Exhibit 99.1
Sun Hydraulics Reports $0.36 Earnings on $39 Million Sales
SARASOTA, FLA, August 9, 2010 - Sun Hydraulics Corporation (NASDAQ: SNHY) reported financial results for the second quarter 2010 as follows:
(Dollars in millions except net income per share)
| July 3, 2010 |
June 27, 2009 |
Increase | |||||||
| Three Months Ended |
|||||||||
| Net Sales |
$ | 39.2 | $ | 21.6 | 81 | % | |||
| Net Income (loss) |
$ | 6.1 | -$ | 0.5 | 1320 | % | |||
| Net Income (loss) per share: |
|||||||||
| Basic |
$ | 0.36 | -$ | 0.03 | 1300 | % | |||
| Diluted |
$ | 0.36 | -$ | 0.03 | 1300 | % | |||
| Six Months Ended |
|||||||||
| Net Sales |
$ | 70.9 | $ | 46.8 | 51 | % | |||
| Net Income |
$ | 9.4 | $ | 0.0 | 62720 | % | |||
| Net Income per share: |
|||||||||
| Basic |
$ | 0.56 | $ | 0.00 | 62496 | % | |||
| Fully Diluted |
$ | 0.55 | $ | 0.00 | 61490 | % | |||
“We had a strong second quarter, as expected,” said Allen Carlson, Sun’s CEO and president. “We met our revenue estimates, came in at the top of our earnings estimates, and have quickly regained our operating leverage. We are very pleased that second quarter results included shipments to new customers in China, North America and Europe. Some of this business represents sizeable ongoing orders. In all cases, it was our efforts during last year’s downturn that proved to be the foundation of securing the new business. As evidenced in our results, we are operating at a high rate of efficiency. On-time deliveries are being maintained with a small amount of overtime and, to date, we have engaged in limited hiring in key areas.”
Continuing, Carlson stated, “We have the infrastructure and capability in place to meet demand. And as we have proven, we are agile and can flex with the business cycle. Above all else, we will continue to service our existing customers, work diligently to gain new ones and invest in our people and processes to ensure Sun’s long-term success.”
Outlook
In conclusion, Carlson commented, “Our third quarter estimates reflect normal seasonality in demand levels. We typically have a strong second quarter followed by some softening in the third quarter and 2010 is following that same pattern. We continue to demonstrate strong operating leverage on higher revenues.”
Third quarter sales are expected to be $37 million, a 59% increase in revenue compared to the same period last year, and earnings are expected to be $0.32 to $0.34 per share compared to $0.03 per share in the same period of the prior year.
Webcast
Sun Hydraulics Corporation will broadcast its Q2 financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, August 10, 2010. To listen to the webcast, go to http://investor.sunhydraulics.com.
Webcast Q&A
If an individual wishes to ask questions directly during the webcast, the conference call may be accessed by dialing (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
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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 July 3, 2010, 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.
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SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
| Three months ended | ||||||||
| July 3, 2010 | June 27, 2009 | |||||||
| (unaudited) | (unaudited) | |||||||
| Net sales |
$ | 39,246 | $ | 21,607 | ||||
| Cost of sales |
25,262 | 17,373 | ||||||
| Gross profit |
13,984 | 4,234 | ||||||
| Selling, engineering and administrative expenses |
4,845 | 4,867 | ||||||
| Operating income (loss) |
9,139 | (633 | ) | |||||
| Interest income, net |
(144 | ) | (171 | ) | ||||
| Foreign currency transaction loss, net |
69 | 339 | ||||||
| Miscellaneous (income) expense, net |
(109 | ) | 101 | |||||
| Income (loss) before income taxes |
9,323 | (902 | ) | |||||
