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Hardinge Inc. Announces Second Quarter 2009 Results
PR Newswire
Aug 06, 2009
ELMIRA, N.Y., Aug. 6 /PRNewswire-FirstCall/ --
Hardinge Inc. (Nasdaq: HDNG), a leading international provider of advanced metal-cutting solutions, today reported net sales of $55.3 million for the quarter and $107.4 million for the six months ended June 30, 2009, down from $96.6 million and $182.2 million, respectively, during 2008. Orders for the three and six months ended June 30, 2009 were $44.6 million and $77.4 million, respectively, a decrease of 59% compared to the prior year quarter, and a decrease of 62% compared to the six months ended June 30, 2008.
The Company had a net loss of ($5.0) million, or ($0.44) per share for the quarter, compared with net income of $0.45 million, or $0.04 per share, for the second quarter of 2008.
"With a worldwide decline in industry demand of between 70 and 80 percent, we remain focused on two things - generating positive cash flow and being positioned to compete when demand for machine tools returns," said Richard L. Simons, President and Chief Executive Officer. "Through the first six months of 2009 cash flow from operations was $16.6 million, reflecting a reduction in net working capital."
"Over the last four quarters we have made difficult decisions which were necessary to position Hardinge to perform well as the economy returns to normal while being mindful that the machine tool industry has historically lagged the general economic recovery," Mr. Simons continued. "As a result of these actions we have the benefit of a very strong balance sheet. In addition to a solid financial foundation, our global footprint of manufacturing, engineering and customer support provides balance and the flexibility needed to respond as manufacturing opportunities migrate around the world."
The following tables summarize orders and sales by geographical region for the three and six months ended June 30, 2009 and 2008:
Quarter Ended
Orders from June 30,
Customers in: 2009 2008 % Change
------------- ---- ---- --------
North America $11,107 $31,761 (65)%
Europe 14,228 56,118 (75)%
Asia & Other 19,231 21,478 (10)%
------ ------ ----
$44,566 $109,357 (59)%
------- -------- ----
Quarter Ended
Sales from June 30,
Customers in: 2009 2008 % Change
-------------- ---- ---- --------
North America $14,546 $30,549 (52)%
Europe 23,779 44,753 (47)%
Asia & Other 16,937 21,263 (20)%
------ ------ ----
$55,262 $96,565 (43)%
------- ------- ----
Six Months Ended
Orders from June 30,
Customers in: 2009 2008 % Change
------------- ---- ---- --------
North America $23,546 $57,459 (59)%
Europe 30,350 99,466 (69)%
Asia & Other 23,477 45,552 (48)%
------ ------ ----
$77,373 $202,477 (62)%
------- -------- ----
Six Months Ended
Sales from June 30,
Customers in: 2009 2008 % Change
-------------- ---- ---- --------
North
America $30,669 $59,105 (48)%
Europe 48,066 82,316 (42)%
Asia & Other 28,641 40,743 (30)%
------ ------ ----
$107,376 $182,164 (41)%
-------- -------- ----
Second quarter and six month order and sales activity declined across all regions compared to the same periods in 2008, reflecting the continued global slowdown in manufacturing. Currency exchange rates had an unfavorable impact on new orders of approximately $1.9 million for the quarter, and $3.4 million for the six months ended June 30, 2009 compared to the prior year. Currency exchange rates had an unfavorable impact on sales of approximately $3.4 million for the quarter, and approximately $7.9 million for the six months compared to the same periods in 2008.
Gross profit was $12.9 million for the quarter and $27.0 million for the six months ended June 30, 2009, a decline of 57% and 51%, respectively, in comparison to the prior year periods. The decline in gross profit continues to reflect increased competitive pricing pressures along with significantly lower sales volume. Gross margins were 23.4% for the quarter and 25.1% for the six month period, compared to 31.4% and 30.4% for the same respective periods of last year. Gross margins have been negatively affected by significant discounting necessary to meet competitive situations as all companies in the industry have lowered prices to reduce finished machine inventory. The fixed cost component of cost of goods sold against lower volumes has also contributed to lower gross margins.
Selling, general and administrative (SG&A) expenses declined by 39% to $17.1 million compared to $28.0 million in the second quarter of 2008. This decline was driven primarily by Company initiatives to reduce operating expenses in response to current order and sales activity levels. In addition, second quarter 2008 SG&A included $1.9 million in US and UK severance costs, as well as $0.3 million of expenses related to restructuring our businesses in Europe and Asia. Foreign currency translation favorably impacted SG&A by approximately $1.4 million compared to second quarter 2008.
SG&A for the six months ended June 30, 2009 declined by 31% to $35.3 million compared to $51.5 million for the same period last year. This decline was driven by the non-recurring 2008 expenses discussed above as well as Company initiatives to reduce operating expenses in response to current order and sales activity levels. These favorable actions were offset by a $1.5 million charge related to a Voluntary Early Retirement Program and severance related expenses in the U.S. and Europe during 2009. Foreign currency translation had a favorable impact of approximately $3.2 million compared to the same period in 2008.
