- Second quarter sales grew 11% to
$78.2 million; up 14% excluding unfavorable foreign currency
translation
- Diluted earnings per share up
significantly to $0.20 from $0.01; Net income grew to $2.5 million
from $0.1 million
- Orders of $92.7 million increased
15% with growth in all three regions
- Backlog of $144.9 million reaches
five-year high
Hardinge Inc. (NASDAQ:HDNG), a leading international provider of
advanced metal-cutting solutions and accessories, reported
financial results for its second quarter ended June 30,
2017.
Chuck Dougherty, President and Chief Executive Officer,
commented, “We had a strong quarter driven by improved industrial
economies in North America and Asia that resulted in higher machine
sales. Importantly, we had a very healthy level of orders that
support our expectation of a solid 2017.”
He added, “I joined the Company in May and have found an
organization with a strong foundation from which we can build. We
have global capabilities in operations, engineering and sales,
great brands and outstanding people. Of note, we have an
exceptional position in China, both in capabilities and market
presence. There are opportunities to better leverage our scale in
areas such as our supply chain and go-to-market strategy. And, I
believe there is more potential to improve efficiencies through
common systems and processes across our businesses. Our current
focal areas are in completing the announced restructuring
activities and developing a plan for optimizing our global
footprint to create greater earnings power, as we develop a
strategy to define our longer term priorities.”
For the announced restructuring activities, the program is
expected to be completed by mid-2018 and generate pre-tax
annualized savings of $2.0 million to $2.5 million. Total
restructuring costs are expected to be in the range of $3.8 million
to $4.3 million, of which $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 9 of this release for the reconciliation tables between
reported amounts and non-GAAP measures discussed in this
document.
Sales, Orders and Backlog for Second Quarter and First Half
of 2017
North America: Sales of $24.2 million in the quarter grew by 17%
due to improved industrial market conditions from the impact of the
recovery in the oil and gas industry on other industrial
businesses. Orders for the region were up 6% in the quarter driven
by $1.9 million in orders by a key distributor.
For the first six months of 2017, sales to North America were up
15% to $43.8 million and orders increased 3% to $50.7 million.
Europe: Sales in Europe of $22.2 million were unchanged mostly
as the result of the timing of machine orders. Orders in the region
were up 12% driven by an improving industrial economy in Europe.
Excluding unfavorable foreign currency translation of $0.6 million
and $0.9 million on sales and orders, respectively, sales increased
3% and orders increased 15%.
For the first six months of 2017, sales to Europe of $39.9
million were down 13% while orders increased 17% to $51.3 million.
Excluding unfavorable foreign currency translation, sales decreased
11% and orders increased 20%.
Asia: Sales of $31.7 million and orders of $35.7 million for the
quarter were up 16% and 25%, respectively, as the economy in Asia
has stabilized driving more investment in automation and machine
tools by industrial manufacturers. Excluding unfavorable foreign
currency impact of $0.9 million on both sales and orders, sales
were up 20% and orders increased 28%.
For the first half of 2017, sales of $59.0 million and orders of
$63.7 million were up 10% and 21%, respectively. Excluding
unfavorable foreign currency translation of $1.9 million on sales
and $1.8 million on orders, sales were up 13% and orders increased
25%.
Consolidated backlog: Backlog at June 30, 2017 was $144.9
million, up 14% over the trailing first quarter and improved 32%
compared with June 30, 2016.
Second Quarter Operating Review
- Gross profit increased $3.1 million, or
13%, on higher volume. As a percent of sales, gross profit was
34.1% in the quarter.
- Higher selling, general and
administrative (SG&A) expenses included $1.1 million in unusual
costs associated with the executive search and severance expenses.
Excluding those costs, and the $0.4 million of professional fees
related to the strategic review in the prior-year period, SG&A
declined $0.4 million in the quarter.
- Operating income increased $1.9 million
as a result of strong operating leverage. Operating margin expanded
2.4 points to 2.8% of sales.
- Adjusted Non-GAAP operating income(1)
was $3.9 million in the quarter, up significantly from $0.9 million
in the prior-year period. The adjusted operating margin was 5.0%, a
3.7 point expansion.
- Net income was $2.5 million, or $0.20
per diluted share, up from $0.1 million, or $0.01 per diluted share
in the prior-year period. Adjusted Non-GAAP income(1) was $4.2
million, or $0.33 per diluted share, a more than four-fold increase
over last year’s second quarter.
First Half 2017 Review
- For the first half, gross profit was
$48.0 million, improved $1.7 million on higher sales. Gross margin
was relatively unchanged from the prior period.
- SG&A was down $2.1 million, or 5%,
primarily as a result of reduced commissions and sales and
marketing spend.
- Adjusted Non-GAAP operating income(1)
for the first half of 2017 was $3.7 million, up from $0.6 million
in the first half of 2016. The adjusted operating margin was 2.6%,
a 2.2 point expansion from leverage on higher volume.
