UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 5, 2015
Hardinge Inc.
(Exact name of registrant as specified in its charter)
|
| | | | |
New York | | 000-15760 | | 16-0470200 |
(State or other jurisdiction of incorporation) | | (Commission File Number) | | (I.R.S. Employer Identification Number) |
| | | | |
One Hardinge Drive Elmira, NY | | | | 14902 |
(Address of principal executive offices) | | | | (Zip Code) |
(607) 734-2281
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On November 5, 2015, Hardinge Inc. ("the "Company" or "Hardinge") issued a press release announcing the Company’s third quarter 2015 financial results. Copies of the press release and the presentation slides used in connection with the Company’s earnings conference call and webcast on 2015 are respectively included as Exhibit 99.1 and Exhibit 99.2 to this Current Report on Form 8-K. On November 2, 2015, the Board of Directors of the Company declared a cash dividend of $0.02 per share on the Company’s common stock. The dividend is payable on December 10, 2015 to stockholders of record as of December 1, 2015.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
|
| | |
EXHIBIT NUMBER | | DESCRIPTION |
99.1 | | Press release issued by Registrant on November 5, 2015 announcing third quarter 2015 results. |
99.2 | | Presentation slides used by Registrant in connection with its November 5, 2015 earnings conference call and webcast. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
| | | |
| | | Hardinge Inc. |
| | | (Registrant) |
Date | November 5, 2015 | | |
| | | /s/ Douglas J. Malone |
| | | Douglas J. Malone Vice President and Chief Financial Officer |
Hardinge Inc. One Hardinge Drive, Elmira, N.Y. 14902
|
| |
For more information contact: | |
| |
Company: | Investor Relations: |
Douglas J. Malone Chief Financial Officer Phone: (607) 378-4140 | Deborah K. Pawlowski, Kei Advisors LLC Phone: (716) 843-3908 Email: dpawlowski@keiadvisors.com |
Hardinge Reports Third Quarter 2015 Results
ELMIRA, N.Y., November 5, 2015 - 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 $5 million on an annualized pre-tax basis.”
____________________
(1)Management believes that the use of non-GAAP measures helps in the understanding of its operating performance. See pages 9 and 10 of this release for the reconciliation tables between reported amounts and non-GAAP measures discussed in this document.
Hardinge Reports Third Quarter 2015 Results
November 5, 2015
Page 2 of 10
Third Quarter Review
|
| | | | | | | | | |
Quarterly Sales by Region ($ 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 $5.8 million, for which there was no corresponding charge in the current year.
Hardinge Reports Third Quarter 2015 Results
November 5, 2015
Page 3 of 10
First Nine Months of 2015 Review
|
| | | | | | |
Year-to-Date Sales by Region ($ 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 $3.0 million from December 31, 2014 levels.
Hardinge Reports Third Quarter 2015 Results
November 5, 2015
Page 4 of 10
|
| | | | | | | | | |
Orders by Region ($ 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.
Hardinge Reports Third Quarter 2015 Results
November 5, 2015
Page 5 of 10
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 Reports Third Quarter 2015 Results
November 5, 2015
Page 6 of 10
HARDINGE INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended 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 Reports Third Quarter 2015 Results
November 5, 2015
Page 7 of 10
HARDINGE INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share data)
|
| | | | | | | |
| September 30, 2015 | | December 31, 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 Reports Third Quarter 2015 Results
November 5, 2015
Page 8 of 10
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 Reports Third Quarter 2015 Results
November 5, 2015
Page 9 of 10
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 September 30, 2015 | | Three Months Ended 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 September 30, 2015 | | Nine Months Ended 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 Reports Third Quarter 2015 Results
November 5, 2015
Page 10 of 10
HARDINGE INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Loss to Non-GAAP Net Income (Loss)
(in thousands, except per share data)
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2015 | | Three Months Ended 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 September 30, 2015 | | Nine Months Ended 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 | ) |
Third Quarter 2015 Financial Results Conference Call November 5, 2015 NASDAQ: HDNG www.hardinge.com Douglas J. Malone Vice President and Chief Financial Officer Richard L. Simons President and Chief Executive Officer
© 2015 Hardinge Inc. www.hardinge.com 2 Safe Harbor Statement This presentation may contain 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). Any such statements are based upon 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 following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: fluctuations in the machine tool business cycles, changes in general economic conditions in the U.S. or internationally, the mix of products sold and the profit margins thereon, the relative success of the Company’s entry into new product and geographic markets, the Company’s ability to manage its operating costs, actions taken by customers such as order cancellations or reduced bookings by customers or distributors, competitor’s actions such as price discounting or new product introductions, governmental regulations and environmental matters, changes in the availability of cost of materials and supplies, the implementation of new technologies and currency fluctuations. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.
