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What changed in HELIOS TECHNOLOGIES, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of HELIOS TECHNOLOGIES, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+342 added−315 removedSource: 10-K (2024-02-27) vs 10-K (2022-03-01)

Top changes in HELIOS TECHNOLOGIES, INC.'s 2023 10-K

342 paragraphs added · 315 removed · 202 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

73 edited+36 added−20 removed19 unchanged
Biggest changeCompetition Hydraulics Competitors in the hydraulics market are broken down into three categories: full-line hydraulics system producers, component-only producers of CVT or QRC products and low-cost producers. Most competitors market globally. Full-line producers, such as Parker Hannifin and Danfoss, can provide complete hydraulic systems to their customers, including components functionally like those manufactured in our Hydraulics segment.
Biggest changeFull-line producers, such as Parker Hannifin, Danfoss/Eaton and Bosch Rexroth/HydraForce, can provide complete hydraulic systems to their customers, including components functionally like those manufactured in our Hydraulics segment. Similar to Helios, component-only producers are entities that offer only CVT or QRC products, while additional parts of the hydraulics system are obtained from other manufacturers.
The outer ring of the HBS is our mission - the four key mission pillars that we believe will deliver growth, diversification and market leading financial performance as we develop into a more sophisticated, globally-oriented, customer-centric and learning-based organization. These are: 1.
The outer ring of the HBS is our mission - the four key mission pillars we believe will deliver growth, diversification and market leading financial performance as we develop into a more sophisticated, globally oriented, customer-centric and learning-based organization. These are: 1.
Develop our talent , our most critical resource, through a culture of customer centricity through the embracement of diversity, engagement of the team, focus on shared, deeply rooted values and promotion of a learning organization.
Develop our talent , our most critical resource, through a culture of customer centricity encompassing the embracement of diversity, engagement of the team, focus on shared, deeply rooted values and promotion of a learning organization.
ITEM 1. BUSINESS Our Business Overview and Strategy Helios Technologies, Inc. (“Helios,” the “Company,” “we,” “us” or “our”), and its wholly owned subsidiaries, is a global leader in highly engineered motion control and electronic controls technology for diverse end markets, including construction, material handling, agriculture, energy, recreational vehicles, marine, health and wellness.
ITEM 1. BUSINESS Our Business Overview and Strategy Helios Technologies, Inc. (“Helios,” the “Company,” “we,” “us” or “our”), and its wholly owned subsidiaries, is a global leader in highly engineered motion control and electronic controls technology for diverse end markets, including construction, material handling, agriculture, industrial, mobile, energy, recreational vehicles, marine, and health and wellness.
However, laws and regulations may be changed, accelerated or adopted that impose significant operational restrictions and compliance requirements upon our company, which could negatively impact our operating results. See Item 1A - Risk Factors. Anti-Corruption and Anti-Bribery Laws and Regulations We are subject to the U.S.
However, laws and regulations that impose significant operational restrictions and compliance requirements upon our company can be changed, accelerated or adopted, which could negatively impact our operating results. See Item 1A - Risk Factors. Anti-Corruption and Anti-Bribery Laws and Regulations We are subject to the U.S.
Our hardware and software products are designed and modified with the customer utilizing our extensive application knowledge to create unique system level products that cannot be easily replaced by simply switching out components. Twenty-four-hour customer service support and an in-house technical service department is available before, during and after the initial sale to create sustainable partnerships with our customers.
Our hardware and software products are designed and modified with the customer utilizing our extensive application knowledge to create unique system level products that cannot be easily replaced by simply switching out components. Customer service support and an in-house technical service department is available before, during and after the initial sale to create sustainable partnerships with our customers.
Joyonway is a fast-growing developer of control panels, software, systems and accessories for the health and wellness industry. Joyonway operates from two locations in China, Shenzhen and Dongguan, both of which are in the hub of electronics and software development in China.
Joyonway is a developer of control panels, software, systems and accessories for the health and wellness industry. Joyonway operates from two locations in China, Shenzhen and Dongguan, both of which are in the hub of electronics and software development in China.
As an innovative manufacturer of electronic controls and displays, we serve a variety of markets including off-highway, recreational and commercial marine, power sports and specialty vehicles, agriculture and water pumping, power generation, engine-driven industrial equipment and health and wellness. We partner directly with OEMs and support a worldwide network of authorized distributors and systems integrators.
As an innovative manufacturer of electronic controls and displays, we serve a variety of markets including off-highway, recreational marine, powersports and specialty vehicles, agriculture, water pumping, power generation, engine-driven industrial equipment, and health and wellness. We partner directly with OEMs and support a worldwide network of authorized distributors and systems integrators.
By providing integrated architecture of hardware and software that is customized to match specific OEM products, Balboa creates a value proposition making it difficult to easily switch suppliers.
By providing integrated architecture of hardware and software that is customized to match specific OEM products, Balboa Water Group creates a value proposition making it difficult to easily switch suppliers.
This allows us to target customers or industries that see value in this level of integration, and as a result, our customer list contains a wide variety of OEM applications.
This allows us to target customers or industries that see value in this level of integration, and as a result, our product list contains a wide variety of OEM applications.
Engineering teams work cross-functionally between the segments where engineers in the Electronics segment bring expertise to enable electrification of products and systems within the Hydraulics segment.
HCEE teams work cross functionally between the segments where engineers in the Electronics segment bring expertise to enable electrification of products and systems within the Hydraulics segment.
Our global channel partner network includes representation in many industrialized markets, and approximately 57% of segment sales are attributed to our channel partners who generally combine our products with other hydraulic components to design a complete hydraulic system. Sales direct to OEMs for integration in their machines make up the remaining 43%.
Our global channel partner network includes representation in many industrialized markets, and approximately 46% of segment sales are attributed to our channel partners who generally combine our products with other hydraulic components to design a complete hydraulic system. Sales direct to OEMs for integration in their machines make up the remaining 54%.
OEM sales constituted 83% of total Electronics segment sales in 2021. Building strong, lasting partnerships with OEMs is a priority. We rely on direct customer contacts to stimulate demand for our products. We work closely with our OEM customers to design and deliver innovative reliable products for specific applications.
OEM sales constituted 75% of total Electronics segment sales in 2023. Building strong, lasting partnerships with OEMs is a priority. We rely on direct customer contacts to stimulate demand for our products. We work closely with our OEM customers to design and deliver innovative and reliable products for specific applications.
They are designed to be able to operate reliably at higher pressures, making them equally suitable for both industrial and mobile applications. Hydraulic systems are increasingly taking signals from on-board electronic control systems, making it necessary for hydraulic products to be capable of digital communication.
They are designed to be able to operate reliably at higher pressures than most competitors, making them equally suitable for both industrial and mobile applications. 7 Hydraulic systems are increasingly taking signals from on-board electronic control systems, making it necessary for hydraulic products to be capable of digital communication.
Foreign Corrupt Practices Act ("FCPA") and anti-corruption laws, and similar laws in foreign countries, such as the UK Anti-Bribery Act of 2010. Any violation of these laws by us or our agents or distributors could create substantial liability for us, subject our officers and directors to personal liability, and cause a loss of reputation in the market.
Foreign Corrupt Practices Act (“FCPA”) and anti-corruption laws, and similar laws in foreign countries, such as the U.K. Anti-Bribery Act of 2010. Any violation of these laws by us or our agents or distributors could create substantial liability for us, subject our officers and directors to personal liability, and cause a loss of reputation in the market.
Established supplier relationships and manufacturing capabilities in precision machining, finishing, heat treatment, process automation and test allow us to deliver best in class quality and market leading hydraulic control solutions. We are continually driving improvements in operational performance. Projects leverage Lean Six Sigma best practices and automation to continually improve the safety, quality and productivity of our operating processes.
Established supplier relationships and manufacturing capabilities in precision machining, finishing, heat treatment, process automation, and test allow us to deliver best in class quality and market leading hydraulic control solutions. We leverage Lean Six Sigma best practices and automation to continually improve the safety, quality, and productivity of our operating processes.
Our overall position in our key markets is defensible due to high barriers to switching suppliers, such as up-front engineering and programming costs and positive perceptions among core customers on key selection criteria, including quality and service. Human Capital We believe our employees are fundamental to our success.
Our overall position in our key markets is defensible due to high barriers to switching suppliers, such as up-front engineering and programming costs and positive perceptions among core customers on key selection criteria, including quality and service. Human Capital We consider our employees as essential contributors to our success.
However, in the event that the Company is unable to comply with OSHA or other environmental requirements, the Company could be subject to substantial sanctions, including restrictions on its business operations, monetary liability and criminal sanctions, any of which could have a material adverse effect upon the Company's business.
However, in the event that the Company is unable to comply with OSHA or other environmental requirements, the Company could be subject to substantial sanctions, including restrictions on its business operations, monetary liability and criminal sanctions, any of which could have a material adverse effect upon the Company's business. 14 Sustainability Corporate responsibility and sustainability are reflected in the Company’s business strategy.
In support of our mission to “Think and Act Globally”, we are actively driving “in the region, for the region” manufacturing. These initiatives are better aligning supply chain and manufacturing value streams with customers geographically to shorten lead times, reduce inventory, optimize cost and mitigate the risks of global supply.
In support of our mission to “Think and Act Globally”, we are driving “in the region, for the region” manufacturing to better align supply chain and manufacturing value streams with customers geographically to shorten lead times, reduce inventory, optimize costs, and mitigate global supply risks.
Our displays offer easy-to-read, bonded LCD graphical interfaces with the industry's best viewability even in direct sunlight or harsh weather conditions. Our controllers are built with the ability to withstand a wide ambient temperature range.
All of our displays offer easy-to-read, bonded LCD graphical interfaces with the industry's best viewability, even in direct sunlight or harsh weather conditions, and the ability to withstand a wide ambient temperature range.
User friendly software configuration tools allow engineers and non-engineers alike to create customized systems that solve complex problems on their equipment making the user experience more seamless. Our panel solutions offer customized design and simple, turnkey solutions and our Industrial Panel Division offers engineers dedicated to applications, wire harnesses, panels and software development.
We believe our user friendly software configuration tools allow engineers and non-engineers alike to create customized systems to solve complex problems on their equipment making the user experience more seamless. Our panel solutions offer customized design and simple, turnkey solutions and our Custom Hardware Solutions team offers engineers dedicated to applications, wire harnesses, panels and software development.
Business Segments Our Hydraulics segment includes products sold under the Sun Hydraulics, Faster, Custom Fluidpower and NEM brands. The Electronics segment includes products sold under the Enovation Controls, Murphy, Balboa Water Group and Joyonway brands. Financial information about our business segments is presented in Note 16 of the Notes to the Consolidated Financial Statements included in this Annual Report.
The Electronics segment includes products sold under the Enovation Controls, Murphy, Zero Off, HCT, Balboa Water Group and Joyonway brands. Financial information about our business segments is presented in Note 16 of the Notes to the Consolidated Financial Statements included in this Annual Report.
Our engagement and speed to market set us apart from larger competitors. 9 Balboa Water Group, including Joyonway, is the largest supplier of integrated end-to-end solutions for the therapy and wellness spa and bath market and is the only supplier capable of providing the full spectrum of components, from controls and displays to pumps and jets.
Balboa Water Group, including Joyonway, is the largest supplier of integrated end-to-end solutions for the therapy and wellness spa and bath market and is the only supplier capable of providing the full spectrum of components, from controls and displays to pumps and jets.
The objective of our acquisition strategy is to enhance Helios by: • Growing our current product portfolio or adding new technologies and capabilities that complement our current offerings; • Expanding geographic presence; • Bringing new customers or markets; • Meeting growth and profitability goals; and • Leveraging operational synergies and earnings accretion.
In addition to looking for strong management teams and good cultural fit, the objective of our acquisition strategy is to enhance Helios by: 5 • Growing our current product portfolio or adding new technologies and capabilities that complement our current offerings; • Expanding geographic presence; • Bringing new customers or markets; • Meeting growth and profitability goals; and • Leveraging operational synergies and earnings accretion.
Compliance with government regulations, including environmental regulations, has not had, and based on current information and the applicable laws and regulations currently in effect, is not expected to have a material effect on our capital expenditures, earnings or competitive position.
These laws and regulations are complex, change frequently and have become more stringent over time. Compliance with government regulations, including environmental regulations, has not had a material effect on our capital expenditures, earnings or competitive position and based on current information and the applicable laws and regulations currently in effect, is not expected to.
Joyonway complements the electronic controls platform from our Balboa Water Group acquisition by bringing an innovative portfolio of new solutions, strengthening our supply chain through broader geographic reach, increasing our manufacturing capacity to meet growing global demand, as well as better servicing ‘in the region for the region’.
Joyonway complements the electronic controls platform from our Balboa Water Group acquisition by bringing an innovative portfolio of new solutions, strengthening our supply chain through broader geographic reach, increasing our manufacturing capacity to meet global demand over time, as well as better servicing ‘in the region for the region’. 6 • In July 2022, we completed the acquisition of the assets of Taimi R&D, Inc.
Sustainability Corporate responsibility and sustainability are reflected in the Company’s business strategy. The board of directors recently reviewed the Company’s historical commitment to principles of corporate and social responsibility. The Company is committed to reducing emissions, recycling and minimizing its environmental footprint and has implemented several strategies to achieve these goals.
The board of directors has oversight over, and recently reviewed, the Company’s principles of corporate and social responsibility. The Company is committed to reducing emissions, recycling and minimizing its environmental footprint and has implemented several strategies to achieve these goals.
Helios Engineering will play an important role in protecting the business, market diversification, globalization of product and developing talent. Importantly, Helios Engineering will advance ongoing joint product development efforts to address the megatrend of the electrification of machines.
HCEE plays an important role in protecting the business, market diversification, globalization and innovation of products and developing talent. Importantly, HCEE advances ongoing joint product development efforts to address the megatrend of the electrification of machines.
Our 2021 Hydraulics segment sales were distributed fairly evenly among our three major geographic regions with 32% to the Americas, 35% to Europe, the Middle East and Africa ("EMEA") and 33% to Asia Pacific ("APAC"). We market and sell hydraulic products through value-add distributors and directly to OEMs.
Our 2023 Hydraulics segment sales were distributed fairly evenly among our three major geographic regions with 42% to the Americas, 31% to Europe, the Middle East and Africa (“EMEA”) and 27% to Asia Pacific (“APAC”). We market and sell hydraulic products and engineered solutions through value-add distributors and directly to OEMs.
Manufacturing Strategy As part of our pivot to an integrated operating company, we are developing shared operations strategies across the companies in our Electronics and Hydraulics segments to leverage the breadth of this global footprint and depth of our manufacturing capabilities.
Manufacturing Strategy As part of our transformation to an integrated operating company, we have developed a unified operations strategy across the companies in our Electronics and Hydraulics segments. This strategy leverages the breadth of our global footprint and depth of our manufacturing capabilities.
