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UNITED STATES CURRENT REPORT February 15, 2005 HELIX TECHNOLOGY CORPORATION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported)
Delaware
(State or Other Jurisdiction of Incorporation)
0-6866 |
04-2423640 |
(Commission File Number) |
(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
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ } Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 9.01 Financial Statements and Exhibits
On February 16, 2005, Helix Technology Corporation (the "Company"), filed a Current Report on Form 8-K announcing the completion of its acquisition of IGC Polycold System, Inc. ("Polycold"). In response to parts (a) and (b) of Item 9.01 of such Form 8-K, the Company stated that it would file on Form 8-K/A the required financial information, as permitted by Item 9.01(a)(4) and 9.01(b)(2) to Form 8-K. This Current Report on Form 8-K/A amends the Current Report on Form 8-K filed on February 16, 2005 in order to provide the financial information required by Item 9.01.
(a) Financial Statements of Business Acquired.
The financial statements, together with the notes thereto, of the business acquired, reflecting the historical results of Polycold, are filed as Exhibit 99.2 to this Current Report on Form 8-K/A and are incorporated herein by reference.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed combined balance sheet as of December 31, 2004, and unaudited pro forma condensed combined statement of operations for the twelve months ended December 31, 2004, have been prepared by adjusting those financial statements, as derived and condensed, as applicable, from the Company's consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2004, audited by PricewaterhouseCoopers LLP, to reflect the acquisition of Polycold on February 15, 2005. The unaudited pro forma condensed combined financial statements have been filed as Exhibit 99.3 to this Current Report on Form 8-K/A and are incorporated herein by reference.
(c) Exhibits.
10.1 |
Stock Purchase Agreement among Intermagnetics General Corporation, IGC Polycold Systems Inc. and Helix Technology Corporation, dated as of December 15, 2004. Filed as Exhibit 10.3 to the Company's Current Report on Form 8-K filed on December 20, 2004 and herein incorporated by reference. |
|
23.1 |
Consent of PricewaterhouseCoopers LLP. (Filed herewith.) |
|
99.1 |
Press Release dated February 15, 2005. Filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 16, 2005 and herein incorporated by reference. |
|
99.2 |
Financial statements for Polycold for the years ended May 30, 2004, and May 25, 2003, and for the twelve months ended May 30, 2004, and May 25, 2003. (Filed herewith.) |
|
99.3 |
Unaudited pro forma condensed combined financial statements for the Company as of and for the year ended December 31, 2004. (Filed herewith.) |
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 hereunto duly authorized.
Date: April 28, 2005 |
By: /s/ James Gentilcore |
|
James Gentilcore |
||
President and |
||
Chief Executive Officer |
||
EXHIBIT INDEX
Exhibit |
||
Number |
Description of Exhibit |
|
10.1 |
Stock Purchase Agreement among Intermagnetics General Corporation, IGC Polycold Systems Inc. and Helix Technology Corporation, dated as of December 15, 2004. Filed as Exhibit 10.3 to the Company's Current Report on Form 8-K filed on December 20, 2004 and herein incorporated by reference. |
|
23.1 |
Consent of PricewaterhouseCoopers LLP. (Filed herewith.) |
|
99.1 |
Press Release dated February 15, 2005. Filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 16, 2005 and herein incorporated by reference. |
|
99.2 |
Financial statements for Polycold for the years ended May 30, 2004 and May 25, 2003, and for the twelve months ended May 30, 2004, and May 25, 2003. (Filed herewith.) |
|
99.3 |
Unaudited pro forma condensed combined financial statements for the Company as of and for the year ended December 31, 2004. (Filed herewith.) |
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-116587, 333-104624, 333-09247 and 333-09245) of Helix Technology Corporation of our report dated August 13, 2004 relating to the financial statements of IGC-Polycold Systems, Inc., which appears in the Current Report on Form 8-K/A of Helix Technology Corporation dated April 28, 2005.
/s/ PricewaterhouseCoopers LLP
Albany, New York
April 28, 2005
IGC-Polycold Systems Inc.
(A wholly-owned subsidiary of Intermagnetics General Corporation)
Financial Statements
(and Report of Independent Auditors)
May 30, 2004 and May 25, 2003
IGC-Polycold Systems Inc.
(A wholly-owned subsidiary of Intermagnetics General Corporation)
Index
May 30, 2004 and May 25, 2003
Page(s) |
|
Report of Independent Auditors |
1 |
Financial Statements |
|
Balance Sheets |
2 |
Statements of Income |
3 |
Statements of Changes in Shareholder's Equity |
4 |
Statements of Cash Flows |
5 |
Notes to Financial Statements |
6 - 12 |
Report of Independent Auditors
To the Board of Directors and Shareholders
IGC-Polycold Systems Inc.
