Hardinge Inc. (NASDAQ:HDNG), a leading international provider of
advanced metal-cutting solutions and accessories, reported
financial results for its fourth quarter and year ended
December 31, 2016.
- Orders for the fourth quarter increased 22% to $90.4 million
compared with the prior-year period on strength in all regions:
Europe up 37%, Asia up 26% and North America up 4%
- Sales for the quarter were $86.8 million and demonstrated a
measurable improvement over the previous three quarters of
2016
- Net income for the quarter was $3.7 million, or $0.29 per
diluted share; Non-GAAP(1) adjusted net income was $4.1 million, or
$0.31 per diluted share
Richard L. Simons, President and Chief Executive Officer,
commented, “We ended 2016 in a much better position than where we
started. Market conditions are improving with the order trend
in the second half of 2016 healthier than the first half. The
restructuring program we worked on most of the year has also proven
successful. It was accomplished on time and on budget and,
importantly, is achieving our cost reduction goals.”
He concluded, “Based on our strong backlog and favorable
outlook, we expect sales to moderately improve in 2017.
Additionally, we are confident that the effects of our
restructuring program will be demonstrated in our financial
results.”
Sales, Orders and Backlog for the Quarter and Full
Year
(Please refer to the Sales and Orders tables included in this
release)
North America: Market conditions in the U.S. have begun to
improve. North America sales were up 5% in the quarter, while
orders increased by 4%. For the full year, sales were down
15% reflecting the weak industrial economy over the last two
years. Orders, however, improved by 3% over 2015 as the
inquiry activity in the U.S. was higher in the second half of
2016.
Europe: Political uncertainty in Europe contributed to a
12% decline in sales during the fourth quarter. For the full
year, Europe sales were down 6%. Excluding the $2.0 million
negative impact from foreign currency translation, sales were down
4% in 2016. Encouragingly, orders in the fourth quarter
increased by 37%. For the full year, orders were down 5%,
partly due to unfavorable foreign currency effect.
Asia: While Asia’s rate of economic growth remains softer
than it has in the past, activity in the second half of 2016 also
strengthened in this market. Fourth quarter sales improved by
8%. The Company believes the increase was related to the
positive impact of its focus on industries and customers that favor
high-precision products and custom solutions combined with
improving market conditions. Orders for the quarter of $36.8
million, up 26% over the prior-year period, reached their highest
level since 2011. Sales to Asia for the full year 2016 were
relatively unchanged and orders for the full year were down 3%;
however, after adjusting for the impact of foreign exchange, both
sales and orders increased in 2016.
Consolidated Backlog: Order backlog at December 31, 2016
was $117.0 million, down slightly from the end of the trailing
third quarter, but up 15% over the December 31, 2015 backlog.
Fourth Quarter Operating Results (comparisons
are to the prior-year period except where noted)
- Gross profit for the quarter was $28.1 million, or 32.4% of
sales, down from the prior-year period due to the mix of sales
which included fewer specialized machine tool solutions
- Selling, general and administrative (“SG&A”) expense
declined $1.3 million, or 6%, from savings realized from the
recently completed restructuring program and the favorable impact
of foreign exchange
- Income from operations was $5.0 million. On a non-GAAP(1)
adjusted basis, income from operations was $5.3 million compared
with $6.3 million last year. As a percent of sales, adjusted
income from operations was 6.1%.
2016 Full Year Review (comparisons are to the
prior-year period except where noted)
- Gross margin of 33.4% was relatively unchanged - The
impact of lower sales volume and less favorable product mix was
more than offset by reduced costs
- SG&A was down $1.6 million to $79.6 million -
SG&A had a favorable foreign currency impact of approximately
$2.1 million and was unfavorably impacted by $1.8 million in
additional expenses related to severance and the Company’s
strategic review initiative - Excluding those aforementioned
items, 2016 SG&A decreased by $1.3 million, mostly as
a result of savings from the recently completed restructuring
program
- Restructuring expenses in 2016 were $0.7 million compared with
$3.6 million in 2015.
- Income from operations was $3.4 million. Non-GAAP(1)
adjusted income from operations declined on lower sales to $6.6
million, or 2.2% of sales, compared with $9.9 million, or 3.1% of
sales, in 2015.
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. Supplemental slides will be made available on
Hardinge’s website at http://ir.hardinge.com/events.cfm.
The conference call can be accessed by calling (201)
689-8560. The listen-only audio webcast can be monitored at
http://ir.hardinge.com/events.cfm.
