Hardinge Inc. (NASDAQ:HDNG), a leading international provider of
advanced metal-cutting solutions and accessories, reported
financial results for its first quarter ended March 31, 2016.
Net sales (“sales”) for the quarter were $67.8 million, up 1%
from the prior year’s first quarter after excluding the impact of
unfavorable foreign currency translation of $1.9 million.
Non-GAAP(1) adjusted net loss was $0.3 million, or a $0.03 loss per
diluted share, which improved from a $0.7 million adjusted net
loss, or $0.05 loss per diluted share, in the prior-year
period. Net loss was $1.2 million, or a $0.10 loss per
diluted share.
Richard L. Simons, President and Chief Executive Officer,
commented, “Our first quarter results are not particularly telling
of what the year may produce, however our slightly better operating
performance was the result of our cost containment efforts and
restructuring process. Improved sales in Europe and a solid
performance from Asia helped to offset the significant decline in
North America which was impacted by weak industrial markets.
We have a fairly good pipeline of quote activity although it does
not show up in our current quarter order volumes. We expect
that this activity will lead to improving order levels and stronger
results over the next couple of quarters.”
First Quarter Review
Quarterly Sales by Region($ in thousands) |
|
Quarter Ended |
|
March 31, 2016 |
March 31, 2015 |
December 31, 2015 |
Sales to Customers in |
$ |
% of Total |
$ |
Year-over-Year%
Change |
$ |
Sequential%
Change |
North America |
17,450 |
|
|
26 |
% |
26,305 |
|
|
(34 |
)% |
28,431 |
|
|
(39 |
)% |
Europe |
23,843 |
|
|
35 |
% |
22,929 |
|
|
4 |
% |
30,716 |
|
|
(22 |
)% |
Asia |
26,529 |
|
|
39 |
% |
19,894 |
|
|
33 |
% |
27,813 |
|
|
(5 |
)% |
Total |
67,822 |
|
|
69,128 |
|
|
(2 |
)% |
86,960 |
|
|
(22 |
)% |
____________________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._________________(1)Management believes that
the use of non-GAAP measures helps in the understanding of the
Company's operating performance. See page 8 of this release for the
reconciliation tables between reported amounts and non-GAAP
measures discussed in this document.
Sales of $67.8 million increased by 1% year-over-year after
excluding the impact of unfavorable foreign currency translation of
$1.9 million. Asia sales, driven by stronger demand for
machine sales in key end-user markets, increased significantly over
the first quarter of 2015 despite the $1.1 million unfavorable
impact from foreign exchange translation. Sales to Europe
were up 7% over the prior-year period after excluding the $0.8
million negative impact from foreign exchange. European sales
growth was driven by stronger grinding machine sales. Sales
to the North America market decreased over the prior-year period,
reflecting the impact of the industrial economic slowdown on
capital equipment decision making, more than offsetting strength in
Asia and Europe.
Gross profit of $22.7 million increased $0.9 million, or 4%,
compared with the prior-year period. As a percent of sales,
gross margin expanded 1.9 points to 33.5%. Last year’s first
quarter gross profit was negatively impacted by a $0.7 million, or
1.0 point, inventory adjustment. For the 2016 first quarter,
$0.2 million in savings from Company’s restructuring program and a
more favorable product mix contributed to improved gross
margin.
Selling, general and administrative (“SG&A”) expense was up
$1.0 million over the prior-year period, of which approximately
$0.7 million was related to the Company’s previously announced
strategic review process. The remainder of the increase was
primarily due to $1.2 million of increased commission expense
reflecting the mix of sales, which was partially offset by $0.6
million of favorable foreign currency translation impact and $0.4
million of restructuring savings.
To provide greater clarity on the investments made in research
and development (“R&D”), the Company has reclassified R&D
expense from cost of sales to operating expenses, where the costs
are identified as a separate line item. Research and
development expense decreased by $0.3 million to $3.3 million,
compared with the 2015 first quarter, driven by $0.2 million in
savings from the restructuring. As a percentage of sales,
R&D was about 5% in both periods.
