HDNG Hardinge Inc. (delisted)

2007 Performance Highlights: ELMIRA, N.Y., Nov. 8 /PRNewswire-FirstCall/ -- Hardinge Inc. (NASDAQ:HDNG), a leading international provider of advanced material-cutting solutions, generated increases in net sales, net income and earnings per share during the third quarter and nine months ended September 30, 2007 compared to the same periods in 2006. The company increased third quarter net income to $3.7 million, a 35% improvement over third quarter 2006. Third quarter results included an increase in net income due to a $1.4 million gain on the sale of an asset and a decrease in net income resulting from a decrease in net foreign exchange gain of $1.2 million. Earnings per diluted share were $0.32 for the quarter, up $0.01 or 3% over third quarter 2006. This reflects 2.6 million additional weighted average shares outstanding in the third quarter of 2007, a result of the company's successful follow-on common stock offering in April 2007. Hardinge increased its net income for the first nine months of 2007 by 95% to $15.0 million, compared to $7.7 million for the comparable period in 2006. Net income for the first nine months included this same asset sale gain of $1.4 million, as well as a $0.3 million decrease in net income resulting from a reduced net foreign exchange gain. Diluted earnings per share for the first three quarters of 2007 were $1.46, an increase of 66% over the prior year. Weighted average shares outstanding for the nine months ended September 30, 2007 were 10.3 million, an increase of 1.5 million shares over the 2006 period. "Our products today are some of the strongest, most capable products available anywhere in the world, and getting those products in the hands of customers is what will drive our continued growth in both the short- and long- term. We are not satisfied with new order levels in certain key markets, and are taking steps to strengthen our various sales and product distribution channels," said J. Patrick Ervin, Chairman, President and Chief Executive Officer. The following table summarizes orders by geographic region for the three and nine months ended September 30, 2007, compared to the same periods in 2006: Three Months Ended Nine Months Ended September 30, September 30, (U.S. dollars in thousands) Orders from customers in: 2007 2006 % Change 2007 2006 % Change North America $ 28,861 $ 36,433 (21)% $ 87,870 $ 99,615 (12)% Europe 39,068 40,387 (3)% 124,875 104,992 19 % Asia & Other 15,481 15,383 1 % 52,240 56,709 (8)% $ 83,410 $ 92,203 (10)% $264,985 $261,316 1 % Orders for the third quarter were $83.4 million; a decrease of $8.8 million or 10% compared to the third quarter of 2006. Orders for the nine months ended September 30, 2007 were $265.0 million, an increase of $3.7 million or 1% compared to the first nine months of 2006. North American orders decreased during the third quarter and year-to-date 2007 when compared to the prior year primarily because 2006 included a significant portion of orders received at the International Manufacturing Technology Show held every other year during September, coupled with a softer economic environment in North America. European orders decreased 3% during the third quarter of 2007 compared to a strong third quarter in 2006, although year to date orders in Europe increased 19%. Since the third quarter of 2006, Hardinge has experienced a significant increase in its European order levels driven by strong demand for machine tools. For the last five quarters, European orders have averaged $41 million per quarter, up more than 30% over the average of the five quarters which preceded that. Although Hardinge did receive very good interest during EMO, the biennial international machine tool show held in Germany this past September, the company did not experience an immediate upswing in orders from the show since most orders will be processed through distributors versus directly with Hardinge. Distributor orders generally are delayed to the manufacturer, as distributors may fill orders from their own stock of inventory before ordering new replacement machines. Hardinge anticipates continued strong orders from Europe well into 2008. "Asia and Other" orders increased 1% for the quarter and decreased 8% on a year-to-date basis. The primary driver to reduced order performance on a comparable basis has been uneven demand patterns in the regions outside of China. On a year-to-date basis, excluding the impact of a single, large $6.0 million