Sun Hydraulics Reports 2005 Sales of $117 Million and Net Income of $12.8 Million


SARASOTA, FL, Mar 06, 2006 (MARKET WIRE via COMTEX News Network) -- Sun Hydraulics Corporation (NASDAQ: SNHY) reported financial results for the year and fourth quarter 2005 as follows:

(Dollars in millions except net income per share)
                         December 31,    December 25,
                            2005            2004         Increase
    Twelve Months Ended
Net Sales                   $116.8          $94.5           24%
Net Income                  $ 12.8          $ 7.8           64%
Net Income per share (1):
  Basic                     $ 1.18          $0.76           55%
  Diluted                   $ 1.17          $0.76           54%
    Three Months Ended
Net Sales                   $ 27.9          $23.4           19%
Net Income                  $  2.9          $ 2.0           45%
Net Income per share (1):
  Basic                     $ 0.26          $0.19           37%
  Diluted                   $ 0.26          $0.19           37%
(1) All 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.

"2005 was another great year for Sun," said Allen Carlson, Sun's President and CEO. "We grew in all geographic segments and believe we gained market share. Sales in 2005 were up 24%, following 33% growth in 2004. We are very pleased with this year's results and look forward to 2006.

"Order rates accelerated going into the new year, and have continued throughout the first quarter with run rates up over 28%," continued Carlson. "Capacity in our U.S. manufacturing facilities continues to increase as we refine production processes and add new machinery. Shipping on time to our customers is still our main focus, and remains one of the keys to our success."

Sarbanes-Oxley

Sun completed documentation and testing for 2005 related to compliance with Sarbanes-Oxley, Section 404. "We are pleased that the first year of SOX is behind us," commented Tricia Fulton, Sun's in-coming CFO. "Our goal throughout the project was to comply fully with the law, contain project costs, and keep the disruption of the exercise on work flow to a minimum. We were able to accomplish this in year one and expect that we will do the same in year two."

Outlook

2006 first quarter sales are estimated to be in the range of $34 million, a 21% increase over last year on a calendarized basis. First quarter earnings per share are estimated to be between $0.35 and $0.37 per share, compared to $0.32 per share last year.

Open House and Webcast

Sun Hydraulics Corporation will broadcast its 2005 financial results conference call live over the Internet at 4:15 P.M. E.T. tomorrow, March 7, 2006. 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 4:00 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, 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 1-877-407-0778.

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 October 1, 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
                                               December 31,  December 25,
                                                   2005          2004
Net sales                                      $    27,938   $    23,426
Cost of sales                                       19,884        16,630
                                               -----------   -----------
Gross profit                                         8,054         6,796
Selling, engineering and administrative
 expenses                                            4,352         3,979
                                               -----------   -----------
Operating income                                     3,702         2,817
Interest expense                                        56           122
Foreign currency transaction (gain) loss               (63)           75
Miscellaneous (income) expense                        (124)           59
                                               -----------   -----------
Income before income taxes                           3,833         2,561
Income tax provision                                   945           560
                                               -----------   -----------
Net income                                     $     2,888   $     2,001
                                               ===========   ===========
Basic net income per share (1)                 $      0.26   $      0.19
Basic weighted average shares outstanding (1)       10,920        10,425
Diluted net income per share (1)               $      0.26   $      0.19
Diluted weighted average share outstanding
 (1)                                                10,994        10,521
Dividends declared per share (1)               $     0.100   $     0.050
(1) All 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 STATEMENTS OF OPERATIONS
(in thousands except per share data)
                                                  Twelve Months Ended
                                               December 31,  December 25,
                                                   2005          2004
Net sales                                      $   116,757   $    94,503
Cost of sales                                       79,839        65,968
                                               -----------   -----------
Gross profit                                        36,918        28,535
Selling, engineering and administrative
 expenses                                           17,738        16,241
                                               -----------   -----------
Operating income                                    19,180        12,294
Interest expense                                       441           527
Foreign currency transaction (gain) loss              (362)            -
Miscellaneous (income) expense                         (36)           35
                                               -----------   -----------
Income before income taxes                          19,137        11,732
Income tax provision                                 6,329         3,902
                                               -----------   -----------
Net income                                     $    12,808   $     7,830
                                               ===========   ===========
Basic net income per share (1)                 $      1.18   $      0.76
Basic weighted average shares outstanding (1)       10,827        10,269
Diluted net income per share (1)               $      1.17   $      0.76
Diluted weighted average share outstanding
 (1)                                                10,918        10,346
Dividends declared per share (1)               $     0.300   $     0.143
(1) All 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)
                                               December 31,  December 25,
                                                   2005          2004
Assets
Current assets:
  Cash and cash equivalents                    $     5,417   $     9,300
  Restricted cash                                      413           462
  Accounts receivable, net of allowance for
     doubtful accounts of $110 and $170             10,975         8,611
  Inventories                                        7,870         7,105
  Income taxes receivable                              236             -
  Deferred income taxes                                782           392
  Other current assets                                 864           776
                                               -----------   -----------
      Total current assets                          26,557        26,646
Property, plant and equipment, net                  45,181        43,687
Other assets                                         1,823         1,475
                                               -----------   -----------
Total assets                                   $    73,561   $    71,808
                                               ===========   ===========
Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                             $     4,822   $     2,536
  Accrued expenses and other liabilities             3,857         4,609
  Long-term debt due within one year                   398         1,058
  Dividends payable                                  1,089           522
  Income taxes payable                                   -         1,198
                                               -----------   -----------
      Total current liabilities                     10,166         9,923
Long-term debt due after one year                    1,986        11,196
Deferred income taxes                                4,688         4,986
Other liabilities                                      281           300
                                               -----------   -----------
      Total liabilities                             17,121        26,405
Shareholders' equity:
  Common stock                                          11            10
  Capital in excess of par value                    32,466        28,579
  Unearned compensation related to
     outstanding restricted stock                     (741)         (608)
  Retained earnings                                 23,406        13,867
  Accumulated other comprehensive income             1,647         3,566
  Treasury stock                                      (349)          (11)
                                               -----------   -----------
      Total shareholders' equity                    56,440        45,403
                                               -----------   -----------
Total liabilities and shareholders' equity     $    73,561   $    71,808
                                               ===========   ===========
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

