HDNG Hardinge Inc. (delisted)

Highlights: ELMIRA, N.Y., Aug. 7 /PRNewswire-FirstCall/ -- Hardinge Inc. (NASDAQ:HDNG), a leading international provider of advanced material-cutting solutions, today reported net sales of $96.6 million for the second quarter of 2008, up 7.6% in comparison to $89.7 million for the second quarter of 2007. Year to date sales increased by 3.1% compared with 2007. Net income for second quarter 2008 was $0.45 million, or $0.04 per diluted and basic share, compared to net income of $6.0 million, or $0.57 per diluted and basic share for the prior year. The Company had a net loss through June 30, 2008 of $0.28 million, or $0.02 per diluted and basic share, compared to net income of $11.3 million, or $1.18 per diluted share for the prior year. Company results were negatively impacted by $1.9 million in severance costs, $0.3 million related to legal entity restructuring, and $0.3 million related to increased reserves for uncertain tax positions. Excluding these items, net income for the three and six months ended June 30, 2008 was $2.9 million or $0.26 per diluted and basic share and $2.2 million or $0.19 per diluted and basic share, respectively. "We are encouraged with the positive improvement in results compared to the past two quarters, but recognize additional improvements are necessary. We have also initiated a number of actions during the second quarter which better position Hardinge to compete in the global marketplace," said Richard L. Simons, President and Chief Executive Officer. "We increased our financial strength and flexibility by entering into a new multi-currency credit facility which provides the ability to borrow in a variety of currencies and jurisdictions. With more than two-thirds of Company revenue originating outside of the US, our new credit facility enhances our ability to respond to global opportunities. Our global sales and operational diversity continues to provide good future prospects for our Company. In addition, we continue to adjust our product distribution channels and build our direct sales capabilities." Mr. Simons continued, "Our product offering, strong brand names, people, and global presence in manufacturing, engineering and distribution provide us with great opportunities going forward. Our management team is committed to strengthening our business through the following action plans: -- Simplifying our operations in areas where we have become unnecessarily complex -- Focusing our resources on the most promising products, markets and projects -- Developing more disciplined processes to enhance the speed and efficiency of decision making -- Becoming a truly global company with employees and partners around the world working in the most collaborative way -- Intensifying our efforts to develop opportunities in China and other growth countries We believe that concentration on these initiatives will allow us to make meaningful improvements in our long term financial performance." Orders for the second quarter of 2008 increased by $23.3 million, or 27.1%, to $109.4 million, compared to $86.0 million for the same period in 2007. The $109.4 million in orders represents the largest one-quarter total in Company history. Foreign currency exchange rates favorably impacted new orders by approximately $8.0 million and $13.8 million for the three and six months ended June 30, 2008 compared to the same periods in 2007. The following table summarizes orders by geographical region for the three and six months ended June 30, 2008 compared to the same periods in 2007: Three Months Ended Six Months Ended June 30, June 30, (U.S. dollars in thousands) Orders from Customers in: 2008 2007 % Change 2008 2007 % Change North America $31,761 $25,014 27.0 % $57,459 $59,009 (2.6)% Europe 56,118 40,455 38.7 % 99,466 85,808 15.9 % Asia & Other 21,478 20,539 4.6 % 45,552 36,759 23.9 % $109,357 $86,008 27.1 % $202,477 $181,576 11.5 % The increase in North American orders was due to a significant order for $6.0 million. Excluding that individual order, performance was even with the prior year quarter. On a year to date basis, the 2.6% decline in orders can be attributed to the realignment of the company's sales channels and the related time required to gain traction within the marketplace. With a softening in UK markets, European orders in the quarter were driven primarily by continued strong market demand in Continental Europe, especially orders for our grinding product lines. Asia & Other orders increased by approximately $0.9 million or 4.6% in the second quarter of 2008 versus the same quarter in 2007. This increase was driven by a double-digit percentage growth in China offset by declines in other parts of the region. On a year to date basis, orders increased primarily due to growth in China. Net sales for the three months ended June 30, 2008 were $96.6 million; an increase of $6.9 million or 7.6% compared to $89.7 million for the three months ended June 30, 2007. Virtually all of the increase can be attributed to the translation of foreign subsidiary financial statements into US dollars. Net sales for the six months ended June 30, 2008 were $182.2 million; an increase of $5.5 million or 3.1% compared to the six months ended June 30, 2007. Excluding approximately $12.2 million sales increase due to translation, overall sales year to date declined by 3.8%. The following table summarizes the Company's sales by geographical region for the three and six month periods ended June 30, 2008 