SOURCE: Sun Hydraulics Corporation

Sun Hydraulics Corporation

November 02, 2009 17:00 ET

Sun Hydraulics Earns $0.03 on Third Quarter Sales of $23 Million; Fourth Quarter Sales Forecast to Be $26 Million

SARASOTA, FL--(Marketwire - November 2, 2009) - Sun Hydraulics Corporation (NASDAQ: SNHY) today reported financial results for the third quarter 2009 as follows:

(Dollars in millions except net income per share)

                                     September 26  September 27
                                         2009          2008      Decrease
       Three Months Ended
Net Sales                                $23.3         $44.8       -48%
Net Income                               $0.6          $6.7        -91%
Net Income per share:
   Basic                                 $0.03         $0.40       -93%
   Diluted                               $0.03         $0.40       -93%

       Nine Months Ended
Net Sales                                $70.1         $145.3      -52%
Net Income                               $0.6          $23.3       -97%
Net Income per share:
   Basic                                 $0.03         $1.40       -98%
   Fully Diluted                         $0.03         $1.40       -98%


"We are encouraged by the modest rebound in sales and incoming order activity that began in the third quarter," said Allen Carlson, Sun's president and CEO. "The sequential revenue increase and recognition of the full benefit of our employee furlough programs helped earnings turn positive for the quarter."

"Like many others in the industrial sector, we are cautiously optimistic," Carlson acknowledged. "Our fourth quarter forecast represents a 12% sequential sales increase in what is historically the weakest quarter of the year. We believe that this growth in revenue is a clear indication that the bottom of this recession has passed. The Purchasing Managers Index (PMI) released this morning reported its third consecutive month above 50, indicating the economy is expanding. We believe this is a strong indication that Sun will continue to see growth into 2010."

"In addition to PMI, our optimism is based, in part, on actions we have taken during this downturn," Carlson said. "We are making investments now that will reap rewards for Sun in the future. On the product side, our electrically-actuated valves continue to gain attention in the marketplace and HCT (High Country Tek), as a by-product of its sales efforts, continues to uncover new opportunities for Sun products. Prototype development for integrated packages has remained very busy throughout the last three quarters and has led to new orders."

"Sun has been able to make it through the downturn without compromising our capabilities," Carlson continued. "Our workforce remains intact and we are investing in machinery and equipment to improve quality and productivity. New product designs complement our integrated packaging strategy and are helping us develop unique system solutions for our customers."

Concluding, Carlson offered, "This is all a result of Sun's culture -- managing for the long-term, prudent financial stewardship and being prepared to capitalize on opportunities. Sun is financially sound, debt free, continuing to pay dividends, and in position to continue to outpace our industry as the economy expands."

Outlook

Fourth quarter 2009 revenues are expected to be approximately $26 million, down 21% from the fourth quarter of 2008. Earnings per share are estimated to be $0.05 to 0.07 compared to $0.15 in the same period a year ago.

2009 year-end sales are estimated to be approximately $96 million, a 46% decrease compared to 2008. Earnings per share for 2009 are estimated to be $0.08 to $0.10, compared to $1.55 in 2008.

Sun's fourth quarter results are based on a 14-week quarter resulting in a 53-week year for 2009.

Industrial Conference Presentation

Sun Hydraulics has been invited to present at the 2009 Robert W. Baird Industrial Conference on November 10, 2009 in Chicago, IL. Allen Carlson, President and CEO, and Tricia Fulton, CFO, will be speaking at 10:05 A.M. C.T. A copy of the presentation will be posted on the Investor Relations section of Sun's website.

Webcast

Sun Hydraulics Corporation will broadcast its Q3 financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, November 3, 2009. To listen to the webcast, go to http://investor.sunhydraulics.com/eventdetail.cfm?eventid=73506.

Webcast Q&A

If an individual wishes to ask questions directly during the webcast, the conference call may be accessed by dialing 1-888-791-4324. Questions also may be submitted to the Company via email at investor@sunhydraulics.com. Sun management will then answer these and other questions during the Company's webcast. A copy of this earnings release is posted on the Investor Relations page of our website under "Press Releases."

