-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VuXG8aFbJMrlYNm2pvBketxODnuNUEjdAzKM8+BA0ewKE/IlhUwb6sFoK+3izPYL 9oANQeK4lSTRFHoZ8ceeWQ== 0000313716-98-000002.txt : 19980514 0000313716-98-000002.hdr.sgml : 19980514 ACCESSION NUMBER: 0000313716-98-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARDINGE INC CENTRAL INDEX KEY: 0000313716 STANDARD INDUSTRIAL CLASSIFICATION: MACHINE TOOLS, METAL CUTTING TYPES [3541] IRS NUMBER: 160470200 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15760 FILM NUMBER: 98617597 BUSINESS ADDRESS: STREET 1: ONE HARDING DRIVE CITY: ELMIRA STATE: NY ZIP: 14902 BUSINESS PHONE: 6077342281 MAIL ADDRESS: STREET 1: ONE HARDINGE DRIVE STREET 2: ONE HARDINGE DRIVE CITY: ELMIRA STATE: NY ZIP: 14902 FORMER COMPANY: FORMER CONFORMED NAME: HARDINGE BROTHERS INC DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ___________ Commission file number: 000-15760 Hardinge Inc. (Exact name of Registrant as specified in its charter) New York 16-0470200 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Hardinge Inc. One Hardinge Drive Elmira, NY 14902 (Address of principal executive offices) (Zip code) (607) 734-2281 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ As of March 31, 1998 there were 6,542,739 shares of Common Sock of the Registrant outstanding. HARDINGE INC. AND SUBSIDIARIES INDEX Part I Financial Information Page Item 1. Financial Statements Consolidated Balance Sheets at March 31, 1998 and December 31, 1997. 3 Consolidated Statements of Income and Retained Earnings for the three months ended March 31, 1998 and 1997. 5 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1998 and 1997. 6 Notes to Consolidated Financial Statements. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 9 Part II Other Information Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Default upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 PART I, ITEM 1 HARDINGE INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in Thousands) Mar. 31, Dec. 31, 1998 1997 ------------------------------- (Unaudited) Assets Current assets: Cash $ 2,618 $ 1,565 Accounts receivable 53,371 56,210 Notes receivable 5,731 5,886 Inventories 89,880 91,969 Deferred income taxes 2,961 2,961 Prepaid expenses 2,725 1,790 ------------------------------- Total current assets 157,286 160,381 Property, plant and equipment: Property, plant and equipment 134,724 128,640 Less accumulated depreciation 65,221 63,453 ------------------------------- 69,503 65,187 Other assets: Notes receivable 11,861 11,951 Deferred income taxes 837 837 Goodwill 4,046 4,082 Other 2,962 2,846 ------------------------------- 19,706 19,716 ------------------------------- Total assets $246,495 $245,284 =============================== See accompanying notes. HARDINGE INC. AND SUBSIDIARIES Consolidated Balance Sheets--Continued (Dollars In Thousands) Mar. 31, Dec. 31, 1998 1997 ------------------------------- (Unaudited) Liabilities and shareholders' equity Current liabilities: Accounts payable $ 13,031 $ 18,323 Notes payable to bank 4,169 7,282 Accrued expenses 10,389 9,756 Accrued income taxes 4,287 1,614 Deferred income taxes 1,612 1,553 Current portion long-term debt 4,355 3,468 ------------------------------- Total current liabilities 37,843 41,996 Other liabilities: Long-term debt 32,383 31,012 Accrued pension plan expense 2,311 2,311 Deferred income taxes 1,521 1,575 Accrued postretirement benefits 5,142 5,206 ------------------------------- 41,357 40,104 Shareholders' equity Preferred stock, Series A, par value $.01: Authorized - 2,000,000; issued - none Common stock, $.01 par value: Authorized shares - 20,000,000 Issued shares - 6,562,703 at March 31, 1998; 6,511,703 at December 31, 1997 66 65 Additional paid-in capital 59,964 58,065 Retained earnings 116,711 112,625 Treasury shares (721) (552) Cumulative foreign currency translation adjustment (3,029) (2,763) Deferred employee benefits (5,696) (4,256) ------------------------------ Total shareholders' equity 167,295 163,184 ------------------------------- Total liabilities and shareholders' equity $246,495 $245,284 =============================== See accompanying notes. HARDINGE INC AND SUBSIDIARIES Consolidated Statements of Income and Retained Earnings (Unaudited) (In Thousands, Except Per Share Data) Three months ended March 31, 1998 1997 ----------------------------- Net Sales $65,779 $60,056 Cost of sales 42,926 39,878 ----------------------------- Gross profit 22,853 20,178 Selling, general and administrative expenses 13,671 11,804 Unusual expense 1,960 ----------------------------- Income from operations 9,182 6,414 Interest expense 573 691 Interest (income) (150) (166) ----------------------------- Income before income taxes 8,759 5,889 Income taxes 3,305 2,375 ----------------------------- Net