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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 2000 Commission file number 0-21835
SUN HYDRAULICS CORPORATION
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(Exact Name of Registration as Specified in its Charter)
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FLORIDA 59-2754337
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1500 WEST UNIVERSITY PARKWAY
SARASOTA, FLORIDA 34243
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(Address of Principal Executive Offices) (Zip Code)
941/362-1200
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(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The Registrant had 6,384,948 shares of common stock, par value $.001,
outstanding as of August 3, 2000.
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Sun Hydraulics Corporation
INDEX
For the second quarter ended July 1, 2000
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of July 1, 2000 (unaudited)
and January 1, 2000 3
Consolidated Statements of Operations for the
Three Months Ended July 1, 2000 (unaudited) and July 3, 1999 (unaudited) 4
Consolidated Statements of Operations for the
Six Months Ended July 1, 2000 (unaudited) and July 3, 1999 (unaudited) 5
Consolidated Statement of Changes in Shareholders' Equity and
Comprehensive Income for the Six Months Ended July 1, 2000
(unaudited) and the Year Ended January 1, 2000 6
Consolidated Statements of Cash Flows
for the Six Months Ended July 1, 2000 (unaudited) and July 3, 1999 (unaudited) 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Forward Looking Information 16
PART II. OTHER INFORMATION 17
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K 17
</TABLE>
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PART I: FINANCIAL INFORMATION
Item 1.
SUN HYDRAULICS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 1, JANUARY 1,
2000 2000
------- -------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,517 $ 1,122
Accounts receivable, net of allowance for
doubtful accounts of $156 and $196 8,196 6,260
Inventories 8,318 8,131
Taxes receivable 0 455
Other current assets 597 591
------- -------
Total current assets 18,628 16,559
Property, plant and equipment, net 46,585 46,529
Other assets 1,075 986
------- -------
Total assets $66,288 $64,074
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,617 $ 2,712
Accrued expenses and other liabilities 2,466 1,464
Long-term debt due within one year 2,117 3,033
Notes payable to related parties due within one year 219 378
Dividends payable 255 255
Taxes payable 594 --
------- -------
Total current liabilities 8,268 7,842
Long-term debt due after one year 10,953 10,830
Notes payable to related parties due after one year 78 101
Deferred income taxes 4,110 4,125
Other noncurrent liabilities 195 --
------- -------
Total liabilities 23,604 22,898
------- -------
Commitments and contingencies
Shareholders' equity:
Preferred stock -- --
Common stock 6 6
Capital in excess of par value 24,486 24,486
Retained earnings 17,896 16,173
Accumulated other comprehensive income 296 511
------- -------
Total shareholders' equity 42,684 41,176
------- -------
Total liabilities and shareholders' equity $66,288 $64,074
======= =======
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these financial statements.
3
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SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
JULY 1, JULY 3,
2000 1999
------- --------
(UNAUDITED)
NET SALES $21,896 $ 15,921
Cost of sales 15,698 12,982
------- --------
GROSS PROFIT 6,198 2,939
Selling, engineering and
administrative expenses 3,544 3,068
------- --------
OPERATING INCOME (LOSS) 2,654 (129)
Interest expense 313 176
Miscellaneous expense (income) 193 36
------- --------
INCOME (LOSS) BEFORE INCOME TAXES 2,148 (341)
Income tax provision 771 (125)
------- --------
NET INCOME (LOSS) $ 1,377 $ (216)
======= ========
BASIC NET INCOME PER COMMON SHARE $ 0.22 $ (0.03)
WEIGHTED AVERAGE SHARES OUTSTANDING 6,385 6,383
DILUTED NET INCOME PER COMMON SHARE $ 0.21 $ (0.03)
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING 6,541 6,383
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these financial statements.
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SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED
JULY 1, JULY 3,
2000 1999
------- -------
(UNAUDITED)
NET SALES $41,966 $34,386
Cost of sales 30,664 26,927
------- -------
GROSS PROFIT 11,302 7,459
Selling, engineering and
administrative expenses 7,210 6,160
------- -------
OPERATING INCOME 4,092 1,299
Interest expense 603 429
Miscellaneous (income) expense 140 133
------- -------
INCOME BEFORE INCOME TAXES 3,349 737
Income tax provision 1,116 230
------- -------
NET INCOME $ 2,233 $ 507
======= =======
BASIC NET INCOME PER COMMON SHARE $ 0.35 $ 0.08
WEIGHTED AVERAGE SHARES OUTSTANDING 6,385 6,375
DILUTED NET INCOME PER COMMON SHARE $ 0.34 $ 0.08
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING 6,532 6,528
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these financial statements.
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SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE
INCOME (IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
CAPITAL IN OTHER
COMMON EXCESS OF RETAINED COMPREHENSIVE
SHARES STOCK PAR VALUE EARNINGS INCOME TOTAL
------ ------ ---------- -------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 6,322 6 24,163 10,732 99 35,000
Dividends declared (1,016) (1,016)
Exercise of stock options 39 223 223
Comprehensive income:
Net income 5,647 5,647
Foreign currency translation adjustments 161 161
-------
Comprehensive income 5,808
----- ---- ------- ------ ---- -------
Balance, December 31, 1998 6,361 6 24,386 15,363 260 40,015
Dividends declared (1,021) (1,021)
Exercise of stock options 22 75 75
Issue of stock 2 13 13
Tax effect of non-qualified stock options 12 12
Comprehensive income:
Net income 1,831 1,831
Foreign currency translation adjustments 251 251
-------
Comprehensive income 2,082
----- ---- ------- ------- ---- -------
Balance, January 1, 2000 6,385 6 24,486 16,173 511 41,176
Dividends declared (510) (510)
Comprehensive income:
Net income 2,233 2,233
Foreign currency translation adjustments (215) (215)
-------
Comprehensive income 2,018
----- ---- ------- ------- ---- -------
Balance, July 1, 2000 (unaudited) 6,385 $ 6 $24,486 $17,896 $296 $42,684
===== ==== ======= ======= ==== =======
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these financial statements.
