Exhibit 99.1

Sun Hydraulics Q1 Earnings Jump to $0.57 on Strong Sales,

Q2 Outlook Reflects Continuing Momentum

SARASOTA, FLA, May 9, 2011 – Sun Hydraulics Corporation (NASDAQ: SNHY) reported financial results for the first quarter 2011 as follows:

(Dollars in millions except net income per share)

 

     April 2,
2011
     April 3,
2010
     Increase  

Three Months Ended

        

Net Sales

   $ 50.7       $ 31.6         60

Net Income

   $ 9.8       $ 3.3         197

Net Income per share:

        

Basic

   $ 0.57       $ 0.20         185

Diluted

   $ 0.57       $ 0.20         185

“The capital goods environment has rebounded and is in a strong growth phase right now,” reported Allen Carlson, Sun Hydraulics’ president and CEO. “Sun is enjoying solid top line growth, which is translating into great operational results. Gross margins in the quarter were 39% with operating margins at 27%. More importantly, though difficult to quantify, we believe we continue to gain market share across all segments.”

“Sun participated in two tradeshows in March and April – the IFPE/CONEXPO show in Las Vegas and the Hanover Power Transmission Fair in Hanover, Germany,” Carlson stated. “We introduced our new Series 4 Plus cartridges, which expand our flow capacity and are cost-effective alternatives for expensive, legacy industrial valves. The mood at both shows was upbeat, with a high energy level among both exhibitors and attendees.”

“The rapid upturn in this business cycle has gained momentum in 2011 and we continue to be able to meet the higher level of demand,” Carlson said. “The recent PMI at 60.4 signals continuing strength of the recovery. Right now, all indicators point to a widespread capital goods expansion.”

“We continue to be watchful of both our capability and capacity,” added Carlson. “Capital expenditures for the year are estimated to be approximately $10 million. Our current capacity is sufficient for the business levels we expect throughout 2011. However, we recognize that additional capacity may be required as the expansion of this business cycle and our market share gains continue.”

Outlook

Second quarter 2011 revenues are expected to be approximately $53 million, up approximately 35% compared to the same period last year. Earnings per share are estimated to be $0.57 to $0.60 compared to $0.36 last year.

Webcast

Sun Hydraulics Corporation will broadcast its Q1 financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, May 10, 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 (800) 334-8065 and using 8120753 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 April 2, 2011, 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  
     April 2, 2011     April 3, 2010  
     (unaudited)     (unaudited)  

Net sales

   $ 50,703      $ 31,605   

Cost of sales

     30,761        21,485   
                

Gross profit

     19,942        10,120   

Selling, engineering and administrative expenses

     6,031        5,156   
                

Operating income

     13,911        4,964   

Interest income, net

     (163     (137

Foreign currency transaction gain, net

     (54     (27

Miscellaneous income, net

     (289     (20
                

Income before income taxes

     14,417        5,148   

Income tax provision

     4,647        1,837   
                

Net income

   $ 9,770      $ 3,311   
                

Basic net income per common share

   $ 0.57      $ 0.20   

Weighted average basic shares outstanding

     17,032        16,942   

Diluted net income per common share

   $ 0.57      $ 0.20   

Weighted average diluted shares outstanding

     17,068        16,977   

Dividends declared per share

   $ 0.200      $ 0.090   


SUN HYDRAULICS CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

     April 2, 2011      January 1, 2011  
     (unaudited)         

Assets

     

Current assets:

     

Cash and cash equivalents

   $ 44,591       $ 33,206   

Restricted cash

     137         131   

Accounts receivable, net of allowance for doubtful accounts of $81 and $82

     20,143         16,399   

Inventories

     11,984         10,773   

Income taxes receivable

     —           1,154   

Deferred income taxes

     446         446   

Marketable securities

     12,532         11,614   

Other current assets

     3,222         2,556   
                 

Total current assets

     93,055         76,279   

Property, plant and equipment, net

     52,981         53,127   

Other assets

     1,466         2,628   
                 

Total assets

   $ 147,502       $ 132,034   
                 

Liabilities and Shareholders’ Equity

     

