ELMIRA, N.Y., Aug. 7, 2014 (GLOBE NEWSWIRE) -- 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, 2014. 2013 comparative results include the Forkardt operations ("Forkardt") since acquired on May 9, 2013.
Net sales ("sales") for the quarter were $79 million, comparable with the prior year's second quarter. Orders for the quarter increased to $80 million, compared with $77 million in the prior year.
Net income from continuing operations was $1.3 million, or $0.11 per diluted share for the quarter, compared with $2.1 million, or $0.18 per diluted share, in the prior year's second quarter.
Richard L. Simons, Chairman, President and Chief Executive Officer, commented, "Our results for the quarter were in line with our expectations, given the modest growth environment in our global machine tool markets. We are especially encouraged by our sequential performance in China, where we believe we continue to gain market share. Demand for our products has been particularly successful in that market, positioning us well, supported by our strong and growing customer support and manufacturing organization there."
| Quarterly Sales by Region | ||||||
| ($ in thousands) | ||||||
| Quarter Ended | ||||||
| June 30, 2014 | June 30, 2013 | March 31, 2014 | ||||
| Sales to | Year-over-Year | Sequential | ||||
| Customers in | $ | % of Total | $ | % Change | $ | % Change |
| North America | 25,029 | 32% | 26,116 | (4)% | 23,203 | 8% |
| Europe | 25,370 | 32% | 23,284 | 9% | 25,305 | —% |
| Asia | 28,452 | 36% | 29,955 | (5)% | 22,342 | 27% |
| Total | 78,851 | 79,355 | (1)% | 70,850 | 11% | |
Second Quarter Review
Fluctuations in Hardinge's consolidated sales among geographic locations and industries can vary from quarter to quarter based on the timing and magnitude of orders and projects. Hardinge does not believe that such quarter-to-quarter fluctuations are necessarily indicative of larger business trends. Rather, the Company believes that such business trends can be discerned from the Company's performance during a longer period of time, such as a trailing twelve-month period.
Improved sales in Europe benefited from the full quarter of the Forkardt acquisition. This was partially offset by reductions in the Company's North American and Southeast Asian markets, leading to comparable consolidated sales relative to the prior year's second quarter. Forkardt contributed $9.5 million of sales in the second quarter of 2014, compared with $5.1 million in the prior-year quarter.
Gross profit of $22.0 million declined $0.8 million compared with the prior-year period. Gross margin as a percent of sales was 27.9% compared with 28.7% in the second quarter of 2013, and improved from 27.1% in the trailing first quarter. Lower machine production and resulting under absorption of costs at certain facilities was the primary driver unfavorably impacting gross margin compared with the prior year.
Selling, general and administrative ("SG&A") expense increased by $0.2 million compared with the prior-year period to $20.1 million, or 25.5% of sales. The increase included $0.3 million of incremental SG&A associated with the Forkardt businesses, partially offset by cost containment in the Company's organic business.
Operating income was $1.6 million compared with $2.7 million in the prior-year period, impacted primarily by lower gross margin and slightly lower sales. Operating margin as a percent of sales was 2.1%.
| Year-to-Date Sales by Region | ||||
| ($ in thousands) | ||||
| Period Ended | ||||
| June 30, 2014 | June 30, 2013 | |||
| Sales to | Year-over-Year | |||
| Customers in | $ | % of Total | $ | % Change |
| North America | 48,232 | 32% | 50,964 | (5)% |
| Europe | 50,675 | 34% | 44,280 | 14% |
| Asia | 50,794 | 34% | 51,330 | (1)% |
| Total | 149,701 | 146,574 | 2% | |
First Half 2014 Review
Sales for the six-month period ended June 30, 2014 were $149.7 million, up by $3.1 million or 2%, from $146.6 million in the prior-year period. Incremental sales from the Forkardt acquisition were partially offset by the impact of subdued order activity during 2013, which affected 2014 sales.
