Exhibit 99.1
FOR RELEASE: Immediately
CONTACT:
RICHARD ARTER INVESTOR RELATIONS 941-362-1200
RICHARD DOBBYN CHIEF FINANCIAL OFFICER 941-362-1200
SUN HYDRAULICS CORPORATION THIRD QUARTER NET INCOME EXCEEDS EXPECTATIONS
SARASOTA, FLA, NOVEMBER 2, 2004 - Sun Hydraulics Corporation (NASDAQ: SNHY)
reported financial results for the third quarter 2004 as follows:
(Dollars in millions except net income per share)
September 25, September 27,
2004 2003 Increase
Three Months Ended
Net Sales $ 23.2 $ 17.9 30%
Net Income $ 1.9 $ 0.5 280%
Net Income per share:
Basic $ 0.27 $ 0.08 238%
Fully Diluted $ 0.27 $ 0.08 238%
Nine Months Ended
Net Sales $ 71.1 $ 53.2 34%
Net Income $ 5.8 $ 1.6 263%
Net Income per share:
Basic $ 0.86 $ 0.24 258%
Fully Diluted $ 0.85 $ 0.24 254%
Sales increases by business segment were as follows:
3rd Quarter Year-to-date
----------- ------------
United States 31% 37%
United Kingdom 19% 15%
Germany 46% 42%
Korea 17% 30%
Sun Hydraulics President, Allen Carlson, commented, "Sales increased 30% during
the quarter compared to last year. Our flexible production capability and our
responsive supplier base continue to provide excellent delivery performance to
our customers.
Sales volume and productivity increases this quarter helped to offset increased
material costs."
Gross profit for the third quarter increased 56% compared to the same quarter
last year. Gross profit as a percentage of net sales increased to 30% from 25%
last year.
"While we are now sharing in the raw material cost increases experienced by our
suppliers, our production unit costs are unchanged," Carlson said. "We recently
announced a modest price increase on selected products effective the beginning
of next year. This will combat the rise in material costs as we continue to
invest time and money to further improve our production processes".
OUTLOOK
Third quarter orders increased 33% compared to last year, and October orders
came in at an even higher rate.
Fourth quarter shipments are estimated to be $22.0 million, which would be a 25%
increase over the same quarter last year. The majority of this increase is
projected to be in the U.S. operation as the rate of growth internationally is
projected to slow.
Net income per share on sales of $22.0 million should yield approximately $0.15,
which would bring net income per share for the year to $1.00.
WEBCAST
Sun Hydraulics Corporation will broadcast its third quarter financial results
conference call live over the Internet at 2:30 P.M. E.T. tomorrow, November 3,
2004. The conference call will be in conjunction with an Investor Open House to
be held at the Company's facility at 701 Tallevast Road, Sarasota, Florida, from
2-5 P.M. To listen, go to http://investor.sunhydraulics.com/medialist.cfm. A
copy of this earnings release is posted on the Investor Relations page of our
website under "Press Releases."
WEBCAST Q&A
Questions may be submitted to the Company via email after reviewing this
earnings release. Sun management will then answer these and other questions
during the Company's webcast. If an individual wishes to ask questions directly
during the webcast, the conference call may be accessed by dialing
1-800-361-0912.
Questions can be submitted by going to the Sun Hydraulics website,
www.sunhydraulics.com, and clicking on Investor Relations on the left hand 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 Hydraulics will answer as many legitimate questions pertaining to
the third quarter earnings release as possible during the webcast time.
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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 June 26, 2004, and under the heading "Business" and particularly under the
subheading, "Business Risk Factors" in the Company's Form 10-K for the year
ended
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December 27, 2003. 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 25, 2004 DECEMBER 27, 2003
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 7,199 $ 4,794
Restricted cash 433 425
Accounts receivable, net of allowance for
doubtful accounts of $193 and $187 8,420 6,215
Inventories 6,794 6,621
Other current assets 580 524
-------- --------
Total current assets 23,426 18,579
Property, plant and equipment, net 42,539 42,829
Other assets 1,593 1,624
-------- --------
TOTAL ASSETS $ 67,558 $ 63,032
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,214 $ 2,440
Accrued expenses and other liabilities 3,750 2,217
Long-term debt due within one year 991 937
Dividends payable 345 270
Taxes payable 2,101 51
-------- --------
Total current liabilities 9,401 5,915
Long-term debt due after one year 11,379 17,270
Deferred income taxes 4,363 4,456
Other noncurrent liabilities 305 328
-------- --------
Total liabilities 25,448 27,969
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
6,906,214 shares outstanding, September 25, 2004
6,757,941 shares outstanding, December 27, 2003 7 7
Capital in excess of par value 27,796 26,478
Unearned compensation related to
outstanding restricted stock (415) (601)
Retained earnings 12,391 7,522
