10-Q 1 0001.txt FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 29, 2000 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 September 29, 2000. 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 (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 September 29, 2000 was 22,536,704. HELIX TECHNOLOGY CORPORATION Form 10-Q INDEX Page Part I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheets as of September 29, 2000 and December 31, 1999....................................................3 Consolidated Statements of Operations for the Three and Nine-Month Periods Ended September 29, 2000 and October 1, 1999.................4 Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 29, 2000 and October 1, 1999.................5 Notes to Consolidated Financial Statements................................6-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...............10-11 Item 3. Quantitative and Qualitative Disclosures about Market Risk ..........................................................12 Part II. OTHER INFORMATION Item 1. Legal Proceedings..............................................13 Item 6 (a). Exhibits.......................................................13 Item 6 (b). Reports on Form 8-K............................................13 Signature..................................................................14 HELIX TECHNOLOGY CORPORATION CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------------------ Sept. 29, 2000 Dec. 31, 1999 (in thousands except per share data) (unaudited) (audited) ------------------------------------------------------------------------------------------ ASSETS Current: Cash and cash equivalents $ 11,936 $ 11,408 Investments (Note 2) 16,443 15,912 Receivables - net of allowances 38,661 19,479 Inventories (Note 3) 24,340 18,442 Deferred income taxes (Note 4) 7,040 7,040 Other current assets 2,021 1,626 ------------------------------------------------------------------------------------------ Total Current Assets 100,441 73,907 ------------------------------------------------------------------------------------------ Property, plant and equipment at cost 47,482 38,724 Less: accumulated depreciation (30,363) (28,093) ------------------------------------------------------------------------------------------ Net property, plant and equipment 17,119 10,631 Other assets 11,417 9,117 ------------------------------------------------------------------------------------------ TOTAL ASSETS $128,977 $ 93,655 ========================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current: Accounts payable $ 15,131 $ 8,490 Payroll and compensation 2,873 4,768 Retirement costs 5,260 4,561 Income taxes (Note 4) 10,524 3,238 Other accrued liabilities 979 975 ------------------------------------------------------------------------------------------ Total Current Liabilities 34,767 22,032 ------------------------------------------------------------------------------------------ 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: 22,536,704 in 2000 and 22,375,631 in 1999 22,537 22,376 Capital in excess of par value 9,203 9,314 Treasury stock, $1 par value (7,670 shares in 2000 and 11,602 shares in 1999) (463) (198) Retained earnings 62,157 39,063 Accumulated other comprehensive income (Note 6) 776 1,068 ------------------------------------------------------------------------------------------ Total Stockholders' Equity 94,210 71,623 ------------------------------------------------------------------------------------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $128,977 $ 93,655 ========================================================================================== The accompanying notes are an integral part of these financial statements.
Page 3 HELIX TECHNOLOGY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
---------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended Sept. 29, Oct. 1, Sept. 29, Oct. 1, (in thousands except per share data) 2000 1999 2000 1999 ---------------------------------------------------------------------------------------------------------- Net sales $69,913 $39,036 $178,488 $97,469 ---------------------------------------------------------------------------------------------------------- Costs and expenses: Cost of sales 36,495 21,431 93,301 54,921 Research and development 4,182 2,481 11,391 7,100 Selling, general and administrative 11,182 8,614 31,427 23,368 ---------------------------------------------------------------------------------------------------------- 51,859 32,526 136,119 85,389 ---------------------------------------------------------------------------------------------------------- Operating income 18,054 6,510 42,369 12,080 Joint venture income 1,322 440 2,920 788 Interest and other income 396 192 933 620 ---------------------------------------------------------------------------------------------------------- Income before taxes 19,772 7,142 46,222 13,488 Income taxes (Note 4) 6,294 2,357 15,022 4,451 ---------------------------------------------------------------------------------------------------------- Net income $13,478 $ 4,785 $ 31,200 $ 9,037 ========================================================================================================== Net income per share: Basic (Note 5) $ 0.60 $ 0.21 $ 1.39 $ 0.40 Diluted (Note 5) $ 0.59 $ 0.21 $ 1.37 $ 0.40 ========================================================================================================== Number of shares used in per share calculations: Basic (Note 5) 22,525 22,344 22,487 22,323 Diluted (Note 5) 22,725 22,673 22,807 22,553 ========================================================================================================== The accompanying notes are an integral part of these financial statements.
