |                |   | 894      |                   |  |   | 9,090   |  
|Transfers to Varian Medical Systems, Inc.                                           |  |                    | (645    | ) |                |   | (600     | )                 |  |   | (646    | )
|                                                                                    |  |                    |         |   |                |   |          |                   |  |   |         |  
|Net cash provided by (used in) financing activities                                 |  |                    | 552     |   |                |   | (94,587  | )                 |  |   | (48,858 | )
|                                                                                    |  |                    |         |   |                |   |          |                   |  |   |         |  
|Effects of exchange rate changes on cash and cash equivalents                       |  |                    | 13,082  |   |                |   | 475      |                   |  |   | 15,787  |  
|                                                                                    |  |                    |         |   |                |   |          |                   |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                                |  |                    | 105,453 |   |                |   | (92,501  | )                 |  |   | 42,241  |  
|Cash and cash equivalents at beginning of period                                    |  |                    | 103,895 |   |                |   | 196,396  |                   |  |   | 154,155 |  
|                                                                                    |  |                    |         |   |                |   |          |                   |  |   |         |  
|Cash and cash equivalents at end of period                                          |  | $                  | 209,348 |   |                | $ | 103,895  |                   |  | $ | 196,396 |  
|                                                                                    |  |                    |         |   |                |   |          |                   |  |   |         |  
|Supplemental cash flow information                                                  |  |                    |         |   |                |   |          |                   |  |   |         |  
|Income taxes paid, net of refunds received                                          |  | $                  | 30,453  |   |                | $ | 38,793   |                   |  | $ | 36,317  |  
|                                                                                    |  |                    |         |   |                |   |          |                   |  |   |         |  
|Interest paid                                                                       |  | $                  | 1,261   |   |                | $ | 1,626    |                   |  | $ | 1,765   |  
|                                                                                    |  |                    |         |   |                |   |          |                   |  |   |         |  



See
accompanying Notes to the Consolidated Financial Statements.



F-6



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS



Note 1.    Description of Business and
Basis of Presentation



Varian, Inc., together
with its subsidiaries (collectively, the Company), designs, develops, manufactures, markets, sells and services scientific instruments (including analytical instruments, research products and related software, consumable products,
accessories and services) and vacuum products (and related accessories and services). These businesses primarily serve life science, environmental, energy, and applied research and other 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 Consolidated Statement of Cash Flows.



Merger Agreement.On July 26,
2009, the Company, Agilent Technologies, Inc., a Delaware corporation (Agilent), and Cobalt Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Agilent (Merger Sub), entered into an Agreement and Plan
of Merger (the Merger Agreement), pursuant to which Merger Sub will, subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, merge with and into the Company and the Company will survive the merger and
continue as a wholly owned subsidiary of Agilent (the Merger). Pursuant to the terms of the Merger Agreement and subject to the conditions thereof, at the effective time of the Merger (the Effective Time), each share of
common stock of the Company issued and outstanding immediately prior to the Effective Time will be converted into the right to receive $52.00 in cash, without interest.



The Company and Agilent have made certain representations, warranties and covenants in the Merger Agreement, including, among
others, covenants that, subject to certain exceptions, (i) the Company will conduct its business in the ordinary course consistent with past practice, and refrain from taking specified actions, during the period between the execution of the
Merger Agreement and the Effective Time, (ii) the Board of Directors of the Company will recommend to its stockholders adoption of the Merger Agreement, and (iii) the Company will not solicit, initiate, seek or knowingly encourage or
facilitate, any inquiry, proposal or offer from, furnish non-public information to, or participate in any discussions with, or enter into any agreement with, any person or group regarding any alternative transaction.



The Merger Agreement contains certain termination rights for
both the Company and Agilent and further provides that, upon termination of the Merger Agreement under specified circumstances, the Company may be required to pay Agilent a termination fee of $46 million.



The Boards of Directors of the Company and Agilent approved the
Merger and the Merger Agreement. In addition, concurrently with the execution of the Merger Agreement, all directors and certain executive officers of the Company, who together held less than 1% of the Companys outstanding common stock as of
July 26, 2009, entered into voting agreements whereby they agreed among other things to vote all shares of the Companys common stock held by them in favor of the adoption of the Merger Agreement.



On October 5, 2009, the Companys stockholders
approved the Merger. The Merger remains subject to regulatory approvals and the satisfaction or waiver of certain other closing conditions.



Fiscal Year.    The Companys fiscal years reported are the 52- or 53-week periods that end on the Friday
nearest September 30. Fiscal year 2009 was comprised of the 52-week period that ended on October 2, 2009. Fiscal year 2008 was comprised of the 53-week period that ended on October 3, 2008. Fiscal year 2007 was comprised of the
52-week period that ended on September 28, 2007. Each quarter during fiscal years 2009, 2008 and 2007 was comprised of 13 weeks, respectively, except for the fourth quarter of fiscal year 2008, which was comprised of 14 weeks.



F-7



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Principles of Consolidation.    The Consolidated Financial
Statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.



Use of Estimates.    The preparation of the Consolidated Financial Statements in
conformity with accounting principles generally accepted in the U.S. 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. Significant estimates in these Consolidated Financial Statements include revenue recognition, allowances for doubtful accounts receivable,
inventory valuation reserves, share-based compensation, product warranty reserves, environmental liabilities and income taxes. Actual results could differ from these estimates.



Revision of Prior Period Financial Statements.    During the fiscal quarter ended
July 3, 2009, the Company identified a clerical error related to the calculation of the fiscal year 2008 income tax provision. The impact of this error was an understatement of income tax expense and an overstatement of consolidated net
earnings of $1.3 million during the fiscal quarter and fiscal year ended October 3, 2008. The error also resulted in an overstatement of current deferred tax assets and retained earnings of $1.3 million at October 3,
2008, January 2, 2009 and April 3, 2009. The Company assessed the materiality of this error and concluded that the previously issued financial statements are not materially misstated. The Company has corrected the immaterial error by
revising the prior period financial statements. Accordingly, the October 3, 2008 consolidated balance sheet and the consolidated statement of earnings and of stockholders equity and comprehensive income for the fiscal year ended
October 3, 2008 presented herein have been revised to correct for the immaterial error. The revision did not impact net cash provided by operating activities or net cash used in investing activities or financing activities for the fiscal year
ended October 3, 2008.



Subsequent
Events.    In accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 855, Subsequent Events, the Company has evaluated subsequent events through
the time the Companys Consolidated Financial Statements were issued on November 25, 2009.



Note 2.    Summary of Significant Accounting Policies



Revenue Recognition.    The Companys revenues are derived from product sales (including accessory sales) and
services. For product sales and accessory sales, revenue is recognized when persuasive evidence of an arrangement exists, the contract price is fixed or determinable, the product or accessory has been delivered, title and risk of loss have passed to
the customer and collection of the resulting receivable is reasonably assured. Product sales that do not involve unique customer acceptance terms or new specifications or technology with customer acceptance provisions, but that do involve
installation services, are accounted for as multiple-element arrangements, where the larger of the contractual billing holdback or the fair value of the installation service is deferred when the product is delivered and subsequently recognized when
the installation is complete. For certain other product sales that do involve unique customer acceptance terms or new specifications or technology with customer acceptance provisions, all revenue is deferred until all contractually required customer
acceptance provisions and product specifications have been satisfied. In all cases, the fair value of undelivered elements, such as accessories or services purchased by customers in connection with a product sale, is deferred until the related items
are delivered to the customer. Revenue related to service contracts is recognized ratably over the term of the contracts. Unearned maintenance and service contract revenue is included in accrued liabilities on the accompanying Consolidated Balance
Sheet. Revenue related to incident-based paid service and training services is recognized when the related services are provided to the customer.



Deferred profit on the accompanying Consolidated Balance Sheet is comprised of the profit (revenue less related cost of sales) on certain
transactions that has been deferred under the Companys revenue



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VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



recognition policy. Deferred profit relates to transactions in the Companys Scientific Instruments segment that typically fit one of the following descriptions:



| |  |  | A product has been delivered to a customer but revenue cannot yet be recognized, typically due to non-standard specifications or acceptance requirements that have not
yet been demonstrated. In these cases, the revenue and related cost of sales that would ordinarily be recorded in the statement of earnings at the time of delivery are instead recorded to deferred profit. This accounting is reversed and the revenue
and related cost of sales are recorded in the statement of earnings once the non-standard specifications or acceptance requirements have been demonstrated and all other revenue recognition criteria have been met.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A product has been delivered and 100% of the contract value is billable per the terms of the arrangement but post-delivery obligations (e.g., installation) remain. In
these cases, revenue equal to the fair value of the post-delivery obligations is deferred and included in deferred profit when the product is delivered. Once the post-delivery obligations have been met, the deferred revenue is reversed out of
deferred profit and recorded as revenue in the statement of earnings. Since installation costs are typically not significant relative to total product costs and the time to complete an installation is usually short, the Company rarely needs to defer
installation costs associated with deferred installation revenue.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following table summarizes the components of deferred profit:



|                |  |                |         |   |                |   |         |  
|--------------- |  | -------------- | ------- | - | -------------- | - | ------- | -
|                |  | October 2,2009 |         |   | October 3,2008 |  
|(in thousands)  |  |                |         |   |                |  
|Deferred profit |  |                |         |   |                |   |         |  
|Revenue         |  | $              | 20,601  |   |                | $ | 21,568  |  
|Cost of sales   |  | $              | (11,666 | ) |                | $ | (10,611 | )



In
certain other cases, products are delivered but post-delivery obligations (e.g., installation) remain and a portion of the contract value is not billable until such obligations have been met (the holdback). In these cases, recognition of
revenue equal to the greater of the holdback or the fair value of the undelivered service element is deferred. However, since holdbacks are not billable until the related undelivered element (typically installation) has been delivered, no invoice is
issued and no receivable is recorded for the holdback amount and the related revenue is not recorded. Accordingly, deferred revenue relating to holdbacks is not recorded and does not otherwise impact the accompanying Consolidated Balance Sheet.



The Company sells products and accessories
predominantly through its direct sales force. As a result, the use of distributors is generally limited to geographic regions where the Companys direct sales force is less developed. The Company does not normally offer product return or
exchange rights (other than those relating to non-conforming or defective goods under warranty) or price protection allowances to its customers, including its distributors. Payment terms granted to distributors are similar to those granted to other
customers and payments are not dependent upon the distributors receipt of payment from their end-user customers.



The Companys products are generally subject to warranties and the Company provides for the estimated future costs of repair or
replacement in cost of sales at the time the related sale is recognized.



Foreign Currency Translation.    The Company uses the local currency as the functional currency in each country in which it operates subsidiaries. The functional currencies of
the Companys operations are primarily the U.S. dollar and the Euro and, to a lesser extent, the British pound, Australian dollar, Japanese yen and various other currencies. Assets and liabilities of foreign subsidiaries are translated into
U.S. dollars at exchange rates at the end of the fiscal period and income and expense items are translated at exchange rates prevailing during the period. Translation gains and losses are included in the cumulative translation adjustment component
of accumulated other comprehensive income. Gains and losses arising



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VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



from transactions and translation of period-end balances denominated in currencies other than a subsidiarys functional currency are reflected in selling, general and administrative
expenses.



Concentration of Credit
Risk.    Financial instruments that potentially subject the Company to concentrations of credit risk include cash equivalents, trade accounts receivable and foreign exchange forward contracts. The Company invests primarily in
demand deposits, short-term U.S. Treasury securities and money market funds. The Company sells its products and extends trade credit to a large number of customers, who are dispersed across many different industries and geographies. The Company
performs ongoing credit evaluations of these customers and generally does not require collateral from them, although the Company does require letters of credit to mitigate credit risk when considered appropriate. As of both October 2, 2009 and
October 3, 2008, trade accounts receivable include allowances for doubtful accounts of $1.3 million. Delinquent account balances are written off when management determines that the likelihood of collection is no longer probable. No single
customer represented 10% or more of the Companys total sales in fiscal year 2009, 2008 and 2007 or trade accounts receivable at fiscal year end 2009 or 2008. The Company seeks to minimize credit risk relating to foreign exchange forward
contracts by limiting its counter-parties to major financial institutions.



Cash and Cash Equivalents.    The Company includes currency on hand, demand deposits, money market funds and all highly liquid debt securities with an original maturity of three
months or less in cash and cash equivalents. The cost basis of cash and cash equivalents approximates fair value due to the short period of time to maturity.



Inventories.    Inventories are stated at the lower of cost or market, with cost being computed on an average-cost
basis. Provisions are made for potentially excess or slow-moving inventories. When a loss provision is made, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the
restoration or an increase in that newly established cost basis.



Property, Plant and Equipment.Property, plant and equipment are stated at cost. Major improvements are capitalized, while maintenance and repairs are expensed as incurred.
Real property (land) is not depreciated. Plant and equipment are depreciated over their estimated useful lives using the straight-line method. Machinery and equipment lives vary from three to 10 years and buildings are depreciated over 20 to 40
years. Purchased software is depreciated over five to 10 years. Leasehold improvements are depreciated using the straight-line method over their estimated useful lives or the remaining term of the lease, whichever is less. Depreciation expense
totaled $19.7 million, $20.8 million and $21.1 million in fiscal years 2009, 2008 and 2007, respectively. When assets are retired or otherwise disposed of, the capitalized costs are removed from the accounts.



Goodwill and Intangible
Assets.    Under ASC 350-20-35, IntangiblesGoodwill and Other, goodwill is not amortized, but must be tested for impairment annually and whenever events or circumstances occur indicating that goodwill might be
impaired. The process of testing goodwill for impairment consists of a two-step process. The first step is the comparison of the fair value to the carrying value of the reporting unit to determine if the carrying value exceeds the fair value. The
second step measures the amount of an impairment loss and is only performed if the carrying value exceeds the fair value of the reporting unit. The Company performed annual goodwill impairment tests during the second quarter of fiscal years 2009,
2008 and 2007 and determined that there was no impairment of goodwill.



Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. We conducted our annual evaluation of
goodwill by reporting unit during the quarter ended April 3, 2009, and concluded that the estimated fair value of Scientific Instruments and Vacuum Technologies reporting units exceeded their carrying value. Determining the fair value of a
reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates and operating margins, cash flows, discount rates and future market conditions, among others. Unanticipated changes
in revenue, gross margin, long-



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VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



term growth factor, cash flows or discount rate could result in a material impact on the estimated fair values of our reporting units. There have been no significant events or circumstances
affecting the valuation of goodwill subsequent to the impairment test performed in the second quarter of the fiscal year ended October 2, 2009.



Identifiable intangible assets recorded in connection with acquisitions are amortized on a straight-line basis over their estimated useful
lives, which range from two to 20 years. Acquired in-process research and development is immediately expensed.



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. These investments are evaluated under applicable guidance to determine the appropriate accounting treatment, including whether the Company must consolidate the investee
company. Based on these evaluations, the Company has determined that no consolidation is required. These investments are included in Other assets in the Consolidated Balance Sheet. The Company monitors these investments for impairment and will make
appropriate reductions in carrying values if the Company determines that an impairment charge is required based primarily on the near-term prospects and financial condition of these companies.



During 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 held 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.



Long-Lived Assets.    The Company
evaluates the carrying value of long-lived assets whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable. All long-lived assets to be disposed of are reported at the lower of carrying amount or
fair market value, less expected selling costs.



Share-Based Compensation.    The Company accounts for share-based compensation in accordance with the provisions of ASC 718, Stock Compensation, which establishes the accounting for share-based awards and
the inclusion of their fair value in net earnings in the respective periods the awards were earned. Consistent with the provisions of ASC 718, the Company estimates the fair value of stock options and shares issued under its employee stock purchase
plan using the Black-Scholes option-pricing model. Fair value is estimated on the date of grant and is then recognized (net of estimated forfeitures) as expense in the Consolidated Statement of Earnings over the requisite service period (generally
the vesting period).



