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 October 1, 1999.
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 October 1, 1999 was 22,341,631.
<PAGE>
HELIX TECHNOLOGY CORPORATION
Form 10-Q
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of October 1, 1999 and
December 31, 1998...................................................3
Consolidated Statements of Operations for the Three and Nine Months
Ended October 1, 1999 and September 25, 1998........................4
Consolidated Statements of Cash Flows for the Nine Months
Ended October 1, 1999 and September 25, 1998........................5
Consolidated Statements of Comprehensive Income for the Nine Months
Ended October 1, 1999 and September 25, 1998........................6
Notes to Consolidated Financial Statements...............................7-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............10-14
Item 3. Quantitative and Qualitative Disclosures about Market
Risk ........................................................14
Part II. OTHER INFORMATION
Item 6 (a). Exhibits.....................................................15
Item 6 (b). Reports on Form 8-K..........................................15
Signature.................................................................16
<PAGE>
<TABLE>
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
- ----------------------------------------------------------------------------------------
Oct. 1, 1999 Dec. 31, 1998
(in thousands except per share data) (unaudited) (audited)
- ----------------------------------------------------------------------------------------
ASSETS
Current:
<S> <C> <C>
Cash and cash equivalents $ 5,932 $ 8,843
Investments (Note 2) 15,771 18,152
Receivables - net of allowances 20,046 9,783
Inventories (Note 3) 16,846 14,811
Deferred income taxes (Note 4) 5,157 5,157
Other current assets 1,833 1,106
- ----------------------------------------------------------------------------------------
Total Current Assets 65,585 57,852
- ----------------------------------------------------------------------------------------
Property, plant and equipment at cost 39,092 36,691
Less: accumulated depreciation (28,466) (25,990)
- ----------------------------------------------------------------------------------------
Net property, plant and equipment 10,626 10,701
Other assets 7,992 7,099
- ----------------------------------------------------------------------------------------
TOTAL ASSETS $ 84,203 $ 75,652
========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable $ 7,080 $ 3,752
Payroll and compensation 4,687 2,884
Retirement costs 4,298 3,588
Income taxes (Note 4) 1,403 507
Other accrued liabilities (Note 6) 874 1,553
- ----------------------------------------------------------------------------------------
Total Current Liabilities 18,342 12,284
- ----------------------------------------------------------------------------------------
Commitments - -
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: 22,341,631 in 1999
and 22,319,131 in 1998 22,342 22,319
Capital in excess of par value 8,424 7,936
Treasury stock, $1 par value (14,444 shares in 1999 and
34,000 shares in 1998) (198) (438)
Accumulated other comprehensive income (loss) 373 (359)
Retained earnings 34,920 33,910
- ----------------------------------------------------------------------------------------
Total Stockholders' Equity 65,861 63,368
- ----------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 84,203 $ 75,652
========================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
Page 3
<PAGE>
<TABLE>
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
Oct. 1, Sept. 25, Oct. 1, Sept. 25,
(in thousands except per share data) 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $39,036 $18,550 $97,469 $75,750
Costs and expenses:
Cost of sales 21,431 12,602 54,921 45,145
Research and development 2,481 2,112 7,100 8,201
Selling, general and administrative 8,614 6,101 23,368 20,175
Merger, restructuring and special charges (Note 6) - 2,500 - 6,046
- -------------------------------------------------------------------------------------------------------------------
32,526 23,315 85,389 79,567
- -------------------------------------------------------------------------------------------------------------------
Operating income (loss) 6,510 (4,765) 12,080 (3,817)
- -------------------------------------------------------------------------------------------------------------------
Joint venture income 440 233 788 824
Interest and other income 192 270 620 994
- -------------------------------------------------------------------------------------------------------------------
Income (loss) before taxes 7,142 (4,262) 13,488 (1,999)
Income taxes (benefit) (Note 4) 2,357 (831) 4,451 -
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4,785 $(3,431) $ 9,037 $(1,999)
===================================================================================================================
Net income (loss) per share:
Basic (Note 5) $ 0.21 $ (0.15) $ 0.40 $ (0.09)
Diluted (Note 5) $ 0.21 $ (0.15) $ 0.40 $ (0.09)
===================================================================================================================
Number of shares used in per share calculations:
Basic (Note 5) 22,344 22,250 22,323 22,227
Diluted (Note 5) 22,673 22,250 22,553 22,227
===================================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
Page 4
<PAGE>
<TABLE>
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
- -------------------------------------------------------------------------------------------------
Nine Months Ended
(in thousands) Oct. 1, 1999 Sept. 25, 1998
- -------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 9,037 $ (1,999)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Amortization of deferred compensation (Note 6) - 861
Depreciation 3,082 2,933
Other 306 (568)
Net change in operating assets and liabilities (A) (6,967) 4,738
