Exhibit 99.1

Sun Hydraulics 2010 Earnings Rise; Board Announces Shared Distribution and First Quarter Dividend

SARASOTA, FLA, March 7, 2011 – Sun Hydraulics Corporation (NASDAQ: SNHY) today reported financial results for the fourth quarter and year-end 2010 as follows:

(Dollars in millions except net income per share)

 

     January 1,
2011
     January 2,
2010
     Increase  

Twelve Months Ended

        

Net Sales

   $ 150.7       $ 97.4         55

Net Income

   $ 21.4       $ 1.9         1026

Net Income per share:

        

Basic

   $ 1.26       $ 0.11         1045

Diluted

   $ 1.26       $ 0.11         1045

Three Months Ended

        

Net Sales

   $ 41.8       $ 27.3         53

Net Income

   $ 6.3       $ 1.3         385

Net Income per share:

        

Basic

   $ 0.37       $ 0.08         363

Diluted

   $ 0.37       $ 0.08         363

“Business activity in 2010 rebounded more quickly than we had anticipated,” said Allen Carlson, Sun Hydraulics’ president and CEO. “We have been able to keep up with the steadily increasing demand, while realizing substantial productivity improvements, thanks in large part to maintaining and investing in our workforce readiness throughout the downturn. Operationally, we have done an excellent job in managing the business, which is demonstrated in the strong earnings numbers.”

“Our business continued to expand in the fourth quarter, which is a bit unusual,” Carlson continued. “That expansion has continued without a hitch into the first quarter, as we begin to see some of our traditional markets gain strength. Sales in 2010 were buoyed by new customers around the world. Traditional markets like mining, construction and AWPs appear to be gaining strength, indicating 2011 could be a very good year.”

Concluding, Carlson spoke about the future, saying, “The macroeconomic outlook is robust, the PMI continues to expand and all signals are positive. As capital goods industries remain strong, Sun will continue to grow and earnings will continue to rise. We have a very strong first quarter forecast, and we expect to remain busy.”

Shared Distribution and Quarterly Dividend

“Last week the Board elected to once again apportion a shared distribution for employees and shareholders based on our 2010 results,” stated Ferdinand Megerlin, Sun’s Chairman. “The shared distribution consists of a 9% contribution for employees, most of which will be paid into retirement plans, and an $0.11 per share cash dividend to shareholders, totaling approximately $4.6 million. We initiated the shared distribution concept in 2008 as a way to reward both shareholders and employees when Sun has a successful year.”


The shared distribution dividend is payable on March 31, 2011, to shareholders of record on March 15, 2011. In addition to the shared distribution dividend, the Board also declared a quarterly dividend of $0.09 per share payable on April 15, 2011, to shareholders of record on March 31, 2011.

Sun Hydraulics advises all shareholders to familiarize themselves with rules regarding dividends, payment dates and ex-dividend dates. See the following website for more information http://www.sec.gov/answers/dividen.htm.

Outlook

First quarter 2011 revenues are expected to be approximately $50 million, up approximately 58% from the first quarter of 2010. Earnings per share are estimated to be $0.50 to $0.53 compared to $0.20 in the same period a year ago.

Webcast

Sun Hydraulics Corporation will broadcast its 2010 financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, March 8, 2011. 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 1-888-240-1347 and using 3208319 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

 

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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 October 2, 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 1, 2011. 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  
     January 1,
2011
    January 2,
2010
 

Net sales

   $  41,772      $  27,262   

Cost of sales

     27,083        20,468   
                

Gross profit

     14,689        6,794   

Selling, engineering and administrative expenses

     5,935        5,245   
                

Operating income

     8,754        1,549   

Interest income, net

     (170     (135

Foreign currency transaction loss, net

     59        22   

Miscellaneous expense, net

     103        36   
                

Income before income taxes

     8,762        1,626   

Income tax provision

     2,495        340   
                

Net income

   $ 6,267      $ 1,286   
                

Basic net income per common share

   $ 0.37      $ 0.08   

Weighted average basic shares outstanding

     17,003        16,927   

Diluted net income per common share

   $ 0.37      $ 0.08   

Weighted average diluted shares outstanding

     17,037        16,962   

Dividends declared per share

   $ 0.590      $ 0.090   

 

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SUN HYDRAULICS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share data)

 

     Twelve Months Ended  
     January 1,
2011
    January 2,
2010
 

Net sales

   $  150,695      $  97,393   

Cost of sales

     98,352        75,436   
                

Gross profit

     52,343        21,957   

Selling, engineering and administrative expenses

     21,304        19,814   
                

Operating income

     31,039        2,143   

Interest income, net

     (653     (562

Foreign currency transaction loss, net

     106        265   

Miscellaneous (income) expense, net

     (57     423   
                

Income before income taxes

     31,643        2,017   

Income tax provision

     10,243        161   
                

Net income

   $ 21,400      $ 1,856   
                

Basic net income per common share

   $ 1.26      $ 0.11   

Weighted average basic shares outstanding

     16,952        16,837   

Diluted net income per common share

   $ 1.26      $ 0.11   

Weighted average diluted shares outstanding

     16,985        16,870   

Dividends declared per share

   $ 0.860      $ 0.450   

 

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SUN HYDRAULICS CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

     January 1,
2011
    January 2,
2010
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 33,206      $ 30,314   