(A wholly-owned subsidiary of Intermagnetics General Corporation)
In our opinion, the accompanying balance sheets and the related statements of income, changes in shareholder's equity and cash flows present fairly, in all material respects, the financial position of IGC-Polycold Systems Inc. (a wholly-owned subsidiary of Intermagnetics General Corporation) (the "Company") at May 30, 2004, and May 25, 2003, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
August 13, 2004
Page 1
IGC-Polycold Systems Inc.
(A wholly-owned subsidiary of Intermagnetics General Corporation)
Balance Sheets
May 30, 2004 and May 25, 2003
(in thousands of dollars) |
2004 |
2003 |
||||||
Assets |
||||||||
Current assets |
||||||||
Cash |
$ |
9 |
$ |
144 |
||||
Trade accounts receivable, less allowance (May 30, 2004 - $43; |
||||||||
May 25, 2003 - $139) |
3,241 |
3,710 |
||||||
Inventories |
||||||||
Consigned products |
720 |
103 |
||||||
Finished products |
233 |
295 |
||||||
Work in process |
274 |
341 |
||||||
Materials and supplies |
1,393 |
1,718 |
||||||
2,620 |
2,457 |
|||||||
Deferred tax asset |
549 |
394 |
||||||
Prepaid expenses and other |
104 |
146 |
||||||
Total current assets |
6,523 |
6,851 |
||||||
Property and equipment, net |
||||||||
Machinery and equipment |
1,592 |
2,411 |
||||||
Leasehold improvements |
3,559 |
2,984 |
||||||
5,151 |
5,395 |
|||||||
Less: Accumulated depreciation |
1,703 |
1,727 |
||||||
3,448 |
3,668 |
|||||||
Goodwill |
6,964 |
6,964 |
||||||
Other intangibles, less accumulated amortization (May 30, 2004 - |
||||||||
$1,290; May 25, 2003 - $1,242 |
600 |
648 |
||||||
Total assets |
$ |
17,535 |
$ |
18,131 |
||||
Liabilities and Shareholder's Equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ |
591 |
$ |
1,135 |
||||
Salaries, wages and related items |
340 |
435 |
||||||
Accrued customer commissions |
825 |
615 |
||||||
Product warranty reserve |
559 |
427 |
||||||
Other liabilities and accrued expenses |
424 |
342 |
||||||
Due to Parent |
97 |
2,646 |
||||||
Total current liabilities |
2,836 |
5,600 |
||||||
Deferred tax liability |
482 |
319 |
||||||
Total liabilities |
3,318 |
5,919 |
||||||
Shareholder's equity |
||||||||
Common stock, par value $.01 per share |
||||||||
Authorized - 3,000 shares |
||||||||
Issued and outstanding - 100 shares as of May 30, 2004 |
||||||||
and May 25, 2003 |
-- |
-- |
||||||
Additional paid-in capital |
-- |
-- |
||||||
Retained earnings |
14,217 |
12,212 |
||||||
Total shareholder's equity |
14,217 |
12,212 |
||||||
Total liabilities and shareholder's equity |
$ |
17,535 |
$ |
18,131 |
||||
The accompanying notes are an integral part of the financial statements.
Page 2
IGC-Polycold Systems Inc.
(A wholly-owned subsidiary of Intermagnetics General Corporation)
Statements of Income
Years Ended May 30, 2004 and May 25, 2003
(in thousands of dollars) |
2004 |
2003 |
||||||
Net sales |
$ |
24,708 |
$ |
20,564 |
||||
Cost of products sold |
15,184 |
13,675 |
||||||
Gross margin |
9,524 |
6,889 |
||||||
Product research and development |
955 |
1,279 |
||||||
Selling, general and administrative |
3,999 |
3,627 |
||||||
Asset management fee - Parent |
1,456 |
1,444 |
||||||
6,410 |
6,350 |
|||||||
Operating income |
3,114 |
539 |
||||||
Interest and other income |
-- |
150 |
||||||
Interest and other expense |
(8 |
) |
(11 |
) |
||||
Income before income taxes |
3,106 |
678 |
||||||
Provision for income taxes |
1,101 |
176 |
||||||
Net income |
$ |
2,005 |
$ |
502 |
||||
The accompanying notes are an integral part of the financial statements.
Page 3
IGC-Polycold Systems Inc.