Reflecting significantly lower net sales in 2009, Company SG&A expense as a percentage of sales was 31.0% for the quarter and 32.9% for the six months ended June 30, 2009, compared to 29.0% and 28.3% for the respective prior year periods.
Cost Containment Initiatives
As a result of continued weakness in the machine tool industry during the second quarter, the Company implemented a number of actions to reduce expenses. These actions included: a pay reduction for all U.S. based salaried employees, including corporate officers, of 5%, on top of a similar 5% reduction in February 2009; a 10% reduction to Directors' cash compensation; suspension of accrual of benefits under the U.S. defined benefit pension plan for active employees, and suspension of Company contributions to the 401(K) program as of June 15, 2009. The Company also implemented a ten week furlough for approximately 80 employees in the Elmira, NY machine manufacturing division. The Company recently announced that it would close its Exeter, England facility and consolidate these operations into its Leicester, England facility. The Company also announced that it will be consolidating its German and Holland operations into a new technical center near Dusseldorf, Germany which will serve as the European hub of technical and warehousing support for turning, milling and workholding products.
On July 21, 2009, the Company reduced its North American workforce by approximately 50 employees in response to continued weakness in demand for capital goods related to global economic conditions. This workforce reduction represented approximately 10% of the Company's North America based employment.
On August 4, 2009, the Company announced a reduced work week schedule resulting in cutbacks in manufacturing and support operations of 40% in most areas of its Switzerland based grinding operations. The Company is also planning a workforce reduction of approximately 65 employees in those operations, which would be effective near the end of the year after the statutorily mandated notification period.
Company Moving To More Variable Cost Business Model
Hardinge also announced today that it will begin the process of outsourcing many of the components and subassemblies for its machines which are currently made in the Elmira facility, and as a result will close significant sections of its manufacturing operation involved in parts production.
"We began an analysis of the Company's past business performance prior to the collapse of the global manufacturing industry in late 2008. Our strategic analysis included a review of our market position, the products we offer, our process for designing and building our products, and our methods of delivering and supporting our products to our customers," said Mr. Simons. "We've concluded that to remain competitive we must continue to move Hardinge to a more variable cost business model in the U.S. Our Elmira, NY manufacturing facility has been a vertically integrated operation with machining operations converting parts from raw castings to finished goods. The cost of supporting the equipment and facility necessary to continue with this business model is prohibitive. Therefore we will begin the process of outsourcing many of the components and subassemblies for machines currently made in this facility, and will be closing significant sections of our manufacturing operation involved in parts production."
Operations which will continue at the Company's Elmira facility include production of the world famous Hardinge collet ready spindle for use in our lathe products, final assembly of Super Precision(TM) and high precision RS and Quest series lathes, manufacture of collets and rotary products, final assembly of Bridgeport kneemills, and development of turnkey solutions for customers. The Company will also continue to manufacture parts in its "Rapid Response" operation which provides repair parts for its large installed base of machines.
Mr. Simons continued, "Unfortunately, the changes we are making throughout the Company will have an adverse effect on many Hardinge employees resulting in additional layoffs and reassignments as we close specific sections of the Elmira facility and reduce our global workforce. In addition to the headcount reductions noted above, we anticipate that the changes in Elmira will further reduce the Company's U.S. workforce by approximately 70 positions or an additional 15%, by year end 2009."
The Company anticipates that it will record a charge for severance related expenses of between $1.3 million and $2.0 million in the second half of the year as a result of the strategic actions described above. Furthermore, the Company expects that the changes announced today, along with actions taken over the past 12 months, will reduce annual fixed costs by approximately $15.0 million in North American operations on a permanent basis. In conjunction with these strategic changes, the Company anticipates that it will record a charge of up to $10.0 million for asset write-downs during the second half of the year.
Dividend Declared
The Hardinge Board of Directors declared a cash dividend of $0.005 per share on the Company's common stock, payable on September 10, 2009 to stockholders of record as of September 1, 2009.
Conference Call
The Company will host an investor call at 11:00 AM (ET) today to discuss results for the second quarter of 2009. The call can be accessed live at 866-796-3865, or via the internet at http://videonewswire.com/event.asp?id=60917. A recording of the call can be accessed from the "Investor Relations" section of the Company's website, www.hardinge.com, where it will be posted for one year. A recording of the call can also be accessed approximately one hour after its completion by dialing 1-888-284-7564, or 1-904-596-3174 if outside the U.S. & Canada, and entering the reference number: 2368901. This telephone recording will be available through September 30, 2009.
Hardinge is a global designer, manufacturer and distributor of machine tools, specializing in SUPER PRECISION(TM) and precision CNC Lathes, high performance Machining Centers, high-end cylindrical and jig Grinding Machines, and technologically advanced Workholding & Rotary Products. The Company's products are distributed to most of the industrialized markets around the world with approximately 69% of the 2008 sales outside of North America. Hardinge has a very diverse international customer base and serves a wide variety of end-user markets. This customer base includes metalworking manufacturers which make parts for a variety of industries, as well as 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, Switzerland, Taiwan, and China. Hardinge's common stock trades on NASDAQ Global Select Market 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.
