Sun Hydraulics Reports 2011 Sales of $204 Million With Earnings of $1.47 per Share; Announces Shared Distribution Based on 2011 Performance

Marketwired

SARASOTA, FL--(Marketwire -03/12/12)- Sun Hydraulics Corporation (NASDAQ: SNHY - News) today reported financial results for the fourth quarter and year-end 2011 as follows:

 

(Dollars in millions except net income per share)

                                        December 31,  January 1,  Increase/
                                            2011         2011      Decrease

          Twelve Months Ended
Net Sales                               $      204.2 $      150.7        36%
Net Income                              $       37.7 $       21.4        76%
Net Income per share:
  Basic                                 $       1.47 $       0.84        75%
  Diluted                               $       1.47 $       0.84        75%

           Three Months Ended
Net Sales                               $       45.7 $       41.8         9%
Net Income                              $        6.1 $        6.3        -3%
Net Income per share:
  Basic                                 $       0.24 $       0.25        -4%
  Diluted                               $       0.24 $       0.25        -4%

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.

"Sun grew its top line by 36% in 2011, and the bottom line by 76%," reported Allen Carlson, Sun Hydraulics CEO and president. "Sales grew in all geographic markets with sales to North America increasing 40%, Europe 33%, and Asia/Pacific 30%."

"In addition to our strong operational results in 2011, we engaged in a number of activities that position us well to take advantage of future growth opportunities," added Carlson. "We opened a sales office in China, which helped us to increase sales by 49% in this region. Despite an end of year slow down in the region, we expect China to regain its growth trajectory in the long term. We added capability and capacity in 2011, notably in the design and manufacturing engineering area. These additions will help us develop the products and processes that will contribute to our growth. In September 2011, we acquired the remaining interest in High Country Tek (HCT). HCT products and capabilities integrate nicely with our line of electrically-actuated hydraulic valves, creating new opportunities in the marketplace."

Commenting on the recent shared distribution, Carlson, said, "At the foundation of Sun's success are its employees. Their creativity and dedication to quality and service make Sun the place it is today. In 2008, the Board initiated the concept of a shared distribution as a way to reward our employees and shareholders when Sun has a successful year. The shared distribution is at the discretion of the Board and may be considered annually. The Board voted unanimously to grant this year's distribution totaling $7.7 million, with 60% provided to employees and 40% to shareholders."

The 2011 shared distribution consists of a contribution for employees equal to 13.5% of wages, most of which will be paid into retirement plans via Sun Hydraulics stock, and a $0.12 per share cash dividend to shareholders. The shared distribution cash dividend is payable on March 31, 2012, to shareholders of record on March 22, 2012.

Concluding, Carlson said, "First quarter demand has rebounded and is forecast to be 5% above last year's level. Orders are strong in all major geographic regions. Coupled with positive PMI numbers, we expect growth in 2012. We are ready for increasing demand and expect to continue to deliver strong operating results."

Outlook

First quarter 2012 revenues are expected to be approximately $53 million, up approximately 5% from the first quarter of 2011. Earnings per share are estimated to be $0.37 to $0.39 compared to $0.38 in the same period a year ago.

Webcast

Sun Hydraulics Corporation will broadcast its 2011 financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, March 13, 2012. 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 1-888-221-9554 and using 1414483 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 1, 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 December 31, 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
                                                 December 31,   January 1,
                                                     2011          2011

Net sales                                        $     45,657  $     41,772

Cost of sales                                          28,809        27,083
                                                 ------------  ------------

Gross profit                                           16,848        14,689

Selling, engineering and administrative expenses        6,376         5,935
                                                 ------------  ------------

Operating income                                       10,472         8,754

Interest income, net                                     (186)         (170)
Foreign currency transaction (gain) loss, net            (124)           59
Miscellaneous expense, net                                168           103
                                                 ------------  ------------

Income before income taxes                             10,614         8,762

Income tax provision                                    4,540         2,495
                                                 ------------  ------------

Net income                                       $      6,074  $      6,267
                                                 ============  ============


Basic net income per common share (1)            $       0.24  $       0.25

Weighted average basic shares outstanding (1)          25,729        25,504

Diluted net income per common share (1)          $       0.24  $       0.25

Weighted average diluted shares outstanding (1)        25,778        25,555

Dividends declared per share (1)                 $      0.090  $      0.393

(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)

                                                     Twelve Months Ended
                                                 December 31,   January 1,
                                                     2011          2011

Net sales                                        $    204,171  $    150,695

Cost of sales                                         124,956        98,352
                                                 ------------  ------------

Gross profit                                           79,215        52,343

Selling, engineering and administrative expenses       23,946        21,304
                                                 ------------  ------------

Operating income                                       55,269        31,039

Interest income, net                                     (775)         (653)
Foreign currency transaction (gain) loss, net            (161)          106
Miscellaneous income, net                              (1,381)          (57)
                                                 ------------  ------------

Income before income taxes                             57,586        31,643

Income tax provision                                   19,909        10,243
                                                 ------------  ------------

Net income                                       $     37,677  $     21,400
                                                 ============  ============


Basic net income per common share (1)            $       1.47  $       0.84

Weighted average basic shares outstanding (1)          25,642        25,428

Diluted net income per common share (1)          $       1.47  $       0.84

Weighted average diluted shares outstanding (1)        25,684        25,478

Dividends declared per share (1)                 $      0.403  $      0.573

(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)

