SOURCE: Sun Hydraulics Corporation

November 05, 2007 11:00 ET

Sun Hydraulics Double Digit Growth Continues With Third Quarter Earnings Up 33% on Sales Increase of 15%

SARASOTA, FL--(Marketwire - November 5, 2007) - Sun Hydraulics Corporation (NASDAQ: SNHY) reported financial results for the third quarter of 2007 as follows:

(Dollars in millions except net income per share)

                                     September 29, September 30,
                                         2007          2006      Increase
    Three Months Ended
Net Sales                            $        41.8 $        36.2        15%
Net Income                           $         5.2 $         3.9        33%
Net Income per share:
   Basic                             $        0.32 $        0.24        33%
   Diluted                           $        0.32 $        0.24        33%


    Nine Months Ended
Net Sales                            $       126.1 $       107.3        18%
Net Income                           $        17.0 $        12.4        37%
Net Income per share:
   Basic                             $        1.04 $        0.76        37%
   Fully Diluted                     $        1.03 $        0.76        36%

Note:  The Company announced a 50% stock dividend to shareholders of record
on June 30, 2007, payable on July 15, 2007.  All earnings per share and
weighted average share information reflect the 50% stock dividend.

"Both revenue and income remained strong, sustaining double digit growth for the quarter and year to date," said Allen Carlson, Sun's President and CEO. "We are pleased with our performance and believe that our growth continues to outpace the industry, resulting in additional market share."

"Our international presence provides a necessary balance to our business," Carlson continued. "While the US economy appears to be softening, our international sales continue to contribute significantly to our top and bottom lines, with international sales making up 59% of the total last quarter."

"We announced last week our intention to take an equity ownership in High Country Tek. We believe this relationship will enhance our ability to better understand our customers' needs, especially with regard to the electro-hydraulic solutions being sought by the marketplace," concluded Carlson.

Outlook

2007 fourth quarter sales are estimated to be approximately $40 million and earnings per share are estimated to be in the range of $0.28 to $0.30. This would represent an increase of approximately 14% in sales and 26% in earnings per share over last year.

2007 year-end sales are estimated to be approximately $166 million, a 17% increase compared to 2006. Earnings per share for 2007 are estimated to be between $1.31 and $1.33, up approximately 33% over last year.

Webcast

Sun Hydraulics Corporation will broadcast its third quarter financial results conference call live over the Internet at 2:30 P.M. E.T. today, November 5, 2007. To listen to the webcast, go to http://investor.sunhydraulics.com/medialist.cfm. A copy of this earnings release is posted on the Investor Relations page of our website under "Press Releases."

Webcast Q&A

Questions may be submitted to the Company via email after reviewing the earnings release by going to the Sun Hydraulics website, www.sunhydraulics.com, and clicking on Investor Relations. Scroll down to the bottom of the page and click on contact email: investor@sunhydraulics.com. Sun management will answer these and other questions during the Company's webcast. If an individual wishes to ask questions directly during the webcast, the conference call may be accessed by dialing 1-877-407-8033.

Sun Hydraulics Corporation is a leading designer and manufacturer of high performance screw-in hydraulic cartridge valves and manifolds for worldwide industrial and mobile markets. For more information about Sun, please visit our website at www.sunhydraulics.com.

FORWARD-LOOKING INFORMATION

Certain oral statements made by management from time to time and certain statements contained herein that are not historical facts are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934 and, because such statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements, including those in Management's Discussion and Analysis of Financial Condition and Results of Operations are statements regarding the intent, belief or current expectations, estimates or projections of the Company, its Directors or its Officers about the Company and the industry in which it operates, and assumptions made by management, and include among other items, (i) the Company's strategies regarding growth, including its intention to develop new products; (ii) the Company's financing plans; (iii) trends affecting the Company's financial condition or results of operations; (iv) the Company's ability to continue to control costs and to meet its liquidity and other financing needs; (v) the declaration and payment of dividends; and (vi) the Company's ability to respond to changes in customer demand domestically and internationally, including as a result of standardization. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that the anticipated results will occur.

