FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the Quarter Ended June 28, 2002.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
Commission File Number 0-6866
HELIX TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2423640
(State of incorporation) (IRS Employer Identification No.)
Mansfield Corporate Center
Nine Hampshire Street
Mansfield, Massachusetts 02048-9171
-------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 337-5500
------------------------------
Indicate by checkmark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past ninety days.
Yes [X] No [ ]
The number of shares outstanding of the registrant's Common Stock, $1 par
value, as of June 28, 2002 was 26,103,204.
HELIX TECHNOLOGY CORPORATION
Form 10-Q
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of June 28, 2002 and
December 31, 2001 3
Consolidated Statements of Operations for the Three and
Six-Month Periods Ended June 28, 2002 and June 29, 2001 4
Consolidated Statements of Cash Flows for the Six-Month
Periods Ended June 28, 2002 and June 29, 2001 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-12
Item 3. Quantitative and Qualitative Disclosures about Market
Risk 13
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6 (b). Reports on Form 8-K 14
Signature 15
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
---------------------------------------------------------------------------------------
June 28, 2002 December 31, 2001
(in thousands except per share data) (unaudited) (audited)
---------------------------------------------------------------------------------------
ASSETS
Current:
Cash and cash equivalents $ 72,878 $ 7,789
Investments 2,866 9,271
Receivables - net of allowances 18,273 11,997
Inventories (Note 2) 26,166 27,293
Income tax receivable 4,453 7,344
Deferred income taxes (Note 3) 5,707 5,707
Other current assets 2,320 2,577
---------------------------------------------------------------------------------------
Total Current Assets 132,663 71,978
---------------------------------------------------------------------------------------
Property, plant and equipment at cost 69,077 65,115
Less: accumulated depreciation (38,294) (35,614)
---------------------------------------------------------------------------------------
Net property, plant and equipment 30,783 29,501
Other assets 11,382 12,101
---------------------------------------------------------------------------------------
TOTAL ASSETS $174,828 $113,580
=======================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable $ 13,723 $ 9,105
Payroll and compensation 523 986
Retirement costs 7,713 6,758
Income taxes (Note 3) 3,583 3,064
Litigation settlement, net (Note 7) 2,800 -
Other accrued liabilities 959 700
---------------------------------------------------------------------------------------
Total Current Liabilities 29,301 20,613
---------------------------------------------------------------------------------------
Commitments and contingencies (Note 8)
Stockholders' Equity:
Preferred stock, $1 par value; authorized
2,000,000 shares; issued and outstanding: none - -
Common stock, $1 par value; authorized 60,000,000
shares; issued and outstanding: 26,103,204 in
2002 and 22,611,204 in 2001 26,103 22,611
Capital in excess of par value 76,344 13,878
Treasury stock, $1 par value (3,840 shares in 2002
and in 2001) (232) (232)
Retained earnings 46,105 58,261
Accumulated other comprehensive income (Note 5) (2,793) (1,551)
---------------------------------------------------------------------------------------
Total Stockholders' Equity 145,527 92,967
---------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $174,828 $113,580
=======================================================================================
The accompanying notes are an integral part of these financial statements.
Page 3
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 28, June 29, June 28, June 29,
(in thousands except per share data) 2002 2001 2002 2001
------------------------------------------------------------------------------------------
Net sales $29,015 $26,604 $ 49,395 $75,245
------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales 19,653 18,495 35,194 47,002
Research and development 3,968 4,209 7,484 8,442
Selling, general and administrative 11,314 9,460 19,373 19,365
------------------------------------------------------------------------------------------
34,935 32,164 62,051 74,809
------------------------------------------------------------------------------------------
Operating (loss) income (5,920) (5,560) (12,656) 436
Joint venture income 14 553 59 1,518
Interest and other income 296 214 365 631
------------------------------------------------------------------------------------------
(Loss) income before taxes (5,610) (4,793) (12,232) 2,585
Income tax (benefit) provision (Note 3) (1,823) (1,558) (3,975) 840
------------------------------------------------------------------------------------------
Net (loss) income $(3,787) $(3,235) $ (8,257) $ 1,745
==========================================================================================
Net (loss) income per share (Note 4):
Basic $ (0.15) $ (0.14) $ (0.34) $ 0.08
Diluted $ (0.15) $ (0.14) $ (0.34) $ 0.08
==========================================================================================
Number of shares used in per share
calculations (Note 4):
Basic 26,097 22,539 24,599 22,536
Diluted 26,097 22,539 24,599 22,662
==========================================================================================
The accompanying notes are an integral part of these financial statements.
