Exhibit 99.1
Sun Hydraulics Reports 2005 Sales of $117 million and Net Income of $12.8 million
SARASOTA, FLA, March 6, 2006 — Sun Hydraulics Corporation (NASDAQ: SNHY) reported financial results for the year and fourth quarter 2005 as follows:
(Dollars in millions except net income per share)
December 31, | December 25, | |||||||||||
2005 | 2004 | Increase | ||||||||||
Twelve Months Ended | ||||||||||||
Net Sales | $ | 116.8 | $ | 94.5 | 24 | % | ||||||
Net Income | $ | 12.8 | $ | 7.8 | 64 | % | ||||||
Net Income per share (1): | ||||||||||||
Basic | $ | 1.18 | $ | 0.76 | 55 | % | ||||||
Diluted | $ | 1.17 | $ | 0.76 | 54 | % | ||||||
Three Months Ended | ||||||||||||
Net Sales | $ | 27.9 | $ | 23.4 | 19 | % | ||||||
Net Income | $ | 2.9 | $ | 2.0 | 45 | % | ||||||
Net Income per share (1): | ||||||||||||
Basic | $ | 0.26 | $ | 0.19 | 37 | % | ||||||
Diluted | $ | 0.26 | $ | 0.19 | 37 | % |
(1) | All earnings per share and weighted average share information reflects a three-for-two stock split effective at the close of business on July 15, 2005. |
“2005 was another great year for Sun,” said Allen Carlson, Sun’s President and CEO. “We grew in all geographic segments and believe we gained market share. Sales in 2005 were up 24%, following 33% growth in 2004. We are very pleased with this year’s results and look forward to 2006.
“Order rates accelerated going into the new year, and have continued throughout the first quarter with run rates up over 28%,” continued Carlson. “Capacity in our U.S. manufacturing facilities continues to increase as we refine production processes and add new machinery. Shipping on time to our customers is still our main focus, and remains one of the keys to our success.”
Sarbanes-Oxley
Sun completed documentation and testing for 2005 related to compliance with Sarbanes-Oxley, Section 404. “We are pleased that the first year of SOX is behind us,” commented Tricia Fulton, Sun’s in-coming CFO. “Our goal throughout the project was to comply fully with the law, contain project costs, and keep the disruption of the exercise on work flow to a minimum. We were able to accomplish this in year one and expect that we will do the same in year two.”
Outlook
2006 first quarter sales are estimated to be in the range of $34 million, a 21% increase over last year on a calendarized basis. First quarter earnings per share are estimated to be between $0.35 and $0.37 per share, compared to $0.32 per share last year.
Open House and Webcast
Sun Hydraulics Corporation will broadcast its 2005 financial results conference call live over the Internet at 4:15 P.M. E.T. tomorrow, March 7, 2006. 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, starting at 4:00 P.M. To listen to the webcast, go tohttp://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, by going to the Sun Hydraulics website,www.sunhydraulics.com, and clicking on Investor Relations on the top 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 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 1-877-407-0778.
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 atwww.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 October 1, 2005, 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 25, 2004. 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 STATEMENTS OF OPERATIONS
(in thousands except per share data)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
Three Months Ended | ||||||||
December 31, | December 25, | |||||||
2005 | 2004 | |||||||
Net sales | $ | 27,938 | $ | 23,426 | ||||
Cost of sales | 19,884 | 16,630 | ||||||
Gross profit | 8,054 | 6,796 | ||||||
Selling, engineering and administrative expenses | 4,352 | 3,979 | ||||||
Operating income | 3,702 | 2,817 | ||||||
Interest expense | 56 | 122 | ||||||
Foreign currency transaction (gain) loss | (63 | ) | 75 | |||||
Miscellaneous (income) expense | (124 | ) | 59 | |||||
Income before income taxes | 3,833 | 2,561 | ||||||
