Sun Hydraulics Reports Strong Finish to 2009, Profitable for the 38th Consecutive Year; Board Declares First Quarter Dividend


SARASOTA, FL--(Marketwire - March 8, 2010) - Sun Hydraulics Corporation (NASDAQ: SNHY) reported financial results for the year and fourth quarter 2009 as follows:

(Dollars in millions except net income per share)

                        January 2,   December 27,    Increase/
                           2010          2008        Decrease

   Twelve Months Ended
Net Sales              $      97.4  $      178.3        -45%
Net Income             $       1.9  $       25.7        -93%
Net Income per share:
  Basic                $      0.11  $       1.55        -93%
  Diluted              $      0.11  $       1.55        -93%

   Three Months Ended
Net Sales              $      27.3  $       32.9        -17%
Net Income             $       1.3  $        2.5        -48%
Net Income per share:
  Basic                $      0.08  $       0.15        -47%
  Diluted              $      0.08  $       0.15        -47%

"The fourth quarter finished strong, and we have now seen sequential quarterly growth since Q2," said Allen Carlson, Sun's CEO and President. "We believe the worst of last year's recession is over. Sun's order rates, capital goods inventory conditions, and indicators like PMI and Capacity Utilization are all showing signs of strength. We are optimistic about 2010. As expressed in our forecast, we estimate the first quarter will show continued improvement."

"We are pleased to have remained profitable for 2009, despite a drop in revenues of 45%," Carlson continued. "We did this without sacrificing our capacity or capabilities. We continued to make capital investments, develop and release new products, and, perhaps most critical, maintain workforce readiness."

"We are encouraged by customer inquiries and the prototype activity we have experienced at all Sun locations," commented Carlson. "Some prototypes have already led to production orders. We are confident that our prototype activities will continue to drive new business."

Concluding, Carlson said, "As we have frequently stated, we believe market share gains are taken on the upturn of the cycle by those companies that are able to respond to the market demand and opportunities created. Sun's depth and breadth of products, our ability to provide complete systems solutions, and deliver reliably will allow us to gain share during this recovery."

Outlook

In 2010, weekly order rates have increased compared to Q4. First quarter 2010 sales are expected to be approximately $30 million, a 19% increase over last year and 10% over the last quarter. First quarter earnings per share are estimated to be between $0.17 and $0.19 per share, compared to $0.03 per share in the first quarter last year and $0.08 last quarter.

Dividend

The Board of Directors of Sun Hydraulics Corporation declared a $0.09 per share cash dividend on Sun's common stock. The dividend is payable on April 15, 2010, to shareholders of record as of March 31, 2010.

Sun Hydraulics advises all shareholders to familiarize themselves with rules regarding dividends, payment dates and ex-dividend dates. See the following website for more information http://www.sec.gov/answers/dividen.htm.

Webcast

Sun Hydraulics Corporation will broadcast its 2009 financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, March 9, 2010. To listen to the webcast, go to http://investor.sunhydraulics.com/eventdetail.cfm?eventid=76500.

Webcast Q&A

If an individual wishes to ask questions directly during the webcast, the conference call may be accessed by dialing 1-877-212-8518. Questions also may be submitted to the Company via email 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. A copy of this earnings release is posted on the Investor Relations page of our website under "Press Releases."

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 26, 2009, and under the heading "Business" and particularly under the subheading, "Business Risk Factors" in the Company's Form 10-K for the year ended January 2, 2010. 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
                                                   January 2,  December 27,
                                                      2010         2008

Net sales                                         $    27,262  $    32,936

Cost of sales                                          20,468       24,726
                                                  -----------  -----------

Gross profit                                            6,794        8,210

Selling, engineering and administrative expenses        5,245        5,536
                                                  -----------  -----------

Operating income                                        1,549        2,674

Interest income, net                                     (135)        (293)
Foreign currency transaction (gain) loss, net              22         (309)
Miscellaneous expense, net                                 36          122
                                                  -----------  -----------

Income before income taxes                              1,626        3,154

Income tax provision                                      340          674
                                                  -----------  -----------

Net income                                        $     1,286  $     2,480
                                                  ===========  ===========


Basic net income per common share                 $      0.08  $      0.15

Weighted average basic shares outstanding              16,927       16,647

Diluted net income per common share               $      0.08  $      0.15

Weighted average diluted shares outstanding            16,962       16,675

Dividends declared per share                      $     0.090  $     0.090




SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)

                                                     Twelve Months Ended
                                                   January 2,  December 27,
                                                      2010         2008

Net sales                                         $    97,393  $   178,278

Cost of sales                                          75,436      119,161
                                                  -----------  -----------

Gross profit                                           21,957       59,117

Selling, engineering and administrative expenses       19,814       22,740
                                                  -----------  -----------

Operating income                                        2,143       36,377

Interest income, net                                     (562)        (793)
Foreign currency transaction (gain) loss, net             265         (467)
Miscellaneous income, net                                 423          (92)
                                                  -----------  -----------

Income before income taxes                              2,017       37,729

Income tax provision                                      161       11,994
                                                  -----------  -----------

Net income                                        $     1,856  $    25,735
                                                  ===========  ===========


Basic net income per common share                 $      0.11  $      1.55

Weighted average basic shares outstanding              16,837       16,603

Diluted net income per common share               $      0.11  $      1.55

Weighted average diluted shares outstanding            16,870       16,634

Dividends declared per share                      $     0.450  $     0.450




SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)

                                                   January 2,  December 27,
                                                      2010         2008
Assets
Current assets:
  Cash and cash equivalents                       $    30,314  $    35,176
  Restricted cash                                         132          127
  Accounts receivable, net of allowance for
   doubtful accounts of $90 and $92                     9,949       12,502
  Inventories                                           7,799        9,960
  Income taxes receivable                               1,485        1,353
  Deferred income taxes                                   575          259
  Marketable Securities                                 7,844            -
  Other current assets                                  1,797        1,290
                                                  -----------  -----------
      Total current assets                             59,895       60,667

