SOURCE: Sun Hydraulics Corporation

Sun Hydraulics Corporation

August 03, 2009 17:00 ET

Sun Hydraulics Corporation Reports 2nd Quarter Sales of $21.6 Million

SARASOTA, FL--(Marketwire - August 3, 2009) - Sun Hydraulics Corporation (NASDAQ: SNHY) today reported financial results for the second quarter 2009 as follows:

(Dollars in millions except net income per share)

                                     June 27,    June 28
                                       2009       2008     Decrease

        Three Months Ended
Net Sales                              $21.6     $51.6      -58%
Net Income                            -$0.5      $8.9       -106%
Net Income (Loss) per share:
   Basic                              -$0.03     $0.54      -106%
   Diluted                            -$0.03     $0.54      -106%

        Six Months Ended
Net Sales                              $46.8     $100.6     -53%
Net Income                             $0.0      $16.6      -100%
Net Income per share:
   Basic                               $0.00     $1.00      -100%
   Fully Diluted                       $0.00     $1.00      -100%


"Second quarter results were consistent with our expectations," commented Allen Carlson, Sun's president and CEO. "Despite the 53% drop in sales for the first half of the year, we are operating at breakeven and generating strong cash flow. Our order rates remain stable and we believe we have seen the bottom of the cycle. We are continuing to invest for the future while maintaining our workforce readiness in preparation for the upturn."

"In June, Sun initiated rolling furloughs for the production workforce and a 3% salary reduction for non-production personnel," Carlson offered. "The furloughs allow us to balance our capacity with current business levels without compromising our ability to respond when demand increases. While we expect to see some cost benefit in the third quarter, keeping our workforce intact is our primary goal. Under the furlough model, it is relatively simple to return to normal work schedules as demand recovers."

"Customers have continued to expedite orders throughout the second quarter," Carlson continued. "Sun's North American distributor inventory decreased 18% from the beginning of the year as distributors and customers remain reluctant to add inventory. However, the expedite activity and decreasing distributor inventory leads us to believe that we are getting closer to seeing actual customer demand levels."

"Thanks to our strong financial position and ability to generate cash, we have continued to invest in our facilities and people, while, at the same time, making Sun an attractive investment for shareholders. In June, we purchased land that now gives us 27 contiguous acres which includes one of our existing facilities, and we installed a new heat treat furnace that enhances capacity and improves the quality of our products. Since the end of the first quarter, more than 100 employees have been engaged in manufacturing training initiatives offered by the state of Florida. Sun is not sitting idle for the recession to be over. We are investing and preparing for the next cycle."

Concluding, Carlson said, "The actions we have taken and our strong financial position provides us flexibility to manage the business regardless of future demand. However, we are very encouraged by the strong uptick in the Purchasing Managers Index that came out earlier today. This index has historically been a leading indicator and has shown seven months of upward momentum. The portion of the index that represents production has been above 50, indicating a growth phase, for the last two months. These external indices coupled with stable internal order rates and decreased distributor inventory, leads us to believe the economy is in the early stages of recovery. When it does, Sun is ideally positioned to respond to customer demand with superior product and service performance. And as we have consistently stated, market share gains are made in the beginning phases of the business cycle."

Outlook

Third quarter 2009 revenues are expected to be in the range of $22 to $23 million, 50% below the third quarter of 2008. Earnings are expected to be around breakeven compared to $0.40 in the same period a year ago.

Webcast

Sun Hydraulics Corporation will broadcast its Q2 financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, August 4, 2009. To listen to the webcast, go to http://investor.sunhydraulics.com/eventdetail.cfm?eventid=70665.

