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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 September 28, 2019

 

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, 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. (Check one):

 

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 32,044,272 shares of common stock, par value $.001, outstanding as of October 25, 2019.


Helios Technologies, Inc.

INDEX

For the quarter ended

September 28, 2019

 

 

 

Page

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

 

 

Consolidated Balance Sheets as of September 28, 2019 (unaudited) and December 29, 2018

 

3

 

 

 

 

 

Consolidated Statements of Operations for the Three Months Ended September 28, 2019 (unaudited) and September 29, 2018 (unaudited)

 

4

 

 

 

 

 

Consolidated Statements of Operations for the Nine Months Ended September 28, 2019 (unaudited) and September 29, 2018 (unaudited)

 

5

 

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 28, 2019 (unaudited) and September 29, 2018 (unaudited)

 

6

 

 

 

 

 

Consolidated Statements of Shareholders’ Equity for the Three Months Ended September 28, 2019 (unaudited) and September 29, 2018 (unaudited)

 

7

 

 

 

 

 

Consolidated Statements of Shareholders’ Equity for the Nine Months Ended September 28, 2019 (unaudited) and September 29, 2018 (unaudited)

 

8

 

 

 

 

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 28, 2019 (unaudited) and September 29, 2018 (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

 

24

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

34

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

34

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

35

 

 

 

 

 

 

Item 1A.

Risk Factors

 

35

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

35

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

35

 

 

 

 

 

 

Item 4.

Mine Safety Disclosure

 

35

 

 

 

 

 

 

Item 5.

Other Information

 

35

 

 

 

 

 

 

Item 6.

Exhibits

 

36

 

 

2


PART I: FINANCIAL INFORMATION

Item 1.

Helios Technologies, Inc.

Consolidated Balance Sheets

(in thousands, except share data)

 

 

September 28, 2019

 

 

December 29, 2018

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,706

 

 

$

23,477

 

Restricted cash

 

 

37

 

 

 

38

 

Accounts receivable, net of allowance for doubtful accounts of $1,427 and $1,336

 

 

77,315

 

 

 

72,806

 

Inventories, net

 

 

89,338

 

 

 

85,989

 

Income taxes receivable

 

 

590

 

 

 

4,549

 

Other current assets

 

 

15,397

 

 

 

9,997

 

Total current assets

 

 

196,383

 

 

 

196,856

 

Property, plant and equipment, net

 

 

144,230

 

 

 

126,868

 

Deferred income taxes

 

 

8,697

 

 

 

9,463

 

Goodwill

 

 

371,803

 

 

 

383,131

 

Other intangible assets, net

 

 

294,682

 

 

 

320,548

 

Other assets

 

 

5,155

 

 

 

5,299

 

Total assets

 

$

1,020,950

 

 

$

1,042,165

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

34,845

 

 

$

40,879

 

Accrued compensation and benefits

 

 

16,365

 

 

 

13,260

 

Other accrued expenses and current liabilities

 

 

14,209

 

 

 

9,941

 

Current portion of contingent consideration

 

 

923

 

 

 

18,120

 

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

 

 

6,946

 

 

 

5,215

 

Dividends payable

 

 

2,884

 

 

 

2,878

 

Income taxes payable

 

 

218

 

 

 

2,697

 

Total current liabilities

 

 

76,390

 

 

 

92,990

 

Revolving line of credit

 

 

225,489

 

 

 

255,750

 

Long-term non-revolving debt, net

 

 

85,913

 

 

 

91,720

 

Contingent consideration, less current portion

 

 

872

 

 

 

840

 

Deferred income taxes

 

 

48,057

 

 

 

57,783

 

Other noncurrent liabilities

 

 

25,782

 

 

 

12,314

 

Total liabilities

 

 

462,503

 

 

 

511,397

 

Commitments and contingencies

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, par value $0.001, 2,000,000 shares authorized,

   no shares issued or outstanding

 

 

 

 

 

 

Common stock, par value $0.001, 100,000,000 and 50,000,000 shares authorized,

   32,032,882 and 31,964,775 shares issued and outstanding

 

 

32

 

 

 

32

 

Capital in excess of par value

 

 

363,762

 

 

 

357,933

 

Retained earnings

 

 

256,735

 

 

 

219,056

 

Accumulated other comprehensive loss

 

 

(62,082

)

 

 

(46,253

)

Total shareholders' equity

 

 

558,447

 

 

 

530,768

 

Total liabilities and shareholders' equity

 

$

1,020,950

 

 

$

1,042,165

 

 

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 thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

September 28, 2019

 

 

September 29, 2018

 

 

 

(unaudited)

 

 

(unaudited)

 

Net sales

 

$

138,045

 

 

$

135,837

 

Cost of sales

 

 

85,926

 

 

 

84,102

 

Gross profit

 

 

52,119

 

 

 

51,735

 

Selling, engineering and administrative expenses

 

 

24,066

 

 

 

25,440

 

Restructuring charges

 

 

1,724

 

 

 

 

Amortization of intangible assets

 

 

4,478

 

 

 

7,049

 

Loss on disposal of intangible asset

 

 

2,713

 

 

 

 

Operating income

 

 

19,138

 

 

 

19,246

 

Interest expense, net

 

 

3,790

 

 

 

4,622

 

Foreign currency transaction loss (gain), net

 

 

30

 

 

 

(42

)

Miscellaneous (income) expense, net

 

 

(72

)

 

 

141

 

Change in fair value of contingent consideration

 

 

(72

)

 

 

275

 

