Market Overview

Helios Technologies Reports Second Quarter 2018 Results

Share:
  • Sales of $136.2 million, up 52%
  • Net income of $6.8 million; non-GAAP net income of $13.7 million
  • Adjusted EBITDA of $34.9 million, 25.6% of sales
  • Raising 2018 revenue guidance to $510 million to $525 million
    • Includes Custom Fluidpower since August 1, 2018 acquisition

Helios
Technologies
(formerly known as Sun Hydraulics) (Nasdaq: SNHY)
("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 2018, ended June 30, 2018. The results include
Faster Group since its acquisition on April 5, 2018.

Wolfgang Dangel, Helios Technologies' President and Chief Executive
Officer, commented, "We are pleased to report record quarterly sales,
driven by the inclusion of Faster Group as well as strong organic
growth. Faster sales grew 25% over the prior-year second quarter on a
pro forma basis and our integration activities have already begun and
are progressing well. Our organic businesses grew 9%, with our legacy
Hydraulics business growing 7% and our Electronics segment growing 14%.
In our legacy Hydraulics business, we have seen record order levels and
expect that shipments in the second half of the year will be stronger
than the first half."

He added, "Demand is continuing at very strong levels globally,
especially in the Asia-Pacific region. As we are working diligently to
keep up with customer demand, we made good progress during the quarter
to alleviate the impact of the supply chain constraints that began a
couple of quarters ago. We were pleased that our operational progress
resulted in a 25.6% adjusted EBITDA margin in the quarter. However,
backlog did grow. We anticipate further improvements in our operational
results as we progress through the second half of 2018, including a
reduction of our backlog.

"Strategically, we recently completed a couple of actions separately
announced. First, the change to our new business name, Helios
Technologies, is an integral part of our Vision 2025. As we have been
growing our portfolio of complementary businesses, it is important to
have an identity separate from our operating brands. Second, the
acquisition of Custom Fluidpower on August 1 is an important stepping
stone to further our growth in the Asia-Pacific region," Mr. Dangel
noted.

Second Quarter 2018 Consolidated Results

($ in millions, except per share data)       Q2 2018   Q2 2017   Change   % Change  
Net sales $ 136.2 $ 89.3 $ 46.9 52 %
Gross profit $ 50.4 $ 38.6 $ 11.8 31 %
Gross margin 37.0 % 43.2 %
Operating income $ 17.0 $ 20.7 $ (3.7 )

(18

%)

Operating margin 12.5 % 23.2 %
Non-GAAP adjusted operating margin 23.5 % 25.5 %
Net income $ 6.8 $ 7.3 $ (0.5 )

(7

%)

Diluted EPS $ 0.22 $ 0.27 $ (0.05 )

(19

%)

Non-GAAP adjusted net income $ 13.7 $ 12.8 $ 0.9 7 %
Non-GAAP adjusted EPS $ 0.43 $ 0.47 $ (0.04 )

(9

%)

 

Sales in the 2018 second quarter grew by $46.9 million, or 52% over the
same period last year, with the Faster business contributing $38.7
million, while organic business sales grew 9%. The Faster sales reflect
25% growth over the 2017 second quarter on a pro forma basis. Order
demand remained strong in the organic business but shipments were
hampered by ongoing supply chain constraints, which have shown
improvement over the first quarter of 2018. Sales to the Americas,
Europe/Middle East/Africa ("EMEA") and Asia Pacific ("APAC") comprised
50%, 32% and 18% of consolidated sales, respectively. Foreign currency
translation favorably impacted consolidated sales by approximately $0.4
million.

Gross profit and gross margin in the second quarter of 2018 were
unfavorably impacted by $3.1 million for amortization of inventory
valuation step-up resulting from the Faster acquisition. Additionally,
while the Faster acquisition and sales growth drove increases in gross
profit, gross margin was unfavorably impacted by ongoing supply chain
constraints and higher material costs which have lessened as the Company
progresses through 2018. These are explained further below in the
segment reviews.

The factors that impacted gross profit and gross margin also impacted
operating income and operating margin, as well as $3.7 million of
acquisition and financing-related expenses. Operating income in the
second quarter of 2018 reflects $8.0 million of acquisition-related
amortization of intangible assets, compared with $2.0 million in the
prior-year second quarter.