Page 4
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
-----------------------------------------------------------------------------------------
Six Months Ended
(in thousands) June 28, 2002 June 29, 2001
-----------------------------------------------------------------------------------------
Cash flows from operating activities:
Net (loss) income $(8,257) $ 1,745
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,944 2,437
Other (486) (1,479)
Net change in operating assets and liabilities (A) 6,688 6,977
-----------------------------------------------------------------------------------------
Net cash provided by operating activities 889 9,680
-----------------------------------------------------------------------------------------
Cash flows provided by (used by) investing activities:
Capital expenditures (4,226) (9,489)
Purchase of investments (8,140) (23,255)
Sale of investments 14,508 22,932
-----------------------------------------------------------------------------------------
Net cash provided by (used by) investing activities 2,142 (9,812)
-----------------------------------------------------------------------------------------
Cash flows provided by (used by) financing activities:
Net proceeds from stock offering 65,246 -
Net cash provided by employee stock plans 711 491
Cash dividends paid (3,899) (5,408)
-----------------------------------------------------------------------------------------
Net cash provided by (used by) financing activities 62,058 (4,917)
-----------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 65,089 (5,049)
Cash and cash equivalents, at the beginning of the period 7,789 15,435
-----------------------------------------------------------------------------------------
Cash and cash equivalents, at the end of the period $72,878 $ 10,386
=========================================================================================
(A) Change in operating assets and liabilities:
(Increase) decrease in accounts receivable $(6,276) $ 21,179
Decrease in inventories 1,127 1,246
Decrease in income tax receivable 2,891 -
Decrease in other current assets 257 100
Increase (decrease) in accounts payable 4,618 (12,239)
Increase in accrued litigation settlement, net 2,800 -
Increase (decrease) in other accrued expenses 1,271 (3,309)
-----------------------------------------------------------------------------------------
Net change in operating assets and liabilities $ 6,688 $ 6,977
=========================================================================================
The accompanying notes are an integral part of these financial statements.
Page 5
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
------------------------------
The accompanying consolidated financial statements for the periods ended
June 28, 2002, and June 29, 2001, contain all adjustments (consisting only
of normal recurring adjustments) necessary to present fairly the financial
position as of June 28, 2002, and December 31, 2001, and the results of
operations and cash flows for the periods ended June 28, 2002, and June 29,
2001.
The results of operations for the six-month period ended June 28, 2002, are
not necessarily indicative of the results expected for the full year.
The consolidated financial statements included herein have been prepared by
the Company, without audit of the six-month periods ended June 28, 2002,
and June 29, 2001, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to present fairly the Company's financial
position and results of operations. These consolidated financial
statements should be read in conjunction with the financial statements and
the notes thereto included in the Company's latest Annual Report on Form
10-K.
Note 2 - Inventories
--------------------
-------------------------------------------------------------------------
(in thousands) June 28, 2002 December 31, 2001
-------------------------------------------------------------------------
Finished goods $ 9,775 $ 8,570
Work in process 12,349 13,067
Materials and parts 4,042 5,656
-------------------------
$26,166 $27,293
=========================
Inventories are stated at the lower of cost or market on a first-in, first-
out basis.
Note 3 - Income Taxes
---------------------
The net federal, state and foreign income tax benefit was $3,975,000 for
the six-month period ended June 28, 2002, and the net federal, state and
foreign income tax provision was $840,000 for the six-month period ended
June 29, 2001. Tax credits are treated as reductions of income tax
provisions in the year in which the credits are realized. The Company does
not provide for federal income taxes on the undistributed earnings of its
wholly-owned foreign subsidiaries, since these earnings are indefinitely
reinvested.
