-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NSgjh9bLjInLdzEavZzsfGeeSxD6vmBgNRxEp1cumMkWdi2KKAJmM3/SyOBqxwhP kATxBs0FBh3Tkwn2eRWCXA== 0000046709-02-000005.txt : 20020719 0000046709-02-000005.hdr.sgml : 20020719 20020718163228 ACCESSION NUMBER: 0000046709-02-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020628 FILED AS OF DATE: 20020718 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HELIX TECHNOLOGY CORP CENTRAL INDEX KEY: 0000046709 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 042423640 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06866 FILM NUMBER: 02705831 BUSINESS ADDRESS: STREET 1: NINE HAMPSHIRE STREET CITY: MANSFIELD STATE: MA ZIP: 02048 BUSINESS PHONE: 5083375111 MAIL ADDRESS: STREET 1: NINE HAMPSHIRE STREET CITY: MANSFIELD STATE: MA ZIP: 02048 FORMER COMPANY: FORMER CONFORMED NAME: CRYOGENIC TECHNOLOGY INC DATE OF NAME CHANGE: 19760707 10-Q 1 q210q02.txt FORM 10-Q FOR THE QUARTER ENDED JUNE 28, 2002 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 28, 2002. 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) 337-5500 ------------------------------ 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 28, 2002 was 26,103,204. HELIX TECHNOLOGY CORPORATION Form 10-Q INDEX Page Part I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheets as of June 28, 2002 and December 31, 2001 3 Consolidated Statements of Operations for the Three and Six-Month Periods Ended June 28, 2002 and June 29, 2001 4 Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 28, 2002 and June 29, 2001 5 Notes to Consolidated Financial Statements 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12 Item 3. Quantitative and Qualitative Disclosures about Market Risk 13 Part II. OTHER INFORMATION Item 1. Legal Proceedings 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 6 (b). Reports on Form 8-K 14 Signature 15 HELIX TECHNOLOGY CORPORATION CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------------- June 28, 2002 December 31, 2001 (in thousands except per share data) (unaudited) (audited) - --------------------------------------------------------------------------------------- ASSETS Current: Cash and cash equivalents $ 72,878 $ 7,789 Investments 2,866 9,271 Receivables - net of allowances 18,273 11,997 Inventories (Note 2) 26,166 27,293 Income tax receivable 4,453 7,344 Deferred income taxes (Note 3) 5,707 5,707 Other current assets 2,320 2,577 - --------------------------------------------------------------------------------------- Total Current Assets 132,663 71,978 - --------------------------------------------------------------------------------------- Property, plant and equipment at cost 69,077 65,115 Less: accumulated depreciation (38,294) (35,614) - --------------------------------------------------------------------------------------- Net property, plant and equipment 30,783 29,501 Other assets 11,382 12,101 - --------------------------------------------------------------------------------------- TOTAL ASSETS $174,828 $113,580 ======================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY Current: Accounts payable $ 13,723 $ 9,105 Payroll and compensation 523 986 Retirement costs 7,713 6,758 Income taxes (Note 3) 3,583 3,064 Litigation settlement, net (Note 7) 2,800 - Other accrued liabilities 959 700 - --------------------------------------------------------------------------------------- Total Current Liabilities 29,301 20,613 - --------------------------------------------------------------------------------------- Commitments and contingencies (Note 8) 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: 26,103,204 in 2002 and 22,611,204 in 2001 26,103 22,611 Capital in excess of par value 76,344 13,878 Treasury stock, $1 par value (3,840 shares in 2002 and in 2001) (232) (232) Retained earnings 46,105 58,261 Accumulated other comprehensive income (Note 5) (2,793) (1,551) - --------------------------------------------------------------------------------------- Total Stockholders' Equity 145,527 92,967 - --------------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $174,828 $113,580 ======================================================================================= The accompanying notes are an integral part of these financial statements.