Contact:
Edward Gaio
Vice President and CFO
(607) 378-4207
Hardinge Inc. and Subsidiaries
Consolidated Balance Sheets June 30, December 31,
2009 2008
---- ----
Assets (In Thousands)
Cash and cash equivalents $16,508 $18,430
Accounts receivable, net 37,630 60,110
Notes receivable, net 1,682 994
Inventories, net 131,149 144,957
Deferred income tax 397 398
Prepaid expenses 10,240 10,964
------ ------
Total current assets 197,606 235,853
Property, plant and equipment 180,040 183,387
Less accumulated depreciation 123,093 123,790
------- -------
Net property, plant and equipment 56,947 59,597
Notes receivable, net 744 923
Deferred income taxes 1,460 1,406
Intangible assets 10,516 10,725
Other long-term assets 606 1,321
--- -----
Total non-current assets 13,326 14,375
Total assets $267,879 $309,825
======== ========
Liabilities and shareholders' equity
Accounts payable $13,432 $20,059
Notes payable to bank 8,354 -
Accrued expenses 24,136 33,255
Accrued income taxes 2,178 2,911
Deferred income taxes 3,445 3,466
Current portion of long-term debt 548 24,549
--- ------
Total current liabilities 52,093 84,240
Long-term debt 3,286 3,572
Accrued pension expense 44,314 44,962
Deferred income taxes 10 -
Accrued postretirement benefits 2,552 2,528
Accrued income taxes 2,270 2,153
Other liabilities 4,456 4,243
----- -----
Total other liabilities 56,888 57,458
Common Stock - $0.01 par value 125 125
Additional paid-in capital 114,288 114,841
Retained earnings 82,194 92,700
Treasury shares - 940,740 shares at June 30,
2009 and 1,003,828 shares at December 31, 2008 (12,097) (13,037)
Accumulated other comprehensive (loss) (25,612) (26,502)
------- -------
Total shareholders' equity 158,898 168,127
Total liabilities and shareholders' equity $267,879 $309,825
======== ========
HARDINGE INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales $55,262 $96,565 $107,376 $182,164
Cost of sales 42,316 66,255 80,379 126,726
------ ------ ------ -------
Gross profit 12,946 30,310 26,997 55,438
Selling, general
and administrative
expenses 17,142 27,963 35,292 51,464
Other expense (income) 637 (68) 448 1,956
--- --- --- -----
(Loss) income
from operations (4,833) 2,415 (8,743) 2,018
Interest expense 241 470 1,473 921
Interest (income) (8) (143) (54) (183)
-- ---- --- ----
(Loss) income before
income taxes (5,066) 2,088 (10,162) 1,280
Income tax (benefit)
expense (109) 1,640 171 1,562
---- ----- --- -----
Net (loss) income $(4,957) $448 $(10,333) $(282)
======= ==== ======== =====
Per share data:
Basic (loss) earnings
per share: $(0.44) $0.04 $(0.91) $(0.02)
====== ===== ====== ======
Weighted average
number of common
shares outstanding
(in thousands) 11,373 11,300 11,371 11,312
====== ====== ====== ======
Diluted (loss)
earnings per
share: $(0.44) $0.04 $(0.91) $(0.02)
====== ===== ====== ======
Weighted average
number of common
shares outstanding
(in thousands) 11,373 11,370 11,371 11,312
====== ====== ====== ======
Cash dividends
declared per share $0.005 $0.05 $0.015 $0.10
====== ===== ====== =====
HARDINGE INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
Six Months Ended
June 30,
2009 2008
---- ----
(Unaudited) (Unaudited)
Operating activities
Net (loss) $(10,333) $(282)
Adjustments to reconcile net (loss) to net
cash provided by operating activities:
Depreciation and amortization 4,395 5,351
Provision for deferred income taxes (355) 904
Loss (gain) on sale of asset 59 (23)
Debt issuance amortization 1,148 180
Unrealized intercompany foreign currency
transaction (gain) loss (7) 1,673
Changes in operating assets and liabilities:
Accounts receivable 22,172 5,257
Notes receivable (519) 1,357
Inventories 14,685 (561)
Prepaids/other assets 1,256 (1,201)
Accounts payable (6,514) (2,819)
Accrued expenses (9,360) (5,296)
Accrued postretirement benefits 21 (216)
-- ----
Net cash provided by operating activities 16,648 4,324
Investing activities
Capital expenditures (1,655) (2,514)
Proceeds from sale of asset 9 60
- --
Net cash used in investing activities (1,646) (2,454)
Financing activities
Increase (decrease) in short-term notes
payable to bank 8,354 (2,800)
(Decrease) increase in long-term debt (24,269) 910
Net purchases of treasury stock - (589)
Dividends paid (173) (1,148)
Debt issuance fees paid (706) (893)
---- ----
Net cash used in financing activities (16,794) (4,520)
Effect of exchange rate changes on cash (130) 948
---- ---
Net decrease in cash (1,922) (1,702)
Cash at beginning of period 18,430 16,003
------ ------
Cash at end of period $16,508 $14,301
======= =======
SOURCE Hardinge Inc.
Copyright (2009) PR Newswire. All Rights Reserved.
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