  	 	  
    
            
                                                          Twelve Months Ended
                                               December 31,  December 25,
                                                   2005          2004
Cash flows from operating activities:
Net income                                     $    12,808   $     7,830
Adjustments to reconcile net income to
    net cash provided by operating
     activities:
Depreciation and amortization                        5,604         5,465
Loss on disposal of assets                              22            73
Stock-based compensation expense                       365           289
Allowance for doubtful accounts                        (60)          (17)
Provision for slow moving inventory                    (96)          110
Provision for deferred income taxes                   (688)          138
(Increase) decrease in:
   Accounts receivable                              (2,304)       (2,379)
   Inventories                                        (669)         (594)
   Income taxes receivable                            (236)            -
   Other current assets                                (88)         (252)
   Other assets, net                                    39           149
Increase (decrease) in:
   Accounts payable                                  2,286            97
   Accrued expenses and other liabilities              306         2,392
   Income taxes payable                               (261)        1,437
   Other liabilities                                   (19)          (28)
                                               -----------   -----------
Net cash from operating activities                  17,009        14,710
Cash flows used in investing activities:
Investment in WhiteOak                                (400)            -
Capital expenditures                                (8,813)       (4,987)
Proceeds from dispositions of equipment                  5            61
                                               -----------   -----------
Net cash used in investing activities               (9,208)       (4,926)
Cash flows used in financing activities:
Proceeds from debt                                  11,599             -
Repayment of debt                                  (21,469)       (5,953)
Proceeds from exercise of stock options              2,487         1,672
Proceeds from stock issued                             157             -
Payments for purchase of treasury stock             (1,588)         (781)
Proceeds from reissuance of treasury stock               -           613
Dividends to shareholders                           (2,701)       (1,230)
                                               -----------   -----------
Net cash used in financing activities              (11,515)       (5,679)
Effect of exchange rate changes on cash and
   cash equivalents                                   (218)          438
                                               -----------   -----------
Net (decrease) increase in restricted cash             (49)           37
Net (decrease) increase in cash and cash
 equivalents                                        (3,883)        4,506
                                               -----------   -----------
Cash and cash equivalents, beginning of
 period                                              9,762         5,219
                                               -----------   -----------
Cash and cash equivalents, end of period       $     5,830   $     9,762
                                               ===========   ===========
Supplemental disclosure of cash flow
 information:
Cash paid:
   Interest                                    $       441   $       527
   Income taxes                                $     8,451   $     2,617
United                    United    Elimi- Consoli-
                       States   Korea   Germany  Kingdom   nation   dated
Three Months
Ended December 31, 2005
Sales to unaffiliated
 customers           $ 18,177 $  2,695 $  3,186 $  3,880 $      -  $ 27,938
Intercompany sales      4,626        -       21      804   (5,451)        -
Operating income        2,587      345      440      337       (7)    3,702
Depreciation            1,010       37      132      246        -     1,425
Capital expenditures    2,442       15       37      112        -     2,606
Three Months
Ended December 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
Twelve Months
Ended December 31, 2005
Sales to unaffiliated
 customers           $ 73,998 $ 11,604 $ 15,101 $ 16,054 $      -  $116,757
Intercompany sales     21,239        -       80    2,873  (24,192)        -
Operating income       13,443    1,520    3,145    1,260     (188)   19,180
Depreciation            3,944      149      473    1,025        -     5,591
Capital expenditures    7,007       29      843      934        -     8,813
Twelve Months
Ended December 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        -     4,987
Contact:
Richard K. Arter
Investor Relations
941-362-1200
Richard J. Dobbyn
Chief Financial Officer
941-362-1200

SOURCE: Sun Hydraulics Corporation

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