Results of Operations
Presented below is summarized selected financial data for the
three and six
months ended
June 30, 2016
and
2015
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
$
Change
|
|
%
Change
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
2016
|
|
2015
|
|
$
Change
|
|
%
Change
|
Sales
|
|
$
|
70,186
|
|
|
$
|
82,356
|
|
|
$
|
(12,170
|
)
|
|
(15
|
)%
|
|
$
|
138,007
|
|
|
$
|
151,484
|
|
|
$
|
(13,477
|
)
|
|
(9
|
)%
|
Gross profit
|
|
23,553
|
|
|
26,962
|
|
|
(3,409
|
)
|
|
(13
|
)%
|
|
46,296
|
|
|
48,817
|
|
|
(2,521
|
)
|
|
(5
|
)%
|
% of sales
|
|
33.6
|
%
|
|
32.7
|
%
|
|
0.9
|
|
pts.
|
|
33.5
|
%
|
|
32.2
|
%
|
|
1.3
|
|
pts.
|
Selling, general and administrative expenses
|
|
19,637
|
|
|
21,071
|
|
|
(1,434
|
)
|
|
(7
|
)%
|
|
40,230
|
|
|
40,671
|
|
|
(441
|
)
|
|
(1
|
)%
|
% of sales
|
|
28.0
|
%
|
|
25.6
|
%
|
|
2.4
|
|
pts.
|
|
29.2
|
%
|
|
26.8
|
%
|
|
2.4
|
|
pts.
|
Research & development
|
|
3,369
|
|
|
3,498
|
|
|
(129
|
)
|
|
(4
|
)%
|
|
6,656
|
|
|
7,105
|
|
|
(449
|
)
|
|
(6
|
)%
|
Restructuring
|
|
226
|
|
|
—
|
|
|
226
|
|
|
100
|
%
|
|
426
|
|
|
—
|
|
|
426
|
|
|
100
|
%
|
Other expense (income), net
|
|
20
|
|
|
10
|
|
|
10
|
|
|
100
|
%
|
|
(72
|
)
|
|
75
|
|
|
(147
|
)
|
|
(196
|
)%
|
Income (loss) from operations
|
|
301
|
|
|
2,383
|
|
|
(2,082
|
)
|
|
(87
|
)%
|
|
(944
|
)
|
|
966
|
|
|
(1,910
|
)
|
|
(198
|
)%
|
% of sales
|
|
0.4
|
%
|
|
2.9
|
%
|
|
(2.5
|
)
|
pts.
|
|
(0.7
|
)%
|
|
0.6
|
%
|
|
(1.3
|
)
|
pts.
|
Interest expense, net
|
|
63
|
|
|
131
|
|
|
(68
|
)
|
|
(52
|
)%
|
|
149
|
|
|
271
|
|
|
(122
|
)
|
|
(45
|
)%
|
Income (loss) before income taxes
|
|
238
|
|
|
2,252
|
|
|
(2,014
|
)
|
|
(89
|
)%
|
|
(1,093
|
)
|
|
695
|
|
|
(1,788
|
)
|
|
(257
|
)%
|
Income tax expense
|
|
93
|
|
|
666
|
|
|
(573
|
)
|
|
(86
|
)%
|
|
8
|
|
|
517
|
|
|
(509
|
)
|
|
(98
|
)%
|
Net income (loss)
|
|
$
|
145
|
|
|
$
|
1,586
|
|
|
$
|
(1,441
|
)
|
|
(91
|
)%
|
|
$
|
(1,101
|
)
|
|
$
|
178
|
|
|
$
|
(1,279
|
)
|
|
(719
|
)%
|
% of sales
|
|
0.2
|
%
|
|
1.9
|
%
|
|
(1.7
|
)
|
pts.
|
|
(0.8
|
)%
|
|
0.1
|
%
|
|
(0.9
|
)
|
pts.
