Hardinge Reports Fourth Quarter and Full Year 2016 Results

ELMIRA, N.Y., Feb. 09, 2017 (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, 2016.

  • Orders for the fourth quarter increased 22% to $90.4 million compared with the prior-year period on strength in all regions: Europe up 37%, Asia up 26% and North America up 4%
  • Sales for the quarter were $86.8 million and demonstrated a measurable improvement over the previous three quarters of 2016
  • Net income for the quarter was $3.7 million, or $0.29 per diluted share; Non-GAAP(1) adjusted net income was $4.1 million, or $0.31 per diluted share

Richard L. Simons, President and Chief Executive Officer, commented, “We ended 2016 in a much better position than where we started. Market conditions are improving with the order trend in the second half of 2016 healthier than the first half. The restructuring program we worked on most of the year has also proven successful. It was accomplished on time and on budget and, importantly, is achieving our cost reduction goals.”

He concluded, “Based on our strong backlog and favorable outlook, we expect sales to moderately improve in 2017. Additionally, we are confident that the effects of our restructuring program will be demonstrated in our financial results.”

Sales, Orders and Backlog for the Quarter and Full Year

(Please refer to the Sales and Orders tables included in this release)

North America: Market conditions in the U.S. have begun to improve. North America sales were up 5% in the quarter, while orders increased by 4%. For the full year, sales were down 15% reflecting the weak industrial economy over the last two years. Orders, however, improved by 3% over 2015 as the inquiry activity in the U.S. was higher in the second half of 2016.

Europe: Political uncertainty in Europe contributed to a 12% decline in sales during the fourth quarter. For the full year, Europe sales were down 6%. Excluding the $2.0 million negative impact from foreign currency translation, sales were down 4% in 2016. Encouragingly, orders in the fourth quarter increased by 37%. For the full year, orders were down 5%, partly due to unfavorable foreign currency effect.

Asia: While Asia’s rate of economic growth remains softer than it has in the past, activity in the second half of 2016 also strengthened in this market. Fourth quarter sales improved by 8%. The Company believes the increase was related to the positive impact of its focus on industries and customers that favor high-precision products and custom solutions combined with improving market conditions. Orders for the quarter of $36.8 million, up 26% over the prior-year period, reached their highest level since 2011. Sales to Asia for the full year 2016 were relatively unchanged and orders for the full year were down 3%; however, after adjusting for the impact of foreign exchange, both sales and orders increased in 2016.

Consolidated Backlog: Order backlog at December 31, 2016 was $117.0 million, down slightly from the end of the trailing third quarter, but up 15% over the December 31, 2015 backlog.

Fourth Quarter Operating Results (comparisons are to the prior-year period except where noted)

  • Gross profit for the quarter was $28.1 million, or 32.4% of sales, down from the prior-year period due to the mix of sales which included fewer specialized machine tool solutions
  • Selling, general and administrative (“SG&A”) expense declined $1.3 million, or 6%, from savings realized from the recently completed restructuring program and the favorable impact of foreign exchange
  • Income from operations was $5.0 million. On a non-GAAP(1) adjusted basis, income from operations was $5.3 million compared with $6.3 million last year. As a percent of sales, adjusted income from operations was 6.1%.

2016 Full Year Review (comparisons are to the prior-year period except where noted)

  • Gross margin of 33.4% was relatively unchanged
    - The impact of lower sales volume and less favorable product mix was more than offset by reduced costs
  • SG&A was down $1.6 million to $79.6 million
    - SG&A had a favorable foreign currency impact of approximately $2.1 million and was unfavorably impacted by $1.8 million in additional expenses related to severance and the Company’s strategic review initiative
    - Excluding those aforementioned items, 2016 SG&A decreased by $1.3 million, mostly as a result of savings from the recently completed restructuring program
  • Restructuring expenses in 2016 were $0.7 million compared with $3.6 million in 2015.
  • Income from operations was $3.4 million. Non-GAAP(1) adjusted income from operations declined on lower sales to $6.6 million, or 2.2% of sales, compared with $9.9 million, or 3.1% of sales, in 2015.

