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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the Quarter Ended September 27, 2002.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
Commission File Number 0-6866
HELIX TECHNOLOGY CORPORATION
----------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2423640
------------------------ ---------------------------------
(State of incorporation) (IRS Employer Identification No.)
Mansfield Corporate Center
Nine Hampshire Street
Mansfield, Massachusetts 02048-9171
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 337-5500
--------------------------------------
Indicate by checkmark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past ninety days.
Yes [X] No [ ]
The number of shares outstanding of the registrant's Common Stock, $1 par
value, as of September 27, 2002 was 26,103,204.
HELIX TECHNOLOGY CORPORATION
Form 10-Q
INDEX
Page
----
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of September 27, 2002, and
December 31, 2001 3
Consolidated Statements of Operations for the Three and
Nine-Month Periods Ended September 27, 2002, and
September 28, 2001 4
Consolidated Statements of Cash Flows for the Nine-Month
Periods Ended September 27, 2002, and September 28, 2001 5
Notes to Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-14
Item 3. Quantitative and Qualitative Disclosures about Market
Risk 15
Item 4. Controls and Procedures 15
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 6 (a). Exhibits 16
Item 6 (b). Reports on Form 8-K 16
Signature 17
Certifications 18-19
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
- ---------------------------------------------------------------------------
Sept. 27, Dec. 31,
2002 2001
(in thousands except per share data) (unaudited) (audited)
- ---------------------------------------------------------------------------
ASSETS
Current:
Cash and cash equivalents $ 51,891 $ 7,789
Investments 15,981 9,271
Receivables - net of allowances 17,845 11,997
Inventories (Note 2) 25,167 27,293
Income tax receivable 6,619 7,344
Deferred income taxes (Note 3) 5,707 5,707
Other current assets 2,860 2,577
- ---------------------------------------------------------------------------
Total Current Assets 126,070 71,978
- ---------------------------------------------------------------------------
Property, plant and equipment at cost 69,677 65,115
Less: accumulated depreciation (39,981) (35,614)
- ---------------------------------------------------------------------------
Net property, plant and equipment 29,696 29,501
Other assets 12,148 12,101
- ---------------------------------------------------------------------------
TOTAL ASSETS $167,914 $113,580
===========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable $ 12,120 $ 9,105
Payroll and compensation 496 986
Retirement costs 8,289 6,758
Income taxes (Note 3) 3,666 3,064
Other accrued liabilities 994 700
- ---------------------------------------------------------------------------
Total Current Liabilities 25,565 20,613
- ---------------------------------------------------------------------------
Commitments and contingencies (Note 8)
Stockholders' Equity:
Preferred stock, $1 par value; authorized
2,000,000 shares; issued and outstanding: none - -
Common stock, $1 par value; authorized 60,000,000
shares; issued and outstanding: 26,103,204 in
2002 and 22,611,204 in 2001 26,103 22,611
Capital in excess of par value 76,344 13,878
Treasury stock, $1 par value (3,840 shares in 2002
and in 2001) (232) (232)
Retained earnings 41,818 58,261
Accumulated other comprehensive loss (Note 5) (1,684) (1,551)
- ---------------------------------------------------------------------------
Total Stockholders' Equity 142,349 92,967
- ---------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $167,914 $113,580
===========================================================================
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 Nine Months Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
(in thousands except per share data) 2002 2001 2002 2001
- ------------------------------------------------------------------------------------------
Net sales $27,395 $20,445 $ 76,790 $ 95,690
- ------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales 19,279 14,444 54,473 61,446
Research and development 3,601 3,731 11,085 12,173
Selling, general and administrative 9,413 7,860 25,986 27,225
Litigation settlement costs (Note 7) - - 2,800 -
Restructuring charge - 1,047 - 1,047
- ------------------------------------------------------------------------------------------
32,293 27,082 94,344 101,891
- ------------------------------------------------------------------------------------------
Operating loss (4,898) (6,637) (17,554) (6,201)
Joint venture income 263 473 322 1,991
Interest and other income 270 117 635 748
- ------------------------------------------------------------------------------------------
Loss before taxes (4,365) (6,047) (16,597) (3,462)
Income tax benefit (Note 3) (2,166) (1,965) (6,141) (1,125)
- ------------------------------------------------------------------------------------------
Net loss $(2,199) $(4,082) $(10,456) $ (2,337)