|
Sales
. The table below summarizes sales by each corresponding geographical region for the
three and six
months ended
June 30, 2016
compared to the same period in
2015
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
2016
|
|
2015
|
|
$ Change
|
|
% Change
|
|
2016
|
|
2015
|
|
$ Change
|
|
% Change
|
Sales to customers in:
|
North America
|
$
|
20,694
|
|
|
$
|
29,073
|
|
|
$
|
(8,379
|
)
|
|
(29)%
|
|
$
|
38,144
|
|
|
$
|
55,378
|
|
|
$
|
(17,234
|
)
|
|
(31)%
|
Europe
|
22,242
|
|
|
22,055
|
|
|
187
|
|
|
1%
|
|
46,084
|
|
|
44,984
|
|
|
1,100
|
|
|
2%
|
Asia and other
|
27,250
|
|
|
31,228
|
|
|
(3,978
|
)
|
|
(13)%
|
|
53,779
|
|
|
51,122
|
|
|
2,657
|
|
|
5%
|
Total
|
$
|
70,186
|
|
|
$
|
82,356
|
|
|
$
|
(12,170
|
)
|
|
(15)%
|
|
$
|
138,007
|
|
|
$
|
151,484
|
|
|
$
|
(13,477
|
)
|
|
(9)%
|
Sales for the
three
months ended
June 30, 2016
were
$70.2 million
, a decrease of
$12.2 million
, or
14.8%
, compared to the same period in
2015
. The decrease in sales was driven by lower demand in the industrial markets in North America and Asia, in addition to unfavorable foreign currency translation of $1.6 million. Excluding the translation impact, the decline in sales would have been 12.9%.
Sales for the
six
months ended
June 30, 2016
were
$138.0 million
, a decrease of
$13.5 million
, or
8.9%
, compared to the same period in
2015
. The decrease in sales was driven by continued lower demand in the industrial markets in North America, partially offset by modest growth in Europe and Asia. Foreign currency translation was unfavorable by $3.5 million. Excluding the translation impact, the decline in sales would have been 6.6%
North America sales were
$20.7 million
and
$38.1 million
during the
three and six
months ended
June 30, 2016
, respectively, a
decrease
of
$8.4 million
, or
29%
, and
$17.2 million
, or
31%
, when compared to the same periods in
2015
. The decreases in sales were mainly the result of lower sales from the Metalcutting Machine Solutions segment as compared to the prior year due to lower demand for capital goods in that market, as also exhibited in industry published data.
Europe sales were
$22.2 million
and
$46.1 million
during the
three and six
months ended
June 30, 2016
, respectively, an increase of
$0.2 million
, or
0.8%
, and
$1.1 million
, or
2.4%
, when compared to the same periods in
2015
. Foreign currency translation adjustments for the
three and six
months ended
June 30, 2016
resulted in an unfavorable impact of approximately of
$0.3 million
and
$1.1 million
to sales. Excluding the impact of translation, sales growth was
$0.4 million
, or
2.2%
, and
$2.2 million
, or
4.9%
, for the
three and six
months ended
June 30, 2016
, respectively, compared to the same prior periods. Virtually all of the increase was in the Metalcutting Machine Solutions segment.
Asia and other sales were
$27.3 million
and
$53.8 million
during the
three and six
months ended
June 30, 2016
, respectively, a decrease of
$4.0 million
, or
12.7%
, and an increase of
$2.7 million
, or
5.2%
, when compared to the same periods in
2015
. Foreign currency translation adjustments for the
three and six
months ended
June 30, 2016
resulted in an unfavorable impact of approximately
$1.3 million
and
$2.4 million
. Excluding the impact of translation, the sales decline was
$2.6 million
, or
8.6%
for the the three months ended June 30, 2016 compared to the same prior year period, while sales increased
$5.1 million
, or
10.0%
for the six months ended
June 30, 2016
compared to the prior period. Demand from customers in China is the key driver of the performance of the machine tool industry, and while recent machine tool industry data from China has continued to be subdued, Hardinge has been able to perform better in the market based upon targeting customer segments that provide better opportunities for growth.
Sales of machines accounted for approximately
66%
of the consolidated sales for the
three and six
months ended
June 30, 2016
and
2015
, while sales of non-machine products and services, primarily consisting of collets, chucks, accessories, repair parts, and service revenue, accounted for approximately
34%
of the consolidated sales for the
three and six
months ended
June 30, 2016
and
2015
.
Gross Profit.
Gross profit was
$23.6 million
, or
33.6%
of sales for the
three
months ended
June 30, 2016
, compared to
$27.0 million
, or
32.7%
of sales for the same period in
2015
. The primary factor to reduced gross profit was the impact of lower sales volume, partially offset by
$0.3 million
in savings from the Company’s 2015 restructuring actions. The improvement in gross margin percent was due to improved product mix and the restructuring savings, partially offset by the impact of lower volume over fixed manufacturing costs.
