Selling, general and administrative (“SG&A”) expenses in the 2011 fourth quarter were $19.0 million compared with $16.5 million in the prior year’s fourth quarter. The increase was primarily due to commissions on higher sales, performance-based compensation increases and approximately $0.4 million associated with foreign currency exchange. As a percent of sales, SG&A was 20.9% in the 2011 fourth quarter, up from 20.1% in the prior year’s fourth quarter. For the year, SG&A expenses increased 12%, or $7.9 million, to $73.6 million compared with $65.7 million in 2010; however, as a percent of sales, SG&A was down to 21.5% of sales in 2011 compared with 25.5% in the prior year, reflecting the Company’s emphasis on cost discipline.
Income from operations in the fourth quarter of 2011 was $3.6 million, up 12% over $3.3 million in the prior year’s fourth quarter. As a percent of sales, income from operations remained unchanged at 4.0%. For the year, income from operations was $16.6 million, or 4.9% of sales, compared with a loss from operations of $2.7 million in the prior year.
Earnings before interest, taxes, depreciation and amortization (EBITDA) grew 11% to $5.5 million in the 2011 fourth quarter compared with $4.9 million in the same period of the prior year. 2011 EBITDA was $24.3 million, sharply improved over EBITDA of $4.3 million in the prior fiscal year. The Company believes that, when used in conjunction with GAAP measures, EBITDA, which is a non-GAAP measure, helps in the understanding of operating performance. (See the attached table for a Reconciliation of Net Income (Loss) to EBITDA and other important information regarding Hardinge’s use and presentation of EBITDA).
Solid Balance Sheet Provides Financial Flexibility for Growth StrategyCash and cash equivalents at December 31, 2011 were $21.7 million compared with $30.9 million at December 31, 2010. During 2011, Hardinge invested $17.2 million in the expansion of its manufacturing operations in China and Switzerland to provide additional capacity for growth and productivity enhancements. Total capital expenditures in 2011 were $19.2 million. Capital expenditures in fiscal 2012 are expected to be approximately $7 million to $8 million, with approximately $3 million to $4 million related to maintenance capital spend. The remainder is planned for completion of the China and Switzerland projects.