Item 1. Business
General - HELIX TECHNOLOGY CORPORATION ("the Company"), a Delaware corporation organized in 1967, is engaged in the development and application of cryogenic and vacuum technology. The Company provides innovative solutions to customer requirements in selected markets worldwide.
Through its CTI-Cryogenics ("CTI") operations, the Company provides a critical vacuum subsystem used in a broad range of electronic component manufacturing equipment. The principal customers for CTI's vacuum products are involved in the production of semiconductors, optical and magnetic data storage media and advanced information displays. The Cryo-Torr cryogenic vacuum pump product line combines the expertise of CTI in both cryogenics and vacuum technology. (Cryo-Torr is a registered trademark of Helix Technology Corporation.) CTI's On-Board cryogenic vacuum pumping system incorporates built-in microprocessor capabilities to provide on-line performance monitoring and diagnostics. (On-Board is a registered trademark of Helix Technology Corporation.)
The Company also applies its technology and manufacturing competence to provide specialized cryogenic refrigeration solutions for both military and commercial customers. Applications for this capability include the cooling of infrared detectors, advanced electronic circuits and superconducting materials.
The Company maintains Customer Support Centers strategically located throughout the world to provide replacement parts, overhaul, repair and upgrade services. The Company's unique GUTS rapid response network is designed to assure that users of the Company's products have direct, twenty- four-hour a day access to the resources of the Customer Support Centers. (GUTS is a registered trademark of Helix Technology Corporation.)
The Company encounters strong competition in both domestic and foreign markets for its products. Competition comes from smaller firms and from larger firms that have greater total resources than the Company. The absence of statistics makes it impossible to state the Company's precise position in its served markets, although the Company believes it enjoys a world leadership in the market for cryogenic vacuum pumping systems. Customer service, product quality, performance and price are all factors in selling the Company's products.
No significant portion of the Company's business is seasonal or cyclical.
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 material in its products.
The Company holds many U.S. and foreign patents in the field of vacuum and cryogenics that it believes are significant to its operations. Trademarks are considered important to the Company's business. These trademarks are protected by registration in the United States and other countries in which the Company's products are marketed.
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PART I
Item 1. Business (continued)
The Company and Ulvac Corporation of Chigasaki, Japan, operate a joint venture, Ulvac Cryogenics, Inc., engaged in the manufacture and sale of cryogenic vacuum pumps in Japan and some Asian countries. The joint venture is 50% owned by each company.
Backlog - The backlog of orders believed to be firm was approximately $11.5 million on December 31, 1995, compared to $9.6 million at December 31, 1994. Increases in bookings resulted primarily from record orders for the Company's On-Board vacuum pumping systems. The Company expects to recognize revenues from essentially all of the December 31, 1995, backlog during the 1996 calendar year.
Research and Development - The Company expended $4,534,000 in 1995 on research and development efforts compared to $4,411,000 and $3,656,000 in 1994 and 1993, respectively. These expenditures reflect development activities relating to product enhancements and new products for commercial applications.
Employment - Total employment in the Company at the end of 1995 was 404 compared with 362 and 340 at the end of 1994 and 1993, 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.
Financial Information about Industry Segments and Major Customers - The Company's one industry segment is cryogenic and vacuum equipment. Information concerning operations in different geographic areas and major customers is included in Note G of Notes to Consolidated Financial Statements included elsewhere in this report.
Item 2.
Item 2. Properties
The Company leases and occupies two buildings in Mansfield, Massachusetts, totaling approximately 218,000 square feet. The Company also leases space to house remote customer support facilities. A facility of approximately 11,000 square feet is leased in Santa Clara, California, and a facility of 12,000 square feet is leased in Austin, Texas. A total of approximately 16,000 square feet is leased in Europe to house three customer support centers. The Company believes that its facilities are adequate to support its current levels of production.
Item 3.
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.
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PART I
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
During the quarter ended December 31, 1995, no matters were submitted to a vote of security holders through the solicitation of proxies or otherwise.
PART II
Item 5.
Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters
The Company's common stock is traded on the Over-The-Counter market (NASDAQ symbol HELX). At December 31, 1995, there were 9,776,944 shares of common stock outstanding and approximately 720 common stockholders of record. In October 1994, the Board of Directors authorized a two-for-one common stock split in the form of a 100% stock dividend. The par value remains at $1 per share. Stock prices and all per share data have been retroactively restated to reflect this stock split. At the Company's 1995 Annual Meeting of Stockholders the number of authorized shares of common stock was increased to 30,000,000 shares from 10,000,000 shares.
