Indicate by check mark whether the ~~Registrant~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the ~~Registrant~~registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The ~~Registrant~~registrant had ~~32,026,807~~32,081,445 shares of common stock, par value $.001, outstanding as of ~~July 26, 2019.~~April 24, 2020.

	June 29, 2019			December 29, 2018			March 28, 2020			December 28, 2019
	(unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	13,283		$	23,477		$	27,257		$	22,123
Restricted cash		38			38			37			39
Accounts receivable, net of allowance for doubtful accounts of $1,529 and $1,336		81,817			72,806
Accounts receivable, net of allowance for doubtful accounts of $1,187 and $1,131								71,638			66,677
Inventories, net		97,176			85,989			86,727			85,195
Income taxes receivable		1,262			4,549			1,757			3,196
Other current assets		14,745			9,997			17,570			15,359
Total current assets		208,321			196,856			204,986			192,589
Property, plant and equipment, net		146,607			126,868			141,912			145,854
Deferred income taxes		7,870			9,463			9,668			5,803
Goodwill		382,221			383,131			343,815			377,569
Other intangible assets, net		310,092			320,548			288,989			294,651
Other assets		4,746			5,299			4,479			5,285
Total assets	$	1,059,857		$	1,042,165		$	993,849		$	1,021,751
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	41,867		$	40,879		$	33,145		$	29,730
Accrued compensation and benefits		15,396			13,260			13,376			16,898
Other accrued expenses and current liabilities		13,642			9,941			12,834			13,549
Current portion of contingent consideration		1,047			18,120			828			828
Current portion of long-term non-revolving debt, net		6,357			5,215			7,369			7,623
Dividends payable		2,882			2,878			2,887			2,884
Income taxes payable		1,852			2,697			7,954			4,941
Total current liabilities		83,043			92,990			78,393			76,453
Revolving line of credit		250,950			255,750			204,865			208,708
Long-term non-revolving debt, net		87,766			91,720			82,197			84,062
Contingent consideration, less current portion		893			840
Deferred income taxes		52,478			57,783			48,680			49,290
Other noncurrent liabilities		26,473			12,314			28,079			25,602
Total liabilities		501,603			511,397			442,214			444,115
Commitments and contingencies		—			—			—			—
Shareholders' equity:
Preferred stock, par value $0.001, 2,000,000 shares authorized, no shares issued or outstanding		—			—
Common stock, par value $0.001, 100,000,000 and 50,000,000 shares authorized, 32,017,300 and 31,964,775 shares issued and outstanding		32			32
Preferred stock, par value $0.001, 2,000 shares authorized, 0 shares issued or outstanding								—			—
Common stock, par value $0.001, 100,000 shares authorized, 32,075 and 32,047 shares issued and outstanding								32			32
Capital in excess of par value		362,104			357,933			366,521			365,310
Retained earnings		246,828			219,056			247,548			267,658
Accumulated other comprehensive loss		(50,710	)		(46,253	)		(62,466	)		(55,364	)
Total shareholders' equity		558,254			530,768			551,635			577,636
Total liabilities and shareholders' equity	$	1,059,857		$	1,042,165		$	993,849		$	1,021,751

The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

The accompanying ~~Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.~~

~~The accompanying~~Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

Consolidated Statements of ~~Shareholders’ Equity (unaudited)~~Comprehensive Income (Loss)

Accumulated

Capital in

other

Preferred

Preferred

Common

Common

excess of

Retained

comprehensive

shares

stock

shares

stock

par value

earnings

income (loss)

Total

Balance, March 30, 2019

—

$
—

31,996

$
32

$
360,195

$
232,445

$
(52,166
)

$
540,506

Shares issued, restricted stock

(1
)

—

Shares issued, other compensation

7

—

Shares issued, ESPP

15

436

436

Shares issued, ESOP

60

60

Stock-based compensation

1,413

1,413

Dividends declared

(2,882
)

(2,882
)
Net income

17,265

17,265

Other comprehensive income

1,456

1,456

Balance, June 29, 2019

—

$
—

32,017

$
32

$
362,104

$
246,828

$
(50,710
)

$
558,254

Balance, March 31, 2018

—

$
—

31,588

$
32

$
336,189

$
192,838

$
(3,983
)

$
525,076

Shares issued, restricted stock

3

—

Shares issued, other compensation

5

—

Shares issued, ESPP

8

438

438

Stock-based compensation

1,145

1,145

Dividends declared

(2,847
)

(2,847
)
Net income

6,796

6,796

Other comprehensive loss

(27,213
)

(27,213
)
Balance, June 30, 2018

—

$
—

31,604

$
32

$
337,772

$
196,787

$
(31,196
)

$
503,395

Balance, December 29, 2018

—

$
—

31,965

$
32

$
357,933

$
219,056

$
(46,253
)

$
530,768

Shares issued, restricted stock

(1
)

—

Shares issued, other compensation

13

—

Shares issued, ESPP

28

844

844

Shares issued, ESOP

24

1,152

1,152

Stock-based compensation

2,781

2,781

Cancellation of shares for payment of employee tax withholding

(12
)

(606
)

(606
)
Dividends declared

(5,763
)

(5,763
)
Net income

33,669

33,669

Other comprehensive loss

(4,457
)

(4,457
)
Impact of adoption of ASU 2016-02, related to leases

(134
)

(134
)
Balance, June 29, 2019

—

$
—

32,017

$
32

$
362,104

$
246,828

$
(50,710
)

$
558,254

Balance, December 30, 2017

—

$
—

27,077

$
27

$
95,354

$
183,770

$
(6,478
)

$
272,673

Shares issued, restricted stock

103

—

Shares issued, other compensation

12

—

Shares issued, ESPP

17

809

809

Shares issued, public offering

4,400

5

239,788

239,793

Stock-based compensation

2,061

2,061

Cancellation of shares for payment of employee tax withholding

(5
)

(240
)

(240
)
Dividends declared

(5,690
)

(5,690
)
Net income

18,707

18,707

Other comprehensive loss

(24,718
)

(24,718
)
Balance, June 30, 2018

—

$
—

31,604

$
32

$
337,772

$
196,787

$
(31,196
)

$
503,395

	Three Months Ended
	March 28, 2020			March 30, 2019
	(unaudited)			(unaudited)
Net (loss) income	$	(17,223	)	$	16,404
Other comprehensive loss
Foreign currency translation adjustments, net of tax		(4,901	)		(4,831	)
Unrealized loss on interest rate swap, net of tax		(2,201	)		(1,082	)
Total other comprehensive loss		(7,102	)		(5,913	)
Comprehensive (loss) income	$	(24,325	)	$	10,491

The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

Six months ended

June 29, 2019

June 30, 2018

(unaudited)

(unaudited)

Cash flows from operating activities:

Net income

$
33,669

$
18,707

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

17,195

17,076

Loss on disposal of assets

79

8

Stock-based compensation expense

2,781

2,061

Amortization of debt issuance costs

358

371

Benefit for deferred income taxes

(1,095
)

—

Amortization of acquisition related inventory step up

—

3,125

Change in fair value of contingent consideration

775

653

Forward contract (gains) losses, net

(409
)

3,493

Other, net

940

196

(Increase) decrease in:

Accounts receivable

(9,586
)

(13,666
)
Inventories

(12,276
)

(4,754
)
Income taxes receivable

(488
)

(46
)
Other current assets

(3,312
)

(501
)
Other assets

781

270

Increase (decrease) in:

Accounts payable

1,178

5,908

Accrued expenses and other liabilities

4,176

1,660

Income taxes payable

3,078

(3,405
)
Other noncurrent liabilities

(1,668
)

(39
)
Contingent consideration payments in excess of acquisition date fair value

(10,731
)

—

Net cash provided by operating activities

25,445

31,117

Cash flows from investing activities:

Capital expenditures

(15,413
)

(10,581
)
Proceeds from dispositions of equipment

597

3

Acquisition of business, net of cash acquired

—

(527,144
)
Cash settlement of forward contract

—

(2,535
)
Net cash used in investing activities

(14,816
)

(540,257
)
Cash flows from financing activities:

Borrowings on revolving credit facility

85,639

258,000

Repayment of borrowings on revolving credit facility

(91,000
)

(117,250
)
Borrowings on long-term non-revolving debt

—

100,932

Repayment of borrowings on long-term non-revolving debt

(2,910
)

(1,250
)
Borrowings under factoring arrangements

—

1,044

Proceeds from stock issued

843

240,602

Dividends to shareholders

(5,759
)

(5,281
)
Debt issuance costs

—

(1,763
)
Payment of contingent consideration liability

(7,064
)

—

Other financing activities

(1,141
)

(570
)
Net cash (used in) provided by financing activities

(21,392
)

474,464

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

569

736

Net decrease in cash, cash equivalents and restricted cash

(10,194
)

(33,940
)
Cash, cash equivalents and restricted cash, beginning of period

23,515

63,922

Cash, cash equivalents and restricted cash, end of period

$
13,321

$
29,982

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

Balance, December 28, 2019		—	$	—		32,047		$	32	$	365,310		$	267,658		$	(55,364	)	$	577,636
Shares issued, restricted stock						21														—
Shares issued, other compensation						5														—
Shares issued, ESPP						12					355									355
Stock-based compensation											1,533									1,533
Cancellation of shares for payment of employee tax withholding						(10	)				(677	)								(677	)
Dividends declared														(2,887	)					(2,887	)
Net loss														(17,223	)					(17,223	)
Other comprehensive loss																	(7,102	)		(7,102	)
Balance at March 28, 2020		—	$	—		32,075		$	32	$	366,521		$	247,548		$	(62,466	)	$	551,635

Balance, December 29, 2018		—	$	—		31,965		$	32	$	357,933		$	219,056		$	(46,253	)	$	530,768
Shares issued, other compensation						6														—
Shares issued, ESPP						13					408									408
Shares issued, ESOP						24					1,092									1,092
Stock-based compensation											1,368									1,368
Cancellation of shares for payment of employee tax withholding						(12	)				(606	)								(606	)
Dividends declared														(2,881	)					(2,881	)
Net income														16,404						16,404
Other comprehensive loss																	(5,913	)		(5,913	)
Impact of adoption of ASU 2016-02, related to leases														(134	)					(134	)
Balance at March 30, 2019		—	$	—		31,996		$	32	$	360,195		$	232,445		$	(52,166	)	$	540,506

The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

	Three Months Ended
	March 28, 2020			March 30, 2019
	(unaudited)			(unaudited)
Cash flows from operating activities:
Net (loss) income	$	(17,223	)	$	16,404
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		8,376			8,571
Loss on disposal of assets		24			71
Goodwill impairment		31,871			—
Stock-based compensation expense		1,533			1,368
Amortization of debt issuance costs		179			179
Benefit for deferred income taxes		(1,186	)		(322	)
Change in fair value of contingent consideration		—			719
Forward contract (gains) losses, net		(440	)		24
Other, net		136			549
(Increase) decrease in:
Accounts receivable		(6,838	)		(8,848	)
Inventories		(2,818	)		(3,729	)
Income taxes receivable		1,415			—
Other current assets		(2,740	)		(2,455	)
Other assets		1,213			1,088
Increase (decrease) in:
Accounts payable		3,867			662
Accrued expenses and other liabilities		(4,652	)		3,496
Income taxes payable		3,051			2,710
Other noncurrent liabilities		(701	)		(659	)
Net cash provided by operating activities		15,067			19,828
Cash flows from investing activities:
Capital expenditures		(2,937	)		(8,792	)
Proceeds from dispositions of equipment		3			64
Cash settlement of forward contracts		1,634			—
Net cash used in investing activities		(1,300	)		(8,728	)
Cash flows from financing activities:
Borrowings on revolving credit facility		2,000			35,282
Repayment of borrowings on revolving credit facility		(5,500	)		(48,000	)
Repayment of borrowings on long-term non-revolving debt		(2,100	)		(1,623	)
Proceeds from stock issued		355			408
Dividends to shareholders		(2,885	)		(2,878	)
Other financing activities		(815	)		(881	)
Net cash used in financing activities		(8,945	)		(17,692	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		310			(167	)
Net increase (decrease) in cash, cash equivalents and restricted cash		5,132			(6,759	)
Cash, cash equivalents and restricted cash, beginning of period		22,162			23,515
Cash, cash equivalents and restricted cash, end of period	$	27,294		$	16,756

The accompanying Condensed Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

Helios Technologies, Inc. (“Helios” or the “Company”), ~~and~~together with its wholly-owned subsidiaries, is an industrial technology leader that develops and manufactures solutions for both the hydraulics and electronics markets. ~~On June 13, 2019, the Company changed its legal name from Sun Hydraulics Corporation to Helios Technologies, Inc.~~ Sun Hydraulics, LLC (“Sun Hydraulics” or “Sun”), ~~a Florida limited liability company that holds the historical net operating assets of the Sun Hydraulics brand entities~~Enovation Controls, LLC (“Enovation Controls”), Faster S.r.l. (“Faster”) and Custom Fluidpower Pty Ltd (“Custom Fluidpower”), ~~along with Enovation Controls, LLC (“Enovation Controls”) and Faster S.r.l. (“Faster”)~~ are the wholly-owned operating subsidiaries of Helios.