Gross profit was $41.2 million, compared with $41.7 million in the prior-year period. Gross profit as a percentage of sales was 27.5% in the first half of 2014, a 1.0 percentage point decrease from the first half of 2013. Gross profit was negatively impacted by lower machine production, which resulted in certain factories experiencing under absorption of fixed costs.
SG&A expense for the first six months of 2014 was $39.3 million, up $1.0 million compared with the prior-year period. Higher SG&A expense reflects incremental SG&A from the Forkardt acquisition and the unfavorable impact of foreign currency fluctuations, partially offset by the prior-year change in the Company's sales distribution in the United Kingdom and lower costs in the Company's organic business. As a percentage of sales, SG&A was 26.2% in the first half of 2014 compared with 26.1% in the first half of 2013.
Income from operations was $1.3 million for the first half of 2014, impacted by lower gross margin and higher SG&A expenses compared with the prior-year period. Operating margin as a percent of sales was 0.9% for the first six months of 2014.
Net income from continuing operations for the first half of 2014 was $0.7 million, or $0.05 per diluted share, compared with $2.1 million, or $0.18 per diluted share, in the 2013 period.
Strong Balance Sheet Provides Flexibility for Strategic Investments
Cash and cash equivalents at June 30, 2014 were $22.3 million. Total debt was $19.1 million, a reduction of $7.5 million from December 31, 2013 levels. Through August 1, 2014 the Company raised $14.6 million from the sale of 1,014,252 of Hardinge shares under its at-the-market program which was authorized for a one year period by the Company's Board of Directors in August 2013 and expires on August 8, 2014.
Cash provided by operations was $0.4 million in the first half of 2014. Capital expenditures were $1.1 million in the first half of 2014, and are expected to be in the $3 million to $5 million range for the year, primarily for general maintenance purposes.
| Orders by Region | ||||||
| ($ in thousands) | ||||||
| Quarter Ended | ||||||
| June 30, 2014 | June 30, 2013 | March 31, 2014 | ||||
| Year-over-Year | Sequential | |||||
| Orders from Customers in | $ | % of Total | $ | % Change | $ | % Change |
| North America | 27,166 | 34% | 24,891 | 9% | 24,361 | 12% |
| Europe | 23,101 | 29% | 21,171 | 9% | 28,437 | (19)% |
| Asia | 29,830 | 37% | 31,045 | (4)% | 28,241 | 6% |
| Total | 80,097 | 77,107 | 4% | 81,039 | (1)% | |
| Six Months Ended | ||||||
| June 30, 2014 | June 30, 2013 | |||||
| Year-over-Year | ||||||
| Orders from Customers in | $ | % of Total | $ | % Change | ||
| North America | 51,527 | 32% | 42,339 | 22% | ||
| Europe | 51,538 | 32% | 43,996 | 17% | ||
| Asia | 58,071 | 36% | 57,543 | 1% | ||
| Total | 161,136 | 143,878 | 12% | |||
Net orders ("orders") during the quarter were $80.1 million, reflecting improvement over the prior-year period. The full quarter of orders from the Forkardt acquisition was the primary driver of order growth during the quarter. Year-to-date orders of $161.1 million reflect 12% improvement over the prior-year period, primarily due to incremental orders from Forkardt as well as strengthened levels in North America. The Company's order backlog at June 30, 2014 was $102.9 million.
2014 Expectations
Mr. Simons noted, "Having attained an order level exceeding $80 million for the second consecutive quarter positions us well as we progress through 2014. Demand for our products in China has been favorable, especially in support of the growing automotive and aerospace industries. While the climate in Europe is showing signs of improvement, orders for our long lead time machines did not continue their momentum from the first quarter. Our machine sales performance in the U.S. market has fallen short of our expectations, but we look forward to the upcoming International Manufacturing Technology Show to be held in Chicago in September, where we will be introducing several new machine models. I am confident that these new products will stimulate interest and generate incremental order activity."
"Due to timing of orders, we have tempered our shipment expectations for 2014, and our current outlook is for sales approximately 3% below 2013. However, as we look forward to 2015, we are very encouraged by our pipeline of order prospects as well as our scheduled new product introductions," he concluded.
