Sun Hydraulics Corporation Reports Increased Second Quarter Earnings and Sales


SARASOTA, Fla., Aug 09, 2005 /PRNewswire-FirstCall via COMTEX/ -- Sun Hydraulics Corporation (Nasdaq: SNHY) reported financial results for the second quarter 2005 as follows:

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    (Dollars in millions except net income per share)

                                               July 2,    June 26,
                                                2005        2004     Increase

        Three Months Ended
    Net Sales                                  $31.0       $26.5        17%
    Net Income                                  $3.5        $2.6        35%
    Net Income per share (1):
       Basic                                   $0.33       $0.25        32%
       Fully Diluted                           $0.32       $0.25        28%


        Six Months Ended
    Net Sales                                  $60.1       $47.9        25%
    Net Income                                  $7.0        $3.9        79%
    Net Income per share (1):
       Basic                                   $0.65       $0.39        66%
       Fully Diluted                           $0.65       $0.38        71%

    (1) The Company announced a 50% stock dividend to shareholders of record
    on June 30, 2005, payable on July 15, 2005.  Prior to the stock
    dividend, the Company estimated net income for the second quarter to be
    between $0.45 and $0.48 per share.  With the effect of the stock
    dividend, forecasted net income for the second quarter would have been
    between $0.30 and $0.32.  All earnings per share and weighted average
    share information reflect the 50% stock dividend.

"Business conditions in the second quarter helped produce strong sales and record earnings," said Allen Carlson, Sun Hydraulics' president and CEO. "Our earnings continue to be bolstered by the high level of productivity throughout the company. Revenues continue to grow, being driven by our delivery performance, the Sun website, our global channel partners, sales of valve packages and our electrically actuated cartridges.

"Last month we secured an equity position in WhiteOak Controls, which designs and produces complementary electronic control products," Carlson continued. "We are working together with WhiteOak to develop electronic products that will enhance our next generation of valve package offerings.

"We are pleased that our performance has resulted in our inclusion in this year's Russell 2000(R) Index," Carlson concluded. "This helps improve the visibility of Sun Hydraulics as an attractive long-term investment to the investment community."

Outlook

The Company estimates sales for the third quarter to be $28 million, a 20% increase over the third quarter last year. Net income is forecasted to be between $0.24 and $0.27 per share, compared to $0.18 per share in the third quarter last year.

Webcast

Sun Hydraulics Corporation will broadcast its second quarter financial results conference call live over the Internet at 2:30 P.M. E.T. tomorrow, August 10, 2005. To listen to the webcast, 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, by going to the Sun Hydraulics website, http://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 management will then answer these and other questions during the Company's webcast. If an individual wishes to ask questions directly during the webcast, the conference call may be accessed by dialing 1-800-406-5356.

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 http://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 April 2, 2005, 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 25, 2004. 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
                                                July 2, 2005     June 26, 2004
                                                 (unaudited)       (unaudited)

    Net sales                                      $31,014           $26,522

    Cost of sales                                   20,928            18,136

    Gross profit                                    10,086             8,386

    Selling, engineering and
     administrative expenses                         4,524             4,196

    Operating income                                 5,562             4,190

    Interest expense                                   147               134
    Foreign currency transaction gain                 (145)              (31)
    Miscellaneous (income)/expense, net                (23)              (30)

    Income before income taxes                       5,583             4,117

    Income tax provision                             2,047             1,526

    Net income                                      $3,536            $2,591

    Basic net income per common share (1)            $0.33             $0.25

    Weighted average basic shares
     outstanding (1)                                10,873            10,170

    Diluted net income per common share (1)          $0.32             $0.25

    Weighted average diluted shares
     outstanding (1)                                10,975            10,250