(A wholly-owned subsidiary of Intermagnetics General Corporation)
Statements of Changes in Shareholder's Equity
Years Ended May 30, 2004 and May 25, 2003
Additional |
|||||||||||||||||
Common |
Paid-in |
Retained |
|||||||||||||||
(in thousands of dollars) |
Stock |
Capital |
Earnings |
Total |
|||||||||||||
Balance at May 26, 2002 |
$ |
-- |
$ |
-- |
$ |
11,710 |
$ |
11,710 |
|||||||||
Net income |
502 |
502 |
|||||||||||||||
Balance at May 25, 2003 |
-- |
-- |
12,212 |
12,212 |
|||||||||||||
Net income |
2,005 |
2,005 |
|||||||||||||||
Balance at May 30, 2004 |
$ |
-- |
$ |
-- |
$ |
14,217 |
$ |
14,217 |
|||||||||
The accompanying notes are an integral part of the financial statements.
Page 4
IGC-Polycold Systems Inc.
(A wholly-owned subsidiary of Intermagnetics General Corporation)
Statements of Cash Flows
Years Ended May 30, 2004 and May 25, 2003
(in thousands of dollars) |
2004 |
2003 |
||||||
Cash flows from operating activities |
||||||||
Net income |
$ |
2,005 |
$ |
502 |
||||
Adjustments to reconcile net income to net |
||||||||
cash provided by operating activities |
||||||||
Depreciation and amortization |
614 |
541 |
||||||
Loss on sale and disposal of property and equipment |
38 |
10 |
||||||
Deferred taxes |
8 |
(100 |
) |
|||||
Changes in operating assets and liabilities |
||||||||
Accounts receivable |
469 |
(1,031 |
) |
|||||
Inventories, prepaid expenses and other assets |
(121 |
) |
190 |
|||||
Accounts payable, accrued expenses and other liabilities |
(215 |
) |
493 |
|||||
Net cash provided by operating activities |
2,798 |
605 |
||||||
Cash flows from investing activities |
||||||||
Purchases of property and equipment |
(386 |
) |
(743 |
) |
||||
Proceeds from sale of property and equipment |
2 |
16 |
||||||
Net cash used in investing activities |
(384 |
) |
(727 |
) |
||||
Cash flows from financing activities |
||||||||
Payments made to Parent, net |
(2,549 |
) |
(946 |
) |
||||
Net cash used in financing activities |
(2,549 |
) |
(946 |
) |
||||
Decrease in cash |
(135 |
) |
(1,068 |
) |
||||
Cash at beginning of period |
144 |
1,212 |
||||||
Cash at end of period |
$ |
9 |
$ |
144 |
||||
The accompanying notes are an integral part of the financial statements.
Page 5
IGC-Polycold Systems Inc.
(A wholly-owned subsidiary of Intermagnetics General Corporation)
Notes to Financial Statements
May 30, 2004 and May 25, 2003
1. Accounting Policies
Organization
IGC Polycold Systems Inc. (the "Company") is a wholly-owned subsidiary of Intermagnetics General Corporation, an SEC Registrant (the "Parent"). The Company was incorporated in the state of Delaware on November 24, 1997 as a C Corporation. The Company manufactures and sells refrigeration equipment used primarily in ultra-high vacuum applications, industrial coatings, analytical instrumentation, medical diagnostics and semiconductor processing and testing.
Basis of Presentation
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and include all the accounts of the Company. It is the Company's policy to reclassify prior year financial statements to conform to current year presentation.
The Company operates on a 52/53 week fiscal year ending the last Sunday during the month of May. Fiscal 2004 had 53 weeks and fiscal 2003 had 52 weeks.
Cash
At May 25, 2003, cash balances held at a financial institution are in excess of federally insured limits by approximately $42,000.
Revenue Recognition
Sales are generally recognized as of the date of shipment which is generally when title and risk of loss passes to the customer. The Company may from time to time offer certain distributors rights of return on unsold products. Product revenue on shipments to distributors that have rights of return, is recognized based upon an agreed upon invoicing schedule when contractually, the right of return has lapsed. Product that has been shipped, but not invoiced, is recorded on the balance sheet as consigned products. Consigned products as of May 30, 2004 and May 25, 2003 were $720,000 and $103,000, respectively.
The Company accrues for possible future claims arising under terms of various warranties (one to three years) made in connection with the sale of products. Warranty expense for fiscal 2004 and 2003, was $442,000 and $397,000, respectively. The following table represents the activity in product warranty reserve for the fiscal years ended:
(in thousands of dollars) |
May 30, 2004 |
May 25, 2003 |
||||||
Beginning balance |
$ |
427 |
$ |
335 |
||||
Warranty expense |
442 |
397 |
||||||
Cost of warranty performed |
(310 |
) |
(305 |
) |
||||
Ending balance |
$ |
559 |
$ |
427 |
||||
Major Customers
Page 6
IGC-Polycold Systems Inc.
(A wholly-owned subsidiary of Intermagnetics General Corporation)
Notes to Financial Statements
May 30, 2004 and May 25, 2003
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market value. At May 30, 2004 and May 25, 2003, the Company had reserves for excess and obsolete inventory of $746,000 and $381,000, respectively.