We pioneered a fundamentally different design platform employing a floating construction that results in a self-alignment characteristic. This design provides better performance and reliability advantages compared with most competitors’ product offerings. Our cartridge valves are offered in five size ranges and include both electrically actuated and hydro-mechanical products.
This design provides better performance and reliability advantages compared with most competitors’ product offerings. Our cartridge valves are offered in several size ranges and include both electrically actuated and hydro-mechanical products.
The Company’s executive offices are located at 7456 16th St E, Sarasota, Florida 34243, and our telephone number is (941) 362-1200. Our websites include www.heliostechnologies.com, www.sunhydraulics.com, www.nem-hydraulics.com, www.custom.com.au, www.fastercouplings.com, www.enovationcontrols.com, www.balboawatergroup.com and www.joyonway.com . 12
The Company’s executive offices are located at 7456 16th St E, Sarasota, Florida 34243, and our telephone number is (941) 362-1200. Our website is www.heliostechnologies.com. 15
Products are serialized and test data is captured against serial numbers and stored in a manufacturing execution system (“MES”) database for product traceability. Our culture of continuous improvement and people first approach spans both segments.
Multipoint functional testing is conducted to ensure quality control of assembled products. Products are serialized and test data is captured against serial numbers and stored in a manufacturing execution system (“MES”) database for product traceability. Our culture of continuous improvement and people first approach spans across both segments. Structured programs ensure our supply chains comply with Conflict Minerals standards.
While the core value of our products has been critical to our companies’ historical success and will remain important in the future, we see significant opportunities in bringing together the technology of hydraulics and electronics to create new products to better serve future market trends.
While the core technology of our products has been critical to our Company’s historical success and will remain important in the future, we see significant opportunities to develop innovative technology encompassing both the Hydraulics and Electronics segments to create new products to address future market trends and further diversify our end markets.
The Company's employees in its manufacturing facilities operate complicated machinery that may cause substantial injury or death upon malfunction or improper operation. The Company's manufacturing locations are subject to the workplace safety rules and regulations of OSHA and local safety and health laws. The Company believes that it is in compliance with the requirements of these laws.
The Company's manufacturing locations are subject to the workplace safety rules and regulations of OSHA and local safety and health laws. The Company believes that it is in compliance with the requirements of these laws.
The systems we manufacture: • are highly efficient; • increase and optimize productivity; • introduce safer operating procedures; • are smaller in size than competitive products; • allow for ease of maintenance; and • reduce energy costs.
The systems we design and manufacture: • may include electro-hydraulic, remote control, electronic control, hydraulic machine control and human-machine interface (“HMI”) display interfaces; • are highly efficient; 8 • increase and optimize productivity; • introduce safer operating procedures; • are smaller in size than competitive products; • allow for automation of existing equipment; • allow for ease of maintenance; and • reduce energy costs.
Established manufacturing centers provide scale in North America, and centers in both Asia and Europe are expanding to meet growing global demand. Manufacturing locations in the US, Italy, Mexico, UK, China and India provide a range of manufacturing options. Hydraulics Our Hydraulics operations footprint leverages manufacturing centers in North America, Europe and Asia.
Established manufacturing centers provide scale in North America, and we continue to expand centers in both Asia and Europe to meet growing global demand. Manufacturing locations in the U.S., Canada, Mexico, Italy, Germany, South Korea, China and India provide a range of manufacturing options.
Our companies offer several health and welfare programs to employees to promote fitness and wellness and preventative healthcare. In addition, our employees are offered a confidential employee assistance program that provides professional counseling to employees and their family members. We have approximately 490 employees in Italy who are represented by a union.
We provide a range of health and welfare programs to encourage employee fitness, wellness, and preventive healthcare. Additionally, our workforce has access to a confidential employee assistance program that offers professional counseling services to employees and their family members. We have approximately 570 employees in Italy who are represented by a union.
We rely heavily on our distribution network in the U.S. with 77% of segment sales in this region going through channel partners. In EMEA and APAC, sales are split more evenly between OEMs and distributors. Technical support is provided by local sales and application experts based at each of our global operations.
We rely heavily on our distribution network in the U.S., while in the EMEA and APAC regions, sales are split more evenly between OEMs and distributors. Technical support is provided by local sales and application experts based in each region. Electronics Electronic products are sold globally to OEM customers, distributors and system integrators.
In connection with our acquisitions, we may assume significant environmental liabilities, some of which we may not be aware of, or may not be quantifiable, at the time of acquisition.
In connection with our acquisitions, we may assume significant environmental liabilities, some of which we may not be aware of, or may not be quantifiable, at the time of acquisition. In addition, new laws and regulations, the discovery of previously unknown contamination or the imposition of new requirements could increase our costs or subject us to new or increased liabilities.
Factory and supplier management is grounded in a people first approach that leverages the talents of our diverse global operations team.
Our factory and supplier management is grounded in a people first approach that leverages the talents of our diverse global operations team. All global sites operate to high standards of stewardship and social responsibility. Hydraulics Our Hydraulics operations footprint leverages manufacturing centers in North America, Europe, and Asia.
The Company and its employees believe that respecting others means recognizing the dignity of every person and embracing diversity around the globe. Helios is committed to maintaining a workplace free from discrimination and harassment and encourages diversity in its hiring and employment practices.
The Company, in conjunction with its workforce, is committed to the principle that respect for others involves recognizing the dignity of every individual and embracing global diversity. Helios is steadfast in its dedication to maintaining a workplace free from discrimination and harassment, actively advocating for diversity in both hiring and employment practices.
These competitors will typically attempt to copy our products and like products designed by competitors. Low-cost producers generally have a limited product range compared with full line or cartridge valve and quick release coupling only producers, which restricts their ability to be competitive.
Low-cost producers generally have a limited product range compared with full line or cartridge valve and quick release coupling only producers, which restricts their ability to be competitive. We believe that we compete based upon the quality, reliability, value, speed of delivery and technological characteristics of our products and services.
We believe that we compete based upon the quality, reliability, price, value, speed of delivery and technological characteristics of our products and services. Electronics Competition within the electronics market is very broad with competitors ranging from large multinational companies with full electronics offerings, such as Continental and Garmin, to small niche companies that specialize in one product type.
Electronics Competition within the electronics market is very broad with competitors ranging from large multinational companies with full electronics offerings, such as Continental and Garmin, to small niche companies that specialize in one product type. Enovation Controls is a niche player in the displays, controllers, gauges and instrumentation panel markets.
Manufacturing value streams incorporate high speed surface mount technology ("SMT") production lines with 3D solder paste inspection, 3D automated optical inspection and x-ray inspection to ensure quality and process control. Multipoint functional testing is conducted to ensure quality control of assembled products.
Electronics We offer a wide range of advanced electronics manufacturing capabilities that deliver integrated electronic control solutions to diverse end markets. Manufacturing value streams incorporate high speed surface mount technology (“SMT”), production lines with 3D solder paste inspection, 3D automated optical inspection and x-ray inspection to ensure quality and process control.
These efforts assist in our ability to diversify our global customer base, allowing us to grow more quickly, diversify the end-markets we serve and expand our customer base. Engineering In early 2021, we established the Helios Center of Engineering Excellence ("HCEE") to serve both our segments.
In addition to acquisitions such as Balboa and Joyonway, this effort includes the development of new partners globally. These efforts assist in our ability to diversify our global customer base, allowing us to grow more quickly, diversify the end-markets we serve and expand our customer base.
Each company within our group maintains environmental, health and safety policies that seek to promote the operation of our business in a manner that is protective of the health and safety of the public and our employees. Several of our businesses have onsite medical clinics for employees and their families.
Each entity upholds environmental, health, and safety policies aimed at fostering the operation of our business in a manner that safeguards the health and well-being of the public and our workforce. Many of our businesses feature onsite medical clinics catering to employees and their families.
To support the execution of our strategy, our financial strategy is oriented around delivering industry leading margins, a strong balance sheet and sufficient financial flexibility to support organic and acquisitive growth while supporting our dividend. We align our internal key performance indicators with our strategy to ensure our short-term actions will deliver long-term expectations.
To support the execution of our strategy, our financial strategy is oriented around delivering industry leading operating margins, a strong balance sheet and sufficient financial flexibility to support organic and acquisitive growth while continuing to sustain our longstanding history of over twenty-six years of dividend payments.
Our shared values of accountability, integrity, inclusion, innovation and leadership foster an inclusive and welcoming environment for our colleagues and their ideas. At the end of our 2021 fiscal year we employed over 2,350 colleagues worldwide. Approximately 49% of our employees are located in the Americas region, 29% in the EMEA region and 22% in APAC.
We are dedicated to building an inclusive workforce, and our commitment to shared values such as accountability, integrity, inclusion, innovation, and leadership creates an inviting environment for our colleagues and their ideas. 12 At the end of our 2023 fiscal year, we employed approximately 2,700 colleagues worldwide.
The market for products designed and manufactured by Enovation Controls is relatively fragmented with the top four to six companies comprising the majority of the market, mostly servicing the automotive space. Enovation Controls differentiates itself through product quality, customization ability and service with a focus on mid-market niche markets that are not well served by the large competitors.
Enovation Controls differentiates itself through product quality, ruggedness, customization ability and service with a focus on mid-sized niche markets that are not well served by the large competitors. Our engagement and speed to market set us apart from larger competitors.
Quick connection of multiple hydraulic lines can be accomplished through the use of a MultiFaster® or casting solution. Simultaneous connection of several lines is an important feature in many applications and allows for dramatic reduction of connection time, even when the system is under pressure.
In particular, the simultaneous connection of several lines granted by our Multifaster® is an important feature in many applications and allows for dramatic reduction of connection time, even when the system is under pressure, and completely removes the risk of incorrect connections and related hazards for the equipment and the operators.
Over the last few years, we restructured our sales teams to create a heavier dedicated focus on distributor sales for that team. Overall, approximately 17% of 2021 segment sales were derived from independent, authorized distributor channel partners. Geographically, our 2021 Electronics segment sales represented 73% to the Americas, 12% to EMEA and 15% to APAC.
Over the last few years, we restructured our sales teams to create a more dedicated focus on distributor sales. Overall, approximately 25% of 2023 segment sales were derived from independent authorized distributor channel partners. We continue to execute on our strategic initiative to further diversify our channels to market and end markets served.
However, our patents are important in the defense of our intellectual property from competitors who exploit product development that is not otherwise legally protected by its creator.
However, our patents are important in the defense of our intellectual property from competitors who exploit product development that is not otherwise legally protected by its creator. 13 Governmental Regulations We are subject to a variety of federal, state and local laws and regulations, including in foreign jurisdictions, relating to our business practices, labor and employment, construction, land use and taxation, among others.
We operate under two business segments: Hydraulics and Electronics. The Hydraulics segment designs and manufactures hydraulic cartridge valves, hydraulic quick release couplings as well as engineers complete hydraulic systems. The Electronics segment designs and manufactures customized electronic controls systems and displays for a variety of end markets including industrial and mobile, recreational and health and wellness.
We operate under two business segments: Hydraulics and Electronics. The Hydraulics segment designs and manufactures hydraulic motion control and fluid conveyance technology products, including cartridge valves, manifolds, quick release couplings as well as engineers hydraulic solutions and in some cases complete systems.
To the best of our knowledge, there is no labor dispute, strike, controversy, slowdown, work stoppage or lockout pending or threatened against or affecting the Company, nor is there any basis for any of the foregoing. 10 Patents and Trademarks In addition to trade secrets, unpatented know-how and other intellectual property rights, we own approximately 305 active patents and trademarks relating to certain of our products and businesses.
We have constructive and productive dialog on a regular basis with union leaders. To the best of our knowledge, there is no labor dispute, strike, controversy, slowdown, work stoppage or lockout pending or threatened against or affecting the Company, nor is there any basis for any of the foregoing.
Our culture of innovation is at the core of our business. We have approximately 230 engineers in support of product innovation, as well as technical support and customer service. We believe our product innovation will aid organic growth and fill the expected demand resulting from the identified megatrends.
We align our internal key performance indicators with our strategy to ensure our short-term actions will deliver long-term expectations. Our culture of innovation is at the core of our business. We have approximately 230 engineers in support of product innovation, as well as technical support and customer service.
NEM enhances the Helios electro-hydraulic product offering, provides geographic expansion and adds scale to address new markets.
Located in northern Italy’s Emilia Romagna region, one of the world’s most innovative and technology-friendly areas in the hydraulics industry, NEM enhances Helios’ electro-hydraulic product offering, provides geographic expansion and adds scale to address new markets.
We will continue to use this long successful approach while augmenting system sales with our key growth targets. We have started to promote the Helios brand while remaining focused on our well-established business unit brands.
We will continue to use this long successful approach while augmenting our strategy by pursuing system sales at key global OEM’s to drive growth. We will accelerate promotion of the Helios brand through system sales while remaining focused on our well-established operating brands. Hydraulics In 2023, 68% of Helios’ sales were derived from the Hydraulics segment.
Similar to Helios, component-only producers are entities that offer only CVT or QRC products, while additional parts of the hydraulics system are obtained from other manufacturers. These include HydraForce, Inc., Delta Power Company, Stucchi, SpA. and CEJN. Low-cost producers, such as Winner and Valvole Italia, are competitors who have emerged in low-cost production areas such as APAC and Europe.
These include Delta Power Company, Stucchi and CEJN. Low-cost producers, such as Winner and Valvole Italia, are competitors who have emerged in low-cost production areas such as APAC and Europe. These competitors will typically attempt to copy our products and like products designed by competitors.
In addition, we have a committed service agreement with a third party that supports nearly 1,150 jobs in Mexico and serves as an integral part of our supply chain. We also hire consultants, independent contractors and temporary workers as needed to augment our workforce. Employees are guided by our Shared Values and Code of Business Conduct and Ethics.
The number of jobs available in Mexico through the third party is flexible based on demand within the markets we serve. We also hire consultants, independent contractors and temporary workers as needed to augment our workforce. Our employees align themselves with our Shared Values and Code of Business Conduct and Ethics.
(“NEM”), an innovative hydraulic solutions company providing customized material handling, construction, industrial vehicle and agricultural applications to its global customer base, predominantly in Europe and Asia. NEM is ideally located in northern Italy’s Emilia Romagna region, one of the world’s most innovative and technology-friendly areas in the hydraulics industry.
This allowed us to centralize our innovation and technology advancements to better leverage Helios’ product portfolio and global talent. • In July 2021, we completed the acquisition of NEM S.r.l. (“NEM”), an innovative hydraulic solutions company providing customized material handling, construction, industrial vehicle and agricultural applications to its global customer base, predominantly in Europe and Asia.
Importantly, the added technology and applications expertise enables us to grow our original equipment manufacturer ("OEM") business throughout the world by leveraging NEM’s strong brand name in the Cartridge Valve Technology ("CVT") OEM markets in Europe. • In October 2021, we completed the acquisition of assets related to the electronic control systems and parts business of Shenzhen Joyonway Electronics & Technology Co., Ltd and its related entities (collectively “Joyonway”).