A telephonic replay will be available from 2:00 p.m. ET today
through Thursday, February 16, 2017. To listen to the
archived call, dial (412) 317-6671 and enter conference ID number
13654118. Alternatively, the archive can be heard on the
Company’s website at http://ir.hardinge.com/events.cfm. A
transcript will also be posted to the website, once available.
About Hardinge
Hardinge is a leading global designer and manufacturer of high
precision, computer-controlled machine tool solutions developed for
critical, hard-to-machine metal parts and of technologically
advanced workholding accessories. The Company’s strategy is
to leverage its global brand strength to further penetrate global
market opportunities where customers will benefit from the
technologically advanced, high quality, reliable products Hardinge
produces. With approximately two-thirds of its sales outside
of North America, Hardinge serves the worldwide metal working
market. Hardinge’s machine tool and accessory solutions can
also be found in a broad base of industries to include aerospace,
agricultural, automotive, construction, consumer products, defense,
energy, medical, technology and transportation.
Hardinge applies its engineering design and manufacturing
expertise in high performance machining centers, high-end
cylindrical and jig grinding machines, SUPER-PRECISION® and
precision CNC lathes and technologically advanced workholding
accessories. Hardinge has manufacturing operations in China,
France, Germany, India, Switzerland, Taiwan, the United Kingdom and
the United States.
The Company regularly posts information on its website:
http://www.hardinge.com.
Safe Harbor Statement
This news release contains forward-looking statements (within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended). Such statements are based on management's current
expectations that involve risks and uncertainties. Any statements
that are not statements of historical fact or that are about future
events may be deemed to be forward-looking statements. For example,
words such as "may," "will," "should," "estimates," "predicts,"
"potential," "continue," "strategy," "believes," "anticipates,"
"plans," "expects," "intends," and similar expressions are intended
to identify forward-looking statements. The Company's actual
results or outcomes and the timing of certain events may differ
significantly from those discussed in any forward-looking
statements. The Company undertakes no obligation to publicly update
any forward-looking statement, whether as a result of new
information, future events, or otherwise.
(1) Management believes that the use of non-GAAP financial
measures help in the understanding of the Company's operating
performance. See pages 8 and 9 of this release for the
reconciliation tables between reported amounts and non-GAAP
measures discussed in this document.
FINANCIAL TABLES FOLLOW.
|
|
HARDINGE INC. AND
SUBSIDIARIESConsolidated Statements of
Operations(in thousands, except per share data) |
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
$ |
86,795 |
|
|
$ |
86,960 |
|
|
$ |
292,013 |
|
|
$ |
315,249 |
|
Cost of sales |
58,716 |
|
|
56,608 |
|
|
194,486 |
|
|
210,711 |
|
Gross
profit |
28,079 |
|
|
30,352 |
|
|
97,527 |
|
|
104,538 |
|
Gross
profit margin |
32.4 |
% |
|
34.9 |
% |
|
33.4 |
% |
|
33.2 |
% |
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
19,426 |
|
|
20,675 |
|
|
79,647 |
|
|
81,271 |
|
Research &
