Investor Presentation March 2015

Transcription

1 Investor Presentation March 2015 Richard L. Simons Chairman, President and Chief Executive Officer Douglas J. Malone Vice President and Chief Financial Officer NASDAQ: HDNG

2 Safe Harbor Statement This presentation may contain 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). Any such statements are based upon 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 following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: 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, competitor s actions such as price discounting or new product introductions, governmental regulations and environmental matters, changes in the availability of cost of materials and supplies, the implementation of new technologies and currency fluctuations. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. 2

3 Leading Global Machine Tool Manufacturer Founded: 1890 IPO: 1995 NASDAQ: HDNG A leading global designer and top 40 manufacturer of high precision computer controlled metal-cutting machines with significant global brand recognition Market capitalization $169.6 million Book value per share 1 $13.23 Recent price $11.36 Current annual dividend rate $ week price range $ $14.85 Dividend yield 0.7% Shares outstanding million Institutional ownership 77.2% Average daily volume (3 mos.) 27,620 Insider ownership 3.0% Market Data as of March 25, 2015 market close (Source: NASDAQ Online), Ownership as of latest filing 1 As of December 31, As of March 6,

4 Metalcutting Processes Turning Sample Parts Milling Sample Parts Grinding Sample Parts 4

5 Global Growth Strategy Leverage our strong brands emphasize developing economies Invest continuous product development Grow organic, acquisitions, strategic partnerships Sales by Region Sales by Production Region Asia 35% North America 32% Asia 34% North America 29% Europe 33% 2014 sales: $312 million Europe 37% Actual net sales may differ due to rounding differences. 5

6 Machine Tool Consumption (in US$ billions) Emerging Economies Drive Demand Oxford Economics Machine Tool Forecast $80 billion industry $ Forecast CAGR World ~6% Asia ~7% Europe ~4% Americas ~4% $100 $80 $60 $40 $20 $ Americas Europe Asia World Drivers of Machine Tool Consumption: Older machines technologically obsolete Skilled machinists shrinking supply Emerging economies growing middle class Global competitiveness advancing productivity Source: Oxford Economics Fall 2014 Global Machine Tool Outlook Report 6

7 Global Premier Brands Competitive Advantage: Deep Industry Experience and Super Precision Capabilities Brand names among the best, most respected in the industry Customer service responsiveness Functionality of solutions provided Customer loyalty higher performance capabilities, longer-lived products T42 SUPER PRECISION Multi Axis Turning Center Elmira, N.Y. 7

8 Continually Enhancing Machine Tool Offering Focused on high precision material-cutting solutions Small- to medium-sized work-pieces requiring tight degrees of tolerance and accuracy Complex applications Hard to machine materials Delivering application-specific solutions Turn-key service: set up programming, installation and material handling systems Customized machines One of the few machine tool OEMs offering turning, milling, grinding, workholding and turnkey solutions worldwide Kel-Varia CNC Cylindrical Grinder Switzerland 8

9 Global Leader Workholding solutions and accessories for machine tools Expanded product offering and capabilities with May 2013 Forkardt acquisition One of the largest manufacturers of workholding systems Used by a wide variety of machine tool manufacturers for endless applications Provide spare parts for tens of thousands of machines world-wide Reduces impact of machine tool industry cyclicality Hardinge is one of the largest manufacturers of chucks, collets, feed fingers and pads with more than 40,000 SKUs. Trademarks include FlexC TM, HQC, Sure- Grip, and HCAC Workholding, Parts and Accessories Sales 34% Represented $106.8 million of 2014 Sales 9

10 Achieving Manufacturing Excellence Hardinge products enable global industries aerospace agriculture automotive technology construction consumer products defense medical energy transportation 10

11 Diversified End Markets of Machined Products Serve second and third tier suppliers for OEMs 11

12 Expanded Capacity & Capabilities Acquisition Acquisition Acquisition L. Kellenberger & Co. Switzerland L. Kellenberger & Taiwan Bridgeport Invested $10 million for Usach Co. Switzerland Established International U.K. cost reduction, Strengthened Acquired company to Hardinge Taiwan Acquired worldwide productivity position as a world enter grinding business greenfield milling products and improvements and leader in grinding manufacturing site strong brand name enhanced solutions manufacturing capacity in Switzerland Acquisition Voumard Expanded internal grinding capabilities enabling us to offer a full line of cylindrical grinders China Established Hardinge China created direct foothold in China market Hauser Tripet Tschudin Switzerland Expanded grinding presence Acquisition Jones and Shipman Broadened grinding product line to foster expansion in Asia Acquisition Hardinge Jiaxing Invested $10 million for expanded manufacturing capacity in China Forkardt Improved and expanded global leadership position in specialty workholding solutions and accessories Acquisition 12

