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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
For the Year Ended December 31, 1998 Commission File Number 0-6866
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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 and zip code)
Registrant's telephone number, including area code: (508) 337-5111
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$1 Par Value
(Title of Class)
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 90 days. YES [X] NO [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the registrant's common stock held by
nonaffiliates of the registrant as of February 26, 1999, (computed by reference
to the quoted selling prices of such stock in the over-the-counter market), was
$430,281,855.
The number of shares outstanding of the registrant's Common Stock, $1 Par Value,
as of February 26, 1999, was 22,319,131.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Proxy Statement for the registrant's 1999 Annual Meeting
of Stockholders to be filed with the SEC in March 1999 are incorporated by
reference into Part III, Items 10-12.
HELIX TECHNOLOGY CORPORATION 10-K Annual Report
Commission File No. 0-6866 For the Year Ended
December 31, 1998
PART I
Item 1. Business
General HELIX TECHNOLOGY CORPORATION (the "Company"), a Delaware
corporation organized in 1967, provides critical enabling vacuum system
technology to a broad range of electronic component manufacturers, principally
for the production of semiconductors, disk drives and flat panel displays.
The Company's On-Board technology is a comprehensive package of hardware and
software that can integrate both Helix and non-Helix vacuum products. (On-Board
is a registered trademark of Helix Technology Corporation.) These systems
provide original equipment manufacturers the flexibility to rapidly implement a
full range of process-driven solutions and end-users performance-enhancing
process controls, advanced diagnostics and communications capabilities to
increase system uptime and to lower the cost of ownership.
The Company's On-Board Cryopump product continues to be the industry standard
high-vacuum pump for both the PVD (Physical Vapor Deposition or "sputtering")
and ion implantation markets. Its On-Board Waterpumps, On-Board Turbopumps and
On-Board TurboPlus give the Company products to support the CVD (Chemical Vapor
Deposition) and etch processes.
The Company's STABIL-ION and CONVECTRON vacuum measurement systems are
considered industry standards and are used in the PVD, ion implantation, CVD and
etch processes. (STABIL-ION and CONVECTRON are registered trademarks of Helix
Technology Corporation.) The Company's vacuum gauging products are also
integrated into analytical instruments, primarily mass spectrometers.
The Company maintains Customer Support Centers strategically located throughout
the world to provide replacement parts, overhaul, repair and upgrade services.
The Company's unique GUTS (Guaranteed Up-Time Support) rapid response system,
which has been the industry benchmark since 1985, is designed to assure that
users of the Company's products have direct, twenty-four-hour-a-day access to
the resources of the Customer Support Centers. (GUTS is a registered trademark
of Helix Technology Corporation.)
The Company encounters competition in both domestic and foreign markets for its
products. Competition comes from smaller firms and from larger firms which have
greater total resources than the Company. Customer service, product quality,
performance and price are all factors in selling the Company's products.
The Company's business is, generally, not dependent on the availability of raw
materials or components from any single source. Certain components, however, may
be available from only one or two qualified sources. The Company's policy is to
develop alternative sources for components and, where possible, to avoid using
scarce raw materials in its products.
- 2 -
PART I
Item 1. Business (continued)
The Company holds many U.S. and foreign patents in the fields of vacuum pumping,
gauging and cryogenics that it believes are significant to its operations. These
patents expire at various years through 2016. No patents which the Company
considers significant expire during the next five years. Trademarks are
considered important to the Company's business. These trademarks are protected
by registration in the United States and other countries in which the Company's
products are marketed.
The Company and Ulvac Corporation of Chigasaki, Japan, operate a joint venture,
Ulvac Cryogenics, Inc. ("UCI") formed in 1981, which manufactures and sells
cryogenic vacuum pumps, principally to Ulvac Corporation. Each company owns 50%
of UCI and made initial cash investments of approximately $100,000, with no
subsequent cash investments. The joint venture arrangement includes a license
and technology agreement from the Company and a management and consultation
agreement from Ulvac Corporation. The Company and Ulvac Corporation essentially
share control of the joint venture.
On May 7, 1998, the Company acquired Granville-Phillips Company ("GPC"). GPC is
a world leader in the development and manufacture of instrumentation for vacuum
measurement and control used principally in the semiconductor, flat panel
display and disk drive manufacturing processes.
Backlog - The backlog of orders believed to be firm was approximately $4.8
million at December 31, 1998, compared to $7.0 million at December 31, 1997. The
Company expects to recognize revenues from essentially all of the December 31,
1998, backlog during 1999.
Research and Development - The Company expended $10,106,000 in 1998 on
research and development efforts compared to $11,540,000 and $10,213,000 in 1997
and 1996, respectively. These expenditures reflect development activities
relating to product enhancements and new products for commercial applications.
Employment - Total employment in the Company at the end of 1998 was 457
compared with 606 and 503 at the end of 1997 and 1996, respectively. This
includes temporary employees of eight at the end of 1998 compared to 65 and 27
in 1997 and 1996, respectively.
Environmental Affairs - Compliance with federal, state and local provisions
relating to environmental quality has not had, and is not expected to have, a
material impact upon capital expenditures, earnings or the competitive position
of the Company.
Financial Information about One Operating Segment and Major Customers - The
Company's one operating segment is cryogenic and vacuum equipment. The Company's
largest customer is Applied Materials, the world's largest manufacturer of
semiconductor capital equipment, representing 20%, 30% and 28% of net sales for
1998, 1997 and 1996, respectively. Information concerning the Company's industry
segment information and different geographical areas are included in Note G of
Notes to Consolidated Financial Statements included elsewhere in this report.
- 3 -
PART I
Item 2. Properties
The Company occupies approximately 230,000 square feet worldwide, as described
in the table below.
Size Lease
Location (Sq. Ft.) Expires Functions
-------- --------- ------- ---------
Mansfield, Massachusetts 155,000 2006 Corporate headquarters, engineering,
manufacturing, sales and
marketing and administration
Boulder, Colorado 22,000 Owned Engineering, manufacturing, and
9,000 2001 sales and marketing
Santa Clara, California 11,000 2000 Sales office, customer support and
repair depot
Austin, Texas 12,000 1999 Sales office and customer support
Phoenix, Arizona 1,300 2000 Sales office and customer support
Scotland 5,300 2020 Sales office and customer support
Germany 2,500 2000 Sales office and customer support
France 6,400 2000 Sales office, customer support and
repair depot
Japan 5,160 2000 Sales office and customer support
The Company believes that its existing facilities will be adequate to meet its
currently anticipated requirements and that suitable additional or substitute
facilities will be available as required. The lease on the Mansfield,
Massachusetts, facility provides for renewal options for up to fifteen
additional years.
Item 3. Legal Proceedings
In the normal course of business, the Company is subject to various legal
proceedings and claims. The Company believes that the ultimate outcome of these
matters will not have a material effect on its financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
During the quarter ended December 31, 1998, no matters were submitted to a vote
of security holders through the solicitation of proxies or otherwise.
- 4 -
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters
The Company's common stock is traded on the NASDAQ National Market (NASDAQ
symbol HELX). At December 31, 1998, there were 22,319,131 shares of common stock
outstanding and approximately 854 common stockholders of record.
Price Range of Common Stock and Cash Dividend Per Common Share
The price range and cash dividend per common share of the Company's common stock
by quarter are:
First Second Third Fourth
1998 Quarter Quarter Quarter Quarter
- -----------------------------------------------------------------------------
Stock price
High $25.13 $20.63 $15.50 $14.00
Low $17.75 $14.75 $ 9.25 $ 6.81
Cash dividends per share (1) $ .21 $ .21 $ .21 $ .12
First Second Third Fourth
1997 Quarter Quarter Quarter Quarter
- -----------------------------------------------------------------------------
Stock price
High (2) $18.63 $21.00 $33.38 $31.53
Low (2) $14.13 $15.00 $19.50 $17.50
Cash dividends per share (1)(2) $ .175 $ .175 $ .175 $ .21
(1) Cash dividends per share declared in periods prior to the acquisition of
Granville-Phillips Company are based on shares outstanding at that time and
therefore do not reflect the 2,383,000 shares issued as part of the acquisition.
(2) Market prices and per share data reflect a two-for-one common stock split
effective November 1997.
The Board of Directors declared a quarterly cash dividend of $0.12 per common
share payable on March 11, 1999, to common stockholders of record at the close
of business on February 25, 1999.
- 5 -
PART II
Item 6. Selected Financial Data
The following table summarizes certain selected consolidated financial data,
which should be read in conjunction with "Management's Discussion and Analysis
of Financial Conditions and Results of Operations" and the Company's
consolidated financial statements and related notes included elsewhere herein.
In connection with the acquisition of Granville-Phillips Company in 1998,
accounted for as a pooling of interests, all prior-period financial data has
been restated to include the impact of the combination.