==========================================================================================
Net loss per share (Note 4):
Basic $ (0.08) $ (0.18) $ (0.42) $ (0.10)
Diluted $ (0.08) $ (0.18) $ (0.42) $ (0.10)
==========================================================================================
Number of shares used in per share
calculations (Note 4):
Basic 26,099 22,599 25,105 22,551
Diluted 26,099 22,599 25,105 22,551
==========================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
Page 4
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
- -----------------------------------------------------------------------------------------
Nine Months Ended
Sept. 27, Sept. 28,
(in thousands) 2002 2001
- -----------------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (10,456) $ (2,337)
Adjustments to reconcile net loss to net
cash (used by) provided by operating activities:
Depreciation and amortization 4,699 3,732
Other (123) (1,392)
Net change in operating assets and liabilities (A) 1,673 7,619
- -----------------------------------------------------------------------------------------
Net cash (used by) provided by operating activities (4,207) 7,622
- -----------------------------------------------------------------------------------------
Cash flows used in investing activities:
Capital expenditures (4,894) (13,637)
Purchase of investments (45,657) (34,665)
Sale of investments 38,890 37,224
- -----------------------------------------------------------------------------------------
Net cash used in investing activities (11,661) (11,078)
- -----------------------------------------------------------------------------------------
Cash flows provided by (used by) financing activities:
Net proceeds from stock offering 65,246 -
Net cash provided by employee stock plans 711 1,518
Cash dividends paid (5,987) (8,114)
- -----------------------------------------------------------------------------------------
Net cash provided by (used by) financing activities 59,970 (6,596)
- -----------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 44,102 (10,052)
Cash and cash equivalents, at the beginning of the period 7,789 15,435
- -----------------------------------------------------------------------------------------
Cash and cash equivalents, at the end of the period $ 51,891 $ 5,383
=========================================================================================
(A) Change in operating assets and liabilities:
(Increase) decrease in accounts receivable $ (5,848) $ 24,701
Decrease in inventories 2,126 2,299
Decrease (increase) in income tax receivable 725 (4,608)
Increase in other current assets (283) (262)
Increase (decrease) in accounts payable 3,015 (10,993)
Increase (decrease) in other accrued expenses 1,938 (3,518)
- -----------------------------------------------------------------------------------------
Net change in operating assets and liabilities $ 1,673 $ 7,619
=========================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
Page 5
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
- ------------------------------
The accompanying consolidated financial statements for the periods ended
September 27, 2002, and September 28, 2001, contain all adjustments
(consisting only of normal recurring adjustments) necessary to present
fairly the financial position as of September 27, 2002, and December 31,
2001, and the results of operations and cash flows for the periods ended
September 27, 2002, and September 28, 2001.
The results of operations for the nine-month period ended September 27,
2002, are not necessarily indicative of the results expected for the full
year.
The consolidated financial statements included herein have been prepared by
the Company, without audit of the three- and nine-month periods ended
September 27, 2002, and September 28, 2001, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to present fairly the
Company's financial position and results of operations. These consolidated
financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's latest Annual
Report on Form 10-K.
Note 2 - Inventories
- --------------------
- --------------------------------------------------------------------------
(in thousands) Sept. 27, 2002 Dec. 31, 2001
- --------------------------------------------------------------------------
Finished goods $ 10,071 $ 8,570
Work in process 11,417 13,067
Materials and parts 3,679 5,656
--------------------------
$ 25,167 $ 27,293
==========================
Inventories are stated at the lower of cost or market on a first-in, first-
out basis.
Note 3 - Income Taxes
- ---------------------
The net federal, state and foreign income tax benefit for the three- and
nine-month periods ended September 27, 2002, were $2,166,000 and
$6,141,000, respectively. The effective income tax rates for the three-
and nine-month periods ended September 27, 2002, were 50.0% and 37.0%,
respectively. The effective tax rate for the three months ended September
27, 2002, includes the cumulative effect of the adjustment from the 32.5%
rate utilized during the six months of fiscal 2002 to the estimated annual
effective rate of 37.0%, based on current full year operating projections.
