EXHIBIT 99
Contacts: | | |
J. Patrick Ervin | | Charles R. Trego, Jr. |
Chairman, President and CEO | | Senior Vice President and CFO |
(607) 378-4420 | | (607) 378-4202 |
Hardinge Increases Earnings Per Share By More
Than 21% in Second Quarter
Strong Improvement Generated in Orders and Backlog As Well
Performance Highlights for Second Quarter 2006:
· Orders of $92.4 million, an increase of 20.5% versus second quarter 2005
· Net sales of $78.5 million, a rise of 6.8% versus second quarter 2005
· Net income of $3.0 million, a 22.5% improvement over second quarter 2005
· Cash dividend of $.03 per share of common stock
ELMIRA, N.Y. — August 9, 2006 — Hardinge Inc. (NASDAQ: HDNG), a leading international provider of advanced material-cutting solutions, today reported increased orders, net sales, net income and earnings per share for the second quarter of 2006, compared to the same quarter in 2005.
Net income for the second quarter of 2006 was $3.0 million, or $.34 per diluted share, compared to $2.5 million, or $.28 per diluted share, in the second quarter of 2005. Net income for the first six months of 2006 was $5.0 million, or $.56 per diluted share, compared to $4.3 million, or $.49 per diluted share, for the first six months of 2005.
Net sales for the second quarter were $78.5 million, an increase of 6.8% compared to $73.5 million of net sales for the second quarter of 2005. Net sales for the first six months of 2006 were $154.0 million, an increase of 8.7% compared to $141.6 million of net sales for the first six months of 2005.
“Our second quarter 2006 performance benefited from the sustained strength of the manufacturing sectors around the globe,” commented Pat Ervin, Chairman, President, and Chief Executive Officer. “The second quarter growth in orders and net sales for 2006 reflects solid increases in each of our geographic markets and across most major product lines. This demonstrates our strong and growing international market position, which remains a strategic focus of the Company. However changes in the mix of sales related to product lines and geographic markets resulted in lower gross profit margins compared to 2005. Also, it is important to note that second quarter 2006 orders included an order for our ‘Asia & Other’ region valued at approximately $5.0 million that we anticipate will repeat in the third quarter of this year, but not in future quarters.”
The following table summarizes the Company’s sales by geographical region for the three and six month periods ended June 30, 2006 and 2005, respectively:
| | Three Months Ended | | Six Months Ended | |
| | June 30, | | June 30, | |
| | (U.S. dollars in thousands) | |
Sales to Customers in: | | 2006 | | 2005 | | %
Change | | 2006 | | 2005 | | %
Change | |
North America | | $ | 28,246 | | $ | 26,292 | | 7.4 | % | $ | 57,427 | | $ | 50,756 | | 13.1 | % |
Europe | | 31,687 | | 29,932 | | 5.9 | % | 60,908 | | 61,046 | | (.2 | )% |
Asia & Other | | 18,585 | | 17,303 | | 7.4 | % | 35,619 | | 29,773 | | 19.6 | % |
| | $ | 78,518 | | $ | 73,527 | | 6.8 | % | $ | 153,954 | | $ | 141,575 | | 8.7 | % |
Sales to customers in all regions increased in the second quarter of 2006 compared to the second quarter of 2005. Sales to customers in North America increased as a result of growth in the lathe product line. Sales to customers in Europe increased as a result of growth in both the milling and grinding product lines. Sales to customers in Asia & Other increased as a result of growth in both milling and lathe product lines.
The weakening of foreign currencies relative to the U.S. dollar had an unfavorable impact of $0.3 million and $3.4 million on sales for the three and six months ended June 30, 2006 compared to the same periods in 2005.
The following table summarizes orders by geographical region for the three and six months ended June 30, 2006 compared to the same periods in 2005:
| | Three Months Ended | | Six Months Ended | |
| | June 30, | | June 30, | |
| | (U.S. dollars in thousands) | |
Orders fromCustomers in: | | 2006 | | 2005 | | %
Change | | 2006 | | 2005 | | %
Change | |
North America | | $ | 34,075 | | $ | 29,847 | | 14.2 | % | $ | 63,182 | | $ | 56,474 | | 11.9 | % |
Europe | | 33,467 | | 29,832 | | 12.2 | % | 64,605 | | 61,216 | | 5.5 | % |
Asia & Other | | 24,841 | | 16,997 | | 46.1 | % | 41,326 | | 30,094 | | 37.3 | % |
| | $ | 92,383 | | $ | 76,676 | | 20.5 | % | $ | 169,113 | | $ | 147,784 | | 14.4 | % |
Orders for the second quarter of 2006 were $92.4 million, an increase of $15.7 million, or 20.5%, compared to the second quarter of 2005. Orders for the six months ended June 30, 2006 were $169.1 million, an increase of $21.3 million, or 14.4%, compared to same period in 2005.