Non-GAAP adjusted operating margin was 23.5% in the 2018 quarter
compared with 25.5% a year ago. The decrease is primarily due to the
supply chain constraints and higher material costs noted above. See
the attached tables for additional important disclosures regarding
Helios' use of non-GAAP adjusted operating income and non-GAAP adjusted
operating margin as well as a reconciliation of net income to non-GAAP
adjusted operating income.

Net interest expense was $4.2 million compared with $1.0 million in the
prior-year period, with the increase due to the debt to fund the Faster
acquisition.

In the second quarter, Helios incurred a $2.0 million net foreign
currency transaction loss associated with locking the Faster Group
purchase price in euros, unfavorably impacting results in the second
quarter of 2018. Additionally, the Company incurred $1.3 million of net
foreign currency transaction losses due to significant currency
fluctuation during the 2018 second quarter.

The Company recorded a $0.3 million charge for accretion of the
contingent consideration associated with the Enovation Controls
acquisition, compared with an $8.2 million increase to the fair value of
the liability in last year's quarter.

The Tax Cuts and Jobs Act was the primary factor resulting in a lower
effective tax rate in the 2018 second quarter, at 26.3%, compared with
33.2% in the second quarter of 2017.

Net income was $6.8 million, or $0.22 per share in the second quarter of
2018. Non-GAAP net income was $13.7 million, or $0.43 per share,
compared with $12.8 million, or $0.47 per share, in the prior-year
second quarter. See the attached tables for additional important
disclosures regarding Helios' use of non-GAAP net income and non-GAAP
EPS as well as a reconciliation of net income to non-GAAP net income.

           
Second Quarter Adjusted EBITDA
($ in millions) Q2 2018 Q2 2017 Change % Change  
Adjusted EBITDA $ 34.9 $ 24.8 $ 10.1 41 %
Adjusted EBITDA margin 25.6 % 27.8 %
 

Second quarter 2018 Adjusted EBITDA (earnings before net interest
expense, income taxes, depreciation and amortization, and certain
amortization and non-recurring charges) was $34.9 million, or 25.6% of
sales.

Helios believes that, when used in conjunction with measures prepared in
accordance with GAAP, Adjusted EBITDA and Adjusted EBITDA margin
(Adjusted EBITDA as a percentage of sales), which are non-GAAP measures,
help in the understanding of its operating performance. See the
attached tables for additional important disclosures regarding Helios'
use of Adjusted EBITDA and Adjusted EBITDA margin as well as a
reconciliation of net income to Adjusted EBITDA.

First Half 2018 Consolidated Results

($ in millions, except per share data)       2018   2017   Change   % Change
Net sales $ 233.5 $ 170.7 $ 62.8 37 %
Gross profit $ 88.0 $ 71.4 $ 16.6 23 %
Gross margin 37.7 % 41.8 %
Operating income $ 34.3 $ 36.5 $ (2.2 )

(6

%)

Operating margin 14.7 % 21.4 %
Non-GAAP adjusted operating margin 22.5 % 25.1 %
Net income $ 18.7 $ 17.5 $ 1.2 7 %
Diluted EPS $ 0.61 $ 0.65 $ (0.04 )

(6

%)

Non-GAAP Adjusted net income $ 27.3 $ 24.3 $ 3.0

12

%

Non-GAAP adjusted EPS $ 0.89 $ 0.90 $ (0.01 )

(1

%)

 

Sales in the 2018 first half grew $62.8 million, or 37%, over the prior
year, with Faster contributing $38.7 million, while organic business
sales grew 14%. Foreign currency translation favorably impacted
consolidated sales by approximately $2.8 million.

Operating income in the first half of 2018 was impacted by
acquisition-related items, including $3.1 million for amortization of
inventory valuation, $4.9 million for acquisition and financing-related
expenses, $0.2 million for restructuring charges and $10.0 million for
acquisition-related amortization of intangible assets. Operating income
in the first half of 2017 was similarly impacted by $1.8 million for
amortization of inventory valuation, $0.2 million for acquisition and
financing-related expenses and $4.3 million for acquisition-related
amortization of intangible assets.

