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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 1, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-21835

 

HELIOS TECHNOLOGIES, INC.

(Exact Name of Registration as Specified in its Charter)

 

Florida

 

59-2754337

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

7456 16th St E

SARASOTA, Florida

 

34243

(Address of Principal Executive Offices)

 

(Zip Code)

 

(941)362-1200

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock $.001 Par Value

 

HLIO

 

The New York Stock Exchange

Indicate by check mark 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. YesNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YesNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller Reporting Company

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

 

 

 

 


 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

The registrant had 32,645,046 shares of common stock, par value $.001, outstanding as of April 28, 2023.

 


 

Helios Technologies, Inc.

INDEX

For the quarter ended

April 1, 2023

 

 

 

Page

 

 

 

PART I. FINANCIAL INFORMATION

 

3

 

 

 

 

 

Item 1.

Financial Statements

 

3

 

 

 

 

 

Consolidated Balance Sheets as of April 1, 2023 (unaudited) and December 31, 2022

 

3

 

 

 

 

 

Consolidated Statements of Operations for the Three Months Ended April 1, 2023 (unaudited) and April 2, 2022 (unaudited)

 

4

 

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three Months Ended April 1, 2023 (unaudited) and April 2, 2022 (unaudited)

 

5

 

 

 

 

 

Consolidated Statements of Shareholders’ Equity for the Three Months Ended April 1, 2023 (unaudited) and April 2, 2022 (unaudited)

 

6

 

 

 

 

 

Consolidated Statements of Cash Flows for the Three Months Ended April 1, 2023 (unaudited) and April 2, 2022 (unaudited)

 

7

 

 

 

 

 

Condensed Notes to the Consolidated, Unaudited Financial Statements

 

8

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

29

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

29

 

 

 

 

PART II. OTHER INFORMATION

 

30

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

30

 

 

 

 

 

 

Item 1A.

Risk Factors

 

30

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

30

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

30

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

30

 

 

 

 

 

 

Item 5.

Other Information

 

30

 

 

 

 

 

 

Item 6.

Exhibits

 

31

 

 

2


 

PART I: FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS.

Helios Technologies, Inc.

Consolidated Balance Sheets

(in millions, except per share data)

 

 

April 1, 2023

 

 

December 31, 2022

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

36.3

 

 

$

43.7

 

Accounts receivable, net of allowance for credit losses of $1.6 and $1.5

 

 

139.5

 

 

 

125.1

 

Inventories, net

 

 

202.4

 

 

 

191.6

 

Income taxes receivable

 

 

8.7

 

 

 

10.2

 

Other current assets

 

 

21.7

 

 

 

17.9

 

Total current assets

 

 

408.6

 

 

 

388.5

 

Property, plant and equipment, net

 

 

202.6

 

 

 

175.7

 

Deferred income taxes

 

 

1.8

 

 

 

1.6

 

Goodwill

 

 

483.5

 

 

 

468.5

 

Other intangible assets, net

 

 

438.7

 

 

 

405.6

 

Other assets

 

 

21.6

 

 

 

23.8

 

Total assets

 

$

1,556.8

 

 

$

1,463.7

 

Liabilities and shareholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

71.7

 

 

$

73.7

 

Accrued compensation and benefits

 

 

19.5

 

 

 

21.1

 

Other accrued expenses and current liabilities

 

 

30.7

 

 

 

32.0

 

Current portion of long-term non-revolving debt, net

 

 

20.2

 

 

 

19.0

 

Dividends payable

 

 

3.0

 

 

 

2.9

 

Income taxes payable

 

 

7.9

 

 

 

3.6

 

Total current liabilities

 

 

153.0

 

 

 

152.3

 

Revolving line of credit

 

 

345.6

 

 

 

261.3

 

Long-term non-revolving debt, net

 

 

158.9

 

 

 

164.2

 

Deferred income taxes

 

 

61.0

 

 

 

61.0

 

Other noncurrent liabilities

 

 

29.7

 

 

 

30.0

 

Total liabilities

 

 

748.2

 

 

 

668.8

 

Commitments and contingencies

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

Preferred stock, par value $0.001, 2.0 shares authorized,
   
no shares issued or outstanding

 

 

 

 

 

 

Common stock, par value $0.001, 100.0 shares authorized,
   
32.6 and 32.6 shares issued and outstanding

 

 

 

 

 

 

Capital in excess of par value

 

 

406.4

 

 

 

404.3

 

Retained earnings

 

 

460.9

 

 

 

450.0

 

Accumulated other comprehensive loss

 

 

(58.7

)

 

 

(59.4

)

Total shareholders' equity

 

 

808.6

 

 

 

794.9

 

Total liabilities and shareholders' equity

 

$

1,556.8

 

 

$

1,463.7

 

 

The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

3


 

Helios Technologies, Inc.

