Sun Hydraulics Continues Double-Digit Sales and Earnings Growth, Released New Electronic Products From WhiteOak Joint Venture


SARASOTA, FL, May 09, 2006 (MARKET WIRE via COMTEX News Network) -- Sun Hydraulics Corporation (NASDAQ: SNHY) reported financial results for the first quarter of 2006 as follows:

(Dollars in millions except net income per share)
                           April 1,   April 2,
                             2006       2005      Increase
    Three Months Ended
Net Sales                   $34.2      $29.1        18%
Net Income                  $ 4.2      $ 3.5        20%
Net Income per share (1):
   Basic                    $0.38      $0.33        15%
   Diluted                  $0.38      $0.32        19%
(1) April 2, 2005 earnings per share and weighted average
    share information reflects a three-for-two stock split
    effective at the close of business on July 15, 2005.

"We saw a significant surge in demand in the first quarter that has continued through April and into May," reported Allen Carlson, Sun Hydraulics' President and CEO. "Our major focus continues to be on delivery performance and satisfying our customers' needs."

"We remain committed to our global strategy of expanding our international footprint. International sales were up 25% over last year with sizable growth in the European and Asian markets," Carlson added. "Domestic sales also continue to be strong, with a 10% year over year increase. With order rates remaining steady at a high level and our short book-to-ship cycle, we expect second quarter results will continue to show strength."

"In April, we released the first products that have resulted from our WhiteOak joint venture, which we entered into last year," Carlson explained. "These complementary electronic products are just the beginning of new, innovative technologies that will result from our association with WhiteOak."

Outlook

2006 second quarter sales are estimated to be in the range of $36 million, a 16% increase over the same period last year. Second quarter earnings per share are estimated to be between $0.39 and $0.41 per share, compared to $0.32 per share last year.

Annual Report

Sun's 2005 Annual Report is now available at the Investor Relations section of our website at www.sunhydraulics.com. To receive a copy by mail, please email requests to investor@sunhydraulics.com or call 941-362-1200.

Webcast

Sun Hydraulics Corporation will broadcast its first quarter financial results conference call live over the Internet at 2:30 P.M. E.T. tomorrow, May 10, 2006. 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, 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. If an individual wishes to ask questions directly during the webcast, the conference call may be accessed by dialing 1-877-407-8033.

