EXHIBIT 99.1
Contact:
Richard K. Arter
Investor Relations
941-362-1200
Richard J. Dobbyn
Chief Financial Officer
941-362-1200
Sun Hydraulics Corporation Reports Increase in Net Income for 2002
Declares dividend of $0.04 for First Quarter of 2003
SARASOTA, FLA, March 4, 2003 - Sun Hydraulics Corporation (NASDAQ: SNHY) today
announced that net income for 2002 was $1.8 million, or 2.8% of net sales,
compared to $1.0 million, or 1.5% of net sales, for 2001. Net sales for 2002
were $64.5 million, compared to $65.0 million the prior year. Basic and diluted
earnings per share for the year ended December 28, 2002, were $0.28 and $0.27
respectively, compared to $0.15 and $0.14 for the year ended December 29, 2001.
Economic conditions remain depressed in the hydraulics industry and the capital
goods markets. Compared to the prior year, sales in 2002 were made up of
increases in the German and Korean operations offset by sales decreases in the
United States and United Kingdom.
The increase in net income is primarily due to an improvement in gross profit as
a percent of net sales related to an increase in productivity and lower
manufacturing overhead spending in the United States, and the strength of local
currencies relative to the U.S. dollar in the foreign operations.
Commenting on the results, Allen Carlson, Sun Hydraulics' president, said, "We
are pleased with the productivity improvement in the U. S. operations, however
the impact was muted in 2002 by our decision to retain the investment in our
production workforce. I think the results prove that the many manufacturing
productivity improvements we have made during the past two years will result in
substantially increased margins as our sales volumes grow."
Strong Cash Flow
Cash generated from operations for 2002 was $7.5 million. $5.9 million was used
for capital expenditures, debt decreased $1.1 million and $1.0 million was paid
in dividends to shareholders. Cash on hand at the end of the year was $4.0
million, an increase of $0.3 million for the year.
Fourth Quarter
For the fourth quarter of 2002, net sales increased 15.7% to $15.5 million,
compared to fourth quarter 2001 net sales of $13.4 million. Net income for the
fourth quarter of 2002 was $0.4 million, compared to a net loss of $0.7 million
for the fourth quarter of 2001. Basic and diluted earnings per share for the
fourth quarter 2002 were $0.06 compared to a loss per share of $0.10 for the
same period last year.
Expansion in the Midwest
On February 24, 2003, Sun Hydraulics announced its intention to open an
operation in the Kansas City area. Sun anticipates that this operation will
increase its market share of engineered valve packages, which are composed of
Sun cartridges and custom manifolds. It will also give the Company a local
source for both larger aluminum and ductile iron manifolds.
Outlook
Management is unable to make a meaningful projection of sales for the year due
to the uncertainty in global economic conditions. Results for the first quarter
of 2003 are expected to approximate the first quarter of 2002, which were $15.6
million in net sales and earnings per share of $0.02.
Dividend
Sun Hydraulics Corporation declared a $0.04 per share quarterly dividend on its
common stock on March 1, 2003. The dividend is payable on April 15, 2003, to
shareholders of record as of March 31, 2003.
Webcast
Sun Hydraulics Corporation will broadcast its 4th quarter and 2002 year end
financial results conference call with analysts live over the Internet at 2:30
P.M. E.T., tomorrow, March 5, 2003. To listen, go to
http://investor.sunhydraulics.com/medialist.cfm.
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.
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 4th Quarter/Year End earnings release as possible during the webcast time.
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
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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 September, 28, 2002, 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 28, 2002. 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.
* Please see attached document for financial information.
