Sun Hydraulics Second Quarter Sales and Earnings Remain Strong

SARASOTA, FL -- (MARKET WIRE) -- 08/08/11 -- Sun Hydraulics Corporation (NASDAQ: SNHY) today reported financial results for the second quarter of 2011 as follows:


(Dollars in millions except net income per share)

                                                 July 2,  July 3,
                                                    2011     2010  Increase

Three Months Ended
Net Sales                                        $  54.8  $  39.2        40%
Net Income                                       $  10.4  $   6.1        70%
Net Income per share:
  Basic                                          $  0.41  $  0.24        71%
  Diluted                                        $  0.41  $  0.24        71%

Six Months Ended
Net Sales                                        $ 105.5  $  70.9        49%
Net Income                                       $  20.2  $   9.4       115%
Net Income per share:
  Basic                                          $  0.79  $  0.37       114%
  Fully Diluted                                  $  0.79  $  0.37       114%


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.

"The global capital goods expansion is strong and Sun's second quarter activity reflects that," commented Allen Carlson, Sun's CEO and president. "Sales were a bit higher than our Q2 estimates and all regions contributed to the top line growth. Earnings were consistent with our strong first quarter results. Gross margin remains high, at 39.6%, as we continue to leverage our manufacturing assets. The U.S. PMI, Sun's primary leading indicator, continued to show growth in July for the 24th month in a row, albeit at a slower rate. This demonstrates to us that the economy is still expanding."

"Product development continues to yield interesting additions to Sun's product line," Carlson continued. "New products, which account for approximately 10% - 12% of sales, provide new and efficient innovative solution possibilities. Sun's brand is built on developing products that help customers create unique solutions for their motion control needs and we continue to meet that challenge."

"In June, the Board declared a 50% stock dividend," stated Carlson. "The new share amounts enhance the trading activity in the marketplace and provide Sun a flexible platform for future financing activities. Coupled with the stock dividend, the Board elected to keep the cash dividend at $0.09 per share on the new shares outstanding, effectively increasing the cash dividend by 50%. We continue to believe that Sun is an attractive and rewarding choice for the investment community."

Outlook

Third quarter 2011 revenues are expected to be approximately $53 million, reflecting what the Company believes is its normal seasonal business pattern. This represents a 39% increase over 2010 third quarter revenue of $38 million.

Earnings per share for the third quarter are estimated to be $0.38 to $0.41, commensurate with sales levels, and compared with $0.23 in the same quarter last 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 9, 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 (800) 218-2154 and using 3546326 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 July 2, 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 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
                                                July 2, 2011   July 3, 2010
                                                (unaudited)    (unaudited)

Net sales                                      $      54,770  $      39,246

Cost of sales                                         33,096         25,262
                                               -------------  -------------

Gross profit                                          21,674         13,984

Selling, engineering and administrative
 expenses                                              6,290          4,845
                                               -------------  -------------

Operating income                                      15,384          9,139

Interest income, net                                    (186)          (144)
Foreign currency transaction (gain) loss, net            (33)            69
Miscellaneous expense (income), net                       32           (109)
                                               -------------  -------------

Income before income taxes                            15,571          9,323

Income tax provision                                   5,134          3,210
                                               -------------  -------------

Net income                                     $      10,437  $       6,113
                                               =============  =============

Basic net income per common share (1)          $        0.41  $        0.24

Weighted average basic shares outstanding (1)         25,638         25,429

Diluted net income per common share (1)        $        0.41  $        0.24

Weighted average diluted shares outstanding
 (1)                                                  25,674         25,477

Dividends declared per share (1)               $       0.090  $       0.060

(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)
                                                     Six months ended
                                                July 2, 2011   July 3, 2010
                                                (unaudited)    (unaudited)

Net sales                                      $     105,473  $      70,850

Cost of sales                                         63,857         46,747
                                               -------------  -------------

Gross profit                                          41,616         24,103

Selling, engineering and administrative
 expenses                                             12,322         10,001
                                               -------------  -------------

Operating income                                      29,294         14,102

Interest income, net                                    (349)          (281)
Foreign currency transaction (gain) loss, net            (87)            41
Miscellaneous income, net                               (258)          (128)
                                               -------------  -------------

Income before income taxes                            29,988         14,470

Income tax provision                                   9,781          5,047
                                               -------------  -------------

Net income                                     $      20,207  $       9,423
                                               =============  =============

Basic net income per common share (1)          $        0.79  $        0.37

Weighted average basic shares outstanding (1)         25,593         25,421

Diluted net income per common share (1)        $        0.79  $        0.37

Weighted average diluted shares outstanding
 (1)                                                  25,629         25,471

Dividends declared per share (1)               $       0.223  $       0.120

(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)
                                             July 2, 2011   January 1, 2011
                                              (unaudited)
Assets
Current assets:
  Cash and cash equivalents                $         49,720 $        33,206
  Restricted cash                                       139             131
  Accounts receivable, net of allowance
   for doubtful accounts of $83 and $82              23,352          16,399
  Inventories                                        12,049          10,773
  Income taxes receivable                               483           1,154
  Deferred income taxes                                 446             446
  Marketable securities                              12,866          11,614
  Other current assets                                2,907           2,556
                                           ---------------- ---------------
    Total current assets                            101,962          76,279

