-----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,
VcdG98TTqG8dvTjXY7AyKHL4yYMNsyJH5/Kq0VcWyOoITQq0gqrSckpwKdvp01ay
Ag5sYXNO5+60F+6JeArkAg==
UNITED STATES (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 28, 2003, [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transitional period from ____________ to ____________ Commission file number: 0-6866 HELIX TECHNOLOGY CORPORATION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
or
Delaware |
04-2423640 |
(State of Incorporation) |
(I.R.S. Employer Identification No.) |
|
|
Mansfield Corporate Center |
|
Nine Hampshire Street |
|
Mansfield, Massachusetts |
02048-9171 |
(Address of principal executive offices) |
(Zip Code) |
|
|
(508) 337-5500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
The number of shares outstanding of the registrant's Common Stock, $1 par value, as of March 28, 2003 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 March 28, 2003, and |
|
|
December 31, 2002 |
3 |
|
|
|
|
Consolidated Statements of Operations for the Three-Month Periods |
|
|
Ended March 28, 2003, and March 29, 2002 |
4 |
|
|
|
|
Consolidated Statements of Cash Flows for the Three-Month |
|
|
Periods Ended March 28, 2003, and March 29, 2002 |
5 |
|
|
|
|
Notes to Consolidated Financial Statements |
6-12 |
|
|
|
|
Item 2. Management's Discussion and Analysis of |
|
|
Financial Condition and Results of Operations |
13-18 |
|
|
|
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
19 |
|
|
|
|
Item 4. Controls and Procedures |
19 |
|
|
|
|
|
|
PART II. |
OTHER INFORMATION |
|
|
|
|
|
Item 1. Legal Proceedings |
20 |
|
|
|
|
Item 6. Exhibits and Reports on Form 8-K |
20 |
|
|
|
Signatures |
21 |
|
|
|
|
Certifications |
|
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
March 28, |
December 31, |
|||||||
2003 |
2002 |
|||||||
(in thousands except per share data) |
|
(unaudited) |
|
(audited) |
||||
|
|
|
|
|
|
|
|
|
ASSETS |
||||||||
Current: |
||||||||
Cash and cash equivalents |
$ |
29,101 |
$ |
26,752 |
||||
Investments |
40,310 |
36,567 |
||||||
Receivables - net of allowances |
17,288 |
15,036 |
||||||
Inventories |
23,602 |
23,946 |
||||||
Income tax receivable |
1,080 |
10,246 |
||||||
Deferred income taxes |
6,764 |
8,708 |
||||||
Other current assets |
2,345 |
1,833 |
||||||
Total Current Assets |
|
|
120,490 |
|
|
|
123,088 |
|
Property, plant and equipment at cost |
|
|
65,129 |
|
|
|
64,900 |
|
Less: accumulated depreciation |
|
|
(41,998 |
) |
|
|
(40,655 |
) |
Net property, plant and equipment |
|
|
23,131 |
|
|
|
24,245 |
|
Other assets |
|
|
12,491 |
|
|
|
12,138 |
|
TOTAL ASSETS |
|
$ |
156,112 |
|
|
$ |
159,471 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
Current: |
||||||||
Accounts payable |
$ |
7,771 |
$ |
8,759 |
||||
Payroll and compensation |
625 |
1,020 |
||||||
Accrued restructuring costs |
2,804 |
4,344 |
||||||
Retirement costs |
9,613 |
8,928 |
||||||
Income taxes |
3,678 |
3,692 |
||||||
Other accrued liabilities |
1,276 |
486 |
||||||
Total Current Liabilities |
|
|
25,767 |
|
|
|
27,229 |
|
|
|
|
|
|
|
|
|
|
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: 26,103,204 in 2003 |
||||||||
and 2002 |
26,103 |
26,103 |
||||||
Capital in excess of par value |
76,405 |
76,405 |
||||||
Treasury stock, $1 par value (3,840 shares in 2003 and |
||||||||
2002) |
(232 |
) |
(232 |
) |
||||
Retained earnings |
29,356 |
31,812 |
||||||
Accumulated other comprehensive loss |
(1,287 |
) |
(1,846 |
) |
||||
Total Stockholders' Equity |
130,345 |
132,242 |
||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
156,112 |
$ |
159,471 |
||||
The accompanying notes are an integral part of these consolidated financial statements.
Page 3
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended |
||||||||
March 28, |
March 29, |
|||||||
(in thousands except per share data) |
2003 |
2002 |
||||||
Net sales |
$ |
23,623 |
$ |
20,380 |
||||
Costs and expenses: |
||||||||
Cost of sales |
15,806 |
15,541 |
||||||
Research and development |
2,683 |
3,516 |
||||||
Selling, general and administrative |
7,768 |
8,059 |
||||||
26,257 |
27,116 |
|||||||
Operating loss |
(2,634 |
) |
(6,736 |
) |
||||
Joint venture income |
290 |
45 |
||||||
Interest and other income |
253 |
69 |
||||||
Loss before taxes |
(2,091 |
) |
(6,622 |
) |
||||
Income tax benefit |
(679 |
) |
(2,152 |
) |
||||
Net loss |
$ |
(1,412 |
) |
$ |
(4,470 |
) |
||
Net loss per share: |
||||||||
Basic |
$ |
(0.05 |
) |
$ |
(0.19 |
) |
||
Diluted |
$ |
(0.05 |
) |
$ |
(0.19 |
) |
||
Number of shares used in per share calculations: |
||||||||
Basic |
26,099 |
23,050 |
||||||
Diluted |
26,099 |
23,050 |
||||||
The accompanying notes are an integral part of these consolidated financial statements.