Orders from customers in North America and Asia & Other increased as a result of expansion in the Company’s lathe product line and increased orders in the Company’s grinding products, as well as the large second quarter order for Asia & Other that Mr. Ervin referred to previously. Hardinge continues to strengthen the Asian market position of its Taiwanese and Chinese subsidiaries by investing in increased capacity, as well as promotional expenses, and support personnel to take advantage of the strong sales growth opportunities in that area. European order growth in the second quarter was driven primarily by improvement in orders for the Company’s grinding product lines.
Our consolidated backlog at June 30, 2006 was $88.8 million compared to $75.0 million at March 31, 2006.
Gross profit margin for the second quarter of 2006 was 30.0% of net sales, compared to 32.0% of net sales in the second quarter of 2005. Gross margin for the six months ended June 30, 2006 was 30.2% compared to 31.5% for the same period in 2005. The decrease in gross profit margin for 2006 compared to 2005 was primarily the result of changes in both product and market mix.
Selling, general and administrative expenses (SG&A) were $18.3 million, or 23.3% of net sales, in the second quarter of 2006, compared to $18.1 million, or 24.6% in the second quarter of 2005. SG&A expenses for the six months ended June 30, 2006 were $37.5 million, or 24.4% of net sales, compared to $35.6 million or 25.1% of net sales, in the six months ended June 30, 2005. The change in SG&A expense for 2006 was attributable to planned increases in spending for: commissions; wages, pension and benefit costs; and information technology enhancements; offset by decreases in: selling and marketing expenses; and other income and expense.
Interest expense was $1.3 million and $2.5 million for the three and six months ended June 30, 2006 compared to $1.0 million and $1.9 million for the same periods in 2005. The increase is due primarily to higher average borrowings incurred to finance the buyout of our minority partner in Hardinge Taiwan in December 2005 along with the purchase of the Bridgeport technical information in January 2006.
The provision for income taxes was $1.0 million and $1.7 million, respectively, for the three and six months ended June 30, 2006, compared to $1.3 million and $2.1 million for the same periods in 2005. The effective tax rate was 25.8% and 25.7% for the three and six months ended June 30, 2006 compared to 28.1% and 27.7% for the same periods in 2005.
In December 2005, the Company acquired the remaining 49% minority interest in Hardinge Taiwan Precision Machinery Limited, which is treated as a consolidated subsidiary. As a result of this transaction, there is no minority interest reduction to consolidated net income in 2006 compared to a reduction of $.8 million and $1.1 million, respectively, for the three and six months ended June 30, 2005.
“Our strategy of product and market diversification has provided growth in both orders and net sales through the midpoint of 2006,” Mr. Ervin continued. “Even with the continued strong performance of the worldwide manufacturing sectors, we need to remain focused and nimble in responding to continued opportunities for growth. We remain confident that the focused execution of our business strategy will generate both top- and bottom-line growth as we leverage the position of our strong product brands in new geographic and product markets.”
The Company also announced that its Board of Directors has declared a cash dividend of $0.03 per share on the Company’s common stock. The dividend is payable on September 8, 2006 to stockholders of record as of September 1, 2006.
The Company will host a conference call at 11:00 AM today to provide additional detail related to second quarter and year-to-date performance. The call can be accessed by dialing 1-866-838-2057, or via the internet live at http://videonewswire.com/event.asp?id=35007. It may also be accessed in replay form within the “Investor Relations” section at the Company’s website, www.hardinge.com, where it will be posted for one full year. You may also access a recording approximately one hour after its completion by dialing 1-888-284-7564, and entering the reference number: 190194. This telephone recording will be available throughout the third quarter, ending September 30, 2006.
Hardinge Inc., founded more than 100 years ago, is an international leader in providing the latest industrial technology to companies requiring material-cutting solutions. The Company designs and manufactures computer-numerically controlled metal-cutting lathes, machining centers, grinding machines, collets, chucks, indexing fixtures, and other industrial products. The company has manufacturing operations in the United States, Switzerland, Taiwan and China and distributes machines in all major industrialized countries of the world. Hardinge’s common stock trades on NASDAQ under the symbol, “HDNG.” For more information, please visit the Company’s website at www.hardinge.com.
This news release contains statements of a forward-looking nature relating to the financial performance of Hardinge Inc. Such statements are based upon information known to management at this time. The company cautions that such statements necessarily involve uncertainties and risk, and deal with matters beyond the company’s ability to control and in many cases the company cannot predict what factors would cause actual results to differ materially from those indicated. Among the many factors that could cause actual results to differ from those set forth in the forward-looking statements are 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, competitors’ actions such as price discounting or new product introductions, governmental regulations and environmental matters, changes in the availability and cost of materials and supplies, the implementation of new technologies and currency fluctuations. Any forward-looking statement should be considered in light of these factors. The company undertakes no obligation to revise its forward-looking statements if unanticipated events alter their accuracy.
