UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the Year Ended December 31, 2000, 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 and zip code)
Registrant's telephone number, including area code: (508) 337-5111
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g)
of the Act: Common Stock, $1 Par Value
(Title of Class)
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of the registrant's common stock held by
nonaffiliates of the registrant as of March 13, 2001, (computed by reference
to the quoted selling prices of such stock in the over-the-counter market),
was $563,647,457.
The number of shares outstanding of the registrant's Common Stock, $1 Par
Value, as of March 13, 2001, was 22,537,204.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Proxy Statement for the registrant's 2001 Annual
Meeting of Stockholders to be filed with the SEC in March 2001 are
incorporated by reference into Part III, Items 10-12.
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PART I
ITEM 1. BUSINESS
GENERAL
HELIX TECHNOLOGY CORPORATION (the "Company" or "Helix"), a Delaware
corporation organized in 1967, is a world leader in the development and
application of innovative solutions in the field of vacuum technology. The
development and delivery of components, total system solutions, and global
support of superior value is the singular focus of the men and women of Helix
who serve our broad customer base throughout the world.
The global electronic component manufacturing industry is our largest market.
Helix is a critical enabling technology provider meeting the demanding
requirements of state-of-the-art semiconductor, data storage, and flat panel
display manufacturing. One measure of our success and our impact is the fact
that today virtually every integrated circuit manufactured in the world is
processed in equipment dependent on the performance of Helix vacuum products,
systems, and support, placing us at a critical point in the electronics "food
chain." Our vacuum instrumentation is also used broadly in the analytical
instrument market and our cryogenic systems are facilitating the
commercialization of emerging applications for superconducting electronics.
Using our proprietary On-Board technology, a comprehensive package of
hardware and software that can integrate both Helix and non-Helix vacuum
products, Helix provides (On-Board is a registered trademark of Helix
Technology Corporation.):
* Original equipment manufacturers design and development support for fully
integrated vacuum systems with the flexibility to rapidly implement a full
range of process-driven solutions, and
* End-user customers performance-enhancing process controls, advanced
diagnostics, and communications capabilities to increase system uptime,
lower the cost of ownership, and facilitate the move to remote
e-diagnostics of critical enabling processes, such as vacuum.
VACUUM COMPONENTS AND SYSTEMS AND GLOBAL SUPPORT SERVICES
For over 30 years, unmatched customer responsiveness has been the cornerstone
of our business strategy. Helix customers want solutions that incorporate
the best technology, deliver the highest performance, perform to
specification out of the box, are delivered on time, are priced fairly, and
are supported by competent personnel anywhere in the world where they may be
used.
For our OEM customers this has meant having the right product, at the right
place, at the right time. From the initial platform design stage through
their production build process, our customers know they can depend on Helix.
Our lean manufacturing process is broadly recognized as a key element in the
ability of our OEM customers to keep pace with the unpredictable and ever-
changing demands of their own customers. This has never been more evident
than over the last 30 months where we increased our sequential production to
unprecedented levels while maintaining our excellent delivery performance.
For the ultimate end-users of our products, we are considered an essential
business partner who both ensures and enhances critical vacuum system
availability and performance. Our GUTS (Guaranteed Up Time Support) rapid
response system is broadly recognized for delivering unsurpassed service
responsiveness anywhere in the world, while our GOLDLink (Global On-Line
Diagnostics) capability has made us the leading provider in the emerging
market for remote e-diagnostic support services. (GUTS is a registered
trademark of Helix Technology Corporation.) (GOLDLink is a registered
service mark of Helix Technology Corporation.)
This ability to continuously meet the varying needs of both OEMs and end-
users, at any level of business activity, sets us apart from our competitors.
-2-
Vacuum Pumping Components and Systems. The Company's CTI-Cryogenics On-Board
Cryopumps and systems continue to be the industry standard for providing high
vacuum for both the PVD (physical vapor deposition or "sputtering") and ion
implantation markets. We are the supplier of choice to virtually every
semiconductor capital equipment OEM and semiconductor end-user. Our On-Board
Cryopumps provide clean, reliable, high-speed pumping for critical vacuum
process applications, ensuring high product yields and process throughputs.
The On-Board system enables central monitoring and control, either in-fab or
at remote sites, of every significant function of both individual pumps and
entire vacuum networks. Since 1988 we have delivered tens of thousands of
our On-Board Cryopumps - making it the best selling pump on the market.
Over the last few years, the Company has introduced its On-Board Waterpumps
and TurboPlus products to support the CVD (chemical vapor deposition) and
etch processes. (TurboPlus is a registered trademark of Helix Technology
Corporation.) On-Board Waterpumps are high-performance vacuum pumps that
optimize the performance of CVD and etch systems by increasing water vapor
pumping speed by a factor of five or more, providing substantially improved
system throughput and better process results. TurboPlus Vacuum Pumps offer
the process advantages of throughput pumping from the turbopump and the
uptime benefits of high-speed water vapor pumping, integrated into a compact
package with a single, easy-to-use interface.
Sales of our CTI-Cryogenics products and related support services represent
approximately 85% of consolidated sales. The average selling price for our
vacuum pumping systems is approximately $20,000.
Vacuum Measurement Components and Systems. The Company's Granville-Phillips
STABIL-ION and CONVECTRON vacuum measurement components and systems are
considered industry standards and are used in the PVD, ion implantation, CVD,
and etch processes. (STABIL-ION and CONVECTRON are registered trademarks of
Helix Technology Corporation.) The Company's vacuum gauging products are
also integrated into analytical instruments, primarily mass spectrometers.
STABIL-ION and CONVECTRON systems are individually calibrated at numerous
pressure values resulting in a stable and accurate gauge that does not change
calibration with time of use. This stable calibration is essential to
starting the production process at the same true pressure on every production
run. It also provides improved gauge-to-gauge reproducibility, which is
essential for process replication.
Companies depend on our measurement systems to provide repeatable readings,
ensuring that processes start at the desired pressure. Non-repeatable gauges
can shift over time, causing two different effects:
* If the gauge reads lower than the actual pressure, a process can be started
when the pressure is too high, possibly causing product defects.
* If the gauge reads higher than the actual pressure, the system will pump
down to a pressure lower than necessary for a process. This is equivalent to
system downtime.
Sales of our Granville-Phillips products and related services represent
approximately 15% of consolidated sales. The average selling price for our
vacuum measurement systems is approximately $500.
Global Support Services. Our history of providing unparalleled post-sales
support began with the introduction of our GUTS rapid response system in the
mid-1980's. Our GUTS response system is broadly recognized for delivering
unsurpassed responsiveness to problems whenever, wherever they may occur.
Every call to our GUTS line is answered by a capable, empowered Helix
employee who has the resources to diagnose a customer problem and to
guarantee a solution will be in place in 59 minutes or less. If necessary, a
part, a pump, a gauge, or a person will be en route to a customer's facility
within that 59-minute period to get a system back on-line. Historically we
have received approximately 30% to 40% of our revenue from providing global
support to our end-user customers.
-3-
To the typical Helix customer, a day, an hour, or even a few minutes of
production downtime is simply unacceptable. Given the magnitude of the
investment in plant and equipment and the value of the work-in-process, which
will only increase with the move to 300mm production equipment, tool
availability is a priority to our customers. While our GUTS response system
continues to be the leader in reactive customer support, the industry is
moving to Internet-based proactive remote e-diagnostics to further enhance
production efficiency and throughput and leverage industry-wide core
competencies. Helix is well positioned to provide e-diagnostics using our
On-Board Information Network and our GOLDLink capability.
Our On-Board network provides us with the ability to access performance data
of key vacuum system components, including third-party products, right at the
production tool. In fact, we have been doing that with our cryopumps since
the early 1990's. However, accessing the data is only the beginning. The
real value is what to do with the data.
Using our GOLDLink capability, Helix is:
* Transmitting tool performance data via the Internet directly from the fab
to our GOLDLink customer support center in Massachusetts, where
* Our vacuum system specialists continuously monitor and analyze the tool
performance data, comparing the actual performance parameters with the
optimum "expected" performance parameters (developed by our vacuum experts
in conjunction with our customers and third-party suppliers), and
* Providing our customers with solutions to any vacuum system problems.
Helix's vacuum system experts are the users of the information. We give our
customers "solutions," not information. This allows our customers to
redirect their employees to focus on their core competencies by leveraging
Helix's vacuum technology and control core competencies. Our ability to
detect performance anomalies before they cause a system failure is saving
customers significant tool downtime and increasing plant productivity at each
of our GOLDLink-connected operating sites. At December 31, 2000, we were
providing various levels of GOLDLink support to more than 25 semiconductor-
related fab sites around the world. In the process, we are bringing new
meaning to the words "Global Support."
CUSTOMERS AND MARKETS
Our customer service and technical support are important competitive factors
and are essential to building and maintaining close, long-term relationships
with our customers. We sell our products and services, primarily through
direct sales personnel, to customers in the United States, Europe, and the
Pacific Rim. Our sales and service personnel are located at our headquarters
in Mansfield, Massachusetts, and in regional offices in Longmont, Colorado;
Santa Clara, California; Austin, Texas; Tempe, Arizona; Darmstadt, Germany;
Orsay, France; Livingston, Scotland; Tokyo, Japan and Hsinchu, Taiwan. We
also have distributors and representatives in other major markets.
We market and sell our products and services primarily to large, original
equipment and end-user manufacturers of semiconductor, data storage, flat
panel display, and other industrial applications. We have sold our products
and services to more than 250 OEMs and more than 750 end-users worldwide,
resulting in a revenue mix of approximately 60% to 70% from OEMs and 30% to
40% from end-users.
The Company's one reportable segment is cryogenic and vacuum equipment. The
Company's largest customer is Applied Materials, the world's largest
manufacturer of semiconductor capital equipment, representing 40%, 29%, and
20% of net sales for 2000, 1999, and 1998, respectively. Our 10 largest
customers accounted for 60%, 50%, and 38% of net sales for 2000, 1999, and
1998, respectively. Information concerning the Company's segment information
and geographical breakdown is included in Note F of "Notes to Consolidated
Financial Statements" included elsewhere in this report.