The determination of fair
value and the timing of expense using option pricing models such as the Black-Scholes model require the input of highly subjective assumptions, including the expected forfeiture rate and life of the option and the expected price volatility of the
underlying stock. The Company estimates the expected forfeiture and expected life assumptions based on historical experience. In determining the Companys expected stock price volatility assumption, the Company reviews both
the historical and implied volatility of the Companys common stock, with implied volatility based on the implied volatility of publicly traded options on the Companys common stock. The Company determines the expected stock price
volatility assumption using a combination of historical and implied volatility unless the volume or maturity of these publicly traded options does not satisfy the conditions to use implied volatility. The Company elected to use the practical
transition option (also known as the short-cut method) to calculate its historical pool of windfall tax benefits. The practical transition option allows the use of a simplified method to establish the beginning balance of the additional
paid-in capital pool (the APIC pool), which is available to absorb shortfalls when actual tax deductions are less than the related book share-based compensation cost recognized subsequent to the adoption of ASC 718.



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Research and Development.    Research and development costs
related to both present and future products are expensed as they are incurred.



Advertising Costs.    Advertising costs are included as part of selling, general and administrative expense and are expensed as incurred. Advertising expense was $2.7 million in
fiscal year 2009, $4.0 million in fiscal year 2008 and $3.2 million in fiscal year 2007.



Income Taxes.    The Company recognizes deferred tax assets and liabilities using enacted tax rates for the effect of temporary differences between the book and tax bases of
recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that the related tax benefits will not be realized in the future.



The Company accrues income tax liabilities for unrecognized tax benefits resulting from uncertain tax positions
by evaluating whether the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit and then measures the tax benefit as the largest amount that is more than 50% likely of being realized upon
ultimate settlement. The Company reevaluates these uncertain tax positions on a quarterly basis. Potential interest and penalties associated with such uncertain tax positions are recorded as a component of income tax expense.



Recent Accounting Standards.In
September 2006, the FASB issued new accounting standards for fair value measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. In February 2008, the FASB
delayed the effective date of the new accounting standard 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 adopted the new accounting standard for fair value measurements effective October 4, 2008 with the exception of the application of the accounting standard to
nonrecurring nonfinancial assets and nonfinancial liabilities (see Note 3). The Company does not expect the adoption in the first quarter of fiscal year 2010 of the provisions deferred to have a material impact on its financial condition or results
of operations.



In December 2007, the FASB revised
the accounting standards for business combinations, which 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.It also requires that certain tax contingencies and adjustments to valuation allowances related to business combinations, which
previously were adjusted to goodwill, must be adjusted to income tax expense, regardless of the date of the original business combination. This revised accounting standard is effective for fiscal years beginning after December 15, 2008. The
Company 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 the new guidance, 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 the impact.



In April 2009, the FASB issued a new standard for business
combinations that amends the accounting prescribed for assets and liabilities arising from contingencies in business combinations. This accounting standard requires pre-acquisition contingencies to be recognized at fair value if fair value can be
reasonably determined during the measurement period. If fair value cannot be reasonably determined, the accounting standard requires measurement based on the recognition and measurement criteria for contingencies. This accounting standard is
effective for fiscal years beginning after December 15, 2008. The Company does not expect its adoption in the first quarter of fiscal year 2010 to have a material impact on the Companys



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



financial condition or results of operations. However, in the event that the Company completes acquisitions subsequent to its adoption, 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 the impact.



In December 2007, the FASB issued a new accounting standard for non-controlling interests in consolidated financial statements, which
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. This accounting standard 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 in the first quarter of fiscal year 2010 of this accounting standard to have a material impact on its financial condition or results of operations.



In April 2008, the FASB issued a new accounting
standard for the determination of the useful life of intangible assets, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. The intent
of this new accounting standard is to improve the consistency between the useful life of a recognized intangible asset under the guidance for intangible assets and the period of expected cash flows used to measure the fair value of the asset under
the guidance for business combinations. This accounting standard is effective for fiscal years beginning after December 15, 2008, and must be applied prospectively to intangible assets acquired after the effective date. Early adoption is
prohibited. Given that this applies to intangible assets acquired after the effective date, the Company does not expect its adoption in the first quarter of fiscal year 2010 to have a material impact on its financial condition or results of
operations.



In June 2008, the FASB issued a new
accounting standard for determining whether instruments granted in share-based transactions are participating securities. This new accounting standard states that unvested share-based payment awards that contain nonforfeitable rights to dividends or
dividend equivalents are participating securities and shall be included in the computation of earnings per share under the two-class method described in the guidance for earnings per share. This accounting standard is effective for fiscal years
beginning after December 15, 2008, and interim periods within those years, on a retrospective basis. The Company does not expect the adoption in the first quarter of fiscal year 2010 to have a material impact on its earnings per share.



In December 2008, the FASB issued additional
disclosure requirements for plan assets of a defined benefit pension or other postretirement plan. The required disclosures include a description of the Companys investment policies and strategies, the fair value of each major category of plan
assets, the inputs and valuation techniques used to measure the fair value of plan assets, the effect of fair value measurements using significant unobservable inputs on changes in plan assets and the significant concentrations of risk within plan
assets. These additional disclosures are effective for fiscal years ending after December 15, 2009. The Company does not expect the adoption of the new disclosure requirements to have a material impact on its financial condition or results of
operations.



In October 2009, the FASB issued two
new accounting standards that provide guidance for revenue recognition. The first standard revises guidance for arrangements with multiple deliverables. This accounting standard replaces the term fair value in the revenue recognition allocation
guidance with selling price and establishes a hierarchy for determining the selling price of a deliverable. The selling price of each deliverable will first be based on vendor specific objective evidence (VSOE) if available, second on
third-party evidence (TPE) if VSOE is not available and third on estimated selling price if neither VSOE nor TPE are available. In addition the residual method is no longer permitted as vendors are now required to allocate arrangement
consideration using the relative selling price method. The second new accounting



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VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



standard excludes from the scope of software revenue recognition software components contained in, and essential to the functionality of, tangible products. These new accounting standards require
expanded qualitative and quantitative disclosures and are effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company does not expect the
adoption of these accounting standards in the first quarter of fiscal year 2011 to have a material impact on its financial condition or results of operations.



Note 3.    Fair Value Measurements



Effective October 4, 2008 (the first day of fiscal year 2009), the Company adopted ASC 820, Fair Value Measurements and
Disclosures. The Company elected to delay applying ASC 820 to certain non-recurring nonfinancial assets and nonfinancial liabilities until fiscal year 2010, as permitted by the guidance.



On the same date, the Company also adopted ASC 825Financial
Instruments,which permits entities to elect, at specified election dates, to measure eligible financial instruments at fair value. Since its adoption of ASC 825, the Company has not elected the fair value option for any financial assets or
liabilities that were not previously measured at fair value.



Fair Value Hierarchy.ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs
when measuring fair value. The three levels of inputs that may be used to measure fair value are:



Level 1Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.



Level 2Other inputs that are directly or indirectly
observable in the marketplace.



Level
3Unobservable inputs which are supported by little or no market activity.



As of October 2, 2009, the Company did not have any financial liabilities that were measured at fair value on a recurring basis.



Financial assets measured at fair value on a recurring basis as of October 2, 2009 follow:



|                                      |  |                                                            |        |                                            |   |                                        |  |       |   |  |   |       
|------------------------------------- |  | ---------------------------------------------------------- | ------ | ------------------------------------------ | - | -------------------------------------- |  | ----- | - |  | - | ------
|                                      |  | Fair Value Measurements Using:                            
|                                      |  | Quoted Prices inActive Marketsfor IdenticalAssets(Level 1) |        | Significant OtherObservableInputs(Level 2) |   | SignificantUnobservableInputs(Level 3) |  | Total
|(in thousands)                        |  |                                                            |        |                                            |   |                                        |  |      
|Financial assets:                     |  |                                                            |        |                                            |   |                                        |  |       |   |  |   |       
|Money market funds (cash equivalents) |  | $                                                          | 65,274 |                                            | $ |                                       |  | $     |  |  | $ | 65,274
|                                      |  |                                                            |        |                                            |   |                                        |  |       |   |  |   |       
|Total financial assets                |  | $                                                          | 65,274 |                                            | $ |                                       |  | $     |  |  | $ | 65,274
|                                      |  |                                                            |        |                                            |   |                                        |  |       |   |  |   |       



The cost
basis of cash and cash equivalents approximates fair value due to the short period of time to maturity.



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Note 4.    Balance Sheet Detail



|                              |  |                |          |   |                |   |          |  
|----------------------------- |  | -------------- | -------- | - | -------------- | - | -------- | -
|                              |  | October 2,2009 |          |   | October 3,2008 |  
|(in thousands)                |  |                |          |   |                |  
|Inventories                   |  |                |          |   |                |   |          |  
|Raw materials and parts       |  | $              | 60,222   |   |                | $ | 77,447   |  
|Work in process               |  |                | 22,596   |   |                |   | 25,091   |  
|Finished goods                |  |                | 53,886   |   |                |   | 58,501   |  
|                              |  |                |          |   |                |   |          |  
|                              |  | $              | 136,704  |   |                | $ | 161,039  |  
|                              |  |                |          |   |                |   |          |  
|Property, plant and equipment |  |                |          |   |                |   |          |  
|Land and land improvements    |  | $              | 6,676    |   |                | $ | 6,519    |  
|Buildings                     |  |                | 120,832  |   |                |   | 102,746  |  
|Machinery and equipment       |  |                | 172,505  |   |                |   | 174,284  |  
|Construction in progress      |  |                | 2,399    |   |                |   | 8,585    |  
|                              |  |                |          |   |                |   |          |  
|                              |  |                | 302,412  |   |                |   | 292,134  |  
|Accumulated depreciation      |  |                | (188,049 | ) |                |   | (181,791 | )
|                              |  |                |          |   |                |   |          |  
|                              |  | $              | 114,363  |   |                | $ | 110,343  |  
|                              |  |                |          |   |                |   |          |  
|Accrued liabilities           |  |                |          |   |                |   |          |  
|Payroll and employee benefits |  | $              | 57,305   |   |                | $ | 61,480   |  
|Deferred service revenue      |  |                | 38,958   |   |                |   | 35,404   |  
|Contract advances             |  |                | 21,502   |   |                |   | 20,760   |  
|Product warranty              |  |                | 13,273   |   |                |   | 13,867   |  
|Other                         |  |                | 40,065   |   |                |   | 35,662   |  
|                              |  |                |          |   |                |   |          |  
|                              |  | $              | 171,103  |   |                | $ | 167,173  |  
|                              |  |                |          |   |                |   |          |  



Note
5.    Forward Exchange Contracts



Effective January 3, 2009 (the first day of the second quarter of fiscal year 2009), the Company adopted ASC 815, Derivatives and Hedging. The adoption of ASC 815 had no financial impact on the Companys primary financial
statements as it only required additional footnote disclosures. The Company has applied the requirements on a prospective basis. Accordingly, disclosures related to periods prior to the date of adoption have not been presented.



The Company enters into foreign exchange forward contracts to
minimize the short-term impact of foreign currency fluctuations on the Companys legal entities monetary assets and liabilities denominated in currencies other than their functional currencies. These foreign currency exposures mainly
arise from intercompany transactions by and between the parent company and its various foreign subsidiaries. The Company does not designate its forward exchange contracts as hedging instruments, and these contracts do not qualify for hedge
accounting treatment.



The Companys
forward exchange contracts generally have maturities of one month or less and are closed out and rolled over into new contracts at the end of each monthly reporting period. Consequently, the fair value of these contracts has historically not been
significant at the end of each reporting period.Typically, realized gains and losses on forward exchange contracts, which arise as a result of closing out the contracts at the end of each reporting period, are substantially offset by
revaluation losses and gains on the underlying balances denominated in non-functional currencies. However, an inaccurate forecast of foreign currency assets or liabilities, coupled with a currency movement, would result in a gain or loss on a net
basis. Gains and losses on forward exchange contracts and from revaluation of the underlying asset and liability balances denominated in non-functional currencies are recognized in the Consolidated Statement of Earnings in selling, general and
administrative expenses.



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VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



During fiscal years 2009, 2008 and 2007, the Company recognized net foreign currency
(losses) and gains of $(0.4) million, $2.1 million and $(1.0) million, respectively.



Other than foreign exchange forward contracts, the Company has no other freestanding or embedded derivative instruments, although the Company may use other derivative instruments in the future. The
Company has not entered into forward exchange contracts for speculative or trading purposes.



As of October 2, 2009, the Company had foreign exchange forward contracts to purchase the U.S. dollar equivalent of $60.6 million and to sell the U.S. dollar equivalent of $11.6 million in various
foreign currencies.



Note
6.    Acquisitions



During fiscal year 2008, the Company acquired Oxford Diffraction Ltd. (Oxford Diffraction) and certain assets and assumed certain liabilities of Analogix, Inc. (the Analogix Business), both of which became part of
the Scientific Instruments segment. Oxford Diffraction was acquired for an aggregate purchase price of $39.0 million through October 2, 2009. Of this amount, a total of $4.5 million is being held in escrow and is due to be released to the
sellers, net of any indemnification claims, during the first quarter of fiscal year 2010. The Analogix Business was acquired for an aggregate purchase price of $13.0 million through October 2, 2009. Of this amount, $1.3 million was retained by
the Company and will become payable, net of any indemnification claims, during the first quarter of fiscal year 2010.



None of the acquisitions made during fiscal year 2008 was material on either an individual or an aggregated basis. As a result, pro forma
sales, earnings from operations, net earnings and net earnings per share have not been presented. However, the Companys Consolidated Statement of Earnings for both fiscal years 2009 and 2008 include the results of operations of the acquired
companies described above since the effective dates of their respective purchases.



