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,
2017.
- Orders for the first quarter increased
12% to $72.9 million compared with the prior-year period on
strength in Europe, up 24%, and Asia, up 17%. North America was
down a moderate 1%.
- As expected, sales for the quarter were
soft at $64.6 million, down 5% from the prior year’s first quarter.
Excluding the $1.5 million impact of foreign currency exchange,
sales were down 3%.
- A new restructuring program was
initiated to generate $2.0 million to $2.5 million annualized
pre-tax savings; incurred $1.4 million in restructuring charges in
quarter.
- Net loss was $2.0 million, or a $0.16
loss per diluted share; Non-GAAP(1) adjusted net loss was $0.6
million, or a $0.05 loss per diluted share.
Richard L. Simons, President and Chief Executive Officer,
commented, “While sales in the quarter were light, they came in as
planned given customers’ delivery schedules. Nonetheless, we
believe the quarter was a good start to the year with very solid
orders. Global demand, for grinding especially, has been picking up
nicely. This supports our confidence for sales in 2017 to be
moderately better than last year and, when combined with the effect
of our restructuring efforts completed in 2016, for profitability
to be stronger.”
He added, “Our strategy is centered on growing market share and
driving down costs. We have initiated a new restructuring program
to rationalize product lines and further streamline our operations
through the consolidation of facilities and sale of assets. The
effort will also deliver operational efficiencies and reduce
manpower requirements. I am confident that these actions will
better position Hardinge within the competitive machine tool
industry for us to grow profitably and create long-term value for
our shareholders. There is momentum building in the machine tool
industry and we are well situated to capture that opportunity.”
The restructuring program is expected to generate an estimated
$2.0 million to $2.5 million in pre-tax annualized savings, and is
anticipated to be substantially complete by mid-2018. Restructuring
costs are expected to be in the range of approximately $3.8 million
to $4.3 million, of which approximately $1.6 million is
non-cash.
(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, Orders and Backlog for the Quarter
(Please refer to the Sales and Orders tables included in this
release)
North America: Market conditions in the U.S. are improved over
the prior year. North America sales were up 12% in the quarter and
orders, while down 1% due to a slow start in January and February,
were much stronger in March.
Europe: Sales were down 26% due to customer delivery timing and
the lingering effects of political uncertainty. Orders increased an
encouraging 24% in the period led by strong demand for grinding
machines and despite unfavorable foreign currency effect.
Asia: The Company believes its strong market position in
high-precision products and ability to provide custom solutions,
combined with China's improving market conditions, makes Asia a key
region for growth. Sales for the quarter rose 3% to $27.3 million,
while orders increased 17% to $28.0 million. Excluding the negative
impact from foreign currency translation, sales were up 7% and
orders were up 20%.
Consolidated Backlog: Order backlog at March 31, 2017 increased
9% over the trailing fourth quarter of 2016 on strong order volume
to $127.2 million and was up 26% over backlog at March 31,
2016.
First Quarter Operating Results (comparisons are to the
prior-year period except where noted)
- Gross profit for the quarter was $21.4
million, down from $22.7 million in the prior-year period on lower
sales. As a percent of sales, gross profit was 33%.
- Selling, general and administrative
(“SG&A”) expense declined $2.6 million, or 12%, driven by $1.7
million lower agent commissions and $0.7 million lower
non-recurring professional fees.
- In March 2017, management initiated a
strategic restructuring program that is expected to be
substantially completed in mid-2018. Restructuring expenses in the
2017 first quarter were $1.4 million compared with $0.2 million in
the prior year quarter.
- Net loss from operations was $1.8
million. On a non-GAAP(1) adjusted basis, net loss from operations
was $0.3 million which is relatively unchanged from the prior-year
period.
China International Machine Tool Show
Demonstrating its leadership in highly reliable, precision
machine tools, Hardinge had 12 machines on display, half of which
were new to the market, at the China International Machine tool
Show in Beijing, April 17 through April 22. This included two
automated cells with robotic loading and unloading systems. One
cell displayed our ability to provide customers with a custom
solution which is Industrial Internet of Things (Industry 4.0)
ready for the next revolution in manufacturing technology. The show
is the largest of its kind in China attracting visitors interested
in understanding the changing dynamics of automation and machine
tool technology.
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 Friday May 12, 2017. To listen to the archived call, dial
(412) 317-6671 and enter conference ID number 13659725.
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 StatementThis 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.