- -------------------------------------------------------------------------------------------------
Net cash provided by operating activities 5,458 5,965
- -------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (3,007) (1,335)
Purchase of investments (18,237) (46,509)
Sale of investments 20,565 29,255
- -------------------------------------------------------------------------------------------------
Net cash (used) by investing activities (679) (18,589)
- -------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Shares tendered for exercise of stock options - (438)
Net cash provided by employee stock plans 337 241
Cash dividends paid (8,027) (13,545)
- -------------------------------------------------------------------------------------------------
Net cash (used) by financing activities (7,690) (13,742)
- -------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (2,911) (26,366)
Cash and cash equivalents, at the beginning of the period 8,843 34,717
- -------------------------------------------------------------------------------------------------
Cash and cash equivalents, at the end of the period $ 5,932 $ 8,351
=================================================================================================
(A) Change in operating assets and liabilities:
(Increase)/decrease in accounts receivable $(10,263) $ 7,310
(Increase)/decrease in inventories (2,035) 57
(Increase)/decrease in other current assets (727) (532)
Increase/(decrease) in accounts payable 3,328 (1,114)
Increase/(decrease) in other accrued expenses 2,730 (983)
- -------------------------------------------------------------------------------------------------
Net change in operating assets and liabilities $ (6,967) $ 4,738
=================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
Page 5
<PAGE>
<TABLE>
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Nine Months Ended
(in thousands) Oct. 1, 1999 Sept. 25, 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income (loss) $9,037 $(1,999)
- -----------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) before tax:
Foreign currency translation adjustment 1,094 (954)
Unrealized (loss) gain on available-for-sale investments (53) 38
- -----------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), before tax 1,041 (916)
Income tax related to items of other comprehensive income (loss) (309) 268
- -----------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), net of tax 732 (648)
- -----------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) $9,769 $(2,647)
=======================================================================================================================
The accompanying notes are an integral part of these financial statements
</TABLE>
Page 6
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
- ------------------------------
In the opinion of the Company, the accompanying consolidated financial
statements for the periods ended October 1, 1999, and September 25, 1998,
contain all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial position as of October 1, 1999, and
December 31, 1998, and the results of operations and cash flows for the periods
ended October 1, 1999, and September 25, 1998. In May 1998, the Company
completed the acquisition of Granville-Phillips Company (GPC). The acquisition
was accounted for as a pooling of interests under Accounting Principles Board
Opinion No. 16 (see Note 6). All prior period consolidated financial statements
have been restated to include the financial position, results of operations and
cash flows of GPC as though it had been part of the Company for all periods
presented.
The results of operations for the nine months ended October 1, 1999, are not
necessarily indicative of the results expected for the full year.
The consolidated financial statements included herein have been prepared by the
Company, without audit of the three and nine months ended October 1, 1999, and
September 25, 1998, 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 - Investments
- --------------------
The Company had investments of $15,771,000 and $18,152,000 as of October 1,
1999, and December 31, 1998, respectively. The investments were classified as
"available-for-sale," and the difference in the cost and fair value of these
investments was immaterial and is included in other comprehensive income.
Note 3 - Inventories
- --------------------
- -----------------------------------------------------------------
(in thousands) Oct. 1, 1999 Dec. 31, 1998
- -----------------------------------------------------------------
Finished goods $ 4,730 $ 3,067
Work in process 7,726 7,597
Materials and parts 4,390 4,147
- -----------------------------------------------------------------
$16,846 $14,811
=================================================================
Inventories are stated at the lower of cost or market on a first-in, first-out
basis.
Page 7
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Income Taxes
- ---------------------
The net federal, state and foreign income tax provisions were $4,451,000 and $0,
respectively, for the nine months ended October 1, 1999, and September 25, 1998.
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 rate for the nine months ended October 1, 1999, and
September 25, 1998, was 33% and 0%, respectively. The effective tax rate for the
nine months ended September 25, 1998 was impacted by the merger and special
charges which are not fully deductible for tax purposes.
The major components of deferred tax assets are compensation and benefit plans,
inventory valuation and tax credit carryforwards, 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 (Loss) Per Share
- ------------------------------------
Basic net income (loss) per common share is based on the weighted average number
of common shares outstanding during the period. Diluted net income (loss) per
common share reflects the potential dilution that could occur if outstanding
stock options were exercised.
