HDNG Hardinge Inc. (delisted)

Strong Improvement Generated in Orders and Backlog As Well ELMIRA, N.Y., Aug. 9 /PRNewswire-FirstCall/ -- Hardinge Inc. (NASDAQ:HDNG), a leading international provider of advanced material-cutting solutions, today reported increased orders, net sales, net income and earnings per share for the second quarter of 2006, compared to the same quarter in 2005. Net income for the second quarter of 2006 was $3.0 million, or $.34 per diluted share, compared to $2.5 million, or $.28 per diluted share, in the second quarter of 2005. Net income for the first six months of 2006 was $5.0 million, or $.56 per diluted share, compared to $4.3 million, or $.49 per diluted share, for the first six months of 2005. Net sales for the second quarter were $78.5 million, an increase of 6.8% compared to $73.5 million of net sales for the second quarter of 2005. Net sales for the first six months of 2006 were $154.0 million, an increase of 8.7% compared to $141.6 million of net sales for the first six months of 2005. "Our second quarter 2006 performance benefited from the sustained strength of the manufacturing sectors around the globe," commented Pat Ervin, Chairman, President, and Chief Executive Officer. "The second quarter growth in orders and net sales for 2006 reflects solid increases in each of our geographic markets and across most major product lines. This demonstrates our strong and growing international market position, which remains a strategic focus of the Company. However changes in the mix of sales related to product lines and geographic markets resulted in lower gross profit margins compared to 2005. Also, it is important to note that second quarter 2006 orders included an order for our 'Asia & Other' region valued at approximately $5.0 million that we anticipate will repeat in the third quarter of this year, but not in future quarters." The following table summarizes the Company's sales by geographical region for the three and six month periods ended June 30, 2006 and 2005, respectively: Three Months Ended Six Months Ended June 30, June 30, (U.S. dollars in thousands) Sales to % % Customers in: 2006 2005 Change 2006 2005 Change North America $28,246 $26,292 7.4 % $57,427 $50,756 13.1 % Europe 31,687 29,932 5.9 % 60,908 61,046 (.2)% Asia & Other 18,585 17,303 7.4 % 35,619 29,773 19.6 % $78,518 $73,527 6.8 % $153,954 $141,575 8.7 % Sales to customers in all regions increased in the second quarter of 2006 compared to the second quarter of 2005. Sales to customers in North America increased as a result of growth in the lathe product line. Sales to customers in Europe increased as a result of growth in both the milling and grinding product lines. Sales to customers in Asia & Other increased as a result of growth in both milling and lathe product lines. The weakening of foreign currencies relative to the U.S. dollar had an unfavorable impact of $0.3 million and $3.4 million on sales for the three and six months ended June 30, 2006 compared to the same periods in 2005. The following table summarizes orders by geographical region for the three and six months ended June 30, 2006 compared to the same periods in 2005: Three Months Ended Six Months Ended June 30, June 30, (U.S. dollars in thousands) Orders from % % Customers in: 2006 2005 Change 2006 2005 Change North America $34,075 $29,847 14.2 % $63,182 $56,474 11.9 % Europe 33,467 29,832 12.2 % 64,605 61,216 5.5 % Asia & Other 24,841 16,997 46.1 % 41,326 30,094 37.3 % $92,383 $76,676 20.5 % $169,113 $147,784 14.4 % Orders for the second quarter of 2006 were $92.4 million, an increase of $15.7 million, or 20.5%, compared to the second quarter of 2005. Orders for the six months ended June 30, 2006 were $169.1 million, an increase of $21.3 million, or 14.4%, compared to same period in 2005. Orders from customers in North America and Asia & Other increased as a result of expansion in the Company's lathe product line and increased orders in the Company's grinding products, as well as the large second quarter order for Asia & Other that Mr. Ervin referred to previously. Hardinge continues to strengthen the Asian market position of its Taiwanese and Chinese subsidiaries by investing in increased capacity, as well as promotional expenses, and support personnel to take advantage of the strong sales growth opportunities in that area. European order growth in the second quarter was driven primarily by improvement in orders for the Company's grinding product lines. Our consolidated backlog at June 30, 2006 was $88.8 million compared to $75.0 million at March 31, 2006. Gross profit margin for the second quarter of 2006 was 30.0% of net sales, compared to 32.0% of net sales in the second quarter of 2005. Gross margin for the six months ended June 30, 2006 was 30.2% compared to 31.5% for the same period in 2005. The decrease in gross profit margin for 2006 compared to 2005 was primarily the result of changes in both product and market mix. Selling, general and administrative expenses (SG&A) were $18.3 million, or 23.3% of net sales, in the second quarter of 2006, compared to $18.1 million, or 24.6% in the second quarter of 2005. SG&A expenses for the six months ended June 30, 2006 were $37.5 million, or 24.4% of net