August 5, 2019 - 4:15 PM EDT
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Helios Technologies Reports Second Quarter 2019 Results

SARASOTA, Fla.

  • 6% sales growth in challenging environment, results in $144 million net sales
  • Solid profitability at all levels
  • EPS of $0.54 per share; Non-GAAP Cash EPS of $0.65
  • Adjusted EBITDA margin of 24.1%, reflecting sequential 40 basis point improvement over first quarter
  • Gross margin of 39.1%, reflecting sequential 60 basis point improvement over first quarter
  • Updating 2019 guidance due to currency headwinds and end market softening

 

Helios Technologies, Inc. (Nasdaq: HLIO) (“Helios” or the “Company”), a global industrial technology leader that develops and manufactures solutions for both the hydraulics and electronics markets, today reported financial results for the second quarter and first half of 2019, ended June 29, 2019. The results include Faster Group since its acquisition on April 5, 2018 and Custom Fluidpower (CFP) since its acquisition on August 1, 2018.

Wolfgang Dangel, the Company’s President and Chief Executive Officer, commented, “We are very pleased with the quality of earnings produced in both segments of the business, even on the lower than anticipated sales. While neither segment was able to drive top line sequential growth, margins were up across the board compared with the first quarter of 2019. Our Electronics segment experienced softer sales than we expected, but we were successful at managing our costs and output, driving improvement at both the gross and operating margin levels while we continue to make significant investments in R&D for new OEM projects scheduled to start production in 2020 and 2021. Our Hydraulics segment also realized organic margin expansion in the second quarter over the first quarter. This improvement was driven by efficiencies following completion of the CVT manufacturing consolidation project which resulted in increased capacity as expected. However, our Hydraulics sales for the second quarter, particularly for our CVT products, were below our expectations. Aside from softening in certain end markets, we had sufficient backlog and demand in total, but the sales mix precluded us from maximizing the newly designed capacity in our Sarasota facilities. This variation in product mix impacted our production scheduling and output during the quarter. Once our production mix is normalized, the CVT manufacturing consolidation project is expected to drive 15% added capacity within our Sarasota facilities by the end of this year, allowing us to further leverage our fixed cost base.

“From an economic standpoint, clearly there is softening in many markets globally,” continued Dangel. “We believe that some of the lower demand is resulting from macroeconomic factors like the trade war and general geopolitical uncertainty, while the remainder is due to the economic cycle. On a sequential basis from the first quarter of 2019 to the second quarter, several end markets such as global mining and U.S. construction still demonstrated resilience. However, several of our other end markets, including recreational and material handling, have further softened. European agriculture remains weak as does oil and gas in the Americas. Most recently, we have started to see a decline in the construction equipment market in APAC, specifically in South Korea. We are continuing to take market share in other areas within APAC, which drove high single digit sequential growth in that region.”

Mr. Dangel added, “Despite the further economic softening, we continue to advance our strategic initiatives. History has shown that these end markets recover quite quickly from cyclical downturns and we plan to have the capacity available to service our customers and win in the marketplace when our end markets recover. We are pleased to report that we began shipping products from our newly opened facility in China in June and will be increasing our output as we progress through the year. This project, which was completed ahead of schedule, strengthens our ‘in the region, for the region’ initiative in support of demand in the growing China market. Also, acquisition synergy realization continues, including the production of CVT components at the Faster facilities in both Europe and the U.S.”

Second Quarter 2019 Consolidated Results

($ in millions, except per share data) Q2 2019 Q2 2018 Change % Change
Net sales

$

143.8

$

136.2

$

7.6

6%

Gross profit

$

56.2

$

50.4

$

5.8

12%

Gross margin

 

39.1%

 

37.0%

Operating income

$

26.4

$

17.0

$

9.4

55%

Operating margin

 

18.4%

 

12.5%

Non-GAAP adjusted operating margin

 

21.5%

 

23.5%

Net income

$

17.3

$

6.8

$

10.5

154%

Diluted EPS

$

0.54

$

0.22

$

0.32

145%

Non-GAAP cash net income

$

20.7

$

19.8

$

0.9

5%

Non-GAAP cash EPS

$

0.65

$

0.63

$

0.02

3%

Adjusted EBITDA

$

34.7

$

34.9

$

(0.2)

(1%)

Adjusted EBITDA margin

 

24.1%

 

25.6%

See the attached tables for additional important disclosures regarding Helios’s use of non-GAAP adjusted operating income, non-GAAP adjusted operating margin, non-GAAP cash net income, non-GAAP cash EPS, adjusted EBITDA (earnings before net interest expense, income taxes, depreciation and amortization, and certain non-recurring charges) and adjusted EBITDA margin (adjusted EBITDA as a percentage of sales) as well as reconciliations of GAAP operating income to non-GAAP adjusted operating income and GAAP net income to non-GAAP cash net income and adjusted EBITDA. Helios believes that, when used in conjunction with measures prepared in accordance with GAAP, non-GAAP measures described above help in the understanding of its operating performance.