Non-GAAP adjusted operating margin was 22.5% in the 2018 first half
compared with 25.1% in the prior-year period. The decrease is primarily
due to the supply chain constraints and higher material costs noted
above, as well as other operational costs noted in the first quarter. See
the attached tables for additional important disclosures regarding
Helios' use of non-GAAP adjusted operating income and non-GAAP adjusted
operating margin as well as a reconciliation of net income to non-GAAP
adjusted operating income.

Net interest expense was $4.6 million compared with $1.6 million for the
first half of 2017, with the increase primarily due to debt to fund the
Faster acquisition.

A foreign currency transaction loss, change in fair value of contingent
consideration and effective tax rate are consistent with the
fluctuations described above for the second quarter.

Net income was $18.7 million, or $0.61 per share. Non-GAAP net income
was $27.3 million, or $0.89 per share, compared with $24.3 million, or
$0.90 per share, last year. See the attached tables for additional
important disclosures regarding Helios' use of non-GAAP net income and
non-GAAP EPS as well as a reconciliation of net income to non-GAAP net
income.

           
First Half 2018 Adjusted EBITDA
($ in millions) 2018 2017 Change % Change
Adjusted EBITDA $ 58.2 $ 47.7 $ 10.5 22 %
Adjusted EBITDA margin 24.9 % 27.9 %
 

First half 2018 Adjusted EBITDA was $58.2 million, or 24.9% of sales.

Helios believes that, when used in conjunction with measures prepared in
accordance with GAAP, Adjusted EBITDA and Adjusted EBITDA margin, which
are non-GAAP measures, help in the understanding of its operating
performance. See the attached tables for additional important
disclosures regarding Helios' use of Adjusted EBITDA and Adjusted EBITDA
margin as well as a reconciliation of net income to Adjusted EBITDA.

Hydraulics Segment Review

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

Segment sales of $103.6 million grew 70.4% over the prior-year second
quarter. The $42.8 million increase included $38.7 million from the
Faster business and 7% of organic growth. Growth was driven by increased
demand in all geographies and end markets, and was also positively
impacted by global sales and marketing initiatives. Orders outpaced
revenue, however, supply chain constraints impacted the segment's
ability to complete and ship certain products. This is leading to a
stronger back half of the year. Including Faster, sales to the Americas,
EMEA and APAC were up 41%, 144% and 46%, respectively. Foreign currency
translation favorably impacted segment sales by $0.1 million, of which
$0.9 million favorable effect was recognized by the Sun Hydraulics
business, offset by $0.8 million unfavorable effect recognized by the
Faster business.

Second quarter operating and gross margins were lower than last year but
showed sequential improvement over the first quarter of 2018. While
significant customer demand continued, the segment realized improvements
in its supply chain activities and recognized production efficiencies
compared with previous quarters. Material cost increases persisted, but
are expected to be alleviated in the third quarter of 2018 as Sun's
price increases take effect.

Higher SEA (selling, engineering and administrative) expenses and R&D
(research and development) expenses in the 2018 quarter include $5.3
million for the Faster business, partially offset by reduced costs and
efficiencies realized by the historical Sun business.

Second quarter operating income increased $9.0 million, or 55%, to $25.4
million, representing 24.5% of sales.

For the first half, segment sales grew $51.3 million, of which $38.7
million was contributed by Faster and 11% growth was realized
organically. Operating income for the first half of 2018 was $38.8
million, or 23.3% of sales.

Electronics Segment Review

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

Segment sales grew to $32.5 million for the second quarter, an increase
of 14% over the second quarter of last year. Growth was driven by
increased demand in power controls and recreational vehicle end markets.
Proactive sales initiatives and increased demand for new products
developed in the past year also contributed to the 2018 growth. Foreign
currency translation favorably impacted segment sales by $0.3 million.

Similar to the Hydraulics segment, second quarter gross margin was lower
than last year but showed sequential improvement over the first quarter
of 2018. Improved productivity partially offset ongoing higher material
and freight costs, resulting in lower gross margin compared with the
prior year. SEA costs increased by $1.0 million due to planned
investments in sales and marketing initiatives, and research and
development to support the segment's growth strategy, as well as
increased accounting and administrative infrastructure costs.

