Hardinge Inc. (NASDAQ: HDNG), a leading international provider
of advanced metal-cutting solutions, reported financial results for
its fourth quarter and full year ended December 31, 2012.
Net sales (“sales”) were $90.6 million in the fourth quarter of
2012, down $0.4 million from sales of $91.0 million in the
prior-year’s fourth quarter. The effect of foreign currency
exchange was not significant. When compared with the trailing third
quarter of 2012, sales were up $7.7 million, or 9%, during the
fourth quarter 2012. Foreign currency translation had a $1.4
million positive impact on sales relative to the trailing
quarter.
Net income for the fourth quarter was $7.8 million, or $0.66 per
diluted share, compared with $3.2 million, or $0.28 per diluted
share, in the prior-year’s fourth quarter. Net income in the 2012
fourth quarter benefited from a $2.7 million reduction in tax
valuation allowances which resulted from deferred tax liabilities
recorded in conjunction with the acquisition of Usach Technologies
in December 2012. Excluding the tax benefit, net income would have
been $5.1 million*, or $0.43 per diluted share*.
For the full year, sales declined in 2012 to $334.4 million,
down by $7.2 million, or 2%, from sales of $341.6 million in 2011.
Foreign currency translation had a negative $4.8 million effect on
sales for the year. Excluding this unfavorable impact, 2012 sales
were down $2.4 million, or relatively unchanged, compared with the
prior year. Net income for the year was $17.9 million, or $1.53 per
diluted share, compared with $12.0 million, or $1.02 per diluted
share, in 2011. Excluding the tax benefit from the previously
mentioned reversal in tax valuation allowances, net income in 2012
was $15.2 million*, or $1.29 per diluted share*.
* These are non-GAAP financial measures. Please see the attached
table for a reconciliation of GAAP and non-GAAP financial
measures.
Richard L. Simons, Chairman, President and Chief Executive
Officer, commented, “Our strong fourth quarter financial
performance reflected favorable product mix, primarily driven by
grinding machine orders received in late 2011 and early 2012 that
were shipped in the quarter. For the full year, we had strong cash
generation from operations which effectively funded the acquisition
of Usach Technologies in late December. This was the result of our
continued focus on driving operational efficiencies and carefully
managing working capital.”
Sales by
Region
Quarter Ended
December 31, December 31,
September 30,
Sales toCustomers in
2012 % of Total
2011 % Change
2012 % Change
North America $ 24,030 27% $ 31,796
(24)% $ 20,161 19% Europe 34,878 39% 26,449 32% 27,445 27% Asia
31,652 35% 32,801
(4)% 35,277 (10)%
Total
$ 90,560 $ 91,046 (1)%
$ 82,883 9%
Fiscal Year Ended
December 31, December 31, Sales
toCustomers in 2012
% of Total 2011 %
Change North America
$ 83,547 25% $ 90,000 (7)% Europe 121,008 36% 104,825 15% Asia
129,858 39%
146,748 (12)%
Total $ 334,413
$ 341,573 (2)%
For the fourth quarter, sales in Europe were up $8.4 million
over the prior-year period and up $7.4 million over the trailing
third quarter driven by strong sales of grinding machines. North
American sales were down by $7.8 million compared with the prior
year which had an unusually strong fourth quarter. Fourth quarter
sales in North America improved by $3.9 million over the trailing
third quarter of 2012, driven by customer year-end delivery
requirements. Asia sales were down $1.1 million from the prior-year
period. Compared with the trailing third quarter, Asia sales were
down $3.6 million as the trailing quarter benefitted from $9.6
million of incremental multi-machine sales to China.
For the full year, European sales increased by $16.2 million on
improved grinding sales, particularly to Germany. This improvement
was offset by sales to Asia which were down $16.9 million as a
result of the decelerating economy in China throughout 2012. In
North America, sales were down by $6.5 million due to our
distributors adjusting their inventory levels.