Page 4
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended |
||||||||
March 28, |
March 29, |
|||||||
(in thousands) |
2003 |
2002 |
||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ |
(1,412 |
) |
$ |
(4,470 |
) |
||
Adjustments to reconcile net loss to net cash provided |
||||||||
(used) by operating activities: |
||||||||
Depreciation and amortization |
1,452 |
1,439 |
||||||
Deferred income taxes |
1,944 |
- |
||||||
Other |
178 |
(156 |
) |
|||||
Change in operating assets and liabilities |
||||||||
Receivables - net of allowances |
(2,252 |
) |
(2,063 |
) |
||||
Inventories |
344 |
177 |
||||||
Income tax receivables |
9,166 |
(1,087 |
) |
|||||
Other current assets |
(512 |
) |
774 |
|||||
Accounts payable |
(988 |
) |
1,245 |
|||||
Accrued restructuring costs |
(1,540 |
) |
- |
|||||
Other accrued expenses |
1,066 |
(124 |
) |
|||||
Net cash provided (used) by operating activities |
7,446 |
(4,265 |
) |
|||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(436 |
) |
(1,905 |
) |
||||
Purchase of investments |
(25,600 |
) |
(6,689 |
) |
||||
Sale of investments |
21,983 |
13,076 |
||||||
Net cash (used) provided by investing activities |
(4,053 |
) |
4,482 |
|||||
Cash flows from financing activities: |
||||||||
Net proceeds from stock offering |
- |
65,246 |
||||||
Net cash provided by employee stock plans |
- |
527 |
||||||
Cash dividends paid |
(1,044 |
) |
(1,811 |
) |
||||
Net cash (used) provided by financing activities |
(1,044 |
) |
63,962 |
|||||
Increase in cash and cash equivalents |
2,349 |
64,179 |
||||||
Cash and cash equivalents, at the beginning of the period |
26,752 |
7,789 |
||||||
Cash and cash equivalents, at the end of the period |
$ |
29,101 |
$ |
71,968 |
||||
The accompanying notes are an integral part of these consolidated financial statements.
Page 5
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 - Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated balance sheets, statements of operations and cash flows contain all adjustments necessary to present fairly the financial position of Helix Technology Corporation and its wholly owned subsidiaries (the "Company") at March 28, 2003, and March 29, 2002, and the results of the Company's operations and cash flows for the three-month periods ended March 28, 2003, and March 29, 2002.
The consolidated financial statements included herein have been prepared by the Company, without audit of the three-month periods ended March 28, 2003, and March 29, 2002, 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 accounting principles generally accepted in the United States of America 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.
The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates these estimates and judgments, including those related to revenue recognition, adequacy of reserves, valuation of investments and income taxes. The Company bases these estimates on historical and anticipated results and trends and on various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from our estimates.
Note 2 - Inventories
March 28, |
December 31, |
|||||||
(in thousands) |
2003 |
2002 |
||||||
Finished goods |
$ |
7,796 |
$ |
8,383 |
||||
Work in process |
12,395 |
12,185 |
||||||
Materials and parts |
3,411 |
3,378 |
||||||
$ |
23,602 |
$ |
23,946 |
|||||
Inventories are stated at the lower of cost or market on a first-in, first-out basis. Cost includes material, labor and applicable manufacturing and engineering overhead costs. Based upon management's assumptions of future material usage and obsolescence, which are a result of future demand and market conditions, the Company regularly reviews inventory quantities on hand and records a provision to write down excess and obsolete inventory to its estimated net realizable value, if less than cost.
Page 6
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 3 - Income Taxes
The net federal, state and foreign income tax benefit was $679,000 for the three-month period ended March 28, 2003. For the three-month period ended March 29, 2002, the Company had a net federal, state and foreign income tax benefit of $2,152,000. 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 both the three-month periods ended March 28, 2003, and March 29, 2002, was 32.5%.
The major components of deferred tax assets are compensation and benefit plans, net operating loss carryforwards, 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 4 - Other Accrued Liabilities
The Company adopted Financial Accounting Standards Board Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, including Indirect Indebtedness of Others" (FIN 45) during the first quarter of 2003. FIN 45 requires disclosures concerning the Company's obligations under certain guarantees.
The Company's products and services are generally sold with warranty coverage for periods ranging from 12 to 18 months after shipment. Parts and labor are covered under the terms of the warranty agreement. The warranty provision is based on historical experience by product family.
Changes in the warranty reserves during the first quarter of 2003 were as follows:
(in thousands) |
||||||||
Balance at December 31, 2002 |
$ |
293 |
||||||
Provisions for warranty |
311 |
|||||||
Consumption of reserves |
(260 |
) |
||||||
Balance at March 28, 2003 |
$ |
344 |
||||||
Note 5 - Accrued Restructuring Costs
During the fourth quarter of 2002, the Company recorded $5,851,000 of restructuring charges associated with the initiation of a worldwide cost-reduction program in response to the continued duration and severity of the slowdown in the semiconductor capital equipment industry. These charges were comprised of $3,046,000 in employee severance costs and $2,805,000 to consolidate leased facilities.
Page 7
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The employee costs of $3,046,000 primarily consist of severance and fringe benefits to terminate approximately 130 employees. The affected employees, most of whom were located in the United States, were primarily full-time nonmanufacturing employees. Notification and termination benefits were communicated to employees in the fourth quarter of 2002. The majority of the terminations took place in 2002 and the first quarter of 2003. All remaining severance benefits are expected to be paid during 2003.
The $2,805,000 of net exit costs related to facility closures resulted from the planned consolidation of customer support facilities located in Massachusetts; facility reductions of satellite sales and customer support facilities located in Texas and Arizona; and consolidation of sales and service centers located in Japan and Europe. These accrued costs reflect payments required under operating lease contracts in excess of expected sublease rentals and costs for writing down related leasehold improvements at the affected facilities.