Webcast Q&A

If an individual wishes to ask questions directly during the webcast, the conference call may be accessed by dialing 1-888-401-4685. 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 June 27, 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
                                                    June 27,     June 28,
                                                      2009         2008
                                                  (unaudited)

Net sales                                         $    21,607  $    51,563

Cost of sales                                          17,373       32,488
                                                  -----------  -----------

Gross profit                                            4,234       19,075

Selling, engineering and
 administrative expenses                                4,867        5,792
                                                  -----------  -----------

Operating income (loss)                                  (633)      13,283

Interest income, net                                     (171)        (155)
Foreign currency transaction loss, net                    339           65
Miscellaneous expense, net                                101           32
                                                  -----------  -----------

Income (loss) before income taxes                        (902)      13,341

Income tax provision                                     (366)       4,433
                                                  -----------  -----------

Net income (loss)                                 $      (536) $     8,908
                                                  ===========  ===========

Basic net income (loss) per common share          $     (0.03) $      0.54

Weighted average basic shares outstanding              16,867       16,592

Diluted net income (loss) per common share        $     (0.03) $      0.54

Weighted average diluted shares outstanding            16,899       16,623

Dividends declared per share                      $     0.090  $     0.180





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

                                                      Six months ended
                                                    June 27,     June 28,
                                                      2009         2008
                                                  (unaudited)

Net sales                                         $    46,815  $   100,571

Cost of sales                                          37,003       64,402
                                                  -----------  -----------

Gross profit                                            9,812       36,169

Selling, engineering and
 administrative expenses                                9,642       11,746
                                                  -----------  -----------

Operating income                                          170       24,423

Interest income, net                                     (282)        (268)
Foreign currency transaction loss, net                    331          101
Miscellaneous (income)/loss, net                          300         (218)
                                                  -----------  -----------

Income (loss) before income taxes                        (179)      24,808

Income tax provision                                     (194)       8,208
                                                  -----------  -----------

Net income                                        $        15  $    16,600
                                                  ===========  ===========

Basic net income per common share                 $      0.00  $      1.00

Weighted average basic shares outstanding              16,767       16,577

Diluted net income per common share               $      0.00  $      1.00

Weighted average diluted shares outstanding            16,797       16,610

Dividends declared per share                      $     0.270  $     0.270




SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)

                                                    June 27,   December 27,
                                                      2009         2008
                                                  (unaudited)
Assets
Current assets:
  Cash and cash equivalents                       $     25,933 $    35,176
  Restricted cash                                          132         127
  Accounts receivable, net of allowance for
   doubtful accounts of $86 and $92                     10,475      12,502
  Inventories                                            8,397       9,960
  Income taxes receivable                                3,410       1,353
  Deferred income taxes                                    259         259
  Marketable securities                                  5,474           -
  Other current assets                                   1,616       1,290
                                                  ------------ -----------
      Total current assets                              55,696      60,667

Property, plant and equipment, net                      58,438      57,726
Marketable securities                                    2,226           -
Other assets                                             3,702       3,992
                                                  ------------ -----------

Total assets                                      $    120,062 $   122,385
                                                  ============ ===========

Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                                $      3,365 $     3,258
  Accrued expenses and other liabilities                 2,549       5,546
  Long-term debt due within one year                         -         147
  Dividends payable                                      1,519       1,499
                                                  ------------ -----------
      Total current liabilities                          7,433      10,450

Long-term debt due after one year                            -         125
Deferred income taxes                                    4,906       4,871
Other noncurrent liabilities                               407         383
                                                  ------------ -----------

      Total liabilities                                 12,746      15,829

Shareholders' equity:
  Common stock                                              17          17
  Capital in excess of par value                        41,493      38,042
  Retained earnings                                     65,590      70,099
  Accumulated other comprehensive income                   216      (1,602)
                                                  ------------ -----------
      Total shareholders' equity                       107,316     106,556
                                                  ------------ -----------

Total liabilities and shareholders' equity        $    120,062 $   122,385
                                                  ============ ===========



