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Hardinge Inc. (NASDAQ:HDNG)

Q1 2014 Earnings Conference Call

May 8, 2014 11:00 ET

Executives

Debbie Pawlowski - Investor Relations

Rick Simons - Chairman, President and Chief Executive Officer

Doug Malone - Vice President and Chief Financial Officer

Analysts

Les Sulewski - Sidoti & Company

Brian Rafn - Morgan Dempsey Capital Management

Operator

Greetings and welcome to the Hardinge Incorporated First Quarter 2014 Financial Results Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder this conference is being recorded.

I would now like to turn the conference over to your host, Debbie Pawlowski, Investor Relations for Hardinge. Thank you. You may begin.

Debbie Pawlowski - Investor Relations

Thank you, Stacy, and good morning, everyone. We appreciate your interest in Hardinge. And on the call with me today, I have Rick Simons, Chairman, President and CEO; and Doug Malone, Vice President and CFO. Rick and Doug will review the first quarter 2014 results and also give an update on the company’s outlook and strategic progress. You should have a copy of the financial results that were released this morning before the market opened. And if not you can access it at the company’s website, www.hardinge.com. On our website, you’ll also find slides that accompany the discussion to which Rick and Doug will be referring.

As you look at the slide deck on Slide 2, you will find our Safe Harbor statement. As you are aware, we may make forward-looking statements during the formal discussion as well as during the Q&A. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ from what is stated in today’s call. These risks and uncertainties and other factors are provided in the earnings release as well as with the other documents filed by the company with the Securities and Exchange Commission. These documents can be found on the company’s website or at sec.gov.

So with that let me turn it over to you, Rick to begin.

Rick Simons - Chairman, President and Chief Executive Officer

Thank you, Debbie. Good morning, everyone, and thank you for joining us today for our 2014 first quarter financial review. As we expected we had a weak start to the year in terms of sales after our record $103 million fourth quarter of last year when we not only shift out at over $20 million of Usach orders, there had been a backlog when we purchased the company at the end of 2012. But also the usual slippage assumption meant at the end of the year and into the first quarter didn’t occur.

Although we did manage our discretionary expenses closely in the first quarter profitability is a challenge at a $70 million of sales level. We generated a slight operational loss given the negative impact of lower absorption of fixed overhead cost at our grinding facilities as well as production levels there have been adjusted to low backlog of orders.

Looking forward we’re encouraged by the recent overall order level, the highest quarter of orders since early 2012. We feel good that this is a positive indicator for sales growth and profitability. I’m going to talk a little more specifically about our top-line results for the quarter and then I’ll pass it over to Doug to provide more details on the financial results.

On Slide 3 of the presentation sales did come in as we expected. Compared with last year’s first quarter we realized higher sales in Asia and Europe. Consistent with the pattern we’ve seen over the last half of 2013 revenue from our acquired Forkardt business continue to offset some or all of the economic softness in our base business demonstrating a success of this strategy to diversify our revenue base. In Asia due to the Chinese New Year shipments aren’t typically moderate for our first quarter which was the case for this year. Also you may recall that in the fourth quarter 2013 we reported particularly strong sales in Asia driven by a large multi and machine shipments in China from our Usach operation.

Europe’s first quarter sales improvement over the last year was due to the Forkardt business included in this year’s results. Our sales were sequentially down from the fourth quarter of last year but it still feels like economic activity in this region bottomed in the latter half of 2013 and we’re in a period of slow growth. Traditionally a big share of our sales in this region are of higher value grinding and turning machines which lagged other orders coming out of recession as their buying decision takes more confidence by our customers.

In North America the incremental sales from our Forkardt business in 2014 first quarter wasn’t enough to offset the organic decline compared with a year ago. While we’re experiencing solid customer co-activity in this region, 2014 sales included fewer shipments of high dollar machine solutions than last year. In terms of this sequential sales comparison recall that shipments out of the Usach backlog were the primary driver of this significantly higher North American sales level in the fourth quarter of last year.

With that I’ll turn it over to Doug and I’ll come back with more comments related to markets and orders when he is finished.

Doug Malone - Vice President and Chief Financial Officer

Thank you, Rick, and good morning everyone. Please turn to Slide 4, and you can see that our gross margin was 27% in the quarter. The one percentage point decline from the prior year reflects under-absorption of overhead in our grinding facilities as a result of low production levels. This also impacted our margin for the trailing 12-month period. When compared with sequential quarters our margin was also impacted by lower production volume as well as sales mix.

