Sun Hydraulics Corporation Reports an Increase of Sales in the U.S. and Third Quarter Net Income of $0.08 Per Share


SARASOTA, FLA, November 4, 2003 -Sun Hydraulics Corporation (NASDAQ: SNHY) today announced that sales for the third quarter ended September 27, 2003, were $17.9 million, a decrease of 5.6% from the second quarter and a 11.3% increase from the same quarter last year. Net income was $0.5 million, equal to net income for the same quarter last year. Basic and diluted earnings per share for the quarter ended September 27, 2003, were $0.08 equal to the same period last year.

Allen Carlson, Sun Hydraulics' president commented, "Sales in the United States increased 6% compared to the same quarter last year. We hope this signals the long awaited recovery in the United States manufacturing economy. International sales increased 17.0% in the third quarter compared to the same quarter last year, with continued strength in Germany and Korea."

Carlson continued, "Net income per share was equal to the same quarter last year, despite an 11% increase in total sales, primarily because of the investments we are making in marketing and related areas. So far this year we have started an operation in the Midwest, opened a sales/marketing office in France and launched a new line of electro-hydraulic valves. We also have continued to invest in our website, focusing on electronically providing customers visual and technical information on millions of possible combinations of our cartridge/manifold assemblies. This feature will be available early next year."

During the quarter ended September 27, 2003, the Company paid a special dividend of $13.3 million and increased debt $10.9 million to $20.0 million at quarter end. Year to date the Company has generated $6.9 million from operations and cash on hand at September 27, 2003, was $5.1 million.

Outlook

Sales for the fourth quarter are projected to be $17.0 million, with net income of $0.08 per share. Last year sales for the fourth quarter were $15.5 million and net income was $0.06 per share. Until there are more positive signs of a recovery in the economy, the Company is reluctant to provide an estimate of sales for 2004.

Webcast

Sun Hydraulics Corporation will broadcast its third quarter financial results conference call with analysts live over the Internet at 2:30 P.M. E.T. tomorrow, November 5, 2003. To listen, go to http://investor.sunhydraulics.com/medialist.cfm. A copy of this earnings release is posted on the Investor Relations page of our website under "Press Releases."

Webcast Q&A

Questions may be submitted to the Company via email after reviewing this earnings release. Sun management will then answer these and other questions during the Company's webcast.

Questions can be submitted by going to the Sun Hydraulics website, www.sunhydraulics.com, and clicking on Investor Relations on the left hand 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 Hydraulics will answer as many legitimate questions pertaining to the 3rd quarter earnings release as possible during the webcast time.

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, 2003, 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, 2002. 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.

Consolidated Statement of Operations

Consolidated Balance Sheets

Consolidated Statement of Cash Flows

Segment Information