Cash Dividend Per Common Share and Price Range of Common Stock
The cash dividend per common share and price range of Helix's common stock by quarter are:
1995 First Second Third Fourth Stock Price Quarter Quarter Quarter Quarter
High $22.00 $45.25 $55.75 $47.00 Low $14.75 $20.00 $43.00 $28.00 Cash dividend per share $ .11 $ .11 $ .11 $ .25
1994 First Second Third Fourth Stock Price Quarter Quarter Quarter Quarter
High $10.13 $12.88 $17.63 $19.00 Low $ 6.75 $ 8.00 $11.25 $13.25 Cash dividend per share $ .06 $ .06 $ .06 $ .11
The Board of Directors declared a quarterly cash dividend of $0.25 per common share payable on March 13, 1996, to common stockholders of record at the close of business on February 28, 1996.
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PART II
Item 6.
Item 6. Selected Financial Data
(in thousands except per share data)
1995 1994 1993 1992 1991
Net sales $123,667 $86,761 $63,863 $50,822 $55,759
Net income $ 20,985 $10,603 $ 5,021* $ 2,868 $ 3,082
Net income per share $ 2.10 $ 1.08 $ .53* $ .30 $ .32
Cash dividends per share $ .58 $ .29 $ .2025 $ .19 $ .19
Total assets $ 69,074 $45,386 $32,662 $32,373 $29,080
Capitalized lease obligations $ - $ 36 $ 81 $ 123 $ 161
Weighted average number of common shares outstanding 10,007 9,849 9,562 9,500 9,488
* Includes $108,000 ($0.01 per share) cumulative tax benefit from adoption of SFAS No. 109 in 1993.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations - 1995 Compared With 1994
Net sales for 1995 increased to $123.7 million, an increase of $36.9 million or 43% compared with prior year sales. The growth in revenues resulted primarily from record sales of the Company's cryogenic vacuum products and services used principally by semiconductor manufacturers worldwide.
Total gross profit as a percentage of net sales improved 4.4 percentage points compared with the prior year. The increase in gross profit was principally due to a favorable product mix and volume, driven by increased sales of the On-Board cryogenic vacuum pumping system and efficiencies derived from the Company's manufacturing competencies.
The Company's investment in research and development increased 3% in 1995. Selling, general and administrative expenses increased 28% and were 16% and 18% of sales in 1995 and 1994, respectively.
The increase in Selling, general and administrative expenses is attributable to increases in selling costs.
Interest income for 1995 was $623 thousand compared with $123 thousand for 1994, reflecting significantly higher cash balances.
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PART II
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Royalty and equity income from the Company's joint venture in Japan improved $593 thousand over last year.
The Company's provision for income taxes was $12.7 million and $5.8 million in 1995 and 1994, respectively. The difference between the statutory federal tax rate and the Company's effective tax rate of 37.75% and 35.5%, for 1995 and 1994, respectively, is principally due to state and foreign income taxes.
In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS No. 123) - Accounting for Stock-Based Compensation. SFAS No. 123 encourages, but does not require, companies to recognize compensation costs for all stock-based compensation arrangements using a fair value method of accounting. The Company has not adopted SFAS No. 123, and has not yet determined the impact of such adoption on its consolidated results of operations. The adoption of SFAS No. 123 will have no cash flow impact on the Company.
Liquidity and Capital Resources
Net cash provided by operating activities increased to $24.2 million in 1995. The Company invested $3.1 million, primarily in machinery and equipment. Cash dividends paid to stockholders increased to $5.7 million.
At December 31, 1995, the Company had informal bank lines of credit of $12 million.
The Company believes anticipated cash flow from operations and funds available under existing credit lines will be adequate to fund operations through 1996 and that it has opportunities to consider further financing options should additional funds be required.
Results of Operations - 1994 Compared With 1993
Net sales for 1994 increased to $86.8 million, an increase of $22.9 million or 36% compared with prior year sales. The growth in revenues resulted primarily from record sales of the Company's cryogenic vacuum products and services used principally by semiconductor manufacturers worldwide.
Sales of On-Board vacuum pumping systems accounted for most of the approximately $26.9 million increase in sales to commercial customers. Continued growth in customer service activities also contributed to the growth in revenues.
Sales for military applications decreased approximately $4 million in 1994 as a result of final shipments of Maverick missile coolers under a program completed early in 1994.
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PART II
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Total gross profit as a percentage of net sales improved 4.8 percentage points compared with prior year. Increased sales of On-Board vacuum products and the completion of the low-margin Maverick missile program are the primary reasons for improved gross profit in 1994.
The Company's investment in research and development increased 21% in 1994. Selling, general and administrative expenses increased 27% and were 18% and 19% of sales in 1994 and 1993, respectively.
This increase in Selling, general and administrative expense is attributable to increases in selling costs and performance-based executive compensation (Note E).