-4-
Following is a discussion of the major markets for our products and services:
Semiconductor. We sell our products and services primarily to semiconductor
capital equipment manufacturers and end-users for incorporation into
equipment used to make integrated circuits. Our products are currently used
in a variety of applications including physical and chemical vapor
deposition, ion implantation, and etch. Precise vacuum levels enable the
production of integrated circuits. We anticipate that the semiconductor
capital equipment industry will continue to be a substantial part of our
business for the foreseeable future. Approximately 60% to 70% of our
revenues generally come from this customer group.
Data Storage. We sell products and services to data storage equipment
manufacturers and to data storage device manufacturers for use in producing a
variety of products including CDs; computer hard disks, including both media
and thin-film heads; CD-ROMs; and DVDs. These products use a PVD process to
produce optical and magnetic thin-film layers, as well as a protective wear
layer. Approximately 10% to 15% of our revenues generally come from this
customer group.
Flat Panel Display. We sell our products and services to manufacturers of
flat panel displays, which have fabrication processes similar to those
employed in manufacturing integrated circuits. Flat panel technology
produces bright, sharp, large, color-rich images on flat screens for products
ranging from hand-held computer games to laptop and desktop computer monitors
to large-screen televisions. Approximately 5% to 10% of our revenues
generally come from this customer group.
Other Customers. We sell our products and services to OEMs and producers of
end products in a variety of industrial markets. Thin-film optical coatings
are used in the manufacture of many industrial products including
architectural glass, eyeglasses, lenses, and front surface mirrors. Thin
films of diamond-like coatings and other materials are currently applied to
products to strengthen and harden surfaces on such diverse products as tools,
razor blades, automotive parts, and hip joint replacements. Certain
superconductivity companies use our cryogenic coolers for their base
stations. Our products are also used in a variety of analytical instruments,
industrial, and scientific research products. Approximately 10% to 20% of
our revenues generally come from this customer group.
The Company and Ulvac Corporation ("Ulvac") of Chigasaki, Japan, operate a
joint venture, Ulvac Cryogenics, Inc. ("UCI"), formed in 1981, which
manufactures and sells cryogenic vacuum pumps, principally to Ulvac, one of
the largest semiconductor OEMs in Japan. Each company owns 50% of UCI and
made initial cash investments of approximately $100,000, with no subsequent
cash investments. The joint venture arrangement includes a license and
technology agreement from the Company and a management and consultation
agreement from Ulvac. The Company and Ulvac essentially share control of the
joint venture.
MANUFACTURING
We manufacture our pump and compressor components at one of our facilities in
Mansfield, Massachusetts, and our measurement gauge components at our
Longmont, Colorado, facility. Our use of a lean manufacturing concept,
including fast cycle times, embedded quality control, and supply chain
management, allows us to consistently meet or exceed our customers' demands
for having the right product, at the right place, at the right time.
Our manufacturing activities consist of the assembly and testing of
components and subassemblies, which are then integrated into our final
products. Once final testing of all subassemblies is completed, the final
product is subjected to a series of reliability enhancing operations prior to
shipment to customers. We purchase a wide range of electronic, mechanical,
and electrical components, some of which are designed to our specifications.
We outsource some of our subassembly work. Our ability to meet our
customers' significantly fluctuating product demands at consistently short
lead times using demand flow and lean manufacturing techniques is a distinct
competitive advantage.
-5-
The Company's business is, generally, not dependent on the availability of
raw materials or components from any single source. Certain components,
however, may be available from only one or two qualified sources. The
Company's policy is to develop alternative sources for components and, where
possible, to avoid using scarce raw materials in its products.
BACKLOG
The backlog of orders believed to be firm was approximately $26.6 million at
December 31, 2000, compared to $13.8 million at December 31, 1999. The
Company expects to recognize revenues from essentially all of the
December 31, 2000, backlog during 2001.
RESEARCH AND DEVELOPMENT
The Company expended $16,131,000 in 2000 on research and development efforts,
compared to $9,916,000 and $10,106,000 in 1999 and 1998, respectively. These
expenditures reflect development activities relating to product enhancements,
new products for commercial applications, and GOLDLink support.
EMPLOYMENT
Total employment in the Company at the end of 2000 was 945, compared to 649
and 457 at the end of 1999 and 1998, respectively. This includes 203
temporary employees at the end of 2000, compared to 90 and eight in 1999 and
1998, respectively.
ENVIRONMENTAL AFFAIRS
Compliance with federal, state, and local provisions relating to
environmental quality has not had, and is not expected to have, a material
impact upon capital expenditures, earnings, or the competitive position of
the Company.
INTELLECTUAL PROPERTY
The Company holds many U.S. and foreign patents in the fields of vacuum
pumping, gauging, and cryogenics that it believes are significant to its
operations. These patents expire at various years through 2020. No patents
that the Company considers significant expire during the next five years.
The Company has a number of trademarks that it considers important to its
business. These trademarks are protected by registration in the United
States and other countries in which the Company's products are marketed.
COMPETITION
The markets for our products and services are highly competitive and
characterized by ongoing technological development and changing customer
requirements. Significant competitive factors in our markets include product
performance, price, quality, reliability, delivery, and level of customer
service and support.
While we believe that our products are industry standards, we have several
foreign and domestic competitors for each of our product lines. Some of
these competitors are subsidiaries/divisions of larger corporations and have
greater resources than we have. Our ability to continue to compete
successfully depends on our ability to make timely introductions of system
enhancements and new products and services, while continuing to provide
excellent pre- and post-sales support on existing products and services. We
believe we will be required to maintain a high level of investment in
research and development and sales and marketing in order to remain
competitive.
-6-
RISK FACTORS
Investors should consider carefully the following factors, in addition to the
other information contained in this filing, before investing in the shares of
the Company's common stock. This filing, and the documents incorporated by
reference, 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 on a variety of factors, some
of which are described below. The Company undertakes no responsibility to
update any forward-looking statements that may be made to reflect events and
circumstances occurring after the dates the statements were made or to
reflect the occurrence of unanticipated events.
Customer Concentration. A small number of customers are currently
responsible for a significant portion of the Company's net sales. In 2000
the Company's ten largest customers accounted for approximately 60% of net
sales, including 40% to Applied Materials. The Company anticipates that a
small number of customers will continue to account for a large portion of its
net sales. Furthermore, the Company generally does not obtain firm long-term
volume purchase commitments from its customers, and because of its efficient
manufacturing process has short lead-times for customer orders. In addition,
customer orders can be canceled and volume levels can be changed or delayed.
The timely replacement of canceled, delayed, or reduced orders with new
business cannot be assured. While the Company's products are used in the
manufacture of data storage devices, advanced coating applications, and flat
panel display product markets, the majority of the Company's sales are to
customers in the semiconductor capital equipment industry. The factors
discussed below affecting the semiconductor capital equipment industry in
general, or any of the Company's major customers in particular, could have a
material adverse effect on the Company, its results of operations and
prospects.
Quarterly Operating Results and Potential Volatility of Common Stock Price.
Our quarterly operating results have fluctuated significantly and we expect
them to continue to experience significant fluctuations. Downward
fluctuations in our quarterly results have historically resulted in decreases
in the price of our common stock. Quarterly operating results are affected
by a variety of factors, many of which are beyond our control. These factors
include:
* Changes or slowdowns in economic conditions in the semiconductor and
semiconductor capital equipment industries and other industries in which our
customers operate.
* The timing and nature of orders placed by major customers.
* Customer cancellations of previously placed orders and shipment delays.
* Changes in customers' inventory management practices.
* The introduction of new products by our competitors or us.
Our operating results in one or more future quarters may fall below the
expectations of analysts and investors. In those circumstances, the trading
price of our common stock would likely decrease.
Volatility of the Semiconductor Industry. The Company's business depends in
large part upon the capital expenditures of semiconductor manufacturers,
which in turn depend on the current and anticipated market demand for
integrated circuits and products utilizing integrated circuits. The
semiconductor industry is highly cyclical and has historically experienced
periodic downturns, which generally have had a severe effect on the
semiconductor industry's demand for capital equipment and have affected the
Company's results of operations.
Any weakness in demand in the semiconductor industry is likely to have a
similar adverse effect on the Company's business and results of operations.
In addition, the need for continued investment in engineering, research and
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development, and extensive ongoing customer service and support requirements
worldwide will limit the Company's ability to significantly reduce expenses
in response to any such downturn. Further, 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.
Dependence on New Products, Product Enhancements, and Global Support. The
Company believes that its continued success will depend significantly on its
ability to continuously develop and manufacture new products and product
enhancements and expand Global Support to provide maximum vacuum system
capability.
If new products have reliability or quality problems, such problems may
result in reduced orders, higher manufacturing costs, delays in collecting
accounts receivable, and additional service and warranty expense. There can
be no assurance that the Company will successfully develop and manufacture
new products, or that new products and services introduced by the Company
will be accepted in the marketplace. If the Company does not continue to
successfully introduce new products and services, the Company's results of
operations may be materially adversely affected.
Risks Associated with Global Market. The Company sells its products and
provides services to customers located throughout the world. Managing global
operations and sites located throughout the world presents challenges
associated with cultural diversities and organizational alignment. Moreover,
each region in the global semiconductor equipment market exhibits unique
characteristics that can cause capital equipment investment patterns to vary
significantly from period to period. Although international markets provide
the Company with significant growth opportunities, periodic economic
downturns, trade balance issues, political instability, and fluctuations in
interest and foreign currency exchange rates are all risks that could affect
global product and service demand.
