Hardinge Reports Fourth Quarter and Full Year 2015 Results
ELMIRA, N.Y., Feb. 11, 2016 (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, 2015.
Net sales (“sales”) for 2015 increased 1% to $315.2 million, compared with $311.6 million in 2014. Adjusting for $11.4 million of unfavorable foreign currency translation, 2015 sales increased 5% over the prior year. Fourth quarter sales of $87.0 million decreased $6.0 million, or 7%, from the prior-year period. Adjusting for unfavorable foreign currency translation of $2.6 million, fourth quarter sales were down 4%.
Non-GAAP(1) adjusted net income for 2015 more than doubled to $6.9 million, or $0.54 per diluted share, compared with adjusted net income of $2.8 million, or $0.22 per diluted share, in 2014. Net income in 2015 of $2.6 million, or $0.20 per diluted share, improved $4.7 million over the prior year net loss of $2.1 million, or $0.17 loss per diluted share. Fourth quarter non-GAAP adjusted net income increased 26%, or $1.2 million, to $5.9 million, or $0.45 per diluted share, over adjusted net income of $4.7 million, or $0.36 per diluted share, in the prior year’s fourth quarter. Net income for the quarter was $2.8 million, or $0.21 per diluted share, compared with $4.5 million, or $0.35 per diluted share, in the prior-year period.
Richard L. Simons, President and Chief Executive Officer, commented, "Our results for 2015 demonstrate Hardinge’s ability to generate cash and deliver growth in a globally challenged economy through continuous product innovation grounded in a deep understanding of what our customers value. These efforts more than offset the impact on sales of the strengthened U.S. dollar and the general weakness in North America. Importantly, we finished the year by delivering impressive fourth quarter gross profit margin in the low thirties, validating that our business can produce this level of margin, given our focus on cost controls and initiatives to drive a more favorable product mix.”
Mr. Simons added, "We have made solid progress with our restructuring program and began to see early benefits of these efforts in the fourth quarter." The previously announced restructuring program, which was initiated in the second half of 2015, is progressing according to plan and expected to be completed by the end of the second quarter of 2016.
Fourth Quarter Review
Fourth quarter sales to the North America market declined modestly from the prior-year period as new product introductions in North America compensated for the impact of a weakened industrial economy. Higher sales volume to Europe helped to offset unfavorable foreign exchange translation of $1.6 million resulting in a moderate $0.4 million decline in sales from the prior-year period. After adjusting for foreign currency impacts, fourth quarter sales to Europe increased 4%. Fourth quarter sales to Asia were impacted by timing of shipments to the region and the decline in China’s economy, as well as $1.0 million in unfavorable foreign currency translation.
Gross profit of $26.9 million in the fourth quarter was unchanged from the prior-year period, on lower sales. Gross margin as a percentage of sales increased 1.9 points to 31.0%, compared with 29.1% in the fourth quarter of 2014. The measurable expansion in gross margin was the result of a higher volume of grinding machines, a richer configuration mix of grinding products and the 0.3 point benefit from the early effects of restructuring activities.
Selling, general and administrative (“SG&A”) expense was down by $1.0 million from the prior-year period, to $20.7 million. The quarter included $0.4 million of professional fees associated with the Company's previously announced strategic review process while foreign currency translation resulted in a favorable $1.1 million impact in the quarter. SG&A as a percentage of sales was 23.8% compared with 23.3% in the prior-year period.
Non-GAAP adjusted operating income in the fourth quarter increased 21% to $6.3 million, or 7.2% of sales, from $5.2 million, or 5.6% of sales, in the prior-year period. Product mix, increased production efficiencies and cost control were the primary drivers of increased adjusted operating income despite lower sales. Operating income was $3.2 million, or 3.7% of sales, compared with $5.1 million, or 5.5% of sales, in the prior-year period.
Full Year 2015 Review
Sales of $315.2 million in 2015 were up 1% from 2014 sales of $311.6 million. Sales increased 4.8% excluding $11.4 million for unfavorable foreign currency translation. Sales to the North America market increased over the prior-year period as a result of new product launches and improved demand for grinding machines. Increased sales to Asia were driven by ongoing demand for Hardinge’s high precision machines, partially offset by the
Gross profit of $90.4 million in 2015 increased $3.5 million compared with gross profit of $86.9 million in 2014. Gross profit was favorably impacted by higher volumes of machine production, particularly at the Company’s Swiss grinding facilities, as well as improved product mix. This was partially offset by $0.8 million for the integration of the Voumard product line, which was acquired in September 2014, and a first quarter inventory valuation adjustment of approximately $0.7 million. Gross margin as a percent of sales improved 0.8 points to 28.7% when compared with gross margin of 27.9% in 2014.
SG&A expense increased $0.2 million to $81.3 million compared with the prior year. The increase included
Non-GAAP adjusted operating income for 2015, which excludes restructuring charges of $3.6 million and $0.8 million of professional fees, was $9.3 million, an 83% increase from $5.1 million in the prior year. Included in 2015 adjusted operating income were $1.5 million of expenses for investments in the Voumard product line. As a percent of sales, adjusted operating income margin was 2.9%, a 1.2 point improvement year-over-year. Operating income was $4.9 million, or 1.6% of sales, compared with an operating loss of $0.4 million, in the prior-year period.
Strong Cash Generation
Cash generated by operating activities in the fourth quarter of 2015 improved measurably to $17.7 million from $4.0 million in the prior-year period. For the full year, cash from operations increased to $26.7 million in 2015 from $3.2 million in 2014. Cash and cash equivalents at December 31, 2015 more than doubled over the prior year to $32.8 million. Total debt was $11.8 million at the end of the year and had been reduced by $4.5 million from December 31, 2014 and $1.4 million from September 30, 2015.
Fourth quarter orders of $74.0 million declined from the prior-year period. The prior-year period had unusually high order levels across all regions, particularly North America. Additionally, fourth quarter orders were impacted by $2.6 million of unfavorable foreign exchange translation.
Orders for 2015 of $316.1 million were down 4% when compared with 2014. Excluding $11.9 million for unfavorable foreign currency translation, 2015 orders decreased 1% over the prior year. The Company’s order backlog at December 31, 2015 was $101.8 million compared with $105.3 million at the end of 2014.
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 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 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 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 18, 2016. To listen to the archived call, dial (404) 537-3406 and enter conference ID #27663940. Alternatively, the archive can be heard on the Company’s website at ir.hardinge.com/events.cfm. A transcript will also be posted to the website, once available.
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.
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.
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: email@example.com