The Company operates in ~~two~~2 business ~~segments,~~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”). ~~Within~~ 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. ~~In the~~The Electronics segment ~~we are a leader in~~provides complete, fully-tailored display and control ~~integration~~ solutions ~~offering rugged~~for engines, engine-driven equipment and ~~reliable instruments, coupled with~~specialty vehicles. This broad range of products is complemented by extensive application expertise ~~in J1939 engine protocol, to produce an industry-leading array~~and unparalleled depth of ~~easy-to-read displays~~software, embedded programming, hardware and ~~gauges for controller area network (“CAN”) transmitted engine data and faults.~~sustaining engineering teams. This technology is referred to as Electronic Controls (“EC”).

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 December ~~29, 2018,~~28, 2019, (“Form 10-K”), filed by Helios ~~Technologies, Inc. (at that time known as Sun Hydraulics Corporation)~~ with the Securities and Exchange Commission on February ~~26, 2019.~~25, 2020. In ~~Management’s~~management’s opinion, all adjustments necessary for a fair presentation of the Company’s financial statements are reflected in the interim periods presented.

The Company faces various risks related to health epidemics, pandemics and similar outbreaks, including the global outbreak of COVID-19. The Company cannot at this time predict the impact of the COVID-19 pandemic, but it could have a material adverse effect on the business, financial position, results of operations and/or cash flows. Operating results for the ~~six month period~~three months ended ~~June 29, 2019,~~March 28, 2020, are not necessarily indicative of the results that may be expected for the ~~period ending December 28, 2019.~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~. ASU 2016-02 requires an entity to recognize both assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The guidance is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company adopted the standard for the fiscal year ~~beginning December 30, 2018, using~~ending January 2, 2021.

Goodwill, which represents the ~~effective date method which required~~excess of the purchase price of an acquisition over the fair value of the net assets acquired, is carried at cost. Goodwill is tested for impairment annually, in the third and fourth quarters, or more frequently if events or circumstances indicate a ~~cumulative-effect adjustment~~reduction in the fair value below the carrying value. As part of the impairment test, the Company has the option to befirst assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after this optional qualitative assessment, the Company determines that impairment is more likely than not, then the Company performs the quantitative impairment test. The carrying value of assets is calculated at the reporting unit level. An impairment loss is recorded to the ~~opening balance of retained earnings. Under~~extent that the effective date method, financial results reported in periods prior to fiscal year 2019 are unchanged. The Company also elected the package of practical expedients, which among other things, does not require reassessment of lease classification. Ascarrying value of the ~~adoption date,~~reporting unit exceeds its fair value, with the impairment loss limited to the amount of goodwill allocated to the reporting unit.

During the first quarter of 2020, the Company ~~recorded right-of-use (“ROU”) assets~~determined that, based on current economic conditions and ~~liabilities of approximately $13,918 to the balance sheet and a cumulative-effect adjustment of $134 was recognized in retained earnings.~~

The Company determines whether an arrangement is a lease at its inception. Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term and are presented in Property, plant and equipment in the Consolidated Balance Sheets. Operating lease liabilities represent the Company’s obligation to make lease payments arisingpotential future impacts from the ~~leases and are presented in Other accrued expenses and current liabilities and Other noncurrent liabilities in~~COVID-19 pandemic, it was more likely than not that the ~~Consolidated Balance Sheets. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present~~fair value of ~~lease payments over~~ the ~~lease term.~~

~~The~~Faster reporting unit was less than its carrying value. Upon completion of the interim impairment testing, the Company ~~utilizes an estimated incremental borrowing rate, which is derived from information available at~~determined that the ~~lease commencement date, in determining the present~~carrying value of ~~lease payments. The Company considers its existing credit facilities when calculating the incremental borrowing rate.~~

~~Lease terms include options to extend the lease when it is reasonably certain that the Company will exercise the option. Leases with a term~~goodwill was impaired. See Note 6 for discussion of ~~12 months or less are not recorded on the balance sheet. There are no residual value guarantees included in the Company’s leases.~~interim impairment testing.

Contract assets are recognized when the Company has a conditional right to consideration for performance completed on contracts. Contract asset balances totaled ~~$1,956~~$2,741 and ~~$2,851~~$2,796 at ~~June 29, 2019~~March 28, 2020 and December ~~29, 2018,~~28, 2019, respectively, and are presented in Other current assets in the Consolidated Balance Sheets. Accounts receivable balances represent unconditional rights to consideration from customers and are presented separate from contract assets in the Consolidated Balance Sheets.

Contract liabilities are recognized when payment is received from customers prior to revenue being recognized. Contract liabilities totaled ~~$451~~$253 and ~~$138~~$353 at ~~June 29, 2019~~March 28, 2020 and December ~~29, 2018,~~28, 2019, respectively, and are presented in Other accrued expenses and current liabilities in the Consolidated Balance Sheets.

All derivative instruments are recorded gross in the Consolidated Balance Sheets at their respective fair values. The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is initially reported as a component of Accumulated other comprehensive income (“AOCI”) and is subsequently reclassified into the line item within the Consolidated Statements of Operations in which the hedged items are recorded in the same period in which the hedged item affects earnings.

The Company enters into foreign exchange currency contracts that are not designated as hedging instruments for accounting purposes. Changes in the fair value of foreign exchange currency contracts not designated as hedging instruments are recognized in earnings. Derivative financial instruments are utilized as risk management tools and are not used for trading or speculative purposes.

The Company utilizes foreign currency denominated debt to hedge currency exposure in foreign operations. The Company designates certain foreign currency denominated debt as hedges of net investments in foreign operations which reduces the Company’s exposure to changes in currency exchange rates on investments in non-U.S. subsidiaries. Gains and losses on net investments in non-U.S. operations are economically offset by losses and gains on foreign currency borrowings. The change in the U.S. dollar value of foreign currency denominated debt is recorded in Foreign currency translation adjustments, a component of AOCI.

The Company conducts research and development (“R&D”) to create new products and to make improvements to products currently in use. R&D costs are charged to expense as incurred and totaled ~~$7,778,~~$4,107, and ~~$6,301~~$3,900 for the ~~six~~three months ended ~~June 29,~~March 28, 2020 and March 30, 2019, respectively.

The following table presents the computation of basic and ~~June 30, 2018, respectively.~~diluted earnings per common share (in thousands except per share data):

In January 2017, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ~~ASU~~Accounting Standards Update (“ASU”) 2017-04, Intangibles – Goodwill and Other: Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates the second step in the goodwill impairment test, which requires an entity to determine the implied fair value of the reporting unit’s goodwill. Instead, an entity should recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill allocated to the reporting unit. The Company adopted the standard for the fiscal year beginning December 29, 2019, and conducted its interim impairment testing accordingly.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. The standard replaces the incurred loss model with the current expected credit loss (“CECL”) model to estimate credit losses for financial assets measured at amortized cost and certain off-balance sheet credit exposures. The CECL model requires a Company to estimate credit losses expected over the life of the financial assets based on historical experience, current conditions and reasonable and supportable forecasts. The Company adopted the standard for the fiscal year beginning December 29, 2019. Adoption of the standard did not have a material impact on the Consolidated, Unaudited Financial Statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This update simplifies accounting for income taxes by eliminating some exceptions to the general approach in ASC 740, Income Taxes, related to intraperiod tax allocation, the methodology for calculating income tax in an interim period and the recognition of deferred tax liabilities for outside basis differences. This update is effective for ~~annual~~fiscal years, and interim ~~goodwill impairment tests conducted in~~periods within those fiscal years, beginning after December 15, ~~2019,~~2020, with early adoption permitted. The amendments in this update should be applied on either a retrospective basis, a modified retrospective basis or prospectively, depending on the provision within the amendment. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

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

On April 5, 2018, the Company completed the acquisition of Faster S.p.A, a worldwide leader in engineering, manufacturing, marketing and distribution of quick release hydraulic coupling solutions headquartered near Milan, Italy. Pursuant to the Share Purchase Agreement, the Company acquired all of the outstanding equity interests of Polyusus Lux IV S.a.r.l., a Luxembourg limited liability company and the owner of 100% of the share capital of Faster S.p.A. The acquisition was completed for cash consideration totaling $532,408 and was financed with cash on hand from the Company’s registered public stock offering and borrowings of $358,000 on its credit facility. Subsequent to the acquisition, the legal structure of Faster was changed to Faster S.r.l.

Faster adds adjacent hydraulics products to the Company’s portfolio of products and broadens end market reach, increasing the Company’s presence in the agriculture market. The results of Faster’s operations are reported in the Company’s Hydraulics segment and have been included in the consolidated financial statements since the acquisition date.

The Share Purchase Agreement allows for future payments to the sellers for certain tax benefits realized within two years of the acquisition date. The estimated fair value of the contingent liability was determined to be $938 as of the acquisition date. See Note 4 for a summary of the change in estimated fair value of the contingent liability.

The purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The allocation of the total purchase price, net of cash acquired, is as follows:

Goodwill is primarily attributable to Faster’s assembled workforce and anticipated synergies and economies of scale expected from the operations of the combined company. The synergies include certain cost savings, operating efficiencies, and other strategic benefits projected to be achieved as a result of the acquisition. Of the total goodwill acquired, approximately $4,337 is expected to be deductible for tax purposes.

Transaction costs of $4,271 incurred in connection with the acquisition are included in Selling, engineering and administrative expenses in the Consolidated Statement of Operations for the six months ended June 30, 2018.

~~The fair value of identified intangible assets and their respective useful lives are as follows:~~

The following unaudited pro forma financial information presents combined results of operations for each of the periods presented, as if Faster had been acquired as of the beginning of 2017. The pro forma information includes adjustments to amortization and depreciation for intangible assets and property, plant and equipment and interest expense from borrowings to fund the acquisition. Non-recurring pro forma adjustments directly attributable to the acquisition included in the pro forma information presented below include the purchase accounting effect of inventory step up to fair value of $3,125, transaction costs totaling $4,271, amortization of sales order backlog intangible asset totaling $3,633, accelerated amortization of Faster pre-acquisition loan costs of $2,328 and loss on forward contract entered into in connection with the acquisition totaling $2,535.

The pro forma information does not reflect any operating efficiencies or potential cost savings that may result from the acquisition. Accordingly, the pro forma information is for illustrative purposes only and is not intended to present or be indicative of the actual results of operations of the combined company that may have been achieved had the acquisition actually occurred at the beginning of 2017, nor is it intended to represent or be indicative of future results of operations of the combined business. Consequently, actual results will differ from the unaudited pro forma information presented below.