income 5,454 3,514 Retained earnings at beginning of period 112,625 99,622 Less dividends declared 1,368 1,235 ----------------------------- Retained earnings at end of period $116,711 $ 101,901 ============================= Per share data: Basic earnings per share $ .87 $ .57 ============================= Weighted average number of common shares outstanding 6,274 6,206 ============================= Diluted earnings per share $ .87 $ .57 ============================= Weighted average number of common shares outstanding 6,296 6,219 ============================= Cash dividends declared $ .21 $ .19 ============================= See accompanying notes. HARDINGE INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In Thousands) Three Months Ended March 31, 1998 1997 ---------------------------------- Net cash provided by operating activities $10,014 $ 10,276 Investing activities: Capital expenditures (6,677) (744) ---------------------------------- Net cash (used in) investing activities (6,677) (744) Financing activities: (Decrease) in short-term notes payable to bank (3,002) (7,485) Increase (decrease) in long-term debt 2,259 (2,218) (Purchase) sale of treasury stock (169) 137 Dividends paid (1,368) (1,235) ---------------------------------- Net cash (used in) financing activities (2,280) (10,801) Effect of exchange rate changes on cash (4) (46) ---------------------------------- Net increase (decrease) in cash $ 1,053 ($1,315) ================================== See accompanying notes. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 1998 NOTE A--BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1998, are not necessarily indicative of the results that may be expected for the year ended December 31, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report for the year ended December 31, 1997. The Company has adopted Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information." The Company operates in only one business segment - industrial machine tools. NOTE B--INVENTORIES Inventories are summarized as follows (dollars in thousands): March 31, December 31, 1998 1997 --------------- --------------- Finished products $34,872 $32,290 Work-in-process 30,576 32,328 Raw materials and purchased components 24,432 27,351 --------------- --------------- $89,880 $91,969 =============== =============== NOTE C--UNUSUAL EXPENSE 1997's first quarter included a one-time charge of $1,960,000 (approximately $1,200,000 after tax, or $.20 per share). This non-recurring charge involves outside costs incurred in connection with a major acquisition that the Company carried into the final stages of the due diligence process but decided not to complete. NOTE D--EARNINGS PER SHARE AND WEIGHTED SHARES OUTSTANDING Earnings per share are computed using the weighted average number of shares of common stock outstanding during the period. For diluted earnings per share, the weighted average number of shares includes common stock equivalents related primarily to restricted stock. In 1997, Statement of Financial Accounting Standards No. 128 "Earnings per Share" was issued. Statement 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. All earnings per share amounts have been restated to conform to the requirements of Statement 128. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, 1998 NOTE E--REPORTING COMPREHENSIVE INCOME As of January 1, 1998 the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." Statement 130 establishes new rules for the reporting and display of comprehensive income and its components, however, the adoption of this Statement had no impact on the Company's net income or shareholders'equity. Statement 130 requires that foreign currency translation adjustments, which prior to adoption were reported separately in shareholders' equity, be included in shareholders' equity as other comprehensive income. Prior year financial statements will be reclassified to conform to the requirements of Statement 130. During the first quarter of 1998 and 1997, the components of total comprehensive income consisted of the following (dollars in thousands): Three months ended March 31, 1998 1997 ------------- ------------ Net Income $ 5,454 $ 3,514 Foreign currency translation adjustments (266) (1,708) ------------- ------------ Comprehensive Income $ 5,188 $ 1,806 ============= ============ PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following are management's comments relating to significant changes in the results of operations for the three month periods ended March 31, 1998 and 1997 and in the Company's financial condition during the three month period ended March 31, 1998. Results of Operations Net Sales. Net sales for the quarter ended March 31, 1998 were $65,779,000, an increase of $5,723,000 or 9.5% over sales of $60,056,000 for the