The effective income tax rates for the six-month periods ended June 28,
2002, and June 29, 2001, were 32.5%.
The major components of deferred tax assets are compensation and benefit
plans, inventory valuation and depreciation. Based on past experience, the
Company expects that the future taxable income will be sufficient for the
realization of the deferred tax assets. The Company believes that a
valuation allowance is not required.
Page 6
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Net (Loss) Income Per Share
------------------------------------
Basic net (loss) income per common share is based on the weighted average
number of common shares outstanding during the period. Diluted net (loss)
income per common share reflects the potential dilution that could occur if
outstanding stock options were exercised.
The following table sets forth the computation of basic and diluted net
(loss) income per common share:
-----------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
(in thousands except per share data) June 28, June 29, June 28, June 29,
2002 2001 2002 2001
------------------------------------------------------------------------------------------
Net (loss) income $(3,787) $(3,235) $(8,257) $ 1,745
==================== ==================
Basic shares 26,097 22,539 24,599 22,536
Add: Common equivalent shares - - - 126
------------------------------------------
Diluted shares 26,097 22,539 24,599 22,662
==========================================
Basic net (loss) income per share $ (0.15) $ (0.14) $ (0.34) $ 0.08
==========================================
Diluted net (loss) income per share $ (0.15) $ (0.14) $ (0.34) $ 0.08
=========================================
Common equivalent shares represent shares issuable upon exercise of stock options
(using the treasury stock method). For the three months ended June 28, 2002, the Company
had 566,375 options outstanding not included in the computation of diluted shares, because
the Company was in a net operating loss position, and the inclusion of such shares would
be anti-dilutive. For the three months ended June 29, 2001, the Company had 578,375
options outstanding not included in the computation of diluted shares, because the option
price was greater than the average market price of the common shares, and the inclusion of
such shares would be anti-dilutive. For the six months ended June 28, 2002, and June 29,
2001, the Company had 566,375 and 25,000 options outstanding not included in the
computation of diluted shares, respectively.
Note 5 - Other Comprehensive (Loss) Income
------------------------------------------
------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
(in thousands) June 28, June 29, June 28, June 29,
2002 2001 2002 2001
------------------------------------------------------------------------------------------
Net (loss) income $(3,787) $(3,235) $(8,257) $ 1,745
------------------------------------------------------------------------------------------
Other comprehensive (loss) before tax:
Foreign currency translation adjustment (449) (1,120) (1,527) (2,145)
Unrealized (loss) gain on available-for-sale
investments (1) 8 (37) 43
------------------------------------------------------------------------------------------
Other comprehensive (loss), before tax (450) (1,112) (1,564) (2,102)
Income tax related to items of other
comprehensive (loss) 31 383 322 605
------------------------------------------------------------------------------------------
Other comprehensive (loss), net of tax (419) (729) (1,242) (1,497)
------------------------------------------------------------------------------------------
Comprehensive (loss) income $(4,206) $(3,964) $(9,499) $ 248
==========================================================================================
Page 7
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Common Stock Offering
------------------------------
On March 19, 2002, the Company completed a public offering of 3,450,000
shares of its common stock. The Company realized proceeds of $65.2
million, net of underwriting fees and discounts and offering expenses.
Note 7 - Litigation Settlement
------------------------------
On July 11, 2002, the Company signed an Agreement in Principle with
Raytheon Company in connection with an action brought in 1998 in the
Massachusetts Superior Court by Raytheon Company which alleged that between
1992 and 1994 the Company sold Raytheon defective components used in
missile guidance systems manufactured by Raytheon. The Company has not
been in the business of selling these components since 1994. While the
Company has continuously denied all claims, the Company and its insurers
concluded that it was in the Company's best interest to reach an out-of-
court settlement to avoid the distraction and expense of a jury trial.
Under the terms of the Agreement, the Company is obligated to pay $2.8
million. Insurance providers will pay an additional $2.1 million and
essentially all of the legal costs associated with this litigation.