Gross profit was
$46.3 million
or
33.5%
of sales for the
six
months ended
June 30, 2016
, compared to
$48.8 million
or
32.2%
of sales for the same period in
2015
. Gross profit and margin for the
six
months ended
June 30, 2016
was impacted by lower volume, partially offset by
$0.6 million
in savings from the Company’s restructuring program, as well as the non-recurrence of an out of period inventory adjustment of
$0.7 million
recorded in the first quarter of
2015
at one of our European subsidiaries to correct for costs that were not properly released from inventory as the product was sold.
Selling, General and Administrative Expenses.
Selling, general and administrative (“SG&A”) expenses were
$19.6 million
, or
28.0%
of sales for the
three
months ended
June 30, 2016
, a decrease of
$1.4 million
, or
7%
, compared to
$21.1 million
, or
25.6%
of sales for the
three
months ended
June 30, 2015
. The decrease of $1.4 million in SG&A expenses for the three months ended June 30, 2016 was driven by reduced commission expense of $0.6 million, a favorable impact from currency translation of $0.5 million and savings from the Company’s restructuring program of $0.4 million. These savings were offset by $0.4 million in costs associated with the Company’s strategic review process and $0.2 million in costs related to the restructuring program.
SG&A expenses were
$40.2 million
, or
29.2%
of sales for the
six
months ended
June 30, 2016
, down $0.5 million, or 1% compared to
$40.7 million
, or
25.6%
of sales for the
six
months ended
June 30, 2015
. The decrease in SG&A expenses of $0.5 million for the six months ended June 30, 2016 was driven by the favorable impact $1.2 million in foreign currency translation, a
$0.8 million
savings from the Company’s restructuring program, and $0.4 million in savings based on timing of trade shows. These savings were offset by $1.1 million in costs associated with the Company’s strategic review process and $0.4 million in cost related to the restructuring program, and an increase in commission expense of $0.6 million.
Research and Development Expenses.
Research and Development ("R&D") expenses were
$3.4 million
, or
4.8%
of sales for the
three
months ended
June 30, 2016
, relatively flat compared to
$3.5 million
, or
4.2%
of sales for the
three
months ended
June 30, 2015
. For the quarter,
$0.2 million
of savings resulted from the restructuring program.
R&D expenses were
$6.7 million
, or
4.8%
of sales for the
six
months ended
June 30, 2016
, a decrease of
$0.4 million
, or
6.3%
compared to
$7.1 million
, or
4.7%
of sales for the
six
months ended
June 30, 2015
. For the year,
$0.4 million
of savings resulted from the restructuring program.
Other (Income)Expense, Net.
Net other expense increased by
$0.01 million
for the
three
months ended
June 30, 2016
compared to the same period in 2015 while net other income for the
six
months ended
June 30, 2016
increased
$0.1 million
when compared to the same period in 2015. Variances are primarily a result of fluctuations in foreign currency exchange rates during the periods as compared to the same periods in
2015
.
Income (Loss) Before Income Taxes
. As a result of the foregoing, income before income taxes was
$0.2 million
for the
three
months ended
June 30, 2016
, compared to income before income taxes of
$2.3 million
for the same period in
2015
. For the
six
months ended
June 30, 2016
, loss before income taxes was
$1.1 million
compared to income before income taxes of
$0.7 million
for the same period in
2015
.
Income Taxes.
The income tax provision was
$0.1 million
and
$0.01 million
for the
three and six
months ended
June 30, 2016
, compared to an income tax provision of
$0.7 million
and
$0.5 million
for the same periods in
2015
. The effective tax rate was
39.1%
and
(0.7)%
for the
three and six
months ended
June 30, 2016
, compared to
29.6%
and
74.4%
for the same periods in
2015
, which differs from the U.S. statutory rate primarily due to the mix of earnings by country and by the non-recognition of tax benefits for certain entities in a loss position for which a full valuation allowance has been recorded.
Each quarter, an estimate of the full year tax rate is developed based upon anticipated annual results and an adjustment is made, if required, to the year-to-date income tax expense to reflect the full year anticipated effective tax rate.