Royalty and equity income from the Company's joint venture in Japan improved over last year.
The Company's provision for income taxes was $5.8 million and $2.5 million in 1994 and 1993, respectively. The difference between the statutory federal tax rate and the Company's effective tax rate of 35.5% and 33.6%, for 1994 and 1993, respectively, is due to state and foreign income taxes.
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PART II
Item 8.
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 16
Consolidated Financial Statements of Helix Technology Corporation
Consolidated Balance Sheets as of December 31, 1995 and 1994 17
Consolidated Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993 18
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995, 1994 and 1993 19
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993 20
Notes to Consolidated Financial Statements 21-30
Report of Independent Accountants 31
Quarterly Results (Unaudited) 32
Financial Statement Schedules for the Years Ended December 31, 1995, 1994 and 1993
II. Valuation and Qualifying Accounts 33
Schedules other than those listed above have been omitted since they are either inapplicable or not required.
Item 9.
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 twenty-four-month period ended December 31, 1995.
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PART III
Item 10.
Item 10. Directors and Executive Officers of The Registrant
Information required by this item is incorporated herein by reference to the registrant's proxy statement for its 1996 Annual Meeting of Stockholders which will be filed with the SEC in March 1996, pursuant to Regulation 14A.
Item 11.
Item 11. Executive Compensation
Information required by this item is incorporated herein by reference to the registrant's proxy statement for its 1996 Annual Meeting of Stockholders which will be filed with the SEC in March 1996, pursuant to Regulation 14A.
Item 12.
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 1996 Annual Meeting of Stockholders which will be filed with the SEC in March 1996, pursuant to Regulation 14A.
Item 13.
Item 13. Certain Relationships and Related Transactions
Information required by this item is incorporated herein by reference to the registrant's proxy statement for its 1996 Annual Meeting of Stockholders which will be filed with the SEC in March 1996, pursuant to Regulation 14A.
PART IV
Item 14.
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 & Exhibits:
(1), (2) The Consolidated Financial Statements and required schedules are indexed under Item 8. 8
(3) Exhibits required by Item 601 of SEC Regulation S-K.(Exhibit numbers refer to exhibit number on Table I).
3. Articles of Incorporation Exhibit 3 to the Restated articles of incorporation Company's Form 10-Q as amended on May 7, 1987 and for the Quarter May 18, 1988. Ended September 30, 1988.
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PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
Page Number(s) or Incorporation by Description Reference to
By-laws Exhibit (3)-3 to the As amended on December 10, 1986 and Company's Form 10-K December 9, 1987. 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.
10. Material Contracts:
(1) Indenture of lease dated April 1, 1969, Exhibit 10.1 to a between the First National Bank of Boston, Registration Trustee, as Lessor, and 500 Incorporated Statement on Form (The Company's former name), as Lessee. S-2, Registration No. 2-84880.
(2) Guarantee by Arthur D. Little, Inc., Exhibit 10.1 to a dated April 1, 1969, of the Indenture of Registration Lease dated April 1, 1969, between the First Statement on Form National Bank of Boston, Trustee, and 500 S-2, Registration Incorporated (the Company's former name). No. 2-84880.
(3) 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.
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PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
Page Number(s) or Incorporation by Description Reference to
(4) Lease agreement dated July 24, 1984, Exhibit 10-(14) between WRC Properties, Inc., as Lessor, to the Company's and the Company as Lessee. Form 10-K for the Year Ended December 31, 1984.
(5) Lease Agreement dated May 23, 1991, Exhibit 10-(14) between Mansfield Corporate Center Limited to the Company's Partnership, as Lessor, and the Company Form 10K for the as Lessee. Year Ended December 31, 1991.
Compensation Plans, Contracts and Arrangements:
(6) The Company's 1992 Stock Option Plan Exhibit 6-(14) for Non-Employee Directors. to the Company's Form 10-K for the Year Ended December 31, 1992.
(7) The Company's 1981 Incentive Stock Exhibit 7-(14) Option Plan as adopted on November 11, to the Company's 1981, and as amended on April 14, 1982, Form 10-K for the February 6, 1985, December 9, 1987, Year Ended February 5, 1988, April 13, 1988, December 31, 1992. February 8, 1989, and February 13, 1992.
(8) The Company's informal incentive Exhibit 10.9 to a bonus plan. Registration Statement on Form S-2, Registration No. 2-84880.
(9) Employment agreement dated December 13, Exhibit 9-(14) to 1989, as amended and restated on the Company's February 13, 1992, and re-executed on Form 10-K for the May 28, 1992, between the Company and Year Ended Robert J. Lepofsky. December 31, 1992.