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 income tax benefit for the three- and nine-month periods ended
September 28, 2001, were $1,965,000 and $1,125,000, respectively, yielding
effective tax rates of 32.5%.
The major components of deferred tax assets are compensation and benefit
plans, inventory valuation and depreciation. The Company expects that the
future taxable income will be sufficient for the realization of the
deferred tax assets. The Company believes that a valuation allowance is
not required.
Page 6
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Net Loss Per Share
- ---------------------------
Basic net loss per common share is based on the weighted average number of
common shares outstanding during the period. Diluted net loss per common
share reflects the potential dilution that could occur if outstanding stock
options were exercised.
The following table sets forth the computation of basic and diluted net
loss per common share:
- ----------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
(in thousands except per share data) Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2002 2001 2002 2001
- ----------------------------------------------------------------------------------------
Net loss $(2,199) $(4,082) $(10,456) $ (2,337)
==================== =====================
Basic shares 26,099 22,599 25,105 22,551
Add: Common equivalent shares - - - -
-------------------- ---------------------
Diluted shares 26,099 22,599 25,105 22,551
==================== =====================
Basic net loss per share $ (0.08) $ (0.18) $ (0.42) $ (0.10)
==================== =====================
Diluted net loss per share $ (0.08) $ (0.18) $ (0.42) $ (0.10)
==================== =====================
Common equivalent shares represent shares issuable upon exercise of stock options
(using the treasury stock method). For the three and nine months ended September 27,
2002, and September 28, 2001, the Company had 552,375 and 474,875 options outstanding not
included in the computation of diluted shares, respectively. The Company was in a net
operating loss position, and the inclusion of such shares would be anti-dilutive.
Page 7
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Other Comprehensive Loss
- ---------------------------------
- -----------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
(in thousands) 2002 2001 2002 2001
- -----------------------------------------------------------------------------------------
Net loss $(2,199) $(4,082) $(10,456) $(2,337)
- -----------------------------------------------------------------------------------------
Other comprehensive income (loss) before tax:
Foreign currency translation adjustment 1,525 231 (2) (1,914)
Unrealized (loss) gain on available-for-sale
investments (20) 12 (57) 55
- -----------------------------------------------------------------------------------------
Other comprehensive income (loss), before tax 1,505 243 (59) (1,859)
Income tax related to items of other
comprehensive income (loss) (396) (95) (74) 510
- -----------------------------------------------------------------------------------------
Other comprehensive income (loss), net of tax 1,109 148 (133) (1,349)
- -----------------------------------------------------------------------------------------
Comprehensive loss $(1,090) $(3,934) $(10,589) $(3,686)
=========================================================================================
Note 6 - Common Stock Offering
- ------------------------------
On March 19, 2002, the Company completed a public offering of 3,450,000
shares of its common stock. The Company realized proceeds of $65.2
million, net of underwriting fees and discounts and offering expenses.
Note 7 - Litigation Settlement
- ------------------------------
On July 11, 2002, the Company signed an Agreement in Principle with
Raytheon Company in connection with an action brought in 1998 in the
Massachusetts Superior Court by Raytheon Company which alleged that between
1992 and 1994 the Company sold Raytheon defective components used in
missile guidance systems manufactured by Raytheon. The Company has not
been in the business of selling these components since 1994. While the
Company continuously denied all claims, the Company and its insurers
concluded that it was in the Company's best interest to reach an out-of-
court settlement to avoid the distraction and expense of a trial. Under
the terms of the Agreement, the Company paid $2.8 million in September
2002. Insurance providers paid an additional $2.1 million plus essentially
all of the legal costs associated with this litigation.
Note 8 - Commitments and Contingencies
- --------------------------------------
The Company had a three year-revolving credit agreement with Fleet National
Bank entered into in July 2000 that permitted the Company to borrow up to
$25.0 million, subject to compliance with certain covenants. The Company
had never borrowed against the agreement and terminated the credit agreement
in April 2002.
