Hardinge Reports $1.7 Million Fourth Quarter Profit; Debt Reduction
of $8.3 Million in Quarter ELMIRA, N.Y., Feb. 12
/PRNewswire-FirstCall/ -- Hardinge Inc. , a leading producer of
advanced material-cutting solutions, today reported improved
operating performance for the fourth quarter and full year 2003
compared to the same periods of 2002. Income before taxes, minority
interest elimination, and equity investment profits was $2.8
million in the fourth quarter of 2003, an increase of $.7
million,or 33% over the same period of the prior year. Full year
profits on the same line for 2003 were $4.5 million, an increase of
$2.8 million over the 2002. Fourth quarter 2003 net income was $1.7
million, or $.19 per share, compared to $2.0 million, or $.23 per
share in the fourth quarter of 2002. The fourth quarter of 2002 net
income was higher due to tax benefits on U.S. losses. There were no
such tax benefits in the fourth quarter of 2003. Full year 2003 net
losses totaled ($11.3) million, or ($1.30) per share compared to a
net profit for the full year 2002 of $2.0 million, or $.23 per
share. Results for the full year 2003 included a $12.9 million
non-cash valuation reserve against its U.S. deferred tax assets
recorded in the third quarter under an accounting rule which
applies when a company has three years of cumulative losses in a
tax jurisdiction, such as the Company has had in its U.S.
operations. J. Patrick Ervin, Chairman, President and Chief
Executive Officer, commented, "We are proud of our accomplishments
during 2003. Although it was not a year of recovery for the
industry in the U.S. as we had hoped, it was a year of
stabilization that allowed us to concentrate on positioning
ourselves for the future. We were able to reduce our total debt
(net of cash) by over $21 million dollars or more than 50% during
the year. Operationally, we were able to successfully integrate the
Bridgeport product line into our Elmira facility, expand our
efforts in China and Taiwan, and make steady progress in new
product design, all of which benefited us during the year, but more
importantly, will provide benefits into the future. Furthermore, we
were able to accomplish this while increasing our pretax earnings."
The following table summarizes the Company's 2003 sales into
geographical regions, with comparison to the same periods of 2002:
(U.S. dollars in thousands) Fourth Quarter Full Year 20032002 %
Change 2003 2002 % Change North America $23,255 $15,140 54% $80,087
$69,400 15% Europe 20,585 17,703 16% 73,863 71,154 4% Asia &
Other 9,073 9,088 0% 31,352 28,460 10% $52,913 $41,931 26% $185,302
$169,014 10% The 2003 sales include the positive impact of the
weaker U.S. dollar on the conversion of the Company's European
subsidiaries' sales into U.S. dollars. Viewed in constant dollars
at the 2002 exchange rates, the Company's 2003 fourth quarter sales
increased by 18% from the same quarter of 2002. When measured in
constant dollar exchange rates, full year 2003 sales increased by
3% over 2002. In its U.S. markets, Hardinge's sales increased due
to the addition of the Bridgeport product line and from a large
sale to an auto supplier that, combined, added approximately $13
million in sales for the year. Additionally, the Company saw an
improvement in the sales of its standard products in the fourth
quarter of the year. Sales in Europe in the fourth quarter, when
measured in constant exchange rates, were flat compared to the
prior year, and 2003 full year sales would have shown a decrease of
about $9 million, or 13%. European markets weakened throughout 2003
resulting in decreased demand for machines. Although there are no
aggregate industry statistics published for the European countries,
management believes the Company's sales mirrored the industry
results inthe main countries where it sells. The Asia & Other
category is primarily sales to China. Fourth quarter 2003 sales
were essentially equal to the strong fourth quarter of 2002. The
10% increase in sales in this region for the full year 2003
resultedfrom the Company's initiatives to expand its sales and
manufacturing capabilities within China. The following table
summarizes the Company's orders for the fourth quarter and full
year of 2003, as compared to the same periods in 2002: (U.S.
