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 March 27, 1998.
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) 337-5111
-------------------------------
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 March 27, 1998 was 19,832,206.
HELIX TECHNOLOGY CORPORATION
Form 10-Q
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.......................... ....3-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....10-12
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders.............................................13
Item 6 (a). Exhibits............................................14
Item 6 (b). Reports on Form 8-K.................................14
Signature...................................................................15
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------
Mar. 27, 1998 Dec. 31, 1997
(in thousands) Notes (unaudited) (audited)
- ------------------------------------------------------------------------------------------------
ASSETS
Current:
Cash and cash equivalents ........................... $ 8,458 $ 33,360
Investments ......................................... 2 25,211 --
Receivables - net of allowances ..................... 14,647 15,371
Inventories ......................................... 3 11,963 11,287
Deferred income taxes ............................... 4 4,215 4,215
Other current assets ................................ 1,101 1,096
-------- --------
Total Current Assets ................................ 65,595 65,329
-------- --------
Property, plant and equipment at cost ............... 27,628 27,094
Less: accumulated depreciation ................. (18,190) (17,370)
-------- --------
Net property, plant and equipment ................... 9,438 9,724
Other assets ........................................ 6,590 6,613
======== ========
TOTAL ASSETS ........................................ $ 81,623 $ 81,666
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable .................................... $ 5,764 $ 4,695
Payroll and compensation ............................ 1,864 3,691
Retirement costs .................................... 3,176 2,960
Income taxes ........................................ 3,159 2,931
Other accrued liabilities ........................... 504 343
-------- --------
Total Current Liabilities ........................... 14,467 14,620
-------- --------
Commitments ......................................... -- --
Stockholders' Equity:
Preferred stock, $1 par value; authorized
2,000,000 shares; issued and outstanding: none .... -- --
Common stock, $1 par value; authorized 30,000,000
shares; issued and outstanding: 19,832,206 in
1998 and 19,830,206 in 1997 ....................... 19,832 19,830
Capital in excess of par value ...................... 3,582 1,897
Accumulated other comprehensive income (loss) ....... 6 (283) 71
Retained earnings ................................... 44,025 45,248
-------- --------
Total Stockholders' Equity .......................... 67,156 67,046
======== ========
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......... $ 81,623 $ 81,666
======== ========
The accompanying notes are an integral part of these financial statements.
Page 3
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
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(in thousands except per share data) Notes Three Months Ended
Mar. 27, 1998 Mar. 28, 1997
- --------------------------------------------------------------------------------
Net Sales ........................... $ 25,872 $ 29,022
-------- --------
Costs and expenses:
Cost of sales ................... 13,857 15,559
Research and development ........ 2,553 1,875
Selling, general and
administrative ................ 5,695 5,745
-------- --------
22,105 23,179
-------- --------
Operating income .................... 3,767 5,843
Joint venture income ................ 372 314
Interest income ..................... 332 349
Other ............................... (14) (9)
-------- --------
Income before taxes ................. 4,457 6,497
Income taxes ........................ 4 (1,516) (2,339)
-------- --------
Net income .......................... $ 2,941 $ 4,158
======== ========
Net income per share:
Basic ........................... 5 $ .15 $ .21 *
Diluted ......................... 5 $ .15 $ .21 *
======== ========
Number of shares used in per share
calculations:
Basic ........................... 5 19,832 19,738 *
Diluted ......................... 5 19,990 19,918 *
======== ========
*Share and per share data reflect a two-for-one stock split effective November
1997.
The accompanying notes are an integral part of these financial statements.
Page 4
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
- ------------------------------------------------------------------------------------------------------------------
Three Months Ended
(in thousands) Mar. 27, 1998 Mar. 28, 1997
- ------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income ........................................................... $ 2,941 $ 4,158
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation ......................................................... 857 639
Undistributed earnings of joint venture, other ....................... (339) (282)
Net change in operating assets and liabilities (A) ................... 1,541 (317)
-------- --------
Net cash provided by operating activities ................................. 5,000 4,198
-------- --------
Cash flows from investing activities:
Capital expenditures ................................................. (571) (413)
Purchase of investments .............................................. (33,644) --
Proceeds from sale of investments .................................... 8,441 --
-------- --------
Net cash used by investing activities ..................................... (25,774) (413)
-------- --------
Cash flows from financing activities:
Shares tendered for exercise of stock options ........................ -- (232)
Net cash provided by employee stock plans ............................ 37 278
Cash dividends paid .................................................. (4,165) (3,457)
-------- --------
Net cash used by financing activities ..................................... (4,128) (3,411)
-------- --------
Increase (decrease) in cash and cash equivalents .......................... (24,902) 374
Cash and cash equivalents, at the beginning of the period ................. 33,360 29,378
======== ========
Cash and cash equivalents, at the end of the period ....................... $ 8,458 $ 29,752
======== ========
(A) Change in operating assets and liabilities:
(Increase)/decrease in accounts receivable ......................... $ 724 $ (3,552)
(Increase)/decrease in inventories ................................. (676) 782
(Increase)/decrease in other current assets ........................ (5) (245)
Increase/(decrease) in accounts payable ............................ 1,069 660
Increase/(decrease) in other accrued expenses ...................... 429 2,038
======== ========
Net change in operating assets and liabilities ..................... $ 1,541 $ (317)
======== ========
The accompanying notes are an integral part of these financial statements.