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, Richard L. Simons, Chairman, President and CEO, and Douglas J. Malone, Vice President and CFO, will review the financial and operating results for the quarter and year, 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 www.hardinge.com/ir/events.
The conference call can be accessed by calling (315) 625-6888. The listen-only audio webcast can be monitored at www.hardinge.com/ir/events.
A telephonic replay will be available from 2:00 p.m. ET the day of the call through Thursday, August 14, 2014. To listen to the archived call, dial (404) 537-3406 and enter conference ID number 79639676. Alternatively, the archive can be heard on the Company's website at www.hardinge.com/ir/events. 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 67% 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, 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.
FINANCIAL TABLES FOLLOW.
| HARDINGE INC. AND SUBSIDIARIES | ||||
| Consolidated Statements of Operations | ||||
| (in thousands, except share and per share data) | ||||
| Three Months Ended | Six Months Ended | |||
| June 30, | June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (unaudited) | (unaudited) | |||
| Sales | $ 78,851 | $ 79,355 | $ 149,701 | $ 146,574 |
| Cost of sales | 56,890 | 56,588 | 108,520 | 104,834 |
| Gross profit | 21,961 | 22,767 | 41,181 | 41,740 |
| Gross profit margin | 27.9% | 28.7% | 27.5% | 28.5% |
| Selling, general and administrative expenses | 20,133 | 19,963 | 39,253 | 38,208 |
| Other expense, net | 192 | 139 | 583 | 415 |
| Income from operations | 1,636 | 2,665 | 1,345 | 3,117 |
| Operating margin | 2.1% | 3.4% | 0.9% | 2.1% |
| Interest expense | 155 | 311 | 398 | 516 |
| Interest income | (12) | (14) | (32) | (29) |
| Income from continuing operations before income taxes | 1,493 | 2,368 | 979 | 2,630 |
| Income taxes | 144 | 312 | 301 | 534 |
| Net income from continuing operations | 1,349 | 2,056 | 678 | 2,096 |
| Gain from disposal of discontinued operation and income from discontinued operations, net of tax | — | 209 | 218 | 209 |
| Net income | $ 1,349 | $ 2,265 | $ 896 | $ 2,305 |
| Per share data: | ||||
| Basic earnings per share: | ||||
| Continuing operations | $ 0.11 | $ 0.18 | $ 0.05 | $ 0.18 |
| Discontinued operations | — | 0.01 | 0.02 | 0.02 |
| Basic earnings per share | $ 0.11 | $ 0.19 | $ 0.07 | $ 0.20 |
| Diluted earnings per share: | ||||
| Continuing operations | $ 0.11 | $ 0.18 | $ 0.05 | $ 0.18 |
| Discontinued operations | — | 0.01 | 0.02 | 0.02 |
| Diluted earnings per share | $ 0.11 | $ 0.19 | $ 0.07 | $ 0.20 |
| Cash dividends declared per share: | $ 0.02 | $ 0.02 | $ 0.04 | $ 0.04 |
| Weighted avg. shares outstanding: Basic | 12,715 | 11,663 | 12,607 | 11,662 |
| Weighted avg. shares outstanding: Diluted | 12,820 | 11,754 | 12,709 | 11,749 |
| HARDINGE INC. AND SUBSIDIARIES | ||
| Consolidated Balance Sheets | ||
| (in thousands, except per share data) | ||
| June 30, | December 31, | |
| 2014 | 2013 | |
| (Unaudited) | ||
| Assets | ||
| Cash and cash equivalents | $ 22,290 | $ 34,722 |
| Restricted cash | 3,469 | 4,124 |
| Accounts receivable, net | 55,301 | 57,137 |
| Inventories, net | 119,330 | 114,064 |
| Other current assets | 11,731 | 11,563 |
| Total current assets | 212,121 | 221,610 |
| Property, plant and equipment, net | 71,898 | 74,656 |
| Goodwill | 11,624 | 10,002 |
| Other intangible assets, net | 32,425 | 32,063 |
