HARDINGE INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 3, 2017

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Exhibit 99.1

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NEWS
RELEASE

Hardinge Inc. One Hardinge Drive, Elmira, N.Y. 14902


Hardinge Reports Second Quarter 2017 Results

•
Second quarter sales grew 11% to $78.2 million; up 14% excluding unfavorable foreign currency translation
•
Diluted earnings per share up significantly to $0.20 from $0.01; Net income grew to $2.5 million from $0.1 million
•
Orders of $92.7 million increased 15% with growth in all three regions
•
Backlog of $144.9 million reaches five-year high

ELMIRA, N.Y., August 3, 2017 - Hardinge Inc. (NASDAQ: HDNG), a leading international provider of advanced metal-cutting solutions and accessories, reported financial results for its second quarter ended June 30, 2017.
Chuck Dougherty, President and Chief Executive Officer, commented, “We had a strong quarter driven by improved industrial economies in North America and Asia that resulted in higher machine sales. Importantly, we had a very healthy level of orders that support our expectation of a solid 2017.”
He added, “I joined the Company in May and have found an organization with a strong foundation from which we can build. We have global capabilities in operations, engineering and sales, great brands and outstanding people. Of note, we have an exceptional position in China, both in capabilities and market presence. There are opportunities to better leverage our scale in areas such as our supply chain and go-to-market strategy. And, I believe there is more potential to improve efficiencies through common systems and processes across our businesses. Our current focal areas are in completing the announced restructuring activities and developing a plan for optimizing our global footprint to create greater earnings power, as we develop a strategy to define our longer term priorities.”
For the announced restructuring activities, the program is expected to be completed by mid-2018 and generate pre-tax annualized savings of $2.0 million to $2.5 million. Total restructuring costs are expected to be in the range of $3.8 million to $4.3 million, of which $1.6 million is non-cash.

(1)Management believes that the use of non-GAAP measures helps in the understanding of the Company's operating performance. See page 9 of this release for the reconciliation tables between reported amounts and non-GAAP measures discussed in this document.

-MORE-
Hardinge Reports Second Quarter 2017 Results
August 3, 2017
Page 2 of 10





Sales, Orders and Backlog for Second Quarter and First Half of 2017
North America: Sales of $24.2 million in the quarter grew by 17% due to improved industrial market conditions from the impact of the recovery in the oil and gas industry on other industrial businesses. Orders for the region were up 6% in the quarter driven by $1.9 million in orders by a key distributor.
For the first six months of 2017, sales to North America were up 15% to $43.8 million and orders increased 3% to $50.7 million.
Europe: Sales in Europe of $22.2 million were unchanged mostly as the result of the timing of machine orders. Orders in the region were up 12% driven by an improving industrial economy in Europe. Excluding unfavorable foreign currency translation of $0.6 million and $0.9 million on sales and orders, respectively, sales increased 3% and orders increased 15%.
For the first six months of 2017, sales to Europe of $39.9 million were down 13% while orders increased 17% to $51.3 million. Excluding unfavorable foreign currency translation, sales decreased 11% and orders increased 20%.
Asia: Sales of $31.7 million and orders of $35.7 million for the quarter were up 16% and 25%, respectively, as the economy in Asia has stabilized driving more investment in automation and machine tools by industrial manufacturers. Excluding unfavorable foreign currency impact of $0.9 million on both sales and orders, sales were up 20% and orders increased 28%.
For the first half of 2017, sales of $59.0 million and orders of $63.7 million were up 10% and 21%, respectively. Excluding unfavorable foreign currency translation of $1.9 million on sales and $1.8 million on orders, sales were up 13% and orders increased 25%.
Consolidated backlog: Backlog at June 30, 2017 was $144.9 million, up 14% over the trailing first quarter and improved 32% compared with June 30, 2016.

Second Quarter Operating Review
•
Gross profit increased $3.1 million, or 13%, on higher volume. As a percent of sales, gross profit was 34.1% in the quarter.
•
Higher selling, general and administrative (SG&A) expenses included $1.1 million in unusual costs associated with the executive search and severance expenses. Excluding those costs, and the $0.4 million of professional fees related to the strategic review in the prior-year period, SG&A declined $0.4 million in the quarter.
•
Operating income increased $1.9 million as a result of strong operating leverage. Operating margin expanded 2.4 points to 2.8% of sales.
•
Adjusted Non-GAAP operating income(1) was $3.9 million in the quarter, up significantly from $0.9 million in the prior-year period. The adjusted operating margin was 5.0%, a 3.7 point expansion.
•
Net income was $2.5 million, or $0.20 per diluted share, up from $0.1 million, or $0.01 per diluted share in the prior-year period. Adjusted Non-GAAP income(1) was $4.2 million, or $0.33 per diluted share, a more than four-fold increase over last year’s second quarter.