Important factors that could cause the actual results to differ materially from those in the forward-looking statements include, among other items, (i) the economic cyclicality of the capital goods industry in general and the hydraulic valve and manifold industry in particular, which directly affect customer orders, lead times and sales volume; (ii) conditions in the capital markets, including the interest rate environment and the availability of capital; (iii) changes in the competitive marketplace that could affect the Company's revenue and/or cost bases, such as increased competition, lack of qualified engineering, marketing, management or other personnel, and increased labor and raw materials costs; (iv) changes in technology or customer requirements, such as standardization of the cavity into which screw-in cartridge valves must fit, which could render the Company's products or technologies noncompetitive or obsolete; (v) new product introductions, product sales mix and the geographic mix of sales nationally and internationally; and (vi) changes relating to the Company's international sales, including changes in regulatory requirements or tariffs, trade or currency restrictions, fluctuations in exchange rates, and tax and collection issues. Further information relating to factors that could cause actual results to differ from those anticipated is included but not limited to information under the headings Item 1. "Business," Item 1A. "Risk Factors" and Item 7. "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in the Company's Form 10-K for the year ended December 30, 2006, and "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in the Company's Form 10-Q for the quarter ended September 29, 2007. The Company disclaims any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)

                                                 Three months ended
                                           September 29,    September 30,
                                                2007             2006
                                            (unaudited)      (unaudited)

Net sales                                 $        41,809  $        36,202

Cost of sales                                      28,485           25,540
                                          ---------------  ---------------

Gross profit                                       13,324           10,662

Selling, engineering and
 administrative expenses                            5,279            4,707
                                          ---------------  ---------------

Operating income                                    8,045            5,955

Interest (income)/expense, net                       (120)              61
Foreign currency transaction loss, net                  -               32
Miscellaneous income, net                            (115)             (34)
                                          ---------------  ---------------

Income before income taxes                          8,280            5,896

Income tax provision                                3,034            1,980
                                          ---------------  ---------------

Net income                                $         5,246  $         3,916
                                          ===============  ===============

Basic net income per common share (1)     $          0.32  $          0.24

Weighted average basic shares
outstanding (1)                                    16,460           16,217

Diluted net income per common share (1)   $          0.32  $          0.24

Weighted average diluted shares
 outstanding (1)                                   16,507           16,300

Dividends declared per share (1)          $         0.090  $         0.067

(1) The Company announced a 50% stock dividend to shareholders of record on
June 30, 2007, payable on July 15, 2007.  All per share and weighted
average share information reflect the 50% stock dividend.




SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)

                                                  Nine months ended
                                           September 29,    September 30,
                                                2007             2006
                                            (unaudited)      (unaudited)

Net sales                                 $       126,085  $       107,315

Cost of sales                                      84,581           74,433
                                          ---------------  ---------------

Gross profit                                       41,504           32,882

Selling, engineering and
 administrative expenses                           15,932           14,068
                                          ---------------  ---------------

Operating income                                   25,572           18,814

Interest (income)/expense, net                       (282)             142
Foreign currency transaction loss, net                  2               63
Miscellaneous income, net                            (321)             (41)
                                          ---------------  ---------------

Income before income taxes                         26,173           18,650

Income tax provision                                9,169            6,240
                                          ---------------  ---------------

Net income                                $        17,004  $        12,410
                                          ===============  ===============

Basic net income per common share (1)     $          1.04  $          0.76

Weighted average basic shares
 outstanding (1)                                   16,401           16,338

Diluted net income per common share (1)   $          1.03  $          0.76

Weighted average diluted shares
 outstanding (1)                                   16,468           16,431

Dividends declared per share (1)          $         0.247  $         0.200

(1) The Company announced a 50% stock dividend to shareholders of record on
June 30, 2007, payable on July 15, 2007.   All per share and weighted
average share information reflect the 50% stock dividend.




SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)

                                                September 29,  December 30,
                                                    2007          2006
                                                (unaudited)
Assets
Current assets:
  Cash and cash equivalents                     $      17,206 $       9,379
  Restricted cash                                         145           118
  Accounts receivable, net of allowance for
   doubtful accounts of $101 and $140                  18,297        13,917
  Inventories                                          11,321        10,386
  Deferred income taxes                                   219           219
  Other current assets                                  2,470           986
                                                ------------- -------------
      Total current assets                             49,658        35,005

Property, plant and equipment, net                     55,676        50,355
Other assets                                            2,076         1,825
                                                ------------- -------------

Total assets                                    $     107,410 $      87,185
                                                ============= =============

Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                              $       6,047 $       4,812
  Accrued expenses and other liabilities                5,433         4,059
  Long-term debt due within one year                      458           426
  Dividends payable                                     1,482         1,085
  Income taxes payable                                  1,034           608
                                                ------------- -------------
      Total current liabilities                        14,454        10,990

Long-term debt due after one year                         292           646
Deferred income taxes                                   4,529         4,451
Other noncurrent liabilities                              502           298
                                                ------------- -------------

      Total liabilities                                19,777        16,385

Shareholders' equity:
  Common stock                                             16            16
  Capital in excess of par value                       33,633        30,962
  Retained earnings                                    48,202        35,279
  Accumulated other comprehensive income                5,782         4,543
                                                ------------- -------------
      Total shareholders' equity                       87,633        70,800
                                                ------------- -------------