development |
3,561 |
|
|
3,425 |
|
|
13,514 |
|
|
14,140 |
|
Restructuring
charges |
53 |
|
|
2,681 |
|
|
661 |
|
|
3,558 |
|
Other expense, net |
61 |
|
|
356 |
|
|
310 |
|
|
632 |
|
Operating
Income |
4,978 |
|
|
3,215 |
|
|
3,395 |
|
|
4,937 |
|
Operating
margin |
5.7 |
% |
|
3.7 |
% |
|
1.2 |
% |
|
1.6 |
% |
|
|
|
|
|
|
|
|
Interest expense |
128 |
|
|
183 |
|
|
555 |
|
|
655 |
|
Interest income |
(35 |
) |
|
(76 |
) |
|
(227 |
) |
|
(156 |
) |
Income
before income taxes |
4,885 |
|
|
3,108 |
|
|
3,067 |
|
|
4,438 |
|
Income taxes |
1,177 |
|
|
349 |
|
|
1,843 |
|
|
1,828 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
3,708 |
|
|
$ |
2,759 |
|
|
$ |
1,224 |
|
|
$ |
2,610 |
|
|
|
|
|
|
|
|
|
Per share data: |
|
|
|
|
|
|
|
Basic
earnings per share: |
$ |
0.29 |
|
|
$ |
0.22 |
|
|
$ |
0.10 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
Diluted
earnings per share: |
$ |
0.29 |
|
|
$ |
0.21 |
|
|
$ |
0.09 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
Cash
dividends declared per share: |
$ |
0.02 |
|
|
$ |
0.02 |
|
|
$ |
0.08 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
Weighted avg. shares
outstanding: Basic |
12,854 |
|
|
12,793 |
|
|
12,824 |
|
|
12,776 |
|
Weighted avg. shares
outstanding: Diluted |
12,923 |
|
|
12,886 |
|
|
12,909 |
|
|
12,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HARDINGE INC. AND
SUBSIDIARIES Consolidated Balance
Sheets(in thousands, except share and per share data) |
|
|
December 31, 2016 |
|
December 31, 2015 |
|
|
|
|
Assets |
|
|
|
Cash and
cash equivalents |
$ |
28,255 |
|
|
$ |
32,774 |
|
Restricted cash |
2,923 |
|
|
2,192 |
|
Accounts
receivable, net |
55,573 |
|
|
56,945 |
|
Inventories, net |
107,018 |
|
|
110,232 |
|
Other
current assets |
6,926 |
|
|
7,212 |
|
Total current
assets |
200,695 |
|
|
209,355 |
|
|
|
|
|
Property,
plant and equipment, net |
56,961 |
|
|
62,025 |
|
Goodwill |
6,579 |
|
|
6,620 |
|
Other
intangible assets, net |
26,730 |
|
|
28,018 |
|
Other
non-current assets |
6,585 |
|
|
4,920 |
|
Total non-current
assets |
96,855 |
|
|
101,583 |
|
Total assets |
$ |
297,550 |
|
|
$ |
310,938 |
|
|
|
|
|
Liabilities and
shareholders’ equity |
|
|
|
Accounts
payable |
$ |
24,920 |
|
|
$ |
24,696 |
|
Accrued
expenses |
25,629 |
|
|
27,964 |
|
Customer
deposits |
18,215 |
|
|
19,845 |
|
Accrued
income taxes |
1,160 |
|
|
1,919 |
|
Current
portion of long-term debt |
2,923 |
|
|
5,621 |
|
Total current
liabilities |
72,847 |
|
|
80,045 |
|
|
|
|
|
Long-term
debt |
2,970 |
|
|
5,985 |
|
Pension
and postretirement liabilities |
58,840 |
|
|
57,322 |
|
Deferred
income taxes |
3,800 |
|
|
3,088 |
|
Other
liabilities |
3,152 |
|
|
3,393 |
|
Total non-current
liabilities |
68,762 |
|
|
69,788 |
|
Commitments and
contingencies |
|
|
|
Common
stock ($0.01 par value, 20,000,000 authorized; 12,903,037 issued
and 12,893,794 outstanding as of December 31, 2016, and
12,856,716 issued and 12,838,227 outstanding as of
December 31, 2015) |
129 |
|
|
128 |
|
Additional paid-in capital |
121,015 |
|
|
120,524 |
|
Retained
earnings |
89,557 |
|
|
89,368 |
|
Treasury
shares (at cost, 9,243 as of December 31, 2016, and 18,489 as of
December 31, 2015) |
(104 |
) |
|
(202 |
) |
Accumulated other comprehensive loss |
(54,656 |
) |
|
(48,713 |
) |
Total shareholders’
equity |
155,941 |
|
|
161,105 |
|
Total liabilities and
shareholders’ equity |
$ |
297,550 |
|
|
$ |
310,938 |
|
|
|
|
|
|
|
|
|
|
HARDINGE INC. AND