| Income tax provision (benefit) |
3,210 | (366 | ) | |||||
| Net income (loss) |
$ | 6,113 | $ | (536 | ) | |||
| Basic net income (loss) per common share |
$ | 0.36 | $ | (0.03 | ) | |||
| Weighted average basic shares outstanding |
16,953 | 16,867 | ||||||
| Diluted net income (loss) per common share |
$ | 0.36 | $ | (0.03 | ) | |||
| Weighted average diluted shares outstanding |
16,985 | 16,899 | ||||||
| Dividends declared per share |
$ | 0.090 | $ | 0.090 | ||||
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
| Six months ended | ||||||||
| July 3, 2010 | June 27, 2009 | |||||||
| (unaudited) | (unaudited) | |||||||
| Net sales |
$ | 70,850 | $ | 46,815 | ||||
| Cost of sales |
46,747 | 37,003 | ||||||
| Gross profit |
24,103 | 9,812 | ||||||
| Selling, engineering and administrative expenses |
10,001 | 9,642 | ||||||
| Operating income |
14,102 | 170 | ||||||
| Interest income, net |
(281 | ) | (282 | ) | ||||
| Foreign currency transaction loss, net |
41 | 331 | ||||||
| Miscellaneous (income) loss, net |
(128 | ) | 300 | |||||
| Income (loss) before income taxes |
14,470 | (179 | ) | |||||
| Income tax provision (benefit) |
5,047 | (194 | ) | |||||
| Net income |
$ | 9,423 | $ | 15 | ||||
| Basic net income per common share |
$ | 0.56 | $ | 0.00 | ||||
| Weighted average basic shares outstanding |
16,948 | 16,767 | ||||||
| Diluted net income per common share |
$ | 0.55 | $ | 0.00 | ||||
| Weighted average diluted shares outstanding |
16,981 | 16,797 | ||||||
| Dividends declared per share |
$ | 0.180 | $ | 0.270 | ||||
SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
| July 3, 2010 | January 2, 2010 | ||||||
| (unaudited) | |||||||
| Assets |
|||||||
| Current assets: |
|||||||
| Cash and cash equivalents |
$ | 27,860 | $ | 30,314 | |||
| Restricted cash |
124 | 132 | |||||
| Accounts receivable, net of allowance for doubtful accounts of $77 and $90 |
16,596 | 9,949 | |||||
| Inventories |
9,300 | 7,799 | |||||
| Income taxes receivable |
— | 1,485 | |||||
| Deferred income taxes |
575 | 575 | |||||
| Marketable securities |
13,352 | 7,844 | |||||
| Other current assets |
2,733 | 1,797 | |||||
| Total current assets |
70,540 | 59,895 | |||||
| Property, plant and equipment, net |
53,644 | 56,633 | |||||
| Other assets |
2,840 | 3,405 | |||||
| Total assets |
$ | 127,024 | $ | 119,933 | |||
| Liabilities and Shareholders’ Equity |
|||||||
| Current liabilities: |
|||||||
| Accounts payable |
$ | 4,743 | $ | 2,442 | |||
| Accrued expenses and other liabilities |
3,205 | 2,475 | |||||
| Income taxes payable |
174 | — | |||||
| Dividends payable |
1,526 | 1,524 | |||||
| Total current liabilities |
9,648 | 6,441 | |||||
| Deferred income taxes |
5,173 | 5,191 | |||||
| Other noncurrent liabilities |
650 | 687 | |||||
| Total liabilities |
15,471 | 12,319 | |||||
| Shareholders’ equity: |
|||||||
| Common stock |
17 | 17 | |||||
| Capital in excess of par value |
43,015 | 42,210 | |||||
| Retained earnings |
70,750 | 64,383 | |||||
| Accumulated other comprehensive income |
(2,229 | ) | 1,004 | ||||
| Total shareholders’ equity |
111,553 | 107,614 | |||||
| Total liabilities and shareholders’ equity |
$ | 127,024 | $ | 119,933 | |||
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Six months ended | ||||||||
| July 3, 2010 | June 27, 2009 | |||||||
| (unaudited) | (unaudited) | |||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 9,423 | $ | 15 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
3,460 | 3,559 | ||||||
| Loss on disposal of assets |
21 | 1 | ||||||
| Provision for deferred income taxes |
(18 | ) | 35 | |||||
| Allowance for doubtful accounts |
(13 | ) | (6 | ) | ||||
| Stock-based compensation expense |
540 | 441 | ||||||
| Stock options income tax benefit |
(29 | ) | — | |||||
