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 THIRD QUARTER EPS OF $0.08
SARASOTA, FLA, NOVEMBER 6, 2002 - Sun Hydraulics Corporation (NASDAQ: SNHY)
today announced that net sales for the third quarter ended September 28, 2002,
were $16.04 million, a decrease of $1.37 million, or 7.9%, from the previous
quarter, and an increase of $0.92 million, or 6.1%, compared to the net sales
for the quarter ended September 29, 2001. Net income for the quarter ended
September 28, 2002, was $0.51 million, or 3.2% of net sales, compared to $0.77
million, or 4.4% of net sales for the previous quarter, and $0.15 million, or
1.0% of net sales for the same quarter last year. Both basic and diluted
earnings per share for the quarter ended September 28, 2002, were $0.08,
compared to $0.02 for the quarter ended September 29, 2001.
Orders for the three months ended September 28, 2002, were $15.76 million. This
was a $1.05 million, or 7.2%, increase from the three months ended September 29,
2001, and a $2.52 million, or 13.8%, decrease compared to the previous quarter
ended June 29, 2002. The 13.8% decrease from the previous quarter included a
15.0% decrease in domestic orders, and a 12.5% decrease in international orders
as follows: Korean orders decreased 13.2%, German orders decreased 5.8% and
United Kingdom orders decreased 15.8%.
Historically, the Company's order trends have tracked the manufacturing capacity
utilization index in the United States. This index increased in January 2002 for
the first time in approximately two years and generally continued to increase
modestly each month through July before decreasing slightly in August and
September.
"The Company's order rate since July has mirrored the lack of upward movement in
the capacity utilization index," said Sun Hydraulics president Allen Carlson.
"What we had hoped was a normal summer slow down has turned out to be a stalling
of the economic recovery in the manufacturing sector, particularly in the United
States."
OUTLOOK
Based on the current order rates, the Company forecasts net sales for the fourth
quarter ending December 28, 2002, to be in the range of $15.2 to $15.8 million.
Net income for the quarter is estimated to be between $0.04 and $0.07 per share.
Net income for the year would then be $0.26 to $0.29 per share.
"The protracted recession in the manufacturing sector of the economy has not
changed our belief that preserving the workforce, while continuing to make
prudent capital expenditures to improve productivity, will yield a return and is
in the best long-term interest of our shareholders," concluded Carlson.
Sun Hydraulics Corporation will broadcast its third quarter conference call with
analysts live over the Internet at 2:30 P.M. E.S.T. today, November 6, 2002. To
listen, go to http://investor.sunhydraulics.com/medialist.cfm.
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 September 28, 2002, 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 29, 2001. 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 BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 28, 2002 DECEMBER 29, 2001
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents 4,169 $ 3,611
Accounts receivable, net of allowance for
doubtful accounts of $201 and $195 6,295 4,755
Inventories 6,936 7,238
Taxes receivable -- 668
Other current assets 382 985
---------- ----------
Total current assets 17,782 17,257
Property, plant and equipment, net 44,357 43,555
Goodwill (net) 714 714
Other assets 275 224
---------- ----------
TOTAL ASSETS $ 63,128 $ 61,750
========== ==========
LIABILITIES, REDEEMABLE COMMON STOCK
AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,787 $ 1,323
Accrued expenses and other liabilities 1,786 1,494
Long-term debt due within one year 1,390 1,405
Dividends payable 258 257
Taxes payable 458 --
---------- ----------
Total current liabilities 5,679 4,479
Long-term debt due after one year 8,495 9,258
Deferred income taxes 3,858 3,848
Other noncurrent liabilities 390 427
---------- ----------
Total liabilities 18,422 18,012
Redeemable Common Stock 2,250 --
Shareholders' equity:
Preferred stock, 2,000,000 shares authorized,
par value $0.001, no shares outstanding -- --
Common stock, 20,000,000 shares authorized,
par value $0.001, 6,442,794 shares outstanding 6 6
Capital in excess of par value 22,469 24,502
Retained earnings 19,639 19,001
342 229
Accumulated other comprehensive income --
---------- ----------
Total shareholders' equity 42,456 43,738
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK, AND
SHAREHOLDERS' EQUITY $ 63,128 $ 61,750
========== ==========
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
SEPTEMBER 28, 2002 SEPTEMBER 29, 2001
(UNAUDITED) (UNAUDITED)
NET SALES $ 16,043 $ 15,119
Cost of sales 11,995 11,849
--------- ---------
GROSS PROFIT 4,048 3,270
Selling, engineering and
administrative expenses 3,021 2,975
--------- ---------
OPERATING INCOME 1,027 295
Interest expense 153 218
Miscellaneous expense/(income) 94 (125)
--------- ---------
INCOME BEFORE INCOME TAXES 780 202
Income tax provision 273 51
--------- ---------
NET INCOME $ 507 $ 151
========= =========
BASIC NET INCOME PER COMMON SHARE $ 0.08 $ 0.02
WEIGHTED AVERAGE BASIC SHARES OUTSTANDING 6,433 6,408
DILUTED NET INCOME PER COMMON SHARE $ 0.08 $ 0.02
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING 6,577 6,564
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED
SEPTEMBER 28, 2002 SEPTEMBER 29, 2001
(UNAUDITED) (UNAUDITED)
NET SALES $ 49,069 $ 51,623
Cost of sales 36,803 38,807
--------- ---------
GROSS PROFIT 12,266 12,816
Selling, engineering and administrative expenses 9,472 9,807
--------- ---------
OPERATING INCOME 2,794 3,009
Interest expense 455 675
Miscellaneous expense/(income) 171 (74)
--------- ---------
INCOME BEFORE INCOME TAXES 2,168 2,408
Income tax provision 759 795
--------- ---------
NET INCOME
$ 1,409 $ 1,613
========= =========
BASIC NET INCOME PER COMMON SHARE $ 0.22 $ 0.25
WEIGHTED AVERAGE BASIC SHARES OUTSTANDING 6,429 6,392
DILUTED NET INCOME PER COMMON SHARE $ 0.21 $ 0.25
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING 6,573 6,547
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 28, 2002 SEPTEMBER 29, 2001
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,409 $ 1,613
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,873 4,102
Loss on disposal of assets 155 (15)
Provision for deferred income taxes 10 (3)
Allowance for doubtful accounts 6 27
(Increase) decrease in:
Accounts receivable (1,546) 227
Inventories 302 352
Taxes receivable 668 (468)
Other current assets 603 123
Other assets (51) 21
Increase (decrease) in:
Accounts payable 464 (244)
Accrued expenses and other liabilities 292 466
Dividends payable 1 --
Taxes payable 458 (315)
Other liabilities (37) (38)
--------- ---------
Net cash provided by operating activities 6,607 5,848
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,883) (2,858)
Proceeds from dispositions of equipment 53 55
--------- ---------
Net cash used in investing activities (4,830) (2,803)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt -- 571
Repayment of debt (778) (1,408)
Proceeds from stock issuance 217 --
Dividends to shareholders (771) (766)
--------- ---------
Net cash used in financing activities (1,332) (1,603)
Effect of exchange rate changes on
cash and cash equivalents 113 27
--------- ---------
Net (decrease)/increase in cash and cash equivalents 558 1,469
--------- ---------
Cash and cash equivalents, beginning of period 3,611 2,698
--------- ---------
Cash and cash equivalents, end of period 4,169 $ 4,167
========= =========
Supplemental disclosure of cash flow information:
Cash paid/(received):
Interest 455 675
Income taxes $ (377) $ 1,581