Fluctuations in Hardinge’s sales in total and among geographic
locations and industries can vary from quarter-to-quarter based on
the timing and magnitude of orders and projects. Hardinge does not
believe that such quarter-to-quarter fluctuations are necessarily
indicative of larger business trends. Rather, the Company believes
that such business trends can be discerned from the Company’s
performance during a longer period of time, such as a trailing
twelve-month period.
Solid Margin Expansion
Gross profit was $27.7 million, or 30.6% of sales, in the 2012
fourth quarter compared with $23.1 million, or 25.4% of sales, in
the same period of the prior year, and gross profit of $24.0
million, or 29.0% of sales, in the trailing third quarter of 2012.
Improvements in fourth quarter 2012 gross profit when compared with
the prior-year period were primarily the result of favorable
product mix and improved pricing, as a larger percent of total
sales was represented by grinding machines than in the prior-year
period. Also, gross profit in the fourth quarter of 2011 was
negatively impacted by $0.9 million in year-end inventory
adjustments. For the year, gross profit in 2012 increased to $96.8
million, or 29.0% of sales, compared with $91.0 million, or 26.6%
of sales, in 2011 as a result of product and sales channel mix.
Selling, general and administrative (“SG&A”) expenses in the
2012 fourth quarter were up by $2.0 million to $21.0 million, or
23.2% of sales, compared with $19.0 million, or 20.9% of sales, in
the prior-year’s fourth quarter. For the full year, SG&A was
$76.2 million or 22.8% of sales, up $2.6 million, or 4%, compared
with 2011, when SG&A as a percent of sales was 21.5%. Increased
SG&A as a percent of sales compared with the prior-year period
for both the fourth quarter and full year 2012 was due to
acquisition related fees associated with the purchase of Usach
Technologies of $0.3 million, $0.3 million for the reorganization
of operations in the United Kingdom, a well as higher agent related
sales commissions.
Income from operations in the fourth quarter of 2012 was $6.5
million, up 80% from $3.6 million during the prior-year’s fourth
quarter. As a percentage of sales, income from operations was 7.2%,
a 3.2 point increase over the same period of the prior year.
Operating margin improved 0.8 points over the trailing third
quarter. For the full year, income from operations was $20.1
million, or 6.0% of sales, compared with $16.6 million, or 4.9% in
2011.
Significant Cash Generation in the Fourth Quarter
Cash and cash equivalents at December 31, 2012 increased by $5.2
million to $26.9 million compared with $21.7 million at December
31, 2011, and increased by $5.4 million from $21.5 million at
September 30, 2012. Increased cash compared with the prior year was
the result of strong cash generation from operations that more than
offset the net $8.8 million use of cash for the acquisition of
Usach Technologies in December 2012 and capital expenditures for
the year of $7.6 million including expansion capital for the
completion of the Company’s new facilities in China and
Switzerland. Capital expenditures in 2013 are expected to be in the
$4.0 to $5.0 million range for general maintenance
expenditures.
Cash from operations was $17.8 million in the fourth quarter of
2012, compared with $1.9 million in the prior-year period, and for
the full year cash from operations increased by $30.6 million, to
$23.4 million.
Net Orders by
Region
Quarter Ended
December 31, December 31,
September 30, Orders from Customers in
2012 % of Total
2011 % Change 2012 %
Change
North America $ 17,410 30%
$
22,647
(23)% $ 20,913 (17)% Europe 19,937 34% 26,920 (26)% 23,756 (16)%
Asia 20,968 36%
19,911 5% 23,690 (11)%
Total
$ 58,315
$
69,478
(16)% $ 68,359 (15)%
Fiscal Year Ended
December 31, December 31, Orders from
Customers in 2012 % of Total
2011 % Change
North America $ 78,982 27%
$
95,435
(17)% Europe 105,978 37% 120,410 (12)% Asia
103,418 36% 157,010 (34)%
Total $ 288,378
$
372,855
(23)%
Net orders (“orders”) during the quarter were $58.3 million, a
decrease of $11.2 million when compared with the fourth quarter of
2011. The effects of foreign currency translation were not
material. Sequentially, orders were down $10.0 million from the
trailing third quarter of 2012, which reflected order declines in
all regions. Excluding the $0.8 million impact of foreign currency
translation, orders on a sequential basis were down $10.8
million.
