Sun Hydraulics Reports 2004 Sales of $94.5 Million and Net Income of $7.8 Million


SARASOTA, Fla., March 1, 2005 /PRNewswire-FirstCall via COMTEX/ -- Sun Hydraulics Corporation (Nasdaq: SNHY) reported financial results for the year and fourth quarter 2004 as follows:

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    (Dollars in millions except net income per share)

                                              Dec. 25,    Dec. 27,
                                                2004        2003     Increase

             Twelve Months Ended
    Net Sales                                  $94.5       $70.8        33%
    Net Income                                  $7.8        $2.2       255%
    Net Income per share:
       Basic                                   $1.14       $0.33       245%
       Fully Diluted                           $1.14       $0.33       245%

             Three Months Ended
    Net Sales                                  $23.4       $17.6        33%
    Net Income                                  $2.0        $0.6       233%
    Net Income per share:
       Basic                                   $0.29       $0.09       222%
       Fully Diluted                           $0.29       $0.09       222%

Commenting on results for the year, Allen Carlson, Sun Hydraulics' President, said, "I believe our most important achievement in 2004 was our ability to maintain and improve our on-time delivery, even with a 33% increase in sales. This capability will help Sun to continue to grow in all of our markets, both short-term and long-term.

"The rebound in domestic markets was very strong in 2004, and remains strong in January and February," Carlson continued. "Along with a 39% North American sales increase compared to 2003, our international business has remained strong, with European sales increasing 25% and Asian sales increasing 28%."

Carlson added, "While the 33% increase in sales had a positive effect on margins, we were also able to offset the effect of material cost increases and further improve margins through higher productivity. This enabled us to hold the line on pricing. As a result, I believe we have gained market share." Gross profit in 2004 increased 54% over 2003. Gross profit as a percentage of sales increased to 30% from 26% in 2003.

Outlook

"In 2005, we will continue to invest in marketing and productivity improvements at a level comparable to 2004," Carlson concluded. Sales for the first quarter of 2005 are projected to be $27.5 million, which would represent

a 29% increase over the first quarter of 2004, with net income per share in the range of $0.38 to $0.41.

Open House and Webcast

Sun Hydraulics Corporation will broadcast its 2004 financial results conference call live over the Internet at 4:00 P.M. E.T. tomorrow, March 2, 2005. The conference call will be in conjunction with an Investor Open House to be held at the Company's facility at 701 Tallevast Road, Sarasota, Florida, starting at 3:30 P.M. 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 1-800-289-0517.

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 September 25, 2004, 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 27, 2003. 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
                                                   Dec. 25,          Dec. 27,
                                                     2004              2003

    Net sales                                      $23,426           $17,610

    Cost of sales                                   16,630            13,253

    Gross profit                                     6,796             4,357

    Selling, engineering and
     administrative expenses                         3,979             3,312

    Operating income                                 2,817             1,045

    Interest expense                                   122               193
    Foreign currency transaction loss
     (gain)                                             75                (8)
    Miscellaneous expense (income)                      59                21

    Income before income taxes                       2,561               839

    Income tax provision                               560               245

    Net income                                      $2,001              $594


    Basic net income per share                       $0.29             $0.09

    Basic weighted average shares
     outstanding                                     6,950             6,758

    Diluted net income per share                     $0.29             $0.09

    Diluted weighted average share
     outstanding                                     7,014             6,806



    CONSOLIDATED STATEMENTS OF OPERATIONS
    (in thousands except per share data)
                                                      Twelve Months Ended
                                                   Dec. 25,          Dec. 27,
                                                     2004              2003

    Net sales                                      $94,503           $70,798

    Cost of sales                                   65,968            52,312

    Gross profit                                    28,535            18,486

    Selling, engineering and
     administrative expenses                        16,241            14,803

    Operating income                                12,294             3,683

    Interest expense                                   527               606
    Foreign currency transaction loss
     (gain)                                             --              (143)
    Miscellaneous expense (income)                      35               (57)

    Income before income taxes                      11,732             3,277

    Income tax provision                             3,902             1,101

    Net income                                      $7,830            $2,176


    Basic net income per share                       $1.14             $0.33

    Basic weighted average shares
     outstanding                                     6,846             6,551

    Diluted net income per share                     $1.14             $0.33

    Diluted weighted average share
     outstanding                                     6,897             6,597


    CONSOLIDATED BALANCE SHEETS
    (in thousands)
                                                   Dec. 25,          Dec. 27,
                                                     2004              2003
    Assets
    Current assets:
      Cash and cash equivalents                     $9,300            $4,794
      Restricted Cash                                  462               425
      Accounts receivable, net of
       allowance for doubtful
       accounts of $170 and $187                     8,611             6,215
      Inventories                                    7,105             6,621
      Deferred income taxes                            392                20
      Other current assets                             776               524
          Total current assets                      26,646            18,599

    Property, plant and equipment, net              43,687            42,829
    Other assets                                     1,475             1,624