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

                                                      Six months ended
                                                    June 27,     June 28,
                                                      2009         2008
                                                  (unaudited)
Cash flows from operating activities:
Net income                                        $        15  $    16,600
Adjustments to reconcile net income to
 net cash provided by operating activities:
Depreciation and amortization                           3,559        3,521
Loss on disposal of assets                                  1          115
Provision for deferred income taxes                        35           (2)
Allowance for doubtful accounts                            (6)         (39)
Stock-based compensation expense                          441          434
Stock options income tax benefit                            -          (15)
(Increase) decrease in:
   Accounts receivable                                  2,033       (5,234)
   Inventories                                          1,563         (782)
   Income taxes receivable                             (2,057)           -
   Other current assets                                  (326)          85
   Other assets                                           277            3
Increase (decrease) in:
   Accounts payable                                       107        1,401
   Accrued expenses and other liabilities                (200)       2,194
   Income taxes payable                                     -        1,679
   Other noncurrent liabilities                            24          157
                                                  -----------  -----------
Net cash provided by operating activities               5,466       20,117

Cash flows from investing activities:
Capital expenditures                                   (3,506)      (6,862)
Proceeds from dispositions of equipment                     -           99
Purchase of marketable securities                      (8,133)           -
Proceeds from Sale of Marketable Securities               420            -
                                                  -----------  -----------
Net cash used in investing activities                 (11,219)      (6,763)

Cash flows from financing activities:
Repayment of debt                                        (261)        (225)
Proceeds from exercise of stock options                   214           84
Proceeds from stock issued                                  -          162
Dividends to shareholders                              (4,504)      (4,474)
Stock options income tax benefit                            -           15
                                                  -----------  -----------
Net cash used in financing activities                  (4,551)      (4,438)

Effect of exchange rate changes on cash and
 cash equivalents                                       1,066         (138)
                                                  -----------  -----------

Net increase/(decrease) in cash and cash
 equivalents                                           (9,238)       8,778

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

Cash and cash equivalents, end of period          $    26,065  $    28,115
                                                  ===========  ===========

Supplemental disclosure of cash flow information:
Cash paid:
   Interest                                       $         9  $        19
   Income taxes                                   $     1,828  $     6,546
Supplemental disclosure of noncash transactions:
   Common stock issued to ESOP through
    accrued expenses and other liabilities        $     2,797  $     2,255



               United                     United
               States    Korea   Germany  Kingdom  Elimination Consolidated
Three Months
 Ended June 27,
 2009
Sales to
 unaffiliated
 customers     $12,569  $  2,384 $  3,445 $  3,209  $       -  $    21,607
Intercompany
 sales           3,544         -       46      233     (3,823)           -
Operating
 income (loss)  (1,541)      124      561      123        100         (633)
Depreciation     1,365        27      130      260          -        1,782
Capital
 expenditures    2,205         4       24       37          -        2,270

Three Months
 Ended June 28,
 2008
Sales to
 unaffiliated
 customers     $31,705  $  5,465 $  7,859 $  6,534  $       -  $    51,563
Intercompany
 sales           8,677         -       65      615     (9,357)           -
Operating
 income          9,391       425    2,314    1,078         75       13,283
Depreciation     1,265        42      151      336          -        1,794
Capital
 expenditures    4,180         1      117      164          -        4,462

Six Months
 Ended June 27,
 2009
Sales to
 unaffiliated
 customers     $28,189  $  4,345 $  7,612 $  6,669  $       -  $    46,815
Intercompany
 sales           7,700         -       75      698     (8,473)           -
Operating
 income (loss)  (2,090)      210    1,274      576        200          170
Depreciation     2,735        53      254      493          -        3,535
Capital
 expenditures    3,336        27       28      115          -        3,506

Six Months
 Ended June 28,
 2008
Sales to
 unaffiliated
 customers     $60,024  $ 11,819 $ 15,821 $ 12,907  $       -  $   100,571
Intercompany
 sales          17,804         -      143    1,204    (19,151)           -
Operating
 income         16,575     1,074    4,728    2,108        (62)      24,423
Depreciation     2,457        88      296      666          -        3,507
Capital
 expenditures    6,412        17      149      284          -        6,862

Contact Information

  • Contact:

    Richard K. Arter
    Investor Relations
    941-362-1200

    Tricia Fulton
    Chief Financial Officer
    941-362-1200