first quarter of 1997. As previously reported, shipments to automotive customers during the first quarter of 1997 were unusually high. Shipments to auto customers during the first quarter of 1998 returned to typical levels. While total U.S. sales increased by a modest 3.5%, sales to non-automotive U.S. customers increased by 20.7%. Sales to European customers were particularly strong, showing an increase of $4,939,000, or 49.1%, over the first quarter of 1997. Sales to all other areas of the world were only slightly lower than the first quarter of 1997, at $5,185,000 compared to $5,960,000 in 1997. Sales of machines accounted for $46,405,000 during the first quarter of 1998, an increase of $4,545,000, or 10.9% over the first quarter of 1997. Sales of non-machine products and services of $19,374,000 increased by $1,178,000, or 6.5%, over the previous year's first quarter. Gross Profit. Gross margin, as a percentage of sales, was 34.7% in the first quarter of 1998, compared to 33.6% for the same period in 1997. This increase reflects a more profitable mix of product sales among machine lines, plus the relatively lower portion of machine sales attributable to automotive customers. Selling, General, and Administrative Expenses. Selling, general and administrative ("SG&A") expenses during the first quarter of 1998 were 20.8% of sales, compared to 19.7% for the same quarter of 1997. The increase is attributable to the fact that Hansvedt Industries, Inc. was not acquired until the second quarter of 1997. Also a factor is a higher level of expenditures for new product promotion and trade shows during 1998. Unusual Expense. 1997's first quarter included a one-time charge of $1,960,000 (approximately $1,200,000 after tax, or $.20 diluted earnings per share). This non-recurring charge involved outside costs incurred in connection with a major acquisition that the Company carried into the final stages of the due diligence process but decided not to complete. Income from Operations. Income from operations as a percentage of net sales increased in the three month period ended March 31, 1998 to 14.0% from the 10.7% earned for the same period in 1997. The increase is substantially attributable to the unusual expense in 1997 described above. Excluding this one-time charge, income from operations for the first quarter of 1997 would have been 13.9%. Interest Expense and Income. Interest expense decreased to $573,000 in the first quarter of 1998, from $691,000 in the same 1997 period, since average outstanding debt for the first quarter of 1998 was considerably lower than a year previous. Interest income, earned primarily on customer notes, remained fairly constant over the two periods. Income Taxes. The provision for income taxes as a percentage of net income was 37.7% for the first quarter of 1998 compared to 40.3% a year earlier. This is largely a result of higher utilization of U.S. income tax credits during 1998. Net Income. Net income for the first quarter of 1998 was $5,454,000 or $.87 diluted earnings per share compared to $3,514,000 or $.57 diluted earnings per share for the first quarter of 1997, an increase of 55.2%. Net income for the first quarter of 1997 was reduced by $1,200,000 or $.20 diluted earnings per share as a result of the one-time charge related to the acquisition efforts described above. Excluding that charge, net income for the first quarter of 1998 increased by 15.7% over the first quarter of 1997. The increase resulted from higher volume in 1998. Earnings Per Share. All earnings per share and weighted average share amounts are presented,and where appropriate, restated as diluted to conform with Financial Accounting Standards Board Statement No. 128, Earnings Per Share. Quarterly Information The following table sets forth certain quarterly financial data for each of the periods indicated. Three Months Ended Mar. 31, June 30, Sept.30, Dec. 31, Mar. 31, 1997 1997 1997 1997 1998 --------------------------------------------------- (in thousands, except per share data) --------------------------------------------------- Net Sales $60,056 $63,668 $56,772 $66,083 $65,779 Gross Profit 20,178 21,334 19,193 21,713 22,853 Income from operations 6,414 8,359 6,800 8,926 9,182 Net income 3,514 4,833 3,985 5,608 5,454 Diluted earnings per share .57 .77 .64 .89 .87 Weighted average shares outstanding 6,219 6,237 6,275 6,295 6,296 Liquidity and Capital Resources Hardinge's current ratio at March 31, 1998 was 4.16:1 compared to 3.82:1 at December 31, 1997. Current assets decreased by $3,095,000 during the first three months of 1998 primarily due to reductions in accounts receivable and inventory of $2,839,000 and $2,089,000, respectively, partially offset by increases in cash and prepaid expenses. Current liabilities also decreased by $4,153,000 