On August 1, 2018, the Company acquired all of the outstanding equity interests of Custom Fluidpower Pty Ltd, an Australian proprietary limited liability company. The acquisition was completed pursuant to a Share Sale Agreement among the Company and the shareholders of Custom Fluidpower. The fair value of consideration paid at closing totaled $26,655, including 333,065 shares of the Company’s common stock and cash of $9,315; cash paid net of cash acquired totaled $7,518. The cash consideration was funded with borrowings on the Company’s credit facility.

~~Custom Fluidpower was acquired to further diversify the Company’s hydraulics product and service portfolio and broaden the Company’s global footprint.~~ ~~The results of Custom Fluidpower’s operations are reported in the Company’s Hydraulics segment and have been included in the consolidated financial statements since the date of acquisition.~~ ~~Supplemental pro forma information has not been provided as the acquisition did not have a material impact on the Company’s consolidated results of operations.~~

The Company recorded $6,316 in goodwill and $7,556 in other identifiable intangible assets in connection with the acquisition; however, the purchase price allocation is preliminary, pending final 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 may be material.

The following tables provide information regarding the Company’s assets and liabilities measured at fair value on a recurring basis at ~~June 29, 2019~~March 28, 2020 and December ~~29, 2018.~~28, 2019.

~~A summary of the changes in the estimated fair value of contingent consideration at June 29, 2019 is as follows:~~

During the first six months of 2019, the Company recorded an adjustment to the estimated fair value of the contingent consideration liability incurred in connection with the acquisition of Faster. The adjustment was the result of revised estimates of future payments owed to the sellers for certain tax benefits to be realized.

The Company leases machinery, equipment, vehicles, buildings and office space throughout its locations, which are classified as operating leases. Remaining terms on these leases range from less than one year to 11ten years. For the ~~six~~three months ended ~~June 29,~~March 28, 2020 and March 30, 2019, operating lease costs totaled ~~$1,818.~~$908 in each period.

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

Supplemental cash flow ~~and other~~ information related to leases is as follows:

A summary of changes in goodwill by segment for the ~~six~~three months ended ~~June 29, 2019,~~March 28, 2020, is as follows:

During the first quarter of 2020, the global economy was significantly impacted by the COVID-19 pandemic. Given the economic impact, primarily in Europe, government mandated facility closures and an unfavorable outlook for certain end markets, the Company concluded that this change in circumstances triggered the need for an interim impairment review of its Faster reporting unit. The interim review was performed as of March 28, 2020. A recoverability test for the long-lived assets within the Faster reporting unit was performed first and resulted in the conclusion that the carrying value of the long-lived assets was fully recoverable. An interim quantitative impairment test for goodwill was then performed.

The fair value of the Faster reporting unit was determined based on a combination of income and market approach methodologies. The income approach utilized a discounted cash flow analysis, which estimates the present value of the projected free cash flows to be generated by the reporting unit. Principal assumptions used in the analysis include the Company's estimates of future revenue and terminal growth rates, margin assumptions and discount rates. While assumptions utilized are subject to a high degree of judgment and complexity, the Company has made every effort to estimate future cash flows as accurately as possible, given the high degree of economic uncertainty that currently exists. The market approaches estimate fair value by comparing to guideline public companies and guideline transactions. Various valuation multiples of companies that are economically and operationally similar were used as data points for selecting multiples. The Company concluded that the estimated fair value of the Faster reporting unit was less than its carrying value, and as a result, recorded a non-cash, non-tax-deductible goodwill impairment charge of $31,871. If the economic impact from the COVID-19 pandemic is more severe than anticipated, or if the economic recovery takes longer to materialize or does not materialize as strongly as anticipated, it could result in further goodwill impairment charges.

The Company considered the known and anticipated impacts of the COVID-19 pandemic on its other reporting units and concluded that it was more likely than not that their fair value exceeded their carrying value.

At ~~June 29, 2019,~~March 28, 2020, and December ~~29, 2018,~~28, 2019, intangible assets consisted of the following:

	June 29, 2019							December 29, 2018							March 28, 2020							December 28, 2019
	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	$	56,454	$	(6,193	)	$	50,261	$	56,604	$	(4,712	)	$	51,892	$	55,747	$	(8,362	)	$	47,385	$	56,032	$	(7,658	)	$	48,374
Non-compete agreements		950		(491	)		459		950		(396	)		554		950		(633	)		317		950		(586	)		364
Technology		31,926		(7,082	)		24,844		32,004		(5,488	)		26,516		31,544		(9,414	)		22,130		31,704		(8,661	)		23,043
Supply agreement		21,000		(5,426	)		15,574		21,000		(4,375	)		16,625		21,000		(7,000	)		14,000		21,000		(6,475	)		14,525
Customer relationships		231,097		(14,877	)		216,220		232,275		(10,168	)		222,107		226,835		(21,678	)		205,157		227,844		(19,499	)		208,345
Licensing agreement		3,716		(982	)		2,734		3,716		(862	)		2,854
	$	345,143	$	(35,051	)	$	310,092	$	346,549	$	(26,001	)	$	320,548	$	336,076	$	(47,087	)	$	288,989	$	337,530	$	(42,879	)	$	294,651

Amortization expense for the ~~six~~three months ended ~~June 29,~~March 28, 2020, and March 30, 2019, was $4,348 and ~~June 30, 2018, was $9,066 and $10,124,~~$4,521, respectively. ~~Remaining amortization for 2019 is approximately $9,224. Total~~Future estimated amortization expense ~~for the years 2020 through 2024~~ is presented below.

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 ~~are~~is presented as follows:

The amount of gains and losses related to the Company’s derivative financial instruments for the three months ended March 28, 2020 and March 30, 2019, are presented as follows:

Interest expense presented in the Consolidated Statements of Operations, in which the effects of cash flow hedges are recorded, totaled ~~$8,433~~$2,951 and $4,385 for the ~~six~~three months ended ~~June 29, 2019.~~March 28, 2020 and March 30, 2019, respectively.

Helios primarily utilizes variable-rate debt to finance its operations. The debt obligations expose the Company to variability in interest payments. The Company enters into various types of derivative instruments to manage fluctuations in cash flows resulting from interest rate risk attributable to changes in the benchmark interest rates.

The Company has entered into an interest rate swap transaction to hedge the variable interest rate payments on the credit facilities. In connection with this transaction, 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 swap has an aggregate notional amount of ~~$200,000,~~$175,000, which decreases by $25,000 annually, ~~starting in July 2019, and~~ has been designated as a hedging instrument and is accounted for as a cash flow hedge. The interest rate swap was effective on August 2, 2018 and is scheduled to expire on April 3, 2023. The contract iswill be settled with the respective counterparties on a net basis at each settlement date.

The Company has entered into forward contracts to economically hedge transactional exposure associated with commitments arising from transactions denominated in a currency other than the functional currency of the respective operating entity. The Company’s forward contracts are not designated as hedging instruments for accounting purposes.

~~As of June 29, 2019,~~At March 28, 2020, the Company had ~~seven~~11 forward foreign exchange contracts with an aggregate notional value of ~~€65,147,~~€61,843, maturing at various dates through ~~December 31, 2020.~~

During the quarter ended March 31, 2018, the Company entered into a forward foreign exchange currency contract, for the purchase of €370,000, to economically hedge transactional exposure associated with the acquisition of Faster, which was denominated in euros. The contract settled upon closing of the acquisition of Faster. October 1, 2021.

The Company utilizes foreign currency denominated debt to hedge currency exposure in foreign operations. ~~During the first quarter of fiscal year 2019, the~~The Company has designated ~~€60,000~~€100,000 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 ~~$68,200~~$111,365 as of ~~June 29, 2019~~March 28, 2020 and is included in the Revolving line of credit line item onin the Consolidated Balance Sheets. The gain or loss on the net investment hedge recorded in ~~AOCI~~accumulated other comprehensive income (“AOCI”) as part of the currency translation adjustment was a ~~loss~~gain of ~~$447,~~$265, net of tax, for the ~~six~~three months ended ~~June 29, 2019. No~~March 28, 2020. NaN amounts associated with the net investment hedge were reclassified from AOCI into income for the ~~quarter~~three months ended ~~June 29, 2019.~~March 28, 2020.

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

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 up to an aggregate maximum principal amount of $400,000. ~~During the first six months of 2019, the Company exchanged a portion of the USD denominated borrowings for~~ ~~€60,000 in order to hedge currency exposure in foreign operations.~~ ~~The Company designated the borrowings as a net investment hedge, see additional discussion in Note 8.~~

The effective interest rate on the credit agreement at ~~June 29, 2019~~March 28, 2020 was ~~3.68%~~2.34%. Interest expense recognized on the credit agreement during the ~~six~~three months ended ~~June 29,~~March 28, 2020 and March 30, 2019, ~~and June 30, 2018,~~ totaled $~~3,803~~2,408 and ~~$4,534,~~$4,164, respectively. As of the date of this filing, the Company was in compliance with all debt covenants related to the credit agreement.

The Company ~~has~~had a credit agreement with Shinhan Bank that ~~provides~~provided a term loan of 1,000,000 Korean won. The loan ~~matures~~matured in March 2020, at which time the ~~full amount will become due. Interest is charged at a one-year variable rate,~~ ~~1.87% as of June 29, 2019.~~

~~The Company had a revolving line of credit with National Australia Bank that allowed for maximum borrowings of 3,000 Australian dollars. Principal and interest were~~balance was paid in ~~full on January 31, 2019, at which time the facility was closed.~~full.

The Company’s other long-term debt ~~primarily~~ consists of auto loans payable to National Australia Bank. Principal and interest payments are due monthly. The loans mature at various dates through ~~January 2024.~~July 2023. Interest is charged at various rates ranging from ~~4.0%~~4.5% to ~~5.3%~~5.1%.

~~On February 6, 2018, the Company completed a public offering of its common stock, pursuant to which the Company sold 4,400,000 shares at a public offering price of $57.50 per share.~~ The ~~Company received net proceeds from the sale totaling $239,793, after deducting the underwriting discount and other offering expenses. The Company used the net proceeds~~provision for income taxes for the ~~repayment~~three months ended March 28, 2020 and March 30, 2019, was 22.3% and 22.1% of ~~debt under its credit facility and to partially fund~~pretax income, respectively, after adjusting for the ~~acquisition~~impact of ~~Faster, which closed on April 5, 2018.~~

At ~~June 29, 2019,~~March 28, 2020, the Company had an unrecognized tax benefit of ~~$6,958~~$8,491 including accrued interest. If recognized, the unrecognized tax benefit would have a favorable effect on 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 ~~June 29, 2019~~March 28, 2020 is not considered material to the Company’s consolidated financial statements.

The Company files United States (“U.S.”) federal income tax returns as well as income tax returns in various states and foreign jurisdictions. The Company is no longer subject to income tax examinations by tax authorities for years prior to 2008 for the majority of tax jurisdictions where the Company files tax returns.

The Company’s U.S. federal income tax returns are not currently under examination by the Internal Revenue Service (IRS) ~~in the United States for the periods 2008 through 2012 as well as the pre-acquisition 2016 return for Enovation Controls LLC.~~. Florida income tax returns for tax years 2015 and 2016 are under examination. The 2016 pre-acquisition Italian income tax return for Faster is also under examination. To date, there have not been any significant proposed adjustments that have not been accounted for in the Company’s consolidated financial statements.

Audit outcomes and the timing of audit settlements are subject to significant uncertainty. It is reasonably possible that within the next twelve months, the Company will resolve some or all of the matters presently under consideration ~~for both its federal and state examinations~~ and there could be significant increases or decreases to unrecognized tax benefits.

The Company’s 2019 Equity Incentive Plan and its predecessor equity plan provide for the grant of shares of restricted stock, restricted share 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.