They also add SAE Cavity Cartridge Valves (SAE-CVT), Parts-in-Body valves (PiB), and Directional Control Valves (DCV) to the Helios Hydraulics segment product portfolio. • In October 2021, we completed the acquisition of assets related to the electronic control systems business of Shenzhen Joyonway Electronics & Technology Co., Ltd and its related entities (collectively “Joyonway”).
We regularly expand our electro-hydraulic product offering for both the mobile and industrial hydraulics markets and gained significant advancements with the addition of NEM. 5 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.
FCT includes our quick release couplings (“QRC”) products, which 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. Quick connection of multiple hydraulic lines can be accomplished through the use of our casting solution or our signature MultiFaster® product line.
Enovation Controls is a niche player in the displays, controllers, gauges and instrumentation panel markets. Balboa is a niche player providing single source control and water flow systems in the health and wellness industry.
Balboa Water Group is a niche player providing single source control and water flow systems in the health and wellness industry. The market for products designed and manufactured by Enovation Controls is relatively fragmented with approximately the top five companies comprising the majority of the market, mostly servicing the automotive space.
In response to this we have aggressively expanded our CVT offering of electrically actuated cartridge valves.
In response to this we have aggressively expanded our CVT offering of electrically actuated cartridge valves for both the mobile and industrial hydraulics markets and gained significant technology advancements in electro-hydraulic products in addition to parts-in-body and directional control valves with the acquisition of NEM.
While always protecting our existing business, we will approach strategic partners with the ability to have Helios provide a “system solution” comprising of components from our four primary world class brands to simplify supply chains and make doing business with Helios easier. Our four primary brands are comprised of over 125 direct sales and application specialist serving our customers' needs.
While always protecting our existing business, we will provide strategic OEM partners with “system solutions” that ensure the safety, reliability, connectivity and control of their applications. Our two segments are comprised of approximately 125 direct sales and application specialists serving our customers’ needs.
Our technologies can be used in both mobile or DC power applications, as well as fixed or AC power applications. 6 We offer our customers the ability to customize software on their products from the graphics for our PowerView® line of LCD displays.
Our technologies can be used in both mobile (DC power applications), as well as fixed (AC power applications), enabling us to provide products and services across a broad base of applications.
Engineers focus entirely on custom and standard solutions built to desired specifications. Our services for design and development include on-site installation and testing with reviews to ensure the solution works with the application out of the box. Globally, electronics products are sold primarily direct to OEM customers, with about 17% sold through independent, authorized channel partners in 2021.
Our services for design and development include on-site installation and testing with reviews to ensure the solution works with the application out of the box. 9 Technology and Innovation In 2021, we established the Helios Center of Engineering Excellence (“HCEE”) to serve both the Electronics and Hydraulics segments of Helios.
Strategy One of the key drivers of future growth for both the Electronics and Hydraulics segments is our system sale approach to specific key OEM’s who utilize both electronics and hydraulics.
Sales and Marketing In 2023, no single customer made up more than 5% of consolidated net sales across the Company. 10 Strategy One of the key drivers of future growth for both the Electronics and Hydraulics segments is our system sale approach that leverages electronic and hydraulic solutions from our trusted brands.
In addition, new laws and regulations, the discovery of previously unknown contamination or the imposition of new requirements could increase our costs or subject us to new or increased liabilities. 11 Occupational Health and Safety Regulations The Company's operations are subject to extensive and stringent governmental regulations including regulations related to the Occupational Safety and Health Act ("OSHA") and similar safety and health regulations promulgated in other countries.
Occupational Health and Safety Regulations The Company's operations are subject to extensive and stringent governmental regulations including regulations related to the Occupational Safety and Health Act (“OSHA”) and similar safety and health regulations promulgated in other countries. The Company's employees in its manufacturing facilities operate complicated machinery that may cause substantial injury or death upon malfunction or improper operation.
We are focused on attracting and retaining strong talent and furthering the development of our workforce through programs that not only enhance technical abilities but also strengthen leadership, communication and collaboration skills that contribute to our high performing, team-oriented culture. Helios is committed to attracting and developing a diverse workforce.
Our primary emphasis is on acquiring and keeping talented individuals, fostering their growth through initiatives that not only improve technical expertise but also bolster leadership, communication, and collaboration skills. These efforts contribute to cultivating a high-performance, team-oriented culture at Helios.
We also introduced the Helios Business System, “HBS” (pictured below) , which is at the heart of all we do. 3 Our trusted global brands deliver technology solutions that ensure safety, reliability, connectivity and controls.
At that same time, we introduced the framework of the Helios Business System, “HBS” (pictured below), which is at the heart of all we do. We are accomplishing this transformation into a global integrated operating company by leveraging sales, marketing, innovation, customer relationships and operational excellence across all our businesses.
Underpinning our expectation of compounded annual growth of approximately two times our market's growth rates, we have an active pipeline and a history of acquiring companies with niche technologies, as well as strong profitability.
We continue to explore acquisition opportunities as a way to accelerate growth in line with our history of acquiring companies with niche technologies, as well as strong profitability. Our acquisition strategy includes bolt-on flywheel acquisitions and transformational acquisitions.
Removed
In November 2016, we set out a vision to achieve $1 billion in sales in 2025 through a combination of organic growth and acquisitions and to deliver operating margins in excess of 20%.
Added
The Electronics segment designs and manufactures customized electronic controls systems, displays, wire harnesses, and software solutions for a variety of end markets. During 2021, we augmented our strategy to transform our business from a holding company to a global integrated operating company.
Removed
In 2021, we augmented our strategy and accelerated our growth plans to achieve the milestone of over $1 billion in sales with top tier adjusted EBITDA margin of approximately 25% in 2023.
Added
Our progress to date, through a very complex macro operating environment, is a direct reflection of the commitment of our talented workforce executing our augmented strategy. 4 Our trusted global brands deliver technology solutions that ensure safety, reliability, connectivity and controls.
Removed
We made significant progress in 2021 with our strategy to include evolving how we operate from a holding company structure toward an integrated operating company that better leverages sales, marketing, innovation, customer relationships and operational excellence across all our businesses.
Added
We believe our product innovation will aid organic growth and fill the expected demand resulting from the megatrends of automation, digitalization, regionalization and supply chain security, productivity and technology advancements. All growth initiatives are intended to preserve Helios’ history of superior profitability and financial strength.
Removed
Through our acquisition plans, we expect to include bolt-on flywheel type acquisitions (up to $100 million in enterprise value) and the evaluation of more transformative type acquisitions (enterprise value in excess of $100 million).

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFactors that could cause actual results to differ materially from what is expressed or forecasted in such forward-looking statements include, but are not limited to: (i) supply chain disruption and the potential inability to procure goods; (ii) conditions in the capital markets, including the interest rate environment and the availability of capital; (iii) inflation (including hyperinflation) or recession; (iv) changes in the competitive marketplace that could affect our revenue and/or cost basis, such as increased competition, lack of qualified engineering, marketing, management or other personnel and increased labor and raw materials costs; (v) risks related to heath epidemics, pandemics and similar outbreaks, including, without limitation, the ongoing COVID-19 pandemic and any variants, which may have material adverse effects on our business, financial position, results of operations and cash flows; (vi) new product introductions, product sales mix and the geographic mix of sales nationally and internationally; and (vii) the following risk factors: Risks Relating to Our Business: Global Regulatory and Economic Conditions General global economic trends and industry trends may affect our sales.
Biggest changeFactors that could cause actual results to differ materially from what is expressed or forecasted in such forward-looking statements include, but are not limited to: (i) our ability to respond to global economic trends and changes in customer demand domestically and internationally, including as a result of standardization and the cyclical nature of our business, which can adversely affect the demand for capital goods, (ii) supply chain disruption and the potential inability to procure goods; (iii) conditions in the capital markets, including the interest rate environment and the continued availability of capital on terms acceptable to us, or at all; (iv) global and regional economic and political conditions, including inflation (or hyperinflation), exchange rates, changes in the cost or availability of energy, transportation, the availability of other necessary supplies and services and recession; (v) changes in the competitive marketplace that could affect our revenue and/or cost basis, such as increased competition, lack of qualified engineering, marketing, management or other personnel and increased labor and raw materials costs; (vi) risks related to heath epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations and cash flows; (vii) risks related to our international operations, including the potential impact from ongoing geopolitical conflicts in Ukraine and the Middle East; (viii) new product introductions, product sales mix and the geographic mix of sales nationally and internationally; (ix) stakeholders, including regulators, views regarding our environmental, social and governance goals and initiatives, and the impact of factors outside of our control on such goals and initiatives; and (x) the risk factors identified below together with other risks and uncertainties described elsewhere in this Annual Report and described from time to time in our future reports filed with the SEC.
Future acquisitions may or may not occur and, if an acquisition does occur, it may not be successful in enhancing our business for one or more of the following reasons: • Any business acquired may not be integrated successfully and may not prove profitable; • The price we pay for any business acquired may overstate the value of that business or otherwise be too high; • Liabilities we take on through the acquisition may prove to be higher than we expected; 17 • There may be impairment of relationships with employees and customers of the business acquired, as a result of the change in ownership; • We may fail to achieve acquisition synergies; or • The focus on the integration of operations of acquired entities may divert management’s attention from the day-to-day operation of our businesses.
Future acquisitions may or may not occur and, if an acquisition does occur, it may not be successful in enhancing our business for one or more of the following reasons: • Any business acquired may not be integrated successfully and may not prove profitable; • The price we pay for any business acquired may overstate the value of that business or otherwise be too high; • Liabilities we take on through the acquisition may prove to be higher than we expected; • There may be impairment of relationships with employees and customers of the business acquired, as a result of the change in ownership; • We may fail to achieve acquisition synergies; or • The focus on the integration of operations of acquired entities may divert management’s attention from the day-to-day operation of our businesses.
In addition, our success is dependent, in part, on our continued ability to reduce our exposure to or mitigate the impact of increases in the cost of raw materials, finished goods, energy, transportation and other necessary supplies and services through a variety of programs, including periodic purchases, future delivery purchases, long-term contracts, sales price adjustments and certain derivative instruments, while maintaining and improving margins and market share.
Our success is dependent, in part, on our continued ability to reduce our exposure to or mitigate the impact of increases in the cost of raw materials, finished goods, energy, transportation and other necessary supplies and services through a variety of programs, including periodic purchases, future delivery purchases, long-term contracts, sales price adjustments and certain derivative instruments, while maintaining and improving margins and market share.
These cost increases may not be fully recoverable or adequately covered by insurance. It is possible that the continued spread of COVID-19 could also cause further disruption in our supply chain; cause delay, or limit the ability of customers to perform, including in making timely payments to us; impact investment performance; and cause other unpredictable events.
These cost increases may not be fully recoverable or adequately covered by insurance. It is possible that any continued spread of COVID-19 could also cause further disruption in our supply chain; cause delay, or limit the ability of customers to perform, including in making timely payments to us; impact investment performance; and cause other unpredictable events.
Our continued success is dependent on our ability to attract and retain a skilled labor force at these locations. There are no assurances that we will continue to be successful in attracting and retaining the personnel required to develop, manufacture and market our products and expand our operations. 24 We are subject to risks relating to international sales.
Our continued success is dependent on our ability to attract and retain a skilled labor force at these locations. There are no assurances that we will continue to be successful in attracting and retaining the personnel required to develop, manufacture and market our products and expand our operations. We are subject to risks relating to international sales.
If the maturity of our indebtedness is accelerated, we may not have sufficient cash resources to satisfy our debt obligations and we may not be able to continue our operations as planned. 21 If our long-lived assets, goodwill or other intangible assets become impaired, we may be required to record significant non-cash charges to our earnings.
If the maturity of our indebtedness is accelerated, we may not have sufficient cash resources to satisfy our debt obligations and we may not be able to continue our operations as planned. If our long-lived assets, goodwill or other intangible assets become impaired, we may be required to record significant non-cash charges to our earnings.
The laws also impose recordkeeping and internal control provisions on companies such as ours. We operate and/or conduct business, and any acquisition target may operate and/or conduct business, in some parts of the world, such as China, India and Russia, that are recognized as having governmental and commercial corruption.
The laws also impose recordkeeping and internal control provisions on companies such as ours. We operate and/or conduct business, and any acquisition target may operate and/or conduct business, in some parts of the world, such as China and India, that are recognized as having governmental and commercial corruption.
Any failure to comply with applicable legal and regulatory trading obligations could result in criminal and civil penalties and sanctions, such as fines, imprisonment, debarment from governmental contracts, seizure of shipments, loss of import and export privileges, reputational damage and a reduction in the value of our common stock. 15 Risks Relating to Our Business: Environmental, Health & Safety We face various risks related to health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations and/or cash flows .
Any failure to comply with applicable legal and regulatory trading obligations could result in criminal and civil penalties and sanctions, such as fines, imprisonment, debarment from governmental contracts, seizure of shipments, loss of import and export privileges, reputational damage and a reduction in the value of our common stock. 18 Risks Relating to Our Business: Environmental, Health & Safety We face various risks related to health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations and/or cash flows .
Further, if we fail to keep pace with evolving technological innovations in the markets we serve, our business will be adversely affected. 19 We are subject to fluctuations in the prices of parts and raw materials and dependent on our suppliers of these parts.
Further, if we fail to keep pace with evolving technological innovations in the markets we serve, our business will be adversely affected. We are subject to fluctuations in the prices of parts and raw materials and dependent on our suppliers of these parts.
Competition could also cause us to lower our prices, which could reduce our margins and profitability. 18 Risks Relating to Our Business: Operations A disruption in our supply chain or other factors impacting the distribution of our products could adversely affect our business .
Competition could also cause us to lower our prices, which could reduce our margins and profitability. Risks Relating to Our Business: Operations A disruption in our supply chain or other factors impacting the distribution of our products could adversely affect our business .
We are dependent upon suppliers for parts and raw materials used in the manufacture of components that we sell to our customers, and some of our raw material costs are subject to commodity market price fluctuations.
We are dependent upon suppliers for parts and raw materials used in the manufacture of components that we sell, and some of our raw material costs are subject to commodity market price fluctuations.
Foreign Corrupt Practices Act and UK Anti-Bribery Act or other applicable anti-corruption legislation, could result in fines, criminal penalties and an adverse effect on our business. We are subject to regulation under a wide variety of U.S. federal and state and non-U.S. laws, regulations and policies, including anti-corruption laws, due to our global operations. In particular, the U.S.
Foreign Corrupt Practices Act and U.K. Anti-Bribery Act or other applicable anti-corruption legislation, could result in fines, criminal penalties and an adverse effect on our business. We are subject to regulation under a wide variety of U.S. federal and state and non-U.S. laws, regulations and policies, including anti-corruption laws, due to our global operations. In particular, the U.S.
Our supply chain is dependent on third-party ocean-going container ships, rail, barge and trucking systems and, therefore, disruption in these logistics services because of weather-related problems, strikes, bankruptcies or other events could adversely affect our financial performance and financial condition, negatively impacting sales, profitability and cash flows.
