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 Second Quarter Net Income of $0.12 Per Share
SARASOTA, FLA, August 4, 2003 -Sun Hydraulics Corporation (NASDAQ: SNHY) today
announced that sales for the second quarter ended June 28, 2003, were $18.9
million, an increase of 15.2% from the first quarter and a 8.6% increase from
the same quarter last year. Net income was $0.8 million, equal to net income for
the same quarter last year and a $0.5 million increase from last quarter. Net
income included a charge for the write off of development costs for an
application software project in the United Kingdom. Excluding this write off,
net income for the second quarter would have been $1.1 million, or 5.6% of
sales, compared to net income of 4.4% of sales for the same quarter last year.
Basic and diluted earnings per share for the quarter ended June 28, 2003, were
$0.13 and $0.12, respectively, compared to $0.12 for the same period last year.
Allen Carlson, Sun Hydraulics' president commented, "We believe that Sun is
gaining market share in some market segments, particularly central Europe, where
sales are increasing in the face of difficult economic times. Sales in all our
international operations, adjusted for the effect of currency changes, increased
12% this quarter compared to the same quarter last year. We still have not seen
signs of recovery in the North American manufacturing sector of the economy.
Sales in the United States operation this quarter were comparable with those in
the same quarter last year."
Carlson continued, "Sun's prime or variable manufacturing costs in the United
States decreased as a percent of sales in the current quarter compared to the
same quarter last year. This is an indication of Sun's productivity improvements
and our ability to significantly improve operating margins as the economy
recovers and the top line grows."
Software Write Off
Approximately $0.4 million of capitalized software costs related to upgrading
the integrated manufacturing system in the United Kingdom operation was written
off in the second quarter. The installation of this highly customized software
was aborted due to major flaws in the system. The Company has decided that it is
not feasible to continue this project and intends to seek remedy from the
software developer.
Outlook
Sales for the third quarter are projected to be $17.0 million, with net income
of $0.06 per share, compared to third quarter 2002 sales and net income of $16.0
million and $0.08 per share. The anticipated decrease in net income, despite the
higher sales volume and increased productivity, is attributed to increased
marketing and administrative costs, including $0.3 million related to the
Company's re-capitalization and special dividend distribution.
Webcast
Sun Hydraulics Corporation will broadcast its second quarter financial results
conference call with analysts live over the Internet at 2:30 P.M. E.T. tomorrow,
August 5, 2003. To listen, go to
http://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. 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 2nd quarter 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 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 June 28, 2003, 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.
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<Table>
<Caption>
THREE MONTHS ENDED
JUNE 28, JUNE 29,
2003 2002
NET SALES $ 18,912 $ 17,413
Cost of sales 13,383 12,887
------------- -------------
GROSS PROFIT 5,529 4,526
Selling, engineering and administrative expenses 4,267 3,142
------------- -------------
OPERATING INCOME 1,262 1,384
Interest expense 138 136
Foreign currency transaction loss (gain) (127) 13
Miscellaneous expense (income) (29) 47
------------- -------------
INCOME BEFORE INCOME TAXES 1,280 1,188
Income tax provision 464 414
------------- -------------
NET INCOME $ 816 $ 774
============= =============
BASIC NET INCOME PER SHARE $ 0.13 $ 0.12
Basic weighted average shares outstanding 6,451 6,429
DILUTED NET INCOME PER SHARE $ 0.12 $ 0.12
Diluted weighted average share outstanding 6,598 6,573
</Table>
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 28, JUNE 29,
2003 2002
NET SALES $ 35,337 $ 33,026
Cost of sales 25,730 24,807
------------- -------------
GROSS PROFIT 9,607 8,219
Selling, engineering and administrative expenses 7,887 6,451
------------- -------------
OPERATING INCOME 1,720 1,768
Interest expense 279 302
Foreign currency transaction loss (gain) (189) (10)
Miscellaneous expense (income) (22) 87
------------- -------------