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SUN HYDRAULICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 1, JULY 3,
2000 1999
------- -------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,233 $ 507
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,788 2,440
(Gain)/Loss on disposal of assets 328 127
Provision for deferred income taxes (15) (20)
(Increase) decrease in:
Accounts receivable (1,896) (542)
Allowance for doubtful accounts (40) (93)
Inventories (187) 758
Income tax receivable, net 455 --
Other current assets (6) (24)
Other assets (18) 51
Increase (decrease) in:
Accounts payable (95) (870)
Accrued expenses and other liabilities 1,003 (395)
Income taxes payable, net 594 104
Other liabilities 195 --
------- -------
Net cash provided by operating activities 5,339 2,043
------- -------
Cash flows from investing activities:
Investment in acquisition and joint venture (100) (100)
Capital expenditures (3,183) (3,135)
Proceeds from dispositions of equipment 40 43
------- -------
Net cash used in investing activities (3,243) (3,192)
------- -------
Cash flows from financing activities:
Proceeds from debt 2,910 5,128
Repayment of debt (3,703) (3,850)
Repayment of notes payable to related parties (182) (494)
Proceeds from exercise of stock options -- 75
Dividends to shareholders (511) (510)
------- -------
Net cash provided by (used in) financing activities (1,486) 349
------- -------
Effect of exchange rate changes on cash and
cash equivalents (215) 52
------- -------
Net increase (decrease) in cash and cash equivalents 395 (748)
Cash and cash equivalents, beginning of period 1,122 1,592
------- -------
Cash and cash equivalents, end of period $ 1,517 $ 844
======= =======
Supplemental disclosure of cash flow information:
Cash paid for:
Interest (including amounts capitalized) $ 603 $ 484
======= =======
Income taxes $ 82 $ 146
======= =======
Non-cash tax effect of non-qualified stock options $ -- $ 12
======= =======
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these financial statements.
7
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SUN HYDRAULICS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands except per share data)
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission for reporting on Form 10-Q. Accordingly, certain
information and footnotes required by generally accepted accounting principles
for complete financial statements are not included herein. The financial
statements are prepared on a consistent basis (including normal recurring
adjustments) and should be read in conjunction with the consolidated financial
statements and related notes contained in the Annual Report on Form 10-K for
the fiscal year ended January 1, 2000, filed by Sun Hydraulics Corporation (the
"Company") with the Securities and Exchange Commission on March 8, 2000.
2. BUSINESS
Sun Hydraulics Corporation and its wholly-owned subsidiaries (the
"Company") design, manufacture and sell screw-in cartridge valves and manifolds
used in hydraulic systems. The Company has facilities in the United States, the
United Kingdom, Germany, and Korea. Sun Hydraulics Corporation ("Sun
Hydraulics"), with its main offices located in Sarasota, Florida, designs,
manufactures and sells primarily through independent distributors. Sun
Hydraulik Holdings Limited ("Sun Holdings"), a wholly-owned subsidiary of Sun
Hydraulics, was formed to provide a holding company vehicle for the European
market operations; its wholly-owned subsidiaries are Sun Hydraulics Limited (a
British corporation, "Sun Ltd.") and Sun Hydraulik GmbH (a German corporation,
"Sun GmbH"). Sun Ltd. operates a manufacturing and distribution facility
located in Coventry, England, and Sun GmbH, located in Erkelenz, Germany,
designs, manufactures and markets the Company's products in German-speaking
European markets. Sun Hydraulics Korea Corporation ("Sun Korea"), a
wholly-owned subsidiary of Sun Hydraulics, located in Inchon, Korea, operates a
manufacturing and distribution facility.
3. JOINT VENTURE
On November 1, 1998, Sun Hydraulics entered into a 50/50 joint venture
agreement ("joint venture") with Links Lin, the owner of Sun Hydraulics
Corporation's Taiwanese distributor. This agreement provides for an initial
capital contribution of $250, which is recorded in Investment in joint venture
in the Company's financial statements on Form 10-K. An additional investment of
$100 was made on March 15, 2000.
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4. LONG-TERM DEBT (in thousands)
July 1, January 1,
2000 2000
-------- --------
(unaudited)
Lines of credit agreements-unsecured $ 500 $ 2,215
Lines of credit agreements-secured 5,677 4,616
Mortgage note payable-U.S. Manatee County facility 4,650 4,725
Mortgage note payable-German facility 1,204 1,352
Secured notes payable-German equipment 898 933
Secured notes payable-Korea 141 22
-------- --------
13,070 13,863
Less amounts due within one year (2,117) (3,033)
-------- --------
$ 10,953 $ 10,830
======== ========
The Company has four revolving lines of credit: two in the United
States, one in England, and one in Germany. None of these arrangements contain
pre-payment penalties.
On July 23, 1999, the Company replaced its $10,000 unsecured revolving
credit facility with a five year, secured, revolving credit facility of $7,500,
and a one-year unsecured, revolving credit facility of $5,000. The $7,500
credit facility has an interest rate equal to the bank lender's prime rate less
1% for the first year, and the Treasury bill rate plus 1.75% for the remaining
four years. The $5,000 credit facility has an interest rate equal to the bank
lender's prime rate less 1% or LIBOR plus 1.9% for predetermined periods of
time, at the Company's option. At July 1, 2000, the interest rate for both the
secured and unsecured facilities was 8.5%, and the balances outstanding were
$5,677 and $500, respectively. Both credit facilities are subject to certain
debt covenants.