Current liabilities:

     

Accounts payable

   $ 5,613       $ 3,348   

Accrued expenses and other liabilities

     4,025         5,250   

Income taxes payable

     3,148         —     

Dividends payable

     1,537         1,531   
                 

Total current liabilities

     14,323         10,129   

Deferred income taxes

     5,690         5,684   

Other noncurrent liabilities

     1,463         1,197   
                 

Total liabilities

     21,476         17,010   

Shareholders’ equity:

     

Common stock

     17         17   

Capital in excess of par value

     46,948         44,001   

Retained earnings

     77,494         71,141   

Accumulated other comprehensive income

     1,567         (135
                 

Total shareholders’ equity

     126,026         115,024   
                 

Total liabilities and shareholders’ equity

   $ 147,502       $ 132,034   
                 


SUN HYDRAULICS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

     Three months ended  
     April 2, 2011     April 3, 2010  
     (unaudited)     (unaudited)  

Cash flows from operating activities:

    

Net income

   $ 9,770      $ 3,311   

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

    

Depreciation and amortization

     1,689        1,732   

(Gain) loss on disposal of assets

     (139     1   

Provision for deferred income taxes

     6        (16

Allowance for doubtful accounts

     (1     (9

Stock-based compensation expense

     402        286   

Stock options income tax benefit

     —          (23

(Increase) decrease in:

    

Accounts receivable

     (3,743     (4,409

Inventories

     (1,211     (1,079

Income taxes receivable

     1,154        1,485   

Other current assets

     (667     (601

Other assets

     (296     485   

Increase (decrease) in:

    

Accounts payable

     2,265        823   

Accrued expenses and other liabilities

     1,187        —     

Taxes payable

     3,148        60   

Other noncurrent liabilities

     266        25   
                

Net cash provided by operating activities

     13,830        2,071   

Cash flows from investing activities:

    

Proceeds from sale of joint venture

     1,451        —     

Capital expenditures

     (1,111     (668

Proceeds from dispositions

     140        —     

Purchases of marketable securities

     (1,989     (6,260

Proceeds from sale of marketable securities

     1,059        3,199   
                

Net cash used in investing activities

     (450     (3,729

Cash flows from financing activities:

    

Proceeds from exercise of stock options

     —          28   

Proceeds from stock issued

     133        98   

Dividends to shareholders

     (3,411     (1,527

Stock options income tax benefit

     —          23   
                

Net cash used in financing activities

     (3,278     (1,378

Effect of exchange rate changes on cash and cash equivalents

     1,289        (641
                

Net increase (decrease) in cash and cash equivalents

     11,391        (3,677

Cash and cash equivalents, beginning of period

     33,337        30,446   
                

Cash and cash equivalents, end of period

   $ 44,728      $ 26,769   
                

Supplemental disclosure of cash flow information:

    

Cash paid:

    

Income taxes

   $ 339      $ 331   

Supplemental disclosure of noncash transactions:

    

Common stock issued for shared distribution through accrued expenses and other liabilities

   $ 2,412      $ —     


     United                    United               
     States      Korea      Germany      Kingdom      Elimination     Consolidated  

Three Months Ended April 2, 2011

                

Sales to unaffiliated customers

   $ 30,467       $ 6,023       $ 7,188       $ 7,025       $ —        $ 50,703   

Intercompany sales

     9,489         —           52         376         (9,917     —     

Operating income

     9,976         941         1,740         1,206         48        13,911   

Depreciation

     1,292         25         99         241         —          1,657   

Capital expenditures

     896         122         45         48         —          1,111   

Three Months Ended April 3, 2010

                

Sales to unaffiliated customers

   $ 18,970       $ 4,192       $ 4,699       $ 3,744       $ —        $ 31,605   

Intercompany sales

     5,097         —           53         338         (5,488     —     

Operating income

     2,870         626         1,117         336         15        4,964   

Depreciation

     1,328         22         111         251         —          1,712   

Capital expenditures

     566         64         5         33         —          668   

Contact:

Richard K. Arter

Investor Relations

941-362-1200

Tricia Fulton

Chief Financial Officer

941-362-1200