INCOME BEFORE INCOME TAXES 1,652 1,389
Income tax provision 582 487
------------- -------------
NET INCOME $ 1,070 $ 902
============= =============
BASIC NET INCOME PER SHARE $ 0.17 $ 0.14
Basic weighted average shares outstanding 6,450 6,429
DILUTED NET INCOME PER SHARE $ 0.16 $ 0.14
Diluted weighted average share outstanding 6,596 6,570
</Table>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<Table>
<Caption>
JUNE 28, DECEMBER 28,
2003 2002
ASSETS
Current assets:
Cash and cash equivalents $ 4,000 $ 3,958
Accounts receivable, net of allowance for
doubtful accounts of $209 and $194 8,182 5,690
Inventories 7,123 6,846
Other current assets 713 810
------------- -------------
Total current assets 20,018 17,304
Property, plant and equipment, net 42,334 43,987
Other assets 1,266 994
------------- -------------
TOTAL ASSETS $ 63,618 $ 62,285
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,290 $ 1,706
Accrued expenses and other liabilities 1,764 1,081
Long-term debt due within one year 1,470 1,421
Dividends payable 258 258
Income taxes payable 482 10
------------- -------------
Total current liabilities 6,264 4,476
Long-term debt due after one year 7,652 8,190
Deferred income taxes 4,088 4,092
Deferred royalties 353 378
------------- -------------
Total liabilities 18,357 17,136
Redeemable Common Stock 2,250 2,250
Shareholders' equity:
Common stock 6 6
Capital in excess of par value 22,623 22,690
Unearned compensation related to
outstanding restricted stock (105) (170)
Retained earnings and
accumulated comprehensive income 20,487 20,373
------------- -------------
Total shareholders' equity 43,011 42,899
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 63,618 $ 62,285
============= =============
</Table>
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 28, JUNE 29,
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,070 $ 902
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,646 2,651
Gain/(Loss) on disposal of assets 367 148
Allowance for doubtful accounts 15 (27)
Provision for deferred income taxes (4) 1
(Increase) decrease in:
Accounts receivable (2,507) (1,935)
Inventories (277) 27
Income tax receivable -- 668
Other current assets 97 188
Other assets, net (272) (49)
Increase (decrease) in:
Accounts payable 584 623
Accrued expenses and other liabilities 683 260
Income taxes payable 472 477
Other liabilities (25) (24)
------------- -------------
Net cash from operating activities 2,849 3,910
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures (1,370) (3,388)
Proceeds from dispositions of equipment 10 53
------------- -------------
Net cash used in investing activities (1,360) (3,335)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Repayment of debt (489) (448)
Proceeds from stock issued 103 188
Dividends to shareholders (516) (514)
------------- -------------
Net cash used in financing activities (902) (774)
Effect of exchange rate changes on cash and
cash equivalents (545) 61
Net increase (decrease) in cash and cash equivalents 42 (138)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,958 3,611
CASH AND CASH EQUIVALENTS, END OF PERIOD 4,000 3,473
Supplemental disclosure of cash flow information:
Cash paid/(received):
Interest $ 279 $ 302
Income taxes $ 114 $ (659)
</Table>
SEGMENT INFORMATION IS AS FOLLOWS:
<Table>
<Caption>
United United
States Korea Germany Kingdom Elimination Consolidated
THREE MONTHS
ENDED JUNE 28, 2003
Sales to unaffiliated customers $ 11,151 $ 2,012 $ 2,368 $ 3,381 $ -- $ 18,912
Intercompany sales 3,920 -- 17 367 (4,304) --
Operating income 1,166 226 238 (337) (31) 1,262
Depreciation 927 28 100 275 -- 1,330
Capital expenditures 606 3 63 160 -- 832
THREE MONTHS
ENDED JUNE 29, 2002
Sales to unaffiliated customers $ 11,468 $ 1,644 $ 1,577 $ 2,723 $ -- $ 17,413
Intercompany sales 2,937 -- 13 431 (3,381) --
Operating income 958 124 53 285 (35) 1,384
Depreciation 1,048 29 74 179 -- 1,330
Capital expenditures 591 23 31 1,291 -- 1,936
SIX MONTHS
ENDED JUNE 28, 2003
Sales to unaffiliated customers $ 21,265 $ 3,545 $ 4,634 $ 5,893 $ -- $ 35,337
Intercompany sales 6,876 -- 24 708 (7,608) --
Operating income 1,299 353 494 (465) 39 1,720
Depreciation 1,852 57 191 546 -- 2,646
Capital expenditures 931 32 92 315 -- 1,370
SIX MONTHS
ENDED JUNE 29, 2002
Sales to unaffiliated customers $ 21,203 $ 3,207 $ 3,303 $ 5,312 $ -- $ 33,026
Intercompany sales 5,987 -- 19 920 (6,926) --
Operating income 972 203 157 532 (95) 1,768
Depreciation 2,093 59 145 354 -- 2,651
Capital expenditures 1,069 48 43 2,228 -- 3,388
</Table>