FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the Quarter Ended June 29, 2001.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
Commission File Number 0-6866
HELIX TECHNOLOGY CORPORATION
----------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2423640
------------------------ ---------------------------------
(State of incorporation) (IRS Employer Identification No.)
Mansfield Corporate Center
Nine Hampshire Street
Mansfield, Massachusetts 02048-9171
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 337-5111
----------------------------
Indicate by checkmark 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 ninety days.
Yes [X] No [ ]
The number of shares outstanding of the registrant's Common Stock, $1 par
value, as of June 29, 2001 was 22,557,204.
HELIX TECHNOLOGY CORPORATION
Form 10-Q
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of June 29, 2001 and
December 31, 2000 3
Consolidated Statements of Operations for the Three and
Six-Month Periods Ended June 29, 2001 and June 30, 2000 4
Consolidated Statements of Cash Flows for the Six-Month
Periods Ended June 29, 2001 and June 30, 2000 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 11
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6 (b) Reports on Form 8-K 12
Signatures 13
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
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June 29, December 31,
2001 2000
(in thousands except per share data) (unaudited) (audited)
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ASSETS
Current:
Cash and cash equivalents $ 10,386 $ 15,435
Investments (Note 2) 17,020 16,654
Receivables - net of allowances 19,064 40,243
Inventories (Note 3) 28,958 30,204
Deferred income taxes (Note 4) 6,444 6,444
Other current assets 2,108 2,208
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Total Current Assets 83,980 111,188
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Property, plant and equipment at cost 58,917 49,940
Less: accumulated depreciation (33,040) (31,115)
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Net property, plant and equipment 25,877 18,825
Other assets 11,893 11,955
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TOTAL ASSETS $121,750 $141,968
===========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable $ 5,754 $ 17,993
Payroll and compensation 1,973 3,060
Retirement costs 6,427 5,586
Income taxes (Note 4) 3,033 6,015
Other accrued liabilities 665 747
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Total Current Liabilities 17,852 33,401
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Commitments and contingencies
Stockholders' Equity:
Preferred stock, $1 par value; authorized
2,000,000 shares; issued and outstanding: none - -
Common stock, $1 par value; authorized 60,000,000
shares; issued and outstanding: 22,557,204 in
2001 and 22,537,204 in 2000 22,557 22,537
Capital in excess of par value 12,734 12,263
Treasury stock, $1 par value (3,840 shares in
2001 and in 2000) (232) (232)
Retained earnings 70,460 74,123
Accumulated other comprehensive income (Note 6) (1,621) (124)
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Total Stockholders' Equity 103,898 108,567
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $121,750 $141,968
===========================================================================
The accompanying notes are an integral part of these financial statements.
Page 3
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
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Three Months Ended Six Months Ended
June 29, June 30, June 29, June 30,
(in thousands except per share data) 2001 2000 2001 2000
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Net sales $26,604 $58,525 $75,245 $108,575
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Costs and expenses:
Cost of sales 18,495 30,858 47,002 56,806
Research and development 4,209 3,934 8,442 7,209
Selling, general and administrative 9,460 10,457 19,365 20,245
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32,164 45,249 74,809 84,260
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Operating (loss) income (5,560) 13,276 436 24,315
Joint venture income 553 1,056 1,518 1,598
Interest and other income 214 240 631 537
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(Loss) income before taxes (4,793) 14,572 2,585 26,450
Income taxes (Note 4) (1,558) 4,808 840 8,728
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Net (loss) income $(3,235) $ 9,764 $ 1,745 $ 17,722
==========================================================================================
Net (loss) income per share (Note 5):
Basic $ (0.14) $ 0.43 $ 0.08 $ 0.79
Diluted $ (0.14) $ 0.43 $ 0.08 $ 0.78
==========================================================================================
Number of shares used in per share
calculations (Note 5):
Basic 22,539 22,516 22,536 22,468
Diluted 22,539 22,796 22,662 22,848
==========================================================================================
The accompanying notes are an integral part of these financial statements.
Page 4
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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Six Months Ended
(in thousands) June 29, June 30,
2001 2000
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Cash flows from operating activities:
Net income $ 1,745 $ 17,722
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,437 1,968
Other (1,479) (1,285)
Net change in operating assets and liabilities (A) 6,977 (3,405)
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Net cash provided by operating activities 9,680 15,000
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Cash flows from (used by) investing activities:
Capital expenditures (9,489) (6,800)
Purchase of investments (23,255) (23,822)
Sale of investments 22,932 23,502
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Net cash used by investing activities (9,812) (7,120)
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Cash flows from (used by) financing activities:
Shares tendered for exercise of stock options 0 (5,181)
Net cash provided by employee stock plans 491 1,230
Cash dividends paid (5,408) (5,403)
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Net cash used by financing activities (4,917) (9,354)
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Decrease in cash and cash equivalents (5,049) (1,474)
Cash and cash equivalents, at the beginning of
the period 15,435 11,408
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Cash and cash equivalents, at the end of the period $ 10,386 $ 9,934
===========================================================================
(A) Change in operating assets and liabilities:
Decrease (Increase) in accounts receivable $ 21,179 $(12,540)
Decrease (Increase) in inventories 1,246 (2,541)
Decrease (Increase) in other current assets 100 (314)
(Decrease) Increase in accounts payable (12,239) 4,196
(Decrease) Increase in other accrued expenses (3,309) 7,794
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Net change in operating assets and liabilities $ 6,977 $ (3,405)
===========================================================================
The accompanying notes are an integral part of these financial statements.
