SOURCE: Sun Hydraulics Corporation

Sun Hydraulics Corporation

August 04, 2014 17:00 ET

Sun Hydraulics Reports Record Sales in Second Quarter, Focus Continues on Investments for Growth

SARASOTA, FL--(Marketwired - Aug 4, 2014) - Sun Hydraulics Corporation (NASDAQ: SNHY) today reported financial results for the second quarter of 2014 as follows:

               
    June 28, 2014   June 29, 2013   Increase  
Three Months Ended                  
Net sales   $ 61.1   $ 55.8   9 %
Net income   $ 12.2   $ 11.8   3 %
Net income per share:                  
  Basic   $ 0.46   $ 0.45   2 %
  Diluted   $ 0.46   $ 0.45   2 %
Six Months Ended                  
Net sales   $ 117.9   $ 106.8   10 %
Net income   $ 23.6   $ 21.4   10 %
Net income per share:                  
  Basic   $ 0.89   $ 0.82   9 %
  Diluted   $ 0.89   $ 0.82   9 %
                     

"Sun's second quarter sales reached record levels," said Allen Carlson, Sun's President and CEO. "Demand was bolstered by European and North American end markets, with Europe up 15%, and North America 10%. Asia/Pacific sales were comparable with the same period last year."

"As anticipated, second quarter earnings were affected by investments, including sales and marketing efforts in Asia and costs associated with our new facility," added Carlson. "These strategic investments support Sun's long-term profitable growth. Earnings were also impacted by non-recurring expenses in the quarter, totaling approximately $0.02 per share."

"We continue to make investments to bring new products to market," continued Carlson. "Earlier this year we expanded our offering of electrically-actuated cartridge valves. This quarter we also enhanced our automated integrated package design tool -- Quick Design. This tool is available on our website and allows customers to create custom integrated package solutions and receive designs in a matter of minutes. Product development efforts are on-going and we expect to release innovative products in the second half of the year."

Concluding, Carlson commented, "Demand in the first half of the year was strong. Estimated third quarter sales follow our normal seasonal pattern and show growth over the same period last year. The U.S. PMI released last week registered 57.1, which is the highest indication of growth in the manufacturing sector since April 2011. This represents positive near-term business conditions for Sun. We stand ready to capitalize on this growth and deliver value to our stakeholders."

Outlook
Third quarter 2014 revenues are expected to be approximately $55 million, up 11% from the third quarter of 2013. Earnings per share are estimated to be $0.36 to $0.38 compared to $0.32 in the same period a year ago.

Webcast
Sun Hydraulics Corporation will broadcast its 2014 second quarter financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, August 5, 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 1-888-455-2296 and using 2093210 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 June 28, 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  
    June 28, 2014     June 29, 2013  
    (unaudited)     (unaudited)  
Net sales   $ 61,050     $ 55,788  
Cost of sales     35,294       32,387  
Gross profit     25,756       23,401  
Selling, engineering and administrative expenses     7,379       6,640  
Operating income     18,377       16,761  
Interest (income) expense, net     (284 )     (242 )
Foreign currency transaction (gain) loss, net     (37 )     (29 )
Miscellaneous (income) expense, net     274       (484 )
Income before income taxes     18,424       17,516  
Income tax provision     6,238       5,726  
Net income   $ 12,186     $ 11,790  
Basic net income per common share   $ 0.46     $ 0.45  
Weighted average basic shares outstanding     26,444       26,236  
Diluted net income per common share   $ 0.46     $ 0.45  
Weighted average diluted shares outstanding     26,444       26,236  
Dividends declared per share   $ 0.090     $ 0.090  
                 
                 
 
