SOURCE: Sun Hydraulics Corporation

Sun Hydraulics Corporation

November 03, 2014 17:00 ET

Growth Continues for Sun Hydraulics; Expects Strong Fourth Quarter

SARASOTA, FL--(Marketwired - Nov 3, 2014) - Sun Hydraulics Corporation (NASDAQ: SNHY) today reported financial results for the third quarter of 2014 as follows:

               
    September 27, 2014   September 28, 2013   Increase  
Three Months Ended                  
Net sales   $ 55.0   $ 49.4   11 %
Net income   $ 9.9   $ 8.3   19 %
Net income per share:                  
  Basic   $ 0.37   $ 0.32   16 %
  Diluted   $ 0.37   $ 0.32   16 %
Nine Months Ended                  
Net sales   $ 172.9   $ 156.2   11 %
Net income   $ 33.4   $ 29.6   13 %
Net income per share:                  
  Basic   $ 1.27   $ 1.13   12 %
  Diluted   $ 1.27   $ 1.13   12 %
                   
                   

"Sun's third quarter results were strong compared to last year," said Allen Carlson, Sun's President and CEO. "Demand for our products was up in all major geographic end markets, with Europe up 15%, and North America and Asia/Pacific each up 10%. Earnings came in as expected and included ongoing investments in product development and marketing efforts."

"Investing in our business for sustainable, profitable growth is key to our operations," continued Carlson. "In 2014, these investments include physical capacity, product development, and marketing efforts in Asia. These investments benefit Sun and our stakeholders long-term, and help drive value for shareholders. In addition to investing in our business, our financial performance and ability to generate cash allowed us to return cash to shareholders through a $1.00 per share special dividend, paid last month. We did this while maintaining a balance sheet that affords us the ability to continue to invest in our business and take advantage of market opportunities for growth."

Concluding, Carlson commented, "The fourth quarter forecast indicates 2014 will be a great year for Sun. We expect double-digit growth, with solid earnings performance. We are pleased that our performance was recently recognized by Forbes, which once again named us to its list of the 50 Best Small Companies. Sun's focus remains on providing differentiated products and services to our customers, and delivering further value to stakeholders."

Outlook

Fourth quarter 2014 revenues are expected to be approximately $55 million, up 12% from the fourth quarter of 2013. Earnings per share are estimated to be $0.37 to $0.39 compared to $0.32 in the same period a year ago.

For the year, revenues are expected to be approximately $228 million, up 11% from the prior year. Earnings per share are estimated to be $1.64 to $1.66 compared to earnings per share of $1.45 in the prior year.

Webcast

Sun Hydraulics Corporation will broadcast its 2014 third quarter financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, November 4, 2014. To listen to the webcast, go to the Investor Relations section of www.sunhydraulics.com.

Webcast Q&A

If an individual wishes to ask questions directly during the webcast, the conference call may be accessed by dialing 1-888-455-2260 and using 6181783 as the access code. Questions also may be submitted to the Company via email by going to the Sun Hydraulics website,  www.sunhydraulics.com, and clicking on Investor Relations on the top menu. Scroll down to the bottom of the page and click on contact email:  investor@sunhydraulics.com, which will open an email window to type in your message. 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 27, 2014, 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 28, 2013. 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 27, 2014     September 28, 2013  
    (unaudited)     (unaudited)  
Net sales   $ 55,011     $ 49,369  
Cost of sales     32,720       29,755  
Gross profit     22,291       19,614  
Selling, engineering and administrative expenses     7,656       6,540  
Operating income     14,635       13,074  
Interest (income) expense, net     (331 )     (272 )
Foreign currency transaction (gain) loss, net     (226 )     82  
Miscellaneous (income) expense, net     191       470  
Income before income taxes     15,001       12,794  
Income tax provision     5,124       4,519  
Net income   $ 9,877     $ 8,275  
Basic net income per common share   $ 0.37     $ 0.32  
Weighted average basic shares outstanding     26,455       26,247  
Diluted net income per common share   $ 0.37     $ 0.32  
Weighted average diluted shares outstanding     26,455       26,247  
Dividends declared per share   $ 1.090     $ 0.090  
                 
                 
   
SUN HYDRAULICS CORPORATION  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands except per share data)  
   
    Nine months ended  
    September 27, 2014     September 28, 2013  
    (unaudited)     (unaudited)  
Net sales   $ 172,870     $ 156,218  
Cost of sales     100,756       92,699  
Gross profit     72,114       63,519  
Selling, engineering and administrative expenses     22,375       19,752  
Operating income     49,739       43,767  
Interest income, net     (926 )     (709 )
Foreign currency transaction gain, net     (256 )     (68 )
Miscellaneous (income) expense, net     548       80  
Income before income taxes     50,373       44,464  
Income tax provision     16,924       14,824  
Net income   $ 33,449     $ 29,640  
Basic net income per common share   $ 1.27     $ 1.13  
Weighted average basic shares outstanding     26,425       26,206  
Diluted net income per common share   $ 1.27     $ 1.13  
Weighted average diluted shares outstanding     26,425       26,206  
Dividends declared per share   $ 1.36     $ 0.36  
                 
