hlio-10q_20200627.htm

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 June 27, 2020

☐ 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.)

1500 WEST UNIVERSITY PARKWAY SARASOTA, Florida		34243
(Address of Principal Executive Offices)		(Zip Code)

941/362-1200

(Registrant’s Telephone Number, Including Area Code)

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock $.001 Par Value

HLIO

The NASDAQ Global Select Market

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.

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 32,093,461 shares of common stock, par value $.001, outstanding as of July 24, 2020.

Helios Technologies, Inc.

INDEX

For the quarter ended

June 27, 2020

			Page

PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements

	Consolidated Balance Sheets as of June 27, 2020 (unaudited) and December 28, 2019		3

	Consolidated Statements of Operations for the Three Months Ended June 27, 2020 (unaudited) and June 29, 2019 (unaudited)		4

	Consolidated Statements of Operations for the Six Months Ended June 27, 2020 (unaudited) and June 29, 2019 (unaudited)		5

	Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 27, 2020 (unaudited) and June 29, 2019 (unaudited)		6

	Consolidated Statements of Shareholders’ Equity for the Three Months Ended June 27, 2020 (unaudited) and June 29, 2019 (unaudited)		7

	Consolidated Statements of Shareholder’s Equity for the Six Months Ended June 27, 2020 (unaudited) and June 29, 2019 (unaudited)		8

	Consolidated Statements of Cash Flows for the Six Months Ended June 27, 2020 (unaudited) and June 29, 2019 (unaudited)		9

	Condensed Notes to the Consolidated, Unaudited Financial Statements		10

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

	Item 4.	Controls and Procedures	32

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	33

	Item 1A.	Risk Factors	33

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

	Item 3.	Defaults Upon Senior Securities	33

	Item 4.	Mine Safety Disclosures	33

	Item 5.	Other Information	33

	Item 6.	Exhibits	34

PART I: FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS.

Helios Technologies, Inc.

Consolidated Balance Sheets

(in thousands)

	June 27, 2020			December 28, 2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	36,965		$	22,123
Restricted cash		37			39
Accounts receivable, net of allowance for doubtful accounts of $1,101 and $1,131		73,018			66,677
Inventories, net		84,950			85,195
Income taxes receivable		2,852			3,196
Other current assets		17,296			15,359
Total current assets		215,118			192,589
Property, plant and equipment, net		140,605			145,854
Deferred income taxes		8,837			5,803
Goodwill		346,071			377,569
Other intangible assets, net		286,522			294,651
Other assets		4,627			5,285
Total assets	$	1,001,780		$	1,021,751
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	29,424		$	29,730
Accrued compensation and benefits		16,457			16,898
Other accrued expenses and current liabilities		12,159			13,549
Current portion of contingent consideration		797			828
Current portion of long-term non-revolving debt, net		10,216			7,623
Dividends payable		2,888			2,884
Income taxes payable		9,972			4,941
Total current liabilities		81,913			76,453
Revolving lines of credit		193,948			208,708
Long-term non-revolving debt, net		83,267			84,062
Deferred income taxes		48,084			49,290
Other noncurrent liabilities		27,804			25,602
Total liabilities		435,016			444,115
Commitments and contingencies		—			—
Shareholders' equity:
Preferred stock, par value $0.001, 2,000 shares authorized, no shares issued or outstanding		—			—
Common stock, par value $0.001, 100,000 shares authorized, 32,081 and 32,047 shares issued and outstanding		32			32
Capital in excess of par value		367,841			365,310
Retained earnings		257,568			267,658
Accumulated other comprehensive loss		(58,677	)		(55,364	)
Total shareholders' equity		566,764			577,636
Total liabilities and shareholders' equity	$	1,001,780		$	1,021,751

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

Helios Technologies, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

	Three Months Ended
	June 27, 2020			June 29, 2019
	(unaudited)			(unaudited)
Net sales	$	119,294		$	143,842
Cost of sales		74,575			87,615
Gross profit		44,719			56,227
Selling, engineering and administrative expenses		23,600			25,309
Amortization of intangible assets		4,417			4,545
Operating income		16,702			26,373
Interest expense, net		2,891			4,048
Foreign currency transaction loss, net		283			501
Miscellaneous expense (income), net		18			(157	)
Change in fair value of contingent consideration		(34	)		56
Income before income taxes		13,544			21,925
Income tax provision		636			4,660
Net income	$	12,908		$	17,265
Basic and diluted net income per common share	$	0.40		$	0.54
Basic and diluted weighted average shares outstanding		32,081			32,012
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.

