SOURCE: Sun Hydraulics Corporation

Sun Hydraulics Corporation

March 03, 2014 17:00 ET

Sun Hydraulics Sees Continued Growth Heading Into 2014, Announces Shared Distribution

SARASOTA, FL--(Marketwired - Mar 3, 2014) - Sun Hydraulics Corporation (NASDAQ: SNHY) today reported financial results for the fourth quarter and year-end 2013 and the Board of Directors announced a $5.7 million shared distribution and $0.09 per share quarterly dividend.

               
(in millions except net income per share)              
    December 28,
2013
  December 29,
2012
  Increase  
Twelve Months Ended                  
Net sales   $ 205.3   $ 204.4   -- %
Net income   $ 38.0   $ 37.4   2 %
Net income per share:                  
  Basic   $ 1.45   $ 1.44   1 %
  Diluted   $ 1.45   $ 1.44   1 %
Three Months Ended                  
Net sales   $ 49.1   $ 43.2   13 %
Net income   $ 8.3   $ 6.7   25 %
Net income per share:                  
  Basic   $ 0.32   $ 0.26   23 %
  Diluted   $ 0.32   $ 0.26   23 %
                       

"Sales were strong in the fourth quarter with growth in all geographic markets," said Allen Carlson, Sun Hydraulics' president and CEO. "Operationally, we maintained healthy margins throughout the year. Our performance led the Board, for the fourth consecutive year, to declare a shared distribution."

"In 2013, we experienced a strong second half," Carlson added. "That momentum gives a good start heading into 2014, with robust business conditions in all geographic markets. Also encouraging, economic indicators are positive. The U.S. PMI, released this morning, bounced back from its reading in January. This bodes well for our business and the capital goods industry in 2014."

"This week, Sun is exhibiting at the International Fluid Power Exposition in Las Vegas," Carlson continued. "We are introducing several new products at the show. These new products expand our addressable markets, make us more competitive, and enhance our integrated package capabilities. Sun remains focused on product development and delivering high quality products to the marketplace to drive growth."

Shared Distribution

The 2013 shared distribution totals approximately $5.7 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, 2014, to shareholders of record as of March 15, 2014.

First Quarter Dividend

Sun's Board also announced a $0.09 per share quarterly cash dividend on its common stock. The dividend is payable on April 15, 2014, to shareholders of record as of March 31, 2014.

Outlook

First quarter 2014 revenues are expected to be approximately $55 million, up approximately 8% from the first quarter of 2013. Earnings per share are estimated to be $0.41 to $0.43 compared to $0.37 in the same period a year ago.

Webcast

Sun Hydraulics Corporation will broadcast its 2013 fourth quarter and year-end financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, March 4, 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 1-888-359-3624 and using 2015316 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 September 28, 2013, 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  
    December 28, 2013     December 29, 2012  
Net sales   $ 49,050     $ 43,237  
Cost of sales     29,608       27,249  
Gross profit     19,442       15,988  
Selling, engineering and administrative expenses     7,039       6,502  
Operating income     12,403       9,486  
Interest (income) expense, net     (258 )     (328 )
Foreign currency transaction (gain) loss, net     41       (41 )
Miscellaneous (income) expense, net     (87 )     199  
Income before income taxes     12,707       9,656  
Income tax provision     4,364       2,963  
Net income   $ 8,343     $ 6,693  
Basic net income per common share   $ 0.32     $ 0.26  
Weighted average basic shares outstanding     26,336       26,068  
Diluted net income per common share   $ 0.32     $ 0.26  
Weighted average diluted shares outstanding     26,336       26,078  
Dividends declared per share   $ 0.090     $ 1.090  
                 
                 
   
SUN HYDRAULICS CORPORATION  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands except per share data)  
   
    For the year ended  
    December 28, 2013     December 29, 2012  
Net sales   $ 205,267     $ 204,367  
Cost of sales     122,306       123,795  
Gross profit     82,961       80,572  
Selling, engineering and administrative expenses     26,790       26,163  
Operating income     56,171       54,409  
Interest (income) expense, net     (967 )     (1,368 )
Foreign currency transaction (gain) loss, net     (27 )     (116 )
Miscellaneous (income) expense, net     (7 )     40  
Income before income taxes     57,172       55,853  
Income tax provision     19,188       18,455  
Net income   $ 37,984     $ 37,398  
Basic net income per common share   $ 1.45     $ 1.44  
Weighted average basic shares outstanding     26,206       25,944  
Diluted net income per common share   $ 1.45     $ 1.44  
Weighted average diluted shares outstanding     26,206       25,971  
Dividends declared per share   $ 0.450     $ 1.480  
                 