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 heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form 10-Q for the quarter ended September 26, 2009, and under the heading "Business" and particularly under the subheading, "Business Risk Factors" in the Company's Form 10-K for the year ended December 27, 2008. 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 26, September 27,
                                                    2009          2008
                                                 (unaudited)   (unaudited)

Net sales                                        $    23,316   $    44,771

Cost of sales                                         17,965        30,033
                                                 -----------   -----------

Gross profit                                           5,351        14,738

Selling, engineering and
 administrative expenses                               4,928         5,457
                                                 -----------   -----------

Operating income                                         423         9,281

Interest income, net                                    (146)         (233)
Foreign currency transaction gain, net                   (88)         (258)
Miscellaneous expense, net                                87             4
                                                 -----------   -----------

Income before income taxes                               570         9,768

Income tax provision                                      16         3,111
                                                 -----------   -----------

Net income                                       $       554   $     6,657
                                                 ===========   ===========

Basic net income per common share                $      0.03   $      0.40

Weighted average basic shares outstanding             16,883        16,612

Diluted net income per common share              $      0.03   $      0.40

Weighted average diluted shares outstanding           16,917        16,642

Dividends declared per share                     $     0.090   $     0.090



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

                                                     Nine months ended
                                                September 26, September 27,
                                                     2009         2008
                                                 (unaudited)   (unaudited)

Net sales                                        $    70,131   $   145,342

Cost of sales                                         54,968        94,436
                                                 -----------   -----------

Gross profit                                          15,163        50,906

Selling, engineering and
 administrative expenses                              14,570        17,203
                                                 -----------   -----------

Operating income                                         593        33,703

Interest income, net                                    (427)         (500)
Foreign currency transaction gain (loss), net            243          (158)
Miscellaneous (income) loss, net                         387          (213)
                                                 -----------   -----------

Income before income taxes                               390        34,574

Income tax provision                                    (179)       11,319
                                                 -----------   -----------

Net income                                       $       569   $    23,255
                                                 ===========   ===========

Basic net income per common share                $      0.03   $      1.40

Weighted average basic shares outstanding             16,806        16,589

Diluted net income per common share              $      0.03   $      1.40

Weighted average diluted shares outstanding           16,837        16,621

Dividends declared per share                     $     0.360   $     0.360




SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)

                                                September 26, December 27,
                                                    2009         2008
                                                 (unaudited)
Assets
Current assets:
  Cash and cash equivalents                      $     30,109  $    35,176
  Restricted cash                                         134          127
  Accounts receivable, net of allowance for
   doubtful accounts of $75 and $92                    10,719       12,502
  Inventories                                           8,097        9,960
  Income taxes receivable                               1,673        1,353
  Deferred income taxes                                   259          259
  Marketable securities                                 5,158            -
  Other current assets                                  1,321        1,290
                                                 ------------  -----------
      Total current assets                             57,470       60,667

Property, plant and equipment, net                     57,790       57,726
Marketable securities                                   2,308            -
Other assets                                            3,515        3,992
                                                 ------------  -----------

Total assets                                     $    121,083  $   122,385
                                                 ============  ===========

Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                               $      3,529  $     3,258
  Accrued expenses and other liabilities                3,307        5,546
  Long-term debt due within one year                        -          147
  Dividends payable                                     1,520        1,499
                                                 ------------  -----------
      Total current liabilities                         8,356       10,450

Long-term debt due after one year                           -          125
Deferred income taxes                                   4,896        4,871
Other noncurrent liabilities                              536          383
                                                 ------------  -----------

      Total liabilities                                13,788       15,829

Shareholders' equity:
  Common stock                                             17           17
  Capital in excess of par value                       41,841       38,042
  Retained earnings                                    64,623       70,099
  Accumulated other comprehensive income                  814       (1,602)
                                                 ------------  -----------
      Total shareholders' equity                      107,295      106,556
                                                 ------------  -----------

Total liabilities and shareholders' equity       $    121,083  $   122,385
                                                 ============  ===========


