- Sales of $85.0 million in the
quarter driven by double digit growth in all regions; Sales for the
first nine months were $227.7 million, up 11% over prior-year
period
- Quarterly net income was $2.2
million with earnings per diluted share of $0.17
- Generated strong cash from
operations of $11.0 million year-to-date
- Ended quarter with $32.3 million in
cash and no outstanding debt
- Expanded restructuring and cost
take-out effort; Targeting an additional $10 million in
savings
Hardinge Inc. (NASDAQ:HDNG), a leading international provider of
advanced metal-cutting solutions and accessories, reported
financial results for its third quarter ended September 30,
2017.
Chuck Dougherty, President and Chief Executive Officer,
commented, “We achieved higher earnings in the quarter as a result
of strong sales growth driven by improved global demand for our
products and machining solutions. Cash generation increased in the
quarter and year-to-date from higher net income combined with a
heightened emphasis on working capital management. We continue to
expect 2017 will be a solid year, even as orders have varied
considerably from quarter to quarter. For the nine month period,
orders were up 9% and we ended September with backlog remaining
very strong at $135 million and, similar to the second quarter, at
a level we have not seen in five years, supporting our expectation
for the year.”
He noted, “Looking further out, our focus is on building a
business with improved earnings power by optimizing our footprint
and further reducing our cost structure. This includes the
execution of the restructuring program for Europe announced earlier
this year that is expected to produce approximately $2 million to
$2.5 million in annual cost savings. Importantly, we have initiated
a larger, multi-year plan that encompasses changes throughout our
global footprint that we believe will not only reduce our cost
structure, but improve our operating efficiencies. As part of this
expanded program, we have identified approximately $10 million in
annualized cost reductions beyond the previously announced
program.”
“Furthermore, our team has been enhanced with fresh talent and
experience through the addition of new leadership for global
operations, human resources and business development. We are moving
quickly to transform Hardinge by leveraging our global capabilities
in operations, engineering and sales to build a better business
model that can heighten our financial performance,” he
concluded.
As noted, the Company is continuing its previously announced
restructuring activities, which included the recent agreement to
sell a 41,500 square foot manufacturing facility in Biel,
Switzerland for $9.8 million. The sale is expected to close in the
second quarter of 2018.
The combined restructuring programs are expected to result in
over $12 million in annualized cost reductions. Initial benefits of
the combined restructuring and cost take-out efforts are expected
to be realized as early as the first quarter of 2018 with the full
benefit being realized later in the year. Total restructuring costs
are expected to be approximately $6.7 million. Through the first
nine months of 2017, total restructuring costs have been $2.8
million.
Sales, Orders and Backlog for Third Quarter and First Nine
Months of 2017
North America: Sales of $27.5 million in the quarter grew by 11%
from strong backlog at the end of the trailing second quarter.
Orders for the region were $23.2 million, down 13% in the quarter,
and have fluctuated from quarter to quarter as a result of changes
being implemented with sales channel partners.
For the first nine months of 2017, sales to North America were
up 13% to $71.3 million and orders decreased 3% to $73.8
million.
Europe: Sales in Europe of $22.4 million were up 23% from
increased demand across all product lines. Orders in the region
were up 15%. Excluding favorable foreign currency translation of
$0.5 million on both sales and orders, sales increased 20% and
orders increased 13%.
For the first nine months of 2017, sales to Europe of $62.4
million were down 3% while orders increased 16% to $74.8 million.
Excluding unfavorable foreign currency translation of $0.6 million
and $1.1 million, sales decreased 2% and orders increased 18%,
respectively.
Asia: Sales of $35.1 million for the quarter were up 45% as
strong growth in China was supplemented by unusually high sales in
other parts of Asia. Orders of $27.3 million were relatively
unchanged. Excluding favorable foreign currency impact of $0.2
million and $0.1 million on sales and orders, respectively, sales
were up 44% and orders were flat.
For the first nine months of 2017, sales of $94.1 million and
orders of $91.0 million were up 21% and 14%, respectively.
Excluding unfavorable foreign currency translation of $1.6 million
on sales and $1.7 million on orders, sales were up 23% and orders
increased 16%. A more stabilized economy in China and growth in
other areas of Asia has supported demand for machine tools,
including the increased investment in factory automation to address
higher labor costs.