turbine blade grinder order in 2006, "Asia and Other" would have increased 3%. The following table summarizes the company's net sales by geographic region for the three and nine month periods ended September 30, 2007 and 2006: Three Months Ended Nine Months Ended September 30, September 30, (U.S. dollars in thousands) Net sales from customers in: 2007 2006 % Change 2007 2006 % Change North America $ 31,397 $ 29,709 6 % $ 91,990 $ 87,136 6 % Europe 38,040 26,917 41% 117,684 87,825 34 % Asia & Other 14,246 22,617 (37)% 50,685 58,236 (13)% $ 83,683 $ 79,243 6 % $260,359 $233,197 12 % Net sales for the quarter were $83.7 million, an increase of $4.4 million or 6% compared to the third quarter of 2006. Net sales for the nine months ended September 30, 2007 were $260.4 million, an increase of $27.2 million or 12% compared to the nine months ended September 30, 2006. The increase in North American net sales for the third quarter and year- to-date in 2007 compared to the same periods in 2006 resulted from a strong demand for grinding products offset by a reduction in turning products. The European increase in net sales stems from continued strong growth in all product categories during both the quarter and year-to-date in 2007. A significant portion of the decrease in net sales in "Asia and Other" is the result of non-recurring shipments of $5.9 million for the third quarter and $10.1 million year-to-date of specialty machines, which shipped in 2006 and did not repeat in 2007. Excluding the impact of these specialty shipments, net sales in the third quarter of 2007 compared to 2006 would have decreased $2.5 million, while on a year-to-date basis net sales would have increased $2.5 million. The company's backlog in China has increased by $4.6 million since the end of the first quarter of 2007 due to tighter import restrictions by the Chinese government, which is attempting to encourage a greater use of products manufactured within their country. The company had hoped to offset any decrease in Chinese imports with increased shipments from its Chinese production facility. However, production output has not grown as quickly as anticipated, due to select supply chain issues, coupled with longer than anticipated start-up training for new employees. Despite this, Hardinge believes it is making good progress eliminating these production bottlenecks and anticipates production reaching its planned levels in the first quarter of 2008. Mr. Ervin continued, "Our key initiative at Hardinge is to continue growing our company by expanding our geographic reach and customer base from a sales and marketing perspective. We currently have the product portfolio to support our growth goals. However, most potential customers are not aware of what the new Hardinge group of companies can offer them. To address this situation we will continue to invest in strengthening our marketing efforts and our worldwide sales and distribution network." The strengthening of foreign currencies relative to the U.S. dollar caused a favorable translation impact of $3.1 million and $8.1 million, respectively, on net sales for the three and nine months ended September 30, 2007 over the same periods in 2006. Hardinge improved its gross profit by 9% to $26.2 million for the third quarter compared to its year-ago quarter, and raised its gross margin to 31.3% of sales, compared to 30.3% a year ago. Gross profit for the nine months ended September 30, 2007 increased 18% to $83.4 million or 32.0% of net sales, compared to $70.5 million, or 30.2% of net sales for 2006. These improvements continue to be driven by higher sales, as well as changes in channel and product mix. Stronger foreign currencies relative to the U.S. dollar favorably impacted gross profit by $0.9 million and $2.4 million, respectively, during the three and nine months ended September 30, 2007, compared to the same periods in 2006. Selling, general and administrative (SG&A) expenses were $22.5 million, or 26.8% of net sales, for third quarter 2007, an increase of $4.2 million or 23% compared to $18.3 million or 23.0% of sales, for third quarter 2006. SG&A expenses were $62.1 million, or 23.8% of net sales for the nine months ended September 30, 2007, an increase of $6.3 million or 11% compared to $55.8 million, or 23.9% of net sales a year ago. The increase is primarily due to: $1.6 million due to expansion of direct sales teams in the United States, Canada, and China; a $1.5 million decrease in net foreign