(10) The Company's Section 125 Plan. Exhibit 18 to Form 8, Amendment No. 1 to 1985 Annual Report on Form 10-K.
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PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
Page Number(s) or Incorporation by Description Reference to
(11) The Company's Amended and Restated Exhibit 10-(11) Employee Savings Plan dated December 15, to the Company's 1994. Form 10-K for the Year Ended December 31, 1994.
(12) The Company's Amended and Restated Exhibit 10-(12) Employee's Pension Plan dated December 15, to the Company's 1994. Form 10-K for the Year Ended December 31, 1994.
(13) The Company's Amended and Restated Exhibit 10-(13) Employees' Personal Account Plan dated to the Company's December 15, 1994. Form 10-K for the Year Ended December 31, 1994.
(14) The Company's Supplemental Key Exhibit 14-(14) Executive Retirement Plan effective to the Company's February 13, 1992. Form 10-K for the Year Ended December 31, 1992.
11. Schedule of Computation of Earnings per Share
21. Subsidiaries of the Registrant
23. Consent of Independent Accountants
24. Powers of Attorney
27. Financial Data Schedule (EDGAR version only)
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PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued)
(b) The Company was not required to file any reports on Form 8-K during the quarter ended December 31, 1995.
(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) Schedules I, III, and IV are not filed because they are either not applicable or the items do not exceed the various disclosure levels.
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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, 1996.
HELIX TECHNOLOGY CORPORATION (Registrant)
Robert J. Lepofsky (Signature) 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, 1996, in the capacities indicated.
Signatures Titles
(i) Principal Executive Officer
Robert J. Lepofsky President and Chief Executive (Signature) Officer
(ii) Principal Financial Officer
Stephen D. Allison Vice President and Chief (Signature) Financial Officer
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(iii) A Majority of the Board of Directors
R. Schorr Berman* Director
Frank Gabron* Director and Chairman of the Board
Milton C. Lauenstein* Director
Robert J. Lepofsky Director (Signature)
Marvin G. Schorr* Director
Wickham Skinner* Director
Mark S. Wrighton* Director
*Robert J. Lepofsky (Signature) Attorney-in-Fact
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REPORT OF INDEPENDENT ACCOUNTANTS
To The Board Of Directors and Stockholders of Helix Technology Corporation:
We have audited the accompanying consolidated balance sheets of Helix Technology Corporation as of December 31, 1995 and 1994, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Helix Technology Corporation as of December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P. (Signature)
Boston, Massachusetts February 7, 1996
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HELIX TECHNOLOGY CORPORATION CONSOLIDATED BALANCE SHEETS
December 31, (in thousands) Notes 1995 1994 ASSETS Current: Cash and cash equivalents A $ 21,697 $ 8,050 Receivables - net of allowances of $150 in 1995 and $157 in 1994 17,974 12,219 Inventories A 12,122 9,556 Deferred income taxes A&D 3,039 2,460 Other current assets 556 586 Total Current Assets 55,388 32,871
Property, plant and equipment at cost A 25,387 22,750 Less: accumulated depreciation (17,061) (14,913) Net property, plant and equipment 8,326 7,837 Other assets A&F 5,360 4,678 TOTAL ASSETS $ 69,074 $ 45,386
LIABILITIES AND STOCKHOLDERS' EQUITY Current: Accounts payable $ 6,558 $ 4,896 Payroll and compensation E 3,755 3,305 Retirement costs H 1,359 610 Income taxes A&D 4,756 1,182 Other accrued liabilities 705 450 Total Current Liabilities 17,133 10,443
Deferred income taxes A&D 388 562 Capitalized lease obligations C - 36 Commitments C - - Stockholders' Equity: Preferred stock, $1 par value; authorized 2,000,000 shares; issued and outstanding: none - - Common stock, $1 par value; authorized 30,000,000 shares; issued and outstanding: 9,776,944 in 1995 and 9,667,642 in 1994 E 9,777 9,668 Capital in excess of par value 3,659 2,157 Currency translation adjustment A&F 1,307 1,043 Retained earnings E 36,810 21,477 Total Stockholders' Equity 51,553 34,345 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 69,074 $ 45,386
The accompanying notes are an integral part of these financial statements.