Slide 5 shows our quarterly and annual operating margin trends. Operating margin was near breakeven in the first quarter of 2014 down two percentage points from the prior year period. First quarter 2013 operating margin has been adjusted to add-back acquisition-related expenses. As with the gross margin our operating margin compared with the other periods presented has been impacted by sales volume, product mix and under-absorption. The first quarter of 2014 includes the results of the Forkardt businesses which we acquired in May of 2013.

On a year-over-year basis Forkardt added about $2 million of SG&A cost. This is net of acquisition-related expenses incurred in the first quarter of 2013. Excluding the additional SG&A cost attributed to Forkardt SG&A costs declined by $1 million or about 6% when compared to the first quarter of 2013. This was driven by active cost management around the world. Looking forward we expect that SG&A will be in the range of $20 million to $21 million per quarter as sales levels improved through 2014.

Slide 6 depicts a view similar to the operating margin trends we saw on Slide 5. Adjusted net loss for the quarter was $700,000 or $0.05 per share. Although our sales were slightly higher than 2013 low production levels at our grinding facilities and resulting under-absorption of our fixed overhead cost had a negative impact on earnings. Jurisdictional mix led to an effective tax rate that is not meaningful in both years’ first quarters. On a full year basis we expected tax rate in the mid teens.

Turning to Slide 7. Here we show managed working capital, inventory turns, and days sales outstanding, some of the key metrics that we monitor. As a percentage of sales our working capital averaged 41% over the trailing 12 months, inventory turns averaged two times during this same period. As we’ve indicated before the machine tool industry generally requires high levels of inventory to be responsive to our customer’s needs. As a result we typically maintained higher inventory levels in other industries. One of the way we try to differentiate ourselves from our competition is by our ability to deliver high quality products within our customer’s required timeframes, while continuing to generate cash flow through our productivity initiatives and working capital management processes.

We depicted the strength of our balance sheet on Slide 8. Our cash balance remains strong at over $32 million and we have less than $21 million of debt, leading to a net cash position of about $12 million. Our debt to total capitalization is less than 10%. Our shareholders’ equity improved modestly from the end of 2013 driven by our at-the-market equity sale program. During the quarter we sold 370,000 shares with net proceeds of about $5 million. These proceeds were used to reduce debt and will enable us to react quickly to strategic investment opportunities.

Since the inception of the program in mid 2013 through April of 2014 we’ve raised about $15 million in aggregate net proceeds from this sale of just over 1 million shares of Hardinge stock. Capital expenditures in the quarter were quite modest at $300,000, as projects typically start out slow in the beginning of the New Year. For the year we’re expecting capital expenditures to be in the range of $5 million to $6 million primarily for maintenance purposes.

This concludes my remarks. I’ll turn it back to you, Rick.

Rick Simons - Chairman, President and Chief Executive Officer

Thanks, Doug. Please turn to Slide 9 while I discuss the stats of our endmarkets and our order trends which are predictors of future sales. Order growth over the prior year’s quarter is driven by the addition of Forkardt this year representing about two-thirds of the growth as well as organic growth which contributed to remaining amount.

Excluding the year-on-year impact of the Forkardt acquisition we saw a modest organic growth in each of the three regions as (part of) global economic momentum continues to develop. I would like to reemphasize the solid results we’re seeing in Asia which seems to be contradictory to much of what you read in the media. I find a very sales (vying) and what we’ve all read about the growth concerns in China we’re experiencing solid growth occurring there and for our target customers meaning those in need of higher end machine.

We’re finding that the negative impact seems to be concentrated more in the markets requiring simpler, less sophisticated equipment where we do not participate. In Europe as I mentioned earlier field at economic activity has plateaued and is beginning to i.e. slow recovery. But demand for our higher end grinding and turning machines will lag that by a couple of quarters or more.

We saw improvement in activity at the end of last quarter and are still seeing it today but with a long order and build cycle orders need to come in very soon to impact revenues and profitability for the year. In the U.S. industry data through February showed orders fairly flat to the same month of last year but down by almost 20% sequentially from the fourth quarter. Specific activities driven by strong distribution network have done better than that trend with Hardinge product.

As you can see the overall sequential order trend is positive for the past two quarters with all regions experiencing growth compared with the third quarter of 2013. This trend as well as what we’re hearing from our customers gives us confidence and our expectations for the rest of 2014. From a macro-economic perspective Slide 11 shows a recently published spring 2014 Oxford Economics Machine Tool forecast. Consistent with what we’ve seen in past reports machine tool consumption is expected to grow from 2013 levels in all regions.

