Hurco Reports Third Quarter Results

Hurco Companies, Inc. Logo

INDIANAPOLIS, Sept. 6, 2013 (GLOBE NEWSWIRE) -- Hurco Companies, Inc., (Nasdaq:HURC) today reported net income of $854,000, or $0.13 per diluted share, for its third fiscal quarter ended July 31, 2013, compared to $3,957,000, or $0.61 per diluted share, for the corresponding period in fiscal 2012. For the first nine months of fiscal 2013, Hurco reported net income of $6,291,000, or $0.96 per diluted share, compared to $11,552,000, or $1.77 per diluted share, for the corresponding period in fiscal 2012.

Sales and service fees for the third quarter of fiscal 2013 totaled $45,158,000, a decrease of $4,801,000, or 10%, compared to the third quarter of fiscal 2012. This decrease was partially offset by approximately $0.7 million, due to the favorable impact of a higher Euro in 2013 when translating foreign sales to U.S. Dollars for financial reporting purposes. Sales and service fees for the nine months ended July 31, 2013 totaled $138,862,000, a decrease of $8,188,000, or 6%, compared to the corresponding period in 2012. The impact of foreign currency translation on the nine-month comparison was not material.

The following table sets forth net sales and service fees by geographic region for the third quarter and first nine months of fiscal 2013 and 2012, respectively (U.S. Dollars in thousands):

Three Months Ended Nine Months Ended
July 31, July 31,
% %
2013 2012 Change 2013 2012 Change
North America $ 14,730 $ 15,513 -5% $ 44,062 $ 42,835 3%
Europe 25,973 29,049 -11% 82,539 85,614 -4%
Asia Pacific 4,455 5,397 -17% 12,261 18,601 -34%
Total $ 45,158 $ 49,959 -10% $ 138,862 $147,050 -6%

Sales decreased across all regions during the third quarter of fiscal 2013, as compared to fiscal 2012, driven primarily by the weakened market conditions in Europe.

European sales for the third quarter of fiscal 2013 and nine months ended July 31, 2013 included $523,000 attributable to one month's of sales of the Company's new line of high-end electro-mechanical components and accessories. The Company acquired this Italian-based business in July 2013 and is operating it as LCM Precision Technologies (LCM). LCM supplies components and accessories for Hurco's own higher performance machine tools, as well as third parties.

The following table sets forth new orders booked by geographic region for the third quarter and first nine months of fiscal 2013 and 2012, respectively (U.S. Dollars in thousands):

Net Sales and Service Fees by Geographic Region
Three Months Ended Nine Months Ended
July 31, July 31,
% %
2013 2012 Change 2013 2012 Change
North America $ 14,427 $ 12,821 13% $ 42,076 $ 41,246 2%
Europe 28,267 27,829 2% 89,719 87,477 3%
Asia Pacific 3,440 5,695 -40% 14,212 17,597 -19%
Total $ 46,134 $ 46,345 0% $ 146,007 $ 146,320 0%

Orders for the third quarter of fiscal 2013 included $3,768,000 of LCM orders existing at the date of acquisition, along with new orders for LCM products subsequent to the acquisition in July.

Excluding the favorable impact of the LCM business, orders decreased by $3,979,000, or 9%, during the quarter when compared to the same quarter in fiscal 2012. Excluding LCM, orders decreased by 12% in Europe and 40% in Asia during the third quarter of 2013 as compared to the prior year period, reflecting the effects of the weakened market conditions in Europe and Asia. The impact of currency translation on orders was consistent with the impact on sales.

Gross profit for the third quarter of fiscal 2013 was $11,715,000, or 26% of sales, compared to $16,084,000, or 32% of sales, for the prior year period. The decrease was primarily due to lower sales and increased pricing pressure in Europe, which is the primary market for Hurco's larger, higher performance machines, as well as the adverse effect of leveraging fixed costs over lower sales. Gross profit for the first nine months of fiscal 2013 was $39,914,000, or 29% of sales, compared to 45,961,000, or 31% of sales, for the same period in 2012 due to the reasons stated above.

Selling, general and administrative expenses in the third quarter of fiscal 2013 were $10,012,000, a decrease of $260,000 from the prior year period primarily due to a reduction in incentive compensation. The third quarter expenses included approximately $602,000 related to LCM, of which $464,000 were one-time costs related to the acquisition of that company. Selling, general and administrative expenses for the first nine months of fiscal 2013 were $29,611,000 compared to $29,290,000 for the first nine months of fiscal 2012.

Cash and cash equivalents totaled $44,612,000 as of July 31, 2013, compared to $35,770,000 as of October 31, 2012, driven by year-to-date cash flow from operations totaling $13,444,000.