sales, compared to $35.6 million or 25.1% of net sales, in the six months ended June 30, 2005. The change in SG&A expense for 2006 was attributable to planned increases in spending for: commissions; wages, pension and benefit costs; and information technology enhancements; offset by decreases in: selling and marketing expenses; and other income and expense. Interest expense was $1.3 million and $2.5 million for the three and six months ended June 30, 2006 compared to $1.0 million and $1.9 million for the same periods in 2005. The increase is due primarily to higher average borrowings incurred to finance the buyout of our minority partner in Hardinge Taiwan in December 2005 along with the purchase of the Bridgeport technical information in January 2006. The provision for income taxes was $1.0 million and $1.7 million, respectively, for the three and six months ended June 30, 2006, compared to $1.3 million and $2.1 million for the same periods in 2005. The effective tax rate was 25.8% and 25.7% for the three and six months ended June 30, 2006 compared to 28.1% and 27.7% for the same periods in 2005. In December 2005, the Company acquired the remaining 49% minority interest in Hardinge Taiwan Precision Machinery Limited, which is treated as a consolidated subsidiary. As a result of this transaction, there is no minority interest reduction to consolidated net income in 2006 compared to a reduction of $.8 million and $1.1 million, respectively, for the three and six months ended June 30, 2005. "Our strategy of product and market diversification has provided growth in both orders and net sales through the midpoint of 2006," Mr. Ervin continued. "Even with the continued strong performance of the worldwide manufacturing sectors, we need to remain focused and nimble in responding to continued opportunities for growth. We remain confident that the focused execution of our business strategy will generate both top- and bottom-line growth as we leverage the position of our strong product brands in new geographic and product markets." The Company also announced that its Board of Directors has declared a cash dividend of $0.03 per share on the Company's common stock. The dividend is payable on September 8, 2006 to stockholders of record as of September 1, 2006. The Company will host a conference call at 11:00 AM today to provide additional detail related to second quarter and year-to-date performance. The call can be accessed by dialing 1-866-838-2057, or via the internet live at http://videonewswire.com/event.asp?id=35007. It may also be accessed in replay form within the "Investor Relations" section at the Company's website, http://www.hardinge.com/, where it will be posted for one full year. You may also access a recording approximately one hour after its completion by dialing 1-888-284-7564, and entering the reference number: 190194. This telephone recording will be available throughout the third quarter, ending September 30, 2006. Hardinge Inc., founded more than 100 years ago, is an international leader in providing the latest industrial technology to companies requiring material- cutting solutions. The Company designs and manufactures computer-numerically controlled metal-cutting lathes, machining centers, grinding machines, collets, chucks, indexing fixtures, and other industrial products. The company has manufacturing operations in the United States, Switzerland, Taiwan and China and distributes machines in all major industrialized countries of the world. Hardinge's common stock trades on NASDAQ under the symbol, "HDNG." For more information, please visit the Company's website at http://www.hardinge.com/. This news release contains statements of a forward-looking nature relating to the financial performance of Hardinge Inc. Such statements are based upon information known to management at this time. The company cautions that such statements necessarily involve uncertainties and risk, and deal with matters beyond the company's ability to control and in many cases the company cannot predict what factors would cause actual results to differ materially from those indicated. Among the many factors that could cause actual results to differ from those set forth in the forward-looking statements are fluctuations in the machine tool business cycles, changes in general economic conditions in the U.S. or internationally, the mix of products sold and the profit margins thereon, the relative success of the company's entry into new product and geographic markets, the company's ability to manage its operating costs, actions taken by customers such as order cancellations or reduced bookings by customers or distributors, competitors' actions such as price discounting or new product introductions, governmental regulations and environmental matters, changes in the availability and cost of materials and supplies, the implementation of new technologies and currency fluctuations. Any forward-looking statement should be considered in light of these factors. The company undertakes no obligation to revise its forward-looking statements if unanticipated events alter their accuracy. Contacts: J. Patrick Ervin Chairman, President and CEO (607) 378-4420 Charles R. Trego, Jr. Senior Vice President