Sun Hydraulics Reports Second Quarter Sales of $55.8 Million, With $0.45 Earnings per Share


SARASOTA, FL--(Marketwired - Aug 5, 2013) - Sun Hydraulics Corporation (NASDAQ: SNHY) today reported financial results for the second quarter of 2013 as follows:

               
    June 29, 2013   June 30, 2012   Increase/
(Decrease)
 
Three Months Ended                  
Net sales   $ 55.8   $ 57.0   (2 )%
Net income   $ 11.8   $ 11.2   5 %
Net income per share:                  
  Basic   $ 0.45   $ 0.43   5 %
  Diluted   $ 0.45   $ 0.43   5 %
Six Months Ended                  
Net sales   $ 106.8   $ 112.3   (5 )%
Net income   $ 21.4   $ 21.9   (2 )%
Net income per share:                  
  Basic   $ 0.82   $ 0.85   (4 )%
  Diluted   $ 0.82   $ 0.84   (2 )%
                     

"The second quarter was strong with better than expected earnings due to higher revenues and a $0.01 per share gain resulting from the acquisition of WhiteOak Controls," said Allen Carlson, Sun's President and CEO. "On a year-over-year basis, second quarter sales were off a bit in the Americas, flat in Europe and up slightly in Asia." 

"Our new factory in Sarasota is progressing nicely and we expect to be operational in the third quarter," Carlson said. "An important part of our value proposition is delivery reliability. The new factory ensures we will continue to offer the industry's best delivery. With the new factory coming online, we are closing our Kansas facility. We started the Kansas operation in 2003 to manufacture both ductile iron and larger aluminum manifolds used in integrated packages. The added space the new factory provides now makes it possible to consolidate these operations in Sarasota."

"The WhiteOak Controls acquisition is complete and fully integrated into High Country Tek (HCT)," Carlson continued. "Integrated solutions continue to represent the evolution of the cartridge valve industry and these electronic additions to our product portfolio enhance our position in the market place. As HCT and WhiteOak become more fully assimilated under the Sun brand, including representation by our global distribution network, we improve our ability to develop differentiated, integrated solutions for our customers."

Concluding, Carlson said, "As the outlook indicates, the 3rd quarter should follow our normal seasonal pattern. Global capital goods leading indicators are more positive than negative. Last week's U.S. PMI at 55.4 was encouraging and bodes well for the manufacturing environment and Sun. With our new factory, we have put Sun in position to take full advantage of the next growth cycle. We will continue to offer the industry's best delivery reliability and remain engaged in product and market development activities, while we continue to deliver strong financial results."

Outlook
Third quarter 2013 revenues are expected to be approximately $49 - 50 million, up approximately 1% from the third quarter of 2012. Earnings per share are estimated to be $0.32 to $0.34 compared to $0.34 in the same period a year ago. The Kansas relocation will cost approximately $0.02 per share, $0.01 of which is included in the third quarter estimate.

Webcast
Sun Hydraulics Corporation will broadcast its 2013 second quarter financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, August 6, 2013. To listen to the webcast, go to the Investor Relations section of www.sunhydraulics.com.

Webcast Q&A
If an individual wishes to ask questions directly during the webcast, the conference call may be accessed by dialing 1-888-481-2844 and using 7529287 as the access code. 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 June 29, 2013, 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 29, 2012. 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 29, 2013     June 30, 2012  
    (unaudited)     (unaudited)  
Net sales   $ 55,788     $ 57,031  
Cost of sales     32,387       34,062  
Gross profit     23,401       22,969  
Selling, engineering and administrative expenses     6,640       6,505  
Operating income     16,761       16,464  
Interest income, net     (242 )     (294 )
Foreign currency transaction gain, net     (29 )     (66 )
Miscellaneous (income) expense, net     (484 )     (39 )
Income before income taxes     17,516       16,863  
Income tax provision     5,726       5,616  
Net income   $ 11,790     $ 11,247  
Basic net income per common share   $ 0.45     $ 0.43  
Weighted average basic shares outstanding     26,236       25,937  
Diluted net income per common share   $ 0.45     $ 0.43  
Weighted average diluted shares outstanding     26,236       25,975  
Dividends declared per share   $ 0.090     $ 0.090  
                 
                 
 
