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Hurco Reports Third Quarter Results

INDIANAPOLIS, Sept. 5, 2014 (GLOBE NEWSWIRE) -- Hurco Companies, Inc. (Nasdaq:HURC) today reported net income of $4,375,000, or $0.66 per diluted share, for its third fiscal quarter ended July 31, 2014, compared to $854,000, or $0.13 per diluted share, for the corresponding period in fiscal 2013. For the first nine months of fiscal 2014, Hurco reported net income of $10,280,000, or $1.56 per diluted share, compared to $6,291,000, or $0.96 per diluted share, for the corresponding period in fiscal 2013.

Sales and service fees for the third quarter of fiscal 2014 totaled $55,379,000, an increase of $10,221,000, or 23%, compared to the third quarter of fiscal 2013. Sales and service fees for the nine months ended July 31, 2014, totaled $160,080,000, an increase of $21,218,000, or 15%, compared to the corresponding period in fiscal 2013. The year-over-year increases in sales and service fees for the third quarter and the first nine months of fiscal 2014 benefitted from favorable currency impacts of approximately $1,655,000 and $3,956,000, respectively, when translating foreign sales to U.S. Dollars for financial reporting purposes.

The following table sets forth sales and service fees by geographic region for the third quarter and the first nine months of fiscal 2014 and 2013, respectively (in thousands):

Three Months Ended Nine Months Ended
July 31, July 31,
$ % $ %
2014 2013 Change Change 2014 2013 Change Change
North America $13,643 $14,730 ($1,087) -7% $42,223 $44,062 ($1,839) -4%
Europe 36,627 25,973 10,654 41% 100,898 82,539 18,359 22%
Asia Pacific 5,109 4,455 654 15% 16,959 12,261 4,698 38%
Total $55,379 $45,158 $10,221 23% $160,080 $138,862 $21,218 15%

Sales and service fees in Europe and the Asia Pacific region increased during the third quarter of fiscal 2014 by 41% and 15%, respectively, compared to the corresponding prior year period. The overall improvement in sales for these regions was driven by increased shipments and a favorable mix of higher-performance machines. European sales and service fees for the third quarter and the first nine months of fiscal 2014 included $2,616,000 and $6,419,000, respectively, of sales from electro-mechanical components and accessories manufactured by Hurco's Italian-based subsidiary, LCM Precision Technologies (LCM), compared to $523,000, representing one month's sales in each of those periods in fiscal 2013. Hurco acquired the LCM machine tool component business on July 1, 2013. The increase in European sales and service fees for the third quarter and the first nine months of fiscal 2014 benefitted from favorable currency impacts of approximately $1,735,000 and $4,249,000, respectively, due primarily to a stronger Euro and Pound Sterling when translating foreign sales to U.S. Dollars for financial reporting purposes.

Sales and service fees in North America decreased during the third quarter of fiscal 2014 by 7% compared to the corresponding prior year period. During the first nine months of fiscal 2014, sales in North America have experienced some market softening in comparison to the record level sales achieved during fiscal 2013. In general, the softening of sales in North America is not unusual in the months prior to the International Manufacturing Technology Show which is held in September of even-numbered years.

Orders for the third quarter of fiscal 2014 were $56,378,000, an increase of $10,244,000, or 22%, over the corresponding period in fiscal 2013. European orders for the third quarter of fiscal 2014 included $1,258,000 of LCM products compared to $3,768,000 in the third quarter of fiscal 2013. LCM orders for the third quarter of fiscal 2013 included backlog orders existing at the date of acquisition and one month of new orders booked subsequent to the acquisition. Orders for the first nine months of fiscal 2014 were $167,152,000, an increase of $21,145,000, or 14%, over the corresponding period in fiscal 2013 and included $7,285,000 of orders for LCM products. The increase in European orders for the third quarter and the first nine months of fiscal 2014 were primarily driven by increased orders in Germany and England. The year-over-year improvement in Asian Pacific orders for the third quarter and nine month periods included the benefit of multiple machine orders and a favorable mix of higher-performance machines. The impact of currency translation on orders booked in the third quarter and the first nine months of fiscal 2014 was consistent with the impact on sales in those periods.