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 October 2, 2009, up to a maximum of $10.1 million could be payable through April 2011 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 contingent consideration arrangements as of October 2, 2009:



|                          |  |                                   |   |  |                   |  |                            
|------------------------- |  | --------------------------------- | - |  | ----------------- |  | ---------------------------
|Acquired Company/Business |  | RemainingAmountAvailable(maximum) |   |  | MeasurementPeriod |  | Measurement Period End Date
|                          |  | (in millions                      | ) |  |                   |  |                            
|Oxford Diffraction        |  | $    7.0                          |   |  | 3 years           |  | April 2011                 
|Analogix Business         |  | 2.8                               |   |  | 3 years           |  | December 2010              
|Other                     |  | 0.3                               |   |  | 2 years           |  | July 2010                  
|                          |  |                                   |   |  |                   |  |                            
|Total                     |  | $  10.1                           |   |  |                   |  |                            
|                          |  |                                   |   |  |                   |  |                            



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Note 7.    Goodwill and Other Intangible Assets



Changes in the carrying amount of goodwill for each of the
Companys reportable segments in fiscal years 2009 and 2008 follow:



|                                                |  |                       |         |   |                    |   |              |  |   |         |  
|----------------------------------------------- |  | --------------------- | ------- | - | ------------------ | - | ------------ |  | - | ------- | -
|                                                |  | ScientificInstruments |         |   | VacuumTechnologies |   | TotalCompany | 
|(in thousands)                                  |  |                       |         |   |                    |   |              |  |   |         |  
|Balance as of September 28, 2007                |  | $                     | 192,794 |   |                    | $ | 966          |  | $ | 193,760 |  
|Fiscal year 2008 acquisitions                   |  |                       | 29,712  |   |                    |   |             |  |   | 29,712  |  
|Contingent payments on prior-years acquisitions |  |                       | 4,057   |   |                    |   |             |  |   | 4,057   |  
|Foreign currency impacts and other adjustments  |  |                       | (9,321  | ) |                    |   |             |  |   | (9,321  | )
|                                                |  |                       |         |   |                    |   |              |  |   |         |  
|Balance as of October 3, 2008                   |  |                       | 217,242 |   |                    |   | 966          |  |   | 218,208 |  
|Contingent payments on prior-years acquisitions |  |                       | 1,861   |   |                    |   |             |  |   | 1,861   |  
|Foreign currency impacts and other adjustments  |  |                       | (3,846  | ) |                    |   |             |  |   | (3,846  | )
|                                                |  |                       |         |   |                    |   |              |  |   |         |  
|Balance as of October 2, 2009                   |  | $                     | 215,257 |   |                    | $ | 966          |  | $ | 216,223 |  
|                                                |  |                       |         |   |                    |   |              |  |   |         |  



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



|                            |  |                 |        |                         |   |          |     |  |   |       
|--------------------------- |  | --------------- | ------ | ----------------------- | - | -------- | --- |  | - | ------
|                            |  | October 2, 2009
|                            |  | Gross           |        | AccumulatedAmortization |   |          | Net
|(in thousands)              |  |                 |        |                         |   |          |     |  |   |       
|Intangible assets           |  |                 |        |                         |   |          |     |  |   |       
|Existing technology         |  | $               | 16,244 |                         | $ | (11,738  | )   |  | $ | 4,506 
|Patents and core technology |  |                 | 38,515 |                         |   | (17,349  | )   |  |   | 21,166
|Trade names and trademarks  |  |                 | 2,400  |                         |   | (2,120   | )   |  |   | 280   
|Customer lists              |  |                 | 12,996 |                         |   | (11,173  | )   |  |   | 1,823 
|Other                       |  |                 | 3,227  |                         |   | (2,668   | )   |  |   | 559   
|                            |  |                 |        |                         |   |          |     |  |   |       
|Total                       |  | $               | 73,382 |                         | $ | (45,048) |     |  | $ | 28,334
|                            |  |                 |        |                         |   |          |     |  |   |       



|                            |  |                 |        |                         |   |         |     |  |   |       
|--------------------------- |  | --------------- | ------ | ----------------------- | - | ------- | --- |  | - | ------
|                            |  | October 3, 2008
|                            |  | Gross           |        | AccumulatedAmortization |   |         | Net
|(in thousands)              |  |                 |        |                         |   |         |     |  |   |       
|Intangible assets           |  |                 |        |                         |   |         |     |  |   |       
|Existing technology         |  | $               | 16,503 |                         | $ | (9,699  | )   |  | $ | 6,804 
|Patents and core technology |  |                 | 40,680 |                         |   | (14,253 | )   |  |   | 26,427
|Trade names and trademarks  |  |                 | 2,425  |                         |   | (1,946  | )   |  |   | 479   
|Customer lists              |  |                 | 13,090 |                         |   | (10,278 | )   |  |   | 2,812 
|Other                       |  |                 | 2,972  |                         |   | (2,522  | )   |  |   | 450   
|                            |  |                 |        |                         |   |         |     |  |   |       
|Total                       |  | $               | 75,670 |                         | $ | (38,698 | )   |  | $ | 36,972
|                            |  |                 |        |                         |   |         |     |  |   |       



F-17



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Actual aggregate amortization expense relating to intangible assets recorded in the
three most recent fiscal years as well as estimated amortization expense for the next five fiscal years and thereafter follow:



|                               |  |   |       
|------------------------------ |  | - | ------
|(in thousands)                 |  |   |       
|Actual amortization expense    |  |   |       
|Fiscal year 2007               |  | $ | 8,141 
|                               |  |   |       
|Fiscal year 2008               |  | $ | 8,553 
|                               |  |   |       
|Fiscal year 2009               |  | $ | 7,345 
|                               |  |   |       
|                               | 
|Estimated amortization expense |  |   |       
|Fiscal year 2010               |  | $ | 7,140 
|Fiscal year 2011               |  |   | 5,029 
|Fiscal year 2012               |  |   | 4,074 
|Fiscal year 2013               |  |   | 3,545 
|Fiscal year 2014               |  |   | 3,361 
|Thereafter                     |  |   | 5,185 
|                               |  |   |       
|Total                          |  | $ | 28,334
|                               |  |   |       



Note
8.    Restructuring Costs



Summary of Restructuring Plans.The Company has committed to several restructuring plans in order to improve operational efficiencies, centralize functions, reallocate resources and reduce
operating costs.



The following tables set
forth changes in the Companys aggregate liability relating to all ongoing restructuring plans (including the Fiscal Year 2009 Plans described below) during fiscal years 2009, 2008 and 2007 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 29, 2006                  |  | $                | 233    |      |                    | $ | 818   |       |  | $ | 1,051  |  
|Charges to expense, net                        |  |                  | 2,321  |      |                    |   |      |       |  |   | 2,321  |  
|Cash payments                                  |  |                  | (393   | )    |                    |   | (127  | )     |  |   | (520   | )
|Foreign currency impacts and other adjustments |  |                  | 61     |      |                    |   | 16    |       |  |   | 77     |  
|                                               |  |                  |        |      |                    |   |       |       |  |   |        |  
|Balance at September 28, 2007                  |  |                  | 2,222  |      |                    |   | 707   |       |  |   | 2,929  |  
|Charges to expense, net                        |  |                  | 1,291  |      |                    |   | 761   |       |  |   | 2,052  |  
|Cash payments                                  |  |                  | (1,702 | )    |                    |   | (408  | )     |  |   | (2,110 | )
|Foreign currency impacts and other adjustments |  |                  | 29     |      |                    |   | (16   | )     |  |   | 13     |  
|                                               |  |                  |        |      |                    |   |       |       |  |   |        |  
|Balance at October 3, 2008                     |  |                  | 1,840  |      |                    |   | 1,044 |       |  |   | 2,884  |  
|Charges to (reversal of) expense, net          |  |                  | 6,283  |      |                    |   | (296  | )     |  |   | 5,987  |  
|Cash payments                                  |  |                  | (7,768 | )    |                    |   | (294  | )     |  |   | (8,062 | )
|Foreign currency impacts and other adjustments |  |                  | 224    |      |                    |   | (56   | )     |  |   | 168    |  
|                                               |  |                  |        |      |                    |   |       |       |  |   |        |  
|Balance at October 2, 2009                     |  | $                | 579    |      |                    | $ | 398   |       |  | $ | 977    |  
|                                               |  |                  |        |      |                    |   |       |       |  |   |        |  
|Total expense since inception of plans         |  |                  |        |      |                    |   |       |       |  |   |        |  
|(in millions)                                  |  |                  |        |      |                    |   |       |       |  |   |        |  
|Restructuring expense                          |  |                  | $      | 12.2 |                   
|                                               |  |                  |        |      |                   
|Other restructuring-related costs(1)           |  |                  | $      | 9.9  |                   
|                                               |  |                  |        |      |                   



|(1) |  | These costs related primarily to employee retention and relocation costs and accelerated depreciation of assets disposed upon the closure of facilities. Of the $9.9
million in other related costs, $3.7 million, $3.4 million and $2.0 million was recorded in fiscal years 2009, 2008 and 2007, respectively.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-18



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Fiscal Year 2009 Second Quarter Plan.    During the second
quarter of fiscal year 2009, the Company committed to a plan to reduce its cost structure, primarily through headcount reductions, due to continuing uncertainties in the global economic environment. The plan primarily involved the elimination
of approximately 240 regular employees (primarily in North America and Europe and, to a lesser extent, Asia Pacific and Latin America) and 80 temporary positions in both the Scientific Instruments and Vacuum Technologies segments. In addition, the
plan included the closure of one small research and development/manufacturing facility in North America (Lake Forest, California) and two sales offices in Europe (Sweden and Switzerland).



The restructuring costs associated with this plan include one-time termination benefits for employees whose
positions were eliminated and lease termination costs on vacated facilities. Other restructuring-related costs include employee retention and relocation costs, facility-related relocation costs and accelerated depreciation of fixed assets to be
disposed upon the closure of facilities. These costs are being recorded and included in cost of sales, selling, general and administrative expenses and research and development expenses.



The following table sets forth changes in the Companys restructuring liability relating to the foregoing
plan during fiscal year 2009:



|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  
|---------------------------------------------- |  | ---------------- | ------ | --- | ------------------ | - | --- | ----- |  | - | ------ | -
|                                               |  | Employee-Related |        |     | Facilities-Related |   |     | Total | 
|(in thousands)                                 |  |                  |        |     |                    |   |     |       |  |   |        |  
|Balance at October 3, 2008                     |  | $                |       |     |                    | $ |    |       |  | $ |       |  
|Charges to expense, net                        |  |                  | 6,073  |     |                    |   | 21  |       |  |   | 6,094  |  
|Cash payments                                  |  |                  | (5,892 | )   |                    |   | (12 | )     |  |   | (5,904 | )
|Foreign currency impacts and other adjustments |  |                  | 197    |     |                    |   | 1   |       |  |   | 198    |  
|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  
|Balance at October 2, 2009                     |  | $                | 378    |     |                    | $ | 10  |       |  | $ | 388    |  
|                                               |  |                  |        |     |                    |   |     |       |  |   |        |  
|Total expense since inception of plan          |  |                  |        |     |                    |   |     |       |  |   |        |  
|(in millions)                                  |  |                  |        |     |                    |   |     |       |  |   |        |  
|Restructuring expense                          |  |                  | $      | 6.1 |                   
|                                               |  |                  |        |     |                   
|Other restructuring-related costs              |  |                  | $      | 0.9 |                   
|                                               |  |                  |        |     |                   



The
restructuring expense of $6.1 million recorded during fiscal year 2009 related to employee termination benefits, of which $5.5 million impacted the Scientific Instruments segment and $0.6 million impacted the Vacuum Technologies segment. The $0.9
million in other restructuring-related costs incurred during fiscal year 2009 were comprised of $0.1 million in employee-related costs which impacted the Vacuum Technologies segment and $0.5 million in employee-related costs and a $0.3 million
non-cash charge for accelerated depreciation of assets to be disposed upon the closure of facilities, which impacted the Scientific Instruments segment. These costs are expected to be settled by the end of fiscal year 2010.



Fiscal Year 2009 First Quarter
Plan.    During the first quarter of fiscal year 2009, the Company committed to a separate plan to reduce its employee headcount in order to reduce operating costs and increase margins. The plan involved the
termination of approximately 30 employees, mostly located in Europe. The restructuring costs related to this plan primarily consist of one-time termination benefits, which are expected to be settled by the end of fiscal year 2010. This
restructuring plan did not involve any non-cash components. Costs relating to restructuring activities recorded under this plan have been included in cost of sales, selling, general and administrative expenses and research and development
expenses.



F-19



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



The following table sets forth changes in the Companys restructuring liability
relating to the foregoing plan during fiscal year 2009:



|                                               |  |                  |        |   |                    |   |       |  |   |        |  
|---------------------------------------------- |  | ---------------- | ------ | - | ------------------ | - | ----- |  | - | ------ | -
|                                               |  | Employee-Related |        |   | Facilities-Related |   | Total | 
|(in thousands)                                 |  |                  |        |   |                    |   |       |  |   |        |  
|Balance at October 3, 2008                     |  | $                |       |   |                    | $ |      |  | $ |       |  
|Charges to expense, net                        |  |                  | 1,354  |   |                    |   |      |  |   | 1,354  |  
|Cash payments                                  |  |                  | (1,309 | ) |                    |   |      |  |   | (1,309 | )
|Foreign currency impacts and other adjustments |  |                  | 39     |   |                    |   |      |  |   | 39     |  
|                                               |  |                  |        |   |                    |   |       |  |   |        |  
|Balance at October 2, 2009                     |  | $                | 84     |   |                    | $ |      |  | $ | 84     |  
|                                               |  |                  |        |   |                    |   |       |  |   |        |  
|Total expense since inception of plan          |  |                  |        |   |                    |   |       |  |   |        |  
|(in millions)                                  |  |                  |        |   |                    |   |       |  |   |        |  
|Restructuring expense                          |  |                  |        |   |                    |   |       |  | $ | 1.4    |  
|                                               |  |                  |        |  
|Other restructuring-related costs              |  |                  |        |   |                    |   |       |  | $ | 0.1    |  
|                                               |  |                  |        |  



The
restructuring expense of $1.4 million recorded during fiscal year 2009 related to employee termination benefits, of which $1.2 million impacted the Scientific Instruments segment and $0.2 million impacted the Vacuum Technologies segment. The Company
also incurred $0.1 million in other employee-related costs during the period which impacted the Scientific Instruments segment.



Fiscal Year 2007 Plan.    During fiscal year 2007, the Company committed to a plan to combine and optimize the
development and assembly of most of its nuclear magnetic resonance (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 created an information rich detection (IRD) center in Walnut Creek, California, where NMR operations that were previously located in Palo Alto, California were integrated
with mass spectrometry operations already located in Walnut Creek. The Company is investing in a substantial remodel of an existing building and invested in a new 45,000 square foot building there to house the IRD center.



As a result of the plan, a number of employee positions were
relocated or eliminated and certain facilities were consolidated. These actions primarily impacted the Scientific Instruments segment and involved the elimination of between approximately 40 and 60 positions.



Restructuring and other related costs associated with this plan
include one-time termination benefits, retention and relocation 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. These costs are currently estimated to be between $12.5 million and $15.0 million, of which $1.3 million was incurred in fiscal year 2009, $5.5 million was incurred in fiscal year 2008 and
$4.3 million was incurred in fiscal year 2007. The estimated remaining costs are expected to be recorded and settled through the fourth quarter of fiscal year 2010. Costs relating to restructuring activities recorded under this plan have been
included in cost of sales, selling, general and administrative expenses and research and development expenses.



F-20



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



The following table sets forth changes in the Companys restructuring liability
relating to the foregoing plan during fiscal years 2009, 2008 and 2007:



|                                               |  |                  |        |     |                    |   |      |       |  |   |        |  
|---------------------------------------------- |  | ---------------- | ------ | --- | ------------------ | - | ---- | ----- |  | - | ------ | -
|                                               |  | Employee-Related |        |     | Facilities-Related |   |      | Total | 
|(in thousands)                                 |  |                  |        |     |                    |   |      |       |  |   |        |  
|Balance at September 29, 2006                  |  | $                |       |     |                    | $ |     |       |  | $ |       |  
|Charges to expense, net                        |  |                  | 2,301  |     |                    |   |     |       |  |   | 2,301  |  
|Cash payments                                  |  |                  | (145   | )   |                    |   |     |       |  |   | (145   | )
|Foreign currency impacts and other adjustments |  |                  | 66     |     |                    |   |     |       |  |   | 66     |  
|                                               |  |                  |        |     |                    |   |      |       |  |   |        |  
|Balance at September 28, 2007                  |  |                  | 2,222  |     |                    |   |     |       |  |   | 2,222  |  
|Charges to expense, net                        |  |                  | 1,291  |     |                    |   | 761  |       |  |   | 2,052  |  
|Cash payments                                  |  |                  | (1,702 | )   |                    |   | (252 | )     |  |   | (1,954 | )
|Foreign currency impacts and other adjustments |  |                  | 29     |     |                    |   | 42   |       |  |   | 71     |  
|                                               |  |                  |        |     |                    |   |      |       |  |   |        |  
|Balance at October 3, 2008                     |  |                  | 1,840  |     |                    |   | 551  |       |  |   | 2,391  |  
|Reversals of expense, net                      |  |                  | (1,144 | )   |                    |   | (317 | )     |  |   | (1,461 | )
|Cash payments                                  |  |                  | (567   | )   |                    |   | (220 | )     |  |   | (787   | )
|Foreign currency impacts and other adjustments |  |                  | (12    | )   |                    |   | (14  | )     |  |   | (26    | )
|                                               |  |                  |        |     |                    |   |      |       |  |   |        |  
|Balance at October 2, 2009                     |  | $                | 117    |     |                    | $ |     |       |  | $ | 117    |  
|                                               |  |                  |        |     |                    |   |      |       |  |   |        |  
|Total expense since inception of plan          |  |                  |        |     |                    |   |      |       |  |   |        |  
|(in millions)                                  |  |                  |        |     |                    |   |      |       |  |   |        |  
|Restructuring expense                          |  |                  | $      | 2.9 |                   
|                                               |  |                  |        |     |                   
|Other restructuring-related costs              |  |                  | $      | 8.2 |                   
|                                               |  |                  |        |     |                   



The net
reversals of restructuring expense of $1.5 million recorded during fiscal year 2009 related to changes in estimates of certain employee termination benefits and the early cancellation of a lease agreement for a vacated facility. The restructuring
charges of $2.1 million and $2.3 million recorded during fiscal years 2008 and 2007, respectively related to employee termination benefits and costs associated with the closure of leased facilities. The Company also incurred other
restructuring-related costs of $2.8 million, $3.4 million and $2.0 million during fiscal years 2009, 2008 and 2007, 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.



