2007 Performance Summary
ELMIRA, N.Y., Feb. 21 /PRNewswire-FirstCall/ -- (NASDAQ:HDNG), a leading global provider of advanced material-cutting solutions, today announced net sales of $96.0 million for the fourth quarter of 2007, an increase of $2.5 million or 3%, compared to $93.4 million for the fourth quarter of 2006. Net sales for the full year were $356.3 million, a $29.7 million or 9% increase over 2006 net sales of $326.6 million.
Net loss for the fourth quarter of 2007 was ($0.1) million, or ($0.01) per basic and diluted share, compared to net income of $6.2 million, or $0.71 per basic and diluted share, in 2006. Fourth quarter 2007 net loss was impacted mainly by a significant reduction in gross margin, coupled with an accounting adjustment related to prior years, that will be discussed below. Net income for 2007 increased by 7% to $14.9 million compared to $14.0 million for 2006. Diluted earnings per share were $1.41 for 2007, compared to $1.58 for 2006. Weighted average shares outstanding for 2007 were 10.6 million, up 20% in comparison to 2006 resulting from the Company's follow-on stock offering in April 2007.
The following table summarizes the Company's orders by geographical region for the three- and twelve-month periods ended December 31, 2007 and 2006, respectively: (U.S. dollars in thousands)
Three Months Ended Year Ended
December 31, December 31,
Orders from ------------ ------------
customers in:
2007 2006 % Change 2007 2006 % Change
--------------------------------------------------------
North America $29,662 $25,037 18% $117,532 $124,652 (6%)
Europe 46,040 41,932 10% 170,916 146,924 16%
Asia & Other 19,852 19,556 2% 72,092 76,265 (5%)
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$95,554 $86,525 10% $360,540 $347,841 4%
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Orders for the three months ended December 31, 2007 were $95.6 million, an increase of 10%, compared to $86.5 million in the same period in 2006. Orders for 2007 were $360.5 million, an increase of 4%, compared to $347.8 million in 2006.
North American orders for the fourth quarter increased by 18%, in comparison to 2006, reflecting higher demand for turning products. North American orders for 2007 were down 6% compared to the prior year.
European orders were up for both the quarter and the full year. Fourth quarter 2007 orders increased $4.1 million or 10% over 2006, driven by strong demand for all products coupled with a positive impact of currency translation of $3.3 million. European orders for the full year increased $24.0 million or 16% for 2007 and remained strong throughout the year averaging more than $42 million per quarter. Approximately $5.6 million of the full year growth in orders can be attributed to foreign currency translation changes. At $170.9 million, European orders accounted for nearly half of the Company's total order activity during 2007.
'Asia and Other' orders increased 2% during the fourth quarter, in comparison to 2006. Order activity for the full year was down by 5% reflecting the impact of several large orders for automotive and turbine blade grinding applications from 2006 that did not recur in 2007.
"Order activity was excellent in the fourth quarter with increases across all of our markets in comparison to the fourth quarter 2006," said J. Patrick Ervin, Chairman, President and Chief Executive Officer. "Our order performance was driven by the strengthening of our global sales network coupled with a series of successful new product introductions during 2007. We anticipate growth in orders in 2008 will be more difficult with certain economies softening. However, we believe we are well positioned to gain market share based upon our strong array of product offerings and our extensive global sales and support channels." The following table summarizes the Company's net sales by geographical region for the three- and twelve-month periods ended December 31, 2007 and 2006, respectively: (U.S. dollars in thousands)
Three Months Ended Year Ended
December 31, December 31,
Sales to ------------ ------------
customers in:
2007 2006 % Change 2007 2006 % Change
--------------------------------------------------------
North America $29,530 $31,021 (5%) $121,520 $118,157 3%
Europe 47,460 39,682 20% 165,144 127,507 30%
Asia & Other 18,973 22,721 (17%) 69,658 80,957 (14%)
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$95,963 $93,424 3% $356,322 $326,621 9%
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Net sales of $96.0 million for the fourth quarter of 2007 increased by $2.5 million or 3% compared to $93.4 million for the fourth quarter of 2006. This sales increase includes a $5.0 million favorable impact as a result of currency translation. Without the currency impact, sales for the quarter would have been down $2.5 million or 2.6% from the fourth quarter of 2006. Net sales for the full year were $356.3 million, a $29.7 million or 9% increase over 2006 sales of $326.6 million. However, this sales increase includes a $13.1 million increase in sales as a result of currency translation. Without the currency impact, sales for the year would have increased $16.6 million or 5% for the full year compared to 2006.