Restricted cash

     131        132   

Accounts receivable, net of allowance for doubtful accounts of $82 and $90

     16,399        9,949   

Inventories

     10,773        7,799   

Income taxes receivable

     1,154        1,485   

Deferred income taxes

     446        575   

Marketable securities

     11,614        7,844   

Other current assets

     2,556        1,797   
                

Total current assets

     76,279        59,895   

Property, plant and equipment, net

     53,127        56,633   

Other assets

     2,628        3,405   
                

Total assets

   $ 132,034      $ 119,933   
                

Liabilities and Shareholders’ Equity

    

Current liabilities:

    

Accounts payable

   $ 3,348      $ 2,442   

Accrued expenses and other liabilities

     5,250        2,475   

Dividends payable

     1,531        1,524   
                

Total current liabilities

     10,129        6,441   

Deferred income taxes

     5,684        5,191   

Other liabilities

     1,197        687   
                

Total liabilities

     17,010        12,319   

Shareholders’ equity:

    

Common stock

     17        17   

Capital in excess of par value

     44,001        42,210   

Retained earnings

     71,141        64,383   

Accumulated other comprehensive income (loss)

     (135     1,004   
                

Total shareholders’ equity

     115,024        107,614   
                

Total liabilities and shareholders’ equity

   $ 132,034      $ 119,933   
                

 

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SUN HYDRAULICS CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands)

 

     Twelve Months Ended  
     January 1,
2011
    January 2,
2010
 

Cash flows from operating activities:

    

Net income

   $ 21,400      $ 1,856   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     6,873        6,968   

(Gain) loss on disposal of assets

     (43     30   

Stock-based compensation expense

     1,149        960   

Deferred director and phantom stock unit expense

     557        398   

Stock options income tax benefit

     (175     (9

Allowance for doubtful accounts

     (8     (2

Provision for slow moving inventory

     (159     (41

Provision for deferred income taxes

     622        4   

(Increase) decrease in:

    

Accounts receivable

     (6,442     2,555   

Inventories

     (2,815     2,202   

Income taxes receivable

     506        (123

Other current assets

     (759     (507

Other assets, net

     750        560   

Increase (decrease) in:

    

Accounts payable

     861        (816

Accrued expenses and other liabilities

     2,775        (672

Other liabilities

     (2     304   
                

Net cash from operating activities

     25,090        13,667   

Cash flows used in investing activities:

    

Capital expenditures

     (3,856     (5,096

Proceeds from dispositions of equipment

     175        —     

Purchases of marketable securities

     (14,175     (10,600

Proceeds from sale of marketable securities

     10,230        2,863   
                

Net cash used in investing activities

     (7,626     (12,833

Cash flows used in financing activities:

    

Repayment of debt

     —          (261

Proceeds from exercise of stock options

     44        11   

Stock options income tax benefit

     175        9   

Proceeds from stock issued

     423        392   

Dividends to shareholders

     (14,635     (7,547
                

Net cash used in financing activities

     (13,993     (7,396

Effect of exchange rate changes on cash and cash equivalents

     (580     1,705   
                

Net increase (decrease) in restricted cash

     (1     5   

Net increase (decrease) in cash and cash equivalents

     2,892        (4,862
                

Cash and cash equivalents, beginning of period

     30,446        35,303   
                

Cash and cash equivalents, end of period

   $ 33,337      $ 30,446   
                

Supplemental disclosure of cash flow information:

    

Cash paid:

    

Interest

   $ —        $ 9   

Income taxes

   $ 9,290      $ 289   

Supplemental disclosure of noncash transactions:

    

Common stock issued to ESOP through accrued expenses and other liabilities

   $ —        $ 2,796   

Unrealized gain (loss) on available for sale securities

   $ (59   $ 116   

 

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     United
States
    Korea      Germany     United
Kingdom
     Elimination     Consolidated  

Three Months

              

Ended January 1, 2011

              

Sales to unaffiliated customers

   $ 26,170      $ 4,134       $ 5,000      $ 6,468       $ —        $ 41,772   

Intercompany sales

     7,267        —           42        289         (7,598     —     

Operating income

     6,528        592         935        700         (1     8,754   

Depreciation and amortization

     1,361        23         109        241         —          1,734   

Capital expenditures

     1,688        76         6        26         —          1,796   

Three Months

              

Ended January 2, 2010

              

Sales to unaffiliated customers

   $ 17,200      $ 3,012       $ 3,613      $ 3,437       $ —        $ 27,262   

Intercompany sales

     3,964        —           21        186         (4,171     —     

Operating income

     320        213         703        284         29        1,549   

Depreciation and amortization

     1,288        24         123        265         —          1,700   

Capital expenditures

     461        10         (7     84         —          548   

Twelve Months

              

Ended January 1, 2011

              

Sales to unaffiliated customers

   $ 94,067      $ 16,284       $ 19,770      $ 20,574       $ —        $ 150,695   

Intercompany sales

     26,022        —           160        1,225         (27,407     —     

Operating income

     22,040        2,246         4,024        2,822         (93     31,039   

Depreciation and amortization

     5,388        89         429        967           6,873   

Capital expenditures

     3,400        217         27        212           3,856   

Twelve Months

              

Ended January 2, 2010

              

Sales to unaffiliated customers

   $ 59,278      $ 9,978       $ 14,654      $ 13,483       $ —        $ 97,393   

Intercompany sales

     15,545        —           139        1,101         (16,785     —     

Operating income (loss)

     (2,110     616         2,475        884         278        2,143   

Depreciation and amortization

     5,335        104         502        1,027           6,968   

Capital expenditures

     4,758        41         30        267           5,096   

 

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