Helios Technologies, Inc. — FY2021 Form 10-K
Reporting period: 52 weeks ended January 1, 2022. The comparable FY2020 period ended January 2, 2021 and contained 53 weeks. Helios designs and manufactures motion-control and electronic-control products through its Hydraulics and Electronics segments.
Financial performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net sales | $869.2 million | $523.0 million |
| Gross profit / margin | $312.8 million / 36.0% | $196.2 million / 37.5% |
| Operating income / margin | $149.3 million / 17.2% | $35.4 million / 6.8% |
| Net income | $104.6 million | $14.2 million |
| Diluted earnings per share | $3.22 | $0.44 |
| Operating cash flow | $113.2 million | $108.6 million |
| Capital expenditures | $26.8 million | $14.6 million |
Sales increased 66.2%; acquisitions contributed $206.6 million, organic growth contributed $139.6 million (26.7%), and foreign exchange added $12.4 million. Stronger end-market demand followed pandemic-related disruption in 2020. Gross margin fell 1.5 percentage points, mainly from higher raw-material, freight and logistics costs and the acquired Balboa business’s different margin profile. Operating margin improved substantially, but FY2020 included a $31.9 million goodwill impairment; excluding that charge, FY2021 operating margin improved 4.3 percentage points.
- Hydraulics: Sales of $516.4 million, up 26.8%; operating income of $119.8 million and margin of 23.2%, versus 20.1% in FY2020.
- Electronics: Sales of $352.7 million, up 204.6%, including $196.2 million of acquisition-related sales; operating income of $71.7 million and margin of 20.3%, versus 16.8%.
Liquidity, debt and capital allocation
Cash and cash equivalents were $28.6 million at year-end. Gross borrowings were approximately $445.5 million: $242.3 million under revolving facilities and $202.5 million of non-revolving debt. The filing reports $158.0 million of available revolving credit. Operating cash flow rose 4.2%, while higher working-capital requirements—especially inventory and receivables—absorbed cash. Inventory increased 50.1% to $165.6 million. The company paid $11.6 million in dividends and declared $0.36 per share for FY2021.
Management said operating cash flow and available borrowing capacity should cover operating expenses and capital expenditures for the foreseeable future. The PNC credit facility matures in October 2025; the company reported compliance with its financial covenants. Interest rates on credit facilities ranged from 2.0% to 5.3% at year-end. A one-percentage-point increase in reference rates was estimated to raise annual financing costs by approximately $2.5 million, based on FY2021 variable debt levels.
Material developments and outlook
- 2021 acquisitions included BJN Technologies, NEM and Joyonway; the 2020 Balboa acquisition also materially increased FY2021 Electronics sales. Management is integrating operations and pursuing cross-segment product and customer opportunities.
- Management accelerated its long-term target to more than $1 billion in sales with adjusted EBITDA margin of approximately 25% in 2023. This is a strategic goal, not a stated FY2022 earnings forecast.
- FY2022 capital expenditures were forecast at approximately 3%–5% of sales. The outlook assumed continued global economic recovery; the filing did not provide a clear FY2022 revenue or earnings guidance range.
- Management reported constrained supplies of electronic and other components, higher freight and material costs, shipment delays, and labor inefficiencies. Estimated sales delayed into later quarters were $6.4 million in Hydraulics and $14.8 million in Electronics.
- The board intended to continue the quarterly dividend of $0.09 per share during 2022, subject to board discretion and financial conditions.
Risks, contingencies and unusual items
Key risks include supply-chain disruption and component shortages; persistent inflation in labor, materials and logistics; COVID-19 effects on operations and demand; cyclical end markets; acquisition integration and goodwill impairment; competition; foreign-exchange movements; and variable-rate debt. A 10% decrease in relevant 2021 average exchange rates was estimated to reduce annual sales by $30.9 million and net income by $6.3 million.
Contingent consideration liabilities were $6.4 million, payable at various times through early 2024. Non-cancelable supplier and capital-expenditure commitments totaled $39.1 million for 2022, $43.3 million for 2023 and $12.6 million for 2024. The company also had a €26.7 million building purchase commitment at the end of a six-year lease, reduced by 60% of lease payments made. Management said routine litigation was not expected to materially affect the company. The FY2021 goodwill impairment test found no impairment; the $31.9 million charge was recorded in FY2020.
The independent auditor issued an unqualified opinion on the financial statements and internal controls; no critical audit matters were identified. Management also concluded that disclosure controls and internal control over financial reporting were effective as of January 1, 2022.
Investor verification points
- Assess how much sales and earnings growth came from acquisitions versus organic demand, and whether acquired businesses meet expected integration and margin objectives.
- Track component availability, delayed orders, inventory growth and the conversion of working capital into operating cash flow.
- Verify whether pricing offsets inflation in materials, freight and labor without further gross-margin pressure.
- Monitor leverage, interest costs, covenant headroom and the timing of debt maturities against acquisition plans and dividend commitments.
- Evaluate progress toward the 2023 sales and adjusted EBITDA margin goals; the filing does not provide a specific FY2022 sales or earnings range.