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HELIX TECHNOLOGY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, (in thousands except per share data) Notes 1995 1994 1993
Net sales $123,667 $86,761 $63,863
Costs and expenses: Cost of sales 67,740 51,336 40,889 Research and development A 4,534 4,411 3,656 Selling, general and administrative E 19,588 15,327 12,104 91,862 71,074 56,649 Operating income 31,805 15,687 7,214
Interest expense - - (82) Joint venture income F 1,392 799 365 Other 517 (47) (101) Income before taxes 33,714 16,439 7,396 Income taxes A&D (12,729) (5,836) (2,483) Income before the cumulative effect of a change in accounting principle 20,985 10,603 4,913 Cumulative effect of a change in accounting for income taxes A&D - - 108 Net income $ 20,985 $10,603 $ 5,021
Income per common share before the cumulative effect of a change in accounting principle $ 2.10 $ 1.08 $ .52 Cumulative effect of a change in accounting for income taxes A&D - - .01 Net income per common share A&E $ 2.10 $ 1.08 $ .53 Average shares and equivalents A&E 10,007 9,849 9,562
The accompanying notes are an integral part of these financial statements.
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HELIX TECHNOLOGY CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Capital Par in Excess Translation Retained (in thousands) Value of Par Adjustment Earnings Total
Balance, December 31, 1992 $9,498 $ 1,231 $ 489 $10,567 $21,785
Shares issued for stock options 38 132 - - 170 Shares tendered for exercise of stock options (5) 1 - - (4) Currency translation adjustment - - (1) - (1) Net income - 1993 - - - 5,021 5,021 Cash dividends ($.2025 per share) - - - (1,923) (1,923) Balance, December 31, 1993 9,531 1,364 488 13,665 25,048
Shares issued for stock options 147 666 - - 813 Income tax benefit from exercise of stock options - 203 - - 203 Shares tendered for exercise of stock options (10) (76) - - (86) Currency translation adjustment - - 555 - 555 Net income - 1994 - - - 10,603 10,603 Cash dividends ($.29 per share) - - - (2,791) (2,791) Balance, December 31, 1994 9,668 2,157 1,043 21,477 34,345
Shares issued for stock options 185 2,708 - - 2,893 Income tax benefit from exercise of stock options - 1,273 - - 1,273 Shares tendered for exercise of stock options (76) (2,479) - - (2,555) Currency translation adjustment - - 264 - 264 Net income - 1995 - - - 20,985 20,985 Cash dividends ($.58 per share) - - - (5,652) (5,652) Balance, December 31, 1995 $9,777 $ 3,659 $1,307 $36,810 $51,553
The accompanying notes are an integral part of these financial statements.
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HELIX TECHNOLOGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, (in thousands) 1995 1994 1993 Cash flows from operating activities: Net income $20,985 $10,603 $ 5,021 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 2,562 2,049 1,777 Decrease in noncurrent deferred income taxes (174) (9) (168) Undistributed earnings of joint venture, other (418) (120) (248) Increase in accrual for performance-based executive compensation 1,938 1,827 541 Net change in other operating assets and liabilities(1) (665) (3,486) 173 Net cash provided by operating activities 24,228 10,864 7,096 Cash flows from investing activities: Capital expenditures (3,051) (2,237) (1,655) Net cash used by investing activities (3,051) (2,237) (1,655) Cash flows from financing activities: Net decrease in short-term debt - - (3,600) Decrease in capital lease obligations (36) (42) (38) Shares tendered for exercise of stock options (2,555) (86) (4) Net cash provided by employee stock plans 713 665 170 Cash dividends paid (5,652) (2,791) (1,923) Net cash used by financing activities (7,530) (2,254) (5,395) Increase in cash and cash equivalents 13,647 6,373 46 Cash and cash equivalents, January 1 8,050 1,677 1,631 Cash and cash equivalents, December 31 $21,697 $ 8,050 $ 1,677 (1) Change in other operating assets and liabilities: (Increase)/decrease in accounts receivable $(5,755) $(3,131) $ 61 (Increase)/decrease in inventories (2,566) (1,359) 151 (Increase)/decrease in other current assets (549) (998) (330) Increase/(decrease) in accounts payable 1,662 1,473 (761) Increase/(decrease) in other accrued expenses 6,543 529 1,052 Net change in other operating assets and liabilities $ (665) $(3,486) $ 173 Supplemental disclosures: Interest paid $ - $ - $ 85 Income taxes paid $ 8,217 $ 6,930 $ 1,675 Supplemental disclosure of non-cash activity: In 1995 and 1994, $2,180,000 and $148,000, respectively, were reclassed from accrued executive compensation to equity in connection with issuance of stock options.
The accompanying notes are an integral part of these financial statements.
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HELIX TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies
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 statements of cash flows to conform with the current presentation.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its 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.
Foreign Currency Translation
Assets and liabilities of operations outside of 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 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.
Inventories
(in thousands) 1995 1994
Finished goods $ 3,870 $2,404 Work in process 7,340 6,115 Materials and parts 912 1,037 Net inventories $12,122 $9,556
Inventories are stated at the lower of cost or market on a first-in, first- out basis.