Page 8
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - New Accounting Pronouncements
- --------------------------------------
In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 (SFAS 142), "Goodwill and Other Intangible Assets," which became
effective for the Company on January 1, 2002. SFAS 142 requires, among other
things, the discontinuance of goodwill amortization and includes provisions
for the reclassification of certain existing recognized intangibles as
goodwill, reassessment of the useful lives of existing recognized
intangibles and reclassification of certain intangibles out of previously
reported goodwill. The revised standards include transition rules and
requirements for identification, valuation and recognition of a much broader
list of intangibles as part of business combinations than prior practice,
most of which will continue to be amortized.
In October 2001, the FASB issued Statement of Financial Accounting Standards
No. 144 (SFAS 144), "Accounting for the Impairment or Disposal of Long-Lived
Assets." The objectives of SFAS 144 are to address significant issues
relating to the implementation of FASB Statement No. 121 (SFAS 121),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," and to develop a single accounting model, based
on the framework established in SFAS 121, for long-lived assets to be
disposed of by sale, whether previously held and used or newly acquired.
SFAS 144 is effective for financial statements issued for fiscal years
beginning after December 15, 2001, and, generally, its provisions are to be
applied prospectively.
The Company adopted these standards, and they did not have a material impact
on its consolidated financial statements.
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 No. 146 for restructuring activities initiated after
December 31, 2002. SFAS No. 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 an exit plan.
SFAS No. 146 also establishes that the liability should initially be
measured and recorded at fair value. Accordingly, SFAS No. 146 may affect
the timing of recognizing future restructuring costs as well as the amounts
recognized.
Page 9
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.
Management's Discussion and Analysis of Financial Condition and Results of
Operations are based on our consolidated financial statements, which have
been prepared in accordance with United States generally accepted
accounting principles. The preparation of these financial statements
requires our management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses. These
estimates and assumptions are based on historical experience and on various
other factors that we believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about our critical
accounting policies. Actual results may differ from these estimates and
judgments under different assumptions or conditions.
Significant Accounting Policies
- -------------------------------
Revenue Recognition. Net sales is recognized 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. As part of a sale, we offer customers a warranty on
defects in materials and workmanship. We continuously monitor and track
the related product returns and record a provision for the estimated amount
of such future returns, based on historical experience and any notification
we receive of pending returns. While such returns have historically been
within our expectations and the provisions established, we cannot guarantee
that we will continue to experience the same return rates that we have in
the past. Any significant increase in material and workmanship defect
rates and the resulting credit returns could have a material adverse impact
on our operating results for the period or periods in which such returns
materialize. We also maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers to make
required payments. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.
Inventory. We value inventory at the lower of cost (first-in, first-out
method) or market. We regularly review inventory quantities on hand and
record a provision to write down inventory to its estimated net realizable
value, if less than cost, based upon management's assumptions of future
material usage and obsolescence, which are a result of future demand and
market conditions. If actual market conditions become less favorable than
those projected by management, additional inventory provisions may be
required.
Investments. We own 50% of a joint venture, ULVAC Cryogenics, Inc., or
UCI, which manufactures and sells cryogenic vacuum pumps in Japan,
principally to ULVAC Corporation. We account for the joint venture using
the equity method of accounting, and we also receive royalties from the
joint venture under the terms of a license and technology agreement. The
royalties we receive from UCI, as well as our equity in the income and
losses of UCI, are both included in our financial statements under joint
venture income.
Page 10
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations (continued)
---------------------
Results of Operations
- ---------------------
Beginning in 2001, a slowdown in the global market for semiconductor
capital equipment impacted us after experiencing a period of significant
growth in 1999 and 2000. Net sales for the three months ended September
27, 2002, (the "2002 Quarter") were $27.4 million compared with net sales
for the three months ended September 28, 2001, (the "2001 Quarter") of
$20.4 million, an increase of 34.0%. Net sales for the nine months ended
September 27, 2002, (the "2002 Period") were $76.8 million, a decrease of
20.0%, from $95.7 million for the nine months ended September 28, 2001 (the
"2001 Period"). While sales increased in the 2002 Quarter versus the 2001
Quarter, indicating a slight recovery from the slowdown, sales in the 2002
Period versus the 2001 Period are still down. The recovery appears to have
stalled, as net sales for the 2002 Quarter were lower than net sales for
the three months ended June 28, 2002, of $29.0 million. Based on
information currently available to us regarding the overall state of the
industry, it is reasonable to project sequentially lower net sales in the
subsequent quarter.