(in thousands except per share data) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------
Net sales ........................ $ 95,345 $157,076 $151,665 $145,370 $103,176
Net income (loss) (1) ............ $ (1,920) $ 25,544 $ 25,126 $ 24,694 $ 11,786
Basic net income (loss)
per share (2) ................. $ (0.09) $ 1.15 $ 1.15 $ 1.14 $ 0.55
Diluted net income (loss)
per share (2) ................. $ (0.09) $ 1.14 $ 1.14 $ 1.12 $ 0.54
Cash dividends per share (1)(2)(3) $ .75 $ 0.735 $ 0.65 $ 0.29 $ 0.145
Total assets ..................... $ 75,652 $ 96,219 $ 83,005 $ 79,509 $ 53,173
Basic shares (2) ................. 22,262 22,151 21,788 21,592 21,260
Diluted shares (2) ............... 22,262 22,353 22,096 22,124 21,812
(1) Net loss for the year ended December 31, 1998, reflects merger and other
special charges of $3,546,000 related to the acquisition of Granville-Phillips
Company and restructuring and other special charges of $2,500,000 related to
work force reductions, exit costs for a leased facility and impairment of
certain assets. (See Note 1 of Notes to Consolidated Financial Statements.)
(2) All share and per share data reflect a two-for-one common stock split
effective November 1997.
(3) Cash dividends per share declared in periods prior to the acquisition are
based on shares outstanding at that time and therefore do not reflect the
2,383,000 shares issued as part of the acquisition.
- 6 -
PART II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
On May 7, 1998, the Company acquired Granville-Phillips Company ("GPC"). GPC is
a world leader in the development and manufacture of instrumentation for vacuum
measurement and control used principally in the semiconductor, flat panel
display and disk drive manufacturing processes. The transaction was accounted
for as a pooling of interests; and accordingly, the financial results of the
Company for all periods presented include the financial position, results of
operations, stockholders' equity, comprehensive income and cash flows of GPC.
Results of Operations - 1998 Compared with 1997
Net sales for 1998 were $95.3 million compared to $157.1 million in 1997, a
decrease of $61.8 million. This decline is attributable to the excess capacity
in the worldwide semiconductor industry, combined with the economic slump in the
Pacific Rim.
Total gross profit as a percentage of net sales was 39.8% for 1998, compared to
48.2% for the prior year. The reduction in gross margin was caused by the
substantial decline in production volume and the related increase in excess
capacity and manufacturing unit costs.
Research and development expenses for 1998 were $10.1 million or 10.6% of net
sales, compared to $11.5 million or 7.3% of net sales for 1997. As industry
conditions worsened during the year, the Company delayed certain expenditures on
projects it believed were not critical during the downturn. Despite the decline
in the semiconductor capital equipment business environment and the continued
weakness of the Asian markets, the Company continues to fund its long-term
strategic development programs. These actions are expected to position the
Company for growth as the economics improve in the worldwide semiconductor
industry.
Selling, general and administrative expenses decreased in 1998 to $26.6 million
from $30.9 million in the prior year. This reduction in spending is primarily
attributable to a decrease in variable compensation, lower sales commission
expense and a reduction in advertising and promotional expenditures, which was
partially offset by expenses associated with the opening of the Company's sales
office in Japan.
During 1998, the Company incurred certain special charges. In the second
quarter, the Company acquired GPC in a transaction accounted for as a pooling of
interests. Direct acquisition costs, including professional fees and
compensation expense for various incentive plans for certain GPC employees,
amounted to $3.5 million and were charged against results of operations. During
the third quarter, the Company restructured its domestic operations to eliminate
non-strategic spending, while redirecting resources to the Company's global
customer support structure and other strategic initiatives and took a charge of
$2.5 million. The restructuring included provisions for termination benefits of
$1.3 million paid to approximately 80 personnel, $1.0 million relating to the
closing of a leased facility and $0.2 million for the impairment of certain
assets. Approximately $0.7 million of the charge was non-cash, relating to the
write-off of certain leasehold improvements in the closed facility and the
impairment of the assets. The Company expects that these changes will provide
approximately $5.0 million of
- 7 -
PART II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of Operations - 1998 Compared with 1997 (continued)
annual cost savings in 1999. At December 31, 1998, $0.9 million of restructuring
and special charges remained in other accrued expenses, which the Company
expects to be paid or amortized by the end of the third quarter of 1999.
As a result of the decline in net sales and the special charges recorded during
1998, the Company experienced an operating loss of $4.8 million or 5.0% of net
sales, compared to an operating profit of $33.3 million or 21.2% of net sales
for the prior year.
Royalty and equity income from the Company's joint venture in Japan decreased by
$0.8 million in 1998 due to the downturn in the Japanese semiconductor capital
equipment market.
Interest and other income for 1998 was $1.2 million compared with $1.8 million
for 1997, reflecting lower cash, cash equivalent and investment balances during
the year.
The Company recorded an income tax benefit of $0.7 million for 1998 compared to
a tax provision of $11.3 million for the previous year. In 1998, the Company had
an operating loss before taxes due to merger, restructuring and special charges.
The Company benefited from research and development and other tax credits. The
1997 provision of 30.6% is less than the federal statutory rate of 35% because
Granville-Phillips Company was an S-Corporation prior to the acquisition and,
therefore, not subject to federal income tax.
Liquidity and Capital Resources
Net cash provided by operating activities was $7.4 million in 1998. The Company
invested $2.6 million, primarily in machinery and equipment, during 1998. As of
December 31, 1998, there are no anticipated material future capital
expenditures. Cash dividends paid to stockholders during 1998 were $16.1 million
compared to $16.3 million for 1997. In October 1998, the Company's Board of
Directors decided to reduce the quarterly dividend from $.21 per common share to
$.12 per common share due to the uncertain business environment in the
semiconductor capital equipment market.
At December 31, 1998, the Company had informal bank money market lines of credit
of $12.0 million. There have been no borrowings under these agreements since
1993. Since the agreements are informal and unused, terms would be negotiated as
necessary. The Company does not anticipate utilizing these lines of credit in
the near term.
The Company manages its 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.
- 8 -
PART II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Liquidity and Capital Resources (continued)
The Company believes that existing cash, cash equivalents and investment
balances, anticipated cash flow from operations and funds available under
existing credit lines will be adequate to fund operations and that it has
further financing options should additional funds be required.
Results of Operations - 1997 Compared with 1996
Net sales for 1997 were $157.1 million compared to $151.7 million in 1996, an
increase of $5.4 million. The growth in sales resulted primarily from record
sales of the Company's cryogenic vacuum products and instruments for vacuum
measurement and control, used principally by semiconductor manufacturers
worldwide. Net sales showed sequential quarterly improvement during the first
three quarters of 1997 as the global market for semiconductor capital equipment
strengthened. Net sales decreased in the fourth quarter due to the downturn in
the worldwide semiconductor industry.
Total gross profit as a percentage of net sales was 48.2% in 1997 compared with
48.0% in 1996. The increase in gross profit was attributable to the efficiencies
derived from the Company's high production volumes and ongoing cost-reduction
initiatives.
Research and development expenses increased to $11.5 million or 7.3% of net
sales for 1997 compared to $10.2 million or 6.7% of net sales for 1996. This
increase reflects continued funding by the Company of long-term strategic
development programs in response to the increasing demand from the semiconductor
industry for new products and product enhancements.
Selling, general and administrative expenses increased to $30.9 million or 19.7%
of net sales for 1997 compared to $27.8 million or 18.3% of net sales for the
prior year. This increase is primarily due to increases in salaries and variable
compensation expense, and to increased sales and marketing efforts worldwide.
Royalty and equity income from the Company's joint venture in Japan improved
$0.3 million over 1996.
Interest and other income for 1997 was $1.8 million compared with $1.5 million
for 1996, reflecting higher cash and cash equivalent balances during the year.
The Company's provision for income taxes was $11.3 million and $12.6 million in
1997 and 1996, respectively. The difference between the statutory federal tax
rate of 35% and the Company's effective tax rate of 30.6% and 33.4% for 1997 and
1996, respectively, is principally due to the impact of Granville-Phillips
Company's status as an S-Corporation, which is not subject to federal income
taxes. Also in 1997, the Company generated a greater benefit from tax credits
for research and development expenditures.
- 9 -
PART II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments
and Hedging Activities." The adoption of SFAS 133 in 2000 is not expected to
have a material impact on the Company's financial statements.
Certain Factors That May Affect Future Results
From time to time, information provided by the Company, statements made by its
employees or information included in its filings with the Securities and
Exchange Commission may contain statements that are not historical facts but
that are "forward-looking statements" involving risks and uncertainties. In
particular, statements in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" relating to the Company's shipment levels,
profitability, sufficiency of capital to meet working capital and capital
expenditure requirements may be forward-looking statements. The words "expect,"
"anticipate," "internal," "plan," "believe," "seek," "estimate" and similar
expressions are intended to identify such forward-looking statements. Such
statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that could cause the Company's future results to
differ materially from those expressed in any forward-looking statements made by
or on behalf of the Company. Many such factors are beyond the Company's ability
to control or predict. Readers are accordingly cautioned not to place undue
reliance on forward-looking statements. The Company disclaims any intent or
obligation to update publicly any forward-looking statements, whether in
response to new information or future events or otherwise. Important factors
that may cause the Company's actual results to differ from such forward-looking
statements include, but are not limited to, the factors discussed below.