Note 8 - Commitments and Contingencies
--------------------------------------
The Company had a three year revolving credit agreement with Fleet National
Bank entered into in July 2000 that permitted the Company to borrow up to
$25.0 million, subject to compliance with certain covenants. The Company
had never borrowed against the agreement and terminated the credit agreement
in April 2002.
Note 9 - New Accounting Pronouncements
--------------------------------------
In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 (SFAS 142), "Goodwill and Other Intangible Assets," which became
effective for the Company on January 1, 2002. SFAS 142 requires, among other
things, the discontinuance of goodwill amortization and includes provisions
for the reclassification of certain existing recognized intangibles as
goodwill, reassessment of the useful lives of existing recognized
intangibles and reclassification of certain intangibles out of previously
reported goodwill. The revised standards include transition rules and
requirements for identification, valuation and recognition of a much broader
list of intangibles as part of business combinations than prior practice,
most of which will continue to be amortized.
In October 2001, the FASB issued Statement of Financial Accounting Standards
No. 144 (SFAS 144), "Accounting for the Impairment or Disposal of Long-Lived
Assets." The objectives of SFAS 144 are to address significant issues
relating to the implementation of FASB Statement No. 121 (SFAS 121),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," and to develop a single accounting model, based
on the framework established in SFAS 121, for long-lived assets to be
disposed of by sale, whether previously held and used or newly acquired.
SFAS 144 is effective for financial statements issued for fiscal years
beginning after December 15, 2001 and, generally, its provisions are to be
applied prospectively.
The Company adopted these standards, and they do not have a material impact
on its consolidated financial statements.
Page 8
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations
---------------------
You should read the following discussion and analysis together with our
financial statements, related notes and other financial information
appearing elsewhere in this report. In addition to historical information,
the following discussion and other parts of this report contain forward-
looking information that involves risks and uncertainties. Our actual
results could differ materially from those anticipated by such forward-
looking information due to competitive factors and other factors discussed
under "Important Factors That May Affect Future Results" below.
Significant Accounting Policies
-------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations are based on our consolidated financial statements, which have
been prepared in accordance with United States generally accepted
accounting principles. The preparation of these financial statements
requires our management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses. These
estimates and assumptions are based on historical experience and on various
other factors that we believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about our critical
accounting policies. Actual results may differ from these estimates and
judgments under different assumptions or conditions.
Revenue Recognition. Net sales is recognized upon shipment provided title
and risk of loss have been transferred to the customer, there is evidence
of an arrangement, fees are fixed or determinable, and collection is
reasonably assured. As part of a sale, we offer customers a warranty on
defects in materials and workmanship. We continuously monitor and track
the related product returns and record a provision for the estimated amount
of such future returns, based on historical experience and any notification
we receive of pending returns. While such returns have historically been
within our expectations and the provisions established, we cannot guarantee
that we will continue to experience the same return rates that we have in
the past. Any significant increase in material and workmanship defect
rates and the resulting credit returns could have a material adverse impact
on our operating results for the period or periods in which such returns
materialize. We also maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers to make
required payments. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.
Inventory. We value inventory at the lower of cost (first-in, first-out
method) or market. We regularly review inventory quantities on hand and
record a provision to write down inventory to its estimated net realizable
value, if less than cost, based upon management's assumptions of future
material usage and obsolescence, which are a result of future demand and
market conditions. If actual market conditions become less favorable than
those projected by management, additional inventory provisions may be
required.
Investments. We own 50% of a joint venture, ULVAC Cryogenics, Inc., or
UCI, which manufactures and sells cryogenic vacuum pumps in Japan,
principally to ULVAC Corporation. We account for the joint venture using
the equity method of accounting, and we also receive royalties from the
joint venture under the terms of a license and technology agreement. The
royalties we receive from UCI, as well as our equity in the income and
losses of UCI, are both included in our financial statements under joint
venture income.
