- Sales increased 4% to $90.2 million
in the quarter, driven by growth in Asia & Europe; Sales for
the year were $317.9 million, up 9% over 2016
- Quarterly net income was $3.2
million with earnings per diluted share of $0.24; Full year net
income was $5.8 million with earnings per diluted share of
$0.45
- Generated cash from operations of
$25.1 million in 2017 compared with $5.3 million in 2016
Hardinge Inc. (NASDAQ: HDNG), a leading international provider
of advanced metal-cutting solutions and accessories, reported
financial results for its fourth quarter and year ended
December 31, 2017.
Sales, Orders and Backlog for the Quarter and Full
Year
(Please refer to the Sales and Orders tables included in this
release)
North America: Sales of $28.7 million in the quarter were down
4% from the prior-year quarter. Orders for the region were $23.6
million, a decrease of 7% from the prior-year quarter, primarily
due to the reorganization of our North America go-to-market
approach.
For the full year, stronger economic conditions led sales in
North America to increase 8% to $99.9 million. Orders decreased 4%
to $97.4 million.
Europe: Sales in Europe increased 7%, or $1.9 million, over the
prior-year quarter to $29.0 million. Orders of $26.7 million were
down 5% from the prior-year quarter. Excluding favorable foreign
currency exchange of $1.5 million and $1.2 million on sales and
orders, respectively, sales were up 2% and orders declined 10%
compared with the prior-year quarter.
For the full year, sales to Europe were unchanged. Excluding
favorable foreign currency exchange of $0.8 million, sales to
Europe decreased 1%. Orders increased 10% over the prior-year.
Excluding favorable foreign currency translation of $0.1 million,
orders increased 9%.
Asia: Asia sales increased $2.5 million, or 8%, to $32.5
million, over the prior-year’s fourth quarter. Excluding favorable
foreign currency translation of $1.0 million, sales increased 5%
over the prior-year period. Orders of $33.5 million decreased $3.3
million, or 9%, compared with the same period in the prior-year,
mostly due to a large order in the prior-year quarter which was not
repeated in the current year. Excluding favorable foreign currency
translation of $0.9 million, orders were down 11% year over
year.
Improving economic conditions helped sales in Asia for the full
year to grow $18.7 million, or 17%, from the prior- year to $126.6
million. Excluding unfavorable foreign currency translation of $0.7
million, sales increased 18%. Orders grew $7.9 million, or 7%, over
the prior-year to $124.5 million as we have continued to focus on
high precision products and custom solutions. Excluding unfavorable
foreign currency translation of $0.9 million orders increased
8%.
Consolidated Backlog: Order backlog at December 31, 2017 was
$130.6 million a 12% increase over backlog at December 31,
2016.
Fourth Quarter Operating Results
- Gross profit for the quarter was $30.9
million, or 34.3% of sales, up 1.9 points from the prior-year
period on improved volume and lower levels of obsolescence
inventory reserves.
- Selling, general and administrative
(“SG&A”) expense increased $1.7 million mostly as a result of
$1.6 million in higher compensation and $0.2 million of costs
related to the Company's strategic review.
- We recorded a non-cash gain on the
dissolution of our Canadian subsidiary related to the realization
of a currency translation adjustment of $0.8 million.
- Income from operations was $5.6
million, an increase of $0.6 million, or 12% from the prior-year
period. On a non-GAAP(1) adjusted basis, income from operations
increased 27% to $6.8 million compared with $5.3 million last year.
As a percent of sales, adjusted income from operations was 7.5%, a
1.4 point improvement over the prior-year period.
- Income tax expense in the quarter was
impacted by the U.S. Tax Cuts and Jobs Act (the Act). Tax expense
includes $1.2 million for the estimated transition tax resulting
from the Act.
- Net income was $3.2 million, or $0.24
per diluted share, down from $3.7 million, or $0.29 per diluted
share in the prior-year period. Adjusted non-GAAP(1) net income was
$4.3 million, or $0.33 per diluted share, an increase over the
prior period adjusted net income of $4.1 million, or $0.31 per
diluted share.
(1) Management believes that the use of non-GAAP financial
measures help in the understanding of the Company's operating
performance. See pages 9 and 10 of this release for the
reconciliation tables between reported amounts and non-GAAP
measures discussed in this document.
2017 Full Year Review
- Gross profit of $107.6 million was up
$10.0 million over the prior-year due to higher volume. Gross
margin of 33.8% was up 0.4 points from the prior year on improved
volume and lower levels of obsolescence inventory reserves
partially offset by unfavorable mix.
- Excluding unusual costs in both
periods, SG&A increased $1.1 million due to higher incentive
compensation costs, which was partially offset by lower sales and
marketing costs.
- Income from operations was $8.9
million, up $5.5 million or 163% from prior-year. Non-GAAP(1)
adjusted income from operations more than doubled to $14.3 million,
or 5% of sales, compared with $6.6 million, or 2% of sales in
2016.
