Sun Hydraulics Corporation Reports Increased First Quarter Earnings and Sales

SARASOTA, Fla., May 10, 2005 /PRNewswire-FirstCall via COMTEX/ -- Sun Hydraulics Corporation (Nasdaq: SNHY) reported financial results for the first quarter 2005 as follows:

(Logo: )

    (Dollars in millions except net income per share)

                                             April 2,   March 27,
                                               2005        2004     Increase

             Three Months Ended
    Net Sales                                  $29.1       $21.4        36%
    Net Income                                  $3.5        $1.4       150%
    Net Income per share:
       Basic                                   $0.49       $0.20       145%
       Fully Diluted                           $0.48       $0.20       140%

"2004 was an excellent year for Sun in all respects and 2005 is shaping up to be better than last year," said Allen Carlson, Sun Hydraulics President and CEO. "Orders continue to be strong and demand is up in all of our markets.

"Orders for the first quarter of 2005 were $30.8 million, a 25% increase over the first quarter last year," Carlson added. "April orders were $10.1 million, a 23% increase over last year. We believe second quarter sales will be higher than the first, despite fewer shipping days, and we expect to maintain our on-time delivery performance."

In conclusion, Carlson stated, "I believe Sun's strong financial condition and long term success are largely due to our philosophy of maintaining 'balance' in our business, both externally and internally. As stated in our just released 2004 annual report, balancing the interests of our customers, shareholders, employees, distributors and suppliers will remain at the heart of our efforts."


The Company estimates sales for the second quarter to be $30 million, a 13% increase over the second quarter last year. Non-recurring refinancing costs and increased marketing expenses are anticipated in the second quarter. Net income is forecasted to be between $0.45 and $0.48 per share.

Annual Report

Sun's 2004 Annual Report is now available at the Investor Relations section of our website at . To receive a copy by mail, please email requests to or call 941-362-1200.


Sun Hydraulics Corporation will broadcast its first quarter financial results conference call live over the Internet at 2:30 P.M. E.T. tomorrow, May 11, 2005. To listen to the webcast, go to . 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, , and clicking on Investor Relations on the left hand menu. Scroll down to the bottom of the page and click on contact email:, 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 1-800-406-5356.

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 .

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 "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.

    (in thousands except per share data)
                                                     Three months ended
                                               April 2, 2005    March 27, 2004
                                                 (unaudited)       (unaudited)

    Net sales                                      $29,079           $21,390

    Cost of sales                                   19,326            15,085

    Gross profit                                     9,753             6,305

    Selling, engineering and
     administrative expenses                         4,220             4,064

    Operating income                                 5,533             2,241

    Interest expense                                   136               148
    Foreign currency transaction gain                 (105)               (2)
    Miscellaneous expense, net                         (16)               13

    Income before income taxes                       5,518             2,082

    Income tax provision                             2,052               724

    Net income                                      $3,466            $1,358

    Basic net income per common share                $0.49             $0.20

    Weighted average basic shares
     outstanding                                     7,088             6,758

    Diluted net income per common share              $0.48             $0.20

    Weighted average diluted shares
     outstanding                                     7,149             6,802

    (in thousands)
                                             April 2, 2005   December 25, 2004
    Current assets:
      Cash and cash equivalents                    $10,725            $9,300
      Restricted Cash                                  454               462
      Accounts receivable, net of
       allowance for doubtful accounts
       of $141 and $170                             12,006             8,611
      Inventories                                    7,859             7,105
      Deferred income taxes                            392               392
      Other current assets                           1,091               776
          Total current assets                      32,527            26,646

    Property, plant and equipment, net              43,426            43,687
    Other assets                                     1,494             1,475

    Total assets                                   $77,447           $71,808

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable                              $3,150            $2,536
      Accrued expenses and other
       liabilities                                   4,077             4,609
      Long-term debt due within one year             1,037             1,058
      Dividends payable                                543               522
      Income taxes payable                             759             1,198
          Total current liabilities                  9,566             9,923

