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CST: 17/06/2019 20:11:40   

Hurco Reports Second Quarter Results for Fiscal 2019

10 Days ago

INDIANAPOLIS, June 07, 2019 (GLOBE NEWSWIRE) -- Hurco Companies, Inc. (Nasdaq Global Select Market: HURC) today reported results for the second fiscal quarter ended April 30, 2019. Hurco recorded net income of $5,252,000, or $0.76 per diluted share, for the second quarter of fiscal 2019 compared to net income of $3,751,000, or $0.55 per diluted share, for the corresponding period in fiscal 2018. For the first six months of fiscal 2019, Hurco reported net income of $11,906,000, or $1.73 per diluted share, compared to $6,688,000, or $0.98 per diluted share, for the corresponding period in fiscal 2018.

Sales and service fees for the second quarter of fiscal 2019 were $70,674,000, an increase of $250,000, or less than 1%, compared to the corresponding prior year period and included an unfavorable currency impact of $3,026,000, or 4%, when translating foreign sales to U.S. dollars for financial reporting purposes.  Sales and service fees for the first six months of fiscal 2019 were $144,887,000, an increase of $6,019,000, or 4%, compared to the corresponding period in fiscal 2018, and included an unfavorable currency impact of $5,707,000, or 4%, 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 six months ended April 30, 2019 and 2018 (dollars in thousands):

  Three Months Ended   Six Months Ended
  April 30,   April 30,
   
2019
 
2018
$
Change
%
Change
   
2019
 
2018
$
Change
%
Change
Americas $ 23,830 $ 21,653 $ 2,177   10 %   $ 52,986 $ 42,683 $ 10,303   24 %
Europe   38,103   38,246   (143 ) (0 %)     73,815   76,564   (2,749 ) (4 %)
Asia Pacific   8,741   10,525   (1,784 ) (17 %)     18,086   19,621   (1,535 ) (8 %)
Total $ 70,674 $ 70,424 $  250   0 %   $ 144,887 $ 138,868 $ 6,019   4 %

Sales in the Americas for the second quarter and first six months of fiscal 2019 increased by 10% and 24%, respectively, compared to the corresponding periods in fiscal 2018.  The increases in sales for the second quarter and first six months of fiscal 2019 were primarily attributable to sales of vertical milling machines from a U.S. machine tool distributor acquired by Hurco in the fourth quarter of fiscal 2018 located in California, one of the largest machine tool markets in the U.S., and increased customer demand for Hurco and Takumi vertical milling machines in the U.S.

European sales for the second quarter of fiscal 2019 were relatively unchanged compared to the corresponding period in fiscal 2018, and included an unfavorable currency impact of 7%, when translating foreign sales to U.S. dollars for financial reporting purposes, which was largely offset by increased sales of Hurco vertical milling machines in Germany.  The 4% decrease in European sales for the first six months of fiscal 2019 was primarily attributable to an unfavorable currency impact of 6%, when translating foreign sales to U.S. dollars for financial reporting purposes.

Asian Pacific sales for the second quarter and first six months of fiscal 2019 decreased by 17% and 8%, respectively, compared to the corresponding periods in fiscal 2018. The decrease in Asian Pacific sales for each of the second quarter and first six months of fiscal 2019 was primarily attributable to decreased shipments of Hurco vertical milling machines and Takumi bridge mill machines in China and an unfavorable currency impact of 2% and 5%, respectively, when translating foreign sales to U.S. dollars for financial reporting purposes.

Orders for the second quarter of fiscal 2019 were $67,207,000, a decrease of $12,717,000, or 16%, compared to the corresponding period in fiscal 2018, and included an unfavorable currency impact of $2,550,000, or 3%, when translating foreign orders to U.S. dollars. Orders for the first six months of fiscal 2019 were $135,214,000, a decrease of $21,617,000, or 14%, compared to the corresponding period in fiscal 2018, and included an unfavorable currency impact of $5,166,000, or 3%, when translating foreign orders to U.S. dollars.

