ELMIRA, N.Y., Feb. 12, 2015 (GLOBE NEWSWIRE) -- 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, 2014.
Net sales ("sales") for the quarter were $93.0 million, and net income was $4.5 million, or $0.35 per diluted share. Orders for the quarter increased 28% to $94.4 million, compared with $73.9 million in the prior-year period.
Richard L. Simons, Chairman, President and Chief Executive Officer, commented, "We finished the year on a strong note, demonstrating our team's ability to execute, as fourth quarter sales slightly exceeded our guidance range. Compared with the trailing third quarter, we realized significant sales growth in all geographic regions. Europe and Asia each grew over 40% and the U.S. was up nearly 20%. Our orders for the quarter and the year were significantly higher than what we had experienced in the last few years. In fact, fourth quarter orders were at the highest level we have achieved since the second quarter of 2011."
|
Quarterly Sales by Region ($ in thousands) |
||||||
| Quarter Ended | ||||||
| December 31, 2014 | December 31, 2013 | September 30, 2014 | ||||
|
Sales to Customers in |
$ |
% of Total |
$ |
Year-over-Year % Change |
$ |
Sequential % Change |
| North America | 28,636 | 31% | 36,473 | (21)% | 24,026 | 19% |
| Europe | 31,102 | 33% | 28,867 | 8% | 21,286 | 46% |
| Asia | 33,270 | 36% | 37,761 | (12)% | 23,612 | 41% |
| Total | 93,008 | 103,101 | (10)% | 68,924 | 35% | |
| Note: 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. | ||||||
Fourth Quarter Review
Compared with the prior year, sales to Europe improved as a result of increased demand for highly-engineered machines with custom specifications. Sales to the North American and Asian markets declined primarily as a result of the prior-year period benefiting from unusually strong shipments out of Usach's purchased backlog of $11.3 million and $9.7 million, respectively, in the fourth quarter of 2013.
Gross profit of $27.0 million declined $2.4 million compared with the prior-year period. As a percentage of sales, gross margin was 29.1%, fairly consistent with the fourth quarter of 2013 after adjusting for an inventory step-up charge of $0.8 million in the 2013 period.
Selling, general and administrative ("SG&A") expenses of $21.7 million were relatively unchanged from the prior-year period. As a percentage of sales, SG&A was 23.3%, compared with 21.1% in the prior-year period, which had the benefit of higher sales volume.
Income from operations was $5.1 million, compared with $1.3 million in the prior-year period. Income from operations in the fourth quarter of last year was negatively impacted by a $0.8 million inventory step-up charge, acquisition-related expenses of $0.3 million, and an impairment charge of $6.2 million. Fourth quarter 2013 income from operations benefited from the shipment of the Usach machines with a de minimis amount of associated variable SG&A.
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Full Year Sales by Region ($ in thousands) |
||||
| Year Ended | ||||
| December 31, 2014 | December 31, 2013 | |||
|
Sales to Customers in |
$ |
% of Total |
$ |
Year-over-Year % Change |
| North America | 100,894 | 32% | 109,457 | (8)% |
| Europe | 103,063 | 33% | 100,126 | 3% |
| Asia | 107,676 | 35% | 119,876 | (10)% |
| Total | 311,633 | 329,459 | (5)% | |
Full Year 2014 Review
Sales for 2014 were $311.6 million, down $17.8 million, mostly as the result of lower Usach product sales after the unusually high 2013 volume previously discussed.
Gross profit was $86.9 million, or 27.9% of sales, compared with $93.2 million, or 28.3% of sales in the prior year. Gross profit in 2014 was negatively impacted by reduced sales volume and lower machine production, which resulted in certain factories experiencing under absorption of fixed costs. Gross profit in 2013 was unfavorably impacted by a $1.9 million inventory step-up charge.
SG&A expense was $81.0 million, up by $1.5 million compared with the prior year, driven primarily by incremental SG&A expense gained with the acquisitions. The prior year SG&A included approximately $2.2 million of acquisition-related expenses. As a percentage of sales, SG&A was 26.0% in 2014 compared with 24.1% in 2013, which benefited from higher sales.
2014 loss from operations was $0.4 million, compared with income from operations of $7.0 million in 2013. Non-GAAP(1) adjusted operating income, which excludes impairment charges and other atypical items, was $5.1 million in 2014, compared with non-GAAP(1) adjusted operating income of $17.3 million in 2013. The decline from the prior year was mostly the result of lower sales and under absorption of fixed costs due to lower production volumes in the Company's grinding operations.