Page 5
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
In the opinion of the Company, the accompanying consolidated financial
statements for the periods ended March 27, 1998, and March 28, 1997, contain all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position as of March 27, 1998, and December 31,
1997, and the results of operations and cash flows for the periods ended March
27, 1998, and March 28, 1997.
The results of operations for the three-month period ended March 27, 1998, are
not necessarily indicative of the results expected for the full year.
The condensed financial statements included herein have been prepared by the
Company, without audit of the three-month periods ended March 27, 1998, and
March 28, 1997, 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. These condensed 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 and
Form 10-K/A.
Note 2 - Investments
At March 27, 1998 the Company's investments were classified as
available-for-sale. The difference between the cost and fair value of these
investments was immaterial and is included in stockholders equity. The
investment balance at March 27, 1998 by major security type follows:
- --------------------------------------------------------------------------------
(in thousands) Cost Fair Value
- --------------------------------------------------------------------------------
Short-term instruments ................ $ 2,820 $ 2,820
Municipal and tax free bonds .......... 22,383 22,391
------- -------
$25,203 $25,211
======= =======
Note 3 - Inventories
- --------------------------------------------------------------------------------
(in thousands) Mar. 27, 1998 Dec. 31, 1997
- --------------------------------------------------------------------------------
Finished goods ........................ $ 3,256 $ 3,846
Work in process ....................... 7,242 6,460
Materials and parts ................... 1,465 981
------- -------
Net inventories ....................... $11,963 $11,287
======= =======
Inventories are stated at the lower of cost or market on a first-in, first-out
basis.
Page 6
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Income Taxes
The federal, state and foreign income tax provisions of $1,516,000 and
$2,339,000 for the three-month periods ended March 27, 1998, and March 28, 1997,
respectively, reflect the effects of various available tax credits. 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 United States taxes on
the undistributed earnings of its wholly owned foreign subsidiaries, since these
earnings are indefinitely reinvested.
A certain level of export income of the Company's Foreign Sales Corporation
(FSC) is permanently exempt from federal income tax; accordingly, the income tax
provisions for the three-month periods ended March 27, 1998, and March 28, 1997,
include the federal tax benefit on export income of the FSC.
The effective income tax rate for the three-month periods ended March 27, 1998,
and March 28, 1997, was 34.0% and 36.0%, respectively.
The major components of deferred tax assets are compensation and benefit plans,
inventory valuation, and leases, respectively. Based on past experience, the
Company expects that the future taxable income will be sufficient for the
realization of the deferred tax assets. The Company believes that a valuation
allowance is not required.
Note 5 - Net Income Per Share
The Company has adopted Financial Accounting Standard No. 128, which specifies
the computation, presentation and disclosure of net income per share. Basic net
income per common share is based on the weighted average number of common shares
outstanding during the year. Diluted net income 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.
Page 7
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 (Cont'd.)
The following table sets forth the computation of basic and diluted net income
per common share:
- ------------------------------------------------------------------------------------------------------------------
Three Months Ended
(in thousands except per share data) Mar. 27, 1998 Mar. 28, 1997
- ------------------------------------------------------------------------------------------------------------------
Net income .......................................................................... $ 2,941 $ 4,158
======= =======
Basic shares ........................................................................ 19,832 19,738
Add: 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 210 and 0 for 1998 and 1997, respectively, because the option's
price was greater than the average market price of the common shares. ....... 158 180
------- -------
Diluted shares ...................................................................... 19,990 19,918
======= =======
Basic net income per share .......................................................... $ .15 $ .21
======= =======
Diluted net income per share ........................................................ $ .15 $ .21
======= =======
Note 6 - Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 (SFAS 130) "Reporting Comprehensive Income". SFAS 130
establishes standards for the reporting and display of comprehensive income and
its components. SFAS 130 requires unrealized gains or losses on the Company's
available-for-sale investments and foreign currency translation adjustments,
which prior to adoption were reported separately in stockholders' equity to be
included in other comprehensive income.