The following table sets forth new orders booked by geographic region for the second quarter and six months ended April 30, 2019 and 2018 (dollars in thousands):

  Three Months Ended   Six Months Ended
  April 30,   April 30,
   
2019
 
2018
$
Change
%
Change
   
2019
 
2018
$
Change
%
Change
Americas $ 20,268 $ 20,869 $   (601 ) (3 %)   $ 44,998 $ 41,383 $   3,615   9 %
Europe   36,840   46,084   (9,244 ) (20 %)     70,150   90,310   (20,160 ) (22 %)
Asia Pacific   10,099   12,971    (2,872 ) (22 %)     20,066   25,138   (5,072 ) (20 %)
Total $ 67,207 $ 79,924 $ (12,717 ) (16 %)   $ 135,214 $ 156,831 $ (21,617 ) (14 %)

Michael Doar, Chief Executive Officer, stated, "Even though we are seeing some hesitation in customer demand in the European and Asia Pacific regions, the U.S. market has remained relatively stable.  During times like these, I realize how fortunate Hurco is to have multiple brands to reach a more diverse group of customers, a strong balance sheet, and an agile corporate structure that can quickly adjust as needed.  We know the machine tool business is cyclical and fluctuates from time to time, but we are able to manage our business with a long-term outlook and continue to advance the products and technologies we provide our customers around the world. While we are disciplined at managing costs, we know that investing in the future can preserve sustainable profitability.”

Orders in the Americas for the second quarter of fiscal 2019 decreased by 3%, compared to the corresponding period in fiscal 2018, due primarily to decreased customer demand in the U.S. for vertical milling machines, partially offset by an increase in orders for vertical milling machines by the newly acquired distributor.  Orders in the Americas for the first six months of fiscal 2019 increased by 9% and included orders for vertical milling machines by the newly acquired distributor, as well as increased customer demand for Hurco vertical milling machines in the U.S.

European orders for the second quarter and first six months of fiscal 2019 decreased by 20% and 22%, respectively, compared to the corresponding prior year periods, and included an unfavorable currency impact of 5% in each period when translating foreign orders to U.S. dollars. The year-over-year decreases in orders were driven primarily by decreased customer demand for Hurco and Takumi vertical milling machines, as well as, for the six month period, a decrease in customer demand for electro-mechanical components and accessories manufactured by our wholly-owned subsidiary, LCM Precision Technology S.r.l.    

Asian Pacific orders for the second quarter and first six months of fiscal 2019 decreased by 22% and 20%, respectively, compared to the corresponding prior year periods. The year-over-year decrease in orders for each period included an unfavorable currency impact of 2% and 4%, respectively, when translating foreign orders to U.S. dollars.  The year-over-year decreases in orders were mainly the result of decreased customer demand for Hurco and Takumi machines in China.  

Gross profit for the second quarter of fiscal 2019 was $21,637,000, or 31% of sales, compared to $19,313,000, or 27% of sales, for the corresponding prior year period.  Gross profit for the first six months of fiscal 2019 was $43,779,000, or 30% of sales, compared to $39,434,000, or 28% of sales, for the corresponding prior year period.  The year-over-year increases in gross profit as a percentage of sales reflected an increased mix of larger, higher-priced vertical milling machine sales and margin contribution from vertical milling machine sales from the newly acquired distributor.

Selling, general and administrative expenses for the second quarter of fiscal 2019 were $14,111,000, or 20% of sales, compared to $13,320,000, or 19% of sales, in the corresponding period in fiscal 2018, and included a favorable currency impact of $503,000 when translating foreign expenses to U.S. dollars for financial reporting purposes. Selling, general and administrative expenses for the first six months of fiscal 2019 were $28,025,000, or 19% of sales, compared to $26,286,000, or 19% of sales, in the prior year period and included a favorable currency impact of $958,000 when translating foreign expenses to U.S. dollars for financial reporting purposes.  The increase in year-over-year selling, general and administrative expenses in each period was primarily related to increased salaries and benefits, increased sales and marketing expenses and operating expenses associated with the newly acquired distributor.