13 FINANCIALS NASDAQ: HDNG

14 Diversified Revenue & Results Net Sales Gross Margin $257 $342 $334 $329 $312 $147 $129 $120 $ % 26.7% 29.0% 28.9% 27.9% $125 $74 $58 $105 $121 $100 $103 $90 $84 $109 $ North America Europe Asia * 2014* EBITDA Margin* 7.1% 8.3% 8.2% 4.8% Net (Loss) Income & EPS $15.4 $14.9 $12.0 $ % ($3.4) 2010* * 2013* 2014* ($0.30) $1.04 $1.33 $1.25 $0.22 Earnings per Diluted Share * Represents a non-gaap adjusted measure. Please see supplemental slides for a reconciliation between GAAP and non-gaap measures 14

15 Emphasis on Productivity and Cash At 41%, we believe our managed working capital to be in upper quartile of industry Machine tool industry requires higher inventory to support customers needs Managed Working Capital* as a Percent of Sales (Monthly Avg) 47% 38% 41% 43% 41% Inventory Turns (Monthly Avg) Receivable Days Outstanding (Monthly Avg) * Managed Working Capital is defined as: Receivables + Inventory - Payables - Customer Deposits 15

16 Financial Strength and Flexibility ($ in millions) Total Capitalization $5.0 $21.5 $20.0 $26.6 $16.2 $157.9 $147.0 $161.2 $203.8 $ Equity Debt Total Capitalization $162.9 $168.5 $181.2 $230.2 $185.8 Cash & Cash Equivalents Capital Expenditures $30.9 $21.7 $26.9 $34.7 $16.3 $19.2 $7.6 $3.9 $3.2 $ * 2012* E * Reflects expansion capital investments in China and Switzerland of $17.2 million in 2011 and $3.3 million in

17 DRIVING LONG-TERM VALUE NASDAQ: HDNG

18 Backlog Feeds 2015 Sales Outlook Geographic Diversity Creates Larger Addressable Market ($ in millions) $297 Total Orders Backlog $372 $157 $331 $288 $288 $117 $139 $103 $107 $10 $47 $46 $47 $48 $120 $109 $42 $106 $95 $91 $91 $101 $103 $107 $105 $11 $12 $12 $10 $67 $95 $79 $86 $105 $39 $43 $45 $48 $ /31/13 3/31/14 6/30/14 9/30/ /31/2014 North America Europe Asia Lead times vary by product line Grinding: six to nine months Milling and turning: two to six months Workholding Parts & Accessories Milling & Turning Grinding Workholding parts and accessories: Standard - next day, Specials four to eight weeks 18

19 2015 Expectations Continued optimistic outlook for 2015 Economists project further growth in machine tool orders Shipments vary based on customer requirements and readiness, Q1 impacted by Chinese New Year and Q3 impacted by European summer vacation season 2015 revenue growth driven by scheduled backlog and an expanding quoting pipeline across all product lines 19

20 Five Points of Focus Creating a larger and more efficient business Quality Customer Service Continuous Product Development and Improvement Global Cooperation Operational Excellence Six Sigma Initiative: Employee Development 20

21 2020 VISION Hardinge s 2020 Vision Revenue >$600 million EBITDA Margin: ~13% = ~$80 million Capture market share with new products and improved distribution Penetrate new industrial and geographic end markets Participate in projected 6% compound annual growth rate of global machine tool demand Acquire additional Aftermarket Tooling and Accessories businesses (~$60 to $80 million) Current Strength Enables Achievement of 2020 Vision 21

22 Key Success Factors Drive Value Growth in Asia Capitalize on strong machine tool demand Leverage our investment in: Expanded manufacturing footprint tripled capacity in 2012 Direct China sales force... ~130 sales, application and service professionals Growth in accessories and grinding product lines Growth through acquisitions and expanded product offerings and capabilities Provides higher margins in less competitive segments Innovation: Invest in Research and Development to maintain competitive edge Leverage brands to expand addressable market HIPEx Lean Six-Sigma initiative Structured problem solving and performance improvement Improved efficiencies with improved operating margins HDNG Global manufacturing capacity of $500 to $550 million 22

23 Why Hardinge? Comprehensive product and service offering with market leading brands Loyal customer base serving blue chip companies in a wide range of end markets Investment Highlights Globally diverse sales and manufacturing platform Experienced management team; record of successful strategic acquisitions and alliances in higher margin businesses Strong balance sheet 23

24 Investor Presentation March 2015 NASDAQ: HDNG

25 SUPPLEMENTAL SLIDES NASDAQ: HDNG

26 Highly Experienced Management Team Name Position Relevant Machine Tool Industry Experience Industrial Experience Richard Simons Chairman, President and Chief Executive Officer 31 Years 36 Years Douglas Malone Vice President and Chief Financial Officer 6 Years 6 Years James Langa Senior Vice President, Machine Solutions 8 Years 34 Years Douglas Tifft Senior Vice President, Administration 37 Years 37 Years Jürg Kellenberger Vice President, Grinding Operations 34 Years 41 Years Bill Sepanik Vice President, Forkardt Operations 19 Years 26 Years Alison Zhang General Manager, China Sales & Marketing 23 Years 32 Years John McTernan Director, European Sales & Marketing 37 Years 39 Years Seasoned Executive Team Driving Growth 26