For 2007, net sales growth was driven by increases in sales of both our grinding and turning products, with continental Europe being the strongest market. For the year, two-thirds of total net sales were to customers outside of North America.
Gross profit for the three months ended December 31, 2007 was $24.0 million or 25.0% of sales, a decrease of $5.7 million, or 19%, compared to $29.6 or 31.7% of sales for the same period in 2006. Mr. Ervin commented, "We are disappointed with our financial performance for the fourth quarter of 2007. In the quarter we had a combination of prior period accounting adjustments and operational issues which contributed to our poor gross margin performance." Without the impact of accounting adjustments relating to prior periods, gross margin percentage would have been 27.0% for the quarter (versus 25%). The net effect of the adjustments related to prior periods was not material to net income for any of the prior periods and not significant in the aggregate to net income for the 2007 full year.
The remaining impact on gross margin in the fourth quarter is primarily due to the rebalancing of production volumes in our U.S. and Taiwan production facilities to address both current market demand for certain products, higher price discounting related to plans to reduce our finished machine inventories and the accelerated phase-out of older product line, higher costs than anticipated on certain turnkey machine projects and product and channel mix changes.
Going forward, we do not anticipate any impact on gross margins as a result of the accounting changes discussed above, however we do anticipate some effect on our gross margin percentage as we continue to phase out older model products and run our factories at lower production volumes to reduce inventory levels. We anticipate these actions to impact gross margin percentage for the first three to six months of 2008.
Gross profit for 2007 increased $7.3 million, or 7%, to $107.4 million, compared to 2006. The primary driver to the gross profit increase is sales volume, predominantly in Europe. For the year, gross margin percentage was 30.1%, down slightly from 30.7% in 2006, and would be approximately 30.6% taking the aforementioned adjustments for prior years into consideration. The after tax impact of the aforementioned adjustments on net income for the year was not significant.
Company selling, general, and administrative (SG&A) expense was $22.4 million for fourth quarter 2007, an increase of $1.2 million, or 6%, compared to $21.3 million for the same period in 2006. SG&A expense as a percentage of net sales was 23.4% for fourth quarter 2007, up from 22.8% for 2006. For 2007, SG&A expense was $84.5 million, an increase of 10%, compared to $77.1 million in 2006. SG&A expense as a percentage of net sales was 23.6% in 2006 and remained essentially the same at 23.7% for 2007, reflecting the Company's increased sales volume. The primary drivers for the increased SG&A expense in 2007 relate to: the translation of foreign subsidiary financial statements in to US dollars, volume-related commission expenses, additional provisions for bad debt expense, and increased selling and marketing expenses in support of the Company's strategy to invest and strengthen its sales channels.
Interest expense in 2007 was $3.1 million, a decrease of $2.2 million, or 42% from 2006. The decrease reflects the Company's decision to use the proceeds from the sale of $55.9 million of common stock in April 2007 to substantially reduce its long-term debt.
Income taxes for the three months ended December 31, 2007 were $1.2 million compared to $1.2 million for the same period in 2006. This includes a provision for an open tax audit of $0.8 million, which is recorded in accordance with FIN 48. The full year 2007 income tax was $6.5 million compared to $4.6 million for 2006. The effective income tax rate for 2007 was 30.4% compared to 24.7% for 2006. The primary driver of the increase in the effective tax rate was the mix of earnings by country.