Page 9
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
---------------------
Beginning in 2001, a slowdown in the global market for semiconductor
capital equipment impacted us after experiencing a period of significant
growth in 1999 and 2000. Net sales for the three months ended June 28,
2002, (the "2002 Quarter") were $29.0 million compared with net sales for
the three months ended June 29, 2001, (the "2001 Quarter") of $26.6
million, an increase of 9.1%. Net sales for the six months ended June 28,
2002, (the "2002 Period") were $49.4 million, a decrease of 34.4%, from
$75.2 million for the six months ended June 29, 2001 (the "2001 Period").
While sales increased in the 2002 Quarter versus the 2001 Quarter,
indicating initial signs of recovery from the slowdown, sales in the 2002
Period versus the 2001 Period are still down. In addition, while sales
increased in the 2002 Quarter from the first quarter of 2002 by 42%, given
the general uncertainty surrounding semiconductor capital equipment
investment plans, we do not expect to be able to sustain our rate of
sequential quarterly improvement in the second half of this year.
Cost of sales for the 2002 Quarter was $19.7 million compared with $18.5
million for the 2001 Quarter. The gross margin for the 2002 Quarter was
32.3% compared with 30.5% for the 2001 Quarter. The improvement in gross
margin was primarily attributable to increased production volume as
overhead costs were spread over a larger sales base. Cost of sales for the
2002 Period was $35.2 million compared with $47.0 million for the 2001
Period. The gross margin for the 2002 Period was 28.7% compared with 37.5%
for the 2001 Period. The reduction in gross margin was primarily
attributable to decreased production volume as overhead costs were spread
over a smaller sales base.
Research and development expenses were $4.0 million for the 2002 Quarter,
or 13.7% of net sales, compared to $4.2 million, or 15.8% of net sales, for
the 2001 Quarter. Spending was $7.5 million, or 15.2% of net sales for the
2002 Period, compared to $8.4 million, or 11.2% of net sales, for the 2001
Period. We continue to focus on developing technologies to support a new
generation of products for 300 millimeter capable production tools, to
expand our GOLDLink support service capability and to improve our core
component product lines. (GOLDLink is a registered trademark of Helix
Technology Corporation.)
Total selling, general and administrative expenses were $11.3 million in
the 2002 Quarter as compared with $9.5 million in the 2001 Quarter and
$19.4 million in the 2002 Period and the 2001 Period. Pursuant to a July
11, 2002, Agreement in Principle with Raytheon Company, we agreed to pay,
net of insurance contributions, approximately $2.8 million to settle the
Raytheon litigation. Excluding the nonrecurring litigation settlement
charge of $2.8 million in the 2002 Quarter and 2002 Period, our spending
declined due to ongoing cost containment measures as well as due to the
restructuring program implemented and completed in the third quarter of
2001 in response to the continued slowdown in the semiconductor capital
equipment industry. We will continue to spend in these areas commensurate
with our near-term business needs and marketplace opportunities.
Royalty and equity income from our joint venture in Japan decreased by $0.5
million in the 2002 Quarter compared to the 2001 Quarter and $1.5 million
in the 2002 Period compared to the 2001 Period due to the decline in the
Japanese semiconductor capital equipment market.
Page 10
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations (continued)
---------------------
Results of Operations (continued)
---------------------
Interest and other income for the 2002 Quarter was $0.3 million, compared
with $0.2 million for the 2001 Quarter, reflecting higher average cash,
cash equivalents and investment balances, partially offset by lower
interest rates. Interest and other income for the 2002 Period was $0.4
million, compared with $0.6 million for the 2001 Period, reflecting lower
interest rates partially offset by higher average cash, cash equivalents
and investment balances.
For the 2002 Quarter, the Company had a pretax loss of $5.6 million
resulting in a tax benefit of $1.8 million compared to a pretax loss of
$4.8 million and a tax benefit of $1.6 million for the 2001 Quarter. For
the 2002 Period, the Company had a pretax loss of $12.2 million resulting
in a tax benefit of $4.0 million compared to a pretax income of $2.6
million and a tax provision of $0.8 million for the 2001 Period. The
effective tax rate for the 2002 and 2001 Quarters and Periods was 32.5%.