Combined, there was $0.8 million of reduced costs from the
restructuring program during the first quarter. The program
from inception has provided a total of $1.2 million in
savings. The restructuring is expected to be completed by the
end of the second quarter of 2016 and to provide total annualized
savings of approximately $4.5 million. As of March 31, 2016,
there were $3.8 million of charges from the restructuring program,
with the expected total cost to be approximately $4.5 million.
Adjusted loss from operations, a non-GAAP measure, improved to a
$0.3 million loss, from a loss of $0.7 million in the first quarter
of 2015. Loss from operations was $1.2 million, compared with
a loss of $1.4 million in the prior-year period.
Quarterly Orders by Region($ in thousands) |
|
Quarter Ended |
|
March 31, 2016 |
March 31, 2015 |
December 31, 2015 |
Orders from Customers in |
$ |
% of Total |
$ |
Year-over-Year%
Change |
$ |
Sequential%
Change |
North America |
23,903 |
|
|
37 |
% |
27,354 |
|
|
(13 |
)% |
24,305 |
|
|
(2 |
)% |
Europe |
17,129 |
|
|
26 |
% |
31,294 |
|
|
(45 |
)% |
20,610 |
|
|
(17 |
)% |
Asia |
23,893 |
|
|
37 |
% |
34,279 |
|
|
(30 |
)% |
29,133 |
|
|
(18 |
)% |
Total |
64,925 |
|
|
92,927 |
|
|
(30 |
)% |
74,048 |
|
|
(12 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net orders (“orders”) of $64.9 million were down from an
unseasonably high order level in the first quarter of 2015, where
two larger orders totaling $10.9 million were received.
Orders for the quarter were negatively impacted by $1.6 million of
foreign currency exchange translation. Order backlog at March
31, 2016 was $100.7 million, which is comparable with backlog at
year-end 2015.
Flexible Balance Sheet
Cash and cash equivalents at March 31, 2016 were $29.3
million, down from $32.8 million at December 31, 2015. Total
debt was $14.0 million, an increase of $2.4 million from
December 31, 2015.
Board Review of Strategic Alternatives
Completed
Hardinge’s Board of Directors has concluded the previously
announced review of strategic alternatives for the Company.
This review, conducted with the support of independent
financial and legal advisors, was deliberate and comprehensive in
its evaluation of potential alternatives. The Company
received indications of interest from a number of financial and
strategic buyers to acquire the Company. After careful
consideration of the results of the process, the Company's current
business strategy, the achievability of near-term operational
improvements, overall economic and marketplace considerations and
the recommendation of the Board’s independent advisors, the Board
of Directors has determined that it is in the best interests of all
of the Company’s stakeholders to conclude the strategic review
process.
The Hardinge Board is committed to maximizing long-term value
for stockholders. Throughout this strategic review process
the Company has used feedback from many parties to better evaluate
Hardinge’s business strategy and operational initiatives. The
Board believes a focus on organic growth and potential
opportunistic acquisitions combined with targeted cost reductions
through incremental operational restructuring plans is the best
current path to enhancing long-term shareholder value.
Mr. Simons commented, “Despite the year long slump in industry
demand, we remain very optimistic about the longer-term
fundamentals of our business. Hardinge's portfolio consists
of high-quality businesses in desirable global locations with
widely-recognized brands. We have a strong balance sheet and
an experienced and capable management team committed to moving the
Company forward. As a result of our thorough strategic review
process, we intend to actively pursue strategies and restructuring
initiatives to enhance shareholder value and to position the
Company so that the value of its business and brands is more fully
realized.
“In addition to the restructuring initiatives identified in
2015, we are aggressively working on plans for further
opportunities to consolidate resources as we manufacture products
and components in the most efficient, cost effective, and customer
supportive facilities around the world. We are very focused
on converting assets into cash to strengthen our balance sheet, and
will opportunistically search for additional acquisitions that can
leverage our global sales, engineering, and manufacturing
footprint.”