Net loss for 2014 was $2.1 million, or $0.17 per diluted share, compared with net income of $9.9 million, or $0.83 per diluted share, in the prior year. Non-GAAP(1) adjusted net income, which excludes atypical items, was $2.8 million, or $0.22 per diluted share in 2014, compared with non-GAAP(1) adjusted net income of $14.9 million or $1.25 per diluted share in 2013.
Flexible Balance Sheet for Strategic Investments
Cash and cash equivalents at December 31, 2014 were $16.3 million. Total debt was $16.2 million, a reduction of $10.4 million from December 31, 2013.
| Orders by Region | ||||||
| ($ in thousands) | ||||||
| Quarter Ended | ||||||
| December 31, 2014 | December 31, 2013 | September 30, 2014 | ||||
| Orders from Customers in |
$ |
% of Total |
$ |
Year-over-Year % Change |
$ |
Sequential % Change |
| North America | 31,467 | 33% | 24,598 | 28% | 22,158 | 42% |
| Europe | 31,302 | 33% | 23,818 | 31% | 26,282 | 19% |
| Asia | 31,582 | 34% | 25,498 | 24% | 26,763 | 18% |
| Total | 94,351 | 73,914 | 28% | 75,203 | 25% | |
| Year Ended | ||||
| December 31, 2014 | December 31, 2013 | |||
| Orders from Customers in |
$ |
% of Total |
$ |
Year-over-Year % Change |
| North America | 105,152 | 32% | 86,216 | 22% |
| Europe | 109,122 | 33% | 95,348 | 14% |
| Asia | 116,416 | 35% | 106,912 | 9% |
| Total | 330,690 | 288,476 | 15% | |
Net orders ("orders") during the fourth quarter were $94.4 million, up 28% over the prior-year period. Full year 2014 orders of $330.7 million grew 15% over 2013, with improvements in all three geographic markets. Incremental orders from the full year contribution of Forkardt accounted for approximately $14 million of the increase. The Company's order backlog at December 31, 2014 was $105.3 million, compared with $91.4 million at December 31, 2013.
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(1)Management believes that the use of non-GAAP measures helps in the understanding of its operating performance. See pages 8 and 9 of this release for the reconciliation tables between reported amounts and non-GAAP measures discussed in this document.
2015 Expectations
Mr. Simons commented, "Given the strength of orders at year end, our firm backlog and very active quote pipeline, we expect that 2015 will demonstrate solid growth. Economists are indicating further order growth for the industry as well. We believe our China and U.S. markets will drive sales as the aerospace and automotive industries continue to expand. Our first quarter is affected by the Chinese New Year and, based on scheduled backlog, we expect our first quarter sales to be similar to last year's first quarter of about $70 million. We believe our 2015 growth will be demonstrated in the quarters thereafter."
He concluded, "We are intent upon growing the business both organically and through acquisitions, and to improve productivity to drive stronger profitability."
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 http://ir.hardinge.com/events.cfm.
The conference call can be accessed by calling (315) 625-6888. 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, February 19, 2015. To listen to the archived call, dial (404) 537-3406 and enter conference ID number 54427769. 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). 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 per share data) | ||||
| Three Months Ended December 31, | Year Ended December 31, | |||
| 2014 | 2013 | 2014 | 2013 | |
| (unaudited) | ||||
| Sales | $93,008 | $103,101 | $311,633 | $329,459 |
| Cost of sales | 65,988 | 73,643 | 224,755 | 236,220 |
| Gross profit | 27,020 | 29,458 | 86,878 | 93,239 |
| Gross profit margin | 29.1% | 28.6% | 27.9% | 28.3% |
| Selling, general and administrative expenses | 21,669 | 21,753 | 81,045 | 79,533 |
| Impairment charges | — | 6,239 | 5,766 | 6,239 |
| Other expense, net | 265 | 155 | 514 | 471 |
| Income (loss) from operations | 5,086 | 1,311 | (447) | 6,996 |
| Operating margin | 5.5% | 1.3% | (0.1)% | 2.1% |
| Interest expense | 168 | 287 | 737 | 1,128 |
| Interest income | (12) | (21) | (59) | (64) |
| Income (loss) from continuing operations before income taxes | 4,930 | 1,045 | (1,125) | 5,932 |