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
fiscal years 2009 and 2008 follow:



|                                            |  |                   |         |   |                |   |         |  
|------------------------------------------- |  | ----------------- | ------- | - | -------------- | - | ------- | -
|                                            |  | Fiscal Year Ended |        
|                                            |  | October 2,2009    |         |   | October 3,2008 |  
|(in thousands)                              |  |                   |         |   |                |   |         |  
|Beginning balance                           |  | $                 | 13,867  |   |                | $ | 12,454  |  
|Charges to costs and expenses               |  |                   | 20,665  |   |                |   | 22,184  |  
|Warranty expenditures and other adjustments |  |                   | (21,259 | ) |                |   | (21,869 | )
|Acquired warranty liabilities               |  |                   |        |   |                |   | 1,098   |  
|                                            |  |                   |         |   |                |   |         |  
|Ending balance                              |  | $                 | 13,273  |   |                | $ | 13,867  |  
|                                            |  |                   |         |   |                |   |         |  



F-21



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Indemnification Obligations.    ASC 460, Guarantees,
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 ASC 460 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 1). 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, employee, tax, litigation 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 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



F-22



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



for which separate liabilities are recorded in the Consolidated Financial Statements. As of October 2, 2009, a total of $14.5 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 October 2, 2009 and October 3, 2008, the Company had an $18.8 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 October 2, 2009.



The following table summarizes future principal payments on borrowings under long-term debt outstanding as of October 2, 2009:



|                                          |  |              |       |       |   |      |  |      |       |      |   |            |  |   |       |  |   |   |  |   |       
|----------------------------------------- |  | ------------ | ----- | ----- | - | ---- |  | ---- | ----- | ---- | - | ---------- |  | - | ----- |  | - | - |  | - | ------
|                                          |  | Fiscal Years |       | Total
|                                          |  | 2010         |       | 2011  |   | 2012 |  | 2013 |       | 2014 |   | Thereafter | 
|(in thousands)                            |  |              |       |       |   |      |  |      |       |      |   |            |  |   |       |  |   |   |  |   |       
|Long-term debt(including current portion) |  | $            | 6,250 |       | $ |     |  | $    | 6,250 |      | $ |           |  | $ | 6,250 |  | $ |  |  | $ | 18,750
|                                          |  |              |       |       |   |      |  |      |       |      |   |            |  |   |       |  |   |   |  |   |       



Based
upon rates currently available to the Company for debt with similar terms and remaining maturities, the carrying amount of long-term debt approximates the estimated fair value.



Note 11.    Operating Lease Commitments



As of October 2, 2009, the Company was committed to
minimum rentals for certain facilities and other leased assets under long-term non-cancelable operating leases (net of non-cancelable sublease income) as follows:



|               |  |   |       
|-------------- |  | - | ------
|(in thousands) |  |   |       
|Fiscal Year    |  |   |       
|2010           |  | $ | 6,817 
|2011           |  |   | 5,097 
|2012           |  |   | 2,958 
|2013           |  |   | 2,247 
|2014           |  |   | 1,713 
|Thereafter     |  |   | 2,052 
|               |  |   |       
|Total          |  | $ | 20,884
|               |  |   |       



Rent
expense for fiscal years 2009, 2008 and 2007, was $17.6 million, $17.4 million and $16.1 million, respectively.



Note 12.    Retirement Plans



Certain employees of the Company in the U.S. are eligible to participate in the Companys sponsored, defined contribution retirement
plan. For employee contributions made after certain minimum employment conditions have been met, the Company is obligated to match the participants contribution up to 6% of their eligible compensation. Participants are entitled, upon
termination or retirement, to receive their account balances, which are held by a third-party trustee. The Company has no defined benefit plans in the U.S. In addition to the U.S. retirement plan, a number of the Companys non-U.S. subsidiaries
have retirement plans for regular full-time employees. Although most of the plans are defined contribution plans, several of them are defined benefit plans. Total expenses for all retirement plans amounted to $11.8 million, $13.0 million and
$12.5 million for fiscal years 2009, 2008 and 2007, respectively.



F-23



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



As of September 28, 2007, the Company adopted the provisions of ASC 715-30, Defined
Benefit PlansPension. In accordance with this accounting standard, the Company recognizes the funded status of defined benefit postretirement plans (other than multiemployer plans) as an asset or liability in its consolidated balance sheet
and recognizes changes in the funded status in the year in which the changes occur through comprehensive income.



The components of the amount recognized in accumulated other comprehensive income at October 2, 2009 and October 3, 2008 were as
follows:



|                                                                                                                                |  |                |       |   |                |   |       |  
|------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----- | - | -------------- | - | ----- | -
|                                                                                                                                |  | October 2,2009 |       |   | October 3,2008 |  
|(in thousands)                                                                                                                  |  |                |       |   |                |   |       |  
|Components of accumulated other comprehensive income(before taxes of $611 and $261 in fiscal years 2009 and 2008,
respectively) |  |                |       |   |                |   |       |  
|Prior service costs                                                                                                             |  | $              |      |   |                | $ | 179   |  
|Transition assets                                                                                                               |  |                | (19   | ) |                |   | (28   | )
|Net actuarial loss                                                                                                              |  |                | 2,964 |   |                |   | 2,089 |  
|Foreign currency changes and other adjustments                                                                                  |  |                | 1,533 |   |                |   | 647   |  
|                                                                                                                                |  |                |       |   |                |   |       |  
|Total                                                                                                                           |  | $              | 4,478 |   |                | $ | 2,887 |  
|                                                                                                                                |  |                |       |   |                |   |       |  



The
portion of this amount expected to be amortized into net periodic pension cost in fiscal year 2010 is not significant.



Changes in the projected benefit obligation, fair value of plan assets and funded status relating to the Companys defined benefit
pension plans follows:



|                                                                    |  |                   |         |   |                |   |         |                   |  |   |         |  
|------------------------------------------------------------------- |  | ----------------- | ------- | - | -------------- | - | ------- | ----------------- |  | - | ------- | -
|                                                                    |  | Fiscal Year Ended |        
|                                                                    |  | October 2,2009    |         |   | October 3,2008 |   |         | September 28,2007 | 
|(in thousands)                                                      |  |                   |         |   |                |   |         |                   |  |   |         |  
|Change in projected benefit obligation                              |  |                   |         |   |                |   |         |                   |  |   |         |  
|Projected benefit obligation at beginning of fiscal year            |  | $                 | 47,653  |   |                | $ | 53,333  |                   |  | $ | 52,071  |  
|Service cost, including plan participant contributions              |  |                   | 856     |   |                |   | 1,573   |                   |  |   | 1,721   |  
|Interest cost                                                       |  |                   | 2,528   |   |                |   | 2,957   |                   |  |   | 2,601   |  
|Actuarial loss (gain)                                               |  |                   | 2,606   |   |                |   | (5,367  | )                 |  |   | (6,110  | )
|Foreign currency changes                                            |  |                   | (1,573  | ) |                |   | (3,749  | )                 |  |   | 4,161   |  
|Benefit payments                                                    |  |                   | (1,483  | ) |                |   | (1,094  | )                 |  |   | (1,111  | )
|                                                                    |  |                   |         |   |                |   |         |                   |  |   |         |  
|Projected benefit obligation at end of fiscal year                  |  | $                 | 50,587  |   |                | $ | 47,653  |                   |  | $ | 53,333  |  
|                                                                    |  |                   |         |   |                |   |         |                   |  |   |         |  
|Change in fair value of plan assets and funded status               |  |                   |         |   |                |   |         |                   |  |   |         |  
|Fair value of plan assets at beginning of fiscal year               |  | $                 | 39,304  |   |                | $ | 44,236  |                   |  | $ | 37,279  |  
|Actual return on plan assets                                        |  |                   | 3,016   |   |                |   | (2,731  | )                 |  |   | 3,163   |  
|Employer and plan participant contributions                         |  |                   | 842     |   |                |   | 1,762   |                   |  |   | 1,617   |  
|Foreign currency changes                                            |  |                   | (1,093  | ) |                |   | (2,869  | )                 |  |   | 3,288   |  
|Benefit and expense payments                                        |  |                   | (1,483  | ) |                |   | (1,094  | )                 |  |   | (1,111  | )
|                                                                    |  |                   |         |   |                |   |         |                   |  |   |         |  
|Fair value of plan assets at end of fiscal year                     |  |                   | 40,586  |   |                |   | 39,304  |                   |  |   | 44,236  |  
|Projected benefit obligation at end of fiscal year                  |  |                   | (50,587 | ) |                |   | (47,653 | )                 |  |   | (53,333 | )
|                                                                    |  |                   |         |   |                |   |         |                   |  |   |         |  
|Projected benefit obligation in excess of fair value of plan assets |  |                   | (10,001 | ) |                |   | (8,349  | )                 |  |   | (9,097  | )
|Unrecognized prior service cost                                     |  |                   |        |   |                |   |        |                   |  |   |        |  
|Unrecognized net actuarial loss                                     |  |                   |        |   |                |   |        |                   |  |   |        |  
|                                                                    |  |                   |         |   |                |   |         |                   |  |   |         |  
|Net accrued benefit cost at end of fiscal year                      |  | $                 | (10,001 | ) |                | $ | (8,349  | )                 |  | $ | (9,097  | )
|                                                                    |  |                   |         |   |                |   |         |                   |  |   |         |  



F-24



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Additional information pertaining to the Companys defined benefit pension plans as
of the end of fiscal years 2009 and 2008 is outlined below:



|                                                                               |  |                |         |   |                |   |         |  
|------------------------------------------------------------------------------ |  | -------------- | ------- | - | -------------- | - | ------- | -
|                                                                               |  | October 2,2009 |         |   | October 3,2008 |  
|(dollars in thousands)                                                         |  |                |         |   |                |   |         |  
|Amounts included in the Consolidated Balance Sheet                             |  |                |         |   |                |   |         |  
|Other (long-term) assets                                                       |  | $              | 4,075   |   |                | $ | 5,241   |  
|Current liabilities                                                            |  |                | (4      | ) |                |   | (22     | )
|Other (long-term) liabilities                                                  |  |                | (14,072 | ) |                |   | (13,568 | )
|                                                                               |  |                |         |   |                |   |         |  
|Net accrued benefit cost at end of fiscal year                                 |  | $              | (10,001 | ) |                | $ | (8,349  | )
|                                                                               |  |                |         |   |                |   |         |  
|Accumulated benefit obligation for all defined benefit pension plans           |  | $              | 49,764  |   |                | $ | 42,974  |  
|                                                                               |  |                |         |   |                |   |         |  
|Weighted-average assumptions used to determine benefit obligations             |  |                |         |   |                |   |         |  
|Discount rate                                                                  |  |                | 5.4     | % |                |   | 6.0     | %
|Rate of compensation increases                                                 |  |                | 2.6     | % |                |   | 3.5     | %
|                                                                               |  |               
|Weighted-average asset allocations by asset category                           |  |                |         |   |                |   |         |  
|Equity securities                                                              |  |                | 39      | % |                |   | 35      | %
|Debt securities                                                                |  |                | 49      |   |                |   | 52      |  
|Cash                                                                           |  |                | 3       |   |                |   | 3       |  
|Real estate                                                                    |  |                | 1       |   |                |   | 2       |  
|Other                                                                          |  |                | 8       |   |                |   | 8       |  
|                                                                               |  |                |         |   |                |   |         |  
|Total                                                                          |  |                | 100     | % |                |   | 100     | %
|                                                                               |  |                |         |   |                |   |         |  
|Additional information                                                         |  |                |         |   |                |   |         |  
|Increase in minimum liability included in other comprehensive income after tax |  | $              | 2,097   |   |                | $ | 965     |  
|                                                                               |  |                |         |   |                |   |         |  



Information relating to defined benefit pension plans with an accumulated benefit obligation in excess of the fair value of plan assets follows:



|                               |  |                |        |                |   |       
|------------------------------ |  | -------------- | ------ | -------------- | - | ------
|                               |  | October 2,2009 |        | October 3,2008
|(in thousands)                 |  |                |        |                |   |       
|Projected benefit obligation   |  | $              | 38,143 |                | $ | 37,367
|Accumulated benefit obligation |  | $              | 37,320 |                | $ | 32,688
|Fair value of plan assets      |  | $              | 24,067 |                | $ | 23,777



Net
Periodic Pension Cost.    Net periodic pension cost for defined benefit pension plans is determined in accordance with ASC 715-30 and is made up of several components that reflect different aspects of the Companys
pension-related financial arrangements and the cost of benefits earned by participating employees. These components are determined using certain actuarial assumptions.



F-25



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



The components of the Companys net periodic pension cost relating to defined
benefit pension plans and the weighted-average assumptions used to determine that cost follow:



|                                                                         |  |                |        |   |                |   |        |                   |  |   |        |  
|------------------------------------------------------------------------ |  | -------------- | ------ | - | -------------- | - | ------ | ----------------- |  | - | ------ | -
|                                                                         |  | October 2,2009 |        |   | October 3,2008 |   |        | September 28,2007 | 
|(dollars in thousands)                                                   |  |                |        |   |                |   |        |                   |  |   |        |  
|Components of net periodic pension cost                                  |  |                |        |   |                |   |        |                   |  |   |        |  
|Service cost, net of plan participant contributions                      |  | $              | 709    |   |                | $ | 1,232  |                   |  | $ | 1,387  |  
|Interest cost                                                            |  |                | 2,528  |   |                |   | 2,957  |                   |  |   | 2,601  |  
|Expected return on plan assets                                           |  |                | (1,931 | ) |                |   | (2,657 | )                 |  |   | (2,126 | )
|Amortization of prior service cost and actuarial (gains) and losses      |  |                | (69    | ) |                |   | (3     | )                 |  |   | 460    |  
|Curtailment loss recognized                                              |  |                | 148    |   |                |   |       |                   |  |   |       |  
|                                                                         |  |                |        |   |                |   |        |                   |  |   |        |  
|Net periodic pension cost                                                |  | $              | 1,385  |   |                | $ | 1,529  |                   |  | $ | 2,322  |  
|                                                                         |  |                |        |   |                |   |        |                   |  |   |        |  
|Weighted-average assumptions used to determine net periodic pension cost |  |                |        |   |                |   |        |                   |  |   |        |  
|Discount rate                                                            |  |                | 6.0    | % |                |   | 5.5    | %                 |  |   | 4.8    | %
|Expected return on plan assets                                           |  |                | 5.7    | % |                |   | 5.8    | %                 |  |   | 5.4    | %
|Rate of compensation increases                                           |  |                | 3.5    | % |                |   | 3.6    | %                 |  |   | 4.1    | %



Basis
for Assumptions.    The Company utilizes yields on country-specific, long-term Corporate AA bond indices (typically 10- or 15-year indices based on the expected timing of benefit payments) as the basis for its discount rate
assumptions for each of its defined benefit pension plans. With regard to the expected return assumption, plan assets in most countries are invested in low-risk, long-term fixed income investments such as direct insurance policies and guaranteed
insurance contracts. For these asset types, the expected rate of return is established either by reference to yields on comparable long-term corporate bond indices in that country or the return guaranteed by the issuer of the investment security
(net of expenses). The exception to this is in the United Kingdom, where the majority of plan assets are invested in equity securities, with the remainder invested typically in corporate bonds, real estate and cash. Due to the nature of these
investments, long-term money and corporate bond yields and an implied equity risk premium are considered in establishing the asset return assumption for the defined benefit pension plan in the United Kingdom.



