Sun Hydraulics Reports 2015 Third Quarter Results
/EINPresswire.com/ -- SARASOTA, FL -- (Marketwired) -- 11/02/15 -- Sun Hydraulics Corporation (NASDAQ: SNHY) today reported financial results for the third quarter of 2015 as follows:
September 26, September 27, Increase/
2015 2014 (Decrease)
Three Months Ended
Net sales $ 48.0 $ 55.0 (13)%
Net income $ 8.4 $ 9.9 (15)%
Net income per share:
Basic $ 0.32 $ 0.37 (14)%
Diluted $ 0.32 $ 0.37 (14)%
Nine Months Ended
Net sales $ 156.4 $ 172.9 (10)%
Net income $ 28.0 $ 33.4 (16)%
Net income per share:
Basic $ 1.05 $ 1.27 (17)%
Diluted $ 1.05 $ 1.27 (17)%
"Third quarter sales were weaker than expected," stated Allen Carlson, President and CEO. "Demand is down in all geographic markets, and the depreciation of global currencies relative to the U.S. dollar continue to influence performance. Third quarter sales in the Americas were down 14%. Asian demand decreased by 17%, driven primarily by the weakening of the South Korean economy. European sales were down 8%, with 5% related to currency. As expected, the strong U.S. Dollar continued to negatively impact sales in Q3 by an estimated $1.8M and reduced EPS by $0.07 over last year."
"It is my sense that we are near the bottom of this difficult economic cycle," commented Carlson. "Given where we believe we are in the business cycle, Sun's focus is on investments to drive future growth. Our efforts are concentrated on:
- Operational execution - We are cross training in production areas, evaluating manufacturing processes for additional improvements and consistently seeking out opportunities to further our automation efforts. This down cycle affords us the opportunity to implement process improvements.
- Product Development - Sun is renowned for its broad scope of products which offer a variety of solutions to meet today's most demanding hydraulic challenges. We continue to release innovative products, specifically in the electro-hydraulic market. The introduction of the new Digital Logic Valves (DLV) has our customers exploring where they can apply this product to solve problems that go beyond traditional cartridge valve applications. The DLV's combination of small size and weight, efficient power consumption and high speed opens doors to markets in agriculture, alternative energy, emergency response, standby systems -- any application that demands low-power, portable, reliable fluid power control. The DLV is the kind of smart product innovation that creates powerful opportunities for both Sun and its customers.
- Market Penetration - We are growing our worldwide marketing resources to reach more customers by adding field application engineers in all regions -- the Americas, Europe and Asia."
Concluding, Carlson remarked, "Market share gains are made in the beginning of the business cycle and to be prepared requires planning and investment at the bottom of the cycle. When the economy does recover, and it will, Sun will be positioned to respond to customer demand with the superior product and service performance that has become our hallmark."
Outlook
Fourth quarter 2015 revenues are expected to be approximately $44 million, down 20% from the fourth quarter of 2014. Earnings per share are estimated to be $0.17 to $0.19 compared to $0.39 in the same period a year ago. This is a result of decreased demand, absorption of fixed costs and currency effects. Currency is responsible for $1.7M of the decline in revenues and approximately $0.06 of the decline in earnings per share in the Q4 estimates. While we expect today's softened demand to continue into 2016, we foresee business conditions strengthening during the year. With the expectation that the down cycle will be short lived, it is imperative that we focus on investments for future growth.