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. Supplemental slides will be made available on Hardinge’s website at http://ir.hardinge.com/events.cfm.

The conference call can be accessed by calling (201) 689-8560. 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 today through Thursday, February 16, 2017. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13654118. 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.


(1) Management believes that the use of non-GAAP financial measures help in the understanding of the Company's 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.


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,
2016 2015 2016 2015
(unaudited)
Sales$86,795 $86,960 $292,013 $315,249
Cost of sales58,716 56,608 194,486 210,711
Gross profit28,079 30,352 97,527 104,538
Gross profit margin32.4% 34.9% 33.4% 33.2%
Selling, general and administrative expenses19,426 20,675 79,647 81,271
Research & development3,561 3,425 13,514 14,140
Restructuring charges53 2,681 661 3,558
Other expense, net61 356 310 632
Operating Income4,978 3,215 3,395 4,937
Operating margin5.7% 3.7% 1.2% 1.6%
Interest expense128 183 555 655
Interest income(35) (76) (227) (156)
Income before income taxes4,885 3,108 3,067 4,438
Income taxes1,177 349 1,843 1,828
Net income$3,708 $2,759 $1,224 $2,610
Per share data:
Basic earnings per share:$0.29 $0.22 $0.10 $0.20
Diluted earnings per share:$0.29 $0.21 $0.09 $0.20
Cash dividends declared per share:$0.02 $0.02 $0.08 $0.08
Weighted avg. shares outstanding: Basic12,854 12,793 12,824 12,776
Weighted avg. shares outstanding: Diluted12,923 12,886 12,909 12,872


HARDINGE INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share data)
December 31,
2016
December 31,
2015
Assets
Cash and cash equivalents$28,255 $32,774
Restricted cash2,923 2,192
Accounts receivable, net55,573 56,945
Inventories, net107,018 110,232
Other current assets6,926 7,212
Total current assets200,695 209,355
Property, plant and equipment, net56,961 62,025
Goodwill6,579 6,620
Other intangible assets, net26,730 28,018
Other non-current assets6,585 4,920
Total non-current assets96,855 101,583
Total assets$297,550 $310,938
Liabilities and shareholders’ equity
Accounts payable$24,920 $24,696
Accrued expenses25,629 27,964
Customer deposits18,215 19,845
Accrued income taxes1,160 1,919
Current portion of long-term debt2,923 5,621
Total current liabilities72,847 80,045
Long-term debt2,970 5,985
Pension and postretirement liabilities58,840 57,322
Deferred income taxes3,800 3,088
Other liabilities3,152 3,393
Total non-current liabilities68,762 69,788
Commitments and contingencies
Common stock ($0.01 par value, 20,000,000 authorized; 12,903,037 issued and
12,893,794 outstanding as of December 31, 2016, and 12,856,716 issued and
12,838,227 outstanding as of December 31, 2015)
129 128
Additional paid-in capital121,015 120,524
Retained earnings89,557 89,368
Treasury shares (at cost, 9,243 as of December 31, 2016, and 18,489 as of December 31, 2015)(104) (202)
Accumulated other comprehensive loss(54,656) (48,713)
Total shareholders’ equity155,941 161,105
Total liabilities and shareholders’ equity$297,550 $310,938


HARDINGE INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Year Ended
December 31,
2016
December 31,
2015
Operating activities
Net income$1,224 $2,610
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization8,789 8,824
Debt issuance costs amortization131 134
Deferred income taxes689 (768)
Gain on sale of assets(38) (26)
Unrealized foreign currency transaction loss524 404
Changes in operating assets and liabilities, net of businesses acquired:
Accounts receivable(284) 3,942
Restricted cash(927) 827
Inventories252 (1,442)
Other assets(372) 834
Accounts payable141 450
Customer deposits(776) 7,762
Accrued expenses(3,964) 3,250
Accrued pension and postretirement liabilities(92) (74)
Net cash provided by operating activities5,297 26,727
Investing activities
Capital expenditures(2,479) (4,210)
Proceeds from sales of assets118 69
Net cash used in investing activities(2,361) (4,141)
Financing activities
Proceeds from short-term notes payable to bank42,820 32,502
Repayments of short-term notes payable to bank(42,114) (32,502)
Repayments of long-term debt(5,761) (4,464)
Dividends paid(1,052) (1,037)
Purchases of treasury stock(368) (201)
Net cash used in financing activities(6,475) (5,702)
Effect of exchange rate changes on cash(980) (403)
Net (decrease) increase in cash(4,519) 16,481
Cash and cash equivalents at beginning of period32,774 16,293
Cash and cash equivalents at end of period$28,255 $32,774