The Company's business depends in large part upon the capital expenditures of
semiconductor manufacturers, which, in turn, depend on the current and
anticipated market demand for integrated circuits and products utilizing
integrated circuits. The semiconductor industry is highly cyclical and has
historically experienced periodic downturns, which generally have had a severe
effect on the semiconductor industry's demand for capital equipment and have
affected the Company's results of operations. There can be no assurance that
developments in the semiconductor industry or the semiconductor equipment
industry will occur at the rate or in the manner expected by the Company.
In addition to the cyclical nature, risks and uncertainties of the semiconductor
industry, the Company faces the following risks and uncertainties: the need to
continuously develop, manufacture and gain customers' acceptance of new products
and product enhancements; dependence on a limited number of customers (the
Company's ten largest customers accounted for approximately 39% of net sales,
and its largest customer, Applied Materials, Inc, accounted for approximately
20% of net sales in 1998); its ability to attract and retain certain key
personnel; the ability of the Company to protect its technology assets by
obtaining and enforcing patents; dependence on sole and limited source suppliers
for certain components and subassemblies included in the Company's products and
systems. As a result of the
- 10 -
PART II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Certain Factors That May Effect Future Results (continued)
foregoing and other factors, the Company may experience material fluctuations in
its future operating results on a quarterly or annual basis which could
materially affect its business, financial position, results of operations and
stock price.
Year 2000
The Year 2000 problem refers to the potential for information systems to be
unable to correctly recognize and process calendar dates and date-sensitive
information involving dates on or after January 1, 2000. The Company is
addressing its Year 2000 risk within four categories: 1) internal business
software, 2) internal systems (hardware and software, exclusive of business
software), 3) external suppliers of goods and services, and 4) the Company's
products.
INTERNAL BUSINESS SOFTWARE. The Company's internal business systems that
collectively provide the major processing functions for its operations are not
Year 2000 compliant. The remediation/replacement of those systems was begun in
mid-1998 and is scheduled for completion by March 1999.
INTERNAL SYSTEMS. The Company utilizes other systems (exclusive of business
systems discussed above) to perform certain data processing, including
computer-based programs, networking equipment, laboratory equipment, building
security and atmosphere control systems, fax and copy machines, and others.
Starting in the first quarter of 1998, the Company initiated a comprehensive
program to address Year 2000 problems with such internal systems, consisting of:
forming a project team of representatives from across the Company; inventorying
and assessing each internal system to determine whether it was compliant or
non-compliant to Year 2000 problems; and developing a plan to address all
non-compliant systems.
The Company is on schedule with its remediation efforts and expects to be
completed by June 1999. Testing of each remediated initial system is performed
at the time of such remediation. Additional testing will be performed during the
second half of 1999, focusing on those systems classified as high risk of
failure as well as critical to the business. Independent organizations might be
employed to assist the Company as needed to test and verify such internal
systems are Year 2000 compliant.
EXTERNAL SUPPLIERS OF GOODS AND SERVICES. Starting in January 1998, the Company
undertook a program to understand and mitigate Year 2000 problems with those
external suppliers who are crucial to the Company's operations, including parts
providers, carriers, telecommunications providers, utilities, financial
institutions and others. A series of questionnaires was sent to external
suppliers. As a result, the Company has determined that the majority of the
Company's suppliers are either Year 2000 compliant or are aware of the problem
and have an active program underway to address their particular problems. For
each supplier who is not Year 2000 compliant, the Company has defined a
contingency plan in case the supplier cannot or will not resolve its Year 2000
problems in a timely
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PART II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Year 2000 (continued)
manner. The plan elements differ for each supplier but generally consist of one
or more actions such as: work with the supplier to help resolve their Year 2000
problems; develop alternative suppliers for sole-source components; redesign
products to negate the need for non-compliant suppliers; maintain back-up
inventories of critical components to protect against temporary disruptions in
supply; evaluate alternative component and product delivery mechanisms; and
monitor those suppliers who have active Year 2000 programs underway to verify
progress against those suppliers' scheduled milestones.
The Company will continue these monitoring activities until satisfied that all
crucial suppliers are Year 2000 compliant. In addition, the Company has enhanced
its new supplier qualification process to require new suppliers to be Year 2000
compliant in all aspects of their operations and products.
THE COMPANY'S PRODUCTS. Certain of the Company's products contain embedded
software. In 1997, the Company performed an assessment of all such software to
determine Year 2000 compliance. As a result, the Company believes that there are
no material issues regarding the use of its products. The Company also has
enhanced its product development and testing processes to ensure that all new
products are Year 2000 compliant.
The Company estimates that the total cost associated with addressing the Year
2000 problem is approximately $0.9 million, of which approximately $0.7 million
has been incurred to date. Of the total cost, approximately $0.7 million relates
to new systems and has been capitalized, and the remainder has or will be
expensed as incurred. These cost estimates are approximate and subject to change
due to unforeseen internal or external conditions.
While the Company believes that it is addressing all material Year 2000
problems, there are a number of risks associated with Year 2000, only some of
which are within the control of the Company. These risks include unforeseen
difficulties in completing certain Year 2000 programs, an incomplete inventory
of internal systems, and the failure of one or more suppliers to adequately
address the Year 2000 problem. The Company's Year 2000 efforts are meant to help
manage and mitigate these risks.
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PART II
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
A portion of the Company's business is conducted outside of the United States
through its foreign subsidiaries. The foreign subsidiaries maintain their
accounting records in their local currencies. Consequently, period-to-period
comparability of results of operations is affected by fluctuations in exchange
rates. To reduce the risks associated with foreign currency rate fluctuations,
the Company has entered into forward exchange contracts on a continuing basis to
hedge the currency exposures. Gains and losses on forward exchange contracts
qualifying for hedge accounting were immaterial for years presented and are
classified in cost of sales. The Company plans to continue to use forward
exchange contracts to mitigate the impact of exchange rate fluctuations. The
potential fair value loss for a hypothetical 10% adverse change in forward
currency exchange rates at December 31, 1998, would be $240,000. The potential
loss was estimated calculating the fair value of the forward exchange
contracts at December 31, 1998, and comparing that with the value calculated
using the hypothetical forward currency exchange rates.
- 13 -
PART II
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
SCHEDULES COVERED BY THE REPORT OF
INDEPENDENT ACCOUNTANTS
Page(s)
Report of Independent Accountants..........................................23
Consolidated Financial Statements of Helix Technology Corporation
Consolidated Balance Sheets as of December 31, 1998 and 1997..........24
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996...................................25
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1998, 1997 and 1996...............26
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1998, 1997 and 1996.............................27
Consolidated Statements of Comprehensive Income (Loss) for the
Years Ended December 31, 1998 and 1997 28
Notes to Consolidated Financial Statements.... .......................29-42
Report of Independent Accountants..........................................43
Quarterly Results (Unaudited)..............................................44
Financial Statement Schedule for the Years Ended December 31, 1998, 1997
and 1996
II. Valuation and Qualifying Accounts...............................45
Schedules other than those listed above have been omitted since they are either
inapplicable or not required.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The Company did not change accountants or file a Form 8-K reporting a
disagreement on an accounting principle, practice or financial statement
disclosure during the two-year period ended December 31, 1998.
- 14 -
PART III
Item 10. Directors and Executive Officers of The Registrant
Officers are elected annually by the Board and serve at the discretion of the
Board. Set forth below is information regarding the current Executive Officers
of the Company who are not Directors of the Company.
Mr. Robert E. Anastasi is 52 and has served the Company as Senior Vice President
since July 1997 and Vice President since June 1991.
Mr. Michael El-Hillow is 47 and has served the Company as Senior Vice President
and Chief Financial Officer since July 1997 and Vice President and Chief
Financial Officer since April 1997. He was Vice President and Chief Financial
Officer of A.T. Cross Company from January 1991 until April 1997.
Mr. Christopher Moody is 43 and has served the Company as Senior Vice President
since August 1997. He was Vice President of Japan Sales at KLA-Tencor
Corporation from April 1996 until August 1997 and Director of Sales for KLA
Instruments Wafer Inspection Division from January 1995 until April 1996. He
served as National Sales Manager at Eaton Corporation, Semiconductor Equipment
Division, from 1993 until January 1995.
Mr. Richard J. Paynting is 51 and has served the Company as Senior Vice
President since July 1997 and Vice President since August 1996. He was Director
of New Products at Bose Corporation from May 1991 until August 1996.