- Net income was $0.5 million, or $0.04
per diluted share, improved from a $1.1 million loss, or $(0.09)
per diluted share, in the first half of 2016. Adjusted Non-GAAP
income(1) was $3.7 million, or $0.29 per diluted share, up
significantly from $0.4 million, or $0.03 per diluted share last
year.
Suspension of Dividend
Hardinge’s Board of Directors has elected to suspend the
quarterly cash dividend to shareholders in consideration of its
development of a long-term strategy for growth, the re-evaluation
of its capital allocation priorities and the nominal value of the
current dividend of $0.08 per share, or $1.0 million per year.
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, Charles P.
Dougherty, President and CEO, and Douglas J. Malone, Senior 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 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 the day
of the call through Thursday, August 10, 2017. To listen to the
archived call, dial (412) 317-6671 and enter conference ID number
13665317. 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.
HARDINGE INC. AND
SUBSIDIARIESConsolidated Statements of Operations(in
thousands, except share and per share data)
Three Months Ended June
30,
Six Months Ended June
30,
2017 2016 2017 2016
(unaudited) (unaudited) Sales $ 78,197 $
70,186 $ 142,754 $ 138,007 Cost of sales 51,568 46,633
94,738 91,711 Gross profit 26,629 23,553
48,016 46,296 Gross profit margin 34.1 % 33.6 % 33.6 % 33.5 %
Selling, general and administrative expenses 20,081 19,637
38,103 40,230 Research & development 3,777 3,369 7,335 6,656
Restructuring 542 226 1,978 426 Other expense (income), net 37
20 192 (72 ) Income (loss) from operations
2,192 301 408 (944 ) Operating margin 2.8 % 0.4 % 0.3 % (0.7 )%
Interest expense 104 132 210 285 Interest income (38 ) (69 )
(79 ) (136 ) Income (loss) before income taxes 2,126 238 277 (1,093
) Income tax (benefit) expense (396 ) 93 (198 ) 8 Net
Income (loss) $ 2,522 $ 145 $ 475 $ (1,101 )
Per share data: Basic earnings (loss) per
share: $ 0.20 $ 0.01 $ 0.04 $ (0.09 )
Diluted earnings (loss) per share: $ 0.20 $
0.01 $ 0.04 $ (0.09 )
Cash dividends
declared per share: $ 0.02 $ 0.02 $ 0.04 $
0.04
Weighted avg. shares outstanding: Basic
12,894 12,812 12,887 12,804
Weighted
avg. shares outstanding: Diluted 12,932 12,901
12,921 12,804
HARDINGE INC. AND
SUBSIDIARIESConsolidated Balance Sheets(in thousands,
except share and per share data)
June 30, 2017
December 31, 2016
(Unaudited) Assets Cash and cash equivalents $ 26,369
$ 28,255 Restricted cash 2,509 2,923 Accounts receivable, net
55,071 55,573 Inventories, net 118,478 107,018 Other current assets
11,321 6,926 Total current assets 213,748 200,695
Property, plant and equipment, net 57,192 56,961 Goodwill
6,658 6,579 Other intangible assets, net 26,698 26,730 Other
non-current assets 6,047 6,585 Total non-current
assets 96,595 96,855 Total assets $ 310,343 $
297,550
Liabilities and shareholders’ equity
Notes payable to bank $ 99 $ 703 Accounts payable 25,982 24,217
Accrued expenses 27,140 25,629 Customer deposits 23,063 18,215
Accrued income taxes 671 1,160 Current portion of long-term debt
4,636 2,923 Total current liabilities 81,591 72,847
Long-term debt — 2,970 Pension and postretirement
liabilities 57,635 58,840 Deferred income taxes 4,343 3,800 Other
liabilities 1,669 3,152 Total non-current liabilities
63,647 68,762 Commitments and contingencies Common stock ($0.01 par
value, 20,000,000 authorized; shares issued 12,943,789 and
12,903,037) 129 129 Additional paid-in capital 121,489 121,015
Retained earnings 89,510 89,557 Treasury shares (at cost, 0 and
9,243) — (104 ) Accumulated other comprehensive loss (46,023 )
(54,656 ) Total shareholders’ equity 165,105 155,941
Total liabilities and shareholders’ equity $ 310,343 $
297,550
HARDINGE INC. AND
SUBSIDIARIESConsolidated Statements of Cash Flows(in
thousands)
Six Months Ended June
30,
2017 2016 (Unaudited) Operating
activities Net income (loss) $ 475 $ (1,101 ) Adjustments to
reconcile net income (loss) to net cash used in operating
activities: Impairment 1,401 — Depreciation and amortization 4,411
4,098 Debt issuance costs amortization 65 66 Deferred income taxes
132 (119 ) Gain on sale of assets (16 ) (4 ) Unrealized foreign
currency transaction gain (819 ) (116 ) Changes in operating assets
and liabilities: Accounts receivable 2,261 11,826 Restricted cash