HARDINGE INC. AND SUBSIDIARIES
Sales by Region
(in thousands)
Quarter Ended
December 31, 2016December 31, 2015September 30, 2016
Sales to Customers in $% of Total $Year-over-Year
% Change
$Sequential
% Change
North America29,744 34%28,431 5%24,780 20%
Europe27,026 31%30,716 (12)%18,271 48%
Asia30,025 35%27,813 8%24,160 24%
Total86,795 86,960 -%67,211 29%


Twelve months ended
December 31, 2016December 31, 2015
Sales to Customers in $% of Total $Year-over-Year
% Change
North America92,668 32%108,470 (15)%
Europe91,381 31%97,269 (6)%
Asia107,964 37%109,510 (1)%
Total292,013 315,249 (7)%


HARDINGE INC. AND SUBSIDIARIES
Orders by Region
(in thousands)
Quarter Ended
December 31, 2016December 31, 2015September 30, 2016
Orders from Customers in $% of Total $Year-over-Year
% Change
$Sequential
% Change
North America25,378 28%24,305 4%26,740 (5)%
Europe28,248 31%20,610 37%20,412 38%
Asia36,778 41%29,133 26%27,457 34%
Total90,404 74,048 22%74,609 21%


Twelve months ended
December 31, 2016December 31, 2015
Orders from Customers in $% of Total $Year-over-Year
% Change
North America101,541 33%98,809 3%
Europe92,648 30%97,223 (5)%
Asia116,683 37%120,045 (3)%
Total310,872 316,077 (2)%

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, 2016
Three Months Ended
December 31, 2015
Amount % of Sales Amount % of Sales
Operating income as reported$4,978 5.7% $3,215 3.7%
Adjustments to reported operating income:
Restructuring charges53 0.1 2,681 3.1
Professional fees for strategic review process42 0.1 414 0.4
Pension settlement adjustment(132) (0.2)
Other adjustments371 0.4
Non-GAAP operating income as adjusted$5,312 6.1% $6,310 7.2%
Year Ended
December 31, 2016
Year Ended
December 31, 2015
Amount % of Sales Amount % of Sales
Operating income as reported$3,395 1.2% $4,937 1.6%
Adjustments to reported operating income:
Restructuring charges661 0.2 3,558 1.1
Professional fees for strategic review process1,270 0.4 756 0.2
Pension settlement adjustment633 0.2
Inventory adjustment 679 0.2
Other adjustments666 0.2
Non-GAAP operating income as adjusted$6,625 2.2% $9,930 3.1%


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, 2016
Three Months Ended
December 31, 2015
Amount EPS Amount EPS
Net income as reported$3,708 $0.29 $2,759 $0.21
Adjustments to reported net income, net of taxes:
Restructuring charges53 2,681 0.21
Professional fees for strategic review process42 414 0.03
Pension settlement adjustment(108) (0.01)
Other adjustments371 0.03
Non-GAAP net income as adjusted$4,066 $0.31 $5,854 $0.45
Year Ended
December 31, 2016
Year Ended
December 31, 2015
Amount EPS Amount EPS
Net income as reported$1,224 $0.09 $2,610 $0.20
Adjustments to reported net income, net of taxes:
Restructuring charges661 0.05 3,558 0.28
Professional fees for strategic review process1,270 0.10 756 0.06
Pension settlement adjustment517 0.04
Inventory adjustment 679 0.05
Other adjustments666 0.05
Non-GAAP net income as adjusted$4,338 $0.33 $7,603 $0.59

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.com

Source:Hardinge Inc.