Additional information required by this item is incorporated herein by reference
to the registrant's proxy statement for its 1999 Annual Meeting of Stockholders
which will be filed with the SEC in March 1999, pursuant to Regulation 14A.
Item 11. Executive Compensation
Information required by this item is incorporated herein by reference to the
registrant's proxy statement for its 1999 Annual Meeting of Stockholders which
will be filed with the SEC in March 1999, pursuant to Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required by this item is incorporated herein by reference to the
registrant's proxy statement for its 1999 Annual Meeting of Stockholders which
will be filed with the SEC in March 1999, pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions
There were no related-party transactions.
- 15 -
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Page Number(s)
or
Incorporation
by
Description Reference to
- ----------- --------------
(a) Financial Statements, Schedules & Exhibits:
(1), (2) The Consolidated Financial Statements and required 14
schedules are indexed under Item 8.
(3) Exhibits required by Item 601 of SEC Regulation S-K.
(Exhibit numbers refer to exhibit number on Table I.)
2.1 Agreement and Plan of Merger dated as of Exhibit 2.1 to
April 16, 1998 among Helix Technology Corporation, the Company's
Helix Acquisition Corporation, Granville-Phillips Form 8-K filed
Company and certain principal stockholders of May 15, 1998.
Granville-Phillips Company.
2.2 Registration Rights Agreement dated May 7, 1998. Exhibit 2.2 to
the Company's
Form 8-K filed
May 15, 1998.
2.3 Escrow Agreement dated May 7, 1998. Exhibit 2.3 to
the Company's
Form 8-K filed
May 15, 1998.
3. Articles of Incorporation Exhibit 3 to
Restated articles of incorporation as amended the Company's
on May 7, 1987, and May 18, 1988. Form 10-Q for
the Quarter
Ended
September 30,
1988.
By-laws Exhibit (3)-3
As amended on December 10, 1986, and to the
December 9, 1987. Company's Form
10-K for the
Year Ended
December 31,
1987.
4A. Description of Common Stock Exhibit 3 to
the Company's
Form 10-Q for
the Quarter
Ended
September 30,
1988.
- 16 -
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
Page Number(s)
or
Incorporation
by
Description Reference to
- ----------- --------------
4B. Description of Preferred Stock Exhibit 3 to
the Company's
Form 10-Q for
the Quarter
Ended
September 30,
1988.
10. Material Contracts:
(1) Basic agreement between the Company and Exhibit 10.13
Ulvac Corporation dated August 17, 1981. to a
Registration
Statement on
Form S-2,
Registration
No. 2-84880.
(2) Lease agreement dated July 24, 1984, Exhibit
between WRC Properties, Inc. as Lessor 10-(14) to
and the Company as Lessee. the Company's
Form 10-K for
the Year Ended
December 31,
1984.
(3) Lease agreement dated May 23, 1991, between Exhibit
Mansfield Corporate Center Limited 10-(14) to the
Partnership as Lessor and the Company Company's Form
as Lessee. 10-K for the
Year Ended
December 31,
1991.
(4) Lease agreement dated May 21, 1996 between
LakeCenter Plaza, Ltd., LLLP as Lessor and
the Company as Lessee.
(5) Lease agreement dated August 7, 1998 between
Mitsubishi Jisho Co., Ltd. as Lessor and the
Company as Lessee.
- 17 -
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
Page Number(s)
or
Incorporation
by
Description Reference to
- ----------- -----------------
Compensation Plans, Contracts and Arrangements:
(6) The Company's 1996 Equity Incentive Plan. Exhibit A to
the Company's
Proxy
Statement for
its 1996
Annual Meeting
of
Stockholders
held on
April 24,
1996.
(7) The Company's 1996 Stock Option Plan for Exhibit B to the
Non-Employee Directors. Company's Proxy
Statement for its
1996 Annual
Meeting of
Stockholders held
on April 24,
1996.
(8) The Company's informal incentive bonus plan. Exhibit 10.9 to a
Registration
Statement on Form
S-2, Registration
No. 2-84880.
(9) Employment agreement dated December 13, 1989, Exhibit 9-(14) to
as amended and restated on February 13, 1992, the Company's
and re-executed on May 28, 1992, between the Form 10-K for the
Company and Robert J. Lepofsky. Year Ended
December 31,
1992.
(10) The Company's Section 125 Plan. Exhibit 18 to
Form 8, Amendment
No. 1 to the
1985 Annual
Report on Form
10-K.
(11) The Company's Amended and Restated Exhibit 10-(12)
Employees' Pension Plan dated December 15, to the Company's
1994. Form 10-K for the
Year Ended
December 31,
1994.
- 18 -
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
Page Number(s) or
Incorporation by
Description Reference to
- ----------- ------------------
(12) The Company's Amended and Restated Exhibit 10-(13) to
Employee Personal Account Plan dated the Company's Form
December 15, 1994. 10-K for the Year
Ended December 31,
1994.
(13) The Company's Supplemental Key Executive Exhibit 14-(14) to
Retirement Plan effective February 13, 1992. the Company's Form
10-K for the Year
Ended December 31,
1992.
(14) Employment Agreement dated July 18, 1997, Exhibit 10-(13) to
between the Company and Robert E. Anastasi. the Company's Form
10-K for the Year
Ended December 31,
1997.
(15) Employment Agreement dated July 18, 1997, Exhibit 10-(14) to
between the Company and Michael El-Hillow. the Company's Form
10-K for the Year
Ended December 31,
1997.
(16) Employment Agreement dated August 18, 1997, Exhibit 10-(15) to
between the Company and Christopher Moody. the Company's Form
10-K for the Year
Ended December 31,
1997.
(17) Employment Agreement dated July 18, 1997, Exhibit 10-(16) to
between the Company and Richard J. Paynting. the Company's Form
10-K for the Year
Ended December 31,
1997.
(18) The Company's Amended and Restated
Employee Savings Plan dated April 1, 1998.
- 19 -
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
21. Subsidiaries of the Registrant
23. Consent of Independent Accountants
27.1 Financial Data Schedule (EDGAR version only)
27.2 Financial Data Schedule (EDGAR version only)
(b) The Company did not file any reports on Form 8-K during the quarter ended
December 31, 1998.
(c) Exhibits required by Item 601 of Regulation S-K are indexed under (a)(3)
above.
(d) Separate financial statements of: (1) subsidiaries not consolidated and
fifty percent or less owned persons; (2) affiliates whose securities are pledged
as collateral; and (3) other Schedules are not filed because they are either not
applicable or the items do not exceed the various disclosure levels.
- 20 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, this
19th day of March, 1999.
HELIX TECHNOLOGY CORPORATION
(Registrant)
/s/Robert J. Lepofsky
----------------------------------------
Robert J. Lepofsky
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant on this 19th day of March, 1999, in the capacities
indicated.
Signatures Titles
(i) Principal Executive Officer
/s/Robert J. Lepofsky
---------------------
Robert J. Lepofsky President and Chief Executive Officer
(ii) Principal Financial and
Accounting Officer
/s/Michael El-Hillow
--------------------
Michael El-Hillow Senior Vice President and Chief
Financial Officer
- 21 -
(iii) A Majority of the Board of Directors
/s/ Arthur R. Buckland Director
-------------------------
Arthur R. Buckland
/s/ Matthew O. Diggs, Jr. Director
-------------------------
Matthew O. Diggs, Jr.
/s/ Frank Gabron Director
-------------------------
Frank Gabron
/s/ Robert H. Hayes Director
-------------------------
Robert H. Hayes
/s/ Robert J. Lepofsky Director
-------------------------
Robert J. Lepofsky
/s/ Marvin G. Schorr Director and Chairman of the Board
-------------------------
Marvin G. Schorr
/s/ Wickham Skinner Director
-------------------------
Wickham Skinner
/s/ Mark S. Wrighton Director
-------------------------
Mark S. Wrighton
- 22 -
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Stockholders
of Helix Technology Corporation:
In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of operations, stockholders' equity, comprehensive
income and cash flows present fairly, in all material respects, the financial
position of Helix Technology Corporation at December 31, 1997 and 1998 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles. 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 generally accepted auditing standards which
require that we plan and perform the audits 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 the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 29, 1999
- 23 -
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31,
(in thousands except share data) Notes 1998 1997
- ---------------------------------------------------------------------------------------------
ASSETS
Current:
Cash and cash equivalents A $ 8,843 $34,717
Investments A 18,152 3,675
Receivables - net of allowances of $228 in
1998 and $240 in 1997 9,783 18,185
Inventories A 14,811 15,371
Deferred income taxes A&D 5,157 4,234
Other current assets 1,106 1,119
- ---------------------------------------------------------------------------------------------
Total Current Assets 57,852 77,301
- ---------------------------------------------------------------------------------------------
Property, plant and equipment at cost A 36,691 34,252
Less: accumulated depreciation (25,990) (22,109)
- ---------------------------------------------------------------------------------------------
Net property, plant and equipment 10,701 12,143
Other assets A&F 7,099 6,775
- ---------------------------------------------------------------------------------------------
TOTAL ASSETS $75,652 $96,219
=============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable $ 3,752 $ 5,036
Payroll and compensation 2,884 4,298
Retirement costs H 3,588 3,501
Income taxes A&D 507 3,022
Other accrued liabilities I 1,553 667
- ---------------------------------------------------------------------------------------------
Total Current Liabilities 12,284 16,524
- ---------------------------------------------------------------------------------------------
Commitments C - -
Stockholders' Equity:
Preferred stock, $1 par value; authorized
2,000,000 shares; issued and outstanding: none - -
Common stock, $1 par value; authorized 60,000,000
shares; issued and outstanding: 22,319,131 in 1998
and 22,213,131 in 1997 E 22,319 22,213
Capital in excess of par value 7,936 3,684
Deferred compensation I - (953)
Treasury stock, $1 par value 34,000 shares (438) -
Accumulated other comprehensive income (loss) (359) 71
Retained earnings 33,910 54,680
- ---------------------------------------------------------------------------------------------
Total Stockholders' Equity 63,368 79,695
- ---------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $75,652 $96,219
=============================================================================================
The accompanying notes are an integral part of these financial statements.