Property, Plant and Equipment
Machinery and equipment and leasehold improvements are recorded at cost. Depreciation is computed using the straight-line method in a manner that is intended to amortize the cost of such assets over their estimated useful lives. Leasehold improvements are amortized on a straight-line basis over the remaining initial term of the lease or estimated useful life, whichever is shorter. For financial reporting purposes, the Company provides for depreciation of property and equipment over the following estimated useful lives:
Machinery and equipment |
3 - 15 years |
||
Leasehold improvements |
2 - 15 years |
Significant additions or improvements extending assets' useful lives are capitalized; normal maintenance and repair costs are expensed as incurred.
The cost of fully depreciated assets remaining in use is included in the respective asset and accumulated depreciation accounts. When items are sold or retired, related gains or losses are included in income. Depreciation expense for the fiscal years ended May 30, 2004 and May 25, 2003 was $566,000 and $493,000, respectively.
Machinery and equipment includes $51,000 and $499,000 of construction in progress at May 30, 2004 and May 25, 2003, respectively.
Goodwill and Other Intangibles
Goodwill and other intangibles with indefinite lives are periodically tested for impairment and identifiable intangible assets other than goodwill are amortized over their estimated useful lives in accordance with SFAS No. 142, Goodwill and Other Intangible Assets.
Impairment of Long-Lived Assets
Long-lived assets, used in the Company's operations are reviewed for impairment when circumstances indicate that the carrying amount of an asset may not be recoverable. The primary indicators of recoverability are the associated current and forecasted undiscounted operating cash flows.
Product Research and Development
Product research and development costs which include labor, materials, external contractor fees and applicable overhead allocations are charged to operations when incurred and are included in operating expenses.
Comprehensive Income
No statement of comprehensive income has been included in the accompanying financial statements since the Company does not have any other comprehensive income to report.
Page 7
IGC-Polycold Systems Inc.
(A wholly-owned subsidiary of Intermagnetics General Corporation)
Notes to Financial Statements
May 30, 2004 and May 25, 2003
Use of Estimates
In order to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America, management of the Company has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Segment Information
The Company believes it operates in only one segment, which manufactures and sells refrigeration equipment used primarily in ultra-high vacuum applications, industrial coatings, analytical instrumentation, medical diagnostics and semiconductor processing and testing.
New Accounting Pronouncements
In December 2003, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 104 (SAB 104), "Revenue Recognition", which supersedes SAB 101, "Revenue Recognition in Financial Statements". SAB 104's primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element arrangements, superseded as a result of the issuance of EITF 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables". The Company's adoption of SAB 104 did not have a material effect on its financial statements.
2. Income Taxes
The Company is included in the consolidated tax return of its Parent, which includes the Company, as well as other subsidiaries. The Company's tax provision has been computed using the separate return method for the allocation of federal income taxes. As of May 30, 2004, there was no formal tax sharing arrangement among the Company and its affiliates. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted rates expected to apply to consolidated taxable income in the years in which those temporary differences are expected to be recovered or settled.
The components of the provision for income taxes (benefit) are as follows for the fiscal years ended:
(in thousands of dollars) |
May 30, 2004 |
May 25, 2003 |
||||||
Current |
||||||||
Federal |
$ |
920 |
$ |
227 |
||||
State |
173 |
49 |
||||||
Total current |
1,093 |
276 |
||||||
Deferred |
||||||||
Federal |
7 |
(91 |
) |
|||||
State |
1 |
(9 |
) |
|||||
Total deferred |
8 |
(100 |
) |
|||||
Provision for income taxes |
$ |
1,101 |
$ |
176 |
||||
Page 8
IGC-Polycold Systems Inc.
(A wholly-owned subsidiary of Intermagnetics General Corporation)
Notes to Financial Statements
May 30, 2004 and May 25, 2003
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows for the fiscal years ended:
(in thousands of dollars) |
May 30, 2004 |
May 25, 2003 |
||||||
Current deferred tax assets |
||||||||
Inventory reserves |
$ |
278 |
$ |
142 |
||||
Non-deductible accruals |
58 |
85 |
||||||
Product warranty reserve |
207 |
161 |
||||||
Other |
6 |
6 |
||||||
Total current deferred tax assets |
549 |
394 |
||||||
Long-term deferred tax liabilities |
||||||||
Depreciation and amortization differences |
(480 |
) |
(315 |
) |
||||
Other, net |
(2 |
) |
(4 |
) |
||||
Total long-term deferred tax liabilities |
(482 |
) |
(319 |
) |
||||
Net deferred tax assets |
$ |
67 |
$ |
75 |
||||
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and capital gains during the periods in which those temporary differences become deductible. Management considers projected future taxable income, the character of such income and tax planning strategies in making this assessment. The Company had Federal taxable income of approximately $3,200,000 in fiscal 2004 and $717,000 in fiscal 2003. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of the remaining deductible differences. The amount of the deferred tax assets considered realizable, however, could be reduce
d in the near term if estimates of future taxable income are reduced.
