Hardinge Inc. (Nasdaq:HDNG), a leading international provider of
advanced metal-cutting solutions and accessories, reported
financial results for its fourth quarter and year ended December
31, 2014.
Net sales ("sales") for the quarter were $93.0 million, and net
income was $4.5 million, or $0.35 per diluted share. Orders for the
quarter increased 28% to $94.4 million, compared with $73.9 million
in the prior-year period.
Richard L. Simons, Chairman, President and Chief Executive
Officer, commented, "We finished the year on a strong note,
demonstrating our team's ability to execute, as fourth quarter
sales slightly exceeded our guidance range. Compared with the
trailing third quarter, we realized significant sales growth in all
geographic regions. Europe and Asia each grew over 40% and the U.S.
was up nearly 20%. Our orders for the quarter and the year were
significantly higher than what we had experienced in the last few
years. In fact, fourth quarter orders were at the highest level we
have achieved since the second quarter of 2011."
Quarterly Sales by
Region ($ in thousands) |
|
Quarter
Ended |
|
December 31,
2014 |
December 31,
2013 |
September 30,
2014 |
Sales to
Customers in |
$ |
% of Total |
$ |
Year-over-Year
% Change |
$ |
Sequential %
Change |
North America |
28,636 |
31% |
36,473 |
(21)% |
24,026 |
19% |
Europe |
31,102 |
33% |
28,867 |
8% |
21,286 |
46% |
Asia |
33,270 |
36% |
37,761 |
(12)% |
23,612 |
41% |
Total |
93,008 |
|
103,101 |
(10)% |
68,924 |
35% |
|
Note: Fluctuations in
Hardinge's consolidated sales 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. |
Fourth Quarter Review
Compared with the prior year, sales to Europe improved as a
result of increased demand for highly-engineered machines with
custom specifications. Sales to the North American and Asian
markets declined primarily as a result of the prior-year period
benefiting from unusually strong shipments out of Usach's purchased
backlog of $11.3 million and $9.7 million, respectively, in the
fourth quarter of 2013.
Gross profit of $27.0 million declined $2.4 million compared
with the prior-year period. As a percentage of sales, gross
margin was 29.1%, fairly consistent with the fourth quarter of 2013
after adjusting for an inventory step-up charge of $0.8 million in
the 2013 period.
Selling, general and administrative ("SG&A") expenses of
$21.7 million were relatively unchanged from the prior-year
period. As a percentage of sales, SG&A was 23.3%, compared
with 21.1% in the prior-year period, which had the benefit of
higher sales volume.
Income from operations was $5.1 million, compared with $1.3
million in the prior-year period. Income from operations in
the fourth quarter of last year was negatively impacted by a $0.8
million inventory step-up charge, acquisition-related expenses of
$0.3 million, and an impairment charge of $6.2 million. Fourth
quarter 2013 income from operations benefited from the shipment of
the Usach machines with a de minimis amount of associated variable
SG&A.
Full Year Sales by
Region ($ in thousands) |
|
Year
Ended |
|
December 31,
2014 |
December 31,
2013 |
Sales to
Customers in |
$ |
% of Total |
$ |
Year-over-Year
% Change |
North America |
100,894 |
32% |
109,457 |
(8)% |
Europe |
103,063 |
33% |
100,126 |
3% |
Asia |
107,676 |
35% |
119,876 |
(10)% |
Total |
311,633 |
|
329,459 |
(5)% |
Full Year 2014 Review
Sales for 2014 were $311.6 million, down $17.8 million, mostly
as the result of lower Usach product sales after the unusually high
2013 volume previously discussed.
Gross profit was $86.9 million, or 27.9% of sales, compared with
$93.2 million, or 28.3% of sales in the prior year. Gross
profit in 2014 was negatively impacted by reduced sales volume and
lower machine production, which resulted in certain factories
experiencing under absorption of fixed costs. Gross profit in
2013 was unfavorably impacted by a $1.9 million inventory step-up
charge.
SG&A expense was $81.0 million, up by $1.5 million compared
with the prior year, driven primarily by incremental SG&A
expense gained with the acquisitions. The prior year SG&A
included approximately $2.2 million of acquisition-related
expenses. As a percentage of sales, SG&A was 26.0% in 2014
compared with 24.1% in 2013, which benefited from higher sales.