Michael Doar, Chairman, Chief Executive Officer, stated, "This quarter was challenging given the soft demand, particularly in Europe. However, our strong financial position affords us the opportunity to continually invest in technology that will benefit our customers. This quarter we completed the acquisition of LCM and I am confident the expertise of the LCM team that joined us in the acquisition will benefit Hurco and our customers in multiple ways. We have positioned Hurco as a leader in 5-axis technology during the last five years and the use of LCM components has been integral to our success. This acquisition increases our ability to efficiently develop new technologies that increase productivity for our customers. It will also enhance our ability to innovate efficiently, foster the expansion of LCM's sophisticated technologies, shorten our product development cycle, and add sophisticated technological components to complement our control and software platforms."

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

This news release contains 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, uncertainty concerning our ability to use tax loss carryforwards and governmental actions and initiatives including import and export restrictions and tariffs.

Hurco Companies, Inc.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per-share data)
Three Months Ended Nine Months Ended
July 31, July 31,
2013 2012 2013 2012
(unaudited) (unaudited)
Sales and service fees $ 45,158 $ 49,959 $ 138,862 $ 147,050
Cost of sales and service 33,443 33,875 98,948 101,089
Gross profit 11,715 16,084 39,914 45,961
Selling, general and administrative expenses 10,012 10,272 29,611 29,290
Operating income 1,703 5,812 10,303 16,671
Interest expense 74 43 194 105
Interest income 14 16 61 57
Investment income (expense) 4 3 19 5
Other (income) expense, net 530 190 861 69
Income before taxes 1,117 5,598 9,328 16,559
Provision for income taxes 263 1,641 3,037 5,007
Net income $ 854 $ 3,957 $ 6,291 $ 11,552
Income per common share
Basic $ 0.13 $ 0.61 $ 0.96 $ 1.78
Diluted $ 0.13 $ 0.61 $ 0.96 $ 1.77
Weighted average common shares outstanding
Basic 6,458 6,447 6,452 6,444
Diluted 6,507 6,465 6,495 6,470
OTHER CONSOLIDATED FINANCIAL DATA Three Months Ended Nine Months Ended
July 31, July 31,
Operating Data: 2013 2012 2013 2012
(unaudited) (unaudited)
Gross margin 26% 32% 29% 31%
SG&A expense as a percentage of sales 22% 21% 21% 20%
Operating income as a percentage of sales 4% 12% 7% 11%
Pre-tax income as a percentage of sales 2% 11% 7% 11%
Effective Tax Rate 24% 29% 33% 30%
Depreciation and amortization 791 955 2,506 3,195
Capital expenditures 608 1,293 1,897 2,603
Balance Sheet Data: 7/31/2012 10/31/2012
(unaudited)
Working capital (excluding cash) $ 81,330 $ 88,239
Days sales outstanding (unaudited) 51 38
Inventory turns (unaudited) 1.5 1.5
Capitalization
Total debt $ 5,737 $ 3,206
Shareholders' equity 148,411 143,793
Total $ 154,148 $ 146,999
Hurco Companies, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per-share data)
July 31, October 31,
2013 2012
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 44,612 $ 35,770
Accounts receivable, net 30,356 35,297
Refundable taxes 20 1,459
Inventories, net 96,161 91,320
Deferred income taxes 2,552 1,182
Derivative assets 284 708
Other 9,008 7,645
Total current assets 182,993 173,381
Property and equipment:
Land 782 782
Building 7,326 7,352
Machinery and equipment 18,922 17,411
Leasehold improvements 3,629 3,467
30,659 29,012
Less accumulated depreciation and amortization (18,209) (16,933)
12,450 12,079
Non-current assets:
Software development costs, less accumulated amortization 3,870 3,969
Intangible assets 4,298 595
Other assets 5,901 5,288
$ 209,512 $ 195,312
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 37,669 $ 29,788
Derivative liabilities 1,909 569
Accrued expenses 11,736 15,809
Short-term debt 5,737 3,206
Total current liabilities 57,051 49,372
Non-current liabilities:
Deferred income taxes 918 903
Accrued Tax Liability 1,080 --
Deferred credits and other obligations 2,052 1,244
Total liabilities 61,101 51,519
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; 6,533,510 and 6,502,928 shares issued; and 6,465,054 and 6,447,210 shares outstanding, as of July 31, 2013 and October 31, 2012, respectively 647 645
Additional paid-in capital 54,468 53,415
Retained earnings 96,554 90,586
Accumulated other comprehensive loss (3,258) (853)
Total shareholders' equity 148,411 143,793
$ 209,512 $ 195,312

CONTACT: John G. Oblazney Vice President & Chief Financial Officer 317-293-5309

Source:Hurco Companies, Inc.