John Perrotti, Chairman of Hardinge’s Board of Directors, added,
“After a thorough review of strategic alternatives available to the
Company, we believe executing on these value-enhancing initiatives
is the best path forward to maximize value for all stockholders of
Hardinge. The Board will continue to focus on pursuing
opportunities that will drive the long-term value of the Company
and its platform.”
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 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
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 Tuesday, May 17, 2016. To listen to the
archived call, dial (404) 537-3406 and enter conference ID number
91165203. 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 share and per share data) |
|
|
Three Months Ended |
|
March 31, |
|
|
2016 |
|
|
|
2015 |
|
|
(unaudited) |
|
|
|
|
|
|
Sales |
$ |
67,822 |
|
|
$ |
69,128 |
|
Cost of sales |
|
45,078 |
|
|
|
47,273 |
|
Gross profit |
|
22,744 |
|
|
|
21,855 |
|
Gross profit margin |
|
33.5 |
% |
|
|
31.6 |
% |
|
|
|
|
|
|
Selling, general and
administrative expenses |
|
20,593 |
|
|
|
19,600 |
|
Research &
Development |
|
3,287 |
|
|
|
3,607 |
|
Restructuring |
|
200 |
|
|
— |
|
Other (income) expense,
net |
|
(91 |
) |
|
|
65 |
|
Loss from operations |
|
(1,245 |
) |
|
|
(1,417 |
) |
Operating margin |
|
(1.8 |
)% |
|
|
(2.0 |
)% |
|
|
|
|
|
|
Interest expense |
|
153 |
|
|
|
157 |
|
Interest income |
|
(67 |
) |
|
|
(17 |
) |
Loss before income taxes |
|
(1,331 |
) |
|
|
(1,557 |
) |
Income taxes |
|
(86 |
) |
|
|
(149 |
) |
Net loss |
$ |
(1,245 |
) |
|
$ |
(1,408 |
) |
|
|
|
|
|
|
Per share
data: |
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share: |
$ |
(0.10 |
) |
|
$ |
(0.11 |
) |
Diluted loss per share: |
$ |
(0.10 |
) |
|
$ |
(0.11 |
) |
|
|
|
|
|
|
Cash dividends declared per
share: |
$ |
0.02 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
Weighted avg.
shares outstanding: Basic |
|
12,797 |
|
|
|
12,742 |
|
Weighted avg.
shares outstanding: Diluted |
|
12,797 |
|
|
|
12,742 |
|
|
|
|
|
HARDINGE INC. AND SUBSIDIARIES |
Consolidated Balance Sheets |
(in thousands, except share and per share data) |
|
|
March 31, 2016 |
|
December 31, 2015 |
|
(unaudited) |
|
|
Assets |
|
|
|
Cash and cash equivalents |
$ |
29,285 |
|
|
$ |
32,774 |
|
Restricted cash |
2,163 |
|
|
2,192 |
|
Accounts receivable, net |
49,940 |
|
|
56,945 |
|
Inventories, net |
117,131 |
|
|
110,232 |
|
Other current assets |
10,496 |
|
|
9,314 |
|
Total current assets |
209,015 |
|
|
211,457 |
|
|
|
|
|
Property, plant and equipment,
net |
62,312 |
|
|
62,025 |
|
Goodwill |
6,619 |
|
|
6,620 |
|
Other intangible assets, net |
27,892 |
|
|
28,018 |
|
Other non-current assets |
3,672 |
|
|
3,015 |
|
Total non-current
assets |
100,495 |
|
|
99,678 |
|
Total assets |
$ |
309,510 |