- 24 -
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31,
(in thousands except per share data) Notes 1998 1997 1996
- -----------------------------------------------------------------------------------------------
Net sales $ 95,345 $157,076 $151,665
- -----------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales 57,373 81,325 78,892
Research and development A 10,106 11,540 10,213
Selling, general and administrative E 26,581 30,891 27,773
Merger, restructuring and special charges I 6,046 - -
- -----------------------------------------------------------------------------------------------
100,106 123,756 116,878
- -----------------------------------------------------------------------------------------------
Operating income (loss) (4,761) 33,320 34,787
Joint venture income F 957 1,744 1,480
Interest and other income 1,234 1,754 1,457
- -----------------------------------------------------------------------------------------------
Income (loss) before taxes (2,570) 36,818 37,724
Income tax benefit (provision) A&D 650 (11,274) (12,598)
- -----------------------------------------------------------------------------------------------
Net income (loss) $ (1,920) $ 25,544 $ 25,126
===============================================================================================
Net income (loss) per share:
Basic A&E $ (0.09) $ 1.15 $ 1.15
Diluted A&E $ (0.09) $ 1.14 $ 1.14
===============================================================================================
Number of shares used in per share calculations:
Basic A&E 22,262 22,151 21,788
Diluted A&E 22,262 22,353 22,096
===============================================================================================
Pro Forma Results (unaudited)
Income (loss) before taxes $ (2,570) $ 36,818 $ 37,724
Income tax benefit (provision) 824 (12,767) (13,675)
- -----------------------------------------------------------------------------------------------
Pro forma net income (loss) $ (1,746) $ 24,051 $ 24,049
===============================================================================================
Pro forma net income (loss) per share:
Basic $ (0.08) $ 1.09 $ 1.10
Diluted $ (0.08) $ 1.08 $ 1.09
===============================================================================================
The accompanying notes are an integral part of these financial statements.
- 25 -
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Accumulated
------------------- Other
Capital in Comprehensive
Par Excess Deferred Treasury Income/ Retained
(in thousands) Value of Par Compensation Stock (Loss) Earnings Total
- --------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 ...... $ 21,765 $ 1,937 $ (508) $ -- $ 1,307 $ 35,787 $ 60,288
Shares issued for stock options . 419 1,417 -- -- -- -- 1,836
Income tax benefit from
exercise of stock options ..... -- 1,739 -- -- -- -- 1,739
Restricted stock (Note I) ....... 99 749 (377) -- -- -- 471
Shares tendered for exercise
of stock options .............. (168) (2,843) -- -- -- -- (3,011)
Retirement of treasury stock .... (80) (895) -- -- -- -- (975)
Other comprehensive loss ........ -- -- -- -- (474) -- (474)
Net income ...................... -- -- -- -- -- 25,126 25,126
Cash dividends .................. -- -- -- -- -- (15,517) (15,517)
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 ...... 22,035 2,104 (885) -- 833 45,396 69,483
- ---------------------------------------------------------------------------------------------------------------------
Shares issued for stock options . 157 1,625 -- -- -- -- 1,782
Income tax benefit from
exercise of stock options ..... -- 448 -- -- -- -- 448
Restricted stock (Note I) ....... 73 494 (68) -- -- -- 499
Shares tendered for exercise
of stock options .............. (52) (987) -- -- -- -- (1,039)
Other comprehensive loss ........ -- -- -- -- (762) -- (762)
Net income ...................... -- -- -- -- -- 25,544 25,544
Cash dividends .................. -- -- -- -- -- (16,260) (16,260)
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 ...... 22,213 3,684 (953) -- 71 54,680 79,695
- ---------------------------------------------------------------------------------------------------------------------
Shares issued for stock options . 106 1,785 -- -- -- -- 1,891
Income tax effect from exercise
of stock options .............. -- (224) -- -- -- -- (224)
Restricted stock and
acquisition adjustment (Note I) -- 2,691 953 -- -- (2,783) 861
Shares tendered for exercise of
stock options ................. -- -- -- (438) -- -- (438)
Other comprehensive loss ........ -- -- -- -- (430) -- (430)
Net loss ........................ -- -- -- -- -- (1,920) (1,920)
Cash dividends .................. -- -- -- -- -- (16,067) (16,067)
- ---------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 ...... $ 22,319 $ 7,936 $ -- $ (438) $ (359) $ 33,910 $ 63,368
=====================================================================================================================
The accompanying notes are an integral part of these financial statements.
- 26 -
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
(in thousands) 1998 1997 1996
- -------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) ......................................... $ (1,920) $ 25,544 $ 25,126
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization .......................... 3,999 3,713 3,632
Deferred income taxes .................................. (923) (820) (763)
Restructuring charge ................................... 667 -- --
Undistributed earnings of joint venture, other ......... (769) (1,561) (984)
Amortization of deferred compensation .................. 861 499 471
Performance-based stock compensation ................... 959 1,300 750
Net change in other operating assets and liabilities (1) 4,535 (1,216) 2,325
- -------------------------------------------------------------------------------------------------
Net cash provided by operating activities ................. 7,409 27,459 30,557
- -------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures ...................................... (2,557) (5,248) (3,819)
Purchase of investments ................................... (53,047) (4,444) (4,277)
Sale of investments ....................................... 38,585 3,470 3,704
- -------------------------------------------------------------------------------------------------
Net cash used by investing activities ..................... (17,019) (6,222) (4,392)
- -------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Shares tendered for exercise of stock options ............. (438) (1,039) (3,011)
Net cash provided by employee stock plans ................. 241 543 1,061
Purchase of treasury stock ................................ -- -- (975)
Cash dividends paid ....................................... (16,067) (16,260) (15,517)
- -------------------------------------------------------------------------------------------------
Net cash used by financing activities ..................... (16,264) (16,756) (18,442)
- -------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents ............ (25,874) 4,481 7,723
Cash and cash equivalents, January 1 ........................ 34,717 30,236 22,513
- -------------------------------------------------------------------------------------------------
Cash and cash equivalents, December 31 ...................... $ 8,843 $ 34,717 $ 30,236
=================================================================================================
(1) Change in other operating assets and liabilities:
(Increase)/decrease in accounts receivable ............ $ 8,402 $ (4,871) $ 7,114
(Increase)/decrease in inventories .................... 560 484 (948)
(Increase)/decrease in other current assets ........... 12 (218) (293)
Increase/(decrease) in accounts payable ............... (1,284) 67 (1,950)
Increase/(decrease) in other accrued expenses ......... (3,155) 3,322 (1,598)
- -------------------------------------------------------------------------------------------------
Net change in other operating assets and liabilities ... $ 4,535 $ (1,216) $ 2,325
=================================================================================================
Income taxes paid ........................................... $ 3,528 $ 10,131 $ 15,482
=================================================================================================
Supplemental disclosure of non-cash activity in 1998, 1997 and 1996, $1,650,000, $1,240,000
and $775,000, respectively, was reclassed from accrued executive compensation to equity in
connection with issuance of stock options.
The accompanying notes are an integral part of these financial statements.
- 27 -
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the years ended December 31,
(in thousands) 1998 1997
- --------------------------------------------------------------------------------------
Net income (loss) ....................................... $ (1,920) $ 25,544
- --------------------------------------------------------------------------------------
Other comprehensive loss, before tax
Foreign currency translation adjustment .............. (662) (1,047)
Unrealized gain on available-for-sale investment ..... 15 --
- --------------------------------------------------------------------------------------
(647) (1,047)
Income tax related to items of other comprehensive income 217 285
- --------------------------------------------------------------------------------------
Other comprehensive loss, net of tax .................... (430) (762)
- --------------------------------------------------------------------------------------
Comprehensive income (loss) ............................. $ (2,350) $ 24,782
======================================================================================
The accompanying notes are an integral part of these financial statements.