Our supply chain is dependent on third-party ocean-going container ships, rail, barge and trucking systems and, therefore, disruption in these logistics services because of weather-related problems, strikes, geopolitical conflicts, bankruptcies or other events could adversely affect our financial performance and financial condition, negatively impacting sales, profitability and cash flows.
In the future, continued weakening or improvement in the economy will directly affect orders and influence results of operations. 13 Our business could be harmed by adverse global and regional economic and political conditions, including inflation, changes in the cost or availability of energy, transportation and other necessary supplies and services, as well as the impact of tariffs.
In the future, continued weakening or improvement in the economy will directly affect orders and influence results of operations. 16 Our business could be harmed by adverse global and regional economic and political conditions, including inflation, changes in the cost or availability of energy, transportation and other necessary supplies and services, as well as the impact of tariffs.
These statements are not guaranteeing future performance and are subject to a number of risks and uncertainties, including those discussed below and elsewhere in this report. Our actual results may differ materially from what is expressed or forecasted in such forward-looking statements, and undue reliance should not be placed on such statements.
These statements are not guarantees of future performance and are subject to a number of risks and uncertainties, including those discussed below and elsewhere in this report. Our actual results may differ materially from what is expressed or forecasted in such forward-looking statements, and undue reliance should not be placed on such statements.
As a result, the actions we take in response to any improvements in conditions may also vary widely by geography and by business and will likely be made with incomplete information, and may prove to be premature, incorrect or insufficient and could have a material, adverse impact on our business and results of operations.
As a result, the actions we take in response to any such conditions may also vary widely by geography and by business and will likely be made with incomplete information, and may prove to be premature, incorrect or insufficient and could have a material, adverse impact on our business and results of operations.
In addition, although in some cases a third party may have agreed to indemnify us for such costs, such indemnifying party may refuse or be unable to uphold its contractual obligations. 23 If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition, although in some cases a third party may have agreed to indemnify us for such costs, such indemnifying party may refuse or be unable to uphold its contractual obligations. 25 If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
We may not succeed in developing and implementing policies and strategies to counter the foregoing factors effectively in each location where we do business and the foregoing factors may cause a reduction in our sales, profitability or cash flows or cause an increase in our liabilities. 14 Failure to comply with laws, regulations and policies, including the U.S.
We may not succeed in developing and implementing policies and strategies to counter the foregoing factors effectively in each location where we do business and the foregoing factors may cause a reduction in our sales, profitability or cash flows or cause an increase in our liabilities. 17 Failure to comply with laws, regulations and policies, including the U.S.
A disruption within our logistics or supply chain network at any of the freight companies that deliver components for our manufacturing operations or ship our fully-assembled products to our customers could adversely affect our business and result in lost sales or harm to our reputation.
A disruption within our logistics or supply chain network at any of the freight companies that deliver components for our manufacturing operations or ship our products to our customers could adversely affect our business and result in lost sales or harm to our reputation.
RISK FACTORS FACTORS INFLUENCING FUTURE RESULTS - FORWARD-LOOKING STATEMENTS This Annual Report contains “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations, estimates, forecasts, projections, our beliefs and assumptions made by us, including (i) our strategies regarding growth, including our intention to develop new products and undertake acquisitions; (ii) our financing plans; (iii) trends affecting our financial condition or results of operations; (iv) our ability to continue to control costs and to meet our liquidity and other financing needs; (v) the declaration and payment of dividends; and (vi) our ability to respond to changes in customer demand domestically and internationally, including as a result of standardization.
RISK FACTORS FACTORS INFLUENCING FUTURE RESULTS - FORWARD-LOOKING STATEMENTS This Annual Report contains “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations, estimates, forecasts, projections, our beliefs and assumptions made by us, including (i) our strategies regarding growth, including our intention to develop new products and undertake acquisitions; (ii) the effectiveness of creating the Centers of Excellence; (iii) our financing plans; (iv) trends affecting our financial condition or results of operations; (v) our ability to continue to control costs and to meet our liquidity and other financing needs; (vi) the declaration and payment of dividends; and (vii) our ability to respond to changes in customer demand domestically and internationally, including as a result of standardization.
Increasing natural disasters in connection with climate change could also be a direct threat to our third-party vendors, service providers or other stakeholders, including disruptions on supply chains or information technology or other necessary services for our Helios. Federal, state, and local governments, as well as some of our customers, are beginning to respond to climate change issues.
Increasing natural disasters in connection with climate change could also be a direct threat to our third-party vendors, service providers or other stakeholders, including disruptions on supply chains or information technology or other necessary services for our operations. 19 Federal, state and local governments, as well as some of our customers, are beginning to respond to climate change issues.
In the Electronics segment, the patents in our portfolio are scheduled to expire at various dates through 2038. In the Hydraulics segment, the patents in our portfolio are schedule to expire at various dates through 2041. We may also face difficulties protecting our intellectual property rights in foreign countries.
In the Electronics segment, the patents in our portfolio are scheduled to expire at various dates through 2041. In the Hydraulics segment, the patents in our portfolio are schedule to expire at various dates through 2053. We may also face difficulties protecting our intellectual property rights in foreign countries.
Foreign Corrupt Practices Act, the UK Bribery Act of 2010 and similar anti-bribery laws in other jurisdictions generally prohibit companies, their agents, consultants and other business partners from making improper payments to government officials or other persons (i.e., commercial bribery) for the purpose of obtaining or retaining business or other improper advantage.
Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010 and similar anti-bribery laws in other jurisdictions generally prohibit companies, their agents, consultants and other business partners from making improper payments to government officials or other persons (i.e., commercial bribery) for the purpose of obtaining or retaining business or other improper advantage.
If the U.S. dollar strengthens relative to the value of the local currency, we may be less competitive. In addition, our debt service requirements are predominantly in U.S. dollars and a portion of our cash flow is generated in British pounds, euros and other foreign currencies.
If the U.S. dollar strengthens relative to the value of the local currency, we may be less competitive. In addition, our debt service requirements are predominantly in U.S. dollars and a portion of our cash flow is generated in Chinese yuan, Australian dollar, British pounds, euros and other foreign currencies.
Accordingly, such supply shortages and delivery limitations could have a material adverse effect on our business, financial condition, results of operations and cash flows. If we are unable to continue our technological innovation and successful introduction of new commercial products in an efficient, cost-effective manner, our business will be adversely affected.
Accordingly, such impact on our manufacturing operations and delivery limitations could have a material adverse effect on our business, financial condition, results of operations and cash flows. 21 If we are unable to continue our technological innovation and successful introduction of new commercial products in an efficient, cost-effective manner, our business will be adversely affected.
We face various risks related to health epidemics, pandemics and similar outbreaks, including the global outbreak of COVID-19. The continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of capital and adversely impacts access to capital.
We face various risks related to health epidemics, pandemics and similar outbreaks, including any ongoing global outbreak of COVID-19. Any continued spread of COVID-19 may lead to disruption and volatility in the global capital markets, which increases the cost of capital and adversely impacts access to capital.
The capital goods industry in general, and our businesses, are subject to economic cycles that directly affect customer orders, lead times and sales volume. Economic downturns generally have a material adverse effect on our business and results of operations.
Risks Relating to Our Business: Global Regulatory and Economic Conditions General global economic trends and industry trends may affect our sales. The capital goods industry in general, and our businesses, are subject to economic cycles that directly affect customer orders, lead times and sales volume. Economic downturns generally have a material adverse effect on our business and results of operations.
We also have certain long-lived assets and other intangible assets which could be at risk of impairment or may require reserves based upon anticipated future benefits to be derived from such assets. Any change in the valuation of such assets could have a material effect on our profitability.
We also have certain long-lived assets and other intangible assets which could be at risk of impairment or may require reserves based upon anticipated future benefits to be derived from such assets. Any change in the valuation of such assets could have a material effect on our profitability. Reference the Critical Accounting Policies and Estimates section for additional considerations.
Disruptions or shutdowns at any of our facilities could be caused by: • maintenance outages to conduct maintenance activities that cannot be performed safely during operations; • prolonged power failures or reductions; • breakdown, failure or substandard performance of any of our machines or other equipment; • noncompliance with, and liabilities related to, environmental requirements or permits; • disruptions in the transportation infrastructure, including railroad tracks, bridges, tunnels or roads; • fires, floods, earthquakes, tornadoes, hurricanes, microbursts or other catastrophic disasters, national emergencies, political unrest, war or terrorist activities; or • other operational problems.
Disruptions or shutdowns at any of our facilities could be caused by: • maintenance outages to conduct maintenance activities that cannot be performed safely during operations; • prolonged power failures or reductions; • breakdown, failure or substandard performance of any of our machines or other equipment; • noncompliance with, and liabilities related to, environmental requirements or permits; • disruptions in the transportation infrastructure, including railroad tracks, bridges, tunnels or roads; • fires, floods, earthquakes, tornadoes, hurricanes, microbursts or other catastrophic disasters, national emergencies, political unrest, war or terrorist activities; or • other operational problems. 22 If some of our facilities are shut down, they may experience prolonged startup periods, regardless of the reason for the shutdown.
Moreover, even if we are able to continue our operations, the failure to obtain additional financing could reduce our competitiveness. Our senior credit facility limits our ability to incur additional debt and therefore we likely would have to issue additional equity to raise additional capital. If we issue additional equity, a shareholder’s interest in us will be diluted.
Moreover, even if we are able to continue our operations, the failure to obtain additional financing could reduce our competitiveness. Our senior credit facility limits our ability to incur additional debt and therefore we likely would have to issue additional equity to raise additional capital.
Pricing and availability of finished goods, raw materials, energy, transportation and other necessary supplies and services for use in our businesses can be volatile due to numerous factors beyond our control, including general, domestic and international economic conditions, natural disasters, labor costs, production levels, competition, consumer demand, import duties and tariffs, currency exchange rates, international treaties and changes in laws, regulations and related interpretations.
Pricing and availability of finished goods, raw materials, energy, transportation and other necessary supplies and services for use in our businesses can be volatile due to numerous factors beyond our control, including general, domestic and international economic conditions, natural disasters, labor costs, production levels, competition, consumer demand, import duties and tariffs, currency exchange rates, international treaties and changes in laws, regulations and related interpretations and global political instability (such as related to the ongoing conflict between Russia and Ukraine, as well as the Israel-Hamas war).
Volatility in currency exchange rates may decrease our sales and profitability and impair our financial condition. We periodically evaluate our need to hedge our exposures to foreign currencies and enter into forward foreign exchange contracts as we deem necessary. Changes in tax rates, laws or regulations and the resolution of tax disputes could adversely impact our financial results.
We periodically evaluate our need to hedge our exposures to foreign currencies and enter into forward foreign exchange contracts as we deem necessary, which contracts may not adequately hedge our exposure to foreign currencies. Changes in tax rates, laws or regulations and the resolution of tax disputes could adversely impact our financial results.
If our board of directors decides not to pay dividends in the future, then a return on investment in our common stock will only occur if our stock price appreciates. 27
If our board of directors decides not to pay dividends in the future, then a return on investment in our common stock will only occur if our stock price appreciates. 29 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Sales by us or our shareholders of a substantial number of shares of our common stock in the public markets, or the perception that these sales might occur, could cause the market price of our common stock to decline or could impair our ability to raise capital through a future sale of, or pay for acquisitions using, our equity securities.
Sales by us or our shareholders of a substantial number of shares of our common stock in the public markets, or the perception that these sales might occur, could cause the market price of our common stock to decline or could impair our ability to raise capital through a future sale of, or pay for acquisitions using, our equity securities. 28 We may issue common stock or equity securities senior to our common stock in the future for a number of reasons, including to finance our operations and business strategy, as consideration in acquisitions or for other reasons.
For example, certain foreign governments may require suppliers for a project to obtain products solely from local manufacturers or may prohibit the use of products manufactured in certain countries. 25 International growth and expansion into markets such as Europe, Asia and Latin America may cause us difficulty due to greater regulatory barriers than in the U.S., the necessity of adapting to new regulatory systems, problems related to entering new markets with different economic, social and political systems and conditions and significant competition from the primary participants in these markets, some of which may have substantially greater resources and political influence than we do.
International growth and expansion into markets such as Europe, Asia and Latin America may cause us difficulty due to greater regulatory barriers than in the U.S., the necessity of adapting to new regulatory systems, problems related to entering new markets with different economic, social and political systems and conditions and significant competition from the primary participants in these markets, some of which may have substantially greater resources and political influence than we do.
Depending on their nature and scope, such threats could potentially lead to the compromising of confidential information, improper use of our systems and networks, manipulation and destruction of data, defective products, production downtimes and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations.
Depending on their nature and scope, such threats could potentially lead to the compromising of confidential information, improper use of our systems and networks, manipulation and destruction of data, defective products, production downtimes and operational disruptions, which in turn could adversely affect our reputation, competitiveness and results of operations. 27 Due to the nature of our business and products, we may be liable for damages based on product liability and other tort and warranty claims.
Although we currently maintain product liability coverage, which we believe to be adequate for the continued operation of our business, such insurance may become difficult or impossible to obtain in the future on terms acceptable to us.
Although we currently maintain product liability coverage, which we believe to be adequate for the continued operation of our business, such insurance may become difficult or impossible to obtain in the future on terms acceptable to us. Moreover, our insurance coverage includes customary exclusions and conditions, may not cover certain specialized applications and generally does not cover warranty.
We also may incur significant costs such as transaction fees, professional service fees and other costs related to future acquisitions, as well as integration-related costs following the completion of any such acquisitions.
The failure to efficiently and effectively achieve such transitions could increase our costs and decrease our profitability. 20 We also may incur significant costs such as transaction fees, professional service fees and other costs related to future acquisitions, as well as integration-related costs following the completion of any such acquisitions.
Currently, certain of our customers purchase parts or products from us to meet a specific need in a system that cannot be filled by a component that they make themselves.
However, we cannot provide assurance that we will continue to be able to compete effectively with these companies. Currently, certain of our customers purchase parts or products from us to meet a specific need in a system that cannot be filled by a component that they make themselves.
Our failure to comply with such laws, regulations, permits and approvals could subject us to increased employee healthcare and workers’ compensation costs, liabilities, fines and other penalties or compliance costs, and could have a material adverse effect on our business, financial condition and results of operations. 16 Climate change and increased focus by governmental and non-governmental organizations and customers on sustainability issues, including those related to climate change, may adversely affect our business and financial results.
Our failure to comply with such laws, regulations, permits and approvals could subject us to increased employee healthcare and workers’ compensation costs, liabilities, fines and other penalties or compliance costs, and could have a material adverse effect on our business, financial condition and results of operations.
The duration and sustainability of any improvements in COVID-19 conditions will be uncertain and continuing adverse impacts and/or the degree of improvement may vary dramatically by geography and by business.