A 10-year mortgage loan of $6,200 was obtained, at a fixed interest
rate of 8.25%, for construction of the Manatee County facility. Terms on the
construction note were interest-only on the balance drawn down through the
completion of construction and then conversion to a 10-year mortgage note with
a 15-year amortization schedule. In April 1999, this mortgage note was
renegotiated to an interest rate of 7.375%. Terms are monthly principal and
interest payments with remaining principal due July 1, 2006. At July 1, 2000,
$4,650 was outstanding under this mortgage loan.
In May 1996, the Company obtained a mortgage loan of approximately
$2,400 , denominated in German marks, for the facility in Erkelenz, Germany.
The loan has a term of 12 years and bears interest at 6.47%. At July 1, 2000,
the outstanding balance of this mortgage note was $1,204.
9
<PAGE> 10
In February 1999, the Company negotiated three loans in Germany,
secured by equipment: a ten year 5.1% fixed interest rate loan for
approximately $300, a ten year 5.1% fixed interest rate loan for approximately
$100, and a ten year 3.5% fixed interest rate loan for approximately $800. At
July 1, 2000, the outstanding balances on these facilities were $212, $0, and
$657, respectively.
In April 2000, the Company obtained a loan in Korea for approximately
$107, secured by equipment. The loan has a variable interest rate of between 3%
and 5%; the current rate on the loan is 4%. Terms are monthly interest payments
only through April 2003, and monthly principal and interest payments from May
2003 through April 2006.
5. SEGMENT REPORTING
The Company has adopted Statement of Accounting Standards No. 131,
"Disclosures about Segments of Enterprise and Related Information" ("SFAS
131"). This approach designates the internal organization that is used by
management for making operational decisions and addressing performance as the
source of determining the Company's reportable segments. Management bases its
financial decisions by the geographical location of its operations.
The individual subsidiaries comprising the Company operate
predominantly in a single industry as manufacturers and distributors of
hydraulic components. The subsidiaries are multinational with operations in the
United States, the United Kingdom, Germany, and Korea. In computing operating
profit for the foreign subsidiaries, no allocations of general corporate
expenses have been made.
Identifiable assets of the foreign subsidiaries are those assets
related to the operation of those companies. United States assets consist of
all other operating assets of the Company.
Segment information is as follows:
<TABLE>
<CAPTION>
United United
States Korea Kingdom Germany Elimination Consolidated
-------- ------ ------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
THREE MONTHS
ENDED JULY 1, 2000
Sales to unaffiliated
customers $ 15,695 $1,408 $3,233 $1,560 $ -- $ 21,896
Intercompany sales 3,101 -- 431 7 (3,539) --
Operating profit 1,994 26 443 123 68 2,654
Depreciation and
amortization 1,097 40 205 68 -- 1,410
Capital expenditures 828 237 535 155 -- 1,755
THREE MONTHS
ENDED JULY 3, 1999
Sales to unaffiliated
customers $ 10,691 $1,152 $2,803 $1,275 $ -- $ 15,921
Intercompany sales 2,139 -- 483 7 (2,629) --
Operating profit (410) 9 215 40 17 (129)
Depreciation expense 944 19 203 75 -- 1,241
Capital expenditures 1,575 63 101 42 -- 1,781
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS
ENDED JULY 1, 2000
Sales to unaffiliated
customers $ 29,418 $2,856 $6,599 $3,093 $ -- $ 41,966
Intercompany sales 5,926 -- 958 15 (6,899) --
Operating profit 2,934 165 850 178 (35) 4,092
Identifiable assets 50,172 1,358 8,911 6,271 (424) 66,288
Depreciation and
amortization 2,146 73 438 131 -- 2,788
Capital expenditures 1,941 406 597 239 -- 3,183
SIX MONTHS
ENDED JULY 3, 1999
Sales to unaffiliated
customers $ 24,233 $1,874 $5,587 $2,692 $ -- $ 34,386
Intercompany sales 3,837 -- 1,081 14 (4,932) --
Operating profit 308 37 668 183 103 1,299
Identifiable assets 45,529 742 8,422 6,297 (244) 60,746
Depreciation expense 1,860 19 404 157 -- 2,440
Capital expenditures 2,191 46 556 342 -- 3,135
</TABLE>
Operating profit is total sales and other operating income less
operating expenses. In computing segment operating profit, interest expense and
net miscellaneous income (expense) have not been deducted (added).
Included in U.S. sales to unaffiliated customers were export sales,
principally to Canada and Asia, of $3,471 and $2,824 during the six months
ended July 1, 2000, and July 3, 1999, respectively.
11
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Sun Hydraulics Corporation is a leading designer and manufacturer of
high-performance screw-in hydraulic cartridge valves and manifolds, which
control force, speed and motion as integral components in fluid power systems.
The Company sells its products globally, primarily though independent
distributors. Approximately 66% of product sales are used by the mobile market,
characterized by applications where the equipment is not fixed in place, the
operating environment is often unpredictable, and duty cycles are generally
moderate to low. The remaining 34% of sales are used by industrial markets,
which are characterized by equipment that is fixed in place, typically in a
controlled environment, with higher pressures and duty cycles. The Company
sells to both markets with a single product line. In 1999, the Company
generated approximately 37% of its net sales outside of the United States.
Orders for the three months ended July 1, 2000, increased $4.8
million, or 30.7%, to $20.3 million compared to the three months ended July 3,
1999. Orders for the six months ended July 1, 2000, increased $9.1 million, or
27.5%, to $42.0 million compared to the six months ended July 3, 1999. The
exceptionally strong demand in the first half of the year has not continued.
Orders for the three months ended July 1, 2000, decreased $1.4 million or 6.5%
compared to the previous quarter. Management believes at the current incoming
order rate, third quarter shipments will be lower than in the second quarter.
