Sun Hydraulics Second Quarter Earnings Up 38% on Sales Increase of 18%


SARASOTA, FL--(Marketwire - August 7, 2007) - Sun Hydraulics Corporation (NASDAQ: SNHY) reported financial results for the second quarter of 2007 as follows:

(Dollars in millions except net income per share)


                                               June 30,  July 1,
                                                 2007     2006    Increase

     Three Months Ended
Net Sales                                      $   43.4 $   36.9     18%
Net Income                                     $    6.0 $    4.3     38%
Net Income per share:
   Basic                                       $   0.36 $   0.26     38%
   Diluted                                     $   0.36 $   0.26     38%


     Six Months Ended
Net Sales                                      $   84.3 $   71.1     19%
Net Income                                     $   11.8 $    8.5     38%
Net Income per share:
   Basic                                       $   0.72 $   0.52     38%
   Fully Diluted                               $   0.71 $   0.51     39%

Note:  The Company announced a 50% stock dividend to shareholders of record
on June 30, 2007, payable on July 15, 2007.  All earnings per share and
weighted average share information reflect the 50% stock dividend.

"We were extremely pleased with the revenue and earnings growth this quarter," said Allen Carlson, Sun's President and CEO. "Gross profit margins remained strong at this level of sales and the incremental sales allowed additional profit to flow to the bottom line, with earnings up 38% over the previous year.

"Growth continued across all business segments in the second quarter," Carlson continued. "European and Asian sales were especially strong, making up 78% of the increase over last year. Our success in reaching into new markets around the world continues to be a significant contributor to our growth.

"Last week we announced that we will open a sales office in Bangalore, India, to help Sun develop new business opportunities in the Indian market. We are excited about our opportunities in India and other expanding markets around the globe," concluded Carlson. "We believe this is a great time in the business cycle to be making strategic investments that will yield future benefits for Sun."

Outlook

2007 third quarter sales are estimated to be approximately $40 million and earnings per share are estimated to be in the range of $0.30 to $0.32. This would represent an increase of approximately 10% in sales and 29% in earnings per share over last year.

Webcast

Sun Hydraulics Corporation will broadcast its second quarter financial results conference call live over the Internet at 2:30 P.M. E.T. tomorrow, August 8, 2007. 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 the earnings release by going to the Sun Hydraulics website, www.sunhydraulics.com, and clicking on Investor Relations. Scroll down to the bottom of the page and click on contact email: investor@sunhydraulics.com. Sun management will 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 30, 2006, and "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in the Company's Form 10-Q for the quarter ended June 30, 2007. 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
                                                    June 30,     July 1,
                                                      2007         2006
                                                  (unaudited)  (unaudited)

Net sales                                         $    43,422  $    36,928

Cost of sales                                          29,125       25,689
                                                  -----------  -----------

Gross profit                                           14,297       11,239

Selling, engineering and
 administrative expenses (1)                            5,438        4,690
                                                  -----------  -----------

Operating income                                        8,859        6,549

Interest (income)/expense, net                            (89)          33
Foreign currency transaction loss, net                     27           72
Miscellaneous income, net                                (124)         (57)
                                                  -----------  -----------

Income before income taxes                              9,045        6,501

Income tax provision                                    3,093        2,187
                                                  -----------  -----------

Net income                                        $     5,952  $     4,314
                                                  ===========  ===========

Basic net income per common share (2)             $      0.36  $      0.26

Weighted average basic shares outstanding (2)          16,425       16,399

Diluted net income per common share (2)           $      0.36  $      0.26

Weighted average diluted shares outstanding (2)        16,494       16,492

Dividends declared per share (2)                  $     0.090  $     0.067

(1) Selling, engineering and administrative expenses for the current period
includes approximately $360,000 of additional unanticipated expenses for
variable stock based compensation.

(2) The Company announced a 50% stock dividend to shareholders of record on
June 30, 2007, payable on July 15, 2007.   All per share and weighted
average share information reflect the 50% stock dividend.




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

                                                      Six months ended
                                                    June 30,     July 1,
                                                      2007        2006
                                                  (unaudited)  (unaudited)

Net sales                                         $    84,275  $    71,114

Cost of sales                                          56,096       48,895
                                                  -----------  -----------

Gross profit                                           28,179       22,219

Selling, engineering and
 administrative expenses (1)                           10,653        9,360
                                                  -----------  -----------

Operating income                                       17,526       12,859

Interest (income)/expense, net                           (162)          81
Foreign currency transaction loss, net                      1           31
Miscellaneous income, net                                (206)          (7)
                                                  -----------  -----------

Income before income taxes                             17,893       12,754

Income tax provision                                    6,135        4,260
                                                  -----------  -----------

Net income                                        $    11,758  $     8,494
                                                  ===========  ===========

Basic net income per common share (2)             $      0.72  $      0.52

Weighted average basic shares outstanding (2)          16,401       16,398

Diluted net income per common share (2)           $      0.71  $      0.51

Weighted average diluted shares outstanding (2)        16,478       16,497

Dividends declared per share (2)                  $     0.157  $     0.133

(1) Selling, engineering and administrative expenses for the current period
includes approximately $360,000 of additional unanticipated expenses for
variable stock based compensation.

(2) The Company announced a 50% stock dividend to shareholders of record on
June 30, 2007, payable on July 15, 2007.   All per share and weighted
average share information reflect the 50% stock dividend.




SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)


                                                June 30, 2007  December 30,
                                                  (unaudited)      2006
Assets
Current assets:
  Cash and cash equivalents                       $     13,662 $      9,379
  Restricted cash                                           60          118
  Accounts receivable, net of allowance for
   doubtful accounts of $102 and $140                   17,786       13,917
  Inventories                                           11,140       10,386
  Deferred income taxes                                    219          219
  Other current assets                                   2,459          986
                                                  ------------ ------------
      Total current assets                              45,326       35,005

Property, plant and equipment, net                      54,354       50,355
Other assets                                             2,017        1,825
                                                  ------------ ------------

Total assets                                      $    101,697 $     87,185
                                                  ============ ============

Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                                $      5,771 $      4,812
  Accrued expenses and other liabilities                 3,984        4,059
  Long-term debt due within one year                       435          426
  Dividends payable                                      1,481        1,085
  Income taxes payable                                   1,529          608
                                                  ------------ ------------
      Total current liabilities                         13,200       10,990

Long-term debt due after one year                          427          646
Deferred income taxes                                    4,535        4,451
Other noncurrent liabilities                               699          298
                                                  ------------ ------------

      Total liabilities                                 18,861       16,385

Shareholders' equity:
  Common stock                                              16           16
  Capital in excess of par value                        33,344       30,962
  Retained earnings                                     44,460       35,279
  Accumulated other comprehensive income                 5,016        4,543
                                                  ------------ ------------
      Total shareholders' equity                        82,836       70,800
                                                  ------------ ------------

Total liabilities and shareholders’ equity        $    101,697 $     87,185
                                                  ============ ============


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

                                                      Six months ended
                                                    June 30,     July 1,
                                                      2007         2006
                                                  (unaudited)  (unaudited)
Cash flows from operating activities:
Net income                                        $    11,758  $     8,494
Adjustments to reconcile net income to
 net cash provided by operating activities:
Depreciation and amortization                           3,047  $     2,932
(Gain)/Loss on disposal of assets                         (61)          62
Provision for deferred income taxes                        84           13
Allowance for doubtful accounts                           (38)           6
Stock-based compensation expense                          331          309
Stock options income tax benefit                         (286)         (42)
(Increase) decrease in:
   Accounts receivable                                 (3,831)      (4,105)
   Inventories                                           (754)      (1,268)
   Income taxes receivable                                  -          236
   Other current assets                                (1,473)         153
   Other assets                                          (205)         (56)
Increase (decrease) in:
   Accounts payable                                       959            8
   Accrued expenses and other liabilities               1,311          829
   Income taxes payable                                 1,207          521
   Other noncurrent liabilities                           401           (9)
                                                  -----------  -----------
Net cash provided by operating activities              12,450        8,083

Cash flows from investing activities:
Capital expenditures                                   (6,885)      (4,816)
Proceeds from dispositions of equipment                    76           20
                                                  -----------  -----------
Net cash used in investing activities                  (6,809)      (4,796)

Cash flows from financing activities:
Proceeds from debt                                          -        5,000
Repayment of debt                                        (210)      (2,639)
Proceeds from exercise of stock options                   256           73
Proceeds from stock issued                                123          114
Payments for purchase of treasury stock                     -       (2,665)
Dividends to shareholders                              (2,181)      (2,183)
Stock options income tax benefit                          286           42
                                                  -----------  -----------
Net cash used in financing activities                  (1,726)      (2,258)

Effect of exchange rate changes on cash and
 cash equivalents                                         310          652
                                                  -----------  -----------

Net increase in cash and cash equivalents               4,225        1,681

Cash and cash equivalents, beginning of period          9,497        5,830
                                                  -----------  -----------

Cash and cash equivalents, end of period          $    13,722  $     7,511
                                                  ===========  ===========

Supplemental disclosure of cash flow information:
Cash paid:
   Interest                                       $        24  $       136
   Income taxes                                   $     5,349  $     3,532
Supplemental disclosure of noncash transactions:
   Common stock issued to ESOP through
    accrued expenses and other liabilities        $     1,386  $     1,183





                      United                     United   Elimin-  Consoli-
                      States    Korea   Germany  Kingdom   ation    dated
Three Months
Ended June 30, 2007
Sales to unaffiliated
 customers            $ 25,836 $  5,695 $  6,107 $  5,784 $     -  $ 43,422
Intercompany sales       7,995        -       20      650  (8,665)        -
Operating income         6,153      636    1,377      686       7     8,859
Depreciation             1,098       43      136      264       -     1,541
Capital expenditures     2,976      152       21      533       -     3,682

Three Months
Ended July 1, 2006
Sales to unaffiliated
 customers            $ 23,332 $  4,072 $  5,193 $  4,331 $     -  $ 36,928
Intercompany sales       6,615        -       26      666  (7,307)        -
Operating income         4,271      596    1,175      583     (76)    6,549
Depreciation             1,088       38      122      241       -     1,489
Capital expenditures     2,534       18       49      251       -     2,852


Six Months
Ended June 30, 2007
Sales to unaffiliated
 customers            $ 49,604 $ 10,652 $ 12,698 $ 11,321 $     -  $ 84,275
Intercompany sales      16,163        -       50    1,534 (17,747)        -
Operating income        11,896    1,146    3,021    1,521     (58)   17,526
Depreciation             2,160       82      272      520       -     3,034
Capital expenditures     5,718      209       47      911       -     6,885

Six Months
Ended July 1, 2006
Sales to unaffiliated
 customers            $ 44,193 $  8,162 $  9,770 $  8,989 $     -  $ 71,114
Intercompany sales      13,292        -       62    1,452 (14,806)        -
Operating income         8,328    1,202    2,116    1,322    (109)   12,859
Depreciation             2,119       75      241      484       -     2,919
Capital expenditures     4,406       21       62      327       -     4,816