Sales

  • Acquisition – CFP contributed $12.6 million
  • Organic – $2.4 million decline, 2%, excluding the effect of currency
  • Foreign currency translation on organic sales – $2.6 million unfavorable

Profits and margins

  • Gross profit and margin drivers – Production efficiencies and cost management efforts, partially offset by lower margin CFP business model; last year included $3.1 million acquisition inventory step-up amortization
  • Selling, engineering and administrative (SEA) expenses – Increased primarily due to the CFP acquisition and investments to support the growth and change in Helios business structure, partially offset by cost reduction efforts; improved as a percent of sales
  • Amortization of intangible assets – $4.5 million ($8.1 million in prior year due to short-lived acquisition intangibles)
  • Other operating profit and margin factors – Last year included $3.7 million for acquisition and financing related expenses

Non-operating items

  • Foreign currency transaction loss – $0.5 million ($3.3 million in prior year, including loss on foreign exchange forward contract to secure funds for the Faster acquisition)
  • Effective tax rate – 21.3%, down from 26.3% last year

EPS, non-GAAP cash EPS and adjusted EBITDA

  • GAAP EPS – Cost management efforts and improved productivity, partially offset by investments to support growth; last year included acquisition-related expenses
  • Non-GAAP cash EPS – Comparable to last year and first quarter 2019, reflects cost management efforts and improved productivity, offset by investments to support growth
  • Adjusted EBITDA margin – Reflects improved productivity, offset by investments to support growth and lower margin CFP business model

First Half 2019 Consolidated Results

($ in millions, except per share data)

2019

2018

Change

% Change

Net sales

$

290.7

$

233.5

$

57.2

25%

Gross profit

$

112.7

$

88.0

$

24.7

28%

Gross margin

 

38.8%

 

37.7%

Operating income

$

52.2

$

34.3

$

17.9

52%

Operating margin

 

18.0%

 

14.7%

Non-GAAP adjusted operating margin

 

21.0%

 

22.5%

Net income

$

33.7

$

18.7

$

15.0

80%

Diluted EPS

$

1.05

$

0.61

$

0.44

72%

Non-GAAP cash net income

$

41.1

$

34.9

$

6.2

18%

Non-GAAP cash EPS

$

1.28

$

1.13

$

0.15

13%

Adjusted EBITDA

$

69.4

$

58.2

$

11.2

19%

Adjusted EBITDA margin

 

23.9%

 

24.9%

See the attached tables for additional important disclosures regarding Helios’s use of non-GAAP adjusted operating income, non-GAAP adjusted operating margin, non-GAAP cash net income, non-GAAP cash EPS, adjusted EBITDA and adjusted EBITDA margin as well as reconciliations of GAAP operating income to non-GAAP adjusted operating income and GAAP net income to non-GAAP cash net income and adjusted EBITDA. Helios believes that, when used in conjunction with measures prepared in accordance with GAAP, non-GAAP measures described above help in the understanding of its operating performance.

Sales

  • Acquisition – Faster and CFP contributed $61.6 million
  • Organic – $0.5 million decline, excluding the effect of currency
  • Foreign currency translation on organic sales – $3.9 million unfavorable

Profits and margins

  • Gross profit and margin drivers – Acquisitions, price increases, production efficiencies and cost management efforts, partially offset by lower margin CFP business model; last year included $3.1 million acquisition inventory step-up amortization
  • SEA expenses – Increased primarily due to Faster and CFP acquisitions as well as investments to support the growth and change in Helios business structure, partially offset by cost management efforts; improved as a percent of sales
  • Amortization of intangible assets – $9.1 million ($10.1 million in prior year)
  • Other operating profit and margin factors – Last year included $4.9 million for acquisition and financing related expenses