We continue to maintain a valuation allowance on all or a portion of the tax benefits of our U.S., Canada, U.K., Germany, and the Netherlands net deferred tax assets and we expect to continue to record a full valuation allowance on future tax benefits until an appropriate level of profitability is sustained in the respective jurisdiction.
Net Income (Loss).
As a result of the foregoing, net income for the
three
months ended
June 30, 2016
was
$0.1 million
, or
0.2%
of sales, compared to
$1.6 million
, or
1.9%
of sales, for the same period in
2015
. Net loss for the
six
months ended
June 30, 2016
was
$1.1 million
, or
0.8%
of sales, compared to net income of
$0.2 million
, or
0.1%
of sales, for the same period in
2015
. Both basic and diluted income (loss) per share for the
three and six
months ended
June 30, 2016
were
$0.01
and
$(0.09)
, compared to
$0.12
and
$0.01
for the same periods in
2015
.
Business Segment Information — Comparison of the
three and six
months ended
June 30, 2016
and
2015
Metalcutting Machine Solutions Segment (MMS) (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
2016
|
|
2015
|
|
$ Change
|
|
% Change
|
|
2016
|
|
2015
|
|
$ Change
|
|
% Change
|
Sales
|
$
|
54,359
|
|
|
$
|
66,210
|
|
|
$
|
(11,851
|
)
|
|
(18
|
)%
|
|
$
|
106,630
|
|
|
$
|
119,186
|
|
|
$
|
(12,556
|
)
|
|
(11
|
)%
|
Segment income (loss)
|
276
|
|
|
1,743
|
|
|
(1,467
|
)
|
|
(84
|
)%
|
|
(880
|
)
|
|
834
|
|
|
(1,714
|
)
|
|
(206
|
)%
|
MMS sales were
$54.4 million
for the
three
months ended
June 30, 2016
, a decrease of
$11.9 million
, or
18%
when compared to the corresponding period in
2015
. After considering the $1.6 million of unfavorable impact of foreign currency translation adjustments, sales would have decreased by $10.3 million or 16%. Declines were exhibited in all machine product lines, primarily due to the uncertainty in the global industrial markets for capital goods. For the
six
months ended
June 30, 2016
, MMS sales were
$106.6 million
, a decrease of
$12.6 million
, or
11%
, when compared to the same period in 2015 primarily due to the uncertainty in global industrial markets. After considering the $3.4 million of unfavorable impact of foreign currency translation adjustments, sales would have decreased by $9.2 million or 8%.
Segment income for the
three
months ended
June 30, 2016
was
$0.3 million
, a decrease of
$1.5 million
, or
84%
when compared to the prior year. The key driver was the impact of lower volume, partially offset by lower spending in manufacturing and SG&A and $0.2 million of savings from the restructuring program.
For the
six
months ended
June 30, 2016
, segment loss was
$0.9 million
, a decrease of
$1.7 million
, or
206%
, when compared to segment income of
$0.8 million
in the same period 2015. The primary driver was the impact of reduced volume, partially offset by reductions in manufacturing and SG&A costs and $0.4 million of savings from the restructuring program.
Aftermarket Tooling and Accessories Segment (ATA)
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
2016
|
|
2015
|
|
$ Change
|
|
% Change
|
|
2016
|
|
2015
|
|
$ Change
|
|
% Change
|
Sales
|
$
|
15,883
|
|
|
$
|
16,672
|
|
|
$
|
(789
|
)
|
|
(5
|
)%
|
|
$
|
31,504
|
|
|
$
|
32,899
|
|
|
$
|
(1,395
|
)
|
|
(4
|
)%
|
Segment income
|
1,641
|
|
|
1,857
|
|
|
(216
|
)
|
|
(12
|
)%
|
|
3,495
|
|
|
3,054
|
|
|
441
|
|
|
14
|
%
|
ATA sales for the
three
months ended
June 30, 2016
were
$15.9 million
, a decrease of
$0.8 million
, or
5%
, when compared to the corresponding period in
2015
. The primary driver of the decline in sales was lower sales in Europe offset by growth in North America and Asia. For the six months ended June 30, 2016, ATA sales were $31.5 million, a decrease of $1.4 million, or 4%, when compared to the same period in 2015. The decline in sales for the same and year to date, was primarily due to 22% and 16% respectively of lower sales in Europe, while sales to Asia increased by 8% and 12% respectively.