| (Increase) decrease in: |
||||||||
| Accounts receivable |
(6,634 | ) | 2,033 | |||||
| Inventories |
(1,501 | ) | 1,563 | |||||
| Income taxes receivable |
1,485 | (2,057 | ) | |||||
| Other current assets |
(936 | ) | (326 | ) | ||||
| Other assets |
549 | 277 | ||||||
| (Increase) decrease in: |
||||||||
| Accounts payable |
2,301 | 107 | ||||||
| Accrued expenses and other liabilities |
752 | (200 | ) | |||||
| Income taxes payable |
203 | — | ||||||
| Other noncurrent liabilities |
(37 | ) | 24 | |||||
| Net cash provided by operating activities |
9,566 | 5,466 | ||||||
| Cash flows from investing activities: |
||||||||
| Capital expenditures |
(1,325 | ) | (3,506 | ) | ||||
| Purchases of marketable securities |
(11,126 | ) | (8,133 | ) | ||||
| Proceeds from sale of marketable securities |
5,390 | 420 | ||||||
| Net cash used in investing activities |
(7,061 | ) | (11,219 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Repayment of debt |
— | (261 | ) | |||||
| Proceeds from exercise of stock options |
39 | 214 | ||||||
| Proceeds from stock issued |
176 | — | ||||||
| Dividends to shareholders |
(3,051 | ) | (4,504 | ) | ||||
| Stock options income tax benefit |
29 | — | ||||||
| Net cash used in financing activities |
(2,807 | ) | (4,551 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents |
(2,160 | ) | 1,066 | |||||
| Net decrease in cash and cash equivalents |
(2,462 | ) | (9,238 | ) | ||||
| Cash and cash equivalents, beginning of period |
30,446 | 35,303 | ||||||
| Cash and cash equivalents, end of period |
$ | 27,984 | $ | 26,065 | ||||
| Supplemental disclosure of cash flow information: |
||||||||
| Cash paid: |
||||||||
| Interest |
$ | — | $ | 9 | ||||
| Income taxes |
$ | 3,406 | $ | 1,828 | ||||
| United States |
Korea | Germany | United Kingdom |
Elimination | Consolidated | ||||||||||||||||
| Three Months Ended July 3, 2010 |
|||||||||||||||||||||
| Sales to unaffiliated customers |
$ | 25,259 | $ | 4,644 | $ | 4,669 | $ | 4,674 | $ | — | $ | 39,246 | |||||||||
| Intercompany sales |
6,785 | — | 28 | 287 | (7,100 | ) | — | ||||||||||||||
| Operating income |
7,005 | 651 | 911 | 759 | (187 | ) | 9,139 | ||||||||||||||
| Depreciation |
1,320 | 22 | 102 | 234 | — | 1,678 | |||||||||||||||
| Capital expenditures |
515 | 48 | 1 | 92 | — | 656 | |||||||||||||||
| Three Months Ended June 27, 2009 |
|||||||||||||||||||||
| Sales to unaffiliated customers |
$ | 12,569 | $ | 2,384 | $ | 3,445 | $ | 3,209 | $ | — | $ | 21,607 | |||||||||
| Intercompany sales |
3,544 | — | 46 | 233 | (3,823 | ) | — | ||||||||||||||
| Operating income (loss) |
(1,541 | ) | 124 | 561 | 123 | 100 | (633 | ) | |||||||||||||
| Depreciation |
1,365 | 27 | 130 | 260 | — | 1,782 | |||||||||||||||
| Capital expenditures |
2,205 | 4 | 24 | 37 | — | 2,270 | |||||||||||||||
| Six Months Ended July 3, 2010 |
|||||||||||||||||||||
| Sales to unaffiliated customers |
$ | 44,228 | $ | 8,836 | $ | 9,368 | $ | 8,418 | $ | — | $ | 70,850 | |||||||||
| Intercompany sales |
11,882 | — | 81 | 625 | (12,588 | ) | — | ||||||||||||||
| Operating income |
9,875 | 1,277 | 2,028 | 1,095 | (173 | ) | 14,102 | ||||||||||||||
| Depreciation |
2,648 | 44 | 214 | 484 | — | 3,390 | |||||||||||||||
| Capital expenditures |
1,081 | 114 | 5 | 125 | — | 1,325 | |||||||||||||||
| Six Months Ended June 27, 2009 |
|||||||||||||||||||||
| Sales to unaffiliated customers |
$ | 28,189 | $ | 4,345 | $ | 7,612 | $ | 6,669 | $ | — | $ | 46,815 | |||||||||
| Intercompany sales |
7,700 | — | 75 | 698 | (8,473 | ) | — | ||||||||||||||
| Operating income (loss) |
(2,090 | ) | 210 | 1,274 | 576 | 200 | 170 | ||||||||||||||
| Depreciation |
2,735 | 53 | 254 | 493 | — | 3,535 | |||||||||||||||
| Capital expenditures |
3,336 | 27 | 28 | 115 | — | 3,506 | |||||||||||||||