Hardinge Inc. (NASDAQ:HDNG), a leading international provider of
advanced metal-cutting solutions and accessories, reported
financial results for its third quarter ended September 30, 2015.
Net sales ("sales") for the quarter increased $7.9 million to
$76.8 million. Excluding $2.2 million for unfavorable foreign
currency translation, this represents a 15% increase over the prior
year's third quarter. Orders for the quarter were $72.0 million, a
1% decrease from the prior year's third quarter when adjusted for
unfavorable foreign currency translation.
Non-GAAP(1) net income for the quarter was $0.8 million, or
$0.06 per diluted share, compared with non-GAAP(1) net loss of $2.6
million, or $0.20 per diluted share, in the prior year's third
quarter. Net loss for the quarter was $0.3 million, or $0.03 per
diluted share, compared with a net loss of $7.6 million, or $0.60
per diluted share, in the prior year's third quarter.
Richard L. Simons, President and Chief Executive Officer,
commented, "We are gaining momentum on a sales growth basis as we
move through the year. We anticipate a strong fourth quarter and
continue to believe we'll finish the year with sales growth in
excess of 5% over 2014."
Mr. Simons continued, "We are progressing with our previously
announced restructuring initiatives while we focus on market
penetration, productivity improvement and EBITDA expansion. We are
at the early stages of implementation of the initiatives, which we
expect to complete by the end of the first quarter of 2016. We
believe that cost savings, which we expect to begin partially
realizing in the fourth quarter of this year, are currently
estimated at $4 million to $5 million on an annualized pre-tax
basis."
____________________
(1)Management believes that the use of non-GAAP measures helps
in the understanding of its operating performance. See pages 9 and
10 of this release for the reconciliation tables between reported
amounts and non-GAAP measures discussed in this document.
Third Quarter Review
Quarterly Sales by
Region |
($ in thousands) |
|
Quarter Ended |
|
September 30,
2015 |
September 30,
2014 |
June 30,
2015 |
Sales to Customers
in |
$ |
% of Total |
$ |
Year-over-Year %
Change |
$ |
Sequential %
Change |
North America |
24,661 |
32% |
24,026 |
3% |
29,073 |
(15)% |
Europe |
21,569 |
28% |
21,286 |
1% |
22,055 |
(2)% |
Asia |
30,575 |
40% |
23,612 |
29% |
31,228 |
(2)% |
Total |
76,805 |
|
68,924 |
11% |
82,356 |
(7)% |
____________________
Note: Fluctuations in Hardinge's consolidated sales and orders
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.
Sales for the quarter increased $7.9 million to $76.8 million,
when compared with the prior-year period. Excluding $2.2 million
for unfavorable foreign currency translation, sales increased 15%
over the prior year's third quarter. Sales to the North America
market increased over the prior-year period primarily due to new
product launches. Sales to Asia continue to reflect the Company's
successful penetration of certain growing industries there,
including automotive, aerospace and consumer electronics. Sales to
Europe remained relatively flat when compared with the prior year
but, when adjusted for unfavorable foreign currency translation,
sales to Europe were up 8.5%.
Gross profit of $21.8 million increased 17% compared with the
prior-year period. Gross margin as a percentage of sales increased
to 28.3%, compared with 27.1% in the third quarter of 2014. Gross
profit and margin were favorably impacted by higher sales and
increased levels of machine production, particularly at the
Company's Swiss grinding facilities.
Selling, general and administrative ("SG&A") expense
decreased by $0.2 million compared with the prior-year period, to
$19.9 million, benefiting $0.7 million from foreign currency
translation changes compared with the prior year. The current year
quarter also includes $0.4 million of expense associated with the
Company's investments for growth of the Voumard product line, as
well as $0.3 million of professional fees associated with the
Company's previously announced strategic review process.
As part of the restructuring initiatives announced last quarter,
the Company incurred $0.9 million of charges in the current
quarter. Total implementation costs for these initiatives are still
estimated to be approximately $4 million to $5 million on a pretax
basis, with annual savings still expected to be between $4 million
to $5 million, also on a pretax basis.
