(Dollars in millions except net income per share)
June 30, July 1,
2007 2006 Increase
Three Months Ended
Net Sales $ 43.4 $ 36.9 18%
Net Income $ 6.0 $ 4.3 38%
Net Income per share:
Basic $ 0.36 $ 0.26 38%
Diluted $ 0.36 $ 0.26 38%
Six Months Ended
Net Sales $ 84.3 $ 71.1 19%
Net Income $ 11.8 $ 8.5 38%
Net Income per share:
Basic $ 0.72 $ 0.52 38%
Fully Diluted $ 0.71 $ 0.51 39%
Note: The Company announced a 50% stock dividend to shareholders of record
on June 30, 2007, payable on July 15, 2007. All earnings per share and
weighted average share information reflect the 50% stock dividend.
"We were extremely pleased with the revenue and earnings growth this
quarter," said Allen Carlson, Sun's President and CEO. "Gross profit
margins remained strong at this level of sales and the incremental sales
allowed additional profit to flow to the bottom line, with earnings up 38%
over the previous year.
"Growth continued across all business segments in the second quarter,"
Carlson continued. "European and Asian sales were especially strong, making
up 78% of the increase over last year. Our success in reaching into new
markets around the world continues to be a significant contributor to our
growth.
"Last week we announced that we will open a sales office in Bangalore,
India, to help Sun develop new business opportunities in the Indian market.
We are excited about our opportunities in India and other expanding markets
around the globe," concluded Carlson. "We believe this is a great time in
the business cycle to be making strategic investments that will yield
future benefits for Sun."
Outlook
2007 third quarter sales are estimated to be approximately $40 million and
earnings per share are estimated to be in the range of $0.30 to $0.32.
This would represent an increase of approximately 10% in sales and 29% in
earnings per share over last year.
Webcast
Sun Hydraulics Corporation will broadcast its second quarter financial
results conference call live over the Internet at 2:30 P.M. E.T. tomorrow,
August 8, 2007. To listen to the webcast, 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 the
earnings release by going to the Sun Hydraulics website,
www.sunhydraulics.com, and clicking on Investor Relations. Scroll down to
the bottom of the page and click on contact email:
investor@sunhydraulics.com. Sun management will 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 1-877-407-8033.
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 headings Item 1.
"Business," Item 1A. "Risk Factors" and Item 7. "Management's Discussion
and Analysis of Financial Conditions and Results of Operations" in the
Company's Form 10-K for the year ended December 30, 2006, and "Management's
Discussion and Analysis of Financial Conditions and Results of Operations"
in the Company's Form 10-Q for the quarter ended June 30, 2007. 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)
Three months ended
June 30, July 1,
2007 2006
(unaudited) (unaudited)
Net sales $ 43,422 $ 36,928
Cost of sales 29,125 25,689
----------- -----------
Gross profit 14,297 11,239
Selling, engineering and
administrative expenses (1) 5,438 4,690
----------- -----------
Operating income 8,859 6,549
Interest (income)/expense, net (89) 33
Foreign currency transaction loss, net 27 72
Miscellaneous income, net (124) (57)
----------- -----------
Income before income taxes 9,045 6,501
Income tax provision 3,093 2,187
----------- -----------
Net income $ 5,952 $ 4,314
=========== ===========
Basic net income per common share (2) $ 0.36 $ 0.26
Weighted average basic shares outstanding (2) 16,425 16,399
Diluted net income per common share (2) $ 0.36 $ 0.26
Weighted average diluted shares outstanding (2) 16,494 16,492
Dividends declared per share (2) $ 0.090 $ 0.067
(1) Selling, engineering and administrative expenses for the current period
includes approximately $360,000 of additional unanticipated expenses for
variable stock based compensation.
(2) The Company announced a 50% stock dividend to shareholders of record on
June 30, 2007, payable on July 15, 2007. All per share and weighted
average share information reflect the 50% stock dividend.
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
Six months ended
June 30, July 1,
2007 2006
(unaudited) (unaudited)
Net sales $ 84,275 $ 71,114
Cost of sales 56,096 48,895
----------- -----------
Gross profit 28,179 22,219
Selling, engineering and
administrative expenses (1) 10,653 9,360
----------- -----------
Operating income 17,526 12,859
Interest (income)/expense, net (162) 81
Foreign currency transaction loss, net 1 31
Miscellaneous income, net (206) (7)
----------- -----------
Income before income taxes 17,893 12,754
Income tax provision 6,135 4,260
----------- -----------
Net income $ 11,758 $ 8,494
=========== ===========
Basic net income per common share (2) $ 0.72 $ 0.52
Weighted average basic shares outstanding (2) 16,401 16,398
Diluted net income per common share (2) $ 0.71 $ 0.51
Weighted average diluted shares outstanding (2) 16,478 16,497
Dividends declared per share (2) $ 0.157 $ 0.133
(1) Selling, engineering and administrative expenses for the current period
includes approximately $360,000 of additional unanticipated expenses for
variable stock based compensation.
(2) The Company announced a 50% stock dividend to shareholders of record on
June 30, 2007, payable on July 15, 2007. All per share and weighted
average share information reflect the 50% stock dividend.
SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, 2007 December 30,
(unaudited) 2006
Assets
Current assets:
Cash and cash equivalents $ 13,662 $ 9,379
Restricted cash 60 118
Accounts receivable, net of allowance for
doubtful accounts of $102 and $140 17,786 13,917
Inventories 11,140 10,386
Deferred income taxes 219 219
Other current assets 2,459 986
------------ ------------
Total current assets 45,326 35,005
Property, plant and equipment, net 54,354 50,355
Other assets 2,017 1,825
------------ ------------
Total assets $ 101,697 $ 87,185
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 5,771 $ 4,812
Accrued expenses and other liabilities 3,984 4,059
Long-term debt due within one year 435 426
Dividends payable 1,481 1,085
Income taxes payable 1,529 608
------------ ------------
Total current liabilities 13,200 10,990
Long-term debt due after one year 427 646
Deferred income taxes 4,535 4,451
Other noncurrent liabilities 699 298
------------ ------------
Total liabilities 18,861 16,385
Shareholders' equity:
Common stock 16 16
Capital in excess of par value 33,344 30,962
Retained earnings 44,460 35,279
Accumulated other comprehensive income 5,016 4,543
------------ ------------
Total shareholders' equity 82,836 70,800
------------ ------------
Total liabilities and shareholders’ equity $ 101,697 $ 87,185
============ ============
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Six months ended
June 30, July 1,
2007 2006
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $ 11,758 $ 8,494
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,047 $ 2,932
(Gain)/Loss on disposal of assets (61) 62
Provision for deferred income taxes 84 13
Allowance for doubtful accounts (38) 6
Stock-based compensation expense 331 309
Stock options income tax benefit (286) (42)
(Increase) decrease in:
Accounts receivable (3,831) (4,105)
Inventories (754) (1,268)
Income taxes receivable - 236
Other current assets (1,473) 153
Other assets (205) (56)
Increase (decrease) in:
Accounts payable 959 8
Accrued expenses and other liabilities 1,311 829
Income taxes payable 1,207 521
Other noncurrent liabilities 401 (9)
----------- -----------
Net cash provided by operating activities 12,450 8,083
Cash flows from investing activities:
Capital expenditures (6,885) (4,816)
Proceeds from dispositions of equipment 76 20
----------- -----------
Net cash used in investing activities (6,809) (4,796)
Cash flows from financing activities:
Proceeds from debt - 5,000
Repayment of debt (210) (2,639)
Proceeds from exercise of stock options 256 73
Proceeds from stock issued 123 114
Payments for purchase of treasury stock - (2,665)
Dividends to shareholders (2,181) (2,183)
Stock options income tax benefit 286 42
----------- -----------
Net cash used in financing activities (1,726) (2,258)
Effect of exchange rate changes on cash and
cash equivalents 310 652
----------- -----------
Net increase in cash and cash equivalents 4,225 1,681
Cash and cash equivalents, beginning of period 9,497 5,830
----------- -----------
Cash and cash equivalents, end of period $ 13,722 $ 7,511
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid:
Interest $ 24 $ 136
Income taxes $ 5,349 $ 3,532
Supplemental disclosure of noncash transactions:
Common stock issued to ESOP through
accrued expenses and other liabilities $ 1,386 $ 1,183
United United Elimin- Consoli-
States Korea Germany Kingdom ation dated
Three Months
Ended June 30, 2007
Sales to unaffiliated
customers $ 25,836 $ 5,695 $ 6,107 $ 5,784 $ - $ 43,422
Intercompany sales 7,995 - 20 650 (8,665) -
Operating income 6,153 636 1,377 686 7 8,859
Depreciation 1,098 43 136 264 - 1,541
Capital expenditures 2,976 152 21 533 - 3,682
Three Months
Ended July 1, 2006
Sales to unaffiliated
customers $ 23,332 $ 4,072 $ 5,193 $ 4,331 $ - $ 36,928
Intercompany sales 6,615 - 26 666 (7,307) -
Operating income 4,271 596 1,175 583 (76) 6,549
Depreciation 1,088 38 122 241 - 1,489
Capital expenditures 2,534 18 49 251 - 2,852
Six Months
Ended June 30, 2007
Sales to unaffiliated
customers $ 49,604 $ 10,652 $ 12,698 $ 11,321 $ - $ 84,275
Intercompany sales 16,163 - 50 1,534 (17,747) -
Operating income 11,896 1,146 3,021 1,521 (58) 17,526
Depreciation 2,160 82 272 520 - 3,034
Capital expenditures 5,718 209 47 911 - 6,885
Six Months
Ended July 1, 2006
Sales to unaffiliated
customers $ 44,193 $ 8,162 $ 9,770 $ 8,989 $ - $ 71,114
Intercompany sales 13,292 - 62 1,452 (14,806) -
Operating income 8,328 1,202 2,116 1,322 (109) 12,859
Depreciation 2,119 75 241 484 - 2,919
Capital expenditures 4,406 21 62 327 - 4,816
Contact Information: Contact: Richard K. Arter Investor Relations 941-362-1200 Tricia L. Fulton Chief Financial Officer 941-362-1200