© 2015 Hardinge Inc. www.hardinge.com 3 Sales ($ in millions) $90 $84 $109 $101 $109 $105 $121 $100 $103 $97 $147 $129 $120 $108 $115 2011 2012 2013 2014 Q3 2015 TTM North America Europe Asia $329 $342 $334 $24 $29 $26 $29 $25 $21 $31 $23 $22 $21 $24 $33 $20 $31 $31 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 North America Europe Asia $93 $69 Quarterly Net Sales Annual Net Sales Q3 2015 sales compared with prior-year period: Impacted by unfavorable FX translation of $2.2 million Excluding FX impact sales increased 15% Actual net sales may differ due to rounding. $312 $69 $82 $77 $321
© 2015 Hardinge Inc. www.hardinge.com 4 $342 $334 $329 $312 $321 $69 $93 $69 $82 $77 26.7% 29.0% 28.9% 27.9% 28.1% 2011 2012 2013* 2014* Q3 2015 TTM 27.1% 29.1% 26.4% 28.5% 28.3% Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Gross Margin Quarterly Sales & Gross Margin Annual Sales & Adjusted Gross Margin* Q3 2015 gross margin compared with prior-year period: Improvement reflects increased production volume at a Swiss grinding facility and resulting overhead absorption Sales ($ in millions) * Gross Margin for 2013 and 2014 were adjusted to exclude atypical items. Adjusted Gross Margin is a non-GAAP measure. See supplemental slides for Adjusted Gross Margin reconciliation and other important disclaimers regarding Adjusted Gross Margin. Amounts shown pertain to continuing operations. Actual net sales may differ due to rounding.
© 2015 Hardinge Inc. www.hardinge.com 5 $342 $334 $329 $312 $321 $69 $93 $69 $82 $77 4.9% 6.1% 5.3% 1.7% 2.5% 2011 2012* 2013* 2014* Q3 2015 TTM* (2.3)% 5.6% (2.0)% 2.9% 2.5% Q3 2014* Q4 2014* Q1 2015 Q2 2015 Q3 2015* Operating Margin Quarterly Sales & Adjusted Operating Margin* Annual Sales & Adjusted Operating Margin* Sales ($ in millions) * Operating Margin for all periods shown except for Q1 2015, Q2 2015 and 2011 were adjusted to exclude atypical items. Adjusted Operating Margin is a non-GAAP measure. See supplemental slides for Adjusted Operating Margin reconciliation and other important disclaimers regarding Adjusted Operating Margin. Actual net sales may differ due to rounding. Q3 2015 adjusted operating margin compared with prior-year period: Improvement reflects operating leverage on higher sales & and production efficiencies All amounts shown pertain to continuing operations.
© 2015 Hardinge Inc. www.hardinge.com 6 $69 $93 $69 $82 $77 $342 $334 $329 $312 $321 7.1% 8.3% 8.2% 4.8% 5.4% 2011 2012 2013 2014 Q3 2015 TTM 1.1% 8.3% 1.3% 5.6% 5.3% Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 EBITDA Margin* Quarterly Sales & Adjusted EBITDA Margin* Annual Sales & Adjusted EBITDA Margin* Sales ($ in millions) * Adjusted EBITDA Margin is a non-GAAP financial measure. Hardinge believes that the use of Adjusted EBITDA Margin helps in the understanding of the Company’s financial results. See supplemental slides for an Adjusted EBITDA Margin reconciliation and other important disclaimers regarding Adjusted EBITDA Margin. Actual net sales may differ due to rounding. All amounts shown pertain to continuing operations. $0.7 $7.7 $0.9 $4.6 $24.3 $26.9 $14.9 $27.9 $17.3 $4.1
© 2015 Hardinge Inc. www.hardinge.com 7 ($1.4) ($2.7) $4.6 $1.6 Q3 2014* Q4 2014* Q1 2015 Q2 2015 Q3 2015* $0.8 Quarterly Adjusted Net (Loss) Income* $12.0 $15.4 $14.9 $2.8 $5.6 2011 2012* 2013* 2014* Q3 2015 TTM* Annual Adjusted Net Income* Net (Loss) Income ($ in millions) * Net (Loss) Income for all periods shown except Q1 2015, Q2 2015 and 2011 were adjusted to exclude atypical items. Adjusted Net (Loss) Income is a non- GAAP measure. See supplemental slides for Adjusted Net (Loss) Income reconciliation and other important disclaimers regarding Adjusted Net (Loss) Income. All amounts shown pertain to continuing operations.
