1. COMPANY BACKGROUND

Helios Technologies, Inc. (“Helios,” or the “Company”) together with 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 and health and wellness. Helios sells its products to customers in over 90 countries around the world. The Company’s strategy for growth is to be the leading provider in niche markets, with premier products and solutions through innovative product development and acquisitions.

The Company operates in 2two business segments: Hydraulics and Electronics. There are three key technologies within the Hydraulics segment: cartridge valve technology (“CVT”), quick-release hydraulic coupling solutions (“QRC”) and hydraulic system design (“Systems”). CVT products provide functions important to a hydraulic system: to control rates and direction of fluid flow and to regulate and control pressures. QRC products allow users to connect and disconnect quickly from any hydraulic circuit without leakage and ensure high-performance under high temperature and pressure using one or multiple couplers. Systems provide engineered solutions for machine users, manufacturers or designers to fulfill complete system design requirements including electro-hydraulic, remote control, electronic control and programmable logic controller systems, as well as automation of existing equipment. The Electronics segment provides complete, fully-tailored display and control solutions for engines, engine-driven equipment, specialty vehicles, therapy baths and traditional and swim spas. This broad range of products is complemented by extensive application expertise and unparalleled depth of software, embedded programming, hardware and sustaining engineering teams.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q. Accordingly, certain information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements are not included herein. The financial statements are prepared on a consistent basis (including normal recurring adjustments) and should be read in conjunction with the consolidated financial statements and related notes contained in the Annual Report on Form 10-K for the fiscal year ended January 1, 2022 (“Form 10-K”), filed by Helios with the Securities and Exchange Commission on March 1, 2022. In management’s opinion, all adjustments necessary for a fair presentation of the Company’s financial statements are reflected in the interim periods presented. Operating results for the ~~six~~nine months ended ~~July 2,~~October 1, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ended December 31, 2022.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

10

Earnings Per Share

The following table presents the computation of basic and diluted earnings per common share (in thousands, except per share data):


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021		October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Net income	$	30,036	$	30,694	$	60,514	$	53,282	$	20,378	$	27,760	$	80,892	$	81,042

Weighted average shares outstanding - Basic		32,497		32,237		32,468		32,215		32,541		32,385		32,493		32,272
Net effect of dilutive securities - Stock based compensation		44		125		98		155		44		154		104		165
Weighted average shares outstanding - Diluted		32,541		32,362		32,566		32,370		32,585		32,539		32,597		32,437

Net income per share:
Basic	$	0.92	$	0.95	$	1.86	$	1.65	$	0.63	$	0.86	$	2.49	$	2.51
Diluted	$	0.92	$	0.95	$	1.86	$	1.65	$	0.63	$	0.85	$	2.48	$	2.50

3. BUSINESS ACQUISITION

Acquisition of Daman

On September 16, 2022, the Company completed the acquisition of Daman Products Company, Inc. ("Daman"), an Indiana corporation. The acquisition was completed pursuant to a Membership Interest Purchase Agreement ("Agreement") among the Company and the owners of Daman.

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 expands the Company's technologies and markets and provides an opportunity to produce integrated package offerings with multiple Helios brands. The results of Daman’s operations are reported in the Company’s Hydraulics segment and have been included in the Consolidated, Unaudited Financial Statements since the date of acquisition.

Initial cash consideration paid at closing, net of cash acquired, totaled $64,331. Total consideration for the acquisition is subject to a post-closing adjustment in accordance with the terms of the Agreement. The consideration was funded with borrowings on the Company’s credit facility.

The Company recorded $24,891 of goodwill and $29,720 of other identifiable intangible assets in connection with the acquisition. The purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The fair value of identified intangibles assets acquired was based on estimates and assumptions made by management at the time of acquisition. As additional information becomes available, as of the acquisition date, management will finalize its analysis of the estimated fair value. The purchase price allocation is preliminary, pending post-closing adjustments, final intangibles valuation and tax related adjustments, and may be revised during the remainder of the measurement period (which will not exceed 12 months from the acquisition date). Any such revisions or changes to the fair values of the tangible and intangible assets acquired and liabilities assumed could be material.

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following tables provide information regarding the Company’s assets and liabilities measured at fair value on a recurring basis at ~~July 2,~~October 1, 2022 and January 1, 2022.


	July 2, 2022								October 1, 2022
			Quoted Market		Significant Other Observable		Significant Unobservable				Quoted Market		Significant Other Observable		Significant Unobservable
	Total		Prices (Level 1)		Inputs (Level 2)		Inputs (Level 3)		Total		Prices (Level 1)		Inputs (Level 2)		Inputs (Level 3)
Assets
Interest rate swap contracts	$	7,816	$	—	$	7,816	$	—	$	11,997	$	—	$	11,997	$	—
Forward foreign exchange contracts		2,570		—		2,570		—		3,048		—		3,048		—
Total	$	10,386	$	—	$	10,386	$	—	$	15,045	$	—	$	15,045	$	—
Liabilities
Forward foreign exchange contracts									$	73	$	—	$	73	$	—
Contingent consideration	$	7,499	$	—	$	—	$	7,499		6,305		—		—		6,305
Total	$	7,499	$	—	$	—	$	7,499	$	6,378	$	—	$	73	$	6,305


	January 1, 2022
			Quoted Market		Significant Other Observable		Significant Unobservable
	Total		Prices (Level 1)		Inputs (Level 2)		Inputs (Level 3)
Assets
Interest rate swap contract	$	1,521	$	—	$	1,521	$	—
Forward foreign exchange contracts		1,040		—		1,040		—
Total	$	2,561	$	—	$	2,561	$	—
Liabilities
Interest rate swap contract	$	3,248	$	—	$	3,248	$	—
Forward foreign exchange contracts		51		—		51		—
Contingent consideration		6,400		—		—		6,400
Total	$	9,699	$	—	$	3,299	$	6,400

1112

A summary of the changes in the estimated fair value of contingent consideration at ~~July 2,~~October 1, 2022 is as follows:


Balance at January 1, 2022	$	6,400		$	6,400
Change in estimated fair value		1,323			1,244
Payment on liability					(1,082	)
Accretion in value		94			249
Currency remeasurement		(318	)		(506	)
Balance at July 2, 2022	$	7,499
Balance at October 1, 2022				$	6,305

4.5. INVENTORIES, NET

At ~~July 2,~~October 1, 2022 and January 1, 2022, inventory consisted of the following:


	July 2, 2022			January 1, 2022			October 1, 2022			January 1, 2022
Raw materials	$	100,491		$	90,487		$	105,018		$	90,487
Work in process		40,852			34,713			46,275			34,713
Finished goods		47,896			50,638			38,038			50,638
Provision for obsolete and slow moving inventory		(10,361	)		(10,209	)
Provision for obsolete and slow-moving inventory								(9,613	)		(10,209	)
Total	$	178,878		$	165,629		$	179,718		$	165,629

5.6. OPERATING LEASES

The Company leases machinery, equipment, vehicles, buildings and office space, throughout its locations, ~~that~~which are classified as operating leases. Remaining terms on these leases range from less than one year to nine years. For the ~~six~~nine months ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021, operating lease costs totaled $~~3,409~~5,105 and $~~2,820~~4,316, respectively.

Supplemental balance sheet information related to operating leases is as follows:


	July 2, 2022			January 1, 2022		October 1, 2022			January 1, 2022
Right-of-use assets	$	19,968		$	22,776	$	18,426		$	22,776
Lease liabilities:
Current lease liabilities	$	5,044		$	5,823	$	4,599		$	5,823
Non-current lease liabilities		15,964			17,940		14,883			17,940
Total lease liabilities	$	21,008		$	23,763	$	19,482		$	23,763

Weighted average remaining lease term (in years):		5.0					5.0
Weighted average discount rate:		4.6	%				4.5	%

Supplemental cash flow information related to leases is as follows:


	Six Months Ended				Nine Months Ended
	July 2, 2022		July 3, 2021		October 1, 2022		October 2, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,476	$	2,783	$	5,205	$	4,357
Non-cash impact of new leases and lease modifications	$	826	$	2,022	$	977	$	5,209

1213

Maturities of lease liabilities are as follows:


2022 Remaining	$	3,336		$	1,658
2023		4,903			4,897
2024		4,262			4,247
2025		3,916			3,933
2026		3,256			3,271
2027		1,364			1,341
Thereafter		2,918			2,753
Total lease payments		23,955			22,100
Less: Imputed interest		(2,947	)		2,618
Total lease obligations		21,008			19,482
Less: Current lease liabilities		(5,044	)		4,599
Non-current lease liabilities	$	15,964		$	14,883

6.7. GOODWILL AND INTANGIBLE ASSETS

Goodwill

A summary of changes in goodwill by segment for the ~~six~~nine months ended ~~July 2,~~October 1, 2022, is as follows:


	Hydraulics			Electronics			Total			Hydraulics			Electronics			Total
Balance at January 1, 2022	$	273,665		$	186,271		$	459,936		$	273,665		$	186,271		$	459,936
Measurement period adjustment, Joyonway acquisition		0			66			66			—			66			66
Measurement period adjustment, NEM acquisition		(37	)		0			(37	)		(37	)		—			(37	)
Acquisition of Taimi											260			—			260
Acquisition of Daman											24,891			—			24,891
Currency translation		(22,507	)		(178	)		(22,685	)		(37,611	)		(365	)		(37,976	)
Balance at July 2, 2022	$	251,121		$	186,159		$	437,280
Balance at October 1, 2022										$	261,168		$	185,972		$	447,140

Acquired Intangible Assets

At ~~July 2,~~October 1, 2022 and January 1, 2022, intangible assets consisted of the following:


	July 2, 2022							January 1, 2022							October 1, 2022							January 1, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Definite-lived intangibles:
Trade names and brands	$	80,210	$	(16,150	)	$	64,060	$	83,443	$	(15,216	)	$	68,227	$	85,184	$	(16,859	)	$	68,325	$	83,443	$	(15,216	)	$	68,227
Non-compete agreements		2,149		(403	)		1,746		3,218		(1,092	)		2,126		2,025		(506	)		1,519		3,218		(1,092	)		2,126
Technology		48,428		(18,542	)		29,886		50,425		(16,729	)		33,696		49,292		(19,563	)		29,729		50,425		(16,729	)		33,696
Supply agreement		21,000		(11,725	)		9,275		21,000		(10,675	)		10,325		21,000		(12,250	)		8,750		21,000		(10,675	)		10,325
Customer relationships		319,415		(47,960	)		271,455		336,809		(43,488	)		293,321		332,808		(49,476	)		283,332		336,809		(43,488	)		293,321
Sales order backlog																720		—			720		1,023		(1,023	)		—
Workforce		6,077		(1,621	)		4,456		6,077		(1,013	)		5,064		6,077		(1,924	)		4,153		6,077		(1,013	)		5,064
	$	477,279	$	(96,401	)	$	380,878	$	500,972	$	(88,213	)	$	412,759	$	497,106	$	(100,578	)	$	396,528	$	501,995	$	(89,236	)	$	412,759

1314

Amortization expense on acquired intangible assets for the ~~six~~nine months ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021, was $~~13,780~~20,554 and $~~17,878~~25,285, respectively. Future estimated amortization expense is presented below.


Year:
2022 Remaining	$	13,471	$	7,443
2023		26,907		28,655
2024		26,252		27,640
2025		26,057		27,456
2026		24,277		25,704
2027		21,003		22,431
Thereafter		242,911		257,199
Total	$	380,878	$	396,528

7.8. DERIVATIVE INSTRUMENTS & HEDGING ACTIVITIES

The Company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments and hedging activities.

