-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JfLVPbzp27kBaQT8lZ3LfL8g/6dINKw0XUQfmeqPHmF2etKg234EkteS19SeQCdK 8+AxZpQjUUXB+tZnadFakg== 0000313716-97-000004.txt : 19970815 0000313716-97-000004.hdr.sgml : 19970815 ACCESSION NUMBER: 0000313716-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARDINGE INC CENTRAL INDEX KEY: 0000313716 STANDARD INDUSTRIAL CLASSIFICATION: MACHINE TOOLS, METAL CUTTING TYPES [3541] IRS NUMBER: 160470200 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15760 FILM NUMBER: 97660819 BUSINESS ADDRESS: STREET 1: ONE HARDING DRIVE CITY: ELMIRA STATE: NY ZIP: 14902 BUSINESS PHONE: 6077342281 MAIL ADDRESS: STREET 1: ONE HARDINGE DRIVE STREET 2: ONE HARDINGE DRIVE CITY: ELMIRA STATE: NY ZIP: 14902 FORMER COMPANY: FORMER CONFORMED NAME: HARDINGE BROTHERS INC DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ___________ Commission file number: 000-15760 Hardinge Inc. New York 16-0470200 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Hardinge Inc. One Hardinge Drive Elmira, NY 14902 (607) 734-2281 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ As of June 30, 1997 there were 6,504,498 shares of Common Stock of the Registrant outstanding. HARDINGE INC. AND SUBSIDIARIES INDEX Part I Financial Information Page Item 1. Financial Statements Consolidated Balance Sheets at June 30, 1997 and December 31, 1996. 3 Consolidated Statements of Income and Retained Earnings for the three months ended June 30, 1997 and 1996, and the six months ended June 30, 1997 and 1996. 5 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 1997 and 1996. 6 Notes to Consolidated Financial Statements. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 8 Part II Other Information Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Default upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 HARDINGE INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in Thousands) June 30, Dec. 31, 1997 1996 ------------------------------- (Unaudited) Assets Current assets: Cash $ 1,392 $ 2,636 Accounts receivable 48,643 41,150 Notes receivable 5,916 5,070 Inventories 90,794 99,906 Deferred income taxe 2,158 2,158 Prepaid expenses 1,198 1,656 ------------------------------- Total current assets 150,101 152,576 Property, plant and equipment: Property, plant and equipment 125,580 117,606 Less accumulated depreciation 60,153 53,716 ------------------------------- 65,427 63,890 Other assets: Notes receivable 10,798 11,791 Deferred income taxes 511 651 Goodwill 4,364 Other 222 254 ------------------------------- 15,895 12,696 ------------------------------- Total assets $231,423 $229,162 =============================== HARDINGE INC. AND SUBSIDIARIES Consolidated Balance Sheets--Continued (Dollars In Thousands) June 30, Dec. 31, 1997 1996 ------------------------------- (Unaudited) Liabilities and shareholders' equity Current liabilities: Accounts payable $ 11,248 $ 12,067 Notes payable to bank 3,569 10,950 Accrued expenses 12,470 10,676 Accrued income taxes 1,177 1,017 Deferred income taxes 1,390 896 Current portion long-term debt 826 714 ------------------------------- Total current liabilities 30,680 36,320 Other liabilities: Long-term debt 40,009 37,156 Accrued pension plan expense 1,485 1,485 Deferred income taxes 1,525 1,657 Accrued postretirement benefits 5,173 4,999 ------------------------------- 48,192 45,297 Shareholders' equity Preferred stock, Series A, par value $.01: Authorized - 2,000,000; issued - none Common stock, $.01 par value: Authorized shares - 20,000,000 Issued shares - 6,511,703 65 65 Additional paid-in capital 57,974 57,027 Retained earnings 105,498 99,622 Treasury shares (208) (343) Cumulative foreign currency translation adjustment (5,515) (3,731) Deferred employee benefits (5,263) (5,095) ------------------------------- Total shareholders' equity 152,551 147,545 ------------------------------- Total liabilities and shareholders' equity $231,423 $229,162 =============================== See accompanying notes. HARDINGE INC. AND SUBSIDIARIES Consolidated Statements of Income and Retained Earnings (Unaudited) (In Thousands, Except Per Share Data) Three months ended Six months ended June 30, June 30, 1997 1996 1997 1996 -------------------- -------------------- Net Sales $63,668 $55,266 $123,724 $114,888 Cost of sales 42,334 36,789 82,212 77,079 --------------------------------------------------------------------------- Gross profit 21,334 18,477 41,512 37,809 Selling, general and administrative expenses 12,975 10,946 24,779 22,516 Unusual expense 1,960 --------------------------------------------------------------------------- Income from operations 8,359 7,531 14,773 15,293 Interest expense 674 675 1,365 1,197 Interest (income) (188) (167) (354) (382) --------------------------------------------------------------------------- Income before income taxes 7,873 7,023 13,762 14,478 Income taxes 3,040 2,703 5,415 5,688 --------------------------------------------------------------------------- Net income 4,833 4,320 8,347 8,790 Retained earnings at beginning of period 101,901 90,035 99,622 86,666 