The Company grants restricted shares of common stock and restricted stock units (“RSU”) 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~~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 restricted stock and RSUs totaled ~~$1,859~~$1,253 and ~~$1,279,~~$811, respectively, for the ~~six~~three months ended ~~June 29, 2019,~~March 28, 2020, and ~~June~~March 30, ~~2018.~~2019.

The following table summarizes restricted stock and RSU activity for the ~~six~~three months ended ~~June 29, 2019:~~March 28, 2020:

⁽¹⁾ Approximately 36,500 performance based RSUs were granted during 2019 and are included as granted in the table above. The number of shares that ultimately vest may vary from 0% to 150% of their target vesting amount based on the achievement of defined performance targets.Includes 82,528 unvested performance-based RSUs.

The Company had ~~$7,806~~$8,481 of total unrecognized compensation cost related to the restricted stock and RSU awards as of ~~June 29, 2019.~~March 28, 2020. That cost is expected to be recognized over a weighted average period of ~~1.9~~2.2 years.

During the first quarter of 2020, the Company granted 18,121 stock options to its officers. The exercise price of $39.75 per share is equal to the market price of Helios stock on the grant date. The options vest ratably over a three-year period and have a 10-year expiration. The weighted average grant date fair value of the options is $12.81 per share and was estimated using a Black Scholes valuation model. At March 28, 2020, the Company had $226 of unrecognized compensation cost related to the options which is expected to be recognized over a weighted average period of 2.9 years.

The Company maintains an Employee Stock Purchase Plan (“ESPP”) in which the U.S. employees of Helios, Sun Hydraulics and Enovation Controls 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 ~~six~~6 shares purchased by the employee under the plan. Employees purchased ~~25,481~~10,927 shares at a weighted average price of ~~$33.09,~~$32.46, and ~~18,728~~14,387 shares at a weighted average price of ~~$43.24,~~$28.37, under the ESPP and ~~U.K.~~UK plans during the ~~six~~three months ended ~~June 29,~~March 28, 2020, and March 30, 2019, ~~and June 30, 2018,~~ respectively. The Company recognized ~~$329~~$60 and ~~$138~~$255 of compensation expense during the ~~six~~three months ended ~~June 29,~~March 28, 2020, and March 30, 2019, ~~and June 30, 2018,~~ respectively.

The Company’s 2012 Nonemployee Director Fees Plan compensates nonemployee ~~Directors~~directors for their board service with shares of common stock. Directors were granted ~~12,500~~5,500 and 5,875 shares for ~~each of~~ the ~~six~~three months ended ~~June 29,~~March 28, 2020 and March 30, 2019, ~~and June 30, 2018.~~respectively. The Company recognized director stock compensation expense of ~~$582~~$235 and ~~$660~~$285 for the ~~six~~three months ended ~~June 29,~~March 28, 2020 and March 30, 2019, ~~and June 30, 2018,~~ respectively.

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

The Company has ~~two~~2 reportable ~~business~~ 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 below.~~item. For the ~~six~~three months ended ~~June 29, 2019,~~March 28, 2020, the unallocated costs ~~included certain corporate costs not deemed to be allocable to either business segment of $4,238 which~~totaled $36,293 and primarily relate to ~~the~~ amortization of acquisition-related intangible ~~assets.~~assets and the goodwill impairment charge. The accounting policies of the Company’s ~~business~~operating segments are the same as those used to prepare the accompanying ~~consolidated financial statements.~~Consolidated, Unaudited Financial Statements.

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 ~~ROU~~right-of-use assets:

Enovation Controls purchases and sells inventory to entities partially owned by a director of Helios. For the ~~six~~three months ended ~~June 29,~~March 28, 2020 and March 30, 2019, ~~and June 30, 2018,~~ inventory sales to the entities totaled ~~$712~~$414 and ~~$1,525,~~$482, respectively, and inventory purchases from the entities totaled ~~$2,694~~$999 and ~~$1,751,~~$1,455, respectively.

At ~~June 29, 2019,~~March 28, 2020 and December ~~29, 2018,~~28, 2019, amounts due from the entities totaled ~~$90~~$166 and ~~$296,~~$73, respectively, and amounts due to the entities totaled ~~$326~~$243 and ~~$631,~~$361, respectively.

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.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF ~~OPERATIONS~~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" and similar expressions identify forward-looking statements. In addition, any statements which 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 ~~section~~report and those identified in Item 1A, "Risk Factors" included in our ~~2018 Annual Report on~~ 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.

We are an industrial technology leader that develops and manufactures solutions for both the hydraulics and electronics markets, each of which serves as a reportable segment. There are three key technologies within our Hydraulics segment: cartridge valve technology (“CVT”), quick-release hydraulic couplings solutions (“QRC”) and hydraulic system design (“Systems”). Within CVT, our products provide functions important to a hydraulic system: to control rates and direction of fluid flow and to regulate and control pressures. QRC products allow users to connect and disconnect quickly from any hydraulic circuit without leakage and ensure high-performance under high temperature and pressure using one or multiple couplers. Systems provide engineered solutions for machine users, manufacturers or designers to fulfill complete system design requirements including electro-hydraulic, remote control, electronic control and programmable logic controller systems, as well as automation of existing equipment. In our Electronics segment, we are a leader in display and control integration solutions offering rugged and reliable instruments, coupled with expertise in J1939 engine protocol, to produce an industry-leading array of easy-to-read displays and gauges for controller area network (“CAN”) transmitted engine data and faults. We refer to this technology as Electronic Controls (“EC”).

On June 13, 2019, we changed our legal name from Sun Hydraulics Corporation to Helios Technologies, Inc. Sun Hydraulics, LLC (a Florida limited liability company that holds the historical net operating assets of the Sun Hydraulics brand entities and Custom Fluidpower), along with Enovation Controls and Faster are the three wholly-owned operating subsidiaries of Helios. Our corporate name change is a reflection of the tremendous growth the Company has accomplished over the last two years, including the addition of various operating companies under our umbrella. On June 17, 2019, shares of Helios began trading on the Nasdaq under the new ticker symbol of “HLIO”.

The operating results of the Hydraulics and Electronics segments included in this MD&A are presented on a basis consistent with our internal management reporting. Segment information included in Note 1412 to the Consolidated, Unaudited Financial Statements is also presented on this basis. All differences between our internal management reporting basis and ~~accounting principles generally accepted in the United States (“~~U.S. ~~GAAP”),~~GAAP, specifically the allocation of certain corporate and acquisition-related costs, are included in Corporate and Other.

In 2016, we introduced our vision for the Company for the next decade. We believe it is important to reach a critical mass of $1 billion in sales by 2025 while remaining a technology leader in the industrial goods sector. To achieve our goal, we are targeting organic sales of our Hydraulics segment ~~including Faster and Custom Fluidpower,~~ of ~~$730~~$700 million, sales of our Electronics segment of ~~$200~~$220 million and acquisitions ~~of $70~~at or exceeding $80 million of revenue. Through this growth, our decision-making process will consider our desire to maintain superior profitability and financial strength. ~~While acquisitions remain an important component of our long-term strategy, our near-term focus is on integrating our recently acquired businesses and improving operating performance.~~

Product development is a key factor to organic and synergistic growth in both the Hydraulics and Electronics segments, including joint development between the two segments. In the Hydraulics segment, our most recent product introductions have been electro-hydraulics products: the FLeX™ Series Solenoid Valves and the XMD Bluetooth-configurable electro-hydraulics driver. XMD ~~represents the second of its kind from Sun Hydraulics and~~ was jointly engineered by a team comprised of Hydraulics and Electronics segment personnel. We expect the trend for development of similar types of products to continue as capital goods markets move toward further electrification and digitalization of machines.

~~Acquisitions~~While not a near-term focus, acquisitions of companies that advance our technology capabilities will be critical to achieving our Vision 2025. Target product offerings include ~~additional CVT, CVT-adjacent~~ hydraulic ~~products,~~components and/or systems, electronic controls and instrumentation and linked technologies such as electro-mechanical actuators, factory automation, software, or products relevant to the Internet of ~~Things. Cultivating relationships with potential acquisition targets can often be a lengthy process,~~Things or high-precision manufacturing.

The COVID-19 pandemic has caused significant economic disruption and substantial uncertainty exists regarding magnitude and duration of the pandemic. Broad measures taken by governments, businesses and others to limit the spread of the virus are adversely affecting the Company and its customers.

Currently our primary manufacturing locations are fully operational but have been impacted to differing degrees by various COVID-19 related factors such as:

Employees are working from home when possible, and we ~~believe it is key~~have taken significant measures to ~~creating successful acquisitions with sustainable business results.~~ ensure the health and safety of those working at our facilities.

We have ~~an established list~~updated our risk factors in Part II, Item 1A, of ~~potential targets at any given time~~this Quarterly Report, in light of the continued and ~~entertain reviewing other opportunities for acquisition as they become known to us.~~expected impact of COVID-19 on our business.

~~Acquisitions~~The impact of the COVID-19 pandemic on our results of operations, liquidity and financial resources and 2020 outlook are discussed later within their respective sections.

In April 2018 we completed our acquisition of Faster, an Italian company headquartered near Milan, Italy. Faster is a worldwide leader in engineering, manufacturing, marketing and distribution of quick release hydraulic coupling solutions. The completion of this acquisition brings us another step closer toJanuary 2020, the realization of our Vision 2025. Faster fits this strategy well and upholds a strongly innovative culture, driving new product development and market leadership. Faster further diversifies the Company more deeply into the global agriculture market. The business also broadens our global footprint, advancing our ‘in the region, for the region’ initiative.

~~On August 1, 2018, we completed our acquisition of Custom Fluidpower,~~ a leading provider of hydraulic, pneumatic, electronic and instrumentation solutions. The company supplies hydraulic, pneumatic, filtration and lubrication products and offers complete system design, installation and commissioning, and service and repairs, to a broad range of industries including agriculture, aerospace, exploration, industrial, marine, mobile, mining and material handling. Headquartered in Newcastle, NSW, Australia, Custom Fluidpower has operational branches co-located with its headquarters as well as throughout Australia. Custom Fluidpower further diversifies our hydraulics product and service portfolio and broadens our global footprint.

~~In June 2016, voters in the United Kingdom (“UK”) approved the UK’s exit from~~UK exited the European Union (“EU”) (“Brexit”). ~~The timing of~~During the ~~UK’s exit from~~transition period, which ends on December 31, 2020, the ~~EU remains uncertain; the EU has extended the deadline for the UK to exit the EU until October 31, 2019. With the terms~~details of the UK’s withdrawal and the nature of its future relationship with the EU ~~still being decided, the~~will be decided. The Company continues to monitor the status of the negotiations and plan for potential impact. ~~We have considered the following factors that mitigate the potential impact of Brexit on the import and export of goods to and from the UK:~~

The ultimate impact of Brexit on the Company’s financial results is uncertain. However, ~~based on the above noted mitigating factors,~~ we do not expect the effects of Brexit to have a material impact on our results of operations or financial position. ~~We are not aware of any material contracts that may require renegotiation or termination due to the impact of Brexit.~~ For additional information, refer to ~~the “Item 1A—Risk~~Part I, Item 1A, “Risk Factors” ~~section~~and Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s ~~2018 Annual Report on~~ Form ~~10-K filed on February 26, 2019.~~10-K.

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. According to the National Fluid Power Association (the fluid power industry’s trade association in the United States), the U.S. index of shipments of hydraulic products decreased 2% during the first six months of 2019 while orders decreased 10% during the same period. The Institute of Printed Circuits Association reported that North American electronics industry sales growth remained positive for printed circuit boards (PCB) and electronics manufacturing services (EMS), while semiconductor sales growth continued to decline into negative territory.

We utilize industry trend reports from various sources, as well as feedback from customers and distributors, to evaluate economic trends. We also rely on global government statistics such as Gross Domestic Product and Purchasing Managers Index to understand ~~higher level economic~~macro-economic conditions.