2014 loss from operations was $0.4 million, compared with income
from operations of $7.0 million in 2013. Non-GAAP(1) adjusted
operating income, which excludes impairment charges and other
atypical items, was $5.1 million in 2014, compared with non-GAAP(1)
adjusted operating income of $17.3 million in 2013. The
decline from the prior year was mostly the result of lower sales
and under absorption of fixed costs due to lower production volumes
in the Company's grinding operations.
Net loss for 2014 was $2.1 million, or $0.17 per diluted share,
compared with net income of $9.9 million, or $0.83 per diluted
share, in the prior year. Non-GAAP(1) adjusted net income,
which excludes atypical items, was $2.8 million, or $0.22 per
diluted share in 2014, compared with non-GAAP(1) adjusted net
income of $14.9 million or $1.25 per diluted share in 2013.
Flexible Balance Sheet for Strategic
Investments
Cash and cash equivalents at December 31, 2014 were $16.3
million. Total debt was $16.2 million, a reduction of $10.4
million from December 31, 2013.
Orders by Region |
|
($ in thousands) |
|
|
|
|
Quarter
Ended |
|
December 31,
2014 |
December 31,
2013 |
September 30,
2014 |
Orders from Customers
in |
$ |
% of Total |
$ |
Year-over-Year
% Change |
$ |
Sequential %
Change |
North America |
31,467 |
33% |
24,598 |
28% |
22,158 |
42% |
Europe |
31,302 |
33% |
23,818 |
31% |
26,282 |
19% |
Asia |
31,582 |
34% |
25,498 |
24% |
26,763 |
18% |
Total |
94,351 |
|
73,914 |
28% |
75,203 |
25% |
|
|
|
Year
Ended |
|
December
31, 2014 |
December
31, 2013 |
Orders from Customers
in |
$ |
% of
Total |
$ |
Year-over-Year %
Change |
North America |
105,152 |
32% |
86,216 |
22% |
Europe |
109,122 |
33% |
95,348 |
14% |
Asia |
116,416 |
35% |
106,912 |
9% |
Total |
330,690 |
|
288,476 |
15% |
Net orders ("orders") during the fourth quarter were $94.4
million, up 28% over the prior-year period. Full year 2014
orders of $330.7 million grew 15% over 2013, with improvements in
all three geographic markets. Incremental orders from the full
year contribution of Forkardt accounted for approximately $14
million of the increase. The Company's order backlog at
December 31, 2014 was $105.3 million, compared with $91.4 million
at December 31, 2013.
_____________________
(1)Management believes that the use of non-GAAP measures helps
in the understanding of its operating performance. See pages 8 and
9 of this release for the reconciliation tables between reported
amounts and non-GAAP measures discussed in this document.
2015 Expectations
Mr. Simons commented, "Given the strength of orders at year end,
our firm backlog and very active quote pipeline, we expect that
2015 will demonstrate solid growth. Economists are indicating
further order growth for the industry as well. We believe our
China and U.S. markets will drive sales as the aerospace and
automotive industries continue to expand. Our first quarter is
affected by the Chinese New Year and, based on scheduled backlog,
we expect our first quarter sales to be similar to last year's
first quarter of about $70 million. We believe our 2015 growth
will be demonstrated in the quarters thereafter."
He concluded, "We are intent upon growing the business both
organically and through acquisitions, and to improve productivity
to drive stronger profitability."
Webcast and Conference Call
Hardinge will host a conference call and webcast today at 11:00
a.m. ET. During the conference call and webcast, Richard L.
Simons, Chairman, President and CEO, and Douglas J. Malone, Vice
President and CFO, will review the financial and operating results
for the quarter and year to date, 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
http://ir.hardinge.com/events.cfm.
The conference call can be accessed by calling (315)
625-6888. The listen-only audio webcast can be monitored at
http://ir.hardinge.com/events.cfm.
A telephonic replay will be available from 2:00 p.m. ET the day
of the call through Thursday, February 19, 2015. To listen to
the archived call, dial (404) 537-3406 and enter conference ID
number 54427769. Alternatively, the archive can be heard on
the Company's website at http://ir.hardinge.com/events.cfm. 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 and of technologically
advanced workholding accessories. 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 products Hardinge
produces. With approximately two thirds of its sales outside
of North America, Hardinge serves the worldwide metal working
market. Hardinge's machine tool and accessory 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,
France, Germany, India, 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.