The fair value of the Company’s derivative financial instruments included in the Consolidated Balance Sheets is presented as follows:


	Asset Derivatives					Liability Derivatives					Asset Derivatives					Liability Derivatives
	Balance Sheet	Fair Value (1)		Fair Value (1)		Balance Sheet	Fair Value (1)		Fair Value (1)		Balance Sheet	Fair Value (1)		Fair Value (1)		Balance Sheet	Fair Value (1)		Fair Value (1)
	Location	July 2, 2022		January 1, 2022		Location	July 2, 2022		January 1, 2022		Location	October 1, 2022		January 1, 2022		Location	October 1, 2022		January 1, 2022
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:										Derivatives designated as hedging instruments:
Interest rate swap contracts	Other assets	$	7,816	$	1,521	Other non-current liabilities	$	0	$	3,248	Other assets	$	11,997	$	1,521	Other non-current liabilities	$	—	$	3,248
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:										Derivatives not designated as hedging instruments:
Forward foreign exchange contracts	Other current assets		2,030		866	Other current liabilities		0		51	Other current assets		2,625		866	Other current liabilities		73		51
Forward foreign exchange contracts	Other assets		540		174	Other non-current liabilities		0		0	Other assets		423		174	Other non-current liabilities		—		—
Total derivatives		$	10,386	$	2,561		$	0	$	3,299		$	15,045	$	2,561		$	73	$	3,299
(1) See Note 3 for information regarding the inputs used in determining the fair value of derivative assets and liabilities.
(1) See Note 4 for information regarding the inputs used in determining the fair value of derivative assets and liabilities.											(1) See Note 4 for information regarding the inputs used in determining the fair value of derivative assets and liabilities.

The amount of gains and losses related to the Company’s derivative financial instruments for the ~~six~~nine months ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021, are presented as follows:


		Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)				Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings (Effective Portion)							Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives (Effective Portion)				Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Earnings (Effective Portion)
		July 2, 2022		July 3, 2021		into Earnings (Effective Portion)	July 2, 2022			July 3, 2021				October 1, 2022		October 2, 2021		into Earnings (Effective Portion)	October 1, 2022			October 2, 2021
Derivatives in cash flow hedging relationships:	Derivatives in cash flow hedging relationships:												Derivatives in cash flow hedging relationships:
Interest rate swap contracts		$	9,545	$	2,906	Interest expense, net	$	(1,767	)	$	(2,170	)		$	13,726	$	3,718	Interest expense, net	$	(1,447	)	$	(3,137	)

Interest expense presented in the Consolidated Statements of Operations, in which the effects of cash flow hedges are recorded, totaled $~~7,621~~11,719 and $~~9,151~~12,965 for the ~~six~~nine months ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021, respectively.

1415

Amount of Gain or (Loss) Recognized
in Earnings on Derivatives

Location of Gain or (Loss) Recognized

Amount of Gain or (Loss) Recognized
in Earnings on Derivatives

Location of Gain or (Loss) Recognized

July 2, 2022

July 3, 2021

in Earnings on Derivatives

October 1, 2022

October 2, 2021

in Earnings on Derivatives

Derivatives not designated as hedging instruments:

Forward foreign exchange contracts

$

4,203

$

1,909

Foreign currency transaction gain loss, net

$

6,433

$

3,401

Foreign currency transaction gain / loss, net

Interest Rate Swap Contracts

The Company has entered into interest rate swap transactions to hedge the variable interest rate payments on its credit facilities. In connection with the transactions, the Company pays interest based upon a fixed rate as agreed upon with the respective counterparties and receives variable rate interest payments based on the one-month LIBOR. The interest rate swaps are designated as hedging instruments and are accounted for as cash flow hedges. The aggregate notional amount of the swaps was $~~270,000~~245,000 as of ~~July 2,~~October 1, 2022. The notional amount decreases periodically through the dates of expiration in April 2023 and October 2025. The contracts are settled with the respective counterparties on a net basis at each settlement date.

Forward Foreign Exchange Contracts

The Company has entered into forward contracts to economically hedge translational and transactional exposure associated with various business units whose local currency differs from the Company’s reporting currency. The Company’s forward contracts are not designated as hedging instruments for accounting purposes.

At ~~July 2,~~October 1, 2022, the Company had 7seven forward foreign exchange contracts with an aggregate notional value of €~~33,000~~27,500, maturing at various dates through ~~December 2023~~March 2024.

Net Investment Hedge

The Company utilizes foreign currency denominated debt to hedge currency exposure in foreign operations. The Company has designated €90,000 of borrowings on the revolving credit facility as a net investment hedge of a portion of the Company’s European operations. The carrying value of the euro denominated debt totaled $~~93,827~~88,193 as of ~~July 2,~~October 1, 2022 and is included in the Revolving line of credit line item in the Consolidated Balance Sheets. The gain on the net investment hedge recorded in accumulated other comprehensive income as part of the currency translation adjustment was $~~6,458~~10,868, net of tax, for the ~~six~~nine months ended ~~July 2,~~October 1, 2022.

8.9. CREDIT FACILITIES

Total long-term non-revolving debt consists of the following:


	Maturity Date	July 2, 2022		January 1, 2022		Maturity Date	October 1, 2022		January 1, 2022
Long-term non-revolving debt:
Term loan with PNC Bank	Oct 2025	$	182,500	$	190,000	Oct 2025	$	178,750	$	190,000
Term loans with Citibank	Various		10,859		12,416	Various		9,859		12,416
Other long-term debt	Various		26		90	Various		9		90
Total long-term non-revolving debt			193,385		202,506			188,618		202,506
Less: current portion of long-term non-revolving debt			19,157		18,125			18,897		18,125
Less: unamortized debt issuance costs			421		484			389		484
Total long-term non-revolving debt, net		$	173,807	$	183,897		$	169,332	$	183,897

Information on the Company’s revolving credit facilities is as follows:


		Balance				Available Credit					Balance				Available Credit
	Maturity Date	July 2, 2022		January 1, 2022		July 2, 2022		January 1, 2022		Maturity Date	October 1, 2022		January 1, 2022		October 1, 2022		January 1, 2022
Revolving line of credit with PNC Bank	Oct 2025	$	223,827	$	242,312	$	174,092	$	157,487	Oct 2025	$	267,693	$	242,312	$	130,788	$	157,487
Revolving line of credit with Citibank	May 2023		2,265		711		123		548	May 2023		1,593		711		658		548

1516

Future maturities of total debt are as follows:


Year:
2022 Remaining	$	10,227	$	5,395
2023		20,873		20,531
2024		24,551		24,285
2025		363,826		407,693
Total	$	419,477	$	457,904

Term Loan and Line of Credit with PNC Bank

The Company has a credit agreement that includes a revolving line of credit and term loan credit facility with PNC Bank, National Association, as administrative agent, and the lenders party thereto. The revolving line of credit allows for borrowings up to an aggregate maximum principal amount of $400,000.

To hedge currency exposure in foreign operations, €90,000 of the borrowings on the line of credit are denominated in euros. The borrowings have been designated as a net investment hedge, see additional information in Note 7.8.

The effective interest rate on the credit agreement at ~~July 2,~~October 1, 2022 was ~~3.25~~4.6%. Interest expense recognized on the credit agreement during the ~~six~~nine months ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021, totaled $~~5,612~~9,818 and $~~6,842~~9,631, respectively. As of the date of this filing, the Company was in compliance with all debt covenants related to the credit agreement.

Term Loans and Line of Credit with Citibank

The Company has an uncommitted fixed asset facility agreement (the “Fixed Asset Facility”), short-term revolving facility agreement (the “Working Capital Facility”) and term loan facility agreement (the "Shanghai Branch Term Loan Facility") with Citibank (China) Co., Ltd. Shanghai Branch, as lender.

Under the Fixed Asset Facility, the Company ~~may, from time-to-time for a period of~~ ~~180~~ ~~days, borrow amounts~~borrowed on a secured basis ~~up to a total of~~ RMB ~~6,000~~2,614. The proceeds of ~~such loans may be~~the loan were used for purchases of certain equipment. Outstanding borrowings under the Fixed Asset Facility accrue interest at a rate equal to the National Interbank Funding Center 1-year loan prime rate plus ~~1.50%~~1.5%, to be repaid on a specified schedule. Currently drawn funds have a final payment due in May 2023.

Under the Working Capital Facility, the Company may, from time-to-time, borrow amounts on an unsecured revolving facility up to a total of RMB 16,000. Proceeds may only be used for expenditures related to production at the Company’s facility located in Kunshan City, China. Outstanding borrowings under the Working Capital Facility accrue interest at a rate equal to the National Interbank Funding Center 1-year loan prime rate plus ~~0.50%~~0.5%. All outstanding balances will be due in May 2023.

Under the Shanghai Branch Term Loan Facility, the Company borrowed on a secured basis RMB 42,653. Outstanding borrowings under the Shanghai Branch Term Loan Facility accrue interest at a rate equal to the National Interbank Funding Center 1-year loan prime rate plus ~~1.50~~1.5%, to be repaid on a specified schedule with the final payment due in October 2024.

The Company has a term loan facility agreement (the “Sydney Branch Term Loan Facility”) with Citibank, N.A., Sydney Branch, as lender. Under the Sydney Branch Term Loan Facility, the Company borrowed on a secured basis AUD 7,500. Outstanding borrowings under the Sydney Branch Term Loan Facility accrue interest at a rate equal to the Australian Bank Bill Swap Reference Rate plus ~~2.00%~~2.0%, to be repaid throughout the term of the loan with a final payment due date of December 2024.

As of the date of this filing, the Company was in compliance with all debt covenants related to the Fixed Asset Facility, Working Capital Facility and Term Loan Facilities.

9.10. INCOME TAXES

The provision for income taxes for the three months ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021 was ~~22.5~~23.6% and ~~17.6~~25.5% of pretax income, respectively. The provision for income taxes for the ~~six~~nine months ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021 was ~~22.4~~22.7% and ~~20.1~~22.0% of pretax income, respectively. These effective rates fluctuate relative to the levels of income and different tax rates in effect among the countries in which the Company sells products.

At ~~July 2,~~October 1, 2022, the Company had an unrecognized tax benefit of $~~10,137~~8,352 including accrued interest. If recognized, $~~2,072~~2,110 of unrecognized tax benefit would reduce the effective tax rate in future periods. The Company recognizes interest and penalties related to income tax matters in income tax expense. Interest accrued as of ~~July 2,~~October 1, 2022 is not considered material to the Company’s Consolidated, Unaudited Financial Statements.

The Company remains subject to income tax examinations in the U.S. and various state and foreign jurisdictions for tax years 2009-2021. Although the Company is not currently under examination in most jurisdictions, limited transfer pricing disputes exist for years dating back to 2008. The Company does not expect to recognize any benefit within the next 12 months due to the expiration of statutes of limitation.

~~10.~~ 11. STOCK-BASED COMPENSATION

Equity Incentive Plan

The Company’s 2019 Equity Incentive Plan ("2019 Plan") and its predecessor equity plan provide for the grant of shares of restricted stock, restricted stock units, stock options, stock appreciation rights, dividend or dividend equivalent rights, stock awards and other awards valued in whole or in part by reference to or otherwise based on the Company’s common stock, to officers, employees and directors of the Company.

Restricted Stock Units

The Company grants restricted stock units (“RSUs”) to employees in connection with a long-term incentive plan. Awards with time-based vesting requirements primarily vest ratably over a three-year period. Awards with performance-based vesting requirements cliff vest after a three-year performance cycle and only after the achievement of certain performance criteria over that cycle. The number of shares ultimately issued for the performance-based units may vary from 0% to 200% of their target amount based on the achievement of defined performance targets. Compensation expense recognized for RSUs granted to employees totaled $~~3,978~~5,566 and $~~2,796~~4,168, respectively, for the ~~six~~nine months ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021.