According to the National Fluid Power Association (the fluid power industry’s trade association in the U.S.), the U.S. index of shipments of hydraulic products decreased an additional 13% during the first three months of 2020, after decreasing 7% in 2019. In Europe, the CEMA Business Barometer reported the general business climate index for the European agricultural machinery industry dropped sharply in April, although the impact of COVID-19 on future periods remains uncertain. The CECE (Committee for European Construction Equipment) business climate index saw a sharp drop in March after three months of strong recovery, primarily attributable to deteriorating future business expectations.

According to the Federal Reserve’s Industrial Production Index, which measures the real output of all relevant establishments located in the U.S., sales of semiconductors and other electronics components peaked at the end of the 2019 ~~Second~~fourth quarter and have since declined slowly back to mid-fourth quarter 2019 levels. The Institute of Printed Circuits Association reports that total North American printed circuit board shipments in February 2020 were down 1.1% compared to the same month last year; however, compared to January 2020, February shipments rose 1.5%. In our electronics segment, we are experiencing sales declining in excess of the overall market, primarily due to a strategic change we made to our customer base during 2019. For additional information, refer to the discussion of 2020 results of our electronics segment below.

2020 First Quarter Results and Comparison of the Three ~~and Six~~ Months Ended ~~June 29,~~March 28, 2020 and March 30, 2019 ~~and June 30, 2018~~

Our acquisition activity impacts the comparability of our financial information. Faster was acquired on April 5, 2018 and Custom Fluidpower was acquired on August 1, 2018. The results of operations and estimated fair value of assets acquired and liabilities assumed from these acquisitions are included in our financial information for all periods subsequent to the acquisition dates.

	Three Months Ended											Three Months Ended
	June 29, 2019			June 30, 2018			$ Change		% Change			March 28, 2020			March 30, 2019			$ Change			% Change
Net sales	$	143.8		$	136.2		$	7.6		5.6	%	$	129.5		$	146.9		$	(17.4	)		(11.8	)%
Gross profit	$	56.2		$	50.4		$	5.8		11.5	%	$	51.9		$	56.5		$	(4.6	)		(8.1	)%
Gross profit %		39.1	%		37.0	%							40.1	%		38.5	%
Operating income	$	26.4		$	17.0		$	9.4		55.3	%
Operating (loss) income												$	(10.0	)	$	25.8		$	(35.8	)		(138.8	)%
Operating income %		18.4	%		12.5	%							(7.7	)%		17.6	%
Net income	$	17.3		$	6.8		$	10.5		154.4	%
Basic and diluted net income per common share	$	0.54		$	0.22		$	0.32		145.5	%
Net (loss) income												$	(17.2	)	$	16.4		$	(33.6	)		(204.9	)%
Basic and diluted net (loss) income per common share												$	(0.54	)	$	0.51		$	(1.05	)		(205.9	)%

	Six Months Ended
	June 29, 2019			June 30, 2018			$ Change		% Change
Net sales	$	290.7		$	233.5		$	57.2		24.5	%
Gross profit	$	112.7		$	88.0		$	24.7		28.1	%
Gross profit %		38.8	%		37.7	%
Operating income	$	52.2		$	34.3		$	17.9		52.2	%
Operating income %		18.0	%		14.7	%
Net income	$	33.7		$	18.7		$	15.0		80.2	%
Basic and diluted net income per common share	$	1.05		$	0.61		$	0.44		72.1	%

~~Second~~First quarter consolidated net sales ~~improved $7.6~~declined $17.4 million, ~~5.6%~~11.8%, over the prior-year ~~period; $12.6 million of sales were contributed by Custom Fluidpower.~~ ~~Organic business sales declined $5.0 million over the prior year second quarter.~~period. Changes in foreign currency exchange rates ~~negatively~~unfavorably impacted sales ~~of our historical businesses during~~for the ~~second~~ quarter by ~~$2.6~~$2.1 million, ~~when~~1.6%, and earnings per share by $0.01. Pricing changes had minimal impact on the 2020 first quarter compared to the prior-year ~~quarter and had an unfavorable impact on earnings per share (“EPS”) for the second quarter~~first quarter. We estimate that we lost approximately $5.0 million of $0.01. Compared with foreign currency exchange rates in effect at the acquisition date, changes in exchange rates unfavorably impacted sales of Custom Fluidpower during the second quarter by $0.7 million, and had a minimal impact on EPS for the quarter. Price increases favorably impacted sales during the first quarter ~~by $2.0 million. During~~from facility closures and regulatory restrictions imposed on shipments as a result of the ~~second quarter~~COVID-19 pandemic. Additionally, we continue to experience softening demand in certain end markets ~~caused a decline in~~and reduced order intake across both segments compared to the ~~prior second~~prior-year first quarter. ~~The agriculture market in Europe remains weak as does the oil and gas market~~

Gross profit trended downward in the ~~Americas. We have also recently seen a decline in both~~first quarter of 2020, compared to the ~~construction equipment market in the Asia/Pacific region and the recreational market in the Americas. We continued to maintain a large order backlog for CVT products during the~~first quarter of 2019, due to ~~strong order intake~~sales volume and an unfavorable ~~product mix~~impact from changes in foreign currency rates of $0.7 million. Gross margin improved over the prior year period by 1.6 percentage points, up to 40.1%, driven primarily by continued cost management efforts and production efficiencies gained from our CVT manufacturing consolidation project which ~~impacted our ability~~was completed at the end of the 2019 first quarter.

Current and expected economic impacts from the COVID-19 pandemic led to ~~maximize manufacturing capacity~~an impairment charge of $31.9 million of goodwill at our ~~Sarasota facilities.~~

~~Gross profit margin increased 2.1 percentage points during~~Faster reporting unit. Continued negative impacts to the ~~second quarter of 2019~~global economy and reductions in our expected future cash flows could cause further impairment to 39.1% compared to 37.0% in the prior-year second quarter. The improvement was driven by a reduction of $3.1 million of amortization of acquisition related inventory step up costs and margin improvement from our organic businesses with the Hydraulics and Electronics segments of 0.8 and 2.4 percentage points, respectively which resulted from production efficiencies and successful cost management efforts. These improvements were offset by lower gross profit margin contributed by Custom Fluidpower, due to their value-add integrator business model.goodwill or other assets.

Operating income as a percentage of sales, ~~increased~~prior to ~~18.4%~~the goodwill impairment charge, declined 0.7 percentage points to 16.9% in the ~~second~~first quarter of ~~2019~~2020 compared to ~~12.5%~~17.6% in the prior-year period primarily due to ~~a decrease~~reduced leverage of our fixed cost base on lower sales volume and an increase in acquisition related costs such as the inventory step up amortization costs noted above, $3.2 million of transaction costs incurred for the acquisition of Faster and $3.5 million in amortization of intangible assets.corporate operating costs.

Consolidated revenue for the full year 2019 is expected to be between $565 million and $575 million, with the Hydraulics segment contributing between $453 million and $458 million and the Electronics segment contributing between $112 million and $117 million. Consolidated U.S. GAAP EPS is expected to be $1.95 to $2.05 for the full year 2019. Consolidated non-GAAP cash EPS, which excludes amortization expense and certain one-time costs, is expected to be between $2.40 and $2.50. The full year adjusted EBITDA margin, prior to certain one-time costs, is anticipated to be 23.5% to 24.0%.

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

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

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

The following table presents organic and acquisition related results for the second quarter and year-to-date period of 2019 (in millions). The results of Faster are included in acquisition results for the first quarter and organic results for the second quarter of 2019, while the results of Custom Fluidpower are included in acquisition results for both periods.

~~Second~~First quarter net sales for the Hydraulics segment totaled ~~$113.7~~$103.8 million, ~~representing growth~~a decline of ~~$10.1~~$12.7 million, ~~9.7%~~10.9%, over the prior-year period. ~~Organic sales decreased $2.5~~Changes in foreign currency exchange rates accounted for $2.0 million ~~2.4%, over~~of the ~~second~~fluctuation. Pricing changes had minimal impact on the first quarter of ~~2018, which resulted from the strengthening of the U.S. dollar~~2020 compared to the ~~currencies~~prior-year first quarter. We estimate that approximately $5.0 million of the ~~countries we operate in. Changes~~first quarter sales fluctuation in ~~exchange rates at the Sun and Faster businesses had a negative impact on~~ the Hydraulics segment second quarter sales of $2.5 million. In addition, since the acquisition of Custom Fluidpower in August 2018, the Australian dollar declined in value to the U.S. dollar resulting in an unfavorable impact on Custom Fluidpower sales of $0.7 million during the period. Price increases, which partially offset material cost increases, resulted in an estimated $1.3 million positive impact to sales during the quarter. Sales growth was ~~limited during the quarter~~ due to ~~softer~~facility closures and regulatory restrictions imposed on shipments as a result of the COVID-19 pandemic. Softening end market demand ~~and capacity constraints at our Sarasota facilities related to specific CVT product families. We~~resulted in reduced incoming orders; however, we continue to ship certain CVT and Systems product orders from our backlog due to extended lead times.

Year-to-date net sales totaled $230.2 million, an increase of $64.0 million, 38.5%, over the prior comparable period. Organic sales grew by $2.4 million, 1.4%, during the year-to-date period, which was driven by increased sales to the Americas and Asia/Pacific regions offset by a negative impact from fluctuations in foreign currency exchange rates. Changes in exchange rates at the Sun and Faster businesses had a negative impact on sales of the Hydraulics segment for the year-to-date period of $3.6 million. In addition, the impact of exchange rates fluctuations since the acquisitions of Faster in April 2018 and Custom Fluidpower in August 2018, resulted in an unfavorable impact on sales of $3.1 million during the year-to-date period. Price increases resulted in an estimated $2.9 million positive impact to sales for the six month period ended June 29, 2019.

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

~~During the second quarter, Custom Fluidpower contributed $12.6 million to our sales~~Shipments and demand weakened in the ~~Asia/Pacific region. For~~Americas region during the ~~year-to-date period, comparability~~first quarter of 2020 with sales ~~by region was impacted by Faster and Custom Fluidpower sales of $11.6 million, $21.7 million and $28.3 million in~~declining 10.3% over the ~~Americas,~~prior-year first quarter. Sales to Europe, the Middle East and Africa (“EMEA”) ~~and Asia/~~decreased 19.9%. This was primarily a result of COVID-19 related factors as well as negative impacts from changes in exchange rates, which accounted for $0.8 million of the fluctuation. Sales to the Asia Pacific ~~regions, respectively.~~

~~Demand continued to be strong in~~(“APAC”) region remained fairly consistent with the ~~Americas region with organic sales increasing $1.5 million, 3.8%, in the second~~first quarter of ~~2019 and $5.3~~2019. After consideration of the negative impact from changes in exchange rates, totaling $1.2 million, ~~8.0% year to date. Organic~~ sales to the ~~EMEA~~APAC region ~~decreased $3.7 million, 9.2%, in~~improved 3.3% over the ~~second~~first quarter of 2019 and decreased $3.4 million, 5.7%, year-to-date. Exchange rates had a negative impact on organic sales to EMEA in the second quarter of 2019 totaling $2.2 million and $2.9 million for the six months ended June 29, 2019. Organic sales to the Asia/Pacific region fell $0.3 million, 1.3%, in the second quarter of 2019 and increased $0.5 million, 1.2%, year to date. Exchange rates had a negative impact on organic sales to Asia/Pacific in the second quarter of 2019 totaling $0.4 million and $0.7 million year to date.