Given the gross margin pressures and SEA investments, second quarter
operating income was relatively flat compared with the prior-year second
quarter, at $6.5 million, or 20.0% of sales.

For the first half, segment sales grew $11.4 million, or 20.4%.
Operating income for the first half of 2018 was $13.6 million, or 20.2%
of sales.

Balance Sheet and Cash Flow Review

Total debt was $355.2 million at June 30, 2018, up from $116.0 million
at December 30, 2017, with the increase primarily to fund the Faster
acquisition. Cash and cash equivalents at June 30, 2018 were $29.9
million, compared with $63.9 million at the end of 2017.

Cash provided by operations was $31.1 million and $21.7 million for the
first half of 2018 and 2017, respectively. The increase was driven by
strong second quarter cash flows, primarily due to higher net income and
improved working capital utilization, especially inventory.

Capital expenditures were $10.6 million and $3.3 million for the first
half of 2018 and 2017, respectively. The increase was primarily for
machinery and equipment and costs for the ongoing construction of the
Company's new production facility in South Korea.

2018 Outlook and Guidance

Mr. Dangel stated, "Our organic businesses and the Faster Group remain
on track with the revenue expectations we previously reported. However,
the addition of Custom Fluidpower has resulted in an increase to our
revenue guidance as well as some of our other metrics. Additionally, we
are adjusting our consolidated operating margin guidance modestly."

The following summarizes the Company's updated expectations for 2018,
including Custom Fluidpower since its August 1 acquisition, compared
with previously provided guidance:

 

Previous 2018
Guidance

Updated 2018
Guidance

Consolidated revenue $490 - $505 million $510 - $525 million
Hydraulics segment revenue $368 - $378 million $388 - $398 million
Electronics segment revenue $122 - $127 million $122 - $127 million
Consolidated operating margin (1) 22.7% - 24.0%(1) 21.7% - 23.0%(1)
Consolidated interest expense $10.5 - $12.0 million $13.5 - $14.5 million
Effective tax rate 24.5% - 26.5% 24.5% - 26.5%
Capital expenditures $20 - $25 million $25 - $30 million
Depreciation $14.5 - $15.5 million $16.5 - $17.5 million
Amortization $20 - $21 million $22.5 - $23.5 million
(1) Operating margin is non-GAAP, before
acquisition-related amortization of intangibles and one-time costs
 

Mr. Dangel concluded, "Step by step, we are striving to become a leading
global designer and manufacturer of intelligent systems and controls. We
are diligently and carefully working toward the attainment of our Vision
2025 goals, to achieve global technology leadership in the industrial
good section with critical mass exceeding $1 billion in sales while
maintaining our superior profitability and financial strength."

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 14, 2018. To listen to the archived
call, dial (412) 317-6671 and enter conference ID number 13681117. 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 the business name for Sun Hydraulics Corporation,
a publicly-listed company on the Nasdaq Global Stock Market (SNHY).
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, LLC, Enovation
Controls, LLC and Faster S.p.A. Through its Hydraulics segment, the
Company serves diverse markets including material handling, construction
equipment, agriculture, specialized vehicles, energy and others through
its Sun Hydraulics and Faster Group companies, providing
high-performance screw-in hydraulic cartridge valves and manifolds as
well as quick-release hydraulic coupling solutions. Through its
Electronics segment, the Company provides electronic control solutions
through Enovation Controls for recreational and off-highway vehicles, as
well as industrial stationary and mobile power equipment. 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 Sun Hydraulics
Corporation ("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 industry 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 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's Form
10‐Q for the quarter ended June 30, 2018, and Item 1. "Business" and
Item 1A. "Risk Factors" in the Company's Form 10-K for the year ended
December 30, 2017. 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.
The Company has provided reconciliations of comparable GAAP
to non-GAAP measures in tables found in the end of this news release.

Financial Tables Follow.

