Hardinge Reports Third Quarter 2014 Results

ELMIRA, N.Y., Nov. 6, 2014 (GLOBE NEWSWIRE) -- 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, 2014.

Net sales ("sales") for the quarter were $68.9 million, down $10.9 million from the prior year's third quarter. Orders for the quarter increased to $75.2 million, compared with $70.7 million in the prior-year period.

Net loss, which was impacted by a non-cash impairment charge, was $7.6 million, or $0.60 per diluted share for the quarter, compared with net income of $1.5 million, or $0.13 per diluted share, in the prior year's third quarter. Non-GAAP⁽¹⁾ net loss was $2.6 million, or $0.20 per share, excluding non-cash impairment charges of $5.4 million and a gain on the Voumard purchase of $0.5 million. Additionally, the current year quarter realized an unusual tax rate due to the Company's jurisdictional mix and intra-period tax allocation accounting.

Richard L. Simons, Chairman, President and Chief Executive Officer, commented, "Our third quarter results were a disappointment to us, negatively impacted by anticipated sales that were deferred to our fourth quarter. The timing of shipments of large dollar orders for customized equipment is dependent upon customer acceptance, which can be impacted by their travel schedules, timing of receiving test material, readiness of the customer's facility, and our ability to finalize complex and demanding processes to meet their requirements. With resolution of those issues early in the fourth quarter, we expect a solid finish to the year with fourth quarter sales of $85 to $90 million and strong profitability."

Mr. Simons added, "Our order levels are continuing to outperform last year's levels, which illustrates the strength of our brands. Economists following the industry are forecasting strong growth in 2015, assuming there is no financial or geo-political crisis that shakes buyer's confidence. In fact, the Oxford Economics Group is forecasting 7% growth in global machine tool consumption for 2015. We are building our business plans and targets for 2015 with that strength in mind, along with anticipation of market share growth through new product introductions and improving distribution efforts around the world."

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⁽¹⁾Management believes that the use of non-GAAP measures helps in the understanding of its 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.

Mr. Simons concluded, "The non-cash impairment charge we reported today is associated with the trade name and goodwill resulting from our 2012 purchase of Usach. We believe this was a good strategic acquisition that will generate long-term value for our Company, especially given our larger, high volume production, specialty machine focus. However, the low order and shipment levels we have been experiencing of late have negatively affected its near-term results, causing these non-cash accounting write-offs."

Third 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.

Sales to the North American market improved as economic activity and industrial capacity utilization improvements in the U.S. positively influenced investments in production capacity. Reduced sales to Europe and Asia more than offset the North American sales growth. Economic uncertainty in Europe impacted investment decisions for capital goods in the current year while prior-year grinding machine sales were unusually high in Asia.

Gross profit of $18.7 million declined $3.4 million compared with the prior-year period. Gross margin as a percentage of sales was 27.1% compared with 27.6% in the third quarter of 2013. The decrease in gross profit was driven by the lower sales volume.

Selling, general and administrative ("SG&A") expense increased by $0.6 million compared with the prior-year period to $20.1 million, or 29.2% of sales. SG&A increases were primarily related to increased trade show and advertising costs.

Operating loss was $6.9 million compared with $2.6 million of operating income in the prior-year period. Non-GAAP⁽¹⁾ operating loss was $1.6 million excluding impairment charges of $5.8 million and a gain on the purchase of Voumard of $0.5 million.

First Nine Months of 2014 Review

Sales for the nine-month period ended September 30, 2014 were $218.6 million, down $7.7 million or 3%, from $226.4 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 $59.9 million, compared with $63.8 million in the prior-year period. Gross profit as a percentage of sales was 27.4% in the nine-month period ended September 30, 2014, a 0.8 percentage point decrease from the same period in 2013. Gross profit was negatively impacted by the decrease in sales volume and lower machine production, which resulted in certain factories experiencing under absorption of fixed costs.

SG&A expense for the nine-month period ended September 30, 2014 was $59.4 million, up $1.6 million compared with the prior-year period. Higher SG&A expense reflects $2.2 million of incremental SG&A from the full year impact of the Forkardt acquisition in addition to seasonal trade show related marketing expenses, and the unfavorable impact of foreign currency fluctuations. This was partially offset by the prior-year change in the Company's sales distribution in the United Kingdom and cost reductions in the Company's organic business. As a percentage of sales, SG&A was 27.2% in the nine-month period ended September 30, 2014 compared with 25.5% for the same period in 2013.

Loss from operations was $5.5 million for the nine-month period ended September 30, 2014, impacted primarily by lower sales and production volume compared with the prior-year period as well as the non-cash impairment charge. Non-GAAP⁽¹⁾ operating loss was $0.1 million excluding impairment charges of $5.8 million and a gain on the purchase of Voumard of $0.5 million.

Net loss from continuing operations for the nine-month period ended September 30, 2014 was $6.9 million, or $0.55 per diluted share, compared with net income from continuing operations of $3.3 million, or $0.28 per diluted share, in the 2013 period. Non-GAAP⁽¹⁾ net loss was $1.8 million, or $0.15 per share, excluding non-cash impairment charges of $5.4 million, a gain on the Voumard purchase of $0.5 million, and a gain on sale of the Swiss operations of Forkardt of $0.2 million. Additionally, the current year-to-date period realized an unusual tax rate due to the Company's jurisdictional mix and intra-period tax allocation accounting.

Flexible Balance Sheet for Strategic Investments

Cash and cash equivalents at September 30, 2014 were $15.0 million. Total debt was $17.5 million, a reduction of $9.1 million from December 31, 2013 levels.

Net orders ("orders") during the quarter were $75.2 million, reflecting 6% improvement over the prior-year period. Year-to-date orders of $236.3 million reflect 10% improvement over the prior-year period, primarily due to incremental orders from Forkardt as well as improvements in the North American market. The Company's order backlog at September 30, 2014 was $107.1 million. 

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 to date, 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, November 13, 2014. To listen to the archived call, dial (404) 537-3406 and enter conference ID number 21856911. 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, 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. 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 believes that providing non-GAAP financial measures such as adjusted operating (loss) income, net (loss) income, and adjusted (loss) 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.