Non-operating items

  • Net interest expense – Higher due to debt to fund the Faster and CFP acquisitions
  • Effective tax rate – 21.7%, down from 25.5% from last year

EPS, non-GAAP cash EPS and adjusted EBITDA

  • GAAP EPS – Improvement primarily driven by acquisition growth and cost management efforts, partially offset by investments to support growth; last year included acquisition-related expenses
  • Non-GAAP cash EPS – Improvement primarily driven by acquisition growth and cost management efforts, partially offset by investments to support growth
  • Adjusted EBITDA margin – Impacted by investments to support growth and lower margin CFP business model

Hydraulics Segment Review

(Refer to sales by geographic region and segment data in accompanying tables)

Segment sales of $113.7 million increased 10% over the prior-year second quarter. The $10.1 million increase included $12.6 million from the acquired CFP business and flat organic sales, partially offset by $2.5 million of unfavorable changes in foreign currency exchange rates. Demand continued to be strong in the Americas region with organic sales increasing 4%. The Europe, Middle East, Africa (EMEA) region declined 4% and Asia/Pacific (APAC) region sales remained flat organically, both excluding the $2.6 million effect of unfavorable foreign currency exchange rate changes.

Second quarter 2019 gross margin of 37.3% was down from the prior year’s 38.0%. Organic gross margin improved but was offset by the impact of CFP’s value-add integrator business model which reduced gross margin by approximately 150 basis points in the quarter.

Higher SEA expenses in the 2019 second quarter included $2.3 million for the CFP business as well as investments to support the growth and change in structure of Helios.

As a result of the above, second quarter operating income decreased to $24.1 million, representing 21.2% of sales, compared with 24.5% last year.

For the first half, segment sales grew $64.0 million, or 39%, to $230.2 million, compared with the 2018 first half. The growth included $61.6 million of acquisition revenue contributed by Faster and CFP, and 4% organic growth excluding the $3.6 million impact of unfavorable changes in foreign currency exchange rates. Operating income for the first half was $47.9 million, or 20.8% of sales.

Electronics Segment Review

(Refer to sales by geographic region and segment data in accompanying tables)

Segment sales were $30.1 million for the 2019 second quarter, a 7% decrease compared with the second quarter of last year. The decline was primarily due to softer demand in recreational and oil and gas end markets as well as a release of contractual obligations to allow the Company to offer all products to a broader and more diversified customer base. Foreign currency translation had a $0.1 million unfavorable impact on segment sales in the quarter.

Second quarter 2019 gross margin expanded to 45.8%, from 43.4% last year. Net price increases and cost management efforts which resulted in production efficiencies drove the improvement.

SEA costs decreased by $0.3 million in the quarter compared with last year.

Operating income was $6.5 million in the second quarters of both 2019 and 2018, with the 2019 operating margin improving to 21.6% from 20.0% last year.

For the first half, segment sales were down 10% to $60.5 million, compared with the 2018 first half. Foreign currency had a $0.4 million unfavorable impact. Despite the sales decline, operating income was $13.0 million, with the 2019 first half operating margin improving to 21.5% from 20.2% last year.

Balance Sheet and Cash Flow Review

Total debt was $345.1 million at June 29, 2019, down from $352.7 million at the end of 2018. Cash and cash equivalents at June 29, 2019 were $13.3 million after using available cash to reduce debt at the end of the quarter, compared with $23.5 million at December 29, 2018. During the second quarter of 2019, the Company paid $17.8 million as the third and final payment due on the Enovation Controls contingent consideration liability. As a result, the net debt to EBITDA ratio increased to 2.4x at June 29, 2019 compared with 2.3x at March 30, 2019.

Cash provided by operations was $25.4 million and $31.1 million in the first six months of 2019 and 2018, respectively. The decrease was impacted by $10.7 million of the contingent consideration payment and a net increase in working capital, partially offset by improved cash from earnings.

Capital expenditures were $15.4 million and $10.6 million in the first halves of 2019 and 2018, respectively. The increase was primarily for manufacturing technology enhancements, equipment to complete the Company’s CVT manufacturing consolidation project in Sarasota, machinery and leasehold improvements for the Company’s new China facility, equipment to support CVT’s new engineering center of excellence and the addition of the Faster business. Capital expenditures in 2019 are estimated to be $30 million to $35 million, in support of the Company’s ongoing investments to drive its innovative leadership.

