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 July 2, 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 July 2, 1999 was 22,339,131.
<PAGE>
HELIX TECHNOLOGY CORPORATION
Form 10-Q
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of July 2, 1999 and
December 31, 1998...................................................3
Consolidated Statements of Operations for the Six-Month Periods
Ended July 2, 1999 and June 26, 1998................................4
Consolidated Statements of Cash Flows for the Six-Month
Periods Ended July 2, 1999 and June 26, 1998........................5
Consolidated Statements of Comprehensive Income for the Six-Month
Periods Ended July 2, 1999 and June 26, 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>
- ---------------------------------------------------------------------------------------------------
July 2, 1999 Dec. 31, 1998
(in thousands except per share data) (unaudited) (audited)
- ---------------------------------------------------------------------------------------------------
ASSETS
Current:
<S> <C> <C>
Cash and cash equivalents $ 6,704 $ 8,843
Investments (Note 2) 15,757 18,152
Receivables - net of allowances 16,822 9,783
Inventories (Note 3) 16,354 14,811
Deferred income taxes (Note 4) 5,157 5,157
Other current assets 1,614 1,106
- ---------------------------------------------------------------------------------------------------
Total Current Assets 62,408 57,852
- ---------------------------------------------------------------------------------------------------
Property, plant and equipment at cost 38,006 36,691
Less: accumulated depreciation (27,613) (25,990)
- ---------------------------------------------------------------------------------------------------
Net property, plant and equipment 10,393 10,701
Other assets 7,758 7,099
- ---------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 80,559 $ 75,652
===================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable $ 7,751 $ 3,752
Payroll and compensation 3,669 2,884
Retirement costs 3,998 3,588
Income taxes (Note 4) 884 507
Other accrued liabilities (Note 6) 1,057 1,553
- ---------------------------------------------------------------------------------------------------
Total Current Liabilities 17,359 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: 22,339,131 in 1999
and 22,319,131 in 1998 22,339 22,319
Capital in excess of par value 8,325 7,936
Treasury stock, $1 par value (19,501 shares in 1999 and
34,000 shares in 1998) (251) (438)
Accumulated other comprehensive income (loss) (25) (359)
Retained earnings 32,812 33,910
- ---------------------------------------------------------------------------------------------------
Total Stockholders' Equity 63,200 63,368
- ---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 80,559 $ 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 Six months ended
July 2, June 26, July 2, June 26,
(in thousands except per share data) 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $32,533 $25,706 $58,433 $57,200
Costs and expenses:
Cost of sales 18,379 15,751 33,490 32,543
Research and development 2,553 2,902 4,619 6,089
Selling, general and administrative 7,597 6,895 14,754 14,074
Merger and special charges (Note 6) - 2,031 - 3,546
- -----------------------------------------------------------------------------------------------------------------
28,529 27,579 52,863 56,252
- -----------------------------------------------------------------------------------------------------------------
Operating income (loss) 4,004 (1,873) 5,570 948
Joint venture income 211 219 348 591
Interest and other income 192 389 428 724
- -----------------------------------------------------------------------------------------------------------------
Income (loss) before taxes 4,407 (1,265) 6,346 2,263
Income taxes (Note 4) 1,415 (831) 2,094 831
- -----------------------------------------------------------------------------------------------------------------
Net income (loss) $ 2,992 $ (434) $ 4,252 $ 1,432
=================================================================================================================
Net income (loss) per share:
Basic (Note 5) $ 0.13 $ (0.02) $ 0.19 $ 0.06
Diluted (Note 5) $ 0.13 $ (0.02) $ 0.19 $ 0.06
=================================================================================================================
Number of shares used in per share calculations:
Basic (Note 5) 22,319 22,215 22,313 22,215
Diluted (Note 5) 22,514 22,215 22,493 22,375
=================================================================================================================
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>
- -----------------------------------------------------------------------------------------------------------
Six Months Ended
(in thousands) July 2, 1999 June 26, 1998
- -----------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 4,252 $ 1,432
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Amortization of deferred compensation (Note 6) - 861
Depreciation 2,043 1,934
Other 5 (572)
Net change in operating assets and liabilities (A) (4,015) 1,110
- -----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,285 4,765
- -----------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (1,735) (1,134)
Purchase of investments (12,524) (41,852)
Sale of investments 14,857 19,508
- -----------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities 598 (23,478)
- -----------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net cash provided by employee stock plans 327 43
Cash dividends paid (5,349) (8,870)
- -----------------------------------------------------------------------------------------------------------
Net cash used by financing activities (5,022) (8,827)
- -----------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents (2,139) (27,540)
Cash and cash equivalents, at the beginning of the period 8,843 34,717
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, at the end of the period $ 6,704 $ 7,177
===========================================================================================================
(A) Change in operating assets and liabilities:
(Increase)/decrease in accounts receivable $ (7,039) $ 4,349
(Increase)/decrease in inventories (1,543) (302)