The United States National Fluid Power Association reported an 11.0%
overall increase in orders for hydraulic products for the first five months of
2000 over the same period a year ago. This increase includes an 11.3% increase
in mobile hydraulic orders and a 12.5% increase in industrial hydraulic orders.
The Company's net sales increased 37.5% for the three months ended
July 1, 2000, compared to the three months ended July 3, 1999. Net sales in the
three months ended July 1, 2000 increased $1.8 million, or 9.1%, to $21.9
million compared to the previous quarter. Net income increased 60.7% to $1.4
million for the three months ended July 1, 2000, compared to the previous
quarter. The $1.8 million increase in sales and the $1.4 million increase in
net income were primarily due to improved production rates and productivity in
the United States manufacturing operations. Management believes these
improvements are the result of the high level of production workload created by
the strong first quarter demand, the recently completed capacity expansion
program, new manufacturing systems, and quality of supplier parts.
COMPARISON OF THREE MONTHS ENDED JULY 1, 2000 AND JULY 3, 1999
Net sales increased $6.0 million, or 37.5%, to $21.9 million for the
quarter ended July 1, 2000, compared to the quarter ended July 3, 1999. This
increase was due to an increase in demand across all business segments and
improved manufacturing productivity in the United States operations. Also, net
sales in the quarter ended July 3, 1999, were adversely affected by reduced
production output in the United States operations related to problems with a
new manufacturing system implementation.
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Gross profit increased $3.3 million, or 110.9%, to $6.2 million for
the quarter ended July 1, 2000, compared to the quarter ended July 3, 1999.
Gross profit as a percentage of net sales increased to 28.3% compared to 18.5%
for the second quarter of 1999. This percentage increase was due to
substantially higher total net sales in the quarter ended July 1, 2000, and an
unusually low gross profit percentage in the quarter ended July 3, 1999,
related to problems implementing a new manufacturing system in the United
States operations. Also, in the quarter ended July 1, 2000, prime manufacturing
costs in the United States operations were lower as a percentage of net sales
than the quarter ended July 3, 1999, primarily due to reduced costs of
purchased parts. Manufacturing overhead expenses in the United States increased
in the quarter ended July 1, 2000, over the same period last year due mainly to
higher depreciation expense.
Selling, engineering and administrative expenses increased 15.5%, or
$0.5 million, to $3.6 million in the quarter ended July 1, 2000, compared to
$3.1 million in the quarter ended July 3, 1999. This increase was due primarily
to increased spending levels for product catalogues and for support and
enhancements to new software systems in the United States and the United
Kingdom operations.
Interest expense was $0.3 million for the quarter ended July 1, 2000,
compared to $0.2 million for the quarter ended July 3, 1999. This increase was
due to an increase in total debt of $1.0 million, and increased interest rates
on both lines of credit in the United States, which vary in relation to the
United States prime rate.
Other expense of $0.2 million for the quarter ended July 1, 2000,
consisted primarily of the disposal of certain equipment no longer used in
production in the United States and United Kingdom operations partially offset
by exchange rate gains.
The provision for income taxes for the quarter ended July 1, 2000, was
35.9% of pretax income, compared to 36.5% of pretax loss for the quarter ended
July 3, 1999. Tax savings were realized in the United States from the Sun
Hydraulics Foreign Sales Corporation. The Company had previously recorded its
provision for income taxes believing an income tax benefit had been obtained
for the Korean operation; the tax benefit request was recently denied by the
Korean government. Although, the Company plans to resubmit an application for
this benefit, management is unsure of the outcome. A retroactive, immaterial
adjustment has been recorded in the quarter ended July 1, 2000, to increase the
provision for income taxes.
Net income for the three months ended July 1, 2000, was $1.4 million,
compared to a net loss of $0.2 million for the three months ended July 3, 1999.
COMPARISON OF SIX MONTHS ENDED JULY 1, 2000 AND JULY 3, 1999
Net sales increased $7.6 million, or 22.0%, to $42.0 million for the
six months ended July 1, 2000, compared to the six months ended July 3, 1999.
This increase was due to an increase in demand across all business segments and
improved manufacturing productivity in the United States operations. Also, net
sales in the six months ended July 3, 1999, were adversely affected by reduced
production output in the United States operations related to problems with a
new manufacturing system implementation.
Gross profit increased $3.8 million, or 51.5%, to $11.3 million for
the six months ended July 1, 2000, compared to the six months ended July 3,
1999. Gross profit as a percentage of net sales increased to 26.9% compared to
21.7% for the first six months of 1999. This percentage increase
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was due to substantially higher total net sales and an unusually low gross
profit percentage in the six months ended July 3, 1999, related to problems
implementing a new manufacturing system in the United States operations. Also,
in the six months ended July 1, 2000, prime manufacturing costs in the United
States operations were lower as a percentage of net sales than the six months
ended July 3, 1999, primarily due to reduced costs of purchased parts and
improved productivity. Manufacturing overhead expenses in the United States
increased in the six months ended July 1, 2000, over the same period last year
due mainly due to higher depreciation expense.
Selling, engineering and administrative expenses increased 17.0%, or
$1.0 million, to $7.2 million in the six months ended July 1, 2000, compared to
$6.2 million in the six months ended July 3, 1999. This increase was due
primarily to increased spending levels for product catalogues and for support
and enhancements to new software systems installed last year in the United
States and the United Kingdom operations.
Interest expense was $0.6 million for the six months ended July 1,
2000, compared to $0.4 million for the six months ended July 3, 1999. This
increase was due to an increase in total debt of $1.0 million, and increased
interest rates on both lines of credit in the United States, which vary in
relation to the United States prime rate.