The following table sets forth new orders booked by geographic region for the third quarter and the first nine months of fiscal 2014 and 2013, respectively:

Three Months Ended Nine Months Ended
July 31, July 31,
$ % $ %
2014 2013 Change Change 2014 2013 Change Change
North America $14,039 $14,427 ($388) -3% $40,040 $42,076 ($2,036) -5%
Europe 36,368 28,267 8,101 29% 110,698 89,719 20,979 23%
Asia Pacific 5,971 3,440 2,531 74% 16,414 14,212 2,202 15%
Total $56,378 $46,134 $10,244 22% $167,152 $146,007 $21,145 14%

Hurco's gross profit for the third quarter of fiscal 2014 was $18,012,000, or 33% of sales, compared to $11,715,000, or 26% of sales, for the corresponding period in fiscal 2013. Gross profit for the first nine months of fiscal 2014 was $48,560,000, or 30% of sales, compared to $39,914,000, or 29% of sales, for the corresponding prior year period. The increases in gross profit were attributable to a higher sales volume, particularly in Europe, the primary market for higher-performance machines, and the increased cost efficiencies realized from higher production levels during fiscal 2014.

Selling, general and administrative expenses for the third quarter of fiscal 2014 were $11,869,000, or 21% of sales, compared to $10,012,000, or 22% of sales, in the corresponding period in fiscal 2013. Selling, general and administrative expenses for the first nine months of fiscal 2014 were $33,675,000, or 21% of sales, compared to $29,611,000, or 21% of sales, for the corresponding prior year period. The year-over-year increases in selling, general and administrative expenses were primarily due to incremental operating expenses associated with the acquisition of the LCM business and increased incentive compensation expense.

The effective tax rate for the third quarter of fiscal 2014 was 28%, compared to 24% for the corresponding prior year period. The effective tax rate for the first nine months of fiscal 2014 was 29%, compared to 33% for the corresponding prior year period. The changes in effective tax rates in the year-over-year comparisons reflected the shift in geographic mix of income or loss among tax jurisdictions.

Cash and cash equivalents totaled $51,345,000 at July 31, 2014, compared to $42,804,000 at October 31, 2013.

Michael Doar, Chief Executive Officer, stated, "I am extremely pleased that Europe has performed so well this quarter, with marked increases in both sales and orders. Europe continues to be an extremely important market for Hurco due to the fact that it accounts for a large percentage of our high-performance machines. We are gaining traction in Asia as we continue to identify companies with more complex manufacturing needs, which is important since these companies can realize the greatest benefit from our control technologies. While activity in North America was somewhat softer than in the corresponding periods in 2013, I am confident our new machines, next generation control and new software technologies will generate excitement at the upcoming International Manufacturing Technology Show as customers seek to increase their productivity and profitability."

Hurco Companies, Inc. is an industrial technology company that designs and produces interactive computer controls, software and computerized machine tools and machine tool components for the worldwide metal cutting and metal forming industry. The end market for the Company's products consists primarily of independent job shops and short-run manufacturing operations within large corporations in industries such as aerospace, defense, medical equipment, energy, transportation and computer equipment. The Company is based in Indianapolis, Indiana, with manufacturing operations in Taiwan, Italy, and China, and sells its products through direct and indirect sales forces throughout North America, Europe, and Asia. The Company has sales, application engineering support and service subsidiaries in China, England, France, Germany, India, Italy, Poland, Singapore, South Africa and the United States of America. Web Site: www.hurco.com

Certain statements in this news release are forward-looking statements which involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors include, among others, the cyclical nature of the machine tool industry, changes in general economic and business conditions that affect demand for our products, the risks of our international operations, changes in manufacturing markets, innovations by competitors, the ability to protect our intellectual property, fluctuations in foreign currency exchange rates, increases in prices of raw materials, quality and delivery performance by our vendors, our ability to effectively integrate acquisitions, negative or unforeseen tax consequences and governmental actions and initiatives including import and export restrictions and tariffs.

