SOURCE: Sun Hydraulics Corporation

Sun Hydraulics Corporation

February 23, 2015 17:00 ET

Sun Hydraulics Reports Strong Earnings in 2014, Announces Shared Distribution

SARASOTA, FL--(Marketwired - Feb 23, 2015) - Sun Hydraulics Corporation (NASDAQ: SNHY) today reported financial results for the fourth quarter and year-end 2014 and the Board of Directors announced a $6.1 million shared distribution.

             
(Dollars in millions except net income per share)        
  December 27,
2014
  December 28,
2013
  Increase  
Twelve Months Ended                
Net sales $ 227.7   $ 205.3   11 %
Net income $ 43.8   $ 38.0   15 %
Net income per share:                
  Basic $ 1.65   $ 1.45   14 %
  Diluted $ 1.65   $ 1.45   14 %
Three Months Ended                
Net sales $ 54.8   $ 49.1   12 %
Net income $ 10.3   $ 8.3   24 %
Net income per share:                
  Basic $ 0.39   $ 0.32   22 %
  Diluted $ 0.39   $ 0.32   22 %
                   

"Demand was strong throughout the fourth quarter, capping off another record year for Sun," said Allen Carlson, Sun's President and CEO. "All geographic end markets expanded in the quarter, led by robust demand in North America, which was up 18%. Asia/Pacific and Europe were each up 5%. For the year, we were able to drive double digit top and bottom line growth. Our performance led the Board to once again declare a shared distribution, recognizing the importance of both employees and shareholders."

"We made significant investments for future growth in 2014, and are seeing positive signs as a result," continued Carlson. "Our larger physical footprint provides the capacity to grow and drive operational improvements. This leads to faster response times to better satisfy our customers. New products, including prototype valves utilizing our new licensed Sturman technology, are creating interesting opportunities with both existing and new customers. Product development efforts increase our capabilities and enhance our offering of integrated package solutions. We anticipate continued product development and releases in 2015."

Concluding, Carlson commented, "Despite some headwinds, 2015 is off to a good start. The breadth and depth of our product line lends itself well to serving diverse end-user markets and eliminating reliance on any one industry. Geographically, there are pockets of strength, including North America and parts of Europe. In China, we have expanded our customer base, which mitigates a slowdown in Asia/Pacific. We remain ready to respond to business conditions in 2015. Our diverse end markets, coupled with on-going investment in products and marketing efforts prepare Sun for future business growth. We also have the infrastructure in place and a strong balance sheet to capitalize on opportunities."

Shared Distribution

The 2014 shared distribution totals approximately $6.1 million. It consists of a contribution to employees equal to 10% of wages, most of which will be paid into retirement plans in the form of Sun Hydraulics stock, and a $0.09 per share cash dividend to be paid to all shareholders. The shared distribution dividend is payable on March 31, 2015, to shareholders of record as of March 15, 2015.

Outlook

First quarter 2015 revenues are expected to be approximately $55 million, down 3% from the first quarter of 2014, primarily driven by a strong U.S. Dollar against the Euro. Earnings per share are estimated to be $0.40 to $0.42 compared to $0.43 in the same period a year ago. The first quarter will look similar on the top line to the fourth quarter, but operationally we expect to drive more profit to the bottom line.

Webcast

Sun Hydraulics Corporation will broadcast its 2014 fourth quarter and year-end financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, February 24, 2015. 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 1-888-364-3109 and using 5125675 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 leadership 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 27, 2014. 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, 2014     December 28, 2013  
               
Net sales $ 54,803     $ 49,050  
Cost of sales   33,025       29,608  
Gross profit   21,778       19,442  
Selling, engineering and administrative expenses   7,445       7,039  
Operating income   14,333       12,403  
Interest (income) expense, net   (666 )     (258 )
Foreign currency transaction (gain) loss, net   (509 )     41  
Miscellaneous (income) expense, net   137       (87 )
Income before income taxes   15,371       12,707  
Income tax provision   5,044       4,364  
Net income $ 10,327     $ 8,343  
Basic net income per common share $ 0.39     $ 0.32  
Weighted average basic shares outstanding   26,548       26,336  
Diluted net income per common share $ 0.39     $ 0.32  
Weighted average diluted shares outstanding   26,548       26,336  
Dividends declared per share $ 0.090     $ 0.090  
   
   
   
SUN HYDRAULICS CORPORATION  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands except per share data)  
   