(Increase)/decrease in other current assets (508) (265)
Increase/(decrease) in accounts payable 3,999 (286)
Increase/(decrease) in other accrued expenses 1,076 (2,386)
- -----------------------------------------------------------------------------------------------------------
Net change in operating assets and liabilities $ (4,015) $ 1,110
===========================================================================================================
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>
- --------------------------------------------------------------------------------------------------------------
Six Months Ended
(in thousands) July 2, 1999 June 26, 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income $4,252 $1,432
- --------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) before tax:
Foreign currency translation adjustment 690 (515)
Unrealized gain (loss) on available-for-sale investment (62) 5
- --------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), before tax 628 (510)
Income tax related to items of other comprehensive income (loss) (294) 98
- --------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), net of tax 334 (412)
- --------------------------------------------------------------------------------------------------------------
Comprehensive income $4,586 $1,020
==============================================================================================================
</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 July 2, 1999, and June 26, 1998, contain all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position as of July 2, 1999, and December 31, 1998,
and the results of operations and cash flows for the periods ended July 2, 1999,
and June 26, 1998. Certain reclassifications have been made to prior year
consolidated financial statements to conform with the current presentation.
The results of operations for the six-month period ended July 2, 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 six-month periods ended July 2, 1999, and June 26,
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 $15,757,000 and $18,152,000 as of July 2, 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) July 2, 1999 Dec. 31, 1998
- -----------------------------------------------------------------
Finished goods $ 4,439 $ 3,067
Work in process 7,702 7,597
Materials and parts 4,213 4,147
- -----------------------------------------------------------------
$16,354 $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 was $2,094,000 for the
six-month period ended July 2, 1999 and $831,000 for the six-month period ended
June 26, 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 six-month periods ended July 2, 1999, and
June 26, 1998, was 33% and 36.7%, respectively. The effective tax rate for the
six-month period ended June 26, 1998 was unfavorably 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, net operating loss and tax credit carry forwards,
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
- -----------------------------
Basic net income per common share is based on the weighted average number of
common shares outstanding during the period. Diluted net 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 income
per common share:
- ----------------------------------------------------------------------------
Six Months Ended
(in thousands except per share data) July 2, 1999 June 26, 1998
- ----------------------------------------------------------------------------
Net income $ 4,252 $ 1,432
============================================================================
Basic shares 22,313 22,215
Add: Common equivalent shares (1) 180 160
- ----------------------------------------------------------------------------
Diluted shares 22,493 22,375
============================================================================
Basic net income per share $ 0.19 $ 0.06
============================================================================
Diluted net income per share $ 0.19 $ 0.06
============================================================================
(1) Common equivalent shares represent shares issuable upon exercise of stock
options (using the treasury stock method). Options outstanding not included in
the computation of diluted shares were 210,000 as of July 2, 1999, and 321,000
as of June 26, 1998, because the option price was greater than the average
market price of the common shares.
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, of which $2.0 million were incurred in the
second quarter of 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 July 2, 1999, $0.3 million of the restructuring accrual
remained in other accrued expenses, which the Company expects to be paid or
amortized by the third quarter of 1999.
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
Results of Operations
- ---------------------
In the first half of 1999, the semiconductor capital equipment industry began to
recover from the significant worldwide downturn that the industry experienced
throughout 1998. Because of this positive industry trend since the end of 1998,
net sales for the second quarter of 1999 were $32.5 million compared with $25.7
million a year ago, an increase of 26%. Net sales for the six-month period were
$58.4 million, an increase of 2%, from $57.2 million for the first half of 1998.
The gross profit percentage for the quarter was 43.5% compared with 38.7% for
the second quarter of 1998, directly attributable to higher net sales and
related production levels. The gross profit percentage for the first half of
1999 was 42.7%, approximating the prior year's 43.1%, on essentially flat
year-to-date net sales.
Spending levels in the first half of 1999 have been favorably impacted by
restructuring actions by the Company in the third quarter of 1998. 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 in the third quarter of 1998 of
$2.5 million. The Company expects that these changes will provide approximately
$4.0 million of annual cost savings in 1999 or 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 July 2, 1999, $0.3 million of the restructuring accrual remained in other
accrued expenses, which the Company expects to be paid or amortized by the end
of the third quarter of 1999.