    Dividends declared per share                    $0.050            $0.050

    (1) The Company announced a 50% stock dividend to shareholders of record
     on June 30, 2005, payable on July 15, 2005.  Prior to the stock dividend,
     the Company estimated net income for the second quarter to be between
     $0.45 and $0.48 per share. With the effect of the stock dividend,
     forecasted net income for the second quarter would have been between
     $0.30 and $0.32.  All earnings 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)

                                                       Six months ended
                                                July 2, 2005     June 26, 2004
                                                 (unaudited)       (unaudited)

    Net sales                                      $60,093           $47,912

    Cost of sales                                   40,254            33,221

    Gross profit                                    19,839            14,691

    Selling, engineering and
     administrative expenses                         8,743             8,260

    Operating income                                11,096             6,431

    Interest expense                                   283               282
    Foreign currency transaction gain                 (257)              (33)
    Miscellaneous (income)/expense, net                (32)              (17)

    Income before income taxes                      11,102             6,199

    Income tax provision                             4,100             2,251

    Net income                                      $7,002            $3,948

    Basic net income per common share (1)            $0.65             $0.39

    Weighted average basic shares
     outstanding (1)                                10,750            10,154

    Diluted net income per common share (1)          $0.65             $0.38

    Weighted average diluted shares
     outstanding (1)                                10,847            10,310

    Dividends declared per share                    $0.125            $0.090

    (1) The Company announced a 50% stock dividend to shareholders of record
     on June 30, 2005, payable on July 15, 2005.  Prior to the stock dividend,
     the Company estimated net income for the second quarter to be between
     $0.45 and $0.48 per share. With the effect of the stock dividend,
     forecasted net income for the second quarter would have been between
     $0.30 and $0.32.  All earnings per share and weighted average share
     information reflect the 50% stock dividend.


    Sun Hydraulics Corporation
    Consolidated Balance Sheets
    (in thousands, except share data)
                                               July 2, 2005  December 25, 2004
                                                 (unaudited)
    Assets
    Current assets:
        Cash and cash equivalents                  $14,051            $9,300
        Restricted cash                                425               462
        Accounts receivable, net of
         allowance for doubtful accounts
         of $163 and $170                           11,490             8,611
        Inventories                                  7,852             7,105
        Deferred income taxes                          392               392
        Other current assets                         1,166               776
        Total current assets                        35,376            26,646

    Property, plant and equipment, net              43,187            43,687
    Other assets                                     1,767             1,475

        Total assets                               $80,330           $71,808

    Liabilities and shareholders' equity
    Current liabilities:
        Accounts payable                            $3,842            $2,536
        Accrued expenses and other
         liabilities                                 4,513             4,609
        Long-term debt due within one
         year                                        1,003             1,058
        Dividends payable                              545               522
        Taxes payable                                  695             1,198
        Total current liabilities                   10,598             9,923

    Long-term debt due after one year               10,548            11,196
    Deferred income taxes                            4,984             4,986
    Other noncurrent liabilities                       290               300
        Total liabilities                           26,420            26,405

    Commitments and contingencies                       --                --

    Shareholders' equity:
        Preferred stock, 2,000,000 shares
         authorized, par value $0.001, no shares
         outstanding                                    --                --
        Common stock, 20,000,000 shares
         authorized, par value $0.001,
         10,889,531 and 10,441,920
         shares outstanding                             11                10
        Capital in excess of par value              32,566            28,579
        Unearned compensation related to
         outstanding restricted stock                 (457)             (608)
        Retained earnings                           19,780            13,867
        Accumulated other comprehensive

  	 	  
    
            
                 income                                      2,010             3,566
        Treasury stock                                  --               (11)
        Total shareholders' equity                  53,910            45,403

        Total liabilities and
         shareholders' equity                      $80,330           $71,808



    Sun Hydraulics Corporation
    Consolidated Statements of Cash Flows              Six Months ended
    (in thousands)                              July 2, 2005     June 26, 2004
                                                 (unaudited)       (unaudited)