Page 3 HELIX TECHNOLOGY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
- ------------------------------------------------------------------------------------------ Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, (in thousands except per share data) 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------ Net sales $29,015 $26,604 $ 49,395 $75,245 - ------------------------------------------------------------------------------------------ Costs and expenses: Cost of sales 19,653 18,495 35,194 47,002 Research and development 3,968 4,209 7,484 8,442 Selling, general and administrative 11,314 9,460 19,373 19,365 - ------------------------------------------------------------------------------------------ 34,935 32,164 62,051 74,809 - ------------------------------------------------------------------------------------------ Operating (loss) income (5,920) (5,560) (12,656) 436 Joint venture income 14 553 59 1,518 Interest and other income 296 214 365 631 - ------------------------------------------------------------------------------------------ (Loss) income before taxes (5,610) (4,793) (12,232) 2,585 Income tax (benefit) provision (Note 3) (1,823) (1,558) (3,975) 840 - ------------------------------------------------------------------------------------------ Net (loss) income $(3,787) $(3,235) $ (8,257) $ 1,745 ========================================================================================== Net (loss) income per share (Note 4): Basic $ (0.15) $ (0.14) $ (0.34) $ 0.08 Diluted $ (0.15) $ (0.14) $ (0.34) $ 0.08 ========================================================================================== Number of shares used in per share calculations (Note 4): Basic 26,097 22,539 24,599 22,536 Diluted 26,097 22,539 24,599 22,662 ========================================================================================== The accompanying notes are an integral part of these financial statements.
Page 4 HELIX TECHNOLOGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
- ----------------------------------------------------------------------------------------- Six Months Ended (in thousands) June 28, 2002 June 29, 2001 - ----------------------------------------------------------------------------------------- Cash flows from operating activities: Net (loss) income $(8,257) $ 1,745 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,944 2,437 Other (486) (1,479) Net change in operating assets and liabilities (A) 6,688 6,977 - ----------------------------------------------------------------------------------------- Net cash provided by operating activities 889 9,680 - ----------------------------------------------------------------------------------------- Cash flows provided by (used by) investing activities: Capital expenditures (4,226) (9,489) Purchase of investments (8,140) (23,255) Sale of investments 14,508 22,932 - ----------------------------------------------------------------------------------------- Net cash provided by (used by) investing activities 2,142 (9,812) - ----------------------------------------------------------------------------------------- Cash flows provided by (used by) financing activities: Net proceeds from stock offering 65,246 - Net cash provided by employee stock plans 711 491 Cash dividends paid (3,899) (5,408) - ----------------------------------------------------------------------------------------- Net cash provided by (used by) financing activities 62,058 (4,917) - ----------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 65,089 (5,049) Cash and cash equivalents, at the beginning of the period 7,789 15,435 - ----------------------------------------------------------------------------------------- Cash and cash equivalents, at the end of the period $72,878 $ 10,386 ========================================================================================= (A) Change in operating assets and liabilities: (Increase) decrease in accounts receivable $(6,276) $ 21,179 Decrease in inventories 1,127 1,246 Decrease in income tax receivable 2,891 - Decrease in other current assets 257 100 Increase (decrease) in accounts payable 4,618 (12,239) Increase in accrued litigation settlement, net 2,800 - Increase (decrease) in other accrued expenses 1,271 (3,309) - ----------------------------------------------------------------------------------------- Net change in operating assets and liabilities $ 6,688 $ 6,977 ========================================================================================= 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 - ------------------------------ The accompanying consolidated financial statements for the periods ended June 28, 2002, and June 29, 2001, contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of June 28, 2002, and December 31, 2001, and the results of operations and cash flows for the periods ended June 28, 2002, and June 29, 2001. The results of operations for the six-month period ended June 28, 2002, 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 28, 2002, and June 29, 2001, 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 - Inventories - -------------------- - ------------------------------------------------------------------------- (in thousands) June 28, 2002 December 31, 2001 - ------------------------------------------------------------------------- Finished goods $ 9,775 $ 8,570 Work in process 12,349 13,067 Materials and parts 4,042 5,656 ------------------------- $26,166 $27,293 ========================= Inventories are stated at the lower of cost or market on a first-in, first- out basis. Note 3 - Income Taxes - --------------------- The net federal, state and foreign income tax benefit was $3,975,000 for the six-month period ended June 28, 2002, and the net federal, state and foreign income tax provision was $840,000 for the six-month period ended June 29, 2001. 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 28, 2002, and June 29, 2001, were 32.5%. 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. Page 6 HELIX TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 - Net (Loss) Income Per Share - ------------------------------------ Basic net (loss) income per common share is based on the weighted average number of common shares outstanding during the period. Diluted net (loss) 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 (loss) income per common share:
- ----------------------------------------------------------------------------------------- Three Months Ended Six Months Ended (in thousands except per share data) June 28, June 29, June 28, June 29, 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------ Net (loss) income $(3,787) $(3,235) $(8,257) $ 1,745 ==================== ================== Basic shares 26,097 22,539 24,599 22,536 Add: Common equivalent shares - - - 126 ------------------------------------------ Diluted shares 26,097 22,539 24,599 22,662 ========================================== Basic net (loss) income per share $ (0.15) $ (0.14) $ (0.34) $ 0.08 ========================================== Diluted net (loss) income per share $ (0.15) $ (0.14) $ (0.34) $ 0.08 ========================================= Common equivalent shares represent shares issuable upon exercise of stock options (using the treasury stock method). For the three months ended June 28, 2002, the Company had 566,375 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 29, 2001, the Company had 578,375 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 28, 2002, and June 29, 2001, the Company had 566,375 and 25,000 options outstanding not included in the computation of diluted shares, respectively.