| Income taxes | 388 | (81) | 1,233 | 1,537 |
| Net income (loss) from continuing operations | 4,542 | 1,126 | (2,358) | 4,395 |
| Gain from disposal of discontinued operation, net of tax | — | 4,890 | 218 | 4,890 |
| Income from discontinued operations, net of tax | — | 127 | — | 642 |
| Net income (loss) | $4,542 | $6,143 | $(2,140) | $9,927 |
| Per share data: | ||||
| Basic earnings (loss) per share: | ||||
| Continuing operations | $0.36 | $0.09 | $(0.19) | $0.37 |
| Disposal of discontinued operation | — | 0.40 | 0.02 | 0.41 |
| Discontinued operations | — | 0.01 | — | 0.06 |
| Basic earnings (loss) per share | $0.36 | $0.50 | $(0.17) | $0.84 |
| Diluted earnings (loss) per share: | ||||
| Continuing operations | $0.35 | $0.09 | $(0.19) | $0.37 |
| Disposal of discontinued operation | — | 0.40 | 0.02 | 0.41 |
| Discontinued operations | — | 0.01 | — | 0.05 |
| Diluted earnings (loss) per share | $0.35 | $0.50 | $(0.17) | $0.83 |
| Cash dividends declared per share: | $0.02 | $0.02 | $0.08 | $0.08 |
| Weighted avg. shares outstanding: Basic | 12,716 | 12,160 | 12,661 | 11,801 |
| Weighted avg. shares outstanding: Diluted | 12,832 | 12,253 | 12,661 | 11,891 |
| HARDINGE INC. AND SUBSIDIARIES | ||
| Consolidated Balance Sheets | ||
| (in thousands, except share and per share data) | ||
|
December 31, 2014 |
December 31, 2013 |
|
| Assets | ||
| Cash and cash equivalents | $16,293 | $34,722 |
| Restricted cash | 3,151 | 4,124 |
| Accounts receivable, net | 62,877 | 57,137 |
| Inventories, net | 111,821 | 114,064 |
| Other current assets | 10,545 | 11,563 |
| Total current assets | 204,687 | 221,610 |
| Property, plant and equipment, net | 65,874 | 74,656 |
| Goodwill | 6,698 | 10,002 |
| Other intangible assets, net | 30,217 | 32,063 |
| Other non-current assets | 3,844 | 5,852 |
| Total non-current assets | 106,633 | 122,573 |
| Total assets | $311,320 | $344,183 |
| Liabilities and shareholders' equity | ||
| Accounts payable | $25,592 | $24,418 |
| Accrued expenses | 25,071 | 26,346 |
| Customer deposits | 12,736 | 15,166 |
| Accrued income taxes | 646 | 830 |
| Deferred income taxes | 2,332 | 2,569 |
| Contingent consideration | — | 7,500 |
| Current portion of long-term debt | 3,972 | 7,850 |
| Total current liabilities | 70,349 | 84,679 |
| Long-term debt | 12,253 | 18,785 |
| Pension and postretirement liabilities | 53,119 | 28,188 |
| Deferred income taxes | 2,516 | 4,968 |
| Other liabilities | 3,487 | 3,775 |
| Total non-current liabilities | 71,375 | 55,716 |
| Commitments and contingencies | ||
| Common stock ($0.01 par value, 20,000,000 authorized; 12,825,468 issued and 12,821,768 outstanding as of December 31, 2014, and 12,472,992 issued and 12,397,867 outstanding as of December 31, 2013) | 128 | 125 |
| Additional paid-in capital | 120,538 | 114,951 |
| Retained earnings | 87,777 | 90,937 |
| Treasury shares (at cost, 3,700 as of December 31, 2014, and 75,125 as of December 31, 2013) | (46) | (806) |
| Accumulated other comprehensive loss | (38,801) | (1,419) |
| Total shareholders' equity | 169,596 | 203,788 |
| Total liabilities and shareholders' equity | $311,320 | $344,183 |
| HARDINGE INC. AND SUBSIDIARIES | ||
| Consolidated Statements of Cash Flows | ||
| (in thousands) | ||
| Year Ended | ||
|
December 31, 2014 |
December 31, 2013 |
|
| Operating activities | ||
| Net (loss) income | $(2,140) | $9,927 |
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||
| Impairment charges | 5,766 | 6,239 |
| Depreciation and amortization | 9,847 | 9,560 |
| Debt issuance costs amortization | 42 | 83 |
| Benefit from deferred income taxes | (245) | (1,140) |
| Gain on sale of assets | (82) | (62) |
| Gain on sale of business | (218) | (4,890) |
| Gain on purchase of business | (462) | — |
| Unrealized intercompany foreign currency transaction loss (gain) | 350 | (2,397) |
| Changes in operating assets and liabilities, net of businesses acquired: | ||
| Accounts receivable | (7,860) | (68) |
| Inventories | (1,303) | 20,259 |
| Other assets | 1,655 | 1,663 |
| Accounts payable | 2,211 | (4,083) |
