Sun Hydraulics Third Quarter Earnings Increase 25% on 7% Sales Increase
SARASOTA, FL -- (MARKET WIRE) -- 11/03/08 -- Sun Hydraulics Corporation (NASDAQ: SNHY) today reported financial results for the third quarter 2008 as follows:
(Dollars in millions except net income per share)
September 27, September 29,
2008 2007 Increase
Three Months Ended
Net Sales $ 44.8 $ 41.8 7%
Net Income $ 6.7 $ 5.2 29%
Net Income per share:
Basic $ 0.40 $ 0.32 25%
Diluted $ 0.40 $ 0.32 25%
Nine Months Ended
Net Sales $ 145.3 $ 126.1 15%
Net Income $ 23.3 $ 17.0 37%
Net Income per share:
Basic $ 1.40 $ 1.04 35%
Fully Diluted $ 1.40 $ 1.03 36%
"Third quarter results were what we expected, with moderate growth in sales and a significant increase in earnings," stated Allen Carlson, Sun's President and CEO. "As we look into the fourth quarter and beyond, we see business slowing. Our business is cyclical and we are in the down slope of the cycle. How long the downturn will last is outside of our vision, but rest assured our focus remains on creating opportunities for long-term profitable growth."
"Sun Hydraulics has a strong balance sheet, the right products for the marketplace and an agile workforce," Carlson stated. "We will continue to do the things we have always done to ensure we are poised to take full advantage of the cyclical upturn when it occurs. Our ability to deliver product reliably throughout this cycle is at the heart of our market share gains and remains a primary focus. While we will look to tighten our belts in the short term, it will not be at the expense of our long-term objectives," Carlson concluded.
R&D Tax Credit Affects EPS
In September, Sun completed an assessment of available R&D tax credits for tax years 2004-07, which resulted in a tax benefit of $900K. This was offset by professional fees of $150K (net of tax) related to the assessment. The overall effect was additional net income of $750K, or $0.045 per share, in the third quarter. This amount was not included in the third quarter estimate provided by management on August 5, 2008.
Outlook
2008 fourth quarter sales are estimated to be approximately $34 million and earnings per share are estimated to be in the range of $0.20 to $0.22. This would represent a decrease of approximately 18% in sales and 32% in earnings per share over the same period last year.
2008 year-end sales are estimated to be approximately $180 million, an 8% increase compared to 2007. Earnings per share for 2008 are estimated to be between $1.60 and $1.62, up approximately 20% over last year.
Webcast
Sun Hydraulics Corporation will broadcast its 2008 third quarter financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, November 4, 2008. To listen to the webcast, go to http://investor.sunhydraulics.com/eventdetail.cfm?EventID=59332.
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 September 27, 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
September September
27, 2008 29, 2007
(unaudited) (unaudited)
Net sales $ 44,771 $ 41,809
Cost of sales 30,033 28,485
----------- -----------
Gross profit 14,738 13,324
Selling, engineering and administrative expenses 5,457 5,279
----------- -----------
Operating income 9,281 8,045
Interest income, net (233) (120)
Foreign currency transaction gain, net (258) -
Miscellaneous (income)/expense, net 4 (115)
----------- -----------
Income before income taxes 9,768 8,280
Income tax provision 3,111 3,034
----------- -----------
Net income $ 6,657 $ 5,246
=========== ===========
Basic net income per common share $ 0.40 $ 0.32
Weighted average basic shares outstanding 16,612 16,460
Diluted net income per common share $ 0.40 $ 0.32
Weighted average diluted shares outstanding 16,642 16,507
Dividends declared per share $ 0.090 $ 0.090
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
Nine months ended
September September
27, 2008 29, 2007
(unaudited) (unaudited)
Net sales $ 145,342 $ 126,085
Cost of sales 94,436 84,581
----------- -----------
Gross profit 50,906 41,504
Selling, engineering and administrative expenses 17,203 15,932
----------- -----------
Operating income 33,703 25,572
Interest income, net (500) (282)
Foreign currency transaction (gain)/loss, net (158) 2
Miscellaneous income, net (213) (321)
----------- -----------
Income before income taxes 34,574 26,173
Income tax provision 11,319 9,169
----------- -----------
Net income $ 23,255 $ 17,004
=========== ===========
Basic net income per common share $ 1.40 $ 1.04
Weighted average basic shares outstanding 16,589 16,401
Diluted net income per common share $ 1.40 $ 1.03
Weighted average diluted shares outstanding 16,621 16,468
Dividends declared per share $ 0.360 $ 0.247
SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 27,
2008 December 29,
(unaudited) 2007
Assets
Current assets:
Cash and cash equivalents $ 33,137 $ 19,191
Restricted cash 141 146
Accounts receivable, net of allowance for
doubtful accounts of $140 and $215 18,921 17,029
Inventories 11,505 11,421
Deferred income taxes 301 301
Other current assets 1,067 1,210
------------- -------------
Total current assets 65,072 49,298
Property, plant and equipment, net 59,803 56,999
Other assets 4,366 4,483
------------- -------------
Total assets $ 129,241 $ 110,780
============= =============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 5,765 $ 5,668
Accrued expenses and other liabilities 5,186 4,857
Long-term debt due within one year 240 417
Dividends payable 1,495 1,484
Income taxes payable 1,161 674
------------- -------------
Total current liabilities 13,847 13,100
Long-term debt due after one year 174 284
Deferred income taxes 5,065 5,108
Other noncurrent liabilities 502 406
------------- -------------
Total liabilities 19,588 18,898
Shareholders' equity:
Common stock 17 16
Capital in excess of par value 37,685 34,390
Retained earnings 69,120 51,844
Accumulated other comprehensive income 2,831 5,632
------------- -------------
Total shareholders' equity 109,653 91,882
------------- -------------
Total liabilities and shareholders’ equity $ 129,241 $ 110,780
============= =============
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Nine months ended
September September
27, 2008 29, 2007
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $ 23,255 $ 17,004
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,297 4,657
(Gain)/Loss on disposal of assets 138 (60)
Provision for deferred income taxes (43) 78
Allowance for doubtful accounts (75) (39)
Stock-based compensation expense 671 542
Stock options income tax benefit (15) (286)
(Increase) decrease in:
Accounts receivable (1,817) (4,341)
Inventories (84) (935)
Other current assets 143 (1,484)
Other assets 97 (271)
Increase in:
Accounts payable 97 1,235
Accrued expenses and other liabilities 2,584 2,759
Income taxes payable 502 712
Other noncurrent liabilities 96 204
----------- -----------
Net cash provided by operating activities 30,846 19,775
Cash flows from investing activities:
Capital expenditures (9,229) (9,448)
Proceeds from dispositions of equipment 99 76
----------- -----------
Net cash used in investing activities (9,130) (9,372)
Cash flows from financing activities:
Repayment of debt (301) (322)
Proceeds from exercise of stock options 87 267
Proceeds from stock issued 267 191
Dividends to shareholders (5,968) (3,684)
Stock options income tax benefit 15 286
----------- -----------
Net cash used in financing activities (5,900) (3,262)
Effect of exchange rate changes on cash and
cash equivalents (1,875) 713
----------- -----------
Net increase in cash and cash equivalents 13,941 7,854
Cash and cash equivalents, beginning of period 19,337 9,497
----------- -----------
Cash and cash equivalents, end of period $ 33,278 $ 17,351
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid:
Interest $ 19 $ 35
Income taxes $ 10,875 $ 8,884
Supplemental disclosure of noncash transactions:
Common stock issued to ESOP through
accrued expenses and other liabilities $ 2,255 $ 1,386
United United Elim- Consoli-
States Korea Germany Kingdom ination dated
Three Months
Ended September
27, 2008
Sales to
unaffiliated
customers $ 28,810 $ 3,854 $ 6,746 $ 5,361 $ - $ 44,771
Intercompany
sales 6,300 - 48 607 (6,955) -
Operating
income 6,204 257 2,131 752 (63) 9,281
Depreciation 1,273 37 147 313 - 1,770
Capital
expenditures 2,080 19 140 129 - 2,368
Three Months
Ended September
29, 2007
Sales to
unaffiliated
customers $ 24,770 $ 5,244 $ 6,033 $ 5,762 $ - $ 41,809
Intercompany
sales 7,551 - 65 609 (8,225) -
Operating
income 4,871 613 1,583 1,007 (29) 8,045
Depreciation 1,142 46 131 284 - 1,603
Capital
expenditures 1,957 55 5 547 - 2,564
Nine Months
Ended September
27, 2008
Sales to
unaffiliated
customers $ 88,834 $ 15,673 $ 22,567 $ 18,268 $ - $ 145,342
Intercompany
sales 24,104 - 191 1,811 (26,106) -
Operating
income 22,779 1,332 6,858 2,860 (126) 33,703
Depreciation 3,730 125 443 979 - 5,277
Capital
expenditures 8,492 35 289 413 - 9,229
Nine Months
Ended September
29, 2007
Sales to
unaffiliated
customers $ 74,375 $ 15,896 $ 18,730 $ 17,084 $ - $ 126,085
Intercompany
sales 23,715 - 115 2,143 (25,973) -
Operating
income 16,767 1,759 4,604 2,529 (87) 25,572
Depreciation 3,301 129 403 804 - 4,637
Capital
expenditures 7,675 263 52 1,458 - 9,448
Contact: Richard K. Arter Investor Relations 941-362-1200 Tricia L. Fulton Chief Financial Officer 941-362-1200
Released November 3, 2008