© 2015 Hardinge Inc. www.hardinge.com 8 Geographic Diversity Creates Larger Addressable Market ($ in millions) Annual Orders $95 $79 $86 $105 $106 $120 $106 $95 $109 $108 $157 $103 $107 $117 $122 2011 2012 2013 2014 Q3 2015 TTM North America Europe Asia $331 $288 $372 $288 Quarterly Orders $22 $32 $27 $27 $20 $26 $31 $32 $22 $23 $27 $32 $34 $28 $29 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 North America Europe Asia $95 $93 $75 Q3 2015 orders reflect $2.2 million unfavorable FX translation impact vs Q3 2014 Actual orders may differ due to rounding. $77 $336 $72
© 2015 Hardinge Inc. www.hardinge.com 9 ($ in millions) Backlog Lead times vary by product line Grinding: six to nine months Milling and turning: two to six months Workholding parts and accessories: Standard - next day, Specials – four to eight weeks Backlog Drives 2015 Sales Growth Outlook $48 $47 $56 $59 $60 $47 $48 $61 $55 $45 $12 $10 $11 $11 $11 9/30/2014 12/31/2014 3/31/2015 6/30/2015 9/30/2015 Grinding Milling & Turning Workholding Parts & Accessories $105 $125 $116 $107 $128
© 2015 Hardinge Inc. www.hardinge.com 10 Source: Oxford Economics Autumn 2015 Global Machine Tool Outlook Report Emerging Economies Drive Demand $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Americas Europe Asia World M ac h in e T o ol C o n s u m p ti o n (i n U S $ b ill io n s ) Drivers of Machine Tool Consumption: Older machines – technologically obsolete Skilled machinists – shrinking supply Emerging economies – growing middle class Global competitiveness – advancing productivity 2015-2019 Forecast CAGR World ~4% Asia ~4% Europe ~4% Americas ~3% Oxford Economics Machine Tool Forecast $80 billion industry
© 2015 Hardinge Inc. www.hardinge.com 11 2015 Expectations Optimistic Outlook for fourth quarter 2015 Expecting sales growth in excess of 5% over 2014 Current strong backlog supports expectations Operational Restructuring update Initiatives include consolidation of certain facilities and restructuring certain operations Expect $4 to $5M of one-time pre-tax costs generating $4 to $5M in annual pre-tax savings, once fully implemented Incurred $0.9 million of restructuring charges in Q3 Expect to be completed by end of Q1 2016
NASDAQ: HDNG www.hardinge.com Third Quarter 2015 Financial Results Conference Call November 5, 2015
NASDAQ: HDNG SUPPLEMENTAL INFORMATION www.hardinge.com
© 2015 Hardinge Inc. www.hardinge.com 14 58 57 59 61 62 2011 2012 2013 2014 Q3 2015 TTM Emphasis on Productivity and Cash Inventory Turns (Monthly Avg) Receivable Days Outstanding (Monthly Avg) * Managed Working Capital is defined as: Receivables + Inventory - Payables - Customer Deposits At 42%, we believe our managed working capital to be in upper quartile of industry • Slight increase over 2014 due to inventory build from elevated backlog Machine tool industry requires higher inventory to support customers’ needs 38% 41% 43% 41% 42% 2011 2012 2013 2014 Q3 2015 TTM 2.1 1.8 1.9 1.9 1.9 2011 2012 2013 2014 Q3 2015 TTM Managed Working Capital* as a Percent of Sales (Monthly Avg)