The following table summarizes the components of the restructuring charges, the cash payments, non-cash activities, and the remaining accrual as of March 28, 2003:
Employee |
||||||||||||||||
Severance and |
Facility |
Asset |
||||||||||||||
Fringe Benefits |
Closures |
Writedowns |
Total |
|||||||||||||
Fourth quarter 2002 restructuring charges |
$ |
3,046 |
$ |
1,486 |
$ |
1,319 |
$ |
5,851 |
||||||||
Non-cash activity |
- |
20 |
(1,319 |
) |
(1,299 |
) |
||||||||||
Cash payments in the last three months of 2002 |
(208 |
) |
- |
- |
(208 |
) |
||||||||||
Balance at December 31, 2002 |
2,838 |
1,506 |
- |
4,344 |
||||||||||||
Cash payments in the first three months of 2003 |
(1,395 |
) |
(145 |
) |
- |
(1,540 |
) |
|||||||||
Balance at March 28, 2003 |
$ |
1,443 |
$ |
1,361 |
$ |
- |
$ |
2,804 |
||||||||
Note 6 - Commitments and Contingencies
The Company may be involved in various legal proceedings in the normal course of business. The Company is not a party to any proceedings that involve amounts that would have a material effect on our financial position or results of operations if such proceedings were resolved unfavorably. The Company accrues loss contingencies when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated.
Page 8
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 7 - Other Comprehensive Loss
Three Months Ended |
||||||||
March 28, |
March 29, |
|||||||
(in thousands) |
2003 |
2002 |
||||||
Net loss |
$ |
(1,412 |
) |
$ |
(4,470 |
) |
||
Other comprehensive loss before tax: |
||||||||
Foreign currency translation adjustment |
549 |
(1,078 |
) |
|||||
Unrealized gain (loss) on available-for-sale investment |
126 |
(36 |
) |
|||||
Other comprehensive gain (loss), before tax |
675 |
(1,114 |
) |
|||||
Income tax related to items of other |
||||||||
comprehensive (loss) gain |
(116 |
) |
291 |
|||||
Other comprehensive gain (loss), net of tax |
559 |
(823 |
) |
|||||
Comprehensive loss |
$ |
(853 |
) |
$ |
(5,293 |
) |
||
Three Months Ended |
||||||||
March 28, |
March 29, |
|||||||
(in thousands except per share data) |
2003 |
2002 |
||||||
Net loss |
$ |
(1,412 |
) |
$ |
(4,470 |
) |
||
Basic shares |
26,099 |
23,050 |
||||||
Add: Common equivalent shares (1) |
- |
- |
||||||
Diluted shares |
26,099 |
23,050 |
||||||
Basic net loss per share |
$ |
(0.05 |
) |
$ |
(0.19 |
) |
||
Diluted net loss per share |
$ |
(0.05 |
) |
$ |
(0.19 |
) |
||
(1) |
Common equivalent shares represent shares issuable upon exercise of stock options (using the treasury stock method). The Company had 613,000 and 568,000 options outstanding not included in the computation of diluted shares for the first quarter of 2003 and 2002, respectively. The Company was in a net loss position, and the inclusion of such shares would be anti-dilutive. |
Page 9
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 9 - Segment Information
Line of Business and Foreign Operations
The Company operates in one reportable segment: the development, manufacture, sale and support of cryogenic and vacuum equipment. The Company's management currently uses consolidated financial information in determining how to allocate resources and assess performance.
The consolidated financial statements include the accounts of wholly owned international subsidiaries that operate customer support facilities to sell and service products manufactured in the United States. A summary of net sales and long-lived assets by geographical operation follows:
(in thousands) |
United States |
International |
Consolidated |
|||||||||||||||||||
Net sales for the three months ended: |
||||||||||||||||||||||
March 28, 2003 |
$ |
17,312 |
$ |
6,311 |
$ |
23,623 |
||||||||||||||||
March 29, 2002 |
$ |
16,138 |
$ |
4,242 |
$ |
20,380 |
||||||||||||||||
Long-lived assets as of: |
||||||||||||||||||||||
March 28, 2003 |
$ |
31,838 |
$ |
3,784 |
$ |
35,622 |
||||||||||||||||
December 31, 2002 |
$ |
32,647 |
$ |
3,736 |
$ |
36,383 |
Page 10
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 10 - Capital Stock
Options for the purchase of the Company's stock have been granted to officers, directors and key employees under various nonqualified stock option agreements. The Company accounts for these grants under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issues to Employees, and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. If the recognition provisions of FASB Statement No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment of FASB Statement No. 123, had been adopted, the effect on net loss and basic and diluted net loss per share would have been as follows:
Three Months Ended |
||||||||
March 28, |
March 29, |
|||||||
(in thousands except per share data) |
2003 |
2002 |
||||||
Net loss, as reported |
$ |
(1,412 |
) |
$ |
(4,470 |
) |
||
Deduct: Total stock-based employee compensation |
||||||||
expense determined under fair value based method |
||||||||
for all awards, net of related tax effects |
(187 |
) |
(165 |
) |
||||
Pro forma net loss |
$ |
(1,599 |
) |
$ |
(4,635 |
) |
||
Earnings per share: |
||||||||
Basic-as reported |
$ |
(0.05 |
) |
$ |
(0.19 |
) |
||
Basic-pro forma |
$ |
(0.06 |
) |
$ |
(0.20 |
) |
||
Diluted-as reported |
$ |
(0.05 |
) |
$ |
(0.19 |
) |
||
Diluted-pro forma |
$ |
(0.06 |
) |
$ |
(0.20 |
) |
||
Note 11 - Recent Accounting Pronouncements
In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143 (SFAS 143), "Accounting for Asset Retirement Obligations." SFAS 143 requires the recognition of liabilities associated with obligations to incur future costs associated with asset retirements. The liability is required to be recorded at fair value with any accretion in future periods recorded to operating expenses. When the liability is initially recognized, the cost of the asset retirement obligation is capitalized by increasing the carrying amount of the related long-lived asset. This asset retirement cost is subsequently depreciated over the useful life of the related asset. In accordance with the requirements of SOP 90-7, the Company adopted SFAS 143 on January 1, 2003. The adoption of this pronouncement did not have a material impact on our financial position or results of operations.
