SNHY-2014.08.04-8K Exhibit

"We continue to make investments to bring new products to market," continued Carlson. "Earlier this year we expanded our offering of electrically-actuated cartridge valves. This quarter we also enhanced our automated integrated package design tool - Quick Design. This tool is available on our website and allows customers to create custom integrated package solutions and receive designs in a matter of minutes. Product development efforts are on-going and we expect to release innovative products in the second half of the year."

Concluding, Carlson commented, "Demand in the first half of the year was strong. Estimated third quarter sales follow our normal seasonal pattern and show growth over the same period last year. The U.S. PMI released last week registered 57.1, which is the highest indication of growth in the manufacturing sector since April 2011. This represents positive near-term business conditions for Sun. We stand ready to capitalize on this growth and deliver value to our stakeholders."

If an individual wishes to ask questions directly during the webcast, the conference call may be accessed by dialing 1-888-455-2296 and using 2093210 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.”

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 28, 2014, 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 28, 2013. 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.



	Three months ended
	June 28, 2014			June 29, 2013
	(unaudited)			(unaudited)
Net sales	$	61,050		$	55,788
Cost of sales	35,294			32,387
Gross profit	25,756			23,401
Selling, engineering and administrative expenses	7,379			6,640
Operating income	18,377			16,761
Interest (income) expense, net	(284		)	(242		)
Foreign currency transaction (gain) loss, net	(37		)	(29		)
Miscellaneous (income) expense, net	274			(484		)
Income before income taxes	18,424			17,516
Income tax provision	6,238			5,726
Net income	$	12,186		$	11,790
Basic net income per common share	$	0.46		$	0.45
Weighted average basic shares outstanding	26,444			26,236
Diluted net income per common share	$	0.46		$	0.45
Weighted average diluted shares outstanding	26,444			26,236
Dividends declared per share	$	0.090		$	0.090



	Six months ended
	June 28, 2014			June 29, 2013
	(unaudited)			(unaudited)
Net sales	$	117,859		$	106,848
Cost of sales	68,036			62,943
Gross profit	49,823			43,905
Selling, engineering and administrative expenses	14,720			13,212
Operating income	35,103			30,693
Interest income, net	(596		)	(438		)
Foreign currency transaction gain, net	(30		)	(149		)
Miscellaneous (income) expense, net	358			(390		)
Income before income taxes	35,371			31,670
Income tax provision	11,800			10,305
Net income	$	23,571		$	21,365
Basic net income per common share	$	0.89		$	0.82
Weighted average basic shares outstanding	26,409			26,185
Diluted net income per common share	$	0.89		$	0.82
Weighted average diluted shares outstanding	26,409			26,185
Dividends declared per share	$	0.27		$	0.27



	June 28, 2014		December 28, 2013
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	72,139	$	54,912
Restricted cash	354		334
Accounts receivable, net of allowance for doubtful accounts of $117 and $117	22,666		16,984
Inventories	14,709		13,853
Income taxes receivable	—		954
Deferred income taxes	486		474
Short-term investments	38,501		38,729
Other current assets	4,417		2,816
Total current assets	153,272		129,056
Property, plant and equipment, net	77,424		75,731
Goodwill	5,329		5,221
Other assets	3,218		3,470
Total assets	$	239,243	$	213,478
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	5,976	$	4,630
Accrued expenses and other liabilities	6,542		7,016
Income taxes payable	21		—
Dividends payable	2,380		2,372
Total current liabilities	14,919		14,018
Deferred income taxes	7,809		7,747
Other noncurrent liabilities	302		285
Total liabilities	23,030		22,050
Commitments and contingencies	—		—
Shareholders’ equity:
Preferred stock, 2,000,000 shares authorized, par value $0.001, no shares outstanding	—		—
Common stock, 50,000,000 shares authorized, par value $0.001, 26,448,374 and 26,352,692 shares outstanding	26		26
Capital in excess of par value	70,879		65,391
Retained earnings	139,854		123,420
Accumulated other comprehensive income (loss)	5,454		2,591
Total shareholders’ equity	216,213		191,428
Total liabilities and shareholders’ equity	$	239,243	$	213,478

(in thousands)



	Six months ended
	June 28, 2014			June 29, 2013
	(unaudited)			(unaudited)
Cash flows from operating activities:
Net income	$	23,571		$	21,365
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,212			3,565
(Gain)Loss on disposal of assets	134			15
Gain on investment in business	—			(528		)
Provision for deferred income taxes	50			(14		)
Allowance for doubtful accounts	—			(29		)
Stock-based compensation expense	1,853			1,416
(Increase) decrease in, net of assets acquired:
Accounts receivable	(5,682		)	(6,740		)
Inventories	(856		)	186
Income taxes receivable	954			728
Other current assets	(1,601		)	(677		)
Other assets	(99		)	258
Increase (decrease) in, net of liabilities assumed:
Accounts payable	1,346			864
Accrued expenses and other liabilities	2,752			1,617
Income taxes payable	21			1,430
Other noncurrent liabilities	17			(1		)
Net cash provided by operating activities	26,672			23,455
Cash flows from investing activities:
Investment in business, net of cash acquired	—			(923		)
Capital expenditures	(5,057		)	(9,518		)
Purchases of short-term investments	(18,990		)	(11,888		)
Proceeds from sale of short-term investments	19,149			11,744
Net cash used in investing activities	(4,898		)	(10,585		)
Cash flows from financing activities:
Proceeds from stock issued	409			466
Dividends to shareholders	(7,129		)	(4,710		)
Change in restricted cash	(20		)	21
Net cash used in financing activities	(6,740		)	(4,223		)
Effect of exchange rate changes on cash and cash equivalents	2,193			(1,439		)
Net increase (decrease) in cash and cash equivalents	17,227			7,208
Cash and cash equivalents, beginning of period	54,912			34,478
Cash and cash equivalents, end of period	$	72,139		$	41,686
Supplemental disclosure of cash flow information:
Cash paid:
Income taxes	$	10,775		$	8,161
Supplemental disclosure of noncash transactions:
Common stock issued for shared distribution through accrued expenses and other liabilities	$	3,226		$	3,486
Common stock issued for deferred director’s compensation through other noncurrent liabilities	$	—		$	294



	June 28, 2014		June 29, 2013		Increase
Three Months Ended
Net sales	$	61.1	$	55.8	9	%
Net income	$	12.2	$	11.8	3	%
Net income per share:
Basic	$	0.46	$	0.45	2	%
Diluted	$	0.46	$	0.45	2	%
Six Months Ended
Net sales	$	117.9	$	106.8	10	%
Net income	$	23.6	$	21.4	10	%
Net income per share:
Basic	$	0.89	$	0.82	9	%
Diluted	$	0.89	$	0.82	9	%