2019 Outlook and Guidance

The Company is updating its guidance for 2019:

Previous 2019
Guidance
Updated 2019
Guidance
Change vs 2018
Actual
Consolidated revenue $580 - $590 million $565 - $575 million 11% - 13%
Hydraulics segment revenue $464 - $469 million $453 - $458 million 18% - 20%
Electronics segment revenue $116 - $121 million $112 - $117 million (7)% - (11)%
GAAP EPS $2.10 - $2.20 $1.95 - $2.05 31% - 38%
Non-GAAP cash EPS $2.55 - $2.65 $2.40 - $2.50 4% - 9%
Adjusted EBITDA margin 24.0% - 24.5% 23.5% - 24.0% (50) - (100) bps

Mr. Dangel noted, “We are updating our guidance for 2019 in light of the changes in foreign currency exchange rates as well as softening end market conditions, exacerbated by the potential impact of recently announced tariffs. A high percentage of the change in our revenue guidance is attributable to the unfavorable impact of currency changes. The remainder is due to the impact of further softening in the recreational and oil and gas markets on our Electronics segment as well as the impact of general market softening on our Hydraulics segment, partially offset by the revenue anticipated from our strong backlog.

“The reduction in our revenue expectations will only have a modest impact on our adjusted EBITDA margin expectations and we still expect to grow our bottom line. We are adapting and adjusting our business processes to respond to the current environment, while continuing to capture the synergies from our acquisitions and execute our long-term strategic initiatives. Our focus remains on making investments to further globalize our business, advancing our state-of-the-art manufacturing technologies, and introducing innovative market-leading products and solutions that result in market share gains. We reiterate the goals we established for Vision 2025,” Mr. Dangel concluded.

Webcast

The Company will host a conference call and webcast tomorrow morning at 9:00 a.m. Eastern Time to review its financial and operating results and discuss its corporate strategies and outlook. A question-and-answer session will follow.

The conference call can be accessed by calling (201) 689-8573. The audio webcast can be monitored at www.heliostechnologies.com. Participants will have the ability to ask questions on either the teleconference call or the webcast.

A telephonic replay will be available from 12:00 p.m. ET on the day of the call through Tuesday, August 13, 2019. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13692266. The webcast replay will be available in the investor relations section of the Company’s website at www.heliostechnologies.com, where a transcript will also be posted once available.

About Helios Technologies

Helios Technologies is a global industrial technology leader that develops and manufactures hydraulic and electronic control solutions for diverse markets. The Company does business through its operating subsidiaries around the world, including Sun Hydraulics, Enovation Controls, and Faster Group. The Company operates in two business segments, Hydraulics and Electronics. There are three key technologies within our Hydraulics segment: cartridge valve technology (“CVT”), quick-release hydraulic coupling solutions (“QRC”) and hydraulic system design (“Systems”). Within CVT, our 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. In our Electronics segment, we are a leader in display and control integration solutions offering rugged and reliable instruments, coupled with expertise in J1939 engine protocol, to produce an industry-leading array of easy-to-read displays and gauges for controller area network (“CAN”) transmitted engine data and faults. We refer to this technology as Electronic Controls (“EC”). Helios Technologies and information about its associated companies is available online at www.heliostechnologies.com.