The provision for income taxes for the six months ended July 1, 2000,
was 33.3% of pretax income, compared to 31.2% of pretax income for the six
months ended July 3, 1999. The change in rate was primarily due to the mix in
pretax income in the operating business segments. Tax savings were realized in
the United States from the Sun Hydraulics Foreign Sales Corporation. The
Company had previously recorded its provision for income taxes believing an
income tax benefit had been obtained for the Korean operation; the tax benefit
request was recently denied by the Korean government. Although, the Company
plans to resubmit an application for this benefit, management is unsure of the
outcome. A retroactive, immaterial adjustment has been recorded for the six
months ended July 1, 2000 to increase the provision for income taxes.
Net income for the six months ended July 1, 2000, was $2.2 million
compared to $0.5 million for the six months ended July 3, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's primary source of capital has been cash
generated from operations, although fluctuations in working capital
requirements have been met through borrowings under revolving lines of credit.
The Company's principal uses of cash have been to pay operating expenses, make
capital expenditures, pay dividends to shareholders and service debt.
Cash flow from operations for the six months ended July 1, 2000,
increased $3.3 million to $5.3 million compared to $2.0 million for the six
months ended July 3, 1999. This increase was due to higher net income and
improved utilization of working capital. Capital expenditures, consisting
primarily of purchases of machinery and equipment, were $3.2 million for the
six months ended July 1, 2000, compared to $3.1 million for the six months
ended July 3, 1999. On March 15, 2000, the Company invested an additional $0.1
million in its 50/50 joint venture agreement in China. (Also, see Note 3 to the
Consolidated Financial Statements.)
14
<PAGE> 15
In 1996, the Company was awarded a grant of $0.4 million by the German
government, which helped to offset the cost of the German facility. The grant
required that the German operation employ 26 people by June 30, 1998. Although,
this deadline was extended several times, it has been determined that $0.1
million must be repaid during the third quarter because the hiring criteria was
not met. Since this item was recorded as a deferred grant, the repayment will
affect only cash; it will not affect net income except with respect to the
interest component, which is immaterial in amount.
The Company has four revolving lines of credit: two in the United
States, one in England, and one in Germany. None of these arrangements contain
pre-payment penalties. For an analysis of Company debt, see Note 4 to the
Consolidated Financial Statements.
The Company has notes payable to five former shareholders that bear
interest at a weighted rate of 15% and have terms expiring in one to four
years. These notes were issued by the Company in 1989 and 1990, in connection
with the repurchase of shares of common stock from former shareholders and do
not allow for prepayment by the Company. At July 1, 2000, $0.3 million was
outstanding under these notes.
The Company believes that cash generated from operations and its
borrowing availability under its revolving lines of credit will be sufficient
to satisfy the Company's operating expenses and capital expenditures for the
foreseeable future.
The Company declared a quarterly dividend of $0.04 per share to
shareholders of record on June 30, 2000, which was paid on July 15, 2000.
SEASONALITY AND INFLATION
The Company generally has experienced reduced activity during the
fourth quarter of the year, largely as a result of fewer working days due to
holiday shutdowns. The Company does not believe that inflation had a material
effect on its operations for the periods ended July 1, 2000, and July 3, 1999.
There can be no assurance, however, that the Company's business will not be
affected by inflation in the future.
15
<PAGE> 16
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
"Business", including under the subheading "Business Risk Factors" in the
Company's Form 10-K for the year ended January 1, 2000, and "Management's
Discussion and Analysis of Financial Conditions and Results of Operations" in
this Form 10-Q for the quarter ended July 1, 2000. 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.
16
<PAGE> 17
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders of the Company was held on May 13,
2000. At the meeting, the following actions were taken by the
shareholders:
John S. Kahler and Robert E. Koski were reelected as Directors to
serve until the Annual Meeting in 2003; Allen J. Carlson was elected as a
Director to serve until the Annual Meeting in 2003; Christine L. Koski was
elected as a Director to serve until the Annual Meeting in 2002; until
their respective successors are elected and qualified or until their
earlier resignation, removal from office or death. The votes cast for and
against each were as follows:
For Withheld
Allen J. Carlson 3,919,281 4,050
John S. Kahler 3,919,281 4,050
Christine L. Koski 3,919,281 4,050
Robert E. Koski 3,918,881 4,450
The appointment of PricewaterhouseCoopers, LLP, as the Company's
independent certified public accountants for the year 2000 was ratified
and approved. The voting on the proposal was as follows:
FOR 3,922,629
AGAINST 702
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
17
<PAGE> 18
EXHIBIT EXHIBIT DESCRIPTION
NUMBER
3.1 Amended and Restated Articles of Incorporation of the Company
(previously filed as Exhibit 3.1 in the Pre-Effective Amendment No.
4 to the Company's Registration Statement on Form S-1 filed on
December 19, 1996 (File No. 333-14183) and incorporated herein by
reference).
3.2 Amended and Restated Bylaws of the Company (previously filed as
Exhibit 3.2 in the Pre-Effective Amendment No. 4 to the Company's
Registration Statement on Form S-1 filed on December 19, 1996 (File
No. 333-14183) and incorporated herein by reference). 4.5 Mortgage
and Security Agreement, dated January 9, 1992, between Suninco,
Inc., Sun Hydraulics Corporation, and Northern Trust Bank of
Florida, N.A. (previously filed as Exhibit 4.5 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File
No. 333-14183) and incorporated herein by reference). 4.6 Loan
Agreement, dated March 29, 1996, between Suninco, Inc., Sun
Hydraulics Corporation, and Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.6 in the Company's Registration
Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)
and incorporated herein by reference).
4.7 Security Agreement, dated March 29, 1996, between Suninco, Inc., Sun
Hydraulics Corporation, and Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.7 in the Company's Registration
Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)
and incorporated herein by reference).
4.8 Modification and Additional Advance Agreement, dated March 29, 1996,
between Suninco, Inc. and Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.8 in the Company's Registration
Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)
and incorporated herein by reference).
