Exhibit 99.3 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 $0.31 EARNINGS PER SHARE FOR THIRD QUARTER SETTLEMENT OF INSURANCE CLAIM CONTRIBUTES TO EARNINGS RISE SARASOTA, FLA, November 13, 1998 - Sun Hydraulics Corporation (NASDAQ: SNHY) today announced net sales were $17.7 million for the quarter ended September 30, 1998, compared to $17.3 million for the quarter ended September 30, 1997. Net income for the quarter ended September 30,1998 was $2.0 million, or $0.31 per diluted share, compared to net income of $1.4 million, or $0.21 per diluted share, for the same quarter in 1997. The settlement of a business interruption insurance claim contributed approximately $0.17 per diluted share to net income. Without the insurance claim settlement, basic and diluted net income per share and would have been $0.15 and $0.14, respectively, for the third quarter of 1998. For the nine months ended September 30, 1998, basic and diluted net income per share were $0.76 and $0.74, respectively. Net sales for the nine months ended September 30, 1998, increased 15.3% to $54.4 million, compared to $47.2 million in the first nine months of 1997. Net income for the nine months ended September 30, 1998, including the insurance claim settlement, increased 40.4% to $4.8 million, compared to $3.4 million in the first nine months of 1997. As previously announced, third quarter earnings, disregarding the settlement of the insurance claim, fell below analyst expectations due to flat sales compared to the second quarter of 1998, a decline in productivity, lower manifold sales volume and increased material costs. Net sales were approximately the same as the second quarter of 1998. "As I stated before, I'm obviously disappointed with our performance this past quarter," said Sun Hydraulics President Clyde Nixon. "We did not get the productivity we had anticipated out of the cartridge operation as we continued to work at improving our output. On the material cost side, we have experienced a steady rise in the prices we pay for purchased parts for our cartridge products and are actively reviewing our procurement procedures and evaluating our supplier base. We are concentrating on improving internal and external processes to yield parts with more consistent quality and improved cost structure, as well as allocating additional resources to our United States cartridge manufacturing operations to increase cartridge valve capacity. "Manifold sales slowed in the third quarter and because manifolds typically yield a higher level of earnings contribution, this sales weakness contributed to the earnings shortfall," Nixon said. "We believe the lower manifold sales are indicative of a general slowdown in the hydraulic markets, a situation we will closely monitor. The National Fluid Power Association is predicting 1999 sales for the hydraulics industry to decline about 5%. "Despite the soft markets, Sun Hydraulics is continuing to position itself for growth," Nixon concluded. "We are excited about our acquisition of Korea Fluid Power in September, and equally excited about the joint-venture company we are forming in China. Together with the expansion of our factory in England, the start-up of manifold manufacturing in Germany and our new cartridge products, especially our new solenoid valves, we believe that Sun Hydraulics is well positioned to grow in the screw-in cartridge valve and manifold markets." -1- Sun Hydraulics is a leading designer and manufacturer of high performance screw-in hydraulic cartridge valves and manifolds for global industrial and mobile 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; (vi) the Company's Year 2000 readiness plans and costs; and (vii) 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; (vi) the Company's ability timely to become Year 2000 ready, including the Company's ability to identify all critical systems that will be impacted by the Year 2000, the Company's ability, in a cost-efficient manner, to correct, upgrade or replace such systems, and the Year 2000 readiness of third parties with which the Company has material relationships; and (vii) 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 "Risk Factors" in the Form S-1 Registration Statement and Prospectus for the Company's initial public offering, and "Business" in the Company's Form 10-K for the year ended December 31, 1997, and "Management's Discussion and Analysis" in the Company's Form 10-Q for the quarter ended September 30, 1998. 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. -2- SUN HYDRAULICS CORPORATION - SEPTEMBER 30, 1998 CONSOLIDATED STATEMENTS OF INCOME (in thousands except per share data)
Three Months Ended September 30, (unaudited) 1998 1997 ---- ---- Net sales $17,664 $17,301 Cost of sales 13,132 11,842 Gross profit 4,532 5,459 Selling, engineering and administrative expenses 2,864 3,018 Operating income 1,668 2,441 Interest expense 216 285 Miscellaneous (income) expense (1,586) 27 Income before income taxes 3,038 2,129 Income tax provision 1,015 777 Net income $ 2,023 $1,352 Basic net income per common share .32 * .21 Basic weighted average shares outstanding 6,354 6,309 Diluted net income per common share .31 * .21 Diluted weighted average shares outstanding 6,560 6,499
* 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. Basic and diluted earnings per share were $0.15 and $0.14, respectively, without this insurance claim.
Nine Months Ended September 30, (unaudited) 1998 1997 ---- ---- Net sales $54,381 $47,176 Cost of sales 39,078 32,488 Gross profit 15,303 14,688 Selling, engineering and administrative expenses 8,911 8,584 Operating income 6,392 6,104 Interest expense 707 653 Miscellaneous (income) expense (1,588) 41 Income before income taxes 7,273 5,410 Income tax provision 2,430 1,961 Net income $ 4,843 $ 3,449 Basic net income per common share .76 ** .55 Basic weighted average shares outstanding 6,340 6,303 Diluted net income per common share .74 ** .53 Diluted weighted average shares outstanding 6,561 6,487
** 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. Basic and diluted earnings per share were $0.59 and $0.57, respectively, without this insurance claim. -3- CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, December 31, 1998 1997 (unaudited) Assets Current assets: Cash and cash equivalents $ 1,474 $ 1,249 Accounts receivable, net of allowance for doubtful accounts of $49 and $47 6,109 4,558 Inventories 7,990 6,775 Other current assets 907 932 Total current assets 16,480 13,514 Property, plant and equipment, net 42,957 39,789 Other assets 689 86 Total assets $60,126 $53,389 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 3,758 $ 2,847 Accrued expenses and other liabilities 2,440 2,174 Long-term debt due within one year 1,744 1,035 Notes payable to related parties due within one year 702 757 Dividends payable 254 221 Income taxes payable 1,136 380 Total current liabilities 10,034 7,414 Long-term debt due after one year 6,724 6,620 Notes payable to related parties due after one year 649 1,152 Deferred income taxes 3,217 3,203 Total liabilities 20,624 18,389 Shareholders' equity: Preferred stock -- -- Common stock 6 6 Capital in excess of par value 24,386 24,163 Retained earnings 14,813 10,732 Equity adjustment for foreign currency translation 297 99 Total shareholders' equity 39,502 35,000 Total liabilities and shareholders' equity $60,126 $53,389
-4-