<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest
Event Reported): September 17, 1998
SUN HYDRAULICS CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)
Florida 0-21835 59-2754337
- ---------------------------- ------------ -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1500 West University Parkway
Sarasota, Florida 34232
- ------------------------------------------ ------------
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code: 941-362-1200
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ITEM 5. OTHER EVENTS.
PRESS RELEASE
On September 17, 1998, the Company issued the press release attached
hereto as Exhibit 99.1 announcing a $0.04 per share dividend on its common
stock payable on October 15, 1998, to shareholders of record on September 30,
1998.
On November 10, 1998, the Company issued the press release attached
hereto as Exhibit 99.2 announcing its plans to form joint-venture company in
China.
On November 13, 1998, the Company issued the press release attached
hereto as Exhibit 99.3 announcing earnings for the quarter ended September 30,
1998.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
None.
(b) Pro Forma Financial Information.
None.
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
-------- -------------------
<S> <C>
99.1 Press Release of the Registrant dated September 17, 1998.
99.2 Press Release of the Registrant dated November 10, 1998.
99.3 Press Release of the Registrant dated November 13, 1998.
</TABLE>
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.
SUN HYDRAULICS CORPORATION
By: /s/ Richard J. Dobbyn
-------------------------------------
Richard J. Dobbyn
Chief Financial Officer (Principal
Financial and Accounting Officer)
Dated: November 16, 1998
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<S> <C>
99.1 Press Release of the Registrant dated September 17, 1998.
99.2 Press Release of the Registrant dated November 10, 1998.
99.3 Press Release of the Registrant dated November 13, 1998.
</TABLE>
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<PAGE> 1
Exhibit 99.1
FOR RELEASE: Immediately
Contact:
Richard K. Arter Investor Relations 941-362-1200
Richard J. Dobbyn Chief Financial Officer 941-362-1200
SUN HYDRAULICS CORPORATION DECLARES THIRD QUARTER DIVIDEND
SARASOTA, FLA, September 17, 1998 - Sun Hydraulics Corporation (NASDAQ: SNHY)
has announced a $0.04 per share dividend on its common stock. The dividend is
payable on October 15, 1998, to shareholders of record as of September 30,
1998.
Sun Hydraulics Corporation, with manufacturing and distribution facilities in
Sarasota, Florida, Coventry, England and Erkelenz, Germany, is a leading
designer and manufacturer of high-performance screw-in hydraulic cartridge
valves and manifolds for global mobile and industrial markets.
<PAGE> 1
EXHIBIT 99.2
FOR RELEASE: Immediately
Contact:
Richard K. Arter Investor Relations 941-362-1200
Richard J. Dobbyn Chief Financial Officer 941-362-1200
SUN HYDRAULICS CORPORATION ANNOUNCES APPLICATION FOR JOINT VENTURE IN CHINA
SARASOTA, FLA, November 10, 1998 - Sun Hydraulics Corporation (NASDAQ: SNHY)
today announced that it has applied to form a joint-venture company in China.
The proposed company, Sun Hydraulics Systems (Shanghai) Ltd., will be located
in Songjiang, a suburb of Shanghai, and will be a joint-venture partnership
between Sun Hydraulics Corporation, and Links Lin, the owner of Sun Hydraulics
Corporation's Taiwanese distributor, Taiphil Pioneer. Upon approval of the
joint venture by the Chinese government, Mr. Lin will set up residence in
Shanghai to act as general manager of the new company.
"Our relationship with Links Lin goes back more than 12 years," said Sun
Hydraulics President Clyde Nixon. "During that time, Mr. Lin has specialized in
designing and manufacturing steel and ductile iron manifolds that incorporate
our screw-in cartridge valves, primarily for use in industrial markets.
Together with our recent acquisition of Korea Fluid Power, these two companies
provide an experienced Asian base for the design and manufacture of both
aluminum and ductile iron manifolds."
Barring unforeseen delays, it is expected that Sun Hydraulics Systems
(Shanghai) Ltd. will be formed before the end of 1998. In addition to designing
and manufacturing ductile iron manifolds, the new joint-venture company will
serve as a source of technical support for the application and sale of Sun
products in Hong Kong and mainland China.