during the quarter, as a result of reductions in accounts and notes payable totaling $8,405,000 partially offset by increases in accrued expenses. For the first three months of 1998, operating activities generated $10,014,000 of cash compared to $10,276,000 for the same period during 1997. As a result of acquiring several large items of manufacturing equipment, capital expenditures were significantly higher during 1998's first quarter, at $6,677,000 compared to $744,000 for the first quarter of 1997. Financing activities during the first quarter of 1998 used cash of $2,280,000 compared to 1997's first quarter which used $10,801,000 primarily to reduce short and long-term debt. Hardinge provides long-term financing for the purchase of its equipment by qualified customers. We periodically sell portfolios of our customer notes to financial institutions in order to reduce debt and finance current operations. Our customer financing program has an impact on our month-to-month borrowings, but it has had little long-term impact on our working capital because of the ability to sell the underlying notes. We sold $10,238,000 and $7,463,000 of customer notes in the first three months of 1998 and 1997, respectively. Hardinge maintains revolving loan agreements with several U.S. banks providing for unsecured borrowing up to $70,000,000 on a revolving basis, $20,000,000 through November 1, 1999 and $50,000,000 through August 1, 2002. At November 1, 1999 any outstanding balance on the $20,000,000 facility converts, at the Company's option, to a term loan payable quarterly over four years through 2003 These facilities, along with other short term credit agreements, provide for immediate access of up to $77,000,000. At March 31, 1998, outstanding borrowings under these arrangements totaled $19,898,000. We believe that currently available funds and credit facilities, along with internally generated funds, will provide sufficient financial resources for ongoing operations. Subsequent Event On April 28, 1998, the Board of Directors approved a three-for-two split of the Company's common stock to be paid in the form of a 50 percent stock dividend. The resolution provides that each two outstanding shares will be converted into three shares of Hardinge common stock with a par value of $.01 per share. The date of record for shareholders entitled to additional shares is May 8, 1998, and payment of the additional shares is to take place on May 29, 1998. As a result of the split, approximately 3,281,351 additional shares of common stock will be issued on May 29, 1998. Any fractional shares created by the split will be paid in cash on May 29, 1998. At its meeting on April 28, 1998, the Board of Directors also declared a dividend of $.14 per post-split share, payable on June 10, 1998 to shareholders of record as of June 2, 1998. This report contains statements of a forward-looking nature relating to the financial performance of Hardinge Inc. Such statements are based upon information known to management at this time. The Company cautions that such statements necessarily involve risk, because actual results could differ materially from those projected. Among the many factors that could cause actual results to differ from those set forth in the forward-looking statements are changes in general economic conditions in the U.S. or internationally, actions taken by customers or competitors, the receipt of more or fewer orders than expected, and changes in the cost of materials. The Company undertakes no obligation to revise its forward-looking statements if unanticipated events alter their accuracy. Part II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Default upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K A. Exhibits 27. Financial Data Schedule B. Reports on Form 8-K There were no reports filed on Form 8-K during the quarter. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Hardinge Inc. May 12, 1998 By:_/s/ Robert E.Agan______________________ Date Robert E. Agan Chairman of the Board, President /CEO May 12, 1998 By:_/s/ J. Patrick Ervin___________________ Date J. Patrick Ervin Senior Vice President May 12, 1998 By:_/s/ Malcolm L Gibson___________________ Date Malcolm L. Gibson Executive Vice President and Chief Financial Officer (Principal Financial Officer) May 12, 1998 By:_/s/ Richard L. Simons__________________ Date Richard L. Simons Vice President - Finance (Principal Accounting Officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS INFORMATION EXTRACTED FROM THE COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 MAR-31-1998 2,618 0 70,963 0 89,880 157,286 134,724 65,221 246,495 37,843 32,383 0 0 66 167,229 246,495 65,779 65,779 42,926 13,671 0 0 573 8,759 3,305 5,454 0 0 0 5,454 .87 .87
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