First Half 2017 Review
•
For the first half, gross profit was $48.0 million, improved $1.7 million on higher sales. Gross margin was relatively unchanged from the prior period.
•
SG&A was down $2.1 million, or 5%, primarily as a result of reduced commissions and sales and marketing spend.
•
Adjusted Non-GAAP operating income(1) for the first half of 2017 was $3.7 million, up from $0.6 million in the first half of 2016. The adjusted operating margin was 2.6%, a 2.2 point expansion from leverage on higher volume.

-MORE-
Hardinge Reports Second Quarter 2017 Results
August 3, 2017
Page 3 of 10




•
Net income was $0.5 million, or $0.04 per diluted share, improved from a $1.1 million loss, or $(0.09) per diluted share, in the first half of 2016. Adjusted Non-GAAP income(1) was $3.7 million, or $0.29 per diluted share, up significantly from $0.4 million, or $0.03 per diluted share last year.

Suspension of Dividend
Hardinge’s Board of Directors has elected to suspend the quarterly cash dividend to shareholders in consideration of its development of a long-term strategy for growth, the re-evaluation of its capital allocation priorities and the nominal value of the current dividend of $0.08 per share, or $1.0 million per year.

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, Charles P. Dougherty, President and CEO, and Douglas J. Malone, Senior Vice President and CFO, will review the financial and operating results for the quarter, as well as the Company’s strategy and 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 http://ir.hardinge.com/events.cfm.
The conference call can be accessed by calling (201) 689- 8560. The listen-only audio webcast can be monitored at http://ir.hardinge.com/events.cfm.
A telephonic replay will be available from 2:00 p.m. ET the day of the call through Thursday, August 10, 2017. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13665317. Alternatively, the archive can be heard on the Company’s website at http://ir.hardinge.com/events.cfm. A transcript will also be posted to the website, once available.

About Hardinge
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.

-MORE-
Hardinge Reports Second Quarter 2017 Results
August 3, 2017
Page 4 of 10




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.

For more information contact:
 
 
 
Company:
Investor Relations:
Douglas J. Malone
Chief Financial Officer
Phone: (607) 378-4140
Deborah K. Pawlowski, Kei Advisors LLC
Phone: (716) 843-3908
Email: dpawlowski@keiadvisors.com


FINANCIAL TABLES FOLLOW.

-MORE-
Hardinge Reports Second Quarter 2017 Results
August 3, 2017
Page 5 of 10




HARDINGE INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except share and per share data)
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2017
 
2016
 
2017
 
2016
 
(unaudited)
 
(unaudited)
 
 
 
 
 
 
 
 
Sales
$
78,197

 
$
70,186

 
$
142,754

 
$
138,007

Cost of sales
51,568

 
46,633

 
94,738

 
91,711

Gross profit
26,629

 
23,553

 
48,016

 
46,296

Gross profit margin
34.1
%
 
33.6
%
 
33.6
%
 
33.5
 %
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
20,081

 
19,637

 
38,103

 
40,230

Research & development
3,777

 
3,369

 
7,335

 
6,656

Restructuring
542

 
226

 
1,978

 
426

Other expense (income), net
37

 
20

 
192

 
(72
)
Income (loss) from operations
2,192

 
301

 
408

 
(944
)
Operating margin
2.8
%
 
0.4
%
 
0.3
%
 
(0.7
)%
 
 
 
 
 
 
 
 
Interest expense
104

 
132

 
210

 
285

Interest income
(38
)
 
(69
)
 
(79
)
 
(136
)
Income (loss) before income taxes
2,126

 
238

 
277

 
(1,093
)
Income tax (benefit) expense
(396
)
 
93

 
(198
)
 
8

Net Income (loss)
$
2,522

 
$
145

 
$
475

 
$
(1,101
)
 
 
 
 
 
 
 
 
Per share data:
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Basic earnings (loss) per share:
$
0.20

 
$
0.01

 
$
0.04

 
$
(0.09
)
 
 
 
 
 
 
 
 
Diluted earnings (loss) per share:
$
0.20

 
$
0.01

 
$
0.04

 
$
(0.09
)
 
 
 
 
 
 
 
 
Cash dividends declared per share:
$
0.02

 
$
0.02

 
$
0.04

 
$
0.04

 
 
 
 
 
 
 
 
Weighted avg. shares outstanding: Basic
12,894

 
12,812

 
12,887

 
12,804

Weighted avg. shares outstanding: Diluted
12,932

 
12,901

 
12,921

 
12,804



-MORE-
Hardinge Reports Second Quarter 2017 Results
August 3, 2017
Page 6 of 10




HARDINGE INC. AND SUBSIDIARIES
 Consolidated Balance Sheets
(in thousands, except share and per share data)
 
