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Hardinge Reports Second Quarter 2015 Results

ELMIRA, N.Y., Aug. 6, 2015 (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, 2015.

Net sales ("sales") for the quarter increased $3.5 million to$82.4 million. Excluding $1.9 million for unfavorable foreign currency translation, this represents a 7% increase over the prior year's second quarter. Orders for the quarter were $77.2 million, a 2% decrease from the prior year's second quarter when adjusted for unfavorable foreign currency translation.

Net income was $1.6 million, or $0.12 per diluted share, for the quarter compared with $1.3 million, or $0.11 per diluted share, in the prior year's second quarter.

Richard L. Simons, President and Chief Executive Officer, commented, "We achieved year-over-year increases in sales in the second quarter and year to date. As we look towards the third quarter we anticipate sales to also surpass the comparable quarter of last year and remain encouraged with our 2015 outlook with expected full year revenue growth in excess of 5%. The magnitude of our backlog gives us confidence in a strong second half of 2015."

Mr. Simons continued, "We have identified several initiatives that will permanently impact the overall cost structure of the Company. These restructuring initiatives are expected to generate annual pretax savings in the range of approximately $4 million to $5 million once fully implemented. To complete those projects, we will incur one-time costs such as severance, moving costs, lease termination, and other related expenses over the upcoming quarters, which we currently estimate to be in the range of $4 million to $5 million on a pretax basis."

Orders by Region
($ in thousands)
Quarter Ended
June 30, 2015 June 30, 2014 March 31, 2015
Orders from Customers in $ % of Total $ Year-over-Year
% Change
$ Sequential
% Change
North America 27,045 35% 27,166 —% 27,354 (1)%
Europe 22,085 29% 23,101 (4)% 31,294 (29)%
Asia 28,021 36% 29,830 (6)% 34,279 (18)%
Total 77,151 80,097 (4)% 92,927 (17)%
Six Months Ended
June 30, 2015 June 30, 2014
Orders from Customers in $ % of Total $ Year-over-Year
% Change
North America 54,399 32% 51,527 6%
Europe 53,379 31% 51,538 4%
Asia 62,300 37% 58,071 7%
Total 170,078 161,136 6%

Year-to-date orders of $170.1 million reflect a 6% improvement over the prior-year period, primarily due to strong orders for our high-end grinding machines. Excluding $4.4 million for unfavorable foreign currency translation, year-to-date orders increased 8% over the prior-year period. Mr. Simons commented, "We are pleased with the growth in our year-to-date orders, given that global industry-wide year-over-year order levels for machine tools are reported to be down. The strength of our products and our organizations are allowing us to perform well in these softer market conditions." The Company's order backlog at June 30, 2015 was $124.6 million.

Quarterly Sales by Region
($ in thousands)
Quarter Ended
June 30, 2015 June 30, 2014 March 31, 2015
Sales to Customers in $ % of Total $ Year-over-Year
% Change
$ Sequential
% Change
North America 29,073 35% 25,029 16% 26,305 11%
Europe 22,055 27% 25,370 (13)% 22,929 (4)%
Asia 31,228 38% 28,452 10% 19,894 57%
Total 82,356 78,851 4% 69,128 19%

____________________

Note: Fluctuations in Hardinge's consolidated sales and orders 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.

Second Quarter Review

Sales for the quarter increased $3.5 million to$82.4 million, when compared with the prior-year period. Excluding $1.9 million for unfavorable foreign currency translation, sales increased 7% over the prior year's second quarter. Sales to the North America market increased over the prior-year period primarily from revenue related to new product launches. Sales to Asia continue to reflect the Company's successful penetration of certain growing industries there, including automotive, aerospace and consumer electronics. Reduced sales to Europe were largely a result of unfavorable foreign currency translation and stagnant economic activity in that region.

Gross profit of $23.5 million increased 7% compared with the prior-year period. Gross margin as a percentage of sales increased to 28.5%, compared with 27.9% in the second quarter of 2014. Gross profit and margin were favorably impacted by increased levels of machine production, particularly at the Company's Swiss grinding facilities.