In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146 (SFAS 146), "Accounting for Costs Associated with Exit or Disposal Activities," which addresses accounting for restructuring and similar costs. SFAS No. 146 supersedes previous accounting guidance, principally Emerging Issues Task Force Issue (EITF) No. 94-3. The Company will adopt the provision of SFAS 146 for restructuring activities initiated after December 31, 2002. SFAS 146 requires that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF No. 94-3, a liability for an exit cost was recognized at the date of the Company's commitment to the worldwide cost-reduction program during the fourth quarter of 2002.
Page 11
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 11 - Recent Accounting Pronouncements (continued)
SFAS 146 also establishes that initially the liability should be measured and recorded at fair value. Accordingly, SFAS 146 may affect the timing of recognizing future restructuring costs as well as the amounts recognized.
In November 2002, the EITF issued No. 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." EITF No. 00-21 addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. EITF No. 00-21 establishes three principles: revenue should be recognized separately for separate units of accounting; revenue for a separate unit of accounting should be recognized only when the arrangement consideration is reliably measurable and the earnings process is substantially complete, and consideration should be allocated among the separate units of accounting in an arrangement based on their fair values. EITF No. 00-21 is effective for all revenue arrangements entered into in fiscal periods beginning after June 15, 2003, with early adoption permitted. The Company does not expect the adoption of EITF No. 00-21 to have a material impact on the Company's results of operations or financial condition.
In January 2003, the FASB issued FIN No. 46 "Consolidation of Variable Interest Entities, an interpretation of ARB 51." FIN No. 46 provides guidance on the identification of entities for which control is achieved through means other than through voting rights called "variable interest entities" or "VIEs" and how to determine when and which business enterprise should consolidate the VIE (the "primary beneficiary"). This new model for consolidation applies to an entity in which either (1) the equity investors (if any) do not have a controlling financial interest or (2) the equity investment at risk is insufficient to finance that entity's activities without receiving additional subordinated financial support from other parties. In addition, FIN No. 46 requires that both the primary beneficiary and all other enterprises with a significant variable interest in a VIE make additional disclosures. Certain transitional disclosures are required in financial statements initially issued after January 31, 2003, if it is reasonably possible that once this guidance is effective the enterprise will either be required to consolidate a VIE or will hold a significant variable interest in a VIE. The Company does not have any interests that would change our current reporting entity or require additional disclosure outlined in FIN No. 46.
Page 12
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
Our discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, adequacy of reserves, valuation of investments and income taxes. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature,
estimates are subject to an inherent degree of uncertainty. Actual results may differ from our estimates. We believe that the following significant accounting policies and assumptions may involve a higher degree of judgment and complexity than others.
Revenue Recognition. We recognize net sales from product sales upon shipment provided title and risk of loss have been transferred to the customer, there is persuasive evidence of an arrangement, fees are fixed or determinable, and collection is reasonably assured. Net sales from global support services is recognized as performed or ratably over the period of the related agreements. We recognize net sales from upgrade sales upon customer acceptance provided installation has been completed. 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 conditions of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances might be required.
Inventory and Reserves for Excess and Obsolescence. 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. If inventory is written down to its net realizable value and subsequently there is an increased demand for the inventory at a higher value, the increased value of the inventory is not realized until the inventory is sold, resulting in improved margins in the period.
Page 13
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
(continued)
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.
Restructuring Charges. During 2002, we recorded significant charges in connection with our restructuring programs. The related reserves reflect estimates, including those pertaining to severance costs and settlements of contractual obligations. We reassess the reserve requirements to complete each individual plan under our restructuring programs at the end of each reporting period. Actual experience may be different from these estimates. For more information, see Note 5 to the consolidated financial statements.
Tax Contingencies. Tax contingencies are recorded to address potential exposures involving tax positions we have taken that could be challenged by taxing authorities. These potential exposures result from the varying application of statutes, rules, regulations and interpretations. Our estimate of the value of our tax contingencies contains assumptions based on past experiences and judgments about potential actions by taxing jurisdictions. It is reasonably likely that the ultimate resolutions of these matters may be greater or less than the amount that we have accrued.
Segment Reporting. The Company operates in one segment for the design, manufacture and service of vacuum technology primarily for the semiconductor, data storage and flat panel display markets. In accordance with SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," the Company's chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. SFAS No. 131, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report quarterly entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under SFAS No. 131 due to their similar customer base and similarities in: economic characteristics; nature of product
s and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by SFAS No. 131 can be found in the accompanying condensed consolidated financial statements.
Results of Operations
We design, develop and manufacture innovative vacuum technology solutions for the semiconductor, data storage, and flat panel display markets. Our vacuum systems provide enabling technology for several key steps within the semiconductor manufacturing process, including ion implantation, physical vapor deposition, chemical vapor deposition, and etching. Semiconductor manufacturers use our systems to create and maintain a vacuum environment, which is critical to their manufacturing processes. Our products are also used in a broad range of industrial manufacturing applications and advanced research and development laboratories.
We also provide an extensive range of global support and vacuum system monitoring services that lower our end-users' total costs of ownership. We increase our customers' system uptime through rapid response to potential operating problems. We also develop and deliver enhancements to our customers' installed base of production tools.
Page 14
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
(continued)
Results of Operations (continued)
We continue to be impacted by the slowdown in the global market for semiconductor capital equipment that began in 2001. Net sales for the first quarter ended March 28, 2003, (the "2003 Quarter") were $23.6 million compared with net sales for the first quarter ended March 29, 2002, (the "2002 Quarter") of $20.4 million. While on a year-over-year basis sales modestly increased 15.9%, sales were flat with the previous quarter. Current weekly order bookings are stable; however, visibility remains unclear.
In the fourth quarter of 2002, we initiated a worldwide cost-reduction program and the suspension of an internal-use software development program in response to the continued duration and severity of the slowdown in the semiconductor capital equipment industry. The cost-reduction program included severance and fringe benefits to terminate approximately 130 employees and included closure or consolidation of selected facilities worldwide. We recorded an $8.7 million charge for restructurings and other charges in the fourth quarter of 2002 and expect to save approximately $2.4 million quarterly which will significantly reduce our breakeven point. This program was substantially completed in the first quarter of 2003. We partially benefited from the cost reduction program in the current quarter, and we expect additional benefits from this program in the second quarter of 2003.