© 2015 Hardinge Inc. www.hardinge.com 15 $147.0 $161.2 $203.8 $169.6 $168.3 $21.5 $20.0 $26.6 $16.2 $13.2 2011 2012 2013 2014 9/30/2015 Equity Debt $21.7 $26.9 $34.7 $16.3 $18.5 2011 2012 2013 2014 9/30/2015 Financial Strength and Flexibility Capitalization ($ in millions) $19.2 $7.6 $3.9 $3.2 $4.0 2011 2012 2013 2014 2015E (1) Reflects expansion capital investments in China and Switzerland of $17.2 million in 2011 and $3.3 million in 2012 (2) Guidance as of November 5, 2015 Cash & Cash Equivalents Capital Expenditures 2015 YTD capex was $3.1 million (1) (1) (2)
© 2015 Hardinge Inc. www.hardinge.com 16 Adjusted Gross Profit & Margin Reconciliation ($ in millions) Gross Profit and Gross Margin for 2013 and 2014 were adjusted to exclude atypical items as listed above. Hardinge believes that when used in conjunction with GAAP measures, Adjusted Gross Profit, which is a non-GAAP measure, assists in the understanding of Hardinge’s operating performance. Actual amounts may differ due to rounding. Q3 2015 Q3 Q4 Q1 Q2 Q3 2011 2012 2013 2014 TTM 2014 2014 2015 2015 2015 Sales $ 341.6 $ 334.4 $ 329.5 $ 311.6 $ 321.3 $ 68.9 $ 93.0 $ 69.1 $ 82.4 $ 76.8 Cost of sales 250.5 237.6 236.2 224.8 230.9 50.2 66.0 50.9 58.9 55.1 Gross profit 91.1 96.8 93.3 86.8 90.4 18.7 27.0 18.2 23.5 21.7 Inventory step-up charge - - 1.9 0.1 - - - - - - Adjusted gross profit $ 91.1 $ 96.8 $ 95.2 $ 86.9 $ 90.4 $ 18.7 $ 27.0 $ 18.2 $ 23.5 $ 21.7 Adjusted gross margin 26.7% 29.0% 28.9% 27.9% 28.1% 27.1% 29.1% 26.4% 28.5% 28.3%
© 2015 Hardinge Inc. www.hardinge.com 17 Annual Adjusted Net Income, Operating Income & Margin and EBITDA & Margin Net Income (Loss) , Operating Income, Operating Margin, EBITDA and EBITDA Margin in 2012, 2013 and 2014 and Q3 2015 TTM were adjusted to exclude atypical items as listed above. Hardinge believes that when used in conjunction with GAAP measures, Adjusted Net Income, Adjusted Operating Income and Adjusted EBITDA, which are non- GAAP measures, assist in the understanding of Hardinge’s operating performance. Actual amounts may differ due to rounding. ($ in millions) 2011 2012 2013 2014 Q3 2015 TTM Net income (loss) 12.0$ 17.9$ 9.9$ (2.1)$ 4.4$ Impairment charges - - 6.2 5.4 - Income from discontinued operations and gain on disposal of discontinued operation, net of tax - - (5.5) (0.2) - Gain on purchase of business - - - (0.5) - Inventory step-up charge - - 1.9 0.1 - Acquisition transaction expenses - 0.2 2.2 0.1 0.1 Restructuring expenses - - - - 0.9 Professional fees for strategic review process - - - - 0.2 Other adjustments - (2.7) 0.2 - - Adjusted net income 12.0 15.4 14.9 2.8 5.6 Plus: Interest expense, net 0.2 0.7 1.0 0.7 0.5 Adjusted income tax expense 4.4 4.3 1.4 1.6 1.9 Adjusted operating income 16.6 20.4 17.3 5.1 8.0 Depreciation and amortization expense 7.7 7.5 9.6 9.8 9.3 Adjusted EBITDA 24.3$ 27.9$ 26.9$ 14.9$ 17.3$ Sales $341.6 $334.4 $329.5 $311.6 321.3$ Adjusted operating margin 4.9% 6.1% 5.3% 1.7% 2.5% Adjusted EBITDA margin 7.1% 8.3% 8.2% 4.8% 5.4%