Webcast
Sun Hydraulics Corporation will broadcast its 2015 third quarter financial results conference call live over the Internet at 9:00 A.M. E.T. tomorrow, November 3, 2015. 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 1-888-329-8893 and using 3024787 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 26, 2015, 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, 2014. 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 26, September 27,
2015 2014
(unaudited) (unaudited)
Net sales $ 48,036 $ 55,011
Cost of sales 29,536 32,720
------------- -------------
Gross profit 18,500 22,291
Selling, engineering and administrative
expenses 7,463 7,656
------------- -------------
Operating income 11,037 14,635
Interest income, net (361) (331)
Foreign currency transaction gain, net (140) (226)
Miscellaneous (income) expense, net (1,005) 191
------------- -------------
Income before income taxes 12,543 15,001
Income tax provision 4,133 5,124
------------- -------------
Net income $ 8,410 $ 9,877
============= =============
Basic net income per common share $ 0.32 $ 0.37
Weighted average basic shares outstanding 26,695 26,455
Diluted net income per common share $ 0.32 $ 0.37
Weighted average diluted shares outstanding 26,695 26,455
Dividends declared per share $ 0.090 $ 1.090
Nine months ended
September 26, September 27,
2015 2014
(unaudited) (unaudited)
Net sales $ 156,438 $ 172,870
Cost of sales 95,140 100,756
------------- -------------
Gross profit 61,298 72,114
Selling, engineering and administrative
expenses 22,077 22,375
------------- -------------
Operating income 39,221 49,739
Interest income, net (1,021) (926)
Foreign currency transaction gain, net (839) (256)
Miscellaneous (income) expense, net (793) 548
------------- -------------
Income before income taxes 41,874 50,373
Income tax provision 13,839 16,924
------------- -------------
Net income $ 28,035 $ 33,449
============= =============
Basic net income per common share $ 1.05 $ 1.27
Weighted average basic shares outstanding 26,662 26,425
Diluted net income per common share $ 1.05 $ 1.27
Weighted average diluted shares outstanding 26,662 26,425
Dividends declared per share $ 0.360 $ 1.360
SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 26, December 27,
2015 2014
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 76,615 $ 56,843
Restricted cash 298 319
Accounts receivable, net of allowance for
doubtful accounts of $158 and $172 16,874 17,501
Inventories 11,757 14,098
Deferred income taxes 452 467
Short-term investments 45,596 43,353
Other current assets 3,014 2,966
------------- -------------
Total current assets 154,606 135,547
Property, plant and equipment, net 75,187 77,716
Goodwill 4,934 5,141
Other assets 5,486 4,360
------------- -------------
Total assets $ 240,213 $ 222,764
============= =============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 5,029 $ 4,873
Accrued expenses and other liabilities 5,287 7,908
Income taxes payable 116 559
Dividends payable 2,403 2,392
------------- -------------
Total current liabilities 12,835 15,732
Deferred income taxes 8,193 8,501
Other noncurrent liabilities 252 272
------------- -------------
Total liabilities 21,280 24,505
Commitments and contingencies -- --
Shareholders' equity:
Preferred stock, 2,000,000 shares
authorized, par value $0.001, no shares
outstanding -- --
Common stock, 50,000,000 shares authorized,
par value $0.001, 26,701,871 and 26,572,774
shares outstanding 27 27
Capital in excess of par value 80,780 73,499
Retained earnings 147,246 128,818
Accumulated other comprehensive income
(loss) (9,120) (4,085)
------------- -------------
Total shareholders' equity 218,933 198,259
------------- -------------
Total liabilities and shareholders' equity $ 240,213 $ 222,764
============= =============
SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Nine months ended
September 26, September 27,
2015 2014
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $ 28,035 $ 33,449
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,054 6,428
(Gain)Loss on disposal of assets (1,086) 155
Provision for deferred income taxes 100 53
Allowance for doubtful accounts (14) 29
Stock-based compensation expense 2,975 2,744
(Increase) decrease in, net of assets
acquired:
Accounts receivable 641 (2,850)
Inventories 2,341 204
Income taxes receivable -- 954
Other current assets (48) (1,185)
Other assets 435 146
Increase (decrease) in, net of liabilities
assumed:
Accounts payable 156 1,289
Accrued expenses and other liabilities 914 2,949
Income taxes payable (443) 2,329
Other noncurrent liabilities (20) 3
------------- -------------
Net cash provided by operating activities 41,040 46,697
Cash flows from investing activities:
Investment in licensed technology (1,425) --
Capital expenditures (4,697) (6,953)
Proceeds from dispositions of equipment 1,645 6
Purchases of short-term investments (20,666) (42,788)
Proceeds from sale of short-term investments 17,459 25,396
------------- -------------
Net cash used in investing activities (7,684) (24,339)
Cash flows from financing activities:
Proceeds from stock issued 772 623
Dividends to shareholders (9,596) (9,509)
Change in restricted cash 21 (3)
------------- -------------
Net cash used in financing activities (8,803) (8,889)
Effect of exchange rate changes on cash and
cash equivalents (4,781) (2,286)
------------- -------------
Net increase (decrease) in cash and cash
equivalents 19,772 11,183
Cash and cash equivalents, beginning of period 56,843 54,912
------------- -------------
Cash and cash equivalents, end of period $ 76,615 $ 66,095
============= =============
Supplemental disclosure of cash flow
information:
Cash paid:
Income taxes $ 14,575 $ 13,818
Supplemental disclosure of noncash
transactions:
Common stock issued for shared distribution
through accrued expenses and other
liabilities $ 3,535 $ 3,226
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