SOURCE: Sun Hydraulics Corporation

Sun Hydraulics Corporation

May 09, 2011 17:00 ET

Sun Hydraulics Q1 Earnings Jump to $0.57 on Strong Sales, Q2 Outlook Reflects Continuing Momentum

SARASOTA, FL--(Marketwire - May 9, 2011) - Sun Hydraulics Corporation (NASDAQ: SNHY) reported financial results for the first quarter 2011 as follows:

(Dollars in millions except net income per share)

                                             April 2,   April 3,
                                               2011       2010     Increase

    Three Months Ended
Net Sales                                   $    50.7  $    31.6        60%
Net Income                                  $     9.8  $     3.3       197%
Net Income per share:
  Basic                                     $    0.57  $    0.20       185%
  Diluted                                   $    0.57  $    0.20       185%

"The capital goods environment has rebounded and is in a strong growth phase right now," reported Allen Carlson, Sun Hydraulics' president and CEO. "Sun is enjoying solid top line growth, which is translating into great operational results. Gross margins in the quarter were 39% with operating margins at 27%. More importantly, though difficult to quantify, we believe we continue to gain market share across all segments."

"Sun participated in two tradeshows in March and April -- the IFPE/CONEXPO show in Las Vegas and the Hanover Power Transmission Fair in Hanover, Germany," Carlson stated. "We introduced our new Series 4 Plus cartridges, which expand our flow capacity and are cost-effective alternatives for expensive, legacy industrial valves. The mood at both shows was upbeat, with a high energy level among both exhibitors and attendees."

"The rapid upturn in this business cycle has gained momentum in 2011 and we continue to be able to meet the higher level of demand," Carlson said. "The recent PMI at 60.4 signals continuing strength of the recovery. Right now, all indicators point to a widespread capital goods expansion."

"We continue to be watchful of both our capability and capacity," added Carlson. "Capital expenditures for the year are estimated to be approximately $10 million. Our current capacity is sufficient for the business levels we expect throughout 2011. However, we recognize that additional capacity may be required as the expansion of this business cycle and our market share gains continue."

Outlook

Second quarter 2011 revenues are expected to be approximately $53 million, up approximately 35% compared to the same period last year. Earnings per share are estimated to be $0.57 to $0.60 compared to $0.36 last year.

Webcast

Sun Hydraulics Corporation will broadcast its Q1 financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, May 10, 2011. 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 (800) 334-8065 and using 8120753 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 April 2, 2011, and under the heading "Business" and particularly under the subheading, "Business Risk Factors" in the Company's Form 10-K for the year ended January 1, 2011. 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
                                                    April 2,     April 3,
                                                      2011         2010
                                                  (unaudited)  (unaudited)

Net sales                                         $    50,703  $    31,605

Cost of sales                                          30,761       21,485
                                                  -----------  -----------

Gross profit                                           19,942       10,120

Selling, engineering and
 administrative expenses                                6,031        5,156
                                                  -----------  -----------

Operating income                                       13,911        4,964

Interest income, net                                     (163)        (137)
Foreign currency transaction gain, net                    (54)         (27)
Miscellaneous income, net                                (289)         (20)
                                                  -----------  -----------

Income before income taxes                             14,417        5,148

Income tax provision                                    4,647        1,837
                                                  -----------  -----------

Net income                                        $     9,770  $     3,311
                                                  ===========  ===========

Basic net income per common share                 $      0.57  $      0.20

Weighted average basic shares outstanding              17,032       16,942

Diluted net income per common share               $      0.57  $      0.20

Weighted average diluted shares outstanding            17,068       16,977

Dividends declared per share                      $     0.200  $     0.090




SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
                                                    April 2,   January 1,
                                                      2011         2011
                                                  (unaudited)
Assets
Current assets:
  Cash and cash equivalents                       $     44,591 $    33,206
  Restricted cash                                          137         131
  Accounts receivable, net of allowance for
   doubtful accounts of $81 and $82                     20,143      16,399
  Inventories                                           11,984      10,773
  Income taxes receivable                                    -       1,154
  Deferred income taxes                                    446         446
  Marketable securities                                 12,532      11,614
  Other current assets                                   3,222       2,556
                                                  ------------ -----------
    Total current assets                                93,055      76,279

Property, plant and equipment, net                      52,981      53,127
Other assets                                             1,466       2,628
                                                  ------------ -----------