                 
 
SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
    December 28, 2013   December 29, 2012
Assets            
Current assets:            
  Cash and cash equivalents   $ 54,912   $ 34,478
  Restricted cash     334     329
  Accounts receivable, net of allowance for doubtful accounts of $117 and $124     16,984     13,754
  Inventories     13,853     12,559
  Income taxes receivable     954     728
  Deferred income taxes     474     248
  Short-term investments     38,729     37,700
  Other current assets     2,816     2,649
  Total current assets     129,056     102,445
Property, plant and equipment, net     75,731     64,672
Goodwill     5,221     4,472
Other assets     3,470     3,532
  Total assets   $ 213,478   $ 175,121
Liabilities and shareholders' equity            
Current liabilities:            
  Accounts payable   $ 4,630   $ 4,606
  Accrued expenses and other liabilities     7,016     7,641
  Income taxes payable     --     --
  Dividends payable     2,372     --
  Total current liabilities     14,018     12,247
Deferred income taxes     7,747     7,230
Other noncurrent liabilities     285     371
  Total liabilities     22,050     19,848
Commitments and contingencies     --     --
Shareholders' equity:            
  Preferred stock, 2,000,000 shares authorized, par value $0.001, no shares outstanding     --     --
  Common stock, 40,000,000 shares authorized, par value $0.001, 26,352,692 and 26,094,580 shares outstanding     26     26
  Capital in excess of par value     65,391     57,402
  Retained earnings     123,420     97,242
  Accumulated other comprehensive income (loss)     2,591     603
  Total shareholders' equity     191,428     155,273
  Total liabilities and shareholders' equity   $ 213,478   $ 175,121
             
             
   
SUN HYDRAULICS CORPORATION  
CONSOLIDATED STATEMENT OF CASH FLOWS  
(in thousands)  
   
    Twelve months ended  
    December 28, 2013     December 29, 2012  
Cash flows from operating activities:                
Net income   $ 37,984     $ 37,398  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     7,227       7,186  
(Gain) Loss on disposal of assets     462       193  
Gain on investment in business     (528 )     --  
Stock-based compensation expense     3,047       2,333  
Deferred director and phantom stock unit expense (income)     70       20  
Stock compensation income tax benefit     (303 )     (88 )
Allowance for doubtful accounts     (7 )     26  
Provision for slow moving inventory     --       112  
Provision for deferred income taxes     291       325  
(Increase) decrease in, net of acquisition:                
  Accounts receivable     (3,210 )     1,903  
  Inventories     (1,226 )     268  
  Income taxes receivable     77       (520 )
  Other current assets     (167 )     (650 )
  Other assets     383       240  
Increase (decrease) in, net of acquisition:                
  Accounts payable     24       (742 )
  Accrued expenses and other liabilities     3,155       4,547  
  Other noncurrent liabilities     (156 )     (353 )
Net cash provided by operating activities     47,123       52,198  
Cash flows from investing activities:                
Proceeds from sale of joint venture             --  
Investment in business, net of cash acquired     (923 )     (1,140 )
Capital expenditures     (17,935 )     (13,359 )
Proceeds from dispositions of equipment     230       56  
Purchases of short-term investments     (28,356 )     (40,495 )
Proceeds from sale of short-term investments     26,764       32,912  
Net cash used in investing activities     (20,220 )     (22,026 )
Cash flows from financing activities:                
Repayment of debt     --       (169 )
Proceeds from exercise of stock options     --       --  
Stock compensation income tax benefit     303       88  
Proceeds from stock issued     859       700  
Dividends to shareholders     (9,435 )     (40,900 )
Change in restricted cash     (5 )     (272 )
Net cash used in financing activities     (8,278 )     (40,553 )
Effect of exchange rate changes on cash and cash equivalents     1,809       2,025  
Net increase (decrease) in cash and cash equivalents     20,434       (8,356 )
Cash and cash equivalents, beginning of period     34,478       42,834  
Cash and cash equivalents, end of period   $ 54,912     $ 34,478  
                 
Supplemental disclosure of cash flow information:                
Cash paid:                
  Income taxes   $ 19,123     $ 18,739  
Supplemental disclosure of noncash transactions:                
Common stock issued for shared distribution through accrued expenses and other liabilities   $ 3,486     $ 4,407  
Common stock issued for deferred director's compensation through other noncurrent liabilities   $ 294     $ 930  
Unrealized gain (loss) on available for sale securities   $ (22 )   $ 326  
                 
                 

Contact Information

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

    Tricia Fulton
    Chief Financial Officer
    941-362-1200