Selling, general and administrative ("SG&A") expense increased by $0.9 million compared with the prior-year period, to $21.1 million. SG&A increases were primarily due to volume-related selling expenses in Asia, as well as the timing of China's International Machine Tool Show (CIMT). In addition, the Company has incurred
$0.3 million of expense associated with its investments for growth of the recently acquired Voumard product line. These increases were partially offset by $0.6 million of favorable foreign currency translation when compared with the prior-year period.

Operating income was $2.4 million, or 2.9% of sales, compared with $1.6 million, or 2.1% of sales, in the prior-year period. The current-year period benefited from the impact of higher sales levels and improved production efficiency which more than offset the $0.6 million of manufacturing and SG&A related expense associated with investments in the recently acquired Voumard product line.

Year-to-Date Sales
by Region
($ in thousands)
Six Months Ended
June 30, 2015 June 30, 2014
Sales to Customers in $ % of Total $ Year-over-Year
% Change
North America 55,378 36% 48,232 15%
Europe 44,984 30% 50,675 (11)%
Asia 51,122 34% 50,794 1%
Total 151,484 149,701 1%

First Half 2015 Review

Sales of $151.5 million reflected a 1% increase year over year. Excluding $4.4 million for unfavorable foreign currency translation, sales were up 4%. Sales to the North America market increased over the prior-year period as a result of revenue from new product launches in addition to the timing of grinding machine shipments out of backlog. Sales to Asia remain steady but both Asia and Europe were impacted by the unfavorable foreign currency translation, partially offsetting consolidated sales growth.

Gross profit of $41.7 million increased $0.5 million compared with the prior-year period. Gross profit was favorably impacted by increased levels of machine production, particularly at the Company's Swiss grinding facilities. This was partially offset by an inventory valuation adjustment of approximately $0.7 million at one of its European facilities. Gross margin as a percent of sales remained unchanged at 27.5% when compared with the first half of 2014.

SG&A expense increased by $1.4 million compared with the prior-year period, to $40.7 million. SG&A increases were primarily due to sales-related expenses and the timing of CIMT. In addition, the increases included $1.0 million associated with the Company's investments for growth of the Voumard product line acquired in the latter half of 2014 and the expansion of the Company's Forkardt businesses in China and India. These increases were partially offset by $1.3 million of favorable foreign currency translation when compared with the prior-year period.

Operating income was $1.0 million, or 0.6% of sales, compared with $1.3 million, or 0.9% of sales, in the prior-year period. Operating income for the first half of 2015 was unfavorably impacted by $1.1 million of manufacturing and SG&A related expense associated with investments in the recently acquired Voumard product line.

Flexible Balance Sheet for Strategic Investments

Cash and cash equivalents at June 30, 2015 were $22.8 million. Total debt was $14.4 million, a reduction of $1.8 million from December 31, 2014 levels.

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, President and CEO, and Douglas J. Malone, 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 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 ir.hardinge.com/events.cfm.

