Sun Hydraulics 2006 Sales Rise 22% to $142 Million, Net Income Up 27%, Board Declares First Quarter Dividend of $0.10, SNHY Celebrates 10 Years on NASDAQ


SARASOTA, FL -- (MARKET WIRE) -- March 6, 2007 -- Sun Hydraulics Corporation (NASDAQ: SNHY) reported financial results for the year and fourth quarter 2006 as follows:

(Dollars in millions except net income per share)

                               December 30, December 31,
                                   2006         2005        Increase

      Twelve Months Ended
Net Sales                      $      142.3 $      116.8          22%
Net Income                     $       16.2 $       12.8          27%
Net Income per share:
   Basic                       $       1.49 $       1.18          26%
   Diluted                     $       1.48 $       1.17          26%

      Three Months Ended
Net Sales                      $       35.0 $       27.9          25%
Net Income                     $        3.8 $        2.9          31%
Net Income per share:
   Basic                       $       0.35 $       0.26          35%
   Diluted                     $       0.35 $       0.26          35%
"Fourth quarter orders and shipments finished very strong and our 2006 financial results were even better than we had expected," said Allen Carlson, Sun's President and CEO. "While North America continued to hold up, we saw robust demand in Europe and Asia/Pacific. The strong order trends have continued through January and February and we anticipate first quarter 2007 results will continue to outpace the industry. We expect continued double digit growth in Q1 2007. This is exceptional given the strength of last year's first quarter."

"The keys to our success have not changed," Carlson continued. "Shipping reliability, new complementary and differentiated products, a focus on integrated packages, our strong geographic presence and our website continue to help Sun gain market share. In the product area, we are excited about the launch of additional electro-hydraulic products at the Hannover Fair in Germany in April. Having the right products at the right time has been, and continues to be, our focus," Carlson stated.

"Sun is proud to celebrate 10 years as a public company. During that time we have continued to grow both the top and bottom lines, and have returned to shareholders over $29 million in dividends," confirmed Carlson. "For long-term investors, the value of an investment in Sun in January 1997, has grown more than 300%, compared to a return of over 200% on the S&P 500 over the same 10-year period," Carlson concluded.

Taxes

Year-end tax provision adjustments included additional taxes due from the repatriation of approximately $5 million from our U.K. and German operations. "While our tax rate was slightly higher than expected, we were able to pay down all U.S. debt in the fourth quarter with the cash brought back from Europe," stated Tricia Fulton, Sun's CFO. The effect on earnings per share from the year-end tax provision adjustments, including repatriation and other items, was approximately $0.03.

Dividend

On March 3, 2007, Sun Hydraulics Board of Directors declared a $0.10 per share dividend on its common stock. The dividend is payable on April 15, 2007, to shareholders of record as of March 31, 2007.

Outlook

2007 first quarter sales are estimated to be $39 million, a 14% increase over last year. First quarter earnings per share are estimated to be between $0.42 and $0.45 per share, compared to $0.38 per share last year.

Open House and Webcast

Sun Hydraulics Corporation will broadcast its 2006 financial results conference call live over the Internet at 4:00 P.M. E.T. tomorrow, March 7, 2007. 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 3:45 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 1-877-407-8033.

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 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 30, 2006, 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 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
                                                  December 30, December 31,
                                                      2006         2005

Net sales                                         $    34,967  $    27,938

Cost of sales                                          23,916       19,884
                                                  -----------  -----------

Gross profit                                           11,051        8,054

Selling, engineering and administrative expenses        4,814        4,352
                                                  -----------  -----------

Operating income                                        6,237        3,702

Interest expense                                           77           56
Foreign currency transaction (gain) loss                  124          (63)
Miscellaneous income                                     (217)        (124)
                                                  -----------  -----------

Income before income taxes                              6,253        3,833

Income tax provision                                    2,440          945
                                                  -----------  -----------

Net income                                        $     3,813  $     2,888
                                                  ===========  ===========

Basic net income per share                        $      0.35  $      0.26

Basic weighted average shares outstanding              10,837       10,920

Diluted net income per share                      $      0.35  $      0.26

Diluted weighted average share outstanding             10,894       10,994

Dividends declared per share                      $     0.100  $     0.100


SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
                                                    Twelve Months Ended
                                                  December 30, December 31,
                                                      2006         2005

Net sales                                         $   142,282  $   116,757

Cost of sales                                          98,350       79,839
                                                  -----------  -----------

Gross profit                                           43,932       36,918

Selling, engineering and administrative expenses       18,881       17,738
                                                  -----------  -----------

Operating income                                       25,051       19,180

Interest expense                                          312          441
Foreign currency transaction (gain) loss                  187         (362)
Miscellaneous income                                     (351)         (36)
                                                  -----------  -----------

Income before income taxes                             24,903       19,137

Income tax provision                                    8,680        6,329
                                                  -----------  -----------

Net income                                        $    16,223  $    12,808
                                                  ===========  ===========


Basic net income per share                        $      1.49  $      1.18

Basic weighted average shares outstanding              10,878       10,827

Diluted net income per share                      $      1.48  $      1.17

Diluted weighted average share outstanding             10,939       10,918

Dividends declared per share                      $     0.400  $     0.300


SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)

