SOURCE: Sun Hydraulics Corporation

Sun Hydraulics Corporation

November 07, 2011 17:00 ET

Sun Hydraulics Third Quarter Sales and Earnings Remain Strong, Completes Acquisition of HCT

SARASOTA, FL--(Marketwire - Nov 7, 2011) - Sun Hydraulics Corporation (NASDAQ: SNHY) today reported financial results for the third quarter of 2011 as follows:

(Dollars in millions except net income per share)
October 1, October 2,
2011 2010 Increase
Three Months Ended
Net Sales $ 53.0 $ 38.1 39 %
Net Income $ 11.4 $ 5.7 100 %
Net Income per share:
Basic $ 0.44 $ 0.22 100 %
Diluted $ 0.44 $ 0.22 100 %
Nine Months Ended
Net Sales $ 158.5 $ 108.9 46 %
Net Income $ 31.6 $ 15.1 109 %
Net Income per share:
Basic $ 1.23 $ 0.60 105 %
Fully Diluted $ 1.23 $ 0.59 108 %
Note: The Company announced a three-for-two stock split, effected in the form of a 50% stock dividend, to shareholders of record on June 30, 2011, payable on July 15, 2011. All earnings per share and weighted average share information reflect the 50% stock dividend.

"Third quarter sales increased in all major geographic regions, with our North American business leading the way," commented Allen Carlson, Sun's CEO and President. "2011 will be another great year, evidenced by our forecast of breaking the $200 million revenue level. We continue to grow our revenues and gain market share while reporting exceptionally strong operating performance."

"Third quarter earnings were augmented by the acquisition of High Country Tek, Inc. (HCT) which added three cents per share to earnings related to a gain on our original investment," Carlson said. "HCT designs and produces ruggedized electronic control products that are important elements in hydraulic systems. HCT's product line and capabilities complement Sun's products and will enable us to offer more complete solutions for our customers, providing additional future growth opportunities for Sun and HCT."

Continuing, Carlson said, "Our fourth quarter forecast reflects softening in orders compared to earlier this year, but we expect fourth quarter 2011 to be stronger than fourth quarter 2010. The decline in orders compared with earlier in the year was predicted by the PMI (which peaked in February). We are encouraged that the U.S. PMI continues to operate in positive territory. Sun is well positioned to continue to grow and gain market share over the long term while achieving exceptional operating results."

Outlook

Fourth quarter 2011 revenues are expected to be approximately $44 million, up approximately 5% from the fourth quarter of 2010. Earnings per share are estimated to be $0.26 to $0.28 compared to $0.25 in the same period a year ago.

Management estimates year-end 2011 sales to be approximately $202 million, an increase of approximately 34% over 2010 sales. Earnings per share for 2011 are estimated to be $1.49 to $1.51, compared to $0.84 in 2010.

Fourth quarter and year-end estimates include approximately $1.3 million in revenue from HCT's operations, with minimal impact on earnings.

Webcast

Sun Hydraulics Corporation will broadcast its Q3 financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, November 8, 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 (888) 417-8531 and using 3043530 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 October 1, 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
October 1, 2011 October 2, 2010
(unaudited) (unaudited)
Net sales $ 53,041 $ 38,073
Cost of sales 32,293 24,523
Gross profit 20,748 13,550
Selling, engineering and
administrative expenses 5,249 5,368
Operating income 15,499 8,182
Interest income, net (241 ) (195 )
Foreign currency transaction loss, net 50 14
Miscellaneous income, net (1,292 ) (46 )
Income before income taxes 16,982 8,409
Income tax provision 5,588 2,700
Net income $ 11,394 $ 5,709
Basic net income per common share (1) $ 0.44 $ 0.22
Weighted average basic shares outstanding (1) 25,652 25,441
Diluted net income per common share (1) $ 0.44 $ 0.22
Weighted average diluted shares outstanding (1) 25,701 25,490
Dividends declared per share (1) $ 0.090 $ 0.060

(1) The Company announced a three-for-two stock split, effected in the form of a 50% stock dividend, to shareholders of record on June 30, 2011, payable on July 15, 2011. All per share and weighted average share information reflect the 50% stock dividend.

SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
Nine months ended
October 1, 2011 October 2, 2010
(unaudited) (unaudited)
Net sales $ 158,514 $ 108,923
Cost of sales 96,147 71,270
Gross profit 62,367 37,653
Selling, engineering and
administrative expenses 17,570 15,369
Operating income 44,797 22,284
Interest income, net (590 ) (477 )
Foreign currency transaction (gain) loss, net (36 ) 56
Miscellaneous income, net (1,550 ) (175 )
Income before income taxes 46,973 22,880
Income tax provision 15,369 7,747
Net income $ 31,604 $ 15,133
Basic net income per common share (1) $ 1.23 $ 0.60
Weighted average basic shares outstanding (1) 25,613 25,428
Diluted net income per common share (1) $ 1.23 $ 0.59
Weighted average diluted shares outstanding (1) 25,653 25,478
Dividends declared per share (1) $ 0.313 $ 0.180

(1) The Company announced a three-for-two stock split, effected in the form of a 50% stock dividend, to shareholders of record on June 30, 2011, payable on July 15, 2011. All per share and weighted average share information reflect the 50% stock dividend.

SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
October 1, 2011 January 1, 2011
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 52,712 $ 33,206
Restricted cash 132 131
Accounts receivable, net of allowance for doubtful accounts of $98 and $82
19,880

16,399
Inventories 12,040 10,773
Income taxes receivable 288 1,154
Deferred income taxes 446 446
Marketable securities 14,932 11,614
Other current assets 1,181 2,556
Total current assets 101,611 76,279
Property, plant and equipment, net 55,312 53,127
Other assets 5,700 2,628
Total assets $ 162,623 $ 132,034
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 5,392 $ 3,348
Accrued expenses and other liabilities 6,611 5,250
Notes payable - 1 year 100 -
Dividends payable 2,309 1,531
Total current liabilities 14,412 10,129
Deferred income taxes 5,684 5,684
Other noncurrent liabilities 1,051 1,197
Total liabilities 21,147 17,010
Shareholders' equity:
Common stock 26 26
Capital in excess of par value 48,100 44,001
Retained earnings 94,674 71,132
Accumulated other comprehensive income (1,324 ) (135 )
Total shareholders' equity 141,476 115,024
Total liabilities and shareholders' equity $ 162,623 $ 132,034
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine months ended
October 1, 2011 October 2, 2010
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $ 31,604 $ 15,133
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 5,025 5,116
(Gain) loss on disposal of assets (27 ) 22
Gain on investment in HCT (1,244 ) -
Provision for deferred income taxes - (6 )
Allowance for doubtful accounts 16 3
Stock-based compensation expense 1,218 798
Stock options income tax benefit - (32 )
(Increase) decrease in, net of acquisition:
Accounts receivable (2,927 ) (6,474 )
Inventories (823 ) (1,962 )
Income taxes receivable 866 1,509
Other current assets (488 ) (1,184 )
Other assets (88 ) 622
Increase (decrease) in, net of acquisition:
Accounts payable 1,534 1,994
Accrued expenses and other liabilities 3,535 1,569
Other noncurrent liabilities (202 ) 164
Net cash provided by operating activities 37,999 17,272
Cash flows from investing activities:
Proceeds from sale of joint venture 1,451 -
Investment in HCT, net of cash received (1,776 ) -
Capital expenditures (6,778 ) (2,060 )
Proceeds from dispositions 30 -
Purchases of marketable securities (10,395 ) (11,626 )
Proceeds from sale of marketable securities 6,497 7,326
Net cash used in investing activities (10,971 ) (6,360 )
Cash flows from financing activities:
Proceeds from exercise of stock options 61 44
Proceeds from stock issued 408 303
Dividends to shareholders (7,284 ) (4,583 )
Stock options income tax benefit - 32
Net cash used in financing activities (6,815 ) (4,204 )
Effect of exchange rate changes on cash and cash equivalents
(706
)
(205
)
Net increase (decrease) in cash and cash equivalents 19,507 6,503
Cash and cash equivalents, beginning of period 33,337 30,446
Cash and cash equivalents, end of period $ 52,844 $ 36,949
Supplemental disclosure of cash flow information:
Cash paid:
Income taxes $ 14,503 $ 6,276
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 October 1, 2011
Sales to unaffiliated customers $ 34,897 $ 5,081 $ 7,824 $ 5,239 $ - $ 53,041
Intercompany sales 8,763 - 60 405 (9,228 ) -
Operating income 12,119 575 2,028 892 (115 ) 15,499
Depreciation 1,294 28 85 235 - 1,642
Capital expenditures 4,121 89 7 68 - 4,285
Three Months
Ended October 2, 2010
Sales to unaffiliated customers $ 23,668 $ 3,315 $ 5,402 $ 5,688 $ - $ 38,073
Intercompany sales 6,873 - 37 311 (7,221 ) -
Operating income 5,636 378 1,061 1,028 79 8,182
Depreciation 1,243 21 107 242 - 1,613
Capital expenditures 631 28 15 62 - 736
Nine Months
Ended October 1, 2011
Sales to unaffiliated customers $ 100,515 $ 16,778 $ 22,320 $ 18,901 $ - $ 158,514
Intercompany sales 26,722 - 176 1,188 (28,086 ) -
Operating income 33,481 2,175 5,690 3,379 72 44,797
Depreciation 3,879 83 272 721 - 4,955
Capital expenditures 6,631 234 57 173 - 7,095
Nine Months
Ended October 2, 2010
Sales to unaffiliated customers $ 67,896 $ 12,151 $ 14,770 $ 14,106 $ - $ 108,923
Intercompany sales 18,755 - 118 936 (19,809 ) -
Operating income (loss) 15,511 1,655 3,088 2,122 (92 ) 22,284
Depreciation 3,891 66 320 727 - 5,004
Capital expenditures 1,712 141 20 187 - 2,060

Contact Information

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

    Tricia Fulton
    Chief Financial Officer
    941-362-1200