Asia continues to be the main driver of a worldwide annual growth rate of about 7% from 2013 to 2017 which was pulled back modestly from the 80% annual growth expected in their fall report. Unchanged is the expectation in nearly 70% of the Asian machine tool consumption will come from China. And our past investments and plan expansion in China as well as our large distribution structure will enable us to be responsive to the ramp-up and demand there.

Please turn to Slide 12 as I summarize our outlook and discuss some our long-term plans. We’re encouraged by this sequential growth in orders seen in the first quarter. However our low sales in the first quarter caused us to have expectations of full year 2014 sales slightly lower than those of 2013, a small downward adjustment to our previous outlook. A good share of our sales within a year based on orders booked in the same year and with our current order trends we believe this level of sales is attainable. We remain confident that the machine tool industry is growing and we have a positive outlook for the future. We’ve diversified our revenue base and despite a short term blip in the first quarter we’ve improved the long-term profitability model of our company.

As you might expect it’s a challenge to grow sales in this large global and fragment market but we believe we’ve been successful on building our basic customers, applications and repeat sales. And we remain dedicated to developing new innovative products to serve our customer’s ever-changing needs. As to earnings power I speak frequently about HIPEx which stands for Hardinge Incorporated Performance Excellence.

Putting us on this past to operational excellence is something I’m passionate about and I believe can be one of my most important contributions to Hardinge. This is our long-term Six Sigma-based initiative that we introduced about a year ago. We’re still learning the tool undertaking smaller projects to internalize them and make HIPEx part of our culture. We’re also developing metrics and establishing targets for process and cost improvements for 2015.

Our focus is on building a culture of problem solving productivity and continuous improvement that positively affects our operational metrics including margins and asset utilization. I’m confident it will take Hardinge to a higher level performance. We’re looking forward to the biennial machine tool show in Chicago in September. This international manufacturing technology show, IMTS running from the 8 through the 13 will give us an opportunity to do exhibit five new machine models in our display area of over 5,000 square feet to an anticipated audience of over 100,000 manufacturing professionals.

This show always generates additional orders for our industry and for Hardinge and we’re confident with our innovative product offerings along with several traditional models or boots with generated excitement and will be busy all week. If any of you are able to attend it’s a great opportunity to see our industry, to see the breadth and capabilities of our products and to see our position as one of the leaders in our industry.

With that Stacy we’d now like to open the call up for any questions.

Question-and-Answer Session

Operator

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Our first question comes from Les Sulewski with Sidoti & Company. Please proceed.

Les Sulewski - Sidoti & Company

Good morning guys. Thank you for taking my questions.

Rick Simons

Good morning, Les.

Doug Malone

Good morning, Les.

Les Sulewski - Sidoti & Company

So I just wanted to talk about your gross margin and kind of a two part question. First you mentioned the under-absorption in a European factory. Is this facility under-utilized and kind of how should we look at it from a gross margin point of view in the short term, was this a one-off event? And then the second part now with Forkardt incorporated into your sales and Forkardt being a stronger business in terms of gross margins. Shouldn’t have gross margins had a more impactful, a positive impact this quarter?

Rick Simons

Yes. Let me start with the second one and I’ll go back to the first one. But certainly Forkardt don’t have better gross margins in our traditional – overall business let me say they’re average business and that did have a positive impact. Of course it’s about what around $9 million in sales, so it doesn’t move the whole pie that much but it’s certainly is an important contributor. But it was more than offset by the fact that our factories, our grinding factories both in Europe and the one here in United States don’t have a strong backlog right now and are working on reduced schedules of short time in terms of hours worked in the shop.

That’s going to continue for a while. I’m encouraged by the orders being stronger especially over the last couple of months. We have seen better orders in March and I will share with you in April continuing that way. So I’m encouraged by that. But I think for the foreseeable future that still going to continue to have downward pressure on our margins for the next couple of quarters at least.

Les Sulewski - Sidoti & Company

Okay. That’s helpful. And perhaps maybe you could talk a bit more if you could about Usach. Is that fully integrated? Are you reaping some of the cost efficiencies now? And then essentially how is that laying out into Europe, do you think Europe should be picking up a little faster than it really – than it is at the moment?

Rick Simons

Yes, Usach we’re still very pleased with. I mean obviously we shipped a lot of products out of Usach last year over $26 million; it contributed to our overall sales for the full year last year. But realistically I mean it is a lumpier business, there are big orders, we do get some orders last year but not enough to keep the factory as busy. We’ve said publicly before the $26 million was somewhat of an aberration, we would consider that to be maybe a couple of years worth of normal sales.