 

HELIOS TECHNOLOGIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

           
Three Months Ended Six Months Ended
June 30,   July 1, June 30,   July 1,
2018 2017 % Change 2018 2017 % Change
Net sales $ 136,168 $ 89,335 52% $ 233,486 $ 170,688 37%
Cost of sales   85,764     50,752   69%   145,465     99,311   46%
Gross profit 50,404 38,583 31% 88,021 71,377 23%
Gross margin 37.0 % 43.2 % 37.7 % 41.8 %
 
Selling, engineering and administrative expenses 25,325 15,843 60% 43,640 30,544 43%
Amortization of intangible assets   8,076     2,039   296%   10,124     4,348   133%
Operating income   17,003     20,701   (18)%   34,257     36,485   (6%)
Operating margin 12.5 % 23.2 % 14.7 % 21.4 %
 
Interest expense, net 4,151 964 331% 4,634 1,589 NM
Foreign currency transaction loss (gain), net 3,301 7 NM 3,812 (40 ) NM
Miscellaneous expense, net 80 635 NM 44 702 NM
Change in fair value of contingent consideration   251     8,191   NM   653     8,191   NM
Income before income taxes 9,220 10,904 (15)% 25,114 26,043 (4%)
Income tax provision   2,424     3,620   (33)%   6,407     8,548   (25%)
Net income $ 6,796   $ 7,284   (7)% $ 18,707   $ 17,495   7%
 
Basic and diluted net income per common share $ 0.22   $ 0.27   (19%) $ 0.61   $ 0.65   (6%)
 
Basic and diluted weighted average shares outstanding 31,597 27,046 30,718 26,996
 
Dividends declared per share $ 0.09   $ 0.09   $ 0.18   $ 0.20  
 
NM = Not meaningful
 

HELIOS TECHNOLOGIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

       
June 30, December 30,
2018 2017

(Unaudited)

Assets
Current assets:
Cash and cash equivalents $ 29,942 $ 63,882
Restricted cash 40 40
Accounts receivable, net of allowance for doubtful accounts
of $631 and $358 74,344 37,503
Inventories, net 77,289 41,545
Income taxes receivable 592 -
Other current assets   8,882     3,806  
Total current assets 191,089 146,776
Property, plant and equipment, net 114,428 91,931
Deferred income taxes 7,940 4,654
Goodwill 345,997 108,869
Other intangibles, net 328,921 104,131
Other assets   3,977     3,405  
Total assets $ 992,352   $ 459,766  
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 39,136 $ 15,469
Accrued expenses 21,856 8,977
Current portion of contingent consideration 34,535 17,102
Current portion of long-term debt, net 3,505 -
Dividends payable 2,845 2,437
Income taxes payable 3,064 1,878
Other current liabilities   2,320     -  
Total current liabilities 107,261 45,863
Revolving line of credit 256,750 116,000
Long-term debt, net 94,972 -
Contingent consideration, less current portion - 16,780
Deferred income taxes 20,817 2,068
Other noncurrent liabilities   9,157     6,382  
Total liabilities   488,957     187,093  
Commitments and contingencies - -
Shareholders' equity:
Preferred stock, 2,000,000 shares authorized, par value $0.001,
no shares outstanding - -
Common stock, 50,000,000 shares authorized, par value $0.001,
31,604,459 and 27,077,145 shares outstanding 32 27
Capital in excess of par value 337,772 95,354
Retained earnings 196,787 183,770
Accumulated other comprehensive loss   (31,196 )   (6,478 )
Total shareholders' equity   503,395     272,673  
Total liabilities and shareholders' equity $ 992,352   $ 459,766  
 