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
 
    Six months ended  
    June 28, 2014     June 29, 2013  
    (unaudited)     (unaudited)  
Net sales   $ 117,859     $ 106,848  
Cost of sales     68,036       62,943  
Gross profit     49,823       43,905  
Selling, engineering and administrative expenses     14,720       13,212  
Operating income     35,103       30,693  
Interest income, net     (596 )     (438 )
Foreign currency transaction gain, net     (30 )     (149 )
Miscellaneous (income) expense, net     358       (390 )
Income before income taxes     35,371       31,670  
Income tax provision     11,800       10,305  
Net income   $ 23,571     $ 21,365  
Basic net income per common share   $ 0.89     $ 0.82  
Weighted average basic shares outstanding     26,409       26,185  
Diluted net income per common share   $ 0.89     $ 0.82  
Weighted average diluted shares outstanding     26,409       26,185  
Dividends declared per share   $ 0.27     $ 0.27  
                 
                 
 
SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
    June 28, 2014   December 28, 2013
    (unaudited)    
Assets            
Current assets:            
  Cash and cash equivalents   $ 72,139   $ 54,912
  Restricted cash     354     334
  Accounts receivable, net of allowance for doubtful accounts of $117 and $117     22,666     16,984
  Inventories     14,709     13,853
  Income taxes receivable     --     954
  Deferred income taxes     486     474
  Short-term investments     38,501     38,729
  Other current assets     4,417     2,816
  Total current assets     153,272     129,056
Property, plant and equipment, net     77,424     75,731
Goodwill     5,329     5,221
Other assets     3,218     3,470
  Total assets   $ 239,243   $ 213,478
Liabilities and shareholders' equity            
Current liabilities:            
  Accounts payable   $ 5,976   $ 4,630
  Accrued expenses and other liabilities     6,542     7,016
  Income taxes payable     21     --
  Dividends payable     2,380     2,372
  Total current liabilities     14,919     14,018
Deferred income taxes     7,809     7,747
Other noncurrent liabilities     302     285
  Total liabilities     23,030     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, 26,448,374 and 26,352,692 shares outstanding     26     26
  Capital in excess of par value     70,879     65,391
  Retained earnings     139,854     123,420
  Accumulated other comprehensive income (loss)     5,454     2,591
  Total shareholders' equity     216,213     191,428
  Total liabilities and shareholders' equity   $ 239,243   $ 213,478
               
               
 
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
 
    Six months ended  
    June 28, 2014     June 29, 2013  
    (unaudited)     (unaudited)  
Cash flows from operating activities:                
Net income   $ 23,571     $ 21,365  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     4,212       3,565  
(Gain)Loss on disposal of assets     134       15  
Gain on investment in business     --       (528 )
Provision for deferred income taxes     50       (14 )
Allowance for doubtful accounts     --       (29 )
Stock-based compensation expense     1,853       1,416  
(Increase) decrease in, net of assets acquired:                
  Accounts receivable     (5,682 )     (6,740 )
  Inventories     (856 )     186  
  Income taxes receivable     954       728  
  Other current assets     (1,601 )     (677 )
  Other assets     (99 )     258  
Increase (decrease) in, net of liabilities assumed:                
  Accounts payable     1,346       864  
  Accrued expenses and other liabilities     2,752       1,617  
  Income taxes payable     21       1,430  
  Other noncurrent liabilities     17       (1 )
Net cash provided by operating activities     26,672       23,455  
Cash flows from investing activities:                
Investment in business, net of cash acquired     --       (923 )
Capital expenditures     (5,057 )     (9,518 )
Purchases of short-term investments     (18,990 )     (11,888 )
Proceeds from sale of short-term investments     19,149       11,744  
Net cash used in investing activities     (4,898 )     (10,585 )
Cash flows from financing activities:                
Proceeds from stock issued     409       466  
Dividends to shareholders     (7,129 )     (4,710 )
Change in restricted cash     (20 )     21  
Net cash used in financing activities     (6,740 )     (4,223 )
Effect of exchange rate changes on cash and cash equivalents     2,193       (1,439 )
Net increase (decrease) in cash and cash equivalents     17,227       7,208  
Cash and cash equivalents, beginning of period     54,912       34,478  
Cash and cash equivalents, end of period   $ 72,139     $ 41,686  
Supplemental disclosure of cash flow information:                
Cash paid:                
  Income taxes   $ 10,775     $ 8,161  
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