Page 5
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
------------------------------
In the opinion of the Company, the accompanying consolidated financial
statements for the periods ended June 29, 2001, and June 30, 2000, contain
all adjustments (consisting only of normal recurring adjustments) necessary
to present fairly the financial position as of June 29, 2001, and December
31, 2000, and the results of operations and cash flows for the periods
ended June 29, 2001, and June 30, 2000.
The results of operations for the six-month period ended June 29, 2001, are
not necessarily indicative of the results expected for the full year.
The consolidated financial statements included herein have been prepared by
the Company, without audit of the six-month periods ended June 29, 2001,
and June 30, 2000, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to present fairly the Company's financial
position and results of operations. These consolidated financial
statements should be read in conjunction with the financial statements and
the notes thereto included in the Company's latest Annual Report on Form
10-K.
Note 2 - Investments
--------------------
The Company had investments of $17,020,000 and $16,654,000 as of June 29,
2001, and December 31, 2000, respectively. The investments were classified
as "available-for-sale," and the difference between the cost and fair value
of these investments was immaterial and is included in other comprehensive
income.
Note 3 - Inventories
--------------------
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(in thousands) June 29, 2001 December 31, 2000
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Finished goods $ 8,159 $ 9,522
Work in process 15,133 15,336
Materials and parts 5,666 5,346
---------------------------
$28,958 $30,204
===========================
Inventories are stated at the lower of cost or market on a first-in, first-
out basis.
Page 6
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Income Taxes
---------------------
The net federal, state and foreign income tax provisions were $840,000 for
the six-month period ended June 29, 2001, and $8,728,000 for the six-month
period ended June 30, 2000. Tax credits are treated as reductions of
income tax provisions in the year in which the credits are realized. The
Company does not provide for federal income taxes on the undistributed
earnings of its wholly-owned foreign subsidiaries, since these earnings are
indefinitely reinvested.
The effective income tax rates for the six-month periods ended June 29,
2001, and June 30, 2000, were 32.5% and 33.0%, respectively.
The major components of deferred tax assets are compensation and benefit
plans, inventory valuation and depreciation. Based on past experience, the
Company expects that the future taxable income will be sufficient for the
realization of the deferred tax assets. The Company believes that a
valuation allowance is not required.
Note 5 - Net Income Per Share
-----------------------------
Basic net income per common share is based on the weighted average number
of common shares outstanding during the period. Diluted net income per
common share reflects the potential dilution that could occur if
outstanding stock options were exercised.
The following table sets forth the computation of basic and diluted net
income per common share:
-----------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
(in thousands except per share data) June 29, June 30, June 29, June 30,
2001 2000 2001 2000
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Net (loss) income $(3,235) $ 9,764 $ 1,745 $17,722
================== ===================
Basic shares 22,539 22,516 22,536 22,468
Add: Common equivalent shares - 280 126 380
------------------ -------------------
Diluted shares 22,539 22,796 22,662 22,848
================== ===================
Basic net (loss) income per share $ (0.14) $ 0.43 $ 0.08 $ 0.79
================== ==================
Diluted net (loss) income per share $ (0.14) $ 0.43 $ 0.08 $ 0.78
================== ===================
Common equivalent shares represent shares issuable upon exercise of stock options
(using the treasury stock method). For the three months ended June 29, 2001, the Company
had 578,375 options outstanding not included in the computation of diluted shares, because
the Company was in a net operating loss position, and the inclusion of such shares would
be anti-dilutive. For the three months ended June 30, 2000, the Company had 35,000
options outstanding not included in the computation of diluted shares, because the option
price was greater than the average market price of the common shares, and the inclusion of
such shares would be anti-dilutive. For the six months ended June 29, 2001, and June 30,
2000, the Company had 25,000 and 35,000 options outstanding not included in the
computation of diluted shares, respectively.
Page 7
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Other Comprehensive Income
-----------------------------------
SFAS 130 requires unrealized gains or losses on the Company's investments
and foreign currency translation adjustments, which prior to adoption were
reported separately in stockholders' equity to be included in other
comprehensive income.