Uncertainty of Intellectual Property Protection. The Company's ability to
compete effectively with other companies will depend, in part, on the ability
of the Company to protect the Company's technology assets by obtaining and
enforcing patents. The Company has a number of patents in the United States
and other countries and additional applications are pending for new
developments in its equipment and processes. Patent applications in the
United States are maintained in secrecy until the patents issue, so the
Company cannot be certain that it was the first creator of inventions covered
by its pending patent applications or the first to file such patent
applications on such inventions. Although the Company believes its products
do not infringe on the proprietary rights of third parties, there can be no
assurance that third parties will not assert infringement claims against the
Company or that such claims will not be successful. There also can be no
assurance that the Company's competitors will not infringe on the Company's
patents. Even if successful, the defense or prosecution of patent suits is
costly and time-consuming. An adverse outcome in a suit in which the Company
asserts its patent rights could result in the loss of such rights, and could
subject the Company to substantial costs and diversion of Company resources.
Dependence on Key Employees. The future success of the Company is dependent,
in part, on its ability to retain certain key personnel. The Company also
needs to attract additional skilled personnel in all areas of its business to
continue to grow. Competition for such personnel is intense. There can be
no assurance that the Company will be able to retain its existing key
management, engineering, and sales personnel or attract additional qualified
employees in the future.
Dependence on Suppliers. Certain of the components and subassemblies
included in the Company's products and systems are obtained from a single
source or a limited group of suppliers. Although the Company seeks to reduce
dependence on sole- and limited-source suppliers, in some cases the partial
or complete loss of certain of these sources could have at least a temporary
adverse effect on the Company's results of operations and could damage
customer relationships.
Integration of Future Acquisitions. The Company may make acquisitions of
complementary companies in the future. Managing an acquired business entails
numerous operational and financial risks, including difficulties in
assimilating acquired operations and new personnel, diversion of management's
attention to other business concerns, and potential loss of key employees or
customers of acquired operations. The Company's success will depend, to a
-8-
significant extent, on the ability of its executive officers and other
members of senior management to respond to these challenges effectively.
There can be no assurance that the Company will be able to effectively
achieve and manage any such growth, or that its management, personnel, or
systems will be adequate to support the Company's operations. Any such
inability would have a material adverse effect on the Company's business,
operating results, financial condition, and cash flows.
ITEM 2. PROPERTIES
The Company occupies approximately 345,300 square feet worldwide, as
described in the table below.
Size Lease
Location (Sq. Ft.) Expires Functions
-----------------------------------------------------------------------------
Massachusetts 155,000 2006 Corporate headquarters, engineering,
63,000 2004 manufacturing, sales and marketing,
customer support, repair center, and
administration
Colorado 60,000 2015 Engineering, manufacturing, and sales
and marketing
California 11,000 2003 Sales office, customer support, and
repair center
Texas 12,000 2005 Sales office and customer support
Arizona 3,000 2006 Sales office and customer support
Scotland 5,300 2020 Sales office and customer support
Germany 2,500 2003 Sales office and customer support
France 6,400 2003 Sales office, customer support, and
repair center
Japan 9,900 2001 Sales office and customer support
9,700 2003 Repair center
Taiwan 7,500 2003 Sales office, customer support, and
repair center
[FN]
The lease on this facility provides for renewal options for up to
fifteen additional years.
The Company believes it has adequate facilities to meet its currently
anticipated requirements and that suitable additional or substitute
facilities will be available if required.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, the Company is subject to various legal
proceedings and claims. The Company believes that the ultimate outcome of
these matters will not have a material effect on its financial statements.
The Company is a defendant in an action brought in 1998 in the Massachusetts
Superior Court by Raytheon Company which alleges that between 1992 and 1994
the Company sold Raytheon defective components used in missile guidance
systems manufactured by Raytheon. The Company has not been in the business
of selling these components since 1994.
-9-
The Company has denied all claims asserted against it by Raytheon and has
succeeded in having certain claims dismissed. The action is in the discovery
and motion phase. The Company believes that it has meritorious defenses and
that, although the ultimate outcome of the matters cannot be predicted with
certainty, the disposition of the matters should not have a material effect
on the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended December 31, 2000, no matters were submitted to a
vote of security holders through the solicitation of proxies or otherwise.
-10-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company's common stock is traded on The Nasdaq Stock Market under the
symbol HELX. At December 31, 2000, there were 22,537,204 shares of common
stock outstanding and approximately 620 common stockholders of record.
Price Range of Common Stock and Cash Dividend Per Common Share
The price range and cash dividend per common share of the Company's common
stock by quarter are:
First Second Third Fourth
Quarter Quarter Quarter Quarter
------------------------------------------------------------------
2000
Stock price
High $80.19 $67.50 $44.00 $30.38
Low $43.38 $28.63 $27.25 $19.31
Cash dividends per share $ 0.12 $ 0.12 $ 0.12 $ 0.12
1999
Stock price
High $24.00 $24.00 $35.06 $49.50
Low $12.88 $15.13 $21.00 $32.44
Cash dividends per share $ 0.12 $ 0.12 $ 0.12 $ 0.12
On February 21, 2001, the Board of Directors declared a quarterly cash
dividend of $0.12 per common share payable on March 13, 2001, to common
stockholders of record at the close of business on March 5, 2001.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes certain selected consolidated financial data
that should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Company's
consolidated financial statements and related notes included elsewhere
herein. In connection with the acquisition of Granville-Phillips Company in
1998, accounted for as a pooling of interests, all prior-period financial
data has been restated to include the impact of the combination.
December 31
-------------------------------------------------
(in thousands except per share data) 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------------------
Net sales $253,085 $139,389 $95,345 $157,076 $151,665
Net income (loss) $ 45,870 $ 15,864 $(1,920) $ 25,544 $ 25,126
Basic net income (loss) per share $ 2.04 $ 0.71 $ (0.09) $ 1.15 $ 1.15
Diluted net income (loss) per share $ 2.02 $ 0.70 $ (0.09) $ 1.14 $ 1.14
Cash dividends per share $ 0.48 $ 0.48 $ 0.75 $ 0.735 $ 0.65
Total assets $141,968 $ 93,655 $75,652 $ 96,219 $ 83,005
Basic shares 22,498 22,336 22,262 22,151 21,788
Diluted shares 22,762 22,623 22,262 22,353 22,096
Net income for the year ended December 31, 1999, reflects the gain on
sale of the Company's Colorado facility of $1,397,000. Net loss for the year
ended December 31, 1998, reflects merger and other special charges of
$3,546,000 related to the acquisition of Granville-Phillips Company and
restructuring and other special charges of $2,500,000 related to work force
reductions, exit costs for a leased facility, and impairment of certain
assets. (See Notes H and I of "Notes to Consolidated Financial Statements.")
All share and per share data reflect a two-for-one common stock split
effective November 1997.
Cash dividends per share declared in periods prior to the acquisition of
Granville-Phillips Company are based on shares outstanding at that time and
therefore do not reflect the 2,383,000 shares issued as part of the
acquisition.
-12-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The discussion in this item and elsewhere in this report contains forward-
looking statements involving risks and uncertainties that could cause actual
results to differ materially from those expressed in the forward-looking
statements. These risks and uncertainties include those described under
"Certain Factors That May Affect Future Results" below.
RESULTS OF OPERATIONS
2000 Compared with 1999
Throughout 2000 the Company continued to benefit from the significant
increase in demand for semiconductor capital equipment. Net sales for 2000
were $253.1 million, compared to $139.4 million in 1999, an increase of
$113.7 million, or 81.6%.
Total gross profit as a percentage of net sales was 47.9% for 2000, compared
to 44.4% for the prior year. The improvement in gross margin was primarily
attributable to increased sales volume, offset by costs relating to a new
manufacturing and engineering center in Colorado, a new customer support
center in Taiwan, and expansion of our Japanese customer support center.
Research and development expenses for 2000 were $16.1 million, or 6.4% of net
sales, compared to $9.9 million, or 7.1% of net sales for 1999. The Company
increased its spending on projects for 300mm products, GOLDLink global
support, and ongoing improvements to its core products.
Selling, general and administrative expenses increased in 2000 to $42.4
million from $32.0 million in the prior year. The increase in spending was
primarily attributable to expenditures to support increased sales activities
worldwide, the aforementioned locations in Colorado, Taiwan, and Japan, and
GOLDLink global support.
Royalty and equity income from the Company's joint venture in Japan increased
by $2.7 million in 2000, due to the corresponding improvement in the Japanese
semiconductor capital equipment market.
Interest and other income for 2000 was $1.2 million, compared with $0.9
million for 1999, reflecting higher interest rates and higher cash, cash
equivalent, and investment balances during the year.
The Company recorded an income tax provision of $22.1 million for 2000,
compared to $7.8 million for the previous year. The 2000 and 1999 effective
tax rates of 32.5% and 33.0%, respectively, are less than the federal
statutory rate of 35% because the Company benefited from research and
development and other tax credits.
1999 Compared with 1998
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 data storage manufacturing processes. The transaction was
accounted for as a pooling of interests and, accordingly, the financial
results of the Company for all periods presented include the financial
position, results of operations, stockholders' equity, and cash flows of GPC.
Throughout 1999 the global semiconductor capital equipment industry
experienced a rapid recovery from the significant worldwide downturn that
occurred in 1998. Due to this positive industry trend, net sales for 1999
were $139.4 million, compared to $95.3 million in 1998, an increase of $44.1
million, or 46.2%.
-13-
Total gross profit as a percentage of net sales was 44.4% for 1999, compared
to 39.8% for the prior year. The improvement in gross margin was primarily
attributable to increased production volume and the related decrease in
manufacturing unit costs.
Research and development expenses for 1999 were $9.9 million, or 7.1% of net
sales, compared to $10.1 million, or 10.6% of net sales, for 1998. As the
Company entered 1999, its research and development spending focused on long-
term strategic initiatives. As industry conditions improved during the year,
the Company increased its spending to also include projects that met near-
term customer requirements.
Selling, general and administrative expenses increased in 1999 to $32.0
million from $26.6 million in the prior year. The increase in spending was
primarily attributable to expenditures to support increased sales activities
worldwide, including expansion of the Company's sales and service location in
Japan and the final year of expense related to a stock-based variable
compensation plan.