Effective January 1, 2022, the board terminated the 2012 Non-Employee Director Fees Plan (the “2012 Directors Plan”) and approved a new Helios Technologies, Inc. Non-Employee Director Compensation Policy (the “Director Compensation Policy”), which revised the compensation for Non-Employee Directors. The Director Compensation Policy compensates Non-Employee Directors for their board service with cash awards and equity-based compensation through grants of RSUs, issued pursuant to the 2019 Plan, which vest over a ~~one year~~one-year period. Directors were granted ~~7,580~~13,137 RSUs during the ~~six~~nine months ended ~~July 2,~~October 1, 2022. The Company recognized director stock compensation expense on the RSUs of $~~139~~266 for the ~~six~~nine months ended ~~July 2,~~October 1, 2022. Directors were granted ~~14,250~~20,375 shares of stock and the Company recognized director stock compensation expense of $~~1,043~~1,586 for the ~~six~~nine months ended ~~July 3,~~October 2, 2021, under the 2012 Directors Plan.

18

The following table summarizes RSU activity for the ~~six~~nine months ended ~~July 2,~~October 1, 2022:

Weighted Average

Number of Units

Grant-Date

(in thousands)

Fair Value per Share

Nonvested balance at January 1, 2022

237

$
45.58

Granted

96

95.29

Vested

(107
)

43.50

Forfeited

(11
)

67.18

Nonvested balance at July 2, 2022 (1)

215

$
67.79

17


				Weighted Average
	Number of Units			Grant-Date
	(in thousands)			Fair Value per Share
Nonvested balance at January 1, 2022		237		$	45.58
Granted		102			92.41
Vested		(109	)		43.79
Forfeited		(14	)		66.84
Nonvested balance at October 1, 2022 (1)		216		$	67.26

(1) Includes ~~106,639~~106,221 nonvested performance-based RSUs.

The Company had $~~11,269~~9,656 of total unrecognized compensation cost related to the RSU awards as of ~~July 2,~~October 1, 2022. That cost is expected to be recognized over a weighted average period of ~~2.0~~1.8 years.

Stock Options

In ~~2020 and 2021,~~2022, the Company granted stock options with market-based vesting conditions to its officers. As of ~~July 2,~~October 1, 2022, there were 82,500 unvested options and no vested unexercised options. The exercise price per share is $50.60, which is equal to the market price of Helios stock on the grant date. The options vest after achievement of defined stock prices and after the required service periods, which range from one to three years. These options have a 10-year expiration. The grant date fair value of the options totaled $2,334 and was estimated using a Monte Carlo simulation.

The Company has also granted stock options with only time-based vesting conditions to its officers. As of October 1, 2022, there were 13,222 unvested options and 11,011 vested unexercised options. The exercise prices per share, which range from $35.04 to $~~55.30~~55.03, are equal to the market price of Helios stock on the respective grant dates. The options vest ratably over a three-year period and have a 10-year expiration. The grant date fair value of the options was estimated using a Black Scholes valuation model.

At ~~July 2,~~October 1, 2022, the Company had $~~198~~2,495 of unrecognized compensation cost related to the options, which is expected to be recognized over a weighted average period of ~~1.5~~1.1 years.

Employee Stock Purchase Plans

The Company maintains an Employee Stock Purchase Plan (“ESPP”) in which U.S. employees are eligible to participate. Employees who choose to participate are granted an opportunity to purchase common stock at 85 percent of market value on the first or last day of the quarterly purchase period, whichever is lower. Employees in the United Kingdom (“UK”), under a separate plan, are granted an opportunity to purchase the Company’s common stock at market value, on the first or last day of the quarterly purchase period, whichever is lower, with the Company issuing one additional free share of common stock for each 6six shares purchased by the employee under the plan. Employees purchased ~~17,076~~28,960 shares at a weighted average price of $~~62.05~~54.29, and ~~14,918~~22,747 shares at a weighted average price of $~~53.37~~57.93, under the ESPP and UK plans during the ~~six~~nine months ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021, respectively. The Company recognized $~~183~~272 and $~~311~~431 of compensation expense during the ~~six~~nine months ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021, respectively.

19

~~11.~~12. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables present changes in accumulated other comprehensive loss by component:

Unrealized
Gains and
(Losses) on
Derivative Instruments

Foreign
Currency
Items

Total

Balance at January 1, 2022

$
(1,334
)

$
(47,655
)

$
(48,989
)
Other comprehensive income (loss) before reclassifications

10,907

(34,471
)

(23,564
)
Amounts reclassified from accumulated other comprehensive loss, net of tax

(1,362
)

—

(1,362
)
Tax effect

(2,280
)

7,599

5,319

Net current period other comprehensive income (loss)

7,265

(26,872
)

(19,607
)
Balance at July 2, 2022

$
5,931

$
(74,527
)

$
(68,596
)

Unrealized
Gains and
(Losses) on
Derivative Instruments

Foreign
Currency
Items

Total

Balance at January 2, 2021

$
(5,922
)

$
(28,418
)

$
(34,340
)
Other comprehensive income (loss) before reclassifications

4,534

(8,447
)

(3,913
)
Amounts reclassified from accumulated other comprehensive loss, net of tax

(1,628
)

—

(1,628
)
Tax effect

(664
)

1,760

1,096

Net current period other comprehensive income (loss)

2,242

(6,687
)

(4,445
)
Balance at July 3, 2021

$
(3,680
)

$
(35,105
)

$
(38,785
)

18


	Unrealized Gains and (Losses) on Derivative Instruments			Foreign Currency Items			Total
Balance at January 1, 2022	$	(1,334	)	$	(47,655	)	$	(48,989	)
Other comprehensive income (loss) before reclassifications		14,841			(59,695	)		(44,854	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		(1,115	)		—			(1,115	)
Tax effect		(3,221	)		12,642			9,421
Net current period other comprehensive income (loss)		10,505			(47,053	)		(36,548	)
Balance at October 1, 2022	$	9,171		$	(94,708	)	$	(85,537	)

	Unrealized Gains and (Losses) on Derivative Instruments			Foreign Currency Items			Total
Balance at January 2, 2021	$	(5,922	)	$	(28,418	)	$	(34,340	)
Other comprehensive income (loss) before reclassifications		6,071			(17,944	)		(11,873	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		(2,353	)		—			(2,353	)
Tax effect		(853	)		3,729			2,876
Net current period other comprehensive income (loss)		2,865			(14,215	)		(11,350	)
Balance at October 2, 2021	$	(3,057	)	$	(42,633	)	$	(45,690	)

~~12.~~13. SEGMENT REPORTING

The Company has 2two reportable segments: Hydraulics and Electronics. These segments are organized primarily based on the similar nature of products offered for sale, the types of customers served and the methods of distribution and are consistent with how the segments are managed, how resources are allocated and how information is used by the chief operating decision makers.

The Company evaluates performance and allocates resources based primarily on segment operating income. Certain costs were not allocated to the business segments as they are not used in evaluating the results of, or in allocating resources to the Company’s segments. These costs are presented in the Corporate and other line item. For the ~~six~~nine months ended ~~July 2,~~October 1, 2022, the unallocated costs totaled $~~17,638~~27,270 and included certain corporate costs not deemed to be allocable to either business segment of $348, amortization of acquisition-related intangible assets of $~~13,780~~20,554 and other acquisition and integration-related costs of $~~3,510~~6,368. The accounting policies of the Company’s operating segments are the same as those used to prepare the accompanying Consolidated, Unaudited Financial Statements.

20

The following table presents financial information by reportable segment:


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	July 2, 2022			July 3, 2021			July 2, 2022			July 3, 2021			October 1, 2022			October 2, 2021			October 1, 2022			October 2, 2021
Net sales
Hydraulics	$	142,807		$	133,039		$	279,913		$	252,145		$	131,204		$	133,404		$	411,118		$	385,549
Electronics		98,861			90,374			202,302			176,113			76,001			89,837			278,302			265,950
Total	$	241,668		$	223,413		$	482,215		$	428,258		$	207,205		$	223,241		$	689,420		$	651,499
Operating income
Hydraulics	$	31,053		$	32,328		$	62,686		$	60,401		$	29,411		$	31,799		$	92,097		$	92,200
Electronics		20,292			19,599			40,815			37,879			10,964			18,445			51,778			56,324
Corporate and other		(8,368	)		(9,865	)		(17,638	)		(21,609	)		(9,632	)		(9,495	)		(27,270	)		(31,103	)
Total	$	42,977		$	42,062		$	85,863		$	76,671		$	30,743		$	40,749		$	116,605		$	117,421
Capital expenditures
Hydraulics	$	5,336		$	3,383		$	8,315		$	6,018		$	5,584		$	4,187		$	13,899		$	10,205
Electronics		2,501			1,886			5,152			4,287			2,865			2,562			8,017			6,849
Total	$	7,837		$	5,269		$	13,467		$	10,305		$	8,449		$	6,749		$	21,916		$	17,054


	July 2, 2022		January 1, 2022		October 1, 2022		January 1, 2022
Total assets
Hydraulics	$	794,238	$	821,836	$	822,548	$	821,836
Electronics		592,474		585,739		574,606		585,739
Corporate		18,952		7,771		22,413		7,771
Total	$	1,405,664	$	1,415,346	$	1,419,567	$	1,415,346

Geographic Region Information

Net sales are measured based on the geographic destination of sales. Tangible long-lived assets are shown based on the physical location of the assets and primarily include net property, plant and equipment and exclude right-of-use assets.


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021		October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
Net sales
Americas	$	130,149	$	105,762	$	250,951	$	205,104	$	114,659	$	109,365	$	365,610	$	314,469
EMEA		61,324		57,629		126,027		110,231		49,012		55,952		175,039		166,183
APAC		50,195		60,022		105,237		112,923		43,534		57,924		148,771		170,847
Total	$	241,668	$	223,413	$	482,215	$	428,258	$	207,205	$	223,241	$	689,420	$	651,499

19


	July 2, 2022		January 1, 2022		October 1, 2022		January 1, 2022
Tangible long-lived assets
Americas	$	98,194	$	97,649	$	105,571	$	97,649
EMEA		33,840		35,829		30,632		35,829
APAC		16,858		17,956		16,694		17,956
Total	$	148,892	$	151,434	$	152,897	$	151,434

~~13.~~14. RELATED PARTY TRANSACTIONS

The Company purchases from, and sells inventory to, entities partially owned or managed by directors of Helios. For the ~~six~~nine months ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021, inventory sales to the entities totaled $~~1,556~~2,146 and $~~1,502~~2,516, respectively, and inventory purchases from the entities totaled $0 and $~~3,229~~3,221, respectively.

At ~~July 2,~~October 1, 2022 and January 1, 2022, amounts due from the entities totaled $~~373~~307 and $344, respectively.

21

In March 2022, the Company completed a sale of real estate to one of its executive officers for $1,850, which sale price was based on the valuation from an independent third-party appraisal. Concurrent with the sale, the Company also purchased real estate from the executive officer for $970, which purchase price reflected a below market valuation based on the original cost of the property to the executive officer, plus the cost of improvements funded by the executive officer.

~~14.~~15. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

The Company is not a party to any legal proceedings other than routine litigation incidental to its business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the results of operations, financial position or cash flows of the Company.

2022

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The words "expects," "anticipates," "believes," "intends," "plans," "will" and similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this Form 10-Q with the Securities and Exchange Commission. These forward-looking statements are subject to risks and uncertainties, including, without limitation, those discussed in this report and those identified in Part I, Item 1A, "Risk Factors" included in our Form 10-K. In addition, new risks emerge from time to time, and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. Accordingly, our future results may differ materially from historical results or from those discussed or implied by these forward-looking statements. Given these risks and uncertainties, the reader should not place undue reliance on these forward-looking statements.

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. 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.

In November 2016, we announced a vision to achieve $1.0 billion in sales in 2025, through a combination of organic growth and acquisitions, and to deliver operating margins in excess of 20%. In 2021, we augmented our strategy and accelerated our growth plans to achieve the milestone of over $1.0 billion in sales with top tier adjusted EBITDA margin of approximately 25% in 2023.

Underpinning our expectation of compounded annual growth of approximately two times our market's growth rates, we have an active acquisition pipeline and a history of acquiring companies with niche technologies, as well as strong profitability.