~~Second~~First quarter gross profit ~~grew $3.0 million, 7.6%,~~trended downward compared to the ~~second~~first quarter of the prior ~~year. Custom Fluidpower contributed $3.2 million~~year due to sales volume and an unfavorable impact from changes in foreign currency rates of ~~the increase representing a 25.4% gross profit margin. Organic gross profit decreased slightly, $0.2 million over the second quarter of 2018, while organic gross~~$0.7 million. Gross profit margin ~~increased 0.8~~improved 1.6 percentage points to ~~38.8%~~38.2%, from ~~38.0%~~36.6% in the prior-year period. ~~Price increases, net~~The main drivers of ~~related material~~the increased profitability were effective cost ~~increases, positively impacted~~management efforts and production efficiencies gained from our CVT manufacturing consolidation project, partially offset by the ~~gross profit~~closure of production at our ~~organic businesses by approximately $0.4 million~~Italian facility during the ~~quarter while changes in foreign currency negatively impacted gross profit for the quarter by approximately $1.1 million.~~quarter.

Year-to-date gross profit grew $22.1 million, 35.1% compared to the 2018 comparable period. Organic gross profit margin improved 0.3 percentage points year over year to 38.1%, while acquisitions contributed $20.8 million and 33.8% gross margin for the six months ended June 29, 2019. Price increases, net of related material cost increases, and increased sales volume positively impacted the gross profit of our organic businesses by approximately $0.8 million and $2.0 million year to date, respectively. Changes in foreign currency had a negative impact of approximately $1.8 million on gross profit during the year-to-date period.

Selling, engineering and administrative expenses (“SEA”) ~~rose $4.3~~decreased $0.6 million in the ~~second~~first quarter of ~~2019~~2020 compared to the ~~second quarter~~same period of the prior year. ~~Custom Fluidpower SEA costs totaled $2.3 million during the quarter. The SEA costs of our organic business increased $2.0 million over the prior-year quarter while~~ SEA as a percent of sales increased ~~2.3~~1.4 percentage ~~points. We also realized increases in~~points primarily due to reduced leverage of our fixed costs base on lower sales. In addition, corporate operating costs allocated to the ~~Hydraulics~~ segment ~~for~~were $0.5 million higher than the prior-year first quarter due to salaries and benefits, ~~travel,~~ insurance costs and talent development programs and legal and professional fees to support the growth and change in structure of Helios that has occurred over the past year and is expected to continue into future periods. These costs accounted for approximately $1.3 million of the year-over-year quarterly increase in the Hydraulics segment.

Year-to-date SEA expenses grew $13.0 million, 7.8%, to $37.1 million from $24.1 million in 2018. Acquisitions contributed $10.5 million to the increase while organic SEA costs grew $2.5 million, 10.4%, to $26.6 million. The remaining increase in SEA costs during the year-to-date period relate to the increase in corporate operating costs previously noted as well as minor increases in sales and administrative costs at the operating business level.programs.

As a result of the impacts to gross profit and SEA costs noted above, ~~second~~first quarter operating income declined ~~$1.3~~$2.3 million, ~~5.1%~~9.7%, compared to the ~~second~~first quarter of the prior ~~year. Custom Fluidpower contributed $0.9 million to operating income, representing a 7.1%~~year, while operating margin for the quarter. The second quarter operating margin of our organic business declined to 22.9% compared to 24.5% during the prior-year period. Year-to-date operating income increased $9.1 million, 23.5%, to $47.9 million compared to $38.8 million during the prior-year period. Acquisitions contributed $10.3 million to operating income, representing a 16.7% operating margin and organic operating margin fell 1.0strengthened 0.3 percentage points ~~compared~~ to ~~the prior-year period.~~20.7%.

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

~~Second~~First quarter net sales for the Electronics segment totaled ~~$30.1~~$25.7 million, a decrease of ~~$2.4~~$4.7 million, ~~7.4%~~15.5%, ~~from~~over the prior-year period. The decline was ~~partially~~ due to ~~due~~ softer demand in recreational and oil and gas end markets, as well as our intentional shift in customer base which included the release of certain contractual obligations to customers that allowed us to leverage all products to a broader and more diversified customer base. ~~Price increases positively impacted sales by approximately $0.7 million for~~The segment experienced a minimal impact from the ~~quarter.~~COVID-19 pandemic during the first quarter of 2020. Changes in exchange rates had a negative impact on ~~second~~first quarter sales of $0.1 million.

Net sales for the Electronics segment during the first six months of 2019 totaled $60.5 million, a decrease of $6.7 million, 10.0%, from the prior-year period. The decline was related to the intentional shift in customer base as well as softening end market conditions. Price increases positively impacted year-to-date sales by approximately $1.2 million while changes in exchange rates had a negative impact of $0.4 million.

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

During the ~~three months ended June 29, 2019,~~first quarter of 2020, sales to the Americas decreased ~~$1.3 million, 4.7%~~17.2%, sales to EMEA ~~decreased $0.9 million, 33.3%,~~remained flat and sales to ~~Asia/Pacific decreased $0.2 million, 10.5%~~the APAC region declined 11.1% over the ~~prior second~~prior-year first quarter. Exchange rates minimally impacted sales to EMEA and had a negative impact on sales to Asia/Pacific of $0.1 million during the second quarter. For the year-to-date period, sales to the Americas decreased $5.2 million, 9.0%, sales to EMEA decreased $1.1 million, 20.4%, and sales to Asia/Pacific decreased $0.4 million, 10.5%. Exchange rates had a negative impact on sales to EMEA ~~and Asia/Pacific~~ of ~~$0.2~~$0.1 million and ~~$0.1 million, respectively,~~minimally impacted sales to APAC during the ~~first six months of 2019.~~quarter.

~~Second~~First quarter gross profit ~~decreased $0.3~~dropped $1.7 million, ~~2.1%~~12.2%, compared to the ~~second~~first quarter of the prior year, primarily due to sales volume, while gross profit margin ~~expanded 2.4~~strengthened by 1.8 percentage points. Gross margin benefited from cost management efforts and a $0.9 million non-recurring benefit from the release of contractual obligations to customers.

SEA expenses were flat in the first quarter of 2020 compared to the first quarter of 2019 while SEA margin increased 4.5 percentage points to ~~45.8% from 43.4% in 2018. The improvement in margin was primarily~~28.8% due to ~~cost management efforts which resulted in production efficiencies as well as price increases, net~~reduced leverage of related material cost increases, totaling approximately $0.5 million. Gross profit for the first six months of 2019 decreased $0.6 million, 2.1%, compared to the same period of the prior year, while gross profit margin expanded 3.7 percentage points to 45.8% from 42.1% in 2018. The improvement in margin was due to material cost reductions, price increases and cost management efforts which resulted in production efficiencies.

~~SEA expenses fell $0.3 million, 3.9%, to $7.3 million in the second quarter of 2019, compared to $7.6 million in the second quarter of the prior year. While increased corporate related~~our fixed costs allocated to the Electronics segment resulted in higher SEA costs of $0.2 million during the second quarter of 2019 compared to the prior year second quarter, cost reduction efforts offset the impact. SEA costs for the first six months of 2019 totaled $14.7 million and remained flat over the prior year period. Cost reduction efforts during the period offset higher research and development costs incurred to support future product development as well as increased corporate related costs.base on lower sales volume.

As a result of the impacts to gross profit and SEA costs ~~during the periods~~ noted above, ~~second~~first quarter operating income ~~remained consistent with~~declined $1.7 million compared to the ~~prior year period while~~first quarter of 2019 and operating income margin ~~increased 1.6~~was reduced by 2.7 percentage points to ~~21.6%. Operating income for the first six months of 2019 declined $0.6 million while operating income margin increased 1.3 percentage points to 21.5%~~18.7%.

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 ~~three months and six months ended June 29, 2019,~~first quarter of 2020, these costs totaled ~~$4.2~~$36.3 million, ~~and $8.7~~of which $4.3 million ~~respectively, primarily for~~was amortization of acquisition-related intangible ~~assets. Year-to-date corporate~~assets and ~~other costs decreased $9.5~~$31.9 million ~~over~~was a goodwill impairment charge which resulted from the ~~prior year period~~global economic disruption and uncertainty due to ~~2018 Faster transaction costs of $4.3 million, reduced amortization of inventory step up~~the COVID-19 pandemic. Refer to ~~fair value costs totaling $3.1 million, reduced amortization of acquisition related intangibles assets of $1.1 million and a reduction in costs related~~Note 6 to ~~corporate projects and initiatives of $0.8 million.~~the Consolidated, Unaudited Financial Statements for further discussion.

Net interest expense was ~~$4.0~~$3.0 million for the ~~second~~first quarter of ~~2019~~2020 compared to ~~$4.2~~$4.4 million for the prior-year quarter. Average net debt declined to ~~$326.5~~$272.7 million compared to ~~$330.3~~$325.3 million during the ~~second~~first quarter of ~~2018. Year-to-date net interest expense was $8.4 million compared to $4.6 million during the comparable period of 2018. Average net~~2019. The decreases primarily resulted from debt for the 2019 year to date period totaled $330.5 million compared to $188.7 million in the comparable period of 2018. The increase was due to debt issued to fund the Faster acquisition in April of 2018.repayments.

The provision for income taxes for the ~~second~~first quarter of ~~2019~~2020 was ~~21.3%~~22.3% of pretax income compared to ~~26.3%~~22.1% for the prior-year ~~second quarter. The year-to-date provision~~first quarter after adjusting for ~~income taxes was 21.7%~~the impact of ~~pretax income compared~~goodwill impairment related to ~~25.5% in the prior year.~~our Italian subsidiary. 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.

On March 27, 2020, the President of the U.S. signed the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, a substantial tax-and-spending package intended to provide additional economic stimulus to address the impact of the COVID-19 pandemic. The Company has evaluated the various income and payroll tax provisions and expects little or no impact to tax expense. However, the Company is taking advantage of the various payment deferments allowed by the CARES Act and other similar state and/or foreign liquidity measures.

As a result of the evolving economic impact of COVID-19, we believe that our 2020 financial results will continue to be impacted, but the magnitude and duration of the impact is uncertain. In addition, production at any of our facilities may be further affected as a result of possible future government, market or Company actions due to COVID-19. For these reasons, we have withdrawn our previously issued guidance.

In the ~~decrease~~near term, we expect there will be continued impacts to our business that will hinder our ability to meet our previous sales forecast. We cannot accurately estimate this impact due to the significant level of unknown conditions that may be created by the pandemic. The economic impact of the pandemic has negatively affected our sales and orders for April. We expect second quarter headwinds, but anticipate that the largest impact was in the month of April due to shutdowns of many of our global OEM customers. A portion of our backlog has been postponed from April to later in the second quarter ~~2019 effective tax rate versus~~and a smaller number of orders have been cancelled. In other cases, we do not have updated order schedules from OEMs due to their extended shutdowns. With ongoing significant uncertainty, we do not have sufficient visibility to reinstate guidance for 2020.

To be prepared, we have undertaken scenario analyses at varying potential demand levels. The Company has already instituted certain cost containment steps in an effort to mitigate the ~~second quarter 2018 effective tax rate was primarily related an increase~~effects of the downturn. These actions include a temporary 20% salary reduction for all officers of the Company, layoffs and temporary salary reductions at Enovation Controls, a hiring freeze, reduction in the ~~Foreign Derived Intangible Income (FDII) deduction.~~use of contingent labor and the elimination and postponement of capital expenditures. Additionally, our Board of Directors has agreed to reduce director compensation by 20% for the remainder of the year. To further protect the health and liquidity of our business, additional actions included in our scenario planning consist of:

The extent of such actions will be determined by the magnitude and duration of the economic downturn.

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, and during 2018 we raised $240 million in net proceeds from our public stock offering which was also used to fund acquisition ~~activity during 2018.~~activity. During the first ~~six months~~quarter of ~~2019,~~2020, cash provided by operating activities totaled ~~$25.4~~$15.1 million and asat the end of ~~June 29, 2019,~~the quarter we had ~~$13.3~~$27.3 million of cash and cash equivalents on hand and ~~$149.1~~$195.1 million of available credit on our revolving credit facility. We also have a $200 million accordion feature available on our credit facility, subject to certain pro forma compliance ~~requirements.~~requirements, intended to support potential future acquisitions. As of the date of this filing, the Company was in compliance with all debt covenants related to the credit agreement.