Consolidated backlog: Backlog at September 30, 2017 was
$135 million, up 16% from
September 30, 2016.
Third Quarter Operating Review
- Gross profit increased $5.5 million, or
24%, on higher volume. As a percent of sales, gross profit was 34%
in the quarter, as unfavorable mix and lower absorption for
machines was offset by strong margins on our workholding
products.
- Excluding unusual costs in both
periods, selling, general and administrative (SG&A) expenses
increased $1.7 million in the quarter due to higher commissions
related to increased volume and higher incentive based compensation
expense from stronger financial results. The prior-year period
included $1.1 million of charges related to severance and a pension
obligation settlement.
- Operating income of $3.0 million
increased $3.6 million as a result of improved operating leverage.
Operating margin expanded 4.5 points to 3.5% of sales.
- Adjusted Non-GAAP operating income(1)
was $3.9 million in the quarter, up significantly from $0.7 million
in the prior-year period. The adjusted operating margin was 4.5%, a
3.6 point expansion.
- Net income was $2.2 million, or $0.17
per diluted share, up from a $1.4 million loss, or $(0.11) per
diluted share in the prior-year period. Adjusted Non-GAAP net
income(1) was $3.0 million, or $0.24 per diluted share, a
significant increase over last year’s third quarter adjusted net
loss of $0.2 million, or $(0.02) per diluted share.
First Nine Months 2017 Review
- For the first nine months, gross profit
improved $7.2 million to $76.6 million on higher sales. Gross
margin was relatively unchanged from the prior period, as
unfavorable mix was offset by cost savings from the 2015
restructuring program.
- Excluding $1.4 million of unusual costs
associated with our strategic review and severance charges in the
current period and $2.3 million of unusual charges in the prior
year period, SG&A decreased $0.6 million. Lower sales and
marketing expenses were partially offset by increased incentive
based compensation.
- Operating income of $3.4 million
increased $5.0 million. Adjusted Non-GAAP operating income(1) was
$7.5 million, up from $1.3 million in the prior year. Adjusted
operating margin was 3.3%, a 2.7 point expansion from leverage on
higher volume.
- Net income was $2.7 million, or $0.21
per diluted share, improved from a $2.5 million loss, or $(0.19)
per diluted share, in the first nine months of 2016. Adjusted
Non-GAAP net income(1) was $6.7 million, or $0.53 per diluted
share, up significantly from $0.3 million, or $0.03 per diluted
share last year.
(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.
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,
November 16, 2017. To listen to the archived call, dial (412)
317-6671 and enter conference ID number 13671990. 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) that involve risks and uncertainties concerning Hardinge’s
expected financial performance and its strategic and operational
plans. Such statements are based on management's current
expectations, assumptions, estimates, and projections, as well as
information currently available to Hardinge, which 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 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 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. Further risks and uncertainties associated with the
previously announced indication of interest by Privet to acquire
Hardinge include uncertainties as to whether any proposed
transaction will occur, and if it does, the timing of any proposed
transaction, the risk that even if a proposal is made and a
transaction is agreed upon it will be unable to be consummated, and
the risk that the proposal will make it more difficult for Hardinge
to execute its strategic plan.