Page 4 HELIX TECHNOLOGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
-------------------------------------------------------------------------------------------- Nine Months Ended (in thousands) Sept. 29, 2000 Oct. 1, 1999 -------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 31,200 $ 9,037 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,996 3,082 Other (1,966) 306 Net change in operating assets and liabilities (A) (9,671) (6,967) -------------------------------------------------------------------------------------------- Net cash provided by operating activities 22,559 5,458 -------------------------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (9,484) (3,007) Purchase of investments (36,547) (18,237) Sale of investments 36,047 20,565 -------------------------------------------------------------------------------------------- Net cash (used) by investing activities (9,984) (679) -------------------------------------------------------------------------------------------- Cash flows from financing activities: Shares tendered for exercise of stock options (5,181) - Net cash provided by employee stock plans 1,240 337 Cash dividends paid (8,106) (8,027) -------------------------------------------------------------------------------------------- Net cash (used) by financing activities (12,047) (7,690) -------------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 528 (2,911) Cash and cash equivalents, at the beginning of the period 11,408 8,843 -------------------------------------------------------------------------------------------- Cash and cash equivalents, at the end of the period $ 11,936 $ 5,932 ============================================================================================ (A) Change in operating assets and liabilities: (Increase) in accounts receivable $(19,182) $(10,263) (Increase) in inventories (5,898) (2,035) (Increase) in other current assets (395) (727) Increase in accounts payable 6,641 3,328 Increase in other accrued expenses 9,163 2,730 -------------------------------------------------------------------------------------------- Net change in operating assets and liabilities $ (9,671) $ (6,967) ============================================================================================ 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 September 29, 2000, and October 1, 1999, contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of September 29, 2000, and December 31, 1999, and the results of operations and cash flows for the periods ended September 29, 2000, and October 1, 1999. The results of operations for the nine-month period ended September 29, 2000, 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 three and nine-month periods ended September 29, 2000, and October 1, 1999, 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 $16,443,000 and $15,912,000 as of September 29, 2000, and December 31, 1999, 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 -------------------- --------------------------------------------------------------- (in thousands) Sept. 29, 2000 Dec. 31, 1999 --------------------------------------------------------------- Finished goods $ 7,008 $ 5,157 Work in process 11,541 8,716 Materials and parts 5,791 4,569 --------------------------------------------------------------- $24,340 $18,442 =============================================================== 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 $15,022,000 for the nine-month period ended September 29, 2000, and $4,451,000 for the nine-month period ended October 1, 1999. 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 rate for the nine-month period ended September 29, 2000 was 32.5%, and for the nine-month period ended October 1, 1999 was 33%. 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 Nine Months Ended (in thousands except per share data) Sept. 29, 2000 Oct. 1, 1999 Sept. 29, 2000 Oct. 1, 1999 -------------------------------------------------------------------------------------------------------------- Net income $13,478 $ 4,785 $31,200 $ 9,037 ============================================================================================================== Basic shares 22,525 22,344 22,487 22,323 Add: Common equivalent shares (1) 200 329 320 230 -------------------------------------------------------------------------------------------------------------- Diluted shares 22,725 22,673 22,807 22,553 ============================================================================================================== Basic net income per share $ 0.60 $ 0.21 $ 1.39 $ 0.40 ============================================================================================================== Diluted net income per share $ 0.59 $ 0.21 $ 1.37 $ 0.40 ============================================================================================================== (1) Common equivalent shares represent shares issuable upon exercise of stock options (using the treasury stock method). The Company had 35,000 options outstanding not included in the computation of diluted shares as of September 29, 2000, 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. As of October 1, 1999, the Company had no stock options that were anti-dilutive.
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.
-------------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended (in thousands) Sept. 29, 2000 Oct. 1, 1999 Sept. 29, 2000 Oct. 1, 1999 -------------------------------------------------------------------------------------------------------------- Net income $13,478 $4,785 $31,200 $9,037 -------------------------------------------------------------------------------------------------------------- Other comprehensive income (loss) before tax: Foreign currency translation adjustment 21 403 (218) 1,094 Unrealized gain (loss) on available-for-sale investment 5 9 31 (53) -------------------------------------------------------------------------------------------------------------- Other comprehensive income (loss), before tax 26 412 (187) 1,041 Income tax related to items of other comprehensive income (loss) (37) (15) (105) (309) -------------------------------------------------------------------------------------------------------------- Other comprehensive (loss) income, net of tax (11) 397 (292) 732 -------------------------------------------------------------------------------------------------------------- Comprehensive income $13,467 $5,182 $30,908 $9,769 ==============================================================================================================