Non-GAAP(1) operating income was $1.9 million, compared with a
non-GAAP(1) operating loss of $1.6 million in the prior year
period. The current-year period benefited from the impact of higher
sales levels and improved production efficiency. Operating income
was $0.8 million, or 1.0% of sales, compared with an operating loss
of $6.9 million, or 10.0% of sales, in the prior-year period.
During the prior year, the Company recorded a non-cash impairment
charge of $5.8 million, for which there was no corresponding charge
in the current year.
First Nine Months of 2015 Review
Year-to-Date Sales by
Region ($ in thousands) |
|
Nine Months
Ended |
|
September 30,
2015 |
September 30,
2014 |
Sales to Customers
in |
$ |
% of Total |
$ |
Year-over-Year
% Change |
North America |
80,039 |
35% |
72,258 |
11% |
Europe |
66,553 |
29% |
71,961 |
(8)% |
Asia |
81,697 |
36% |
74,406 |
10% |
Total |
228,289 |
|
218,625 |
4% |
Sales of $228.3 million reflected a 4% increase year-over-year.
Excluding $6.6 million for unfavorable foreign currency
translation, sales were up 7%. Sales to the North America market
increased over the prior-year period as a result of new product
launches as well as improved levels of grinding machine sales.
Strong sales to Asia were driven by ongoing increased demand for
the Company's machines, which was partially offset by the impact of
unfavorable foreign currency translation. Sales to Europe improved
on a constant currency basis, but the unfavorable foreign currency
translation impact more than offset the growth.
Gross profit of $63.5 million increased $3.6 million compared
with the prior-year period. Gross profit was favorably impacted by
higher sales as well as increased levels of machine production,
particularly at the Company's Swiss grinding facilities. This was
partially offset by a first quarter inventory valuation adjustment
of approximately $0.7 million at one of its European facilities.
Gross margin as a percent of sales improved modestly to 27.8% when
compared with the first nine months of 2014.
SG&A expense increased by $1.2 million compared with the
prior-year period, to $60.6 million. The increase included $1.3
million associated with the Company's investments for growth of the
Voumard product line acquired in the latter half of 2014 and the
expansion of the Company's Forkardt businesses in China and India,
as well as $0.3 million of professional fees associated with the
Company's previously announced strategic review process. These
increases were partially offset by $2.0 million of favorable
foreign currency translation when compared with the prior-year
period.
Non-GAAP(1) operating income was $2.8 million, compared with a
non-GAAP(1) operating loss of $0.1 million in the prior year.
Operating income was $1.7 million, or 0.8% of sales, compared with
an operating loss of $5.5 million, or 2.5% of sales, in the
prior-year period.
Flexible Balance Sheet for Strategic
Investments
Cash and cash equivalents at September 30, 2015 were $18.5
million. Total debt was $13.2 million, a reduction of $3.0
million from December 31, 2014 levels.
Orders by Region
($ in thousands) |
|
Quarter
Ended |
|
September 30,
2015 |
September 30,
2014 |
June 30,
2015 |
Orders from Customers
in |
$ |
% of Total |
$ |
Year-over-Year
% Change |
$ |
Sequential %
Change |
North America |
20,105 |
28% |
22,158 |
(9)% |
27,045 |
(26)% |
Europe |
23,234 |
32% |
26,282 |
(12)% |
22,085 |
5% |
Asia |
28,612 |
40% |
26,763 |
7% |
28,021 |
2% |
Total |
71,951 |
|
75,203 |
(4)% |
77,151 |
(7)% |
|
Nine Months
Ended |
|
|
September 30,
2015 |
September 30,
2014 |
|
Orders from Customers
in |
$ |
% of Total |
$ |
Year-over-Year
% Change |
|
North America |
74,504 |
31% |
73,685 |
1% |
|
Europe |
76,613 |
32% |
77,820 |
(2)% |
|
Asia |
90,912 |
37% |
84,834 |
7% |
|
Total |
242,029 |
|
236,339 |
2% |
|
Third quarter orders of $72.0 million were down by 4% from the
prior-year period, as a 7% increase in Asia was more than offset by
declines in North America and Europe. Increased orders for
grinding machines were more than offset by order reductions across
the Company's other product lines. Excluding $2.2 million of
unfavorable foreign exchange translation, orders for the third
quarter were down by 1% compared with the third quarter of
2014.