Cost of sales for the 2002 Quarter were $19.3 million compared with $14.4
million for the 2001 Quarter. The gross margin for the 2002 Quarter was
29.6% compared with 29.4% for the 2001 Quarter. The 2001 Quarter included
certain nonrecurring benefits related to the restructuring program that was
implemented and completed during the third quarter of 2001. Cost of sales
for the 2002 Period were $54.5 million compared with $61.4 million for the
2001 Period. The gross margin for the 2002 Period was 29.1% compared with
35.8% for the 2001 Period. The reduction in gross margin was primarily
attributable to decreased production volume as overhead costs were spread
over a smaller sales base.
Research and development expenses were $3.6 million for the 2002 Quarter,
or 13.1% of net sales, compared to $3.7 million, or 18.2% of net sales, for
the 2001 Quarter. Spending was $11.1 million, or 14.4% of net sales for
the 2002 Period, compared to $12.2 million, or 12.7% of net sales, for the
2001 Period. We continue to focus on developing technologies to support a
new generation of products for 300 millimeter-capable production tools, to
expand our GOLDLink support service capability and to improve our core
component product lines. (GOLDLink is a registered trademark of Helix
Technology Corporation.)
Total selling, general and administrative expenses were $9.4 million for
the 2002 Quarter as compared with $7.9 million for the 2001 Quarter. The
increase in selling, general and administrative expenses in the 2002
Quarter is primarily due to the additional depreciation expense associated
with our new global information system and the associated initial startup
costs. Depreciation expenses are expected to remain at their current
levels in subsequent quarters. Total selling, general and administrative
expenses including litigation settlement costs were $28.8 million for the
2002 Period as compared with $27.2 million for the 2001 Period. Excluding
the nonrecurring litigation settlement charge of $2.8 million in the 2002
Period, our spending declined due to ongoing cost containment measures and
due to the restructuring program implemented and completed in the third
quarter of 2001 in response to the slowdown in the semiconductor capital
equipment industry. Due to projected continued weakening in the
semiconductor industry, we will be implementing significant changes to our
business structure in the current quarter that will more closely align our
costs with near-term revenue expectations.
Royalty and equity income from our joint venture in Japan decreased by $0.2
million in the 2002 Quarter compared to the 2001 Quarter and $1.7 million
in the 2002 Period compared to the 2001 Period due to the decline in the
Japanese semiconductor capital equipment market.
Page 11
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations (continued)
---------------------
Results of Operations (continued)
- ---------------------
Interest and other income for the 2002 Quarter was $0.3 million, compared
with $0.1 million for the 2001 Quarter, reflecting higher average cash,
cash equivalents and investment balances as a result of the public offering
completed in March 2002, partially offset by lower interest rates.
Interest and other income for the 2002 Period was $0.6 million, compared
with $0.7 million for the 2001 Period, reflecting lower interest rates
partially offset by higher average cash, cash equivalents and investment
balances.
For the 2002 Quarter, the Company had a pretax loss of $4.4 million
resulting in a tax benefit of $2.2 million compared to a pretax loss of
$6.0 million and a tax benefit of $2.0 million for the 2001 Quarter. For
the 2002 Period, the Company had a pretax loss of $16.6 million resulting
in a tax benefit of $6.1 million compared to a pretax loss of $3.5 million
and a tax benefit of $1.1 million for the 2001 Period. The effective tax
rates for the 2002 Quarter and 2002 Period were 50.0% and 37.0%,
respectively, compared to 32.5% for each of the 2001 Quarter and 2001
Period. We adjusted our full year effective tax rate to 37.0% in the 2002
Quarter based on our current full year operating projection. In the prior
year an adjustment was made in the fourth quarter. The tax rates differ
from the U.S. statutory rate primarily due to tax credits and undistributed
nontaxable equity income from our joint venture.