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Three Months Ended Six Months Ended
(in thousands) June 29, June 30, June 29, June 30,
2001 2000 2001 2000
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Net (loss) income $(3,235) $9,764 $ 1,745 $17,722
------------------------------------------------------------------------------------------
Other comprehensive (loss) income before
tax:
Foreign currency translation adjustment (1,120) (381) (2,145) (241)
Unrealized gain on available-for-sale
investment 8 5 43 26
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Other comprehensive (loss), before tax (1,112) (376) (2,102) (215)
Income tax related to items of other
comprehensive income (loss) 383 33 605 (66)
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Other comprehensive (loss), net of tax (729) (343) (1,497) (281)
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Comprehensive (loss) income $(3,964) $9,421 $ 248 $17,441
==========================================================================================
Page 8
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
---------------------
Net sales for the three months ended June 29, 2001, (the "2001 Quarter")
were $26.6 million compared with net sales for the three months ended June
30, 2000, (the "2000 Quarter") of $58.5 million, a decrease of 54.5%. Net
sales for the six months ended June 29, 2001, (the "2001 Period") were
$75.2 million, a decrease of 30.7%, from $108.6 million for the six months
ended June 30, 2000 (the "2000 Period"). The decline in sales is a result
of the continuing slowdown in the global market for semiconductor capital
equipment.
The gross profit percentage for the 2001 Quarter was 30.5% compared with
47.3% for the 2000 Quarter. The gross profit percentage for the 2001
Period was 37.5% compared with 47.7% for the 2000 Period. The reduction in
gross margin was primarily attributable to decreased production volume.
Research and development expenses were $4.2 million for the 2001 Quarter,
or 15.8% of net sales, compared to $3.9 million, or 6.7% of net sales, for
the 2000 Quarter. Spending was $8.4 million, or 11.2% of net sales for the
2001 Period, compared to $7.2 million, or 6.6% of net sales, for the 2000
Period. Despite the significant near-term reduction in product demand, we
are committed to preparing the Company to fully participate in the next
expansion phase of the semiconductor capital equipment demand cycle. We
continue to focus on technologies to support 300mm products, our GOLDLink
support services, and improvement to our core products. (GOLDLink is a
registered service mark of Helix Technology Corporation.) The Company
expects R&D spending to be approximately $4.0 million per quarter over the
next several quarters.
Total selling, general and administrative expenses decreased by $1.0
million in the 2001 Quarter and $0.9 million in the 2001 Period compared to
the 2000 Quarter and the 2000 Period, respectively. Spending declined as
cost containment measures were initiated during the 2001 Quarter and the
2001 Period.
The Company had an operating loss of $5.6 million in the 2001 Quarter and
operating income of $0.4 million in the 2001 Period as compared with
operating income of $13.3 million and $24.3 million in the 2000 Quarter and
the 2000 Period. The primary reason for the decrease was lower sales.
For the 2001 Quarter, the Company had a pretax loss of $4.8 million
resulting in a tax benefit of $1.6 million compared to a pretax income of
$14.6 million and a tax provision of $4.8 million for the 2000 Quarter.
For the 2001 Period, the Company had pretax income of $2.6 million and a
tax provision of $0.8 million compared to pretax income of $26.5 million
and a tax provision of $8.7 million for the 2000 Period.
The effective tax rates for the 2001 and 2000 Quarters and Periods were
32.5% and 33.0%, respectively.
Page 9
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations (continued)
---------------------
Liquidity and Capital Resources
-------------------------------
Cash provided by operating activities for the 2001 Period was $9.7 million
compared with $15.0 million for the 2000 Period, primarily due to a decline
in net income, offset by the reduction in working capital.
In the 2001 Period, capital expenditures were $9.5 million, principally for
our new Japanese service center and implementation of our global
information system. In the 2000 Period, capital expenditures were $6.8
million, principally due to consolidation of our Colorado operations into a
new 60,000 square foot leased facility. For the year, the Company expects
to spend approximately $12.0 to $14.0 million as it continues the
implementation of the global information system and GOLDLink system
enhancements.
Cash dividends paid to stockholders during both the 2001 Period and the
2000 Period were $5.4 million.
The Company believes that existing cash, cash equivalents, investment
balances and anticipated cash flow from operations and borrowings under its
revolving credit agreement will be adequate to fund operations and its
capital expenditure program for at least the next twelve months.
Certain Factors That May Affect Future Results
----------------------------------------------
From time to time, information provided by the Company, statements made by
its employees or information included in its filings with the Securities
and Exchange Commission may contain statements that are not historical
facts but that are "forward-looking statements" involving risks and
uncertainties. In particular, statements in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" relating to the
Company's shipment levels, profitability, sufficiency of capital to meet
working capital and capital expenditure requirements may be forward-looking
statements. The words "expect," "anticipate," "internal," "plan,"
"believe," "seek," "estimate" and similar expressions are intended to
identify such forward-looking statements. Such statements are not
guarantees of future performance and involve certain risks, uncertainties
and assumptions that could cause the Company's future results to differ
materially from those expressed in any forward-looking statements made by
or on behalf of the Company. Many such factors are beyond the Company's
ability to control or predict. Readers are accordingly cautioned not to
place undue reliance on forward-looking statements. The Company disclaims
any intent or obligation to update publicly any forward-looking statements,
whether in response to new information or future events or otherwise.
