10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting Company

Emerging growth company

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

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.

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

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.

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


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)


			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


	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


	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


	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


															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