Richard Simons hired as Chief Operating Officer We are also pleased to announce that Richard L. Simons will return to Hardinge as its Senior Vice President / Chief Operating Officer. In this position Rick will be responsible for all manufacturing, engineering and supply chain activities within Hardinge. Rick will also be responsible for global expansion of these activities as we continue to grow our operations. Rick previously worked for Hardinge for over 20 years and was instrumental in assisting in the international expansion Hardinge has experienced over the last 15 years.
Share Repurchase The Board of Directors also approved a share repurchase program for up to $10 million of Hardinge stock.
Dividend Declared On February 21, 2008, the company's Board of Directors declared a cash dividend of $0.05 per share on Hardinge common stock, payable on March 10, 2008 to shareholders of record as of March 3, 2008.
Conference Call Today Hardinge will host a conference call at 11:00 a.m. (Eastern) today to provide additional detail related to fourth quarter performance. The call can be accessed by dialing 1-866-812-6491 (or 904-596-2360 outside the U.S. or Canada), or via the internet live at http://videonewswire.com/event.asp?id=46103. It may also be accessed in replay form within the "Investor Relations" section at the company's website, http://www.hardinge.com/, where it will be posted for one full year. Investors may also access a recording approximately one hour after its completion by dialing 1-888-284-7564, and entering the reference number: 22958 (or 904-596-3174 outside the U.S. or Canada). This recording will be available through March 31, 2008.
Hardinge is a global designer, manufacturer and distributor of machine tools, specializing in high-precision, computer controlled, material-cutting machines. The company's products are distributed to most of the industrialized markets around the world and, in 2007, approximately 66% of sales were to customers outside of North America. Hardinge has a diverse international customer base and serves a wide variety of end-user markets. Along with metalworking manufacturers, which make parts for a variety of industries, our customers include a wide range of end users in the aerospace, agricultural, transportation, basic consumer goods, communications and electronics, construction, defense, energy, pharmaceutical and medical equipment, and recreation industries, among others. The company has manufacturing operations in the United States and Switzerland, and assembly operations in Taiwan, China and the United Kingdom. Hardinge's common stock trades on the Nasdaq Global Select MarketSM under the symbol, "HDNG." For more information, please visit http://www.hardinge.com/.
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.
HARDINGE INC. AND SUBSIDIARIES Consolidated Statements of Operations
(In Thousands, Except Per Share Data)
Three Months Ended Year Ended
December 31, December 31,
2007 2006 2007 2006
--------------------------------------------
Net sales $95,963 $93,424 $356,322 $326,621
Cost of sales 71,985 63,776 248,911 226,470
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Gross profit 23,978 29,648 107,411 100,151 Selling, general and
administrative expenses 22,427 21,257 84,520 77,054
--------------------------------------------
Income from operations 1,551 8,391 22,891 23,097 (Gain) on sale of assets - - (1,372) - Interest expense 466 1,412 3,051 5,294
Interest (income) (53) (500) (224) (713)
--------------------------------------------
Income before income taxes 1,138 7,479 21,436 18,516 Income taxes 1,235 1,244 6,510 4,566
--------------------------------------------
Net (loss) income $(97) $6,235 $14,926 $13,950
============================================
Per share data: Basic (loss) earnings per
share: $(0.01) $0.71 $1.43 $1.59
Weighted average number ============================================
of common shares
outstanding 11,317 8,780 10,442 8,770
============================================
Diluted (loss) earnings per
share: $(0.01) $0.71 $1.41 $1.58
Weighted average number ============================================
of common shares
outstanding 11,417 8,811 10,562 8,809
============================================
Cash dividends declared per
share: $0.05 $0.05 $0.20 $0.14