27 Competition North America Europe Asia & Other Turning & Milling Yamazaki Mazak Corporation, Doosan Corporation, Haas Automation, Okuma Corporation, DMG Mori Seiki, and a number of manufacturers/assemblers in Taiwan Grinding Körber Schleifring (Studer), Moore Jig Grinding Workholding Small- to mid-size companies in the U.S., Europe, India and China Hardinge among world s top 40 machine tool manufacturers 27

28 Adjusted Gross Profit & Margin Reconciliation ($ in millions) Q4 Q1 Q2 Q3 Q Sales $ $ $ $ $ $ $ 70.9 $ 78.9 $ 68.9 $ 93.0 Cost of sales Gross profit Inventory step-up charge Adjusted gross profit $ 61.3 $ 91.1 $ 96.8 $ 95.2 $ 86.9 $ 30.2 $ 19.2 $ 22.1 $ 18.7 $ 27.0 Adjusted gross margin 23.9% 26.7% 29.0% 28.9% 27.9% 29.3% 27.1% 28.0% 27.1% 29.1% Gross Profit and Gross Margin for 2013, 2014, Q and Q were adjusted to exclude unusual items as listed above. Hardinge believes that when used in conjunction with GAAP measures, Adjusted Gross Profit, which is a non-gaap measure, assists in the understanding of Hardinge s operating performance. Actual amounts may differ due to rounding. 28

29 Adjusted Net (Loss) Income, Operating (Loss) Income & Margin and EBITDA & Margin ($ in millions) Net (loss) income $ (5.2) $ 12.0 $ 17.9 $ 9.9 $ (2.1) Impairment charges Income from discontinued operations and gain on disposal of discontinued operation, net of tax (5.5) (0.2) Gain on purchase of business (0.6) (0.5) Inventory step-up charge Acquisition transaction expenses Other adjustments (2.7) Adjusted net (loss) income (3.4) Plus: Interest expense, net Adjusted income tax expense Adjusted operating (loss) income (0.9) Depreciation and amortization expense Adjusted EBITDA $ 6.1 $ 24.3 $ 27.9 $ 26.9 $ 14.9 Sales $257.0 $341.6 $334.4 $329.5 $311.6 Adjusted operating margin (0.4)% 4.9 % 6.1 % 5.3 % 1.7 % Adjusted EBITDA margin 2.4 % 7.1 % 8.3 % 8.2 % 4.8 % Net (Loss) Income, Operating (Loss) Income, Operating Margin, EBITDA and EBITDA Margin in 2010, 2012, 2013 and 2014 were adjusted to exclude unusual items as listed above. Hardinge believes that when used in conjunction with GAAP measures, Adjusted Net (Loss) Income, Adjusted Operating (Loss) Income and Adjusted EBITDA, which are non-gaap measures, assist in the understanding of Hardinge s operating performance. Actual amounts may differ due to rounding. 29

30 Quarterly Financial Appendix ($ in millions, except for share and per share data) Quarter Ended 3/31/2013 6/30/2013 9/30/ /31/2013 3/31/2014 6/30/2014 9/30/ /31/2014 Sales $ 67.2 $ 79.4 $ 79.8 $ $ 70.9 $ 78.9 $ 68.9 $ 93.0 Cost of sales Gross profit Gross profit margin 28.2% 28.7% 27.7% 28.6% 27.1% 27.9% 27.1% 29.1% Selling, general and administrative expenses Impairment charges Other expense (income) (0.1) (0.3) 0.2 Income (loss) from operations (0.3) 1.6 (6.9) 5.1 Operating margin 0.7 % 3.4 % 3.2 % 1.3 % (0.4)% 2.1 % (10.0)% 5.5 % Interest expense, net Income (loss) from continuing operations before income taxes (0.5) 1.5 (7.1) 4.9 Income tax expense (benefit) (0.1) Income (loss) from continuing operations $ 0.0 $ 2.1 $ 1.2 $ 1.1 $ (0.7) $ 1.3 $ (7.6) $ 4.5 Income from discontinued operations, net of tax Gain from disposal of discontinued operation, net of tax Net income (loss) $ 0.0 $ 2.3 $ 1.5 $ 6.1 $ (0.5) $ 1.3 $ (7.6) $ 4.5 Basic earnings (loss) per share Continuing operations $ - $ 0.18 $ 0.10 $ 0.09 $ (0.05) $ 0.11 $ (0.60) $ 0.36 Discontinued operations Disposal of discontinued operation Earnings (loss) per share $ - $ 0.19 $ 0.13 $ 0.50 $ (0.04) $ 0.11 $ (0.60) $ 0.36 Diluted earnings (loss) per share Continuing operations $ - $ 0.18 $ 0.10 $ 0.09 $ (0.05) $ 0.11 $ (0.60) $ 0.35 Discontinued operations Disposal of discontinued operation Earnings (loss) per share $ - $ 0.19 $ 0.13 $ 0.50 $ (0.04) $ 0.11 $ (0.60) $ 0.35 Cash dividends declared per share $ 0.02 $ 0.02 $ 0.02 $ 0.02 $ 0.02 $ 0.02 $ 0.02 $ 0.02 Weighted avg. shares outstanding: Basic Weighted avg. shares outstanding: Diluted Actual amounts may differ due to rounding. 30