In 1998 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. These changes made
available approximately $5.0 million, which was redirected to the above-
mentioned operations in 1999. At October 1, 1999, the restructuring accrual
was fully utilized.
Royalty and equity income from the Company's joint venture in Japan increased
by $0.5 million in 1999 due to the improvement in the Japanese semiconductor
capital equipment market.
Interest and other income for 1999 was $0.9 million, compared with $1.2
million for 1998, reflecting lower cash, cash equivalent, and investment
balances during the year.
The Company sold its Colorado facility in December 1999, recognizing a $1.4
million gain and moved to a new leased facility during 2000.
The Company recorded an income tax provision of $7.8 million for 1999,
compared to an income tax benefit of $0.7 million for the previous year. The
1999 provision of 33% is less than the federal statutory rate of 35% because
the Company benefited from research and development and other tax credits.
Liquidity and Capital Resources
Net cash provided by operating activities was $31.9 million in 2000,
primarily due to increased net income.
The Company's historical annual capital needs have been approximately $4.0
million to $5.0 million. However, in 2000 the Company spent $12.4 million,
primarily due to the following major projects: consolidation of our Colorado
operations into a new 60,000 square foot leased facility, the opening of our
GOLDLink global support operations center in Massachusetts, the opening of a
sales and service location in Taiwan, and the first phase of our new global
information system.
In 2001 the Company expects to spend approximately $12.0 to $14.0 million for
capital, including the following major projects: the next phase of our global
information system, expansion of our Japanese customer support center, and
GOLDLink system enhancements.
Cash dividends paid to stockholders during 2000 were $10.8 million, compared
to $10.7 million for 1999. The Company paid a quarterly common stock
dividend of $0.12 per share.
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.
-14-
In July 2000, the Company entered into a three-year, $25.0 million Revolving
Credit Agreement ("the Agreement"). Loans under the Agreement bear interest
for each calendar quarter at an annual rate equal to, at the Company's
option; 1) the applicable LIBOR rate, or 2) the lender's base rate, plus a
varying margin. The Company is also required to meet certain covenants, none
of which are considered restrictive to operations. The Company had no
borrowings outstanding under the Agreement and was in compliance with all
covenants during 2000.
The Company believes that existing cash, cash equivalents, investment
balances, anticipated cash flow from operations, and borrowings under the
revolving credit agreement will be adequate to fund operations and its
capital expenditure program for the foreseeable future.
Legal Proceedings
In the normal course of business, the Company is subject to various legal
proceedings and claims. The Company believes that the ultimate outcome of
these matters will not have a material effect on its financial statements.
The Company is a defendant in an action brought in 1998 in the Massachusetts
Superior Court by Raytheon Company which alleges that between 1992 and 1994
the Company sold Raytheon defective components used in missile guidance
systems manufactured by Raytheon. The Company has not been in the business
of selling these components since 1994.
The Company has denied all claims asserted against it by Raytheon and has
succeeded in having certain claims dismissed. The action is in the discovery
and motion phase. The Company believes that it has meritorious defenses and
that, although the ultimate outcome of the matters cannot be predicted with
certainty, the disposition of the matters should not have a material effect
on the financial position of the Company.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities" as amended by Statement of Financial
Accounting Standards No. 138 (SFAS 138), "Accounting for Certain Derivative
Instruments and Hedging Activities," which is effective January 1, 2001, for
the Company. This statement establishes accounting and reporting standards
for derivative instruments, including some derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities. The Company will adopt SFAS 133 in 2001, in accordance with SFAS
138, which deferred the effective date of SFAS 133. The adoption of this
standard in 2001 will not have a material impact on the Company's
consolidated financial statements in the foreseeable future.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements," which was effective for the Company beginning with the fourth
quarter of 2000. SAB 101 summarizes the staff's view in applying generally
accepted accounting principles to selected revenue recognition issues. The
adoption of these provisions did not materially impact the Company's
consolidated results of operations.
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,
business and industry outlook, and 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
-15-
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, future events, or otherwise. Important factors
that may cause the Company's actual results to differ materially 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 and concentration
of sales to one or a few customers; the Company's ability to attract and
retain certain key personnel; the ability of the Company to protect its
technology assets by obtaining and enforcing patents; and dependence on sole
and limited source suppliers for certain components and subassemblies
included in the Company's products and systems. As a result of the foregoing
and other factors, 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.
Foreign Currency Exchange Rate Risk
A portion of the Company's business is conducted outside the United States
through its foreign subsidiaries. The foreign subsidiaries maintain their
accounting records in their local currencies. Consequently, period-to-period
comparability of results of operations is affected by fluctuations in
exchange rates. To reduce the risks associated with foreign currency rate
fluctuations, the Company has entered into forward exchange contracts on a
continuing basis to offset the currency exposures. The gains and losses on
these transactions partially offset the unrealized and realized foreign
exchange gains and losses of the underlying exposure. These gains and losses
were immaterial for the years presented and were included in cost of sales.
The Company plans to continue to use forward exchange contracts to mitigate
the impact of exchange rate fluctuations. The notional amount of the
Company's outstanding foreign currency contracts at December 31, 2000, was
$12,022,000. The potential fair value loss for a hypothetical 10% adverse
change in forward currency exchange rates at December 31, 2000, would be
$1,295,000. The potential loss was estimated calculating the fair value of
the forward exchange contracts at December 31, 2000, and comparing that with
the value calculated using the hypothetical forward currency exchange rates.
Credit Risk
The Company is exposed to concentration of credit risk in cash and cash
equivalents, investments, trade receivables, and short-term foreign exchange
forward contracts. Cash and cash equivalents are placed with the Company's
primary bank, a major financial institution, with a high quality credit
rating. The Company's investments consist of money market funds, municipal
government agencies and tax-free bonds or investment-grade securities. The
short-term foreign currency exchange contracts are entered into with its
primary bank.
-16-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES COVERED BY
THE REPORT OF INDEPENDENT ACCOUNTANTS
Page(s)
Report of Independent Accountants 24
Consolidated Financial Statements of Helix Technology Corporation
Consolidated Balance Sheets as of December 31, 2000 and 1999 25
Consolidated Statements of Operations for the Years Ended
December 31, 2000, 1999, and 1998 26
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 2000, 1999, and 1998 27
Consolidated Statements of Cash Flows for the Years
Ended December 31, 2000, 1999, and 1998 28
Notes to Consolidated Financial Statements 29-41
Financial Statement Schedule for the Years Ended December 31, 2000, 1999, and
1998
II. Valuation and Qualifying Accounts 42
Schedules other than those listed above have been omitted, since they are
either inapplicable or not required.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company did not change accountants or file a Form 8-K reporting a
disagreement on an accounting principle, practice or financial statement
disclosure during the three-year period ended December 31, 2000.
-17-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Officers are elected annually by the Board and serve at the discretion of the
Board. Set forth below is information regarding the current Executive
Officers of the Company who are not Directors of the Company.
Mr. Robert E. Anastasi is 54 and Executive Vice President of the Company. He
served as Senior Vice President of the Company from July 1997 until February
2001 and prior to that as Vice President since June 1991.
Mr. Michael El-Hillow is 49 and has served the Company as Senior Vice
President and Chief Financial Officer since July 1997 and prior to that as
Vice President and Chief Financial Officer since April 1997. He was Vice
President and Chief Financial Officer of A.T. Cross Company from January 1991
until April 1997.
Mr. Christopher Moody is 45 and has served the Company as Senior Vice
President since August 1997. He was Vice President of Japan Sales at KLA-
Tencor Corporation from April 1996 until August 1997 and Director of Sales
for KLA Instruments Wafer Inspection Division from January 1995 until April
1996. He served as National Sales Manager at Eaton Corporation,
Semiconductor Equipment Division, from September 1993 until January 1995.
Additional information required by this item is incorporated herein by
reference to the registrant's proxy statement for its 2001 Annual Meeting of
Stockholders that will be filed with the SEC in March 2001, pursuant to
Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated herein by reference to the
registrant's proxy statement for its 2001 Annual Meeting of Stockholders that
will be filed with the SEC in March 2001, pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated herein by reference to the
registrant's proxy statement for its 2001 Annual Meeting of Stockholders that
will be filed with the SEC in March 2001, pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no related-party transactions.
-18-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Page Number(s) or
Incorporation by
Description Reference to
(a) Financial Statements, Schedules, and Exhibits:
(1), (2) The Consolidated Financial Statements 17
and required schedules are indexed
under Item 8.
(3) Exhibits required by Item 601 of SEC
Regulation S-K. (Exhibit numbers refer to
exhibit number on Table I.)
2.1 Agreement and Plan of Merger dated as Exhibit 2.1 to the
of April 16, 1998, among Helix Company's Form 8-K
Technology Corporation, Helix filed May 15, 1998.
Acquisition Corporation, Granville-
Phillips Company, and certain
principal stockholders of Granville-
Phillips Company.
2.2 Escrow Agreement dated May 7, 1998. Exhibit 2.3 to the
Company's Form 8-K
filed May 15, 1998.
3. Restated Certificate of Exhibit 3 to the
Incorporation, as amended on May 7, Company's Form 10-Q
1987, and May 18, 1988. for the Quarter
Ended September 30,
1988.
By-laws, as amended on December 10, Exhibit (3)-3 to
1986 and December 9, 1987. the Company's Form
10-K for the Year
Ended December 31,
1987.
4A. Description of Common Stock Exhibit 3 to the
Company's Form
10-Q for the
Quarter Ended
September 30,
1988.
4B. Description of Preferred Stock Exhibit 3 to the
Company's Form
10-Q for the
Quarter Ended
September 30,
1988.
-19-
10. Material Contracts:
(1) Basic agreement between the Company and Exhibit 10.13 to
Ulvac Corporation dated August 17, 1981. a Registration
Statement on Form
S-2, Registration
No. 2-84880.