June 30,
2017
 
December 31,
2016
 
(Unaudited)
 
 
Assets
 

 
 

Cash and cash equivalents
$
26,369

 
$
28,255

Restricted cash
2,509

 
2,923

Accounts receivable, net
55,071

 
55,573

Inventories, net
118,478

 
107,018

Other current assets
11,321

 
6,926

Total current assets
213,748

 
200,695

 
 
 
 
Property, plant and equipment, net
57,192

 
56,961

Goodwill
6,658

 
6,579

Other intangible assets, net
26,698

 
26,730

Other non-current assets
6,047

 
6,585

Total non-current assets
96,595

 
96,855

Total assets
$
310,343

 
$
297,550

 
 
 
 
Liabilities and shareholders’ equity
 

 
 

Notes payable to bank
$
99

 
$
703

Accounts payable
25,982

 
24,217

Accrued expenses
27,140

 
25,629

Customer deposits
23,063

 
18,215

Accrued income taxes
671

 
1,160

Current portion of long-term debt
4,636

 
2,923

Total current liabilities
81,591

 
72,847

 
 
 
 
Long-term debt
—

 
2,970

Pension and postretirement liabilities
57,635

 
58,840

Deferred income taxes
4,343

 
3,800

Other liabilities
1,669

 
3,152

Total non-current liabilities
63,647

 
68,762

Commitments and contingencies
 
 
 
Common stock ($0.01 par value, 20,000,000 authorized; shares issued 12,943,789 and 12,903,037)
129

 
129

Additional paid-in capital
121,489

 
121,015

Retained earnings
89,510

 
89,557

Treasury shares (at cost, 0 and 9,243)
—

 
(104
)
Accumulated other comprehensive loss
(46,023
)
 
(54,656
)
Total shareholders’ equity
165,105

 
155,941

Total liabilities and shareholders’ equity
$
310,343

 
$
297,550



-MORE-
Hardinge Reports Second Quarter 2017 Results
August 3, 2017
Page 7 of 10




HARDINGE INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
 
Six Months Ended 
 June 30,
 
2017
 
2016
 
(Unaudited)
Operating activities
 

 
 

Net income (loss)
$
475

 
$
(1,101
)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
 

 
 

Impairment
1,401

 
—

Depreciation and amortization
4,411

 
4,098

Debt issuance costs amortization
65

 
66

Deferred income taxes
132

 
(119
)
Gain on sale of assets
(16
)
 
(4
)
Unrealized foreign currency transaction gain
(819
)
 
(116
)
Changes in operating assets and liabilities:
 

 
 

Accounts receivable
2,261

 
11,826

Restricted cash
499

 
(331
)
Inventories
(8,251
)
 
(7,720
)
Other assets
(2,893
)
 
(1,330
)
Accounts payable
745

 
(2,170
)
Customer deposits
4,132

 
(3,886
)
Accrued expenses
(2,381
)
 
(5,211
)
Accrued pension and postretirement liabilities
(19
)
 
(41
)
Net cash used in operating activities
(258
)
 
(6,039
)
 
 
 
 
Investing activities
 

 
 

Capital expenditures
(968
)
 
(992
)
Proceeds from sales of assets
16

 
37

Net cash used in investing activities
(952
)
 
(955
)
 
 
 
 
Financing activities
 

 
 

Proceeds from short-term notes payable to bank
12,418

 
28,871

Repayments of short-term notes payable to bank
(13,062
)
 
(28,643
)
Repayments of long-term debt
(1,456
)
 
(2,271
)
Dividends paid
(516
)
 
(536
)
Net cash used in financing activities
(2,616
)
 
(2,579
)
 
 
 
 
Effect of exchange rate changes on cash
1,940

 
167

Net decrease in cash
(1,886
)
 
(9,406
)
 
 
 
 
Cash and cash equivalents at beginning of period
28,255

 
32,774

 
 
 
 
Cash and cash equivalents at end of period
$
26,369

 
$
23,368


-MORE-
Hardinge Reports Second Quarter 2017 Results
August 3, 2017
Page 8 of 10





Quarterly Sales by Region
($ in thousands)
 
Quarter Ended
 
June 30, 2017
June 30, 2016
March 31, 2017
Sales to Customers in
  $
% of Total
  $
Year-over-Year
% Change
  $
Sequential
% Change
North America
24,220

31%
20,694

17%
19,583

24%
Europe
22,240

28%
22,242

—%
17,702

26%
Asia
31,737

41%
27,250

16%
27,272

16%
Total
78,197


70,186

11%
64,557

21%



 
Year-to-Date Sales by Region
($ in thousands)
 
 
 
 
 
Six Months Ended
 
 
 