4.9 Consolidated Note, dated March 29, 1996, in the amount of
$2,475,000.00, given by Suninco, Inc. to Northern Trust Bank of
Florida, N.A. (previously filed as Exhibit 4.9 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File
No. 333-14183) and incorporated herein by reference).
4.10 Loan Agreement, dated May 20, 1996, between Sun Hydraulics
Corporation and Northern Trust Bank of Florida, N.A. (previously
filed as Exhibit 4.10 in the Company's Registration Statement on
Form S-1 filed on October 15, 1996 (File No. 333-14183) and
incorporated herein by reference).
18
<PAGE> 19
4.11 Security Agreement, dated May 20, 1996, between Sun Hydraulics
Corporation and Northern Trust Bank of Florida, N.A. (previously
filed as Exhibit 4.11 in the Company's Registration Statement on
Form S-1 filed on October 15, 1996 (File No. 333-14183) and
incorporated herein by reference).
4.12 Consolidated Note, dated May 20, 1996, in the amount of
$3,063,157.00, given by Sun Hydraulics Corporation to Northern Trust
Bank of Florida, N.A. (previously filed as Exhibit 4.12 in the
Company's Registration Statement on Form S-1 filed on October 15,
1996 (File No. 333-14183) and incorporated herein by reference).
4.13 Loan Agreement, dated June 14, 1996, between Sun Hydraulics
Corporation, Suninco Inc., and Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.13 in the Company's Registration
Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)
and incorporated herein by reference).
4.14 Mortgage, dated June 14, 1996, between Sun Hydraulics Corporation,
Suninco Inc., and Northern Trust Bank of Florida, N.A. (previously
filed as Exhibit 4.14 in the Company's Registration Statement on
Form S-1 filed on October 15, 1996 (File No. 333-14183) and
incorporated herein by reference).
4.15 Security Agreement, dated June 14, 1996, between Sun Hydraulics
Corporation and Northern Trust Bank of Florida, N.A. (previously
filed as Exhibit 4.15 in the Company's Registration Statement on
Form S-1 filed on October 15, 1996 (File No. 333-14183) and
incorporated herein by reference).
4.16 Promissory Note, dated June 14, 1996, in the amount of
$6,187,000.00, given by Sun Hydraulics Corporation and Suninco, Inc.
to Northern Trust Bank of Florida, N.A. (previously filed as Exhibit
4.16 in the Company's Registration Statement on Form S-1 filed on
October 15, 1996 (File No. 333-14183) and incorporated herein by
reference).
4.17 Revolving Loan Facility letter agreement, dated July 30, 1996, in
the amount of (pound)800,000, between Sun Hydraulics Ltd. and Lloyds
Bank Plc. (previously filed as Exhibit 4.17 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File
No. 333-14183) and incorporated herein by reference).
4.18 Overdraft and Other Facilities letter agreement, dated June 7, 1996,
in an amount not to exceed (pound)250,000, between Sun Hydraulics
Ltd. and Lloyds Bank Plc. (previously filed as Exhibit 4.18 in the
Company's Registration Statement on Form S-1 filed on October 15,
1996 (File No. 333-14183) and incorporated herein by reference).
19
<PAGE> 20
4.19 Mortgage, dated April 11, 1996, between Sun Hydraulik GmbH and
Dresdner Bank (previously filed as Exhibit 4.19 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File
No. 333-14183) and incorporated herein by reference).
4.20 Amendment to Recommended Offer by Sun Hydraulics Corporation to
acquire the whole of the issued share capital of Sun Hydraulik
Holdings Limited, dated December 17, 1996 (previously filed as
Exhibit 2.1 in the Pre-Effective Amendment No. 4 to the Company's
Registration Statement on Form S-1 filed on December 19, 1996 (File
No. 333-14183) and incorporated herein by reference).
4.21 Master Note, dated February 3, 1997, in the amount of
$10,000,000.00, made by the Company to evidence a line of credit
granted to the Company by Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.21 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 and incorporated
herein by reference).
4.22 Renewal Master Note, dated February 3, 1998, in the amount of
$10,000,000.00, made by the Company to evidence a line of credit
granted to the Company by Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.22 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998 and incorporated
herein by reference).
4.23 Modification Agreement, dated March 1, 1998, between the Company and
Northern Trust Bank of Florida, N.A. (previously filed as Exhibit
4.23 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998 and incorporated herein by reference).
4.24 Renewal Master Note, dated as of February 3, 1998, in the amount of
$4,965,524.51, between the Company and Northern Trust Bank of
Florida, N.A. (previously filed as Exhibit 4.24 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998
and incorporated herein by reference).
4.25 Renewal Master Note, dated of February 3, 1999, in the amount of
$4,965,524.51, between the Company and Northern Trust Bank of
Florida, N.A. (previously filed as Exhibit 4.25 to the Company's
Quarterly Report on Form 10-Q for the quarter ended April 3, 1999
and incorporated herein by reference).
4.26 Renewal Master Note, dated July 23, 1999, in the amount of
$5,000,000.00 between the Company and Northern Trust Bank of
Florida, N.A. (previously filed as Exhibit 4.26 to the Company's
Quarterly Report on Form 10-Q for the quarter ended July 3, 1999
and incorporated herein by reference).
4.27 Loan Agreement, dated July 23, 1999, in the amount of $7,500,000.00,
between the Company and Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.27 to the Company's Quarterly Report
on Form 10-Q for the quarter ended July 3, 1999 and incorporated
herein by reference).
20
<PAGE> 21
4.28 Security Agreement, dated July 23, 1999, between the Company and
Northern Trust Bank of Florida, N.A. (previously filed as Exhibit
4.28 to the Company's Quarterly Report on Form 10-Q for the
quarter ended July 3, 1999 and incorporated herein by reference).