Liquidity and Capital Resources
- -------------------------------
Cash used by operating activities for the 2002 Period was $4.2 million
compared with cash provided by operating activities of $7.6 million for the
2001 Period. Excluding the $2.8 million payment required by the non-
recurring litigation settlement, the remaining $1.4 million used by
operations was primarily due to a higher net loss in the 2002 Period.
In the 2002 Period, we spent $4.9 million, principally for the continued
effort associated with the implementation of our global information system,
the U.S. portion of which went live during July 2002. In the 2001 Period,
capital expenditures were $13.6 million, principally for our new Japanese
service center and implementation of our global information system. As a
result of completing the U.S. portion of our global information system, we
expect capital expenditures for the last quarter of 2002 to be
significantly lower than prior quarters in the 2002 Period, and we expect
our depreciation expense in subsequent quarters to remain unchanged from
the current levels, which was $1.8 million in the 2002 Quarter.
On March 19, 2002, we completed a public offering of 3,450,000 shares of
our common stock. We realized proceeds of $65.2 million, net of
underwriting fees and discounts and offering expenses.
Cash dividends paid to stockholders were $6.0 million or $0.08 per common
share during the 2002 Period and $8.1 million during the 2001 Period. In
October 2001, our Board of Directors reduced the quarterly dividend from
$0.12 per share to $0.08 per share, resulting in aggregate quarterly cash
savings of approximately $1.0 million. In October 2002, our Board of
Directors further reduced the quarterly dividend to $0.04 per share due to
the uncertain business environment and lack of visibility in the
semiconductor capital equipment market. This reduction is expected to
provide an additional aggregate quarterly cash savings of approximately
$1.0 million.
Page 12
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations (continued)
---------------------
Liquidity and Capital Resources (continued)
- --------------------------------
We 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 had a three-year revolving credit agreement with Fleet National Bank
entered into in July 2000 that permitted us to borrow up to $25.0 million,
subject to compliance with certain covenants. We had never borrowed
against the agreement and terminated the credit agreement in April 2002.
We believe that our existing funds and anticipated cash flow from operations
will satisfy our working capital and capital expenditure requirements for at
least the next 12 months.
Important Factors That May Affect Future Results
- ------------------------------------------------
This Form 10-Q contains forward-looking statements. These forward-looking
statements appear principally in the section entitled "Management's
Discussion and Analysis of Financial Conditions and Results of Operations."
Forward-looking statements may appear in other sections of this report as
well. Generally, the forward-looking statements in this report use words
like "expect," "anticipate," "plan," "believe," "seek," "estimate," and
similar expressions.
Forward-looking statements are not guarantees of future performance and
involve certain risks, uncertainties, and assumptions that could cause our
future results to differ materially from those expressed in any forward-
looking statements made by or on behalf of us. Many such factors are beyond
our ability to control or predict. Readers are accordingly cautioned not to
place undue reliance on forward-looking statements. We disclaim any intent
or obligation to update publicly any forward-looking statements, whether in
response to new information, future events, or otherwise.
Our business depends in large part upon the capital expenditures of
semiconductor manufacturers, which, in turn, depend on the current and
anticipated market demand for integrated circuits and products utilizing
integrated circuits. The semiconductor industry is highly cyclical and has
historically experienced periodic downturns, which generally have had a
severe effect on the semiconductor industry's demand for capital
equipment and have adversely affected our results of operations. We cannot
assure you that developments in the semiconductor industry or the
semiconductor equipment industry will occur at the rate or in the manner
that we expect.
In addition to the cyclical nature, risks and uncertainties of the
semiconductor industry, the Company faces the following risks and
uncertainties among others: the need to continuously develop, manufacture
and gain customers' acceptance of new products and product enhancements;
dependence on a limited number of customers and concentration of sales to
one or a few customers; the Company's ability to attract and retain certain
key personnel; the ability of the Company to protect its technology assets
by obtaining and enforcing patents; and dependence on sole and limited
source suppliers for certain components and subassemblies included in the
Company's products and systems.
Page 13
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 (continued)
- -------------------------------------------------
As a result of the foregoing and other factors, we may experience material
fluctuations in our future operating results on a quarterly or annual basis,
which could materially affect our business, financial position, results of
operations, and stock price.