and CFO (607) 378-4202 Hardinge Inc. and Subsidiaries Consolidated Balance Sheets (In Thousands, except preferred and common share and per share amounts) June 30, December 31, 2006 2005 (Unaudited) Assets Current assets: Cash $6,499 $6,552 Accounts receivable, net 67,440 67,559 Notes receivable, net 2,893 4,060 Inventories 125,434 117,036 Deferred income tax 779 744 Prepaid expenses 11,206 6,921 Total current assets 214,251 202,872 Property, plant and equipment: Property, plant and equipment 175,318 170,961 Less accumulated depreciation 108,989 104,640 Net property, plant and equipment 66,329 66,321 Other assets: Notes receivable 4,080 3,683 Deferred income taxes 461 455 Intangible pension asset 264 247 Other intangible assets 12,148 7,438 Goodwill 18,997 17,699 Other long term assets 1,643 1,561 37,593 31,083 Total assets $318,173 $300,276 Liabilities and shareholders' equity Current liabilities: Accounts payable $27,940 $26,454 Notes payable to bank 10,285 3,803 Deferred purchase price of acquisitions -- 5,129 Accrued expenses 18,611 19,920 Accrued pension expense 2,059 2,375 Accrued income taxes 3,075 3,223 Deferred income taxes 2,764 2,592 Current portion of long-term debt 19,880 12,955 Total current liabilities 84,614 76,451 Other liabilities: Long-term debt 49,854 50,356 Accrued pension expense 19,787 19,731 Deferred income taxes 2,915 2,646 Accrued postretirement benefits 5,779 5,985 Derivative financial instruments 1,329 1,709 Other liabilities 4,019 4,405 83,683 84,832 Shareholders' equity: Preferred stock, Series A, par value $.01 per share; Authorized 2,000,000; but unissued at June 30, 2006 and December 31, 2005. Common stock, $.01 par value: Authorized shares - 20,000,000; Issued shares - 9,919,992 at June 30, 2006 and December 31, 2005 99 99 Additional paid-in capital 59,646 60,387 Retained earnings 108,642 104,219 Treasury shares - 1,089,037 at June 30, 2006 and 1,063,287 shares at December 31, 2005. (14,022) (13,697) Accumulated other comprehensive income (4,489) (11,029) Deferred employee benefits -- (986) Total shareholders' equity 149,876 138,993 Total liabilities and shareholders' equity $318,173 $300,276 HARDINGE INC. AND SUBSIDIARIES Consolidated Statements of Operations (In Thousands, Except Per Share Data) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net sales $78,518 $73,527 $153,954 $141,575 Cost of sales 54,932 50,030 107,465 96,964 Gross profit 23,586 23,497 46,489 44,611 Selling, general and administrative expenses 18,279 18,114 37,540 35,590 Income from operations 5,307 5,383 8,949 9,021 Interest expense 1,311 1,021 2,457 1,861 Interest (income) (58) (155) (180) (291) Income before income taxes and minority interest in (profit) of consolidated subsidiary 4,054 4,517 6,672 7,451 Income taxes 1,047 1,271 1,718 2,064 Minority interest in (profit) of consolidated subsidiary (791) (1,068) Net income 3,007 2,455 4,954 4,319 Retained earnings at beginning of period 105,900 99,876 104,219 98,277 Less dividends declared 265 267 531 532 Retained earnings at end of period $108,642 $102,064 $108,642 $102,064 Per share data: Basic earnings per share: $0.34 $0.28 $0.57 $0.49 Weighted average number of common shares outstanding 8,765 8,767 8,766 8,756 Diluted earnings per share: $0.34 $0.28 $0.56 $0.49 Weighted average number of common shares outstanding 8,807 8,829 8,801 8,840 Other financial data: Gross margin 30.0 % 32.0 % 30.2 % 31.5 % Operating margin 6.8 % 7.3 % 5.8 % 6.4 % Capital expenditures $1,135 $2,277 $1,967 $2,947 Depreciation and amortization $2,398 $2,286 $4,731 $4,606 HARDINGE INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In Thousands) Six Months Ended June 30, 2006 2005 (Unaudited) (Unaudited) Operating activities Net income $4,954 $4,319 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 4,731 4,606 Provision for deferred income taxes 127 425 Minority interest -- 1,068 Foreign currency transaction (gain) loss (319) 295 Changes in operating assets and liabilities: Accounts receivable 2,402 (7,576) Notes receivable 855 2,222 Inventories (4,376) (19,762) Prepaids/other assets (4,478) (1,870) Accounts payable 835 2,220 Accrued expenses (4,150) (3,335) Accrued postretirement benefits (205) (65) Net cash provided by (used in) operating activities 376 (17,453) Investing activities Capital expenditures (1,967) (2,947) Purchase of Bridgeport kneemill technical information (5,000) -- Purchase of minority interest in Hardinge Taiwan (110) -- Purchase of U-Sung Co., Ltd. (5,071) -- Net cash (used in) investing activities (12,148) (2,947) Financing activities Increase in short-term notes payable to bank 5,921 368 Increase in long-term debt 6,298 21,067 Net (purchases) sales of treasury stock (332) 210 Dividends paid (531) (532) Net cash provided by financing activities 11,356 21,113 Effect of exchange rate changes on cash 363 (216) Net (decrease) increase in cash (53) 497 Cash at beginning of period 6,552 4,189 Cash at end of period $6,499 $4,686 DATASOURCE: Hardinge Inc. CONTACT: J. Patrick Ervin, Chairman, President and CEO, +1-607-378-4420, or Charles R. Trego, Jr., Senior Vice President and CFO, +1-607-378-4202, both of Hardinge Inc. Web site: http://www.hardinge.com/

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