A telephonic replay will be available from 2:00 p.m. ET the day of the call through Thursday, August 13, 2015. To listen to the archived call, dial (404) 537-3406 and enter conference ID number 82112263. Alternatively, the archive can be heard on the Company's website at 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
June 30,
Six Months Ended
June 30,
2015 2014 2015 2014
(unaudited) (unaudited)
Sales $ 82,356 $ 78,851 $ 151,484 $ 149,701
Cost of sales 58,892 56,890 109,772 108,520
Gross profit 23,464 21,961 41,712 41,181
Gross profit margin 28.5% 27.9% 27.5% 27.5%
Selling, general and administrative expenses 21,071 20,133 40,671 39,253
Other expense, net 10 192 75 583
Income from operations 2,383 1,636 966 1,345
Operating margin 2.9% 2.1% 0.6% 0.9%
Interest expense 154 155 311 398
Interest income (23) (12) (40) (32)
Income from continuing operations before income taxes 2,252 1,493 695 979
Income taxes 666 144 517 301
Net income from continuing operations 1,586 1,349 178 678
Gain from disposal of discontinued operation, net of tax 218
Net income $ 1,586 $ 1,349 $ 178 $ 896
Per share data:
Basic earnings per share:
Continuing operations $ 0.12 $ 0.11 $ 0.01 $ 0.05
Discontinued operations 0.02
Basic earnings per share $ 0.12 $ 0.11 $ 0.01 $ 0.07
Diluted earnings per share:
Continuing operations $ 0.12 $ 0.11 $ 0.01 $ 0.05
Discontinued operations 0.02
Diluted earnings per share $ 0.12 $ 0.11 $ 0.01 $ 0.07
Cash dividends declared per share: $ 0.02 $ 0.02 $ 0.04 $ 0.04
Weighted avg. shares outstanding: Basic 12,776 12,715 12,759 12,607
Weighted avg. shares outstanding: Diluted 12,857 12,820 12,862 12,709
HARDINGE INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share data)
June 30,
2015
December 31,
2014
(Unaudited)
Assets
Cash and cash equivalents $ 22,778 $ 16,293
Restricted cash 2,887 3,151
Accounts receivable, net 56,179 62,877
Inventories, net 122,319 111,821
Other current assets 12,809 10,545
Total current assets 216,972 204,687
Property, plant and equipment, net 66,338 65,874
Goodwill 6,683 6,698
Other intangible assets, net 29,505 30,217
Other non-current assets 4,478 3,844
Total non-current assets 107,004 106,633
Total assets $ 323,976 $ 311,320
Liabilities and shareholders' equity
Accounts payable $ 30,488 $ 25,592
Accrued expenses 24,980 25,071
Customer deposits 16,319 12,736
Accrued income taxes 1,961 646
Deferred income taxes 2,562 2,332
Current portion of long-term debt 4,678 3,972
Total current liabilities 80,988 70,349
Long-term debt 9,722 12,253
Pension and postretirement liabilities 52,534 53,119
Deferred income taxes 2,588 2,516
Other liabilities 3,636 3,487
Total non-current liabilities 68,480 71,375
Commitments and contingencies
Common stock ($0.01 par value, 20,000,000 authorized; 12,856,716 issued and 12,836,711 outstanding as of June 30, 2015, and 12,825,468 issued and 12,821,768 outstanding as of December 31, 2014) 129 128
Additional paid-in capital 120,954 120,538
Retained earnings 87,441 87,777
Treasury shares (at cost, 20,005 as of June 30, 2015, and 3,700 as of December 31, 2014) (219) (46)
Accumulated other comprehensive loss (33,797) (38,801)
Total shareholders' equity 174,508 169,596
Total liabilities and shareholders' equity $ 323,976 $ 311,320
HARDINGE INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Six Months Ended
June 30,
2015 2014
(Unaudited)
Operating activities
Net income $ 178 $ 896
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 4,567 5,049
Debt issuance costs amortization 19 23
Deferred income taxes (260) 207
Gain on sale of assets (2) (92)
Gain on sale of business (218)
Unrealized foreign currency transaction loss (gain) 1,185 (32)
Changes in operating assets and liabilities:
Accounts receivable 6,683 1,945
Inventories (8,467) (4,672)
Other assets (1,017) 728
Accounts payable 5,097 3,548
Customer deposits 3,420 (2,853)
Accrued expenses (799) (4,619)
Accrued pension and postretirement liabilities (57) 93
Net cash provided by operating activities 10,547 3
Investing activities
Acquisition of business, net of cash acquired (3,533)
Capital expenditures (1,993) (1,124)
Proceeds from disposal of business 218
Proceeds from sales of assets 11 122
Net cash used in investing activities (1,982) (4,317)
Financing activities
Payment of contingent consideration (6,000)
Proceeds from short-term notes payable to bank 13,706 6,204
Repayments of short-term notes payable to bank (13,706) (6,204)
Repayments of long-term debt (2,364) (7,585)
Dividends paid (525) (503)
Purchases of treasury stock (201)
Net proceeds from sales of common stock 5,678
Net cash used in financing activities (3,090) (8,410)
Effect of exchange rate changes on cash 1,010 292
Net increase (decrease) in cash 6,485 (12,432)
Cash and cash equivalents at beginning of period 16,293 34,722
Cash and cash equivalents at end of period $ 22,778 $ 22,290

CONTACT: For more information contact: Company: Douglas J. Malone Chief Financial Officer Phone: (607) 378-4140 Investor Relations: Deborah K. Pawlowski, Kei Advisors LLC Phone: (716) 843-3908 Email: dpawlowski@keiadvisors.comSource:Hardinge Inc.