Accumulated other comprehensive income 2,331 1,657
-------- --------
Total shareholders' equity 42,110 35,063
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 67,558 $ 63,032
======== ========
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SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
SEPTEMBER 25, 2004 SEPTEMBER 27, 2003
(UNAUDITED) (UNAUDITED)
NET SALES $ 23,164 $ 17,851
Cost of sales 16,117 13,328
-------- --------
GROSS PROFIT 7,047 4,523
Selling, engineering and
administrative expenses 4,002 3,604
-------- --------
OPERATING INCOME 3,045 919
Interest expense 123 137
Foreign currency transaction (gain)/loss (43) (1)
Miscellaneous (income)/expense, net (7) (1)
-------- --------
INCOME BEFORE INCOME TAXES 2,972 784
Income tax provision 1,092 275
-------- --------
NET INCOME $ 1,880 $ 509
======== ========
BASIC NET INCOME PER COMMON SHARE $ 0.27 $ 0.08
WEIGHTED AVERAGE BASIC SHARES OUTSTANDING 6,895 6,591
DILUTED NET INCOME PER COMMON SHARE $ 0.27 $ 0.08
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING 6,972 6,635
DIVIDENDS DECLARED PER SHARE $ 0.05 $ 0.04
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SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED
SEPTEMBER 25, 2004 SEPTEMBER 27, 2003
(UNAUDITED) (UNAUDITED)
NET SALES $ 71,077 $ 53,188
Cost of sales 49,338 39,059
-------- --------
GROSS PROFIT 21,739 14,129
Selling, engineering and
administrative expenses 12,262 11,491
-------- --------
OPERATING INCOME 9,477 2,638
Interest expense 405 415
Foreign currency transaction (gain)/loss (75) (190)
Miscellaneous (income)/expense, net (25) (24)
-------- --------
INCOME BEFORE INCOME TAXES 9,172 2,437
Income tax provision 3,343 857
-------- --------
NET INCOME $ 5,829 $ 1,580
======== ========
BASIC NET INCOME PER COMMON SHARE $ 0.86 $ 0.24
WEIGHTED AVERAGE BASIC SHARES OUTSTANDING 6,811 6,491
DILUTED NET INCOME PER COMMON SHARE $ 0.85 $ 0.24
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING 6,869 6,535
DIVIDENDS DECLARED PER SHARE $ 0.14 $ 0.12
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SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 25, 2004 SEPTEMBER 27, 2003
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,829 $ 1,580
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 4,073 3,907
Loss on disposal of assets 43 367
Deferred income taxes (93) (1)
Allowance for doubtful accounts 6 35
Amortization of compensation expense 186 116
(Increase) decrease in:
Accounts receivable (2,211) (2,219)
Inventories (173) 34
Taxes receivable -- --
Other current assets (56) 612
Other assets 31 (516)
Increase (decrease) in:
Accounts payable (226) 474
Accrued expenses and other liabilities 1,533 1,941
Dividends payable 75 11
Taxes payable 2,050 684
Other liabilities (23) (38)
-------- --------
Net cash provided by operating activities 11,044 6,987
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,531) (3,090)
Proceeds from dispositions of equipment 19 11
-------- --------
Net cash used in investing activities (3,512) (3,079)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt -- 18,850
Repayment of debt (5,837) (8,411)
Proceeds from stock issuance 1,319 956
Dividends to shareholders (960) (14,133)
-------- --------
Net cash used in financing activities (5,478) (2,738)
Effect of exchange rate changes on cash and
cash equivalents 359 (58)
Net increase in cash and cash equivalents 2,413 1,112
-------- --------
Cash and cash equivalents, beginning of period 5,219 3,958
-------- --------
Cash and cash equivalents, end of period $ 7,632 $ 5,070
======== ========
Supplemental disclosure of cash flow information:
Cash paid/(received):
Interest $ 405 $ 415
Income taxes $ 1,386 $ 174
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UNITED UNITED
STATES KOREA GERMANY KINGDOM ELIMINATION CONSOLIDATED
THREE MONTHS
ENDED SEPTEMBER 25, 2004
Sales to unaffiliated customers $ 14,676 $ 1,900 $ 3,390 $ 3,198 $ -- $ 23,164
Intercompany sales 4,112 -- 19 465 (4,596) --
Operating income/(loss) 1,921 201 791 135 (3) 3,045
Depreciation 960 34 132 259 -- 1,385
Capital expenditures 883 32 38 99 -- 1,052
THREE MONTHS
ENDED SEPTEMBER 27, 2003
Sales to unaffiliated customers $ 11,208 $ 1,630 $ 2,316 $ 2,697 $ -- $ 17,851
Intercompany sales 2,918 -- 9 323 (3,250) --
Operating income/(loss) 508 187 432 (190) (18) 919
Depreciation 900 32 94 235 -- 1,261
Capital expenditures 757 386 111 466 -- 1,720
NINE MONTHS
ENDED SEPTEMBER 25, 2004
Sales to unaffiliated customers $ 44,566 $ 6,744 $ 9,860 $ 9,907 $ -- $ 71,077
Intercompany sales 12,029 -- 52 1,301 (13,382) --
Operating income/(loss) 6,361 776 2,013 338 (11) 9,477
Depreciation 2,834 102 341 795 -- 4,072
Capital expenditures 2,922 40 105 465 -- 3,532
NINE MONTHS
ENDED SEPTEMBER 27, 2003
Sales to unaffiliated customers $ 32,473 $ 5,175 $ 6,951 $ 8,589 $ -- $ 53,188
Intercompany sales 9,794 -- 33 1,032 (10,859) --
Operating income/(loss) 1,806 541 925 (655) 21 2,638
Depreciation 2,752 89 285 781 -- 3,907
Capital expenditures 1,688 418 203 781 -- 3,090
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