Total assets                                      $    147,502 $   132,034
                                                  ============ ===========

Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                                $      5,613 $     3,348
  Accrued expenses and other liabilities                 4,025       5,250
  Income taxes payable                                   3,148           -
  Dividends payable                                      1,537       1,531
                                                  ------------ -----------
    Total current liabilities                           14,323      10,129

Deferred income taxes                                    5,690       5,684
Other noncurrent liabilities                             1,463       1,197
                                                  ------------ -----------

    Total liabilities                                   21,476      17,010

Shareholders' equity:
  Common stock                                              17          17
  Capital in excess of par value                        46,948      44,001
  Retained earnings                                     77,494      71,141
  Accumulated other comprehensive income                 1,567        (135)
                                                  ------------ -----------
    Total shareholders' equity                         126,026     115,024
                                                  ------------ -----------

Total liabilities and shareholders' equity        $    147,502 $   132,034
                                                  ============ ===========




SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                                                     Three months ended
                                                    April 2,     April 3,
                                                      2011         2010
                                                  (unaudited)  (unaudited)
Cash flows from operating activities:
Net income                                        $     9,770  $     3,311
Adjustments to reconcile net income to
 net cash provided by operating activities:
Depreciation and amortization                           1,689        1,732
(Gain) loss on disposal of assets                        (139)           1
Provision for deferred income taxes                         6          (16)
Allowance for doubtful accounts                            (1)          (9)
Stock-based compensation expense                          402          286
Stock options income tax benefit                            -          (23)
(Increase) decrease in:
  Accounts receivable                                  (3,743)      (4,409)
  Inventories                                          (1,211)      (1,079)
  Income taxes receivable                               1,154        1,485
  Other current assets                                   (667)        (601)
  Other assets                                           (296)         485
Increase (decrease) in:
  Accounts payable                                      2,265          823
  Accrued expenses and other liabilities                1,187            -
  Taxes payable                                         3,148           60
  Other noncurrent liabilities                            266           25
                                                  -----------  -----------
Net cash provided by operating activities              13,830        2,071

Cash flows from investing activities:
Proceeds from sale of joint venture                     1,451            -
Capital expenditures                                   (1,111)        (668)
Proceeds from dispositions                                140            -
Purchases of marketable securities                     (1,989)      (6,260)
Proceeds from sale of marketable securities             1,059        3,199
                                                  -----------  -----------
Net cash used in investing activities                    (450)      (3,729)

Cash flows from financing activities:
Proceeds from exercise of stock options                     -           28
Proceeds from stock issued                                133           98
Dividends to shareholders                              (3,411)      (1,527)
Stock options income tax benefit                            -           23
                                                  -----------  -----------
Net cash used in financing activities                  (3,278)      (1,378)

Effect of exchange rate changes on cash and
 cash equivalents                                       1,289         (641)
                                                  -----------  -----------

Net increase (decrease) in cash and cash
 equivalents                                           11,391       (3,677)

Cash and cash equivalents, beginning of period         33,337       30,446
                                                  -----------  -----------

Cash and cash equivalents, end of period          $    44,728  $    26,769
                                                  ===========  ===========

Supplemental disclosure of cash flow information:
Cash paid:
  Income taxes                                    $       339  $       331
Supplemental disclosure of noncash transactions:
  Common stock issued for shared distribution
   through accrued expenses and other liabilities $     2,412  $         -




              United                     United
              States    Korea   Germany  Kingdom  Elimination  Consolidated
Three Months
Ended April
 2, 2011
Sales to
 unaffiliated
 customers    $ 30,467 $  6,023 $  7,188 $  7,025 $         -  $     50,703
Intercompany
 sales           9,489        -       52      376      (9,917)            -
Operating
 income          9,976      941    1,740    1,206          48        13,911
Depreciation     1,292       25       99      241           -         1,657
Capital
 expenditures      896      122       45       48           -         1,111

Three Months
Ended April
 3, 2010
Sales to
 unaffiliated
 customers    $ 18,970 $  4,192 $  4,699 $  3,744 $         -  $     31,605
Intercompany
 sales           5,097        -       53      338      (5,488)            -
Operating
 income          2,870      626    1,117      336          15         4,964
Depreciation     1,328       22      111      251           -         1,712
Capital
 expenditures      566       64        5       33           -           668

Contact Information

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

    Tricia Fulton
    Chief Financial Officer
    941-362-1200