SUBSIDIARIESConsolidated Statements of Cash
Flows(in thousands) |
|
|
Year Ended |
|
December 31,2016 |
|
December 31,2015 |
Operating
activities |
|
|
|
Net
income |
$ |
1,224 |
|
|
$ |
2,610 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
8,789 |
|
|
8,824 |
|
Debt
issuance costs amortization |
131 |
|
|
134 |
|
Deferred
income taxes |
689 |
|
|
(768 |
) |
Gain on
sale of assets |
(38 |
) |
|
(26 |
) |
Unrealized foreign currency transaction loss |
524 |
|
|
404 |
|
Changes
in operating assets and liabilities, net of businesses
acquired: |
|
|
|
Accounts receivable |
(284 |
) |
|
3,942 |
|
Restricted cash |
(927 |
) |
|
827 |
|
Inventories |
252 |
|
|
(1,442 |
) |
Other assets |
(372 |
) |
|
834 |
|
Accounts payable |
141 |
|
|
450 |
|
Customer deposits |
(776 |
) |
|
7,762 |
|
Accrued expenses |
(3,964 |
) |
|
3,250 |
|
Accrued pension and postretirement liabilities |
(92 |
) |
|
(74 |
) |
Net cash
provided by operating activities |
5,297 |
|
|
26,727 |
|
|
|
|
|
Investing
activities |
|
|
|
Capital
expenditures |
(2,479 |
) |
|
(4,210 |
) |
Proceeds
from sales of assets |
118 |
|
|
69 |
|
Net cash
used in investing activities |
(2,361 |
) |
|
(4,141 |
) |
|
|
|
|
Financing
activities |
|
|
|
Proceeds
from short-term notes payable to bank |
42,820 |
|
|
32,502 |
|
Repayments of short-term notes payable to bank |
(42,114 |
) |
|
(32,502 |
) |
Repayments of long-term debt |
(5,761 |
) |
|
(4,464 |
) |
Dividends
paid |
(1,052 |
) |
|
(1,037 |
) |
Purchases
of treasury stock |
(368 |
) |
|
(201 |
) |
Net cash
used in financing activities |
(6,475 |
) |
|
(5,702 |
) |
|
|
|
|
Effect of exchange rate
changes on cash |
(980 |
) |
|
(403 |
) |
Net (decrease) increase
in cash |
(4,519 |
) |
|
16,481 |
|
|
|
|
|
Cash and cash
equivalents at beginning of period |
32,774 |
|
|
16,293 |
|
|
|
|
|
Cash and cash
equivalents at end of period |
$ |
28,255 |
|
|
$ |
32,774 |
|
|
|
|
|
|
|
|
|
|
HARDINGE INC. AND
SUBSIDIARIESSales by Region(in
thousands) |
|
|
Quarter Ended |
|
December 31, 2016 |
December 31, 2015 |
September 30, 2016 |
Sales to Customers in |
$ |
% of Total |
$ |
Year-over-Year%
Change |
$ |
Sequential%
Change |
North America |
29,744 |
|
34 |
% |
28,431 |
|
5 |
% |
24,780 |
|
20 |
% |
Europe |
27,026 |
|
31 |
% |
30,716 |
|
(12 |
)% |
18,271 |
|
48 |
% |
Asia |
30,025 |
|
35 |
% |
27,813 |
|
8 |
% |
24,160 |
|
24 |
% |
Total |
86,795 |
|
|
86,960 |
|
- |
% |
67,211 |
|
29 |
% |
|
Twelve months ended |
|
December 31, 2016 |
December 31, 2015 |
Sales to Customers in |
$ |
% of Total |
$ |
Year-over-Year%
Change |
North America |
92,668 |
|
32 |
% |
108,470 |
|
(15 |
)% |
Europe |
91,381 |
|
31 |
% |
97,269 |
|
(6 |
)% |
Asia |
107,964 |
|
37 |
% |
109,510 |
|
(1 |
)% |
Total |
292,013 |
|
|
315,249 |
|
(7 |
)% |
|
|
|
|
|
|
|
|
|
HARDINGE INC. AND
SUBSIDIARIESOrders by Region(in
thousands) |
|
|
Quarter Ended |
|
December 31, 2016 |
December 31, 2015 |
September 30, 2016 |
Orders from Customers in |
$ |
% of Total |
$ |
Year-over-Year%
Change |
$ |
Sequential%
Change |
North America |
25,378 |
|
28 |
% |
24,305 |
|
4 |
% |
26,740 |
|
(5 |
)% |
Europe |
28,248 |
|
31 |
% |
20,610 |
|
37 |
% |
20,412 |
|
38 |
% |
Asia |
36,778 |
|
41 |
% |
29,133 |
|
26 |
% |
27,457 |
|
34 |
% |
Total |
90,404 |
|
|
74,048 |
|
22 |
% |
74,609 |
|
21 |
% |
|
Twelve months ended |
|
December 31, 2016 |
December 31, 2015 |
Orders from Customers in |
$ |
% of Total |
$ |
Year-over-Year%