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 headings Item 1. "Business," Item 1A. "Risk Factors" and Item 7. "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in the Company's Form 10-K for the year ended December 31, 2005. 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
                                         April 1, 2006   April 2, 2005
                                           (unaudited)     (unaudited)
Net sales                                $       34,185  $       29,079
Cost of sales                                    23,204          19,326
                                         --------------  --------------
Gross profit                                     10,981           9,753
Selling, engineering and
 administrative expenses                          4,671           4,220
                                         --------------  --------------
Operating income                                  6,310           5,533
Interest expense                                     70             136
Foreign currency transaction gain                   (41)           (105)
Miscellaneous expense/(income), net                  28             (16)
                                         --------------  --------------
Income before income taxes                        6,253           5,518
Income tax provision                              2,073           2,052
                                         --------------  --------------
Net income                               $        4,180  $        3,466
                                         ==============  ==============
Basic net income per common share (1)    $         0.38  $         0.33
Weighted average basic shares
 outstanding (1)                                 10,932          10,632
Diluted net income per common share (1)  $         0.38  $         0.32
Weighted average diluted shares
 outstanding (1)                                 11,001          10,724
Dividends declared per share (1)         $        0.100  $        0.050
(1) April 2, 2005 earnings per share, weighted average share and dividend
information reflects a three-for-two stock split effective at the close of
business on July 15, 2005.
SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
                                         April 1, 2006    December 31,
                                           (unaudited)        2005
Assets
Current assets:
  Cash and cash equivalents              $         7,341 $        5,417
  Restricted cash                                     52            413
  Accounts receivable, net of allowance
   for doubtful accounts of $98 and $110          13,629         10,975
  Inventories                                      8,592          7,870
  Income taxes receivable                              -            236
  Deferred income taxes                              782            782
  Other current assets                             1,065            864
                                         --------------- --------------
      Total current assets                        31,461         26,557
Property, plant and equipment, net                46,061         45,181
Other assets                                       1,831          1,823
                                         --------------- --------------
Total assets                             $        79,353 $       73,561
                                         =============== ==============
Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                       $         3,637 $        4,822
  Accrued expenses and other liabilities           3,437          3,857
  Long-term debt due within one year                 391            398
  Dividends payable                                1,093          1,089
  Income taxes payable                             1,362              -
                                         --------------- --------------
      Total current liabilities                    9,920         10,166
Long-term debt due after one year                  3,348          1,986
Deferred income taxes                              4,687          4,688
Other liabilities                                    277            281
                                         --------------- --------------
      Total liabilities                           18,232         17,121
Shareholders' equity:
  Common stock                                        11             11
  Capital in excess of par value                  32,594         32,466
  Unearned compensation related to
     outstanding restricted stock                      -           (741)
  Retained earnings                               26,492         23,406
  Accumulated other comprehensive income           2,024          1,647
  Treasury stock                                       -           (349)
                                         --------------- --------------
      Total shareholders' equity                  61,121         56,440
                                         --------------- --------------
Total liabilities and shareholders'
 equity                                  $        79,353 $       73,561
                                         =============== ==============
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
                                               Three Months Ended
                                         April 1, 2006   April 2, 2005
                                           (unaudited)     (unaudited)
Cash flows from operating activities:
Net income                               $        4,180  $        3,466
Adjustments to reconcile net income to
    net cash provided by operating
     activities:
Depreciation and amortization                     1,437           1,390
Loss (gain) on disposal of assets                    26              (1)
Provision for deferred income taxes                  (1)              3
Allowance for doubtful accounts                     (12)            (29)
Stock-based compensation expense                    152              81
Stock options income tax benefit                    (31)              -
(Increase) decrease in:
   Accounts receivable                           (2,642)         (3,366)
   Inventories                                     (722)           (754)
   Income taxes receivable                          236               -
   Other current assets                            (201)           (315)
   Other assets, net                                (16)            (19)
Increase (decrease) in:
   Accounts payable                              (1,185)            614
   Accrued expenses and other
    liabilities                                     760             526
   Income taxes payable                           1,393              79
   Other liabilities                                 (4)             (5)
                                         --------------  --------------
Net cash provided by operating
 activities                                       3,370           1,670
Cash flows used in investing activities:
Capital expenditures                             (1,965)         (1,538)
Proceeds from dispositions of equipment               2               1
                                         --------------  --------------
Net cash used in investing activities            (1,963)         (1,537)
Cash flows used in financing activities:
Proceeds from debt                                1,500               -
Repayment of debt                                  (145)           (371)
Proceeds from exercise of stock options              49           2,056
Proceeds from stock issued                           50              32
Payments for purchase of treasury stock            (244)            (27)
Dividends to shareholders                        (1,089)           (522)
Stock options income tax benefit                     31               -
                                         --------------  --------------

  	 	  
    
            
        Net cash provided by financing
 activities                                         152           1,168
Effect of exchange rate changes on cash
 And cash equivalents                                 4             116
                                         --------------  --------------
Net increase in cash and cash
 equivalents                                      1,563           1,417
                                         --------------  --------------
Cash and cash equivalents, beginning of
 period                                           5,830           9,762
                                         --------------  --------------
Cash and cash equivalents, end of period $        7,393  $       11,179
                                         ==============  ==============
Supplemental disclosure of cash flow
 information:
Cash paid:
   Interest                              $           70  $          136
   Income taxes                          $          476  $        2,488
                       United                    United   Elimi-  Consol-
                       States   Korea   Germany  Kingdom  nation  idated
                      -------  -------  -------  -------  ------  -------
Three Months
Ended April 1, 2006
Sales to unaffiliated
 customers            $20,861  $ 4,090  $ 4,577  $ 4,657  $    -  $34,185
Intercompany sales      6,677        -       36      786  (7,499)       -
Operating income        4,058      607      940      739     (34)   6,310
Depreciation            1,031       37      119      243       -    1,430
Capital expenditures    1,873        3       13       76       -    1,965
Three Months
Ended April 2, 2005
Sales to unaffiliated
 customers            $18,146  $ 2,667  $ 4,081  $ 4,185  $    -  $29,079
Intercompany sales      5,862        -       23      602  (6,487)       -
Operating income        3,872      330    1,174      318    (161)   5,533
Depreciation              977       37      109      267       -    1,390
Capital expenditures    1,375        5       61       97       -    1,538
Contact:
Richard K. Arter
Investor Relations
941-362-1200
Tricia Fulton
Chief Financial Officer
941-362-1200

SOURCE: Sun Hydraulics Corporation

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