(Dollars in millions except net income per share)
December 27, December 29, Increase/
2008 2007 Decrease
Twelve Months Ended
Net Sales $ 178.3 $ 167.4 7%
Net Income $ 25.7 $ 22.1 16%
Net Income per share:
Basic $ 1.55 $ 1.35 15%
Diluted $ 1.55 $ 1.34 16%
Three Months Ended
Net Sales $ 32.9 $ 41.3 -20%
Net Income $ 2.5 $ 5.1 -51%
Net Income per share:
Basic $ 0.15 $ 0.31 -52%
Diluted $ 0.15 $ 0.31 -52%
Sun Hydraulics reported significant sales and earnings growth for the first
nine months of 2008, leading the way to record sales and earnings. Despite
a drastic slowdown in the last three months of the year, 2008 sales were up
7% compared to 2007 and net income was up 16%.
Commenting on the year, Allen Carlson, Sun Hydraulics' president and CEO,
said, "Everyone at Sun continues to work hard to exceed our customers'
expectations. In 2008, we introduced new products and maintained our
industry-leading delivery performance. We are extremely proud of our
accomplishments."
Regarding the deteriorating conditions in the fourth quarter, Carlson said,
"Business began rapidly slowing in October. Because our book-to-ship cycle
is so short, about four weeks, we began to feel the slowdown immediately,
and that is reflected in our fourth quarter results."
Carlson, in explaining that this is not the first time the Company has
experienced a downturn, said, "We will not stop investing for the future,
but will be mindful of the tough economic times. Our focus remains on
developing new products and enhancing productivity. We have the resources
to do what we believe is necessary to take the next step in our growth."
Shared Distribution
The Company's Board of Directors voted to again provide a shared
distribution to Sun employees and shareholders. Totaling approximately $4.5
million, the distribution provides a special $0.09 per share dividend to
shareholders and a 9% contribution to Sun's employee retirement accounts.
The dividend is payable on March 31, 2009, to shareholders of record as of
March 15, 2009.
"When we announced the concept of a shared distribution last spring, we
said we would consider it on an annual basis," commented Ferdinand
Megerlin, Sun Hydraulics' Chairman of the Board. "Given our performance in
2008, we felt it was appropriate to reward our employees for their diligent
work and our shareholders for their support."
The employee portion of the shared distribution reduced EPS for the fourth
quarter and for the year by $0.06 per share.
Outlook
The slowdown in business activity that began in October continued in the
first two months of 2009. During this slowdown Sun has taken actions to
reduce discretionary expenses while continuing to invest in people,
processes, equipment, and product development. Sun's 2009 first quarter
sales are expected to be approximately $25 million with net income near
breakeven. As in past business cycles, Sun's investments at the bottom of
the cycle directly translate into new business and increased market share
as the economy recovers and that recovery in the business cycle often
happens unannounced and at a rapid pace.
Webcast
Sun Hydraulics Corporation will broadcast its 2008 financial results
conference call live over the Internet at 9:00 A.M. E.T. tomorrow, March 3,
2009. To listen to the webcast, go to
http://investor.sunhydraulics.com/eventdetail.cfm?EventID=64991.
Webcast Q&A
If an individual wishes to ask questions directly during the webcast, the
conference call may be accessed by dialing 1-877-397-0250. 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, 2008, 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
December 27, December 29,
2008 2007
Net sales $ 32,936 $ 41,289
Cost of sales 24,726 27,943
------------ ------------
Gross profit 8,210 13,346
Selling, engineering and administrative
expenses 5,536 5,282
------------ ------------
Operating income 2,674 8,064
Interest income, net (293) (129)
Foreign currency transaction gain, net (309) (44)
Miscellaneous expense, net 122 39
------------ ------------
Income before income taxes 3,154 8,198
Income tax provision 674 3,071
------------ ------------
Net income $ 2,480 $ 5,127
============ ============
Basic net income per common share $ 0.15 $ 0.31
Weighted average basic shares outstanding 16,647 16,485
Diluted net income per common share $ 0.15 $ 0.31
Weighted average diluted shares outstanding 16,675 16,530
Dividends declared per share $ 0.090 $ 0.090
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
Twelve Months Ended
December 27, December 29,
2008 2007
Net sales $ 178,278 $ 167,374
Cost of sales 119,161 112,524
------------ ------------
Gross profit 59,117 54,850
Selling, engineering and administrative
expenses 22,740 21,215
------------ ------------
Operating income 36,377 33,635
Interest income, net (793) (411)
Foreign currency transaction gain, net (467) (42)
Miscellaneous income, net (92) (283)
------------ ------------
Income before income taxes 37,729 34,371
Income tax provision 11,994 12,240
------------ ------------
Net income $ 25,735 $ 22,131
============ ============
Basic net income per common share $ 1.55 $ 1.35
Weighted average basic shares outstanding 16,603 16,437