- --------------------------------------------------------------------------------------------------------------
Three Months Ended
(in thousands) Mar. 27, 1998 Mar. 28, 1997
- --------------------------------------------------------------------------------------------------------------
Net income .................................................................. $ 2,941 $ 4,158
------- -------
Other comprehensive income (loss) before tax
Foreign currency translation adjustment ................................ (464) (359)
Unrealized gain on available-for-sale investment ....................... 8 --
------- -------
Other comprehensive income (loss), before tax ............................... (456) (359)
Income tax related to items of other comprehensive income ................... 102 95
------- -------
Other comprehensive income, net of tax ...................................... (354) (264)
------- -------
Comprehensive income ........................................................ $ 2,587 $ 3,894
======= =======
Page 8
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information" (SFAS 131). SFAS 131 requires public companies to report
segment information on the basis used internally to measure segment performance
in complete financial statements and in condensed interim financials issued to
stockholders. This segment information includes their products and services, the
geographic areas in which they operate and their major customers. The Company
will comply with the disclosure requirements of the statement in the 1998 Annual
Report.
In February 1998, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 132 (SFAS132), Employers' Disclosures about pensions and
other post retirement benefits. The Company will comply with the additional
disclosure requirements of the statement in the 1998 Annual Report.
Note 8 - Subsequent Event
On April 16, 1998 the Company announced the signing of a definitive agreement to
acquire Granville-Phillips Company of Boulder, Colorado, a privately owned
provider of advanced vacuum measurement solutions. Under the terms of the
agreement, Granville-Phillips' shareholders will receive approximately 2.4
million shares of Helix common stock. The transaction will be accounted for as a
pooling of interests and is expected to close in the second quarter of 1998,
subject to regulatory approvals and other customary closing conditions.
Granville-Phillips will become a division of Helix Technology Corporation with
its manufacturing, engineering and customer support operations remaining in
Boulder. Granville-Phillips had 1997 revenues of approximately $25 million.
Page 9
HELIX TECHNOLOGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the first quarter of 1998 were $25.9 million compared with $29.0
million for the first quarter of 1997, a decrease of 10.9%. This decline in
quarterly sales is a result of a slowdown in the global market for semiconductor
capital equipment primarily due to uncertainty in the Asian Market and the
overcapacity of the memory chip market.
Gross profit percentage was 46.4% both for the first quarter of 1998 and 1997.
The company's flexible manufacturing strategies have resulted in continued
strong gross profit performance, despite the year to year reduction in sales.
Research and development expenditures increased $.7 million compared with the
same period last year as the Company continues to develop new products. Total
Selling, general and administrative expense decreased by $.1 million primarily
due to decreases in variable compensation expense.
Operating income in the first quarter of 1998 decreased $2.1 million compared
with the first quarter of 1997 due to lower revenue levels and increased
research and development spending.
The Company's provision for income taxes was $1.5 million and $2.3 million for
the first quarter of 1998 and 1997, respectively. The effective tax rate for the
three-month periods ended March 27, 1998, and March 28, 1997, was 34.0% and
36.0%, respectively. The difference between the statutory federal rate and the
Company's effective tax rate is due to state and foreign income taxes. The lower
tax rate for 1998 is primarily due to increased tax credits for research and
development expenditures.
Liquidity and Capital Resources
Cash provided by operating activities for the first quarter of 1998 was $5.0
million compared with $4.2 million for the comparable period last year.
Cash used by investing activities increased by $25.4 million during the first
quarter of 1998 compared with the same period last year. The increase was
primarily due to the purchase of available-for-sale investments comprised
primarily of short-term tax exempt securities.
The Company's informal bank money market lines of credit amount to $12.0
million. There were no borrowings under these agreements during 1998 or 1997.
Cash dividends paid to stockholders during the first quarter of 1998 were $4.2
million or $.21 per common share compared with $3.5 million or $.175 per common
share for the first quarter of 1997.
Page 10
HELIX TECHNOLOGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
On April 16, 1998 the Board of Directors declared a quarterly cash dividend of
$.21 per common share. The dividend is payable on May 13, 1998 to stockholders
of record on April 29, 1998.
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.
The Company believes anticipated cash flow from operations and funds available
under existing credit lines will be adequate to fund operations through 1998 and
that it has opportunities to consider further financing options should
additional funds be required.
Subsequent Event
On April 16, 1998 the Company announced the signing of a definitive agreement to
acquire Granville-Phillips Company of Boulder, Colorado, a privately owned
provider of advanced vacuum measurement solutions. Under the terms of the
agreement, Granville-Phillips' shareholders will receive approximately 2.4
million shares of Helix common stock. The transaction will be accounted for as a
pooling of interests and is expected to close in the second quarter of 1998,
subject to regulatory approvals and other customary closing conditions.