The reasons for the differences between the provision of income taxes (benefit) and the amount of income tax (benefit) determined by applying the applicable statutory Federal tax rate to income (loss) before income taxes are as follows for the fiscal years ended:
(in thousands of dollars) |
May 30, 2004 |
May 25, 2003 |
||||||
Pretax income at statutory tax rate (34% for 2004 and 2003) |
$ |
1,056 |
$ |
231 |
||||
State taxes, net of federal benefit |
110 |
22 |
||||||
Benefit of extraterritorial income exclusion |
(65 |
) |
(82 |
) |
||||
Other, net |
-- |
5 |
||||||
Provision for income taxes |
$ |
1,101 |
$ |
176 |
||||
In the accompanying financial statements, the current tax provision of the Company for 2004 and 2003 is included in the caption, Due to Parent. The benefit of any net operating losses or the impact of any tax liability is paid or collected by the Company's Parent.
Page 9
IGC-Polycold Systems Inc.
(A wholly-owned subsidiary of Intermagnetics General Corporation)
Notes to Financial Statements
May 30, 2004 and May 25, 2003
3. Commitments and Contingencies
The Company leases certain facilities and certain equipment under operating lease agreements expiring at various dates through September 2011. Certain of the leases provide for renewal options. Total rent expense was $682,000 and $591,000 for the fiscal years ended May 30, 2004 and May 25, 2003, respectively.
Future minimum rental commitments, excluding renewal options, under the non-cancelable operating leases covering its facilities and equipment through the term of the leases are as follows:
Fiscal Year |
||||||||
2005 |
$ |
702 |
||||||
2006 |
717 |
|||||||
2007 |
742 |
|||||||
2008 |
756 |
|||||||
2009 |
786 |
|||||||
Thereafter |
1,093 |
|||||||
$ |
4,796 |
|||||||
The Company is contingently liable as one of the guarantors with respect to its Parent's $130 million unsecured credit facility. The Company's Parent had $56.1 million outstanding on this credit facility as of May 30, 2004. As of August 29, 2004, the Company's Parent had approximately $90.1 million outstanding under this credit facility.
The Company may from time to time be a defendant in legal proceedings relating to the conduct of its business. In the best judgment of Management, the financial position of the Company will not be affected materially by the outcome of any pending or threatening legal proceedings.
4. Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments". Although the estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies, the estimates presented are not necessarily indicative of the amounts that the Company could realize in current market exchanges.
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:
Cash and cash equivalents, receivables, and accounts payable and accrued expenses: The carrying amounts reported in the consolidated balance sheets approximate their fair values because of the short maturities of these instruments.
Page 10
IGC-Polycold Systems Inc.
(A wholly-owned subsidiary of Intermagnetics General Corporation)
Notes to Financial Statements
May 30, 2004 and May 25, 2003
5. Goodwill and Other Intangible Assets
The Company follows the provisions of Statement of Financial Accounting Standards No. 142 (FAS No. 142), "Goodwill and Other Intangible Assets". FAS No. 142 changed the accounting for goodwill from an amortization method to an impairment-only approach.
The components of other intangibles are as follows:
(in thousands of dollars) |
As of May 30, 2004 |
|||||||||||||||
Gross |
Weighted |
|||||||||||||||
Carrying |
Accumulated |
Average Life |
||||||||||||||
Amount |
Amortization |
in Years |
||||||||||||||
Amortized intangible assets |
||||||||||||||||
Unpatented technology |
$ |
930 |
$ |
930 |
5.0 |
|||||||||||
Trade name |
960 |
360 |
20.0 |
|||||||||||||
$ |
1,890 |
$ |
1,290 |
12.6 |
||||||||||||
Aggregate amortization expense for each of the fiscal years ended May 30, 2004 and May 25, 2003 was $48,000. All intangibles are amortized on a straight line basis.
Estimated amortization expense for each of the next five years will be $48,000 each fiscal year.
Management evaluated goodwill for impairment during the quarters ended November 24, 2002 and November 23, 2003 in accordance with SFAS No. 142 and determined no impairment exists. Fair values of the related implied fair values of their respective goodwill were established using public company analysis and discounted cash flows. Management will perform the next annual goodwill impairment test during the quarter ended November 28, 2004 unless an event occurs or circumstances change that would more likely than not reduce the fair value of the Company below its carrying amount.