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

                                                     Nine months ended
                                                September 26, September 27,
                                                    2009          2008
                                                 (unaudited)   (unaudited)
Cash flows from operating activities:
Net income                                       $       569   $    23,255
Adjustments to reconcile net income to
 net cash provided by operating activities:
Depreciation and amortization                          5,269         5,297
Loss on disposal of assets                                17           138
Provision for deferred income taxes                       25           (43)
Allowance for doubtful accounts                          (17)          (75)
Stock-based compensation expense                         686           671
Stock options income tax benefit                           -           (15)
(Increase) decrease in:
   Accounts receivable                                 1,800        (1,817)
   Inventories                                         1,863           (84)
   Income taxes receivable                              (320)            -
   Other current assets                                  (31)          143
   Other assets                                          457            97
Increase in:
   Accounts payable                                      271            97
   Accrued expenses and other liabilities                558         2,584
   Income taxes payable                                    -           502
   Other noncurrent liabilities                          153            96
                                                 -----------   -----------
Net cash provided by operating activities             11,300        30,846

Cash flows from investing activities:
Capital expenditures                                  (4,549)       (9,229)
Proceeds from dispositions of equipment                    -            99
Purchase of marketable securities                     (8,928)            -
Proceeds from Sale of Marketable Securities            1,451             -
                                                 -----------   -----------
Net cash used in investing activities                (12,026)       (9,130)

Cash flows from financing activities:
Repayment of debt                                       (261)         (301)
Proceeds from exercise of stock options                    7            87
Proceeds from stock issued                               310           267
Dividends to shareholders                             (6,024)       (5,968)
Stock options income tax benefit                           -            15
                                                 -----------   -----------
Net cash used in financing activities                 (5,968)       (5,900)

Effect of exchange rate changes on cash and
 cash equivalents                                      1,634        (1,875)
                                                 -----------   -----------

Net increase/(decrease) in cash and cash
 equivalents                                          (5,060)       13,941

Cash and cash equivalents, beginning of period        35,303        19,337
                                                 -----------   -----------

Cash and cash equivalents, end of period         $    30,243   $    33,278
                                                 ===========   ===========

Supplemental disclosure of cash flow
 information:
Cash paid:
   Interest                                      $         9   $        19
   Income taxes                                  $       116   $    10,875
Supplemental disclosure of noncash transactions:
   Common stock issued to ESOP through
    accrued expenses and other liabilities       $     2,797   $     2,255




                      United                     United   Elimin-  Consoli-
                      States    Korea   Germany  Kingdom   ation    dated
Three Months
Ended September 26, 2009
Sales to unaffiliated
 customers            $13,890  $  2,621 $  3,429 $  3,376 $     -  $ 23,316
Intercompany sales      3,881         -       43      217  (4,141)        -
Operating income
 (loss)                  (340)      193      498       24      48       423
Depreciation            1,284        27      125      268       -     1,704
Capital expenditures      961         4        9       69       -     1,043

Three Months
Ended September 27, 2008
Sales to unaffiliated
 customers            $28,810  $  3,854 $  6,746 $  5,361 $     -  $ 44,771
Intercompany sales      6,300         -       48      607  (6,955)        -
Operating income        6,204       257    2,131      752     (63)    9,281
Depreciation            1,273        37      147      313       -     1,770
Capital expenditures    2,080        19      140      129       -     2,368

Nine Months
Ended September 26, 2009
Sales to unaffiliated
 customers            $42,078  $  6,966 $ 11,041 $ 10,046 $     -  $ 70,131
Intercompany sales     11,581         -      118      915 (12,614)        -
Operating income
 (loss)                (2,430)      403    1,772      600     248       593
Depreciation            4,018        80      379      762       -     5,239
Capital expenditures    4,297        31       37      184       -     4,549

Nine Months
Ended September 27, 2008
Sales to unaffiliated
 customers            $88,834  $ 15,673 $ 22,567 $ 18,268 $     -  $145,342
Intercompany sales     24,104         -      191    1,811 (26,106)        -
Operating income       22,779     1,332    6,858    2,860    (126)   33,703
Depreciation            3,730       125      443      979       -     5,277
Capital expenditures    8,492        35      289      413       -     9,229

Contact Information

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

    Tricia Fulton
    Chief Financial Officer
    941-362-1200