×

Hurco Reports Fiscal 2017 Second Quarter Results

INDIANAPOLIS, June 02, 2017 (GLOBE NEWSWIRE) -- Hurco Companies, Inc. (Nasdaq:HURC) today reported results for the second fiscal quarter ended April 30, 2017. Hurco recorded net income of $3,646,000, or $0.54 per diluted share, for the second quarter of fiscal 2017, compared to net income of $3,674,000, or $0.56 per diluted share, for the corresponding period in fiscal 2016. For the first six months of fiscal 2017, Hurco reported net income of $4,525,000, or $0.67 per diluted share, compared to $7,569,000, or $1.14 per diluted share, for the corresponding period in fiscal 2016.

Sales and service fees for the second quarter of fiscal 2017 were $58,222,000, an increase of $6,193,000, or 12%, compared to the corresponding period in fiscal 2016, and included a negative currency impact of $1,648,000, or 3%, when translating foreign sales to U.S. dollars for financial reporting purposes. Sales and service fees for the first six months of fiscal 2017 were $106,966,000, a decrease of $1,566,000, or 1%, compared to the corresponding period in fiscal 2016, and included a negative currency impact of $3,128,000, or 3%, when translating foreign sales to U.S. dollars for financial reporting purposes.

The following table sets forth net sales and service fees by geographic region for the second quarter and first six months of fiscal 2017 and 2016 (in thousands):

Three Months Ended Six Months Ended
April 30, April 30,
$% $%
2017 2016ChangeChange 2017 2016ChangeChange
Americas$18,050$14,933$3,117 21% $34,759$33,874$885 3%
Europe 31,572 32,006 (434) -1% 57,144 61,011 (3,867) -6%
Asia Pacific 8,600 5,090 3,510 69% 15,063 13,647 1,416 10%
Total$58,222$52,029$6,193 12% $106,966$108,532$(1,566) -1%

Sales in the Americas for the second quarter and first six months of fiscal 2017 increased by 21% and 3%, respectively, compared to the corresponding periods in fiscal 2016, due primarily to increased sales of Hurco, Milltronics and Takumi machines in the U.S. The increase in sales was primarily attributable to an increased sales volume of vertical milling machines from all product lines.

European sales for the second quarter of fiscal 2017 decreased by 1%, compared to the corresponding period in fiscal 2016, and included a negative currency impact of 5%, when translating foreign sales to U.S. dollars for financial reporting purposes. Excluding the negative impact of currency, the year-over-year increase in European sales for the second quarter was driven primarily by increased sales of Hurco and Takumi machines in the United Kingdom, France and Germany. European sales for the first six months of fiscal 2017 decreased by 6%, compared to the corresponding period in fiscal 2016, and included a negative currency impact of 5%, when translating foreign sales to U.S. dollars for financial reporting purposes. The year-over-year decrease in European sales for the first six months was driven primarily by decreased shipments of higher-performance Hurco machines in Germany, France and Italy during the first quarter of fiscal 2017.

Asian Pacific sales for the second quarter and first six months of fiscal 2017 increased by 69% and 10%, respectively, compared to the corresponding periods in fiscal 2016, primarily due to increased sales of Hurco and Takumi machines in China.

Orders for the second quarter of fiscal 2017 were $63,364,000, an increase of $10,144,000, or 19%, compared to the corresponding period in fiscal 2016, and included a negative currency impact of $2,047,000, or 4%, when translating foreign orders to U.S. dollars. Orders for the first six months of fiscal 2017 were $124,384,000, an increase of $19,874,000, or 19%, compared to the corresponding period in fiscal 2016, and included a negative currency impact of $3,996,000, or 4%, when translating foreign orders to U.S. dollars.

The following table sets forth new orders booked by geographic region for the second quarter and first six months of fiscal 2017 and 2016 (in thousands):

Three Months Ended Six Months Ended
April 30, April 30,
$% $%
2017 2016ChangeChange 2017 2016ChangeChange
Americas$18,474$12,106$6,368 53% $38,816$28,969$9,84734%
Europe 32,571 33,290 (719) -2% 64,920 61,908 3,0125%
Asia Pacific 12,319 7,824 4,495 57% 20,648 13,633 7,01551%
Total$63,364$53,220$10,144 19% $124,384$104,510$19,87419%

Orders in the Americas for the second quarter and first six months of fiscal 2017 increased by 53% and 34%, respectively, compared to the corresponding periods in fiscal 2016, due primarily to increased demand for Hurco, Milltronics and Takumi vertical milling machines in the U.S.