and 2007, respectively: Three Months Ended Six Months Ended June 30, June 30, (U.S. dollars in thousands) Sales to Customers in: 2008 2007 % Change 2008 2007 % Change North America $30,549 $32,813 (6.9)% $59,105 $60,593 (2.5)% Europe 44,753 38,381 16.6 % 82,316 79,644 3.3 % Asia & Other 21,263 18,516 14.8 % 40,743 36,439 11.8 % $96,565 $89,710 7.6 % $182,164 $176,676 3.1 % The decrease in North American net sales for the quarter and year to date are primarily a result of the transition issues related to the development of a direct sales channel, and generally slow business conditions driven by declining consumer confidence. Net sales in Europe increased as a result of continued high levels of grinding product demand, stable demand in Europe for milling and turning products, and the favorable effects of foreign currency translation. Net sales to customers in Asia & Other increased by $2.7 million or 14.8%. This was primarily driven by a 22.3% increase in China. Gross profit for the second quarter was $30.3 million, an increase of 3.5% in comparison to $29.3 million for the prior year quarter. Gross profit year to date was $55.4 million down 3.2% in comparison to the prior year. The increased gross profit is primarily due to the increased sales levels, and the strengthening of foreign currencies relative to the U.S. dollar; offset by increased product costs and lower capacity utilization in the US and Taiwan. The gross margin percentage for the second quarter was 31.4% of net sales, a reduction of 120 basis points in comparison to 32.6% for the prior year quarter. Selling, general and administrative (SG&A) expenses were $28.0 million, or 29.0% of net sales for the three months ended June 30, 2008, an increase of $6.6 million or 31% compared to $21.4 million or 23.8% of net sales for the three months ended June 30, 2007. The increase of $6.6 million is primarily attributable to: $1.9 million in severance costs in the US and UK, $0.3 million related to the legal entity restructuring of businesses in Europe and Asia, and $2.0 million resulting from the translation of foreign subsidiary financial statements in to US dollars. The balance was primarily a result of increased sales and marketing expenses for direct sales channels and trade show expenses incurred in the quarter. SG&A expenses were $51.4 million or 28.3% of net sales for the six months ended June 30, 2008, compared to $41.0 million or 23.2% of net sales for the six months ended June 30, 2007. The $10.4 million increase on a year to date basis was a result of $2.2 million of one-time expenses recorded in the current quarter, $3.5 million impact of translating foreign subsidiary financial statements into US dollars, and increased sales and marketing expenses in the company's direct sales channels. The provision for income taxes was $1.6 million for the three and six months ended June 30, 2008, compared to $2.0 million and $4.4 million for the three and six months ended June 30, 2007. The effective tax rate was 78.5% and 122.0% for the three and six months ended June 30, 2008, compared to 25.2% and 27.8% for same periods in 2007. These differences are due to the mix of earnings by country, non-recognition of tax benefits for certain entities in a loss position for which a full valuation allowance has been recorded, the benefit of the completion of the qualifying hedge contract of $0.6 million, and an increase in the amount of reserves for uncertain tax benefits of $0.3 million. The Company expects the 2008 effective tax rate to be in the range of 39% to 41% excluding discrete items, which would have a 1.5% unfavorable impact on the effective tax rate. Multi-Currency Secured Credit Facility The Company entered into a new five-year $100 million multi-currency secured credit facility on June 13, 2008, which replaced a secured credit facility due to mature January 2011 as well as several other credit facilities in place in our foreign subsidiaries. This new facility will allow the Company and its wholly owned subsidiaries to borrow in a variety of currencies and jurisdictions. The agreement provides for a revolving loan facility allowing for borrowing of up to $100.0 million. At June 30, 2008, the Company has borrowed approximately $21.5 million on this facility. Richard L. Simons Elected President and Chief Executive Officer The Board of Directors of the Company elected Richard L. Simons President and Chief Executive Officer, and appointed him a director of the Company effective May 22, 2008. Mr. Simons, age 52, worked for Hardinge Inc. for 22 years and served as Executive Vice President and Chief Financial Officer, with operational responsibility for its Asian companies when he left the Company in 2005. He served as a financial officer at Carpenter Technology Corporation (NYSE:CRS) for two and a half years before returning to Hardinge in March 2008. Michael J. Hillock Leads Global Sales and Marketing Efforts The Company also announced the appointment of Michael J. Hillock as Vice President of Sales and Marketing in June 2008. Mr. Hillock has more than 30 years of global sales experience, and has held senior level positions in the United States, the Asia Pacific Region and Europe. He is focused on enhancing the performance of the Company's European and Asian sales operations. Conference Call The Company will host a conference call at 11:00 AM Eastern Time today to discuss second quarter results. The call can be accessed live at 1-866-838- 2057, or via the internet at http://videonewswire.com/event.asp?id=50196. A recording of the call can be accessed from the "Investor Relations" section of the Company's website, http://www.hardinge.com/, where it will be posted for one year. A recording of the call can also be accessed approximately one hour after its completion by dialing 1-888-284-7564, and entering the reference number: 236498. This telephone recording will be available through the third quarter, ending September 30, 2008. 