499 (331 ) Inventories (8,251 ) (7,720 ) Other assets (2,893 )
(1,330 ) Accounts payable 745 (2,170 ) Customer deposits 4,132
(3,886 ) Accrued expenses (2,381 ) (5,211 ) Accrued pension and
postretirement liabilities (19 ) (41 ) Net cash used in operating
activities (258 ) (6,039 )
Investing activities
Capital expenditures (968 ) (992 ) Proceeds from sales of assets 16
37 Net cash used in investing activities (952 ) (955
)
Financing activities Proceeds from short-term notes
payable to bank 12,418 28,871 Repayments of short-term notes
payable to bank (13,062 ) (28,643 ) Repayments of long-term debt
(1,456 ) (2,271 ) Dividends paid (516 ) (536 ) Net cash used in
financing activities (2,616 ) (2,579 ) Effect of exchange
rate changes on cash 1,940 167 Net decrease in cash
(1,886 ) (9,406 ) Cash and cash equivalents at beginning of
period 28,255 32,774 Cash and cash equivalents
at end of period $ 26,369 $ 23,368
Quarterly Sales by Region($ in
thousands)
Quarter Ended June 30,
2017 June 30, 2016 March 31, 2017
Sales to Customers in $ % of
Total $
Year-over-Year% Change
$
Sequential% Change
North America 24,220 31% 20,694 17%
19,583 24% Europe 22,240 28% 22,242 —% 17,702 26%
Asia 31,737 41% 27,250 16%
27,272 16%
Total 78,197
70,186 11% 64,557 21%
Year-to-Date Sales by Region($ in
thousands)
Six Months Ended June 30,
2017 June 30, 2016 Sales to Customers in
$ % of Total $
Year-over-Year%
Change
North America 43,803 31% 38,144 15%
Europe 39,942 28% 46,084 (13)% Asia 59,009 41%
53,779 10%
Total 142,754
138,007 3%
Quarterly Orders by Region($ in
thousands)
Quarter Ended June 30,
2017 June 30, 2016 March 31, 2017
Orders from Customers in $ % of
Total $
Year-over-Year% Change
$
Sequential% Change
North America 27,003 29% 25,520 6%
23,669 14% Europe 30,021 32% 26,859 12% 21,290 41%
Asia 35,692 38% 28,555 25%
27,987 28%
Total 92,716
80,934 15% 72,946 27%
Year-to-Date Orders by Region($ in
thousands)
Six Months Ended June 30,
2017 June 30, 2016 Orders from Customers
in $ % of Total $
Year-over-Year%
Change
North America $ 50,672 31% $ 49,423 3%
Europe 51,311 31% 43,988 17% Asia 63,679 38%
52,448 21%
Total 165,662
145,859 14%
Hardinge believes that providing non-GAAP financial measures
such as 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
SUBSIDIARIESReconciliation of GAAP Income (Loss) from
Operations to Non-GAAP Adjusted Income from Operations(in
thousands)
Three Months Ended June 30,
2017
Three Months Ended June 30,
2016
Amount % of Sales Amount % of
Sales Income from operations as reported $ 2,192 2.8 % $
301 0.4 % Adjustments to reported income from operations:
Restructuring charges 542 0.7 % 226 0.3 % Professional fees for
strategic review process — — % 404 0.6 % Other adjustments 1,161
1.5 % — — % Non-GAAP income from operations as
adjusted $ 3,895 5.0 % $ 931 1.3 %
Six Months Ended June 30,
2017
Six Months Ended June 30,
2016
Amount % of Sales Amount % of Sales
Income (loss) from operations as reported 408 0.3 % $ (944 )
(0.7 )% Adjustments to reported income (loss) from operations:
Restructuring charges 1,978 1.4 % 426 0.3 % Professional fees for
strategic review process — — % 1,103 0.8 % Other adjustments 1,303
0.9 % — — % Non-GAAP income from operations as
adjusted $ 3,689 2.6 % $ 585 0.4 %
HARDINGE INC. AND
SUBSIDIARIESReconciliation of GAAP Net Income (Loss) to
Non-GAAP Adjusted Net Income(in thousands, except per share
data)
Three Months Ended June 30,
2017
Three Months Ended June 30,
2016
Amount EPS Amount EPS
Net income as reported $ 2,522 $ 0.20 $ 145 $ 0.01
Adjustments to reported net income, pre-tax: (1) Restructuring
charges 496 0.04 226 0.02 Professional fees for strategic review
process — — 404 0.03 Other adjustments 1,161 0.09 —
— Non-GAAP net income as adjusted $ 4,179 $
0.33 $ 775 $ 0.06
Six Months
Ended June 30, 2017 Six Months Ended June 30,
2016 Amount EPS Amount EPS
Net (loss) income as reported $ 475 $ 0.04 $ (1,101 ) $ (0.09 )
Adjustments to reported net (loss) income, pre-tax: (1)
Restructuring charges 1,926 0.15 426 0.03 Professional fees for
strategic review process — — 1,103 0.09 Other adjustments 1,303
0.10 — — Non-GAAP net income as
adjusted $ 3,704 $ 0.29 $ 428 $ 0.03
(1) items have no tax effect due to full tax valuation
allowances in the related jurisdictions.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170803005256/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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