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,
2018.
Sales, Orders and Backlog for First Quarter
Sales for the first quarter of 2018 increased 24% to $79.9
million driven by higher demand in all regions. Orders of $90.4
million were up 24%. Excluding favorable foreign currency
translation of $4.2 million on sales and $5.0 million on orders,
sales and orders both increased 17%.
Americas: Sales grew 10% to $21.5 million primarily from
increased demand for workholding products. Orders for the region
were $24.5 million, up 4% in the quarter, and have fluctuated from
quarter to quarter as a result of changes being implemented with
sales channel partners.
Europe: Sales in Europe of $21.2 million were up 20% from
favorable mix of more complex grinding machines. Orders in the
region were up 55% due to strengthening industrial conditions
driving higher demand across all product lines. Excluding favorable
foreign currency translation of $1.7 million on sales and $2.7
million on orders, sales increased 10% and orders increased
43%.
Asia: Sales of $37.2 million for the quarter were up 36% as
strong demand in China was supplemented by high demand in other
parts of Asia. Orders of $32.9 million increased 18%. Excluding
favorable foreign currency impact of $2.5 million and $2.3 million
on sales and orders, respectively, sales were up 27% and orders
were up 9%.
Consolidated backlog: Backlog at March 31, 2018 was $144.3
million, up 14% from March 31, 2017.
First Quarter Operating Review
- Gross profit was $28.1 million, an
increase of $7.0 million, or 33% from higher sales volume and
improved margins. As a percent of sales, gross profit was 35.2%, a
2.4 point improvement over the prior year quarter due to favorable
mix.
- Excluding professional services fees of
$0.9 million in the current year and $0.1 million of other unusual
costs in the prior year, selling, general and administrative
(SG&A) expenses increased $2.0 million in the quarter due to
higher commissions of $1.0 million related to increased volume, and
unfavorable foreign currency translation of $1.0 million.
- Operating income of $2.6 million
increased $4.2 million as a result of higher volume partially
offset by unusual costs in the current year. Operating margin
expanded 5.6 points to 3.3% of sales.
- Adjusted Non-GAAP operating income(1)
was $4.9 million in the quarter, up significantly from $0.1 million
in the prior-year period. Adjusted operating margin was 6.2%, a 6.1
point expansion.
- Net income was $1.8 million, or $0.14
per diluted share, up from a $2.0 million loss, or $(0.16) per
diluted share in the prior-year period. Adjusted Non-GAAP net
income(1) was $4.1 million, or $0.31 per diluted share, a
significant increase over last year’s adjusted net loss in the
quarter.
(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.
Recent Merger Announcement
On February 12, 2018, Hardinge announced that it had entered
into a definitive agreement with affiliates of Privet Fund
Management LLC (“Privet”) under which Privet has agreed to
acquire Hardinge for $18.50 per share in an all-cash transaction
valued at approximately $245 million, subject to approval of
Hardinge shareholders and other customary closing conditions.
In light of the announcement, Hardinge will not hold a
conference call to discuss these financial results. There is a
Special Meeting of Shareholders of Hardinge Inc., scheduled to be
held on Tuesday, May 22, 2018, for shareholders to vote on the
adoption of the agreement and plan of merger.
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.
Certain factors could cause actual results to differ from those
anticipated in the forward-looking statements in this release,
including the possibility that the proposed transaction with Privet
is delayed or does not close, including due to the failure to
receive required shareholder approval, due to litigation in respect
of the Merger ,due to alternative acquisition proposals, the taking
of governmental action (including the passage of legislation) to
block the transaction, the failure of Privet to obtain the equity
and debt financing or other funds required to finance the
transaction, or the failure of other closing conditions,
disruptions of our business as a result of the announcement and
pursuit of the Merger, the possibility that the expected financial
impacts will not be realized, or will not be realized within the
expected time period, including as a result of fluctuations in the
machine tool business, the cyclical nature of our markets, 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 our entry into new product and geographic markets, our
ability to manage our operating costs and announced cost reduction
initiatives, product liability claims, work stoppages or other
labor issues, our ability to execute on our previously announced
real estate sale and other restructuring activities, 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, loss of key management or other
personnel, failure of operating equipment or information technology
infrastructure, changes in the availability and cost of materials
and supplies, the implementation of new technologies and currency
fluctuations, and other risks and factors described in our
quarterly reports on Form 10-Q and annual reports on Form 10-K and
in our other filings with the Securities and Exchange Commission or
in materials incorporated therein by reference.