============================================ Hardinge Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, except preferred and common share and per share amounts) December 31, December 31,
2007 2006
Assets -------------------------- Current assets:
Cash $16,003 $6,762
Accounts receivable, net 70,112 73,149
Notes receivable, net 2,671 4,930
Inventories 158,617 132,834
Deferred income tax 1,032 747
Prepaid expenses 8,573 9,216
--------------------------
Total current assets 257,008 227,638
Property, plant and equipment:
Property, plant and equipment 180,427 176,754
Less accumulated depreciation 118,896 112,702
--------------------------
Net property, plant and equipment 61,531 64,052
Other assets:
Notes receivable 1,847 1,983
Deferred income taxes 306 246
Other intangible assets 11,927 11,849
Goodwill 22,841 19,110
Pension asset and other long term assets 6,368 5,782
--------------------------
43,289 38,970
--------------------------
Total assets $361,828 $330,660
========================== Hardinge Inc. and Subsidiaries
Consolidated Balance Sheets - Continued
(In Thousands, except preferred and common share and per share amounts) December 31, December 31,
2007 2006
--------------------------
Liabilities and shareholders' equity Current liabilities:
Accounts payable $27,266 $31,462
Notes payable to bank 2,801 4,525
Accrued expenses 26,860 22,542
Accrued income taxes 2,828 3,640
Deferred income taxes 2,375 2,717
Current portion of long-term debt 5,655 5,758
--------------------------
Total current liabilities 67,785 70,644
Other liabilities:
Long-term debt 19,363 67,578
Accrued pension liability 8,123 26,814
Deferred income taxes 4,361 1,673
Accrued postretirement benefits 2,199 2,414
Derivative financial instruments - 433
Other liabilities 4,817 3,995
--------------------------
38,863 102,907
Shareholders' equity:
Preferred stock, Series A, par value
$.01 per share; Authorized 2,000,000;
but unissued at December 31, 2007 and
December 31, 2006. Common stock, $.01 par value:
Authorized shares - 20,000,000;
Issued shares - 12,472,992 at
December 31, 2007 and 9,919,992 at
December 31, 2006. 125 99
Additional paid-in capital 114,971 59,741
Retained earnings 128,838 116,438
Treasury shares - 993,076 at December
31, 2007 and 1,083,117 shares at
December 31, 2006. (13,023) (13,916)
Accumulated other comprehensive income
(loss) 24,269 (5,253)
--------------------------
Total shareholders' equity 255,180 157,109
--------------------------
Total liabilities and shareholders' equity $361,828 $330,660
==========================
HARDINGE INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
Year Ended
December 31,
2007 2006
----------------------
Operating activities
Net income $14,926 $13,950
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 9,446 9,545
Provision for deferred income taxes 250 (43)
(Gain) on sale of assets (1,352) -
Unrealized intercompany foreign currency
transaction (gain) (1,062) (1,229)
Changes in operating assets and
liabilities:
Accounts receivable 5,560 (3,698)
Notes receivable 2,495 869
Inventories (21,448) (10,471)
Other assets 2,537 (2,516)
Accounts payable (4,857) 4,254
Accrued expenses 1,242 (3,362)
Accrued postretirement benefits (432) (575)
----------------------
Net cash provided by operating activities 7,305 6,724 Investing activities
Capital expenditures (5,582) (3,591)
Proceeds from sale of assets 3,629 -
Purchase of Canadian entity (240) (2,043)
Purchase of minority interest in Hardinge Taiwan - (110)
Purchase of U-Sung, net of cash acquired - (5,071)
Purchase of Bridgeport kneemill technical
information - (5,000)
----------------------
Net cash (used in) investing activities (2,193) (15,815) Financing activities
(Decrease) increase in short-term notes payable
to bank (1,542) 427
(Decrease) increase in long-term debt (48,724) 9,651
Net proceeds from issuance of common stock 55,946 -
Net (purchases) of treasury stock (89) (40)
Dividends paid (2,164) (1,237)
----------------------
Net cash provided by financing activities 3,427 8,801 Effect of exchange rate changes on cash 702 500
----------------------
Net increase in cash 9,241 210 Cash at beginning of period 6,762 6,552
----------------------
Cash at end of period $16,003 $6,762
======================
DATASOURCE: Hardinge Inc.
CONTACT: Edward Gaio, Corporate Controller of Hardinge Inc., +1-607-378-4207 Web site: http://www.hardinge.com/
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