Cash Equivalents
Short-term investments with maturities of three months or less from the date of purchase are classified as cash equivalents.
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HELIX TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies (continued)
Revenue Recognition
The Company records revenue on its standard products when units are shipped. Revenues associated with certain government-related contracts are recognized upon shipment based on sales value per unit, and costs are based on estimated average cost per unit over the entire contract. Changes in estimated average unit costs are recognized in the period they become known.
Research and Development
Research and development costs are expensed as incurred.
Income Taxes
The Company provides for income taxes based on provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," adopted at the beginning of 1993. 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.
Earnings Per Share
Net income per common share is based on the weighted average number of common shares outstanding during each year after giving effect to stock options considered to be dilutive common stock equivalents. Fully diluted net income per common share is not materially different from primary net income per common share.
Property, Plant and Equipment
(in thousands) 1995 1994 Building - capital lease $ 1,847 $ 1,847 Machinery and equipment 19,497 17,236 Leasehold improvements 4,043 3,667 Total $25,387 $22,750
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 10 years.
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HELIX TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of Significant Accounting Policies (continued)
Property, Plant and Equipment (continued)
Maintenance and repairs are charged to expense as incurred, and betterments are capitalized. A capital lease on the Company's Waltham facility is depreciated on a straight-line method over the life of the lease. Accumulated depreciation of the capital lease was $1,813,000 at December 31, 1995, and $1,745,000 at December 31, 1994.
New Accounting Pronouncements
Statement of Financial Accounting Standards No. 123, "Accounting for Stock- Based Compensation" (SFAS 123), will require the Company to either elect expense recognition or the disclosure-only alternative for stock-based employee compensation. SFAS 123 must be adopted in the Company's 1996 financial statements with comparable disclosures for the prior year. The Company has not yet determined whether it will elect the expense recognition or disclosure-only alternative permitted under SFAS 123 and therefore has not yet determined the impact of such adoption on the consolidated results of operations.
B. Bank Credit Arrangements
The Company's informal lines of credit with several banks amounted to $12,000,000 on December 31, 1995 and 1994. At December 31, 1995 and 1994, no borrowings were outstanding.
C. Lease Obligations and Commitments
The Company leases its facilities and certain equipment under long-term operating and capital leases. In 1991, in connection with consolidating its operations in Mansfield, the Company entered into a noncancelable operating lease, which expires December 31, 2006. The lease includes scheduled base rent increases through the term of the lease and renewal options up to fifteen additional years.
The Company's Waltham facility, which is under a capital lease, was subleased in 1992. The sublease revenues are expected to cover the remaining obligations of the capital lease, which expires on September 30, 1996. Future minimum lease payments under the noncancelable operating and capital leases are:
($ thousands) 1996 1997 1998 1999 2000 Later Yrs Total Operating leases 2,701 2,802 2,610 2,415 1,913 13,260 25,701 Capital lease, including interest 37 - - - - - 37
Total rental expense under operating leases was $3,028,445 in 1995, $3,030,000 in 1994, and $3,151,000 in 1993.
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HELIX TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
C. Lease Obligations and Commitments (continued)
The Company enters into short-term foreign currency forward contracts with its primary banks to minimize the effect of fluctuations on its foreign currency denominated transactions, principally intercompany trade receivables, with its wholly owned European subsidiaries. Net realized and unrealized gains and losses on these transactions are not material and are recorded in the statements of operations. The Company's outstanding foreign currency forward contracts at December 31, 1995 and 1994, were $3,329,000 and $1,250,000, respectively.
D. Income Taxes
The Company adopted SFAS No. 109 as of January 1, 1993. The cumulative effect of this change in accounting principle increased net income by $108,000 for that year. The provisions for income taxes are as follows:
(in thousands) 1995 1994 1993 Current tax expense: Federal $ 9,816 $ 5,197 $2,058 State 2,443 1,340 481 Foreign 1,223 555 474 Total current 13,482 7,092 3,013 Deferred tax expense: Federal (710) (942) (411) State (43) (314) (119) Total deferred (753) (1,256) (530) Total provision for taxes $12,729 $ 5,836 $2,483
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HELIX TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
D. Income Taxes (continued)
Significant components of deferred income taxes are as follows: December 31, December 31, (in thousands) 1995 1994 Gross deferred assets: Inventory valuation $ 1,073 $ 904 Compensation 1,806 1,400 Warranties 100 104 Leases 256 163 Other 59 54 Total gross deferred assets $ 3,294 $2,625 Gross deferred liabilities: Depreciation $ (643) $ (727) Total gross deferred liabilities $ (643) $ (727) Net deferred assets $ 2,651 $1,898
Deferred income taxes on undistributed earnings of the foreign subsidiaries are not material. The Company does not believe that a valuation allowance is required for the net deferred tax assets.
