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 ANNOUNCES NET SALES INCREASE OF 11.0% FOR THIRD QUARTER,
EARNINGS REBOUND TO $0.09 EPS
SARASOTA, FLA, November 10, 1999 - Sun Hydraulics Corporation (NASDAQ: SNHY)
today announced earnings of $0.09 per share on net sales of $17.7 million for
the third quarter ended October 2, 1999. Third quarter 1999 net sales were the
same amount as the third quarter of 1998, and an increase of 11.0% compared to
the second quarter of 1999. Net income for the third quarter of 1999 was $0.6
million, compared to a net loss of $0.2 million in the second quarter of 1999,
and net income of $0.9 million in the third quarter of 1998*. Basic and diluted
net income per share for the third quarter of 1999 were $0.09, compared to both
basic and diluted net income per share of $0.14 in the third quarter of 1998.
(*Third quarter 1998 net income figures exclude $1.1 million from the
settlement of a business interruption insurance claim.)
"The increased shipments in the third quarter, compared to the second quarter,
were a result of improved production output in the U.S. operation," said Sun
Hydraulics President Clyde Nixon. "The major difficulties related to the second
quarter implementation of our new operating system were overcome during the
third quarter. We are very pleased to report that gross profit as a percent of
sales improved in the quarter and is higher than it has been in any of the
three previous quarters. The improvement reflects reduced material costs in the
U.S. operation.
"North American and Asian orders increased approximately 13% in the third
quarter, while European orders were down 9%. We are currently seeing a
strengthening of European orders, which bodes well for the first quarter of
next year. Fourth quarter production output in the U.S. operation should be
about the same as the third quarter, despite the reduced number of working
days," Nixon continued. "Entering next year, we expect material costs to
continue to improve. We also anticipate that productivity will improve as the
new heat treat facility is completed, the high volume production is moved from
the Sarasota plant to the Manatee plant, and we continue to fine tune the new
operating system."
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 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 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, "Business" and "Management's Discussion and Analysis of Financial
Condition" in the Company's Form 10-K for the year ended December 31, 1998 and
"Management's Discussion and Analysis of Financial Condition" in the Company's
Form 10-Q for the quarter ended July 3, 1999. 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 - October 2, 1999
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
Three Months Ended
October 2, September 30,
1999 1998
----------- -------------
(unaudited) (unaudited)
Net sales $ 17,664 $ 17,664
Cost of sales 13,174 13,132
Gross profit 4,490 4,532
Selling, engineering and
administrative expenses 3,157 2,864
Operating income (loss) 1,333 1,668
Interest expense 264 216
Miscellaneous expense (income) 151 (1,586)
Income (loss) before income taxes 918 3,038
Income tax provision (benefit) 303 1,015
Net income (loss) before equity loss
in joint venture 615 2,023
Equity loss in joint venture 27 --
Net income (loss) $ 588 $ 2,023
Basic net income (loss)
per common share $ 0.09 $ 0.32
Basic weighted average
shares outstanding 6,384 6,354
Diluted net income (loss)
per common share $ 0.09 $ 0.31
Diluted weighted average
shares outstanding 6,536 6,560
SUN HYDRAULICS CORPORATION - October 2, 1999
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
Nine Months Ended
October 2, September 30,
1999 1998
----------- -------------
(unaudited) (unaudited)
Net sales $ 52,050 $ 54,381
Cost of sales 40,100 39,078
Gross profit 11,950 15,303
Selling, engineering and
administrative expenses 9,317 8,911
Operating income 2,633 6,392
Interest expense 693 707
Miscellaneous expense (income) 228 (1,588)
Income before income taxes 1,712 7,273
Income tax provision 532 2,430
Net income before equity loss in joint venture 1,180 4,843
Equity loss in joint venture 84 --
Net income $ 1,096 $ 4,843
Basic net income
per common share $ 0.17 $ 0.76
Basic weighted average
shares outstanding 6,378 6,340
Diluted net income
per common share $ 0.17 $ 0.74
Diluted weighted average
shares outstanding 6,531 6,561
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CONSOLIDATED BALANCE SHEETS
(in thousands)
October 2, December 31,
1999 1998
----------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,087 $ 1,592
Accounts receivable, net of allowance for
doubtful accounts of $262 and $169 6,750 5,342
Inventories 7,237 8,125
Other current assets 752 891
Total current assets 15,826 15,950
Property, plant and equipment, net 45,619 44,003
Investment in joint venture 162 246
Other assets 912 820
Total assets $ 62,519 $ 61,019
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 2,327 $ 2,877
Accrued expenses and other liabilities 1,633 2,065
Long-term debt due within one year 2,802 4,302
Notes payable to related parties due within one year 375 578
Dividends payable 255 254
Income taxes payable (25) 245
Total current liabilities 7,367 10,321
Long-term debt due after one year 10,621 6,461
Notes payable to related parties due after one year 201 566
Deferred income taxes 3,641 3,656
Total liabilities 21,830 21,004
Shareholders' equity:
Preferred stock -- --
Common stock 6 6
Capital in excess of par value 24,486 24,386
Retained earnings 15,693 15,363
Equity adjustment for foreign currency translation 504 260
Total shareholders' equity 40,689 40,015
Total liabilities and shareholders' equity $ 62,519 $ 61,019
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