— Financial Tables Follow —
HARDINGE INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands, except preferred and common share and per share amounts)
| | June 30, | | December 31, | |
| | 2006 | | 2005 | |
| | (Unaudited) | | | |
Assets | | | | | |
| | | | | |
Current assets: | | | | | |
Cash | | $ | 6,499 | | $ | 6,552 | |
Accounts receivable, net | | 67,440 | | 67,559 | |
Notes receivable, net | | 2,893 | | 4,060 | |
Inventories | | 125,434 | | 117,036 | |
Deferred income tax | | 779 | | 744 | |
Prepaid expenses | | 11,206 | | 6,921 | |
Total current assets | | 214,251 | | 202,872 | |
| | | | | |
Property, plant and equipment: | | | | | |
Property, plant and equipment | | 175,318 | | 170,961 | |
Less accumulated depreciation | | 108,989 | | 104,640 | |
Net property, plant and equipment | | 66,329 | | 66,321 | |
| | | | | |
Other assets: | | | | | |
Notes receivable | | 4,080 | | 3,683 | |
Deferred income taxes | | 461 | | 455 | |
Intangible pension asset | | 264 | | 247 | |
Other intangible assets | | 12,148 | | 7,438 | |
Goodwill | | 18,997 | | 17,699 | |
Other long term assets | | 1,643 | | 1,561 | |
| | 37,593 | | 31,083 | |
Total assets | | $ | 318,173 | | $ | 300,276 | |
HARDINGE INC. AND SUBSIDIARIES
Consolidated Balance Sheets - Continued
(In Thousands, except preferred and common share and per share amounts)
| | June 30, | | December 31, | |
| | 2006 | | 2005 | |
| | (Unaudited) | | | |
Liabilities and shareholders’ equity | | | | | |
| | | | | |
Current liabilities: | | | | | |
Accounts payable | | $ | 27,940 | | $ | 26,454 | |
Notes payable to bank | | 10,285 | | 3,803 | |
Deferred purchase price of acquisitions | | — | | 5,129 | |
Accrued expenses | | 18,611 | | 19,920 | |
Accrued pension expense | | 2,059 | | 2,375 | |
Accrued income taxes | | 3,075 | | 3,223 | |
Deferred income taxes | | 2,764 | | 2,592 | |
Current portion of long-term debt | | 19,880 | | 12,955 | |
Total current liabilities | | 84,614 | | 76,451 | |
| | | | | |
Other liabilities: | | | | | |
Long-term debt | | 49,854 | | 50,356 | |
Accrued pension expense | | 19,787 | | 19,731 | |
Deferred income taxes | | 2,915 | | 2,646 | |
Accrued postretirement benefits | | 5,779 | | 5,985 | |
Derivative financial instruments | | 1,329 | | 1,709 | |
Other liabilities | | 4,019 | | 4,405 | |
| | 83,683 | | 84,832 | |
| | | | | |
Shareholders’ equity: | | | | | |
Preferred stock, Series A, par value $.01 per share; Authorized 2,000,000; but unissued at June 30, 2006 and December 31, 2005. | | | | | |
Common stock, $.01 par value:
Authorized shares - 20,000,000;
Issued shares — 9,919,992 at June 30, 2006 and December 31, 2005 | | 99 | | 99 | |
Additional paid-in capital | | 59,646 | | 60,387 | |
Retained earnings | | 108,642 | | 104,219 | |
Treasury shares — 1,089,037 at June 30, 2006 and 1,063,287 shares at December 31, 2005. | | (14,022 | ) | (13,697 | ) |
Accumulated other comprehensive income | | (4,489 | ) | (11,029 | ) |
Deferred employee benefits | | — | | (986 | ) |
Total shareholders’ equity | | 149,876 | | 138,993 | |
Total liabilities and shareholders’ equity | | $ | 318,173 | | $ | 300,276 | |
HARDINGE INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In Thousands, Except Per Share Data)
| | Three Months Ended
June 30, | | Six Months Ended
June 30, | |
| | 2006 | | 2005 | | 2006 | | 2005 | |
| | (Unaudited) | | (Unaudited) | | (Unaudited) | | (Unaudited) | |
| | | | | | | | | |
Net sales | | $ | 78,518 | | $ | 73,527 | | $ | 153,954 | | $ | 141,575 | |
Cost of sales | | 54,932 | | 50,030 | | 107,465 | | 96,964 | |
Gross profit | | 23,586 | | 23,497 | | 46,489 | | 44,611 | |
| | | | | | | | | |
Selling, general and administrative expenses | | 18,279 | | 18,114 | | 37,540 | | 35,590 | |