FORWARD-LOOKING INFORMATION

This news release contains “forward‐looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward‐looking statements involve risks and uncertainties, and actual results may differ materially from those expressed or implied by such statements. They include statements regarding the intent, belief or current expectations, estimates, vision or projections of Helios Technologies, Inc. (“Helios” or the “Company”), its directors or its officers about the Company and the industry in which it operates, and assumptions made by management, and include among other items, (i) the Company’s strategies regarding growth, including its intention to develop new products and make acquisitions; (ii) the Company’s financing plans; (iii) the Company’s expectations regarding our sales, expenses, gross margins and other results of operations; (iv) trends affecting the Company’s financial condition or results of operations; (v) the Company’s ability to continue to control costs and to meet its liquidity and other financing needs; (vi) the declaration and payment of dividends; (vii) the Company’s ability to respond to changes in customer demand domestically and internationally, including as a result of standardization; and (viii) potential challenges relating to changes in and compliance with governmental laws and regulations affecting our U.S. and international business. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that the anticipated results will occur. Important factors that could cause the actual results to differ materially from those in the forward‐looking statements include, among other items, (i) the economic cyclicality of the capital goods industry in general and the hydraulics and electronics industries in particular, which directly affect customer orders, lead times and sales volume; (ii) fluctuations in global business conditions, including the impact of economic recessions in the U.S. and other parts of the world, (iii) conditions in the capital markets, including the interest rate environment and the availability of capital; (iv) changes in the competitive marketplace that could affect the Company’s revenue and/or costs, such as increased competition, lack of qualified engineering, marketing, management or other personnel, and increased labor and raw materials costs; (v) risks related to the integration of the businesses of the Company, Enovation Controls and Faster Group; (vi) changes in technology or customer requirements, such as standardization of the cavity into which screw‐in cartridge valves must fit, which could render the Company’s products or technologies noncompetitive or obsolete; (vii) new product introductions, product sales mix and the geographic mix of sales nationally and internationally; and (viii) changes relating to the Company’s international sales, including changes in regulatory requirements or tariffs, compliance with anti-corruption laws and trade laws, including export and import compliance, trade or currency restrictions, fluctuations in exchange rates, and tax and collection issues. Further information relating to factors that could cause actual results to differ from those anticipated is included but not limited to information under the heading Item 1. “Business” and Item 1A. “Risk Factors” in the Company’s Form 10-K for the year ended December 29, 2018. The Company disclaims any intention or obligation to update or revise forward‐looking statements, whether as a result of new information, future events or otherwise.

This news release will discuss some non-GAAP financial measures, which the Company believes are useful in evaluating our performance. You should not consider the inclusion of this additional information in isolation or as a substitute for results prepared in accordance with GAAP.

Financial Tables Follow.

HELIOS TECHNOLOGIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

 

Three Months Ended

Six Months Ended

June 29,

June 30,

June 29,

June 30,

2019

2018

% Change

2019

2018

% Change

(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales

$

143,842

$

136,168

6 %

$

290,693

$

233,486

25 %

Cost of sales

 

87,615

 

85,764

2 %

 

177,958

 

145,465

22 %

Gross profit

 

56,227

 

50,404

12 %

 

112,735

 

88,021

28 %

Gross margin

 

39.1%

 

37.0%

 

38.8%

 

37.7%

 
Selling, engineering and administrative expenses

 

25,309

 

25,325

(0)%

 

51,465

 

43,640

18 %

Amortization of intangible assets

 

4,545

 

8,076

(44)%

 

9,066

 

10,124

(10)%

Operating income

 

26,373

 

17,003

55 %

 

52,204

 

34,257

52 %

Operating margin

 

18.4%

 

12.5%

 

18.0%

 

14.7%

 
Interest expense, net

 

4,048

 

4,151

(2)%

 

8,433

 

4,634

82 %

Foreign currency transaction loss, net

 

501

 

3,301

(85)%

 

62

 

3,812

(98)%

Miscellaneous (income) expense, net

 

(157)

 

80

(296)%

 

(50)

 

44

(214)%

Change in fair value of contingent consideration

 

56

 

251

(78)%

 

775

 

653

19 %

Income before income taxes

 

21,925

 

9,220

138 %

 

42,984

 

25,114

71 %

Income tax provision

 

4,660

 

2,424

92 %

 

9,315

 

6,407

45 %

Net income

$

17,265

$

6,796

154 %

$

33,669

$

18,707

80 %

 
Basic and diluted net income per common share

$

0.54

$

0.22

145 %

$

1.05

$

0.61

72 %

 
Basic and diluted weighted average shares outstanding

 

32,012

 

31,597

 

31,995

 

30,718

 
Dividends declared per share

$

0.09

$

0.09

$

0.18

$

0.18

 
NM = Not meaningful

HELIOS TECHNOLOGIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

June 29,

 

December 29,

2019

 

2018

(Unaudited)
Assets
Current assets:
Cash and cash equivalents

$

13,283

 

$

23,477

 

Restricted cash

 

38

 

 

38

 

Accounts receivable, net of allowance for doubtful accounts
of $1,529 and $1,336

 

81,817

 

 

72,806

 

Inventories, net

 

97,176

 

 

85,989

 

Income taxes receivable

 

1,262

 

 

4,549

 

Other current assets

 

14,745

 

 

9,997

 

Total current assets

 

208,321

 

 

196,856

 

Property, plant and equipment, net

 

146,607

 