HARDINGE INC. AND SUBSIDIARIES Consolidated
Statements of Operations (in thousands, except share and per
share data) Three Months Ended March 31,
2017 2016 (unaudited) Sales $
64,557 $ 67,822 Cost of sales 43,170 45,078 Gross
profit 21,387 22,744 Gross profit margin 33.1 % 33.5 %
Selling, general and administrative expenses 18,022 20,593 Research
& development 3,559 3,287 Restructuring 1,436 200 Other expense
(income), net 155 (91 ) Loss from operations (1,785 ) (1,245
) Operating margin (2.8 )% (1.8 )% Interest expense 105 153
Interest income (40 ) (67 ) Loss before income taxes (1,850 )
(1,331 ) Income taxes 198 (86 ) Net loss $ (2,048 ) $ (1,245
) Per share data: Basic loss per share: $ (0.16 ) $
(0.10 ) Diluted loss per share: $ (0.16 ) $ (0.10 )
Cash dividends declared per share: $ 0.02 $ 0.02
Weighted avg. shares outstanding: Basic 12,880 12,797
Weighted avg. shares outstanding: Diluted 12,880
12,797
HARDINGE INC. AND
SUBSIDIARIES Consolidated Balance Sheets (in
thousands, except share and per share data) March
31, December 31, 2017 2016
(Unaudited) Assets Cash and cash equivalents $ 26,725
$ 28,255 Restricted cash 2,757 2,923 Accounts receivable, net
46,562 55,573 Inventories, net 115,863 107,018 Other current assets
10,621 6,926 Total current assets 202,528 200,695
Property, plant and equipment, net 56,863 56,961 Goodwill
6,652 6,579 Other intangible assets, net 26,966 26,730 Other
non-current assets 6,787 6,585 Total non-current
assets 97,268 96,855 Total assets $ 299,796 $
297,550
Liabilities and shareholders’ equity
Notes payable to bank $ 823 $ 703 Accounts payable 25,956 24,217
Accrued expenses 21,865 25,629 Customer deposits 21,300 18,215
Accrued income taxes 1,426 1,160 Current portion of long-term debt
2,935 2,923 Total current liabilities 74,305 72,847
Long-term debt 2,262 2,970 Pension and postretirement
liabilities 58,049 58,840 Deferred income taxes 4,073 3,800 Other
liabilities 2,879 3,152 Total non-current liabilities
67,263 68,762 Commitments and contingencies Common stock (par value
$0.01 per share; shares authorized 20,000,000; shares issued
12,926,716 and 12,903,037) 129 129 Additional paid-in capital
121,160 121,015 Retained earnings 87,249 89,557 Treasury shares (at
cost, 0 and 9,243) — (104 ) Accumulated other comprehensive loss
(50,310 ) (54,656 ) Total shareholders’ equity 158,228
155,941 Total liabilities and shareholders’ equity $ 299,796
$ 297,550
HARDINGE INC. AND
SUBSIDIARIES Consolidated Statements of Cash Flows
(in thousands) Three Months Ended March
31, 2017 2016 (Unaudited)
Operating activities Net loss $ (2,048 ) $ (1,245 )
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities: Impairment 1,401 — Depreciation and
amortization 2,157 2,017 Debt issuance costs amortization 32 32
Deferred income taxes 143 (255 ) Gain on sale of assets (2 ) (13 )
Unrealized foreign currency transaction gain (387 ) (225 ) Changes
in operating assets and liabilities: Accounts receivable 9,786
7,613 Restricted cash 193 — Inventories (8,208 ) (4,851 ) Other
assets (3,287 ) (595 ) Accounts payable 1,056 (514 ) Customer
deposits 2,887 (2,170 ) Accrued expenses (4,823 ) (5,177 ) Accrued
pension and postretirement liabilities (14 ) (20 ) Net cash used in
operating activities (1,114 ) (5,403 )
Investing
activities Capital expenditures (480 ) (436 ) Proceeds from
sales of assets 3 32 Net cash used in investing
activities (477 ) (404 )
Financing activities
Proceeds from short-term notes payable to bank 7,535 18,172
Repayments of short-term notes payable to bank (7,463 ) (14,995 )
Repayments of long-term debt (762 ) (1,010 ) Dividends paid (258 )
(274 ) Net cash (used in) provided by financing activities (948 )
1,893 Effect of exchange rate changes on cash 1,009
425 Net decrease in cash (1,530 ) (3,489 ) Cash and
cash equivalents at beginning of period 28,255 32,774
Cash and cash equivalents at end of period $ 26,725 $
29,285
HARDINGE INC. AND SUBSIDIARIES
Sales by Region
(in thousands)
Quarter Ended March
31, 2017 March 31, 2016 December
31, 2016 Year-over-
Year Sequential Sales to Customers in
$ % of Total $ %
Change $ % Change North America
19,583 30% 17,450 12% 29,744 (34)% Europe
17,702 28% 23,843 (26)% 27,026 (35)% Asia 27,272
42% 26,529 3%
30,025 (9)%
Total 64,557
100% 67,822 (5)%
86,795 (26)%
HARDINGE INC.
AND SUBSIDIARIES Orders by Region
(in thousands)
Quarter Ended March
31, 2017 March 31, 2016 December 31,
2016 Year-over-
Year Sequential
Orders from Customers in
$ % of Total $
% Change $ % Change North
America 23,669 32% 23,903 (1)% 25,378 (7)% Europe
21,290 30% 17,129 24% 28,248 (25)% Asia 27,987
38% 23,893 17% 36,778
(24)%
Total 72,946
100% 64,925 12% 90,404
(19)%
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 Loss from Operations to Non-GAAP Adjusted
Loss from Operations
(in thousands)
Three Months Ended March 31, 2017 Three
Months Ended March 31, 2016 Amount % of
Sales Amount % of Sales Loss from
operations as reported $ (1,785 ) (2.8 )% $ (1,245 ) (1.8 )%
Adjustments to reported loss from operations: Restructuring charges
1,436 2.2 200 0.3 Professional fees for strategic review process —
— 699 1.0 Non-GAAP loss from operations
as adjusted $ (349 ) (0.6 )% $ (346 ) (0.5 )%
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, 2017 Three Months
Ended March 31, 2016 Amount EPS
Amount EPS Net loss as reported $
(2,048 ) $ (0.16 ) $ (1,245 ) $ (0.10 ) Adjustments to reported net
loss, net of taxes: Restructuring charges 1,429 0.11 200 0.02
Professional fees for strategic review process — —
699 0.05 Non-GAAP net loss as adjusted $ (619 ) $
(0.05 ) $ (346 ) $ (0.03 )
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170505005231/en/
Company:Hardinge Inc.Douglas J. Malone, 607-378-4140Chief
Financial OfficerorInvestor Relations:Kei Advisors
LLCDeborah K. Pawlowski, 716-843-3908dpawlowski@keiadvisors.com
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