The following table sets forth the computation of basic and diluted net income
(loss) per common share:
- ----------------------------------------------------------------------------
Nine Months Ended
(in thousands except per share data) Oct. 1, 1999 Sept. 25, 1998
- ----------------------------------------------------------------------------
Net income (loss) $ 9,037 $ (1,999)
============================================================================
Basic shares 22,323 22,227
Add: Common equivalent shares (1) 230 -
- ----------------------------------------------------------------------------
Diluted shares 22,553 22,227
============================================================================
Basic net income (loss) per share $ 0.40 $ (0.09)
============================================================================
Diluted net income (loss) per share $ 0.40 $ (0.09)
============================================================================
(1) Common equivalent shares represent shares issuable upon exercise of stock
options (using the treasury stock method). All options outstanding were included
in the computation of diluted shares for 1999. In 1998, 421,000 options were not
included because the Company was in a net loss position, and the inclusion of
such shares would be anti-dilutive.
Page 8
<PAGE>
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Merger, Restructuring and Special Charges
- --------------------------------------------------
In the second quarter of 1998, the Company acquired GPC in a transaction
accounted for as a pooling of interests. The Company issued 2,382,925 shares of
common stock for all of the common stock of GPC. 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
approximately $3.5 million in 1998 and were charged against the results of
operations.
During the third quarter of 1998, the Company recorded restructuring and other
special charges of $2.5 million. 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. As of October 1, 1999, the restructuring accrual was fully
paid or amortized.
Note 7 - New Accounting Pronouncements
- --------------------------------------
In June 1998, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The adoption of this Standard in 2001 is not expected to have a
material effect on the Company's consolidated financial statements.
Page 9
<PAGE>
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. 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 1998 includes financial position, results of operations,
comprehensive income and cash flows of GPC.
Results of Operations
- ---------------------
Throughout 1999, the semiconductor capital equipment industry experienced a
rapid recovery from the significant worldwide downturn that occurred in 1998.
Because of this positive industry trend, net sales for the three months ended
October 1, 1999, (the "1999 Quarter") were $39.0 million compared with net sales
for the three months ended September 25, 1998, (the "1998 Quarter") of $18.6
million, an increase of 110%. Net sales for the nine months ended October 1,
1999, (the "1999 Period") were $97.5 million, an increase of 29%, from $75.8
million for the nine months ended September 25, 1998 (the "1998 Period").
The gross profit percentage for the 1999 Quarter was 45.1% compared with 32.1%
for the 1998 Quarter. The gross profit percentage for the 1999 Period was 43.7%
compared with 40.4% for the 1998 Period. The increase in gross profit percentage
for both quarters and periods was primarily attributable to higher net sales
leverage on fixed production costs.
Spending levels in the 1999 Period have been favorably impacted by restructuring
actions taken by the Company in the 1998 Quarter. As part of this restructuring,
the Company eliminated 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 Company expects that these changes will
provide approximately $4.0 million of annual cost savings in 1999 and enable
resources to be reallocated to strategic investments, such as the Company's
Japanese sales and global support subsidiary, which began operations in the
fourth quarter of 1998. At October 1, 1999, the restructuring accrual was fully
paid or amortized.
Research and development expenses were $2.5 million for the 1999 Quarter or 6%
of net sales compared to $2.1 million or 11% of net sales for the 1998 Quarter.
Spending was $7.1 million or 7% of net sales for the 1999 Period compared to
$8.2 million or 11% of net sales for the 1998 Period. As the 1998 downturn
progressively worsened, the Company reduced its R & D spending by focusing on
critical near-term and strategic projects. In 1999, the Company is adjusting its
spending to be in line with improving industry conditions and opportunities.
Total selling, general and administrative expenses increased by $2.5 million in
the 1999 Quarter and $3.2 million in the 1999 Period compared to the 1998
Quarter and 1998 Period, primarily due to higher variable compensation expense
and expenses related to the start-up of the Japanese subsidiary, partially
offset by savings related to the restructuring actions.
Operating income increased $11.3 million and $15.9 million in the 1999 Quarter
and the 1999 Period, respectively, compared with the 1998 Quarter and the 1998
Period. The primary reasons for the
Page 10
<PAGE>
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of Operations (continued)
- ---------------------------------
increases are higher net sales in 1999, sales leverage on fixed production costs
and reductions to 1998 operating income due to non-recurring merger and special
charges associated with the Company's pooling of interest transaction with GPC
in May 1998 and restructuring charges recorded in September 1998.