| Other non-current assets | 6,543 | 5,852 |
| Total non-current assets | 122,490 | 122,573 |
| Total assets | $ 334,611 | $ 344,183 |
| Liabilities and shareholders' equity | ||
| Accounts payable | $ 27,968 | $ 24,418 |
| Accrued expenses | 23,050 | 26,346 |
| Customer deposits | 12,287 | 15,166 |
| Accrued income taxes | 180 | 830 |
| Deferred income taxes | 2,650 | 2,569 |
| Contingent consideration | 1,500 | 7,500 |
| Current portion of long-term debt | 3,468 | 7,850 |
| Total current liabilities | 71,103 | 84,679 |
| Long-term debt | 15,636 | 18,785 |
| Pension and postretirement liabilities | 27,778 | 28,188 |
| Deferred income taxes | 5,063 | 4,968 |
| Other liabilities | 3,913 | 3,775 |
| Total non-current liabilities | 52,390 | 55,716 |
| Commitments and contingencies | ||
| Common stock ($0.01 par value, 20,000,000 authorized; 12,825,468 issued and outstanding as of June 30, 2014, and 12,472,992 issued and outstanding as of December 31, 2013) | 128 | 125 |
| Additional paid-in capital | 120,381 | 114,951 |
| Retained earnings | 91,325 | 90,937 |
| Treasury shares (at cost, none as of June 30, 2014, and 75,125 as of December 31, 2013) | — | (806) |
| Accumulated other comprehensive loss | (716) | (1,419) |
| Total shareholders' equity | 211,118 | 203,788 |
| Total liabilities and shareholders' equity | $ 334,611 | $ 344,183 |
| HARDINGE INC. AND SUBSIDIARIES | ||
| Consolidated Statements of Cash Flows | ||
| (in thousands) | ||
| Six Months Ended | ||
| June 30, | ||
| 2014 | 2013 | |
| (Unaudited) | ||
| Operating activities | ||
| Net income | $ 896 | $ 2,305 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and amortization | 5,049 | 4,350 |
| Debt issuance costs amortization | 23 | 34 |
| Provision for deferred income taxes | 207 | (20) |
| Gain on sale of assets | (92) | (11) |
| Gain on sale of Forkardt Switzerland | (218) | — |
| Unrealized intercompany foreign currency transaction loss | 318 | 67 |
| Changes in operating assets and liabilities, net of business acquired: | ||
| Accounts receivable | 1,945 | 1,263 |
| Inventories | (4,672) | 311 |
| Other assets | 728 | (49) |
| Accounts payable | 3,548 | (1,174) |
| Customer deposits | (2,853) | 3,901 |
| Accrued expenses | (4,619) | (8,771) |
| Accrued pension and postretirement liabilities | 93 | (197) |
| Net cash provided by operating activities | 353 | 2,009 |
| Investing activities | ||
| Acquisition of business, net of cash acquired | (3,533) | (34,250) |
| Capital expenditures | (1,124) | (1,627) |
| Proceeds from disposal of business | 218 | — |
| Proceeds on sales of assets | 122 | 102 |
| Net cash used in investing activities | (4,317) | (35,775) |
| Financing activities | ||
| Payment of contingent consideration | (6,000) | — |
| Proceeds from short-term notes payable to bank | 6,204 | 32,458 |
| Repayments of short-term notes payable to bank | (6,204) | (26,674) |
| Proceeds from long-term debt | — | 23,000 |
| Repayments of long-term debt | (7,585) | (1,432) |
| Dividends paid | (503) | (467) |
| Net proceeds from sale of common stock | 5,678 | — |
| Other financing activities | — | (667) |
| Net cash (used in) provided by financing activities | (8,410) | 26,218 |
| Effect of exchange rate changes on cash | (58) | (591) |
| Net decrease in cash | (12,432) | (8,139) |
| Cash and cash equivalents at beginning of period | 34,722 | 26,855 |
| Cash and cash equivalents at end of period | $ 22,290 | $ 18,716 |