Year-to-date orders of $242.0 million reflect a 2% improvement
over the prior-year period, primarily due to strong orders for the
Company's high-end grinding machines and ongoing demand in
Asia. Excluding $6.7 million for unfavorable foreign currency
translation, year-to-date orders increased 5% over the prior-year
period. The Company's order backlog at September 30, 2015
was $116.1 million.
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, President and CEO, and Douglas J. Malone, Vice President
and CFO, will review the financial and operating results for the
quarter, as well as the Company's 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 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
ir.hardinge.com/events.cfm.
A telephonic replay will be available from 2:00 p.m. ET the day
of the call through Thursday, November 12, 2015. To listen to
the archived call, dial (404) 537-3406 and enter conference ID
#49117646. Alternatively, the archive can be heard on the
Company's website at 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 |
Nine Months
Ended |
|
September
30, |
September
30, |
|
2015 |
2014 |
2015 |
2014 |
|
(unaudited) |
(unaudited) |
|
|
|
|
|
Sales |
$ 76,805 |
$ 68,924 |
$ 228,289 |
$ 218,625 |
Cost of sales |
55,046 |
50,247 |
164,818 |
158,767 |
Gross profit |
21,759 |
18,677 |
63,471 |
59,858 |
Gross profit margin |
28.3% |
27.1% |
27.8% |
27.4% |
|
|
|
|
|
Selling, general and administrative
expenses |
19,925 |
20,123 |
60,596 |
59,376 |
Restructuring charges |
877 |
— |
877 |
— |
Impairment charge |
— |
5,766 |
— |
5,766 |
Other expense (income), net |
201 |
(334) |
276 |
249 |
Income (loss) from operations |
756 |
(6,878) |
1,722 |
(5,533) |
Operating margin |
1.0% |
(10.0)% |
0.8% |
(2.5)% |
|
|
|
|
|
Interest expense |
161 |
171 |
472 |
569 |
Interest income |
(40) |
(15) |
(80) |
(47) |
Income (loss) from continuing operations
before income taxes |
635 |
(7,034) |
1,330 |
(6,055) |
Income taxes |
962 |
544 |
1,479 |
845 |
Net loss from continuing operations |
(327) |
(7,578) |
(149) |
(6,900) |
|
|
|
|
|
Gain from disposal of discontinued operation,
net of tax |
— |
— |
— |
218 |
|
|
|
|
|
Net loss |
$ (327) |
$ (7,578) |
$ (149) |
$ (6,682) |
|
|
|
|
|
Per share data: |
|
|
|
|
|
|
|
|
|
Basic loss per
share: |
|
|
|
|
Continuing
operations |
$ (0.03) |
$ (0.60) |
$ (0.01) |
$ (0.55) |
Discontinued
operations |
— |
— |
— |
0.02 |
Basic loss per share |
$ (0.03) |
$ (0.60) |
$ (0.01) |
$ (0.53) |
|
|
|
|
|
Diluted loss per
share: |
|
|
|
|
Continuing
operations |
$ (0.03) |
$ (0.60) |
$ (0.01) |
$ (0.55) |
Discontinued
operations |
— |
— |
— |
0.02 |
Diluted loss per share |
$ (0.03) |
$ (0.60) |
$ (0.01) |
$ (0.53) |
|
|
|
|
|
Cash dividends
declared per share: |
$ 0.02 |
$ 0.02 |
$ 0.06 |
$ 0.06 |
|
|
|
|
|
Weighted avg. shares outstanding:
Basic |
12,793 |
12,715 |
12,770 |
12,643 |
Weighted avg. shares outstanding:
Diluted |
12,793 |
12,715 |
12,770 |
12,643 |
|
HARDINGE INC. AND
SUBSIDIARIES |
Consolidated Balance
Sheets |
(in thousands, except share and
per share data) |
|
|
|
|
September 30, |
December 31, |
|
2015 |
2014 |
|
(Unaudited) |
|
Assets |
|
|
Cash and cash equivalents |
$ 18,535 |
$ 16,293 |
Restricted cash |
2,782 |
3,151 |
Accounts receivable, net |
55,651 |
62,877 |
Inventories, net |
119,193 |