The tax rates differ from the U.S. statutory rate primarily due to tax
credits and undistributed nontaxable equity income from our joint venture.
Liquidity and Capital Resources
-------------------------------
Cash provided by operating activities for the 2002 Period was $0.9 million
compared with $9.7 million for the 2001 Period, primarily due to our net
loss in the 2002 Period.
In the 2002 Period, we spent $4.2 million, principally for the continued
effort associated with the implementation of our global information system,
which went live in the U.S. in July 2002. In the 2001 Period, capital
expenditures were $9.5 million, principally for our new Japanese service
center and implementation of our global information system. As a result of
completing our U.S. global information system, we expect capital
expenditures for the second half of 2002 to be significantly lower than
that of the 2002 Period, and we expect our depreciation expense, which was
$1.5 million in the 2002 Quarter, will exceed $2.0 million in the
subsequent quarters.
On March 19, 2002, we completed a public offering of 3,450,000 shares of
our common stock. We realized proceeds of $65.2 million, net of
underwriting fees and discounts and offering expenses.
Cash dividends paid to stockholders were $3.9 million or $0.08 per common
share during the 2002 Period and $5.4 million or $0.12 per common share
during the 2001 Period. In October 2001, after considering the uncertain
business environment in the semiconductor equipment industry, our board of
directors reduced the quarterly dividend to $0.08 per share, resulting in
aggregate quarterly cash savings of approximately $1.0 million.
We manage our foreign exchange rate risk arising from intercompany foreign
currency denominated transactions through the use of foreign currency
forward contracts. The gains and losses on these transactions are not
material.
Page 11
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations (continued)
----------------------
Liquidity and Capital Resources (continued)
-------------------------------
We had a three year revolving credit agreement with Fleet National Bank
entered into in July 2000 that permitted us to borrow up to $25.0 million,
subject to compliance with certain covenants. We had never borrowed
against the agreement and terminated the credit agreement in April 2002.
We believe that our existing funds and anticipated cash flow from operations
will satisfy our working capital and capital expenditure requirements for at
least the next 12 months.
Important Factors That May Affect Future Results
------------------------------------------------
This Form 10-Q contains forward-looking statements. These forward-looking
statements appear principally in the section entitled "Management's
Discussion and Analysis of Financial Conditions and Results of Operations."
Forward-looking statements may appear in other sections of this report as
well. Generally, the forward-looking statements in this report use words
like "expect," "anticipate," "plan," "believe," "seek," "estimate," and
similar expressions.
Forward-looking statements are not guarantees of future performance and
involve certain risks, uncertainties, and assumptions that could cause our
future results to differ materially from those expressed in any forward-
looking statements made by or on behalf of us. Many such factors are beyond
our ability to control or predict. Readers are accordingly cautioned not to
place undue reliance on forward-looking statements. We disclaim any intent
or obligation to update publicly any forward-looking statements, whether in
response to new information, future events, or otherwise.
Our business depends in large part upon the capital expenditures of
semiconductor manufacturers, which, in turn, depend on the current and
anticipated market demand for integrated circuits and products utilizing
integrated circuits. The semiconductor industry is highly cyclical and has
historically experienced periodic downturns, which generally have had a
severe effect on the semiconductor industry's demand for capital
equipment and have adversely affected our results of operations. We cannot
assure you that developments in the semiconductor industry or the
semiconductor equipment industry will occur at the rate or in the manner
that we expect.
In addition to the cyclical nature, risks and uncertainties of the
semiconductor industry, the Company faces the following risks and
uncertainties among others: the need to continuously develop, manufacture
and gain customers' acceptance of new products and product enhancements;
dependence on a limited number of customers and concentration of sales to
one or a few customers; the Company's ability to attract and retain certain
key personnel; the ability of the Company to protect its technology assets
by obtaining and enforcing patents; and dependence on sole and limited
source suppliers for certain components and subassemblies included in the
Company's products and systems.