Note 5 - Other Comprehensive (Loss) Income - ------------------------------------------
- ------------------------------------------------------------------------------------------ Three Months Ended Six Months Ended (in thousands) June 28, June 29, June 28, June 29, 2002 2001 2002 2001 - ------------------------------------------------------------------------------------------ Net (loss) income $(3,787) $(3,235) $(8,257) $ 1,745 - ------------------------------------------------------------------------------------------ Other comprehensive (loss) before tax: Foreign currency translation adjustment (449) (1,120) (1,527) (2,145) Unrealized (loss) gain on available-for-sale investments (1) 8 (37) 43 - ------------------------------------------------------------------------------------------ Other comprehensive (loss), before tax (450) (1,112) (1,564) (2,102) Income tax related to items of other comprehensive (loss) 31 383 322 605 - ------------------------------------------------------------------------------------------ Other comprehensive (loss), net of tax (419) (729) (1,242) (1,497) - ------------------------------------------------------------------------------------------ Comprehensive (loss) income $(4,206) $(3,964) $(9,499) $ 248 ==========================================================================================
Page 7 HELIX TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 6 - Common Stock Offering - ------------------------------ On March 19, 2002, the Company completed a public offering of 3,450,000 shares of its common stock. The Company realized proceeds of $65.2 million, net of underwriting fees and discounts and offering expenses. Note 7 - Litigation Settlement - ------------------------------ On July 11, 2002, the Company signed an Agreement in Principle with Raytheon Company in connection with an action brought in 1998 in the Massachusetts Superior Court by Raytheon Company which alleged 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. While the Company has continuously denied all claims, the Company and its insurers concluded that it was in the Company's best interest to reach an out-of- court settlement to avoid the distraction and expense of a jury trial. Under the terms of the Agreement, the Company is obligated to pay $2.8 million. Insurance providers will pay an additional $2.1 million and essentially all of the legal costs associated with this litigation. Note 8 - Commitments and Contingencies - -------------------------------------- The Company had a three year revolving credit agreement with Fleet National Bank entered into in July 2000 that permitted the Company to borrow up to $25.0 million, subject to compliance with certain covenants. The Company had never borrowed against the agreement and terminated the credit agreement in April 2002. Note 9 - New Accounting Pronouncements - -------------------------------------- In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 (SFAS 142), "Goodwill and Other Intangible Assets," which became effective for the Company on January 1, 2002. SFAS 142 requires, among other things, the discontinuance of goodwill amortization and includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles and reclassification of certain intangibles out of previously reported goodwill. The revised standards include transition rules and requirements for identification, valuation and recognition of a much broader list of intangibles as part of business combinations than prior practice, most of which will continue to be amortized. In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144 (SFAS 144), "Accounting for the Impairment or Disposal of Long-Lived Assets." The objectives of SFAS 144 are to address significant issues relating to the implementation of FASB Statement No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and to develop a single accounting model, based on the framework established in SFAS 121, for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 and, generally, its provisions are to be applied prospectively. The Company adopted these standards, and they do not have a material impact on its consolidated financial statements. Page 8 HELIX TECHNOLOGY CORPORATION PART I Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations --------------------- You should read the following discussion and analysis together with our financial statements, related notes and other financial information appearing elsewhere in this report. In addition to historical information, the following discussion and other parts of this report contain forward- looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward- looking information due to competitive factors and other factors discussed under "Important Factors That May Affect Future Results" below. Significant Accounting Policies - ------------------------------- Management's Discussion and Analysis of Financial Condition and Results of Operations are based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are based on historical experience and on various other factors that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about