- 28 -
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Certain reclassifications have been made to prior years' consolidated
financial statements to conform with the current presentation.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries after elimination of all intercompany
transactions. The investment in and operating results of the Company's 50%-owned
joint venture are included on the basis of the equity method of accounting.
Business Combination
In May 1998, the Company acquired Granville-Phillips Company ("GPC"). The
acquisition was accounted for as a pooling of interests under Accounting
Principles Board Opinion No. 16 "Business Combinations". All prior period
consolidated financial statements have been restated to include the financial
position, results of operations, stockholders equity and cash flows of GPC.
Foreign Currency Translation
Assets and liabilities of operations outside the United States are
translated into U.S. dollars using current exchange rates. Income and expense
accounts are translated at the average rates in effect during the year. The
effects of foreign currency translation adjustments are included in
comprehensive income as a component of stockholders' equity. The cumulative
translation adjustment for the Company's 50%-owned joint venture is reported net
of income taxes. Transaction gains/losses were not material. The effect of
foreign currency exchange rates on cash and cash equivalents was not material.
Comprehensive Income
In January 1998, the Company adopted Financial Accounting Standard No. 130
"Reporting Comprehensive Income," which requires unrealized gains or losses on
the Company's investments and foreign currency translation adjustments to be
included in other comprehensive income.
- 29 -
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies (continued)
Cash and Cash Equivalents
Cash and cash equivalents include demand deposits, money market accounts
and other highly liquid investments with original maturities of three months or
less.
Investments
The Company's investments are classified as available-for-sale securities,
and the difference in the cost and fair value of these investments is included
in comprehensive income. The Company's investments consist of the following:
December 31,
1998 1997
------------------- ------------------
(in thousands) Cost Fair Value Cost Fair Value
- -------------------------------------------------------------------------------
Money market funds $ 2,336 $ 2,336 - -
Municipal and tax-free bonds 15,516 15,531 - -
Treasury bills 285 285 $3,675 $3,675
-----------------------------------------------------------------------------
$18,137 $18,152 $3,675 $3,675
=============================================================================
Financial Instruments
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents,
short-term investments and trade accounts receivable. The Company invests in
investment-grade securities. The Company's customers are concentrated in one
industry segment, the semiconductor manufacturing industry, and, historically, a
significant portion of the Company's sales have been to a limited number of
customers within this industry. The Company performs ongoing credit evaluations
of its customers' financial condition and may require deposits on large orders
but does not require collateral or other security to support customer
receivables.
- 30 -
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies (continued)
Inventories
December 31,
(in thousands) 1998 1997
--------------------------------------------------------------------
Finished goods $ 3,067 $ 4,355
Work in process 7,597 7,367
Materials and parts 4,147 3,649
--------------------------------------------------------------------
$14,811 $15,371
====================================================================
Inventories are stated at the lower of cost or market on a first-in,
first-out basis.
Property, Plant and Equipment
December 31,
(in thousands) 1998 1997
--------------------------------------------------------------------
Land $ 20 $ 20
Leasehold improvements 5,454 4,710
Machinery and equipment 31,217 29,522
--------------------------------------------------------------------
$36,691 $34,252
====================================================================
Depreciation is provided on the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are amortized over the lesser
of their useful life or the remaining life of the lease. Estimated useful lives
of machinery and equipment range from 3 to 15 years.
Maintenance and repairs are charged to expense as incurred, and betterments
are capitalized. The cost of assets sold or retired and related depreciation are
removed from the accounts at the time of sale and any resulting gain or loss is
reflected in income.
Revenue Recognition
The Company records revenue on its products when units are shipped and when
services are performed.
Research and Development
Research and development costs are expensed as incurred.
- 31 -
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies (continued)
Income Taxes
Deferred income taxes result from temporary differences in the recognition
of revenues and expenses between financial statements and tax returns. Tax
credits are recognized when realized for tax purposes using the "flow-through"
method of accounting. The Company has not provided for federal income taxes
applicable to undistributed earnings of its foreign subsidiaries since these
earnings are indefinitely reinvested.
Net Income Per Share
In 1997, the Company adopted Financial Accounting Standards No. 128
"Earnings per Share" which specifies the computation, presentation and
disclosure of net income per share. Basic net income (loss) per common share is
based on the weighted average number of common shares outstanding during the
year. Diluted net income (loss) per common share reflects the potential dilution
that could occur if outstanding stock options were exercised. All prior period
net income per share figures have been restated.
The following table sets forth the computation of basic and diluted net
income (loss) per common share:
For the years ended December 31,
(in thousands except per share data) 1998 1997 1996
--------------------------------------------------------------------------
Net income (loss) $(1,920) $25,544 $25,126
==========================================================================
Basic Shares 22,262 22,151 21,788
Add: Common equivalent shares (1) - 202 308
--------------------------------------------------------------------------
Diluted shares 22,262 22,353 22,096
Basic net income (loss) per share $ (0.09) $ 1.15 $ 1.15
==========================================================================
Diluted net income (loss) per share $ (0.09) $ 1.14 $ 1.14
==========================================================================
(1) Common equivalent shares representing shares issuable upon conversion
of stock options (using the treasury stock method). Options outstanding not
included in the computation of diluted shares were 491,000 in 1998 because the
Company was in a net loss position, and the inclusion of such shares would be
anti-dilutive. For 1997 and 1996, respectively, 30,000 and 120,000 options
outstanding were not included in the computation, because the option price was
greater than the average market price of the common shares.
- 32 -
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies (continued)
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The adoption of this Standard in 2000 is not expected to have a
material impact on the Company's financial statements.
B. Bank Credit Arrangements
The Company's informal bank money market lines of credit amounted to
$12,000,000 at December 31, 1998 and 1997.
C. Lease Obligations and Commitments
The Company leases certain facilities and equipment under long-term
operating leases. The Company has a noncancelable operating lease for its
corporate headquarters and manufacturing operations, which expires in 2006. The
lease includes scheduled base rent increases through the term of the lease and
renewal options for up to fifteen additional years.
Future minimum lease payments under the noncancelable operating leases are:
(in thousands) Operating Leases
------------------------------------------------
1999 $3,534
2000 2,870
2001 2,165
2002 2,195
2003 2,189
Later years 6,119
------------------------------------------------
Total $19,072
================================================
Total rental expense under operating leases was $3,526,000 in 1998,
$3,289,000 in 1997, and $3,159,000 in 1996.
The Company enters into short-term foreign currency forward contracts with
its primary bank to minimize the effect of foreign currency exchange rate
fluctuations on certain intercompany transactions with its wholly owned European
and Japanese subsidiaries. Net realized and unrealized gains and losses on these
transactions are not material and are recorded in the statements of operations.
The notional amounts of the Company's outstanding foreign currency forward
contracts at December 31, 1998 and 1997, were $2,153,000 and $2,224,000,
respectively.
- 33 -
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
D. Income Taxes
The components of income (loss) before income taxes and the related
provision for (benefit from) income taxes are presented below:
For the years ended December 31,
(in thousands) 1998 1997 1996
-----------------------------------------------------------------------
Income (loss) before income taxes:
Domestic $(2,572) $36,106 $37,152
Foreign 2 712 572
-----------------------------------------------------------------------
$(2,570) $36,818 $37,724
=======================================================================
Provision for (benefit from) income
taxes:
Current:
Federal $ 176 $10,096 $10,593
Foreign 18 250 285
State 79 1,729 2,482
-----------------------------------------------------------------------
273 12,075 13,360
Deferred:
Federal (611) (656) (624)
Foreign - - -
State (312) (145) (138)
-----------------------------------------------------------------------
(923) (801) (762)
-----------------------------------------------------------------------
Total $ (650) $11,274 $12,598
=======================================================================
The Company's deferred tax assets and (liabilities) are comprised of the
following:
December 31,
(in thousands) 1998 1997
-----------------------------------------------------------------------
Deferred tax assets:
Inventory valuation $1,411 $1,312
Compensation and benefit plans 2,208 2,483
Leases 223 262
Depreciation 305 -
Net operating loss and tax credit carryforwards 656 -
Other 434 230
------------------------------------------------------------------------
Total deferred tax assets $5,237 $4,287
Deferred tax liabilities:
Depreciation $ - $ (53)
Other (80) -
------------------------------------------------------------------------
Total deferred tax liabilities $ (80) $ (53)
------------------------------------------------------------------------
Net deferred tax assets $5,157 $4,234
========================================================================
Deferred income taxes on undistributed earnings of the foreign subsidiaries
are not material. The Company believes that its deferred tax assets are more
likely than not realizable; therefore, no valuation allowance is required.