We undertake 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 EndedSeptember
30,
Nine Months EndedSeptember
30,
2017 2016 2017 2016
(unaudited) (unaudited) Sales $ 84,991 $
67,211 $ 227,745 $ 205,218 Cost of sales 56,376 44,060
151,114 135,770 Gross profit 28,615 23,151
76,631 69,448 Gross profit margin 33.7 % 34.4 % 33.6 % 33.8 %
Selling, general and administrative expenses 20,701 19,992
58,804 60,221 Research & development 3,887 3,296 11,222 9,953
Restructuring 789 182 2,767 608 Other expense, net 276 321
468 249 Income (loss) from operations 2,962
(640 ) 3,370 (1,583 ) Operating margin 3.5 % (1.0 )% 1.5 % (0.8 )%
Interest expense 135 142 346 427 Interest income (37 ) (56 )
(116 ) (192 ) Income (loss) before income taxes 2,864 (726 ) 3,140
(1,818 ) Income tax expense 665 657 466 666
Net Income (loss) $ 2,199 $ (1,383 ) $ 2,674 $
(2,484 )
Per share data: Basic earnings
(loss) per share: $ 0.17 $ (0.11 ) $ 0.21 $ (0.19
)
Diluted earnings (loss) per share: $ 0.17 $
(0.11 ) $ 0.21 $ (0.19 )
Cash dividends declared
per share: $ — $ 0.02 $ 0.04 $ 0.06
Weighted avg. shares outstanding: Basic 12,907
12,835 12,894 12,815
Weighted avg. shares
outstanding: Diluted 12,983 12,835 12,944
12,815
HARDINGE INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share
data)
September 30,2017
December 31,2016
(Unaudited) Assets Cash and cash equivalents $ 32,327
$ 28,255 Restricted cash 2,115 2,923 Accounts receivable, net
60,750 55,573 Inventories, net 114,420 107,018 Other current assets
10,815 6,926 Assets held for sale 5,682 — Total
current assets 226,109 200,695 Property, plant and
equipment, net 50,569 56,961 Goodwill 6,641 6,579 Other intangible
assets, net 26,434 26,730 Other non-current assets 6,163
6,585 Total non-current assets 89,807 96,855
Total assets $ 315,916 $ 297,550
Liabilities and shareholders’ equity Notes payable to bank $
— $ 703 Accounts payable 25,542 24,217 Accrued expenses 32,595
25,629 Customer deposits 26,182 18,215 Accrued income taxes 1,590
1,160 Current portion of long-term debt — 2,923 Total
current liabilities 85,909 72,847 Long-term debt — 2,970
Pension and postretirement liabilities 56,023 58,840 Deferred
income taxes 4,088 3,800 Other liabilities 1,167 3,152
Total non-current liabilities 61,278 68,762 Commitments and
contingencies Common stock ($0.01 par value, 20,000,000 authorized;
shares issued 12,949,525 and 12,903,037) 129 129 Additional paid-in
capital 121,925 121,015 Retained earnings 91,709 89,557 Treasury
shares (at cost, 6,850 and 9,243) (71 ) (104 ) Accumulated other
comprehensive loss (44,963 ) (54,656 ) Total shareholders’ equity
168,729 155,941 Total liabilities and shareholders’
equity $ 315,916 $ 297,550
HARDINGE
INC. AND SUBSIDIARIES Consolidated Statements of Cash
Flows
(in thousands)
Nine Months EndedSeptember
30,
2017 2016 (Unaudited) Operating
activities Net income (loss) $ 2,674 $ (2,484 ) Adjustments to
reconcile net income (loss) to net cash used in operating
activities: Impairment 1,401 — Depreciation and amortization 6,694
6,095 Debt issuance costs amortization 139 98 Deferred income taxes
(229 ) (705 ) (Gain) loss on sale of assets (36 ) 23 Unrealized
foreign currency transaction (gain) loss (489 ) 219 Changes in
operating assets and liabilities: Accounts receivable (2,793 )
9,761 Restricted cash 941 (1,313 ) Inventories (4,037 ) (9,458 )
Other assets (2,255 ) (988 ) Accounts payable 172 (586 ) Customer
deposits 6,928 (1,604 ) Accrued expenses 1,747 (3,338 ) Accrued
pension and postretirement liabilities 131 (65 ) Net cash
generated from (used in) operating activities 10,988 (4,345 )
Investing activities Capital expenditures (1,737 )
(1,543 ) Deposit on assets held for sale 516 — Proceeds from sales
of assets 57 38 Net cash used in investing activities
(1,164 ) (1,505 )
Financing activities Proceeds from
short-term notes payable to bank 17,960 35,974 Repayments of