 

126,868

 

Deferred income taxes

 

7,870

 

 

9,463

 

Goodwill

 

382,221

 

 

383,131

 

Other intangibles, net

 

310,092

 

 

320,548

 

Other assets

 

4,746

 

 

5,299

 

Total assets

$

1,059,857

 

$

1,042,165

 

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable

$

41,867

 

$

40,879

 

Accrued compensation and benefits

 

15,396

 

 

13,260

 

Other accrued expenses and current liabilities

 

13,642

 

 

9,941

 

Current portion of contingent consideration

 

1,047

 

 

18,120

 

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

 

6,357

 

 

5,215

 

Dividends payable

 

2,882

 

 

2,878

 

Income taxes payable

 

1,852

 

 

2,697

 

Total current liabilities

 

83,043

 

 

92,990

 

Revolving line of credit

 

250,950

 

 

255,750

 

Long-term non-revolving debt, net

 

87,766

 

 

91,720

 

Contingent consideration, less current portion

 

893

 

 

840

 

Deferred income taxes

 

52,478

 

 

57,783

 

Other noncurrent liabilities

 

26,473

 

 

12,314

 

Total liabilities

 

501,603

 

 

511,397

 

Commitments and contingencies

 

-

 

 

-

 

Shareholders’ equity:
Preferred stock, 2,000,000 shares authorized, par value $0.001,
no shares outstanding

 

-

 

 

-

 

Common stock, 100,000,000 shares authorized, par value $0.001,
32,017,300 and 31,964,775 shares outstanding

 

32

 

 

32

 

Capital in excess of par value

 

362,104

 

 

357,933

 

Retained earnings

 

246,828

 

 

219,056

 

Accumulated other comprehensive loss

 

(50,710

)

 

(46,253

)

Total shareholders’ equity

558,254

530,768

Total liabilities and shareholders’ equity

$

1,059,857

$

1,042,165

HELIOS TECHNOLOGIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

Six Months Ended

June 29,

 

June 30,

2019

 

2018

(Unaudited)

 

(Unaudited)

Cash flows from operating activities:
Net income

$

33,669

 

$

18,707

 

Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization

 

17,195

 

 

17,076

 

Loss on disposal of assets

 

79

 

 

8

 

Stock-based compensation expense

 

2,781

 

 

2,061

 

Amortization of debt issuance costs

 

358

 

 

371

 

Benefit for deferred income taxes

 

(1,095

)

 

-

 

Amortization of acquisition related inventory step-up

 

-

 

 

3,125

 

Change in fair value of contingent consideration

 

775

 

 

653

 

Forward contract (gains) losses, net

 

(409

)

 

3,493

 

Other, net

 

940

 

 

196

 

(Increase) decrease in operating assets:
Accounts receivable

 

(9,586

)

 

(13,666

)

Inventories

 

(12,276

)

 

(4,754

)

Income taxes receivable

 

(488

)

 

(46

)

Other current assets

 

(3,312

)

 

(501

)

Other assets

 

781

 

 

270

 

Increase (decrease) in operating liabilities:
Accounts payable

 

1,178

 

 

5,908

 

Accrued expenses and other liabilities

 

4,176

 

 

1,660

 

Income taxes payable

 

3,078

 

 

(3,405

)

Other noncurrent liabilities

 

(1,668

)

 

(39

)

Contingent consideration payment in excess of acquisition date fair value

 

(10,731

)

 

-

 

Net cash provided by operating activities

 

25,445

 

 

31,117

 

Cash flows from investing activities:
Capital expenditures

 

(15,413

)

 

(10,581

)

Proceeds from dispositions of equipment

 

597

 

 

3

 

Acquisition of business, net of cash acquired

 

-

 

 

(527,144

)

Cash settlement of forward contract

 

-

 

 

(2,535

)

Net cash used in investing activities

 

(14,816

)

 

(540,257

)

Cash flows from financing activities:
Borrowings on revolving credit facility

 

85,639

 

 

258,000

 

Repayment of borrowings on revolving credit facility

 

(91,000

)

 

(117,250

)

Borrowings on long-term non-revolving debt

 

-

 

 

100,932

 

Repayment of borrowings on long-term non-revolving debt

 

(2,910

)

 

(1,250

)

Borrowings unders factoring arrangements

 

-

 

 

1,044

 

Proceeds from stock issued

 

843

 

 