For the 1999 Quarter, the Company had pretax income of $7.1 million resulting in
a tax provision of $2.4 million compared to a pretax loss of $4.3 million and a
tax benefit of $0.8 million for the 1998 Quarter.
For the 1999 Period, the Company had pretax income of $13.5 million and a tax
provision of $4.5 million compared to pretax loss of $2.0 million and no tax
provision for the 1998 Period. The effective tax rate for the 1999 Quarter and
the 1999 Period was 33%. The effective tax rates for the 1998 Quarter and the
1998 Period were 19% and 0%, respectively. The tax rates for 1998 were impacted
by merger, restructuring and special charges, which were not fully deductible
for tax purposes.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities for the 1999 Period of $5.5 million was
relatively flat when compared with $6.0 million for the 1998 Period. This was
primarily due to increased net income offset by increased accounts receivable in
1999. These changes were driven by the increased net sales activity at the end
of the 1999 Period, when compared with the 1998 Period.
Cash used by investing activities decreased by $17.9 million during the 1999
Period compared to the 1998 Period, primarily due to lower purchases of
available-for-sale investments partially offset by increased capital
expenditures as industry business conditions improved.
Cash dividends paid to stockholders during the 1999 Period were $8.0 million
compared with $13.5 million during the 1998 Period. In October 1998, the Board
of Directors reduced the quarterly cash dividend to $0.12 per common share from
$0.21 per common share paid in each of the first three quarters of 1998.
On October 14, 1999, the Board of Directors declared a quarterly cash dividend
of $0.12 per common share. The dividend is payable on November 2, 1999, to
stockholders of record at the close of business on October 25, 1999.
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 were not material.
The Company believes that existing cash and investment balances will be adequate
to fund operations for the foreseeable future and that it has opportunities to
consider further financing options should additional funds be required.
Page 11
<PAGE>
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. 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 Standard No. 133 (SFAS 133), "Accounting for Derivative Instruments
and Hedging Activities." The adoption of this Standard in 2001 is not expected
to have a material effect on the Company's consolidated 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 "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 revenues, profitability, sufficiency of capital to
meet working capital and capital expenditure requirements may be forward-looking
statements. The words "expect," "anticipate," "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
adversely 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 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; 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; 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, 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.
Page 12
<PAGE>
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
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 were not
Year 2000 compliant. The remediation/replacement of those systems was begun in
mid-1998 and was completed in June 1999. Testing of these systems continue in
the second half of 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 completed the remediation efforts and related testing efforts of all
major systems in June 1999. Additional testing is being 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 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.
Page 13
<PAGE>
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Year 2000 (Continued)
- ---------------------
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 $0.8 million
has been incurred to date. Of the total cost, approximately $0.8 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.
The Company intends to adopt a contingency plan, if deemed necessary, to address
any issues raised as it completes remedial work on its internal systems and
assesses the state of readiness of its key external suppliers. As no specific
instance of material Year 2000 non-compliance has been discovered to date, the
Company has not yet adopted a contingency plan to deal with Year 2000 issues.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no significant changes in the Company's market risks since the
year ended December 31, 1998. For more information please read the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K.
Page 14
<PAGE>
HELIX TECHNOLOGY CORPORATION
PART II. OTHER INFORMATION
Item 6(a). Exhibits
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
October 1, 1999.
Page 15
<PAGE>
HELIX TECHNOLOGY CORPORATION
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HELIX TECHNOLOGY CORPORATION
(Registrant)
October 26, 1999 By: /s/Michael El-Hillow
- ------------------- -------------------------------
Date Michael El-Hillow
Senior Vice President
Chief Financial Officer
Page 16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> OCT-01-1999
<CASH> 5,932
<SECURITIES> 15,771
<RECEIVABLES> 20,252
<ALLOWANCES> (206)
<INVENTORY> 16,846
<CURRENT-ASSETS> 65,585
<PP&E> 39,092
<DEPRECIATION> (28,466)
<TOTAL-ASSETS> 84,203
<CURRENT-LIABILITIES> 18,342
<BONDS> 0
0
0
<COMMON> 22,342
<OTHER-SE> 43,519
<TOTAL-LIABILITY-AND-EQUITY> 84,203
<SALES> 97,469
<TOTAL-REVENUES> 97,469
<CGS> 54,921
<TOTAL-COSTS> 30,468
<OTHER-EXPENSES> (1,408)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,488
<INCOME-TAX> 4,451
<INCOME-CONTINUING> 9,037
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,037
<EPS-BASIC> 0.40
<EPS-DILUTED> 0.40
</TABLE>