Cost of sales for the 2003 Quarter was $15.8 million compared with $15.5 million for the 2002 Quarter, an increase of 1.7%. The gross margin for the 2003 Quarter was 33.1% compared with 23.7% for the 2002 Quarter. The increase in gross margin was primarily attributable to higher sales volume and decreased overhead costs resulting from our cost reduction actions.
Research and development expenses were $2.7 million for the 2003 Quarter, or 11.4% of net sales, compared to $3.5 million, or 17.3% of net sales, for the 2002 Quarter. The $0.8 million decrease in overall research and development expenses from the prior year is due to cost reduction actions taken in the fourth quarter of 2002 as well as the completion of several major research and development projects during the past year. We intend to maintain our current level of spending on research and development in the coming quarters.
Total selling, general and administrative expenses were $7.8 million in the 2003 Quarter compared with $8.1 million in the 2002 Quarter, a reduction of $0.3 million. Our spending declined due to the restructuring program implemented in the fourth quarter of 2002 in response to the continued slowdown in the semiconductor capital equipment industry.
Royalty and equity income from our joint venture in Japan increased by $0.2 million in the 2003 Quarter compared to the 2002 Quarter and remained relatively flat with the fourth quarter of 2002, as the Japanese semiconductor capital equipment market reflects the same uncertainty as the global market.
Page 15
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 2003 Quarter was $0.3 million, compared with $0.1 million for the 2002 Quarter, reflecting higher average cash, cash equivalent and investment balances during the 2003 Quarter.
For the 2003 Quarter, the Company had a pretax loss of $2.1 million, resulting in a tax benefit of $0.7 million, compared to a pretax loss of $6.6 million and a tax benefit of $2.2 million for the 2002 Quarter. The effective tax rate for the 2003 and 2002 Quarters was 32.5%. The tax rates differ from the United States 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 2003 Quarter was $7.4 million compared with $4.3 million in cash used by operating activities for the 2002 Quarter. The cash provided by operating activities for the 2003 Quarter was primarily due to our receipt of an $11.6 million tax refund, resulting from the carryback of the 2002 net operating loss offset by the loss in the 2003 Quarter and by $1.5 million of severance and facility closure payments related to the 2002 restructuring activity.
In the 2003 Quarter, we spent $0.4 million to support the existing infrastructure. In the 2002 Quarter, capital expenditures were $1.9 million, primarily for implementation of our global information system. We expect full year spending for 2003 to be approximately $3.0 million to $4.0 million. We continue to closely manage our capital expenditures.
Cash dividends paid to stockholders were $1.0 million or $0.04 per common share during the 2003 Quarter and $1.8 million or $0.08 per common share during the 2002 Quarter. In October 2002, our Board of Directors reduced the quarterly dividend to $0.04 per share, due to the continuing uncertain business environment and lack of stability in the semiconductor capital equipment market.
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.
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.
Recent Accounting Pronouncements
In June 2001, the FASB issued Statement of Financial Accounting Standards No. 143 (SFAS 143), "Accounting for Asset Retirement Obligations." SFAS 143 requires the recognition of liabilities associated with obligations to incur future costs associated with asset retirements. The liability is required to be recorded at fair value with any accretion in future periods recorded to operating expenses. When the liability is initially recognized, the cost of the asset retirement obligation is capitalized by increasing the carrying amount of the related long-lived asset. This asset retirement cost is subsequently depreciated over the useful life of the related asset. In accordance with the requirements of SOP 90-7, we adopted SFAS 143 on January 1, 2003. The adoption of this pronouncement did not have a material impact on our financial position or results of operations.
Page 16
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
(continued)
Recent Accounting Pronouncements (continued)
In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146 (SFAS 146), "Accounting for Costs Associated with Exit or Disposal Activities," which addresses accounting for restructuring and similar costs. SFAS No. 146 supersedes previous accounting guidance, principally Emerging Issues Task Force Issue (EITF) No. 94-3. We will adopt the provision of SFAS 146 for restructuring activities initiated after December 31, 2002. SFAS 146 requires that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF No. 94-3, a liability for an exit cost was recognized at the date of our commitment to the worldwide cost-reduction program during the fourth quarter of 2002. SFAS 146 also establishes that initially the liability should be measured and recorded at fair value. Accordingly, SFAS 146 may affect the timing of recognizing future restructuring costs as well as the amounts recognized.
In November 2002, the EITF issued No. 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." EITF No. 00-21 addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. EITF No. 00-21 establishes three principles: revenue should be recognized separately for separate units of accounting; revenue for a separate unit of accounting should be recognized only when the arrangement consideration is reliably measurable and the earnings process is substantially complete, and consideration should be allocated among the separate units of accounting in an arrangement based on their fair values. EITF No. 00-21 is effective for all revenue arrangements entered into in fiscal periods beginning after June 15, 2003, with early adoption permitted. We do not expect the adoption of EITF No. 00-21 to have a material impact on our results of operations or financial condition.
In January 2003, the FASB issued FIN No. 46 "Consolidation of Variable Interest Entities, an interpretation of ARB 51." FIN No. 46 provides guidance on the identification of entities for which control is achieved through means other than through voting rights called "variable interest entities" or "VIEs" and how to determine when and which business enterprise should consolidate the VIE (the "primary beneficiary"). This new model for consolidation applies to an entity which either (1) the equity investors (if any) do not have a controlling financial interest or (2) the equity investment at risk is insufficient to finance that entity's activities without receiving additional subordinated financial support from other parties. In addition, FIN No. 46 requires that both the primary beneficiary and all other enterprises with a significant variable interest in a VIE make additional disclosures. Certain transitional disclosures are required in financial statements initially issued after January 31, 2003, if it is reasonably possible that once this guidance is effective the enterprise will either be required to consolidate a VIE or will hold a significant variable interest in a VIE. We do not have any interests that would change our current reporting entity or require additional disclosure outlined in FIN No. 46.