- Net income was $5.8 million, or $0.45
per diluted share, improved from $1.2 million, or $0.09 per diluted
share in the prior-year. Adjusted non-GAAP(1) net income was $11.0
million, or $0.86 per diluted share, up significantly from $4.3
million, or $0.33 per diluted share in the prior-year.
Recent Acquisition 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.
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, 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, 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
HARDINGE INC. AND SUBSIDIARIES
Consolidated Statements of
Operations
(in thousands, except per share data)
Three Months Ended December 31, Year Ended
December 31, 2017 2016 2017
2016 (unaudited) Sales $ 90,175 $ 86,795 $
317,920 $ 292,013 Cost of sales 59,238 58,716 210,352
194,486 Gross profit 30,937 28,079 107,568 97,527
Gross profit margin 34.3 % 32.4 % 33.8 % 33.4 % Selling,
general and administrative expenses 21,146 19,426 79,950 79,647
Research & development 3,321 3,561 14,543 13,514 Restructuring
charges 1,739 53 4,506 661 Other (income) expense, net (833 ) 61
(365 ) 310 Operating Income 5,564 4,978 8,934 3,395
Operating margin 6.2 % 5.7 % 2.8 % 1.2 % Interest expense 71
128 417 555 Interest income (50 ) (35 ) (166 ) (227 ) Income before
income taxes 5,543 4,885 8,683 3,067 Income taxes 2,371
1,177 2,837 1,843 Net income $ 3,172
$ 3,708 $ 5,846 $ 1,224 Per
share data: Basic earnings per share: $ 0.25 $ 0.29 $
0.45 $ 0.10 Diluted earnings per share: $ 0.24
$ 0.29 $ 0.45 $ 0.09 Cash
dividends declared per share: $ — $ 0.02 $ 0.04
$ 0.08 Weighted avg. shares outstanding: Basic
12,918 12,854 12,900 12,824 Weighted
avg. shares outstanding: Diluted 13,054 12,923 12,972
12,909
HARDINGE INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share
data)
December 31, 2017 December 31,
2016 Assets Cash and cash equivalents $ 44,958
$ 28,255 Restricted cash 2,717 2,923 Accounts receivable, net
61,800 55,573 Inventories, net 104,502 107,018 Other current assets
9,076 6,926 Assets held for sale 5,647 — Total
current assets 228,700 200,695 Property, plant and
equipment, net 50,790 56,961 Goodwill 6,677 6,579 Other intangible
assets, net 26,386 26,730 Other non-current assets 6,396
6,585 Total non-current assets 90,249 96,855
Total assets $ 318,949 $ 297,550
Liabilities and shareholders’ equity Accounts payable $
26,362 $ 24,920 Accrued expenses 31,695 25,629 Customer deposits
23,852 18,215 Accrued income taxes 1,370 1,160 Current portion of
long-term debt — 2,923 Total current liabilities
83,279 72,847 Long-term debt — 2,970 Pension and
postretirement liabilities 49,122 58,840 Deferred income taxes
5,217 3,800 Other liabilities 2,405 3,152 Total
non-current liabilities 56,744 68,762 Commitments and contingencies
Common stock (par value $0.01 per share; shares authorized
20,000,000; Shares issued 12,963,164 and 12,903,037) 130 129
Additional paid-in capital 122,140 121,015 Retained earnings 94,882
89,557 Treasury shares (at cost, 0 and 9,243) — (104 ) Accumulated
other comprehensive loss (38,226 ) (54,656 ) Total shareholders’
equity 178,926 155,941 Total liabilities and
shareholders’ equity $ 318,949 $ 297,550
HARDINGE INC. AND SUBSIDIARIES
Consolidated Statements of Cash
Flows
(in thousands)
Year Ended December 31, 2017
December 31, 2016 Operating activities Net income $
5,846 $ 1,224 Adjustments to reconcile net income to net cash
provided by operating activities: Impairment charge 1,401 —
Depreciation and amortization 8,905 8,789 Debt issuance costs
amortization 155 131 Deferred income taxes 376 689 Gain on sale of
assets (38 ) (38 ) Gain on dissolution of subsidiary (833 ) —
Unrealized foreign currency transaction loss (296 ) 524 Changes in
operating assets and liabilities, net of businesses acquired:
Accounts receivable (2,993 ) (284 ) Restricted cash 411 (927 )
Inventories 6,451 252 Other assets (925 ) (372 ) Accounts payable
611 141 Customer deposits 4,421 (776 ) Accrued expenses 1,658
(3,964 ) Accrued pension and postretirement liabilities (35 ) (92 )
Net cash provided by operating activities 25,115 5,297
Investing activities Capital expenditures (3,207 ) (2,479 )
Deposit on assets held for sale 516 — Proceeds from sales of assets
68 118 Net cash used in investing activities (2,623 )