                 
 
SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
    September 27, 2014     December 28, 2013
    (unaudited)      
Assets              
Current assets:              
  Cash and cash equivalents   $ 66,095     $ 54,912
  Restricted cash     337       334
  Accounts receivable, net of allowance for doubtful accounts of $146 and $117     19,805       16,984
  Inventories     13,649       13,853
  Income taxes receivable     --       954
  Deferred income taxes     476       474
  Short-term investments     55,232       38,729
  Other current assets     4,001       2,816
  Total current assets     159,595       129,056
Property, plant and equipment, net     76,577       75,731
Goodwill     5,242       5,221
Other assets     3,087       3,470
  Total assets   $ 244,501     $ 213,478
Liabilities and shareholders' equity              
Current liabilities:              
  Accounts payable   $ 5,919     $ 4,630
  Accrued expenses and other liabilities     6,739       7,016
  Income taxes payable     2,329       --
  Dividends payable     28,848       2,372
  Total current liabilities     43,835       14,018
Deferred income taxes     7,572       7,747
Other noncurrent liabilities     288       285
  Total liabilities     51,695       22,050
Commitments and contingencies     --       --
Shareholders' equity:              
  Preferred stock, 2,000,000 shares authorized, par value $0.001, no shares outstanding     --       --
  Common stock, 50,000,000 shares authorized, par value $0.001, 26,462,819 and 26,352,692 shares outstanding     26       26
  Capital in excess of par value     71,984       65,391
  Retained earnings     120,883       123,420
  Accumulated other comprehensive income (loss)     (87 )     2,591
  Total shareholders' equity     192,806       191,428
  Total liabilities and shareholders' equity   $ 244,501     $ 213,478
                 
                 
   
SUN HYDRAULICS CORPORATION  
CONSOLIDATED STATEMENT OF CASH FLOWS  
(in thousands)  
   
    Nine months ended  
    September 27, 2014     September 28, 2013  
    (unaudited)     (unaudited)  
Cash flows from operating activities:                
Net income   $ 33,449     $ 29,640  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     6,428       5,393  
(Gain)Loss on disposal of assets     155       324  
Gain on investment in business     --       (528 )
Provision for deferred income taxes     53       (23 )
Allowance for doubtful accounts     29       8  
Stock-based compensation expense     2,744       2,124  
(Increase) decrease in, net of assets acquired:                
  Accounts receivable     (2,850 )     (4,514 )
  Inventories     204       (151 )
  Income taxes receivable     954       728  
  Other current assets     (1,185 )     (525 )
  Other assets     146       284  
Increase (decrease) in, net of liabilities assumed:                
  Accounts payable     1,289       1,115  
  Accrued expenses and other liabilities     2,949       2,206  
  Income taxes payable     2,329       679  
  Other noncurrent liabilities     3       21  
Net cash provided by operating activities     46,697       36,781  
Cash flows from investing activities:                
Investment in business, net of cash acquired     --       (923 )
Capital expenditures     (6,953 )     (14,569 )
Proceeds from dispositions of equipment     6       70  
Purchases of short-term investments     (42,788 )     (22,945 )
Proceeds from sale of short-term investments     25,396       19,327  
Net cash used in investing activities     (24,339 )     (19,040 )
Cash flows from financing activities:                
Proceeds from stock issued     623       651  
Dividends to shareholders     (9,509 )     (7,072 )
Change in restricted cash     (3 )     1  
Net cash used in financing activities     (8,889 )     (6,420 )
Effect of exchange rate changes on cash and cash equivalents     (2,286 )     691  
Net increase (decrease) in cash and cash equivalents     11,183       12,012  
Cash and cash equivalents, beginning of period     54,912       34,478  
Cash and cash equivalents, end of period   $ 66,095     $ 46,490  
Supplemental disclosure of cash flow information:                
Cash paid:                
  Income taxes   $ 13,818     $ 13,440  
Supplemental disclosure of noncash transactions:                
Common stock issued for shared distribution through accrued expenses and other liabilities   $ 3,226     $ 3,486  
Common stock issued for deferred director's compensation through other noncurrent liabilities   $ --     $ 294  
                 
                 

Contact Information

  • Contact:
    Dennis Tichio
    Investor Relations
    941-362-1200

    Tricia Fulton
    Chief Financial Officer
    941-362-1200