The nature and severity of COVID-19 conditions will be uncertain and continuing adverse impacts and/or the degree of the nature and severity of such conditions may vary dramatically by geography and by business.
Our business involves a significant level of product development activities, generally in connection with our customers’ development activities. Industry standards, customer expectations or other products may emerge that could render one or more of our products or services less desirable or obsolete.
Our business involves a significant level of product development activities. Industry standards, customer expectations or other products may emerge that could render one or more of our products or services less desirable or obsolete. Maintaining our market position requires continued investment in research and development (“R&D”).
In addition, because some of our international sales are to suppliers that perform work for foreign governments, we are subject to the political and legal risks associated with foreign government projects.
In addition, because some of our international sales are to suppliers that perform work for foreign governments, we are subject to the political and legal risks associated with foreign government projects. For example, certain foreign governments may require suppliers for a project to obtain products solely from local manufacturers or may prohibit the use of products manufactured in certain countries.
Any of these events individually or in the aggregate could have a material adverse effect on our business, financial condition and operating results. 20 Risks Relating to Our Business: Financial We may need additional capital in the future, and it may not be available on acceptable terms, or at all.
Risks Relating to Our Business: Financial We may need additional capital in the future, and it may not be available on acceptable terms, or at all.
International sales represent a significant proportion of our consolidated sales. Approximately 57% and 62% of our net sales were outside of the U.S. during 2021 and 2020, respectively.
International sales represent a significant proportion of our consolidated sales. Approximately 54% of our net sales were outside of the U.S. in both 2023 and 2022.
Within our primary markets, we compete with a range of companies that offer certain individual components of our full system solutions. Particularly within our Electronics segment, the components of our overall systems most commonly include displays, panels, sensors, valves and other end-devices.
Particularly within our Electronics segment, the components of our overall systems most commonly include displays, panels, sensors, valves and other end-devices.
Our future results could be harmed by a variety of factors, including: • changes in the political and economic conditions in the countries in which we operate, including civil uprisings and terrorist acts; • unexpected changes in regulatory requirements; • the imposition of duties and tariffs and other trade barriers; • import and export controls; • potentially negative consequences from changes in U.S. and international tax laws; • fluctuations in currency exchange rates and the value of the U.S. dollar; • exchange controls and currency restrictions; • expropriation of property without fair compensation; • governmental actions that result in the deprivation of contract or proprietary rights; • the acceptance of business practices that are not consistent with or are antithetical to prevailing business practices we are accustomed to in the U.S., including bribery and corruption; • difficulty in staffing and managing geographically widespread operations; • the unionization of, or increased union activity, such as strikes or work stoppages, with respect to, our workforce outside the U.S.; • differing labor regulations; • global and/or regional pandemics; • requirements relating to withholding taxes on remittances and other payments by subsidiaries; • different regulatory regimes controlling the protection of our intellectual property; • difficulty in enforcement of contractual obligations under non-U.S. law; • refusal or inability of foreign banks to make payment on letters of credit in connection with foreign sales, and our inability to collect from our foreign customers in such circumstances; • restrictions on our ability to own or operate subsidiaries, repatriate dividends or earnings from our foreign subsidiaries, or to make investments or acquire new businesses in these jurisdictions; and/or • the burden of complying with multiple and potentially conflicting laws.
We will continue to expand the scope of operations outside the U.S., both through direct investment and distribution, and we believe that international sales will continue to account for a substantial portion of net sales in future periods. 26 Our future results could be harmed by a variety of factors already stated in this Risk Section as well as those below: • expropriation of property without fair compensation; • governmental actions that result in the deprivation of contract or proprietary rights; • difficulty in staffing and managing geographically widespread operations; • the unionization of, or increased union activity, such as strikes or work stoppages, with respect to, our workforce outside the U.S.; • differing labor regulations; • requirements relating to withholding taxes on remittances and other payments by subsidiaries; • difficulty in enforcement of contractual obligations under non-U.S. law; • refusal or inability of foreign banks to make payment on letters of credit in connection with foreign sales, and our inability to collect from our foreign customers in such circumstances; • restrictions on our ability to own or operate subsidiaries, repatriate dividends or earnings from our foreign subsidiaries, or to make investments or acquire new businesses in these jurisdictions; and/or • the burden of complying with multiple and potentially conflicting laws.
For purposes of accounting, the assets and liabilities of our foreign operations, where the local currency is the functional currency, are translated using period-end exchange rates, and the revenues and expenses of our foreign operations are translated using average exchange rates during each period.
For purposes of accounting, the assets and liabilities of our foreign operations, where the local currency is the functional currency, are translated using period-end exchange rates, and the revenues and expenses of our foreign operations are translated using average exchange rates during each period. 24 In addition to currency translation risks, we incur currency transaction risk whenever we enter into either a purchase or a sales transaction using a currency other than U.S. dollars.
Competition for management and engineering personnel is intense, and other employers may have greater financial and other resources to attract and retain these employees. We conduct a substantial part of our operations in Sarasota, Florida; Tulsa, Oklahoma; Rivolta D’adda, Italy; various locations across Australia; Costa Mesa, California, China, India and through a third party supplier in Baja, Mexico.
Competition for management and engineering personnel is intense, and other employers may have greater financial and other resources to attract and retain these employees. We conduct our global operations in North America, Europe and Asia Pacific and through a third-party supplier in Mexico.
While we believe our tax provisions are appropriate, the final outcome of tax audits or disputes could result in adjustments to the Company’s tax liabilities, which could adversely affect our financial results. 22 Risks Relating to Our Business: Intellectual Property The inability to protect our intellectual property could reduce or eliminate any competitive advantage and reduce our sales and profitability, and the cost of protecting our intellectual property may be significant.
Risks Relating to Our Business: Intellectual Property The inability to protect our intellectual property could reduce or eliminate any competitive advantage and reduce our sales and profitability, and the cost of protecting our intellectual property may be significant.
If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets or issue equity to obtain necessary funds. We do not know whether we would be able to take any of these actions on a timely basis, on terms satisfactory to us or at all.
We do not know whether we would be able to take any of these actions on a timely basis, on terms satisfactory to us or at all.
As Helios has been able to manage through the current COVID-19 pandemic, we cannot at this time predict the impact of any variants and the effect to our workforce and potential material adverse effect on our business, financial position, results of operations and/or cash flows.
We cannot at this time predict the impact of any variants and the effect to our workforce and potential material adverse effect on our business, financial position, results of operations and/or cash flows. Our operations are subject to environmental, health and safety laws and regulations, and we may face significant costs or liabilities associated with environmental, health and safety matters.
Inherent in any future acquisition is the risk of transitioning company cultures and facilities. The failure to efficiently and effectively achieve such transitions could increase our costs and decrease our profitability.
Inherent in any future acquisition is the risk of transitioning company cultures and facilities.
A catastrophic event, whether resulting from severe weather or otherwise, could result in the loss of the use of all or a portion of one of our manufacturing facilities. Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur.
Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur. Any of these events individually or in the aggregate could have a material adverse effect on our business, financial condition and operating results.
If some of our facilities are shut down, they may experience prolonged startup periods, regardless of the reason for the shutdown. Those startup periods could range from several days to several weeks or longer, depending on the reason for the shutdown and other factors.
Those startup periods could range from several days to several weeks or longer, depending on the reason for the shutdown and other factors. Any prolonged disruption in operations at any of our facilities could cause a significant loss of production and adversely affect our results of operations and negatively impact our customers and dealers.
If we generally are not able to sufficiently increase our pricing to offset these increased costs or if increased costs and prolonged inflation continue, it could materially and adversely affect our business, operating results and profitability.
We are subject to inflationary pressures on our operating costs, including labor, costs for supplies and costs for the transportation of our products. If we are not able to reduce our exposure to, mitigate the impact of or sufficiently increase our pricing to offset an increase in costs, it could materially and adversely affect our business, operating results and profitability.
We believe that we contend with our competitors based upon quality, reliability, price, value, speed of delivery and technological characteristics. However, we cannot provide assurance that we will continue to be able to compete effectively with these companies.
Our products currently, and will continue to, face significant competition, both from other companies and from incumbent technologies and will continue to do so in the future. We believe that we contend with our competitors based upon quality, reliability, price, value, speed of delivery and technological characteristics.
In addition to currency translation risks, we incur currency transaction risk whenever we enter into either a purchase or a sales transaction using a currency other than U.S. dollars. Given the volatility of exchange rates, we may not be able to effectively manage our currency or translation risks.
Given the volatility of exchange rates, we may not be able to effectively manage our currency or translation risks. Volatility in currency exchange rates may decrease our sales and profitability and impair our financial condition.
Any prolonged disruption in operations at any of our facilities could cause a significant loss of production and adversely affect our results of operations and negatively impact our customers and dealers. We currently have operations located in geographies susceptible to severe weather events, such as hurricanes, floods, earthquakes and tornadoes.
We currently have operations located in geographies susceptible to severe weather events, such as hurricanes, floods, earthquakes and tornadoes. A catastrophic event, whether resulting from severe weather or otherwise, could result in the loss of the use of all or a portion of one of our manufacturing facilities.
In addition, the Company’s tax returns are subject to regular review and audit by U.S. and non-U.S. tax authorities.
In addition, the Company’s tax returns are subject to regular review and audit by U.S. and non-U.S. tax authorities. While we believe our tax provisions are appropriate, the final outcome of tax audits or disputes could result in adjustments to the Company’s tax liabilities, which could adversely affect our financial results.
Moreover, any insurance or indemnification rights that we have may be insufficient or unavailable to protect us against potential loss exposures. 26 We are subject to risks related to sustainability, corporate social responsibility and reputation.
Moreover, any insurance or indemnification rights that we have may be insufficient or unavailable to protect us against potential loss exposures. Expectations relating to environmental, social and governance considerations expose the Company to potential liabilities, increased costs, reputational harm and other adverse effects on the Company's business.
Our existing indebtedness could adversely affect our business and growth prospects. As of January 1, 2022, we had total indebtedness of app roximately $446 million. O ur indebtedness, or any additional indebtedness we may incur, could require us to divert funds identified for other purposes for debt service and impair our liquidity position.
Our indebtedness, or any additional indebtedness we may incur, could require us to divert funds identified for other purposes for debt service and impair our liquidity position. If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets or issue equity to obtain necessary funds.
In addition, supply shortages for a particular type of material can delay production or cause increases in the cost of manufacturing our products. The ongoing COVID-19 pandemic has resulted in disruption to the operations of certain suppliers around the globe and the related transportation of their goods to the United States.
In addition, supply shortages for a particular type of material can delay production or cause increases in the cost of manufacturing our products. If these shortages were to be prolonged or expanded in scope, there could be significant impact on our ability to manufacture and to deliver our products.
Future sales prospects also are dependent upon acceptance of third-party sourcing for products as an alternative to in-house development. In the future, customers may continue to use internally developed components. They also may decide to develop or acquire products that are similar to, or that may be substituted for, our products. We also sell products into competitive markets.
They also may decide to develop or acquire products that are similar to, or that may be substituted for, our products. We also sell products into competitive markets. Within our primary markets, we compete with a range of companies that offer certain individual components of our full system solutions.
Removed
In the Electronics segment, our business is dependent on the general economy and widespread adoption of advanced digital control solutions that integrate technologies such as high-resolution displays, configurable software GPS navigation, vehicle management systems, engine safety diagnostics and engine energy efficiency.
Added
Climate change and increased focus by governmental and non-governmental organizations and customers on sustainability issues, including those related to climate change, may adversely affect our business and financial results.
Removed
If one or more of these expected industry trends fail to occur, or occurs at a slower rate than expected, our sales growth will be negatively impacted, and our business will be adversely affected.
Added
The transformation of our business from a holding company into an integrated operating company to improve productivity and advance product development efforts through our Centers of Excellence may not be successful in growing or enhancing our business on the timelines we suspect, or at all.
Removed
We are currently experiencing inflationary pressures on our operating costs. Among other things, competition for labor is becoming more acute and we expect our labor costs to increase as a result. In addition, we have experienced increased costs for supplies, and rising fuel costs have resulted in increased costs for the transportation of our products.
Added
Over the past few years, we began the process of transforming our operating model from a holding company to an integrated operating company with initiatives to drive growth, including "in the region, for the region" manufacturing to better align supply chain and manufacturing value streams with customers geographically to shorten lead times, reduce inventory, optimize costs, and mitigate global supply risks and establishing and expanding manufacturing centers to provide scale in North America, Asia and Europe to meet growing global demand.
Removed
We continue to work with our stakeholders (including customers, employees, suppliers and local communities) to responsibly address this global pandemic. We continue to monitor the situation to assess further possible implications to our business, supply chain and customers, and to take actions in an effort to mitigate adverse consequences.
Added
While the majority of the restructuring activity necessary to shift manufacturing to regional operational Centers of Excellence has been completed, there still remains additional transfers, integration activities and efficiency efforts.
Removed
As a result of current economic conditions and expected future impacts from the COVID-19 pandemic, the carrying value of goodwill with respect to certain of our assets was impaired, resulting in impairment charges that negatively impacted our results of operations. We may be required to record additional impairment charges in the future if the COVID-19 pandemic continues.
Added
These restructuring activities may not be substantially completed in the expected timeframe or at all, may be more costly to implement than expected, or may not fully achieve the anticipated benefits for the business.
Removed
We cannot predict the amount and timing of any such additional charges that could adversely impact our results of operations.
Added
Furthermore, such initiatives involve a significant amount of capital expenditures, organizational change and execution risk, which could have a negative impact on employee engagement, divert management’s attention from other initiatives, and if not properly managed, impact our ability to retain key employees, cause disruptions in our day-to-day operations and have a negative impact on our financial results.
Removed
Our operations are subject to environmental, health and safety laws and regulations, and we may face significant costs or liabilities associated with environmental, health and safety matters.
Added
If we issue additional equity, a shareholder’s interest in us will be diluted. 23 Our existing indebtedness could adversely affect our business and growth prospects. As of December 30, 2023, we had total indebtedness of approximately $525 million.
Removed
Our products in both the Hydraulics and Electronics segments currently, and will continue to, face significant competition, both from other companies and from incumbent technologies. In the case of our Hydraulics segment, some of our competitors are full-line hydraulic system producers and others are niche suppliers like us.
Added
Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on environmental, social and governance considerations relating to businesses, including climate change and greenhouse gas emissions, human capital and diversity, equity and inclusion.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+2 added−1 removed0 unchanged
Biggest changeWe believe that our properties have been adequately maintained, are generally in good condition and are suitable and adequate for our business as presently conducted. The extent of utilization of our properties varies from time to time and among our facilities.
Biggest changeWe believe that our properties have been adequately maintained, are generally in good condition and are suitable and adequate for our business as presently conducted.
ITEM 2. PROPERTIES Corporate Office We lease office space in Sarasota, FL that is used as our corporate headquarters. Segments The table below presents information on the primary operating facilities in our Hydraulics and Electronics segments. These locations are generally used for manufacturing and distribution activities as well as sales, engineering and administrative functions.