our critical accounting policies. Actual results may differ from these estimates and judgments under different assumptions or conditions. Revenue Recognition. Net sales is recognized upon shipment provided title and risk of loss have been transferred to the customer, there is evidence of an arrangement, fees are fixed or determinable, and collection is reasonably assured. As part of a sale, we offer customers a warranty on defects in materials and workmanship. We continuously monitor and track the related product returns and record a provision for the estimated amount of such future returns, based on historical experience and any notification we receive of pending returns. While such returns have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same return rates that we have in the past. Any significant increase in material and workmanship defect rates and the resulting credit returns could have a material adverse impact on our operating results for the period or periods in which such returns materialize. We also maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Inventory. We value inventory at the lower of cost (first-in, first-out method) or market. We regularly review inventory quantities on hand and record a provision to write down inventory to its estimated net realizable value, if less than cost, based upon management's assumptions of future material usage and obsolescence, which are a result of future demand and market conditions. If actual market conditions become less favorable than those projected by management, additional inventory provisions may be required. Investments. We own 50% of a joint venture, ULVAC Cryogenics, Inc., or UCI, which manufactures and sells cryogenic vacuum pumps in Japan, principally to ULVAC Corporation. We account for the joint venture using the equity method of accounting, and we also receive royalties from the joint venture under the terms of a license and technology agreement. The royalties we receive from UCI, as well as our equity in the income and losses of UCI, are both included in our financial statements under joint venture income. Page 9 HELIX TECHNOLOGY CORPORATION PART I Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations --------------------- Results of Operations - --------------------- Beginning in 2001, a slowdown in the global market for semiconductor capital equipment impacted us after experiencing a period of significant growth in 1999 and 2000. Net sales for the three months ended June 28, 2002, (the "2002 Quarter") were $29.0 million compared with net sales for the three months ended June 29, 2001, (the "2001 Quarter") of $26.6 million, an increase of 9.1%. Net sales for the six months ended June 28, 2002, (the "2002 Period") were $49.4 million, a decrease of 34.4%, from $75.2 million for the six months ended June 29, 2001 (the "2001 Period"). While sales increased in the 2002 Quarter versus the 2001 Quarter, indicating initial signs of recovery from the slowdown, sales in the 2002 Period versus the 2001 Period are still down. In addition, while sales increased in the 2002 Quarter from the first quarter of 2002 by 42%, given the general uncertainty surrounding semiconductor capital equipment investment plans, we do not expect to be able to sustain our rate of sequential quarterly improvement in the second half of this year. Cost of sales for the 2002 Quarter was $19.7 million compared with $18.5 million for the 2001 Quarter. The gross margin for the 2002 Quarter was 32.3% compared with 30.5% for the 2001 Quarter. The improvement in gross margin was primarily attributable to increased production volume as overhead costs were spread over a larger sales base. Cost of sales for the 2002 Period was $35.2 million compared with $47.0 million for the 2001 Period. The gross margin for the 2002 Period was 28.7% compared with 37.5% for the 2001 Period. The reduction in gross margin was primarily attributable to decreased production volume as overhead costs were spread over a smaller sales base. Research and development expenses were $4.0 million for the 2002 Quarter, or 13.7% of net sales, compared to $4.2 million, or 15.8% of net sales, for the 2001 Quarter. Spending was $7.5 million, or 15.2% of net sales for the 2002 Period, compared to $8.4 million, or 11.2% of net sales, for the 2001 Period. We continue to focus on developing technologies to support a new generation of products for 300 millimeter capable production tools, to expand our GOLDLink support service capability and to improve our core component product lines. (GOLDLink is a registered trademark of Helix Technology Corporation.) Total selling, general and administrative expenses were $11.3 million in the 2002 Quarter as compared with $9.5 million in the 2001 Quarter and $19.4 million in the 2002 Period and the 2001 Period. Pursuant to a July 11, 2002, Agreement in Principle with Raytheon Company, we agreed to pay, net of insurance contributions, approximately $2.8 million to settle the Raytheon litigation. Excluding the nonrecurring litigation settlement charge of $2.8 million in the 2002 Quarter and 2002 