dollars in thousands) Orders from Fourth Quarter Full Year
Customers in: 2003 2002 % Change 2003 2002 % Change North America
$23,686 $18,825 26% $87,822 $70,353 25% Europe 17,370 12,065 44%
64,515 55,405 16% Asia & Other 8,655 8,685 0% 34,110 29,513 16%
$49,711 $39,575 26% $186,447 $155,271 20% Fourth quarter 2003
orders increased by 19% on a constant currency basis compared with
the same quarter of 2002. Orders for the full year of 2003
increased by $20 million, or 13%, after excluding foreign currency
translation impacts. North American orders rose despite a
continuing decline in industry-wide orders. The Association for
Manufacturing Technology, the machine tool industry's primary trade
group, has recently reported that metal-cutting machinery orders
from U.S. customers in 2003 were down 6% from the alreadydepressed
level in 2002. U.S. orders for Hardinge's traditional products
outpaced the overall industry experience. The Company also added
incremental new business from its Bridgeport products. Excluding
foreign currency translation effects, fourth quarter 2003 orders
from customers in Europe were approximately 27% above the fourth
quarter orders in 2002. The Company's HTT subsidiary had a very
strong order rate in the quarter compared to 2002. For the full
year of 2003, orders from Europe, stated in constant U.S. dollars,
increased by only 1%. Fourth quarter orders from customers in Asia
were flat compared to the same quarter in 2002. Full year orders in
Asia continued to grow in 2003, primarily due to increased demand
in China. The Company's consolidated backlog at December 31, 2003
was $42.5 million, 15% above the December 31, 2002 backlog of $37.0
million. The following table summarizes the Company's 2003 sales by
product category, with comparisons to the same periods of 2002:
(U.S. dollars in thousands) Fourth Quarter Full Year 2003 2002 %
Change 2003 2002 % Change Machines $38,253 $29,148 31% $126,543
$112,389 13% Non-machine products & services 14,660 12,783 15%
58,759 56,625 4% $52,913 $41,931 26% $185,302 $169,014 10% The
fourth quarter 2003 gross margin was 28.0% of sales, compared to
33.4% in the fourth quarter of 2002. This reflects the higher
percentage of sales coming from machine sales, where we
traditionally achieve lower margins than on the non-machine product
and service revenue. The full-year 2003 gross margin was 29.5% of
sales, compared to 30.5% in 2002. Gross margins for both years
reflect the lower recovery of fixed manufacturing overhead,
particularly in the U.S. operations. Despite further production
level declines in 2003, the Company's worldwide cost reduction
initiatives have allowed it to maintain very consistent gross
margins percentages over the past three years. The stockholders'
equity section of the balance sheet includes a direct charge of
approximately $3.9 million in the fourth quarter relating to the
Company's U.S. and UK pension plans. This charge reflects unfunded
accumulated benefit obligations. It is primarily the result of a
lower discount rate used to value future pension liabilities and a
decline in the value of the pension assetsover the past few years,
although pension assets performed well in 2003. This non-cash
charge, which is not reflected in the income statement, is required
under accounting standards to reflect a net pension liability on
the balance sheet. A charge of$5.1 million was recorded in 2002.
Mr. Ervin further commented on the results for the year, "We are
pleased to report improved operational results for the year 2003
while many in our industry continue to struggle. We have done the
appropriate things to ensure that our Company is well positioned so
that shareholders, employees, and most importantly, customers can
benefit from our operations in the future." "As we begin 2004, I
see many opportunities for Hardinge. In the U.S., statistics such
as the Institute of Supply-Chain Managers Index and the Consumer
Confidence Index point to a stronger year for manufacturers. More
government officials are speaking out about the importance of U.S.
manufacturing and manufacturing jobs for a truly healthy economy. I
would like to see this talk turn into positive action to support
manufacturers. The weaker dollar should also help U.S.
manufacturing companies compete better in world markets. With the
product lines we are producing in our Elmira, NY facility, we are
well prepared to take advantage of the increased demand for machine
tools resulting from our nation's manufacturers ramping up
production, coupled with increased international demand due to more
competitive local pricing." Mr. Ervin continued, "Our two Swiss
operations, Kellenberger and HTT, have completed profitable years,
despite seeing decreases in their sales levels. Operating with a
stronger currency will provide challenges for 2004, but I am
encouraged by the progress that has been made during the year in
achieving operational and product line synergies." "Our Taiwanese
manufacturing facility has shown the ability to produce quality
machine tools that are accepted in all markets of the world. With
planned expansion of their product lines, we look for them to
continue to add revenues and bottom line profits to Hardinge.
Mainland China is, and will continue to be, an area of superior
growth for our products produced in the U.S., Switzerland, and
Taiwan. We are expanding our assembly operations in Mainland China,
combining components from our other manufacturing facilities with
locally sourced components that will allow us to compete
effectively in the Chinese market. Our worldwide engineering
resources covering three continents will continue to work together
to develop new products which are vital to the success of our
company." "I believe 2004 will be a better year for our company.
Furthermore, I believe there will be opportunities for acquisitions
of product lines, companies, or assets that will enable us to build
on the strong base that we have developed. Plus we will begin to
explore opportunities outside of machine tools to more fully
utilize our worldwide assets," Mr. Ervin said. "I remain optimistic
about further improvements in operating results in 2004. My
optimism stems not just from the expected positive direction of our
markets, but also from the employees of Hardinge. Our Company
remains a leader because of our people throughout the world. They
are its backbone and they have been loyal to our Company and its
future through very difficult times. For that, I am thankful," Mr.