    Long-term debt due after one year               10,846            11,196
    Deferred income taxes                            4,989             4,986
    Other liabilities                                  295               300

          Total liabilities                         25,696            26,405

    Shareholders' equity:
      Common stock                                       7                 7
      Capital in excess of par value                32,210            28,579
      Unearned compensation related to
         outstanding restricted stock                 (532)             (608)
      Retained earnings                             16,793            13,870
      Accumulated other comprehensive
       income                                        3,273             3,566
      Treasury stock                                    --               (11)
          Total shareholders' equity                51,751            45,403

    Total liabilities and shareholders'
     equity                                        $77,447           $71,808

    Consolidated Statements of Cash Flows
    (in thousands)
                                                       Three Months ended
                                                April 2, 2005   March 27, 2004
                                                 (unaudited)      (unaudited)
    Cash flows from operating activities:
    Net income                                       $3,466            $1,358
    Adjustments to reconcile net income
     to net cash provided by operating
    Depreciation                                      1,390             1,327
    Loss on disposal of assets                           (1)               13
    Provision for deferred income taxes                   3               (87)
    Allowance for doubtful accounts                     (29)               20
    Amortization of compensation expense              1,139                65
    (Increase) decrease in:
        Accounts receivable                          (3,366)           (2,858)
        Inventories                                    (754)             (245)
        Other current assets                           (315)               (6)
        Other assets                                    (19)              117
    Increase (decrease) in:
        Accounts payable                                614               300
        Accrued expenses and other
         liabilities                                   (532)              744
        Dividends payable                                21                --
        Taxes payable                                    79               491
        Other liabilities                                (5)              (13)
    Net cash provided by operating
     activities                                       1,691             1,226

    Cash flows from investing activities:
    Capital expenditures                             (1,538)             (968)
    Proceeds from dispositions of
     equipment                                            1                17
    Net cash used in investing activities            (1,537)             (951)

    Cash flows from financing activities:
    Repayment of debt                                  (371)             (806)
    Proceeds from exercise of stock
     options                                          2,056                --
    Proceeds from stock issued                           32                --
    Payments for purchase of treasury
     stock                                              (27)              (25)
    Proceeds from reissuance of treasury
     stock                                               --                28
    Dividends to shareholders                          (543)             (270)
    Net cash used in financing activities             1,147            (1,073)

    Effect of exchange rate changes on
     cash and cash equivalents                          116                19

    Net increase in cash and cash
     equivalents                                      1,417              (779)

    Cash and cash equivalents, beginning
     of period                                        9,762             5,219

    Cash and cash equivalents, end of
     period                                         $11,179            $4,440

    Supplemental disclosure of cash flow
    Cash paid/(received):
        Interest                                       $136              $148
        Income taxes                                 $2,488              $320

                            United                   United    Elimi-  Consoli-

                                    States   Korea  Germany  Kingdom   nation   dated
    Three Months
    Ended April 2, 2005
    Sales to unaffiliated
     customers              $18,146  $2,667  $4,081  $4,185      $--  $29,079
    Intercompany sales        5,862      --      23     602   (6,487)      --
    Operating income/(loss)   3,872     330   1,174     318     (161)   5,533
    Depreciation                977      37     109     267       --    1,390
    Capital expenditures      1,375       5      61      97       --    1,538

    Three Months
    Ended March 27, 2004
    Sales to unaffiliated
     customers              $12,918  $2,296  $2,996  $3,180      $--  $21,390
    Intercompany sales        3,723      --      12     355   (4,090)      --
    Operating income/(loss)   1,490     264     526     (34)      (5)   2,241
    Depreciation                920      35      99     273       --    1,327
    Capital expenditures        800       4      30     134       --      968

SOURCE Sun Hydraulics Corporation

Dennis Tichio, Sun Hydraulics Corporation, +1-941-362-1288

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