|
|
$ |
311,135 |
|
|
|
|
|
Liabilities and
shareholders’ equity |
|
|
|
Notes payable to bank |
$ |
3,177 |
|
|
$ |
— |
|
Accounts payable |
24,523 |
|
|
24,696 |
|
Accrued expenses |
24,032 |
|
|
27,964 |
|
Customer deposits |
17,932 |
|
|
19,845 |
|
Accrued income taxes |
1,489 |
|
|
1,919 |
|
Deferred income taxes |
2,385 |
|
|
2,164 |
|
Current portion of long-term
debt |
5,456 |
|
|
5,621 |
|
Total current
liabilities |
78,994 |
|
|
82,209 |
|
|
|
|
|
Long-term debt |
5,376 |
|
|
5,985 |
|
Pension and postretirement
liabilities |
56,811 |
|
|
57,322 |
|
Deferred income taxes |
1,225 |
|
|
1,121 |
|
Other liabilities |
3,476 |
|
|
3,393 |
|
Total non-current
liabilities |
66,888 |
|
|
67,821 |
|
Commitments and
contingencies |
|
|
|
Common stock ($0.01 par value,
20,000,000 authorized; 12,861,674 issued and outstanding as of
March 31, 2016, and 12,856,716 issued and 12,838,227 outstanding as
of December 31, 2015) |
128 |
|
|
128 |
|
Additional paid-in capital |
120,539 |
|
|
120,524 |
|
Retained earnings |
87,866 |
|
|
89,368 |
|
Treasury shares (at cost, none as
of March 31, 2016, and 18,489 as of December 31,
2015) |
— |
|
|
(202 |
) |
Accumulated other comprehensive
loss |
(44,905 |
) |
|
(48,713 |
) |
Total shareholders’
equity |
163,628 |
|
|
161,105 |
|
Total liabilities and
shareholders’ equity |
$ |
309,510 |
|
|
$ |
311,135 |
|
|
|
|
|
|
|
|
|
HARDINGE INC. AND SUBSIDIARIES |
Consolidated Statements of Cash
Flows |
(in thousands) |
|
|
Three Months Ended March
31, |
|
2016 |
|
2015 |
|
(unaudited) |
Operating
activities |
|
|
|
Net loss |
$ |
(1,245 |
) |
|
$ |
(1,408 |
) |
Adjustments to reconcile net loss
to net cash (used in) provided by operating activities: |
|
|
|
Depreciation and amortization |
2,017 |
|
|
2,338 |
|
Debt issuance costs
amortization |
32 |
|
|
34 |
|
Deferred income taxes |
(255 |
) |
|
(64 |
) |
(Gain) loss on sale of assets |
(13 |
) |
|
8 |
|
Unrealized foreign currency
transaction (gain) loss |
(225 |
) |
|
1,309 |
|
Changes in operating assets and
liabilities: |
|
|
|
Accounts receivable |
7,613 |
|
|
6,640 |
|
Inventories |
(4,851 |
) |
|
(4,821 |
) |
Other assets |
(595 |
) |
|
(2,629 |
) |
Accounts payable |
(514 |
) |
|
2,083 |
|
Customer deposits |
(2,170 |
) |
|
3,378 |
|
Accrued expenses |
(5,177 |
) |
|
(3,021 |
) |
Accrued pension and postretirement
liabilities |
(20 |
) |
|
(34 |
) |
Net cash (used in) provided by
operating activities |
(5,403 |
) |
|
3,813 |
|
|
|
|
|
Investing
activities |
|
|
|
Capital expenditures |
(436 |
) |
|
(699 |
) |
Proceeds from sales of assets |
32 |
|
|
— |
|
Net cash used in investing
activities |
(404 |
) |
|
(699 |
) |
|
|
|
|
Financing
activities |
|
|
|
Proceeds from short-term notes
payable to bank |
18,172 |
|
|
10,212 |
|
Repayments of short-term notes
payable to bank |
(14,995 |