(2,361 )
Financing activities Proceeds from
short-term notes payable to bank 20,987 42,820 Repayments of
short-term notes payable to bank (21,734 ) (42,114 ) Repayments of
long-term debt (6,088 ) (5,761 ) Dividends paid (526 ) (1,052 )
Purchases of treasury stock (80 ) (368 ) Net cash used in financing
activities (7,441 ) (6,475 ) Effect of exchange rate changes
on cash 1,652 (980 ) Net increase (decrease) in cash 16,703
(4,519 ) Cash and cash equivalents at beginning of period
28,255 32,774 Cash and cash equivalents at end
of period $ 44,958 $ 28,255
HARDINGE INC. AND SUBSIDIARIES
Sales by Region
(in thousands)
Quarter Ended December 31, 2017
December 31, 2016 September 30, 2017
Sales to Customers in $ % of Total
$ Year-over-Year
% Change
$ Sequential
% Change
North America 28,680 32 % 29,744 (4 )% 27,465
4 % Europe 28,950 32 % 27,026 7 % 22,437 29 % Asia 32,545
36 % 30,025 8 % 35,089 (7 )%
Total 90,175 86,795 4 %
84,991 6 %
Twelve months ended
December 31, 2017 December 31, 2016
Sales to Customers in $ % of Total
$ Year-over-Year
% Change
North America 99,948 31 % 92,668 8 % Europe 91,329 29
% 91,381 — % Asia 126,643 40 % 107,964
17 %
Total 317,920 292,013
9 %
HARDINGE INC. AND SUBSIDIARIES
Orders by Region
(in thousands)
Quarter Ended December 31, 2017
December 31, 2016 September 30, 2017
Orders from Customers in $ % of Total
$ Year-over-Year
% Change
$ Sequential
% Change
North America 23,568 28 % 25,378 (7 )% 23,153
2 % Europe 26,745 32 % 28,248 (5 )% 23,491 14 % Asia 33,525
40 % 36,778 (9 )% 27,337 23 %
Total 83,838 90,404 (7 )%
73,981 13 %
Twelve months ended
December 31, 2017 December 31, 2016
Orders from Customers in $ % of Total
$ Year-over-Year
% Change
North America 97,393 30 % 101,541 (4 )% Europe
101,547 31 % 92,648 10 % Asia 124,541 39 % 116,683
7 %
Total 323,481 310,872
4 %
Hardinge believes that providing non-GAAP financial measures
such as adjusted operating income, 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 Operating Income
to Non-GAAP Operating Income
(in thousands)
Three Months Ended December 31, 2017
Three Months Ended December 31, 2016 Amount
% of Sales Amount % of Sales
Operating income as reported $ 5,564 6.2 % $ 4,978 5.7 %
Adjustments to reported operating income: Restructuring charges
1,739 1.9 53 0.1 Professional fees for strategic review process 208
0.2 42 0.1 Pension settlement adjustment — — (132 ) (0.2 ) Other
adjustments (744 ) (0.8 ) 371 0.4 Non-GAAP operating
income as adjusted $ 6,767 7.5 % $ 5,312 6.1 %
Year Ended December 31, 2017 Year Ended
December 31, 2016 Amount % of Sales
Amount % of Sales Operating income as reported 8,934
2.8 % $ 3,395 1.2 % Adjustments to reported operating income:
Restructuring charges 4,506 1.4 661 0.2 Professional fees for
strategic review process 208 0.1 1,270 0.4 Pension settlement
adjustment — — 633 0.2 Other adjustments 615 0.2 666
0.2 Non-GAAP operating income as adjusted $ 14,263
4.5 % $ 6,625 2.2 %
HARDINGE INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income to
Non-GAAP Net Income
(in thousands, except per share data)
Three Months Ended December 31, 2017
Three Months Ended December 31, 2016 Amount
EPS Amount EPS Net income as
reported $ 3,172 $ 0.24 $ 3,708 $ 0.29 Adjustments to reported net
income, net of taxes: Restructuring charges 1,682 0.13 53 —
Professional fees for strategic review process 208 0.02 42 —
Pension settlement adjustment — — (108 ) (0.01 ) Other adjustments
(744 ) (0.06 ) 371 0.03 Non-GAAP net income as
adjusted $ 4,318 $ 0.33 $ 4,066 $ 0.31
Year Ended December 31, 2017 Year Ended
December 31, 2016 Amount EPS Amount
EPS Net income as reported $ 5,846 $ 0.45 $ 1,224 $ 0.09
Adjustments to reported net income, net of taxes: Restructuring
charges 4,358 0.34 661 0.05 Professional fees for strategic review
process 208 0.02 1,270 0.10 Pension settlement adjustment — — 517
0.04 Other adjustments 615 0.05 666 0.05
Non-GAAP net income as adjusted $ 11,027 $ 0.86
$ 4,338 $ 0.33
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180215005245/en/
Company:HardingeDouglas J. Malone, Chief Financial
Officer, (607) 378-4140orInvestor Relations:Kei Advisors
LLCDeborah K. Pawlowski, (716) 843-3908Email:
dpawlowski@keiadvisors.com
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