Compared with the prior-year period, fourth quarter 2012 orders
declined $5.2 million in North America as U.S. based distributors’
slowed order levels to manage their inventories. In Europe, orders
declined as the recession has negatively impacted demand. Orders in
Asia improved somewhat in the fourth quarter as the economy in
China improved after several quarters of decline.
For the year, orders were down $84.5 million as capital spending
slowed and comparables in the prior year reflected order recovery
from very weak levels during the recession.
The Company’s order backlog at December 31, 2012 was $124.9
million, which includes the addition of $28.8 million in backlog
from the Usach acquisition.
Outlook
Mr. Simons noted, “During the quarter, the impact of Europe’s
recession was apparent in the dramatic decline in orders and we
expect demand to remain weak in that region through 2013. The North
American market overall is actually stable and we are expecting
organic sales in 2013 to be at about the same level as 2012.
Somewhat encouraging is that Asia has appeared to have stabilized
with positive growth in the fourth quarter in China. As I have
mentioned on several occasions, China can turn upward rapidly and
we are confident that we are in an excellent position to handle a
strong surge in orders should that occur. However, we expect it
will be sometime in the second quarter before we have a real sense
of the direction and degree that the China market will trend.
“Our current level of orders indicates much weaker organic sales
for us in 2013, although we do expect strong cash generation. Given
our strengthened business model, we expect our financial results in
slower periods to be much better than they were historically. And,
no matter what direction the markets turn, we are prepared to
adjust our operations accordingly. Of note, the acquisition of
Usach Technologies has fortified our grinding machine offering in
North America and over the next year we will work to roll out
Usach’s products to the rest of the world. We will continue to
pursue other opportunities that can enhance our product offering
focused on providing custom solutions to our global markets, while
maintaining our focus on building upon our brands and high
precision machining of difficult materials.”
Hardinge to Participate in CIMT 2013
Hardinge will be participating in the 2013 China International
Machine Tool Show (“CIMT 2013”), in Beijing, China from April
22-27, 2013 at the China International Exhibition Center. CIMT is a
biennial machine tool show first launched in 1989 and serves as a
platform for Hardinge to showcase our broad product offerings. CIMT
2011 was attended by over 305,000 visitors from 60 countries.
Webcast and Conference Call
Hardinge will host a conference call and webcast today at 11:00
a.m. Eastern Time. During the conference call and webcast, Richard
L. Simons, Chairman, President and CEO, and Edward J. Gaio, Vice
President and CFO, will review the financial and operating results
for the quarter, as well as the Company’s strategy and outlook. A
question and answer session will follow the formal discussion.
Their review will be accompanied by a slide presentation which will
be available on Hardinge’s website at www.hardinge.com.
The conference call can be accessed by calling (201) 689-8560.
The listen-only audio webcast can be monitored at
www.hardinge.com.
A telephonic replay will be available from 2:00 p.m. ET the day
of the call through Thursday, February 21, 2013. To listen to the
archived call, dial (858) 384-5517 and enter conference ID number
406979. Alternatively, the archive can be heard on the Company’s
website at www.hardinge.com. A transcript will also be posted to
the website, once available.
About Hardinge
Hardinge is a leading global designer and manufacturer of high
precision, computer-controlled machine tool solutions developed for
critical, hard to machine metal parts. The Company’s strategy is to
leverage its global brand strength to further penetrate global
market opportunities where customers will benefit from the
technologically advanced, high quality, reliable equipment Hardinge
produces. With approximately 75% of its sales outside of North
America, Hardinge serves the worldwide metal working market.