Income tax provision | 945 | 560 | ||||||
Net income | $ | 2,888 | $ | 2,001 | ||||
Basic net income per share (1) | $ | 0.26 | $ | 0.19 | ||||
Basic weighted average shares outstanding (1) | 10,920 | 10,425 | ||||||
Diluted net income per share (1) | $ | 0.26 | $ | 0.19 | ||||
Diluted weighted average share outstanding (1) | 10,994 | 10,521 | ||||||
Dividends declared per share (1) | $ | 0.100 | $ | 0.050 |
(1) | All earnings per share, weighted average share and dividend information reflects a three-for-two stock split effective at the close of business on July 15, 2005. |
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
Twelve Months Ended | ||||||||
December 31, | December 25, | |||||||
2005 | 2004 | |||||||
Net sales | $ | 116,757 | $ | 94,503 | ||||
Cost of sales | 79,839 | 65,968 | ||||||
Gross profit | 36,918 | 28,535 | ||||||
Selling, engineering and administrative expenses | 17,738 | 16,241 | ||||||
Operating income | 19,180 | 12,294 | ||||||
Interest expense | 441 | 527 | ||||||
Foreign currency transaction (gain) loss | (362 | ) | — | |||||
Miscellaneous (income) expense | (36 | ) | 35 | |||||
Income before income taxes | 19,137 | 11,732 | ||||||
Income tax provision | 6,329 | 3,902 | ||||||
Net income | $ | 12,808 | $ | 7,830 | ||||
Basic net income per share (1) | $ | 1.18 | $ | 0.76 | ||||
Basic weighted average shares outstanding (1) | 10,827 | 10,269 | ||||||
Diluted net income per share (1) | $ | 1.17 | $ | 0.76 | ||||
Diluted weighted average share outstanding (1) | 10,918 | 10,346 | ||||||
Dividends declared per share (1) | $ | 0.300 | $ | 0.143 |
(1) | All earnings per share, weighted average share and dividend information reflects a three-for-two stock split effective at the close of business on July 15, 2005. |
SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, | December 25, | |||||||
2005 | 2004 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 5,417 | $ | 9,300 | ||||
Restricted cash | 413 | 462 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $110 and $170 | 10,975 | 8,611 | ||||||
Inventories | 7,870 | 7,105 | ||||||
Income taxes receivable | 236 | — | ||||||
Deferred income taxes | 782 | 392 | ||||||
Other current assets | 864 | 776 | ||||||
Total current assets | 26,557 | 26,646 | ||||||
Property, plant and equipment, net | 45,181 | 43,687 | ||||||
Other assets | 1,823 | 1,475 | ||||||
Total assets | $ | 73,561 | $ | 71,808 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 4,822 | $ | 2,536 | ||||
Accrued expenses and other liabilities | 3,857 | 4,609 | ||||||
Long-term debt due within one year | 398 | 1,058 | ||||||
Dividends payable | 1,089 | 522 | ||||||
Income taxes payable | — | 1,198 | ||||||
Total current liabilities | 10,166 | 9,923 | ||||||
Long-term debt due after one year | 1,986 | 11,196 | ||||||
Deferred income taxes | 4,688 | 4,986 | ||||||
Other liabilities | 281 | 300 | ||||||
Total liabilities | 17,121 | 26,405 | ||||||
Shareholders’ equity: | ||||||||
Common stock | 11 | 10 | ||||||
Capital in excess of par value | 32,466 | 28,579 | ||||||
Unearned compensation related to outstanding restricted stock | (741 | ) | (608 | ) | ||||
Retained earnings | 23,406 | 13,867 | ||||||
Accumulated other comprehensive income | 1,647 | 3,566 | ||||||
Treasury stock | (349 | ) | (11 | ) | ||||
Total shareholders’ equity | 56,440 | 45,403 | ||||||
Total liabilities and shareholders’ equity | $ | 73,561 | $ | 71,808 | ||||
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Twelve Months Ended | ||||||||
December 31, | December 25, | |||||||
2005 | 2004 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 12,808 | $ | 7,830 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 5,604 | 5,465 | ||||||
Loss on disposal of assets | 22 | 73 | ||||||
Stock-based compensation expense | 365 | 289 | ||||||
Allowance for doubtful accounts | (60 | ) | (17 | ) | ||||
Provision for slow moving inventory | (96 | ) | 110 | |||||
Provision for deferred income taxes | (688 | ) | 138 | |||||
