FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the Quarter Ended March 30, 2001.
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
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(State of incorporation) (IRS Employer Identification No.)
Mansfield Corporate Center
Nine Hampshire Street
Mansfield, Massachusetts 02048-9171
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 337-5111
-----------------------------
Indicate by checkmark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past ninety days.
Yes [X] No [ ]
The number of shares outstanding of the registrant's Common Stock, $1 par
value, as of March 30, 2001 was 22,537,204.
HELIX TECHNOLOGY CORPORATION
Form 10-Q
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of March 30, 2001
and December 31, 2000 ....................................3
Consolidated Statements of Income for the Three-Month
Periods Ended March 30, 2001 and March 31, 2000 ..........4
Consolidated Statements of Cash Flows for the
Three-Month Periods Ended March 30, 2001 and
March 31, 2000 ...........................................5
Notes to Consolidated Financial Statements ...............6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ..9-11
Item 3. Quantitative and Qualitative Disclosures
about Market Risk ................................12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings ............................13
Item 6 (a). Reports on Form 8-K ..........................13
Signature .................................................14
HELIX TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
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March 30, December 31,
2001 2000
(in thousands except per share data) (unaudited) (audited)
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ASSETS
Current:
Cash and cash equivalents $ 14,231 $ 15,435
Investments (Note 2) 16,861 16,654
Receivables - net of allowances 29,450 40,243
Inventories (Note 3) 30,812 30,204
Deferred income taxes (Note 4) 6,444 6,444
Other current assets 2,375 2,208
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Total Current Assets 100,173 111,188
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Property, plant and equipment at cost 55,939 49,940
Less: accumulated depreciation (32,010) (31,115)
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Net property, plant and equipment 23,929 18,825
Other assets 12,220 11,955
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TOTAL ASSETS $136,322 $141,968
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable $ 10,739 $ 17,993
Payroll and compensation 2,842 3,060
Retirement costs 6,006 5,586
Income taxes (Note 4) 5,883 6,015
Other accrued liabilities 777 747
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Total Current Liabilities 26,247 33,401
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Commitments and contingencies
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
2001 and 2000 22,537 22,537
Capital in excess of par value 12,263 12,263
Treasury stock, $1 par value (3,840 shares in
2001 and 2000) (232) (232)
Retained earnings 76,399 74,123
Accumulated other comprehensive loss (892) (124)
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Total Stockholders' Equity 110,075 108,567
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $136,322 $141,968
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The accompanying notes are an integral part of these financial statements.
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HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
------------------------------------------------------------------------
Three Months Ended
March 30, March 31,
(in thousands except per share data) 2001 2000
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Net sales $48,641 $50,050
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Costs and expenses:
Cost of sales 28,507 25,948
Research and development 4,233 3,275
Selling, general and administrative 9,905 9,788
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42,645 39,011
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Operating income 5,996 11,039
Joint venture income 965 542
Interest and other income 417 297
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Income before taxes 7,378 11,878
Income taxes (Note 4) 2,398 3,920
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Net income $ 4,980 $ 7,958
========================================================================
Net income per share (Note 5):
Basic $ 0.22 $ 0.36
Diluted $ 0.22 $ 0.35
========================================================================
Number of shares used in per share calculations
(Note 5):
Basic 22,533 22,419
Diluted 22,649 22,899
========================================================================
The accompanying notes are an integral part of these financial statements.
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HELIX TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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Three Months Ended
March 30, March 31,
(in thousands) 2001 2000
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Cash flows from operating activities:
Net income $ 4,980 $ 7,958
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,174 974
Other (1,069) (351)
Net change in operating assets and liabilities (A) 2,865 (2,598)
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Net cash provided by operating activities 7,950 5,983
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Cash flows from (used by) investing activities:
Capital expenditures (6,278) (2,118)
Purchase of investments (10,487) (4,814)
Sale of investments 10,315 4,663
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Net cash used by investing activities (6,450) (2,269)
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Cash flows from (used by) financing activities:
Shares tendered for exercise of stock options 0 (5,167)
Net cash provided by employee stock plans 0 1,178
Cash dividends paid (2,704) (2,701)
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Net cash used by financing activities (2,704) (6,690)
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Decrease in cash and cash equivalents (1,204) (2,976)
Cash and cash equivalents, at the beginning of
the period 15,435 11,408
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Cash and cash equivalents, at the end of the
period $ 14,231 $ 8,432
==========================================================================
(A) Change in operating assets and liabilities:
Decrease/(increase) in accounts receivable $ 10,793 $(8,953)
(Increase) in inventories (608) (408)
(Increase)/decrease in other current assets (167) 227
(Decrease)/increase in accounts payable (7,254) 3,025
Increase in other accrued expenses 101 3,511
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Net change in operating assets and liabilities $ 2,865 $(2,598)
==========================================================================
The accompanying notes are an integral part of these financial statements.
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HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
------------------------------
In the opinion of the Company, the accompanying consolidated financial
statements for the three-month periods ended March 30, 2001, and March 31,
2000, contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position as of March
30, 2001, and December 31, 2000, and the results of operations and cash
flows for the three-month periods ended March 30, 2001, and March 31, 2000.