Hardinge’s machine tool solutions can also be found in a broad base
of industries to include aerospace, agricultural, automotive,
construction, consumer products, defense, energy, medical,
technology and transportation.
Hardinge applies its engineering design and manufacturing
expertise in high performance machining centers, high-end
cylindrical and jig grinding machines, SUPER-PRECISION® and
precision CNC lathes and technologically advanced workholding
accessories. Hardinge has manufacturing operations in China,
Switzerland, Taiwan, the United Kingdom and the United States.
The Company regularly posts information on its website:
http://www.hardinge.com
Safe Harbor Statement
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
statements of operations (in thousands except per share data)
Quarter Ended
December 31,
Year to Date Ended
December 31,
2012 2011
2012 2011
(unaudited) Net sales $ 90,560 $ 91,046 $ 334,413 $ 341,573
Cost of sales 62,878 67,946
237,576 250,545 Gross profit 27,682
23,100 96,837 91,028
Gross profit margin
30.6%
25.4%
29.0%
26.6%
Selling, general and administrative expenses 20,981 18,990
76,196 73,599 Other expense 156 466
559 832 Income from operations
6,545 3,644 20,082 16,597
Operating margin
7.2%
4.0%
6.0%
4.9%
Interest expense 204 102 859 339 Interest income (23
) - (118 ) (101 ) Income before income
taxes 6,364 3,542 19,341 16,359 Income tax (benefit) expense
(1,388 ) 300 1,486 4,373
Net income $ 7,752 $ 3,242 $ 17,855 $
11,986 Basic earnings per share $ 0.67 $ 0.28 $ 1.53
$ 1.03 Diluted earnings per share $ 0.66 $ 0.28 $ 1.53 $
1.02 Cash dividends declared per share $ 0.02 $ 0.02 $ 0.08
$ 0.05 Weighted avg. shares outstanding: Basic 11,574 11,467
11,557 11,463 Weighted avg. shares outstanding: Diluted 11,619
11,552 11,596 11,548
HARDINGE INC. AND SUBSIDIARIES
Consolidated Balance Sheets (in thousands except share and
per share data)
December
31, December 31, 2012
2011 Assets Cash and cash equivalents $
26,855 $ 21,736 Restricted cash 2,634 4,575 Accounts receivable,
net 51,871 65,909 Inventories, net 128,000 122,782 Other current
assets 12,580 13,338 Total current
assets 221,940 228,340 Property, plant and equipment, net
71,035 68,204 Goodwill and other intangible assets, net 30,321
12,765 Other non-current assets 2,358 2,360
Total non-current assets 103,714 83,329
Total assets $ 325,654 $ 311,669
Liabilities and shareholders' equity Accounts payable $
27,779 $ 36,952 Notes payable to bank 11,500 12,969 Accrued
expenses 29,307 25,103 Customer deposits 15,720 18,881 Accrued
income taxes 3,952 3,480 Deferred income taxes 2,980 2,556 Current
portion of long-term debt 2,873 1,548
Total current liabilities 94,111 101,489 Long-term debt
5,616 7,020 Pension and postretirement liabilities 50,313 49,310
Deferred income taxes 3,431 2,391 Other liabilities 10,976
4,436 Total non-current liabilities 70,336
63,157
Common stock ($0.01 par value, 12,472,992
issued)
125 125 Additional paid-in capital 114,072 114,369 Retained
earnings 81,961 65,041 Treasury shares (9,442 ) (10,379 )
Accumulated other comprehensive loss (25,509 )
(22,133 ) Total shareholders' equity 161,207
147,023 Total liabilities and shareholders' equity $ 325,654
$ 311,669
HARDINGE INC. AND
SUBSIDIARIES Consolidated Statements of Cash Flows (in
thousands)
Quarter
Ended December 31, YTD Ended December 31,
2012 2011
2012 2011 (unaudited)
Operating activities Net income
$
