(Dollars in millions except net income per share)
March 28, March 29,
2009 2008 Decrease
Three Months Ended
Net Sales $ 25.2 $ 49.0 -49%
Net Income $ 0.6 $ 7.7 -92%
Net Income per share:
Basic $ 0.03 $ 0.46 -93%
Diluted $ 0.03 $ 0.46 -93%
"First quarter sales were what we expected and we were able to do a little
better than we anticipated on the earnings side," reported Allen Carlson,
Sun's CEO and President. "Cash flow remains positive, allowing us to
continue taking actions that will improve our place in the market when
demand rallies. This spring we also released new automated design software
that has been in development for four years. This web-based software will
stimulate increased cartridge sales around the world."
Continuing, Carlson offered, "It is my sense that we are getting close to,
and may have, reached the bottom of this difficult economic cycle. There
are some positive signals out there, most notably the Purchasing Manager's
Index, which has now reported four consecutive months of upward movement.
While the magnitude is small, upward is the right direction and this index
has proven to be a reliable directional indicator of our business. Our
strong financial foundation enables us to maintain our readiness, continue
paying our dividend and prepare for the next expansion. This is a result of
being diligent in managing our business throughout the business cycle."
Outlook
Sun's 2009 second quarter sales are expected to be approximately $21
million, a 60% decrease in revenue compared to last year, and earnings are
expected to be slightly below breakeven.
"We have taken steps to mitigate the effects of declining demand including
curtailing non-essential spending. Our priority remains to invest in
capability, capacity, quality, productivity, product development and
expanding the Sun brand globally. Any actions to balance production with
demand will not compromise our long term objectives at the expense of
quarterly results. We know from previous business cycles that our market
share grows and earnings benefit by maintaining a steady course at the
bottom of the cycle," concluded Carlson.
Webcast
Sun Hydraulics Corporation will broadcast its Q1 financial results
conference call live over the Internet at 9:00 A.M. E.T. tomorrow, May 5,
2009. To listen to the webcast, go to
http://investor.sunhydraulics.com/eventdetail.cfm?eventid=67790.
Webcast Q&A
If an individual wishes to ask questions directly during the webcast, the
conference call may be accessed by dialing
1-877-852-6573. Questions also may be submitted to the Company via email at
investor@sunhydraulics.com. Sun management will then answer these and other
questions during the Company's webcast. A copy of this earnings release is
posted on the Investor Relations page of our website under "Press
Releases."
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 March 28, 2009, 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 27,
2008. 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
March 28, March 29,
2009 2008
(unaudited) (unaudited)
Net sales $ 25,208 $ 49,008
Cost of sales 19,629 31,914
----------- -----------
Gross profit 5,579 17,094
Selling, engineering and administrative expenses 4,775 5,955
----------- -----------
Operating income 804 11,139
Interest income, net (110) (113)
Foreign currency transaction (gain)/loss, net (8) 36
Miscellaneous (income)/expense, net 199 (249)
----------- -----------
Income before income taxes 723 11,465
Income tax provision 171 3,775
----------- -----------
Net income $ 552 $ 7,690
=========== ===========
Basic net income per common share $ 0.03 $ 0.46
Weighted average basic shares outstanding 16,664 16,562
Diluted net income per common share $ 0.03 $ 0.46
Weighted average diluted shares outstanding 16,694 16,596
Dividends declared per share $ 0.180 $ 0.090
SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 28,
2009 December 27,
(unaudited) 2008
Assets
Current assets:
Cash and cash equivalents $ 30,534 $ 35,176
Restricted cash 123 127
Accounts receivable, net of allowance for
doubtful accounts of $90 and $92 11,109 12,502
Inventories 8,646 9,960
Income taxes receivable 2,251 1,353
Deferred income taxes 259 259
Marketable securities 5,183 -
Other current assets 1,175 1,290
----------- -----------
Total current assets 59,280 60,667
Property, plant and equipment, net 56,859 57,726
Marketable securities 1,041 -
Other assets 3,899 3,992
----------- -----------
Total assets $ 121,079 $ 122,385
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 3,217 $ 3,258
Accrued expenses and other liabilities 6,022 5,546
Long-term debt due within one year - 147
Dividends payable 3,000 1,499
----------- -----------
Total current liabilities 12,239 10,450
Long-term debt due after one year - 125
Deferred income taxes 4,863 4,871
Other noncurrent liabilities 348 383
----------- -----------
Total liabilities 17,450 15,829
Shareholders' equity:
Common stock 17 17
Capital in excess of par value 38,364 38,042
Retained earnings 67,647 70,099
Accumulated other comprehensive income (2,399) (1,602)
----------- -----------
Total shareholders' equity 103,629 106,556
----------- -----------
Total liabilities and shareholders' equity $ 121,079 $ 122,385
=========== ===========
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Three months ended
March 28, March 29,
2009 2008
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $ 552 $ 7,690
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,760 1,720
Loss on disposal of assets - 104
Provision for deferred income taxes (8) 2
Allowance for doubtful accounts (2) (7)
Stock-based compensation expense 228 199
Stock options income tax benefit - (15)
(Increase) decrease in:
Accounts receivable 1,395 (7,754)
Inventories 1,314 (584)
Income taxes receivable (898) -
Other current assets 115 193
Other assets 90 (84)
Increase (decrease) in:
Accounts payable (41) 1,407
Accrued expenses and other liabilities 476 1,725
Income taxes payable - 2,753
Other noncurrent liabilities (35) 90
----------- -----------
Net cash provided by operating activities 4,946 7,439
Cash flows from investing activities:
Capital expenditures (1,236) (2,400)
Proceeds from dispositions of equipment - 99
Purchase of marketable securities (6,230) -
----------- -----------
Net cash used in investing activities (7,466) (2,301)
Cash flows from financing activities:
Repayment of debt (261) (51)
Proceeds from exercise of stock options - 66
Proceeds from stock issued 94 77
Dividends to shareholders (1,503) (1,485)
Stock options income tax benefit - 15
----------- -----------
Net cash used in financing activities (1,670) (1,378)
Effect of exchange rate changes on cash and cash
equivalents (456) 286
----------- -----------
Net increase/(decrease) in cash and cash
equivalents (4,646) 4,046
Cash and cash equivalents, beginning of period 35,303 19,337
----------- -----------
Cash and cash equivalents, end of period $ 30,657 $ 23,383
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid:
Interest $ 9 $ 10
Income taxes $ 1,077 $ 1,035
Supplemental disclosure of noncash transactions:
Common stock issued to ESOP through accrued
expenses and other liabilities $ - $ 1,498
United United
States Korea Germany Kingdom Elimination Consolidated
Three Months Ended
March 28, 2009
Sales to
unaffiliated
customers $15,621 $1,960 $ 4,167 $ 3,460 $ - $ 25,208
Intercompany sales 4,156 - 29 465 (4,650) -
Operating income (550) 86 713 454 101 804
Depreciation 1,370 26 124 233 - 1,753
Capital expenditures 1,131 22 4 79 - 1,236
Three Months Ended
March 29, 2008
Sales to
unaffiliated
customers $28,320 $6,354 $ 7,962 $ 6,372 $ - $ 49,008
Intercompany sales 9,126 - 78 590 (9,794) -
Operating income 7,184 650 2,413 1,030 (138) 11,139
Depreciation 1,192 46 145 330 - 1,713
Capital expenditures 2,232 15 33 120 - 2,400
Contact Information: Contact: Richard K. Arter Investor Relations 941-362-1200 Tricia Fulton Chief Financial Officer 941-362-1200