HELIOS TECHNOLOGIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

       
Six Months Ended
June 30, July 1,
2018 2017
Cash flows from operating activities:
Net income $ 18,707 $ 17,495
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 17,076 9,855
Loss on disposal of assets 8 692
Stock-based compensation expense 2,061 2,038
Amortization of debt issuance costs 371 202
Benefit for deferred income taxes - (3,229 )
Amortization of acquisition-related inventory step-up 3,125 1,774
Change in fair value of contingent consideration 653 8,191
Forward contract losses, net 3,493 -
Other, net 196 227
(Increase) decrease in operating assets, net of acquisition:
Accounts receivable (13,666 ) (14,191 )
Inventories (4,754 ) (10,120 )
Income taxes receivable (46 ) 512
Other current assets (501 ) (303 )
Other assets 270 98
Increase (decrease) in operating liabilities, net of acquisition:
Accounts payable 5,908 5,796
Accrued expenses and other liabilities 1,660 1,145
Income taxes payable (3,405 ) 1,207
Other noncurrent liabilities   (39 )   295  
Net cash provided by operating activities   31,117     21,684  
Cash flows from investing activities:
Capital expenditures (10,581 ) (3,305 )
Proceeds from dispositions of equipment 3 18
Proceeds from sale of short-term investments - 2,938
Acquisition of business, net of cash acquired (527,144 ) -
Cash settlements of forward contracts   (2,535 )   -  
Net cash used in investing activities   (540,257 )   (349 )
Cash flows from financing activities:
Borrowings on revolving line of credit 258,000 -
Repayment of borrowings on revolving line of credit (117,250 ) (16,000 )
Borrowings on long-term debt 100,932 -
Repayment of borrowings on long-term debt (1,250 ) -
Borrowings under factoring arrangement 1,044 -
Payments on capital lease obligations (330 ) -
Proceeds from stock issued 240,602 465
Dividends to shareholders (5,281 ) (5,390 )
Debt issuance costs (1,763 ) -
Payment of employee tax withholding   (240 )   -  
Net cash provided by (used in) financing activities   474,464     (20,925 )
Effect of exchange rate changes on cash and cash equivalents   736     4,042  
Net (decrease) increase in cash and cash equivalents (33,940 ) 4,452
Cash and cash equivalents, beginning of period   63,882     74,221  
Cash and cash equivalents, end of period $ 29,942   $ 78,673  
 
 

HELIOS TECHNOLOGIES

SEGMENT DATA

(In thousands)

(Unaudited)

         
Three Months Ended Six Months Ended
June 30,   July 1, June 30, July 1,
2018 2017 2018 2017
Sales:
Hydraulics $ 103,634 $ 60,818 $ 166,243 $ 114,940
Electronics   32,534     28,517     67,243     55,748  
Consolidated $ 136,168   $ 89,335   $ 233,486   $ 170,688  
 
Gross profit and margin:
Hydraulics $ 39,422 $ 25,576 $ 62,870 $ 47,599
38.0 % 42.1 % 37.8 % 41.4 %
Electronics 14,107 13,007 28,276 25,552
43.4 % 45.6 % 42.1 % 45.8 %
Corporate and other   (3,125 )   -     (3,125 )   (1,774 )
Consolidated $ 50,404   $ 38,583   $ 88,021   $ 71,377  
37.0 % 43.2 % 37.7 % 41.8 %
 
Operating income and margin:
Hydraulics $ 25,401 $ 16,359 $ 38,844 $ 30,131
24.5 % 27.0 % 23.3 % 26.2 %
Electronics 6,532 6,419 13,639 12,655
20.0 % 22.5 % 20.2 % 22.8 %
Corporate and other   (14,930 )   (2,077 )   (18,226 )   (6,301 )
Consolidated $ 17,003   $ 20,701   $ 34,257   $ 36,485  
12.5 % 23.2 % 14.7 % 21.4 %
 
 

HELIOS TECHNOLOGIES

ADDITIONAL INFORMATION

(Unaudited)

           
2018 Sales by Geographic Region and Segment
($ in millions)                            
Q1   %

of Total

  Q2   %

of Total

  2018   %

of Total

Americas:    
Hydraulics $ 26.4 $ 39.7 $ 66.1
Electronics   30.1   27.9   58.0
Consol. Americas 56.5 58 % 67.6 50 % 124.1 53 %
EMEA:
Hydraulics 19.6 40.5 60.1
Electronics   2.7   2.7   5.4
Consol. EMEA 22.3 23 % 43.2 32 % 65.5 28 %
APAC:
Hydraulics 16.6 23.4 40.0
Electronics   1.9   2.0   3.9
Consol. APAC   18.5 19 %   25.4 18 %   43.9 19 %
Total $ 97.3       $ 136.2       $ 233.5    
 
