Company Announces Strategic Change to North American Manufacturing Operations
Summary of Results Through June 30, 2009:
- Six-month cash flow from operations of $16.6 million, compared to $4.3 million in 2008
- Sales for the quarter were $55.3 million, down 43% compared to 2008
- Orders for the quarter were $44.6 million, down 59% compared to 2008
- The Company was in a positive net cash position with consolidated cash of $16.5 million, and total debt of $12.2 million
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.