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, 2018
2017 (unaudited) Sales $ 79,882
$ 64,557 Cost of sales 51,744 43,388 Gross profit
28,138 21,169 Gross profit margin 35.2 % 32.8 % Selling,
general and administrative expenses 20,361 17,574 Research &
development 3,281 3,559 Restructuring 1,352 1,436 Other operating
expense, net 509 155 Income (loss) from operations
2,635 (1,555 ) Operating margin 3.3 % (2.4 )% Other
non-operating (income) expense, net (99 ) 230 Interest expense 49
105 Interest income (51 ) (40 ) Income (loss) before income taxes
2,736 (1,850 ) Income tax expense 917 198 Net Income
(loss) $ 1,819 $ (2,048 )
Per share data:
Basic earnings (loss) per share: $ 0.14 $
(0.16 )
Diluted earnings (loss) per share: $ 0.14
$ (0.16 )
Cash dividends declared per share: $
— $ 0.02
Weighted avg. shares outstanding:
Basic 12,941 12,880
Weighted avg. shares
outstanding: Diluted 13,066 12,880
HARDINGE INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share
data)
March 31, 2018 December 31, 2017
(Unaudited) Assets Cash and cash equivalents $ 39,478
$ 44,958 Restricted cash 3,712 2,717 Accounts receivable, net
62,136 61,800 Inventories, net 109,445 104,502 Other current assets
9,313 9,076 Assets held for sale 5,770 5,647 Total
current assets 229,854 228,700 Property, plant and
equipment, net 51,673 50,790 Goodwill 6,646 6,677 Other intangible
assets, net 26,340 26,386 Other non-current assets 6,621
6,396 Total non-current assets 91,280 90,249
Total assets $ 321,134 $ 318,949
Liabilities and shareholders’ equity Accounts payable 27,671
26,362 Accrued expenses 27,502 31,695 Customer deposits 24,623
23,852 Accrued income taxes 1,542 1,370 Total current
liabilities 81,338 83,279 Pension and postretirement
liabilities 46,255 49,122 Deferred income taxes 5,539 5,217 Other
liabilities 2,366 2,405 Total non-current liabilities
54,160 56,744 Commitments and contingencies Common stock ($0.01 par
value, 20,000,000 authorized; shares issued 12,966,148 and
12,963,164) 130 130 Additional paid-in capital 122,546 122,140
Retained earnings 96,702 94,882 Treasury shares (at cost, 2,000 and
0) (22 ) — Accumulated other comprehensive loss (33,720 ) (38,226 )
Total shareholders’ equity 185,636 178,926 Total
liabilities and shareholders’ equity $ 321,134 $ 318,949
HARDINGE INC. AND SUBSIDIARIES
Consolidated Statements of Cash
Flows
(in thousands)
Three Months Ended March 31, 2018
2017 (Unaudited) Operating
activities Net income (loss) $ 1,819 $ (2,048 ) Adjustments to
reconcile net income (loss) to net cash used in operating
activities: Impairment — 1,401 Depreciation and amortization 2,131
2,157 Debt issuance costs amortization 15 32 Deferred income taxes
113 143 (Gain) loss on sale of assets (63 ) (2 ) Unrealized foreign
currency transaction loss (gain) 137 (387 ) Changes in operating
assets and liabilities: Accounts receivable 1,021 9,786 Inventories
(2,963 ) (8,208 ) Other assets 323 (3,287 ) Accounts payable 734
1,056 Customer deposits 91 2,887 Accrued expenses (7,056 ) (4,823 )
Accrued pension and postretirement liabilities (124 ) (14 ) Net
cash used in operating activities (3,822 ) (1,307 )
Investing activities Capital expenditures (1,417 ) (480 )
Proceeds from sales of assets 63 3 Net cash used in
investing activities (1,354 ) (477 )
Financing
activities Proceeds from short-term notes payable to bank 2,454
7,535 Repayments of short-term notes payable to bank (2,454 )
(7,463 ) Repayments of long-term debt — (762 ) Dividends paid —
(258 ) Net cash used in financing activities — (948 )
Effect of exchange rate changes on cash 691 1,036 Net
decrease in cash, cash equivalents, and restricted cash (4,485 )
(1,696 ) Cash, cash equivalents, and restricted cash at
beginning of period 47,675 31,178 Cash, cash
equivalents, and restricted cash at end of period (1) $ 43,190
$ 29,482
(1) Restricted cash is held at various
banks to collateralize outstanding letters of credit, which are
held by customers as performance, bid, or pre-payment
guarantees.
Quarterly Sales by Region
($ in thousands)
Quarter Ended
March 31, 2018 March 31,
2017 December 31, 2017 Sales to
Customers in $ %
of Total $
Year-over-Year% Change
$
Sequential% Change
North America 21,499 27%
19,583 10% 28,680
(25)% Europe 21,173 26% 17,702 20% 28,950 (27)% Asia
37,210 47% 27,272
36% 32,545 14%
Total 79,882
64,557 24%
90,175 (11)%
Quarterly Orders by
Region
($ in thousands)
Quarter Ended
March 31, 2018 March 31,
2017 December 31, 2017 Orders from
Customers in $ %
of Total $
Year-over-Year% Change
$
Sequential% Change
North America 24,503 27%
23,669 4% 23,568
4% Europe 33,021 37% 21,290 55% 26,745 23% Asia
32,915 36% 27,987
18% 33,525 (2)%
Total 90,439
72,946 24%
83,838 8%
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 SUBSIDIARIES
Reconciliation of GAAP Income (Loss)
from Operations to Non-GAAP Adjusted Income from Operations
(in thousands)
Three Months Ended March 31, 2018 Three
Months Ended March 31, 2017 Amount
% of Sales Amount % of Sales
Income (loss) from operations as reported $ 2,635 3.3 % $
(1,555 ) (2.4 )% Adjustments to reported income from operations:
Restructuring charges 1,352 1.7 % 1,436 2.2 % Professional fees for
strategic review process 924 1.2 % — — % Other adjustments 14
— % 142 0.2 % Non-GAAP income from operations as
adjusted $ 4,925 6.2 % $ 23 — %
HARDINGE INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income
(Loss) to Non-GAAP Adjusted Net Income
(in thousands, except per share data)
Three Months Ended March 31, 2018 Three
Months Ended March 31, 2017 Amount
EPS Amount EPS Net income
(loss) as reported $ 1,819 $ 0.14 $ (2,048 ) $ (0.16 ) Adjustments
to reported net income (loss), pre-tax: (1) Restructuring charges
1,318 0.10 1,436 0.11 Professional fees for strategic review
process 924 0.07 — — Other adjustments 14 — 142
0.01 Non-GAAP net income (loss) as adjusted $ 4,075
$ 0.31 $ (470 ) $ (0.04 )
(1) Some items have no tax effect due to
full tax valuation allowances in the related jurisdictions.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180503006205/en/
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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