    Cash flows from operating activities:
    Net income                                      $7,002            $3,948
    Adjustments to reconcile net income
     to net cash provided by operating
     activities:
    Depreciation                                     2,779             2,687
    Loss on disposal of assets                           7                43
    Provision for deferred income taxes                 (2)              (87)
    Allowance for doubtful accounts                     (7)               11
    Stock-based compensation expense                   165               130
    (Increase) decrease in:
        Accounts receivable                         (2,872)           (3,466)
        Inventories                                   (747)              (92)
        Other current assets                          (390)              (85)
        Other assets                                   108                66
    Increase (decrease) in:
        Accounts payable                             1,306               213
        Accrued expenses and other
         liabilities                                   962             1,572
        Taxes payable                                  108             1,065
        Other liabilities                              (10)              (25)
    Net cash provided by operating
     activities                                      8,409             5,980

    Cash flows from investing activities:
    Equity method investment                          (400)               --
    Capital expenditures                            (3,638)           (2,478)
    Proceeds from dispositions of
     equipment                                           1                19
    Net cash used in investing activities           (4,037)           (2,459)

    Cash flows from financing activities:
    Repayment of debt                                 (703)           (3,422)
    Proceeds from exercise of stock
     options                                         2,273             1,173
    Proceeds from stock issued                          69                --
    Payments for purchase of treasury
     stock                                             (27)             (558)
    Proceeds from reissuance of treasury
     stock                                              --                48
    Dividends to shareholders                       (1,065)             (540)
    Net cash provided by (used in)
     financing activities                              547            (3,299)

    Effect of exchange rate changes on
     cash and cash equivalents                        (205)              269

    Net increase in cash and cash
     equivalents                                     4,714               491

    Cash and cash equivalents, beginning
     of period                                       9,762             5,219

    Cash and cash equivalents, end of
     period                                        $14,476            $5,710

    Supplemental disclosure of cash flow
     information:
    Cash paid:
        Interest                                      $283              $282
        Income taxes                                $4,605            $1,273






                        United                United
    Three Months        States  Korea Germany Kingdom Elimination Consolidated
    Ended July 2, 2005
    Sales to
     unaffiliated
     customers         $19,557  $3,251 $4,097  $4,109      $--      $31,014
    Intercompany sales   5,573      --     20     745   (6,338)          --
    Operating income     3,862     467    915     334      (16)       5,562
    Depreciation           985      38    110     256       --        1,389
    Capital
     expenditures        1,457       2     33     608       --        2,100

    Three Months
    Ended June 26, 2004
    Sales to
     unaffiliated
     customers         $16,972  $2,548 $3,473  $3,529       $--     $26,522
    Intercompany
     sales               4,195      --     21     480    (4,696)         --
    Operating income     2,949     310    696     238        (3)      4,190
    Depreciation           955      33    110     263        --       1,361
    Capital
     expenditures        1,239       3     36     232        --       1,510

    Six Months
    Ended July 2, 2005
    Sales to
     unaffiliated
     customers         $37,703  $5,917 $8,179  $8,294       $--     $60,093
    Intercompany
     sales              11,435      --     42   1,348   (12,825)         --
    Operating income     7,734     798  2,089     652      (177)     11,096
    Depreciation         1,962      75    219     523        --       2,779
    Capital
     expenditures        2,832       7     94     705        --       3,638

    Six Months
    Ended June 26, 2004
    Sales to
     unaffiliated
     customers         $29,889  $4,844 $6,470  $6,709       $--     $47,912
    Intercompany
     sales               7,918      --     33     835    (8,786)         --
    Operating income     4,439     574  1,222     204        (8)      6,431
    Depreciation         1,874      67    210     536        --       2,687
    Capital
     expenditures        2,038       8     66     366        --       2,478

SOURCE Sun Hydraulics Corporation

Richard K. Arter, Investor Relations, or Richard J. Dobbyn, Chief Financial Officer,
both of Sun Hydraulics, +1-941-362-1200
http://www.prnewswire.com

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