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
 
       
    Six months ended  
    June 29, 2013     June 30, 2012  
    (unaudited)     (unaudited)  
Net sales   $ 106,848     $ 112,305  
Cost of sales     62,943       67,118  
Gross profit     43,905       45,187  
Selling, engineering and administrative expenses     13,212       13,459  
Operating income     30,693       31,728  
Interest income, net     (438 )     (635 )
Foreign currency transaction gain, net     (149 )     (77 )
Miscellaneous (income) expense, net     (390 )     (164 )
Income before income taxes     31,670       32,604  
Income tax provision     10,305       10,734  
Net income   $ 21,365     $ 21,870  
Basic net income per common share   $ 0.82     $ 0.85  
Weighted average basic shares outstanding     26,185       25,861  
Diluted net income per common share   $ 0.82     $ 0.84  
Weighted average diluted shares outstanding     26,185       25,905  
Dividends declared per share   $ 0.270     $ 0.300  
                 
                 
 
SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
 
           
    June 29, 2013     December 29, 2012
    (unaudited)    
Assets              
Current assets:              
  Cash and cash equivalents   $ 41,686     $ 34,478
  Restricted cash     308       329
  Accounts receivable, net of allowance for doubtful accounts of $95 and $124     20,536       13,754
  Inventories     12,441       12,559
  Income taxes receivable     --       728
  Deferred income taxes     429       248
  Short-term investments     36,815       37,700
  Other current assets     3,326       2,649
  Total current assets     115,541       102,445
Property, plant and equipment, net     70,555       64,672
Goodwill     5,082       4,472
Other assets     3,803       3,532
  Total assets   $ 194,981     $ 175,121
Liabilities and shareholders' equity              
Current liabilities:              
  Accounts payable   $ 5,470     $ 4,606
  Accrued expenses and other liabilities     5,478       7,641
  Income taxes payable     1,430       --
  Dividends payable     2,362       --
  Total current liabilities     14,740       12,247
Deferred income taxes     7,397       7,230
Other noncurrent liabilities     370       371
  Total liabilities     22,507       19,848
Commitments and contingencies     --       --
Shareholders' equity:              
  Preferred stock, 2,000,000 shares authorized, par value $0.001, no shares outstanding     --       --
  Common stock, 40,000,000 shares authorized, par value $0.001, 26,239,642 and 26,094,580 shares outstanding     26       26
  Capital in excess of par value     63,064       57,402
  Retained earnings     111,535       97,242
  Accumulated other comprehensive income (loss)     (2,151 )     603
  Total shareholders' equity     172,474       155,273
  Total liabilities and shareholders' equity   $ 194,981     $ 175,121
                 
                 
 
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
 
       
    Six months ended  
    June 29, 2013     June 30, 2012  
    (unaudited)     (unaudited)  
Cash flows from operating activities:                
Net income   $ 21,365     $ 21,870  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     3,565       3,576  
(Gain)Loss on disposal of assets     15       (21 )
Gain on investment in business     (528 )     --  
Unrealized foreign exchange gain     --       15  
Provision for deferred income taxes     (14 )     1  
Allowance for doubtful accounts     (29 )     (15 )
Stock-based compensation expense     1,416       1,157  
(Increase) decrease in:                
  Accounts receivable     (6,740 )     (5,442 )
  Inventories     186       (890 )
  Income taxes receivable     728       120  
  Other current assets     (677 )     (356 )
  Other assets     258       181  
Increase (decrease) in:                
  Accounts payable     864       403  
  Accrued expenses and other liabilities     1,617       2,834  
  Income taxes payable     1,430       342  
  Other noncurrent liabilities     (1 )     25  
Net cash provided by operating activities     23,455       23,800  
Cash flows from investing activities:                
Investment in business, net of cash acquired     (923 )     --  
Capital expenditures     (9,518 )     (4,752 )
Proceeds from dispositions of equipment     --       21  
Purchases of short-term investments     (11,888 )     (12,251 )
Proceeds from sale of short-term investments     11,744       3,130  
Net cash used in investing activities     (10,585 )     (13,852 )
Cash flows from financing activities:                
Proceeds from stock issued     466       333  
Dividends to shareholders     (4,710 )     (7,769 )
Change in restricted cash     21       2  
Net cash used in financing activities     (4,223 )     (7,434 )
Effect of exchange rate changes on cash and cash equivalents     (1,439 )     (311 )
Net increase (decrease) in cash and cash equivalents     7,208       2,203  
Cash and cash equivalents, beginning of period     34,478       51,262  
Cash and cash equivalents, end of period   $ 41,686     $ 53,465  
Supplemental disclosure of cash flow information:                
Cash paid:                
  Income taxes   $ 8,161     $ 10,272  
Supplemental disclosure of noncash transactions:                
Common stock issued for shared distribution through accrued expenses and other liabilities   $ 3,486     $ 4,407  
Common stock issued for deferred director's compensation through other noncurrent liabilities   $ 294     $ 930