Sun Hydraulics Corporation Net Income Increases 61% Over 1st Quarter

SARASOTA, Fla., Aug. 7-- Sun Hydraulics Corporation (Nasdaq: SNHY) today announced net sales for the quarter ended July 1, 2000, were a record $21.9 million, representing an increase of 37.5% compared to second quarter 1999 and 9.0% compared to the first quarter of 2000. Second quarter 2000 net income rose to $1.4 million, an increase of 60.7% compared to the first quarter of 2000. Basic and diluted earnings per share for the second quarter of 2000 were $0.22 and $0.21, respectively.

"We continued to improve our operational performance in the second quarter," said Allen Carlson, Sun Hydraulics new president. "Both production and factory productivity are increasing and we finished the quarter with an exceptionally strong shipping month. The improvements in revenue and income over the past four quarters are attributable to strong customer demand and the concentrated efforts of our worldwide distributors, our suppliers and our employees.

"The exceptionally strong demand we saw in the first half of the year has not continued," Carlson said. "We started to see orders soften at the end of the second quarter, and at the current incoming order rate, we expect third quarter shipments to be lower than the second quarter.

"Our focus continues to be on sustaining revenue and earnings growth over a long-term perspective. We have the capacity and product development programs in place to continue to profitably grow our business for the foreseeable future and will continue to develop and introduce new products and ensure that capacity is sufficient to allow us to increase production when required," Carlson concluded.

Sun Hydraulics Corporation, with manufacturing and distribution facilities in Sarasota and Manatee County, Florida, Coventry, England, Erkelenz, Germany and Inchon, Korea, is a leading designer and manufacturer of high performance screw-in hydraulic cartridge valves and manifolds for worldwide industrial and mobile markets.


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 "Business" and particularly under the subheading, "Business Risk Factors" in the Company's Form 10-K for the year ended January 1, 2000, and "Management's Discussion and Analysis of Financial Condition and Results of Operation" in the Company's Form 10Q for the quarter ended July 1, 2000. 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 - JULY 1, 2000
                     (in thousands except per share data)

                                         Three Months Ended
                                   July 1,                July 3,
                                    2000                   1999
                                (unaudited)            (unaudited)
    Net sales                     $21,896                 $15,921
    Cost of sales                  15,698                  12,982
    Gross profit                    6,198                   2,939
    Selling, engineering and
     administrative expenses        3,544                   3,068
    Operating income (loss)         2,654                   (129)
    Interest expense                  313                     176
    Miscellaneous expense (income)    193                      36
    Income (loss) before
     income taxes                   2,148                   (341)
    Income tax provision (benefit)    771                   (125)

    Net income (loss)              $1,377                  $(216)
    Basic net income (loss)
     per common share               $0.22                 $(0.03)
    Basic weighted average
     shares outstanding             6,385                   6,383
    Diluted net income (loss)
     per common share               $0.21                 $(0.03)
    Diluted weighted average
     shares outstanding             6,590                   6,537

                  SUN HYDRAULICS CORPORATION - JULY 1, 2000
                     (in thousands except per share data)

                                          Six Months Ended
                                   July 1,                July 3,
                                    2000                   1999
                               (unaudited)             (unaudited)
    Net sales                     $41,966                 $34,386
    Cost of sales                  30,664                  26,927
    Gross profit                   11,302                   7,459
    Selling, engineering and
     administrative expenses        7,210                   6,160
    Operating income                4,092                   1,299
    Interest expense                  603                     429
    Miscellaneous expense (income)    140                     133
    Income before income taxes      3,349                     737
    Income tax provision            1,116                     230

    Net income                     $2,233                    $507
    Basic net income
     per common share               $0.35                   $0.08
    Basic weighted average
     shares outstanding             6,385                   6,375
    Diluted net income
     per common share               $0.34                   $0.08
    Diluted weighted average
     shares outstanding             6,582                   6,528

    (in thousands)
                                   July 1,              January 1,
                                    2000                    2000
    Current assets:
     Cash and cash equivalents     $1,517                  $1,122
     Accounts receivable,
      net of allowance for
      doubtful accounts of $156
      and $196                      8,196                   6,260
     Inventories                    8,318                   8,131
     Taxes Receivable                 127                     455
     Other current assets             597                     591
      Total current assets         18,755                   16559
    Property, plant and
     equipment, net                46,585                  46,529
    Other assets                    1,075                     986
    Total assets                  $66,415                 $64,074

    Liabilities and Shareholders'
    Current liabilities:
     Accounts payable              $2,617                  $2,712
     Accrued expenses and
      other liabilities             2,466                   1,464
     Long-term debt due within
      one year                      2,117                   3,033
     Notes payable to related
      parties due within one year     219                     378
     Dividends payable                255                     255
     Income taxes payable             721                     ---
      Total current liabilities     8,395                   7,842
    Long-term debt due after one
     year                          10,953                  10,830
    Notes payable to related
     parties due after one year        78                     101
    Deferred income taxes           4,110                   4,125
    Other n/c liabilities             195                     ---
      Total liabilities            23,731                  22,898
    Shareholders' equity:
     Preferred stock                  ---                     ---
     Common stock                       6                       6
     Capital in excess of
      par value                    24,486                  24,486
     Retained earnings             17,896                  16,173
     Equity adjustment for
      foreign currency translation    296                     511
       Total shareholders' equity  42,684                  41,176
    Total liabilities and
     shareholders' equity         $66,415                 $64,074