111,821 |
Other current assets |
12,371 |
10,545 |
Total current assets |
208,532 |
204,687 |
|
|
|
Property, plant and equipment, net |
63,751 |
65,874 |
Goodwill |
6,636 |
6,698 |
Other intangible assets, net |
28,511 |
30,217 |
Other non-current assets |
4,645 |
3,844 |
Total non-current assets |
103,543 |
106,633 |
Total assets |
$ 312,075 |
$ 311,320 |
|
|
|
Liabilities and shareholders'
equity |
|
|
Accounts payable |
$ 25,445 |
$ 25,592 |
Accrued expenses |
27,195 |
25,071 |
Customer deposits |
16,034 |
12,736 |
Accrued income taxes |
1,929 |
646 |
Deferred income taxes |
2,539 |
2,332 |
Current portion of long-term debt |
4,467 |
3,972 |
Total current liabilities |
77,609 |
70,349 |
|
|
|
Long-term debt |
8,718 |
12,253 |
Pension and postretirement
liabilities |
51,256 |
53,119 |
Deferred income taxes |
2,557 |
2,516 |
Other liabilities |
3,614 |
3,487 |
Total non-current liabilities |
66,145 |
71,375 |
Commitments and contingencies |
|
|
Common stock ($0.01 par value, 20,000,000
authorized; 12,856,716 issued and 12,836,711 outstanding as of
September 30, 2015, and 12,825,468 issued and 12,821,768
outstanding as of December 31, 2014) |
129 |
128 |
Additional paid-in capital |
121,016 |
120,538 |
Retained earnings |
86,858 |
87,777 |
Treasury shares (at cost, 20,005 as of
June 30, 2015, and 3,700 as of December 31, 2014) |
(219) |
(46) |
Accumulated other comprehensive loss |
(39,463) |
(38,801) |
Total shareholders' equity |
168,321 |
169,596 |
Total liabilities and shareholders'
equity |
$ 312,075 |
$ 311,320 |
|
|
|
HARDINGE INC. AND
SUBSIDIARIES |
Consolidated Statements
of Cash Flows |
(in thousands) |
|
|
|
|
Nine Months
Ended |
|
September
30, |
|
2015 |
2014 |
|
(Unaudited) |
Operating activities |
|
|
Net loss |
$ (149) |
$ (6,682) |
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities: |
|
|
Impairment charge |
— |
5,766 |
Depreciation and
amortization |
6,831 |
7,317 |
Debt issuance costs
amortization |
29 |
33 |
Deferred income taxes |
(284) |
(346) |
Gain on sale of assets |
(1) |
(101) |
Gain on sale of
business |
— |
(218) |
Gain on purchase of
business |
— |
(462) |
Unrealized foreign currency
transaction (gain) loss |
(4) |
593 |
Changes in operating assets
and liabilities: |
|
|
Accounts
receivable |
6,015 |
2,670 |
Inventories |
(8,688) |
(10,054) |
Other
assets |
(1,360) |
225 |
Accounts
payable |
990 |
2,743 |
Customer
deposits |
3,494 |
259 |
Accrued
expenses |
2,161 |
(2,859) |
Accrued
pension and postretirement liabilities |
(13) |
(35) |
Net cash provided by (used
in) operating activities |
9,021 |
(1,151) |
|
|
|
Investing activities |
|
|
Acquisition of businesses, net of cash
acquired |
— |
(5,683) |
Capital expenditures |
(3,103) |
(1,830) |
Proceeds from disposal of business |
— |
218 |
Proceeds from sales of assets |
38 |
131 |
Net cash used in investing
activities |
(3,065) |
(7,164) |
|
|
|
Financing activities |
|
|
Payment of contingent consideration |
— |
(7,500) |
Proceeds from short-term notes payable to
bank |
24,937 |
13,827 |
Repayments of short-term notes payable to
bank |
(24,937) |
(13,827) |
Repayments of long-term debt |
(3,245) |
(8,373) |
Dividends paid |
(781) |
(757) |
Purchases of treasury stock |
(201) |
— |
Net proceeds from sales of common
stock |
— |
5,678 |
Net cash used in financing