) |
|
(10,088 |
) |
Repayments of long-term debt |
(1,010 |
) |
|
(1,458 |
) |
Dividends paid |
(274 |
) |
|
(255 |
) |
Net cash provided by (used in)
financing activities |
1,893 |
|
|
(1,589 |
) |
|
|
|
|
Effect of exchange rate
changes on cash |
425 |
|
|
482 |
|
Net (decrease) increase in
cash |
(3,489 |
) |
|
2,007 |
|
|
|
|
|
Cash and cash equivalents
at beginning of period |
32,774 |
|
|
16,293 |
|
|
|
|
|
Cash and cash equivalents
at end of period |
$ |
29,285 |
|
|
$ |
18,300 |
|
|
|
|
|
|
|
|
|
Hardinge believes that providing non-GAAP financial measures
such as adjusted gross profit, adjusted loss from operations,
adjusted 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 Gross Profit to
Non-GAAP Adjusted Gross Profit |
(in thousands) |
|
|
Three Months Ended March 31,
2016 |
|
Three Months Ended March 31,
2015 |
|
Amount |
|
% of Sales |
|
Amount |
|
% of Sales |
|
|
|
|
|
|
|
|
Gross profit as
reported |
$ |
22,744 |
|
|
33.5 |
% |
|
$ |
21,855 |
|
|
31.6 |
% |
Adjustments to reported
gross profit: |
|
|
|
|
|
|
|
Inventory adjustment |
— |
|
|
— |
|
|
679 |
|
|
0.9 |
% |
Non-GAAP gross profit
as adjusted |
$ |
22,744 |
|
|
33.5 |
% |
|
$ |
22,534 |
|
|
32.5 |
% |
|
|
|
|
|
|
|
|
HARDINGE INC. AND SUBSIDIARIES |
Reconciliation of GAAP Loss from Operations to
Non-GAAP Adjusted Loss from Operations |
(in thousands) |
|
|
Three Months Ended March 31,
2016 |
|
Three Months Ended March 31,
2015 |
|
Amount |
|
% of Sales |
|
Amount |
|
% of Sales |
|
|
|
|
|
|
|
|
Loss from operations as
reported |
$ |
(1,245 |
) |
|
(1.8 |
)% |
|
$ |
(1,417 |
) |
|
(2.0 |
)% |
Adjustments to reported
loss from operations: |
|
|
|
|
|
|
|
Restructuring charges |
200 |
|
|
0.3 |
|
|
— |
|
|
— |
|
Professional fees for strategic
review process |
699 |
|
|
1.0 |
|
|
35 |
|
|
0.1 |
|
Inventory adjustment |
— |
|
|
— |
|
|
679 |
|
|
0.9 |
% |
Non-GAAP loss from
operations as adjusted |
$ |
(346 |
) |
|
(0.5 |
)% |
|
$ |
(703 |
) |
|
(1.0 |
)% |
|
|
|
|
|
|
|
|
HARDINGE INC. AND SUBSIDIARIES |
Reconciliation of GAAP Net Loss to Non-GAAP
Adjusted Net Loss |
(in thousands, except per share data) |
|
|
Three Months Ended March 31,
2016 |
|
Three Months Ended March 31,
2015 |
|
Amount |
|
EPS |
|
Amount |
|
EPS |
|
|
|
|
|
|
|
|
Net loss as
reported |
$ |
(1,245 |
) |
|
$ |
(0.10 |
) |
|
$ |
(1,408 |
) |
|
$ |
(0.11 |
) |
Adjustments to reported
net loss, net of taxes: |
|
|
|
|
|
|
|
Restructuring charges |
200 |
|
|
0.02 |
|
|
— |
|
|
— |
|
Professional fees for strategic
review process |
699 |
|
|
0.05 |
|
|
35 |
|
|
— |
|
Inventory adjustment |
— |
|
|
— |
|
|
679 |
|
|
0.06 |
|
Non-GAAP net income as
adjusted |
$ |
(346 |
) |
|
$ |
(0.03 |
) |
|
$ |
(694 |
) |
|
$ |
(0.05 |
) |
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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