Ervin concluded. The Company will host its usual conference call at
10:00 am today to discuss these results. The call can beaccessed
via the Internet live or as a replay at
http://www.fulldisclosure.com/ . The archive will be available for
replay for 14 days following the call. Hardinge Inc., founded more
than 100 years ago, is an international leader in providing the
latest industrial technology to companies requiring material-
cutting solutions. The Company designs and manufactures
computer-numerically controlled metal-cutting lathes, machining
centers, grinding machines and other industrial products. The
Company's common stock trades on NASDAQ under the symbol "HDNG."
For more information, please visit the Company's website at
http://www.hardinge.com/ . This news release contains statements of
a forward-looking nature relating to the financial performance of
Hardinge Inc. 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 inthe 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. HARDINGE INC. AND SUBSIDIARIES Consolidated Statements of
Operations (In Thousands,Except Per Share Data) Three months ended
Year ended December 31, December 31, 2003 2002 2003 2002 Net Sales
$52,913 $41,931 $185,302 $169,014 Cost of sales 38,119 27,930
130,698 117,403 Gross profit 14,794 14,001 54,604 51,611 Selling,
general and administrative expenses 11,359 10,991 47,731 46,448
Income from operations 3,435 3,010 6,873 5,163 Interest expense 760
1,132 2,917 3,978 Interest (income) (161) (219) (500) (496) Income
before income taxes and minority interest in consolidated
subsidiary and investment of equity company 2,836 2,097 4,456 1,681
Income taxes (benefits) 716 (149) 14,667 (868) Minority interest in
(profit) of consolidated subsidiary (566) (244) (1,257) (566)
Profit in investment of equity company 109 (17) 184 17 Net income
(loss) $1,663 $1,985 ($11,284) $2,000 Per share data: Basic
earnings (loss) per share $.19 $.23 ($1.30) $.23 Weighted average
number of common shares outstanding 8,725 8,702 8,708 8,687 Diluted
earnings (loss) per share $.19 $.23 ($1.30) $.23 Weighted average
number of common shares outstanding 8,760 8,721 8,708 8,687 Other
financial data: Gross margin 28.0% 33.4% 29.5% 30.5% Operating
margin 6.5% 7.2% 3.7% 3.1% Capital expenditures $323 $304 $1,504
$2,337 Depreciation and amortization $2,222 $1,426 $8,668 $8,967
HARDINGE INC. AND SUBSIDIARIES Consolidated Balance Sheets (In
Thousands) Dec. 31, Dec. 31, 2003 2002 Assets Current assets: Cash
$4,739 $2,175 Accounts receivable, net 44,660 38,519 Notes
receivable, net 6,354 6,333 Inventories 87,064 87,748 Deferred
income taxes 5 4,243 Income tax receivables 5,795 Prepaid expenses
4,540 3,362 Total current assets 147,362 148,175 Property, plant
and equipment: Property, plant and equipment 162,926 156,815 Less
accumulated depreciation 96,741 87,908 66,185 68,907 Other assets:
Notes receivable 7,733 8,392 Deferred income taxes 126 9,268
Intangible pension asset 3,900 2,630 Goodwill 18,314 16,390 Other
2,087 2,523 32,160 39,203 Total assets $245,707 $256,285 HARDINGE
INC. AND SUBSIDIARIES Consolidated Balance Sheets--Continued (In
Thousands) Dec. 31, Dec. 31, 2003 2002 Liabilities and
shareholders' equity Current liabilities: Accounts payable $ 13,760
$ 14,417 Notes payable to bank 624 5,351 Accrued expenses 18,315
13,995 Accrued income taxes 2,990 1,150 Deferred income taxes 3,477
3,273 Current portion long-term debt 5,002 6,125 Total current
liabilities 44,168 44,311 Other liabilities: Long-term debt 17,675
30,526 Accrued pension plan expense 23,602 17,356 Deferred income
taxes 3,163 2,525 Accrued postretirement benefits 5,864 5,838
Derivative financial instruments 6,194 5,257 Other liabilities
2,267 2,255 58,765 63,757 Equity of minority interest 3,688 2,431
Shareholders' equity: Preferred stock, Series A, par value $.01:
Authorized - 2,000,000; issued - none Common stock, $.01 par value:
Authorized shares - 20,000,000 Issued shares - 9,919,992 at
December 31, 2003 and December 31, 2002 99 99 Additional paid-in
capital 60,586 61,139 Retained earnings 94,150 105,612 Treasury
shares (13,843) (15,068) Accumulated other comprehensive loss (393)
(4,562) Deferred employee benefits (1,513) (1,434) Total
shareholders' equity 139,086 145,786 Total liabilities and
shareholders' equity $245,707 $256,285 DATASOURCE: Hardinge Inc.
CONTACT: Richard L. Simons, Exec VP & CFO of Hardinge Inc.,
+1-607-378-4202, or Analyst Inquiries, JohnMcNamara of Financial
Relations Board, +1-212-445-8435 Web site: http://www.hardinge.com/
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