As a result of the foregoing and other factors, we may experience material
fluctuations in our future operating results on a quarterly or annual basis,
which could materially affect our business, financial position, results of
operations, and stock price.
Page 12
HELIX TECHNOLOGY CORPORATION
PART I
Item 3. Quantitative and Qualitative Disclosures about Market Risk
-------------------------------------------------------------------
Foreign Currency Exchange Rate Risk
-----------------------------------
A portion of our business is conducted outside the United States through our
foreign subsidiaries. Our foreign subsidiaries maintain their accounting
records in their local currencies. Consequently, fluctuations in exchange
rates affect the period-to-period comparability of results. To reduce the
risks associated with foreign currency rate fluctuations, we have entered
into forward exchange contracts on a continuing basis to offset the currency
exposures. The gains and losses on these transactions partially offset the
unrealized and realized foreign exchange gains and losses of the underlying
exposures. The net gains and losses were immaterial for the periods
presented and were included in cost of sales. We plan to continue to use
forward exchange contracts to mitigate the impact of exchange rate
fluctuations. The notional amount of our outstanding foreign currency
contracts at June 28, 2002, was $11.3 million. The potential fair value
loss for a hypothetical 10% adverse change in forward currency exchange
rates at June 28, 2002, would be $1.1 million, which would be essentially
offset by corresponding gains related to the underlying assets. The
potential loss was estimated calculating the fair value of the forward
exchange contracts at June 28, 2002, and comparing that with the value
calculated using the hypothetical forward currency exchange rates.
Credit Risk
-----------
We are exposed to concentration of credit risk in cash and cash equivalents,
investments, trade receivables, and short-term foreign exchange forward
contracts. Our cash and cash equivalents placed with our financial
institutions have a high-quality credit rating. Our investments consist of
money market funds, municipal government agencies and tax-free bonds or
investment-grade securities. We enter into short-term foreign currency
exchange contracts with our primary bank.
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HELIX TECHNOLOGY CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
--------------------------
On July 11, 2002, we signed an Agreement in Principle with Raytheon Company
in connection with an action brought in 1998 in the Massachusetts Superior
Court by Raytheon Company which alleged that between 1992 and 1994 we sold
Raytheon defective components used in missile guidance systems manufactured
by Raytheon. We have not been in the business of selling these components
since 1994. While we have continuously denied all claims, the Company and
its insurers concluded that it was in the Company's best interest to reach
an out-of-court settlement to avoid the distraction and expense of a jury
trial. Under the terms of the Agreement, the Company is obligated to pay
$2.8 million. Insurance providers will pay an additional $2.1 million and
essentially all of the legal costs associated with this litigation.
We are also involved in various legal proceedings in the normal course of
business. In our opinion, these proceedings involve amounts that would not
have a material effect on our financial position or results of operations if
such proceedings were resolved unfavorably.
Item 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
The Company's Annual Meeting of Stockholders was held on April 24, 2002.
Proposal I, submitted to a vote of security holders at the meeting, was the
election of Directors. The following Directors, being all of the Directors
of the Company, were elected at the meeting, with the number of votes cast
for each Director or withheld from each Director being set forth after his
respective name:
Name Votes For Votes Withheld
---- --------- --------------
Arthur R. Buckland 20,086,188 433,200
Frank Gabron 19,973,233 546,155
Robert H. Hayes 20,212,088 307,300
Robert J. Lepofsky 20,216,927 302,461
Marvin G. Schorr 20,216,633 302,755
Mark S. Wrighton 20,219,721 299,667
Proposal II submitted to a vote of security holders at the meeting was to
amend and restate the Stock Option Plan for Non-Employee Directors. Votes
cast were as follows:
For Against Abstain
--- ------- -------
19,536,087 666,055 317,245
Item 6(b). Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during the quarter
ended June 28, 2002.
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HELIX TECHNOLOGY CORPORATION
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HELIX TECHNOLOGY CORPORATION
(Registrant)
July 18, 2002 By: /s/Jay Zager
------------- -----------------------
Date Jay Zager
Senior Vice President
Chief Financial Officer
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