ITEM 2. PROPERTIES Corporate Office We lease office space in Sarasota, FL that is used as our corporate headquarters and customer experience center. Segments The table below presents information on the primary operating facilities in our Hydraulics and Electronics segments. These locations are generally used for manufacturing and distribution activities as well as sales, engineering and administrative functions.
Removed
Hydraulics Segment Square Footage (in thousands) Region Owned Leased Total Americas 1,083 62 1,145 Europe 91 825 916 Asia/Pacific 59 184 243 Total 1,233 1,071 2,304 Electronics Segment Square Footage (in thousands) Region Owned Leased Total Americas 179 310 489 Europe 18 7 25 Asia/Pacific — 63 63 Total 197 380 577
Added
The extent of utilization of our properties varies from time to time and among our facilities. 31 Hydraulics Segment Square Footage (in thousands) Region Owned Leased Total Americas 1,953 4 1,957 Europe 54 825 879 Asia/Pacific 73 184 257 Total 2,080 1,013 3,093 Electronics Segment Square Footage (in thousands) Region Owned Leased Total Americas 533 377 910 Europe 18 7 25 Asia/Pacific — 63 63 Total 551 447 998 ITEM 3.
Added
LEGAL PROCEEDINGS From time to time we are involved in routine litigation incidental to the conduct of our business. We do not believe that any pending litigation will have a material adverse effect on our consolidated financial position or results of operations. ITEM 4. MINE SAFETY DISCLOSURE Not applicable. 32 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−1 removed4 unchanged
Biggest changeThe stock price performance shown in the graph is not necessarily indicative of future price performance. 12/31/2016 12/30/2017 12/29/2018 12/28/2019 1/2/2021 1/1/2022 Helios Technologies 100.00 162.95 84.59 116.41 137.64 273.06 Russell 2000 Index 100.00 114.65 101.21 128.03 153.62 176.39 Dow Jones US Diversified Industries Index 100.00 93.41 69.41 88.98 99.85 109.82 30
Biggest changeThe stock price performance shown in the graph is not necessarily indicative of future price performance. 12/29/2018 12/28/2019 1/2/2021 1/1/2022 12/31/2022 12/30/2023 Helios Technologies $ 100.00 $ 137.62 $ 162.72 $ 322.80 $ 167.95 $ 140.77 Russell 2000 Index 100.00 126.50 151.79 174.28 138.66 162.14 Dow Jones US Diversified Industries Index 100.00 128.20 143.86 158.23 145.36 188.70 34 ITEM 6. [RESERVED] 35
Our board of directors currently intends to continue to pay a quarterly dividend of $0.09 per share during 2022.
Our board of directors currently intends to continue to pay a quarterly dividend of $0.09 per share during 2024.
We previously traded on the Nasdaq Global Select Market under the symbol HLIO since June 17, 2019 and prior to that under the symbol SNHY since our initial public offering on January 9, 1997. Holders There were 132 shareholders of record of Common Stock on February 18, 2022.
We previously traded on the Nasdaq Global Select Market under the symbol HLIO since June 17, 2019 and prior to that under the symbol SNHY since our initial public offering on January 9, 1997. Holders There were 120 shareholders of record of Common Stock on February 16, 2024.
Equity Compensation Plans Information called for by Item 5 is provided in Note 13 of the Notes to the Consolidated Financial Statements included in this Annual Report (Item 8 of this report). Issuer Purchases of Equity Securities The following information describes the Company's stock repurchases during the fiscal years ended January 1, 2022 and January 2, 2021.
Equity Compensation Plans Information called for by Item 5 is provided in Note 13 of the Notes to the Consolidated Financial Statements included in this Annual Report (Item 8 of this report).
The price paid per share totaled $82.11 which was the fair value of the shares at the time of the repurchase. 29 Five-Year Stock Performance Graph The following graph compares cumulative total return among Helios, the Russell 2000 Index and the Dow Jones US Diversified Industries Index, from December 31, 2016, to January 1, 2022, assuming $100 invested in each on December 31, 2016.
Issuer Purchases of Equity Securities We did not repurchase any of our stock during the year ended December 30, 2023. 33 Five-Year Stock Performance Graph The following graph compares cumulative total return among Helios, the Russell 2000 Index and the Dow Jones US Diversified Industries Index, from December 28, 2018, through December 30, 2023, assuming $100 invested in each on December 29, 2018.
Removed
Period Total number of shares (or units) purchased Average price paid per share (or unit) Total number of shares (or units) purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs August 29, 2021 - October 2, 2021 7,096 $ 82.11 — — On October 1, 2021, we repurchased 7,096 shares of our common stock in connection with the sale of certain technology.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

47 edited+89 added−70 removed11 unchanged
Biggest changeCapital expenditures could be postponed since they primarily pertain to long-term improvements in operations, operating expense reductions could be made and the dividend to shareholders could be reduced or suspended. 38 Cash flows The following table summarizes our cash flows for the periods (in millions): For the year ended January 1, 2022 January 2, 2021 $ Change Net cash provided by operating activities $ 113.2 $ 108.6 $ 4.6 Net cash used in investing activities (90.3 ) (235.9 ) 145.6 Net cash (used in) provided by financing activities (22.6 ) 137.7 (160.3 ) Effect of exchange rate changes on cash 3.0 (7.3 ) 10.3 Net increase in cash and cash equivalents $ 3.3 $ 3.1 $ 0.2 Cash on hand increased $3.3 million from $25.3 million at the end of 2020 to $28.6 million at the end of 2021.
Biggest changeCash flows The following table summarizes our cash flows for the periods: For the year ended December 30, 2023 December 31, 2022 $ Change Net cash provided by operating activities $ 83.9 $ 109.9 $ (26.0 ) Net cash used in investing activities (153.9 ) (90.8 ) (63.1 ) Net cash provided by (used in) financing activities 57.9 (6.9 ) 64.8 Effect of exchange rate changes on cash and cash equivalents 0.8 3.0 (2.2 ) Net (decrease) increase in cash and cash equivalents $ (11.3 ) $ 15.2 $ (26.5 ) Cash on hand decreased $11.3 to $32.4 at the end of 2023.
Future maturities of our operating lease liabilities are presented in Note 7 of the Notes to the Consolidated Financial Statements included in this Annual Report. 40 Critical Accounting Policies and Estimates We prepare our Consolidated Financial Statements in conformity with U.S. GAAP, which requires management to make certain estimates and assumptions that affect reported amounts and related disclosures.
Future maturities of our operating lease liabilities are presented in Note 7 of the Notes to the Consolidated Financial Statements included in this Annual Report. Critical Accounting Policies and Estimates We prepare our Consolidated Financial Statements in conformity with U.S. GAAP, which requires management to make certain estimates and assumptions that affect reported amounts and related disclosures.
See Note 12 of the Notes to the Consolidated Financial Statements included in this Annual Report for income tax amounts, including reserves. Off Balance Sheet Arrangements We do not engage in any off balance sheet financing arrangements. In particular, we do not have any material interest in variable interest entities, which include special purpose entities and structured finance entities.
See Note 12 of the Notes to the Consolidated Financial Statements included in this Annual Report for income tax amounts, including reserves. Off Balance Sheet Arrangements We do not engage in any off balance sheet financing arrangements. In particular, we do not have any material interest in variable interest entities, which include special purpose entities and structured finance entities. 47
In July 2021, we completed another flywheel acquisition with NEM S.r.l., an innovative hydraulic solutions company providing customized material handling, construction, industrial vehicle and agricultural applications to its global customer base, predominantly in Europe and Asia. NEM enhances the Helios electro-hydraulic product offering, provides geographic expansion and adds scale to address new markets.
In July 2021, we completed another flywheel acquisition of NEM S.r.l., an innovative hydraulic solutions company providing customized material handling, construction, industrial vehicle and agricultural applications to its global customer base, predominantly in Europe and Asia. NEM enhances the Helios electro-hydraulic product offering, provides geographic expansion and adds scale to address new markets.
Overview We are a global leader in highly engineered motion control and electronic controls technology for diverse end markets, including construction, material handling, agriculture, energy, recreational vehicles, marine and health and wellness. We operate under two business segments: Hydraulics and Electronics.
Overview We are a global leader in highly engineered motion control and electronic controls technology for diverse end markets, including construction, material handling, agriculture, industrial, mobile, energy, recreational vehicles, marine and health and wellness. We operate under two business segments: Hydraulics and Electronics.
The following policies are considered by management to be the most critical in understanding the judgements, estimates and assumptions that are involved in the preparation of our Consolidated Financial Statements.
The following policies are considered by management to be the most critical in understanding the judgments, estimates and assumptions that are involved in the preparation of our Consolidated Financial Statements.
The full purchase price is €26.7 million; however, the actual purchase price will be reduced by 60% of the payments made during the lease term. Leases We regularly enter into operating lease agreements for the use of machinery, equipment, vehicles, buildings and office space.
The expected purchase price is €26.7; however, the actual purchase price will be reduced by 60% of the payments made during the lease term. 44 Leases We regularly enter into operating lease agreements for the use of machinery, equipment, vehicles, buildings and office space.
The difference relates principally to a shift in the mix of the company's worldwide income. The effective rate typically fluctuates relative to the levels of income and different tax rates in effect from year to year among the countries in which we sell our products.
The difference relates principally to a shift in the mix of the Company's worldwide income and increase in valuation allowance established. The effective rate typically fluctuates relative to the levels of income and different tax rates in effect from year to year among the countries in which we sell our products.
As of January 1, 2022, the Company had approximately $23.7 million of undistributed earnings of its non-U.S. subsidiaries for which it has not provided for non-U.S. withholding taxes and state taxes because such earnings are intended to be reinvested indefinitely in international operations. 2020 Results and Comparison of Years Ended January 2, 2021 and December 28, 2019 For the discussion and analysis of our 2020 results compared with our 2019 results, refer to our Annual Report on Form 10-K for the fiscal year ended January 2, 2021, filed with the SEC on March 2, 2021.
As of December 30, 2023, the Company had approximately $29.3 million of undistributed earnings of its non-U.S. subsidiaries for which it has not provided for non-U.S. withholding taxes and state taxes because such earnings are intended to be reinvested indefinitely in international operations. 2022 Results and Comparison of Years Ended December 31, 2022 and January 1, 2022 For the discussion and analysis of our 2022 results compared with our 2021 results, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 28, 2023.
The discussion is incorporated herein by reference. Liquidity and Capital Resources Historically, our primary source of capital has been cash generated from operations. In recent years we have used borrowings on our credit facilities to fund acquisitions.
The discussion is incorporated herein by reference. Liquidity and Capital Resources Historically, our primary source of capital has been cash generated from operations. We also use borrowings on our credit facilities to fund acquisitions.
Capital expenditures for 2022 are forecasted to be approximately 3%-5% of sales, for investments in machinery and equipment for capacity expansion projects, improvements to manufacturing technology and maintaining/replacing existing machine capabilities. Financing activities Cash used in financing activities totaled $22.6 million in 2021, compared with cash provided by financing activities of $137.7 million in 2020.
Capital expenditures for 2024 are forecasted to be approximately 3%-4% of sales, for investments in machinery and equipment for capacity expansion projects, improvements to manufacturing technology and maintaining/replacing existing machine capabilities. 43 Financing activities Net cash provided by financing activities totaled $57.9 in 2023, compared with net cash used in financing activities of $6.9 in 2022.
Cash balances on hand are a result of our cash management strategy, which focuses on maintaining sufficient cash to fund operations while reinvesting cash in the Company and also paying down borrowings on our credit facilities. Operating activities Net cash from operations totaled $113.2 million in 2021, an increase of $4.6 million, 4.2%, compared with the prior year.
Cash balances on hand are a result of our cash management strategy, which focuses on maintaining sufficient cash to fund operations while reinvesting cash in the Company and also paying down borrowings on our credit facilities. Operating activities Net cash from operations totaled $83.9 in 2023, a decrease of $26.0, 23.7%, compared with the prior year.
The Hydraulics segment designs and manufactures hydraulic cartridge valves, hydraulic quick release couplings as well as engineers complete hydraulic systems. The Electronics segment designs and manufactures customized electronic controls systems and displays for a variety of end markets including industrial and mobile, recreational and health and wellness.
The Hydraulics segment designs and manufactures hydraulic motion control and fluid conveyance technology products, including cartridge valves, manifolds, quick release couplings as well as engineers hydraulic solutions and in some cases complete systems. The Electronics segment designs and manufactures customized electronic controls systems, displays, wire harnesses, and software solutions for a variety of end markets.
We also have a $300.0 million accordion feature available on our credit facility, which is subject to certain pro forma compliance requirements and is intended to support potential future acquisitions. Our principal uses of cash have been paying operating expenses, making capital expenditures, servicing debt, making acquisition-related payments and paying dividends to shareholders.
We also have a $300.0 accordion feature available on our credit facility, which is subject to certain pro forma compliance requirements and is intended to support potential future acquisitions.
Refer to Item 1A Risk Factors of this Annual Report for additional COVID-19 related discussion. Industry Conditions Market demand for our products is dependent on demand for the industrial goods in which the products are incorporated. The capital goods industries in general, and the Hydraulics and Electronics segments specifically, are subject to economic cycles.
Refer to Item 1A Risk Factors of this Annual Report for additional COVID-19 related discussion. Industry Conditions The capital goods industries in general, and the Hydraulics and Electronics segments specifically, are subject to economic cycles. We utilize industry trend reports from various sources, as well as feedback from customers and distributors, to evaluate economic trends.
Assumptions made for future cash flows are developed based on consideration of current and future economic conditions, recent sales trends, planned timing of product launches or other relevant variables. The market approach estimates the value of reporting units by comparing to guideline public companies or guideline transactions.
Assumptions used in the analysis include estimated future revenues and expenses, working capital, capital expenditures and other variables. Assumptions made for future cash flows are developed based on consideration of current and future economic conditions, recent sales trends, planned timing of product launches or other relevant variables.
Corporate and Other Certain costs are excluded from business segment results as they are not used in evaluating the results of, or allocating resources to, our operating segments.
SEA as a percent of sales increased 5.4 percentage points to 20.5% in 2023 from 15.1% in 2022, negatively impacted by reduced leverage of our fixed costs on the lower sales. Corporate and Other Certain costs are excluded from business segment results as they are not used in evaluating the results of, or allocating resources to, our operating segments.
During 2021, net cash provided by operating activities totaled $113.2 million and as of January 1, 2022 we had $28.6 million of cash on hand and $158.0 million of available credit on our revolving credit facilities.
During 2023, net cash provided by operating activities totaled $83.9 and as of December 30, 2023, we had $32.4 of cash on hand and $200.1 of available credit on our revolving credit facilities.
Cash and cash equivalents were favorably impacted by changes in exchange rates during the year ended January 1, 2022 by $3.0 million and unfavorably impacted during the year ended January 2, 2021 by $7.3 million.