European orders for the second quarter of fiscal 2017 decreased by 2%, compared to the corresponding prior year period, and included a negative currency impact of 6%, when translating foreign orders to U.S. dollars. Excluding the negative impact of currency, the year-over-year increase in European orders for the second quarter was driven primarily by increased demand for Hurco machines in Italy and France. For the first six months of fiscal 2017, European orders increased by 5%, compared to the corresponding prior year period, and included a negative currency impact of 7%, when translating foreign orders to U.S. dollars. The year-over-year increase in European orders in the first six months was primarily due to increased customer demand for Hurco and Takumi machines in the United Kingdom and Germany.

Asian Pacific orders for the second quarter and first six months of fiscal 2017 increased by 57% and 51%, respectively, compared to the corresponding prior year periods. The year-over-year increases in orders were driven primarily by increased demand for Hurco and Takumi machines in all Asian Pacific countries, with the largest increase coming from China.

Michael Doar, Chief Executive Officer, stated, “For the first time in our company’s 49-year history, order levels have exceeded $60 million for three consecutive quarters. This trend combined with the order growth we are experiencing quarter over quarter and year over year, is encouraging for our company’s future. Both orders and sales in the Americas and Asia Pacific regions have shown good improvement this year and the European region continues to be a strong contributor despite the negative impact of currency translation. Hurco is performing well in this dynamic and competitive global market, which means we are serving our customers well by delivering CNC machine technology that makes their businesses more profitable.”

Gross profit for the second quarter of fiscal 2017 was $17,068,000, or 29% of sales, compared to $16,610,000, or 32% of sales, for the corresponding prior year period. For the first six months of fiscal 2017, gross profit was $29,654,000, or 28% of sales, compared to $34,308,000, or 32% of sales, for the corresponding prior year period. The year-over-year decreases in gross profit as a percentage of sales for the second quarter and first six months reflected the negative impact of foreign currency translation compared to the corresponding prior year periods and a sales mix comprised of more entry-level machines, such as those under the Milltronics and Takumi brands, in price competitive geographic regions, such as the Americas and Asia Pacific. The decrease in gross profit year to date was the biggest driver in the year-over-year reduction in earnings per share.

Selling, general and administrative expenses for the second quarter of fiscal 2017 were $11,714,000, or 20% of sales, compared to $11,943,000, or 23% of sales, in the corresponding period in fiscal 2016. For the first six months of fiscal 2017, selling, general and administrative expenses were $22,881,000, or 21% of sales, compared to $23,904,000, or 22% of sales, in the corresponding period in fiscal 2016. The year-over-year reduction in selling, general and administrative expenses for the second quarter and first six months of fiscal 2017 included favorable currency impacts of $287,000 and $553,000, respectively, when translating foreign expenses to U.S. dollars for financial reporting purposes.

The effective tax rates for the second quarter and first six months of fiscal 2017 were 29% and 31%, respectively, compared to 25% and 28% in the corresponding prior year periods. The changes in the effective tax rates year-over-year were due to changes in the geographic mix of income and loss among tax jurisdictions.

Cash and cash equivalents totaled $60,614,000 at April 30, 2017, compared to $41,217,000 at October 31, 2016. Working capital was $166,943,000 at April 30, 2017 compared to $160,413,000 at October 31, 2016. The increase in working capital was primarily due to the increase in cash and cash equivalents, partially offset by a reduction in accounts receivable.

Hurco Companies, Inc. is an international, industrial technology company that sells its three brands of computer numeric control (CNC) machine tools to the worldwide metal cutting and metal forming industry. Two of the Company’s brands of machine tools, Hurco and Milltronics, are equipped with interactive controls that include software that is proprietary to each respective brand. The Company designs these controls and develops the software. The third brand of CNC machine tools, Takumi, is equipped with industrial controls that are produced by third parties, which allows the customer to decide the type of control added to the Takumi CNC machine tool. The end markets for the Company's products are independent job shops, short-run manufacturing operations within large corporations, and manufacturers with production-oriented operations. The Company’s customers manufacture precision parts, tools, dies, and/or molds for 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, the U.S. and China, and sells its products through direct and indirect sales forces throughout the Americas, Europe, and Asia. The Company has sales, application engineering support and service subsidiaries in China, England, France, Germany, India, Italy, Poland, Singapore, South Africa, the U.S., and Taiwan. Web Site: www.hurco.com