240,602

 

Dividends to shareholders

 

(5,759

)

 

(5,281

)

Debt issuance costs

 

-

 

 

(1,763

)

Payment of contingent consideration liability

 

(7,064

)

 

-

 

Other financing activities

 

(1,141

)

 

(570

)

Net cash (used in) provided by financing activities

 

(21,392

)

 

474,464

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

569

 

 

736

 

Net decrease in cash, cash equivalents and restricted cash

 

(10,194

)

 

(33,940

)

Cash, cash equivalents and restricted cash, beginning of period

 

23,515

 

 

63,922

 

Cash, cash equivalents and restricted cash, end of period

$

13,321

 

$

29,982

 

HELIOS TECHNOLOGIES

SEGMENT DATA

(In thousands)

 

Three Months Ended

 

Six Months Ended

June 29,

 

June 30,

 

June 29,

 

June 30,

2019

 

2018

 

2019

 

2018

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

Sales:
Hydraulics

$

113,710

$

103,634

$

230,173

$

166,243

Electronics

 

30,132

 

32,534

 

60,520

 

67,243

Consolidated

$

143,842

$

136,168

$

290,693

$

233,486

 
Gross profit and margin:
Hydraulics

$

42,407

$

39,422

$

85,040

$

62,870

 

37.3%

 

38.0%

 

36.9%

 

37.8%

Electronics

 

13,820

 

14,107

 

27,695

 

28,276

 

45.8%

 

43.4%

 

45.8%

 

42.1%

Corporate and other

 

-

 

(3,125)

 

-

 

(3,125)

Consolidated

$

56,227

$

50,404

$

112,735

$

88,021

 

39.1%

 

37.0%

 

38.8%

 

37.7%

 
Operating income and margin:
Hydraulics

$

24,123

$

25,401

$

47,885

$

38,844

 

21.2%

 

24.5%

 

20.8%

 

23.3%

Electronics

 

6,488

 

6,532

 

13,000

 

13,639

 

21.6%

 

20.0%

 

21.5%

 

20.2%

Corporate and other

 

(4,238)

 

(14,930)

 

(8,681)

 

(18,226)

Consolidated

$

26,373

$

17,003

$

52,204

$

34,257

 

18.4%

 

12.5%

 

18.0%

 

14.7%

HELIOS TECHNOLOGIES

ADDITIONAL INFORMATION

(Unaudited)

 
2019 Sales by Geographic Region and Segment
($ in millions)

Q1

%
of Total

Q2

%
of Total

2019

%
of Total

Americas:
Hydraulics

$

41.6

$

41.2

$

82.9

Electronics

 

26.1

 

26.6

 

52.7

Consol. Americas

 

67.7

46%

 

67.8

47%

 

135.6

47%

EMEA:
Hydraulics

 

41.8

 

36.8

 

78.5

Electronics

 

2.5

 

1.8

 

4.3

Consol. EMEA

 

44.3

30%

 

38.6

27%

 

82.8

28%

APAC:
Hydraulics

 

33.1

 

35.7

 

68.8

Electronics

 

1.8

 

1.7

 

3.5

Consol. APAC

 

34.9

24%

 

37.4

26%

 

72.3

25%

Total

$

146.9

$

143.8

$

290.7

2018 Sales by Geographic Region and Segment
($ in millions)
Q1 %
of Total
Q2 %
of Total
Q3 %
of Total
Q4 %
of Total

2018

%
of Total
Americas:
Hydraulics

$

26.4

$

39.7

$

38.4

$

44.2

$

148.7

Electronics

 

30.1

 

27.9

 

27.4

 

23.5

 

108.9

Consol. Americas

 

56.5

58%

 

67.6

50%

 

65.8

48%

 

67.7

49%

 

257.6

51%

EMEA:
Hydraulics

 

19.6

 

40.5

 

34.6

 

34.9

 

129.6

Electronics

 

2.7

 

2.7

 

2.7

 

2.0

 

10.1

Consol. EMEA

 

22.3

23%

 

43.2

32%

 

37.3

28%

 

36.9

27%

 

139.7

27%

APAC:
Hydraulics

 

16.6

 

23.4

 

31.1

 

32.4

 

103.5

Electronics

 

1.9

 

2.0

 

1.6

 

1.7

 

7.2

Consol. APAC

 

18.5

19%

 

25.4

18%

 

32.7

24%

 