  For the year ended  
  December 27, 2014     December 28, 2013  
               
Net sales $ 227,673     $ 205,267  
Cost of sales   133,781       122,306  
Gross profit   93,892       82,961  
Selling, engineering and administrative expenses   29,821       26,790  
Operating income   64,071       56,171  
Interest income, net   (1,592 )     (967 )
Foreign currency transaction gain, net   (764 )     (27 )
Miscellaneous (income) expense, net   685       (7 )
Income before income taxes   65,742       57,172  
Income tax provision   21,967       19,188  
Net income $ 43,775     $ 37,984  
Basic net income per common share $ 1.65     $ 1.45  
Weighted average basic shares outstanding   26,456       26,206  
Diluted net income per common share $ 1.65     $ 1.45  
Weighted average diluted shares outstanding   26,456       26,206  
Dividends declared per share $ 1.45     $ 0.45  
 
 
 
SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
  December 27, 2014     December 28, 2013
             
Assets            
Current assets:            
  Cash and cash equivalents $ 56,843     $ 54,912
  Restricted cash   319       334
  Accounts receivable, net of allowance for doubtful accounts of $172 and $117   17,501       16,984
  Inventories   14,098       13,853
  Income taxes receivable   --       954
  Deferred income taxes   467       474
  Short-term investments   43,353       38,729
  Other current assets   2,966       2,816
  Total current assets   135,547       129,056
Property, plant and equipment, net   77,716       75,731
Goodwill   5,141       5,221
Other assets   4,360       3,470
  Total assets $ 222,764     $ 213,478
Liabilities and shareholders' equity            
Current liabilities:            
  Accounts payable $ 4,873     $ 4,630
  Accrued expenses and other liabilities   7,908       7,016
  Income taxes payable   559       --
  Dividends payable   2,392       2,372
  Total current liabilities   15,732       14,018
Deferred income taxes   8,501       7,747
Other noncurrent liabilities   272       285
  Total liabilities   24,505       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, 26,572,774 and 26,352,692 shares outstanding   27       26
  Capital in excess of par value   73,499       65,391
  Retained earnings   128,818       123,420
  Accumulated other comprehensive income (loss)   (4,085 )     2,591
  Total shareholders' equity   198,259       191,428
  Total liabilities and shareholders' equity $ 222,764     $ 213,478
   
   
   
SUN HYDRAULICS CORPORATION  
CONSOLIDATED STATEMENT OF CASH FLOWS  
(in thousands)  
   
  Twelve months ended  
  December 27, 2014     December 28, 2013  
               
Cash flows from operating activities:              
Net income $ 43,775     $ 37,984  
Adjustments to reconcile net income to net cash provided by operating activities:              
Depreciation and amortization   8,718       7,227  
(Gain)Loss on disposal of assets   171       462  
Gain on investment in business   --       (528 )
Stock-based compensation expense   3,899       3,047  
Deferred director and phantom stock unit expense (income)   35       70  
Stock compensation income tax benefit   (137 )     (303 )
Allowance for doubtful accounts   55       (7 )
Provision for slow moving inventory   (37 )     --  
Provision for deferred income taxes   1,265       291  
(Increase) decrease in, net of acquisition:              
  Accounts receivable   (572 )     (3,210 )
  Inventories   (208 )     (1,226 )
  Income taxes receivable   1,091       77  
  Other current assets   (150 )     (167 )
  Other assets   69       383  
Increase (decrease) in, net of acquisition:              
  Accounts payable   243       24  
  Income taxes payable   559       --  
  Accrued expenses and other liabilities   4,118       3,155  
  Other noncurrent liabilities   (48 )     (156 )
Net cash provided by operating activities   62,846       47,123  
Cash flows from investing activities:              
Investment in business, net of cash acquired   --       (923 )
Investment in licensed technology   (1,075 )     --  
Capital expenditures   (10,667 )     (17,935 )
Proceeds from dispositions of equipment   37       230  
Purchases of short-term investments   (51,236 )     (28,356 )
Proceeds from sale of short-term investments   44,765       26,764  
Net cash used in investing activities   (18,176 )     (20,220 )
Cash flows from financing activities:              
Stock compensation income tax benefit   137       303  
Proceeds from stock issued   846       859  
Dividends to shareholders   (38,357 )     (9,435 )
Change in restricted cash   15       (5 )
Net cash used in financing activities   (37,359 )     (8,278 )
Effect of exchange rate changes on cash and cash equivalents   (5,380 )     1,809  
Net increase (decrease) in cash and cash equivalents   1,931       20,434  
Cash and cash equivalents, beginning of period   54,912       34,478  
Cash and cash equivalents, end of period $ 56,843     $ 54,912  
               
Supplemental disclosure of cash flow information:              
Cash paid:              
  Income taxes $ 19,693     $ 19,123  
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  
Unrealized gain (loss) on available for sale securities $ (671 )   $ (22 )
               

Contact Information

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

    Tricia Fulton
    Chief Financial Officer
    941-362-1200