exchange gains; other costs of $0.5 million and the strengthening of foreign currencies relative to the U.S. dollar, which had an unfavorable translation effect of $0.6 million. Year-to-date these increases are primarily attributable to a $2.9 million expansion of direct sales teams in the United States, Canada and China; the strengthening of foreign currencies relative to the U.S. dollar, which had an unfavorable translation effect of $1.8 million; and $1.6 million in other costs. Net interest expense was $0.4 million for the quarter and $2.4 million for the nine months ended September 30, 2007, down from $1.4 million and $3.7 million for the same periods in 2006. The provision for income taxes was $0.9 million and $5.3 million for the three and nine months ended September 30, 2007, compared to $1.6 million and $3.3 million for the three and nine months ended September 30, 2006. The effective tax rates were 19.8% and 26.0% for the three months and nine months ended September 30, 2007, compared to 36.7% and 30.1% for the same periods of 2006. The primary driver for these differences was the mix of earnings by country. Additionally, the 2007 rates include the non-taxable, one-time gain on the sale of the Exeter facility previously discussed above. Dividend Declared On November 6, 2007, the company's Board of Directors declared a cash dividend of $0.05 per share on Hardinge common stock, payable on December 10, 2007 to shareholders of record as of November 30, 2007. Investor Conference Call Today Hardinge will host a conference call at 11:00 a.m. (Eastern) today to provide additional detail related to third quarter performance. The call can be accessed by dialing 1-866-838-2057 (or 904-596-2360 outside the U.S. or Canada), or via the internet live at http://videonewswire.com/event.asp?id=43603. 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. Investors may also access a recording approximately one hour after its completion by dialing 1-888-284-7564, and entering the reference number: 222918 (or 904-596-3174 outside the U.S. or Canada). This recording will be available throughout the fourth quarter ending December 31, 2007. Hardinge is a global designer, manufacturer and distributor of machine tools, specializing in high-precision, computer controlled, material-cutting machines. The company's products are distributed to most of the industrialized markets around the world and, in 2006, more than 60% of sales were from outside of North America. Hardinge has a diverse international customer base and serves a wide variety of end-user markets. Along with metalworking manufacturers, which make parts for a variety of industries, our customers include a wide range of end users in the aerospace, agricultural, transportation, basic consumer goods, communications and electronics, construction, defense, energy, pharmaceutical and medical equipment, and recreation industries, among others. The company has manufacturing operations in the United States and Switzerland, and assembly operations in Taiwan, China and the United Kingdom. Hardinge's common stock trades on the Nasdaq Global Select Market(SM) under the symbol, "HDNG." For more information, please visit http://www.hardinge.com/. This news release contains forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended). Such statements are based on management's current expectations that involve risks and uncertainties. Any statements that are not statements of historical fact or that are about future events may be deemed to be forward-looking statements. For example, words such as "may," "will," "should," "estimates," "predicts," "potential," "continue," "strategy," "believes," "anticipates," "plans," "expects," "intends," and similar expressions are intended to identify forward-looking statements. The company's actual results or outcomes and the timing of certain events may differ significantly from those discussed in any forward- looking statements. The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Hardinge Inc. and Subsidiaries Consolidated Balance Sheets (In Thousands) September 30, December 31, 2007 2006 (Unaudited) Assets Current assets: Cash $11,526 $6,762 Accounts receivable, net 74,746 73,149 Notes receivable, net 2,222 4,930 Inventories, net 162,504 132,834 Deferred income tax 745 747 Prepaid expenses 10,228 9,216 Total current assets 261,971 227,638 Property, plant and equipment: Property, plant and equipment 177,920 176,754 Less accumulated depreciation 