Sun Hydraulics First Quarter Earnings Increase 31%, Sales Increase 20%; Board of Directors Declares Shared Distribution Dividend

SARASOTA, FL -- (MARKET WIRE) -- 05/06/08 -- Sun Hydraulics Corporation (NASDAQ: SNHY) reported financial results for the first quarter 2008 as follows:

(Dollars in millions except net income per share)

                                      March 29,    March 31,
                                         2008         2007       Increase
    Three Months Ended
Net Sales                            $       49.0 $       40.9          20%
Net Income                           $        7.7 $        5.8          33%
Net Income per share:
   Basic                             $       0.46 $       0.35          31%
   Diluted                           $       0.46 $       0.35          31%


Note: March 31, 2007 earnings per share and weighted average share
information reflects a 50% stock dividend effective at the close of
business on July 15, 2007.

"Strong orders and sales continued throughout the first quarter," said Allen Carlson, Sun's CEO and president. "All geographic areas were active with first quarter sales to North America increasing 11%, Europe 20% and Asia/Pacific 41%. This is now the 20th consecutive quarter of double-digit sales growth and 18th consecutive quarter of double-digit earnings growth. Dating back to 1972, Sun is proud to have sustained a compound annual growth rate of 23%. As we move forward, we will continue to focus on customer service and bringing new products to market."

Continuing, Carlson talked about the positive reaction to Sun products at the recently concluded International Fluid Power Exposition in Las Vegas. "As we had expected, all of our new products were well received by our customers. There was a high level of interest, especially in electrically actuated cartridges and integrated packages."

Commenting on the important role Sun employees play, Dr. Ferdi Megerlin, Sun's Chairman of the Board, said, "Sun's employees are fundamental to our success. Historically, employees have been rewarded via employer contributions to a 401(k) plan and an Employee Stock Ownership Plan (ESOP). Most recently, at the end of 2007, Sun contributed $1.5 million to the ESOP in the form of newly issued shares of Sun stock."

Introducing the new shared distribution dividend, Dr. Megerlin explained, "Sun's Board of Directors acknowledged that, to maintain the Company's momentum, it is important for its employees to continue to perform at the highest level and that it is desirable for Sun employees and Sun shareholders to share further in the benefits resulting from Sun's ongoing growth and profitability. Therefore, the Board has elected to make an additional $0.75 million contribution to the Employee Stock Ownership Plan (ESOP) and concurrently pay a discretionary cash dividend of $0.09 per share to shareholders. Combined, the shared distribution is the equivalent of $2.25 million."

"In the future, the Board of Directors may consider a shared distribution on an annual basis, taking into account Sun's financial performance, strategic opportunities, debt position, known future cash requirements and current and future liabilities," Dr. Megerlin continued. "Additionally, management will continue to explore methods that would allow non-U.S. employees to participate in the shared distributions. A decision in this regard is expected by year end."

Commenting on the shared distribution, Allen Carlson said, "This action is consistent with Sun's culture of rewarding and sharing with those who participate in and contribute to our success. We are proud to implement this ground-breaking method of uniting together employees and shareholders in pursuit of Sun's on-going success."

The special $0.09 per share dividend is payable on May 30, 2008, to shareholders of record as of May 15, 2008. The $0.75 million contribution to the ESOP, to be made on May 30, 2008; had an impact of approximately $0.03/share on first quarter earnings, which was partially offset by proceeds for an insurance claim equal to approximately $0.01/per share.

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

2008 second quarter sales are estimated to be approximately $51 million, an 18% increase over last year. Second quarter earnings per share are estimated to be between $0.50 and $0.52 per share, compared to $0.36 per share last year.

Webcast

Sun Hydraulics Corporation will broadcast its 2008 first quarter financial results conference call live over the Internet at 2:30 P.M. E.T. tomorrow, May 7, 2008. To listen to the webcast, go to http://investor.sunhydraulics.com/medialist.cfm.

Webcast Q&A

If an individual wishes to ask questions directly during the webcast, the conference call may be accessed by dialing 1-877-407-8033. 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 headings Item 1. "Business," Item 1A. "Risk Factors" and Item 7. "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in the Company's Form 10-K for the year ended December 29, 2007, and "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in the Company's Form 10-Q for the quarter ended March 29, 2008. 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
                                                   March 29,    March 31,
                                                      2008         2007
                                                  (unaudited)  (unaudited)

Net sales                                         $    49,008  $    40,854

Cost of sales                                          31,914       26,971
                                                  -----------  -----------

Gross profit                                           17,094       13,883

Selling, engineering and
 administrative expenses                                5,955        5,216
                                                  -----------  -----------

Operating income                                       11,139        8,667

Interest income, net                                     (113)         (74)
Foreign currency transaction (gain)/loss, net              36          (26)
Miscellaneous income, net                                (249)         (82)
                                                  -----------  -----------

Income before income taxes                             11,465        8,849

Income tax provision                                    3,775        3,043
                                                  -----------  -----------

Net income                                        $     7,690  $     5,806
                                                  ===========  ===========

Basic net income per common share (1)             $      0.46  $      0.35

Weighted average basic shares outstanding (1)          16,562       16,377

Diluted net income per common share (1)           $      0.46  $      0.35

Weighted average diluted shares outstanding (1)        16,596       16,461

Dividends declared per share (1)                  $     0.090  $     0.067


(1) March 31, 2007 earnings per share, weighted average share and dividend
information reflects a 50% stock dividend effective at the close of
business on July 15, 2007.



SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)

                                                   March 29,   December 29,
                                                      2008         2007
                                                  (unaudited)
Assets
Current assets:
  Cash and cash equivalents                       $     23,230 $     19,191
  Restricted cash                                          153          146
  Accounts receivable, net of allowance for
     doubtful accounts of $208 and $215                 24,790       17,029
  Inventories                                           12,005       11,421
  Deferred income taxes                                    301          301
  Other current assets                                   1,017        1,210
                                                  ------------ ------------
      Total current assets                              61,496       49,298

Property, plant and equipment, net                      57,806       56,999
Other assets                                             4,561        4,483
                                                  ------------ ------------

Total assets                                      $    123,863 $    110,780
                                                  ============ ============

Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                                $      7,075 $      5,668
  Accrued expenses and other liabilities                 5,084        4,857
  Long-term debt due within one year                       401          417
  Dividends payable                                      1,492        1,484
  Income taxes payable                                   3,412          674
                                                  ------------ ------------
      Total current liabilities                         17,464       13,100

Long-term debt due after one year                          301          284
Deferred income taxes                                    5,110        5,108
Other noncurrent liabilities                               496          406
                                                  ------------ ------------

      Total liabilities                                 23,371       18,898

Shareholders' equity:
  Common stock                                              17           16
  Capital in excess of par value                        36,245       34,390
  Retained earnings                                     58,041       51,844
  Accumulated other comprehensive income                 6,189        5,632
                                                  ------------ ------------
      Total shareholders' equity                       100,492       91,882
                                                  ------------ ------------

Total liabilities and shareholders' equity        $    123,863 $    110,780
                                                  ============ ============




SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

                                                     Three months ended
                                                   March 29,    March 31,
                                                      2008         2007
                                                  (unaudited)  (unaudited)
Cash flows from operating activities:
Net income                                        $     7,690  $     5,806
Adjustments to reconcile net income to
    net cash provided by operating activities:
Depreciation and amortization                           1,720        1,500
(Gain)/Loss on disposal of assets                         104          (20)
Provision for deferred income taxes                         2           76
Allowance for doubtful accounts                            (7)         (30)
Stock-based compensation expense                          199          150
Stock options income tax benefit                          (15)         (31)
(Increase) decrease in:
   Accounts receivable                                 (7,754)      (3,235)
   Inventories                                           (584)      (1,382)
   Other current assets                                   193         (364)
   Other assets                                           (84)         (62)
Increase in:
   Accounts payable                                     1,407        1,433
   Accrued expenses and other liabilities               1,725          613
   Income taxes payable                                 2,753        2,747
   Other noncurrent liabilities                            90           37
                                                  -----------  -----------
Net cash provided by operating activities               7,439        7,238

Cash flows from investing activities:
Capital expenditures                                   (2,400)      (3,203)
Proceeds from dispositions of equipment                    99           31
                                                  -----------  -----------
Net cash used in investing activities                  (2,301)      (3,172)

Cash flows from financing activities:
Repayment of debt                                         (51)        (153)
Proceeds from exercise of stock options                    66           54
Proceeds from stock issued                                 77           59
Dividends to shareholders                              (1,485)      (1,087)
Stock options income tax benefit                           15           31
                                                  -----------  -----------
Net cash used in financing activities                  (1,378)      (1,096)

Effect of exchange rate changes on cash and
   cash equivalents                                       286          154
                                                  -----------  -----------

Net increase in cash and cash equivalents               4,046        3,124

Cash and cash equivalents, beginning of period         19,337        9,497
                                                  -----------  -----------

Cash and cash equivalents, end of period          $    23,383  $    12,621
                                                  ===========  ===========

Supplemental disclosure of cash flow information:
Cash paid:
   Interest                                       $        10  $         1
   Income taxes                                   $     1,035  $       470
Supplemental disclosure of noncash transactions:
   Common stock issued to ESOP through
      accrued expenses and other liabilities      $     1,498  $     1,386



                      United   Korea  Germany  United   Elimin- Consoli-
                      States                   Kingdom   ation   dated
Three Months
Ended March 29, 2008
Sales to unaffiliated
 customers            $28,320 $ 6,354 $ 7,962 $ 6,372  $     -  $49,008
Intercompany sales      9,126       -      78     590   (9,794)       -
Operating income        7,184     650   2,413   1,030     (138)  11,139
Depreciation            1,192      46     145     330        -    1,713
Capital expenditures    2,232      15      33     120        -    2,400

Three Months
Ended March 31, 2007
Sales to unaffiliated
 customers            $23,769 $ 4,957 $ 6,591 $ 5,537  $     -  $40,854
Intercompany sales      8,169       -      30     883   (9,082)       -
Operating income        5,743     510   1,644     835      (65)   8,667
Depreciation            1,061      40     136     256        -    1,493
Capital expenditures    2,742      57      26     378        -    3,203

Contact:
Richard K. Arter
Investor Relations
941-362-1200

Tricia L. Fulton
Chief Financial Officer
941-362-1200