Research and development expenses were $2.6 million for the second quarter of
1999 or 8% of net sales compared to $2.9 million or 11% of net sales for the
same period last year. Year-to-date 1999 spending was $4.6 million or $1.5
million less than the same period last year. 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 selectively adjusting
its spending on other programs to be in line with industry conditions,
positioning the Company for growth as the economics improve in the worldwide
semiconductor industry.
Total selling, general and administrative expenses increased by $0.7 million in
the second quarter and first half of 1999 compared to the same periods in 1998,
primarily due to higher variable compensation expense and expenses related to
the start-up of the Japanese subsidiary operations, offset by savings related to
the restructuring actions.
Operating income increased $5.9 million and $4.7 million in the second quarter
of 1999 and year-to-date, respectively, compared with the same periods of 1998.
The primary reasons for the increases are higher net sales in 1999 and the
non-recurring merger and special charges associated with the Company's
pooling of interest transaction with Granville-Phillips Company in May of 1998.
For the second quarter of 1999, the Company had a pretax income of $4.4 million
resulting in a tax provision of $1.4 million compared to a pretax loss of $1.3
million and a tax benefit of $0.8 million for the same period a year ago. For
the first half of 1999 the company had pretax income of $6.3 million
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)
- ---------------------------------
and a tax provision of $2.1 million compared to pretax income of $2.3 million
and a tax provision of $0.8 million for the first half of 1998. The effective
tax rate for the six-month periods ended July 2, 1999, and June 26, 1998, was
33% and 36.7%, respectively. The tax rate in 1998 was unfavorably impacted by
merger and special charges, which were not fully deductible for tax purposes.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities for the first six months of 1999 was $2.3
million compared with $4.8 million for the comparable period in 1998, primarily
due to increased accounts receivable partially offset by increased accounts
payable. Both changes were driven by the increased net sales activity at the end
of the second quarter of 1999, when compared with the same period of 1998.
Cash used by investing activities decreased by $24.1 million during the first
six months of 1999 compared with the same period last year, due to the purchase
of available-for-sale investments, which occurred during the first quarter of
1998.
Cash dividends paid to stockholders during the first six months of 1999 were
$5.3 million compared with $8.9 million during the first six months of 1998. 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 the first and second
quarters of 1998.
On July 16, 1999, the Board of Directors declared a quarterly cash dividend of
$0.12 per common share. The dividend is payable on August 6, 1999, to
stockholders of record at the close of business July 29, 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 through at least 1999 and that it has opportunities to
consider further financing options should additional funds be required.
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.
Page 11
<PAGE>
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
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 shipment levels, 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 will 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 will be performed during the
second half of 1999, focusing on those systems classified as high risk of
failure as well as critical to the business. Independent organizations might be
employed to assist the Company as needed to test and verify such internal
systems are Year 2000 compliant.
EXTERNAL SUPPLIERS OF GOODS AND SERVICES. Starting in January 1998, the Company
undertook a program to understand and mitigate Year 2000 problems with those
external suppliers who are crucial to the Company's operations, including parts
providers, carriers, telecommunications providers, utilities, financial
institutions and others. A series of questionnaires was sent to external
suppliers. As a result, the Company has determined that the majority of the
Company's suppliers are either Year 2000 compliant or are aware of the problem
and have an active program underway to address their particular problems. For
each supplier who is not Year 2000 compliant, the Company has defined a
contingency plan in case the supplier cannot or will not resolve its Year 2000
problems in a timely 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
July 2, 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)
August 3, 1999 By: /s/Michael El-Hillow
- --------------------------------- -------------------------------------
Date Michael El-Hillow
Senior Vice President
Chief Financial Officer
Page 16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUL-02-1999
<CASH> 6,704
<SECURITIES> 15,757
<RECEIVABLES> 17,061
<ALLOWANCES> (239)
<INVENTORY> 16,354
<CURRENT-ASSETS> 62,408
<PP&E> 38,006
<DEPRECIATION> (27,613)
<TOTAL-ASSETS> 80,559
<CURRENT-LIABILITIES> 17,359
<BONDS> 0
0
0
<COMMON> 22,339
<OTHER-SE> 40,861
<TOTAL-LIABILITY-AND-EQUITY> 80,559
<SALES> 58,433
<TOTAL-REVENUES> 58,433
<CGS> 33,490
<TOTAL-COSTS> 19,373
<OTHER-EXPENSES> (776)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,346
<INCOME-TAX> 2,094
<INCOME-CONTINUING> 4,252
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,252
<EPS-BASIC> 0.19
<EPS-DILUTED> 0.19
</TABLE>