    Total assets                                   $71,808           $63,052

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable                              $2,536            $2,440
      Accrued expenses and other
       liabilities                                   4,609             2,217
      Long-term debt due within one year             1,058               937
      Dividends payable                                522               270
      Income taxes payable                           1,198                51
          Total current liabilities                  9,923             5,915

    Long-term debt due after one year               11,196            17,270
    Deferred income taxes                            4,986             4,476
    Other liabilities                                  300               328

          Total liabilities                         26,405            27,989

    Shareholders' equity:
      Common stock                                       7                 7
      Capital in excess of par value                28,579            26,478
      Unearned compensation related to
       outstanding restricted stock                   (608)             (601)
      Retained earnings                             13,870             7,522
      Accumulated other comprehensive
       income                                        3,566             1,657
      Treasury stock                                   (11)               --
          Total shareholders' equity                45,403            35,063

    Total liabilities and shareholders'
     equity                                        $71,808           $63,052



    CONSOLIDATED STATEMENT OF CASH FLOWS
    (in thousands)
                                                      Twelve Months Ended
                                                   Dec. 25,           Dec. 27,
                                                     2004               2003
    Cash flows from operating activities:
    Net income                                      $7,830             $2,176
    Adjustments to reconcile net income
     to net cash provided by operating
     activities:
    Depreciation and amortization                    5,465              5,152
    (Gain)/Loss on disposal of assets                   73                370
    Stock-based compensation expense                   289                182
    Allowance for doubtful accounts                    (17)                (7)
    Provision for slow moving inventory                110                (16)
    Provision for deferred income taxes                138                364
    (Increase) decrease in:
       Accounts receivable                          (2,379)              (518)
       Inventories                                    (594)               241
       Other current assets                           (252)               286
       Other assets, net                               149               (630)

  	 	  
    
            
            Increase (decrease) in:
       Accounts payable                                 97                734
       Accrued expenses and other
        liabilities                                  2,392              1,136
       Dividends payable                               252                 12
       Income taxes payable                          1,437                 41
       Other liabilities                               (28)               (50)
    Net cash from operating activities              14,962              9,473

    Cash flows used in investing
     activities:
    Capital expenditures                            (4,987)            (3,076)
    Proceeds from dispositions of
     equipment                                          61                 33
    Net cash used in investing activities           (4,926)            (3,043)

    Cash flows used in financing
     activities:
    Proceeds from debt                                  --             18,850
    Repayment of debt                               (5,953)           (10,254)
    Proceeds from exercise of stock
     options                                         1,672                899
    Proceeds from stock issued                          --                 39
    Payments for purchase of treasury
     stock                                            (781)               (71)
    Proceeds from reissuance of treasury
     stock                                             613                 59
    Dividends to shareholders                       (1,482)           (14,404)
    Net cash used in financing activities           (5,931)            (4,882)

    Effect of exchange rate changes on
     cash and cash equivalents                         438               (287)

    Net increase (decrease) in restricted
     cash                                               37
    Net increase (decrease) in cash and
     cash equivalents                                4,506              1,261

    Cash and cash equivalents, beginning
     of period                                       5,219              3,958

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

    Supplemental disclosure of cash flow
     information:
    Cash paid/(received):
       Interest                                       $527               $607
       Income taxes                                 $2,617               $696




                          United                    United    Elimi-  Consoli-
                          States   Korea   Germany  Kingdom   nation  dated

    Three Months
    Ended Dec. 25, 2004
    Sales to unaffiliated
     customers            $15,281  $1,979   $2,699   $3,467     $--   $23,426
    Intercompany sales      3,673      --       14      512   (4,199)      --
    Operating income        2,056     151      386      144       80    2,817
    Depreciation              957      35      134      267      --     1,393
    Capital expenditures    1,344       2       36       75      --     1,457

    Three Months
    Ended Dec. 27, 2003
    Sales to unaffiliated
     customers            $11,030  $1,682   $2,141   $2,756     $--   $17,610
    Intercompany sales      2,315      --        9      389   (2,713)      --
    Operating income          354     148      266      158      118    1,044
    Depreciation              878      34       95      238      --     1,245
    Capital expenditures      225      31       49      348      --       653

    Twelve Months
    Ended Dec. 25, 2004
    Sales to unaffiliated
     customers            $59,847  $8,723  $12,558  $13,375     $--   $94,503
    Intercompany sales     15,702      --       66    1,812  (17,580)      --
    Operating income        8,417     926    2,399      483       69   12,294
    Depreciation            3,792     137      475    1,061      --     5,465
    Capital expenditures    4,264      42      141      540      --     4,986

    Twelve Months
    Ended Dec. 27, 2003
    Sales to unaffiliated
     customers            $43,503  $6,857   $9,092  $11,346     $--   $70,798
    Intercompany sales     12,109      --       41    1,421  (13,571)      --
    Operating income        2,160     689    1,192     (497)     139    3,683
    Depreciation            3,630     123      380    1,019      --     5,152
    Capital expenditures    1,914     265      149      748      --     3,076

SOURCE Sun Hydraulics Corporation

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

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