In terms of that activity we have seen improved activity, we do have orders in the pipeline, we have booked some orders. In terms of internationally that’s going to take a little bit longer to develop, we knew that both in China and Europe as customers – it specialized equipment. So the order cycle itself takes longer and then working with customers for those specific products. So Usach is going to continue to develop internationally but right now it’s going to take sometime.

I think in terms of the synergies with Usach I mean certainly we have been working with using some of the resources here in Elmira to support them last year when they had a lot of sales to get out the door and also as they look at new projects considering some of the components being manufactured here that they might have outsourced in other places. And then, lastly having the engineering team from Usach here in the United States worked especially with the Kellenberger team and St. Gallen, Switzerland to look at components that they could use from the Swiss facility and some of the specialized equipment here. So, all of that activity is affecting quotes right now and is affecting our opportunity to win orders, but we still need to start getting more orders to get that operation really rocking and rolling.

Les Sulewski - Sidoti & Company

Thank you for that. Actually I probably should have started with this question first. But your European sales, how impacted already by the stronger Euro, is that even meaningful to you or at this point or not?

Rick Simons

No, not really. Our – most of our – actually we have two operations in Europe in terms of sales or production facilities the biggest being the ones in Switzerland and we’re operating in a Swiss Franc and then the other one being in the UK in the Pounds Sterling. So the Euro really doesn’t impact us a great deal.

Les Sulewski - Sidoti & Company

I see, okay. Thank you. I think that will do it for me. Actually I look forward to seeing you guys next week during your site visit. Thank you.

Doug Malone

Wonderful.

Rick Simons

Great. Look forward to seeing you up here.

Les Sulewski - Sidoti & Company

Thanks.

Rick Simons

Before we go on to other question just I’ll kind of elaborate on that a little bit. Next week well Les we’ll be talking about we’re having a open house here in Elmira for our customers and our distributors and we actually have a lot of vendors coming as well. We’ll have over 700 people visiting our facility in a two day period, Tuesday and Wednesday and those people are coming from all over the United States. We’ve got people coming from as far away as the West Coast and Midwest, Southwest, Southeast everywhere basically. And it’s an open house to show them not only the products we make here in Elmira but the products we make worldwide. Of that group it’s just a lot of great deals I mean 350 year or so customers that are specifically taken a day or two out of their time to come and visit us, so we’re really excited about that.

Operator

Thank you. Our next question comes from Brian Rafn with Morgan Dempsey Capital Management. Please proceed.

Brian Rafn - Morgan Dempsey Capital Management

Good morning guys.

Rick Simons

Hi, Brian.

Doug Malone

Good morning, Brian.

Brian Rafn - Morgan Dempsey Capital Management

Give me a sense now that you guys maybe continue to build out your portfolio. You’re looking Hardinge Kellenberger HCT, Bridgeport, Usach, Forkardt. In the past you guys used to kind of have these semi prebuilt machines, you talked about carrying more inventory. Talk about maybe into the brands, how much of – when you look at the type of work, how much of those brands would be large sophisticated CapEx machines with very much longer lead times versus how much of those brand businesses might be just broken the ship right off with maybe slight inputs from the standpoint of customization? And kind of maybe the differences between the brands?

Rick Simons

Okay. I mean certainly as you look at our overall sales and now we’re saying our sales are going to be slightly below last year. So say somewhere around $330 million that we had last year is slightly below that. I mean if you take out the repair parts and accessories part of the business which is about a third of that say then we have another $200 million plus left in machine sales. And of that I’d say it’s probably about 50:50 in terms of the part that is longer lead time project related special (rated) machines which account for maybe half of that and the other half of that would be almost what we would call book and build I mean we’re building machines to specs and to for anticipated demand for the other $100 million. So I just break it out that way.

Brian Rafn - Morgan Dempsey Capital Management

Okay. That’s a good – some good visibility. Within those brands do you guys and then again I go back to that where you had semi assembled machines. Do you deal that in all the brands or only in specific brands?

Rick Simons

Certainly, for some of this grinding equipment Usach and (indiscernible) and even some of the more what we would consider to be more traditional grinding of Kellenberger. Those almost always our built to order, I mean we’re starting machines until we have the customer order. And Jones & Shipman brand and some of the more basic Kellenberger brands we’re building to a forecast and we’re trying to have some on inventory.