Recent Acquisitions

Our acquisition activity, driven by our strategic vision, has enabled us to diversify our product offerings and the markets we serve and expand our geographic presence. Prior to 2016, we operated primarily in the Hydraulics market with a small presence in electronics.

In January 2021, we acquired all of the assets of BJN Technologies, LLC, an innovative engineering solutions provider that was founded in 2014. With the acquisition, we formed the Helios Center of Engineering Excellence to centralize our innovation and technology advancements to better leverage existing talents across the electronics segment initially, and then throughout all of Helios.

In July 2021, we completed another flywheel acquisition with 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. NEM enhances the Helios electro-hydraulic product offering, provides geographic expansion and adds scale to address new markets.

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"). 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. This provides us a foothold for electronics manufacturing in Asia.

21

In July 2022, we completed the acquisition of the assets of Taimi R&D, Inc., a Canadian manufacturer of innovative hydraulic components that offer 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. 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. 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 expands the Company's technologies and markets and provides an opportunity to produce integrated package offerings with multiple Helios brands.

23

Global Economic Conditions

Russian Invasion of Ukraine

In February of 2022, Russia invaded Ukraine. As a result, several governments have enacted sanctions against Russia and Russian interests. The conflict has led to economic uncertainty and market disruptions, including significant volatility in commodity, fuel and energy prices as well as in credit and capital markets. We do not have operations in the region, and less than 1% of our sales are to Russia and Ukraine customers. In Europe, we continue to experience inflation from: increased energy and raw material costs, logistics issues and reduced orders from customers who do business in the region. The broader consequences of the conflict could impact our business through further increases or fluctuations in commodity and energy prices, further disruptions to the global supply chain, reduced availability of certain natural resources and other adverse effects on macroeconomic conditions.

COVID-19 Update

~~We continue to experience impacts~~In the third quarter we did not have any COVID-related shutdowns or other significant new disruption to our ~~operations~~business from the ~~effects of the COVID-19~~ pandemic. Most recently, 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. The shut down of our locations and our customers' locations impacted operations and sales through May. Recovery occurred in June as the lockdowns were lifted. We are monitoring the most recent new variant but to date have not been impacted by new lock down measures.

WeHowever, we continue to face constraints related to sourcing certain electronic and other components, which originated from the high demand for these products caused by the pandemic. We have been able to mitigate the impact with our procurement efforts, production schedule adjustments and product redesigns. While at a slowing degree, in the ~~second~~third quarter we continued to experience delays in shipments as well as material and logistics cost increases.

We are also facing some disruption to our workforce from the pandemic. While the impact has not been significant, the absenteeism has caused labor inefficiencies in production. The Omicron variant impacted 2021 fourth quarter labor efficiency, and we continued to experience the effects through January 2022. During the second quarter the disruption primarily occurred in our European operations. 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.

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. At this time, we do not believe there will be a material impact on our operations due to these requirements.

Our outlook for the remainder of the 2022 fiscal year assumes the global economy continues to recover; however, we cannot at this time predict any future impacts. 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. Refer to Item 1A "Risk Factors" of our Form 10-K for additional COVID-19 related discussion.

22

~~Russian Invasion of Ukraine~~

In February of 2022, Russia invaded Ukraine. As a result, several governments have enacted sanctions against Russia and Russian interests. The conflict has led to economic uncertainty and market disruptions, including significant volatility in commodity, fuel and energy prices as well as in credit and capital markets. We do not have operations in the region, and less than 1% of our sales are to Russia and Ukraine customers. In Europe, we are experiencing increased energy and raw material costs, logistics issues and reduced orders from customers who do business in the region. The broader consequences of the conflict could impact our business through increased inflation, further increases or fluctuations in commodity and energy prices, further disruptions to the global supply chain, reduced availability of certain natural resources and other adverse effects on macroeconomic conditions.

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. 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 macroeconomic conditions.

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 ~~18.2%~~19.9% during the first ~~half~~nine months of 2022, after increasing 20.9% during 2021. In Europe, the CEMA Business Barometer ~~reports~~reported in October that the general business climate index for the European agricultural machinery industry has ~~risen slightly for~~continued its sideways movement at a positive level after the ~~first time since its~~ sharp ~~decline~~declines in the course of the Russian war against Ukraine and ~~expectations for the coming six months have improved again.~~current business appears to remain stable. Further noted was the price increases and bottlenecks on the supplier side that continue to challenge the industry, ~~and~~for which some companies are planning temporary production stops due to shortages. The Committee for European Construction Equipment (“CECE”) business climate index reports that the index has gone down for the fifth consecutive month, andslight easing is ~~now at levels last seen at the end of 2020. Further noted was that the industry backlog remains high but new order intake is no longer growing.~~observable.

24

Electronics

The Federal Reserve’s Industrial Production Index, which measures the real output of all relevant establishments located in the U.S., reports ~~second~~third quarter 2022 sales of semiconductors and other electronics components ~~declined~~improved over the ~~first~~second quarter of 2022 ~~down~~back up to ~~third~~first quarter ~~2021~~2022 levels. The Institute of Printed Circuits Association (“IPC”) reported that total North American printed circuit board (“PCB”) shipments were up ~~17.1%~~14.6% in ~~June~~September 2022 compared with the same month last year; compared with ~~May~~August 2022, ~~June~~September shipments grew ~~26.3%~~17.9%. PCB year-to-date bookings were down 2.6% in September compared to the same period last year. However, September bookings increased 52.0% from August 2022. The IPC also reported that North American electronics manufacturing services (“EMS”) shipments were ~~down 7.6%~~up 15.5% in ~~June~~September 2022 compared with the same month last year; compared with ~~May~~August 2022, ~~June~~September shipments ~~grew 9.6%~~declined 0.1%. ~~Demand continues~~EMS bookings in September were up 21.1% compared to ~~exceed supply for both PCB~~September last year and ~~EMS products as the book-to-bill ratios were 1.03 and 1.39 in June, respectively, as reported by the ICP.~~improved 18.1% from August 2022. Further noted was improvement in bookings is a sign that demand for durable goods still has some life despite the slowing macroeconomic environment, and shipments ~~in the PCB sector are improving, suggesting~~remain healthy, which indicates that severe supply chain ~~challenges might be abating.~~constraints are behind us.

23

2022 ~~Second~~Third Quarter Results and Comparison of the Three and ~~Six~~Nine Months Ended ~~July 2,~~October 1, 2022 and ~~July 3,~~October 2, 2021

(in millions except per share data)


	Three Months Ended													Three Months Ended
	July 2, 2022			July 3, 2021			$ Change				% Change			October 1, 2022			October 2, 2021			$ Change			% Change
Net sales	$	241.7		$	223.4		$	18.3				8.2	%	$	207.2		$	223.2		$	(16.0	)		(7.2	)%
Gross profit	$	82.3		$	82.2		$	0.1				0.1	%	$	69.3		$	80.9		$	(11.6	)		(14.3	)%
Gross profit %		34.1	%		36.8	%				��					33.4	%		36.2	%
Operating income	$	43.0		$	42.1		$	0.9				2.1	%	$	30.7		$	40.7		$	(10.0	)		(24.6	)%
Operating income %		17.8	%		18.8	%									14.8	%		18.2	%
Net income	$	30.0		$	30.7		$	(0.7	)			(2.3	)%	$	20.4		$	27.8		$	(7.4	)		(26.6	)%
Diluted net income per share	$	0.92		$	0.95		$	(0.03	)			(3.2	)%	$	0.63		$	0.85		$	(0.22	)		(25.9	)%

	Six Months Ended													Nine Months Ended
	July 2, 2022			July 3, 2021			$ Change				% Change			October 1, 2022			October 2, 2021			$ Change			% Change
Net sales	$	482.2		$	428.3		$	53.9				12.6	%	$	689.4		$	651.5		$	37.9			5.8	%
Gross profit	$	166.0		$	157.5		$	8.5				5.4	%	$	235.2		$	238.5		$	(3.3	)		(1.4	)%
Gross profit %		34.4	%		36.8	%									34.1	%		36.6	%
Operating income	$	85.9		$	76.7		$	9.2				12.0	%	$	116.6		$	117.4		$	(0.8	)		(0.7	)%
Operating income %		17.8	%		17.9	%									16.9	%		18.0	%
Net income	$	60.5		$	53.3		$	7.2				13.5	%	$	80.9		$	81.0		$	(0.1	)		(0.1	)%
Diluted net income per share	$	1.86		$	1.65		$	0.21				12.7	%	$	2.48		$	2.50		$	(0.02	)		(0.8	)%

~~Second~~Third quarter consolidated net sales ~~grew $18.3~~declined $16.0 million, ~~8.2%~~7.2%, over the prior-year ~~second~~third quarter. ~~Acquisition growth accounted for $6.6~~We experienced organic net sales decline of $18.9 million, of8.5%, over the ~~increase, and we experienced solid organic~~prior-year third quarter, offset partially by acquisition growth of ~~$11.7 million, 5.2%.~~ $2.9 million. Discrete impacts to our third quarter organic sales compared to the prior year quarter are as follows:

•

Changes in foreign currency exchange rates - unfavorable by $8.2 million, 3.7%

•

Pricing changes - favorable by $8.1 million, 3.6%

•

Delayed sales due to supply chain constraints - unfavorable by an estimated $14.7 million

•

Hurricane Ian, which resulted in a shut-down of our Sarasota manufacturing location for multiple days - unfavorable by an estimated $5.3 million

Third quarter sales to the Americas region increased compared to the ~~second~~2021 third quarter, ~~of 2021, had an unfavorable impact on~~while sales for the quarter totaling $7.5 million, 3.4%, and earnings per share by $0.03. Price increases added $10.7 million to second quarter organic sales compared with the prior-year period. Organic sales improved in the Americas and Europe, the Middle East and Africa ("EMEA") regions compared to the ~~second~~EMEA and APAC regions declined. Demand for electronics products in our health and wellness end market has sharply declined from the prior year third quarter, ~~of 2021~~which was strengthened by ~~22.6%~~the pandemic as consumers invested in health and ~~7.5%, respectively; meanwhile, organic sales for the Asia Pacific ("APAC") region fell by 15.0%, all excluding effects of changes in foreign currency exchange rates.~~leisure products. Sales in several of our end markets improved over the ~~second~~third quarter of 2021, with ~~the industrial machinery, mobile equipment and~~our recreational end markets leading the ~~growth, while~~growth. Improvement was also realized in the ~~health~~industrial machinery and ~~wellness~~mobile equipment end ~~market started to contract.~~markets.

25

Consolidated net sales for the year-to-date period improved by ~~$53.9~~$37.9 million, ~~12.6%~~5.8%, compared with the prior-year period. Acquisition-related sales for the first ~~half~~three quarters of 2022 totaled ~~$13.8 million. Organic~~$16.7 million and organic sales were up ~~$40.1~~$21.2 million, ~~9.4%,~~3.3%. Discrete impacts to our year-to-date organic sales compared ~~with~~to the ~~first half of 2021.~~ prior year period are as follows:

•

Changes in foreign currency exchange rates ~~unfavorably impacted sales~~- unfavorable by $20.5 million, 3.1%

•

Pricing changes - favorable by $29.7 million, 4.6%

•

Supply chain constraints - same amount as noted above for the ~~first six months of 2022 compared~~third quarter

•

Hurricane Ian - same amount as noted above for the third quarter

Year-to-date sales to the first six months of 2021 by $12.2 million, 2.8%, and earnings per share by $0.05. Price increases added $20.4 million to the first six months of 2022 organic sales compared to the prior-year period. Organic sales improved in the Americas and EMEA regions increased compared to the ~~first six months of~~ 2021 ~~by 22.1% and 12.8%, respectively; meanwhile, organic~~comparable period, while sales ~~for~~to the APAC region ~~fell by 6.2%, all excluding the effects of changes in foreign currency exchange rates.~~declined. Sales growth in the year-to-date period was driven by the industrial machinery, mobile equipment, construction and recreational end ~~markets.~~markets while health and wellness contracted.