- 34 -
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
D. Income Taxes (continued)
The table below reconciles the expected U.S. federal income tax provision
(benefit) to the recorded income tax provision (benefit) in the statements of
operations:
December 31,
(in thousands) 1998 1997 1996
---------------------------------------------------------------------------
Federal tax computed at statutory rate
of 35% $(899) $12,886 $13,203
State income taxes, net of federal income
tax benefit (151) 1,063 1,563
Non-taxable S-Corporation (income) loss 165 (1,514) (1,148)
Foreign sales corporation tax benefit - (907) (923)
Earnings not subject to U.S. income taxes (191) (414) (333)
R&D and foreign tax credits (357) (516) (177)
Non-deductible acquisition costs 620 - -
Other, net 163 676 413
---------------------------------------------------------------------------
Income tax provision (benefit) $(650) $11,274 $12,598
===========================================================================
Prior to the acquisition on May 7, 1998, Granville-Phillips Company ("GPC")
had elected to be treated as an S-Corporation for federal income tax reporting
purposes. Under this election, the individual stockholders of GPC are deemed to
have received a pro rata distribution of taxable income of GPC (whether or not
an actual distribution was made), which is included in their taxable income.
Accordingly, GPC did not provide for federal income taxes. Unaudited pro forma
net income (loss) per share reflects unaudited pro forma income tax benefit
(provision) of GPC as if GPC was combined and subject to the effective federal
and state statutory rates of approximately 38% throughout the periods presented.
GPC's S-Corporation tax reporting status was terminated on the date of the
acquisition and, therefore, the undistributed earnings of $2.8 million as of the
date of acquisition have been reclassified to additional paid-in capital.
For U.S. federal income tax purposes, the Company has a net operating loss
carryforward of approximately $1.0 million. This carryforward will expire in
2018.
E. Capital Stock
On October 16, 1997, the Company's Board of Directors authorized a
two-for-one common stock split that was effected in the form of a 100% stock
dividend. Stock certificates were distributed on November 13, 1997, to
stockholders of record on October 30, 1997. All references in the financial
statements and notes to number of shares, per share amounts and market prices of
the Company's common stock have been retroactively restated to reflect the
increased number of common shares outstanding.
Options for the purchase of shares of the Company's common stock have been
granted to officers, directors and key employees under various incentive and
nonqualified stock option agreements. The terms of these agreements provide that
the options are exercisable over a number of years from the date of grant at not
less than the fair market value at the date of grant.
- 35 -
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
E. Capital Stock (continued)
Options expire at various dates through the year 2008. At December 31, 1998
and 1997, respectively, 1,207,774 and 1,313,774 shares of common stock were
reserved for stock options. At December 31, 1998 and 1997, respectively, 97,024
and 75,774 nonqualified stock options were exercisable. In 1989, the Company
entered into an agreement with its President under which options to purchase up
to 800,000 shares of the Company's common stock were granted, at a price of
$1.69 per share, exercisable over a ten-year period subject to the attainment of
certain financial performance targets. At December 31, 1998, options for the
purchase of 640,000 shares had become exercisable. In connection with this
agreement, compensation expense of $959,000, $1,300,000 and $750,000 was charged
in 1998, 1997 and 1996, respectively.
The following table summarizes option activity for the years ended 1998,
1997 and 1996:
Number of Weighted Average
Options Outstanding Common Shares Exercise Price
---------------------------------------------------------------------
December 31, 1995 895,400 $ 2.71
Options granted 140,000 $16.40
Options exercised (420,400) $ 2.52
---------
December 31, 1996 615,000 $ 5.95
Options granted 121,000 $20.90
Options exercised (157,226) $ 3.45
Options cancelled (82,000) $14.66
---------
December 31, 1997 496,774 $ 8.95
Options granted 180,000 $22.33
Options exercised (106,000) $ 2.27
---------
December 31, 1998 570,774 $14.41
The following table summarizes information concerning currently outstanding
and exercisable options:
Options Outstanding Options Exercisable
------------------------------------------------- -----------------------------
Range of Number Weighted Average Weighted Number Weighted
Exercise Outstanding Remaining Average Exercisable Average
Prices at 12/31/98 Contractual Life Exercise Price at 12/31/98 Exercise Price
---------------------------------------------------------------------------------------------------
$ 1.69 - $ 9.13 199,774 2.17 years $ 2.37 29,774 $ 3.78
$14.31 - $18.44 161,000 6.47 years $17.06 57,750 $16.74
$23.11 - $27.03 210,000 8.84 years $23.83 9,500 $26.91
- 36 -
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
E. Capital Stock (continued)
The Company adopted the disclosure only option under Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
123) as of December 31, 1996. If the accounting provisions of SFAS 123 had been
adopted, the effect on net income (loss) and basic and diluted net income (loss)
per share would have been as follows:
(in thousands except per share data) 1998 1997 1996
------------------------------------------------------------------------
As Reported
Net income (loss) $(1,920) $25,544 $25,126
Basic net income (loss) per share $ (0.09) $ 1.15 $ 1.15
Diluted net income (loss) per share $ (0.09) $ 1.14 $ 1.14
Pro Forma
Net income (loss) $(2,438) $25,371 $25,015
Basic net income (loss) per share $ (0.11) $ 1.15 $ 1.15
Diluted net income (loss) per share $ (0.11) $ 1.14 $ 1.14
The weighted average fair value of options granted during 1998, 1997 and
1996 was $8.44, $8.06 and $6.16, respectively. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions:
1998 1997 1996
-----------------------------------------------------------------------
Dividend yield 4.2% 4.2% 4.2%
Expected stock price volatility 50% 50% 50%
Risk-free interest rate 5.49% 6.34% 6.08%
Expected holding period (years) 6.4 6.4 6.3
- 37 -
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F. Other Assets
The Company has a 50/50 joint venture company, Ulvac Cryogenics, Inc., with
an unrelated Japanese manufacturer to produce cryogenic vacuum pumps in Japan.
Condensed results of operations for the joint venture for each of the three
fiscal years ended September 30 are as follows:
(in thousands) 1998 1997 1996
------------------------------------------------------------------------
Net sales $19,511 $27,638 $25,751
========================================================================
Gross profit $ 5,280 $ 8,488 $ 7,415
========================================================================
Net income $ 1,092 $ 2,364 $ 1,901
========================================================================
Fee income, including royalty income
and equity income $ 957 $ 1,744 $ 1,480
========================================================================
Condensed balance sheet information as of September 30, is as follows:
(in thousands) 1998 1997
------------------------------------------------------------------------
Current assets $15,314 $20,724
Noncurrent assets 2,906 3,399
------------------------------------------------------------------------
Total assets $18,220 $24,123
========================================================================
Current liabilities $ 4,572 $ 9,710
Long-term liabilities 829 915
Stockholders' equity 12,819 13,498
------------------------------------------------------------------------
Total liabilities and stockholders' equity $18,220 $24,123
========================================================================
The Company's net investment in the joint venture of approximately
$6,500,000 and $6,552,000 at December 31, 1998 and 1997, respectively, is
reported in other assets. The Company's net investment at December 31, 1998 and
1997, reflects a cumulative translation gain (loss) of ($168,000) and $366,000,
respectively (net of income tax benefit of $90,000 and provision of $197,000,
respectively). This currency translation gain or loss, which is included in
stockholders' equity, resulted from translating the balance sheet of the joint
venture into U.S. dollars.
G. Segment Information
Line of Business and Foreign Operations
The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosure about Segments of an Enterprise and Related Information" for 1998.
The Company operates in one line of business; the development, manufacture, sale
and support of cryogenic and vacuum equipment.
- 38 -
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
G. Segment Information (continued)
The consolidated financial statements include the accounts of wholly owned
international subsidiaries which operate customer support facilities to sell and
service products manufactured in the United States. A summary of United States
and International operations follows for the years ended December 31:
Corporate
Expenses
United and Assets/
(in thousands) States International Eliminations Consolidated
---------------------------------------------------------------------------
1998
Net sales $ 90,278 $13,598 $(8,531) $ 95,345
Operating income (loss) 3,843 85 (8,689) (4,761)
Identifiable assets 42,530 8,026 25,096 75,652
1997
Net sales $152,448 $13,993 $(9,365) $157,076
Operating income 37,733 751 (5,164) 33,320
Identifiable assets 52,231 7,457 36,531 96,219
1996
Net sales $147,175 $13,093 $(8,603) $151,665
Operating income 38,324 561 (4,098) 34,787
Identifiable assets 44,706 7,183 31,116 83,005
Corporate expenses consist of certain general and administrative expenses,
including merger, restructuring and special charges in 1998, which are not
allocable to geographic operations. Corporate assets consist primarily of cash,
cash equivalents and investments. Intercompany transactions are at prices that
are comparable to third-party sales.
Export Sales and Significant Customers
The Company's export sales, principally to customers in the Far East, were
$6,322,000 in 1998, $13,105,000 in 1997 and $11,524,000 in 1996.
The Company's largest customer represented 20%, 30%, and 28% of net sales
for 1998, 1997 and 1996, respectively.