short-term notes payable to bank (18,705 ) (35,974 ) Repayments of
long-term debt (6,090 ) (3,186 ) Dividends paid (516 ) (792 ) Net
cash used in financing activities (7,351 ) (3,978 ) Effect
of exchange rate changes on cash 1,599 (3 ) Net increase
(decrease) in cash 4,072 (9,831 ) Cash and cash equivalents
at beginning of period 28,255 32,774 Cash and
cash equivalents at end of period $ 32,327 $ 22,943
Quarterly Sales by Region
($ in thousands)
Quarter Ended
September 30, 2017 September 30, 2016
June 30, 2017 Sales to Customers in
$ % of Total $
Year-over-Year% Change
$
Sequential% Change
North America 27,465 32% 24,780
11% 24,220 13% Europe 22,437 26% 18,271 23% 22,240 1%
Asia 35,089 41% 24,160 45%
31,737 11%
Total 84,991
67,211 26% 78,197 9%
Year-to-Date Sales by Region
($ in thousands)
Nine months ended
September 30, 2017 September 30, 2016 Sales
to Customers in $ % of Total
$
Year-over-Year% Change
North America 71,268 31% 62,924
13% Europe 62,379 27% 64,355 (3)% Asia 94,098
41% 77,939 21%
Total 227,745
205,218 11%
Quarterly
Orders by Region
($ in thousands)
Quarter Ended
September 30, 2017 September 30, 2016
June 30, 2017 Orders from Customers in
$ % of Total $
Year-over-Year% Change
$
Sequential% Change
North America 23,153 31% 26,740
(13)% 27,003 (14)% Europe 23,491 32% 20,412 15%
30,021 (22)% Asia 27,337 37% 27,457
—% 35,692 (23)%
Total
73,981 74,609 (1)% 92,716
(20)%
Year-to-Date Orders by Region
($ in thousands)
Nine months ended
September 30, 2017 September 30, 2016
Orders from Customers in $ %
of Total $
Year-over-Year% Change
North America
73,825
31%
76,163
(3)% Europe 74,802 31% 64,400 16% Asia 91,016
38% 79,905 14%
Total
239,643 220,468 9%
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 September 30,
2017
Three Months Ended September 30,
2016
Amount % of Sales Amount % of
Sales Income (loss) from operations as reported $ 2,962
3.5 % $ (640 ) (1.0 )% Adjustments to reported income from
operations: Restructuring charges 789 0.9 % 182 0.3 % Professional
fees for strategic review process — — % 125 0.2 % Pension
settlement loss — — % 765 1.1 % Other adjustments 75 0.1 %
225 0.3 % Non-GAAP income from operations as adjusted $
3,826 4.5 % $ 657 0.9 %
Nine Months EndedSeptember 30,
2017
Nine Months EndedSeptember 30,
2016
Amount % of Sales Amount % of Sales
Income (loss) from operations as reported 3,370 1.5 % $
(1,583 ) (0.8 )% Adjustments to reported income (loss) from
operations: Restructuring charges 2,767 1.2 % 608 0.3 %
Professional fees for strategic review process — — % 1,228 0.6 %
Pension settlement loss — — % 765 0.4 % Other adjustments 1,378
0.6 % 295 0.1 % Non-GAAP income from operations as
adjusted $ 7,515 3.3 % $ 1,313 0.6 %
HARDINGE INC. AND SUBSIDIARIES Reconciliation of GAAP Net
Income (Loss) to Non-GAAP Adjusted Net Income
(in thousands, except per share data)
Three Months EndedSeptember 30,
2017
Three Months EndedSeptember 30,
2016
Amount EPS Amount EPS
Net income (loss) as reported $ 2,199 $ 0.17 $ (1,383 ) $
(0.11 ) Adjustments to reported net income (loss), pre-tax: (1)
Restructuring charges 751 0.06 182 0.01 Professional fees for
strategic review process — — 125 0.01 Pension settlement loss 625
0.05 Other adjustments 75 0.01 225 0.02
Non-GAAP net income (loss) as adjusted $ 3,025 $ 0.24
$ (226 ) $ (0.02 )
Nine Months EndedSeptember 30,
2017
Nine Months EndedSeptember 30,
2016
Amount EPS Amount EPS Net income
(loss) as reported $ 2,674 $ 0.21 $ (2,484 ) $ (0.19 ) Adjustments
to reported net income (loss), pre-tax: (1) Restructuring charges
2,677 0.21 608 0.05 Professional fees for strategic review process
— — 1,228 0.10 Pension settlement loss — 625 0.05 Other adjustments
1,378 0.11 295 0.02 Non-GAAP net income
as adjusted $ 6,729 $ 0.53 $ 272 $ 0.03
(1) Some 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/20171109005303/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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