Sun Hydraulics is a leading designer and manufacturer of high performance
screw-in hydraulic cartridge valves and manifolds for global industrial and
mobile markets.
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; (vi) the Company's Year 2000 readiness
plans and costs; and (vii) 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.
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<PAGE> 2
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; (vi)
the Company's ability timely to become Year 2000 ready, including the Company's
ability to identify all critical systems that will be impacted by the Year
2000, the Company's ability, in a cost-efficient manner, to correct, upgrade or
replace such systems, and the Year 2000 readiness of third parties with which
the Company has material relationships; and (vii) 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 "Risk Factors" in the Form S-1
Registration Statement and Prospectus for the Company's initial public
offering, and "Business" in the Company's Form 10-K for the year ended December
31, 1997, and "Management's Discussion and Analysis" in the Company's Form 10-Q
for the quarter ended June 30, 1998. 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.
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<PAGE> 1
Exhibit 99.3
FOR RELEASE: Immediately
Contact:
Richard K. Arter Investor Relations 941-362-1200
Richard J. Dobbyn Chief Financial Officer 941-362-1200
SUN HYDRAULICS CORPORATION REPORTS $0.31 EARNINGS PER SHARE FOR THIRD QUARTER
SETTLEMENT OF INSURANCE CLAIM CONTRIBUTES TO EARNINGS RISE
SARASOTA, FLA, November 13, 1998 - Sun Hydraulics Corporation (NASDAQ: SNHY)
today announced net sales were $17.7 million for the quarter ended September
30, 1998, compared to $17.3 million for the quarter ended September 30, 1997.
Net income for the quarter ended September 30,1998 was $2.0 million, or $0.31
per diluted share, compared to net income of $1.4 million, or $0.21 per diluted
share, for the same quarter in 1997. The settlement of a business interruption
insurance claim contributed approximately $0.17 per diluted share to net
income. Without the insurance claim settlement, basic and diluted net income
per share and would have been $0.15 and $0.14, respectively, for the third
quarter of 1998.
For the nine months ended September 30, 1998, basic and diluted net income per
share were $0.76 and $0.74, respectively. Net sales for the nine months ended
September 30, 1998, increased 15.3% to $54.4 million, compared to $47.2 million
in the first nine months of 1997. Net income for the nine months ended
September 30, 1998, including the insurance claim settlement, increased 40.4%
to $4.8 million, compared to $3.4 million in the first nine months of 1997.
As previously announced, third quarter earnings, disregarding the settlement of
the insurance claim, fell below analyst expectations due to flat sales compared
to the second quarter of 1998, a decline in productivity, lower manifold sales
volume and increased material costs. Net sales were approximately the same as
the second quarter of 1998.
"As I stated before, I'm obviously disappointed with our performance this past
quarter," said Sun Hydraulics President Clyde Nixon. "We did not get the
productivity we had anticipated out of the cartridge operation as we continued
to work at improving our output. On the material cost side, we have experienced
a steady rise in the prices we pay for purchased parts for our cartridge
products and are actively reviewing our procurement procedures and evaluating
our supplier base. We are concentrating on improving internal and external
processes to yield parts with more consistent quality and improved cost
structure, as well as allocating additional resources to our United States
cartridge manufacturing operations to increase cartridge valve capacity.
"Manifold sales slowed in the third quarter and because manifolds typically
yield a higher level of earnings contribution, this sales weakness contributed
to the earnings shortfall," Nixon said. "We believe the lower manifold sales
are indicative of a general slowdown in the hydraulic markets, a situation we
will closely monitor. The National Fluid Power Association is predicting 1999
sales for the hydraulics industry to decline about 5%.
"Despite the soft markets, Sun Hydraulics is continuing to position itself for
growth," Nixon concluded. "We are excited about our acquisition of Korea Fluid
Power in September, and equally excited about the joint-venture company we are
forming in China. Together with the expansion of our factory in England, the
start-up of manifold manufacturing in Germany and our new cartridge products,
especially our new solenoid valves, we believe that Sun Hydraulics is well
positioned to grow in the screw-in cartridge valve and manifold markets."