(2) Lease agreement dated July 24, 1984, Exhibit 10.2 to the
as amended July 26, 1999, between Company's Form 10-K
Long Gate LLC as Lessor and the Company for the Year Ended
as Lessee. December 31, 1999.
(3) Lease agreement dated May 23, 1991, between Exhibit 10-(14) to
Mansfield Corporate Center Limited the Company's
Partnership as Lessor and the Company Form 10-K
As Lessee. for the Year Ended
December 31, 1991.
(4) Lease agreement dated May 21, 1996, between Exhibit 10-(4) to
LakeCenter Plaza, Ltd., LLP as Lessor and the Company's Form
the Company as Lessee. 10K for the Year
Ended December 31,
1998.
(5) Lease agreement dated August 7, 1998, Exhibit 10-(5) to
between Mitsubishi Jisho Co., Ltd. as the Company's Form
Lessor and the Company as Lessee. 10-K for the Year
Ended December 31,
1998.
(6) Lease agreement dated May 14, 1999, between Exhibit 10.6 to the
MUM IV, LLC as Lessor and the Company Company's Form 10-K
as Lessee. for the Year Ended
December 31, 1999.
(7) Revolving Credit Agreement, dated July 18, Exhibit 4.1 to the
2000, by and between Helix Technology Company's Form 10-Q
Corporation and Fleet National Bank. for the Quarter
Ended September 29,
2000.
Management Compensation Plans, Contracts and Arrangements:
(8) The Company's informal incentive bonus plan. Exhibit 10.9 to a
Registration
Statement on Form
S-2, Registration
No. 2-84880.
(9) The Company's Supplemental Key Executive Exhibit 14-(14) to
Retirement Plan effective February 13, 1992. the Company's Form
10-K for the Year
Ended December 31,
1992.
-20-
(10) The Company's 1996 Equity Incentive Plan. Exhibit A to the
Company's Proxy
Statement for its
1996 Annual Meeting
of Stockholders held
on April 24, 1996.
(11) The Company's 1996 Stock Option Plan for Exhibit B to the
Non-Employee Directors. Company's Proxy
Statement for its
1996 Annual Meeting
of Stockholders
held on April 24,
1996.
(12) Employment Agreement dated July 18, 1997, Exhibit 10-(13) to
between the Company and Robert E. Anastasi. the Company's Form
10-K for the Year
Ended December 31,
1997.
(13) Employment Agreement dated July 18, 1997, Exhibit 10-(14) to
between the Company and Michael El-Hillow. the Company's Form
10-K for the Year
Ended December 31,
1997.
(14) Employment Agreement dated August 18, 1997, Exhibit 10-(15) to
between the Company and Christopher Moody. the Company's Form
10-K for the Year
Ended December 31,
1997.
(15) Employment Agreement dated February 11, Exhibit 10-(1) to
1999, between the Company and Robert J. the Company's Form
Lepofsky. 10-Q for the
Quarter Ended
April 2, 1999.
(16) The Company's Supplemental Benefit Plan, Exhibit 10.15 to
effective April 1, 1999. the Company's Form
10-K for the Year
Ended December 31,
1999.
21. Subsidiaries of the Registrant (filed herewith).
23. Consent of Independent Accountants (filed herewith).
(b) The Company did not file any reports on Form 8-K during the quarter
ended December 31, 2000.
(c) Exhibits required by Item 601 of Regulation S-K are indexed under (a)(3)
above.
(d) Separate financial statements of: (1) subsidiaries not consolidated and
fifty-percent-or-less owned persons; (2) affiliates whose securities are
pledged as collateral; and (3) other Schedules are not filed because they are
either not applicable or the items do not exceed the various disclosure
levels.
-21-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, this 13th day of
March, 2001.
HELIX TECHNOLOGY CORPORATION
(Registrant)
/s/Robert J. Lepofsky
-------------------------------------
Robert J. Lepofsky
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant on this 13th day of March, 2001, in the capacities indicated.
Signatures Titles
(i) Principal Executive Officer
/s/Robert J. Lepofsky
---------------------------
Robert J. Lepofsky President and Chief Executive Officer
(ii) Principal Financial Officer
/s/Michael El-Hillow
-------------------------------
Michael El-Hillow Senior Vice President and
Chief Financial Officer
(iii) Principal Accounting Officer
/s/Teodor Klowan, Jr.
----------------------------
Teodor Klowan, Jr. Corporate Controller
-22-
(iv) A Majority of the Board of Directors
/s/Arthur R. Buckland Director
-----------------------------
Arthur R. Buckland
/s/Matthew O. Diggs, Jr. Director
-----------------------------
Matthew O. Diggs, Jr.
/s/Frank Gabron Director
-----------------------------
Frank Gabron
/s/Robert H. Hayes Director
-----------------------------
Robert H. Hayes
/s/Robert J. Lepofsky Director
-----------------------------
Robert J. Lepofsky
/s/Marvin G. Schorr Director and Chairman
----------------------------- of the Board
Marvin G. Schorr
/s/Mark S. Wrighton Director
-----------------------------
Mark S. Wrighton
-23-
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Stockholders
of Helix Technology Corporation:
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Helix Technology Corporation and its subsidiaries at December 31,
2000 and 1999, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2000, in conformity
with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule
listed in the accompanying index presents fairly, in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/PricewaterhouseCoopers LLP
--------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 24, 2001
-24-
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31,
(in thousands except share data) Notes 2000 1999
-----------------------------------------------------------------------------------
ASSETS
Current:
Cash and cash equivalents A $ 15,435 $11,408
Investments A 16,654 15,912
Receivables - net of allowances of $197
in 2000 and $185 in 1999 40,243 19,479
Inventories A 30,204 18,442
Deferred income taxes A&C 6,444 7,040
Other current assets 2,208 1,626
--------------------
Total Current Assets 111,188 73,907
--------------------
Property, plant, and equipment at cost A 49,940 38,724
Less: accumulated depreciation (31,115) (28,093)
--------------------
Net property, plant, and equipment 18,825 10,631
Other assets A&E 11,955 9,117
--------------------
TOTAL ASSETS $141,968 $93,655
====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable $ 17,993 $ 8,490
Payroll and compensation 3,060 4,768
Retirement costs G 5,586 4,561
Income taxes A&C 6,015 3,238
Other accrued liabilities 747 975
--------------------
Total Current Liabilities 33,401 22,032
--------------------
Commitments and contingencies B
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: 22,537,204 in 2000
and 22,375,631 in 1999 D 22,537 22,376
Capital in excess of par value 12,263 9,314
Treasury stock, $1 par value, 3,840 shares in
2000 and 11,602 shares in 1999 (232) (198)
Retained earnings 74,123 39,063
Accumulated other comprehensive (loss) income (124) 1,068
--------------------
Total Stockholders' Equity 108,567 71,623
--------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $141,968 $93,655
====================
The accompanying notes are an integral part of these consolidated financial statements.
-25-
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31,
(in thousands except per share data) Notes 2000 1999 1998
--------------------------------------------------------------------------------
Net sales $253,085 $139,389 $ 95,345
------------------------------
Costs and expenses:
Cost of sales 131,950 77,487 57,373
Research and development A 16,131 9,916 10,106
Selling, general and administrative D 42,421 31,976 26,581
Merger, restructuring and special
charges H - - 6,046
------------------------------
190,502 119,379 100,106
------------------------------
Operating income (loss) 62,583 20,010 (4,761)
Joint venture income E 4,132 1,415 957
Interest and other income 1,241 856 1,234
Gain on sale of building I - 1,397 -
------------------------------
Income (loss) before taxes 67,956 23,678 (2,570)
Income tax provision (benefit) A&C 22,086 7,814 (650)
------------------------------
Net income (loss) $ 45,870 $ 15,864 $ (1,920)
==============================
Net income (loss) per share:
Basic A&D $ 2.04 $ 0.71 $ (0.09)
Diluted A&D $ 2.02 $ 0.70 $ (0.09)
==============================
Number of shares used in per
share calculations:
Basic A&D 22,498 22,336 22,262
Diluted A&D 22,762 22,623 22,262
==============================
Pro Forma Results (unaudited)
Loss before taxes $ (2,570)
Income tax benefit (824)
---------
Pro forma net loss $ (1,746)
=========
Pro forma net loss per share:
Basic $ (0.08)
Diluted $ (0.08)
=========
The accompanying notes are an integral part of these consolidated financial statements.
-26-
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Accumulated
Capital Other Statements of
Par in Excess Deferred Treasury Retained Comprehensive Comprehensive
(in thousands) Value of Par Compensation Stock Earnings Income (Loss) Total Income
--------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 $22,213 $ 3,684 $(953) $ - $ 54,680 $ 71 $ 79,695
-------------------------------------------------------------------------
Comprehensive loss, net of tax:
Net loss - - - - (1,920) - (1,920) $(1,920)
Other comprehensive loss:
Foreign currency translation adjustments - - - - - (440) (440) (440)
Unrealized gain on available-for-sale
investment - - - - - 10 10 10
------- --------
Other comprehensive loss - - - - - (430) (430)
--------
Comprehensive loss $(2,350)
========
Shares issued for stock options 106 1,785 - - - - 1,891
Income tax effect from exercise of stock
options - (224) - - - - (224)
Restricted stock and acquisition adjustment
(Note H) - 2,691 953 - (2,783) - 861
Shares tendered for exercise of stock
options - - - (438) - - (438)
Cash dividends - - - - (16,067) - (16,067)
-------------------------------------------------------------------------
Balance, December 31, 1998 22,319 7,936 - (438) 33,910 (359) 63,368
-------------------------------------------------------------------------
Comprehensive income, net of tax:
Net income - - - - 15,864 - 15,864 $15,864
Other comprehensive income:
Foreign currency translation adjustments - - - - - 1,467 1,467 1,467
Unrealized loss on available-for-sale
investment - - - - - (40) (40) (40)
-------- --------
Other comprehensive income - - - - - 1,427 1,427
--------
Comprehensive income $17,291
========
Shares issued for stock options 57 746 - - - - 803
Shares issued for employee savings plan - 302 - 318 - - 620
Income tax effect from exercise of stock
options - 330 - - - - 330
Shares tendered for exercise of stock
options - - - (78) - - (78)
Cash dividends - - - - (10,711) - (10,711)
-------------------------------------------------------------------------
Balance, December 31, 1999 22,376 9,314 - (198) 39,063 1,068 71,623
-------------------------------------------------------------------------
Comprehensive income, net of tax:
Net income - - - - 45,870 - 45,870 $45,870
Other comprehensive loss:
Foreign currency translation adjustments - - - - - (1,233) (1,233) (1,233)
Unrealized gain on available-for-sale
investment - - - - - 41 41 41
-------- --------
Other comprehensive loss - - - - - (1,192) (1,192)
--------
Comprehensive income $44,678
========
Shares issued for stock options 235 4,083 - - - - 4,318
Shares issued for employee savings plan - 42 - 711 - - 753
Retirement of treasury stock (74) (4,361) - 4,435 - - -
Income tax effect from exercise of stock
options - 3,185 - - - - 3,185
Shares tendered for exercise of stock
options - - - (5,180) - - (5,180)
Cash dividends - - - - (10,810) - (10,810)
--------------------------------------------------------------------------
Balance, December 31, 2000 $22,537 $12,263 $ - $ (232) $ 74,123 $ (124) $108,567
==========================================================================
The accompanying notes are an integral part of these consolidated financial statements.