FINANCIAL TABLES FOLLOW.
HARDINGE INC. AND
SUBSIDIARIES |
Consolidated Statements
of Operations |
(in thousands, except per share
data) |
|
|
Three Months
Ended December 31, |
Year Ended
December 31, |
|
2014 |
2013 |
2014 |
2013 |
|
(unaudited) |
|
|
|
|
|
|
|
Sales |
$93,008 |
$103,101 |
$311,633 |
$329,459 |
Cost of sales |
65,988 |
73,643 |
224,755 |
236,220 |
Gross profit |
27,020 |
29,458 |
86,878 |
93,239 |
Gross profit margin |
29.1% |
28.6% |
27.9% |
28.3% |
|
|
|
|
|
Selling, general and administrative
expenses |
21,669 |
21,753 |
81,045 |
79,533 |
Impairment charges |
— |
6,239 |
5,766 |
6,239 |
Other expense, net |
265 |
155 |
514 |
471 |
Income (loss) from operations |
5,086 |
1,311 |
(447) |
6,996 |
Operating margin |
5.5% |
1.3% |
(0.1)% |
2.1% |
|
|
|
|
|
Interest expense |
168 |
287 |
737 |
1,128 |
Interest income |
(12) |
(21) |
(59) |
(64) |
Income (loss) from continuing operations
before income taxes |
4,930 |
1,045 |
(1,125) |
5,932 |
Income taxes |
388 |
(81) |
1,233 |
1,537 |
Net income (loss) from continuing
operations |
4,542 |
1,126 |
(2,358) |
4,395 |
|
|
|
|
|
Gain from disposal of discontinued operation,
net of tax |
— |
4,890 |
218 |
4,890 |
Income from discontinued operations, net of
tax |
— |
127 |
— |
642 |
|
|
|
|
|
Net income (loss) |
$4,542 |
$6,143 |
$(2,140) |
$9,927 |
|
|
|
|
|
Per share data: |
|
|
|
|
Basic earnings (loss) per
share: |
|
|
|
|
Continuing operations |
$0.36 |
$0.09 |
$(0.19) |
$0.37 |
Disposal of discontinued operation |
— |
0.40 |
0.02 |
0.41 |
Discontinued operations |
— |
0.01 |
— |
0.06 |
Basic earnings (loss) per share |
$0.36 |
$0.50 |
$(0.17) |
$0.84 |
|
|
|
|
|
Diluted earnings (loss) per
share: |
|
|
|
|
Continuing operations |
$0.35 |
$0.09 |
$(0.19) |
$0.37 |
Disposal of discontinued operation |
— |
0.40 |
0.02 |
0.41 |
Discontinued operations |
— |
0.01 |
— |
0.05 |
Diluted earnings (loss) per share |
$0.35 |
$0.50 |
$(0.17) |
$0.83 |
|
|
|
|
|
Cash dividends declared per
share: |
$0.02 |
$0.02 |
$0.08 |
$0.08 |
|
|
|
|
|
Weighted avg. shares outstanding:
Basic |
12,716 |
12,160 |
12,661 |
11,801 |
Weighted avg. shares outstanding:
Diluted |
12,832 |
12,253 |
12,661 |
11,891 |
|
HARDINGE INC. AND
SUBSIDIARIES |
Consolidated Balance
Sheets |
(in thousands, except share and
per share data) |
|
|
December 31,
2014 |
December 31,
2013 |
|
|
|
Assets |
|
|
Cash and cash equivalents |
$16,293 |
$34,722 |
Restricted cash |
3,151 |
4,124 |
Accounts receivable, net |
62,877 |
57,137 |
Inventories, net |
111,821 |
114,064 |
Other current assets |
10,545 |
11,563 |
Total current assets |
204,687 |
221,610 |
|
|
|
Property, plant and equipment, net |
65,874 |
74,656 |
Goodwill |
6,698 |
10,002 |
Other intangible assets, net |
30,217 |
32,063 |
Other non-current assets |
3,844 |
5,852 |
Total non-current assets |
106,633 |
122,573 |
Total assets |
$311,320 |
$344,183 |
|
|
|
Liabilities and shareholders'
equity |
|
|
Accounts payable |
$25,592 |
$24,418 |
Accrued expenses |
25,071 |
26,346 |
Customer deposits |
12,736 |
15,166 |
Accrued income taxes |
646 |
830 |
Deferred income taxes |
2,332 |
2,569 |
Contingent consideration |
— |
7,500 |
Current portion of long-term debt |
3,972 |
7,850 |
Total current liabilities |
70,349 |
84,679 |
|
|
|
Long-term debt |
12,253 |
18,785 |
Pension and postretirement
liabilities |
53,119 |