6. Retirement Plan
The Company participates in its Parent's employee savings plan, covering substantially all employees under Section 401(k) of the Internal Revenue Code. Under this plan, the Company makes a contribution for all employees and matches a portion of the participants' contributions. Expenses under the plan during the fiscal years ended May 30, 2004, and May 25, 2003, were $91,000 and $86,000, respectively.
Page 11
IGC-Polycold Systems Inc.
(A wholly-owned subsidiary of Intermagnetics General Corporation)
Notes to Financial Statements
May 30, 2004 and May 25, 2003
7. Related Party Transactions
Asset Management Fee
The Company has a corporate services agreement with its Parent. Under the terms of the agreement, the Company pays its Parent for finance, accounting, legal and other various corporate and administrative support services. Such fee equals 1.0% of net operating assets consisting of working capital plus net plant, property and equipment and 1% annualized payroll. Management believes that the method used to allocate the costs and expenses is reasonable; however, such allocated amounts may or may not necessarily be indicative of what actual expenses would have been incurred had the Company operated independently of its Parent. Amounts incurred by the Company under this arrangement were $1,456,000 and $1,444,000 for the fiscal years ended May 30, 2004 and May 25, 2003, respectively.
Banking Arrangement
The Company's primary operating cash account consists of a zero balance account that sweeps the Company's net receipts and disbursements nightly into its Parent's consolidated concentration account. The Company will transfer cash balances to its Parent on a daily basis. The Company's Parent is responsible for making cash flow available to satisfy the Company's cash flow requirements, if needed. The Company does not record a return on the cash transferred to its Parent.
Cost Allocations
The Company benefits from insurance coverage provided by independent third-parties through its Parent. As a result, the Company recognizes the appropriate direct expense with the offsetting amount due to its Parent. The expense is allocated based on a percentage of Company sales to consolidated sales of the Company's Parent. Amounts recognized during fiscal 2004 and fiscal 2003 were $931,000 and $783,000, respectively.
As a result of the above relationships with the Company's Parent, the Company recorded a net amount due to its Parent of $97,000 and $2,646,000 at May 30, 2004 and May 25, 2003, respectively. Due to Parent consists of the following at:
(in thousands of dollars) |
May 30, 2004 |
May 25, 2003 |
||||||
Income taxes |
$ |
1,369 |
$ |
276 |
||||
Other |
(1,272 |
) |
2,370 |
|||||
Due to Parent |
$ |
97 |
$ |
2,646 |
||||
Page 12
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
On February 15, 2005, Helix Technology Corporation ("Helix") acquired all the issued and outstanding stock of IGC Polycold Systems Inc. ("Polycold") for approximately $49.2 million in cash and up to $3.3 million in transaction-related tax payments, which are currently estimated to be $515,000. Polycold is a producer of high-speed water vapor cryopumping and cryogenic cooling products based in Petaluma, California. This acquisition is taxable and has been accounted for as a purchase of a business.
The unaudited pro forma condensed combined financial information has been prepared based on estimates of the fair values of the identifiable assets and liabilities of Polycold. The fair value of intangible assets acquired from Polycold was determined by management with the assistance of an independent third-party appraiser. The impact of ongoing integration activities and adjustments to the fair value of acquired net tangible and intangible assets of Polycold could cause material differences in the information presented.
The pro forma data are presented for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have occurred if the transaction had been consummated as of January 1, 2004, for statement of operations purposes, and as of December 31, 2004, for financial position purposes, nor are the data necessarily indicative of future operating results or financial position. The unaudited pro forma condensed combined financial information should be read in conjunction with the historical consolidated financial statements of (i) Helix Technology Corporation included in its Form 10-K for the year ended December 31, 2004, filed on March 16, 2005, and (ii) IGC Polycold Systems Inc. included in this Form 8-K/A filing for the fiscal years ended May 30, 2004, and May 25, 2003.
