Sun Hydraulics 2010 Earnings Rise; Board Announces Shared Distribution and First Quarter Dividend

SARASOTA, FL -- (MARKET WIRE) -- 03/07/11 -- Sun Hydraulics Corporation (NASDAQ: SNHY) today reported financial results for the fourth quarter and year-end 2010 as follows:

(Dollars in millions except net income per share)

                               January 1,  January 2,
                                  2011        2010     Increase

      Twelve Months Ended
Net Sales                      $   150.7   $    97.4          55%
Net Income                     $    21.4   $     1.9        1026%
Net Income per share:
   Basic                       $    1.26   $    0.11        1045%
   Diluted                     $    1.26   $    0.11        1045%

      Three Months Ended
Net Sales                      $    41.8   $    27.3          53%
Net Income                     $     6.3   $     1.3         385%
Net Income per share:
   Basic                       $    0.37   $    0.08         363%
   Diluted                     $    0.37   $    0.08         363%

"Business activity in 2010 rebounded more quickly than we had anticipated," said Allen Carlson, Sun Hydraulics' president and CEO. "We have been able to keep up with the steadily increasing demand, while realizing substantial productivity improvements, thanks in large part to maintaining and investing in our workforce readiness throughout the downturn. Operationally, we have done an excellent job in managing the business, which is demonstrated in the strong earnings numbers."

"Our business continued to expand in the fourth quarter, which is a bit unusual," Carlson continued. "That expansion has continued without a hitch into the first quarter, as we begin to see some of our traditional markets gain strength. Sales in 2010 were buoyed by new customers around the world. Traditional markets like mining, construction and AWPs appear to be gaining strength, indicating 2011 could be a very good year."

Concluding, Carlson spoke about the future, saying, "The macroeconomic outlook is robust, the PMI continues to expand and all signals are positive. As capital goods industries remain strong, Sun will continue to grow and earnings will continue to rise. We have a very strong first quarter forecast, and we expect to remain busy."

Shared Distribution and Quarterly Dividend

"Last week the Board elected to once again apportion a shared distribution for employees and shareholders based on our 2010 results," stated Ferdinand Megerlin, Sun's Chairman. "The shared distribution consists of a 9% contribution for employees, most of which will be paid into retirement plans, and an $0.11 per share cash dividend to shareholders, totaling approximately $4.6 million. We initiated the shared distribution concept in 2008 as a way to reward both shareholders and employees when Sun has a successful year."

The shared distribution dividend is payable on March 31, 2011, to shareholders of record on March 15, 2011. In addition to the shared distribution dividend, the Board also declared a quarterly dividend of $0.09 per share payable on April 15, 2011, to shareholders of record on March 31, 2011.

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

First quarter 2011 revenues are expected to be approximately $50 million, up approximately 58% from the first quarter of 2010. Earnings per share are estimated to be $0.50 to $0.53 compared to $0.20 in the same period a year ago.

Webcast

Sun Hydraulics Corporation will broadcast its 2010 financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, March 8, 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 1-888-240-1347 and using 3208319 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 October 2, 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 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
                                                    January 1,  January 2,
                                                       2011        2010

Net sales                                           $   41,772  $   27,262

Cost of sales                                           27,083      20,468
                                                    ----------  ----------

Gross profit                                            14,689       6,794

Selling, engineering and administrative expenses         5,935       5,245
                                                    ----------  ----------

Operating income                                         8,754       1,549

Interest income, net                                      (170)       (135)
Foreign currency transaction loss, net                      59          22
Miscellaneous expense, net                                 103          36
                                                    ----------  ----------

Income before income taxes                               8,762       1,626

Income tax provision                                     2,495         340
                                                    ----------  ----------

Net income                                          $    6,267  $    1,286
                                                    ==========  ==========


Basic net income per common share                   $     0.37  $     0.08

Weighted average basic shares outstanding               17,003      16,927

Diluted net income per common share                 $     0.37  $     0.08

Weighted average diluted shares outstanding             17,037      16,962

Dividends declared per share                        $    0.590  $    0.090





SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)

                                                     Twelve Months Ended
                                                    January 1,  January 2,
                                                       2011        2010

Net sales                                           $  150,695  $   97,393

Cost of sales                                           98,352      75,436
                                                    ----------  ----------

Gross profit                                            52,343      21,957

Selling, engineering and administrative expenses        21,304      19,814
                                                    ----------  ----------

Operating income                                        31,039       2,143

Interest income, net                                      (653)       (562)
Foreign currency transaction loss, net                     106         265
Miscellaneous (income) expense, net                        (57)        423
                                                    ----------  ----------

Income before income taxes                              31,643       2,017

Income tax provision                                    10,243         161
                                                    ----------  ----------

Net income                                          $   21,400  $    1,856
                                                    ==========  ==========


Basic net income per common share                   $     1.26  $     0.11

Weighted average basic shares outstanding               16,952      16,837

Diluted net income per common share                 $     1.26  $     0.11

Weighted average diluted shares outstanding             16,985      16,870

Dividends declared per share                        $    0.860  $    0.450





SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
                                                    January 1,  January 2,
                                                       2011        2010
Assets
Current assets:
  Cash and cash equivalents                         $   33,206  $   30,314
  Restricted cash                                          131         132
  Accounts receivable, net of allowance for
   doubtful accounts of $82 and $90                     16,399       9,949
  Inventories                                           10,773       7,799
  Income taxes receivable                                1,154       1,485
  Deferred income taxes                                    446         575
  Marketable securities                                 11,614       7,844
  Other current assets                                   2,556       1,797
                                                    ----------  ----------
    Total current assets                                76,279      59,895