28,188 |
Deferred income taxes |
2,516 |
4,968 |
Other liabilities |
3,487 |
3,775 |
Total non-current liabilities |
71,375 |
55,716 |
Commitments and contingencies |
|
|
Common stock ($0.01 par value, 20,000,000
authorized; 12,825,468 issued and 12,821,768 outstanding as of
December 31, 2014, and 12,472,992 issued and 12,397,867
outstanding as of December 31, 2013) |
128 |
125 |
Additional paid-in capital |
120,538 |
114,951 |
Retained earnings |
87,777 |
90,937 |
Treasury shares (at cost, 3,700 as of
December 31, 2014, and 75,125 as of December 31, 2013) |
(46) |
(806) |
Accumulated other comprehensive loss |
(38,801) |
(1,419) |
Total shareholders' equity |
169,596 |
203,788 |
Total liabilities and shareholders'
equity |
$311,320 |
$344,183 |
|
|
HARDINGE INC. AND
SUBSIDIARIES |
Consolidated Statements
of Cash Flows |
(in thousands) |
|
|
Year
Ended |
|
December 31,
2014 |
December 31,
2013 |
|
|
|
Operating activities |
|
|
Net (loss) income |
$(2,140) |
$9,927 |
Adjustments to reconcile net (loss)
income to net cash provided by operating activities: |
|
|
Impairment charges |
5,766 |
6,239 |
Depreciation and amortization |
9,847 |
9,560 |
Debt issuance costs amortization |
42 |
83 |
Benefit from deferred income taxes |
(245) |
(1,140) |
Gain on sale of assets |
(82) |
(62) |
Gain on sale of business |
(218) |
(4,890) |
Gain on purchase of business |
(462) |
— |
Unrealized intercompany foreign currency
transaction loss (gain) |
350 |
(2,397) |
Changes in operating assets and
liabilities, net of businesses acquired: |
|
|
Accounts receivable |
(7,860) |
(68) |
Inventories |
(1,303) |
20,259 |
Other assets |
1,655 |
1,663 |
Accounts payable |
2,211 |
(4,083) |
Customer deposits |
(1,783) |
(899) |
Accrued expenses |
(2,590) |
(8,373) |
Accrued pension and postretirement
liabilities |
(9) |
9 |
Net cash provided by operating
activities |
3,179 |
25,828 |
|
|
|
Investing activities |
|
|
Acquisition of businesses, net of cash
acquired |
(5,683) |
(34,250) |
Capital expenditures |
(3,186) |
(3,871) |
Proceeds from disposal of business |
218 |
6,255 |
Proceeds on sales of assets |
151 |
179 |
Net cash used in investing
activities |
(8,500) |
(31,687) |
|
|
|
Financing activities |
|
|
Payment of contingent consideration |
(7,500) |
(299) |
Proceeds from short-term notes payable to
bank |
21,143 |
47,733 |
Repayments of short-term notes payable to
bank |
(21,143) |
(59,025) |
Proceeds from long-term debt |
— |
33,821 |
Repayments of long-term debt |
(9,296) |
(15,743) |
Debt issuance costs |
— |
(687) |
Dividends paid |
(1,012) |
(944) |
Net proceeds from sales of common
stock |
5,678 |
8,884 |
Other financing activities |
— |
— |
Net cash (used in) provided by financing
activities |
(12,130) |
13,740 |
Effect of exchange rate changes on cash |
(978) |
(14) |
Net (decrease) increase in cash |
(18,429) |
7,867 |
Cash and cash equivalents at beginning of
period |
34,722 |
26,855 |
Cash and cash equivalents at end of
period |
$16,293 |
$34,722 |
Hardinge believes that providing non-GAAP financial measures
such as adjusted operating income, net income, and adjusted
earnings per diluted share is important for investors and other
readers of Hardinge's financial statements, as they are used as an
analytical indicator by Hardinge management to better understand
its operating performance.