Less dividends declared 1,236 1,097 2,471 2,198 =========================================================================== Retained earnings at end of period $105,498 $ 93,258 $105,498 $ 93,258 =========================================================================== Weighted average number of common shares outstanding 6,236 6,228 6,252 6,228 =========================================================================== Per share data: Net Income $ .78 $ .69 $ 1.34 $ 1.41 =========================================================================== Dividends Declared $ .19 $ .17 $ .38 $ .34 =========================================================================== See accompanying notes. HARDINGE INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In Thousands) Six Months Ended June 30, 1997 1996 ---------------------------------- Net cash provided by (used in) operating activities $18,308 ($ 2,398) Investing activities: Capital expenditures (5,124) (6,384) Proceeds from sale of assets 24 Investment in subsidiary (4,588) ---------------------------------- Net cash (used in) investing activities (9,712) (6,360) Financing activities: (Decrease) increase in short-term notes payable to bank (6,801) 364 (Decrease) increase in long-term debt (652) 10,036 Sale of treasury stock 137 171 Dividends paid (2,471) (2,199) ---------------------------------- Net cash (used in) provided by financing activities (9,787) 8,372 Effect of exchange rate changes on cash (53) (1) ================================== Net (decrease) in cash ($ 1,244) ($387) ================================== NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) June 30, 1997 NOTE A--BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 1997, are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report for the year ended December 31, 1996. NOTE B--INVENTORIES Inventories are summarized as follows (dollars in thousands): June 30, December 31, 1997 1996 ------------- -------------- Finished products $ 32,791 $ 34,461 Work-in-process 31,259 35,479 Raw materials and purchased components 26,744 29,966 ------------- -------------- $ 90,794 $ 99,906 ============= ============== NOTE C--UNUSUAL EXPENSE 1997's first quarter included a one-time charge of $1,960,000 (approximately $1,200,000 after tax, or $.20 per share). This non-recurrung charge involves outside costs incurred in connection with a major acquisition that the Company carried into the final stages of the due diligence process but decided not to complete. NOTE D--EARNINGS PER SHARE AND WEIGHTED SHARES OUTSTANDING Earnings per share are calculated using a monthly weighted average shares outstanding and include common stock equivalents related to restricted stock. PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following are management's comments relating to significant changes in the results of operations for the three month and six month periods ended June 30, 1997 and 1996 and in the Company's financial condition during the six month period ended June 30, 1997. Results of Operations Net Sales. Net sales for the quarter ended June 30, 1997 were $63,668,000, an increase of $8,402,000, or 15.2%, over 1996's second quarter sales of $55,266,000. Year to date sales of $123,724,000 for the first six months of 1997 represent a 7.7% increase over the $114,888,000 net sales for the same 1996 period. Machine sales accounted for $43,103,000 of net sales for the second quarter of 1997, representing a 19.6% increase from the same 1996 period. Year to date June 30, 1997 sales of machines accounted for $84,962,000, a 13.7% increase over the $74,739,000 sales in the same 1996 period. Sales of non-machine products and services in the second quarter of 1997 increased to $20,565,000 from $19,292,000 for the same 1996 period, a 6.6% increase. Year to date sales of this product group were $38,762,000, down 3.6% from $40,149,000 the previous year. Factors in the increased machine sales for both the three and six month periods were the success of the Company's new Cobra(TM)42 product and a number of large deliveries of automotive orders during both the first and second quarters of this year. Geographically, these same factors resulted in a large increase in sales in the United States. Second quarter U.S. sales of $44,650,000 exceeded 1996's second quarter by $9,533,000, or 27%. Similarly, U.S. sales for the first six months of 1997 were up by $16,923,000 over the previous year, an increase of nearly 24%. European sales continue to lag behind the previous year. Sales for the second quarter were down from the previous year by 21%, but considerably less than the first quarter's shortfall of 44%. Year to date sales to European customers were $22,144,000, down 34% from the 1996 level. International sales to the remainder of the world continued to increase in the second quarter, with a volume of $6,900,000 representing an increase of 46% over the previous year. For the six months ended June 30, 1997, these sales increased to $12,900,000, 34% over the 1996 level. Gross Profit. Gross margin for the second quarter 1997, as a