Sun Hydraulics Third Quarter Sales and Earnings Consistent With Forecast at $49 Million and $0.34 per Share

SARASOTA, FL--(Marketwire - Nov 5, 2012) - Sun Hydraulics Corporation (NASDAQ: SNHY) today reported financial results for the third quarter of 2012 as follows:

(Dollars in millions except net income per share)
			September 29, 2012			October 1, 2011			Increase/ Decrease
Three Months Ended
Net Sales			$	48.8		$	53.0		-8	%
Net Income			$	8.8		$	11.4		-23	%
Net Income per share:
	Basic		$	0.34		$	0.44		-23	%
	Diluted		$	0.34		$	0.44		-23	%
Nine Months Ended
Net Sales			$	161.1		$	158.5		2	%
Net Income			$	30.7		$	31.6		-3	%
Net Income per share:
	Basic		$	1.19		$	1.23		-3	%
	Fully Diluted		$	1.18		$	1.23		-4	%

"Third quarter sales were as expected," said Allen Carlson, Sun's CEO and president. "The sales decline was driven primarily by Asia/Pacific and Europe. While business was down in these regions, we continued to gain new customers to make up for slowing business with existing customers. North America was able to eke out a modest increase in the period. Earnings were within our forecast range, despite being negatively impacted by approximately $0.01 due to taxes."

Continuing, Carlson commented, "Our product development efforts are ongoing and new products continue to represent between 10 and 15% of sales. We have also been working to revamp and enhance our website and expect to launch the new version in early 2013. The new website will be faster, with added configuration mechanisms to make it easier for customers to define and procure solutions."

Carlson concluded by saying, "Our fourth quarter forecast reflects continued sluggishness in the macro economy. The PMI is bouncing around the 50 mark, plus or minus, and has yet to provide any clear trend indications either positive or negative. Despite global headwinds, 2012 will be a successful year for Sun. Our efforts remain focused on product and market development and providing differentiated solutions and services to our customers." 

Outlook

Fourth quarter 2012 revenues are expected to be approximately $41 million, down approximately 10% from the fourth quarter of 2011. Earnings per share are estimated to be $0.22 to $0.24 compared to $0.24 in the same period a year ago.

Management estimates year-end 2012 sales to be approximately $202 million, down approximately 1% from 2011 sales. Earnings per share for 2011 are estimated to be $1.40 to $1.42, compared to $1.46 in 2011.

For comparison purposes, 2011 results included a one-time $0.03 per share gain resulting from the acquisition of HCT.

Webcast

Sun Hydraulics Corporation will broadcast its 2012 third quarter financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, November 6, 2012. To listen to the webcast, go to the Investor Relations section of www.sunhydraulics.com.

Webcast Q&A

If an individual wishes to ask questions directly during the webcast, the conference call may be accessed by dialing 1-888-455-2296 and using 4600776 as the access code. Questions also may be submitted to the Company via email 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. 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 September 29, 2012, 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 31, 2011. 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
		September 29, 2012				October 1, 2011
		(unaudited)				(unaudited)
Net sales		$	48,825			$	53,041
Cost of sales			29,428				32,293
Gross profit			19,397				20,748
Selling, engineering and administrative expenses			6,202				5,249
Operating income			13,195				15,499
Interest income, net			(406	)			(241	)
Foreign currency transaction loss, net			2				50
Miscellaneous (income) expense, net			6				(1,292	)
Income before income taxes			13,593				16,982
Income tax provision			4,758				5,588
Net income		$	8,835			$	11,394
Basic net income per common share		$	0.34			$	0.44
Weighted average basic shares outstanding			25,989				25,652
Diluted net income per common share		$	0.34			$	0.44
Weighted average diluted shares outstanding			25,999				25,701
Dividends declared per share		$	0.090			$	0.090

SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
		Nine months ended
		September 29, 2012				October 1, 2011
		(unaudited)				(unaudited)
Net sales		$	161,131			$	158,514
Cost of sales			96,546				96,147
Gross profit			64,585				62,367
Selling, engineering and administrative expenses			19,662				17,570
Operating income			44,923				44,797
Interest income, net			(1,041	)			(590	)
Foreign currency transaction gain, net			(75	)			(36	)
Miscellaneous income, net			(158	)			(1,550	)
Income before income taxes			46,197				46,973
Income tax provision			15,493				15,369
Net income		$	30,704			$	31,604
Basic net income per common share		$	1.19			$	1.23
Weighted average basic shares outstanding			25,904				25,613
Diluted net income per common share		$	1.18			$	1.23
Weighted average diluted shares outstanding			25,937				25,653
Dividends declared per share		$	0.390			$	0.313

SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
				September 29, 2012				December 31, 2011
				(unaudited)
Assets
Current assets:
	Cash and cash equivalents			$	50,742			$	45,080
	Restricted cash				49				46
	Accounts receivable, net of allowance for doubtful accounts of $127 and $83				18,492				16,227
	Inventories				12,976				12,829
	Income taxes receivable				-				120
	Deferred income taxes				260				260
	Marketable securities				46,985				28,014
	Other current assets				1,268				1,354
		Total current assets			130,772				103,930
Property, plant and equipment, net					58,900				56,959
Other assets					6,566				6,639
Total assets				$	196,238			$	167,528
Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable			$	4,467			$	4,402
	Accrued expenses and other liabilities				6,781				7,466
	Income taxes payable				1,047				-
	Dividends payable				2,339				2,318
		Total current liabilities			14,634				14,186
Deferred income taxes					6,921				6,917
Other noncurrent liabilities					-				1,149
		Total liabilities			21,555				22,252
Shareholders' equity:
	Common stock				26				26
	Capital in excess of par value				56,426				48,944
	Retained earnings				119,002				98,426
	Accumulated other comprehensive loss				(771	)			(2,120	)
		Total shareholders' equity			174,683				145,276
Total liabilities and shareholders' equity				$	196,238			$	167,528

SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
			Nine months ended
			September 29, 2012				October 1, 2011
			(unaudited)				(unaudited)
Cash flows from operating activities:
Net income			$	30,704			$	31,604
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization				5,353				5,025
Gain on investment in HCT				-				(1,244	)
(Gain) loss on disposal of assets				84				(27	)
Provision for deferred income taxes				4				-
Allowance for doubtful accounts				44				16
Stock-based compensation expense				1,639				1,218
(Increase) decrease in:
	Accounts receivable			(2,309	)			(2,927	)
	Inventories			(147	)			(823	)
	Income taxes receivable			120				866
	Other current assets			86				(488	)
	Other assets			(92	)			(88	)
Increase (decrease) in:
	Accounts payable			65				1,534
	Accrued expenses and other liabilities			3,722				3,535
	Income taxes payable			1,047				-
	Other noncurrent liabilities			(219	)			(202	)
Net cash provided by operating activities				40,101				37,999
Cash flows from investing activities:
Proceeds from sale of joint venture				-				1,451
Acquisition of business, net of cash acquired				-				(1,776	)
Capital expenditures				(6,703	)			(6,778	)
Proceeds from dispositions				56				30
Purchases of marketable securities				(25,774	)			(13,516	)
Proceeds from sale of marketable securities				6,821				6,497
Net cash used in investing activities				(25,600	)			(14,092	)
Cash flows from financing activities:
Proceeds from exercise of stock options				-				61
Proceeds from stock issued				506				408
Dividends to shareholders				(10,107	)			(7,284	)
Net cash used in financing activities				(9,601	)			(6,815	)
Effect of exchange rate changes on cash and cash equivalents				762				(707	)
Net (decrease) increase in cash and cash equivalents				5,662				16,385
Cash and cash equivalents, beginning of period				45,080				33,206
Cash and cash equivalents, end of period			$	50,742			$	49,591
Supplemental disclosure of cash flow information:
Cash paid:
	Income taxes		$	14,323			$	14,503
Supplemental disclosure of noncash transactions:
	Common stock issued for shared distribution through accrued expenses and other liabilities		$	4,407			$	2,412
	Common stock issued for deferred director's compensation through other noncurrent liabilities		$	930			$	-

		United									United
		States			Korea			Germany			Kingdom			Elimination				Consolidated
Three Months
Ended September 29, 2012
Sales to unaffiliated customers		$	34,302		$	3,495		$	6,267		$	4,761		$	-			$	48,825
Intercompany sales			7,331			-			31			443			(7,805	)			-
Operating income			11,069			185			1,296			912			(267	)			13,195
Depreciation			1,302			36			82			185			-				1,605
Capital expenditures			1,735			4			6			206			-				1,951
Three Months
Ended October 1, 2011
Sales to unaffiliated customers		$	34,897		$	5,081		$	7,824		$	5,239		$	-			$	53,041
Intercompany sales			8,763			-			60			405			(9,228	)			-
Operating income			12,119			575			2,028			892			(115	)			15,499
Depreciation			1,294			28			85			235			-				1,642
Capital expenditures			4,121			89			7			68			-				4,285
Nine Months
Ended September 29, 2012
Sales to unaffiliated customers		$	109,381		$	14,401		$	20,741		$	16,608		$	-			$	161,131
Intercompany sales			24,872			-			75			1,289			(26,236	)			-
Operating income			35,966			1,400			4,488			3,131			(62	)			44,923
Depreciation			3,933			93			242			622			-				4,890
Capital expenditures			5,949			24			38			692			-				6,703
Nine Months
Ended October 1, 2011
Sales to unaffiliated customers		$	100,515		$	16,778		$	22,320		$	18,901		$	-			$	158,514
Intercompany sales			26,722			-			176			1,188			(28,086	)			-
Operating income			33,481			2,175			5,690			3,379			72				44,797
Depreciation			3,879			83			272			721			-				4,955
Capital expenditures			6,631			234			57			173			-				7,095