Our principal uses of cash ~~have been~~are paying operating expenses, paying dividends to shareholders, making capital expenditures, servicing debt and acquisition-related ~~payments and servicing debt.~~payments.

We believe that cash generated from operations and our borrowing availability under our credit facilities will be sufficient to satisfy our operating ~~expenses~~expenses. In light of current economic uncertainty, we are actively managing operating costs and capital expenditures, ~~for~~which is expected to provide adequate liquidity beyond the ~~foreseeable future.~~next twelve months. In the event that economic conditions were to severely worsen for a protracted period of time, we would have several options available ~~to ensure liquidity~~ in addition to increased ~~borrowing. Capital expenditures could be postponed since they primarily pertain~~borrowing to ~~long-term improvements in operations. Additional operating expense reductions also could be made. Finally, the dividend to shareholders could be reduced or suspended.~~ensure liquidity, as discussed previously.

Cash on hand ~~declined $10.2~~increased $5.1 million from ~~$23.5~~$22.2 million at the end of ~~2018~~2019 to ~~$13.3~~$27.3 million at ~~June 29, 2019.~~March 28, 2020. Cash and cash equivalents were favorably impacted by changes in exchange rates during the quarter by $0.3 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 also paying down borrowings on our credit facilities. ~~Cash and~~During the first quarter of 2020, we increased our cash ~~equivalents were favorably impacted by changes in exchange rates during~~on hand to provide liquidity for potential future cash flow needs due to the ~~six months ended June 29, 2019 by $0.6 million.~~economic impact of the COVID-19 pandemic.

Cash from operations declined ~~$5.7~~$4.7 million, ~~18.3%~~23.7%, compared to the prior-year ~~period. $10.7 million~~period, a result of ~~the second quarter payment made on the contingent consideration liability related to the Enovation acquisition was included in operating~~lower cash flows for the period as the total payments exceeded the acquisition date fair value of the liability. The remaining increase of $5.0 million of operating cash flows resulted from of improved cash earnings partially offset by a net increase in operating assets and liabilities.earnings. Changes in inventory and accounts receivable reduced cash by ~~$21.9~~$9.7 million and ~~$18.4 million~~$12.6 during the first ~~six months~~quarter of ~~2019~~2020 and ~~2018,~~2019, respectively. Days sales outstanding increased slightly during the current period, up to 5251 days from 50 days as of ~~June~~March 30, ~~2018.~~2019. We have not experienced significant delays in collection of accounts receivable balances from customers as a result of the COVID-19 pandemic. Days of inventory on hand went up to 96101 as of ~~June 29, 2019, from 85~~March 28, 2020, compared to 88 as of ~~June~~March 30, ~~2018. Inventory~~2019, a result of increased inventory levels ~~have increased~~and lower sales compared to the prior-year quarter. There has been no decline in the net realizable value of our inventory as a result of ~~capacity constraints at our Sarasota facilities as well as softer than expected demand during~~recent economic conditions.

We have considered the impacts of the current ~~year period.~~ economic environment on our long-lived assets and determined that there have been no indications that the recorded value of our long-lived assets may not be recoverable.

Capital expenditures totaled ~~$15.4~~$2.9 million for the ~~six months ended June 29, 2019, an increase~~first quarter of ~~$4.8~~2020, a decrease of $5.9 million over the ~~prior~~prior-year comparable period. Current year ~~period,~~expenditures primarily ~~made up~~consist of purchases of machinery and ~~equipment, Sun’s manufacturing consolidation project,~~equipment. Due to the ~~initial phase~~current economic conditions and uncertainty of ~~construction of Sun’s state-of-the-art engineering center~~future cash flows, capital expenditure projects are being evaluated and ~~equipment and leasehold improvements for our new China facility. Capital expenditures for the full year 2019~~several have been postponed. We are estimated to be between $30 million and $35 million for additional investments in machinery and equipment, construction of the state-of-the-art engineering center, and expansion of our China operations.currently only proceeding with critical projects.

Cash flows used in financing activities totaled ~~$21.4~~$9.0 million during the first quarter of 2020, compared to cash used of $17.7 million in the ~~first half of 2019, compared~~prior-year period. The reduction is due to ~~cash provided by financing activities of $474.5 million in the prior year period.~~

On February 6, 2018, the Company issued and sold 4.4 million shares of its common stock at $57.50 per share in a registered public offering. The net increase to shareholders’ equity and cash proceeds from the offering was approximately $240 million. We initially used $116 million of the proceeds to repay the outstandinglower debt ~~under our credit facility and used the remaining proceeds in April of 2018 to fund the Faster acquisition.~~

On April 1, 2018, we amended our credit facility to increase the limit on our revolving credit facility to $400 million and add a term loan of $100 million. We also increased the accordion feature to $200 million. During the second quarter of 2018, we paid cash of approximately $175.0 million and borrowed $358.0 million on our term loan and line of credit to complete the acquisition of Faster. During the third quarter of 2018, we borrowed additional amounts on our revolving credit facility to fund the acquisition of Custom Fluidpower. Cash paid for the Custom Fluidpower acquisition totaled approximately $9.3 million. Amounts due on our revolving credit facility and our long-term non-revolving debt as of June 29, 2019 totaled $251.0 million and $95.0 million, respectively.

In April 2019, we paid $17.8 million to the former owners of Enovation Controls in connection with the third and final payment due on the contingent consideration liability, of which $10.7 million was presented in operating cash flows for the period as it exceeded the acquisition date fair value of the liability, and the remaining $7.1 million was classified as financing cash flows.repayments.

During the ~~second~~first quarter of ~~2019,~~2020, we declared a quarterly cash dividend of $0.09 per share payable on ~~July~~April 20, ~~2019,~~2020, to shareholders of record as of ~~July~~April 5, ~~2019.~~2020. 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.

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.

The impact of inflation on our operating results has been moderate in recent years, reflecting generally lower rates of inflation in the economies in which we operate. While inflation has not had, and we do not expect that it will have, a material impact upon operating results, there is no assurance that our business will not be affected by inflation in the future.

We currently apply judgment and estimates which 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 ~~Annual Report on~~ Form 10-K, ~~for the year ended December 29, 2018,~~ and any changes made during the ~~six~~first three months of ~~2019, including the adoption of ASC 842,~~2020, are disclosed in Note 2 to the Consolidated, Unaudited Financial Statements.

See “Item 7A – Quantitative and Qualitative Disclosures about Market Risk” in our ~~2018 Annual Report on~~ Form ~~10-K filed on February 26, 2019.~~10-K. There were no material changes during the ~~six~~three months ended ~~June 29, 2019.~~March 28, 2020.

The Company’s management, with the participation of the Interim 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 Interim Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

During the first quarter of 2020, the Company moved to remote work arrangements for the majority of its administrative functions. Management has evaluated the effect of this change on internal control over financial reporting and disclosure controls and procedures and determined that it has not had a material effect on our internal control over financial reporting.

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.

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. 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.

We face various risks related to health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations and/or cash flows.

We face various risks related to health epidemics, pandemics and similar outbreaks, including the global outbreak of COVID-19. In recent weeks, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of capital and adversely impacts access to capital. If significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, facility closures or other restrictions in connection with the COVID-19 pandemic, our operations will likely be impacted. We may be unable to perform fully on our contracts and our costs may increase as a result of the COVID-19 outbreak. These cost increases may not be fully recoverable or adequately covered by insurance.

It is possible that the continued spread of COVID-19 could also cause further disruption in our supply chain; cause delay, or limit the ability of customers to perform, including in making timely payments to us; impact investment performance; and cause other unpredictable events.

We continue to work with our stakeholders (including customers, employees, suppliers and local communities) to responsibly address this global pandemic. We continue to monitor the situation to assess further possible implications to our business, supply chain and customers, and to take actions in an effort to mitigate adverse consequences.

As a result of current economic conditions and expected future impacts from the COVID-19 pandemic, the carrying value of goodwill with respect to certain of our assets was impaired, resulting in impairment charges that negatively impacted our results of operations. We may be required to record additional impairment charges in the future if the COVID-19 pandemic continues and we cannot predict the amount and timing of any such additional charges, which could adversely impact our results of operations.

We cannot at this time predict the impact of the COVID-19 pandemic, but it could have a material adverse effect on our business, financial position, results of operations and/or cash flows.

We are currently undergoing a period of management transition, which could be disruptive to, or cause uncertainty in, our business.

On April 9, 2020, Helios announced that its Board of Directors named Tricia L. Fulton, the Company’s Chief Financial Officer, as Interim President and Chief Executive Officer, effective immediately. We are in the process of searching for a new Chief Executive Officer. However, there is no guarantee that we will be able to find a permanent replacement on a timely basis. We face significant competition for an executive with the qualifications and experience we are seeking. The prolonged absence of a permanent Chief Executive Officer could adversely impact our business and results of operations.

For additional information regarding risk factors, please refer to Part I, Item 1A, “Risk Factors” included in the Company’s ~~Annual Report on~~ Form ~~10-K for the year ended December 29, 2018.~~10-K.

Item 2. ~~Unregistered Sales of Equity Securities and Use of Proceeds.~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Pursuant to the requirements of ~~Section 13 or 15(d) of~~ the Securities Exchange Act of 1934, the ~~Registrant~~registrant has duly caused this ~~Report~~report to be signed on its behalf by the undersigned, thereunto duly ~~authorized, in the City of Sarasota, State of Florida on August 6, 2019.~~authorized.

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

1500 WEST UNIVERSITY PARKWAY SARASOTA, Florida		34243
(Address of Principal Executive Offices)		(Zip Code)

			Page

PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements

	Consolidated Balance Sheets as of ~~June 29, 2019~~March 28, 2020 (unaudited) and December ~~29, 2018~~28, 2019		3

	Consolidated Statements of Operations for the Three Months Ended ~~June 29, 2019~~March 28, 2020 (unaudited) and ~~June~~March 30, ~~2018~~2019 (unaudited)		4

	Consolidated Statements of ~~Operations~~Comprehensive Income (Loss) for the ~~Six~~Three Months Ended ~~June 29, 2019~~March 28, 2020 (unaudited) and ~~June~~March 30, ~~2018~~2019 (unaudited)		5

	Consolidated Statements of ~~Comprehensive Income~~Shareholders’ Equity for the Three ~~and Six~~ Months Ended ~~June 29, 2019~~March 28, 2020 (unaudited) and ~~June~~March 30, ~~2018~~2019 (unaudited)		6

	Consolidated Statements of ~~Shareholders’ Equity~~Cash Flows for the Three ~~and Six~~ Months Ended ~~June 29, 2019~~March 28, 2020 (unaudited) and ~~June~~March 30, ~~2018~~2019 (unaudited)		7

	~~Consolidated Statements of Cash Flows for the Six Months Ended June 29, 2019 (unaudited) and June 30, 2018 (unaudited)~~		8

	Condensed Notes to the Consolidated, Unaudited Financial Statements		98

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2320

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3327

	Item 4.	Controls and Procedures	3327

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	3428

	Item 1A.	Risk Factors	3428

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3429

	Item 3.	Defaults Upon Senior Securities	3429

	Item 4.	Mine Safety ~~Disclosure~~Disclosures	3429

	Item 5.	Other Information	3429

	Item 6.	Exhibits	3530

	Three months ended					Three Months Ended
	June 29, 2019			June 30, 2018		March 28, 2020			March 30, 2019
	(unaudited)			(unaudited)		(unaudited)			(unaudited)
Net sales	$	143,842		$	136,168	$	129,483		$	146,851
Cost of sales		87,615			85,764		77,633			90,342
Gross profit		56,227			50,404		51,850			56,509
Selling, engineering and administrative expenses		25,309			25,325		25,664			26,156
Amortization of intangible assets		4,545			8,076		4,348			4,521
Operating income		26,373			17,003
Goodwill impairment							31,871			—
Operating (loss) income							(10,033	)		25,832
Interest expense, net		4,048			4,151		2,951			4,385
Foreign currency transaction loss, net		501			3,301
Foreign currency transaction loss (gain), net							125			(439	)
Miscellaneous (income) expense, net		(157	)		80		(94	)		108
Change in fair value of contingent consideration		56			251		—			719
Income before income taxes		21,925			9,220
(Loss) income before income taxes							(13,015	)		21,059
Income tax provision		4,660			2,424		4,208			4,655
Net income	$	17,265		$	6,796
Basic and diluted net income per common share	$	0.54		$	0.22
Net (loss) income						$	(17,223	)	$	16,404
Basic and diluted net (loss) income per common share						$	(0.54	)	$	0.51
Basic and diluted weighted average shares outstanding		32,012			31,597		32,062			31,978
Dividends declared per share	$	0.09		$	0.09	$	0.09		$	0.09