When it gets into the milling and turning more predominantly built to forecast I mean we obviously are building to orders placed on us by our distributors who are then holding some inventory. But then also within those areas some meaningful projects that our distributors especially here in United States and actually Allison and China are developing a multi-machine orders where we’re making a bunch of machines in a system for specific parts. So it kind of – it’s a mix then. When we get down to specific brands it’s even harder for me to shoot from the (indiscernible).

Brian Rafn - Morgan Dempsey Capital Management

Yes, no, I think that’s good. Rick, you talked a little bit about it. But are you seeing a divergence between the high-end sophisticated precision machine tool and more of that kind of lower in maybe the Chinese, the commodity and then how are those two maybe tranches of business globally performing?

Rick Simons

Well we’re fortunate to be balanced. But and have the higher end machine, but it’s clearly in China and I would say this is true around the world. There has been depressed demand for machine tools, United States orders were down 9% this year, last year over 2012, China was down what 12%. And we believe most of that has been in the more simple machines especially in China we’ve heard numbers as much as 30% to 40%, some of the local builders were down last year and we certainly didn’t see that. And so the higher end machines in China are selling well.

Where we’re seeing a shortfall in higher end is about Europe, I mean Europe clearly the economy still is depressed although we’ve talked about recovery it’s from a very, very low level, much lower level than they were in 2008, if you look to their Oxford Economics graph. And so given they’ve been at low level, given you’re traditionally a buyer of high-end machines that is the area where we’re finding these higher end machines are suffering in the process, big part of the grinding sales have been there. So that’s hurting us most.

Brian Rafn - Morgan Dempsey Capital Management

Yes, okay. Can you talk a little bit about maybe endmarkets automotive, aerospace, agriculture, general machinery participation in oil and gas globally maybe?

Rick Simons

Yes, certainly as everyone is seeing and is good for the industry, but auto continues to be strong both auto production here and people throw phenomenal numbers about the potential auto purchases in China over the future. So auto still seems to be good as well as not only as the business is good but there seem to be a move to new models, there’s a lot of new several new models of cars that are going to come out with different powertrain. So that’s good for our industry. Aerospace continues I mean everything we all see about the backlog at Boeing and Airbus have in terms of planes on order as well as they talked about the aging planes around the world as well as the need to get more fuel efficient. So aerospace continues to be strong.

The construction side still that’s weak I think, it doesn’t affect us as dramatically as some of the other areas. But certainly in China the infrastructure spending over there has cut back. And the reason we haven’t been impacted as much as because we’re gaining, we sell some machines they get involved in valves and hydraulics for the big equipment but we don’t sell machines that really cut the parts for the John Deere, Caterpillar size products. I think general machinery is one it is down. I mean when you see machine tool demand down that kind of general machinery is obviously part of that.

And that part of the business is down and I would say again that’s kind of hit our grinding business maybe higher than some of our other businesses because there are a fair number of Kellenberger machines specifically that go into people making spindles for whether it’s machine tools or spindles for other types of things. And I think that impacted us on a general manufacturing side.

Brian Rafn - Morgan Dempsey Capital Management

Yes, okay. Anything in the job mark or the job shop area. Is it still demand maybe the level of demand and then give me your mix, your sense, is it productivity throughput driven or there’s anybody adding any capacity?

Rick Simons

I think the job ship business here in the United States I still think is very strong. I think that they have been reluctant to buy a (indiscernible) crazy with buying machines for capacity because I think as everyone is still trying to figure out what’s going on in Washington and nervous about the overall economy. I think that the unemployment number is still a drag on people’s attitudes. I don’t think that unemployment numbers mean a great deal of the manufacturing because manufacturing people are looking for people.

But still there’s still that kind of uncertainty I think in the overall economy. And so the job shops are in some cases making do with what they have as opposed to be in robust. But on the other I don’t want to say that they’re depressed fees. I mean United States market as I talk to others in our industry, other as talked to you directly with distributors we’re – met with them for two days last month. Right now there’s business out there, manufacturing is good. Robust I won’t say but it’s good.

Brian Rafn - Morgan Dempsey Capital Management

Okay. I’ll ask one more question and then get back in line. From a philosophical standpoint with the discussions about that you mentioned China being 70% to 80% from the Oxford Economics of demand. They have been from a political standpoint a little more aggressive from the standpoint of these issues with the Irelands, with Philippines, and Japan, we’ve seen this Renaissance with U.S. manufacturing and bringing more U.S. industrial manufacturing back to the U.S. whether the be lead time shipments, piracy. And what is your sense – China becomes a little more aggressive from a military standpoint. How does that impact the business relationship commercially? If the business guys that you talk to separate from maybe the governmental policy and what’s going on.