                                                 December 31,   January 1,
                                                     2011          2011
Assets
Current assets:
  Cash and cash equivalents                      $     51,262  $     33,206
  Restricted cash                                          46           131
  Accounts receivable, net of allowance for
   doubtful accounts of $83 and $82                    16,227        16,399
  Inventories                                          12,829        10,773
  Income taxes receivable                                 120         1,154
  Deferred income taxes                                   260           446
  Marketable securities                                21,832        11,614
  Other current assets                                  1,354         2,556
                                                 ------------  ------------
    Total current assets                              103,930        76,279

Property, plant and equipment, net                     56,959        53,127
Other assets                                            6,639         2,628
                                                 ------------  ------------

Total assets                                     $    167,528  $    132,034
                                                 ============  ============

Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                               $      4,402  $      3,348
  Accrued expenses and other liabilities                7,466         5,250
  Dividends payable                                     2,318         1,531
                                                 ------------  ------------
    Total current liabilities                          14,186        10,129

Deferred income taxes                                   6,917         5,684
Other liabilities                                       1,149         1,197
                                                 ------------  ------------

    Total liabilities                                  22,252        17,010

Shareholders' equity:
  Common stock                                             26            26
  Capital in excess of par value                       48,944        44,001
  Retained earnings                                    98,426        71,132
  Accumulated other comprehensive income (loss)        (2,120)         (135)
                                                 ------------  ------------
    Total shareholders' equity                        145,276       115,024
                                                 ------------  ------------

Total liabilities and shareholders' equity       $    167,528  $    132,034
                                                 ============  ============



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

                                                     Twelve Months Ended
                                                 December 31,   January 1,
                                                     2011          2011
Cash flows from operating activities:
Net income                                       $     37,677  $     21,400
Adjustments to reconcile net income to net cash
 provided by operating activities:
Depreciation and amortization                           6,721         6,873
(Gain) loss on disposal of assets                         (32)          (43)
Gain on Investment in HCT                              (1,244)
Stock-based compensation expense                        1,752         1,149
Deferred director and phantom stock unit expense
 (income)                                                 (22)          557
Stock compensation income tax benefit                    (144)         (175)
Allowance for doubtful accounts                             1            (8)
Provision for slow moving inventory                       (19)         (159)
Provision for deferred income taxes                     1,419           622
(Increase) decrease in:
  Accounts receivable                                     741        (6,442)
  Inventories                                          (1,593)       (2,815)
  Income taxes receivable                               1,178           506
  Other current assets                                   (662)         (759)
  Other assets, net                                    (1,081)          750
Increase (decrease) in:
  Accounts payable                                        499           861
  Accrued expenses and other liabilities                4,390         2,775
  Other noncurrent liabilities                            (37)           (2)
                                                 ------------  ------------
Net cash from operating activities                     49,544        25,090

Cash flows used in investing activities:
Sale of China Joint Venture                             1,451             -
Investment in HCT                                      (1,776)            -
Capital expenditures                                  (10,143)       (3,856)
Proceeds from dispositions of equipment                    35           175
Purchases of marketable securities                    (18,405)      (14,175)
Proceeds from sale of marketable securities             7,517        10,230
                                                 ------------  ------------
Net cash used in investing activities                 (21,321)       (7,626)

Cash flows used in financing activities:
Repayment of debt                                        (100)            -
Proceeds from exercise of stock options                    61            44
Stock compensation income tax benefit                     144           175
Proceeds from stock issued                                574           423
Dividends to shareholders                              (9,596)      (14,635)
                                                 ------------  ------------
Net cash used in financing activities                  (8,917)      (13,993)

Effect of exchange rate changes on cash and cash
 equivalents                                           (1,335)         (580)
                                                 ------------  ------------

Net decrease in restricted cash                           (85)           (1)
Net increase in cash and cash equivalents              18,056         2,892
                                                 ------------  ------------

Cash and cash equivalents and restricted cash,
 beginning of period                                   33,337        30,446
                                                 ------------  ------------

Cash and cash equivalents and restricted cash,
 end of period                                   $     51,308  $     33,337
                                                 ============  ============

Supplemental disclosure of cash flow
 information:
Cash paid:
  Income taxes                                   $     17,456  $      9,290
Supplemental disclosure of noncash transactions:
Common stock issued to ESOP through accrued
 expenses and other liabilities                  $      2,412  $          -
Unrealized gain (loss) on available for sale
 securities                                      $       (549) $        (59)


                   United                   United
                   States   Korea  Germany Kingdom Elimination  Consolidated

Three Months
Ended December
 31, 2011
Sales to
 unaffiliated
 customers        $ 31,199 $ 3,788 $ 5,677 $ 4,993 $         -  $     45,657
Intercompany
 sales               6,989       -      26     348      (7,363)            -
Operating income     8,366     317   1,025     788         (24)       10,472
Depreciation and
 amortization        1,240      31      85     220           -         1,576
Capital
 expenditures        3,009      40       7     309           -         3,365

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

Twelve Months
Ended December
 31, 2011
Sales to
 unaffiliated
 customers        $131,714 $20,566 $27,997 $23,894 $         -  $    204,171
Intercompany
 sales              33,711       -     201   1,536     (35,448)            -
Operating income    41,847   2,492   6,715   4,167          48        55,269
Depreciation and
 amortization        5,308     114     357     942                     6,721
Capital
 expenditures        9,324     274      63     482                    10,143

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
 (loss)             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
Contact:

Richard K. Arter
Investor Relations
941-362-1200
Tricia Fulton
Chief Financial Officer
941-362-1200

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