The results of operations for the three-month period ended March 30, 2001,
are not necessarily indicative of the results expected for the full year.
The consolidated financial statements included herein have been prepared by
the Company, without audit of the three-month periods ended March 30, 2001,
and March 31, 2000, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to present fairly the Company's financial
position and results of operations. These consolidated financial
statements should be read in conjunction with the financial statements and
the notes thereto included in the Company's latest Annual Report on Form
10-K.
Note 2 - Investments
--------------------
The Company had investments of $16,861,000 and $16,654,000 as of March 30,
2001, and December 31, 2000, respectively. The investments were classified
as "available-for-sale," and the difference between the cost and fair value
of these investments was immaterial and is included in other comprehensive
income.
Note 3 - Inventories
--------------------
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(in thousands) March 30, 2001 December 31, 2000
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Finished goods $ 9,336 $ 9,522
Work in process 14,691 15,336
Materials and parts 6,785 5,346
--------------------------
$30,812 $30,204
==========================
Inventories are stated at the lower of cost or market on a first-in, first-
out basis.
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HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Income Taxes
---------------------
The net federal, state and foreign income tax provisions were $2,398,000
for the three-month period ended March 30, 2001 and $3,920,000 for the
three-month period ended March 31, 2000. Tax credits are treated as
reductions of income tax provisions in the year in which the credits are
realized. The Company does not provide for federal income taxes on the
undistributed earnings of its wholly owned foreign subsidiaries, since
these earnings are indefinitely reinvested.
The effective income tax rate for the three-month periods ended March 30,
2001, and March 31, 2000, was 32.5% and 33%, respectively.
The major components of deferred tax assets are inventory valuation,
compensation and benefit plans, and depreciation, respectively. Based on
past experience, the Company expects that the future taxable income will be
sufficient for the realization of the deferred tax assets. The Company
believes that a valuation allowance is not required.
Note 5 - Net Income Per Share
-----------------------------
Basic net income per common share is based on the weighted average number
of common shares outstanding during the period. Diluted net income per
common share reflects the potential dilution that could occur if
outstanding stock options were exercised.
The following table sets forth the computation of basic and diluted net
income per common share:
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Three Months Ended
(in thousands except per share data) March 30, 2001 March 31, 2000
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Net income $ 4,980 $ 7,958
=======================
Basic shares 22,533 22,419
Add: Common equivalent shares 116 480
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Diluted shares 22,649 22,899
=======================
Basic net income per share $ 0.22 $ 0.36
=======================
Diluted net income per share $ 0.22 $ 0.35
=======================
[FN]
Common equivalent shares represent shares issuable upon exercise of
stock options (using the treasury stock method). The Company had 173,500
options outstanding not included in the computation of diluted shares for
the first quarter of 2001, because the option price was greater than the
average market price of the common shares. The Company had no stock
options that were anti-dilutive for the first quarter of 2000.
Page 7
HELIX TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Other Comprehensive Income
-----------------------------------
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Three Months Ended
March 30, March 31,
(in thousands) 2001 200
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Net income $ 4,980 $7,958
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Other comprehensive (loss) income before tax:
Foreign currency translation adjustment (1,023) 142
Unrealized gain on available-for-sale investment 35 21
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Other comprehensive (loss) income, before tax (988) 163
Income tax related to items of other
comprehensive (loss) income 220 (99)
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Other comprehensive (loss) income, net of tax (768) 64
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Comprehensive income $ 4,212 $8,022
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Note 7 - 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 became 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 adopted SFAS
133 in 2001, in accordance with SFAS 138, which deferred the effective date
of SFAS 133. 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.
Page 8
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
---------------------
Net sales for the first quarter ended March 30, 2001, (the "2001 Quarter")
were $48.6 million compared with net sales for the first quarter ended
March 31, 2000, (the "2000 Quarter") of $50.1 million, a decrease of 2.8%.
While net sales in the 2001 Quarter are essentially at the same level as
the 2000 Quarter, demand for semiconductor capital equipment, which has
been a highly cyclical industry, began to decline late in 2000 after having
experienced one of the largest expansions in industry history. As a result
of this slowdown, sales in the 2001 Quarter were approximately 35% less
than sales in the fourth quarter of 2000.
The gross profit percentage for the 2001 Quarter was 41.4% compared with
48.2% for the 2000 Quarter. The reduction in gross margin was primarily
attributable to decreased production volume, start-up of our Japanese and
Taiwanese service centers that included redundant transition costs from our
former service providers, and increased 300mm product mix that initially
will have lower margins than our 200mm products.
On a year over year basis, the impact of a significantly stronger dollar on
our international operations also contributed to the reduction of both
sales and gross margin.
Research and development expenses were $4.2 million for the 2001 Quarter,
or 8.7% of net sales, compared to $3.3 million, or 6.5% of net sales, for
the 2000 Quarter. Despite the significant near-term reduction in OEM
product demand, we are committed to moving our key product and service
initiatives forward. We continue to focus on technologies to support 300mm
products, our GOLDLink support services, and improvement to our core
products. (GOLDLink is a registered service mark of Helix Technology
Corporation.) The Company expects R&D spending to be approximately $4.0
million to $5.0 million per quarter over the next several quarters.