Note 7 - New Accounting Pronouncements -------------------------------------- In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including some derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. The Company will adopt SFAS 133 in 2001, in accordance with SFAS 137, which deferred the effective date of SFAS 133. The adoption of this standard in 2001 is not expected to have a material impact on the Company's consolidated financial statements. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." SAB 101 summarizes the staff's view in applying generally accepted accounting principles to selected revenue recognition issues. The application of the guidance in SAB 101 will be required in the Company's fourth quarter of 2000. The Company is evaluating the application of SAB 101 and has not determined the impact on the Company's consolidated financial statements. 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 September 29, 2000, (the "2000 Quarter") were $69.9 million compared with net sales for the three months ended October 1, 1999, (the "1999 Quarter") of $39.0 million, an increase of 79.2%. Net sales for the nine months ended September 29, 2000, (the "2000 Period") were $178.5 million, an increase of 83.1%, from $97.5 million for the nine months ended October 1, 1999 (the "1999 Period"). The Company continued to benefit from the significant increase in demand for semiconductor capital equipment. The gross profit percentage for the 2000 Quarter was 47.8% compared with 45.1% for the 1999 Quarter. The gross profit percentage for the 2000 Period was 47.7% compared with 43.7% for the 1999 Period. The improvement in gross margin was primarily attributable to increased sales volume, offset by costs relating to a new manufacturing and engineering center in Colorado, a new customer support center in Taiwan, and expansion of our Japanese customer support center. Research and development expenses were $4.2 million for the 2000 Quarter, or 6.0% of net sales, compared to $2.5 million, or 6.4% of net sales, for the 1999 Quarter. Spending was $11.4 million, or 6.4% of net sales for the 2000 Period, compared to $7.1 million, or 7.3% of net sales, for the 1999 Period. The Company increased its spending on projects to support 300 mm products, GOLDLink support services and ongoing improvements to its core products. Total selling, general and administrative expenses increased by $2.6 million in the 2000 Quarter and $8.1 million in the 2000 Period compared to the 1999 Quarter and the 1999 Period, respectively. The increase in spending was primarily attributable to expenditures to support increased sales activities worldwide, the aforementioned locations in Colorado, Taiwan and Japan and our GOLDLink global support initiative. Operating income increased $11.5 million and $30.3 million in the 2000 Quarter and the 2000 Period, respectively, compared with the 1999 Quarter and the 1999 Period, respectively. The primary reasons for the increase were higher net sales and spending growth that was lower than sales growth. For the 2000 Quarter, the Company had pretax income of $19.8 million resulting in a tax provision of $6.3 million compared to a pretax income of $7.1 million and a tax provision of $2.4 million for the 1999 Quarter. For the 2000 Period, the Company had pretax income of $46.2 million and a tax provision of $15.0 million compared to pretax income of $13.5 million and a tax provision of $4.5 million for the 1999 Period. The effective tax rate for the 2000 Period was 32.5% and for the 1999 Period was 33.0%. 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 2000 Period was $22.6 million compared with $5.5 million for the 1999 Period, primarily due to increased net income. The Company's historical annual capital needs have been approximately $4.0 million to $5.0 million. However, in 2000 the Company has four major initiatives that are expected to result in capital spending in excess of approximately $12.0 million. These initiatives are: consolidation of our Colorado operations into a new 60,000 square foot leased facility, the first phase of a new corporate information system, a GOLDLink global support operations center, expansion of our Japanese customer support center and the opening of a sales and service location in Taiwan. Cash used by investing activities was $10.0 million during the 2000 Period, primarily due to increased capital expenditures related to the above-mentioned projects. Cash dividends paid to stockholders were $8.1 million during the 2000 Period and $8.0 million during the 1999 Period. The Company paid a quarterly common stock dividend of $0.12 per share. The Company believes that existing cash, cash equivalents, investment balances and anticipated cash flow from operations will be adequate to fund operations and its capital expenditure program for the foreseeable future. The Company also has a $25 million unsecured bank line of credit. New Accounting Pronouncements ----------------------------- In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including some derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. The Company will adopt SFAS 133 in 2001, in accordance with SFAS 137, which deferred the effective date of SFAS 133. The adoption of this standard in 2001 is not expected to have a material impact on the Company's consolidated financial statements. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." SAB 101 summarizes the staff's view in applying generally accepted accounting principles to selected revenue recognition issues. The application of the guidance in SAB 101 will be required in the Company's fourth quarter of 2000. The Company is evaluating the application of SAB 101 and has not determined the impact on the Company's consolidated financial statements. 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 ---------------------------------------------- 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, results of operations, sufficiency of capital to meet working capital and capital expenditure requirements may be forward-looking statements. The words "expect," "anticipate," "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. 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 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. Page 11 HELIX TECHNOLOGY CORPORATION PART I 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, 1999. 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, 1999. Page 12 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 is a defendant in an action brought by Raytheon Company on November 10, 1998, in Massachusetts Superior Court claiming damages from the sale of allegedly defective components by the Company to Raytheon, which the Company no longer sells. The Company believes that it has meritorious defenses to the claims and that, although the outcome of the action cannot be predicted with certainty, the disposition of the claim should not have a material effect on the financial position of the Company. Item 6(a). Exhibits ---------- -------- 4.1 Revolving Credit Agreement, dated July 18, 2000, by and between Helix Technology Corporation and Fleet National Bank. 27.1 Financial Data Schedule (EDGAR version only). Item 6(b). Reports on Form 8-K --------------------------------- The Company did not file any Current Reports on Form 8-K during the quarter ended September 29, 2000. Page 13 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) November 8, 2000 By: /s/Michael El-Hillow ---------------- ---------------------------- Date Michael El-Hillow Senior Vice President Chief Financial Officer Page 14 HELIX TECHNOLOGY CORPORATION EXHIBIT INDEX Exhibit 4.1 Revolving Credit Agreement 27.1 Financial Data Schedule (EDGAR version only)