Period, our spending declined due to ongoing cost containment measures as well as due to the restructuring program implemented and completed in the third quarter of 2001 in response to the continued slowdown in the semiconductor capital equipment industry. We will continue to spend in these areas commensurate with our near-term business needs and marketplace opportunities. Royalty and equity income from our joint venture in Japan decreased by $0.5 million in the 2002 Quarter compared to the 2001 Quarter and $1.5 million in the 2002 Period compared to the 2001 Period due to the decline in the Japanese semiconductor capital equipment market. Page 10 HELIX TECHNOLOGY CORPORATION PART I Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations (continued) --------------------- Results of Operations (continued) - --------------------- Interest and other income for the 2002 Quarter was $0.3 million, compared with $0.2 million for the 2001 Quarter, reflecting higher average cash, cash equivalents and investment balances, partially offset by lower interest rates. Interest and other income for the 2002 Period was $0.4 million, compared with $0.6 million for the 2001 Period, reflecting lower interest rates partially offset by higher average cash, cash equivalents and investment balances. For the 2002 Quarter, the Company had a pretax loss of $5.6 million resulting in a tax benefit of $1.8 million compared to a pretax loss of $4.8 million and a tax benefit of $1.6 million for the 2001 Quarter. For the 2002 Period, the Company had a pretax loss of $12.2 million resulting in a tax benefit of $4.0 million compared to a pretax income of $2.6 million and a tax provision of $0.8 million for the 2001 Period. The effective tax rate for the 2002 and 2001 Quarters and Periods was 32.5%. The tax rates differ from the U.S. statutory rate primarily due to tax credits and undistributed nontaxable equity income from our joint venture. Liquidity and Capital Resources - ------------------------------- Cash provided by operating activities for the 2002 Period was $0.9 million compared with $9.7 million for the 2001 Period, primarily due to our net loss in the 2002 Period. In the 2002 Period, we spent $4.2 million, principally for the continued effort associated with the implementation of our global information system, which went live in the U.S. in July 2002. In the 2001 Period, capital expenditures were $9.5 million, principally for our new Japanese service center and implementation of our global information system. As a result of completing our U.S. global information system, we expect capital expenditures for the second half of 2002 to be significantly lower than that of the 2002 Period, and we expect our depreciation expense, which was $1.5 million in the 2002 Quarter, will exceed $2.0 million in the subsequent quarters. On March 19, 2002, we completed a public offering of 3,450,000 shares of our common stock. We realized proceeds of $65.2 million, net of underwriting fees and discounts and offering expenses. Cash dividends paid to stockholders were $3.9 million or $0.08 per common share during the 2002 Period and $5.4 million or $0.12 per common share during the 2001 Period. In October 2001, after considering the uncertain business environment in the semiconductor equipment industry, our board of directors reduced the quarterly dividend to $0.08 per share, resulting in aggregate quarterly cash savings of approximately $1.0 million. We manage our foreign exchange rate risk arising from intercompany foreign currency denominated transactions through the use of foreign currency forward contracts. The gains and losses on these transactions are not material. Page 11 HELIX TECHNOLOGY CORPORATION PART I Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations (continued) ---------------------- Liquidity and Capital Resources (continued) - ------------------------------- We had a three year revolving credit agreement with Fleet National Bank entered into in July 2000 that permitted us to borrow up to $25.0 million, subject to compliance with certain covenants. We had never borrowed against the agreement and terminated the credit agreement in April 2002. We believe that our existing funds and anticipated cash flow from operations will satisfy our working capital and capital expenditure requirements for at least the next 12 months. Important Factors That May Affect Future Results - ------------------------------------------------ This Form 10-Q contains forward-looking statements. These forward-looking statements appear principally in the section entitled "Management's Discussion and Analysis of Financial Conditions and Results of Operations." Forward-looking statements may appear in other sections of this report as well. Generally, the forward-looking statements in this report use words like "expect," "anticipate," "plan," "believe," "seek," "estimate," and similar expressions. Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that could cause our future results to differ materially from those expressed in any forward- looking statements made by or on behalf of us. Many such factors are beyond our ability to control or predict. Readers are accordingly cautioned not to place undue reliance on forward-looking statements. We disclaim any intent or obligation to update publicly any forward-looking statements, whether in response to new information, future events, or otherwise. Our 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 our results of operations. We cannot assure you that developments in the semiconductor industry or the semiconductor equipment industry will occur at the rate or in the manner that we expect. 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, we may experience material fluctuations in our future operating results on a quarterly or annual basis, which could materially affect our business, financial position, results of operations, and stock price. Page 12 HELIX TECHNOLOGY CORPORATION PART I Item 3. Quantitative and Qualitative Disclosures about Market Risk - ------------------------------------------------------------------- Foreign Currency Exchange Rate Risk - ----------------------------------- A portion of our business is conducted outside the United States through our foreign subsidiaries. Our foreign subsidiaries maintain their accounting records in their local currencies. Consequently, fluctuations in exchange rates affect the period-to-period comparability of results. To reduce the risks associated with foreign currency rate fluctuations, we have entered into forward exchange contracts on a continuing basis to offset the currency exposures. The gains and losses on these transactions partially offset the unrealized and realized foreign exchange gains and losses of the underlying exposures. The net gains and losses were immaterial for the periods presented and were included in cost of sales. We plan to continue to use forward exchange contracts to mitigate the impact of exchange rate fluctuations. The notional amount of our outstanding foreign currency contracts at June 28, 2002, was $11.3 million. The potential fair value loss for a hypothetical 10% adverse change in forward currency exchange rates at June 28, 2002, would be $1.1 million, which would be essentially offset by corresponding gains related to the underlying assets. The potential loss was estimated calculating the fair value of the forward exchange contracts at June 28, 2002, and comparing that with the value calculated using the hypothetical forward currency exchange rates. Credit Risk - ----------- We are exposed to concentration of credit risk in cash and cash equivalents, investments, trade receivables, and short-term foreign exchange forward contracts. Our cash and cash equivalents placed with our financial institutions have a high-quality credit rating. Our investments consist of money market funds, municipal government agencies and tax-free bonds or investment-grade securities. We enter into short-term foreign currency exchange contracts with our primary bank. Page 13 HELIX TECHNOLOGY CORPORATION PART II. OTHER INFORMATION Item 1. Legal Proceedings - -------------------------- On July 11, 2002, we signed an Agreement in Principle with Raytheon Company in connection with an action brought in 1998 in the Massachusetts Superior Court by Raytheon Company which alleged that between 1992 and 1994 we sold Raytheon defective components used in missile guidance systems manufactured by Raytheon. We have not been in the business of selling these components since 1994. While we have continuously denied all claims, the Company and its insurers concluded that it was in the Company's best interest to reach an out-of-court settlement to avoid the distraction and expense of a jury trial. Under the terms of the Agreement, the Company is obligated to pay $2.8 million. Insurance providers will pay an additional $2.1 million and essentially all of the legal costs associated with this litigation. We are also involved in various legal proceedings in the normal course of business. In our opinion, these proceedings involve amounts that would not have a material effect on our financial position or results of operations if such proceedings were resolved unfavorably. Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ The Company's Annual Meeting of Stockholders was held on April 24, 2002. 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 Company, 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 20,086,188 433,200 Frank Gabron 19,973,233 546,155 Robert H. Hayes 20,212,088 307,300 Robert J. Lepofsky 20,216,927 302,461 Marvin G. Schorr 20,216,633 302,755 Mark S. Wrighton 20,219,721 299,667 Proposal II submitted to a vote of security holders at the meeting was to amend and restate the Stock Option Plan for Non-Employee Directors. Votes cast were as follows: For Against Abstain --- ------- ------- 19,536,087 666,055 317,245 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 28, 2002. Page 14 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) July 18, 2002 By: /s/Jay Zager - ------------- ----------------------- Date Jay Zager Senior Vice President Chief Financial Officer Page 15 -----END PRIVACY-ENHANCED MESSAGE-----