117,516 112,702 Net property, plant and equipment 60,404 64,052 Other assets: Notes receivable, net 2,077 1,983 Deferred income taxes 100 246 Other intangible assets 12,086 11,849 Goodwill 22,017 19,110 Other long-term assets 2,082 5,782 38,362 38,970 Total assets $360,737 $330,660 Hardinge Inc. and Subsidiaries Consolidated Balance Sheets - Continued (In Thousands, Except Share Data) September 30, December 31, 2007 2006 (Unaudited) Liabilities and shareholders' equity Current liabilities: Accounts payable $31,499 $31,462 Notes payable to bank 4,034 4,525 Accrued expenses 27,010 22,542 Accrued income taxes 4,789 3,640 Deferred income taxes 2,964 2,717 Current portion of long-term debt 5,651 5,758 Total current liabilities 75,947 70,644 Other liabilities: Long-term debt 17,745 67,578 Accrued pension liability 26,914 26,814 Deferred income taxes 1,948 1,673 Accrued postretirement benefits 2,080 2,414 Other liabilities 4,382 4,428 53,069 102,907 Shareholders' equity: Preferred stock, Series A, par value $.01 per share; Authorized 2,000,000; issued - none Common stock, $.01 par value: Authorized shares - 20,000,000; Issued shares - 12,472,992 at September 30, 2007 and 9,919,992 at December 31, 2006 125 99 Additional paid-in capital 114,939 59,741 Retained earnings 129,509 116,438 Treasury shares - 996,076 at September 30, 2007 and 1,083,117 shares at December 31, 2006 (13,066) (13,916) Accumulated other comprehensive income (loss) 214 (5,253) Total shareholders' equity 231,721 157,109 Total liabilities and shareholders' equity $360,737 $330,660 HARDINGE INC. AND SUBSIDIARIES Consolidated Statements of Operations (In Thousands, Except Per Share Data) Three Months Ended Nine Months Ended September 30, September 30, 2007 2006 2007 2006 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net sales $83,683 $79,243 $260,359 $233,197 Cost of sales 57,517 55,229 176,926 162,694 Gross profit 26,166 24,014 83,433 70,503 Selling, general and administrative expenses 22,467 18,257 62,093 55,797 Income from operations 3,699 5,757 21,340 14,706 (Gain) on sale of assets (1,372) - (1,372) - Interest expense 502 1,425 2,585 3,882 Interest (income) (63) (33) (171) (213) Income before income taxes 4,632 4,365 20,298 11,037 Income taxes 917 1,604 5,275 3,322 Net income $3,715 $2,761 $15,023 $7,715 Per share data: Basic earnings per share: $0.33 $0.31 $1.48 $0.88 Weighted average number of common shares outstanding (in thousands) 11,301 8,771 10,151 8,767 Diluted earnings per share: $0.32 $0.31 $1.46 $0.88 Weighted average number of common shares outstanding (in thousands) 11,432 8,806 10,277 8,800 Cash dividends declared per share $0.05 $0.03 $0.15 $0.09 HARDINGE INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In Thousands) Nine Months Ended September 30, 2007 2006 (Unaudited) (Unaudited) Operating activities Net income $15,023 $7,715 Adjustments to reconcile net income to net provided by operating activities: Depreciation and amortization 7,253 7,372 Provision for deferred income taxes 462 104 Gain on sale of assets (1,352) - Unrealized intercompany foreign currency transaction (gain) (1,439) (1,276) Changes in operating assets and liabilities: Accounts receivable 256 487 Notes receivable 2,682 1,350 Inventories (26,374) (11,606) Prepaids/other assets 1,094 (2,984) Accounts payable (473) 3,324 Accrued expenses 3,690 (1,365) Accrued postretirement benefits (334) (308) Net cash provided by operating activities 488 2,813 Investing activities Capital expenditures (3,615) (2,715) Proceeds from sale of assets 3,629 - Purchase of Bridgeport kneemill technical information - (5,000) Purchase of minority interest in Hardinge Taiwan - (110) Purchase of U-Sung Co., Ltd. - (5,071) Purchase of Canadian entity net of cash acquired (238) - Net cash (used in) investing activities (224) (12,896) Financing activities (Decrease) increase in short-term notes payable to bank (158) 2,227 (Decrease) increase in long-term debt (50,237) 9,252 Net Proceeds from issuance of common stock 55,946 - Net (purchases) of treasury stock (89) (83) Dividends paid (1,590) (796) Net cash provided by financing activities 3,872 10,600 Effect of exchange rate changes on cash 628 146 Net increase in cash 4,764 663 Cash at beginning of period 6,762 6,552 Cash at end of period $11,526 $7,215 DATASOURCE: Hardinge Inc. CONTACT: Charles R. Trego, Jr., SVP & CFO of Hardinge Inc., +1-607-378-4202 Web site: http://www.hardinge.com/

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