EX-99.1 2 ex991q4fy14earningsrelease.htm EXHIBIT 99.1 HDNG Q4 FY14 EARNINGS RELEASE EX. 99.1 Q4 FY14 Earnings Release
Exhibit 99.1

NEWS
RELEASE

Hardinge Inc. One Hardinge Drive, Elmira, N.Y. 14902

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

Hardinge Reports Fourth Quarter 2014 Results

ELMIRA, N.Y., February 12, 2015 - 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.

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Hardinge Reports Fourth Quarter 2014 Results
February 12, 2015
Page 2 of 9



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.

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.

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Hardinge Reports Fourth Quarter 2014 Results
February 12, 2015
Page 3 of 9



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.

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."
____________________
(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.


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Hardinge Reports Fourth Quarter 2014 Results
February 12, 2015
Page 4 of 9



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.

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Hardinge Reports Fourth Quarter 2014 Results
February 12, 2015
Page 5 of 9


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


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Hardinge Reports Fourth Quarter 2014 Results
February 12, 2015
Page 6 of 9


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



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Hardinge Reports Fourth Quarter 2014 Results
February 12, 2015
Page 7 of 9


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


-MORE-
Hardinge Reports Fourth Quarter 2014 Results
February 12, 2015
Page 8 of 9


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
%
 
 
 
 
 
 
 
 


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Hardinge Reports Fourth Quarter 2014 Results
February 12, 2015
Page 9 of 9


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



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