Cash and cash equivalents were favorably impacted by changes in exchange rates by $0.8 and $3.0 during the years ended December 30, 2023, and December 31, 2022, respectively.
Changes in accounts receivable, net of acquisitions, decreased cash by $32.4 million in 2021 compared with an increase in cash of $0.7 million in 2020, a direct result of higher sales in the last few months of the 2021 year compared to 2020.
Changes in accounts receivable, net of acquisitions, increased cash by $16.3 in 2023 compared with a decrease in cash of $9.1 in 2022, a result of higher sales in the last few months of the 2023 year compared to 2022.
The income approach is generally based on a discounted cash flow analysis, which estimates the present value of the projected free cash flows to be generated by the reporting unit. Assumptions used in the analysis include estimated future revenues and expenses, weighted average cost of capital, capital expenditures and other variables.
If these assumptions and estimates are not met or operations are impacted by other factors the reporting units could be subject to goodwill impairment. The income approach is generally based on a discounted cash flow analysis, which estimates the present value of the projected free cash flows to be generated by the reporting unit.
Days sales outstanding for the 2021 year went up slightly to 57 days, from 50 days during 2020. Investing activities Cash used in investing activities totaled $90.3 million in 2021, compared with $235.9 million in 2020. The decrease in acquisition-related payments accounted for $153.5 million of the fluctuation.
Days sales outstanding for the 2023 year decreased slightly to 50 days, from 52 days during 2022, as our collection patterns remain consistent with the prior year. Investing activities Cash used in investing activities totaled $153.9 in 2023, an increase of $63.1, 69.5%, compared with the prior year. The increase in acquisition-related payments accounted for $46.9 of the fluctuation.
Our term loan with PNC Bank is payable in quarterly installments of $3.8 million through 2023 and quarterly installments of $5.0 million thereafter through the maturity date of October 2025, at which time the remaining balance becomes due in full. Interest rates on our credit facilities range from 2.0% to 5.3% as of January 1, 2022.
Our term loan with PNC Bank is payable in quarterly installments of $5.0 through the maturity date of October 2025, at which time the remaining balance will be due in full. Our new term loan with PNC Bank is payable in full in October 2025 and is not subject to any required repayments prior to that date.
We believe that cash generated from operations and our borrowing availability under our credit facilities will be sufficient to satisfy our operating expenses and capital expenditures for the foreseeable future. In the event that economic conditions were to severely worsen for a protracted period of time, we would have several options available to ensure liquidity in addition to increased borrowing.
In the event that economic conditions were to severely worsen for a protracted period of time, we would have several options available to ensure liquidity in addition to increased borrowing. Capital expenditures could be postponed since they primarily pertain to long-term improvements in operations, operating expense reductions could be made and the dividend to shareholders could be reduced or suspended.
In October 2021, we completed the acquisition of Joyonway. Joyonway is a fast-growing developer of control panels, software, systems and accessories for the health and wellness industry.
In October 2021, we completed the acquisition of Joyonway, a developer of control panels, software, systems and accessories for the health and wellness industry. Joyonway operates from two locations in China, Shenzhen and Dongguan, both of which are in the hub of electronics and software development in China and give us a foothold for electronics manufacturing in Asia.
These methodologies incorporate various estimates and assumptions, the most significant being estimated royalty rates, projected revenue growth rates, profit margins and forecasted cash flows based on the discount rate. Goodwill Goodwill, which represents the excess of the purchase price of an acquisition over the fair value of the net assets acquired, is carried at cost.
These methodologies incorporate various estimates and assumptions, the most significant being estimated royalty rates, projected revenue growth rates, profit margins and forecasted cash flows based on the discount rate. Intangible assets consist primarily of customer relationships, technology, trade names and brands and supply agreements.
The Institute of Printed Circuits Association ("IPC") reported that total North American printed circuit board ("PCB") shipments in December 2021 were up 16.9% compared with the same month last year, and compared with November 2021, December shipments grew 21.5%.
The Institute of Printed Circuits Association (“IPC”) reported that North American printed circuit board (“PCB”) shipments and bookings decreased in December 2023 by 18.3% and 28.7%, respectively, compared with the same month last year. PCB shipments increased and bookings decreased in December 2023 by 1.0% and 14.1%, respectively, compared with November 2023.
An impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than its carrying value. The assessment of fair value for impairment purposes requires significant judgment by management. We generally use a combination of market and income approach methodologies to estimate the fair value of our reporting units.
An impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than its carrying value.
Tax laws are complex and subject to different interpretations by the taxpayer and respective government taxing authorities. Significant judgment is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties. We review our tax positions quarterly and adjust the balances as new information becomes available.
Significant judgment is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties. We review our tax positions quarterly and adjust the balances as new information becomes available. Indefinite reinvestment is determined by management’s judgment about, and intentions concerning, our future operations. We recognize and measure uncertain tax positions in accordance with ASC 740.
Various valuation multiples of companies that are economically and operationally similar are used as data points for selecting multiples for the reporting units. Changes in assumptions or estimates could materially affect the estimated fair value of our reporting units and the potential for impairment.
The market approach estimates the value of reporting units by comparing to guideline public companies or guideline transactions. Various valuation multiples of companies that are economically and operationally similar are used as data points for selecting multiples for the reporting units, which are deemed to be market-adjusted multiples based on key data points for guideline public companies.
Changes in inventory, net of acquisitions, reduced cash by $52.5 million in 2021 compared with an increase in cash of $0.6 million during 2020. Inventory on hand as of January 1, 2022 increased by $55.3 million, 50.1%, compared to the 2020 year end.
Investments in inventory, net of acquisitions, reduced cash by $17.9 and $27.0 in 2023 and 2022, respectively. Inventory on hand as of December 30, 2023, increased by $23.5, 12.3%, compared to the 2022 year end.
The IPC also reported that North American electronics manufacturing services ("EMS") shipments were up 0.9% compared to the same month last year, and compared to November 2021, shipments rose 8.0%.
The IPC also reported that North American electronics manufacturing services (“EMS”) shipments increased and bookings decreased in December 2023 by 1.3% and 7.0%, respectively when compared with the same month last year.
Hydraulics According to the National Fluid Power Association (the fluid power industry’s trade association in the U.S.), the U.S. index of shipments of hydraulic products increased 21% in 2021, after decreasing 20% in 2020 and decreasing 7% in 2019.
We also rely on global government statistics such as Gross Domestic Product and Purchasing Managers Index to understand higher level economic conditions. 37 Hydraulics According to the National Fluid Power Association (the fluid power industry’s trade association in the U.S.), the U.S. index of shipments of hydraulic products decreased 4% in 2023, after increasing 20% in 2022 and increasing 21% in 2021.
These differences result from items reported differently for financial reporting and income tax purposes, primarily depreciation, amortization, accrued expenses and reserves. 41 Our annual tax rate fluctuates based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate.
Our annual tax rate fluctuates based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and respective government taxing authorities.
Building purchase commitment In 2020, the Company entered into a lease to buy agreement for the purchase of a building. We have the option to purchase the building at any time during the lease period and are committed to buy at the end of the 6-year lease term.
Open purchase orders as of December 30, 2023 total $83.3 for purchases expected in 2024 and $3.3 for purchases expected in 2025. Building purchase commitment The Company is negotiating a lease-to-buy agreement for the purchase of a building with the option to purchase the building at any time during the lease period.
Electronics The following table sets forth the results of operations for the Electronics segment (in millions): For the year ended January 1, 2022 January 2, 2021 $ Change % Change Net sales $ 352.7 $ 115.8 $ 236.9 204.6 % Gross profit $ 120.0 $ 47.8 $ 72.2 151.0 % Gross profit % 34.0 % 41.3 % Operating income $ 71.7 $ 19.4 $ 52.3 269.6 % Operating income % 20.3 % 16.8 % Net sales for the Electronics segment totaled $352.7 million in 2021, an increase of $236.9 million, 204.6%, over the prior year.
Electronics The following table presents the results of operations for the Electronics segment: For the year ended December 30, 2023 December 31, 2022 $ Change % Change Net sales $ 269.8 $ 334.1 $ (64.3 ) (19.2 )% Gross profit $ 79.9 $ 103.0 $ (23.1 ) (22.4 )% Gross profit % 29.6 % 30.8 % Operating income $ 24.7 $ 52.5 $ (27.8 ) (53.0 )% Operating income % 9.2 % 15.7 % 40 Net sales for the Electronics segment declined by $64.3, 19.2%.
Average net debt during 2021 totaled $426.9 million compared with $357.8 million in 2020. 37 Income Taxes The provision for income taxes for the year ended January 1, 2022, was 20.3% of pretax income compared with 17.6%, before non-deductible impairment related charges, for the year ended January 2, 2021.
Average net debt increased by $37.9 during 2023 to $447.4 compared with $409.5 in 2022. 41 Income Taxes The provision for income taxes for the year ended December 30, 2023, was 23.8% of pretax income compared with 19.2% for the year ended December 31, 2022.
Material costs as a percentage of sales, excluding pricing changes and acquisition-related sales, increased in 2021 by 6.6 percentage points compared to the prior year. SEA expenses increased by $19.9 million in 2021, compared with 2020, primarily from the Balboa acquisition.
Material costs as a percentage of sales increased by 110 basis points, excluding pricing changes and acquisition-related sales. Operating income as a percentage of sales decreased 580 basis points to 16.5%. SEA expenses increased $15.7, 21.6%, mainly due to acquisitions and corporate activities.
Future interest payments are estimated to total $37.7 million, with annual payments ranging from $10.8 million to $7.8 million payable through the last maturity date of October 2025. Future payments assume the current interest rate environment, current currency exchange rates, future required payments on term loans and revolver borrowings consistent with January 1, 2022 debt levels.
Future payments assume the current interest rate environment, current currency exchange rates, future required payments on term loans and revolver borrowings consistent with December 30, 2023 debt levels. Future payments do not include an estimate of impacts from our derivative instruments. Contingent consideration payments Our contingent consideration liabilities total $0.5 as of December 30, 2023.
For the year ended January 1, 2022, these costs totaled $42.2 million primarily for acquisition-related items such as (i) transaction costs of $4.0 million, (ii) charges related to inventory step-up to fair value of $0.6 million, (iii) amortization of acquisition-related intangible assets of $32.8 million, (iv) $4.6 million related to other acquisition and integration activities and (v) other costs not deemed allocable to either business segment of $0.2 million.
For the year ended December 30, 2023, these costs totaled $38.1 for: amortization of acquisition-related intangible assets of $32.9, $4.0 related to other acquisition and integration activities and $1.2 officer transition costs.
In the 2020 year net borrowings on debt totaled $151.7 million, primarily for the acquisition of Balboa. 39 Borrowings on our long-term non-revolving debt and our revolving credit facilities as of January 1, 2022 totaled $202.5 million and $243.0 million, respectively.
Cash paid for acquisitions in 2023 was primarily financed with borrowings on our credit facility; borrowings, net of repayments, during 2023 totaled $75.7. In 2022, borrowings, net of repayments, totaled $8.0. Borrowings on our term loans and revolving credit facilities as of December 30, 2023, totaled $322.1 and $203.3, respectively.
The following table presents net sales based on the geographic region of the sale for the Hydraulics segment (in millions): For the year ended January 1, 2022 January 2, 2021 $ Change % Change Americas $ 167.7 $ 130.5 $ 37.2 28.5 % EMEA 180.0 131.2 48.8 37.2 % APAC 168.7 145.5 23.2 15.9 % Total $ 516.4 $ 407.2 Demand in the Americas region drove sales growth of $37.2 million, 28.5%, compared with the prior year.
The following table presents net sales based on the geographic region of the sale for the Electronics segment: For the year ended December 30, 2023 December 31, 2022 $ Change % Change Americas $ 226.5 $ 270.9 $ (44.4 ) (16.4 )% EMEA 25.2 37.1 (11.9 ) (32.1 )% APAC 18.1 26.1 (8.0 ) (30.7 )% Total $ 269.8 $ 334.1 In 2023, we executed restructuring activities within our Electronics segment to shift product lines to the expanded facility in Tijuana and to adjust our labor base in line with current demand levels.
Goodwill is tested for impairment annually, in our third and fourth fiscal quarters, or more frequently if events or circumstances indicate a reduction in the fair value below the carrying value. The carrying value of assets is calculated at the reporting unit level.
We test goodwill for impairment at the reporting unit level, as of the third quarter period end date, on an annual basis and between annual tests whenever events or circumstances indicate the carrying value of a reporting unit may exceed its fair value.
They reported, however, that order intake and sales in Europe continue to be on a growth path as future sales expectations have stabilized or even slightly improved for virtually all market regions. 33 Electronics The Federal Reserve’s Industrial Production Index, which measures the real output of all relevant establishments located in the U.S., reports production of semiconductors and other electronics components continued to improve during the fourth quarter of 2021, exceeding fourth quarter 2020 levels.
Electronics The Federal Reserve’s Industrial Production Index, which measures the real output of all relevant establishments located in the U.S., reports production of semiconductors and other electronics components met the lowest level in the first quarter of 2023 when compared to the prior two years; however, this improved notably and consistently throughout 2023, to reach the record high in the fourth quarter of 2023 when compared to the prior two years.
While we have been able to mitigate the majority of the impact with our procurement efforts and production schedule adjustments, we are experiencing delays in shipments as well as material and logistics cost increases. We are also facing disruption to our workforce from the pandemic. While the impact has not been significant, the absenteeism has caused labor inefficiencies in production.
The shutdown of our locations and our customers' locations impacted operations and sales through May with recovery occurring in June as the lockdowns were lifted. We also faced disruption to our workforce from the pandemic. While the impact was not significant, the absenteeism caused labor inefficiencies in production. Additionally, in certain locations we faced pressure from competitive labor markets.
See Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report for additional information regarding our credit facilities. We have historically declared regular quarterly dividends to shareholders of $0.09 per share. We paid dividends totaling $11.6 million for the years ended January 1, 2022 and January 2, 2021.
See Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report for additional information regarding our credit facilities. In May 2023, we entered into an incremental facility amendment to our credit agreement with PNC Bank, National Association, as administrative agent, and various lenders party thereto.
Segment Results Hydraulics The following table sets forth the results of operations for the Hydraulics segment (in millions): For the year ended January 1, 2022 January 2, 2021 $ Change % Change Net sales $ 516.4 $ 407.2 $ 109.2 26.8 % Gross profit $ 193.4 $ 150.3 $ 43.1 28.7 % Gross profit % 37.5 % 36.9 % Operating income $ 119.8 $ 82.0 $ 37.8 46.1 % Operating income % 23.2 % 20.1 % Net sales for the Hydraulics segment totaled $516.4 million in 2021, an increase of $109.2 million, 26.8%, over the prior year.
Segment Results Hydraulics The following table presents the results of operations for the Hydraulics segment: For the year ended December 30, 2023 December 31, 2022 $ Change % Change Net sales $ 565.8 $ 551.3 $ 14.5 2.6 % Gross profit $ 181.8 $ 195.5 $ (13.7 ) (7.0 )% Gross profit % 32.1 % 35.5 % Operating income $ 93.3 $ 122.7 $ (29.4 ) (24.0 )% Operating income % 16.5 % 22.3 % Net sales for the Hydraulics segment grew by $14.5, 2.6%.