Certain statements in this news release are forward-looking statements that 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, breaches of our network and system security measures, 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
(Dollars in thousands, except per share data)
Three Months Ended
April 30,
Six Months Ended
April 30,
2017 2016 2017 2016
(unaudited) (unaudited)
Sales and service fees$58,222 $52,029 $106,966 $108,532
Cost of sales and service 41,154 35,419 77,312 74,224
Gross profit 17,068 16,610 29,654 34,308
Selling, general and administrative expenses 11,714 11,943 22,881 23,904
Operating income 5,354 4,667 6,773 10,404
Interest expense 24 25 45 49
Interest income 7 7 18 22
Investment income 16 4 80 106
Other (income) expense, net 240 (246) 291 (20)
Income before taxes 5,113 4,899 6,535 10,503
Provision for income taxes 1,467 1,225 2,010 2,934
Net income$3,646 $3,674 $4,525 $7,569
Income per common share
Basic$0.55 $0.56 $0.68 $1.15
Diluted$0.54 $0.56 $0.67 $1.14
Weighted average common shares outstanding
Basic 6,617 6,570 6,600 6,564
Diluted 6,671 6,641 6,664 6,630
OTHER CONSOLIDATED FINANCIAL DATAThree Months Ended
April 30,
Six Months Ended
April 30,
Operating Data: 2017 2016 2017 2016
(unaudited) (unaudited)
Gross margin 29% 32% 28% 32%
SG&A expense as a percentage of sales 20% 23% 21% 22%
Operating income as a percentage of sales 9% 9% 6% 10%
Pre-tax income as a percentage of sales 9% 9% 6% 10%
Effective tax rate 29% 25% 31% 28%
Depreciation and amortization 823 972 1,782 1,934
Capital expenditures 825 1,137 2,105 2,267
Balance Sheet Data:4/30/2017 10/31/2016
(unaudited) (audited)
Working capital$166,943 $160,413
Days sales outstanding (unaudited) 46 52
Inventory turns (unaudited) 1.3 1.4
Capitalization
Total debt$1,451 $1,476
Shareholders' equity 192,134 185,475
Total$193,585 $186,951

Hurco Companies, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
April 30, October 31,
2017 2016
ASSETS(unaudited) (audited)
Current assets:
Cash and cash equivalents$60,614 $41,217
Accounts receivable, net 35,831 48,631
Inventories, net 118,853 117,025
Derivative assets 1,227 1,725
Prepaid expenses 8,519 8,207
Other 2,056 1,576
Total current assets 227,100 218,381
Property and equipment:
Land 841 841
Building 7,352 7,352
Machinery and equipment 24,731 23,515
Leasehold improvements 3,590 3,487
36,514 35,195
Less accumulated depreciation and amortization (24,375) (22,898)
Total property and equipment 12,139 12,297
Non-current assets:
Software development costs, less accumulated amortization 5,520 4,926
Goodwill 2,298 2,314
Intangible assets, net 1,087 1,150
Deferred income taxes 6,146 6,138
Investments and other assets, net 7,079 6,743
Total non-current assets 22,130 21,271
Total assets$261,369 $251,949
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable$43,957 $37,200
Derivative liabilities 517 538
Accrued expenses 14,232 18,754
Short-term debt 1,451 1,476
Total current liabilities 60,157 57,968
Non-current liabilities:
Deferred income taxes 4,492 4,294
Accrued tax liability 1,178 963
Deferred credits and other obligations 3,408 3,249
Total non-current liabilities 9,078 8,506
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;
6,782,006 and 6,720,453 shares issued and 6,624,197 and 6,573,103 shares outstanding,
as of April 30, 2017 and October 31, 2016, respectively 663 657
Additional paid-in capital 60,028 59,119
Retained earnings 140,014 136,742
Accumulated other comprehensive loss (8,571) (11,043)
Total shareholders' equity 192,134 185,475
Total liabilities and shareholders' equity$261,369 $251,949


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

Source:Hurco Companies, Inc.