                                                  December 30, December 31,
                                                      2006         2005
Assets
Current assets:
  Cash and cash equivalents                       $      9,379 $     5,417
  Restricted cash                                          118         413
  Accounts receivable, net of allowance for
   doubtful accounts of $140 and $110                   13,917      10,975
  Inventories                                           10,386       7,870
  Income taxes receivable                                    -         236
  Deferred income taxes                                    219         782
  Other current assets                                     986         864
                                                  ------------ -----------
    Total current assets                                35,005      26,557

Property, plant and equipment, net                      50,355      45,181
Other assets                                             1,825       1,823
                                                  ------------ -----------

Total assets                                      $     87,185 $    73,561
                                                  ============ ===========

Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                                $      4,812 $     4,822
  Accrued expenses and other liabilities                 4,059       3,857
  Long-term debt due within one year                       426         398
  Dividends payable                                      1,085       1,089
  Income taxes payable                                     608           -
                                                  ------------ -----------
    Total current liabilities                           10,990      10,166

Long-term debt due after one year                          646       1,986
Deferred income taxes                                    4,451       4,688
Other liabilities                                          298         281
                                                  ------------ -----------

    Total liabilities                                   16,385      17,121

Shareholders' equity:
  Common stock                                              11          11
  Capital in excess of par value                        30,962      32,466
  Unearned compensation related to
   outstanding restricted stock                              -        (741)
  Retained earnings                                     35,284      23,406
  Accumulated other comprehensive income                 4,543       1,647
  Treasury stock                                             -        (349)
                                                  ------------ -----------
    Total shareholders' equity                          70,800      56,440
                                                  ------------ -----------

Total liabilities and shareholders' equity        $     87,185 $    73,561
                                                  ============ ===========


SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
                                                    Twelve Months Ended
                                                  December 30, December 31,
                                                      2006         2005
Cash flows from operating activities:
Net income                                        $    16,223  $    12,808
Adjustments to reconcile net income to
 net cash provided by operating activities:
Depreciation and amortization                           5,849        5,604
Loss on disposal of assets                                 12           22
Stock-based compensation expense                          573          365
Stock options income tax benefit                         (381)           -
Allowance for doubtful accounts                            30          (60)
Provision for slow moving inventory                       157          (96)
Provision for deferred income taxes                       326         (688)
(Increase) decrease in:
  Accounts receivable                                  (2,972)      (2,304)
  Inventories                                          (2,673)        (669)
  Income taxes receivable                                 236         (236)
  Other current assets                                   (122)         (88)
  Other assets, net                                       (29)          39
Increase (decrease) in:
  Accounts payable                                        (10)       2,286
  Accrued expenses and other liabilities                1,385          306
  Income taxes payable                                    989         (261)
  Other liabilities                                        15          (19)
                                                  -----------  -----------
Net cash from operating activities                     19,608       17,009

Cash flows used in investing activities:
Investment in WhiteOak                                      -         (400)
Capital expenditures                                   (9,525)      (8,813)
Proceeds from dispositions of equipment                    28            5
                                                  -----------  -----------
Net cash used in investing activities                  (9,497)      (9,208)

Cash flows used in financing activities:
Proceeds from debt                                      7,000       11,599
Repayment of debt                                      (8,312)     (21,469)
Proceeds from exercise of stock options                   162        2,487
Stock options income tax benefit                          381            -
Proceeds from stock issued                                238          157
Payments for purchase of treasury stock                (2,951)      (1,588)
Dividends to shareholders                              (4,347)      (2,701)
                                                  -----------  -----------
Net cash used in financing activities                  (7,829)     (11,515)

Effect of exchange rate changes on cash and
 cash equivalents                                       1,385         (218)
                                                  -----------  -----------

Net (decrease) increase in restricted cash               (295)         (49)
Net (decrease) increase in cash and cash
 equivalents                                            3,962       (3,883)
                                                  -----------  -----------

Cash and cash equivalents, beginning of period          5,830        9,762
                                                  -----------  -----------

Cash and cash equivalents, end of period          $     9,497  $     5,830
                                                  ===========  ===========

Supplemental disclosure of cash flow information:
Cash paid:
  Interest                                        $       312  $       441
  Income taxes                                    $     7,510  $     8,451


                United                   United
                States    Korea Germany  Kingdom   Elimination Consolidated

Three Months
Ended December
 30, 2006
Sales to
 unaffiliated
 customers      $ 21,972 $  4,121 $  4,484 $  4,390 $        -  $    34,967
Intercompany
 sales             6,359        -       18      728     (7,105)           -
Operating
 income            4,520      521      817      436        (57)       6,237
Depreciation
 and amortization  1,044       38      142      252          -        1,476
Capital
 expenditures      1,822       76       33      400          -        2,331

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
 and amortization  1,010       37      132      246          -        1,425
Capital
 expenditures      2,442       15       37      112          -        2,606

Twelve Months
Ended December
 30, 2006
Sales to
 unaffiliated
 customers      $ 89,077 $ 16,368 $ 19,128 $ 17,709 $        -  $   142,282
Intercompany
 sales            25,809        -      106    2,990    (28,905)           -
Operating
 income           16,608    2,212    4,046    2,330       (145)      25,051
Depreciation
 and amortization  4,206      150      510      983          -        5,849
Capital
 expenditures      8,408      122      238      757          -        9,525

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
 and amortization  3,944      149      473    1,025          -        5,591
Capital
 expenditures      7,007       29      843      934          -        8,813