Domestic income before income taxes was approximately $31,065,000, $14,950,000 and $6,035,000 in 1995, 1994 and 1993, respectively. Foreign income before income taxes for the same years was approximately $2,649,000, $1,489,000, and $1,361,000, respectively.
Tax returns for the years through 1991 have been examined by the Internal Revenue Service.
The following table reconciles income tax based on the federal statutory rate to the income tax provision in the Statement of Operations:
(in thousands) 1995 1994 1993 Federal tax computed at statutory rate of 35% in 1995 and 1994 and 34% in 1993 $11,800 $5,754 $2,515 State income taxes, net of federal tax benefit 1,545 557 212 Foreign sales corporation tax benefit (704) (102) (48) Earnings not subject to U.S. income taxes (287) (140) (17) R&D tax credit (100) (291) (201) Other 475 58 22 Income tax provision $12,729 $5,836 $2,483 Effective tax rate 37.75% 35.5% 33.6%
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HELIX TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
E. 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 incentive and 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 2005. At December 31, 1995 and 1994, respectively, 537,776 and 723,126 shares of common stock were reserved for stock options. At December 31, 1995 and 1994, respectively, 185,200 and 179,300 nonqualified and incentive stock options were exercisable. In 1989, the Company entered into an agreement with its President under which options to purchase up to 400,000 shares of the Company's common stock were granted, at a price of $3.375 per share, exercisable over a ten-year period subject to the attainment of certain financial performance targets. Based on 1995 performance, options for the purchase of 40,000 shares will become exercisable on March 1, 1996. Based on 1994 performance, options for the purchase of 40,000 shares became exercisable on March 1, 1995. In addition, based on cumulative performance for the five-year period ending December 31, 1994, 120,000 shares also became exercisable on March 1, 1995. Based on 1993 performance, options for the purchase of 40,000 shares became exercisable on March 1, 1994. In connection with this agreement, compensation expense of $1,938,000 and $1,827,000 was charged to "Selling, general and administrative expenses" in 1995 and 1994, respectively.
Number of Option Options Outstanding Common Shares Price Range December 31, 1992 739,600 $ 3.38 - $ 6.69
Options granted 10,000 $ 5.41 - $ 5.41 Options lapsed (14,000) $ 5.72 - $ 6.25 Options exercised (38,400) $ 3.35 - $ 6.31 December 31, 1993 697,200 $ 3.38 - $ 6.69
Options granted 83,000 $ 7.69 - $14.25 Options lapsed (18,000) $ 7.69 - $14.25 Options exercised (146,650) $ 3.38 - $ 7.69 December 31, 1994 615,550 $ 3.38 - $ 9.31
Options granted 17,500 $16.75 - $27.88 Options exercised (185,350) $ 3.38 - $ 7.69 December 31, 1995 447,700 $ 3.38 - $27.88
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HELIX TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F. 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 the three years ended September 30, 1995, are as follows:
(in thousands) 1995 1994 1993 Net sales $27,845 $18,697 $14,490 Gross profit $ 7,894 $ 3,946 $ 2,687 Net income/(loss) $ 1,642 $ 370 $ (68) Fee income, including royalty income and equity income $ 1,392 $ 799 $ 365
Condensed balance sheet information as of September 30, is as follows:
(in thousands) 1995 1994 Current assets $18,390 $15,124 Noncurrent assets 5,010 5,118 Total assets $23,400 $20,242 Current liabilities $10,200 $ 8,329 Long-term liabilities 1,300 1,313 Stockholders' equity 11,900 10,600 Total liabilities and stockholders' equity $23,400 $20,242
The Company's net investment in the joint venture of approximately $5,302,000 and $4,622,000 at December 31, 1995 and 1994, respectively, is included in "Other assets." The Company's net investment at December 31, 1995 and 1994, reflects a cumulative translation adjustment of $1,202,000 and $1,317,000, respectively (net of income taxes of $648,000 and $678,000, respectively). This currency translation adjustment, which is also shown as a separate component of the stockholders' equity, resulted from translating the balance sheet of the joint venture into U.S. dollars.
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HELIX TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
G. Segment Information
Line of Business and Foreign Operations
The Company's operations comprise a single line of business; the development, manufacture and sale of cryogenic and vacuum equipment.