7,752
$
3,242
$ 17,855 $ 11,986
Adjustments to reconcile net income to net
cash
used in operating activities:
Depreciation and amortization 1,998 1,851 7,451 7,736 Debt issuance
amortization 36 46 78 124 (Benefit) provision for deferred income
taxes (3,453 ) 50 (2,601 ) (361 ) Loss on sale of assets 107 69 80
46 Unrealized intercompany foreign currencytransaction loss (gain)
340 (114 ) 853 (862 ) Changes in operating assets and liabilities:
Accounts receivable 1,296 (7,227 ) 17,522 (18,589 ) Inventories
12,580 2,362 2,365 (18,123 ) Other assets 5,443 3,144 4,486 444
Accounts payable (6,119 ) (2,061 ) (11,538 ) 3,990 Customer
deposits (3,669 ) 4,260 (7,876 ) 8,469 Accrued expenses 1,511
(3,467 ) (4,781 ) (1,277 ) Accrued postretirement benefits
(68 ) (292 ) (455 ) (715 ) Net cash provided
by (used in) operating activities 17,754 1,863 23,439 (7,132 )
Investing activities Capital expenditures (1,474 )
(5,705 ) (7,641 ) (19,217 ) Proceeds on sale of assets 517 - 557
900 Purchase of Usach, net of cash acquired (8,768 )
- (8,768 ) - Net cash used in investing
activities (9,725 ) (5,705 ) (15,852 ) (18,317 )
Financing activities (Repayments of) proceeds from
short-term notes payable to bank (2,738 ) 745 (1,911 ) 11,688
(Repayments of) proceeds from long-term debt (154 ) 4,245 (294 )
5,397 Dividends paid (233 ) (232 ) (931 ) (581 ) Other financing
activities (11 ) (83 ) (3 ) (41 ) Net
cash (used in) provided by financing activities (3,136 ) 4,675
(3,139 ) 16,463 Effect of exchange rate changes on cash
455 (358 ) 671 (223 ) Net
increase (decrease) in cash 5,348 475 5,119 (9,209 ) Cash and cash
equivalents at beginning of period 21,507
21,261 21,736 30,945 Cash and
cash equivalents at end of period
$
26,855
$
21,736
$
26,855
$ 21,736
HARDINGE INC. AND SUBSIDIARIES
Adjusted Net Income and Earnings Per Share
Reconciliation (in thousands except per share data)
Quarter Ended
December 31,
Year Ended
December 31,
2012 2011 2012
2011 (unaudited)
Net income as reported $ 7,752 $ 3,242 $ 17,855 $
11,986 Income tax benefit 2,720 -
2,720 - Adjusted net
income $ 5,032 $ 3,242 $ 15,135 $ 11,986 Basic earnings per
share as reported $ 0.67 $ 0.28 $ 1.53 $ 1.03 Income tax benefit
per share: Basic $ 0.24 $ - $ 0.23
$ - Adjusted basic earnings per share $ 0.43 $ 0.28 $
1.30 $ 1.03 Diluted earnings per share as reported $ 0.66 $
0.28 $ 1.53 $ 1.02 Income tax benefit per share: Diluted $ 0.23
$ - $ 0.24 $ - Adjusted
diluted earnings per share $ 0.43 $ 0.28 $ 1.29 $ 1.02
Weighted avg. shares outstanding: Basic 11,574 11,467 11,557 11,463
Weighted avg. shares outstanding: Diluted 11,619 11,552 11,596
11,548
Adjusted Net Income and Earnings Per Share are defined as GAAP
net income and earnings per share adjusted for unusual items that
the Company believes do not clearly represent actual financial
performance. The Company believes that providing non-GAAP
information such as Adjusted Net Income and EPS is important for
investors and other readers of the Company’s financial statements,
as it is used as an analytical indicator by the Company’s
management to better understand of operating performance. Because
Adjusted Net Income and EPS are non-GAAP measures and thus
susceptible to varying calculations, Adjusted Net Income and EPS,
as presented, may not be directly comparable to other similarly
titled measures used by other companies.
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