Property, plant and equipment, net                     56,633       57,726
Other assets                                            3,405        3,992
                                                  -----------  -----------

Total assets                                      $   119,933  $   122,385
                                                  ===========  ===========

Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                                $     2,442  $     3,258
  Accrued expenses and other liabilities                2,475        5,546
  Long-term debt due within one year                        -          147
  Dividends payable                                     1,524        1,499
                                                  -----------  -----------
      Total current liabilities                         6,441       10,450

Long-term debt due after one year                           -          125
Deferred income taxes                                   5,191        4,871
Other liabilities                                         687          383
                                                  -----------  -----------

      Total liabilities                                12,319       15,829

Shareholders' equity:
  Common stock                                             17           17
  Capital in excess of par value                       42,210       38,042
  Retained earnings                                    64,383       70,099
  Accumulated other comprehensive income                1,004       (1,602)
                                                  -----------  -----------
      Total shareholders' equity                      107,614      106,556
                                                  -----------  -----------

Total liabilities and shareholders' equity        $   119,933  $   122,385
                                                  ===========  ===========




SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

                                                     Twelve Months Ended
                                                   January 2,  December 27,
                                                      2010         2008
Cash flows from operating activities:
Net income                                        $     1,856  $    25,735
Adjustments to reconcile net income to net cash
 provided by operating activities:
Depreciation and amortization                           6,968        7,096
Loss on disposal of assets                                 30          138
Stock-based compensation expense                          960          896
Stock options income tax benefit                           (9)         (55)
Allowance for doubtful accounts                            (2)        (123)
Provision for slow moving inventory                       (41)         102
Provision for deferred income taxes                         4         (195)
(Increase) decrease in:
   Accounts receivable                                  2,555        4,650
   Inventories                                          2,202        1,359
   Income taxes receivable                               (123)      (1,353)
   Other current assets                                  (507)         (80)
   Other assets, net                                      560          465
Increase (decrease) in:
   Accounts payable                                      (816)      (2,410)
   Accrued expenses and other liabilities                (274)       2,944
   Income taxes payable                                     -         (619)
   Other liabilities                                      304          (23)
                                                  -----------  -----------
Net cash from operating activities                     13,667       38,527

Cash flows used in investing activities:
Capital expenditures                                   (5,096)     (10,874)
Proceeds from dispositions of equipment                     -           99
Purchases of Marketable Securities                    (10,600)           -
Proceeds from Sale of Marketable Securities             2,863            -
                                                  -----------  -----------
Net cash used in investing activities                 (12,833)     (10,775)

Cash flows used in financing activities:
Repayment of debt                                        (261)        (416)
Proceeds from exercise of stock options                    11           87
Stock options income tax benefit                            9           55
Proceeds from stock issued                                392          359
Dividends to shareholders                              (7,547)      (7,465)
                                                  -----------  -----------
Net cash used in financing activities                  (7,396)      (7,380)

Effect of exchange rate changes on cash and cash
 equivalents                                            1,705       (4,406)
                                                  -----------  -----------

Net (decrease) increase in restricted cash                  5          (19)
Net (decrease) increase in cash and cash
 equivalents                                           (4,862)      15,985
                                                  -----------  -----------

Cash and cash equivalents, beginning of period         35,303       19,337
                                                  -----------  -----------

Cash and cash equivalents, end of period          $    30,446  $    35,303
                                                  ===========  ===========

Supplemental disclosure of cash flow information:
Cash paid:
   Interest                                       $         9  $        31
   Income taxes                                   $       289  $    14,216
Supplemental disclosure of noncash transactions:
Common stock issued to ESOP through accrued
 expenses and other liabilities                   $     2,797  $     2,255






                   United                     United   Elimina-   Consoli-
                   States    Korea   Germany  Kingdom   tion       dated

Three Months Ended
 January 2, 2010
Sales to
 unaffiliated
 customers        $ 17,200  $ 3,012  $ 3,613  $ 3,437 $       -  $   27,262
Intercompany sales   3,964        -       21      186    (4,171)          -
Operating income       320      213      703      284        29       1,549
Depreciation and
 amortization        1,288       24      123      265         -       1,700
Capital
 expenditures          461       10       (7)      84         -         548

Three Months Ended
 December 27, 2008
Sales to
 unaffiliated
 customers        $ 22,345  $ 1,782  $ 4,789  $ 4,020 $       -  $   32,936
Intercompany sales   4,552        -       53      472    (5,077)          -
Operating income     1,752     (183)     834      371      (100)      2,674
Depreciation and
 amortization        1,389       27      129      254         -       1,799
Capital
 expenditures        1,412        3        9      220         -       1,644

Twelve Months Ended
 January 2, 2010
Sales to
 unaffiliated
 customers        $ 59,278  $ 9,978  $14,654  $13,483 $       -  $   97,393
Intercompany sales  15,545        -      139    1,101   (16,785)          -
Operating income    (2,110)     616    2,475      884       278       2,143
Depreciation and
 amortization        5,335      104      502    1,027                 6,968
Capital
 expenditures        4,758       41       30      267                 5,096

Twelve Months Ended
 December 27, 2008
Sales to
 unaffiliated
 customers        $111,180  $17,455  $27,356  $22,287 $       -  $  178,278
Intercompany sales  28,656        -      245    2,282   (31,183)          -
Operating income    24,531    1,148    7,693    3,231      (226)     36,377
Depreciation and
 amortization        5,139      151      572    1,234                 7,096
Capital
 expenditures        9,904       39      298      633                10,874