-27-
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
(in thousands) 2000 1999 1998
--------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $45,870 $15,864 $ (1,920)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 4,233 4,045 3,999
Deferred income taxes 596 (1,883) (923)
Gain on sale of property - (1,397) -
Restructuring charge - - 667
Undistributed earnings of joint venture, other (4,085) (533) (769)
Amortization of deferred compensation - - 861
Performance-based stock compensation - 1,581 959
Shares issued for employee savings plan 753 620 -
Income tax effect from exercise of stock options 3,185 330 (224)
Net change in other operating assets and liabilities (18,672) (6,197) 4,759
-------------------------------------
Net cash provided by operating activities 31,880 12,430 7,409
------------------------------------
Cash flows from investing activities:
Proceeds from sale of property - 2,500 -
Capital expenditures (12,427) (4,561) (2,557)
Purchase of investments (42,512) (23,910) (53,047)
Sale of investments 41,826 26,092 38,585
------------------------------------
Net cash (used) provided by investing activities (13,113) 121 (17,019)
------------------------------------
Cash flows from financing activities:
Shares tendered for exercise of stock options (5,180) (78) (438)
Net cash provided by employee stock plans 1,250 803 241
Cash dividends paid (10,810) (10,711) (16,067)
------------------------------------
Net cash used by financing activities (14,740) (9,986) (16,264)
------------------------------------
Increase (decrease) in cash and cash equivalents 4,027 2,565 (25,874)
Cash and cash equivalents, January 1 11,408 8,843 34,717
------------------------------------
Cash and cash equivalents, December 31 $ 15,435 $ 11,408 $ 8,843
====================================
(1) Change in other operating assets and liabilities:
(Increase) decrease in accounts receivable $(20,764) $ (9,696) $ 8,402
(Increase) decrease in inventories (11,762) (3,631) 560
(Increase) decrease in other current assets (582) (520) 12
Increase (decrease) in accounts payable 9,503 4,738 (1,284)
Increase (decrease) in other accrued expenses 4,933 2,912 (2,931)
------------------------------------
Net change in other operating assets and liabilities $(18,672) $ (6,197) $ 4,759
====================================
Income taxes paid $ 15,294 $ 6,619 $ 3,528
====================================
Supplemental disclosure of non-cash activity in 2000, 1999, and 1998 of $3,068,000, $0, and $1,650,000,
respectively, was reclassed from other accrued expenses to equity in connection with issuance of stock options.
The accompanying notes are an integral part of these consolidated financial statements.
-28-
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Certain reclassifications have been made to prior years' consolidated
financial statements to conform with the current presentation.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries after elimination of all intercompany
transactions. The investment in and operating results of the Company's 50%-
owned joint venture are included on the basis of the equity method of
accounting.
Business Combination
In May 1998, the Company acquired Granville-Phillips Company ("GPC"). The
acquisition was accounted for as a pooling of interests under Accounting
Principles Board Opinion No. 16 "Business Combinations." The consolidated
financial statements for 1998 have been restated to include the financial
position, results of operations, stockholders' equity, and cash flows of GPC.
Unaudited pro forma net loss per share for 1998 reflects the unaudited pro
forma income tax benefit of GPC as if GPC was combined and subject to the
effective federal and state statutory rates of approximately 38% for this
period.
Foreign Currency Translation
Assets and liabilities of operations outside the United States are translated
into U.S. dollars using current exchange rates. Income and expense accounts
are translated at the average rates in effect during the year. The effects
of foreign currency translation adjustments are included in comprehensive
income as a component of stockholders' equity. The cumulative translation
adjustment for the Company's 50%-owned joint venture is reported net of
income taxes. Transaction gains/losses were not material. The effect of
foreign currency exchange rates on cash and cash equivalents was not
material.
Cash and Cash Equivalents
Cash and cash equivalents include demand deposits, money market accounts, and
other highly liquid investments with original maturities of three months or
less.
-29-
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Investments
The Company's investments are classified as available-for-sale securities,
and the difference in the cost and fair value of these investments is
included in comprehensive income. The Company's investments consist of the
following:
December 31,
-------------------------------------------
2000 1999
------------------- -------------------
(in thousands) Cost Fair Value Cost Fair Value
-----------------------------------------------------------------------------
Money market funds $ 2,397 $ 2,397 $ 1,855 $ 1,855
Municipal bonds, government
agencies, and tax-free bonds 14,201 14,257 14,114 14,057
-------------------------------------------
$16,598 $16,654 $15,969 $15,912
===========================================
Financial Instruments
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash
equivalents, short-term investments, and trade accounts receivable. The
Company invests in investment-grade securities. The Company's customers are
concentrated in one industry segment, the semiconductor manufacturing
industry, and, historically, a significant portion of the Company's sales
have been to a limited number of customers within this industry. The Company
performs ongoing credit evaluations of its customers' financial condition and
may require deposits on large orders but does not require collateral or other
security to support customer receivables.
In July 2000 the Company entered into a three-year, $25.0 million Revolving
Credit Agreement ("the Agreement"). Loans under the Agreement bear interest
for each calendar quarter at an annual rate equal to, at the Company's
option; 1) the applicable LIBOR rate, or 2) the lender's base rate, plus a
varying margin. The Company is also required to meet certain covenants, none
of which are considered restrictive to operations. The Company had no
borrowings outstanding under the Agreement and was in compliance with all
covenants during 2000.
Credit Risk
The Company is exposed to concentration of credit risk in cash and cash
equivalents, investments, trade receivables, and short-term foreign exchange
forward contracts. Cash and cash equivalents are placed with the Company's
primary bank, a major financial institution, with a high quality credit
rating. The Company's investments consist of money market funds, municipal
government agencies and tax-free bonds or investment-grade securities. The
short-term foreign currency exchange contracts are entered into with its
primary bank.
Inventories
December 31,
(in thousands) 2000 1999
-----------------------------------------------------------------------------
Finished goods $ 9,522 $ 5,157
Work in process 15,336 8,716
Materials and parts 5,346 4,569
----------------------
$30,204 $18,442
======================
Inventories are stated at the lower of cost or market on a first-in, first-
out basis.
-30-
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Property, Plant, and Equipment
December 31,
(in thousands) 2000 1999
-----------------------------------------------------------------------------
Leasehold improvements $ 7,957 $ 3,962
Machinery and equipment 41,983 34,762
---------------------
$49,940 $38,724
=====================
Depreciation is provided on the straight-line method over the estimated
useful lives of the assets. Leasehold improvements are amortized over the
lesser of their useful life or the remaining life of the lease. Estimated
useful lives of machinery and equipment range from 3 to 15 years.
Maintenance and repairs are charged to expense as incurred and betterments
are capitalized. The cost of assets sold or retired and related depreciation
are removed from the accounts at the time of sale and any resulting gain or
loss is reflected in income.
Revenue Recognition
The Company recognizes revenue from product sales upon shipments if title and
risk of loss have been transferred to the customer, the price is fixed or
determinable, and the collection of the receivable is reasonably assured.
Service revenue is recognized when contractual obligations have been
satisfied, the performance of services has been completed, and the collection
of the associated receivable is reasonably assured.
Research and Development
Research and development costs are expensed as incurred.
Income Taxes
Deferred income taxes result from temporary differences in the recognition of
revenues and expenses between financial statements and tax returns. Tax
credits are recognized when realized for tax purposes using the "flow-
through" method of accounting. The Company has not provided for federal
income taxes applicable to undistributed earnings of its foreign subsidiaries
since these earnings are indefinitely reinvested.
Net Income (Loss) Per Share
Basic net income (loss) per common share is based on the weighted average
number of common shares outstanding during the year. Diluted net income
(loss) per common share reflects the potential dilution that could occur if
outstanding stock options were exercised and converted into common stock at
the beginning of the period.
-31-
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
The following table sets forth the computation of basic and diluted net
income (loss) per common share:
For the years ended December 31,
(in thousands except per share data) 2000 1999 1998
-----------------------------------------------------------------------------
Net income (loss) $45,870 $15,864 $(1,920)
====================================
Basic shares 22,498 22,336 22,262
Add: Common equivalent shares 264 287 -
------------------------------------
Diluted shares 22,762 22,623 22,262
Basic net income (loss) per share $ 2.04 $ 0.71 $ (0.09)
====================================
Diluted net income (loss) per share $ 2.02 $ 0.70 $ (0.09)
====================================
[FN]
Common equivalent shares represent shares issuable upon conversion of
stock options (using the treasury stock method). As of December 31, 2000,
80,000 options outstanding were not included in the computation, because the
option price was greater than the average market price of the common shares.