Removed
In November 2016, we set out a vision to achieve $1 billion in sales in 2025 through a combination of organic growth and acquisitions and to deliver operating margins in excess of 20%.
Added
During 2021, we augmented our strategy to transform our business from a holding company to a global integrated operating company. At that same time, we introduced the framework of the Helios Business System, “HBS” (pictured in Item 1 of Part 1), which is at the heart of all we do.
Removed
In 2021, we augmented our strategy and accelerated our growth plans to achieve the milestone of over $1 billion in sales with top tier adjusted EBITDA margin of approximately 25% in 2023.
Added
We are accomplishing this transformation into a global integrated operating company by leveraging sales, marketing, innovation, customer relationships and operational excellence across all our businesses. Our progress to date, through a very complex macro operating environment, is a direct reflection of the commitment of our talented workforce executing our augmented strategy.
Removed
Underpinning our expectation of compounded annual growth of approximately two times our market's growth rates, we have an active pipeline and a history of acquiring companies with niche technologies, as well as strong profitability.
Added
In July 2022, we completed the acquisition of the assets of Taimi R&D, Inc., a Canadian manufacturer of innovative hydraulic components that offers ball-less design swivel products, which improve hydraulic reliability of equipment, increase the service life of components and help protect the environment by reduced leakage.
Removed
In November 2020, we acquired Balboa Water Group, further diversifying the markets we serve and expanding our technological capabilities in electronics. Balboa is an innovative market leader of electronic controls for the health and wellness industry with proprietary and patented technology that enables end-to-end electronic control systems for therapy baths and traditional and swim spas.
Added
Taimi brings a differentiated, yet complementary product line to our hydraulics platform as well as strong engineering breadth. In September 2022, we completed another flywheel acquisition of Daman Products Company, headquartered in Mishawaka, Indiana.
Removed
Joyonway operates from two locations in China, Shenzhen and Dongguan, both of which are in the hub of electronics and software development in China and give us a foothold for electronics manufacturing in Asia. 32 Global Economic Conditions COVID-19 Update The COVID-19 pandemic has caused, and continues to cause, economic disruption globally, and substantial uncertainty exists regarding the magnitude and duration of the pandemic and its economic impact.
Added
Daman is a leading designer and manufacturer of standard and custom precision hydraulic manifolds and other fluid conveyance products for its customer base, predominantly in North America. The acquisition of Daman 36 expands the Company's technologies and markets and provides an opportunity to produce integrated package offerings with multiple Helios brands.
Removed
Many of our customers and end markets are recovering from the substantial impacts of the pandemic experienced during 2020. Demand in 2021 for our products exceeded our expectations as end market recovery occurred sooner and was stronger than we projected.
Added
In January 2023, we completed the acquisition of Schultes Precision Manufacturing, Inc. Schultes is a highly trusted specialist in manufacturing precision machined components and assemblies for customers requiring very tight tolerances, superior quality, and exceptional value-added manufacturing processes.
Removed
Demand in the health and wellness and recreational marine markets has been favorably impacted by the pandemic as consumers are investing in leisure products and activities. We face constraints on our ability to source certain electronic and other components, which originated from the high demand for these products caused by the pandemic.
Added
Currently serving the hydraulic, aerospace, communication, food services, medical device, and dental industries, Schultes brings the manufacturing quality, reliability, and responsiveness critical to its customers’ success. Schultes provides additional manufacturing know-how and expands our business into new end markets with attractive secular tailwinds.
Removed
The Omicron variant impacted fourth quarter labor efficiency, and we continued to experience the effects through January 2022. Additionally, in certain locations we are facing pressure from competitive labor markets; however, to date we have been successful at minimizing the impact on our operations using various methods including reallocating resources, attending job fairs and increasing wages when appropriate.
Added
In May 2023, we completed the acquisition of i3 Product Development. i3 is a custom engineering services firm, with over 55 engineers specializing in electronics, mechanical, industrial, embedded and software engineering. i3 specializes in working to transform customer’s ideas into industrial design solutions through rapid prototyping and creating 3D models in-house.
Removed
We are closely monitoring the various laws, regulations and executive orders that could impact future periods relating to government-imposed requirements regarding mandatory testing for COVID-19 in the workplace and/or vaccination requirements for employees. The Company has taken and is in the process of taking necessary steps to comply with applicable requirements.
Added
Their solutions are used across many sectors, including medical, off-highway, recreational and commercial marine, power sports, health and wellness, agriculture, consumer goods, industrial, sports and fitness.
Removed
At this time, we do not believe there will be a material impact on our operations due to these requirements. Our outlook for the 2022 fiscal year assumes the global economy continues to recover; however, we cannot at this time predict any future impacts.
Added
Global Economic Conditions Geo-Political Conflict We continue to monitor the ongoing conflicts between Russia and Ukraine and the Israel-Hamas war and evaluate the broader economic impact those conflicts could have on our operations, supply channels and the operations of our partners and customers.
Removed
The Company continues to monitor developments, new strains and variants of COVID-19 and government requirements and recommendations at the national, state and local levels, as well as vaccine mandates, to evaluate whether to reinstate and/or extend certain initiatives it implemented to help contain the spread of COVID-19.
Added
We do not have operations in these regions at this time and those conflicts have not and are not expected to have a material impact on our financial condition or results. Refer to Item 1A Risk Factors of this Annual Report for additional discussion about geo-political risks.
Removed
We utilize industry trend reports from various sources, as well as feedback from customers and distributors, to evaluate economic trends. We also rely on global government statistics such as Gross Domestic Product and Purchasing Managers Index to understand higher level economic conditions.
Added
COVID-19 Pandemic In the first half of 2022, we experienced mild impacts from the pandemic. At the beginning of the second quarter our locations in China began to shut down periodically due to regulatory lockdown measures associated with a COVID-19 outbreak.
Removed
In Europe, the CEMA Business Barometer reports that in January 2022, the business climate index for the European agricultural machinery industry stabilized at a high level after several months of slight downward correction since its peak in May and June.
Added
Since the first half of 2022, there have been no COVID-related shutdowns or other significant new disruption to our business from the pandemic. Throughout 2022, and continuing into 2023, we faced constraints related to sourcing certain electronic and other components, which originated from the high demand for these products caused by the pandemic.
Removed
CEMA further reported that the near future turnover is already secured, and there is still growth potential for the time being, which might initially be delayed into the coming months due to the supply bottlenecks. The CECE (Committee for European Construction Equipment) business climate index went down slightly in November.
Added
We were able to mitigate some of the impact with our procurement efforts, production schedule adjustments and product redesigns. The availability of components improved as 2023 progressed. Demand in the health and wellness market was favorably impacted by the pandemic in 2020 and 2021, as consumers invested in leisure products and activities.
Removed
Demand continues to exceed supply for both PCB and EMS products as the book-to-bill ratios were at 1.17 and 1.55, respectively, in December 2021, as reported by the IPC. 2021 Results and Comparison of Years Ended January 1, 2022 and January 2, 2021 The following table sets forth our consolidated results of operations: (in millions except net income per share) For the year ended January 1, 2022 January 2, 2021 $ Change % Change Net sales $ 869.2 $ 523.0 $ 346.2 66.2 % Gross profit $ 312.8 $ 196.2 $ 116.6 59.4 % Gross profit % 36.0 % 37.5 % Operating income $ 149.3 $ 35.4 $ 113.9 321.8 % Operating income % 17.2 % 6.8 % Net income $ 104.6 $ 14.2 $ 90.4 636.6 % Diluted net income per share $ 3.22 $ 0.44 $ 2.78 631.8 % Consolidated net sales for the 2021 year totaled $869.2 million, an increase of 66.2% over the prior year.
Added
However, during 2022, we experienced a sharp decline in sales in this end market as demand declined and inventory levels in the channel increased. By the second half of 2023, inventory levels in the market began to normalize, and we saw an uptick in demand as we exited the year.
Removed
Acquisitive growth accounted for a large portion of the increase, $206.6 million, and we also experienced significant organic growth of $139.6 million, 26.7%. Changes in foreign currency exchange rates favorably impacted sales by $12.4 million, and earnings per share by $0.05 compared to 2020. The effect of price increases impacted 2021 organic sales by $4.4 million compared to 2020.
Added
In Europe, the CEMA Business Barometer reported in January 2024 that the general business climate index for the European agricultural machinery industry has continued its downward slide in the area of deep recession territory. CEMA further reported that the direct customers of the manufacturers, the dealers, are not able to pass on their numerous orders to the end customers.
Removed
We realized improved demand in all regions in both segments as our end markets recovered from the significant impacts of the COVID-19 pandemic. In early 2020, we experienced a considerable negative impact on sales due to facility closures, customer shut-downs and regulatory restrictions imposed on shipments.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+2 added−1 removed1 unchanged
Biggest changeForeign Currency Risk Our exposure to foreign currency exchange fluctuations relate primarily to our locations in Italy, Australia, Germany, South Korea, the United Kingdom, China and India. Our operations in these countries are exposed to fluctuations in foreign currency rates primarily from payments received from customers and payments made to suppliers denominated in foreign currencies.
Biggest changeThis sensitivity analysis incorporates the effects of our interest rate swap contracts. Foreign Currency Risk Our exposure to foreign currency exchange fluctuations relate primarily to our locations in Italy, Australia, Germany, South Korea, the United Kingdom, China and India.
A discussion of our accounting policies for derivative financial instruments is included within Notes 2 and 9, of the Notes to the Consolidated Financial Statements included in this Annual Report. Interest Rate Risk Our exposure to interest rate risk results from variable debt outstanding under our term loan and revolving credit facility with PNC Bank.
A discussion of our accounting policies for derivative financial instruments is included within Notes 2 and 9, of the Notes to the Consolidated Financial Statements included in this Annual Report. Interest Rate Risk Our exposure to interest rate risk results from variable debt outstanding under our term loans and revolving credit facility with PNC Bank.
This sensitivity analysis assumes that each exchange rate changed in the same direction relative to the U.S. dollar and excludes the potential effects that changes in foreign currency exchange rates may have on actual sales or price levels.
This sensitivity analysis assumes that each exchange rate changed in the same direction relative to the U.S. dollar and incorporates the effects of our forward contracts. This analysis excludes the potential effects that changes in foreign currency exchange rates may have on actual sales or price levels.
Based on our level of variable rate debt outstanding during the year ended January 1, 2022, a one percentage point increase in the reference average interest rate, which generally equaled 3.19%, would have resulted in an approximate $2.5 million increase in financing costs for the year ended January 1, 2022.
Based on our level of variable rate debt outstanding during the year ended December 31, 2022, a one percentage point increase in the reference average interest rate, which generally equaled 3.5%, would have resulted in an approximate $1.7 million increase in financing costs for the year ended December 31, 2022.
Based on our level of variable rate debt outstanding during the year ended January 2, 2021, a one percentage point increase in the reference average interest rate, which generally equaled 3.55%, would have resulted in an approximate $1.4 million increase in financing costs for the year ended January 2, 2021.
Based on our level of variable rate debt outstanding during the year ended December 30, 2023, a one percentage point increase in the reference average interest rate, which generally equaled 5.5%, would have resulted in an approximate $3.1 million increase in financing costs for the year ended December 30, 2023.
Similarly, a 10% decline in foreign currency exchange rates relative to the U.S. dollar on our January 1, 2022 and January 2, 2021 financial position would have resulted in a $53.8 million and $55.3 million reduction to equity (accumulated other comprehensive loss), respectively, as a result of non-U.S. dollar denominated assets and liabilities being translated into U.S. dollars, our reporting currency. 43
Similarly, a 10% decline in foreign currency exchange rates relative to the U.S. dollar on our December 30, 2023 and December 31, 2022 financial position would have resulted in a $57.5 million and $54.4 million reduction to equity (accumulated other comprehensive loss), respectively, as a result of non-U.S. dollar denominated assets and liabilities being translated into U.S. dollars, our reporting currency. 48
The result of a 10% decrease in the 2021 average exchange rates of the currencies in which our transactions are denominated would have resulted in a decrease in annual sales and net income of $30.9 million and $6.3 million, respectively, for the year ended January 1, 2022.
The result of a 10% decrease in the 2022 average exchange rates of the currencies in which our transactions are denominated would have resulted in a decrease in annual sales of $32.6 million for the year ended December 31, 2022.
The result of a 10% decrease in the 2020 average exchange rates of the currencies in which our transactions are denominated would have resulted in a decrease in annual sales and net income of $23.0 million and $3.1 million, respectively, for the year ended January 2, 2021.
The result of a 10% decrease in the 2023 average exchange rates of the currencies in which our transactions are denominated would have resulted in a decrease in annual sales of $31.5 million for the year ended December 30, 2023.
A discussion of our accounting policies for derivative financial instruments is included within Notes 2 and 9, of the Notes to the Consolidated Financial Statements included in this Annual Report. The strengthening of the U.S. dollar can have an unfavorable impact on our results of operations and financial position as foreign denominated operating results are translated into U.S. dollars.
The strengthening of the U.S. dollar can have an unfavorable impact on our results of operations and financial position as foreign denominated operating results are translated into U.S. dollars.
We pay interest on outstanding borrowings at interest rates that fluctuate based upon changes in various base rates. As of January 1, 2022, we had $242.3 million in borrowings outstanding under the revolving credit facility and $190.0 million in borrowings outstanding under the term loan.
We pay interest on outstanding borrowings at interest rates that fluctuate based upon changes in various base rates. As of December 30, 2023, we had $199.8 million in borrowings outstanding under the revolving credit facility, $310.0 million in borrowings outstanding under the term loans and an aggregate notional amount of $220.0 million on our interest rate swap contracts.
As of January 2, 2021, we had $255.9 million in borrowings outstanding under the revolving credit facility and $200.0 million in borrowings outstanding under the term loan.
As of December 31, 2022, we had $261.3 million in borrowings outstanding under the revolving credit facility, $175.0 million in borrowings outstanding under the term loan and an aggregate notional amount of $245.0 million on our interest rate swap contracts.
Removed
During the year ended January 1, 2022, we economically hedged certain foreign currency risks by entering into forward foreign exchange contracts. These contracts were not designated as hedging instruments for accounting purposes.
Added
Our operations in these countries are exposed to fluctuations in foreign currency rates primarily from payments received from customers, payments made to suppliers and loans denominated in foreign currencies. During the year ended December 30, 2023, we economically hedged certain foreign currency risks by entering into forward foreign exchange contracts.
Added
These contracts were not designated as hedging instruments for accounting purposes. A discussion of our accounting policies for derivative financial instruments is included within Notes 2 and 9 of the Notes to the Consolidated Financial Statements included in this Annual Report.

Other HLIO 10-K year-over-year comparisons