Defined Benefit Pension Plan
Curtailment.    During fiscal year 2009, the Company ceased future benefit accruals to its defined benefit pension plan in the United Kingdom. In connection with this action, the Company recorded a curtailment loss of $0.1
million during fiscal year 2009.



Employer
Contributions.    During fiscal year 2009, the Company made contributions totaling approximately $0.7 million to its defined benefit pension plans. The Company currently anticipates contributing an additional $0.3 million to
its defined benefit pension plans in fiscal year 2010.



Estimated Future Benefit Payments.As of October 2, 2009, benefit payments, which reflect expected future service (as appropriate), are expected to be as follows:



|              |  |   |    
|------------- |  | - | ---
|(in millions) |  |   |    
|Fiscal Year   |  |   |    
|2010          |  | $ | 0.9
|2011          |  | $ | 1.0
|2012          |  | $ | 1.0
|2013          |  | $ | 1.1
|2014          |  | $ | 1.2
|2015-2019     |  | $ | 8.1



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Other Postretirement Benefits.    At the Distribution
(described in Note 1), the Company assumed responsibility for certain post-employment and postretirement benefits for active employees of the Company; the responsibility for all others, principally retirees of VAI, remained with VMS, although the
Company is obligated to reimburse VMS for certain costs relating to certain VAI retirees. The Companys portion of assets and liabilities as well as related expenses for shared post-employment and postretirement benefits have been included in
these Consolidated Financial Statements. As of both October 2, 2009 and October 3, 2008, the Company had accrued $0.9 million in current liabilities relating to these obligations. The Company also had accrued $6.4 million as of
October 2, 2009 and $5.6 million as of October 3, 2008, in other non-current liabilities relating to these obligations.



Note 13.    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 1) 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.



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
October 2, 2009, it was nonetheless estimated that the Companys future exposure for these environmental-related costs ranged in the aggregate from $1.0 million to $2.6 million. The time frame over which these costs are expected to be
incurred varies with each type of cost, ranging up to approximately 30 years as of October 2, 2009. 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 $1.0 million as of October 2, 2009 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 October 2, 2009, it was estimated that the Companys future costs for these environmental-related activities ranged in the aggregate from $2.6 million to $12.7 million. The time frame over which these costs are expected
to be incurred varies, ranging up to approximately 30 years as of October 2, 2009. 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 $5.5 million at October 2, 2009. 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 October 2, 2009, which represents its best estimate of these future environmental-related costs after discounting estimated recurring future costs. This accrual is in addition to the $1.0 million
described in the preceding paragraph.



F-27



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



At October 2, 2009, the Companys reserve for environmental-related costs,
based upon future environmental-related costs estimated by the Company as of that date, was calculated as follows:



|                                          |  |                |      |                    |   |                             |  |   |     | 
|----------------------------------------- |  | -------------- | ---- | ------------------ | - | --------------------------- |  | - | --- | 
|                                          |  | RecurringCosts |      | Non-RecurringCosts |   | TotalAnticipatedFuture Cost | 
|(in millions)                             |  |                |      |                    |   |                             |  |   |     | 
|Fiscal Year                               |  |                |      |                    |   |                             |  |   |     | 
|2010                                      |  | $              | 0.4  |                    | $ | 0.4                         |  | $ | 0.8 | 
|2011                                      |  |                | 0.2  |                    |   | 0.4                         |  |   | 0.6 | 
|2012                                      |  |                | 0.3  |                    |   | 0.3                         |  |   | 0.6 | 
|2013                                      |  |                | 0.2  |                    |   | 0.2                         |  |   | 0.4 | 
|2014                                      |  |                | 0.2  |                    |   | 0.2                         |  |   | 0.4 | 
|Thereafter                                |  |                | 3.2  |                    |   | 0.6                         |  |   | 3.8 | 
|                                          |  |                |      |                    |   |                             |  |   |     | 
|Total costs                               |  | $              | 4.5  |                    | $ | 2.1                         |  |   | 6.6 | 
|                                          |  |                |      |                    |   |                             |  |   |     | 
|Less imputed interest                     |  |                | (1.6 | )                 
|                                          |  |                |      |                    |   |                             |  |   |     | 
|Reserve amount                            |  |                | 5.0  |                   
|Less current portion                      |  |                | (0.8 | )                 
|                                          |  |                |      |                    |   |                             |  |   |     | 
|Long-term (included in Other liabilities) |  | $              | 4.2  |                   
|                                          |  |                |      |                    |   |                             |  |   |     | 



The
foregoing amounts are only estimates of anticipated future environmental-related costs and the amounts actually spent in the years indicated may be greater or less than such estimates. The aggregate range of cost estimates reflects various
uncertainties inherent in many environmental investigation, monitoring and remediation activities and the large number of sites where such investigation, monitoring and remediation activities are being undertaken.



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 October 2, 2009, 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
14.    Stockholders Equity



Stock Rights, Stock Plans and Stock Repurchase Programs



On April 2, 1999, stockholders of record of VAI on March 24, 1999 received in the Distribution (described in Note 1) one share of the Companys common stock for each share of VAI common
stock held on April 2, 1999. Each stockholder also received one preferred stock purchase right (Right) for each



F-28



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



share of common stock distributed, entitling the stockholder to purchase one one-thousandth of a share of Participating Preferred Stock, par value $0.01 per share, for $200.00 (subject to
adjustment), in the event of certain changes in the Companys ownership. The Participating Preferred Stock was designed so that each one one-thousandth of a share had economic and voting terms similar to those of one share of common stock.
During the second quarter of fiscal year 2009, the Rights expired. As of April 2, 2009, when the Rights had expired, no Rights were eligible to be exercised and none had been exercised through that date.



Omnibus Stock
Plan.Effective April 2, 1999, the Company adopted the Omnibus Stock Plan (OSP) under which shares of common stock can be issued to officers, directors and employees. The OSP has been approved by
the Companys stockholders and is administered by the Compensation Committee of the Companys Board of Directors. At October 2, 2009, a total of 3,656,000 shares were available for issuance under the OSP.



Employee Stock Purchase
Plan.During fiscal year 2000, the Companys Board of Directors approved the Employee Stock Purchase Plan (ESPP), which was approved by the Companys stockholders in February 2003. Under the ESPP,
eligible Company employees may set aside, through payroll deductions, between 1% and 10% of eligible compensation for purchases of the Companys common stock. The participants purchase price is the lower of 85% of the stocks market
value on the enrollment date or 85% of the stocks market value on the purchase date. Prior to fiscal year 2006, enrollment dates occurred every six months and purchase dates occurred each quarter. Beginning in fiscal year 2006, the Company
reduced the length of each offering period under its ESPP from six months to three months. At October 2, 2009, a total of 46,000 shares were 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 fiscal year
2009, the Company repurchased and retired 344,000 shares under this authorization at an aggregate cost of $7.1 million. During fiscal year 2008, the Company repurchased and retired 1,070,000 shares under this authorization at an aggregate cost of
$55.4 million. As of October 2, 2009, the Company had remaining authorization to repurchase $37.5 million of its common stock under this program. However, under the terms of the Merger Agreement with Agilent, the Company is generally prohibited
from repurchasing any shares of its common stock without the prior consent of Agilent.



In January 2007, the Companys Board of Directors approved a stock repurchase program under which the Company is authorized to utilize up to $100 million to repurchase shares of its common stock.
This repurchase program was effective through December 31, 2008. During fiscal year 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. During fiscal year 2007, the Company repurchased and retired 862,000 shares under this authorization at an aggregate cost of $49.6 million.



In November 2005, 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 was effective through September 30, 2007. During fiscal year 2007, the Company repurchased and retired 820,000 shares under this authorization at an aggregate
cost of $37.0 million, which completed this repurchase program.



Other Stock Repurchases.During both fiscal years 2009 and 2008, the Company repurchased and retired approximately 16,000 shares tendered to it by employees in
settlement of employee tax withholding obligations due from those employees upon the vesting of restricted stock in each of those respective periods.



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Share-Based Compensation



Stock Options.    Under the 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 of the Companys Board of Directors, 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). Stock Options generally vest in three
equal annual installments over three years from the grant date.



The following table summarizes stock option activity under the OSP for the periods indicated:



|                                  |  |                |   |  |                              |  |                                  |  |                                         |  |                        
|--------------------------------- |  | -------------- | - |  | ---------------------------- |  | -------------------------------- |  | --------------------------------------- |  | -----------------------
|                                  |  | Shares         |   |  | WeightedAverageExercisePrice |  | AggregateGrant DateFair Value(1) |  | WeightedAverageRemainingContractualLife |  | AggregateIntrinsicValue
|                                  |  | (in thousands) |   |  |                              |  | (in millions)                    |  | (in years)                              |  | (in millions)          
|Outstanding at September 29, 2006 |  | 2,493          |   |  | $  33.30                     |  |                                  |  | 5.4                                     |  | $  31.4                
|Granted                           |  | 339            |   |  | $  46.13                     |  | $  5.0                           |  |                                         |  |                        
|Exercised                         |  | (1,001         | ) |  | $  28.12                     |  |                                  |  |                                         |  |                        
|Cancelled or expired              |  | (48            | ) |  | $  41.22                     |  |                                  |  |                                         |  |                        
|                                  |  |                |   |  |                              |  |                                  |  |                                         |  |                        
|Outstanding at September 28, 2007 |  | 1,783          |   |  | $  38.43                     |  |                                  |  | 5.6                                     |  | $  44.9                
|Granted                           |  | 301            |   |  | $  66.71                     |  | $  5.9                           |  |                                         |  |                        
|Exercised                         |  | (410           | ) |  | $  35.07                     |  |                                  |  |                                         |  |                        
|Cancelled or expired              |  | (14            | ) |  | $  59.04                     |  |                                  |  |                                         |  |                        
|                                  |  |                |   |  |                              |  |                                  |  |                                         |  |                        
|Outstanding at October 3, 2008    |  | 1,660          |   |  | $  44.21                     |  |                                  |  | 5.7                                     |  | $  24.0                
|Granted                           |  | 334            |   |  | $  35.44                     |  | $  3.6                           |  |                                         |  |                        
|Exercised                         |  | (151           | ) |  | $  30.13                     |  |                                  |  |                                         |  |                        
|Cancelled or expired              |  | (57            | ) |  | $  43.15                     |  |                                  |  |                                         |  |                        
|                                  |  |                |   |  |                              |  |                                  |  |                                         |  |                        
|Outstanding at October 2, 2009    |  | 1,786          |   |  | $  43.80                     |  |                                  |  | 5.8                                     |  | $  17.6                
|                                  |  |                |   |  |                              |  |                                  |  |                                         |  |                        
|Exercisable at October 2, 2009    |  | 1,191          |   |  | $  42.20                     |  |                                  |  | 4.4                                     |  | $  12.2                
|                                  |  |                |   |  |                              |  |                                  |  |                                         |  |                        



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



The intrinsic value of options exercised in fiscal years 2009, 2008 and 2007 was $2.1 million, $11.4 million and $26.2 million, respectively.



Share-based compensation expense related to stock
options was $4.8 million, $5.5 million and $6.7 million in fiscal years 2009, 2008 and 2007, respectively. As of October 2, 2009, the unrecognized share-based compensation balance related to stock options was $3.3 million. This amount will be
recognized as expense using the straight-line attribution method over the remaining weighted-average amortization period of 1.2 years.



Restricted (Nonvested) Stock.Under the OSP, the Company also periodically grants restricted (nonvested) common
stock to employees. Such grants are valued using the quoted market value of the underlying common stock as of the grant date. The fair value of these shares is then recognized by the Company as share-based compensation expense ratably over their
respective vesting periods, which range from one to three years.



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



The following table summarizes restricted (nonvested) common stock activity under the
OSP for the periods indicated:



|                                  |  |                |   |  |                                     |  |                              
|--------------------------------- |  | -------------- | - |  | ----------------------------------- |  | -----------------------------
|                                  |  | Shares         |   |  | WeightedAverageGrant DateFair Value |  | AggregateGrant DateFair Value
|                                  |  | (in thousands) |   |  |                                     |  | (in millions)                
|Outstanding at September 29, 2006 |  | 52             |   |  | $  39.51                            |  |                              
|Granted                           |  | 59             |   |  | $  47.83                            |  | $  2.8                       
|                                  |  |                |   |  |                                     |  |                              
|Outstanding at September 28, 2007 |  | 111            |   |  | $  43.92                            |  |                              
|Granted                           |  | 46             |   |  | $  67.55                            |  | $  3.1                       
|Vested(2)                         |  | (52            | ) |  | $  43.48                            |  |                              
|                                  |  |                |   |  |                                     |  |                              
|Outstanding at October 3, 2008    |  | 105            |   |  | $  54.51                            |  |                              
|Granted(1)                        |  | 122            |   |  | $  24.18                            |  | $  2.9                       
|Vested(2)                         |  | (68            | ) |  | $  50.76                            |  |                              
|Forfeited                         |  | (3             | ) |  | $  53.56                            |  |                              
|                                  |  |                |   |  |                                     |  |                              
|Outstanding at October 2, 2009    |  | 156            |   |  | $  32.51                            |  |                              
|                                  |  |                |   |  |                                     |  |                              



|(1) |  | Includes 63,000 shares for which vesting is subject to both a performance condition and continued service.
|--- |  | ----------------------------------------------------------------------------------------------------------

|(2) |  | Includes shares tendered to the Company by employees in settlement of employee tax withholding obligations.
|--- |  | -----------------------------------------------------------------------------------------------------------



The fair value of restricted stock that vested in fiscal years
2009 and 2008 was $2.1 million and $2.8 million, respectively. There was no restricted stock that vested in fiscal year 2007.



Share-based compensation expense related to restricted (nonvested) common stock was $1.9 million, $2.9 million and $2.2 million in fiscal
years 2009, 2008 and 2007, respectively. As of October 2, 2009, there was $2.9 million of total unrecognized compensation expense related to restricted (nonvested) common stock granted under the OSP. This expense is expected to be recognized
over a weighted-average period of 2.0 years.



Performance Shares.    During fiscal year 2008, the Company implemented a long-term performance share program. Under this program, vested shares of the Companys common stock could be granted under the OSP to
certain key employees, depending on the Companys performance relative to pre-determined long-term earnings per share targets.



As of October 2, 2009, targeted performance shares had been awarded for two performance periods, key aspects of which are summarized
below:



|                         |  |                          |  |                                     
|------------------------ |  | ------------------------ |  | ------------------------------------
|Performance period       |  | Range of shares issuable |  | Timing of share issuance (if earned)
|Fiscal years 2008  2010 |  | 0  73,000               |  | Fiscal year 2011                    
|Fiscal years 2009  2011 |  | 0  121,800              |  | Fiscal year 2012                    



As of
October 2, 2009, no performance share awards were earned or were expected to be earned based on the pre-determined criteria and no share based compensation expense related to these performance shares has been recognized in fiscal years 2009 or 2008.



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 does not have rights as a stockholder with respect to the



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



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 both fiscal years 2009 and 2008, the Company granted stock units with an aggregate value of $225,000 to non-employee members of its Board of Directors (of which there were five) and recognized the total value of $225,000 as
share-based compensation expense at the time of grant in each of those respective periods. During fiscal year 2007, the Company granted stock units with an aggregate value of $125,000 to non-employee members of its Board of Directors (of which there
were five) and recognized the total value of $125,000 as share-based compensation expense at the time of grant.



Employee Stock Purchase Plan.    Under the ESPP, employees purchased 142,200 shares for $3.6 million, 79,100
shares for $3.9 million and 96,600 shares for $3.8 million, during fiscal years 2009, 2008 and 2007, respectively.