~~Gross~~Third quarter gross profit ~~remained fairly consistent in the second quarter of 2022 compared with~~decreased $11.6 million, 14.3%, over the prior-year ~~period despite both~~third quarter driven by lower volume and ~~pricing increases.~~unfavorable foreign currency partially offset by pricing. Changes in foreign currency exchange rates compared to the ~~second~~third quarter of 2021 reduced gross profit by ~~$2.2~~$2.1 million. Gross margin declined by ~~2.7~~2.8 percentage points compared with the prior-year ~~second~~third quarter, ~~driven~~impacted most significantly by higher raw material costs. While the majority of these costs were passed on to customers, the result of increasing sales with no additional profit is an unfavorable impact to margins. We are also experiencing higher energy costs in the EMEA region that further compressed margins. Material costs as a percentage of sales, excluding pricing changes and acquisition-related sales, increased by ~~3.9~~3.5 percentage points compared to the prior-year ~~second~~third quarter.

24

Gross profit for the first ~~six~~nine months of 2022 ~~increased $8.5~~decreased $3.3 million, ~~5.4%~~1.4%, compared with the same period of ~~2021,~~2021. While sales volumes were higher in the current year period, headwinds from ~~pricing~~inflation and ~~increased sales volume.~~foreign currency offset the gains. Changes in foreign currency exchange rates compared to the first ~~six~~nine months of 2021 reduced year-to-date gross profit by ~~$3.9~~$6.2 million. Gross margin declined ~~2.4~~2.5 percentage points over the prior-year period as pricing efforts did not recover the full margin to offset the impact of higher raw material and logistic costs. Material costs as a percentage of sales, excluding pricing changes and acquisition-related sales, increased in the year-to-date period by ~~4.1~~4.0 percentage points compared to the prior year-to-date period.

In the ~~second~~third quarter of 2022, we incurred ~~$1.7~~$1.8 million of costs related to our restructuring ~~costs within our Hydraulics segment.~~activities. The restructuring plans are expected to improve the global cost structure of the business. In the EMEA region, we ~~executed~~continued the execution of an operational restructure in our Hydraulics segment that ~~combined~~combines the manufacturing operations at two of our locations into one location. We are continuing our sales and research and development ("R&D") efforts in both locations in order to serve customers in the regions. In the APAC region, we ~~executed~~are executing an organizational restructure in our Hydraulics segment among several locations to align employee talent with the strategic operational goals of the Company. ~~The restructuring plans are expected to improve the global cost structure of the business.~~ We estimate annual cost savings in our Hydraulics segment will total $1.8 million. In our Electronics segment, we executed an organizational restructure to adjust our labor base in line with current demand levels. The restructuring costs ~~were primarily~~are comprised of recurring labor costs for ~~labor,~~employees who worked on projects, severance and other expenses associated with the manufacturing ~~relocation costs.~~relocation.

Operating income as a percentage of sales decreased ~~1.0~~3.4 percentage ~~point~~points to ~~17.8%~~14.8% in the ~~second~~third quarter of 2022 compared to the prior-year period. ~~Improved~~Gross margin level changes, our restructuring activities, increased acquisition and integration costs of $1.4 million and reduced leverage of our selling, engineering and administrative ("SEA") level fixed cost base on the ~~higher~~lower sales volume ~~was reduced by gross margin level changes, our restructuring activities and increased travel and marketing costs of $0.9 million.~~led to the erosion.

For the first ~~six~~nine months of 2022, operating income as a percentage of sales ~~remained fairly consistent~~decreased 1.1 percentage points to 16.9% compared to with the prior-year ~~period, decreasing 0.1 percentage points to 17.8%. Acquisition-related~~period. Partially offsetting the factors noted above, was acquisition-related amortization for the first ~~six~~nine months of 2022, which was lower than the prior-year period by ~~$4.1~~$4.7 million, primarily from the sales order backlog intangible acquired with the Balboa acquisition that was fully amortized in the second quarter of 2021.

26

SEGMENT RESULTS

Hydraulics

The following table sets forth the results of operations for the Hydraulics segment (in millions):


	Three Months Ended												Three Months Ended
	July 2, 2022			July 3, 2021			$ Change			% Change			October 1, 2022			October 2, 2021			$ Change			% Change
Net sales	$	142.8		$	133.0		$	9.8			7.4	%	$	131.2		$	133.4		$	(2.2	)		(1.6	)%
Gross profit	$	49.5		$	50.9		$	(1.4	)		(2.8	)%	$	46.5		$	50.2		$	(3.7	)		(7.4	)%
Gross profit %		34.7	%		38.3	%								35.4	%		37.6	%
Operating income	$	31.1		$	32.3		$	(1.2	)		(3.7	)%	$	29.4		$	31.8		$	(2.4	)		(7.5	)%
Operating income %		21.8	%		24.3	%								22.4	%		23.8	%

	Six Months Ended												Nine Months Ended
	July 2, 2022			July 3, 2021			$ Change			% Change			October 1, 2022			October 2, 2021			$ Change			% Change
Net sales	$	279.9		$	252.1		$	27.8			11.0	%	$	411.1		$	385.5		$	25.6			6.6	%
Gross profit	$	100.3		$	96.3		$	4.0			4.2	%	$	146.8		$	146.5		$	0.3			0.2	%
Gross profit %		35.8	%		38.2	%								35.7	%		38.0	%
Operating income	$	62.7		$	60.4		$	2.3			3.8	%	$	92.1		$	92.2		$	(0.1	)		(0.1	)%
Operating income %		22.4	%		24.0	%								22.4	%		23.9	%

~~Second~~Third quarter net sales for the Hydraulics segment ~~increased~~decreased by ~~$9.8~~$2.2 million, ~~7.4%~~1.6%, compared with the prior-year ~~second~~third quarter. We experienced organic net sales decline of $4.3 million, 3.2%, over the prior-year third quarter and acquisition growth of $2.1 million. Discrete impacts to our third quarter organic sales compared to the prior year quarter are as follows:

•

Changes in foreign currency exchange rates - unfavorable by $7.9 million, 5.9%

•

Pricing changes - favorable by $5.4 million, 4.0%

•

Delayed sales due to supply chain constraints - unfavorable by an estimated $6.6 million

•

Hurricane Ian, which resulted in a shut-down of our Sarasota manufacturing location for multiple days - unfavorable by an estimated $5.3 million

Year-to-date net sales grew by $25.6 million, 6.6%, compared with the 2021 comparable period. Acquisition-related sales accounted for ~~$5.7~~$14.2 million of the increase and sales from our organic businesses improved ~~$4.1~~$11.4 million, ~~3.1%~~3.0%. Discrete impacts to our year-to-date organic sales compared to the prior year period are as follows:

•

Changes in foreign currency exchange rates ~~compared to~~- unfavorable by $19.4 million, 5.0%

•

Pricing changes - favorable by $16.2 million, 4.2%

•

Supply chain constraints - same amount as noted above for the ~~second~~third quarter ~~of 2021, had an unfavorable impact on sales totaling $7.0 million. Price increases added $5.6 million to second~~

•

Hurricane Ian - same amount as noted above for the third quarter ~~organic sales compared with the prior-year second quarter.~~

Organic sales growth in the first three quarters of 2022 benefited from improved demand primarily in the Americas and EMEA regions, as well as in several of our end markets including the mobile and industrial equipment markets.

2527

Year-to-date net sales grew by $27.8 million, 11.0%, compared with the first half of 2021. Acquisition-related sales accounted for $12.1 million of the increase and sales from our organic businesses improved $15.7 million, 6.2%. Changes in foreign currency exchange rates unfavorably impacted sales for the first half of 2022 by $11.5 million compared with rates in effect during the same period of 2021. Price increases added $9.6 million to organic sales in the first half of 2022 compared with the prior-year period.

The segment’s supply chain continues to experience constraints on its ability to source certain components. While the effect on sales has been mitigated by our increased procurement efforts and production schedule adjustments, we estimate that approximately $6.0 million of sales were delayed into future quarters due to the supply shortages.

The following table presents net sales based on the geographic region of the sale for the Hydraulics segment (in millions):


	Three Months Ended										Three Months Ended
	July 2, 2022		July 3, 2021		$ Change			% Change			October 1, 2022		October 2, 2021		$ Change			% Change
Americas	$	49.9	$	41.7	$	8.2			19.7	%	$	49.7	$	45.2	$	4.5			10.0	%
EMEA		49.0		46.6		2.4			5.2	%		41.3		44.8		(3.5	)		(7.8	)%
APAC		43.9		44.7		(0.8	)		(1.8	)%		40.2		43.4		(3.2	)		(7.4	)%
Total	$	142.8	$	133.0							$	131.2	$	133.4

	Six Months Ended										Nine Months Ended
	July 2, 2022		July 3, 2021		$ Change			% Change			October 1, 2022		October 2, 2021		$ Change			% Change
Americas	$	93.1	$	76.0	$	17.1			22.5	%	$	142.7	$	121.2	$	21.5			17.7	%
EMEA		101.9		89.9		12.0			13.3	%		143.2		134.7		8.5			6.3	%
APAC		84.9		86.2		(1.3	)		(1.5	)%		125.2		129.6		(4.4	)		(3.4	)%
Total	$	279.9	$	252.1							$	411.1	$	385.5

~~Demand~~Regional sales performance in the ~~Americas region improved during the second~~third quarter ~~of 2022~~ compared to the ~~prior-year second~~prior year quarter ~~and, including pricing impacts, sales increased 19.7%. Improved~~was driven by:

Americas - demand, pricing and our recent ~~acquisition~~acquisitions contributed to a 10.0% increase in sales

EMEA - excluding unfavorable changes in foreign currency rates of $6.3 million, sales improved 6.3%, primarily from pricing

APAC - excluding unfavorable changes in foreign currency rates of $1.6 million, sales declined 3.7%, driven by lower demand in Korea and China

Regional sales performance in the ~~region generated an increase in sales~~year-to-date period compared to the EMEA region of 5.2%, compared with the second quarter of 2021, or 16.7% excluding adverse impacts from foreign currency exchange rate fluctuations totaling $5.4 million. Impacted by lockdowns in China, sales to the APAC region declined 1.8%, compared with the second quarter of 2021, but improved 1.8% excluding adverse impacts from foreign currency exchange rate fluctuations totaling $1.6 million.prior year period was driven by:

~~During the 2022 year-to-date period, sales growth of $17.1 million, 22.5%, occurred in the~~ Americas ~~region due to improved demand and pricing. Improved~~ - demand, pricing and our recent acquisitions contributed to a 17.7% increase in sales

EMEA - excluding unfavorable changes in foreign currency rates of $14.9 million, sales improved 17.4%, primarily from demand, pricing and our 2021 acquisition

APAC - excluding unfavorable changes in foreign currency rates of $4.5 million, sales in the region generated an increase in sales to the EMEA region of 13.3%, compared with the first half of 2021, or 22.9% after adjusting for unfavorable impacts from foreign currency fluctuations totaling $8.6 million. Sales to the APAC region declined 1.5%, compared with the first six months of 2021, but improved 1.7% excluding unfavorable impacts from foreign currency exchange rate fluctuations totaling $2.8 million.were flat

In the ~~second~~third quarter of 2022, gross profit decreased ~~$1.4~~$3.7 million, ~~2.8%~~7.4%, compared with the same quarter of the prior year. Changes in foreign currency exchange rates compared to the ~~second~~third quarter of 2021 reduced gross profit by $1.9 million. Gross profit margin declined over the same period by ~~3.6~~2.2 percentage points to ~~34.7%. Fixed cost leverage on the higher sales positively impacted gross margin for the quarter while an unfavorable mix, increased labor costs and impacts from~~35.4%, which is primarily attributable to rising material ~~logistics~~ and energy costs, ~~compressed the margin.~~for which margin was not fully recovered by pricing efforts. Material costs as a percentage of sales, excluding pricing changes and acquisition-related sales, increased in the ~~second~~third quarter by ~~3.2~~3.9 percentage points compared to the prior-year ~~second~~third quarter.