Income from operations | | 5,307 | | 5,383 | | 8,949 | | 9,021 | |
| | | | | | | | | |
Interest expense | | 1,311 | | 1,021 | | 2,457 | | 1,861 | |
Interest (income) | | (58 | ) | (155 | ) | (180 | ) | (291 | ) |
Income before income taxes and minority interest in (profit) of consolidated subsidiary | | 4,054 | | 4,517 | | 6,672 | | 7,451 | |
Income taxes | | 1,047 | | 1,271 | | 1,718 | | 2,064 | |
Minority interest in (profit) of consolidated subsidiary | | | | (791 | ) | | | (1,068 | ) |
Net income | | 3,007 | | 2,455 | | 4,954 | | 4,319 | |
| | | | | | | | | |
Retained earnings at beginning of period | | 105,900 | | 99,876 | | 104,219 | | 98,277 | |
Less dividends declared | | 265 | | 267 | | 531 | | 532 | |
Retained earnings at end of period | | $ | 108,642 | | $ | 102,064 | | $ | 108,642 | | $ | 102,064 | |
| | | | | | | | | |
| | | | | | | | | |
Per share data: | | | | | | | | | |
| | | | | | | | | |
Basic earnings per share: | | $ | 0.34 | | $ | 0.28 | | $ | 0.57 | | $ | 0.49 | |
Weighted average number of common shares outstanding | | 8,765 | | 8,767 | | 8,766 | | 8,756 | |
| | | | | | | | | |
Diluted earnings per share: | | $ | 0.34 | | $ | 0.28 | | $ | 0.56 | | $ | 0.49 | |
Weighted average number of common shares outstanding | | 8,807 | | 8,829 | | 8,801 | | 8,840 | |
| | | | | | | | | |
| | | | | | | | | |
Other financial data: | | | | | | | | | |
| | | | | | | | | |
Gross margin | | 30.0 | % | 32.0 | % | 30.2 | % | 31.5 | % |
Operating margin | | 6.8 | % | 7.3 | % | 5.8 | % | 6.4 | % |
Capital expenditures | | $ | 1,135 | | $ | 2,277 | | $ | 1,967 | | $ | 2,947 | |
Depreciation and amortization | | $ | 2,398 | | $ | 2,286 | | $ | 4,731 | | $ | 4,606 | |
HARDINGE INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
| | Six Months Ended | |
| | June 30, | |
| | 2006 | | 2005 | |
| | (Unaudited) | | (Unaudited) | |
| | | | | |
Operating activities | | | | | |
Net income | | $ | 4,954 | | $ | 4,319 | |
Adjustments to reconcile net income to net cash used in operating activities: | | | | | |
Depreciation and amortization | | 4,731 | | 4,606 | |
Provision for deferred income taxes | | 127 | | 425 | |
Minority interest | | — | | 1,068 | |
Foreign currency transaction (gain) loss | | (319 | ) | 295 | |
Changes in operating assets and liabilities: | | | | | |
Accounts receivable | | 2,402 | | (7,576 | ) |
Notes receivable | | 855 | | 2,222 | |
Inventories | | (4,376 | ) | (19,762 | ) |
Prepaids/other assets | | (4,478 | ) | (1,870 | ) |
Accounts payable | | 835 | | 2,220 | |
Accrued expenses | | (4,150 | ) | (3,335 | ) |
Accrued postretirement benefits | | (205 | ) | (65 | ) |
Net cash provided by (used in) operating activities | | 376 | | (17,453 | ) |
| | | | | |
Investing activities | | | | | |
Capital expenditures | | (1,967 | ) | (2,947 | ) |
Purchase of Bridgeport kneemill technical information | | (5,000 | ) | — | |
Purchase of minority interest in Hardinge Taiwan | | (110 | ) | — | |
Purchase of U-Sung Co., Ltd. | | (5,071 | ) | — | |
Net cash (used in) investing activities | | (12,148 | ) | (2,947 | ) |
| | | | | |
Financing activities | | | | | |
Increase in short-term notes payable to bank | | 5,921 | | 368 | |
Increase in long-term debt | | 6,298 | | 21,067 | |
Net (purchases) sales of treasury stock | | (332 | ) | 210 | |
Dividends paid | | (531 | ) | (532 | ) |
Net cash provided by financing activities | | 11,356 | | 21,113 | |
| | | | | |
Effect of exchange rate changes on cash | | 363 | | (216 | ) |
Net (decrease) increase in cash | | (53 | ) | 497 | |
| | | | | |
Cash at beginning of period | | 6,552 | | 4,189 | |
| | | | | |
Cash at end of period | | $ | 6,499 | | $ | 4,686 | |
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