Property, plant and equipment, net                      53,127      56,633
Other assets                                             2,628       3,405
                                                    ----------  ----------

Total assets                                        $  132,034  $  119,933
                                                    ==========  ==========

Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                                  $    3,348  $    2,442
  Accrued expenses and other liabilities                 5,250       2,475
  Dividends payable                                      1,531       1,524
                                                    ----------  ----------
    Total current liabilities                           10,129       6,441

Deferred income taxes                                    5,684       5,191
Other liabilities                                        1,197         687
                                                    ----------  ----------

    Total liabilities                                   17,010      12,319

Shareholders' equity:
  Common stock                                              17          17
  Capital in excess of par value                        44,001      42,210
  Retained earnings                                     71,141      64,383
  Accumulated other comprehensive income (loss)           (135)      1,004
                                                    ----------  ----------
    Total shareholders' equity                         115,024     107,614
                                                    ----------  ----------

Total liabilities and shareholders' equity          $  132,034  $  119,933
                                                    ==========  ==========





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

                                                     Twelve Months Ended
                                                    January 1,  January 2,
                                                       2011        2010
Cash flows from operating activities:
Net income                                          $   21,400  $    1,856
Adjustments to reconcile net income to net cash
 provided by operating activities:
Depreciation and amortization                            6,873       6,968
(Gain) loss on disposal of assets                          (43)         30
Stock-based compensation expense                         1,149         960
Deferred director and phantom stock unit expense           557         398
Stock options income tax benefit                          (175)         (9)
Allowance for doubtful accounts                             (8)         (2)
Provision for slow moving inventory                       (159)        (41)
Provision for deferred income taxes                        622           4
(Increase) decrease in:
  Accounts receivable                                   (6,442)      2,555
  Inventories                                           (2,815)      2,202
  Income taxes receivable                                  506        (123)
  Other current assets                                    (759)       (507)
  Other assets, net                                        750         560
Increase (decrease) in:
  Accounts payable                                         861        (816)
  Accrued expenses and other liabilities                 2,775        (672)
  Other liabilities                                         (2)        304
                                                    ----------  ----------
Net cash from operating activities                      25,090      13,667

Cash flows used in investing activities:
Capital expenditures                                    (3,856)     (5,096)
Proceeds from dispositions of equipment                    175           -
Purchases of marketable securities                     (14,175)    (10,600)
Proceeds from sale of marketable securities             10,230       2,863
                                                    ----------  ----------
Net cash used in investing activities                   (7,626)    (12,833)

Cash flows used in financing activities:
Repayment of debt                                            -        (261)
Proceeds from exercise of stock options                     44          11
Stock options income tax benefit                           175           9
Proceeds from stock issued                                 423         392
Dividends to shareholders                              (14,635)     (7,547)
                                                    ----------  ----------
Net cash used in financing activities                  (13,993)     (7,396)

Effect of exchange rate changes on cash and
 cash equivalents                                         (580)      1,705
                                                    ----------  ----------

Net increase (decrease) in restricted cash                  (1)          5
Net increase (decrease) in cash and cash
 equivalents                                             2,892      (4,862)
                                                    ----------  ----------

Cash and cash equivalents, beginning of period          30,446      35,303
                                                    ----------  ----------

Cash and cash equivalents, end of period            $   33,337  $   30,446
                                                    ==========  ==========

Supplemental disclosure of cash flow information:
Cash paid:
 Interest                                           $        -  $        9
 Income taxes                                       $    9,290  $      289
Supplemental disclosure of noncash transactions:
Common stock issued to ESOP through accrued
 expenses and other liabilities                     $        -  $    2,796
Unrealized gain (loss) on available for sale
 securities                                         $      (59) $      116





                       United                    United  Elimina-  Consoli-
                       States   Korea   Germany  Kingdom   tion     dated

Three Months
Ended January 1, 2011
Sales to unaffiliated
 customers             $26,170  $ 4,134 $ 5,000  $ 6,468 $      -  $ 41,772
Intercompany sales       7,267        -      42      289   (7,598)        -
Operating income         6,528      592     935      700       (1)    8,754
Depreciation and
 amortization            1,361       23     109      241        -     1,734
Capital expenditures     1,688       76       6       26        -     1,796

Three Months
Ended January 2, 2010
Sales to unaffiliated
 customers             $17,200  $ 3,012 $ 3,613  $ 3,437 $      -  $ 27,262
Intercompany sales       3,964        -      21      186   (4,171)        -
Operating income           320      213     703      284       29     1,549
Depreciation and
 amortization            1,288       24     123      265        -     1,700
Capital expenditures       461       10      (7)      84        -       548

Twelve Months
Ended January 1, 2011
Sales to unaffiliated
 customers             $94,067  $16,284 $19,770  $20,574 $      -  $150,695
Intercompany sales      26,022        -     160    1,225  (27,407)        -
Operating income        22,040    2,246   4,024    2,822      (93)   31,039
Depreciation and
 amortization            5,388       89     429      967              6,873
Capital expenditures     3,400      217      27      212              3,856

Twelve Months
Ended January 2, 2010
Sales to unaffiliated
 customers             $59,278  $ 9,978 $14,654  $13,483 $      -  $ 97,393
Intercompany sales      15,545        -     139    1,101  (16,785)        -
Operating income
 (loss)                 (2,110)     616   2,475      884      278     2,143
Depreciation and
 amortization            5,335      104     502    1,027              6,968
Capital expenditures     4,758       41      30      267              5,096

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

Tricia Fulton
Chief Financial Officer
941-362-1200

Source: Sun Hydraulics Corporation