Sun Hydraulics Reports $0.36 Earnings on $39 Million Sales
SARASOTA, FL -- (MARKET WIRE) -- 08/09/10 -- 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, June 27, 2010 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 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.
SUN HYDRAULICS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except per share data) Three months ended July 3, June 27, 2010 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, June 27, 2010 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, January 2, 2010 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, June 27, 2010 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 United States Korea Germany 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
Contact: Richard K. Arter Investor Relations 941-362-1200 Tricia Fulton Chief Financial Officer 941-362-1200
Released August 9, 2010