Revenue during the quarter dropped 5.84 percent to $45.23 million from $48.04 million in the previous year period. Gross margin for the quarter contracted 416 basis points over the previous year period to 34.36 percent. Total expenses were 83.99 percent of quarterly revenues, up from 77.02 percent for the same period last year. That has resulted in a contraction of 696 basis points in operating margin to 16.01 percent.

Operating income for the quarter was $7.24 million, compared with $11.04 million in the previous year period.

"Third quarter sales were slightly below expectations," reported Wolfgang Dangel, Sun's president and chief executive officer. "Overall, global demand declined 6% due to persistent headwinds. Sluggish end markets continued to strain demand in the Americas and Europe as both experienced a 10% decline, while Asia Pacific remained a bright spot, up more than 12% for the quarter. Our sales and marketing investments in this region are having significant influence on our ability to win new customers and expand our market share. A strong U.S dollar adversely affected EPS by $0.02; however it was still within our expected range."

For financial year 2016, Sun Hydraulics Corporation projects revenue to be $193 million. The company expects diluted earnings per share to be in the range of $0.88 to $0.90.

For the fourth-quarter 2016, Sun Hydraulics Corporation projects revenue to be $46 million. The company expects diluted earnings per share to be in the range of $0.13 to $0.15.

Operating cash flow declines
Sun Hydraulics Corporation has generated cash of $31.32 million from operating activities during the nine month period, down 23.67 percent or $9.72 million, when compared with the last year period.

Cash flow from investing activities was $5.34 million for the nine month period as against cash outgo of $7.68 million in the last year period. It has incurred net capital expenditure of $4.50 million on net basis during the nine month period, up 47.61 percent or $1.45 million from year ago period.

The company has spent $7.49 million cash to carry out financing activities during the nine month period as against cash outgo of $8.80 million in the last year period.

Cash and cash equivalents stood at $110.02 million as on Oct. 01, 2016, up 43.60 percent or $33.41 million from $76.62 million on Sep. 26, 2015.

Working capital increases
Sun Hydraulics Corporation has recorded an increase in the working capital over the last year. It stood at $165.36 million as at Oct. 01, 2016, up 16.64 percent or $23.59 million from $141.77 million on Sep. 26, 2015. Current ratio was at 13.56 as on Oct. 01, 2016, up from 12.05 on Sep. 26, 2015.

Cash conversion cycle (CCC) has decreased to 40 days for the quarter from 55 days for the last year period. Days sales outstanding went up to 38 days for the quarter compared with 34 days for the same period last year.

Days inventory outstanding has decreased to 19 days for the quarter compared with 37 days for the previous year period. At the same time, days payable outstanding was almost stable at 17 days for the quarter, when compared with the previous year period.