As of December 31, 1999, the Company had no stock options that were anti-
dilutive. Options outstanding not included in the computation of diluted
shares were 491,000 in 1998 because the Company was in a net loss position
and the inclusion of such shares would be anti-dilutive.
B. COMMITMENTS AND CONTINGENCIES
The Company leases certain facilities and equipment under long-term operating
leases.
Future minimum lease payments under the noncancelable operating leases are:
(in thousands) Operating Leases
-----------------------------------------------------------------
2001 $ 4,835
2002 4,612
2003 3,701
2004 3,185
2005 2,729
Later years 6,708
-------
Total $25,770
=======
Total rental expense under operating leases was $5,334,000 in 2000,
$4,130,000 in 1999, and $3,526,000 in 1998.
The Company enters into short-term foreign currency forward contracts with
its primary bank to minimize the effect of foreign currency exchange rate
fluctuations on certain intercompany transactions with its wholly owned
European, Taiwanese, and Japanese subsidiaries. The net realized and
unrealized gains and losses on these transactions are not material and are
recorded in the statements of operations. The notional amounts of the
Company's outstanding foreign currency forward contracts at December 31, 2000
and 1999, were $12,022,000 and $4,027,000, respectively.
The Company is a defendant in an action brought in 1998 in the Massachusetts
Superior Court by Raytheon Company which alleges that between 1992 and 1994
the Company sold Raytheon defective components used in missile guidance
systems manufactured by Raytheon. The Company has not been in the business
of selling these components since 1994.
-32-
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
B. COMMITMENTS AND CONTINGENCIES - (Continued)
The Company has denied all claims asserted against it by Raytheon and has
succeeded in having certain claims dismissed. The action is in the discovery
and motion phase. The Company believes that it has meritorious defenses and
that, although the ultimate outcome of the matters cannot be predicted with
certainty, the disposition of the matters should not have a material effect
on the financial position of the Company.
C. INCOME TAXES
The components of income (loss) before income taxes and the related provision
for (benefit from) income taxes are presented below:
For the years ended December 31,
(in thousands) 2000 1999 1998
-----------------------------------------------------------------------------
Income (loss) before income taxes:
Domestic $66,906 $22,500 $(2,572)
Foreign 1,050 1,178 2
-------------------------------
$67,956 $23,678 $(2,570)
===============================
Provision for (benefit from) income taxes:
Current:
Federal $18,271 $ 8,114 $ 176
Foreign 748 558 18
State 2,471 1,025 79
-------------------------------
21,490 9,697 273
Deferred:
Federal 400 (1,675) (611)
State 196 (208) (312)
-------------------------------
596 (1,883) (923)
-------------------------------
Total $22,086 $ 7,814 $ (650)
===============================
The Company's deferred tax assets and (liabilities) are comprised of the
following:
December 31,
(in thousands) 2000 1999
-----------------------------------------------------------------------------
Deferred tax assets:
Inventory valuation $2,810 $1,821
Compensation and benefit plans 2,802 3,643
Leases 163 190
Depreciation 484 671
Net operating loss and tax credit carryforwards 104 457
Other 144 335
----------------------------
Total deferred tax assets 6,507 7,117
Deferred tax liabilities (63) (77)
----------------------------
Net deferred tax assets $6,444 $7,040
============================
-33-
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
C. INCOME TAXES - (Continued)
Deferred income taxes on undistributed earnings of the foreign subsidiaries
are not material. The Company believes that its deferred tax assets are more
likely than not realizable; therefore, no valuation allowance is required.
The table below reconciles the expected U.S. federal income tax provision
(benefit) to the recorded income tax provision (benefit) in the statements of
operations:
December 31,
(in thousands) 2000 1999 1998
----------------------------------------------------------------------------
Federal tax computed at statutory rate of 35% $23,785 $8,287 $(899)
State income taxes, net of federal income tax
benefit 1,733 531 (151)
Nontaxable S-Corporation loss - - 165
Foreign sales corporation tax benefit (1,508) (548) -
Earnings not subject to U.S. income taxes (1,127) (308) (191)
R&D and foreign tax credits (1,150) (508) (357)
Nondeductible acquisition costs - - 620
Other, net 353 360 163
--------------------------
Income tax provision (benefit) $22,086 $7,814 $(650)
==========================
Prior to the acquisition on May 7, 1998, Granville-Phillips Company ("GPC")
had elected to be treated as an S-Corporation for federal income tax
reporting purposes. Under this election, the individual stockholders of GPC
are deemed to have received a pro rata distribution of taxable income of GPC
(whether or not an actual distribution was made), which is included in their
taxable income. Accordingly, GPC did not provide for federal income taxes.
GPC's S-Corporation tax reporting status was terminated on the date of the
acquisition and, therefore, the undistributed earnings of $2.8 million as of
the date of acquisition have been reclassified to additional paid-in capital.
D. CAPITAL STOCK
Options for the purchase of shares of the Company's common stock have been
granted to officers, directors, and key employees under various nonqualified
stock option agreements. The terms of these agreements provide that the
options are exercisable over a number of years from the date of grant at not
less than the fair market value at the date of grant.
Options expire at various dates through the year 2010. At December 31, 2000
and 1999, respectively, 916,250 and 1,151,274 shares of common stock were
reserved for stock options. At December 31, 2000 and 1999, respectively,
161,000 and 115,274 nonqualified stock options were exercisable. In 1989 the
Company entered into an agreement with its president under which options to
purchase up to 800,000 shares of the Company's common stock were granted at a
price of $1.69 per share, exercisable over a ten-year period subject to the
attainment of certain financial performance targets. At December 31, 1999,
options for the purchase of 640,000 shares had become exercisable. The
remaining 160,000 shares became exercisable on March 1, 2000, and were
exercised. In connection with this agreement, compensation expense of $0,
$1,581,000, and $959,000 was charged in 2000, 1999, and 1998, respectively.
-34-
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
D. CAPITAL STOCK - (Continued)
In the first quarter of 1999, the Company entered into a new employment
agreement with its president under which nonqualified options to purchase up
to 200,000 shares of the Company's common stock were granted at the fair
market value of $20.81 per share, vesting over an eight-year period.
The following table summarizes option activity for the years ended 1998,
1999, and 2000:
Number of Weighted Average
Options Outstanding Common Shares Exercise Price
-------------------------------------------------------------------------
January 1, 1998 496,774 $ 8.95
Options granted 180,000 $22.33
Options exercised (106,000) $ 2.27
---------
December 31, 1998 570,774 $14.41
Options granted 331,500 $21.68
Options exercised (56,500) $14.21
Options canceled (73,500) $20.65
---------
December 31, 1999 772,274 $16.95
Options granted 40,000 $55.95
Options exercised (235,024) $ 7.54
Options canceled (32,375) $24.60
---------
December 31, 2000 544,875 $23.42
=========
The following table summarizes information concerning outstanding and
exercisable options at December 31, 2000:
Options Outstanding Options Exercisable
----------------------------------------------- ----------------------------
Range of Weighted Average Weighted Weighted
Exercise Number Remaining Average Number Average
Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
-------------------------------------------------------------------------------------------------
$ 2.86 - $18.44 117,250 4.03 years $16.21 90,500 $16.34
$20.81 - $20.81 242,625 6.85 years $20.81 13,250 $20.81
$23.11 - $27.28 150,000 7.05 years $24.19 56,000 $24.18
$40.69 - $65.97 35,000 9.13 years $62.36 1,250 $40.69
-------------------------------------------------------------------------------------------------
$ 2.86 - $65.97 544,875 6.44 years $23.42 161,000 $19.62
-35-
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
D. CAPITAL STOCK - (Continued)
The Company adopted the disclosure-only option under Statement of Financial
Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation" as of December 31, 1996. If the accounting provisions of SFAS
123 had been adopted, the effect on net income (loss) and basic and diluted
net income (loss) per share would have been as follows:
For the years ended December 31,
(in thousands except per share data) 2000 1999 1998
-----------------------------------------------------------------------------
As Reported
Net income (loss) $45,870 $15,864 $(1,920)
Basic net income (loss) per share $ 2.04 $ 0.71 $ (0.09)
Diluted net income (loss) per share $ 2.02 $ 0.70 $ (0.09)
Pro Forma
Net income (loss) $45,023 $15,179 $(2,438)
Basic net income (loss) per share $ 2.00 $ 0.68 $ (0.11)
Diluted net income (loss) per share $ 1.98 $ 0.67 $ (0.11)
The weighted average fair value of options granted during 2000, 1999, and
1998 was $31.96, $10.63, and $8.44, respectively. The fair value of each
option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions:
2000 1999 1998
-----------------------------------------------------------------------------
Dividend yield 1.2% 1.8% 4.2%
Expected stock price volatility 60% 50% 50%
Risk-free interest rate 6.38% 5.18% 5.49%
Expected holding period (years) 6.2 7.4 6.4
-36-
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
E. OTHER ASSETS
The Company has a 50/50 joint venture company, Ulvac Cryogenics, Inc., with
an unrelated Japanese manufacturer to produce cryogenic vacuum pumps in
Japan.
Condensed results of operations for the joint venture for each of the three
fiscal years ended September 30 are as follows:
(in thousands) 2000 1999 1998
-----------------------------------------------------------------------------
Net sales $46,199 $24,229 $19,511
================================
Gross profit $16,511 $ 7,847 $ 5,280
================================
Net income $ 6,443 $ 1,762 $ 1,092
================================
Joint venture income, including royalty
income and equity income $ 4,132 $ 1,415 $ 957
================================
Condensed balance sheet information as of September 30 is as follows:
(in thousands) 2000 1999
-----------------------------------------------------------------------------
Current assets $41,743 $26,548
Noncurrent assets 5,230 4,119
-------------------
Total assets $46,973 $30,667
===================
Current liabilities $23,075 $11,291
Long-term liabilities 1,118 1,113
Stockholders' equity 22,780 18,263
-------------------
Total liabilities and stockholders' equity $46,973 $30,667
===================
The Company's net investment in the joint venture of approximately
$10,998,000 and $8,549,000 at December 31, 2000 and 1999, respectively, is
reported in other assets. The Company's net investment at December 31, 2000
and 1999, reflects a cumulative translation gain of $728,000 and $1,083,000,
respectively (net of income tax provision of $392,000 and $583,000,
respectively). This currency translation gain, which is included in
stockholders' equity, resulted from translating the balance sheet of the
joint venture into U.S. dollars.