Pro Forma Condensed Combined Statement of Operations
Twelve Months Ended December 31, 2004
(Unaudited)
(in thousands, except per share amounts)
Historical |
|||||||||||||||||
Pro Forma |
Pro Forma |
||||||||||||||||
Helix(1) |
Polycold(2) |
Adjustments |
Combined |
||||||||||||||
Net sales |
$ |
159,674 |
$ |
29,777 |
$ |
-- |
$ |
189,451 |
|||||||||
Costs and expenses: |
|||||||||||||||||
Cost of sales |
95,849 |
17,055 |
1,547 |
(A) |
114,451 |
||||||||||||
Research and development |
10,826 |
709 |
160 |
(A) |
11,695 |
||||||||||||
Selling, general and administrative |
35,623 |
3,788 |
705 |
(A) |
40,116 |
||||||||||||
142,298 |
21,552 |
2,412 |
166,262 |
||||||||||||||
Operating income |
17,376 |
8,225 |
(2,412 |
) |
23,189 |
||||||||||||
Joint venture income |
3,508 |
-- |
-- |
3,508 |
|||||||||||||
Interest income and other, net |
1,065 |
(10 |
) |
(824 |
) |
(B) |
231 |
||||||||||
Income before taxes |
21,949 |
8,215 |
(3,236 |
) |
26,928 |
||||||||||||
Income tax provision (benefit) |
(5,562 |
) |
2,875 |
(1,133 |
) |
(C) |
(3,820 |
) |
|||||||||
Net income |
$ |
27,511 |
$ |
5,340 |
$ |
(2,103 |
) |
$ |
30,748 |
||||||||
Net income per weighted average share: |
|||||||||||||||||
Basic |
$ |
1.05 |
$ |
1.18 |
|||||||||||||
Diluted |
$ |
1.05 |
$ |
1.17 |
|||||||||||||
Weighted average shares: |
|||||||||||||||||
Basic |
26,110 |
26,110 |
|||||||||||||||
Diluted |
26,187 |
26,187 |
|||||||||||||||
(1)
As reported in Helix's annual report on Form 10-K for the year ended December 31, 2004.(2)
Derived from Polycold historical financial information for the twelve month period ended January 2, 2005.
See accompanying notes to unaudited pro forma condensed combined financial information.
Pro Forma Condensed Combined Balance Sheet
December 31, 2004
(Unaudited)
(in thousands)
Historical |
|||||||||||||||||
Pro Forma |
Pro Forma |
||||||||||||||||
Helix(1) |
Polycold(2) |
Adjustments |
Combined |
||||||||||||||
ASSETS |
|||||||||||||||||
Current assets: |
|||||||||||||||||
Cash and cash equivalents |
$ |
6,462 |
$ |
9 |
$ |
-- |
$ |
6,471 |
|||||||||
Short-term investments |
69,874 |
-- |
(50,306 |
) |
(D) |
19,568 |
|||||||||||
Accounts receivable |
24,100 |
4,475 |
-- |
28,575 |
|||||||||||||
Inventories |
21,595 |
2,736 |
-- |
24,331 |
|||||||||||||
Other current assets |
12,044 |
151 |
-- |
12,195 |
|||||||||||||
Total current assets |
134,075 |
7,371 |
(50,306 |
) |
91,140 |
||||||||||||
Property, plant and equipment, net |
18,940 |
3,209 |
-- |
22,149 |
|||||||||||||
Goodwill |
-- |
-- |
29,463 |
(E) |
29,463 |
||||||||||||
Intangible assets, net |
-- |
-- |
14,300 |
(F) |
14,300 |
||||||||||||
Other assets |
16,549 |
-- |
-- |
16,549 |
|||||||||||||
Total assets |
$ |
169,564 |
$ |
10,580 |
$ |
(6,543 |
) |
$ |
173,601 |
||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||||||||||||
Accounts payable |
$ |
5,951 |
$ |
408 |
$ |
-- |
$ |
6,359 |
|||||||||
Accrued expenses |
11,966 |
2,428 |
527 |
(G) |
|||||||||||||
674 |
(H) |
15,595 |
|||||||||||||||
Total current liabilities |
17,917 |
2,836 |
1,201 |
21,954 |
|||||||||||||
Retirement costs |
6,403 |
-- |
-- |
6,403 |
|||||||||||||
Deferred income taxes |
1,103 |
-- |
-- |
1,103 |
|||||||||||||
Stockholders' equity: |
|||||||||||||||||
Common stock |
26,114 |
-- |
-- |
26,114 |
|||||||||||||
Capital in excess of par value |
76,413 |
-- |
-- |
76,413 |
|||||||||||||
Retained earnings |
37,745 |
7,744 |
(7,744 |
) |
(I) |
37,745 |
|||||||||||
Accumulated other comprehensive income |
3,869 |
-- |
-- |
3,869 |
|||||||||||||
Total stockholders' equity |
144,141 |
7,744 |
(7,744 |
) |
144,141 |
||||||||||||
Total liabilities and stockholders' equity |
$ |
169,564 |
$ |
10,580 |
$ |
(6,543 |
) |
$ |
173,601 |
||||||||
(1)
As reported in Helix's annual report on Form 10-K for the year ended December 31, 2004.(2)
Derived from Polycold historical financial information as of January 2, 2005.