Diluted net income per common share $ 1.55 $ 1.34
Weighted average diluted shares outstanding 16,634 16,498
Dividends declared per share $ 0.450 $ 0.337
SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 27, December 29,
2008 2007
Assets
Current assets:
Cash and cash equivalents $ 35,176 $ 19,191
Restricted cash 127 146
Accounts receivable, net of allowance for
doubtful accounts of $92 and $215 12,502 17,029
Inventories 9,960 11,421
Income taxes receivable 1,353 -
Deferred income taxes 259 301
Other current assets 1,290 1,210
------------ -------------
Total current assets 60,667 49,298
Property, plant and equipment, net 57,726 56,999
Other assets 3,992 4,483
------------ -------------
Total assets $ 122,385 $ 110,780
============ =============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 3,258 $ 5,668
Accrued expenses and other liabilities 5,546 4,857
Long-term debt due within one year 147 417
Dividends payable 1,499 1,484
Income taxes payable - 674
------------ -------------
Total current liabilities 10,450 13,100
Long-term debt due after one year 125 284
Deferred income taxes 4,871 5,108
Other liabilities 383 406
------------ -------------
Total liabilities 15,829 18,898
Shareholders' equity:
Common stock 17 16
Capital in excess of par value 38,042 34,390
Retained earnings 70,099 51,844
Accumulated other comprehensive income (1,602) 5,632
------------ -------------
Total shareholders' equity 106,556 91,882
------------ -------------
Total liabilities and shareholders’ equity $ 122,385 $ 110,780
============ =============
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Twelve Months Ended
December 27, December 29,
2008 2007
Cash flows from operating activities:
Net income $ 25,735 $ 22,131
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 7,096 6,341
(Gain) loss on disposal of assets 138 (74)
Stock-based compensation expense 896 735
Stock options income tax benefit (55) (748)
Allowance for doubtful accounts (123) 75
Provision for slow moving inventory 102 251
Provision for deferred income taxes (195) 575
(Increase) decrease in:
Accounts receivable 4,650 (3,187)
Inventories 1,359 (1,286)
Income taxes receivable (1,353) -
Other current assets (80) (224)
Other assets, net 465 (310)
Increase (decrease) in:
Accounts payable (2,410) 856
Accrued expenses and other liabilities 2,944 2,184
Income taxes payable (619) 814
Other liabilities (23) 108
------------ ------------
Net cash from operating activities 38,527 28,241
Cash flows used in investing activities:
Investment in High Country Tek, Inc. - (2,375)
Capital expenditures (10,874) (12,591)
Proceeds from dispositions of equipment 99 192
------------ ------------
Net cash used in investing activities (10,775) (14,774)
Cash flows used in financing activities:
Repayment of debt (416) (371)
Proceeds from exercise of stock options 87 287
Stock options income tax benefit 55 748
Proceeds from stock issued 359 272
Dividends to shareholders (7,465) (5,167)
------------ ------------
Net cash used in financing activities (7,380) (4,231)
Effect of exchange rate changes on cash and
cash equivalents (4,406) 604
------------ ------------
Net (decrease) increase in restricted cash (19) 28
Net increase in cash and cash equivalents 15,985 9,812
------------ ------------
Cash and cash equivalents, beginning of period 19,337 9,497
------------ ------------
Cash and cash equivalents, end of period $ 35,303 $ 19,337
============ ============
Supplemental disclosure of cash flow
information:
Cash paid:
Interest $ 31 $ 51
Income taxes $ 14,216 $ 11,599
Supplemental disclosure of noncash
transactions:
Common stock issued to ESOP through
accrued expenses and other liabilities $ 2,255 $ 1,386
United United Elimina- Consoli-
States Korea Germany Kingdom tion dated
Three Months
Ended December
27, 2008
Sales to
unaffiliated
customers $ 22,345 $ 1,782 $ 4,789 $ 4,020 $ - $ 32,936
Intercompany
sales 4,552 - 53 472 (5,077) -
Operating
income 1,752 (183) 834 371 (100) 2,674
Depreciation
and
amortization 1,389 27 129 254 - 1,799
Capital
expenditures 1,412 3 9 220 - 1,644
Three Months
Ended December
29, 2007
Sales to
unaffiliated
customers $ 25,142 $ 4,671 $ 5,434 $ 6,042 $ - $ 41,289
Intercompany
sales 6,629 - 27 478 (7,134) -
Operating
income 5,641 345 1,351 676 51 8,064
Depreciation
and
amortization 1,167 49 153 316 - 1,685
Capital
expenditures 1,664 20 73 1,386 - 3,143
Twelve Months
Ended December
27, 2008
Sales to
unaffiliated
customers $ 111,180 $ 17,455 $ 27,356 $ 22,287 $ - $ 178,278
Intercompany
sales 28,656 - 245 2,282 (31,183) -
Operating
income 24,531 1,148 7,693 3,231 (226) 36,377
Depreciation
and
amortization 5,139 151 572 1,234 - 7,096
Capital
expenditures 9,904 39 298 633 - 10,874
Twelve Months
Ended December
29, 2007
Sales to
unaffiliated
customers $ 99,516 $ 20,567 $ 24,164 $ 23,127 $ - $ 167,374
Intercompany
sales 30,344 - 142 2,621 (33,107) -
Operating
income 22,408 2,103 5,955 3,205 (36) 33,635
Depreciation
and
amortization 4,488 178 556 1,119 - 6,341
Capital
expenditures 9,339 284 125 2,843 - 12,591
Contact Information: Contact: Richard K. Arter Investor Relations 941-362-1200 Tricia Fulton Chief Financial Officer 941-362-1200