Exhibit 99.2
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 1998 SALES INCREASE 12%,
FOURTH QUARTER EARNINGS PER SHARE $0.12
SARASOTA, FLA, March 10, 1999 - Sun Hydraulics Corporation (NASDAQ: SNHY) today
announced that for the year ended December 31, 1998, net sales were $71.9
million, compared to net sales of $64.2 million for 1997. Net income for 1998
was $5.6 million, or 7.9% of net sales, compared to $4.7 million, or 7.3% of
net sales for 1997. Basic and diluted earnings per share for the year ended
December 31, 1998, were $0.89 and $0.87, respectively. The settlement of a
business-interruption insurance claim in the third quarter of 1998 contributed
approximately $0.17 per diluted share to net income for the year.
Net sales for the quarter ended December 31, 1998, were $17.5 million, a 2.8%
increase compared to $17.0 million of net sales in the fourth quarter of 1997.
Net income for the quarter ended December 31, 1998, was $0.8 million, or 4.6%
of net sales, compared to $1.3 million, or 7.4% of net sales for the quarter
ended December 31, 1997. Basic and diluted earnings per share for the fourth
quarter 1998 were $0.13 and $0.12, respectively.
"At this time, the industry outlook for 1999 is uncertain," said Sun Hydraulics
President Clyde Nixon. "Demand for hydraulic products began to slow in the last
half of 1998, and we are expecting sales and operating income in the first half
of 1999 to be no better than the last half of 1998. The industry order rate,
reported by the National Fluid Power Association (NFPA), indicated that orders
in 1998 were down 4.7% compared to 1997.
"We continued to improve delivery times in the fourth quarter and significantly
reduced our past due backlog," continued Nixon. "This improvement, coupled with
distributor inventory increases during 1998 and the slowdown of business could
adversely affect orders, and, thus, shipments, in the near term. We are in the
final stages of implementing new software systems in the United States and
England. By the last half of the year, our new procurement strategies and
productivity improvement efforts should begin to improve our margins.
Nixon cited a number of initiatives recently undertaken by Sun Hydraulics to
sustain the Company's long-term growth. "1999 will be the first full year of
operation of our new Korean subsidiary, and our joint venture in China is
expected to have production equipment in place in March. In April, we will
formally introduce our new electrically actuated (solenoid) product line at the
Hannover Fair in Germany. This product line gives us entry into a large market
that we do not currently serve," Nixon concluded.
Sun Hydraulics Corporation, with manufacturing and distribution facilities in
Sarasota and Manatee County, Florida, Coventry, England, Erkelenz, Germany and
Incheon, 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; (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 - DECEMBER 31, 1998
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
(unaudited) (unaudited)
1998 1997 1998 1997
---- ---- ---- ----
Net sales $17,500 $17,022 $71,881 $64,198
Cost of sales 13,459 12,133 52,537 44,621
Gross profit 4,041 4,889 19,344 19,577
Selling, engineering and administrative expenses 2,745 2,691 11,656 11,275
Operating income 1,296 2,198 7,688 8,302
Interest expense 130 252 837 905
Miscellaneous (income) expense (84) 92 (1,672) 133
Income before income taxes 1,250 1,854 8,523 7,264
Income tax provision 443 593 2,873 2,554
Net income before Joint Venture 807 1,261 5,650 4,710
Equity Loss in Joint Venture 3 - 3 -
Net Income $ 804 $ 1,261 $ 5,647 $ 4,710
Basic net income per common share .13 .20 .89* .75
Basic weighted average shares outstanding 6,361 6,322 6,345 6,308
Diluted net income per common share .12 .19 .87* .73
Diluted weighted average shares outstanding 6,521 6,520 6,531 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 $0.72 and $0.70,
respectively, without this insurance claim.
3
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, December 31,
1998 1997
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,592 $ 1,249
Accounts receivable, net of allowance for
doubtful accounts of $169 and $47 5,342 4,558
Inventories 8,125 6,775
Other current assets 891 932
Total current assets 15,950 13,514
Property, plant and equipment, net 44,003 39,789
Other assets 1,066 86
Total assets $ 61,019 $ 53,389
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 2,877 $ 2,847
Accrued expenses and other liabilities 2,065 2,174
Long-term debt due within one year 4,302 1,035
Notes payable to related parties due within one year 578 757
Dividends payable 254 221
Income taxes payable 245 380
Total current liabilities 10,321 7,414
Long-term debt due after one year 6,461 6,620
Notes payable to related parties due after one year 566 1,152
Deferred income taxes 3,656 3,203
Total liabilities 21,004 18,389
Shareholders' equity:
Preferred stock - -
Common stock 6 6
Capital in excess of par value 24,386 24,163
Retained earnings 15,363 10,732
Equity adjustment for foreign currency translation 260 99
Total shareholders' equity 40,015 35,000
Total liabilities and shareholders' equity $ 61,019 $ 53,389
4