Segment income for the
three
months ended
June 30, 2016
was
$1.6 million
, a $0.2 million, or
12%
decrease from the prior year. The ATA segment experienced decreased profitability as a result of the decline is sales volume, partially offset by $0.7 million in savings from the restructuring program, reduced by $0.2 million of cost to implement. For the six months ended June 30, 2016, segment income was $3.5 million, an increase of $0.4 million or 14%, when compared to segment income of $3.1 million in the same period 2015. The primary driver of this increase is $1.4 million in savings from the restructuring program, reduced by $0.4 million of cost to implement, in addition to the non-recurrence of an out of period inventory adjustment of $0.7 million at one of our European subsidiaries to correct for costs that were not properly released from inventory as the product was sold in 2015. This was partially offset by the impact of lower sales volume.
Segment Summary For the
Three and Six
Months Ended
June 30, 2016
and
2015
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended June 30, 2016
|
|
Three Months Ended June 30, 2015
|
|
MMS
|
|
ATA
|
|
Inter-Segment
Eliminations
|
|
Total
|
|
MMS
|
|
ATA
|
|
Inter-Segment
Eliminations
|
|
Total
|
Sales
|
$
|
54,359
|
|
|
$
|
15,883
|
|
|
$
|
(56
|
)
|
|
$
|
70,186
|
|
|
$
|
66,210
|
|
|
$
|
16,672
|
|
|
$
|
(526
|
)
|
|
$
|
82,356
|
|
Segment income
|
276
|
|
|
1,641
|
|
|
|
|
|
1,917
|
|
|
1,743
|
|
|
1,857
|
|
|
|
|
|
3,600
|
|
Unallocated corporate
expense
|
|
|
|
|
|
|
|
|
|
(1,616
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,068
|
)
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
(63
|
)
|
|
|
|
|
|
|
|
|
|
|
(131
|
)
|
Other unallocated
expense
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
(149
|
)
|
Income before
income taxes
|
|
|
|
|
|
|
|
|
|
$
|
238
|
|
|
|
|
|
|
|
|
$
|
2,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2016
|
|
Six Months Ended June 30, 2015
|
|
MMS
|
|
ATA
|
|
Inter-Segment
Eliminations
|
|
Total
|
|
MMS
|
|
ATA
|
|
Inter-Segment
Eliminations
|
|
Total
|
Sales
|
$
|
106,630
|
|
|
$
|
31,504
|
|
|
$
|
(127
|
)
|
|
$
|
138,007
|
|
|
$
|
119,186
|
|
|
$
|
32,899
|
|
|
$
|
(601
|
)
|
|
$
|
151,484
|
|
Segment (loss) income
|
(880
|
)
|
|
3,495
|
|
|
|
|
2,615
|
|
|
834
|
|
|
3,054
|
|
|
—
|
|
|
3,888
|
|
Unallocated corporate
expense
|
|
|
|
|
|
|
|
|
|
(3,559
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,771
|
)
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
(149
|
)
|
|
|
|
|
|
|
|
|
|
|
(271
|
)
|
Other unallocated
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(151
|
)
|
(Loss) income before
income taxes
|
|
|
|
|
|
|
|
|
|
$
|
(1,093
|
)
|
|
|
|
|
|
|
|
$
|
695
|
|
Summary of Cash Flows for the
Six Months Ended
June 30, 2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2016
|
|
2015
|
|
Net cash (used in) provided by operating activities
|
|
$
|
(6,039
|
)
|
|
$
|
10,547
|
|
|
Net cash used in investing activities
|
|
$
|
(955
|
)
|
|
$
|
(1,982
|
)
|
|
Net cash used in financing activities
|
|
$
|
(2,579
|
)
|
|
$
|
(3,090
|
)
|
|
During the
six
months ended
June 30, 2016
, we used
$6.0 million
net cash from operating activities. The net cash used was driven by a net loss (as adjusted for depreciation and amortization expense as well as the impact of unrealized foreign currency transaction loss), an increase in inventory based on orders and associated production levels, and decreases in accounts payable due to timing of purchases and payment activity, customer deposits due to timing of shipments and new orders received, and accrued expenses, primarily as a result of payment of annual incentive compensation, severance pay related to restructuring, sales commission payable, as well as the payment of the annual Company contribution to the 401(k) Plan. These uses of cash were partially offset by cash generated from a reduction in customer accounts receivable due to the timing of sales and collection activity.
