Market Overview

Hardinge Reports First Quarter 2018 Results

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Hardinge Inc. (NASDAQ:HDNG), a leading international provider of
advanced metal-cutting solutions and accessories, reported financial
results for its first quarter ended March 31, 2018.

Sales, Orders and Backlog for First Quarter

Sales for the first quarter of 2018 increased 24% to $79.9 million
driven by higher demand in all regions. Orders of $90.4 million were up
24%. Excluding favorable foreign currency translation of $4.2 million on
sales and $5.0 million on orders, sales and orders both increased 17%.

Americas: Sales grew 10% to $21.5 million primarily from
increased demand for workholding products. Orders for the region were
$24.5 million, up 4% in the quarter, and have fluctuated from quarter to
quarter as a result of changes being implemented with sales channel
partners.

Europe: Sales in Europe of $21.2 million were up 20% from
favorable mix of more complex grinding machines. Orders in the region
were up 55% due to strengthening industrial conditions driving higher
demand across all product lines. Excluding favorable foreign currency
translation of $1.7 million on sales and $2.7 million on orders, sales
increased 10% and orders increased 43%.

Asia: Sales of $37.2 million for the quarter were up 36% as
strong demand in China was supplemented by high demand in other parts of
Asia. Orders of $32.9 million increased 18%. Excluding favorable foreign
currency impact of $2.5 million and $2.3 million on sales and orders,
respectively, sales were up 27% and orders were up 9%.

Consolidated backlog: Backlog at March 31, 2018 was $144.3
million, up 14% from March 31, 2017.

First Quarter Operating Review

  • Gross profit was $28.1 million, an increase of $7.0 million, or 33%
    from higher sales volume and improved margins. As a percent of sales,
    gross profit was 35.2%, a 2.4 point improvement over the prior year
    quarter due to favorable mix.
  • Excluding professional services fees of $0.9 million in the current
    year and $0.1 million of other unusual costs in the prior year,
    selling, general and administrative (SG&A) expenses increased $2.0
    million in the quarter due to higher commissions of $1.0 million
    related to increased volume, and unfavorable foreign currency
    translation of $1.0 million.
  • Operating income of $2.6 million increased $4.2 million as a result of
    higher volume partially offset by unusual costs in the current year.
    Operating margin expanded 5.6 points to 3.3% of sales.
  • Adjusted Non-GAAP operating income(1) was $4.9 million in
    the quarter, up significantly from $0.1 million in the prior-year
    period. Adjusted operating margin was 6.2%, a 6.1 point expansion.
  • Net income was $1.8 million, or $0.14 per diluted share, up from a
    $2.0 million loss, or $(0.16) per diluted share in the prior-year
    period. Adjusted Non-GAAP net income(1) was $4.1 million,
    or $0.31 per diluted share, a significant increase over last year's
    adjusted net loss in the quarter.

(1)Management believes that the use of non-GAAP measures
helps in the understanding of the Company's operating performance. See
page 8 of this release for the reconciliation tables between reported
amounts and non-GAAP measures discussed in this document.

Recent Merger Announcement

On February 12, 2018, Hardinge announced that it had entered into a
definitive agreement with affiliates of Privet Fund Management LLC
("Privet") under which Privet has agreed to acquire Hardinge for $18.50
per share in an all-cash transaction valued at approximately $245
million, subject to approval of Hardinge shareholders and other
customary closing conditions.

In light of the announcement, Hardinge will not hold a conference call
to discuss these financial results. There is a Special Meeting of
Shareholders of Hardinge Inc., scheduled to be held on Tuesday, May 22,
2018, for shareholders to vote on the adoption of the agreement and plan
of merger.

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.

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.

Certain factors could cause actual results to differ from those
anticipated in the forward-looking statements in this release, including
the possibility that the proposed transaction with Privet is delayed or
does not close, including due to the failure to receive required
shareholder approval, due to litigation in respect of the Merger ,due to
alternative acquisition proposals, the taking of governmental action
(including the passage of legislation) to block the transaction, the
failure of Privet to obtain the equity and debt financing or other funds
required to finance the transaction, or the failure of other closing
conditions, disruptions of our business as a result of the announcement
and pursuit of the Merger, the possibility that the expected financial
impacts will not be realized, or will not be realized within the
expected time period, including as a result of fluctuations in the
machine tool business, the cyclical nature of our markets, 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
our entry into new product and geographic markets, our ability to manage
our operating costs and announced cost reduction initiatives, product
liability claims, work stoppages or other labor issues, our ability to
execute on our previously announced real estate sale and other
restructuring activities, 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, loss
of key management or other personnel, failure of operating equipment or
information technology infrastructure, changes in the availability and
cost of materials and supplies, the implementation of new technologies
and currency fluctuations, and other risks and factors described in our
quarterly reports on Form 10-Q and annual reports on Form 10-K and in
our other filings with the Securities and Exchange Commission or in
materials incorporated therein by reference.

The Company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future events, or otherwise.

FINANCIAL TABLES FOLLOW.

     

HARDINGE INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except share and per share data)

 
Three Months Ended
March 31,
2018     2017
(unaudited)
 
Sales $ 79,882 $ 64,557
Cost of sales 51,744   43,388  
Gross profit 28,138 21,169
Gross profit margin 35.2 % 32.8 %
 
Selling, general and administrative expenses 20,361 17,574
Research & development 3,281 3,559
Restructuring 1,352 1,436
Other operating expense, net 509   155  
Income (loss) from operations 2,635 (1,555 )
Operating margin 3.3 % (2.4 )%
 
Other non-operating (income) expense, net (99 ) 230
Interest expense 49 105
Interest income (51 ) (40 )
Income (loss) before income taxes 2,736 (1,850
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