Page 14
HELIX TECHNOLOGY CORPORATION
PART I
Item 3. Quantitative and Qualitative Disclosures about Market Risk
- -------------------------------------------------------------------
Foreign Currency Exchange Rate Risk
A portion of our business is conducted outside the United States through our
foreign subsidiaries. Our foreign subsidiaries maintain their accounting
records in their local currencies. Consequently, fluctuations in exchange
rates affect the period-to-period comparability of results. To reduce the
risks associated with foreign currency rate fluctuations, we have entered
into forward exchange contracts on a continuing basis to offset the currency
exposures. The gains and losses on these transactions partially offset the
unrealized and realized foreign exchange gains and losses of the underlying
exposures. The net gains and losses were immaterial for the periods
presented and were included in cost of sales. We plan to continue to use
forward exchange contracts to mitigate the impact of exchange rate
fluctuations. The notional amount of our outstanding foreign currency
contracts at September 27, 2002, was $10.4 million. The potential fair
value loss for a hypothetical 10% adverse change in forward currency
exchange rates at September 27, 2002, would be $1.0 million, which would be
essentially offset by corresponding gains related to the underlying assets.
The potential loss was estimated calculating the fair value of the forward
exchange contracts at September 27, 2002, and comparing that with the value
calculated using the hypothetical forward currency exchange rates.
Credit Risk
We are exposed to concentration of credit risk in cash and cash equivalents,
investments, trade receivables, and short-term foreign exchange forward
contracts. Our cash and cash equivalents placed with our financial
institutions have a high-quality credit rating. Our investments consist of
money market funds, municipal government agencies and tax-free bonds or
investment-grade securities. We enter into short-term foreign currency
exchange contracts with our primary bank.
Item 4. Controls and Procedures
- --------------------------------
Based on the evaluation of the Company's disclosure controls and procedures
as of a date within 90 days of the filing date of this quarterly report,
each of Robert J. Lepofsky, the Chief Executive Officer of the Company, and
Jay Zager, the Chief Financial Officer of the Company, have concluded that
the Company's disclosure controls and procedures are effective in ensuring
that information required to be disclosed by the Company in the reports
that it files or submits under the Securities and Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported, within the time
period specified by the Securities and Exchange Commission's rules and
forms.
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
Page 15
HELIX TECHNOLOGY CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
The proposed settlement of litigation with Raytheon Company disclosed in
our Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, was
concluded with dismissal of the action on September 10, 2002.
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.
Item 6(a). Exhibits
- --------------------
The exhibits listed on the Exhibit Index are filed herewith.
Item 6(b). Reports on Form 8-K
- -------------------------------
The Company did not file any Current Reports on Form 8-K during the quarter
ended September 27, 2002.
Page 16
HELIX TECHNOLOGY CORPORATION
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HELIX TECHNOLOGY CORPORATION
(Registrant)
October 18, 2002 By: /s/ Jay Zager
- ---------------- -----------------------
Date Jay Zager
Senior Vice President
Chief Financial Officer
Page 17
HELIX TECHNOLOGY CORPORATION
CERTIFICATION
- -------------
I, Robert J. Lepofsky, President and Chief Executive Officer of Helix
Technology Corporation, 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.
Date: October 18, 2002 /S/ Robert J. Lepofsky
---------------- ----------------------------
Robert J. Lepofsky
President and Chief Executive Officer
Page 18
HELIX TECHNOLOGY CORPORATION
CERTIFICATION
- -------------
I, Jay Zager, Senior Vice President and Chief Financial Officer of Helix
Technology Corporation, 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.
Date: October 18, 2002 /S/ Jay Zager
---------------- -----------------------
Jay Zager
Senior Vice President
Chief Financial Officer
Page 19
HELIX TECHNOLOGY CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
- ------- -----------------------
10.1 Employment Agreement dated August 1, 2002, between the Company
and Robert E. Anastasi (supercedes all other prior
agreements). *
10.2 Employment Agreement dated August 9, 2002, between the Company
and Jay Zager. *
* Denotes management contract or compensation plan or arrangement required
to be filed as an exhibit pursuant to Item 6(a) of Form 10-Q.