4.29 Promissory Note, dated July 23, 1999, in the amount of
$7,500,000.00, between the Company and Northern Trust Bank of
Florida, N.A. (previously filed as Exhibit 4.29 to the Company's
Quarterly Report on Form 10-Q for the quarter ended July 3,
1999 and incorporated herein by reference).
10.1 Form of Distributor Agreement (Domestic) (previously filed as
Exhibit 10.1 in the Company's Registration Statement on Form S-1
filed on October 15, 1996 (File No. 333-14183) and incorporated
herein by reference).
10.2 Form of Distributor Agreement (International) (previously filed as
Exhibit 10.2 in the Company's Registration Statement on Form S-1
filed on October 15, 1996 (File No. 333-14183) and incorporated
herein by reference).
10.3+ 1996 Sun Hydraulics Corporation Stock Option Plan (previously filed
as Exhibit 10.3 in the Pre-Effective Amendment No. 4 to the
Company's Registration Statement on Form S-1 filed on December 19,
1996 (File No. 333-14183) and incorporated herein by reference).
10.4+ Amendment No. 1 to 1996 Stock Option Plan (previously filed as
Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 and incorporated herein by reference).
10.5+ Form of Indemnification Agreement (previously filed as Exhibit 10.4
in the Pre-Effective Amendment No. 4 to the Company's Registration
Statement on Form S-1 filed on December 19, 1996 (File No.
333-14183) and incorporated herein by reference).
10.6+ Sun Hydraulics Corporation Employee Stock Award Program (previously
filed as Exhibit 4 to the Company's registration statement on Form
S-8 filed on July 20, 1999, and incorporated herein by reference).
27.1 Financial Data Schedule for period ended July 1, 2000 (for SEC
purposes only).
+ Executive management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
Report on Form 8-K (dated December 8, 1999) filed January 12, 2000,
announcing the election of Allen J. Carlson as Vice President of the
Company.
Report on Form 8-K (dated March 7, 2000) filed March 10, 2000, announcing
year-end 1999 and fourth quarter financial results.
21
<PAGE> 22
Report on Form 8-K (dated April 28, 2000) filed May 4, 2000, announcing
anticipated management changes and 1st quarter financial results
Report on Form 8-K (dated May 12, 2000) filed May 18, 2000, announcing
management changes and quarterly dividend.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Sarasota, State of Florida on August 7, 2000.
SUN HYDRAULICS CORPORATION
By: /s/ Richard J. Dobbyn
---------------------------------------
Richard J. Dobbyn
Chief Financial Officer (Principal
Financial and Accounting Officer)
22
<PAGE> 23
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
3.1 Amended and Restated Articles of Incorporation of the Company
(previously filed as Exhibit 3.1 in the Pre-Effective Amendment No.
4 to the Company's Registration Statement on Form S-1 filed on
December 19, 1996 (File No. 333-14183) and incorporated herein by
reference).
3.2 Amended and Restated Bylaws of the Company (previously filed as
Exhibit 3.2 in the Pre-Effective Amendment No. 4 to the Company's
Registration Statement on Form S-1 filed on December 19, 1996 (File
No. 333-14183) and incorporated herein by reference).
4.5 Mortgage and Security Agreement, dated January 9, 1992, between
Suninco, Inc., Sun Hydraulics Corporation, and Northern Trust Bank
of Florida, N.A. (previously filed as Exhibit 4.5 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File
No. 333-14183) and incorporated herein by reference).
4.6 Loan Agreement, dated March 29, 1996, between Suninco, Inc., Sun
Hydraulics Corporation, and Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.6 in the Company's Registration
Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)
and incorporated herein by reference).
4.7 Security Agreement, dated March 29, 1996, between Suninco, Inc., Sun
Hydraulics Corporation, and Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.7 in the Company's Registration
Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)
and incorporated herein by reference).
4.8 Modification and Additional Advance Agreement, dated March 29, 1996,
between Suninco, Inc. and Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.8 in the Company's Registration
Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)
and incorporated herein by reference).
4.9 Consolidated Note, dated March 29, 1996, in the amount of
$2,475,000.00, given by Suninco, Inc. to Northern Trust Bank of
Florida, N.A. (previously filed as Exhibit 4.9 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File
No. 333-14183) and incorporated herein by reference).
4.10 Loan Agreement, dated May 20, 1996, between Sun Hydraulics
Corporation and Northern Trust Bank of Florida, N.A. (previously
filed as Exhibit 4.10 in the Company's Registration Statement on
Form S-1 filed on October 15, 1996 (File No. 333-14183) and
incorporated herein by reference).
23
<PAGE> 24
4.11 Security Agreement, dated May 20, 1996, between Sun Hydraulics
Corporation and Northern Trust Bank of Florida, N.A. (previously
filed as Exhibit 4.11 in the Company's Registration Statement on
Form S-1 filed on October 15, 1996 (File No. 333-14183) and
incorporated herein by reference).
4.12 Consolidated Note, dated May 20, 1996, in the amount of
$3,063,157.00, given by Sun Hydraulics Corporation to Northern Trust
Bank of Florida, N.A. (previously filed as Exhibit 4.12 in the
Company's Registration Statement on Form S-1 filed on October 15,
1996 (File No. 333-14183) and incorporated herein by reference).
4.13 Loan Agreement, dated June 14, 1996, between Sun Hydraulics
Corporation, Suninco Inc., and Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.13 in the Company's Registration
Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)
and incorporated herein by reference).
4.14 Mortgage, dated June 14, 1996, between Sun Hydraulics Corporation,
Suninco Inc., and Northern Trust Bank of Florida, N.A. (previously
filed as Exhibit 4.14 in the Company's Registration Statement on
Form S-1 filed on October 15, 1996 (File No. 333-14183) and
incorporated herein by reference).
