Exhibit 99.1

Sun Hydraulics Second Quarter Sales and Earnings Remain Strong

SARASOTA, FLA, August 8, 2011 – Sun Hydraulics Corporation (NASDAQ: SNHY) today reported financial results for the second quarter of 2011 as follows:

(Dollars in millions except net income per share)

 

     July 2,
2011
     July 3,
2010
     Increase  

Three Months Ended

        

Net Sales

   $ 54.8       $ 39.2         40

Net Income

   $ 10.4       $ 6.1         70

Net Income per share:

        

Basic

   $ 0.41       $ 0.24         71

Diluted

   $ 0.41       $ 0.24         71

Six Months Ended

        

Net Sales

   $ 105.5       $ 70.9         49

Net Income

   $ 20.2       $ 9.4         115

Net Income per share:

        

Basic

   $ 0.79       $ 0.37         114

Fully Diluted

   $ 0.79       $ 0.37         114

Note: The Company announced a three-for-two stock split, effected in the form of a 50% stock dividend, to shareholders of record on June 30, 2011, payable on July 15, 2011. All earnings per share and weighted average share information reflect the 50% stock dividend.

“The global capital goods expansion is strong and Sun’s second quarter activity reflects that,” commented Allen Carlson, Sun’s CEO and president. “Sales were a bit higher than our Q2 estimates and all regions contributed to the top line growth. Earnings were consistent with our strong first quarter results. Gross margin remains high, at 39.6%, as we continue to leverage our manufacturing assets. The U.S. PMI, Sun’s primary leading indicator, continued to show growth in July for the 24th month in a row, albeit at a slower rate. This demonstrates to us that the economy is still expanding.”

“Product development continues to yield interesting additions to Sun’s product line,” Carlson continued. “New products, which account for approximately 10% – 12% of sales, provide new and efficient innovative solution possibilities. Sun’s brand is built on developing products that help customers create unique solutions for their motion control needs and we continue to meet that challenge.”

“In June, the Board declared a 50% stock dividend,” stated Carlson. “The new share amounts enhance the trading activity in the marketplace and provide Sun a flexible platform for future financing activities. Coupled with the stock dividend, the Board elected to keep the cash dividend at $0.09 per share on the new shares outstanding, effectively increasing the cash dividend by 50%. We continue to believe that Sun is an attractive and rewarding choice for the investment community.”


Outlook

Third quarter 2011 revenues are expected to be approximately $53 million, reflecting what the Company believes is its normal seasonal business pattern. This represents a 39% increase over 2010 third quarter revenue of $38 million.

Earnings per share for the third quarter are estimated to be $0.38 to $0.41, commensurate with sales levels, and compared with $0.23 in the same quarter last 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 9, 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) 218-2154 and using 3546326 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 July 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  
     July 2, 2011     July 3, 2010  
     (unaudited)     (unaudited)  

Net sales

   $ 54,770      $ 39,246   

Cost of sales

     33,096        25,262   
  

 

 

   

 

 

 

Gross profit

     21,674        13,984   

Selling, engineering and administrative expenses

     6,290        4,845   
  

 

 

   

 

 

 

Operating income

     15,384        9,139   

Interest income, net

     (186     (144

Foreign currency transaction (gain) loss, net

     (33     69   

Miscellaneous expense (income), net

     32        (109
  

 

 

   

 

 

 

Income before income taxes

     15,571        9,323   

Income tax provision

     5,134        3,210   
  

 

 

   

 

 

 

Net income

   $ 10,437      $ 6,113   
  

 

 

   

 

 

 

Basic net income per common share (1)

   $ 0.41      $ 0.24   

Weighted average basic shares outstanding (1)

     25,638        25,429   

Diluted net income per common share (1)

   $ 0.41      $ 0.24   

Weighted average diluted shares outstanding (1)

     25,674        25,477   

Dividends declared per share (1)

   $ 0.090      $ 0.060   

 

(1) The Company announced a three-for-two stock split, effected in the form of a 50% stock dividend, to shareholders of record on June 30, 2011, payable on July 15, 2011. All per share and weighted average share information reflect the 50% stock dividend.


SUN HYDRAULICS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share data)

 

     Six months ended  
     July 2, 2011     July 3, 2010  
     (unaudited)     (unaudited)  

Net sales

   $ 105,473      $ 70,850   

Cost of sales

     63,857        46,747   
  

 

 

   

 

 

 

Gross profit

     41,616        24,103   

Selling, engineering and administrative expenses

     12,322        10,001   
  

 

 

   

 

 

 

Operating income

     29,294        14,102   

Interest income, net

     (349     (281

Foreign currency transaction (gain) loss, net

     (87     41   

Miscellaneous income, net

     (258     (128
  

 

 

   

 

 

 

Income before income taxes

     29,988        14,470   

Income tax provision

     9,781        5,047   
  

 

 

   

 

 

 

Net income

   $ 20,207      $ 9,423   
  

 

 

   

 

 

 

Basic net income per common share (1)

   $ 0.79      $ 0.37   

Weighted average basic shares outstanding (1)

     25,593        25,421   

Diluted net income per common share (1)

   $ 0.79      $ 0.37   

Weighted average diluted shares outstanding (1)

     25,629        25,471   

Dividends declared per share (1)

   $ 0.223      $ 0.120   

 

(1) The Company announced a three-for-two stock split, effected in the form of a 50% stock dividend, to shareholders of record on June 30, 2011, payable on July 15, 2011. All per share and weighted average share information reflect the 50% stock dividend.