 
2017 Sales by Geographic Region and Segment
($ in millions)                                      
Q1   %

of Total

  Q2   %

of Total

  Q3   %

of Total

  Q4   %

of Total

  2017   %

of Total

Americas:
Hydraulics $ 24.7 $ 28.2 $ 25.3 $ 25.6 $ 103.8
Electronics   22.6   24.5   26.8   21.1   95.0
Consol. Americas 47.3 58 % 52.7 59 % 52.1 59 % 46.7 56 % 198.8 58 %
EMEA:
Hydraulics 17.1 16.6 16.1 16.4 66.2
Electronics   3.0   2.6   2.9   2.4   10.9
Consol. EMEA 20.1 25 % 19.2 22 % 19.0 22 % 18.8 22 % 77.1 22 %
APAC:
Hydraulics 12.3 16.0 15.2 17.1 60.6
Electronics   1.7   1.4   1.7   1.5   6.3
Consol. APAC   14.0 17 %   17.4 19 %   16.9 19 %   18.6 22 %   66.9 20 %
Total $ 81.4       $ 89.3       $ 88.0       $ 84.1       $ 342.8    
 
 

HELIOS TECHNOLOGIES

Non-GAAP Adjusted Operating Income RECONCILIATION

(In thousands)

(Unaudited)

         
Three Months Ended Year Ended
June 30,   July 1, June 30, July 1,
2018 2017 2018 2017
GAAP operating income $ 17,003 $ 20,701 $ 34,257 $ 36,485
Acquisition-related amortization of intangible assets 8,015 2,039 10,004 4,348
Acquisition-related amortization of inventory step-up 3,125 - 3,125 1,774
Acquisition and financing-related expenses 3,731 - 4,927 200
Restructuring charges   59     -     170     -  
Non-GAAP adjusted operating income $ 31,933   $ 22,740   $ 52,483   $ 42,807  
GAAP operating margin 12.5 % 23.2 % 14.7 % 21.4 %
Non-GAAP Adjusted operating margin 23.5 % 25.5 % 22.5 % 25.1 %
 
 

Non-GAAP Net Income RECONCILIATION

(in thousands)

(Unaudited)

         
Three Months Ended Six Months Ended
June 30,   July 1, June 30,   July 1,
2018 2017 2018 2017
Net income $ 6,796 $ 7,284 $ 18,707 $ 17,495
Acquisition-related amortization of inventory step-up 3,125 - 3,125 1,774
Acquisition and financing-related expenses 3,731 - 4,927 200
Restructuring charges 59 - 170 -
Foreign currency forward contract loss 2,030 - 2,535 -
Change in fair value of contingent consideration 251 8,191 653 8,191
Tax effect of above   (2,299 )   (2,703 )   (2,853 )   (3,354 )
Adjusted net income $ 13,693   $ 12,772   $ 27,264   $ 24,306  
Adjusted net income per diluted share $ 0.43   $ 0.47   $ 0.89   $ 0.90  
 

Adjusted EBITDA RECONCILIATION

(in thousands)

(Unaudited)

         
Three Months Ended Six Months Ended
June 30,   July 1, June 30, July 1,
2018 2017 2018 2017
Net income $ 6,796 $ 7,284 $ 18,707 $ 17,495
Interest expense (income), net 4,151 964 4,634 1,589
Income tax provision 2,424 3,620 6,407 8,548
Depreciation and amortization   12,347     4,764     17,076     9,855  
EBITDA 25,718 16,632 46,824 37,487
Acquisition-related amortization of inventory step-up 3,125 - 3,125 1,774
Acquisition and financing-related expenses 3,731 - 4,927 200
Restructuring charges 59 - 170 -
Foreign currency forward contract loss 2,030 - 2,535 -
Change in fair value of contingent consideration   251     8,191     653     8,191  
Adjusted EBITDA $ 34,914   $ 24,823   $ 58,234   $ 47,652  
Adjusted EBITDA margin 25.6 % 27.8 % 24.9 % 27.9 %
 

Non-GAAP Financial Measures:

Adjusted operating income, adjusted operating margin, adjusted
EBITDA, adjusted EBITDA margin, adjusted net income and adjusted 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 and adjusted net income per diluted share are important for
investors and other readers of Helios' financial statements, as they are
used as analytical indicators by Helios' management to better understand
operating performance.
Because adjusted operating income,
adjusted operating margin, adjusted EBITDA, adjusted EBITDA margin,
adjusted net income and adjusted 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 and adjusted net income per
diluted share, as presented, may not be directly comparable to other
similarly titled measures used by other companies.

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