Total liabilities and shareholders' equity      $     107,410 $      87,185
                                                ============= =============




SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

                                                  Nine months ended
                                           September 29,    September 30,
                                                2007             2006
                                            (unaudited)      (unaudited)
Cash flows from operating activities:
Net income                                $        17,004  $        12,410
Adjustments to reconcile net income to
 net cash provided by operating activities:
Depreciation and amortization                       4,657  $         4,372
(Gain)/Loss on disposal of assets                     (60)              37
Provision for deferred income taxes                    78               20
Allowance for doubtful accounts                       (39)               4
Stock-based compensation expense                      542              421
Stock options income tax benefit                     (286)             (82)
(Increase) decrease in:
   Accounts receivable                             (4,341)          (4,167)
   Inventories                                       (935)          (1,448)
   Income taxes receivable                              -              236
   Other current assets                            (1,484)             492
   Other assets                                      (271)             (72)
Increase (decrease) in:
   Accounts payable                                 1,235              673
   Accrued expenses and other liabilities           2,759            1,474
   Income taxes payable                               712              840
   Other noncurrent liabilities                       204              (15)
                                          ---------------  ---------------
Net cash provided by operating activities          19,775           15,195

Cash flows from investing activities:
Capital expenditures                               (9,448)          (7,194)
Proceeds from dispositions of equipment                76               20
                                          ---------------  ---------------
Net cash used in investing activities              (9,372)          (7,174)

Cash flows from financing activities:
Proceeds from debt                                      -            7,000
Repayment of debt                                    (322)          (4,791)
Proceeds from exercise of stock options               267              112
Proceeds from stock issued                            191              179
Payments for purchase of treasury stock                 -           (2,951)
Dividends to shareholders                          (3,684)          (3,267)
Stock options income tax benefit                      286               82
                                          ---------------  ---------------
Net cash used in financing activities              (3,262)          (3,636)

Effect of exchange rate changes on cash
 and cash equivalents                                 713              862
                                          ---------------  ---------------

Net increase in cash and cash equivalents           7,854            5,247

Cash and cash equivalents, beginning of
 period                                             9,497            5,830
                                          ---------------  ---------------

Cash and cash equivalents, end of period  $        17,351  $        11,077
                                          ===============  ===============

Supplemental disclosure of cash flow
 information:
Cash paid:
   Interest                               $            35  $           235
   Income taxes                           $         8,884  $         5,226
Supplemental disclosure of noncash
 transactions:
   Common stock issued to ESOP through
    accrued expenses and other
    liabilities                           $         1,386  $         1,183



                 United                       United    Elimina-  Consolid-
                 States     Korea   Germany   Kingdom     tion      ated
Three Months
Ended September
 29, 2007
Sales to
 unaffiliated
 customers      $  24,770 $   5,244 $   6,033 $   5,762 $      -  $  41,809
Intercompany
 sales              7,551         -        65       609   (8,225)         -
Operating
 income             4,871       613     1,583     1,007      (29)     8,045
Depreciation        1,142        46       131       284        -      1,603
Capital
 expenditures       1,957        55         5       547        -      2,564

Three Months
Ended September
 30, 2006
Sales to
 unaffiliated
 customers      $  22,912 $   4,085 $   4,874 $   4,331 $      -  $  36,202
Intercompany
 sales              6,158         -        26       810   (6,994)         -
Operating
 income             3,760       488     1,114       572       21      5,955
Depreciation        1,023        37       127       247        -      1,434

Capital
 expenditures       2,179        26       143        30        -      2,378

Nine Months
Ended September
 29, 2007
Sales to
 unaffiliated
 customers      $  74,375 $  15,896 $  18,730 $  17,084 $      -  $ 126,085
Intercompany
 sales             23,715         -       115     2,143  (25,973)         -
Operating
 income            16,767     1,759     4,604     2,529      (87)    25,572
Depreciation        3,301       129       403       804        -      4,637
Capital
 expenditures       7,675       264        52     1,458        -      9,448

Nine Months
Ended September
 30, 2006
Sales to
 unaffiliated
 customers      $  67,105 $  12,247 $  14,644 $  13,319 $      -  $ 107,315
Intercompany
 sales             19,450         -        88     2,262  (21,800)         -
Operating
 income            12,088     1,691     3,230     1,893      (88)    18,814
Depreciation        3,142       112       368       730        -      4,352
Capital
 expenditures       6,586        46       205       357        -      7,194


Contact Information

  • Contact:
    Richard K. Arter
    Investor Relations
    941-362-1200

    Tricia L. Fulton
    Chief Financial Officer
    941-362-1200