Page 17
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
(continued)
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," "intend," "believe," "seek," "estimate," and similar expressions.
The forward-looking statements include statements about:
- Our strategic plan;
- The outlook for our business and industry;
- Anticipated expenses;
- Anticipated sources of future revenues; and
- The sufficiency of capital to meet working capital and capital expenditure requirements.
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 our behalf. 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.
As a result of the foregoing and other factors, we may experience material fluctuations in our future operating results on a quarterly basis, which could materially affect our business, financial position, results of operations, and stock price. These risks and uncertainties are discussed in more detail in Exhibit 99.1 to our Annual Report on Form 10-K filed for the year ended December 31, 2002.
Page 18
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 years 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 March 28, 2003, was $8.7 million. The potential fair value loss for a hypothetical 10% adverse change in forward curre ncy exchange rates at March 28, 2003, would be $0.9 million, which would be essentially offset by gains in the corresponding assets. The potential loss was estimated calculating the fair value of the forward exchange contracts at March 28, 2003, 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. We place our cash and cash equivalents with our primary bank, a major financial institution, with a high-quality credit rating. Our investments consist of money market funds, municipal and other tax-free bonds, or investment-grade securities. We enter into short-term foreign currency exchange contracts with our primary bank.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and our Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934) within 90 days of the filing date of this Quarterly Report on Form 10-Q, have concluded that, as of the evaluation date, our disclosure controls and procedures were adequate and designed to ensure that the evaluating officers timely received the information that we are required to disclose in the reports we file or submit under the Act.
While the Company's disclosure controls and procedures provide reasonable assurance that the apropriate information will be available on a timely basis, this assurance is subject to limitations inherent in any control system, no matter how well designed and administered.
Changes in Internal Controls
There were no significant changes in our internal controls, or, to our knowledge, in other factors that could significantly affect our internal controls subsequent to the date of the evaluation.
Page 19
HELIX TECHNOLOGY CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We may be involved in various legal proceedings in the normal course of business. We are not a party to any proceedings that involve amounts that would have a material effect on our financial position or results of operations if such proceedings were resolved unfavorably.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
Exhibit |
|
|
Number |
|
Description of Exhibits |
|
|
|
10.1 |
|
1996 Equity Incentive Plan as amended and restated as of January 29, 2003. |
|
|
|
99.1 |
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as |
|
|
adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. |
|
|
|
99.2 |
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as |
|
|
adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002. |
|
|
|
b. Reports on Form 8-K:
The Company did not file any Current Reports on Form 8-K during the quarter ended March 28, 2003.
Page 20
HELIX TECHNOLOGY CORPORATION
SIGNATURES
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) |
|
|
|
|
|
|
Date: April 17, 2003 |
|
By: /s/ Robert J. Lepofsky |
|
|
Robert J. Lepofsky |
|
|
President and Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
Date: April 17, 2003 |
|
By: /s/ Jay Zager |
|
|
Jay Zager |
|
|
Senior Vice President and |
|
|
Chief Financial Officer |
|
|
|
Page 21
HELIX TECHNOLOGY CORPORATION
CERTIFICATION
I, Robert J. Lepofsky, certify that: |
||||
1. |
|
I have reviewed this quarterly report on Form 10-Q of Helix Technology Corporation; |
||
2. |
|
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
||
3. |
|
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
||
4. |
|
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
||
|
|
a) |
|
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
|
|
b) |
|
evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and |
|
|
c) |
|
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. |
|
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): |
||
|
|
a) |
|
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and |
|
|
b) |
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and |
6. |
|
The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
|
|
|
|
|
April 17, 2003 |
|
|
|
/s/ Robert J. Lepofsky |
|
|
|
|
Robert J. Lepofsky |
|
|
|
|
President and Chief Executive Officer |
HELIX TECHNOLOGY CORPORATION
CERTIFICATION
I, Jay Zager, certify that: |
||||
1. |
|
I have reviewed this quarterly report on Form 10-Q of Helix Technology Corporation; |
||
2. |
|
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
||
3. |
|
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
||
4. |
|
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
||
|
|
a) |
|
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; |
|
|
b) |
|
evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and |
|
|
c) |
|
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
5. |
|
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): |
||
|
|
a) |
|
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and |
|
|
b) |
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and |
6. |
|
The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
|
|
|
|
|
April 17, 2003 |
|
|
|
/s/ Jay Zager |
|
|
|
|
Jay Zager |
|
|
|
|
Senior Vice President and Chief |
|
|
|
|
Financial Officer |
HELIX TECHNOLOGY CORPORATION
1996 EQUITY INCENTIVE PLAN
(As Amended and Restated)
1. Purpose
The purpose of the Helix Technology Corporation 1996 Equity Incentive Plan (the "Plan") is to attract and retain key employees and consultants of the Company and its Affiliates, to provide an incentive for them to achieve long-range performance goals, and to enable them to participate in the long-term growth of the Company.
The Plan was originally established in 1996 and is hereby being amended and restated.
2. Definitions
"Affiliate" means any business entity in which the Company owns directly or indirectly 50% or more of the total voting power or has a significant financial interest as determined by the Committee.
"Award" means any Option, Stock Appreciation Right or Restricted Stock granted under the Plan.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor law.
"Committee" means one or more committees each comprised of not less than three members of the Board appointed by the Board to administer the Plan or a specified portion thereof. If a Committee is authorized to grant Awards to a Reporting Person or a "covered employee" within the meaning of Section 162(m) of the Code, each member shall be a "disinterested person" or the equivalent within the meaning of applicable Rule 16b-3 under the Exchange Act or an "outside director" or the equivalent within the meaning of Section 162(m) of the Code, respectively.
"Common Stock" or "Stock" means the Common Stock, $1.00 par value, of the Company.
"Company" means Helix Technology Corporation.
"Designated Beneficiary" means the beneficiary designated by a Participant, in a manner determined by the Committee, to receive amounts due or exercise rights of the Participant in the event of the Participant's death. In the absence of an effective designation by a Participant, "Designated Beneficiary" means the Participant's estate.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor law.