percentage of sales, remained relatively unchanged from the second quarter 1996 level, at 33.5% compared to 33.4%. Gross margins for the first six months of 1997 and 1996 were 33.6% and 32.9%, respectively. The improvement was due primarily to lower distribution discounts in the United States compared to Europe, as reported for the first quarter. Selling, General, and Administrative Expenses. Selling, general and administrative ("SG&A") expenses were 20.4% of sales during the second quarter of 1997 compared to 19.8% a year earlier. The increase resulted in part from higher commission costs related to the Company's increased sales and in part to the acquisition of Hansvedt Industries, Inc. as described below. SG&A expenses for the six months ended June 30, 1997 and 1996 were 20% and 19.6%, respectively. Income from Operations. Income from operations as a percentage of net sales decreased for the three months ended June 30, 1997 to 13.1%, from 13.6% a year earlier, as a result of the increase in SG&A costs discussed above. Prior to the non-recurring charge related to acquisition efforts which was reported during the first quarter of this year, income from operations for the first six months of 1997 increased to 13.6% of sales compared to 13.3% for the same period of 1996. With this charge taken into consideration, operating earnings for the first half of 1997 were 11.9% of sales. Interest Expense. Interest expense totaled $674,000 in the second quarter of 1997 compared to $675,000 in the same 1996 period. Average borrowings were only slightly higher in the second quarter of 1997 compared to 1996, and the average consolidated interest rate was slightly lower. Interest expense for the six month periods ended June 30, 1997 and 1996 was $1,365,000 and $1,197,000, respectively. Interest Income. Interest income remained fairly constant in the comparative periods of 1997 and 1996, with the majority of this category coming from interest on financing of customer purchases. Income Taxes. The provisions for income taxes as percentages of income before income taxes were nearly identical for both second quarter and year-to-date, at 38.6% and 39.3%, for the second quarter and first half of 1997, respectively, compared to 38.5% and 39.3% for the same 1996 periods. Net Income. Net income for the second quarter of 1997 was $4,833,000, or $.78 per share, an increase of $513,000 or 11.9% from the same 1996 period. Year to date 1997 net income was $8,347,000, or $1.34 per share, compared to $8,790,000, or $1.41 per share for the same 1996 period. 1997's net income has been reduced by $1,200,000, or $.20 per share, as a result of the previously reported non-recurring charge related to first quarter 1997 acquisition efforts. Excluding that charge, net income for the first half of 1997 was $9,547,000, or $1.52 per share, an increase of 8.6% over the first half of 1996. This improvement in performance is primarily the result of increased volume coupled with successful margin and operating cost management. Acquisition. In April, 1997 the Company acquired 100% of the outstanding shares of Hansvedt Industries, Inc., an Urbana, Illinois-based manufacturer of Electronic Discharge Machines (EDM) and related equipment. Electronic discharge machines are used to produce complex metal parts through a process of erosion with electricity using either a cutting wire or electrode. Hansvedt Industries, which was privately held and is the largest U.S. manufacturer of EDM equipment, had 1996 revenues of $8,000,000 and has approximately 75 employees. Quarterly Information The following table sets forth certain quarterly financial data for each of the periods indicated. Three Months Ended ---------------------------------------------------------- March 31, June 30, Sept.30, Dec. 31, March 31, June 30, 1996 1996 1996 1996 1997 1997 ---------------------------------------------------------- (in thousands, except per share data) ---------------------------------------------------------- Net Sales $ 59,622 $ 55,266 $47,577 $57,830 $60,056 $63,668 Gross Profit 19,332 18,477 17,103 20,119 20,178 21,334 SG&A expense 11,570 10,946 10,849 11,693 11,804 12,975 Unusual expense 1,960 Income from operations 7,762 7,531 6,254 8,426 6,414 8,359 Net income 4,470 4,320 3,435 5,063 3,514 4,833 Net income per share .72 .69 .56 .82 .56 .78 Weighted averages shares outstanding 6,199 6,228 6,189 6,204 6,225 6,236 Liquidity and Capital Resources Hardinge's current ratio at June 30, 1997 was 4.89:1 compared to 4.20:1 at December 31, 1996. The high level of sales in the first half of 1997 resulted in an increase in accounts and current notes receivable of $8,339,000. During the same period, however, inventories were reduced by $9,112,000 as work in process and finished goods for a number of large orders for automotive customers were completed and shipped. The net result of these changes combined with a number of smaller differences was an overall reduction in current assets of $2,475,000 from December 31, 1996 to June 30, 1997. On the other hand, current liabilities also decreased by $5,640,000, primarily as a result of repayment of bank debt at the L. Kellenberger & Co. AG subsidiary. The repayment was financed by Hardinge's long-term credit facilities. In the first half of 1997, operating activities provided $18,308,000 of cash, while operating activities in the first half of 1996 used $2,398,000 of cash. Nearly all of this change in cash generation was provided by changes in inventory levels. During the first half of 1996, inventories were building significantly for the launch of the new Cobra(TM)42 lathe and to support a number of large orders with extended delivery dates. During the first half of 1997 inventories declined significantly as noted above, as these orders have now been shipped and the Cobra introduction has been completed. During the first half of 1997, the cash generated by operating activities was used to repay $ 7,453,000 of short and long-term debt. Cash was also used for the Hansvedt acquisition, capital expenditures and to pay dividends. Hardinge provides long-term financing for the purchase of its equipment by qualified customers. We periodically sell portfolios of our customer notes to financial institutions in order to reduce debt and finance current operations. Our customer financing program has an impact on our month-to-month borrowings, but it has had little long-term impact on our working capital because of the ability to sell the underlying notes. We sold $17,400,000 of customer notes in the first half of 1997, compared to $15,000,000 during the same period of 1996. At June 30, 1997 Hardinge maintained revolving loan agreements with several U.S. banks providing for unsecured borrowing up to $50,000,000 on a revolving basis, $30,000,000 through August 1, 1997 and $20,000,000 through November 1, 1999. At those times, the outstanding amounts convert, at the Company's option, to term loans payable quarterly over four years through 2001 and 2003, respectively. These facilities, along with other short term credit agreements, provided for immediate access of up to $57,000,000. At June 30, 1997, outstanding borrowings under these arrangements totaled $24,191,000. On July 31, 1997, the Company completed a new unsecured revolving credit arrangement with a group of banks which replaces the $30,000,000 agreement expiring on August 1, 1997. This new facility, which has no term loan conversion option, provides for borrowings up to $50,000,000 through August 1, 2002, bringing the total available funds under the Company's revolving and other short term credit facilities to $77,000,000. This increase will provide Hardinge with further flexibility in financing its world-wide operations. In March, 1996, the Company completed negotiations with a syndication of banks on a long term credit agreement for $17,750,000. The proceeds were used to pay down the amount on the revolving loan agreement which had originally been used to finance the acquisition of Kellenberger. Quarterly interest payments began in 1996, and principal payments begin in 1998. The agreement contains financial covenants consistent with the revolving loan agreements. We believe that the currently available funds and credit facilities, along with internally generated funds, will provide sufficient financial resources for ongoing operations. This report 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 risk, because actual results could differ materially from those projected. Among the many factors that could cause actual results to differ from those set forth in the forward-looking statements are changes in general economic conditions in the U.S. or internationally, actions taken by customers or competitors, the receipt of more or fewer orders than expected , and changes in the cost of materials. The Company undertakes no obligation to revise its forward-looking statements if unanticipated events alter their accuracy. PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Default upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K A. Exhibits 27. Financial Data Schedule B. Reports on Form 8-K There were no reports on Form 8-K filed during this quarter. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Hardinge Inc. August 14, 1997 By:_/s/ Robert E. Agan_____________________ Date Robert E. Agan Chairman of the Board and Chief Executive Officer August 14, 1997 By:_/s/ J. Allan Krul______________________ Date J. Allan Krul President and Chief Operating Officer August 14, 1997 By:_/s/ Malcolm L. Gibson__________________ Date Malcolm L. Gibson Executive Vice President and Chief Financial Officer (Principal Financial Officer) August 14, 1997 By:_/s/ Richard L. Simons__________________ Date Richard L. Simons Vice President - Finance (Principal Accounting Officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS INFORMATION EXTRACTED FROM THE COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JUN-30-1997 1,392 0 65,357 0 90,794 150,101 125,580 60,153 231,423 30,680 0 0 0 65 152,486 231,423 123,724 123,724 82,212 24,779 1,960 0 1,365 13,762 5,415 8,347 0 0 0 8,347 1.34 1.34
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