During the
six
months ended
June 30, 2015
, we generated
$10.5 million
net cash from operating activities. The net cash generated was driven by net income (as adjusted for depreciation and amortization expense as well as the impact of unrealized foreign currency transaction loss), a decrease in customer receivables due to the timing of sales and collection activity, an increase in customer deposits due to timing of shipments and new orders received, and an increase in accounts payable due to timing of purchases and payment activity. These cash inflows were partially offset by an increase in inventories based on orders and associated production levels, a decrease in accrued expenses, primarily as a result of payment of annual bonuses as well as the payment of the annual Company contribution to the 401(k) Plan, and an increase in other assets related to advanced vendor payments for inventory.
Net cash used in investing activities was
$1.0 million
for the
six
months ended
June 30, 2016
. The primary use of cash was for capital expenditures during the period, which were made primarily for maintenance capital purchases.
Net cash used in investing activities was
$2.0 million
for the
six
months ended
June 30, 2015
. The primary use of cash was for capital expenditures, which were made primarily for maintenance capital purchases.
Net cash flow used in financing activities was
$2.6 million
for the
six
months ended
June 30, 2016
. Cash used was primarily attributable to
$2.3 million
of payments on long-term debt due to normal scheduled payment activity and year-to-date dividends paid of
$0.5 million
, offset by
$0.2 million
of short-term borrowings during the period.
Net cash flow used by financing activities was
$3.1 million
for the
six
months ended
June 30, 2015
. Cash used by financing activities was primarily driven by
$2.4 million
of payments on long-term debt due to normal scheduled payment activity and year-to-date dividends paid of
$0.5 million
.
Liquidity and Capital Resources
We maintain financing arrangements with several financial institutions. These financing arrangements are in the form of long term loans, credit facilities, and lines of credit. The credit facilities allow us to borrow up to
$77.6 million
at
June 30, 2016
and
$77.2 million
at
December 31, 2015
, of which
$54.3 million
and
$54.1 million
, respectively, can be borrowed for working capital needs. As of
June 30, 2016
and
December 31, 2015
,
$69.2 million
and
$69.8 million
was available for borrowing under these respective arrangements, of which
$51.6 million
and
$53.2 million
, respectively, was available for working capital needs. Total consolidated borrowings outstanding were
$9.7 million
and
$11.6 million
at
June 30, 2016
and
December 31, 2015
, respectively.
Our financing arrangements contain certain debt covenant requirements, including financial covenants, representations, affirmative and negative covenants, prepayment provisions and events of default. As of
June 30, 2016
, we were in compliance with all of our debt covenants.
Our liquidity requirements primarily include funding for operations, including working capital requirements, and funding for capital investments and acquisitions. We expect to meet these requirements in the long term through cash provided by operating activities and availability under various credit facilities and other financing arrangements. Cash flows from operating activities are primarily driven by earnings before non-cash charges and change in working capital needs. During the
six
months ended
June 30, 2016
, cash flows from operating activities and available cash were sufficient to fund our normal investment activities, primarily capital expenditures for property, plant and equipment and other productive assets.
We assess on an ongoing basis our portfolio of operations, as well as our financial and capital structures, to ensure we have sufficient capital and liquidity to meet our strategic objectives. As part of this process, from time to time we evaluate and pursue acquisition opportunities that we believe will enhance our strategic position.
Accounting Guidance Not Yet Adopted
We are currently assessing the financial impact to our consolidated financial statements of accounting guidance not yet adopted. For further information on accounting guidance not yet adopted, refer to
Note 16. "New Accounting Standards"
of the Consolidated Financial Statements.
Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Accordingly, there can be no assurance that our expectations will be realized. Such statements are based upon information known to management at this time. The Company cautions that such statements necessarily involve uncertainties and risk and deal with matters beyond the Company’s ability to control, and in many cases the Company cannot predict what factors would cause actual results to differ materially from those indicated. Among the many factors that could cause actual results to differ from those set forth in the forward-looking statements are 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, competitors’ actions such as price discounting or new product introductions, governmental regulations and environmental matters, changes in the availability and cost of materials and supplies, the implementation of new technologies and currency fluctuations. Any forward-looking statement should be considered in light of these factors. The Company undertakes no obligation to revise its forward-looking statements if unanticipated events alter their accuracy.