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SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED TWELVE MONTHS ENDED
-------------------------- --------------------------
DECEMBER 28, DECEMBER 29, DECEMBER 28, DECEMBER 29,
2002 2001 2002 2001
------------ ------------ ------------ ------------
NET SALES $ 15,476 $ 13,361 $64,545 $ 64,983
COST OF SALES 11,779 11,552 48,581 50,358
-------- -------- ------- --------
GROSS PROFIT 3,697 1,809 15,964 14,625
SELLING, ENGINEERING AND ADMINISTRATIVE EXPENSES 3,071 2,758 12,544 12,565
-------- -------- ------- --------
OPERATING INCOME (LOSS) 626 (949) 3,420 2,060
INTEREST EXPENSE 123 203 578 878
FOREIGN CURRENCY TRANSACTION LOSS (GAIN) (8) (64) 68 (34)
MISCELLANEOUS EXPENSE (INCOME) 88 8 182 (96)
-------- -------- ------- --------
INCOME (LOSS) BEFORE INCOME TAXES 423 (1,096) 2,592 1,312
INCOME TAX PROVISION (BENEFIT) 55 (434) 814 362
-------- -------- ------- --------
NET INCOME (LOSS) $ 368 $ (662) $ 1,778 $ 950
======== ======== ======= ========
BASIC NET INCOME (LOSS) PER SHARE 0.06 (0.10) 0.28 0.15
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 6,433 6,416 6,433 6,392
DILUTED NET INCOME (LOSS) PER SHARE 0.06 (0.10) 0.27 0.14
DILUTED WEIGHTED AVERAGE SHARE OUTSTANDING 6,602 6,572 6,589 6,554
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
DECEMBER 28, DECEMBER 29,
2002 2001
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,958 $ 3,611
Accounts receivable, net of allowance for
doubtful accounts of $194 and $195 5,690 4,755
Inventories 6,846 7,238
Taxes Receivable 0 668
Other current assets 810 985
-------- --------
Total current assets 17,304 17,257
Property, plant and equipment, net 43,987 43,555
Other assets 994 938
-------- --------
TOTAL ASSETS $ 62,285 $ 61,750
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,706 $ 1,323
Accrued expenses and other liabilities 1,081 1,494
Long-term debt due after one year 1,421 1,405
Dividends payable 258 257
Income taxes payable 10 0
-------- --------
Total current liabilities 4,476 4,479
Long-term debt due after one year 8,190 9,258
Deferred income taxes 4,092 3,848
Deferred royalties 378 427
-------- --------
Total liabilities 17,136 18,012
Redeemable Common Stock 2,250 --
Shareholders' equity:
Common stock 6 6
Capital in excess of par value 22,690 24,718
Unearned compensation related to
outstanding restricted stock (170) (216)
Retained earnings 19,750 19,001
Accumulated comprehensive income 623 229
-------- --------
Total shareholders' equity 42,899 43,738
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 62,285 $ 61,750
======== ========
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
FOR THE YEAR ENDED
DECEMBER 28, DECEMBER 29,
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,778 $ 950
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,100 5,426
Gain/(Loss) on disposal of assets 190 (2)
Compensation expense of stock options -- --
Allowance for doubtful accounts (1) 32
Provision for slow moving inventory (101) 314
Provision for deferred income taxes 244 (258)
(Increase) decrease in:
Accounts receivable (934) 1,325
Inventories 493 1,481
Income tax receivable 668 (668)
Other current assets 175 (449)
Other assets, net (56) 30
Increase (decrease) in:
Accounts payable 383 (464)
Accrued expenses and other liabilities (413) (91)
Dividends payable 1 2
Income taxes payable 10 (315)
Other liabilities (49) (51)
------- ------
Net cash from operating activities 7,488 7,262
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures (5,870) (4,022)
Proceeds from dispositions of equipment 148 70
------- ------
Net cash used in investing activities (5,722) (3,952)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Proceeds from debt -- 571
Repayment of debt (1,052) (1,920)
Proceeds from exercise of stock options 17 --
Proceeds from stock issued 251 16
Dividends to shareholders (1,029) (1,022)
------- ------
Net cash used in financing activities (1,813) (2,355)
Effect of exchange rate changes on cash and
cash equivalents 394 (42)
Net increase (decrease) in cash and cash equivalents 347 913
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,611 2,698
CASH AND CASH EQUIVALENTS, END OF PERIOD 3,958 3,611
Supplemental disclosure of cash flow information:
Cash paid/(received):
Interest $ 578 $ 878
Income taxes $ (108) $ 1,603