HARDINGE INC. AND
SUBSIDIARIES |
Reconciliation of GAAP
Operating Income (Loss) to Non-GAAP Operating Income |
(in thousands) |
|
|
Three Months
Ended December 31, 2014 |
Three Months
Ended December 31, 2013 |
|
Amount |
% of Sales |
Amount |
% of Sales |
|
|
|
|
|
Income from operations, as reported |
$5,086 |
5.5% |
$1,311 |
1.3% |
Adjustments to reported income from
operations: |
|
|
|
|
Impairment charges |
— |
— |
6,239 |
6.0 |
Acquisition-related inventory step-up
charge |
— |
— |
785 |
0.8 |
Acquisition-related expenses |
121 |
0.1 |
258 |
0.2 |
Non-GAAP income from operations, as
adjusted |
$5,207 |
5.6% |
$8,593 |
8.3% |
|
|
|
|
|
|
Year Ended
December 31, 2014 |
Year Ended
December 31, 2013 |
|
Amount |
% of Sales |
Amount |
% of Sales |
Income (loss) from operations, as
reported |
$(447) |
(0.1)% |
$6,996 |
2.1% |
Adjustments to reported income (loss) from
operations: |
|
|
|
|
Impairment charges |
5,766 |
1.9 |
6,239 |
1.9 |
Gain on purchase of business |
(462) |
(0.1) |
— |
— |
Acquisition-related inventory step-up
charge |
86 |
— |
1,927 |
0.6 |
Acquisition-related expenses |
121 |
— |
2,154 |
0.7 |
Non-GAAP income from operations, as
adjusted |
$5,064 |
1.7% |
$17,316 |
5.3% |
|
|
|
|
|
|
HARDINGE INC. AND
SUBSIDIARIES |
Reconciliation of GAAP
Net Income (Loss) to Non-GAAP Net Income |
(in thousands, except per share
data) |
|
|
Three Months
Ended December 31, 2014 |
Three Months
Ended December 31, 2013 |
|
Amount |
EPS |
Amount |
EPS |
|
|
|
|
|
Net income, as reported |
$4,542 |
$0.35 |
$6,143 |
$0.50 |
Adjustments to reported net income, net of
taxes: |
|
|
|
|
Impairment charges |
— |
— |
6,239 |
0.51 |
Gain from disposal of discontinued
operation and income from discontinued
operations, net of tax |
— |
— |
(5,017) |
(0.41) |
Acquisition-related inventory step-up
charge |
— |
— |
785 |
0.06 |
Acquisition-related expenses |
121 |
0.01 |
258 |
0.02 |
Non-GAAP net income, as adjusted |
$4,663 |
$0.36 |
$8,408 |
$0.68 |
|
|
|
|
|
|
Year Ended
December 31, 2014 |
Year Ended
December 31, 2013 |
|
Amount |
EPS |
Amount |
EPS |
|
|
|
|
|
Net (loss) income, as reported |
$(2,140) |
$(0.17) |
$9,927 |
$0.83 |
Adjustments to reported net (loss) income,
net of taxes: |
|
|
|
|
Impairment charges |
5,437 |
0.43 |
6,239 |
0.52 |
Gain on purchase of business |
(462) |
(0.04) |
— |
— |
Gain from disposal of discontinued
operation and income from discontinued operations, net of tax |
(218) |
(0.02) |
(5,532) |
(0.46) |
Acquisition-related inventory step-up
charge |
86 |
0.01 |
1,915 |
0.16 |
Acquisition-related expenses |
121 |
0.01 |
2,154 |
0.18 |
Other adjustments |
— |
— |
186 |
0.02 |
Non-GAAP net income, as adjusted |
$2,824 |
$0.22 |
$14,889 |
$1.25 |
CONTACT: Company:
Douglas J. Malone
Chief Financial Officer
Phone: (607) 378-4140
Investor Relations:
Deborah K. Pawlowski, Kei Advisors LLC
Phone: (716) 843-3908
Email: dpawlowski@keiadvisors.com
Hardinge Inc. (delisted) (NASDAQ:HDNG)
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Hardinge Inc. (delisted) (NASDAQ:HDNG)
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