	Six months ended
	June 29, 2019			June 30, 2018
	(unaudited)			(unaudited)
Net sales	$	290,693		$	233,486
Cost of sales		177,958			145,465
Gross profit		112,735			88,021
Selling, engineering and administrative expenses		51,465			43,640
Amortization of intangible assets		9,066			10,124
Operating income		52,204			34,257
Interest expense, net		8,433			4,634
Foreign currency transaction loss, net		62			3,812
Miscellaneous (income) expense, net		(50	)		44
Change in fair value of contingent consideration		775			653
Income before income taxes		42,984			25,114
Income tax provision		9,315			6,407
Net income	$	33,669		$	18,707
Basic and diluted net income per common share	$	1.05		$	0.61
Basic and diluted weighted average shares outstanding		31,995			30,718
Dividends declared per share	$	0.18		$	0.18

The accompanying Notes to the Consolidated, Unaudited Financial Statements are an integral part of these financial statements.

Cash	$	532,408
Acquisition date fair value of contingent consideration		938
Total purchase consideration		533,346
Less: cash acquired		(5,265	)
Total purchase consideration, net of cash acquired	$	528,081

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller Reporting Company	☐
~~Emerging growth company~~	☐		Emerging growth company	☐

Accounts receivable	$	24,638
Inventories		34,835
Other current assets		6,661
Property, plant and equipment		20,242
Goodwill		288,449
Intangible assets		248,823
Other assets		7,040
Total assets acquired		630,688
Accounts payable		(18,668	)
Accrued expenses		(12,223	)
Incomes taxes payable		(4,862	)
Other current liabilities		(1,289	)
Other noncurrent liabilities		(65,565	)
Total liabilities assumed		(102,607	)
Fair value of net assets acquired	$	528,081

	Fair Value		Weighted- Average Amortization Periods (Yrs)
Trade name	$	25,740		18
Technology		13,483		13
Customer relationships		202,245		26
Sales order backlog		7,355		0.4
Identified intangible assets	$	248,823		24

	June 29, 2019								March 28, 2020
			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
Forward foreign exchange contracts	$	433	$	—	$	433	$	—	$	710	$	—	$	710	$	—
Total	$	433	$	—	$	433	$	—	$	710	$	—	$	710	$	—
Liabilities
Interest rate swap contract	$	6,344	$	—	$	6,344	$	—	$	9,821	$	—	$	9,821	$	—
Forward foreign exchange contracts										1,309		—		1,309		—
Contingent consideration		1,940		—		—		1,940		828		—		—		828
Total	$	8,284	$	—	$	6,344	$	1,940	$	11,958	$	—	$	11,130	$	828

Balance, December 29, 2018	$	18,960
Change in estimated fair value		775
Payment on liability		(17,795	)
Balance, June 29, 2019	$	1,940

	June 29, 2019			December 29, 2018
Raw materials	$	40,942		$	39,086
Work in process		32,223			26,871
Finished goods		30,303			23,963
Provision for obsolete and slow moving inventory		(6,292	)		(3,931	)
Total	$	97,176		$	85,989

	June 29, 2019
2019 Remaining	$	1,841
2020		3,654
2020 Remaining				$	2,656
2021		3,517			3,419
2022		1,695			1,638
2023		1,335			1,289
2024		963			903
2025					631
Thereafter		2,868			2,053
Total lease payments		15,873			12,589
Less: Imputed interest		(2,139	)		(1,586	)
Total lease obligations		13,734			11,003
Less: Current lease liabilities		(3,100	)		(3,092	)
Non-current lease liabilities	$	10,634		$	7,911

	Hydraulics			Electronics		Total
Balance at December 29, 2018	$	276,758		$	106,373	$	383,131
Faster acquisition measurement period adjustment		(343	)		—		(343	)
Custom Fluidpower acquisition measurement period adjustment		1,205			—		1,205
Currency translation		(1,772	)		—		(1,772	)
Balance at June 29, 2019	$	275,848		$	106,373	$	382,221

Year:
2020	$	18,284
2020 Remaining			$	13,413
2021		18,183		17,674
2022		17,921		17,411
2023		17,861		17,352
2024		17,206		16,697
2025				16,642
Thereafter				189,800
Total	$	89,455	$	288,989

	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	June 29, 2019		December 29, 2018		Location	June 29, 2019		December 29, 2018		Location	March 28, 2020		December 28, 2019		Location	March 28, 2020		December 28, 2019
Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:										Derivatives designated as hedging instruments:
Interest rate swap contract	Other assets	$	—	$	—	Other non-current liabilities	$	6,344	$	2,309	Other assets	$	—	$	—	Other non-current liabilities	$	9,821	$	5,792
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		404		—	Other current liabilities		—		137	Other current assets		547		509	Other current liabilities		1,228		213
Forward foreign exchange contracts	Other assets		29		—	Other non-current liabilities		—		—	Other assets		163		306	Other non-current liabilities		81		6
Total derivatives		$	433	$	—		$	6,344	$	2,446		$	710	$	815		$	11,130	$	6,011
⁽¹⁾ See Note 3 for information regarding the inputs used in determining the fair value of derivative assets and liabilities.											⁽¹⁾ See Note 3 for information regarding the inputs used in determining the fair value of derivative assets and liabilities.

Year:
2019 Remaining	$	2,555
2020		7,876
2020 Remaining			$	5,720
2021		7,655		7,636
2022		9,458		9,448
2023		318,454		272,368
Total	$	345,998	$	295,172

		Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion)					Location of Gain or (Loss) Reclassified from AOCI	Amount of Gain or (Loss) Reclassified from AOCI 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)
		June 29, 2019			June 30, 2018		into Earnings (Effective Portion)	June 29, 2019			June 30, 2018			March 28, 2020			March 30, 2019			into Earnings (Effective Portion)	March 28, 2020			March 30, 2019
Derivatives in cash flow hedging relationships:	Derivatives in cash flow hedging relationships:												Derivatives in cash flow hedging relationships:
Interest rate swap contract		$	(4,035	)	$	—	Interest expense, net	$	(384	)	$	—		$	(4,029	)	$	(1,521	)	Interest expense, net	$	(525	)	$	(183	)

	Maturity Date	June 29, 2019		December 29, 2018		Maturity Date	March 28, 2020		December 28, 2019
Long-term non-revolving debt:
Term loan credit facility with PNC Bank	4/3/2023	$	93,750	$	96,250	4/3/2023	$	90,000	$	91,250
Term loan credit facility with Shinhan Bank	3/30/2020		865		895	3/30/2020		—		862
Other long-term debt	Various		433		838	Various		307		376
Total long-term non-revolving debt			95,048		97,983			90,307		92,488
Less: current portion of long-term non-revolving debt			6,357		5,215			7,369		7,623
Less: unamortized debt issuance costs			925		1,048			741		803
Total long-term non-revolving debt, net		$	87,766	$	91,720		$	82,197	$	84,062

		Balance				Available credit
	Maturity Date	June 29, 2019		December 29, 2018		June 29, 2019		December 29, 2018
Revolving line of credit with PNC	4/3/2023	$	250,950	$	255,750	$	149,050	$	144,250

				Weighted
				average
	Number of shares			grant-date
	(in thousands)			fair value
Nonvested balance at December 29, 2018		146		$	48.66
Granted ⁽¹⁾		130			38.39
Vested		(43	)		47.14
Forfeited		(15	)		47.40
Nonvested balance at June 29, 2019		218		$	42.90

	Number of			Weighted average
	shares / units			grant-date
	(in thousands)			fair value per share
Nonvested balance at December 28, 2019		203		$	42.73
Granted		112			38.88
Vested		(58	)		43.15
Forfeited		(24	)		43.33
Nonvested balance at March 28, 2020 ⁽¹⁾		233		$	41.55

	Unrealized Gains and Losses on Derivative Instruments			Foreign Currency Items			Total			Unrealized Gains and (Losses) on Derivative Instruments			Foreign Currency Items			Total
Balance at December 29, 2018	$	(2,309	)	$	(43,944	)	$	(46,253	)
Balance at December 28, 2019										$	(5,372	)	$	(49,992	)	$	(55,364	)
Other comprehensive loss before reclassifications		(4,336	)		(2,033	)		(6,369	)		(4,423	)		(5,950	)		(10,373	)
Amounts reclassified from accumulated other comprehensive loss, net of tax		301			—			301			394			—			394
Tax effect		911			700			1,611			1,828			1,049			2,877
Net current period other comprehensive loss		(3,124	)		(1,333	)		(4,457	)		(2,201	)		(4,901	)		(7,102	)
Balance at June 29, 2019	$	(5,433	)	$	(45,277	)	$	(50,710	)
Balance at March 28, 2020										$	(7,573	)	$	(54,893	)	$	(62,466	)

	Unrealized Gains and Losses on Derivative Instruments			Foreign Currency Items			Total			Unrealized Gains and (Losses) on Derivative Instruments			Foreign Currency Items			Total
Balance at December 30, 2017	$	—		$	(6,478	)	$	(6,478	)
Balance at December 29, 2018										$	(2,309	)	$	(43,944	)	$	(46,253	)
Other comprehensive loss before reclassifications		—			(24,718	)		(24,718	)		(1,666	)		(7,239	)		(8,905	)
Amounts reclassified from accumulated other comprehensive loss		—			—			—			144			—			144
Tax effect											440			2,408			2,848
Net current period other comprehensive loss		—			(24,718	)		(24,718	)		(1,082	)		(4,831	)		(5,913	)
Balance at June 30, 2018	$	—		$	(31,196	)	$	(31,196	)
Balance at March 30, 2019										$	(3,391	)	$	(48,775	)	$	(52,166	)

	Three months ended June 29, 2019
	Organic			Acquisition
Net sales	$	101.1		$	12.6
Gross profit	$	39.2		$	3.2
Gross profit %		38.8	%		25.4	%
Operating income	$	23.2		$	0.9
Operating income %		22.9	%		7.1	%

	Six months ended June 29, 2019
	Organic			Acquisition
Net sales	$	168.6		$	61.6
Gross profit	$	64.2		$	20.8
Gross profit %		38.1	%		33.8	%
Operating income	$	37.6		$	10.3
Operating income %		22.3	%		16.7	%

Exhibit Number		Exhibit Description

~~31.1~~10.1+		~~CEO Certification pursuant~~Helios Technologies 2020 Executive Compensation Policy (previously filed as Exhibit 10.1+ to ~~Section 302 of~~ the ~~Sarbanes-Oxley Act of 2002.~~Company’s Form 8-K filed on March 3, 2020, and incorporated herein by reference).

~~31.2~~10.2+		Form of Restricted Stock Unit and Stock Option Agreement (previously filed as Exhibit 10.2+ to the Company’s Form 8-K filed on March 3, 2020, and incorporated herein by reference).

31.1		CEO & 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 March 28, 2020, has been formatted in Inline XBRL.

+		Executive management contract or compensatory plan or arrangement.

Date: May 5, 2020	HELIOS TECHNOLOGIES, INC.

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