Helios Technologies, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

	Six Months Ended
	June 27, 2020			June 29, 2019
	(unaudited)			(unaudited)
Net sales	$	248,777		$	290,693
Cost of sales		152,208			177,958
Gross profit		96,569			112,735
Selling, engineering and administrative expenses		49,264			51,465
Amortization of intangible assets		8,765			9,066
Goodwill impairment		31,871			—
Operating income		6,669			52,204
Interest expense, net		5,842			8,433
Foreign currency transaction loss, net		408			62
Miscellaneous income, net		(76	)		(50	)
Change in fair value of contingent consideration		(34	)		775
Income before income taxes		529			42,984
Income tax provision		4,844			9,315
Net (loss) income	$	(4,315	)	$	33,669
Basic and diluted net (loss) income per common share	$	(0.13	)	$	1.05
Basic and diluted weighted average shares outstanding		32,071			31,995
Dividends declared per share	$	0.18		$	0.18

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

Helios Technologies, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

	Three Months Ended					Six Months Ended
	June 27, 2020		June 29, 2019			June 27, 2020			June 29, 2019
	(unaudited)		(unaudited)			(unaudited)			(unaudited)
Net income (loss)	$	12,908	$	17,265		$	(4,315	)	$	33,669
Other comprehensive income (loss)
Foreign currency translation adjustments, net of tax		3,562		3,498			(1,338	)		(1,333	)
Unrealized gain (loss) on interest rate swap, net of tax		227		(2,042	)		(1,975	)		(3,124	)
Total other comprehensive income (loss)		3,789		1,456			(3,313	)		(4,457	)
Comprehensive income (loss)	$	16,697	$	18,721		$	(7,628	)	$	29,212

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

Helios Technologies, Inc.

Consolidated Statements of Shareholders’ Equity (unaudited)

Three Months Ended

(in thousands)

																Accumulated
										Capital in						other
	Preferred		Preferred		Common			Common		excess of			Retained			comprehensive
	shares		stock		shares			stock		par value			earnings			loss			Total

Balance, March 28, 2020		—	$	—		32,075		$	32	$	366,521		$	247,548		$	(62,466	)	$	551,635
Shares issued, restricted stock						(6	)													—
Shares issued, ESPP						11					368									368
Shares issued, discretionary contribution						1					45									45
Stock-based compensation											914									914
Cancellation of shares for payment of employee tax withholding											(7	)								(7	)
Dividends declared														(2,888	)					(2,888	)
Net income														12,908						12,908
Other comprehensive income																	3,789			3,789
Balance at June 27, 2020		—	$	—		32,081		$	32	$	367,841		$	257,568		$	(58,677	)	$	566,764

Balance, March 30, 2019		—	$	—		31,996		$	32	$	360,195		$	232,445		$	(52,166	)	$	540,506
Shares issued, restricted stock						(1	)													—
Shares issued, other compensation						7														—
Shares issued, ESPP						15					436									436
Shares issued, ESOP											60									60
Stock-based compensation											1,413									1,413
Dividends declared														(2,882	)					(2,882	)
Net income														17,265						17,265
Other comprehensive income																	1,456			1,456
Balance at June 29, 2019		—	$	—		32,017		$	32	$	362,104		$	246,828		$	(50,710	)	$	558,254

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

Helios Technologies, Inc.

Consolidated Statements of Shareholders’ Equity (unaudited)

Six Months Ended

(in thousands)

													Accumulated
									Capital in				other
	Preferred		Preferred		Common		Common		excess of		Retained		comprehensive
	shares		stock		shares		stock		par value		earnings		loss			Total

Balance at December 28, 2019		—	$	—		32,047	$	32	$	365,310	$	267,658	$	(55,364	)	$	577,636
Shares issued, restricted stock						15											—
Shares issued, other compensation						5											—
Shares issued, ESPP						23				723							723
Shares issued, discretionary contribution