Exhibit 99.1
FOR RELEASE: Immediately
Contact:
Richard K. Arter Investor Relations 941-362-1200
Richard J. Dobbyn Chief Financial Officer 941-362-1200
SUN HYDRAULICS CORPORATION REPORTS 1999 YEAR END RESULTS,
FOURTH QUARTER NET SALES OF $17.6 MILLION WITH RECORD ORDERS
SARASOTA, FLA, March 7, 2000 - Sun Hydraulics Corporation (NASDAQ: SNHY) today
announced net sales for the year ended January 1, 2000, were $69.7 million,
compared to net sales of $71.9 million for the year ended December 31, 1998. Net
income for 1999 was $1.8 million, or 2.6% of net sales, compared to $5.6
million, or 7.9% of net sales for 1998. Basic and diluted earnings per share for
the year ended January 1, 2000, were $0.29 and $0.28, respectively. (Excluding
the Korean operation, acquired in September 1998, net sales decreased 6.2%, or
$4.4 million. Net income in 1998 included $1.1 million from the settlement of a
business interruption insurance claim.)
Net sales for the quarter ended January 1, 2000, were $17.6 million, essentially
equal to the fourth quarter of 1998. Fourth quarter operating income in 1999
increased 8.3% compared to the fourth quarter of 1998. Net income for the
quarter ended January 1, 2000, was $0.7 million, or 4.2% of net sales, compared
to $0.8 million, or 4.6% of net sales for the quarter ended December 31, 1998.
Basic and diluted earnings per share for the fourth quarter of 1999 were $0.12
and $0.11, respectively.
"Despite the slowdown in sales in 1999, we ended the year on a positive note
with fourth quarter orders the highest in the history of Sun," said Sun
Hydraulics President Clyde Nixon. "Consolidated shipments at Sun were down 3.1%
in 1999, and we experienced weakness in most markets, with the exception of
Germany and Korea. Even though the macro economy was strong, 1999 was a down
year for the hydraulics industry. The National Fluid Power Association (the
hydraulics industry's trade association in the United States) indicated that
U.S. shipments of mobile and industrial hydraulic products were down 6.7% and
10.3%, respectively, compared to 1998.
"Sun's consolidated orders declined 1.1% in 1999, compared to the previous year,
but all of the decline occurred in the first three quarters. We ended the year
on a positive note with fourth quarter orders of $20.0 million, an increase of
13.1% compared to the fourth quarter of 1998. As we enter 2000, orders continue
to be strong and we believe this increase is indicative of an upturn in the
business cycle of the capital goods industries.
"In addition to the impact of lower sales, profits were significantly affected
by the implementation of new software in our U.S. operations in the second
quarter, and in our U.K. operation in the fourth quarter," Nixon continued.
"These software conversions not only caused us to delay shipments, but, more
importantly, temporarily resulted in decreased productivity, especially in our
U.S. facilities. Following the conversion in the U.S. facility, we have steadily
increased our shipping rates and continued to improve delivery times. Both
system conversions are now substantially complete and we do not expect any
further disruptions.
"In 1999 the Company did a number of very exciting things," Nixon said. "In
addition to the software conversions, we nearly doubled the capacity of our high
volume production cell, we doubled our in-house heat treat capacity, we
introduced our new solenoid cartridge valves, saw our newly acquired
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Korean operation rebound nicely, and saw our joint venture in China begin to
produce manifolds. We have freed up significant space in our Sarasota facility
that will help improve the production efficiency of our lower-volume,
complementary products and were fortunate to be able to add a significant number
of experienced employees in our Florida operations. We have expended a lot of
energy and money on our capacity expansion programs to be ready for the next
upturn in business. We have put the final pieces of these programs in place and
we are eagerly looking forward to the coming year." Sun Hydraulics Corporation,
with manufacturing and distribution facilities in Sarasota and Manatee County,
Florida, Coventry, England, Erkelenz, Germany and Inchon, Korea, is a leading
designer and manufacturer of high-performance screw-in hydraulic cartridge
valves and manifolds for worldwide mobile and industrial markets.
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 "Business" and
particularly under the subheading, "Business Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operation" in the
Company's Form 10-K for the year ended January 1, 2000. 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.
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SUN HYDRAULICS CORPORATION - JANUARY 1, 2000
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
Three Months Ended Twelve Months Ended
January 1, December 31, January 1, December 31,
(unaudited)
2000 1998 2000 1998
---- ---- ---- ----
Net sales $ 17,602 $ 17,500 $ 69,652 $ 71,881
Cost of sales 13,007 13,459 53,107 52,537
Gross profit 4,595 4,041 16,545 19,344
Selling, engineering and
administrative expenses 3,191 2,745 12,507 11,656
Operating income 1,404 1,296 4,038 7,688
Interest expense 261 130 954 837
Miscellaneous (income) expense 108 (81) 420 (1,669)
Income before income taxes 1,035 1,247 2,664 8,520
Income tax provision 300 443 833 2,873
Net Income $ 735 804 $ 1,831 $ 5,647
Basic net income
per common share .12 .13 .29 .89*
Basic weighted average
shares outstanding 6,385 6,361 6,380 6,345
Diluted net income
per common share .11 .12 .28 .87*
Diluted weighted average
shares outstanding 6,571 6,521 6,569 6,531
* During the third quarter of 1998, the Company received a settlement of an
insurance claim of $1,661, net of expenses, or $1,096, net of expenses and
taxes.
CONSOLIDATED BALANCE SHEETS
(in thousands)
January 1, December 31,
2000 1998
Assets
Current assets:
Cash and cash equivalents $ 1,122 $ 1,592
Accounts receivable, net of allowance for
doubtful accounts of $196 and $169 6,260 5,342
Inventories 8,131 8,125
Taxes receivable 455 -
Other current assets 591 891
Total current assets 16,559 15,950
Property, plant and equipment, net 46,529 44,003
Other assets 986 1,066
Total assets $ 64,074 $ 61,019
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 2,712 $ 2,877
Accrued expenses and other liabilities 1,464 2,065
Long-term debt due within one year 3,033 4,302
Notes payable to related parties due within one year 378 578
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Dividends payable 255 254
Income taxes payable - 245
Total current liabilities 7,842 10,321
Long-term debt due after one year 10,830 6,461
Notes payable to related parties due after one year 101 566
Deferred income taxes 4,125 3,656
Total liabilities 22,898 21,004
Shareholders' equity:
Preferred stock - -
Common stock 6 6
Capital in excess of par value 24,486 24,386
Retained earnings 16,173 15,363
Equity adjustment for foreign currency translation 511 260
Total shareholders' equity 41,176 40,015
Total liabilities and shareholders' equity $ 64,074 $ 61,019
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