26

During the 2022 year-to-date period, gross profit ~~increased $4.0~~improved slightly, $0.3 million, ~~4.2%~~0.2%, over the comparable prior-year ~~period, due primarily to sales volume and pricing.~~period. The segment realized an unfavorable impact on gross profit from changes in foreign currency rates, compared to the first ~~two~~three quarters of 2021, of ~~$3.5~~$5.3 million. Gross margin for the first ~~two~~three quarters of 2022 decreased ~~2.4~~2.3 percentage points as the segment was impacted by higher material, logistic and energy ~~costs and labor costs from increased wages and overtime.~~costs. Higher freight costs of ~~$1.4~~$1.5 million impacted gross margin for the year-to-date period compared to the prior-year period. Material costs as a percentage of sales, excluding pricing changes and acquisition-related sales, increased in the first ~~two~~three quarters of 2022 by ~~2.5~~3.2 percentage points compared to the prior-year period. Price increases to customers did not fully recover the margin impact of the material cost increases.

~~As previously noted, restructuring charges totaling $1.7~~Restructuring costs totaled $1.1 million ~~were incurred in our Hydraulics segment during~~for the ~~second~~third quarter of 2022; ~~$0.6~~$0.3 million of the costs are included in direct labor in cost of goods sold and ~~$1.1~~$0.8 million are reflected in SEA expenses. The restructuring costs are comprised of $0.6 million of recurring labor costs for employees who worked on the restructuring projects, non-recurring severance of $0.3 million and other non-recurring expenses associated with the manufacturing relocation of $0.2 million.

28

SEA expenses decreased ~~$0.2~~$1.3 million, ~~1.1%~~7.1%, in the ~~second~~third quarter of 2022 compared with the prior-year period. ~~SEA~~Non-recurring costs from ~~our 2021 acquisition and our~~ restructuring activities inflated costs in the 2022 ~~second~~third quarter when compared to the prior-year ~~second quarter. Changes~~quarter while changes in foreign currency rates compared to the prior-year ~~second~~ quarter reduced SEA costs by ~~$0.7~~$1.0 million. ~~Better leverage~~Additional savings of ~~our fixed cost base on the higher sales~~$1.1 million were realized from lower benefit costs, primarily from performance-based incentive compensation accruals. The savings led to SEA as a percent of sales decreasing ~~1.1~~0.8 percentage points during the quarter, to ~~12.9%~~13.0%, compared to the 2021 ~~second~~third quarter.

Restructuring activities totaled $3.0 million for the year-to-date period of 2022; $0.9 million of the costs are included in direct labor in cost of goods sold and $2.1 million are reflected in SEA expenses. The restructuring costs are comprised of $1.8 million of recurring labor costs for employees who worked on the restructuring projects, non-recurring severance of $0.9 million and other non-recurring expenses associated with the manufacturing relocation of $0.3 million.

Year-to-date SEA expenses increased ~~$1.7~~$0.4 million, ~~4.7%~~0.7%, in 2022 compared with the prior-year period, mainly due to our 2021 acquisition, ~~and~~non-recurring costs from restructuring activities as well as higher travel and marketing costs of ~~$0.5 million.~~$0.8 million, offset by savings of $0.8 million realized from lower benefit costs, primarily from performance-based incentive compensation accruals. Changes in foreign currency rates compared to the prior-year period further reduced SEA costs by ~~$1.3~~$2.4 million. SEA as a percent of sales decreased 0.8 percentage points to ~~13.4%~~13.3% in 2022, ~~from 14.2% in 2021~~also benefiting from fixed cost leverage on the higher sales.

As a result of the impacts to gross profit and SEA noted above, second quarter operating income decreased $1.2 million, 3.7%, compared with the second quarter of the prior year, and operating margin declined 2.5 percentage points to 21.8%. Operating income for the year-to-date period increased $2.3 million, 3.8%, with operating margin declining 1.6 percentage points to 22.4% compared to the same period in the prior year.

Electronics

The following table sets forth the results of operations for the Electronics segment (in millions):


	Three Months Ended											Three Months Ended
	July 2, 2022			July 3, 2021			$ Change		% Change			October 1, 2022			October 2, 2021			$ Change			% Change
Net sales	$	98.9		$	90.4		$	8.5		9.4	%	$	76.0		$	89.8		$	(13.8	)		(15.4	)%
Gross profit	$	32.8		$	31.2		$	1.6		5.1	%	$	22.8		$	31.3		$	(8.5	)		(27.2	)%
Gross profit %		33.2	%		34.5	%							30.0	%		34.9	%
Operating income	$	20.3		$	19.6		$	0.7		3.6	%	$	11.0		$	18.4		$	(7.4	)		(40.2	)%
Operating income %		20.5	%		21.7	%							14.5	%		20.5	%

	Six Months Ended											Nine Months Ended
	July 2, 2022			July 3, 2021			$ Change		% Change			October 1, 2022			October 2, 2021			$ Change			% Change
Net sales	$	202.3		$	176.1		$	26.2		14.9	%	$	278.3		$	266.0		$	12.3			4.6	%
Gross profit	$	65.6		$	61.2		$	4.4		7.2	%	$	88.4		$	92.5		$	(4.1	)		(4.4	)%
Gross profit %		32.4	%		34.8	%							31.8	%		34.8	%
Operating income	$	40.8		$	37.9		$	2.9		7.7	%	$	51.8		$	56.3		$	(4.5	)		(8.0	)%
Operating income %		20.2	%		21.5	%							18.6	%		21.2	%

~~Second~~Third quarter net sales for the Electronics segment ~~grew by $8.5~~declined $13.8 million, ~~9.4%~~15.4%, compared with the prior-year ~~second~~third quarter. Acquisition growth ~~accounted for $1.0 million~~contributed an increase of ~~the increase. Price increases added $5.1 million of~~$0.8 million. Discrete impacts to our third quarter organic sales ~~to the 2022 second quarter~~ compared to the ~~2021 second quarter.~~ prior year quarter are as follows:

•

Changes in foreign currency exchange rates ~~compared~~- unfavorable by $0.3 million

•

Pricing changes - favorable by $2.7 million, 3.0%

•

Delayed sales due to ~~the second~~supply chain constraints - unfavorable by an estimated $8.2 million

Third quarter ~~of 2021, adversely impacted second quarter sales by $0.5 million.~~

27

~~Second quarter growth was primarily driven by demand in our recreational and industrial machinery end markets, while~~ demand in our health and wellness end market has softened. The segment's supply chain continues to experience constraints on its ability to source certain electronic and other components. While the effect on sales has been mitigated by our procurement efforts, production schedule adjustments and product redesigns, we estimate that approximately $9.1 million of sales were delayed into future quarters duedeclined sharply compared to the ~~shortages.~~prior year quarter, which was strengthened by the pandemic as consumers invested in health and leisure products. Inventory held by customers remained inflated in this end market, which further led to the decline. We continue to realize growth in our recreational, construction and industrial machinery end markets.

Year-to-date net sales for the Electronics segment improved by ~~$26.2~~$12.3 million, ~~14.9%~~4.6%, compared with the prior-year period. ~~Sales totaling $1.7 million were contributed by our recently acquired business. Price increases added $10.8~~Acquisition growth accounted for $2.5 million of ~~sales~~the increase. Discrete impacts to ~~the first two quarters of 2022~~our year-to-date organic sales compared to the ~~prior-year period.~~ prior year period are as follows:

•

Changes in foreign currency exchange rates ~~unfavorably impacted sales~~- unfavorable by ~~$0.7~~$1.1 million

29

•

Pricing changes - favorable by $13.6 million, 5.1%

•

Supply constraints - same amount as noted above for the ~~year-to-date~~third quarter

The segment experienced a favorable sales mix, which contributed to the period ~~compared with rates~~over period increase. We realized sales growth in ~~effect during~~our recreational and industrial machinery end markets, which was offset by the ~~same period of 2021.~~decline in health and wellness.

The following table presents net sales based on the geographic region of the sale for the Electronics segment (in millions):


	Three Months Ended										Three Months Ended
	July 2, 2022		July 3, 2021		$ Change			% Change			October 1, 2022		October 2, 2021		$ Change			% Change
Americas	$	80.2	$	64.1	$	16.1			25.1	%	$	65.0	$	64.2	$	0.8			1.2	%
EMEA		12.3		11.0		1.3			11.8	%		7.7		11.1		(3.4	)		(30.6	)%
APAC		6.4		15.3		(8.9	)		(58.2	)%		3.3		14.5		(11.2	)		(77.2	)%
Total	$	98.9	$	90.4							$	76.0	$	89.8

	Six Months Ended										Nine Months Ended
	July 2, 2022		July 3, 2021		$ Change			% Change			October 1, 2022		October 2, 2021		$ Change			% Change
Americas	$	157.9	$	129.1	$	28.8			22.3	%	$	222.9	$	193.3	$	29.6			15.3	%
EMEA		24.1		20.4		3.7			18.1	%		31.8		31.5		0.3			1.0	%
APAC		20.3		26.6		(6.3	)		(23.7	)%		23.6		41.2		(17.6	)		(42.7	)%
Total	$	202.3	$	176.1							$	278.3	$	266.0

~~Demand~~Regional sales performance in the ~~Americas region was solid during the second~~third quarter ~~of 2022, and coupled with pricing and capacity improvements, sales grew 25.1%~~ compared to the ~~second~~prior year quarter ~~of 2021. Sales~~was driven by:

Americas - demand lessened but pricing efforts contributed to ~~the~~ a 1.2% increase in sales

EMEA ~~region improved by 11.8%, compared with the second quarter of 2021, or 16.4% after adjusting for adverse impacts from~~ - excluding unfavorable changes in foreign currency ~~fluctuations totaling $0.5 million. Reduced~~rates of $0.3 million, sales declined 27.9%, primarily from lower demand ~~for our products from customers in China, and regulatory lock downs~~ in the ~~country, resulted~~health and wellness end market

APAC - sales declined 77.2% from reduced demand in ~~sales to~~ the ~~APAC region contracting by $8.9 million compared to the prior-year period, with minimal~~health and wellness end market in China; impacts from foreign currency exchange ~~rate changes.~~rates were minimal

~~During~~Regional sales performance in the ~~2022~~ year-to-date period ~~sales growth of 22.3% occurred in~~compared to the prior year period was driven by:

Americas ~~region from~~ - demand, pricing and capacity ~~improvements. In~~improvements contributed to a 15.3% increase in sales

EMEA - excluding unfavorable changes in foreign currency rates of $1.1 million, sales improved 4.4%, primarily from pricing

APAC - sales declined 42.7%, from lower demand in the ~~EMEA region, sales grew 18.1% over the first half of 2021, or 21.6% after adjusting for unfavorable~~health and wellness end market in China; impacts from foreign currency fluctuations totaling $0.7 million. Due to the second quarter demand decline and lockdowns in China, the APAC region experienced a 23.7% sales reduction compared to the first two quarters of 2021, withexchange rates were minimal ~~impacts from changes in foreign currency exchange rates.~~

~~Second~~Third quarter gross profit ~~increased 5.1%~~decreased $8.5 million, 27.2%, compared with the ~~second~~third quarter of the prior year, primarily due to lower sales volume and ~~pricing. Unfavorable impacts~~material cost increases. Impacts from changes in foreign currency exchange rates compared to the prior-year period ~~impacted~~reduced gross profit by $0.3 million. Gross margin declined over the same period by ~~1.3~~4.9 percentage points to ~~33.2%~~30.0%. The segment continues to experience increases in raw material costs, due to high demand and shortages of materials in the market for electronic and other components used in our products. Pricing efforts have offset some of the ~~impact.~~impact but did not recover the full margin. Material costs as a percentage of sales, excluding pricing changes and acquisition-related sales, increased in the ~~second~~third quarter by ~~4.7~~3.9 percentage points compared to the prior-year quarter. In addition, the segment experienced reduced labor efficiency from lower production due to the demand decline.