Property, plant and equipment, net                   53,031          53,127
Other assets                                          1,481           2,628
                                           ---------------- ---------------

Total assets                               $        156,474 $       132,034
                                           ================ ===============

Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                         $          5,175 $         3,348
  Accrued expenses and other liabilities              6,364           5,250
  Dividends payable                                   2,307           1,531
                                           ---------------- ---------------
    Total current liabilities                        13,846          10,129

Deferred income taxes                                 5,690           5,684
Other noncurrent liabilities                          1,562           1,197
                                           ---------------- ---------------

    Total liabilities                                21,098          17,010

Shareholders' equity:
  Common stock                                           26              26
  Capital in excess of par value                     47,583          44,001
  Retained earnings                                  85,610          71,132
  Accumulated other comprehensive income              2,157            (135)
                                           ---------------- ---------------
    Total shareholders' equity                      135,376         115,024
                                           ---------------- ---------------

Total liabilities and shareholders' equity $        156,474 $       132,034
                                           ================ ===============



SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                                                     Six months ended
                                                July 2, 2011   July 3, 2010
                                                (unaudited)    (unaudited)
Cash flows from operating activities:
Net income                                     $      20,207  $       9,423
Adjustments to reconcile net income to net
 cash provided by operating activities:
Depreciation and amortization                          3,368          3,460
(Gain) loss on disposal of assets                         69             21
Provision for deferred income taxes                        6            (18)
Allowance for doubtful accounts                            1            (13)
Stock-based compensation expense                         829            540
Stock options income tax benefit                           -            (29)
(Increase) decrease in:
  Accounts receivable                                 (6,954)        (6,634)
  Inventories                                         (1,276)        (1,501)
  Income taxes receivable                                671          1,485
  Other current assets                                  (352)          (936)
  Other assets                                          (318)           549
Increase (decrease) in:
  Accounts payable                                     1,827          2,301
  Accrued expenses and other liabilities               3,526            752
  Taxes payable                                            -            203
  Other noncurrent liabilities                           365            (37)
                                               -------------  -------------
Net cash provided by operating activities             21,969          9,566

Cash flows from investing activities:
Proceeds from sale of joint venture                    1,451              -
Capital expenditures                                  (2,811)        (1,325)
Proceeds from dispositions                                30              -
Purchases of marketable securities                    (5,500)       (11,126)
Proceeds from sale of marketable securities            4,190          5,390
                                               -------------  -------------
Net cash used in investing activities                 (2,640)        (7,061)

Cash flows from financing activities:
Proceeds from exercise of stock options                   61             39
Proceeds from stock issued                               281            176
Dividends to shareholders                             (4,952)        (3,051)
Stock options income tax benefit                           -             29
                                               -------------  -------------
Net cash used in financing activities                 (4,610)        (2,807)

Effect of exchange rate changes on cash and
 cash equivalents                                      1,803         (2,160)
                                               -------------  -------------

Net increase (decrease) in cash and cash
 equivalents                                          16,522         (2,462)

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

Cash and cash equivalents, end of period       $      49,859  $      27,984
                                               =============  =============

Supplemental disclosure of cash flow
 information:
Cash paid:
  Income taxes                                 $       9,104  $       3,406
Supplemental disclosure of noncash
 transactions:
  Common stock issued for shared distribution
   through accrued expenses and other
   liabilities                                 $       2,412  $           -



                 United                     United
                 States    Korea   Germany  Kingdom Elimination Consolidated
                -------- -------- -------- -------- ----------- ------------

Three Months
Ended July 2,
 2011
Sales to
 unaffiliated
 customers      $ 35,152 $  5,674 $  7,308 $  6,636 $         - $     54,770
Intercompany
 sales             8,470        -       63      407      (8,940)           -
Operating
 income           11,383      659    1,922    1,281         139       15,384
Depreciation       1,292       29       88      246           -        1,655
Capital
 expenditures      1,615       23        5       56           -        1,699

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

Six Months
Ended July 2,
 2011
Sales to
 unaffiliated
 customers      $ 65,618 $ 11,697 $ 14,496 $ 13,662 $         - $    105,473
Intercompany
 sales            17,959        -      116      783     (18,858)           -
Operating
 income           21,359    1,599    3,662    2,487         187       29,294
Depreciation       2,585       54      188      486           -        3,313
Capital
 expenditures      2,510      146       50      104           -        2,810

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 (loss)     9,875    1,277    2,028    1,095        (173)      14,102
Depreciation       2,648       44      214      484           -        3,390
Capital
 expenditures      1,081      113        5      125           -        1,324

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

Tricia Fulton
Chief Financial Officer
941-362-1200

Source: Sun Hydraulics Corporation