Granville-Phillips will become a division of Helix Technology Corporation with
its manufacturing, engineering and customer support operations remaining in
Boulder. Granville-Phillips had 1997 revenues of approximately $25 million.
Year 2000
The Company has established a project team to work with our major customers and
suppliers regarding their abilities to meet the Year 2000 requirements.
Specifically, we have sent questionnaires to our suppliers regarding their Year
2000 programs, and we have received similar correspondence from our customers.
These programs are in process, and to date the Company is unaware of any
possible negative impact by these third parties in their abilities to be ready
for the Year 2000.
Certain of the Company's internal computer systems are not Year 2000 ready
(i.e., such systems use only two digits to represent the year in date data
fields and, consequently, may not accurately distinguish between the 20th and
21st centuries or may not function properly at the turn of the century). The
Company has been taking actions intended to either correct such systems or
replace them with Year 2000 ready systems. The Company expects to implement
successfully the systems and programming changes necessary to address Year 2000
issues and does not believe that the cost of such actions will have a material
effect on the Company's results of operations or financial condition.
Page 11
HELIX TECHNOLOGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information" (SFAS 131). SFAS 131 requires public companies to report
segment information on the basis used internally to measure segment performance
in complete financial statements and in condensed interim financials issued to
stockholders. This segment information includes their products and services, the
geographic areas in which they operate and their major customers. The Company
will comply with the disclosure requirements of the statement in the 1998 Annual
Report.
In February 1998, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 132 (SFAS132), Employers' Disclosures about pensions and
other post retirement benefits. The Company will comply with the additional
disclosure requirements of the statement in the 1998 Annual Report.
Business Risks and Uncertainties
The Company operates in a changing and cyclical business environment that
involves a number of risks, some of which are beyond the Company's control. The
Company's future results will depend on its continued ability to manage the
cyclical nature of the semiconductor capital equipment industry, the Company's
ability to introduce new products to meet its customers' demands for higher
productivity and reliability, and the dependence of the Company on key customers
and key suppliers.
Forward-Looking Statements
This Form 10-Q, other SEC filings, and pronouncements and press releases made
from time to time by the Company through its senior management may include a
number of forward-looking statements, including, but not limited to, statements
with respect to the Company's future financial performance, operating results,
plans and objectives. Such statements are made pursuant to the Safe Harbor
provisions of the Private Securities Litigation Reform Act of 1995. Actual
results may differ materially from those anticipated by such statements
depending upon a variety of factors, some of which are itemized in the "Business
Risks and Uncertainties" section above. The Company undertakes no responsibility
to update any forward-looking statements which may be made to reflect events or
circumstances occurring after the dates the statements were made or to reflect
the occurrence of unanticipated events.
Page 12
HELIX TECHNOLOGY CORPORATION
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on April
29, 1998. Proposal I submitted to a vote of security holders
at the meeting was the election of Directors. The following
Directors, being all the Directors of the Corporation, 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 18,014,859 67,479
Matthew O. Diggs, Jr. 18,027,263 55,075
Frank Gabron 18,026,763 55,575
Robert J. Lepofsky 18,027,538 54,800
Marvin G. Schorr 17,983,308 99,030
Wickham Skinner 17,968,453 113,885
Mark S. Wrighton 18,018,152 64,186
No abstentions or broker non-votes were recorded.
Proposal II submitted to a vote of security holders at the
meeting was an amendment of the Company's Certificate of
Incorporation to increase the number of authorized shares of
Common Stock from 30,000,000 shares to 60,000,000 shares.
Votes cast were as follows:
For Against Abstain
17,647,904 376,166 58,268
The proposal was approved.
Proposal III submitted to a vote of security holders at the
meeting was ratification of the appointment of Coopers &
Lybrand, L.L.P., as the Company's independent accountants for
fiscal year 1998.
For Against Abstain
18,012,311 26,838 43,189
The proposal was approved.
Page 13
HELIX TECHNOLOGY CORPORATION
PART II. OTHER INFORMATION
Item 6(a). Exhibits
4A Description of Common Stock (incorporated herein, by
reference to Exhibit 3 to the Form 10-Q for the
quarter ended September 30, 1988).
4B Description of Preferred Stock (incorporated herein,
by reference to Exhibit 3 to the Form 10-Q for the
quarter ended September 30, 1988).
27 Financial Data Schedule (EDGAR version only)
Item 6(b). Reports on Form 8-K
No Form 8-K was required to be filed during the quarter ended
March 27, 1998.
Page 14
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)
May 8, 1998 By: /s/Michael El-Hillow
- -------------------- ------------------------------
Date Michael El-Hillow
Senior Vice President and
Chief Financial Officer