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 2007 approximately 66% of sales were from outside of North America. Hardinge has a very 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, Switzerland, Taiwan and China. Hardinge's common stock trades on NASDAQ Global Select Market 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. Contact: Edward Gaio Vice President and CFO (607) 378-4207 - Financial Tables Follow - Hardinge Inc. and Subsidiaries Consolidated Balance Sheets (In Thousands) June 30, December 31, 2008 2007 (Unaudited) Assets Current assets: Cash $14,301 $16,003 Accounts receivable, net 68,826 71,228 Notes receivable, net 702 1,555 Inventories, net 165,537 158,617 Deferred income tax 1,106 1,032 Prepaid expenses 10,123 8,573 Total current assets 260,595 257,008 Property, plant and equipment: Property, plant and equipment 188,114 180,427 Less accumulated depreciation 124,931 118,896 Net property, plant and equipment 63,183 61,531 Non-current assets: Notes receivable, net 1,391 1,847 Deferred income taxes 296 306 Other intangible assets 11,540 11,927 Goodwill 24,979 22,841 Other long-term assets 9,180 6,368 47,386 43,289 Total assets $371,164 $361,828 Hardinge Inc. and Subsidiaries Consolidated Balance Sheets - Continued (In Thousands, Except Share Data) June 30, December 31, 2008 2007 (Unaudited) Liabilities and shareholders' equity Current liabilities: Accounts payable $24,788 $27,266 Notes payable to bank - 2,801 Accrued expenses 31,128 26,873 Accrued income taxes 275 2,574 Deferred income taxes 2,525 2,375 Current portion of long-term debt 593 5,655 Total current liabilities 59,309 67,544 Other liabilities: Long-term debt 25,650 19,363 Accrued pension expense 5,851 8,145 Deferred income taxes 4,808 4,361 Accrued postretirement benefits 1,983 2,199 Accrued income taxes 1,406 1,054 Other liabilities 5,066 4,017 44,764 39,139 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 June 30, 2008 and December 31, 2007 125 125 Additional paid-in capital 115,152 114,971 Retained earnings 127,408 128,838 Treasury shares - 1,039,768 at June 30, 2008 and 993,076 shares at December 31, 2007 (13,603) (13,023) Accumulated other comprehensive income 38,009 24,234 Total shareholders' equity 267,091 255,145 Total liabilities and shareholders' equity $371,164 $361,828 HARDINGE INC. AND SUBSIDIARIES Consolidated Statements of Operations (In Thousands, Except Per Share Data) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 (Unaudited)(Unaudited)(Unaudited)(Unaudited) Net sales $96,565 $89,710 $182,164 $176,676 Cost of sales 66,255 60,423 126,726 119,409 Gross profit 30,310 29,287 55,438 57,267 Selling, general and administrative expenses 27,963 21,367 51,464 40,992 Other expense (income) (68) (733) 1,956 (1,366) Income from operations 2,415 8,653 2,018 17,641 Interest expense 470 714 921 2,083 Interest (income) (143) (55) (183) (108) Income before income taxes 2,088 7,994 1,280 15,666 Income taxes 1,640 2,011 1,562 4,358 Net income (loss) $448 $5,983 $(282) $11,308 Per share data: Basic earnings (loss) per share: $0.04 $0.57 $(0.02) $1.19 Weighted average number of common shares outstanding (in thousands) 11,300 10,502 11,312 9,522 Diluted earnings (loss) per share: $0.04 $0.57 $(0.02) $1.18 Weighted average number of common shares outstanding (in thousands) 11,370 10,575 11,312 9,595 Cash dividends declared per share $0.05 $0.05 $0.10 $0.10 HARDINGE INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In Thousands) Six Months Ended June 30, 2008 2007 (Unaudited) (Unaudited) Operating activities Net (loss) income $(282) $11,308 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,351 4,972 Provision for deferred income taxes 904 548 Gain on sale of asset (23) - Unrealized intercompany foreign currency transaction loss (gain) 1,673 (1,188) Changes in operating assets and liabilities: Accounts receivable 5,257 (491) Notes receivable 1,357 1,877 Inventories (561) (19,022) Prepaids/other assets (1,914) 1,092 Accounts payable (2,819) 512 Accrued expenses (5,296) 2,763 Accrued postretirement benefits (216) (215) Net cash provided by operating activities 3,431 2,156 Investing activities Capital expenditures (2,514) (1,524) Proceeds from sale of asset 60 - Purchase of Canadian entity net of cash acquired - (232) Net cash (used in) investing activities (2,454) (1,756) Financing activities (Decrease) in short-term notes payable to bank (2,800) (205) Increase (decrease) in long-term debt 910 (52,134) Net Proceeds from issuance of common stock - 55,946 Net (purchases) sales of treasury stock (589) 62 Dividends paid (1,148) (1,017) Net cash (used in) provided by financing activities (3,627) 2,652 Effect of exchange rate changes on cash 948 148 Net (decrease) increase in cash (1,702) 3,200 Cash at beginning of period 16,003 6,762 Cash at end of period $14,301 $9,962 DATASOURCE: Hardinge Inc. CONTACT: Edward Gaio, Vice President and CFO of Hardinge Inc., +1-607-378-4207 Web site: http://www.hardinge.com/

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