| Customer deposits | (1,783) | (899) |
| Accrued expenses | (2,590) | (8,373) |
| Accrued pension and postretirement liabilities | (9) | 9 |
| Net cash provided by operating activities | 3,179 | 25,828 |
| Investing activities | ||
| Acquisition of businesses, net of cash acquired | (5,683) | (34,250) |
| Capital expenditures | (3,186) | (3,871) |
| Proceeds from disposal of business | 218 | 6,255 |
| Proceeds on sales of assets | 151 | 179 |
| Net cash used in investing activities | (8,500) | (31,687) |
| Financing activities | ||
| Payment of contingent consideration | (7,500) | (299) |
| Proceeds from short-term notes payable to bank | 21,143 | 47,733 |
| Repayments of short-term notes payable to bank | (21,143) | (59,025) |
| Proceeds from long-term debt | — | 33,821 |
| Repayments of long-term debt | (9,296) | (15,743) |
| Debt issuance costs | — | (687) |
| Dividends paid | (1,012) | (944) |
| Net proceeds from sales of common stock | 5,678 | 8,884 |
| Other financing activities | — | — |
| Net cash (used in) provided by financing activities | (12,130) | 13,740 |
| Effect of exchange rate changes on cash | (978) | (14) |
| Net (decrease) increase in cash | (18,429) | 7,867 |
| Cash and cash equivalents at beginning of period | 34,722 | 26,855 |
| Cash and cash equivalents at end of period | $16,293 | $34,722 |
Hardinge believes that providing non-GAAP financial measures such as adjusted operating income, 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 (Loss) to Non-GAAP Operating Income | ||||
| (in thousands) | ||||
|
Three Months Ended December 31, 2014 |
Three Months Ended December 31, 2013 |
|||
| Amount | % of Sales | Amount | % of Sales | |
| Income from operations, as reported | $5,086 | 5.5% | $1,311 | 1.3% |
| Adjustments to reported income from operations: | ||||
| Impairment charges | — | — | 6,239 | 6.0 |
| Acquisition-related inventory step-up charge | — | — | 785 | 0.8 |
| Acquisition-related expenses | 121 | 0.1 | 258 | 0.2 |
| Non-GAAP income from operations, as adjusted | $5,207 | 5.6% | $8,593 | 8.3% |
|
Year Ended December 31, 2014 |
Year Ended December 31, 2013 |
|||
| Amount | % of Sales | Amount | % of Sales | |
| Income (loss) from operations, as reported | $(447) | (0.1)% | $6,996 | 2.1% |
| Adjustments to reported income (loss) from operations: | ||||
| Impairment charges | 5,766 | 1.9 | 6,239 | 1.9 |
| Gain on purchase of business | (462) | (0.1) | — | — |
| Acquisition-related inventory step-up charge | 86 | — | 1,927 | 0.6 |
| Acquisition-related expenses | 121 | — | 2,154 | 0.7 |
| Non-GAAP income from operations, as adjusted | $5,064 | 1.7% | $17,316 | 5.3% |
| HARDINGE INC. AND SUBSIDIARIES | ||||
| Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income | ||||
| (in thousands, except per share data) | ||||
|
Three Months Ended December 31, 2014 |
Three Months Ended December 31, 2013 |
|||
| Amount | EPS | Amount | EPS | |
| Net income, as reported | $4,542 | $0.35 | $6,143 | $0.50 |
| Adjustments to reported net income, net of taxes: | ||||
| Impairment charges | — | — | 6,239 | 0.51 |
| Gain from disposal of discontinued operation and income from discontinued operations, net of tax | — | — | (5,017) | (0.41) |
| Acquisition-related inventory step-up charge | — | — | 785 | 0.06 |
| Acquisition-related expenses | 121 | 0.01 | 258 | 0.02 |
| Non-GAAP net income, as adjusted | $4,663 | $0.36 | $8,408 | $0.68 |
|
Year Ended December 31, 2014 |
Year Ended December 31, 2013 |
|||
| Amount | EPS | Amount | EPS | |
| Net (loss) income, as reported | $(2,140) | $(0.17) | $9,927 | $0.83 |
| Adjustments to reported net (loss) income, net of taxes: | ||||
| Impairment charges | 5,437 | 0.43 | 6,239 | 0.52 |
| Gain on purchase of business | (462) | (0.04) | — | — |
| Gain from disposal of discontinued operation and income from discontinued operations, net of tax | (218) | (0.02) | (5,532) | (0.46) |
| Acquisition-related inventory step-up charge | 86 | 0.01 | 1,915 | 0.16 |
| Acquisition-related expenses | 121 | 0.01 | 2,154 | 0.18 |
| Other adjustments | — | — | 186 | 0.02 |
| Non-GAAP net income, as adjusted | $2,824 | $0.22 | $14,889 | $1.25 |