In the third quarter ~~despite a favorable sales mix.~~of 2022, we executed an organizational restructure to adjust our labor base in line with current demand levels. We incurred $0.8 million of restructuring costs for severance; $0.4 million of the costs are included in direct labor in cost of goods sold and $0.4 million are reflected in SEA expenses.

30

During the 2022 year-to-date period, the segment experienced a ~~7.2% increase~~$4.1 million, 4.4%, decrease in gross profit over the comparable prior-year period, primarily due to ~~sales volume~~higher material costs and ~~pricing. Unfavorable~~unfavorable impacts from changes in foreign currency exchange rates compared to the prior-year period ~~impacted gross profit by $0.5~~of $0.9 million. Gross margin for the first ~~two~~three quarters of 2022 decreased ~~2.4~~3.0 percentage points from the higher material ~~costs.~~costs as margin was not fully recovered by pricing efforts. Material costs as a percentage of sales, excluding pricing changes and acquisition-related sales, increased in the first ~~two~~three quarters of 2022 by ~~6.0~~5.5 percentage points compared to the prior-year period.

28

SEA expenses ~~increased~~decreased by ~~$0.9~~$1.1 million, ~~7.8%~~8.5%, in the ~~second~~third quarter of 2022, compared with the ~~second~~third quarter of 2021, impacted by ~~our 2021 acquisition~~savings of $0.9 million realized from lower benefit costs, primarily from performance-based incentive compensation accruals and ~~higher~~lower R&D costs ~~for travel and marketing~~ of $0.2 ~~million, R&D of $0.2 million and wage and benefits of $0.3~~ million. SEA costs as a percentage of sales ~~decreased 0.2~~increased 1.1 percentage points, to ~~12.6%~~15.5%, in the ~~second~~third quarter of 2022 compared ~~to 12.8% in~~with the prior-year ~~second~~third quarter from ~~improved~~lost leverage of our fixed costs on the ~~higher~~lower sales.

Year-to-date SEA expenses increased ~~$1.5~~$0.4 million, ~~6.4%~~1.1%, in 2022 compared with the prior-year period primarily from our 2021 acquisition offset by lower benefit costs of $1.1 million, mainly from performance-based incentive compensation accruals, and ~~increased corporate~~lower R&D costs ~~allocated to the segment totaling $0.5~~of $0.4 million. SEA as a percent of sales decreased ~~0.9~~0.4 percentage points to ~~12.3%~~13.2% in 2022 from ~~13.2%~~13.6% in 2021 from improved leverage of our fixed costs on the higher sales.

As a result of the impacts to gross profit and SEA noted above, second quarter operating income increased 3.6% compared with the second quarter of the prior year, while operating margin declined 1.2 percentage points to 20.5%. Operating income for the year-to-date period increased 7.7% and operating margin dropped 1.3 percentage points to 20.2% compared to the same period in the prior year.

Corporate and Other

Certain costs are excluded from business segment results as they are not used in evaluating the results of, or in allocating resources to, our operating segments. For the ~~second~~third quarter of 2022, these costs totaled ~~$8.4~~$9.6 million for (i) amortization of acquisition-related intangible assets of $6.8 million and (ii) ~~$1.6~~$2.8 million related to other acquisition and integration activities. Year-to-date, corporate and other costs totaled ~~$17.6~~$27.3 million for (i) transition costs for one of our executive officers of $0.3 million, (ii) amortization of acquisition-related intangible assets of ~~$13.8~~$20.6 million and (iii) ~~$3.5~~$6.4 million related to other acquisition and integration activities.

Interest Expense, net

Net interest expense ~~decreased $0.6~~increased $0.3 million to ~~$3.8~~$4.1 million in the ~~second~~third quarter of 2022 compared with ~~$4.4~~$3.8 million in the prior-year ~~second~~third quarter. ~~The decrease is primarily a result of lower~~While average debt balances ~~during~~were lower compared to the ~~second~~prior year quarter, ~~of 2022.~~the impact was offset by higher interest rates. Average net debt decreased to ~~$390.3~~$399.2 million during the ~~second~~third quarter of 2022 compared with ~~$414.5~~$413.2 million during the ~~second~~third quarter of 2021. Year-to-date net interest expense decreased ~~$1.6~~$1.3 million to ~~$7.6~~$11.7 million compared with ~~$9.2~~$13.0 million during the comparable 2021 period. The decrease is primarily a result of lower debt balances during the first ~~half~~three quarters of 2022. Average net debt for the 2022 year-to-date period totaled ~~$397.1~~$418.6 million compared with ~~$420.0~~$430.4 million in the corresponding period of 2021.

Income Taxes

The provision for income taxes for the ~~second~~third quarter of 2022 was ~~22.5%~~23.6% of pretax income compared to ~~17.6%~~25.5% for the prior-year ~~second~~third quarter. The year-to-date provision was ~~22.4%~~22.7% and ~~20.1%~~22.0% of pretax income for 2022 and 2021, respectively. The 2021 year-to-date tax rate includes benefit from the settlement of a transfer pricing dispute resolved through competent authority between the United States and Germany. These effective rates fluctuate relative to the levels of income and different tax rates in effect among the countries in which we sell our products.

31

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted into law in response to the COVID-19 pandemic. The Company has evaluated the various income and payroll tax provisions and expects little or no impact to income tax expense. However, the Company is taking advantage of the various payment deferments allowed and employee retention credits afforded by the CARES Act and other similar state and/or foreign liquidity measures. The CARES Act allowed employers to defer the deposit and payment of the employer's share of Social Security taxes. We deferred 50% of the $1.7 million in payroll taxes normally due between March 27, 2020 and December 31, 2020. We paid 50% of this amount during the fourth quarter of 2021. The remaining balance will be paid during the fourth quarter of 2022 and is included in the Accrued compensation and benefits line item in the accompanying Consolidated Balance Sheets.

29

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. During the first ~~six~~nine months of 2022, cash provided by operating activities totaled ~~$44.2~~$74.2 million. At the end of the ~~second~~third quarter, we had ~~$41.3~~$36.8 million of available cash and cash equivalents on hand and ~~$174.2~~$131.4 million of available credit on our revolving credit facilities. We also have a $300.0 million accordion feature available on our credit facility, subject to certain pro forma compliance requirements, 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 believe that cash generated from operations and our borrowing availability under our credit facilities will be sufficient to satisfy our operating expenses. 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 borrowings. Capital expenditures could be postponed since they primarily pertain to long-term improvements in operations, operating expense reductions could be made and finally, the dividend to shareholders could be reduced or suspended.

Cash Flows

The following table summarizes our cash flows for the periods (in millions):


	Six Months Ended									Nine Months Ended
	July 2, 2022			July 3, 2021			$ Change			October 1, 2022			October 2, 2021			$ Change
Net cash provided by operating activities	$	44.2		$	49.5		$	(5.3	)	$	74.2		$	82.0		$	(7.8	)
Net cash used in investing activities		(9.2	)		(14.2	)		5.0			(85.2	)		(68.2	)		(17.0	)
Net cash used in financing activities		(24.8	)		(28.7	)		3.9
Net cash provided by financing activities											15.6			4.3			11.3
Effect of exchange rate changes on cash		2.6			2.5			0.1			3.7			4.4			(0.7	)
Net increase in cash	$	12.8		$	9.1		$	3.7		$	8.3		$	22.5		$	(14.2	)

Cash on hand increased ~~$12.8~~$8.3 million ~~from $28.6 million at~~in the ~~end~~first three quarters of ~~2021~~2022 to ~~$41.4~~$36.8 million as of ~~July 2,~~October 1, 2022. Changes in exchange rates during the ~~six~~nine months ended ~~July 2,~~October 1, 2022, favorably impacted cash and cash equivalents by ~~$2.6~~$3.7 million. 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 paying down borrowings on our credit facilities.

Operating activities

Cash from operations declined by ~~$5.3~~$7.8 million in the first ~~half~~nine months of 2022 compared to the prior-year comparable period. Year-to-date cash earnings (calculated as net income plus adjustments to reconcile net income to net cash provided by operating activities, excluding changes in net operating assets and liabilities) decreased by ~~$1.5~~$10.1 million over the prior-year period. Changes in net operating assets and liabilities ~~reduced~~increased cash by ~~$3.8~~$2.3 million, compared to the prior-year period, primarily from ~~reductions in AP and accrued expenses only partially offset by~~ favorable cash flows from AR and ~~inventories.~~inventories only partially offset by reductions in AP and accrued expenses. Strategic investments in inventory reduced cash by ~~$17.9~~$19.7 million and ~~$22.9~~$35.8 million in the first ~~two~~three quarters of 2022 and 2021, respectively. Days of inventory on hand increased to 118 days as of October 1, 2022,

32

compared with 92 days as of October 2, 2021. The increase in inventory levels is primarily from higher material costs and supply chain challenges such as (i) making earlier purchases of material to avoid shortages, (ii) inventory on hand that is waiting on delayed components to complete and (iii) delayed orders by customers after we have already started the production process. ~~Days of inventory on hand increased to 103 days as of July 2, 2022, compared with 81 days as of July 3, 2021.~~ Changes in accounts receivable reduced cash by ~~$20.0~~$2.9 million and ~~$37.4~~$36.6 million in the first ~~two~~three quarters of 2022 and 2021, respectively. Days sales outstanding ~~remained fairly consistent with~~increased slightly from the prior-year period at 58 days as of October 1, 2022, compared to 56 days as of ~~July~~October 2, ~~2022 compared to 55 days~~2021, as ~~of July 3, 2021. Our~~our collection patterns remain consistent with the prior period.

30

Investing activities

Capital expenditures totaled ~~$13.5~~$21.9 million for the first ~~six~~nine months of 2022, an increase of ~~$3.2~~$4.9 million over the prior-year comparable period. Capital expenditures for 2022 are forecasted to be approximately 3%~~-5%~~-4% of sales, for investments in machinery and equipment for capacity expansion projects, improvements to manufacturing technology and maintaining/replacing existing machine capabilities.

Cash ~~provided from~~used for acquisition related activities in the first ~~six~~nine months of 2022 totaled ~~$1.3~~$67.3 million, compared to ~~cash used~~$50.9 million in the prior-year ~~period of $3.4 million.~~period.

Financing activities

Cash ~~used for~~provided by financing activities totaled ~~$24.8~~$15.6 million during the first ~~six~~nine months of 2022, compared with ~~cash used of $28.7~~$4.3 million in the prior-year period. ~~Repayments,~~Borrowings, net of ~~borrowings,~~repayments, on our credit facilities totaled ~~$16.8~~$27.9 million for the first ~~six~~nine months of 2022 compared to ~~net repayments of $22.1~~$14.5 million during the same period of 2021.

During the ~~second~~third quarter of 2022, we declared a quarterly cash dividend of $0.09 per share payable on ~~July~~October 20, 2022, to shareholders of record as of ~~July~~October 5, 2022. The declaration and payment of future dividends is subject to the sole discretion of the board of directors, and any determination as to the payment of future dividends will depend upon our profitability, financial condition, capital needs, future prospects and other factors deemed pertinent by the board of directors.

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.

Inflation

As more fully described inthroughout Item 2 above, we are experiencing supply shortages and increasing material and logistics costs. Continued increases in the global demand for the materials used in our products could result in significant increases in the costs of the components we purchase, and we may not be able to fully offset such higher costs through price increases. There is no assurance that our business will not be materially affected by inflation in the future.

