I am very proud of the results that our team delivered in 2017 in furtherance of our Vision 2025 strategic plan.

$343M

Record Revenue

This represents a 74% increase over 2016 revenue.

I am very proud of the results that our team delivered in 2017 in furtherance of our Vision 2025 strategic plan. Your Company realized record revenue of $343 million. The Hydraulics segment grew organically by 22% to $231 million and the Electronics segment contributed $112 million, nearly all of which resulted from the December 2016 acquisition of Enovation Controls. On a pro forma comparative basis, the Electronics segment grew 33% organically in 2017. Consistent with our historical performance as well as our long-term goals, we maintained superior profitability in 2017, generating a 23% adjusted operating margin, leading to $1.60 adjusted earnings per share. This represents 72% EPS growth over 2016 results. And with solid cash generated from operations, we repaid $24 million of acquisition debt, closing the year at $116 million of debt outstanding.

These results were driven by the actions we’ve been taking to solidify our foundation and execute our Vision 2025, including the following:

Integration of Enovation Controls

During 2017 we integrated Enovation Controls, to become a vital contributor to Sun’s results. This included the completion of a very complex carve-out from the Enovation Controls lines of business that we did not acquire. This complex carve-out involved the intricate dismantle and setup of inventories and production lines between San Antonio and Tulsa. This was completed while the Electronics segment realized 33% pro forma organic growth.

When we announced the acquisition, we indicated that, while we anticipate the Enovation Controls business will be successful on a standalone basis, we identified approximately $5 million of annualized EBITDA synergies to be ramped up and realized by 2020. We have many projects underway in support of the realization of those activities, which are driven by global cross-selling initiatives.

Advancing Hydraulics market penetration

To accelerate our global sales growth, we began adding experienced application specialists in the field over the past couple of years. In the Americas, these new resources work with our channel partners to provide solutions directly to OEMs. In other parts of the world where our go-to-market strategy is primarily direct to OEMs, we are addressing geographic regions which historically were white spots for us and had little or no penetration. This is especially the case in southeast Asia, a rapidly growing region for us. Adding more selling resources in the field is one of the early steps in our “In the region, for the region” initiative, placing us closer to our customers locally. These additional resources are also diversifying our revenue base by penetrating new end markets globally.

Another way we’re adding value through the supply chain is by intensifying collaboration between our global suppliers and our global sales channel partners, including value-add distributors and integrators. Bridging this gap and providing such problem-solving in the field is just one example of how we differentiate Sun in the market place.

Evolving to an intelligent control systems provider

While Sun has historically been known as a best-in-class component supplier, and will strive to continue to be, we are also expanding our know-how to develop more smart components and intelligent control systems. As consumers are becoming more technologically advanced, industry is demanding more electrification and digitization, and we are developing products and systems to satisfy this growing demand. During 2017, we launched the first products in our new line of competitively priced, high performance electro-hydraulics which were jointly developed by engineers from both our Hydraulics and Electronics teams.

Expanding capacity to support growing Asia-Pacific region

In 2017 we purchased the land and began construction of our new facility in South Korea. Once complete in 2018, this will house expanded manufacturing, engineering, sales and warehousing activities to support rapidly growing demand for our products and solutions in the Asia-Pacific region.

Acquisition of Faster Group expands hydraulics market coverage

We accessed the equity capital markets at the end of January 2018 and successfully raised approximately $240 million to reduce our debt and fund our second quarter 2018 acquisition of Faster Group. Faster Group is a leading global manufacturer of quick-release hydraulic coupling solutions. Its primary markets include agriculture, construction equipment and general industrial applications. This aligns with our strategy to add approximately $350 million of acquired revenue between 2018 and 2025, to reach our Vision 2025 $1 billion revenue goal.

In closing, I wish to thank all of our stakeholders who contribute to our success, including our employees, customers, and suppliers around the globe, as well as our Board of Directors for their counsel. Finally, I wish to thank all of our shareholders for their confidence in the Sun organization as we continuously strive to reach our Vision 2025 goals.

With best regards, Wolfgang Dangel CEO and President April 18, 2018