© 2015 Hardinge Inc. www.hardinge.com 18 Quarterly Adjusted Net (Loss) Income, Operating (Loss) Income & Margin and EBITDA & Margin ($ in millions) Quarterly Net (Loss) Income, Operating (Loss) Income, Operating Margin, EBITDA and EBITDA Margin in Q3 2014, Q4 2014 and Q3 2015 were adjusted to exclude atypical items as listed above. Hardinge believes that when used in conjunction with GAAP measures, Adjusted Net (Loss) Income, Adjusted Operating (Loss) Income and Adjusted EBITDA, which are non-GAAP measures, assist in the understanding of Hardinge’s operating performance. Actual amounts may differ due to rounding. Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Net (loss) income (7.6)$ 4.5$ (1.4)$ 1.6$ (0.3)$ Impairment charges 5.4 - - - - Gain on purchase of business (0.5) - - - - Acquisition transaction expenses - 0.1 - - - Restructuring expenses - - - - 0.9 Professional fees for strategic review process - - - - 0.2 Adjusted net (loss) income (2.7) 4.6 (1.4) 1.6 0.8 Plus: Interest expense, net 0.2 0.2 0.1 0.1 0.1 Adjusted income tax expense (benefit) 0.9 0.4 (0.1) 0.7 0.9 Adjusted operating (loss) income (1.6) 5.2 (1.4) 2.4 1.8 Depreciation and amortization expense 2.3 2.5 2.3 2.2 2.3 Adjusted EBITDA 0.7$ 7.7$ 0.9$ 4.6$ 4.1$ Sales 68.9 93.0 69.1 82.4 76.8 Adjusted operating margin (2.3)% 5.6 % (2.0)% 2.9 % 2.5 % Adjusted EBITDA margin 1.1 % 8.3 % 1.3 % 5.6 % 5.3 %
© 2015 Hardinge Inc. www.hardinge.com 19 Quarterly Financial Appendix Actual amounts may differ due to rounding. (in millions, except per share data) 12/31/2013 3/31/2014 6/30/2014 9/30/2014 12/31/2014 3/31/2015 6/30/2015 9/30/2015 Sales 103.1$ 70.9$ 78.9$ 68.9$ 93.0$ 69.1$ 82.4$ 76.8$ Cost of sales 73.7 51.7 56.9 50.2 66.0 50.9 58.9 55.1 Gross profit 29.4 19.2 22.0 18.7 27.0 18.2 23.5 21.7 Gross profit margin 28.6% 27.1% 27.9% 27.1% 29.1% 26.4% 28.5% 28.3% Selling, general and administrative expenses 21.8 19.1 20.1 20.1 21.7 19.6 21.1 19.9 Restructuring charges - - - - - - - 0.9 Impairment charges 6.2 - - 5.8 - - - - Other expense (income) 0.1 0.4 0.3 (0.3) 0.2 - - 0.2 Income (loss) from operations 1.3 (0.3) 1.6 (6.9) 5.1 (1.4) 2.4 0.7 Operating margin 1.3 % (0.4)% 2.1 % (10.0)% 5.5 % (2.0)% 2.9 % 1.0 % Interest expense, net 0.3 0.2 0.1 0.2 0.2 0.1 0.1 0.1 Income (loss) from continuing operations before income taxes 1.0 (0.5) 1.5 (7.1) 4.9 (1.5) 2.3 0.6 Income tax (benefit) expense (0.1) 0.2 0.2 0.5 0.4 (0.1) 0.7 0.9 Income (loss) from continuing operations 1.1$ (0.7)$ 1.3$ (7.6)$ 4.5$ (1.4)$ 1.6$ (0.3)$ Income from discontinued operations, and gain from disposal of discontinued operation, net of tax 5.0 0.2 - - - - - - Net income (loss) 6.1$ (0.5)$ 1.3$ (7.6)$ 4.5$ (1.4)$ 1.6$ (0.3)$ Basic earnings (loss) per share Continuing operations 0.09$ (0.05)$ 0.11$ (0.60)$ 0.36$ (0.11)$ 0.12$ (0.03)$ Discontinued operations 0.41 0.01 - - - - - - Earnings (loss) per share 0.50$ (0.04)$ 0.11$ (0.60)$ 0.36$ (0.11)$ 0.12$ (0.03)$ Diluted earnings (loss) per share Continuing operations 0.09$ (0.05)$ 0.11$ (0.60)$ 0.35$ (0.11)$ 0.12$ (0.03)$ Discontinued operations 0.41 0.01 - - - - - - Earnings (loss) per share 0.50$ (0.04)$ 0.11$ (0.60)$ 0.35$ (0.11)$ 0.12$ (0.03)$ Cash dividends declared per share 0.02$ 0.02$ 0.02$ 0.02$ 0.02$ 0.02$ 0.02$ 0.02$ Weighted avg. shares outstanding: Basic 12.2 12.5 12.7 12.7 12.7 12.7 12.8 12.8 Weighted avg. shares outstanding: Diluted 12.3 12.5 12.8 12.7 12.8 12.7 12.9 12.8
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