During fiscal year 2009, the weighted-average estimated fair value of the option to purchase a share of the Companys common stock under
the ESPP was $5.98 per share for offering periods during the year. During fiscal year 2008, the weighted-average estimated fair value of the option to purchase a share of the Companys common stock under the ESPP was $13.88 per share for
offering periods during the year. During fiscal year 2007, the weighted-average estimated fair value of the option to purchase a share of the Companys common stock under the ESPP was $10.87 per share for offering periods during the year.



Share-Based Compensation
Expense.    The following table summarizes the amount of share-based compensation expense by award type as well as the effect of this expense on income tax expense and net earnings:



|                                                                                |  |                   |        |   |                |   |        |                   |  |   |        |  
|------------------------------------------------------------------------------- |  | ----------------- | ------ | - | -------------- | - | ------ | ----------------- |  | - | ------ | -
|                                                                                |  | Fiscal Year Ended |       
|                                                                                |  | October 2,2009    |        |   | October 3,2008 |   |        | September 28,2007 | 
|(in thousands)                                                                  |  |                   |        |   |                |   |        |                   |  |   |        |  
|Share-based compensation expense by award type:                                 |  |                   |        |   |                |   |        |                   |  |   |        |  
|Employee and non-employee director stock options                                |  | $                 | 4,768  |   |                | $ | 5,484  |                   |  | $ | 6,653  |  
|Employee stock purchase plan                                                    |  |                   | 815    |   |                |   | 1,048  |                   |  |   | 948    |  
|Restricted (nonvested) stock                                                    |  |                   | 1,897  |   |                |   | 2,916  |                   |  |   | 2,220  |  
|Non-employee director stock units                                               |  |                   | 225    |   |                |   | 225    |                   |  |   | 125    |  
|                                                                                |  |                   |        |   |                |   |        |                   |  |   |        |  
|Total share-based compensation expense (effect on earnings before income taxes) |  |                   | 7,705  |   |                |   | 9,673  |                   |  |   | 9,946  |  
|Effect on income tax expense                                                    |  |                   | (2,671 | ) |                |   | (2,686 | )                 |  |   | (3,622 | )
|                                                                                |  |                   |        |   |                |   |        |                   |  |   |        |  
|Effect on net earnings                                                          |  | $                 | 5,034  |   |                | $ | 6,987  |                   |  | $ | 6,324  |  
|                                                                                |  |                   |        |   |                |   |        |                   |  |   |        |  



Share-based compensation expense included in the preceding table related to restricted (non-vested) stock includes $238,000, $332,000 and $128,000 in fiscal years 2009, 2008 and 2007, respectively, related to shares granted in connection
with the Companys fiscal year 2007 restructuring plan.



Share-based compensation expense recorded has been included in the Companys Consolidated Statement of Earnings as follows:



|                                    |  |                   |       |                |   |                   |  |   |      
|----------------------------------- |  | ----------------- | ----- | -------------- | - | ----------------- |  | - | -----
|                                    |  | Fiscal Year Ended
|                                    |  | October 2,2009    |       | October 3,2008 |   | September 28,2007
|(in thousands)                      |  |                   |       |                |   |                   |  |   |      
|Cost of sales                       |  | $                 | 388   |                | $ | 463               |  | $ | 443  
|Selling, general and administrative |  |                   | 7,034 |                |   | 8,728             |  |   | 8,970
|Research and development            |  |                   | 283   |                |   | 482               |  |   | 533  
|                                    |  |                   |       |                |   |                   |  |   |      
|Total                               |  | $                 | 7,705 |                | $ | 9,673             |  | $ | 9,946
|                                    |  |                   |       |                |   |                   |  |   |      



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Capitalizable share-based compensation expense relating to inventory or deferred cost of
sales (a component of deferred profit) was not significant at October 2, 2009, October 3, 2008 and September 28, 2007.



Valuation Assumptions.    The Company estimates the fair value of employee stock options granted under the OSP and
shares issued under the ESPP using the Black-Scholes option-pricing model. The fair value of each option grant under the OSP and each share issuance under the ESPP was estimated on the date of grant using the Black-Scholes model with the
following weighted-average assumptions:



|                                                  |  |                   |   |  |                |   |  |                   |  
|------------------------------------------------- |  | ----------------- | - |  | -------------- | - |  | ----------------- | -
|                                                  |  | Fiscal Year Ended |  
|                                                  |  | October 2,2009    |   |  | October 3,2008 |   |  | September 28,2007 |  
|Employee and non-employee director stock options: |  |                   |   |  |                |   |  |                   |  
|Expected dividend yield                           |  | 0.0               | % |  | 0.0            | % |  | 0.0               | %
|Risk-free interest rate                           |  | 2.5               | % |  | 3.4            | % |  | 4.6               | %
|Expected price volatility                         |  | 34                | % |  | 29             | % |  | 30                | %
|Expected life (in years)                          |  | 4.7               |   |  | 4.5            |   |  | 4.5               |  
|                                                  |  |                   |  
|Employee stock purchase plan purchases:           |  |                   |   |  |                |   |  |                   |  
|Expected dividend yield                           |  | 0.0               | % |  | 0.0            | % |  | 0.0               | %
|Risk-free interest rate                           |  | 0.1               | % |  | 2.1            | % |  | 5.0               | %
|Expected price volatility                         |  | 61                | % |  | 39             | % |  | 28                | %
|Expected life (in years)                          |  | 0.3               |   |  | 0.3            |   |  | 0.3               |  



Option-pricing models require the input of highly subjective assumptions, including the expected forfeiture rate and life of the option and the expected price volatility of the underlying stock. The Company estimates the expected forfeiture
and expected life assumptions based on historical experience. In determining the Companys expected stock price volatility assumption, the Company reviews both the historical and implied volatility of the Companys common stock, with
implied volatility based on the implied volatility of publicly traded options on the Companys common stock. The Company determines the expected stock price volatility assumption using a combination of historical and implied volatility unless
the volume or maturity of these publicly traded options does not satisfy the conditions to use implied volatility. The expected stock price volatility assumption for fiscal years 2009 and 2008 was determined using only the historical volatility of
the Companys common stock. For fiscal year 2007, the expected stock price volatility assumption was determined using a combination of the historical and implied volatility of the Companys common stock.



Note 15.    Income Taxes



The sources of earnings before income taxes follow:



|                             |  |                   |         |   |                |   |         |                   |  |   |         |  
|---------------------------- |  | ----------------- | ------- | - | -------------- | - | ------- | ----------------- |  | - | ------- | -
|                             |  | Fiscal Year Ended |        
|                             |  | October 2,2009    |         |   | October 3,2008 |   |         | September 28,2007 | 
|(in thousands)               |  |                   |         |   |                |   |         |                   |  |   |         |  
|United States                |  | $                 | (27,141 | ) |                | $ | (7,359  | )                 |  | $ | (3,387  | )
|Foreign                      |  |                   | 86,288  |   |                |   | 110,078 |                   |  |   | 100,215 |  
|                             |  |                   |         |   |                |   |         |                   |  |   |         |  
|Earnings before income taxes |  | $                 | 59,147  |   |                | $ | 102,719 |                   |  | $ | 96,828  |  
|                             |  |                   |         |   |                |   |         |                   |  |   |         |  



F-33



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



Income tax expense on earnings consists of the following:



|                   |  |                   |         |   |                |   |        |                   |  |   |        |  
|------------------ |  | ----------------- | ------- | - | -------------- | - | ------ | ----------------- |  | - | ------ | -
|                   |  | Fiscal Year Ended |        
|                   |  | October 2,2009    |         |   | October 3,2008 |   |        | September 28,2007 | 
|(in thousands)     |  |                   |         |   |                |   |        |                   |  |   |        |  
|Current            |  |                   |         |   |                |   |        |                   |  |   |        |  
|U.S. Federal       |  | $                 | (385    | ) |                | $ | (1,670 | )                 |  | $ | 7,730  |  
|Foreign            |  |                   | 32,134  |   |                |   | 39,909 |                   |  |   | 32,728 |  
|State and local    |  |                   | 182     |   |                |   | 1,157  |                   |  |   | 2,158  |  
|                   |  |                   |         |   |                |   |        |                   |  |   |        |  
|Total current      |  |                   | 31,931  |   |                |   | 39,396 |                   |  |   | 42,616 |  
|                   |  |                   |         |   |                |   |        |                   |  |   |        |  
|Deferred           |  |                   |         |   |                |   |        |                   |  |   |        |  
|U.S. Federal       |  |                   | (7,487  | ) |                |   | (1,422 | )                 |  |   | (8,002 | )
|Foreign            |  |                   | (3,614  | ) |                |   | (442   | )                 |  |   | 422    |  
|State and local    |  |                   | (303    | ) |                |   | 73     |                   |  |   | (1,824 | )
|                   |  |                   |         |   |                |   |        |                   |  |   |        |  
|Total deferred     |  |                   | (11,404 | ) |                |   | (1,791 | )                 |  |   | (9,404 | )
|                   |  |                   |         |   |                |   |        |                   |  |   |        |  
|Income tax expense |  | $                 | 20,527  |   |                | $ | 37,605 |                   |  | $ | 33,212 |  
|                   |  |                   |         |   |                |   |        |                   |  |   |        |  



Deferred
tax assets and liabilities are recognized for the temporary differences between the tax basis and reported amounts of assets and liabilities, and tax loss and credit carry-forwards. Their significant components follow:



|                                            |  |                |        |   |                |   |        |  
|------------------------------------------- |  | -------------- | ------ | - | -------------- | - | ------ | -
|                                            |  | October 2,2009 |        |   | October 3,2008 |  
|(in thousands)                              |  |                |        |   |                |   |        |  
|Assets                                      |  |                |        |   |                |   |        |  
|Capitalized research and development costs  |  | $              | 28,406 |   |                | $ | 22,646 |  
|Deferred compensation                       |  |                | 17,501 |   |                |   | 16,154 |  
|Inventory                                   |  |                | 14,422 |   |                |   | 12,623 |  
|Deferred profit                             |  |                | 5,294  |   |                |   | 3,564  |  
|Product warranty                            |  |                | 3,737  |   |                |   | 3,827  |  
|Loss and credit carry-forwards              |  |                | 1,665  |   |                |   | 2,292  |  
|Other                                       |  |                | 3,822  |   |                |   | 2,434  |  
|                                            |  |                |        |   |                |   |        |  
|Gross deferred tax assets                   |  |                | 74,847 |   |                |   | 63,540 |  
|Valuation allowance                         |  |                | (618   | ) |                |   | (837   | )
|                                            |  |                |        |   |                |   |        |  
|Total deferred tax assets                   |  |                | 74,229 |   |                |   | 62,703 |  
|                                            |  |                |        |   |                |   |        |  
|Liabilities                                 |  |                |        |   |                |   |        |  
|Depreciation and amortization               |  |                | 18,923 |   |                |   | 18,782 |  
|Currency translation adjustment             |  |                | 6,938  |   |                |   | 5,406  |  
|Unremitted earnings of foreign subsidiaries |  |                |       |   |                |   | 836    |  
|                                            |  |                |        |   |                |   |        |  
|Total deferred tax liabilities              |  |                | 25,861 |   |                |   | 25,024 |  
|                                            |  |                |        |   |                |   |        |  
|Net deferred tax assets                     |  | $              | 48,368 |   |                | $ | 37,679 |  
|                                            |  |                |        |   |                |   |        |  



As of
October 2, 2009, the Companys foreign manufacturing and sales subsidiaries had accumulated approximately $151 million of earnings that have been reinvested in their operations. The Company has not provided U.S. tax on these earnings.
Determination of the amount of unrecognized deferred tax liability on such earnings is not practicable.



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



As of October 2, 2009, the Company had a U.S. foreign tax credit carry-forward of
approximately $1.9 million that expires in 2019. If realized, all of this carry-forward will be accounted for as a credit to stockholders equity. None of this carry-forward has been recognized as a deferred tax asset.



As of October 2, 2009, the Company had U.S. federal
research and development credit carry-forwards of approximately $1.5 million that begin to expire in 2028 and have been recognized as a deferred tax asset.



As of October 2, 2009, the Company had foreign loss carry-forward of approximately $0.7 million that have been recognized as deferred
tax assets. A full valuation allowance has been provided on this loss carry-forward.



The difference between the reported income tax rate on earnings before income taxes and the federal statutory income tax rate is attributable to the following:



|                                              |  |                   |   |  |                |   |  |                   |  
|--------------------------------------------- |  | ----------------- | - |  | -------------- | - |  | ----------------- | -
|                                              |  | Fiscal Year Ended |  
|                                              |  | October 2,2009    |   |  | October 3,2008 |   |  | September 28,2007 |  
|Federal statutory income tax rate             |  | 35.0              | % |  | 35.0           | % |  | 35.0              | %
|State and local taxes, net of federal benefit |  | (0.1              | ) |  | 0.8            |   |  | 0.2               |  
|Foreign taxes                                 |  | (2.2              | ) |  | (2.2           | ) |  | (0.8              | )
|Costs related to pending acquisition          |  | 3.6               |   |  |               |   |  |                  |  
|U.S. taxes on dividends                       |  | 1.0               |   |  | 2.1            |   |  | (0.1              | )
|Other                                         |  | (2.6              | ) |  | 0.9            |   |  |                  |  
|                                              |  |                   |   |  |                |   |  |                   |  
|Reported income tax rate                      |  | 34.7              | % |  | 36.6           | % |  | 34.3              | %
|                                              |  |                   |   |  |                |   |  |                   |  



In fiscal
years 2009 and 2008, accumulated other comprehensive income was increased approximately $0.4 million and decreased approximately $0.6 million, respectively, due to the tax benefit of certain postretirement liabilities recognized during those
periods.



Effective September 29, 2007 (the first
day of fiscal year 2008), the Company adopted ASC 740, Income Taxes, which addresses accounting for, and disclosure of, uncertain tax positions. ASC 740 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 ASC 740, 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. In addition, the Company
reclassified certain tax liabilities for unrecognized tax benefits, as well as related potential penalties and interest, from current liabilities to long-term liabilities. 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 include interest and penalties related to income taxes within income tax expense did not change as a
result of implementing ASC 740. As of the date of adoption of ASC 740, the Company had accrued $0.7 million in income taxes payable for the payment of interest and penalties related to unrecognized tax benefits.



At October 2, 2009, the total amount of unrecognized tax
benefits excluding interest thereon was $5.4 million, substantially all of which would impact the effective tax rate if realized during the year. The Company accrued $0.2 million and reversed $0.3 million of interest and penalties related to
these unrecognized tax benefits during fiscal year 2009. Income taxes payable at October 2, 2009 included accrued interest and penalties of $0.4 million. Although the timing and outcome of income tax audits is highly uncertain, it is possible
that certain unrecognized tax benefits could decrease by up to $0.9 million in the next twelve months due to lapse of certain statutes of limitation. Any such reduction could be impacted by other changes in unrecognized tax benefits.



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



The following table summarizes the activity related to unrecognized tax benefits:



|                                                                     |  |   |        |  
|-------------------------------------------------------------------- |  | - | ------ | -
|(in thousands)                                                       |  |   |        |  
|Balance at September 29, 2007 (first day of fiscal year 2008)        |  | $ | 6,924  |  
|Additions based on tax positions related to the current year         |  |   | 1,501  |  
|Expiration of the statute of limitations for the assessment of taxes |  |   | (2,514 | )
|                                                                     |  |   |        |  
|Balance at October 3, 2008                                           |  |   | 5,911  |  
|Additions based on tax positions related to the current year         |  |   | 777    |  
|Decreases in earlier period tax positions                            |  |   | (104   | )
|Expiration of the statute of limitations for the assessment of taxes |  |   | (1,213 | )
|                                                                     |  |   |        |  
|Balance at October 2, 2009                                           |  | $ | 5,371  |  
|                                                                     |  |   |        |  



The
Companys U.S. federal, state and local and foreign income tax returns are subject to audit by relevant tax authorities. During fiscal year 2008, the U.S. Internal Revenue Service closed its examination of the Companys fiscal year 2003
federal tax return without assessing additional tax. The Companys income tax reporting periods beginning with fiscal year 2006 for the U.S. and fiscal year 2004 for the Companys major foreign jurisdictions remain generally open to audit
by relevant tax authorities.