Total selling, general and administrative expenses were $9.9 million in the
2001 Quarter as compared with $9.8 million in the 2000 Quarter. We will
continue to spend in these areas commensurate with our near-term business
needs and marketplace opportunities.
Operating income was $6.0 million and $11.0 million in the 2001 Quarter
and 2000 Quarter, respectively. The primary reasons for the decrease are
slightly lower sales, higher unit costs because of product mix, start-up of
our Japanese and Taiwanese service centers, and increased spending in
research and development principally for our GOLDLink support services.
For the 2001 Quarter, the Company had pretax income of $7.4 million
resulting in a tax provision of $2.4 million compared to a pretax income of
$11.9 million and a tax provision of $3.9 million for the 2000 Quarter.
The effective tax rate was 32.5% for the 2001 Quarter. The effective tax
rate was 33.0% for the 2000 Quarter.
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HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations(continued)
---------------------
Liquidity and Capital Resources
-------------------------------
Cash provided by operating activities for the 2001 Quarter was $8.0 million
compared with $6.0 million for the 2000 Quarter, primarily due to the
reduction in working capital offset by a decline in net income.
In the 2001 Quarter, the Company spent $6.3 million principally for our new
Japanese service center and implementation of our global information
system. In the 2000 Quarter, capital expenditures were $2.1 million
primarily due to the consolidation of our Colorado operations into a new
60,000 square foot leased facility. For the year, the Company expects to
spend approximately $12.0 million to $14.0 million as it continues the
implementation of the global information system and GOLDLink system
enhancements.
Cash dividends paid to stockholders during both the 2001 Quarter and the
2000 Quarter were $2.7 million or $0.12 per common share.
The Company believes that existing cash, cash equivalents, investment
balances, anticipated cash flow from operations, and borrowings under its
revolving credit agreement will be adequate to fund operations and its
capital expenditure program for at least the next twelve months.
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 became 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 adopted SFAS
133 in 2001, in accordance with SFAS 138, which deferred the effective date
of SFAS 133. 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.
Page 10
HELIX TECHNOLOGY CORPORATION
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations(continued)
---------------------
Certain Factors That May Affect Future Results
----------------------------------------------
From time to time, information provided by the Company, statements made by
its employees or information included in its filings with the Securities
and Exchange Commission may contain statements that are not historical
facts but that are "forward-looking statements" involving risks and
uncertainties. In particular, statements in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" relating to the
Company's shipment levels, profitability, sufficiency of capital to meet
working capital and capital expenditure requirements may be forward-looking
statements. The words "expect," "anticipate," "internal," "plan,"
"believe," "seek," "estimate" and similar expressions are
intended to identify such forward-looking statements. Such statements are
not guarantees of future performance and involve certain risks,
uncertainties and assumptions that could cause the Company's
future results to differ materially from those expressed in any forward-
looking statements made by or on behalf of the Company. Many such factors
are beyond the Company's ability to control or predict.
Readers are accordingly cautioned not to place undue reliance on forward-
looking statements. The Company disclaims any intent or obligation to
update publicly any forward-looking statements, whether in response to new
information or future events or otherwise. Important factors that may
cause the Company's actual results to differ from such forward-looking
statements include, but are not limited to, the factors discussed below.
The Company's business depends in large part upon the capital expenditures
of semiconductor manufacturers, which, in turn, depend on the current and
anticipated market demand for integrated circuits and products utilizing
integrated circuits. The semiconductor industry is highly cyclical and has
historically experienced periodic downturns, which generally have had a
severe effect on the semiconductor industry's demand for capital equipment
and have adversely affected the Company's results of operations. There can
be no assurance that developments in the semiconductor industry or the
semiconductor equipment industry will occur at the rate or in the manner
expected by the Company.
In addition to the cyclical nature, risks and uncertainties of the
semiconductor industry, the Company faces the following risks and
uncertainties among others: the need to continuously develop, manufacture
and gain customers' acceptance of new products and product enhancements;
dependence on a limited number of customers 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.
Page 11
HELIX TECHNOLOGY CORPORATION
PART I
Item 3. Quantitative and Qualitative Disclosures about Market Risk
-------------------------------------------------------------------
There have been no significant changes in the Company's market risks since
the year ended December 31, 2000. For more information please read the
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
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.
Page 12
HELIX TECHNOLOGY CORPORATION
PART II. OTHER INFORMATION
Item 1. 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.
Item 6(b). Reports on Form 8-K
-------------------------------
The Company did not file any Current Reports on Form 8-K during the quarter
ended March 30, 2001.
Page 13
HELIX TECHNOLOGY CORPORATION
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HELIX TECHNOLOGY CORPORATION
(Registrant)
May 9, 2001 By: /s/Michael El-Hillow
----------- -----------------------
Date Michael El-Hillow
Senior Vice President
Chief Financial Officer
Page 14