F. SEGMENT INFORMATION
Line of Business and Foreign Operations
The Company operates in several operating segments and in one reportable
segment: the development, manufacture, sale, and support of cryogenic and
vacuum equipment. These operating segments have been combined in accordance
with the aggregation criteria of SFAS 131, "Disclosure about Segments of an
Enterprise and Related Information."
-37-
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F. SEGMENT INFORMATION - (Continued)
The consolidated financial statements include the accounts of wholly owned
international subsidiaries that operate customer support facilities to sell
and service products manufactured in the United States. A summary of United
States and international operations follows for the years ended December 31:
United
(in thousands) States International Consolidated
-----------------------------------------------------------------------------
2000
Net sales $217,885 $35,200 $253,085
Long-lived assets $ 27,531 $ 3,249 $ 30,780
1999
Net sales $119,154 $20,235 $139,389
Long-lived assets $ 17,328 $ 2,420 $ 19,748
1998
Net sales $ 81,747 $13,598 $ 95,345
Long-lived assets $ 16,707 $ 1,093 $ 17,800
Export Sales and Significant Customers
The Company's export sales were $16,431,000 in 2000, $10,663,000 in 1999, and
$9,231,000 in 1998.
The Company's largest customer represented 40%, 29%, and 20% of net sales for
2000, 1999, and 1998, respectively.
G. EMPLOYEE BENEFIT PLANS
A noncontributory defined benefit pension plan and a defined contribution
plan function together as the Company's retirement program, covering
substantially all of the Company's employees who have one year of service.
The following tables set forth the funded status of the defined benefit
pension plan and the amount reflected in the Company's consolidated balance
sheets, projected benefit obligation, and fair value of assets of the plan.
Reconciliation of Funded Status
December 31,
(in thousands) 2000 1999
---------------------------------------------------------------------------
Funded status $ 944 $ 2,336
Unrecognized prior service cost 26 33
Unrecognized net transition asset (106) (145)
Unrecognized net actuarial gain (5,245) (5,819)
----------------------
Accrued pension cost $(4,381) $(3,595)
======================
-38-
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
G. EMPLOYEE BENEFIT PLANS - (Continued)
Reconciliation of Projected Benefit Obligation
(in thousands) 2000 1999
-----------------------------------------------------------------------------
Benefit obligation January 1 $5,879 $ 7,271
Service cost 1,146 1,024
Interest cost 574 515
Actuarial (gain) loss 787 (1,975)
Benefits paid (400) (956)
--------------------
Benefit obligation December 31 $7,986 $ 5,879
====================
Reconciliation of Fair Value of Assets
(in thousands) 2000 1999
-----------------------------------------------------------------------------
Fair value of assets January 1 $8,215 $ 8,673
Actual return on plan assets 615 498
Benefits paid (400) (956)
Transfer from Personal Account Plan 500 -
--------------------
Fair value of assets December 31 $8,930 $ 8,215
====================
The Company's net pension cost included the following components:
(in thousands) 2000 1999 1998
-----------------------------------------------------------------------------
Service cost $1,146 $1,024 $ 981
Interest cost 574 515 508
Expected return on assets (611) (546) (563)
Net amortization of:
Prior service cost 7 7 8
Net actuarial gain (291) (125) (131)
Transition obligation (39) (39) (39)
Curtailment gain - - (489)
-------------------------------
Net periodic pension cost $ 786 $ 836 $ 275
===============================
[FN]
The curtailment gain relates to certain participants in the pension plan
who were terminated from employment in connection with the Company's
restructuring plan (Note H).
-39-
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
G. EMPLOYEE BENEFIT PLANS - (Continued)
Key assumptions used in computing year-end obligations for the defined
benefit plan were:
2000 1999 1998
------------------------------------------------------------------------
Discount rate for obligations 7.5% 8.0% 6.75%
Rate of compensation increase 5.0% 5.5% 5.0%
Long-term rate of return on assets 9.0% 9.0% 9.0%
The Company has Employee Savings Plans, qualified under Section 401(k), which
are designed to supplement retirement income. The Company contributes a
percentage of the participants' contributions up to a defined maximum amount.
The contributions expense, net of forfeitures, was $1,817,000 in 2000,
$1,239,000 in 1999, and $826,000 in 1998.
The Company has a Supplemental Key Executive Retirement Plan which is
designed to supplement benefits paid to participants under Company-funded,
tax-qualified retirement plans. The Company recorded additional retirement
costs of $217,000 in 2000, $186,000 in 1999, and $170,000 in 1998 in
connection with this plan.
H. MERGER, RESTRUCTURING, AND SPECIAL CHARGES
In the second quarter of 1998, the Company acquired Granville-Phillips
Company ("GPC") in a transaction accounted for as a pooling of interests.
GPC operates in the same line of business as the Company; the development,
manufacture, sale, and support of vacuum equipment. The Company issued
2,382,925 shares of common stock in exchange for all outstanding common stock
of GPC at May 7, 1998. Direct acquisition costs, primarily stock-based
compensation expense relating to shares issued to certain GPC employees as
part of a restricted stock plan, and professional fees amounted to $3.5
million and were charged against the results of operations. At the time of
the acquisition, GPC common shares included in its restricted stock plan were
exchanged for the equivalent value of the Company's common shares. GPC was
an S-Corporation for tax purposes prior to the acquisition. In accordance
with SAB Topic 4B, the amount of undistributed earnings of $2.8 million
generated during the periods that GPC was taxed as an S-Corporation was
reclassified from retained earnings to capital in excess of par value at the
time of the merger and $0.8 million was recorded in capital in excess of par
value for stock incentive plans in 1998.
The following information presents certain statement of operations data of
the Company and GPC for the period prior to the acquisition.
(Unaudited)
Three Months Ended
(in thousands) March 31, 1998
------------------------------------------------------------------
Net sales for:
Helix $25,872
GPC 5,622
--------
Combined $31,494
========
Net income (loss) for:
Helix $ 2,941
GPC (1,075)
--------
Combined $ 1,866
========
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HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
H. MERGER, RESTRUCTURING, AND SPECIAL CHARGES - (Continued)
During the third quarter of 1998, the Company recorded restructuring and other
special charges of $2.5 million. The Company restructured its domestic
operations to eliminate nonstrategic spending, while redirecting resources to
the Company's global customer support structure and other strategic
initiatives. The charges primarily included provisions for termination
benefits of $1.3 million for approximately 80 personnel, exit costs related to
a leased facility of $1.0 million, and $0.2 million for the impairment of
certain assets. At December 31, 1999, the restructuring accrual was fully
utilized.
The amounts accrued and charged against the provisions described above were
as follows:
1998 1999
Cash Payments Dec. 31, Cash Payments Dec. 31,
and Asset 1998 and Asset 1999
(in thousands) Provision Write-offs Balance Write-offs Balance
-----------------------------------------------------------------------------------------------------
Employee termination benefits $1,300 $1,000 $300 $300 $ -
Leased facility 1,000 400 600 600 -
Asset impairment 200 200 - - -
--------------------------------------------------------------
Total $2,500 $1,600 $900 $900 $ -
==============================================================
I. GAIN ON SALE OF BUILDING
The Company sold its Colorado facility in December 1999, recognizing a $1.4
million gain, and moved to a new leased facility during 2000.
J. QUARTERLY FINANCIAL RESULTS (Unaudited)
First Second Third Fourth
(in thousands except per share data) Quarter Quarter Quarter Quarter
-----------------------------------------------------------------------------
2000
Net sales $50,050 $58,525 $69,913 $74,597
Gross profit 24,102 27,667 33,418 35,948
Operating income 11,039 13,276 18,054 20,214
Net income 7,958 9,764 13,478 14,670
Basic net income per share $ 0.36 $ 0.43 $ 0.60 $ 0.65
Diluted net income per share $ 0.35 $ 0.43 $ 0.59 $ 0.65
1999
Net sales $25,900 $32,533 $39,036 $41,920
Gross profit 10,789 14,154 17,605 19,354
Operating income 1,566 4,004 6,510 7,930
Net income 1,260 2,992 4,785 6,827
Basic net income per share $ 0.06 $ 0.13 $ 0.21 $ 0.31
Diluted net income per share $ 0.06 $ 0.13 $ 0.21 $ 0.30
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HELIX TECHNOLOGY CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2000, 1999, and 1998
(in thousands)
Additions
------------------------
Balance at Charged to Charged to Deductions Balance at
Beginning Costs and Other from End
Description of Period Expenses Accounts Reserves of Period
--------------------------------------------------------------------------------------------------------
Year ended December 31, 2000
Allowance for doubtful accounts $185 $100 $ - $ 88 $197
========================================================================================================
Year ended December 31, 1999
Allowance for doubtful accounts $228 $ 63 $ - $106 $185
========================================================================================================
Year ended December 31, 1998
Allowance for doubtful accounts $240 $ 5 $ - $ 17 $228
========================================================================================================
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
Exhibits To
FORM 10-K
Annual Report Pursuant to Section 13 of
the Securities Exchange Act of 1934
------------------------------------------------
For the Year Ended December 31, 2000
HELIX TECHNOLOGY CORPORATION
(Exact name of registrant as specified in charter)
Mansfield Corporate Center
Nine Hampshire Street
Mansfield, MA 02048-9171
(Address of principal executive offices)
--------------------------------------------
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