Hurco Companies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per-share data)
Three Months Ended Nine Months Ended
July 31, July 31,
2014 2013 2014 2013
(unaudited) (unaudited)
Sales and service fees $ 55,379 $ 45,158 $ 160,080 $ 138,862
Cost of sales and service 37,367 33,443 111,520 98,948
Gross profit 18,012 11,715 48,560 39,914
Selling, general and administrative expenses 11,869 10,012 33,675 29,611
Operating income 6,143 1,703 14,885 10,303
Interest expense 65 74 196 194
Interest income 23 14 55 61
Investment income (expense) 4 4 40 19
Other (income) expense, net 46 530 331 861
Income before income taxes 6,059 1,117 14,453 9,328
Provision for income taxes 1,684 263 4,173 3,037
Net income $ 4,375 $ 854 $ 10,280 $ 6,291
Income per common share
Basic $ 0.67 $ 0.13 $ 1.57 $ 0.96
Diluted $ 0.66 $ 0.13 $ 1.56 $ 0.96
Weighted average common shares outstanding
Basic 6,505 6,458 6,493 6,452
Diluted 6,548 6,507 6,529 6,495
OTHER CONSOLIDATED FINANCIAL DATA Three Months Ended Nine Months Ended
July 31, July 31,
Operating Data: 2014 2013 2014 2013
(unaudited) (unaudited)
Gross margin 33% 26% 30% 29%
SG&A expense as a percentage of sales 21% 22% 21% 21%
Operating income as a percentage of sales 11% 4% 9% 7%
Pre-tax income as a percentage of sales 11% 2% 9% 7%
Effective tax rate 28% 24% 29% 33%
Depreciation and amortization 808 791 2,359 2,506
Capital expenditures 761 608 2,135 1,897
Balance Sheet Data: 7/31/2014 10/31/2013
(unaudited)
Working capital (excluding cash) $ 88,300 $ 86,512
Days sales outstanding (unaudited) 48 45
Inventory turns (unaudited) 1.5 1.4
Capitalization
Total debt $ 3,239 $ 3,665
Shareholders' equity 161,252 151,491
Total $ 164,491 $ 155,156
Hurco Companies, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per-share data)
July 31, October 31,
2014 2013
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 51,345 $ 42,804
Accounts receivable, net 37,620 36,145
Inventories, net 99,338 95,260
Deferred income taxes 2,096 2,080
Derivative assets 1,189 699
Prepaid expenses 8,691 6,584
Other 1,479 1,430
Total current assets 201,758 185,002
Property and equipment:
Land 782 782
Building 7,314 7,326
Machinery and equipment 19,787 19,059
Leasehold improvements 3,594 3,634
31,477 30,801
Less accumulated depreciation and amortization (19,490) (18,502)
11,987 12,299
Non-current assets:
Software development costs, less accumulated amortization 3,625 3,714
Goodwill 2,771 2,807
Intangible assets, net 1,811 2,155
Other assets 5,746 5,258
$ 227,698 $ 211,235
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 41,819 $ 35,527
Derivative liabilities 668 1,212
Accrued expenses 16,387 15,282
Short-term debt 3,239 3,665
Total current liabilities 62,113 55,686
Non-current liabilities:
Deferred income taxes 804 743
Accrued tax liability 1,127 1,103
Deferred credits and other obligations 2,402 2,212
Total liabilities 66,446 59,744
Shareholders' equity:
Preferred stock: no par value per share; 1,000,000 shares authorized; no shares issued -- --
Common stock: no par value; $.10 stated value per share; 12,500,000 shares authorized; 6,585,918 and 6,533,510 shares issued; and 6,504,880 and 6,465,054 shares outstanding, as of July 31, 2014 and October 31, 2013, respectively 651 647
Additional paid-in capital 55,651 54,698
Retained earnings 107,174 98,130
Accumulated other comprehensive loss (2,224) (1,984)
Total shareholders' equity 161,252 151,491
$ 227,698 $ 211,235

CONTACT: Sonja K. McClelland Vice President, Secretary, Treasurer & Chief Financial Officer 317-293-5309

Source:Hurco Companies, Inc.