The consolidated financial statements include the accounts of wholly owned European subsidiaries which operate customer support facilities to sell and service products manufactured in the United States. A summary of domestic and European operations follows:
Corporate Expenses United and Assets/ (in thousands) States Europe Eliminations Consolidated Revenues $117,407 $14,400 $(8,140) $123,667 Operating income 34,362 2,806 (5,363) 31,805 Identifiable assets 39,588 9,209 20,277 69,074
Revenues $ 82,012 $10,582 $(5,833) $ 86,761 Operating income 18,413 1,636 (4,362) 15,687 Identifiable assets 32,036 6,288 7,062 45,386
Revenues $ 59,756 $ 8,313 $(4,206) $ 63,863 Operating income 8,368 1,436 (2,590) 7,214 Identifiable assets 26,376 5,239 1,047 32,662
Corporate expenses consist of certain general and administrative expenses not allocable to operations. Corporate assets consist of cash and cash equivalents. Intercompany transactions are at prices which are comparable to unrelated party sales.
Export Sales and Significant Customers
The Company's export sales, principally to customers in the Far East, were $8,330,000 in 1995, $8,888,000 in 1994 and $6,784,000 in 1993.
In 1995, the Company's two largest customers represented 30% and 12% of sales. In 1994 and 1993, the Company's largest customer represented 23% and 16% of sales, respectively. Sales to U.S. Government agencies and their contractors were 2%, 7% and 16% in 1995, 1994 and 1993, respectively. In 1993 a single government contractor accounted for 11%.
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HELIX TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
H. Employee Benefit Plans
The Company's retirement and savings plans cover substantially all of the Company's employees who have one year of service. A noncontributory defined benefit pension plan and a defined contribution plan function together as the Company's retirement program.
In February 1994, the Company decided that, beginning in 1994, it would discontinue future contributions to the Company's Defined Contribution Plan. The Company will now fund the Pension Plan directly and not by the way of the Defined Contribution Plan.
The Company's funding policy is to contribute not less than the minimum required amount in accordance with the Internal Revenue Code and ERISA. The following table sets forth the funded status of the defined benefit pension plan at December 31, 1995 and 1994, in accordance with SFAS No. 87.
(in thousands) 1995 1994 Accumulated benefit obligation, including nonvested benefit obligations of $28 and $8 in 1995 and 1994, respectively $(4,316) $(3,435) Projected benefit obligation (7,188) (5,086) Plan assets at fair value 6,812 5,810 Plan assets in excess of projected benefit obligations (376) 724 Unrecognized net transition asset (301) (340) Unrecognized prior service cost 68 77 Unrecognized net gain (491) (941) Accrued pension cost recognized on the consolidated balance sheets $(1,100) $ (480)
The Company's net pension cost included the following components:
(in thousands) 1995 1994 1993 Service cost $ 664 $ 691 $ 76 Interest cost 470 391 337 Actual return on plan assets (1,396) (11) (609) Net amortization and deferral 882 (492) 139 Net pension cost of defined benefit plan $ 620 $ 579 $ (57) Net cost of defined contribution plan $ - $ - $ 621
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HELIX TECHNOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
H. Employee Benefit Plans (continued)
Key assumptions used in computing pension cost for the defined benefit plan were:
1995 1994 1993 Discount rate for obligations 7.0% 7.75% 7.0% Rate of compensation increase 5.0% 5.5% 5.0% Long-term rate of return on assets 9.0% 9.0% 9.0%
Defined benefit plan assets include marketable equity securities, corporate and government debt securities and cash.
The Company has an Employee Savings Plan, qualified under Section 401(k), that is designed to supplement income to be received from the Company's retirement program. The Company contributes a percentage of the participants' contributions up to a defined maximum amount. The matching contributions expense, net of forfeitures, was $383,000 in 1995, $333,000 in 1994 and $307,000 in 1993.
In 1992, the Company adopted 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 $130,000 in 1995 and $119,000 in 1994 in connection with this Plan.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Helix Technology Corporation:
Our report on the consolidated financial statements of Helix Technology Corporation is included on Page 16 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in the index on Page 8 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
COOPERS & LYBRAND L. L. P. (Signature)
Boston, Massachusetts February 7, 1996
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HELIX TECHNOLOGY CORPORATION
QUARTERLY RESULTS (UNAUDITED)
First Second Third Fourth (in thousands except per share data) Quarter Quarter Quarter Quarter Net sales $27,154 $29,030 $32,253 $35,230 Gross profit 12,084 12,910 14,508 16,425 Operating income 6,284 7,448 8,428 9,645 Net income 4,336 4,983 5,502 6,164 Primary net income per share $ .43 $ .50 $ .55 $ .62
Net Sales $18,785 $21,251 $22,355 $24,370 Gross profit 6,776 8,829 9,356 10,464 Operating income 2,640 4,008 4,260 4,779 Net income 1,757 2,621 2,857 3,368 Primary net income per share $ .18 $ .27 $ .29 $ .34