Change |
North America |
101,541 |
|
33 |
% |
98,809 |
|
3 |
% |
Europe |
92,648 |
|
30 |
% |
97,223 |
|
(5 |
)% |
Asia |
116,683 |
|
37 |
% |
120,045 |
|
(3 |
)% |
Total |
310,872 |
|
|
316,077 |
|
(2 |
)% |
|
|
|
|
|
|
|
|
Hardinge believes that providing non-GAAP financial measures
such as adjusted operating income, 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
SUBSIDIARIESReconciliation of GAAP Operating
Income to Non-GAAP Operating Income(in thousands) |
|
|
Three Months EndedDecember 31,
2016 |
|
Three Months EndedDecember 31,
2015 |
|
Amount |
|
% of Sales |
|
Amount |
|
% of Sales |
Operating income as
reported |
$ |
4,978 |
|
|
5.7 |
% |
|
$ |
3,215 |
|
|
3.7 |
% |
Adjustments to reported
operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges |
53 |
|
|
0.1 |
|
|
2,681 |
|
|
3.1 |
|
Professional fees for strategic review process |
42 |
|
|
0.1 |
|
|
414 |
|
|
0.4 |
|
Pension
settlement adjustment |
(132 |
) |
|
(0.2 |
) |
|
— |
|
|
— |
|
Other
adjustments |
371 |
|
|
0.4 |
|
|
— |
|
|
— |
|
Non-GAAP operating
income as adjusted |
$ |
5,312 |
|
|
6.1 |
% |
|
$ |
6,310 |
|
|
7.2 |
% |
|
|
|
|
|
|
|
|
|
Year Ended December 31,
2016 |
|
Year Ended December 31,
2015 |
|
Amount |
|
% of Sales |
|
Amount |
|
% of Sales |
Operating income as
reported |
$ |
3,395 |
|
|
1.2 |
% |
|
$ |
4,937 |
|
|
1.6 |
% |
Adjustments to reported
operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges |
661 |
|
|
0.2 |
|
|
3,558 |
|
|
1.1 |
|
Professional fees for strategic review process |
1,270 |
|
|
0.4 |
|
|
756 |
|
|
0.2 |
|
Pension
settlement adjustment |
633 |
|
|
0.2 |
|
|
— |
|
|
— |
|
Inventory
adjustment |
— |
|
|
— |
|
|
679 |
|
|
0.2 |
|
Other
adjustments |
666 |
|
|
0.2 |
|
|
— |
|
|
— |
|
Non-GAAP operating
income as adjusted |
$ |
6,625 |
|
|
2.2 |
% |
|
$ |
9,930 |
|
|
3.1 |
% |
|
|
|
|
|
|
|
|
|
HARDINGE INC. AND
SUBSIDIARIESReconciliation of GAAP Net Income to
Non-GAAP Net Income(in thousands, except per share
data) |
|
|
Three Months EndedDecember 31,
2016 |
|
Three Months EndedDecember 31,
2015 |
|
Amount |
|
EPS |
|
Amount |
|
EPS |
|
|
|
|
|
|
|
|
Net income as
reported |
$ |
3,708 |
|
|
$ |
0.29 |
|
|
$ |
2,759 |
|
|
$ |
0.21 |
|
Adjustments to reported
net income, net of taxes: |
|
|
|
|
|
|
|
Restructuring charges |
53 |
|
|
— |
|
|
2,681 |
|
|
0.21 |
|
Professional fees for strategic review process |
42 |
|
|
— |
|
|
414 |
|
|
0.03 |
|
Pension
settlement adjustment |
(108 |
) |
|
(0.01 |
) |
|
— |
|
|
— |
|
Other
adjustments |
371 |
|
|
0.03 |
|
|
— |
|
|
— |
|
Non-GAAP net income as
adjusted |
$ |
4,066 |
|
|
$ |
0.31 |
|
|
$ |
5,854 |
|
|
$ |
0.45 |
|
|
|
|
|
|
|
|
|
|
Year EndedDecember 31, 2016 |
|
Year EndedDecember 31, 2015 |
|
Amount |
|
EPS |
|
Amount |
|
EPS |
|
|
|
|
|
|
|
|
Net income as
reported |
$ |
1,224 |
|
|
$ |
0.09 |
|
|
$ |
2,610 |
|
|
$ |
0.20 |
|
Adjustments to reported
net income, net of taxes: |
|
|
|
|
|
|
|
Restructuring charges |
661 |
|
|
0.05 |
|
|
3,558 |
|
|
0.28 |
|
Professional fees for strategic review process |
1,270 |
|
|
0.10 |
|
|
756 |
|
|
0.06 |
|
Pension
settlement adjustment |
517 |
|
|
0.04 |
|
|
— |
|
|
— |
|
Inventory
adjustment |
— |
|
|
— |
|
|
679 |
|
|
0.05 |
|
Other
adjustments |
666 |
|
|
0.05 |
|
|
— |
|
|
— |
|
Non-GAAP net income as
adjusted |
$ |
4,338 |
|
|
$ |
0.33 |
|
|
$ |
7,603 |
|
|
$ |
0.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
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