(Increase) decrease in: | ||||||||
Accounts receivable | (2,304 | ) | (2,379 | ) | ||||
Inventories | (669 | ) | (594 | ) | ||||
Income taxes receivable | (236 | ) | — | |||||
Other current assets | (88 | ) | (252 | ) | ||||
Other assets, net | 39 | 149 | ||||||
Increase (decrease) in: | ||||||||
Accounts payable | 2,286 | 97 | ||||||
Accrued expenses and other liabilities | 306 | 2,392 | ||||||
Income taxes payable | (261 | ) | 1,437 | |||||
Other liabilities | (19 | ) | (28 | ) | ||||
Net cash from operating activities | 17,009 | 14,710 | ||||||
Cash flows used in investing activities: | ||||||||
Investment in WhiteOak | (400 | ) | — | |||||
Capital expenditures | (8,813 | ) | (4,987 | ) | ||||
Proceeds from dispositions of equipment | 5 | 61 | ||||||
Net cash used in investing activities | (9,208 | ) | (4,926 | ) | ||||
Cash flows used in financing activities: | ||||||||
Proceeds from debt | 11,599 | — | ||||||
Repayment of debt | (21,469 | ) | (5,953 | ) | ||||
Proceeds from exercise of stock options | 2,487 | 1,672 | ||||||
Proceeds from stock issued | 157 | — | ||||||
Payments for purchase of treasury stock | (1,588 | ) | (781 | ) | ||||
Proceeds from reissuance of treasury stock | — | 613 | ||||||
Dividends to shareholders | (2,701 | ) | (1,230 | ) | ||||
Net cash used in financing activities | (11,515 | ) | (5,679 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (218 | ) | 438 | |||||
Net (decrease) increase in restricted cash | (49 | ) | 37 | |||||
Net (decrease) increase in cash and cash equivalents | (3,883 | ) | 4,506 | |||||
Cash and cash equivalents, beginning of period | 9,762 | 5,219 | ||||||
Cash and cash equivalents, end of period | $ | 5,830 | $ | 9,762 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid: | ||||||||
Interest | $ | 441 | $ | 527 | ||||
Income taxes | $ | 8,451 | $ | 2,617 |
United | United | |||||||||||||||||||||||
States | Korea | Germany | Kingdom | Elimination | Consolidated | |||||||||||||||||||
Three Months Ended December 31, 2005 | ||||||||||||||||||||||||
Sales to unaffiliated customers | $ | 18,177 | $ | 2,695 | $ | 3,186 | $ | 3,880 | $ | — | $ | 27,938 | ||||||||||||
Intercompany sales | 4,626 | — | 21 | 804 | (5,451 | ) | — | |||||||||||||||||
Operating income | 2,587 | 345 | 440 | 337 | (7 | ) | 3,702 | |||||||||||||||||
Depreciation | 1,010 | 37 | 132 | 246 | — | 1,425 | ||||||||||||||||||
Capital expenditures | 2,442 | 15 | 37 | 112 | — | 2,606 | ||||||||||||||||||
Three Months Ended December 25, 2004 | ||||||||||||||||||||||||
Sales to unaffiliated customers | $ | 15,281 | $ | 1,979 | $ | 2,699 | $ | 3,467 | $ | — | $ | 23,426 | ||||||||||||
Intercompany sales | 3,673 | — | 14 | 512 | (4,199 | ) | — | |||||||||||||||||
Operating income | 2,056 | 151 | 386 | 144 | 80 | 2,817 | ||||||||||||||||||
Depreciation | 957 | 35 | 134 | 267 | — | 1,393 | ||||||||||||||||||
Capital expenditures | 1,344 | 2 | 36 | 75 | — | 1,457 | ||||||||||||||||||
Twelve Months Ended December 31, 2005 | ||||||||||||||||||||||||
Sales to unaffiliated customers | $ | 73,998 | $ | 11,604 | $ | 15,101 | $ | 16,054 | $ | — | $ | 116,757 | ||||||||||||
Intercompany sales | 21,239 | — | 80 | 2,873 | (24,192 | ) | — | |||||||||||||||||
Operating income | 13,443 | 1,520 | 3,145 | 1,260 | (188 | ) | 19,180 | |||||||||||||||||
Depreciation | 3,944 | 149 | 473 | 1,025 | — | 5,591 | ||||||||||||||||||
Capital expenditures | 7,007 | 29 | 843 | 934 | — | 8,813 | ||||||||||||||||||
Twelve Months Ended December 25, 2004 | ||||||||||||||||||||||||
Sales to unaffiliated customers | $ | 59,847 | $ | 8,723 | $ | 12,558 | $ | 13,375 | $ | — | $ | 94,503 | ||||||||||||
Intercompany sales | 15,702 | — | 66 | 1,812 | (17,580 | ) | — | |||||||||||||||||
Operating income | 8,417 | 926 | 2,399 | 483 | 69 | 12,294 | ||||||||||||||||||
Depreciation | 3,792 | 137 | 475 | 1,061 | — | 5,465 | ||||||||||||||||||
Capital expenditures | 4,264 | 42 | 141 | 540 | — | 4,987 |