4.15 Security Agreement, dated June 14, 1996, between Sun Hydraulics
Corporation and Northern Trust Bank of Florida, N.A. (previously
filed as Exhibit 4.15 in the Company's Registration Statement on
Form S-1 filed on October 15, 1996 (File No. 333-14183) and
incorporated herein by reference).
4.16 Promissory Note, dated June 14, 1996, in the amount of
$6,187,000.00, given by Sun Hydraulics Corporation and Suninco, Inc.
to Northern Trust Bank of Florida, N.A. (previously filed as Exhibit
4.16 in the Company's Registration Statement on Form S-1 filed on
October 15, 1996 (File No. 333-14183) and incorporated herein by
reference).
4.17 Revolving Loan Facility letter agreement, dated July 30, 1996, in
the amount of (pound)800,000, between Sun Hydraulics Ltd. and Lloyds
Bank Plc. (previously filed as Exhibit 4.17 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File
No. 333-14183) and incorporated herein by reference).
4.18 Overdraft and Other Facilities letter agreement, dated June 7, 1996,
in an amount not to exceed (pound)250,000, between Sun Hydraulics
Ltd. and Lloyds Bank Plc. (previously filed as Exhibit 4.18 in the
Company's Registration Statement on Form S-1 filed on October 15,
1996 (File No. 333-14183) and incorporated herein by reference).
24
<PAGE> 25
4.19 Mortgage, dated April 11, 1996, between Sun Hydraulik GmbH and
Dresdner Bank (previously filed as Exhibit 4.19 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File
No. 333-14183) and incorporated herein by reference).
4.20 Amendment to Recommended Offer by Sun Hydraulics Corporation to
acquire the whole of the issued share capital of Sun Hydraulik
Holdings Limited, dated December 17, 1996 (previously filed as
Exhibit 2.1 in the Pre-Effective Amendment No. 4 to the Company's
Registration Statement on Form S-1 filed on December 19, 1996 (File
No. 333-14183) and incorporated herein by reference).
4.21 Master Note, dated February 3, 1997, in the amount of
$10,000,000.00, made by the Company to evidence a line of credit
granted to the Company by Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.21 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 and incorporated
herein by reference).
4.22 Renewal Master Note, dated February 3, 1998, in the amount of
$10,000,000.00, made by the Company to evidence a line of credit
granted to the Company by Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.22 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998 and incorporated
herein by reference).
4.23 Modification Agreement, dated March 1, 1998, between the Company and
Northern Trust Bank of Florida, N.A. (previously filed as Exhibit
4.23 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998 and incorporated herein by reference).
4.24 Renewal Master Note, dated as of February 3, 1998, in the amount of
$4,965,524.51, between the Company and Northern Trust Bank of
Florida, N.A. (previously filed as Exhibit 4.24 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998
and incorporated herein by reference).
4.25 Renewal Master Note, dated of February 3, 1999, in the amount of
$4,965,524.51, between the Company and Northern Trust Bank of
Florida, N.A. (previously filed as Exhibit 4.25 to the Company's
Quarterly Report on Form 10-Q for the quarter ended April 3, 1999
and incorporated herein by reference).
4.26 Renewal Master Note, dated July 23, 1999, in the amount of
$5,000,000.00 between the Company and Northern Trust Bank of
Florida, N.A. (previously filed as Exhibit 4.26 to the Company's
Quarterly Report on Form 10-Q for the quarter ended July 3, 1999
and incorporated herein by reference.)
4.27 Loan Agreement, dated July 23, 1999, in the amount of $7,500,000.00,
between the Company and Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.27 to the Company's Quarterly Report
on Form 10-Q for the quarter ended July 3, 1999 and incorporated
herein by reference.)
25
<PAGE> 26
4.28 Security Agreement, dated July 23, 1999, between the Company and
Northern Trust Bank of Florida, N.A. (previously filed as Exhibit
4.28 to the Company's Quarterly Report on Form 10-Q for the quarter
ended July 3, 1999 and incorporated herein by reference.)
4.29 Promissory Note, dated July 23, 1999, in the amount of
$7,500,000.00, between the Company and Northern Trust Bank of
Florida, N.A. (previously filed as Exhibit 4.29 to the Company's
Quarterly Report on Form 10-Q for the quarter ended July 3, 1999
and incorporated herein by reference.)
10.1 Form of Distributor Agreement (Domestic) (previously filed as
Exhibit 10.1 in the Company's Registration Statement on Form S-1
filed on October 15, 1996 (File No. 333-14183) and incorporated
herein by reference).
10.2 Form of Distributor Agreement (International) (previously filed as
Exhibit 10.2 in the Company's Registration Statement on Form S-1
filed on October 15, 1996 (File No. 333-14183) and incorporated
herein by reference).
10.3+ 1996 Sun Hydraulics Corporation Stock Option Plan (previously filed
as Exhibit 10.3 in the Pre-Effective Amendment No. 4 to the
Company's Registration Statement on Form S-1 filed on December 19,
1996 (File No. 333-14183) and incorporated herein by reference).
10.4+ Amendment No. 1 to 1996 Stock Option Plan (previously filed as
Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 and incorporated herein by reference).
10.5+ Form of Indemnification Agreement (previously filed as Exhibit 10.4
in the Pre-Effective Amendment No. 4 to the Company's Registration
Statement on Form S-1 filed on December 19, 1996 (File No.
333-14183) and incorporated herein by reference).
10.6+ Sun Hydraulics Corporation Employee Stock Award Program (previously
filed as Exhibit 4 to the Company's registration statement on Form
S-8 filed on July 20, 1999, and incorporated herein by reference).
27.1 Financial Data Schedule for period ended July 1, 2000 (for SEC
purposes only).
+ Executive management contract or compensatory plan or arrangement.
26