Rick Simons

Oh lastly you’re probably getting me into something, I’ll probably get myself in trouble but with – from a political perspective I find it is hard to believe that the Chinese government is going to do anything so aggressive as to disrupt their economic model. And so although there will be talk, I’d be very surprised I mean the impacts on their economy would be so dramatic that I’d be totally surprised if they got that aggressive. No question if they didn’t get that aggressive I think the whole world changes, I mean so much of the world would be, they are dependent on products coming from China or selling into China and if they ever did get aggressive that would be a huge impact. But I don’t see them doing. I think to your last point I think we all have to remember in China the government has a huge impact on commerce.

I think it has the most impact. I don’t think its fiscal policy. I don’t think its monetary policy. I think it has more to do with direction and if the government starts getting depressed I think business people get depressed, I think if the government is positive then business people get positive. And I will always say that it’s going to be a fun ride, a bumpy ride but a fun ride to participate in this growth in China because I think from time-to-time you’re going to see people pulling back and then moving forward very quickly in a short period of time.

What I love about Hardinge is I think we’re prepared for that. Our model over there is a nimble model. We’re able to work – we outsource a lot of the parts but we have a lot of suppliers that we can get parts from, we can take advantage of it when a business turns up and we can react quickly if they had – they come back down for a short period of time. Having said all of that I absolutely still believe in the long-term dynamics. There is business coming back in United States but its not huge amounts, it’s good for United States but China will still be the growth model for manufacturing long-term.

Brian Rafn - Morgan Dempsey Capital Management

Okay. Thanks.

Rick Simons

Okay. Thanks Brian.

Operator

(Operator Instructions) Gentlemen it doesn’t look like there were any further questions. I’d like to turn the floor back over to management for closing comments.

Rick Simons - Chairman, President and Chief Executive Officer

Okay. Before I close just a couple of things and then of course Brian some of his questions gotten me into some of this as well. But people asking what am I get excited about for Hardinge and I kind of my world, our world as managers both the short term world and the long-term world. In short term certainly the order trends I’m pleased with, we need more than the $80 million to feel good but on the other hand I feel pleased with the $80 million in the last three quarters have been a good trend there, I think it’s broad-based across the world which makes me feel good about that as well.

I’m really excited about some of the new products we have coming out that will primary be introduced around the IMTS show in September of which that show itself we always get excited about because it does generate new activity and new energy. But we’ve got some really good products coming out that I think can move the needle, one of them being a product that’s replacing an existing product that was (long in a tooth) and another one that’s kind of filling a whole in our product line and then three others, we’ve got five as I said products coming out in the IMTS. This show next week I think the HMTS our show a open house here next week having 700 people showing that they are interested in traveling to our little town up here in upstate New York. It’s pretty impressive. It shows that people care about Hardinge. It shows that we are a player and people know what they’re excited to hear what’s new with us.

I think then I go over long-term I mean I will talk about HIPEx continuously, you’re going to get tired of me talking about it perhaps, but it is what I’m passionate about. I do believe it’s going to be able to take a very, very good company and make us be a great company going forward. I think it gives us a way to solve problem and improve processes that will get some very, very good people, some tools that will help them to become even better. I talk with a open group of people about and hopefully being my legacy I mean after I retired in 10, 20 years later people look back and say what impacted – what big impacted Rick has on the company, it was about getting this HIPEx in a good state-of-the art the way best manufacturers solve problems.

I – certainly I’m excited about our acquisitions that we’ve done I mean the acquisitions are always not easy to integrate and so they always take some time usually unfortunately more time than you might have hoped for when it first happens, but usually what gets in the way as the economy changes. It’s not a matter of not being successful at it, but I’m excited about the Usach products, I’m excited about the Jones & Shipman products, I’m excited about Forkardt becoming a platform that we can continue to build on. So the acquisitions are exciting.

And then last and that kind of follows what Brian was finishing off on. Last but not least China, I mean we’re so well positioned in China with our production facility. We’re so well positioned in China with our sales organization and frankly so well positioned in China with our worldwide attitude about being able to participate in that great market of growth over there. So with that I want to thank you all for joining us today. We look forward to updating you in August for our second quarter 2014 results. And I wish you a good day.

Operator

This concludes today’s teleconference. You may disconnect.

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