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<PAGE> 2
Sun Hydraulics is a leading designer and manufacturer of high performance
screw-in hydraulic cartridge valves and manifolds for global industrial and
mobile markets.
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; (vi) the Company's Year 2000 readiness
plans and costs; and (vii) 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; (vi)
the Company's ability timely to become Year 2000 ready, including the Company's
ability to identify all critical systems that will be impacted by the Year
2000, the Company's ability, in a cost-efficient manner, to correct, upgrade or
replace such systems, and the Year 2000 readiness of third parties with which
the Company has material relationships; and (vii) 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 "Risk Factors" in the Form S-1
Registration Statement and Prospectus for the Company's initial public
offering, and "Business" in the Company's Form 10-K for the year ended December
31, 1997, and "Management's Discussion and Analysis" in the Company's Form 10-Q
for the quarter ended September 30, 1998. 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.
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<PAGE> 3
SUN HYDRAULICS CORPORATION - SEPTEMBER 30, 1998
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
(unaudited)
1998 1997
---- ----
<S> <C> <C>
Net sales $17,664 $17,301
Cost of sales 13,132 11,842
Gross profit 4,532 5,459
Selling, engineering and
administrative expenses 2,864 3,018
Operating income 1,668 2,441
Interest expense 216 285
Miscellaneous (income) expense (1,586) 27
Income before income taxes 3,038 2,129
Income tax provision 1,015 777
Net income $ 2,023 $1,352
Basic net income
per common share .32 * .21
Basic weighted average shares outstanding 6,354 6,309
Diluted net income
per common share .31 * .21
Diluted weighted average
shares outstanding 6,560 6,499
</TABLE>
* During the third quarter of 1998, the Company received a settlement of an
insurance claim of $1,661, net of expenses, or $1,096, net of expenses and
taxes. Basic and diluted earnings per share were $0.15 and $0.14, respectively,
without this insurance claim.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
(unaudited)
1998 1997
---- ----
<S> <C> <C>
Net sales $54,381 $47,176
Cost of sales 39,078 32,488
Gross profit 15,303 14,688
Selling, engineering and
administrative expenses 8,911 8,584
Operating income 6,392 6,104
Interest expense 707 653
Miscellaneous (income) expense (1,588) 41
Income before income taxes 7,273 5,410
Income tax provision 2,430 1,961
Net income $ 4,843 $ 3,449
Basic net income
per common share .76 ** .55
Basic weighted average shares outstanding 6,340 6,303
Diluted net income
per common share .74 ** .53
Diluted weighted average
shares outstanding 6,561 6,487
</TABLE>
** During the third quarter of 1998, the Company received a settlement of an
insurance claim of $1,661, net of expenses, or $1,096, net of expenses and
taxes. Basic and diluted earnings per share were $0.59 and $0.57, respectively,
without this insurance claim.
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<PAGE> 4
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,474 $ 1,249
Accounts receivable, net of allowance for
doubtful accounts of $49 and $47 6,109 4,558
Inventories 7,990 6,775
Other current assets 907 932
Total current assets 16,480 13,514
Property, plant and equipment, net 42,957 39,789
Other assets 689 86
Total assets $60,126 $53,389
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 3,758 $ 2,847
Accrued expenses and other liabilities 2,440 2,174
Long-term debt due within one year 1,744 1,035
Notes payable to related parties due within one year 702 757
Dividends payable 254 221
Income taxes payable 1,136 380
Total current liabilities 10,034 7,414
Long-term debt due after one year 6,724 6,620
Notes payable to related parties due after one year 649 1,152
Deferred income taxes 3,217 3,203
Total liabilities 20,624 18,389
Shareholders' equity:
Preferred stock -- --
Common stock 6 6
Capital in excess of par value 24,386 24,163
Retained earnings 14,813 10,732
Equity adjustment for foreign currency translation 297 99
Total shareholders' equity 39,502 35,000
Total liabilities and shareholders' equity $60,126 $53,389
</TABLE>
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