"Fair Market Value" means, with respect to Common Stock or any other property, the fair market value of such property as determined by the Committee in good faith or in the manner established
Page 1
by the Committee from time to time, and in the case of the grant of any Incentive Stock Option, also determined in accordance with Section 422 of the Code.
"Incentive Stock Option" - See Section 6(a).
"Nonstatutory Stock Option" - See Section 6(a).
"Option" - See Section 6(a).
"Participant" means a person selected by the Committee to receive an Award under the Plan.
"Reporting Person" means a person subject to Section 16 of the Exchange Act.
"Restricted Period" - See Section 8(a).
"Restricted Stock" - See Section 8(a).
"Stock Appreciation Right" or "SAR" - See Section 7(a).
3. Administration
The Plan shall be administered by the Committee. The Committee shall have authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Plan as it shall from time to time consider advisable, to interpret the provisions of the Plan and any Award agreement, and to remedy any ambiguities or inconsistencies therein. The Committee's decisions shall be final and binding. To the extent permitted by applicable law, the Committee may delegate to one or more executive officers of the Company the power to make Awards to Participants who are not subject to Section 16 of the Exchange Act and all determinations under the Plan with respect thereto, provided that the Committee shall fix the maximum amount of such Awards for all such Participants and a maximum for any one Participant.
4. Eligibility
All employees and, in the case of Awards other than Incentive Stock Options under Section 6, consultants of the Company or any Affiliate, capable of contributing significantly to the successful performance of the Company, are eligible to be Participants in the Plan. Incentive Stock Options may be granted only to eligible employees of the Company or its Affiliates.
5. Stock Available for Awards
(a) Amount. Subject to adjustment under subsection (b), Awards may be made under the Plan for up to 1,800,000 shares of Common Stock. If any Award expires or is terminated unexercised or is forfeited or settled in cash or in a manner that results in fewer shares outstanding than were awarded, the shares subject to such Award, to the extent of such expiration, termination, forfeiture or decrease, shall again be available for award under the Plan; provided, however, that the maximum number of shares which may be issued as the result of the exercise of Incentive Stock Options may not exceed 1,800,000 shares. Common Stock issued through the assumption or substitution of outstanding grants from an acquired company shall not reduce the shares available
Page 2
for Awards under the Plan. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.
(b) Adjustment. In the event that the Committee determines that any stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares, or other transaction affects the Common Stock such that an adjustment is required in order to preserve the benefits intended to be provided by the Plan, then the Committee (subject in the case of Incentive Stock Options to any limitation required under the Code) shall equitably adjust any or all of (i) the number and kind of shares in respect of which Awards may be made under the Plan, (ii) the number and kind of shares subject to outstanding Awards, and (iii) the exercise price with respect to any of the foregoing, and if considered appropriate, the Committee may make provision for a cash payment with respect to an outstanding Award, provided that the number of shares subject to any Award shall always be a whole number.
(c) Limit on Individual Grants. The maximum number of shares of Common Stock subject to Options and Stock Appreciation Rights that may be granted to any Participant in the aggregate in any calendar year shall not exceed 200,000 shares taking into account Awards granted and terminated or repriced during such calendar year, subject to adjustment under subsection (b).
6. Stock Options
(a) Grant of Options. Subject to the provisions of the Plan, the Committee may grant options ("Options") to purchase shares of Common Stock (i) complying with the requirements of Section 422 of the Code or any successor provision and any regulations thereunder ("Incentive Stock Options"), and (ii) not intended to comply with such requirements ("Nonstatutory Stock Options"). The Committee shall determine the number of shares subject to each Option and the exercise price therefor, which shall not be less than 100% of the Fair Market Value of the Common Stock on the date of grant. No Incentive Stock Option may be granted hereunder after February 14, 2006.
(b) Terms and Conditions. Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may specify in the applicable grant or thereafter. The Committee may impose such conditions with respect to the exercise of Options, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable.
(c) Payment. No shares shall be delivered pursuant to any exercise of an Option until payment in full of the exercise price therefor is received by the Company. Such payment may be made in whole or in part in cash or to the extent permitted by the Committee at or after the grant of the Option, by delivery (including through attestation) of shares of Common Stock owned by the optionee, including Restricted Stock, or by retaining shares otherwise issuable pursuant to the Option (a so-called "cashless exercise") in each case valued at their Fair Market Value on the date of delivery, or such other lawful consideration as the Committee may determine.
7. Stock Appreciation Rights
(a) Grant of SARs. Subject to the provisions of the Plan, the Committee may grant rights to receive any excess in value of shares of Common Stock over the exercise price ("Stock Appreciation Rights" or "SARs") in tandem with an Option (at or after the award of the Option), or alone and unrelated to an Option. SARs in tandem with an Option shall terminate to the extent that the related
Page 3
Option is exercised, and the related Option shall terminate to the extent that the tandem SARs are exercised. The Committee shall determine at the time of grant or thereafter whether SARs are settled in cash, Common Stock or other securities of the Company, Awards or other property.
(b) Exercise Price. The Committee shall fix the exercise price of each SAR or specify the manner in which the price shall be determined. An SAR granted in tandem with an Option shall have an exercise price not less than the exercise price of the related Option. An SAR granted alone and unrelated to an Option may not have an exercise price less than 100% of the Fair Market Value of the Common Stock on the date of the grant.
(c) Limited SARs. An SAR related to an Option, which SAR can only be exercised upon or during limited periods following a change in control of the Company, may entitle the Participant to receive an amount based upon the highest price paid or offered for Common Stock in any transaction relating to the change in control or paid during a specified period immediately preceding the occurrence of the change in control in any transaction reported in the stock market in which the Common Stock is normally traded.