Consolidated Statements of Operations

(in millions, except per share data)

 

 

 

Three Months Ended

 

 

 

April 1, 2023

 

 

April 2, 2022

 

 

 

(unaudited)

 

 

(unaudited)

 

Net sales

 

$

213.2

 

 

$

240.5

 

Cost of sales

 

 

142.2

 

 

 

156.9

 

Gross profit

 

 

71.0

 

 

 

83.6

 

Selling, engineering and administrative expenses

 

 

38.1

 

 

 

33.7

 

Amortization of intangible assets

 

 

8.1

 

 

 

7.0

 

Operating income

 

 

24.8

 

 

 

42.9

 

Interest expense, net

 

 

6.2

 

 

 

3.8

 

Foreign currency transaction loss (gain), net

 

 

0.4

 

 

 

(0.9

)

Other non-operating expense, net

 

 

0.2

 

 

 

0.7

 

Income before income taxes

 

 

18.0

 

 

 

39.3

 

Income tax provision

 

 

4.1

 

 

 

8.8

 

Net income

 

$

13.9

 

 

$

30.5

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

Basic

 

$

0.43

 

 

$

0.94

 

Diluted

 

$

0.42

 

 

$

0.94

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

Basic

 

 

32.6

 

 

 

32.4

 

Diluted

 

 

32.7

 

 

 

32.5

 

 

 

 

 

 

 

 

Dividends declared per share

 

$

0.09

 

 

$

0.09

 

 

The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

 

4


 

Helios Technologies, Inc.

Consolidated Statements of Comprehensive Income

(in millions)

 

 

Three Months Ended

 

 

 

April 1, 2023

 

 

April 2, 2022

 

 

 

(unaudited)

 

 

(unaudited)

 

Net income

 

$

13.9

 

 

$

30.5

 

Other comprehensive income (loss)

 

 

 

 

 

 

Foreign currency translation adjustments, net of tax

 

 

3.1

 

 

 

(7.7

)

Unrealized (loss) gain on interest rate swaps, net of tax

 

 

(2.4

)

 

 

5.6

 

Total other comprehensive income (loss)

 

 

0.7

 

 

 

(2.1

)

Comprehensive income

 

$

14.6

 

 

$

28.4

 

 

The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

 

5


 

Helios Technologies, Inc.

Consolidated Statements of Shareholders’ Equity (unaudited)

Three Months Ended

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

other

 

 

 

 

 

 

Preferred

 

 

Preferred

 

 

Common

 

 

Common

 

 

excess of

 

 

Retained

 

 

comprehensive

 

 

 

 

 

 

shares

 

 

stock

 

 

shares

 

 

stock

 

 

par value

 

 

earnings

 

 

loss

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2022

 

 

 

 

$

 

 

 

32.6

 

 

$

 

 

$

404.3

 

 

$

450.0

 

 

$

(59.4

)

 

$

794.9

 

Shares issued, ESPP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.5

 

 

 

 

 

 

 

 

 

0.5

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.4

 

 

 

 

 

 

 

 

 

3.4

 

Cancellation of shares for payment of employee tax withholding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1.8

)

 

 

 

 

 

 

 

 

(1.8

)

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3.0

)

 

 

 

 

 

(3.0

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13.9

 

 

 

 

 

 

13.9

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.7

 

 

 

0.7

 

Balance at April 1, 2023

 

 

 

 

$

 

 

 

32.6

 

 

$

 

 

$

406.4

 

 

$

460.9

 

 

$

(58.7

)

 

$

808.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2022

 

 

 

 

$

 

 

 

32.4

 

 

$

 

 

$

394.6

 

 

$

363.3

 

 

$

(49.0

)

 

$

709.0

 

Shares issued, restricted stock

 

 

 

 

 

 

 

 

0.1

 

 

 

 

 

 

0.1

 

 

 

 

 

 

 

 

 

0.1

 

Shares issued, ESPP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.5

 

 

 

 

 

 

 

 

 

0.5

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.5

 

 

 

 

 

 

 

 

 

2.5

 

Cancellation of shares for payment of employee tax withholding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1.9

)

 

 

 

 

 

 

 

 

(1.9

)

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2.9

)

 

 

 

 

 

(2.9

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30.5

 

 

 

 

 

 

30.5

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2.1

)

 

 

(2.1

)

Balance at April 2, 2022

 

 

 

 

$

 

 

 

32.5

 

 

$

 

 

$

395.8

 

 

$

390.9

 

 

$

(51.1

)

 

$

735.7

 

 

The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

6


 

Helios Technologies, Inc.

