EX-99.2 3 a13-5367_1ex99d2.htm EX-99.2

Exhibit 99.2

 

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Fourth Quarter and Full Year 2012 Financial Results Conference Call February 14, 2013 NASDAQ: HDNG www.hardinge.com Edward J. Gaio Vice President and Chief Financial Officer Richard L. Simons Chairman, President and Chief Executive Officer

 


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Safe Harbor Statement This presentation may contain 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). Any such statements are based upon 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 following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: fluctuations in the machine tool business cycles, changes in general economic conditions in the U.S. or internationally, the mix of products sold and the profit margins thereon, the relative success of the Company’s entry into new product and geographic markets, the Company’s ability to manage its operating costs, actions taken by customers such as order cancellations or reduced bookings by customers or distributors, competitor’s actions such as price discounting or new product introductions, governmental regulations and environmental matters, changes in the availability of cost of materials and supplies, the implementation of new technologies and currency fluctuations. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. 2

 


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Strong Fourth Quarter Sales 3 ($ in millions) $345 $214 $257 $342 $334 $75 $91 Quarterly Net Sales Annual Net Sales $86 $83 Increased grinding sales drove fourth quarter and full year growth in Europe Fourth quarter North America sales down on unusually strong prior year; Asia down slightly on decelerating growth which appears to have stabilized during quarter $90

 


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Solid Gross Margin Performance 4 Quarterly Sales and Gross Margin Annual Sales and Gross Margin Improved Q4 2012 gross margin 5.2 point improvement year over year, on similar sales levels Favorable product mix and improved pricing drove improved gross margin when compared with last year’s fourth quarter and the trailing third quarter of 2012 Sales ($ in millions) * Gross Profit and Gross Margin for 2008 and 2009 were adjusted to exclude unusual items. See supplemental slides for Adjusted Gross Profit and Gross Margin reconciliation and other important disclaimers regarding Adjusted Gross Profit and Gross Margin

 


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Operating Margin Trending Upwards 5 Quarterly Sales & Operating Margin Annual Sales & Operating Margin Expected SG&A run rate of ~ $18 - $19 mm per quarter Sales ($ in millions) * Operating Income and Operating Margin for 2008, 2009 and 2010 were adjusted to exclude unusual items. See supplemental slides for Adjusted Operating Income and Operating Margin reconciliation and other important disclaimers regarding Adjusted Operating Income and Operating Margin

 


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Quarterly Net Income Annual Net Income Strengthened Earnings Power in 2012 6 ($ in millions) * Net Income for 2008, 2009, 2010, and 2012 were adjusted to exclude unusual items. ** Q4 2012 Net Income of $5.1 million excludes a $2.7 million income tax benefit See supplemental slides for Adjusted Net Income reconciliation and other important disclaimers regarding Adjusted Net Income

 


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Emphasis on Productivity and Cash Managed Working Capital* as a Percent of Sales 7 Receivable Days Outstanding (Avg) Inventory Turns (Avg) * Managed Working Capital is defined as: Receivables + Inventory - Payables - Customer Deposits

 


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8 Financial Strength Total Capitalization ($ in millions) * Reflects expansion capital investments in China and Switzerland ** Midpoint of guidance of $4.0 million to $5.0 million provided on 2/14/2013 Cash & Cash Equivalents Capital Expenditures $196.2 $166.5 $162.9 $168.5 $181.1 ** Q4 2012 Q4 2011 Cash provided by operating activities $17.8 $1.9 Cap ex and acquisitions (10.2) (5.7) Operating free cash flow $7.6 ($3.8)

 


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Acquired December 20, 2012 Designer and manufacturer of high precision grinding solutions Improves reach into U.S. OEM market for grinding machines Expands capabilities of grinding machine offering Purchase price of ~$10.5 million subject to working capital adjustment, estimated at ~$0.7 million, plus a $7.0 million maximum potential earn out Earn out based on future performance against minimum EBITDA thresholds over three years Revenue of approximately $14 million in 2012 Entering 2013 with a backlog of approximately $29 million Expected to be accretive in 2013 Strategic Acquisition: U.S. Grinding Operations 9 Usach Technologies, Inc.

 


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10 Geographic Diversity Creates Larger Addressable Market ($ in millions) Annual Orders $288 $372 $297 $175 $341 Quarterly Orders $80 $81 $69 $58 $69 Fourth quarter orders declined year-over-year on recession in Europe and inventory management by our North American distributors, partially offset by Asia Full year orders down on reductions from all markets; stronger than usual orders in early 2011 were related to pent up demand from the global recession

 


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11 Overview and Outlook Continue to have positive long-term outlook on machine tool industry Current market conditions: Stalled economic growth in North America and Europe Current order levels indicate weaker organic revenue Growth rate in China stabilized during the fourth quarter 2012 Despite lower order trend, expect strong cash generation Usach acquisition added $29 million to backlog and expanded North American grinding presence Engineering and development efforts focused on maintaining competitive edge Focus on further productivity improvements and cash management Operational Excellence: Foundational values drive culture: Quality, customer service, continuous process improvement, global cooperation, and employee development