See Note 1
discussing the revision of the fiscal year 2008 income tax expense and related deferred tax asset that is reflected in the above footnote.



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 is increased by the number of additional shares of common stock that would have been
outstanding if the dilutive potential shares of common stock had been issued. The dilutive effect of potential common stock (including outstanding stock options, unvested restricted stock 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 and the tax benefit thereon.



In fiscal years 2009, 2008 and 2007, options to purchase approximately 1,635,000, 255,000 and 10,000 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 Year Ended
|                                              |  | October 2,2009    |  | October 3,2008 |  | September 28,2007
|(in thousands)                                |  |                   |  |                |  |                  
|Weighted-average basic shares outstanding     |  | 28,785            |  | 29,620         |  | 30,457           
|Net effect of dilutive potential common stock |  | 151               |  | 452            |  | 547              
|                                              |  |                   |  |                |  |                  
|Weighted-average diluted shares outstanding   |  | 28,936            |  | 30,072         |  | 31,004           
|                                              |  |                   |  |                |  |                  



Note
17.    Industry and Geographic Segments



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, environmental, energy, and applied



F-36



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##### Table of Contents

VARIAN, INC. AND SUBSIDIARY COMPANIES



NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS(Continued)



research and other 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, environmental, energy, and applied
research and other applications requiring ultra-clean or high-vacuum environments. These segments were determined in accordance with ASC 280, Segment Reporting.



General corporate costs include shared costs of legal, tax, accounting, treasury, insurance and certain 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.



The Company operates various manufacturing and marketing operations outside of the U.S. In fiscal years 2009, 2008 and 2007, no single country outside of the U.S. accounted for more than 10% of total
sales (based on the geographic location of the customer). Except for the United Kingdom, no single country outside the U.S. accounted for more than 10% of total assets in fiscal years 2009, 2008 and 2007. Transactions between geographic areas are
accounted for at cost and are not included in sales.



Included in the total of Other international salesare export sales recorded by U.S. entities of $47 million in fiscal year 2009, and $53 million in both fiscal years 2008 and 2007.



Industry Segments



|                                                |  |             |     |                |   |       |                    |      |                      |  |                             |     |   |      |   |     |      |  |      |     |      |  |      |     |      |   |      |  |      |     |      |   |      |  |   |    |  |   |    |  |   |    |  |   |    |  |   |   
|----------------------------------------------- |  | ----------- | --- | -------------- | - | ----- | ------------------ | ---- | -------------------- |  | --------------------------- | --- | - | ---- | - | --- | ---- |  | ---- | --- | ---- |  | ---- | --- | ---- | - | ---- |  | ---- | --- | ---- | - | ---- |  | - | -- |  | - | -- |  | - | -- |  | - | -- |  | - | --
|                                                |  | Total Sales |     | PretaxEarnings |   |       | IdentifiableAssets |      | Capital Expenditures |  | DepreciationandAmortization
|                                                |  | 2009        |     | 2008           |   | 2007  |                    | 2009 |                      |  | 2008                        |     |   | 2007 |   |     | 2009 |  | 2008 |     | 2007 |  | 2009 |     | 2008 |   | 2007 |  | 2009 |     | 2008 |   | 2007
|(in millions)                                   |  |             |     |                |   |       |                    |      |                      |  |                             |     |   |      |   |     |      |  |      |     |      |  |      |     |      |   |      |  |      |     |      |   |      |  |   |    |  |   |    |  |   |    |  |   |    |  |   |   
|Scientific Instruments                          |  | $           | 675 |                | $ | 839   |                    | $    | 762                  |  | $                           | 54  |   |      | $ | 81  |      |  | $    | 79  |      |  | $    | 631 |      | $ | 695  |  | $    | 631 |      | $ | 25   |  | $ | 21 |  | $ | 16 |  | $ | 24 |  | $ | 25 |  | $ | 25
|Vacuum Technologies                             |  |             | 132 |                |   | 174   |                    |      | 159                  |  |                             | 26  |   |      |   | 34  |      |  |      | 32  |      |  |      | 49  |      |   | 57   |  |      | 58  |      |   |     |  |   | 3  |  |   | 3  |  |   | 3  |  |   | 4  |  |   | 4 
|                                                |  |             |     |                |   |       |                    |      |                      |  |                             |     |   |      |   |     |      |  |      |     |      |  |      |     |      |   |      |  |      |     |      |   |      |  |   |    |  |   |    |  |   |    |  |   |    |  |   |   
|Total industry segments                         |  |             | 807 |                |   | 1,013 |                    |      | 921                  |  |                             | 80  |   |      |   | 115 |      |  |      | 111 |      |  |      | 680 |      |   | 752  |  |      | 689 |      |   | 25   |  |   | 24 |  |   | 19 |  |   | 27 |  |   | 29 |  |   | 29
|General corporate                               |  |             |    |                |   |      |                    |      |                     |  |                             | (21 | ) |      |   | (13 | )    |  |      | (18 | )    |  |      | 264 |      |   | 150  |  |      | 248 |      |   | 0    |  |   | 0  |  |   | 0  |  |   | 0  |  |   | 0  |  |   | 0 
|Impairment of private company equity investment |  |             |    |                |   |      |                    |      |                     |  |                             |    |   |      |   | (3  | )    |  |      |    |      |  |      |    |      |   |     |  |      |    |      |   |     |  |   |   |  |   |   |  |   |   |  |   |   |  |   |  
|Interest income                                 |  |             |    |                |   |      |                    |      |                     |  |                             | 1   |   |      |   | 6   |      |  |      | 6   |      |  |      |    |      |   |     |  |      |    |      |   |     |  |   |   |  |   |   |  |   |   |  |   |   |  |   |  
|Interest expense                                |  |             |    |                |   |      |                    |      |                     |  |                             | (1  | ) |      |   | (2  | )    |  |      | (2  | )    |  |      |    |      |   |     |  |      |    |      |   |     |  |   |   |  |   |   |  |   |   |  |   |   |  |   |  
|                                                |  |             |     |                |   |       |                    |      |                      |  |                             |     |   |      |   |     |      |  |      |     |      |  |      |     |      |   |      |  |      |     |      |   |      |  |   |    |  |   |    |  |   |    |  |   |    |  |   |   
|Total company                                   |  | $           | 807 |                | $ | 1,013 |                    | $    | 921                  |  | $                           | 59  |   |      | $ | 103 |      |  | $    | 97  |      |  | $    | 944 |      | $ | 902  |  | $    | 937 |      | $ | 25   |  | $ | 24 |  | $ | 19 |  | $ | 27 |  | $ | 29 |  | $ | 29
|                                                |  |             |     |                |   |       |                    |      |                      |  |                             |     |   |      |   |     |      |  |      |     |      |  |      |     |      |   |      |  |      |     |      |   |      |  |   |    |  |   |    |  |   |    |  |   |    |  |   |   



F-37



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##### Table of Contents

Geographic Information



|                                  |  |                                    |     |                                    |   |       |             |      |     |                 |      |      |   |      |   |      |      |  |   |      |   |  |      |       |   |      |   |       |      |  |   |       |   |  |   |     |   |  |   |     |   |  |   |     |  
|--------------------------------- |  | ---------------------------------- | --- | ---------------------------------- | - | ----- | ----------- | ---- | --- | --------------- | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | - |  | ---- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | - |  | - | --- | - |  | - | --- | - |  | - | --- | -
|                                  |  | Sales to Unaffiliated Customers(1) |     | IntergeographicSales to Affiliates |   |       | Total Sales |      |     | Pretax Earnings |     
|                                  |  | 2009                               |     | 2008                               |   | 2007  |             | 2009 |     |                 | 2008 |      |   | 2007 |   |      | 2009 |  |   | 2008 |   |  | 2007 |       |   | 2009 |   |       | 2008 |  |   | 2007  |  
|(in millions)                     |  |                                    |     |                                    |   |       |             |      |     |                 |      |      |   |      |   |      |      |  |   |      |   |  |      |       |   |      |   |       |      |  |   |       |   |  |   |     |   |  |   |     |   |  |   |     |  
|United States                     |  | $                                  | 221 |                                    | $ | 279   |             | $    | 264 |                 | $    | 103  |   |      | $ | 118  |      |  | $ | 97   |   |  | $    | 324   |   |      | $ | 397   |      |  | $ | 361   |   |  | $ | 5   |   |  | $ | 26  |   |  | $ | 28  |  
|International                     |  |                                    | 586 |                                    |   | 734   |             |      | 657 |                 |      | 283  |   |      |   | 357  |      |  |   | 304  |   |  |      | 869   |   |      |   | 1,091 |      |  |   | 961   |   |  |   | 91  |   |  |   | 105 |   |  |   | 101 |  
|                                  |  |                                    |     |                                    |   |       |             |      |     |                 |      |      |   |      |   |      |      |  |   |      |   |  |      |       |   |      |   |       |      |  |   |       |   |  |   |     |   |  |   |     |   |  |   |     |  
|Total geographic segments         |  |                                    | 807 |                                    |   | 1,013 |             |      | 921 |                 |      | 386  |   |      |   | 475  |      |  |   | 401  |   |  |      | 1,193 |   |      |   | 1,488 |      |  |   | 1,322 |   |  |   | 96  |   |  |   | 131 |   |  |   | 129 |  
|Eliminations, corporate and other |  |                                    |    |                                    |   |      |             |      |    |                 |      | (386 | ) |      |   | (475 | )    |  |   | (401 | ) |  |      | (386  | ) |      |   | (475  | )    |  |   | (401  | ) |  |   | (37 | ) |  |   | (28 | ) |  |   | (32 | )
|                                  |  |                                    |     |                                    |   |       |             |      |     |                 |      |      |   |      |   |      |      |  |   |      |   |  |      |       |   |      |   |       |      |  |   |       |   |  |   |     |   |  |   |     |   |  |   |     |  
|Total company                     |  | $                                  | 807 |                                    | $ | 1,013 |             | $    | 921 |                 | $    |     |   |      | $ |     |      |  | $ |     |   |  | $    | 807   |   |      | $ | 1,013 |      |  | $ | 921   |   |  | $ | 59  |   |  | $ | 103 |   |  | $ | 97  |  
|                                  |  |                                    |     |                                    |   |       |             |      |     |                 |      |      |   |      |   |      |      |  |   |      |   |  |      |       |   |      |   |       |      |  |   |       |   |  |   |     |   |  |   |     |   |  |   |     |  
|                                  |  |                                    |     |                                    |   |       |             |     
|                                  |  | IdentifiableAssets                 |     | Long-LivedAssets(2)                |   |       |             |      |     |                 |      |      |   |      |   |      |      |  |   |      |   |  |     
|                                  |  | 2009                               |     | 2008                               |   | 2007  |             | 2009 |     |                 | 2008 |      |   | 2007 |   |      |      |  |   |      |   |  |      |       |   |      |   |       |      |  |   |       |  
|(in millions)                     |  |                                    |     |                                    |   |       |             |      |     |                 |      |      |   |      |   |      |      |  |   |      |   |  |      |       |   |      |   |       |      |  |   |       |   |  |   |     |   |  |   |     |   |  |   |     |  
|United States                     |  | $                                  | 545 |                                    | $ | 461   |             | $    | 551 |                 | $    | 75   |   |      | $ | 67   |      |  | $ | 70   |   |  |      |       |   |      |   |       |      |  |   |       |   |  |   |     |   |  |   |     |   |  |   |     |  
|United Kingdom                    |  |                                    | 103 |                                    |   | 112   |             |      | 111 |                 |      | 11   |   |      |   | 12   |      |  |   | 13   |   |  |      |       |   |      |   |       |      |  |   |       |   |  |   |     |   |  |   |     |   |  |   |     |  
|Italy(3)                          |  |                                    |    |                                    |   |      |             |      |    |                 |      | 13   |   |      |   | 14   |      |  |   | 15   |   |  |      |       |   |      |   |       |      |  |   |       |   |  |   |     |   |  |   |     |   |  |   |     |  
|The Netherlands(3)                |  |                                    |    |                                    |   |      |             |      |    |                 |      | 15   |   |      |   | 17   |      |  |   | 12   |   |  |      |       |   |      |   |       |      |  |   |       |   |  |   |     |   |  |   |     |   |  |   |     |  
|Other international               |  |                                    | 296 |                                    |   | 329   |             |      | 275 |                 |      | 14   |   |      |   | 15   |      |  |   | 17   |   |  |      |       |   |      |   |       |      |  |   |       |   |  |   |     |   |  |   |     |   |  |   |     |  
|                                  |  |                                    |     |                                    |   |       |             |      |     |                 |      |      |   |      |   |      |      |  |   |      |   |  |      |       |   |      |   |       |      |  |   |       |   |  |   |     |   |  |   |     |   |  |   |     |  
|Total company                     |  | $                                  | 944 |                                    | $ | 902   |             | $    | 937 |                 | $    | 128  |   |      | $ | 125  |      |  | $ | 127  |   |  |      |       |   |      |   |       |      |  |   |       |   |  |   |     |   |  |   |     |   |  |   |     |  
|                                  |  |                                    |     |                                    |   |       |             |      |     |                 |      |      |   |      |   |      |      |  |   |      |   |  |      |       |   |      |   |       |      |  |   |       |   |  |   |     |   |  |   |     |   |  |   |     |  







|(1) |  | Sales to unaffiliated customers are generally reported based on the geographic location of the customer. No single customer accounted for more than 10% of sales in any
of the fiscal years presented.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Excludes goodwill, intangible assets and long-term deferred tax assets.
|--- |  | -----------------------------------------------------------------------

|(3) |  | Identifiable asset amounts are included in Other international amounts as they are not individually material.
|--- |  | -------------------------------------------------------------------------------------------------------------



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SCHEDULE II



VARIAN, INC. AND SUBSIDIARY COMPANIES



VALUATION AND QUALIFYING ACCOUNTS

for fiscal years 2009, 2008 and 2007

(In thousands)



|                                            |  |                              |             |                             |        |      |            |  |                          |  |   |     |  |   |      
|------------------------------------------- |  | ---------------------------- | ----------- | --------------------------- | ------ | ---- | ---------- |  | ------------------------ |  | - | --- |  | - | -----
|Description                                 |  | Balance atBeginningof Period |             | Charged toCosts andExpenses |        |      | Deductions |  | Balance atEnd ofPeriod  
|                                            |  |                              | Description |                             | Amount |     
|Allowance for Doubtful Accounts Receivable: |  |                              |             |                             |        |      |            |  |                          |  |   |     |  |   |      
|Fiscal year 2009                            |  | $                            | 1,252       |                             | $      | 156  |            |  | Write-offs & adjustments |  | $ | 115 |  | $ | 1,293
|                                            |  |                              |             |                             |        |      |            |  |                          |  |   |     |  |   |      
|Fiscal year 2008                            |  | $                            | 1,748       |                             | $      | (138 | )          |  | Write-offs & adjustments |  | $ | 358 |  | $ | 1,252
|                                            |  |                              |             |                             |        |      |            |  |                          |  |   |     |  |   |      
|Fiscal year 2007                            |  | $                            | 1,982       |                             | $      | (167 | )          |  | Write-offs & adjustments |  | $ | 67  |  | $ | 1,748
|                                            |  |                              |             |                             |        |      |            |  |                          |  |   |     |  |   |      



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VARIAN, INC. AND SUBSIDIARY COMPANIES



Quarterly Consolidated Financial Data (Unaudited)