Consolidated Statements of Cash Flows

(in millions)

 

 

Three Months Ended

 

 

 

April 1, 2023

 

 

April 2, 2022

 

 

 

(unaudited)

 

 

(unaudited)

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

13.9

 

 

$

30.5

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

15.2

 

 

 

12.6

 

Stock-based compensation expense

 

 

3.4

 

 

 

2.5

 

Amortization of debt issuance costs

 

 

0.1

 

 

 

0.1

 

Benefit for deferred income taxes

 

 

(1.1

)

 

 

(1.1

)

Forward contract losses (gains), net

 

 

0.3

 

 

 

(1.6

)

Other, net

 

 

0.1

 

 

 

0.7

 

(Increase) decrease in, net of acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

(9.5

)

 

 

(17.4

)

Inventories

 

 

(6.5

)

 

 

(15.5

)

Income taxes receivable

 

 

1.6

 

 

 

0.9

 

Other current assets

 

 

(4.1

)

 

 

(2.4

)

Other assets

 

 

2.4

 

 

 

2.2

 

Increase (decrease) in, net of acquisitions:

 

 

 

 

 

 

Accounts payable

 

 

(3.1

)

 

 

4.1

 

Accrued expenses and other liabilities

 

 

(3.4

)

 

 

(8.0

)

Income taxes payable

 

 

4.3

 

 

 

8.2

 

Other noncurrent liabilities

 

 

(1.3

)

 

 

(1.1

)

Net cash provided by operating activities

 

 

12.3

 

 

 

14.7

 

Cash flows from investing activities:

 

 

 

 

 

 

Business acquisitions, net of cash acquired

 

 

(84.7

)

 

 

1.3

 

Capital expenditures

 

 

(9.1

)

 

 

(5.6

)

Proceeds from dispositions of property, plant and equipment

 

 

 

 

 

1.8

 

Cash settlement of forward contracts

 

 

0.3

 

 

 

0.7

 

Software development costs

 

 

(1.1

)

 

 

(0.9

)

Net cash used in investing activities

 

 

(94.6

)

 

 

(2.7

)

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings on revolving credit facilities

 

 

95.0

 

 

 

23.5

 

Repayment of borrowings on revolving credit facilities

 

 

(12.5

)

 

 

(23.6

)

Repayment of borrowings on long-term non-revolving debt

 

 

(4.1

)

 

 

(4.2

)

Proceeds from stock issued

 

 

0.5

 

 

 

0.6

 

Dividends to shareholders

 

 

(3.0

)

 

 

(2.9

)

Payment of employee tax withholding on equity award vestings

 

 

(1.8

)

 

 

(1.9

)

Other financing activities

 

 

(0.3

)

 

 

(0.3

)

Net cash provided by (used in) financing activities

 

 

73.8

 

 

 

(8.8

)

Effect of exchange rate changes on cash and cash equivalents

 

 

1.1

 

 

 

1.3

 

Net (decrease) increase in cash and cash equivalents

 

 

(7.4

)

 

 

4.5

 

Cash and cash equivalents, beginning of period

 

 

43.7

 

 

 

28.6

 

Cash and cash equivalents, end of period

 

$

36.3

 

 

$

33.1

 

 

The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

7


 

HELIOS TECHNOLOGIES, INC.

CONDENSED NOTES TO THE CONSOLIDATED, UNAUDITED FINANCIAL STATEMENTS

(Currencies in millions, except per share data)

 

 

1. COMPANY BACKGROUND

Helios Technologies, Inc. (“Helios,” or the “Company”) together with its wholly owned subsidiaries, is a global leader in highly engineered motion control and electronic controls technology for diverse end markets, including construction, material handling, agriculture, energy, recreational vehicles, marine and health and wellness. Helios sells its products to customers in over 90 countries around the world. The Company’s strategy for growth is to be the leading provider in niche markets, with premier products and solutions through innovative product development and acquisitions.

The Company operates in two business segments: Hydraulics and Electronics. There are three key technologies within the Hydraulics segment: cartridge valve technology (“CVT”), quick-release hydraulic coupling solutions (“QRC”) and hydraulic system solutions (“Systems”), which often incorporate manifold solutions with CVT and QRC technologies. CVT products provide functions important to a hydraulic system: to control rates and direction of fluid flow and to regulate and control pressures. QRC products allow users to connect and disconnect quickly from any hydraulic circuit without leakage and ensure high-performance under high temperature and pressure using one or multiple couplers. Systems provide engineered solutions for machine users, manufacturers or designers to fulfill complete system design requirements including electro-hydraulic, remote control, electronic control and programmable logic controller systems, as well as automation of existing equipment. The Electronics segment provides complete, fully-tailored display and control solutions for engines, engine-driven equipment, specialty vehicles, therapy baths and traditional and swim spas. This broad range of products is complemented by extensive application expertise and unparalleled depth of software, embedded programming, hardware and sustaining engineering teams.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Accordingly, certain information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements are not included herein. The financial statements are prepared on a consistent basis (including normal recurring adjustments) and should be read in conjunction with the consolidated financial statements and related notes contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (“Form 10-K”), filed by Helios with the Securities and Exchange Commission on February 28, 2023. In management’s opinion, all adjustments necessary for a fair presentation of the Company’s financial statements are reflected in the interim periods presented. Operating results for the three months ended April 1, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ended December 30, 2023.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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.

8


 

Earnings Per Share

The following table presents the computation of basic and diluted earnings per common share (in millions, except per share data):

 

Three Months Ended

 

 

 

April 1, 2023