 


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Fourth Quarter and Full Year 2012 Earnings Conference Call February 14, 2013 NASDAQ: HDNG www.hardinge.com

 


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NASDAQ: HDNG SUPPLEMENTAL INFORMATION www.hardinge.com

 


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Annual Adjusted Gross Profit Reconciliation 14 ($ in millions) Gross Profit and Gross Margin for 2008 and 2009 were adjusted to exclude unusual items. Hardinge believes that when used in conjunction with GAAP measures, Adjusted Gross Profit, which is a non-GAAP measure, assists in the understanding of Hardinge’s operating performance. 2008 2009 2010 2011 2012 Sales $345.0 $214.1 $257.0 $341.6 $334.4 Cost of sales 252.7 173.3 195.7 250.5 237.6 Gross profit 92.3 40.8 61.3 91.1 96.8 Inventory impairment 7.8 5.0 - - - Adjusted gross profit 100.1 45.8 61.3 91.1 96.8 Adjusted gross margin 29.0% 21.4% 23.9% 26.7% 29.0%

 


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Adjusted Net Income and Operating Income 15 ($ in millions, except for EPS) Net Income and Operating Income in 2008, 2009, and 2010 were adjusted to exclude unusual items. Net Income in Q4 2012 and 2012 were adjusted to exclude an unusual item Hardinge believes that when used in conjunction with GAAP measures, adjusted Net Income and adjusted Operating Income, which are non-GAAP measures, assist in the understanding of Hardinge’s operating performance. 2008 2009 2010 2011 2012 Net (loss) income ($34.3) ($33.3) ($5.2) $12.0 $17.9 Inventory impairment 7.8 5.0 - - - Goodwill write-off 24.4 - - - - Restructuring 3.2 5.4 - - - Gain on sale & acquisition - - (1.7) - - Other adjustment - - 3.5 - 2.7 Net income (loss) / adjusted net income (loss) 1.1 (22.9) (3.4) 12.0 15.2 Plus: Interest expense, net 1.4 1.8 0.3 0.2 0.7 Adjusted income tax expense 3.1 1.9 2.2 4.4 4.2 Adjusted operating income (loss) 5.6 (19.2) (0.9) 16.6 20.1 Sales 345.0 214.1 257.0 341.6 334.4 Adjusted operating margin 1.6% (9.0)% (0.4)% 4.9% 6.0%

 


Quarterly Financial Appendix 16 ($ in thousands, except for per share data) 3/31/2011 6/30/2011 9/30/2011 12/31/2011 3/31/2012 6/30/2012 9/30/2012 12/31/2012 Net sales $ 73,482 $ 86,656 $ 90,389 $ 91,046 $ 74,650 $ 86,320 $ 82,883 $ 90,560 Cost of sales 54,406 63,353 64,840 67,946 53,461 62,348 58,889 62,878 Gross profit 19,076 23,303 25,549 23,100 21,189 23,972 23,994 27,682 Gross profit margin 26.0% 26.9% 28.3% 25.4% 28.4% 27.8% 28.9% 30.6% Selling, general and administrative expenses 16,673 18,993 18,943 18,990 17,599 19,047 18,569 20,981 (Gain) loss on sale of assets (25) 7 (5) 69 (2) (12) (13) 49 Other expense (income) 177 (72) 284 397 204 99 127 107 Income from operations 2,251 4,375 6,327 3,644 3,388 4,838 5,311 6,545 Operating margin 3.1% 5.0% 7.0% 4.0% 4.5% 5.6% 6.4% 7.2% Interest expense 78 93 97 102 140 269 246 204 Interest income (39) (48) (45) - (24) (27) (44) (23) Income before income taxes 2,212 4,330 6,275 3,542 3,272 4,596 5,109 6,364 Income tax expense (benefit) 831 1,217 2,025 300 829 956 1,089 (1,388) Net income $ 1,381 $ 3,113 $ 4,250 $ 3,242 $ 2,443 $ 3,640 $ 4,020 $ 7,752 Basic earnings per share $ 0.12 $ 0.27 $ 0.37 $ 0.28 $ 0.21 $ 0.31 $ 0.35 $ 0.67 Diluted earnings per share $ 0.12 $ 0.27 $ 0.36 $ 0.28 $ 0.21 $ 0.31 $ 0.34 $ 0.66 Cash dividends declared per share $ 0.005 $ 0.005 $ 0.02 $ 0.02 $ 0.02 $ 0.02 $ 0.02 $ 0.02 Weighted avg. shares outstanding: Basic 11,450 11,467 11,467 11,467 11,524 11,562 11,567 11,574 Weighted avg. shares outstanding: Diluted 11,476 11,495 11,533 11,552 11,557 11,600 11,606 11,619 Quarter Ended