8. Restricted Stock
(a) Grant of Restricted Stock. Subject to the provisions of the Plan, the Committee may grant shares of Common Stock subject to forfeiture ("Restricted Stock") and determine the duration of the period (the "Restricted Period") during which, and the conditions under which, the shares may be forfeited to the Company and the other terms and conditions of such Awards. Shares of Restricted Stock may be issued for no cash consideration or such minimum consideration as may be required by applicable law.
(b) Restrictions. Shares of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered, except as permitted by the Committee, during the Restricted Period. Shares of Restricted Stock shall be evidenced in such manner as the Committee may determine. Any certificates issued in respect of shares of Restricted Stock shall be registered in the name of the Participant and unless otherwise determined by the Committee, deposited by the Participant, together with a stock power endorsed in blank, with the Company. At the expiration of the Restricted Period, the Company shall deliver such certificates to the Participant or if the Participant has died, to the Participant's Designated Beneficiary.
9. General Provisions Applicable to Awards
(a) Reporting Person Limitations. Notwithstanding any other provision of the Plan, to the extent required to qualify for the exemption provided by Rule 16b-3 under the Exchange Act, Awards made to a Reporting Person shall not be transferable by such person other than by will or the laws of descent and distribution and are exercisable during such person's lifetime only by such person or by such person's guardian or legal representative. If then permitted by Rule 16b-3, such Awards shall also be transferable pursuant to a qualified domestic relations order as defined in the Code or Title I of the Employee Retirement Income Security Act or the rules thereunder.
(b) Documentation. Each Award under the Plan shall be evidenced by a writing delivered to the Participant specifying the terms and conditions thereof and containing such other terms and conditions not inconsistent with the provisions of the Plan as the Committee considers necessary or
Page 4
advisable to achieve the purposes of the Plan or to comply with applicable tax and regulatory laws and accounting principles.
(c) Committee Discretion. Each type of Award may be made alone, in addition to or in relation to any other Award. The terms of each type of Award need not be identical, and the Committee need not treat Participants uniformly. Except as otherwise provided by the Plan or a particular Award, any determination with respect to an Award may be made by the Committee at the time of grant or at any time thereafter.
(d) Dividends and Cash Awards. In the discretion of the Committee, any Award under the Plan may provide the Participant with (i) dividends or dividend equivalents payable currently or deferred with or without interest, and (ii) cash payments in lieu of or in addition to an Award.
(e) Termination of Employment. The Committee shall determine and set forth in the grant agreement evidencing the Award the effect on an Award of the disability, death, retirement or other termination of employment of a Participant and the extent to which, and the period during which, the Participant's legal representative, guardian or Designated Beneficiary may receive payment of an Award or exercise rights thereunder.
(f) Change in Control. In order to preserve a Participant's rights under an Award in the event of a change in control of the Company, the Committee in its discretion may, at the time an Award is made or at any time thereafter, take one or more of the following actions: (i) provide for the acceleration of any time period relating to the exercise or payment of the Award, (ii) provide for payment to the Participant of cash or other property with a Fair Market Value equal to the amount that would have been received upon the exercise or payment of the Award had the Award been exercised or paid upon the change in control, (iii) adjust the terms of the Award in a manner determined by the Committee to reflect the change in control, (iv) cause the Award to be assumed, or new rights substituted therefor, by another entity, or (v) make such other provision as the Committee may consider equitable to Participants and in the best interests of the Company.
(g) Loans. The Committee may not authorize the making of loans to Participants in connection with the grant or exercise of any Award under the Plan.
(h) Withholding Taxes. The Participant shall pay to the Company, or make provision satisfactory to the Committee for payment of, any taxes required by law to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability. In the Committee's discretion, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value on the date of delivery. The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Participant.
(i) Foreign Nationals. Awards may be made to Participants who are foreign nationals or employed outside the United States on such terms and conditions different from those specified in the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or to comply with applicable laws.
(j) Amendment of Award. The Committee may amend, modify or terminate any outstanding Award, including substituting therefor another Award of the same or a different type, changing the date of exercise or realization and converting an Incentive Stock Option to a Nonstatutory Stock
Page 5
Option, provided that the Participant's consent to such action shall be required unless the Committee determines that the action, taking into account any related action, would not materially and adversely affect the Participant.
10. Miscellaneous
(a) No Right To Employment. No person shall have any claim or right to be granted an Award. Neither the Plan nor any Award hereunder shall be deemed to give any employee the right to continued employment or to limit the right of the Company to discharge any employee at any time.
(b) No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed under the Plan until he or she becomes the holder thereof. A Participant to whom Common Stock is awarded shall be considered the holder of the Stock at the time of the Award except as otherwise provided in the applicable Award.
(c) Effective Date. Subject to the approval of the stockholders of the Company, the amendment and restatement of the Plan shall be effective on April 16, 2003.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, subject to such stockholder approval as the Board determines to be necessary or advisable to comply with any tax or regulatory requirement.
(e) Governing Law. The provisions of the Plan shall be governed by and interpreted in accordance with the laws of Delaware.
This Plan, as amended and restated, was approved by the Board of Directors on January 29, 2003.
This Plan, as amended and restated, was approved by the stockholders on April 16, 2003.
Page 6
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
HELIX TECHNOLOGY CORPORATION
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Helix Technology Corporation (the "Company") Quarterly Report on Form 10-Q for the period ending March 28, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert J. Lepofsky, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1). The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2). The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
HELIX TECHNOLOGY CORPORATION |
|
|
Date: April 17, 2003 |
By: /s/ Robert J. Lepofsky |
A signed original of this written statement required by Section 906 has been provided to Helix Technology Corporation and will be retained by Helix Technology Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
HELIX TECHNOLOGY CORPORATION
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Helix Technology Corporation (the "Company") Quarterly Report on Form 10-Q for the period ending March 28, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jay Zager, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1). The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2). The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
HELIX TECHNOLOGY CORPORATION |
|
|
Date: April 17, 2003 |
By: /s/ Jay Zager |
A signed original of this written statement required by Section 906 has been provided to Helix Technology Corporation and will be retained by Helix Technology Corporation and furnished to the Securities and Exchange Commission or its staff upon request.