Amounts for each quarterly period in fiscal
years 2009 and 2008 follow:



|                                        |  |                  |       |               |   |              |  |               |       |  |   |      
|--------------------------------------- |  | ---------------- | ----- | ------------- | - | ------------ |  | ------------- | ----- |  | - | -----
|                                        |  | Fiscal Year 2009
|                                        |  | FirstQuarter     |       | SecondQuarter |   | ThirdQuarter |  | FourthQuarter
|(in millions, except per share amounts) |  |                  |       |               |   |              |  |               |       |  |   |      
|Sales                                   |  | $                | 208.2 |               | $ | 205.4        |  | $             | 196.6 |  | $ | 196.5
|                                        |  |                  |       |               |   |              |  |               |       |  |   |      
|Gross profit                            |  | $                | 95.3  |               | $ | 89.5         |  | $             | 86.6  |  | $ | 83.3 
|                                        |  |                  |       |               |   |              |  |               |       |  |   |      
|Net earnings                            |  | $                | 13.0  |               | $ | 10.2         |  | $             | 13.5  |  | $ | 1.9  
|                                        |  |                  |       |               |   |              |  |               |       |  |   |      
|Net earnings per share                  |  |                  |       |               |   |              |  |               |       |  |   |      
|Basic                                   |  | $                | 0.45  |               | $ | 0.35         |  | $             | 0.47  |  | $ | 0.07 
|                                        |  |                  |       |               |   |              |  |               |       |  |   |      
|Diluted                                 |  | $                | 0.45  |               | $ | 0.35         |  | $             | 0.47  |  | $ | 0.07 
|                                        |  |                  |       |               |   |              |  |               |       |  |   |      
|                                        | 
|                                        |  | Fiscal Year 2008
|                                        |  | FirstQuarter     |       | SecondQuarter |   | ThirdQuarter |  | FourthQuarter
|(in millions, except per share amounts) |  |                  |       |               |   |              |  |               |       |  |   |      
|Sales                                   |  | $                | 237.4 |               | $ | 248.2        |  | $             | 244.4 |  | $ | 282.5
|                                        |  |                  |       |               |   |              |  |               |       |  |   |      
|Gross profit                            |  | $                | 107.3 |               | $ | 112.9        |  | $             | 106.2 |  | $ | 126.1
|                                        |  |                  |       |               |   |              |  |               |       |  |   |      
|Net earnings                            |  | $                | 17.6  |               | $ | 15.8         |  | $             | 11.4  |  | $ | 20.3 
|                                        |  |                  |       |               |   |              |  |               |       |  |   |      
|Net earnings per share                  |  |                  |       |               |   |              |  |               |       |  |   |      
|Basic                                   |  | $                | 0.58  |               | $ | 0.53         |  | $             | 0.39  |  | $ | 0.70 
|                                        |  |                  |       |               |   |              |  |               |       |  |   |      
|Diluted                                 |  | $                | 0.57  |               | $ | 0.52         |  | $             | 0.38  |  | $ | 0.69 
|                                        |  |                  |       |               |   |              |  |               |       |  |   |      



Net
earnings per share for the four quarters of each fiscal year may not sum to the total for the fiscal year because of the different number of shares outstanding during each period.



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EXHIBIT INDEX



|            |  |                                                                                                                                                                            |  |                           |  |                   |  |                  |  |              
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ----------------- |  | ---------------- |  | -------------
|            |  |                                                                                                                                                                            |  | Incorporated by Reference |  |                  
|Exhibit No. |  | Exhibit Description                                                                                                                                                        |  | Form                      |  | Date Filed        |  | ExhibitNumber(s) |  | FiledHerewith
|2.1         |  | Amended and Restated Distribution Agreement, dated as of January 14, 1999, among Varian Associates, Inc., Varian Semiconductor Equipment Associates, Inc. and Varian,
Inc. |  | 10-Q                      |  | May 17, 1999      |  | 2.1              |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|2.2         |  | Agreement and Plan of Merger dated as of July 26, 2009, by and among Agilent Technologies, Inc., Varian, Inc. and Cobalt Acquisition Corp.                                 |  | 8-K                       |  | July 27, 2009     |  | 2.1              |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|3.1         |  | Restated Certificate of Incorporation of Varian, Inc.                                                                                                                      |  | 10-Q                      |  | May 17, 1999      |  | 3.1, 3.2         |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|3.2         |  | Amended and Restated By-Laws of Varian, Inc.                                                                                                                               |  | 8-K                       |  | February 9, 2009  |  | 3.1              |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|4.1         |  | Specimen Common Stock Certificate.                                                                                                                                         |  | 10-Q                      |  | May 12, 2009      |  | 4.1              |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|10.1        |  | Intellectual Property Agreement, dated as of April 2, 1999, among Varian Associates, Inc., Varian Semiconductor Equipment Associates, Inc. and Varian, Inc.                |  | 10-Q                      |  | May 17, 1999      |  | 10.2             |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|10.2        |  | Varian, Inc. Amended and Restated Note Purchase and Private Shelf Agreement and Assumption dated as of April 2, 1999.                                                      |  | 10-Q                      |  | May 17, 1999      |  | 10.6             |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|10.3        |  | Asset Purchase Agreement, dated as of February 4, 2005, between Varian, Inc. and Jabil Circuit, Inc.                                                                       |  | 8-K                       |  | March 17, 2005    |  | 2.1              |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|10.4        |  | Form of Indemnity Agreement between Varian, Inc. and its Directors and Officers.                                                                                           |  | 10-K                      |  | December 9, 2004  |  | 10.5             |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|10.5*       |  | Varian, Inc. Omnibus Stock Plan, as amended and restated as of November 8, 2007.                                                                                           |  | 8-K                       |  | February 1, 2008  |  | 10.1             |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|10.6*       |  | Varian, Inc. Management Incentive Plan, as amended and restated as of November 8, 2007.                                                                                    |  | 8-K                       |  | November 13, 2007 |  | 10.9             |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|10.7*       |  | Varian, Inc. Supplemental Retirement Plan, as amended and restated as of November 13, 2008.                                                                                |  | 10-K                      |  | November 26, 2008 |  | 10.7             |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|10.8*       |  | Varian, Inc. Employee Stock Purchase Plan.                                                                                                                                 |  | 10-Q                      |  | May 10, 2000      |  | 10.1             |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|10.9*       |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Executive Officers (used beginning April 2, 1999 and prior to November 10, 2003).                     |  | 10-K                      |  | December 7, 2006  |  | 10.9             |  |              
|            |  |                                                                                                                                                                            |  |                           | 
|10.10*      |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Executive Officers (used beginning November 10, 2003 and prior to November 11, 2004).                 |  | 10-K                      |  | December 7, 2006  |  | 10.10            |  |              



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##### Table of Contents

|            |  |                                                                                                                                                                 |  |                           |  |                    |  |                  |  |              
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ------------------ |  | ---------------- |  | -------------
|            |  |                                                                                                                                                                 |  | Incorporated by Reference |  |                   
|Exhibit No. |  | Exhibit Description                                                                                                                                             |  | Form                      |  | Date Filed         |  | ExhibitNumber(s) |  | FiledHerewith
|10.11*      |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Executive Officers (used beginning November 11, 2004 and prior to December 4, 2006).       |  | 10-K                      |  | December 7, 2006   |  | 10.11            |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.12*      |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Executive Officers (used beginning December 4, 2006 and prior to November 8, 2007).        |  | 10-K                      |  | December 7, 2006   |  | 10.12            |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.13*      |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Executive Officers (used beginning November 8, 2007).                                      |  | 8-K                       |  | November 13, 2007  |  | 10.3             |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.14*      |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Non-Employee Directors.                                                                    |  | 10-K                      |  | December 9, 2004   |  | 10.12            |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.15*      |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Non-Employee DirectorsFor New Director/Chairman Grants (used beginning February 1, 2008). |  | 10-Q                      |  | May 6, 2008        |  | 10.29            |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.16*      |  | Form of Nonqualified Stock Option Agreement between Varian, Inc. and Non-Employee DirectorsFor Annual Director Grants (used beginning February 1, 2008).       |  | 10-Q                      |  | May 6, 2008        |  | 10.30            |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.17*      |  | Form of Restricted Stock Agreement between Varian, Inc. and Executive Officers (used prior to December 4, 2006).                                                |  | 10-K                      |  | December 7, 2006   |  | 10.14            |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.18*      |  | Form of Restricted Stock Agreement between Varian, Inc. and Executive Officers (used beginning December 4, 2006 and prior to November 8, 2007).                 |  | 10-K                      |  | December 7, 2006   |  | 10.15            |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.19*      |  | Form of Restricted Stock Agreement between Varian, Inc. and Executive Officers (used beginning November 8, 2007).                                               |  | 10-Q                      |  | February 5, 2008   |  | 10.17            |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.20*      |  | Form of Restricted Stock Agreement between Varian, Inc. and Certain Executive Officers (used beginning March 13, 2009).                                         |  | 8-K                       |  | March 17, 2009     |  | 10.1             |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.21*      |  | Form of Restricted Stock Agreement between Varian, Inc. and G. Edward McClammy (used beginning March 13, 2009).                                                 |  | 8-K                       |  | March 17, 2009     |  | 10.2             |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.22*      |  | Form of Performance Share Agreement between Varian, Inc. and Executive Officers (used beginning November 8, 2007).                                              |  | 8-K                       |  | November 13, 2007  |  | 10.1             |  |              
|            |  |                                                                                                                                                                 |  |                           | 
|10.23*      |  | Form of Performance Share Agreement between Varian, Inc. and Executive Officers (used beginning October 6, 2008).                                               |  | 8-K                       |  | September 15, 2008 |  | 10.2             |  |              



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##### Table of Contents

|            |  |                                                                                                                           |  |                           |  |                    |  |                  |  |              
|----------- |  | ------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ------------------ |  | ---------------- |  | -------------
|            |  |                                                                                                                           |  | Incorporated by Reference |  |                   
|Exhibit No. |  | Exhibit Description                                                                                                       |  | Form                      |  | Date Filed         |  | ExhibitNumber(s) |  | FiledHerewith
|10.24*      |  | Form of Stock Unit Agreement between Varian, Inc. and Non-Employee Directors.                                             |  | 10-Q                      |  | February 8, 2005   |  | 10.23            |  |              
|            |  |                                                                                                                           |  |                           | 
|10.25*      |  | Change in Control Agreement, as amended and restated as of November 8, 2007, between Varian, Inc. and Garry W. Rogerson.  |  | 8-K                       |  | November 13, 2007  |  | 10.4             |  |              
|            |  |                                                                                                                           |  |                           | 
|10.26*      |  | Amendment to Change in Control Agreement, dated as of September 8, 2009, between Varian, Inc. and Garry W. Rogerson.      |  |                           |  |                    |  |                  |  | X            
|            |  |                                                                                                                           |  |                           | 
|10.27*      |  | Change in Control Agreement, as amended and restated as of November 8, 2007, between Varian, Inc. and G. Edward McClammy. |  | 8-K                       |  | November 13, 2007  |  | 10.5             |  |              
|            |  |                                                                                                                           |  |                           | 
|10.28*      |  | Amendment to Change in Control Agreement, dated as of September 8, 2009, between Varian, Inc. and G. Edward McClammy.     |  |                           |  |                    |  |                  |  | X            
|            |  |                                                                                                                           |  |                           | 
|10.29*      |  | Change in Control Agreement, as amended and restated as of November 8, 2007, between Varian, Inc. and Martin ODonoghue.  |  | 8-K                       |  | November 13, 2007  |  | 10.6             |  |              
|            |  |                                                                                                                           |  |                           | 
|10.30*      |  | Amendment to Change in Control Agreement, dated as of September 8, 2009, between Varian, Inc. and Martin ODonoghue.      |  |                           |  |                    |  |                  |  | X            
|            |  |                                                                                                                           |  |                           | 
|10.31*      |  | Change in Control Agreement, as amended and restated as of November 8, 2007, between Varian, Inc. and Sergio Piras.       |  | 8-K                       |  | November 13, 2007  |  | 10.7             |  |              
|            |  |                                                                                                                           |  |                           | 
|10.32*      |  | Amendment to Change in Control Agreement, dated as of September 18, 2009, between Varian, Inc. and Sergio Piras.          |  |                           |  |                    |  |                  |  | X            
|            |  |                                                                                                                           |  |                           | 
|10.33*      |  | Change in Control Agreement, as amended and restated as of November 8, 2007, between Varian, Inc. and Arthur W. Homan.    |  | 8-K                       |  | November 13, 2007  |  | 10.8             |  |              
|            |  |                                                                                                                           |  |                           | 
|10.34*      |  | Amendment to Change in Control Agreement, dated as of September 8, 2009, between Varian, Inc. and Arthur W. Homan.        |  |                           |  |                    |  |                  |  | X            
|            |  |                                                                                                                           |  |                           | 
|10.35*      |  | Change in Control Agreement, as amended and restated as of November 8, 2007, between Varian, Inc. and Sean M. Wirtjes.    |  | 10-K                      |  | November 21, 2007  |  | 10.25            |  |              
|            |  |                                                                                                                           |  |                           | 
|10.36*      |  | Amendment to Change in Control Agreement, dated as of September 14, 2009, between Varian, Inc. and Sean M. Wirtjes.       |  |                           |  |                    |  |                  |  | X            
|            |  |                                                                                                                           |  |                           | 
|10.37*      |  | Change in Control Agreement, dated as of September 15, 2008, between Varian, Inc. and Robert W. Dean II.                  |  | 8-K                       |  | September 15, 2008 |  | 10.1             |  |              



---

##### Table of Contents

|            |  |                                                                                                                      |  |                           |  |                   |  |                  |  |              
|----------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | ----------------- |  | ---------------- |  | -------------
|            |  |                                                                                                                      |  | Incorporated by Reference |  |                  
|Exhibit No. |  | Exhibit Description                                                                                                  |  | Form                      |  | Date Filed        |  | ExhibitNumber(s) |  | FiledHerewith
|10.38*      |  | Amendment to Change in Control Agreement, dated as of September 8, 2009, between Varian, Inc. and Robert W. Dean II. |  |                           |  |                   |  |                  |  | X            
|            |  |                                                                                                                      |  |                           | 
|10.39*      |  | Change in Control Agreement, dated as of October 6, 2008, between Varian, Inc. and Gordon B. Tredger.                |  | 10-K                      |  | November 26, 2008 |  | 10.30            |  |              
|            |  |                                                                                                                      |  |                           | 
|10.40*      |  | Amendment to Change in Control Agreement, dated as of September 8, 2009, between Varian, Inc. and Gordon B. Tredger. |  |                           |  |                   |  |                  |  | X            
|            |  |                                                                                                                      |  |                           | 
|10.41*      |  | Description of Compensatory Arrangements between Varian, Inc. and Non-Employee Directors.                            |  | 10-Q                      |  | February 10, 2009 |  | 10.31            |  |              
|            |  |                                                                                                                      |  |                           | 
|10.42*      |  | Description of Certain Compensatory Arrangements between Varian, Inc. and Executive Officers.                        |  | 10-K                      |  | November 21, 2007 |  | 10.27            |  |              
|            |  |                                                                                                                      |  |                           | 
|10.43*      |  | Description of Certain Compensatory Arrangements between Varian S.p.A. and Sergio Piras.                             |  | 10-Q                      |  | February 5, 2008  |  | 10.28            |  |              
|            |  |                                                                                                                      |  |                           | 
|18.1        |  | Preferability letter regarding inventory accounting principle change.                                                |  | 10-K                      |  | December 7, 2000  |  | 18.1             |  |              
|            |  |                                                                                                                      |  |                           | 
|21          |  | Subsidiaries of the Registrant.                                                                                      |  |                           |  |                   |  |                  |  | X            
|            |  |                                                                                                                      |  |                           | 
|23          |  | Consent of Independent Registered Public Accounting Firm.                                                            |  |                           |  |                   |  |                  |  | 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.
|- |  | --------------------------------------------------------