Income before income taxes

 

 

15,462

 

 

 

14,250

 

Income tax provision

 

 

2,671

 

 

 

2,651

 

Net income

 

$

12,791

 

 

$

11,599

 

Basic and diluted net income per common share

 

$

0.40

 

 

$

0.36

 

Basic and diluted weighted average shares outstanding

 

 

32,027

 

 

 

31,843

 

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 Operations

(in thousands, except per share data)

 

 

 

Nine Months Ended

 

 

 

September 28, 2019

 

 

September 29, 2018

 

 

 

(unaudited)

 

 

(unaudited)

 

Net sales

 

$

428,738

 

 

$

369,322

 

Cost of sales

 

 

263,884

 

 

 

229,567

 

Gross profit

 

 

164,854

 

 

 

139,755

 

Selling, engineering and administrative expenses

 

 

75,531

 

 

 

69,078

 

Restructuring charges

 

 

1,724

 

 

 

 

Amortization of intangible assets

 

 

13,544

 

 

 

17,174

 

Loss on disposal of intangible asset

 

 

2,713

 

 

 

 

Operating income

 

 

71,342

 

 

 

53,503

 

Interest expense, net

 

 

12,223

 

 

 

9,256

 

Foreign currency transaction loss, net

 

 

92

 

 

 

3,770

 

Miscellaneous (income) expense, net

 

 

(122

)

 

 

185

 

Change in fair value of contingent consideration

 

 

703

 

 

 

928

 

Income before income taxes

 

 

58,446

 

 

 

39,364

 

Income tax provision

 

 

11,986

 

 

 

9,058

 

Net income

 

$

46,460

 

 

$

30,306

 

Basic and diluted net income per common share

 

$

1.45

 

 

$

0.97

 

Basic and diluted weighted average shares outstanding

 

 

32,006

 

 

 

31,093

 

Dividends declared per share

 

$

0.27

 

 

$

0.27

 

 

 

 

 

 

 

 

 

 

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 Comprehensive Income

(in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 28, 2019

 

 

September 29, 2018

 

 

September 28, 2019

 

 

September 29, 2018

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Net income

 

$

12,791

 

 

$

11,599

 

 

$

46,460

 

 

$

30,306

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments, net of tax

 

 

(10,984

)

 

 

(4,727

)

 

 

(12,317

)

 

 

(29,445

)

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

 

 

(388

)

 

 

119

 

 

 

(3,512

)

 

 

119

 

Total other comprehensive loss

 

 

(11,372

)

 

 

(4,608

)

 

 

(15,829

)

 

 

(29,326

)

Comprehensive income

 

$

1,419

 

 

$

6,991

 

 

$

30,631

 

 

$

980

 

 

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 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

 

 

income (loss)

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 29, 2019

 

 

 

 

$

 

 

 

32,017

 

 

$

32

 

 

$

362,104

 

 

$

246,828

 

 

$

(50,710

)

 

$

558,254

 

Shares issued, restricted stock

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued, other compensation

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued, ESPP

 

 

 

 

 

 

 

 

 

 

12

 

 

 

 

 

 

 

408

 

 

 

 

 

 

 

 

 

 

 

408

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,277

 

 

 

 

 

 

 

 

 

 

 

1,277

 

Cancellation of shares for payment of withholding tax

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

(27

)

 

 

 

 

 

 

 

 

 

 

(27

)

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,884

)

 

 

 

 

 

 

(2,884

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,791

 

 

 

 

 

 

 

12,791

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,372

)

 

 

(11,372

)

Balance at September 28, 2019

 

 

 

 

$

 

 

 

32,033

 

 

$

32

 

 

$

363,762

 

 

$

256,735

 

 

$

(62,082

)

 

$

558,447

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2018

 

 

 

 

$

 

 

 

31,604

 

 

$

32

 

 

$

337,772

 

 

$

196,787

 

 

$

(31,196

)

 

$

503,395

 

Shares issued, restricted stock

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued, other compensation

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued, ESPP

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

 

358

 

 

 

 

 

 

 

 

 

 

 

358

 

Shares issued, acquisition

 

 

 

 

 

 

 

 

 

 

333

 

 

 

 

 

 

 

17,339

 

 

 

 

 

 

 

 

 

 

 

17,339

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,303

 

 

 

 

 

 

 

 

 

 

 

1,303

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,876

)

 

 

 

 

 

 

(2,876

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,599

 

 

 

 

 

 

 

11,599

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,608

)

 

 

(4,608

)

Balance at September 29, 2018

 

 

 

 

$

 

 

 

31,957

 

 

$

32

 

 

$

356,772

 

 

$

205,510

 

 

$

(35,804

)

 

$

526,510

 

 

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


7


Helios Technologies, Inc.

Consolidated Statements of Shareholders’ Equity (unaudited)

Nine Months Ended

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

other

 

 

 

 

 

 

 

Preferred

 

 

Preferred

 

 

Common

 

 

Common

 

 

excess of

 

 

Retained

 

 

comprehensive

 

 

 

 

 

 

 

shares

 

 

stock

 

 

shares

 

 

stock

 

 

par value

 

 

earnings

 

 

income (loss)

 

 

Total

 

Balance at December 29, 2018

 

 

 

 

$

 

 

 

31,965

 

 

$

32

 

 

$

357,933

 

 

$

219,056

 

 

$

(46,253

)

 

$

530,768

 

Shares issued, restricted stock

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued, other compensation

 

 

 

 

 

 

 

 

 

 

19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued, ESPP