- 39 -
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
H. Employee Benefit Plans
The Company's retirement and savings plans cover substantially all of the
Company's employees who have one year of service. A noncontributory defined
benefit pension plan and a defined contribution plan function together as the
Company's retirement program.
The Company's funding policy is to contribute not less than the minimum
required amount in accordance with the Internal Revenue Code and ERISA. The
Company adopted Statement of Financial Accounting Standards No. 132, "Employee's
Disclosure about Pensions and Other Retirement Benefits," during 1998. The
following tables set forth the funded status, projected benefit obligation and
fair value of assets of the defined benefit pension plan.
Reconciliation of Funded Status
December 31,
(in thousands) 1998 1997
---------------------------------------------------------------------------
Funded status $ 1,402 $ 1,821
Unrecognized prior service cost 40 52
Unrecognized net transition asset (184) (223)
Unrecognized net actuarial gain (4,018) (4,135)
---------------------------------------------------------------------------
Accrued pension cost $(2,760) $(2,485)
===========================================================================
Reconciliation of Projected Benefit Obligation
(in thousands) 1998 1997
---------------------------------------------------------------------------
Beginning of year benefit obligation (January 1) $ 6,369 $ 5,964
Service cost 981 894
Interest cost 508 481
Actuarial loss 963 99
Benefits paid (1,061) (1,069)
Curtailment gain (1) (489) -
---------------------------------------------------------------------------
End of year benefit obligation (December 31) $ 7,271 $ 6,369
===========================================================================
Reconciliation of Fair Value of Assets
(in thousands) 1998 1997
---------------------------------------------------------------------------
Beginning of year, fair value of assets (January 1) $ 8,190 $ 7,553
Actual return on plan assets 1,544 1,706
Benefits paid (1,061) (1,069)
---------------------------------------------------------------------------
End of year, fair value of assets (December 31) $ 8,673 $ 8,190
===========================================================================
- 40 -
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
H. Employee Benefit Plans (continued)
The Company's net pension cost included the following components:
(in thousands) 1998 1997 1996
---------------------------------------------------------------------------
Service cost $ 981 $ 894 $ 840
Interest cost 508 481 443
Expected return on assets (563) (537) (505)
Net amortization of:
Prior service cost 8 8 8
Net actuarial gain (131) (131) (38)
Transition obligation (39) (39) (39)
Curtailment gain(1) (489) - -
-------------------------------------------------------------------------
Net periodic pension cost $ 275 $ 676 $ 709
=========================================================================
(1) The curtailment gain relates to certain participants in the pension
plan who were terminated from employment in connection with the Company's
restructuring plan. (Note I).
Key assumptions used in computing year-end obligations for the defined
benefit plan were:
1998 1997 1996
-------------------------------------------------------------------------
Discount rate for obligations 6.75% 7.0% 7.5%
Rate of compensation increase 5.0% 5.0% 5.5%
Long-term rate of return on assets 9.0% 9.0% 9.0%
Defined benefit plan assets include marketable equity securities, corporate
and government debt securities and cash.
The Company has Employee Savings Plans, qualified under Section 401(k),
that are designed to supplement retirement income. The Company contributes a
percentage of the participants' contributions up to a defined maximum amount.
The contributions expense, net of forfeitures, was $826,000 in 1998, $812,000 in
1997 and $761,000 in 1996.
The Company has a Supplemental Key Executive Retirement Plan which is
designed to supplement benefits paid to participants under Company-funded,
tax-qualified retirement plans. The Company recorded additional retirement costs
of $170,000 in 1998, $69,000 in 1997 and $140,000 in 1996 in connection with
this Plan.
- 41 -
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
I. Merger, Restructuring and Special Charges
In the second quarter of 1998, the Company acquired Granville-Phillips Company
("GPC") in a transaction accounted for as a pooling of interests. GPC operates
in the same line of business as the Company; the development, manufacture, sale
and support of vacuum equipment. The Company issued 2,382,925 shares of common
stock in exchange for all outstanding common stock of GPC at May 7, 1998. Direct
acquisition costs, primarily compensation expense relating to shares issued to
certain GPC employees as part of a restricted stock plan, and professional fees
amounted to $3.5 million and were charged against the results of operations. At
the time of the acquisition, GPC common shares included in the restricted stock
plan were exchanged for the equivalent value of the Company's common shares. GPC
was an S-Corporation for tax purposes prior to the acquisition. In accordance
with SAB topic 4B, the amount of undistributed earnings of $2.8 million
generated during the periods that GPC was taxed as an S-Corporation was
reclassified from retained earnings to capital in excess of par value at the
time of the merger and $0.8 million was recorded in capital in excess of par
value for stock incentive plans in 1998.
The following information presents certain statement of operations data of the
Company and GPC for the periods prior to the acquisition.
(Unaudited)
Three Months Ended Year Ended Year Ended
(in thousands) Mar. 31, 1998 Dec. 31, 1997 Dec. 31, 1996
---------------------------------------------------------------------------
Net sales for:
Helix $25,872 $ 131,519 $128,383
GPC 5,622 25,557 23,282
---------------------------------------------------------------------------
Combined $31,494 $ 157,076 $151,665
===========================================================================
Net income (loss) for:
Helix $ 2,941 $ 21,315 $ 21,957
GPC (1,075) 4,229 3,169
---------------------------------------------------------------------------
Combined $ 1,866 $ 25,544 $ 25,126
===========================================================================
During the third quarter of 1998, the Company recorded restructuring and other
special charges of $2.5 million. The Company restructured its domestic
operations to eliminate non-strategic spending, while redirecting resources to
the Company's global customer support structure and other strategic initiatives.
The charges primarily included provisions for termination benefits of $1.3
million for approximately 80 personnel, exit costs related to a leased facility
of $1.0 million and $0.2 million for the impairment of certain assets. At
December 31, 1998, $0.9 million of restructuring and special charges remained in
other accrued expenses, which the Company expects to be paid or amortized by the
third quarter of 1999.
The amounts accrued and charged against the provisions described above were as
follows:
Cash Payments
and Asset December 31, 1998
(in thousands) 1998 Provision Write-offs Balance
- --------------------------------------------------------------------------------
Employee termination benefits $1,300 $1,000 $300
Exit leased facility 1,000 400 600
Asset impairment 200 200 -
- --------------------------------------------------------------------------------
Total $2,500 $1,600 $900
================================================================================
- 42 -
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board Of Directors and Stockholders
of Helix Technology Corporation:
Our report on the consolidated financial statements of Helix Technology
Corporation is included on Page 23 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule listed in the index on Page 14 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/PricewaterhouseCoopers LLP
- -----------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 29, 1999
- 43 -
HELIX TECHNOLOGY CORPORATION
QUARTERLY RESULTS
(UNAUDITED)
First Second Third Fourth
(in thousands except per share data) Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------
1998
Net sales ............................. $ 31,494 $ 25,706 $ 18,550 $ 19,595
Gross profit .......................... 14,702 9,955 5,948 7,367
Operating income (loss) ............... 2,821 (1,873) (4,765) (944)
Net income (loss) ..................... 1,866 (434) (3,431) 79
Basic net income (loss) per share (1) . $ 0.08 $ (0.02) $ (0.15) $ 0.00
Diluted net income (loss) per share (1) $ 0.08 $ (0.02) $ (0.15) $ 0.00
1997
Net sales ............................. $ 34,408 $ 39,440 $ 42,508 $ 40,720
Gross profit .......................... 16,196 18,854 20,349 20,352
Operating income ...................... 6,590 8,188 9,552 8,990
Net income ............................ 4,896 6,266 7,343 7,039
Basic net income per share (1) ........ $ 0.22 $ 0.28 $ 0.33 $ 0.32
Diluted net income per share (1) ...... $ 0.22 $ 0.28 $ 0.33 $ 0.31
(1) All per share data reflects a two-for-one common stock split effective
November 1997.
- 44 -
HELIX TECHNOLOGY CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1998, 1997 and 1996
(in thousands)
Column A Column B Column C Column D Column E
- ------------------------------------------------------------------------------------------------------
Additions
------------------------
Balance at Charged to Charged to Deductions Balance at
Beginning Costs and Other from End of
Description of Period Expenses Accounts Reserves Period
- ------------------------------------------------------------------------------------------------------
Year ended December 31, 1998
Allowance for doubtful accounts $240 $ 5 $ - $ 17 $ 228
======================================================================================================
Warranty $292 $1,375 $ - $1,370 $ 297
======================================================================================================
Year ended December 31, 1997
Allowance for doubtful accounts $238 $ 17 $ - $ 15 $ 240
======================================================================================================
Warranty $303 $1,614 $ - $1,625 $ 292
======================================================================================================
Year ended December 31, 1996
Allowance for doubtful accounts $240 $ 6 $ - $ 8 $ 238
======================================================================================================
Warranty $305 $1,305 $ - $1,307 $ 303
======================================================================================================
- 45 -