activities |
(4,227) |
(10,952 |
|
|
|
Effect of exchange rate changes on cash |
513 |
(450) |
Net increase (decrease) in cash |
2,242 |
(19,717 |
|
|
|
Cash and cash equivalents at beginning of
period |
16,293 |
34,722 |
|
|
|
Cash and cash equivalents at end of
period |
$ 18,535 |
$ 15,005 |
|
|
|
Hardinge believes that providing non-GAAP financial measures
such as adjusted operating income (loss), adjusted net income
(loss), and adjusted earnings (loss) 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
(Loss) |
(in thousands) |
|
|
|
|
|
|
Three Months
Ended |
Three Months
Ended |
|
September 30,
2015 |
September 30,
2014 |
|
Amount |
% of Sales |
Amount |
% of Sales |
|
|
|
|
|
Operating income (loss) as reported |
$ 756 |
$ 1.0% |
$ (6,878) |
(10.0)% |
Adjustments to reported operating income
(loss): |
|
|
|
|
Impairment charge |
— |
— |
5,766 |
8.4 |
Gain on purchase of business |
— |
— |
(462) |
(0.7) |
Restructuring charges |
877 |
1.2 |
— |
— |
Professional fees for strategic review
process |
250 |
0.3 |
— |
— |
Non-GAAP operating income (loss) as
adjusted |
$ 1,883 |
2.5% |
$ (1,574) |
(2.3)% |
|
|
|
|
|
|
Nine Months
Ended |
Nine Months
Ended |
|
September 30,
2015 |
September 30,
2014 |
|
Amount |
% of Sales |
Amount |
% of Sales |
Operating income (loss) as reported |
$ 1,722 |
$ 0.8% |
$ (5,533) |
(2.5)% |
Adjustments to reported operating income
(loss): |
|
|
|
|
Impairment charge |
— |
— |
5,766 |
2.6 |
Gain on purchase of business |
— |
— |
(462) |
(0.2) |
Acquisition-related inventory step-up
charge |
— |
— |
86 |
— |
Restructuring charges |
877 |
0.3 |
— |
— |
Professional fees for strategic review
process |
250 |
0.1 |
— |
— |
Non-GAAP operating income (loss) as
adjusted |
$ 2,849 |
1.2% |
$ (143) |
(0.1)% |
|
HARDINGE INC. AND
SUBSIDIARIES |
Reconciliation of GAAP
Net Loss to Non-GAAP Net Income (Loss) |
(in thousands, except per share
data) |
|
|
|
|
|
|
Three Months
Ended |
Three Months
Ended |
|
September 30,
2015 |
September 30,
2014 |
|
Amount |
EPS |
Amount |
EPS |
|
|
|
|
|
Net loss as reported |
$ (327) |
$ (0.03) |
$ (7,578) |
$ (0.60) |
Adjustments to reported net loss, net of
taxes: |
|
|
|
|
Impairment charge |
— |
— |
5,437 |
0.44 |
Gain on purchase of business |
— |
— |
(462) |
(0.04) |
Restructuring charges |
877 |
0.07 |
— |
— |
Professional fees for strategic review
process |
250 |
0.02 |
— |
— |
Non-GAAP net income (loss) as adjusted |
$ 800 |
$ 0.06 |
$ (2,603) |
$ (0.20) |
|
|
|
|
|
|
Nine Months
Ended |
Nine Months
Ended |
|
September 30,
2015 |
September 30,
2014 |
|
Amount |
EPS |
Amount |
EPS |
|
|
|
|
|
Net loss as reported |
$ (149) |
$ (0.01) |
$ (6,682) |
$ (0.53) |
Adjustments to reported net loss, net of
taxes: |
|
|
|
|
Impairment charge |
— |
— |
5,437 |
0.43 |
Gain on purchase of business |
— |
— |
(462) |
(0.04) |
Gain from disposal of discontinued
operation, net of tax |
— |
— |
(218) |
(0.02) |
Acquisition-related inventory step-up
charge |
— |
— |
86 |
0.01 |
Restructuring charges |
877 |
0.07 |
— |
— |
Professional fees for strategic review
process |
250 |
0.02 |
— |
— |
Non-GAAP net income (loss) as adjusted |
$ 978 |
$ 0.08 |
$ (1,839) |
$ (0.15) |
CONTACT: For more information 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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