Critical Accounting Policies and Estimates

We currently apply judgment and estimates that may have a material effect on the eventual outcome of assets, liabilities, revenues and expenses for impairment of long-lived assets, inventory, goodwill, accruals, income taxes and fair value measurements. Our critical accounting policies and estimates are included in our Form 10-K, and any changes made during the first ~~six~~nine months of 2022, are disclosed in Note 2 to the Consolidated, Unaudited Financial Statements.

3133

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Item 7A – Quantitative and Qualitative Disclosures about Market Risk” in our Form 10-K. There were no material changes during the ~~six~~nine months ended ~~July 2,~~October 1, 2022.

Item 4. CONTROLS AND PROCEDURES.

The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report, have concluded that our disclosure controls and procedures are effective and are designed to ensure that the information we are required to disclose is recorded, processed, summarized and reported within the necessary time periods. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports that we file or submit pursuant to the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting identified in management's evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Securities Exchange Act of 1934, as amended, during the period covered by this report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3234

PART II: OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS.

None.

Item 1A. RISK FACTORS.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors that affect our business and financial results that are discussed in Part I, Item 1A, “Risk Factors” of our Form ~~10-K.~~10-K and Part II, Item 1A, "Risk Factors" of our second quarter Form 10Q. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report. Other than as set forth below, there have been no material changes to such risk factors.

~~Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing conflict between Russia and Ukraine.~~

The global economy has been negatively impacted by the military conflict between Russia and Ukraine. Furthermore, governments in the United States, United Kingdom and European Union have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia. Although we have no operations in Russia or Ukraine, the Russia-Ukraine military conflict could have a negative impact on the global supply chain logistics or economy. Further escalation of geopolitical tensions related to the military conflict, including increased trade barriers or restrictions on global trade, could result in, among other things, cyberattacks, supply disruptions, lower consumer demand, and changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain. In addition, the effects of the ongoing conflict could heighten many of our known risks described in section entitled “Risk Factors" in Part I, Item 1A in our Annual Report on Form 10-K for the fiscal year ended January 1, 2022 filed with the SEC on March 1, 2022.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

Item 3. DEFAULTS UPON SENIOR SECURITIES.

None.

Item 4. MINE SAFETY DISCLOSURES.

Not applicable.

Item 5. OTHER INFORMATION.

None.

3335

Item 6. EXHIBITS.

Exhibits:


Exhibit Number		Exhibit Description

10.1+		Form of Performance Stock Option Agreement for Helios employees (filed herewith).

10.2+		Form of Performance Stock Option Agreement for business unit officers (filed herewith).

10.3		Third Amendment to Second Amended and Restated Credit Agreement among Helios Technologies, Inc. as Borrower, the Guarantor parties thereto, the financial institutions party thereto from time to time as lenders, and PNC Bank, National Association, as Administrative Agent, dated July 29, 2022 (filed herewith).

31.1		CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		CEO Certification pursuant to 18 U.S.C. § 1350.

32.2		CFO Certification pursuant to 18 U.S.C. § 1350.

101.INS		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH		XBRL Schema Document

101.CAL		XBRL Calculation Linkbase Document

101.DEF		XBRL Definition Linkbase Document

101.LAB		XBRL Label Linkbase Document

101.PRE		XBRL Presentation Linkbase Document

104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~July 2,~~October 1, 2022, has been formatted in Inline XBRL.

+		Executive management contract or compensatory plan or arrangement.

3436

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Date: ~~August 9,~~November 8, 2022	HELIOS TECHNOLOGIES, INC.

	By:	/s/ Tricia L. Fulton
		Tricia L. Fulton
		Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

3537


Florida		59-2754337
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

7456 16th St E SARASOTA, Florida		34243
(Address of Principal Executive Offices)		(Zip Code)


	July 2, 2022			January 1, 2022			October 1, 2022			January 1, 2022
	(unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	41,315		$	28,540		$	36,813		$	28,540
Restricted cash		36			41			33			41
Accounts receivable, net of allowance for credit losses of $1,049 and $1,212		149,883			134,561
Accounts receivable, net of allowance for credit losses of $1,122 and $1,212								131,649			134,561
Inventories, net		178,878			165,629			179,718			165,629
Income taxes receivable		2,685			2,762			6,517			2,762
Other current assets		17,481			20,101			19,543			20,101
Total current assets		390,278			351,634			374,273			351,634
Property, plant and equipment, net		168,860			174,210			171,323			174,210
Deferred income taxes		8,887			2,934			6,008			2,934
Goodwill		437,280			459,936			447,140			459,936
Other intangible assets, net		380,878			412,759			396,528			412,759
Other assets		19,481			13,873			24,295			13,873
Total assets	$	1,405,664		$	1,415,346		$	1,419,567		$	1,415,346
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	76,530		$	85,301		$	64,921		$	85,301
Accrued compensation and benefits		20,473			28,595			19,004			28,595
Other accrued expenses and current liabilities		35,099			28,254			30,890			28,254
Current portion of long-term non-revolving debt, net		19,157			18,125			18,897			18,125
Dividends payable		2,925			2,917			2,930			2,917
Income taxes payable		8,631			6,328			7,489			6,328
Total current liabilities		162,815			169,520			144,131			169,520
Revolving line of credit		223,827			242,312			267,693			242,312
Long-term non-revolving debt, net		173,807			183,897			169,332			183,897
Deferred income taxes		66,912			71,836			57,042			71,836
Other noncurrent liabilities		31,279			38,818			29,932			38,818
Total liabilities		658,640			706,383			668,130			706,383
Commitments and contingencies		—			—			—			—
Shareholders' equity:
Preferred stock, par value $0.001, 2,000 shares authorized, 0 shares issued or outstanding		0			0
Common stock, par value $0.001, 100,000 shares authorized, 32,504 and 32,407 shares issued and outstanding		33			32
Preferred stock, par value $0.001, 2,000 shares authorized, no shares issued or outstanding								—			—
Common stock, par value $0.001, 100,000 shares authorized, 32,544 and 32,407 shares issued and outstanding								33			32
Capital in excess of par value		397,643			394,641			401,549			394,641
Retained earnings		417,944			363,279			435,392			363,279
Accumulated other comprehensive loss		(68,596	)		(48,989	)		(85,537	)		(48,989	)
Total shareholders' equity		747,024			708,963			751,437			708,963
Total liabilities and shareholders' equity	$	1,405,664		$	1,415,346		$	1,419,567		$	1,415,346


	Three Months Ended						Three Months Ended
	July 2, 2022			July 3, 2021			October 1, 2022			October 2, 2021
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net sales	$	241,668		$	223,413		$	207,205		$	223,241
Cost of sales		159,358			141,261			137,939			142,299
Gross profit		82,310			82,152			69,266			80,942
Selling, engineering and administrative expenses		32,534			32,410			31,749			32,786
Amortization of intangible assets		6,799			7,680			6,774			7,407
Operating income		42,977			42,062			30,743			40,749
Interest expense, net		3,813			4,400			4,098			3,813
Foreign currency transaction (gain) loss, net		(173	)		503			(199	)		304
Other non-operating expense (income), net		581			(110	)		177			(616	)
Income before income taxes		38,756			37,269			26,667			37,248
Income tax provision		8,720			6,575			6,289			9,488
Net income	$	30,036		$	30,694		$	20,378		$	27,760

Net income per share:
Basic	$	0.92		$	0.95		$	0.63		$	0.86
Diluted	$	0.92		$	0.95		$	0.63		$	0.85

Weighted average shares outstanding:
Basic		32,497			32,237			32,541			32,385
Diluted		32,541			32,362			32,585			32,539

Dividends declared per share	$	0.09		$	0.09		$	0.09		$	0.09


															Accumulated																					Accumulated
									Capital in						other															Capital in						other
	Preferred		Preferred		Common		Common		excess of			Retained			comprehensive						Preferred		Preferred		Common			Common		excess of			Retained			comprehensive
	shares		stock		shares		stock		par value			earnings			loss			Total			shares		stock		shares			stock		par value			earnings			loss			Total

Balance at April 2, 2022		0	$	0		32,478	$	32	$	395,873		$	390,831		$	(51,100	)	$	735,636
Balance at July 2, 2022																						—	$	—		32,504		$	33	$	397,643		$	417,944		$	(68,596	)	$	747,024
Shares issued, restricted stock						19		1		41									42							5														—
Shares issued, ESPP						7				530									530							10					511									511
Shares issued, acquisition																										25					1,573									1,573
Stock-based compensation										1,878									1,878												1,840									1,840
Cancellation of shares for payment of employee tax withholding										(679	)								(679	)											(18	)								(18	)
Dividends declared													(2,923	)					(2,923	)														(2,930	)					(2,930	)
Net income													30,036						30,036															20,378						20,378
Other comprehensive loss																(17,496	)		(17,496	)																	(16,941	)		(16,941	)
Balance at July 2, 2022		0	$	0		32,504	$	33	$	397,643		$	417,944		$	(68,596	)	$	747,024
Balance at October 1, 2022																						—	$	—		32,544		$	33	$	401,549		$	435,392		$	(85,537	)	$	751,437

Balance at April 3, 2021		0	$	0		32,226	$	32	$	376,994		$	290,007		$	(41,753	)	$	625,280
Balance at July 3, 2021																						—	$	—		32,249		$	32	$	379,299		$	317,799		$	(38,785	)	$	658,345
Shares issued, restricted stock						1				18									18							12					18									18
Shares issued, other compensation						7													0							5														—
Shares issued, ESPP						15				463									463							7					522									522
Shares issued, acquisition																										134					10,390									10,390
Stock-based compensation										2,076									2,076												2,050									2,050
Cancellation of shares for payment of employee tax withholding										(252	)								(252	)											(235	)								(235	)
Shares repurchased																										(7	)				(583	)								(583	)
Dividends declared													(2,902	)					(2,902	)														(2,916	)					(2,916	)
Net income													30,694						30,694															27,760						27,760
Other comprehensive income																2,968			2,968
Balance at July 3, 2021		0	$	0		32,249	$	32	$	379,299		$	317,799		$	(38,785	)	$	658,345
Other comprehensive loss																																					(6,905	)		(6,905	)
Balance at October 2, 2021																						—	$	—		32,400		$	32	$	391,461		$	342,643		$	(45,690	)	$	688,446


			Page

PART I. FINANCIAL INFORMATION			3

	Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of ~~July 2,~~October 1, 2022 (unaudited) and January 1, 2022		3

	Consolidated Statements of Operations for the Three Months Ended ~~July 2,~~October 1, 2022 (unaudited) and ~~July 3,~~October 2, 2021 (unaudited)		4

	Consolidated Statements of Operations for the ~~Six~~Nine Months Ended ~~July 2,~~October 1, 2022 (unaudited) and ~~July 3,~~October 2, 2021 (unaudited)		5

	Consolidated Statements of Comprehensive Income for the Three and ~~Six~~Nine Months Ended ~~July 2,~~October 1, 2022 (unaudited) and ~~July 3,~~October 2, 2021 (unaudited)		6

	Consolidated Statements of Shareholders’ Equity for the Three Months Ended ~~July 2,~~October 1, 2022 (unaudited) and ~~July 3,~~October 2, 2021 (unaudited)		7

	Consolidated Statements of Shareholders’ Equity for the ~~Six~~Nine Months Ended ~~July 2,~~October 1, 2022 (unaudited) and ~~July 3,~~October 2, 2021 (unaudited)		8

	Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~July 2,~~October 1, 2022 (unaudited) and ~~July 3,~~October 2, 2021 (unaudited)		9

	Condensed Notes to the Consolidated, Unaudited Financial Statements		10

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2123

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3234

	Item 4.	Controls and Procedures	3234

PART II. OTHER INFORMATION			3335

	Item 1.	Legal Proceedings	3335

	Item 1A.	Risk Factors	3335

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3335

	Item 3.	Defaults Upon Senior Securities	3335

	Item 4.	Mine Safety Disclosures	3335

	Item 5.	Other Information	3335

	Item 6.	Exhibits	3436

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting Company

Emerging growth company