SUN HYDRAULICS CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

     July 2, 2011      January 1, 2011  
     (unaudited)         

Assets

     

Current assets:

     

Cash and cash equivalents

   $ 49,720       $ 33,206   

Restricted cash

     139         131   

Accounts receivable, net of allowance for doubtful accounts of $83 and $82

     23,352         16,399   

Inventories

     12,049         10,773   

Income taxes receivable

     483         1,154   

Deferred income taxes

     446         446   

Marketable securities

     12,866         11,614   

Other current assets

     2,907         2,556   
  

 

 

    

 

 

 

Total current assets

     101,962         76,279   

Property, plant and equipment, net

     53,031         53,127   

Other assets

     1,481         2,628   
  

 

 

    

 

 

 

Total assets

   $ 156,474       $ 132,034   
  

 

 

    

 

 

 

Liabilities and Shareholders’ Equity

     

Current liabilities:

     

Accounts payable

   $ 5,175       $ 3,348   

Accrued expenses and other liabilities

     6,364         5,250   

Dividends payable

     2,307         1,531   
  

 

 

    

 

 

 

Total current liabilities

     13,846         10,129   

Deferred income taxes

     5,690         5,684   

Other noncurrent liabilities

     1,562         1,197   
  

 

 

    

 

 

 

Total liabilities

     21,098         17,010   

Shareholders’ equity:

     

Common stock

     26         26   

Capital in excess of par value

     47,583         44,001   

Retained earnings

     85,610         71,132   

Accumulated other comprehensive income

     2,157         (135
  

 

 

    

 

 

 

Total shareholders’ equity

     135,376         115,024   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 156,474       $ 132,034   
  

 

 

    

 

 

 


SUN HYDRAULICS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

     Six months ended  
     July 2, 2011     July 3, 2010  
     (unaudited)     (unaudited)  

Cash flows from operating activities:

    

Net income

   $ 20,207      $ 9,423   

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

    

Depreciation and amortization

     3,368        3,460   

(Gain) loss on disposal of assets

     69        21   

Provision for deferred income taxes

     6        (18

Allowance for doubtful accounts

     1        (13

Stock-based compensation expense

     829        540   

Stock options income tax benefit

     —          (29

(Increase) decrease in:

    

Accounts receivable

     (6,954     (6,634

Inventories

     (1,276     (1,501

Income taxes receivable

     671        1,485   

Other current assets

     (352     (936

Other assets

     (318     549   

Increase (decrease) in:

    

Accounts payable

     1,827        2,301   

Accrued expenses and other liabilities

     3,526        752   

Taxes payable

     —          203   

Other noncurrent liabilities

     365        (37
  

 

 

   

 

 

 

Net cash provided by operating activities

     21,969        9,566   

Cash flows from investing activities:

    

Proceeds from sale of joint venture

     1,451        —     

Capital expenditures

     (2,811     (1,325

Proceeds from dispositions

     30        —     

Purchases of marketable securities

     (5,500     (11,126

Proceeds from sale of marketable securities

     4,190        5,390   
  

 

 

   

 

 

 

Net cash used in investing activities

     (2,640     (7,061

Cash flows from financing activities:

    

Proceeds from exercise of stock options

     61        39   

Proceeds from stock issued

     281        176   

Dividends to shareholders

     (4,952     (3,051

Stock options income tax benefit

     —          29   
  

 

 

   

 

 

 

Net cash used in financing activities

     (4,610     (2,807

Effect of exchange rate changes on cash and cash equivalents

     1,803        (2,160
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     16,522        (2,462

Cash and cash equivalents, beginning of period

     33,337        30,446   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 49,859      $ 27,984   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Cash paid:

    

Income taxes

   $ 9,104      $ 3,406   

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 July 2, 2011

                

Sales to unaffiliated customers

   $ 35,152       $ 5,674       $ 7,308       $ 6,636       $ —        $ 54,770   

Intercompany sales

     8,470         —           63         407         (8,940     —     

Operating income

     11,383         659         1,922         1,281         139        15,384   

Depreciation

     1,292         29         88         246         —          1,655   

Capital expenditures

     1,615         23         5         56         —          1,699   

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   

Six Months

Ended July 2, 2011

                

Sales to unaffiliated customers

   $ 65,618       $ 11,697       $ 14,496       $ 13,662       $ —        $ 105,473   

Intercompany sales

     17,959         —           116         783         (18,858     —     

Operating income

     21,359         1,599         3,662         2,487         187        29,294   

Depreciation

     2,585         54         188         486         —          3,313   

Capital expenditures

     2,510         146         50         104         —          2,810   

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 (loss)

     9,875         1,277         2,028         1,095         (173     14,102   

Depreciation

     2,648         44         214         484         —          3,390   

Capital expenditures

     1,081         113         5         125         —          1,324   

Contact:

Richard K. Arter

Investor Relations

941-362-1200

Tricia Fulton

Chief Financial Officer

941-362-1200