June 30, 2017
June 30, 2016
 
Sales to Customers in
  $
% of Total
  $
Year-over-Year
% Change
 
North America
43,803

31%
38,144

15%
 
Europe
39,942

28%
46,084

(13)%
 
Asia
59,009

41%
53,779

10%
 
Total
142,754

 
138,007

3%



Quarterly Orders by Region
($ in thousands)
 
Quarter Ended
 
June 30, 2017
June 30, 2016
March 31, 2017
Orders from Customers in
  $
% of Total
  $
Year-over-Year
% Change
  $
Sequential
% Change
North America
27,003

29%
25,520

6%
23,669

14%
Europe
30,021

32%
26,859

12%
21,290

41%
Asia
35,692

38%
28,555

25%
27,987

28%
Total
92,716

 
80,934

15%
72,946

27%


 
Year-to-Date Orders by Region
($ in thousands)
 
 
 
 
Six Months Ended
 
 
 
June 30, 2017
June 30, 2016
 
Orders from Customers in
  $
% of Total
  $
Year-over-Year
% Change
 
North America
$
50,672

31%
$
49,423

3%
 
Europe
51,311

31%
43,988

17%
 
Asia
63,679

38%
52,448

21%
 
Total
165,662

 
145,859

14%


-MORE-
Hardinge Reports Second Quarter 2017 Results
August 3, 2017
Page 9 of 10





Hardinge believes that providing non-GAAP financial measures such as adjusted loss from operations, 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.


HARDINGE INC. AND SUBSIDIARIES
Reconciliation of GAAP Income (Loss) from Operations to Non-GAAP Adjusted Income from Operations
(in thousands)
 
Three Months Ended 
 June 30, 2017
 
Three Months Ended 
 June 30, 2016
 
Amount
 
% of Sales
 
Amount
 
% of Sales
 
 
 
 
 
 
 
 
Income from operations as reported
$
2,192

 
2.8
%
 
$
301

 
0.4
%
Adjustments to reported income from operations:
 
 
 
 
 
 


Restructuring charges
542

 
0.7
%
 
226

 
0.3
%
Professional fees for strategic review process
—

 
—
%
 
404

 
0.6
%
Other adjustments
1,161

 
1.5
%
 
—

 
—
%
Non-GAAP income from operations as adjusted
$
3,895

 
5.0
%
 
$
931

 
1.3
%
 
 
 
 
 
 
 
 

 
Six Months Ended 
 June 30, 2017
 
Six Months Ended 
 June 30, 2016
 
Amount
 
% of Sales
 
Amount
 
% of Sales
 
 
 
 
 
 
 
 
Income (loss) from operations as reported
408

 
0.3
%
 
$
(944
)
 
(0.7
)%
Adjustments to reported income (loss) from operations:
 
 


 
 
 


Restructuring charges
1,978

 
1.4
%
 
426

 
0.3
 %
Professional fees for strategic review process
—

 
—
%
 
1,103

 
0.8
 %
Other adjustments
1,303

 
0.9
%
 
—

 
—
 %
Non-GAAP income from operations as adjusted
$
3,689

 
2.6
%
 
$
585

 
0.4
 %
 
 
 
 
 
 
 
 






-MORE-
Hardinge Reports Second Quarter 2017 Results
August 3, 2017
Page 10 of 10





HARDINGE INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted Net Income
(in thousands, except per share data)
 
Three Months Ended 
 June 30, 2017
 
Three Months Ended 
 June 30, 2016
 
Amount
 
EPS
 
Amount
 
EPS
 
 
 
 
 
 
 
 
Net income as reported
$
2,522

 
$
0.20

 
$
145

 
$
0.01

Adjustments to reported net income, pre-tax: (1)
 
 
 
 
 
 
 
Restructuring charges
496

 
0.04

 
226

 
0.02

Professional fees for strategic review process
—

 
—

 
404

 
0.03

Other adjustments
1,161

 
0.09

 
—

 
—

Non-GAAP net income as adjusted
$
4,179

 
$
0.33

 
$
775

 
$
0.06

 
 
 
 
 
 
 
 
 
Six Months Ended 
 June 30, 2017
 
Six Months Ended 
 June 30, 2016
 
Amount
 
EPS
 
Amount
 
EPS
 
 
 
 
 
 
 
 
Net (loss) income as reported
$
475

 
$
0.04

 
$
(1,101
)
 
$
(0.09
)
Adjustments to reported net (loss) income, pre-tax: (1)

 
 
 
 
 
 
 
Restructuring charges
1,926

 
0.15

 
426

 
0.03

Professional fees for strategic review process
—

 
—

 
1,103

 
0.09

Other adjustments
1,303

 
0.10

 
—

 
—

Non-GAAP net income as adjusted
$
3,704

 
$
0.29

 
$
428

 
$
0.03

 
 
 
 
 
 
 
 
(1) items have no tax effect due to full tax valuation allowances in the related jurisdictions.


-END-

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