See accompanying notes to unaudited pro forma condensed combined financial information.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
Note 1: Basis of Pro Forma Presentation
The following unaudited pro forma condensed combined balance sheet as of December 31, 2004, and the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2004, are based on the historical financial statements of Helix and Polycold and give effect to the acquisition of Polycold by Helix as a purchase given the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information. Due to different fiscal period ends, the pro forma condensed combined balance sheet combines the historical balance sheet of Helix at December 31, 2004, and historical balance sheet of Polycold at January 2, 2005, and the pro forma condensed combined statement of operations combines the historical results of Helix for the year ended December 31, 2004, and the historical results of Polycold for the twelve months ended January 2, 2005.
The unaudited pro forma condensed combined balance sheet as of December 31, 2004, is presented to give effect to the acquisition of Polycold as if it occurred on December 31, 2004. The unaudited pro forma condensed combined statement of operations of Helix and Polycold for the year ended December 31, 2004, is presented as if the acquisition had taken place on January 1, 2004.
The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not intended to represent or be indicative of the consolidated results of operations or financial position of Helix that would have been reported had the acquisition been consummated as of the dates presented, and should not be taken as representative of future operating results or financial position of Helix. The pro forma adjustments are based upon available information and assumptions that Helix believes are reasonable under the circumstances.
The following represents the preliminary purchase price (in thousands):
Cash consideration paid |
$ |
49,200 |
|||
Transaction-related tax payments |
515 |
||||
Direct transaction costs |
591 |
||||
Total preliminary purchase price |
$ |
50,306 |
|||
The Company considered a number of factors to determine the purchase price allocation, including engaging a third party valuation firm to independently appraise the fair value of certain assets acquired. The estimated purchase price has been allocated to the acquired tangible and intangible assets and liabilities based on their estimated fair values as of December 31, 2004 (in thousands):
Current assets |
$ |
7,371 |
|||
Property, plant and equipment |
3,209 |
||||
Intangible assets: |
|||||
Developed technology |
9,200 |
||||
Trade names |
1,000 |
||||
Customer & distributor relationships |
3,300 |
||||
Consulting contract |
400 |
||||
Non-compete agreement |
400 |
||||
Total intangible assets |
14,300 |
||||
Goodwill |
29,463 |
||||
Current liabilities |
(4,037 |
) |
|||
Total preliminary purchase price allocation |
$ |
50,306 |
|||
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
Under the purchase method of accounting, the total estimated purchase price as shown in the table above is allocated to Polycold's net tangible and intangible assets based on their estimated fair value at the acquisition date. These allocations are subject to change pending the completion of the final analysis of the total purchase price and fair values of the assets acquired and the liabilities assumed. The impact of such changes could be material.
In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, goodwill resulting from the transaction is not amortized, but will be subject to an impairment test at least annually (more frequently if certain indicators are present). In the event that goodwill is impaired, Helix will incur an impairment charge for the amount of impairment during the fiscal quarter in which the determination is made that goodwill is impaired.
In connection with the closing of the transaction, Helix could incur additional integration-related expenses not reflected in the pro forma financial information. These may include the elimination of duplicative facilities, operational realignment expenses and related workforce reductions. Such costs would generally be recognized as a liability assumed as of the acquisition date resulting in additional goodwill if these costs relate to facilities or workforce previously aligned to Polycold and would be expensed if these costs relate to facilities or workforce previously aligned with Helix.
Note 2: Pro Forma Adjustments
The pro forma adjustments included in the unaudited pro forma condensed combined financial statements are as follows:
(A) Represents the amortization of intangible assets established as part of the purchase price allocation. Intangible assets are amortized based on the pattern in which the estimated economic benefits of the intangible assets are consumed over the following number of years:
Developed technology |
4-8 years |
||||
Trade names |
6 years |
||||
Customer and distributor relationships |
7-9 years |
||||
Consulting contract |
4 years |
||||
Non-compete agreement |
5 years |
(B) Represents the reduction of interest income resulting from cash consideration, transaction-related tax payments and direct transaction costs paid by Helix to purchase Polycold.
(C) Represents the tax effect of the transaction based upon the statutory income tax rate of 35%.
(D) Represents the cash consideration paid, transaction-related tax payments and estimated direct transaction costs to acquire the outstanding shares of Polycold.
(E) Represents the preliminary fair value of goodwill created from the transaction.
(F) Represents the fair value of the amortizable intangible assets acquired from Polycold.
(G) Represents the adjustment for change of control arrangements for Polycold personnel.
(H) Represents an accrual associated with the above-market lease rate related to an assumed operating lease for Polycold's facility.
(I) Represents the elimination of Polycold's equity accounts.
There were no intercompany balances or transactions between Helix and Polycold. No pro forma adjustments were required to conform Polycold's accounting policies to Helix's accounting policies.
The pro forma combined provision for income taxes does not reflect the amounts that would have resulted had Helix and Polycold filed consolidated income tax returns during the period presented.