34.1

24%

 

110.7

22%

Total

$

97.3

$

136.2

$

135.8

$

138.7

$

508.0

HELIOS TECHNOLOGIES

Non-GAAP Adjusted Operating Income RECONCILIATION

(In thousands)

(Unaudited)

 

Three Months Ended

 

Six Months Ended

June 29,

 

June 30,

 

June 29,

 

June 30,

2019

 

2018

 

2019

 

2018

GAAP operating income

$

26,373

$

17,003

$

52,204

$

34,257

Acquisition-related amortization of intangible assets

 

4,484

 

8,015

 

8,945

 

10,004

Acquisition-related amortization of inventory step-up

 

-

 

3,125

 

-

 

3,125

Acquisition and financing-related expenses

 

-

 

3,731

 

11

 

4,927

Restructuring charges

 

-

 

59

 

-

 

170

Non-GAAP adjusted operating income

$

30,857

$

31,933

$

61,160

$

52,483

GAAP operating margin

 

18.4%

 

12.5%

 

18.0%

 

14.7%

Non-GAAP Adjusted operating margin

 

21.5%

 

23.5%

 

21.0%

 

22.5%

Non-GAAP Cash Net Income RECONCILIATION

(in thousands)

(Unaudited)

 

Three Months Ended

 

 

Six Months Ended

June 29,

 

June 30,

 

 

June 29,

 

June 30,

2019

 

2018

 

 

2019

 

2018

Net income

$

17,265

$

6,796

$

33,669

$

18,707

Acquisition-related amortization of inventory step-up

 

-

 

3,125

 

-

 

3,125

Acquisition and financing-related expenses

 

-

 

3,731

 

11

 

4,927

Restructuring charges

 

-

 

59

 

-

 

170

Foreign currency forward contract loss

 

-

 

2,030

 

-

 

2,535

Change in fair value of contingent consideration

 

56

 

251

 

775

 

653

Amortization of intangible assets

 

4,545

 

8,076

 

9,066

 

10,124

Tax effect of above

 

(1,150)

 

(4,318)

 

(2,463)

 

(5,384)

Non-GAAP cash net income

$

20,716

$

19,750

$

41,058

$

34,857

Non-GAAP cash net income per diluted share

$

0.65

$

0.63

$

1.28

$

1.13

Adjusted EBITDA RECONCILIATION

(in thousands)

(Unaudited)

 

Three Months Ended

 

Six Months Ended

June 29,

 

June 30,

 

June 29,

 

June 30,

2019

 

2018

 

2019

 

2018

Net income

$

17,265

$

6,796

$

33,669

$

18,707

Interest expense, net

 

4,048

 

4,151

 

8,433

 

4,634

Income tax provision

 

4,660

 

2,424

 

9,315

 

6,407

Depreciation and amortization

 

8,624

 

12,347

 

17,195

 

17,076

EBITDA

 

34,597

 

25,718

 

68,612

 

46,824

Acquisition-related amortization of inventory step-up

 

3,125

 

3,125

Acquisition and financing-related expenses

 

-

 

3,731

 

11

 

4,927

Restructuring charges

 

-

 

59

 

-

 

170

Foreign currency forward contract loss

 

-

 

2,030

 

-

 

2,535

Change in fair value of contingent consideration

 

56

 

251

 

775

 

653

Adjusted EBITDA

$

34,653

$

34,914

$

69,398

$

58,234

Adjusted EBITDA margin

 

24.1%

 

25.6%

 

23.9%

 

24.9%

Non-GAAP Financial Measures:

Adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted share, cash net income and cash net income per diluted share are not measures determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP. Nevertheless, Helios believes that providing non-GAAP information such as adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted share, cash net income and cash net income per diluted share are important for investors and other readers of Helios’s financial statements, as they are used as analytical indicators by Helios’s management to better understand operating performance. Because adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted share, cash net income and cash net income per diluted share are non-GAAP measures and are thus susceptible to varying calculations, adjusted operating income, adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income per diluted share, cash net income and cash net income per diluted share, as presented, may not be directly comparable to other similarly titled measures used by other companies.

Karen L. Howard / Deborah K. Pawlowski
Kei Advisors LLC
(716) 843-3942 / (716) 843-3908
[email protected] / [email protected]


Source: Business Wire (August 5, 2019 - 4:15 PM EDT)

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