Important factors that may cause the Company's actual results to differ
from such forward-looking statements include, but are not limited to, the
factors discussed below.
Page 10
HELIX TECHNOLOGY CORPORATION
PART I
Item 2 Management's Discussion and Analysis of Financial Condition and
-----------------------------------------------------------------------
Results of Operations (continued)
---------------------
Certain Factors That May Affect Future Results (continued)
----------------------------------------------
The Company's business depends in large part upon the capital expenditures
of semiconductor manufacturers, which, in turn, depend on the current and
anticipated market demand for integrated circuits and products utilizing
integrated circuits. The semiconductor industry is highly cyclical and has
historically experienced periodic downturns, which generally have had a
severe effect on the semiconductor industry's demand for capital equipment
and have adversely affected the Company's results of operations. There can
be no assurance that developments in the semiconductor industry or the
semiconductor equipment industry will occur at the rate or in the manner
expected by the Company.
In addition to the cyclical nature, risks and uncertainties of the
semiconductor industry, the Company faces the following risks and
uncertainties among others: the need to continuously develop, manufacture
and gain customers' acceptance of new products and product enhancements;
dependence on a limited number of customers and concentration of sales to
one or a few customers; the Company's ability to attract and retain certain
key personnel; the ability of the Company to protect its technology assets
by obtaining and enforcing patents; and dependence on sole and limited
source suppliers for certain components and subassemblies included in the
Company's products and systems. As a result of the foregoing and other
factors, the Company may experience material fluctuations in its future
operating results on a quarterly or annual basis which could materially
affect its business, financial position, results of operations and stock
price.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
-------------------------------------------------------------------
There have been no significant changes in the Company's market risks since
the year ended December 31, 2000. For more information please read the
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
The Company is exposed to concentration of credit risk in cash and cash
equivalents, investments, trade receivables, and short-term foreign
exchange forward contracts. Cash and cash equivalents are placed with the
Company's primary bank, a major financial institution, with a high quality
credit rating. The Company's investments consist of money market funds,
municipal government agencies and tax-free bonds or investment-grade
securities. The short-term foreign currency exchange contracts are entered
into with its primary bank.
Page 11
HELIX TECHNOLOGY CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
--------------------------
In the normal course of business, the Company is subject to various legal
proceedings and claims. The Company believes that the ultimate outcome of
these matters will not have a material effect on its financial statements.
The Company is a defendant in an action brought in 1998 in the
Massachusetts Superior Court by Raytheon Company which alleges that between
1992 and 1994 the Company sold Raytheon defective components used in
missile guidance systems manufactured by Raytheon. The Company has not
been in the business of selling these components since 1994.
The Company has denied all claims asserted against it by Raytheon and has
succeeded in having certain claims dismissed. The action is in the
discovery and motion phase. The Company believes that it has meritorious
defenses and that, although the ultimate outcome of the matters cannot be
predicted with certainty, the disposition of the matters should not have a
material effect on the financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
The Company's Annual Meeting of Stockholders was held on April 25, 2001.
Proposal I, submitted to a vote of security holders at the meeting, was the
election of Directors. The following Directors, being all of the Directors
of the Corporation, were elected at the meeting, with the number of votes
cast for each Director or withheld from each Director being set forth after
his respective name:
Name Votes For Votes Withheld
---- --------- --------------
Arthur R. Buckland 20,049,532 88,367
Matthew O. Diggs, Jr. 20,043,253 94,646
Frank Gabron 20,046,509 91,390
Robert H. Hayes 20,048,842 89,057
Robert J. Lepofsky 19,876,434 261,465
Marvin G. Schorr 20,040,445 97,454
Mark S. Wrighton 20,051,202 86,697
Item 6(b). Reports on Form 8-K
-------------------------------
The Company did not file any Current Reports on Form 8-K during the quarter
ended June 29, 2001.
Page 12
HELIX TECHNOLOGY CORPORATION
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HELIX TECHNOLOGY CORPORATION
(Registrant)
August 2, 2001 By: /s/Robert J. Lepofsky
-------------- -------------------------------------------------
Date Robert J. Lepofsky
President and Chief Executive Officer
August 2, 2001 /s/Teodor Klowan, Jr.
-------------- -------------------------------------------------
Date Teodor Klowan, Jr.
Corporate Controller and Chief Accounting Officer
Page 13