The effective tax rate for the second quarter of fiscal 2019 was 32%, compared to 31% in the corresponding prior year period. The year-over-year increase in the effective tax rate for the second quarter was primarily due to a shift in taxable income and loss among the various geographic regions.  The effective tax rate for the first six months of fiscal 2019 was 29%, compared to 48% in the corresponding prior year period.  The year-over-year decrease in the effective tax rate for the first six months was primarily due to one-time charges of $2.9 million related to the U.S. Tax Cuts and Jobs Act of 2017 recorded in the first quarter of fiscal 2018. The impact of these one-time charges increased the effective tax rate by approximately 39% for the first quarter of fiscal 2018. 

Cash and cash equivalents totaled $70,180,000 at April 30, 2019, compared to $77,170,000 at October 31, 2018.  Working capital was $205,130,000 at April 30, 2019, compared to $194,632,000 at October 31, 2018.  The increase in working capital was primarily due to an increase in inventories and decreases in accounts payable and accrued payroll and employee benefits.

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, governmental actions and initiatives, including import and export restrictions and tariffs, 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 other risks and uncertainties discussed more fully under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended October 31, 2018, and in our subsequent filings with the Securities and Exchange Commission. We expressly disclaim any obligation to update or revise any forward–looking statements, whether as a result of new information, future events or otherwise.

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

 

Hurco Companies, Inc.  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  
(In thousands, except per share data)  
                 
  Three Months Ended
April 30,
  Six Months Ended  
April 30,
 
     
    2019       2018       2019       2018    
   (unaudited)     (unaudited)   
Sales and service fees $   70,674     $   70,424     $   144,887     $   138,868    
Cost of sales and service     49,037         51,111         101,108         99,434    
                 
Gross profit     21,637         19,313         43,779         39,434    
Selling, general and administrative expenses     14,111         13,320         28,025         26,286    
                 
Operating income     7,526         5,993         15,754         13,148    
                 
Interest expense     14         25         26         45    
Interest income     99         12         181         30    
Investment income     129         6         371         122    
Other income (expense), net     (7 )       (579 )       560         (411 )  
Income before taxes     7,733         5,407         16,840         12,844    
Provision for income taxes     2,481         1,656         4,934         6,156    
Net income $   5,252     $   3,751     $   11,906     $   6,688    
Income per common share                
Basic $   0.77     $   0.55     $   1.75     $   0.99    
Diluted $   0.76     $   0.55     $   1.73     $   0.98    
Weighted average common shares outstanding                
Basic     6,764         6,706         6,750         6,682    
Diluted     6,824         6,784         6,816         6,763    
                 
Dividends per share $   0.12     $   0.11     $   0.23     $   0.21    
                 
                 
OTHER CONSOLIDATED FINANCIAL DATA Three Months Ended
April 30,
  Six Months Ended  
April 30,
 
     
Operating Data:   2019       2018       2019       2018    
   (unaudited)     (unaudited)   
Gross margin   31 %     27 %     30 %     28 %  
SG&A expense as a percentage of sales   20 %     19 %     19 %     19 %  
Operating income as a percentage of sales   11 %     9 %     11 %     9 %  
Pre-tax income as a percentage of sales    11 %     8 %     12 %     9 %  
Effective tax rate   32 %     31 %     29 %     48 %  
Depreciation and amortization $   906     $   1,023     $   1,845     $   1,911    
Capital expenditures $   1,007     $   1,416     $   2,250     $   2,896    
                 
Balance Sheet Data: 4/30/2019   10/31/2018          
Working capital $   205,130     $   194,632            
Days sales outstanding (unaudited)     50         47            
Inventory turns (unaudited)     1.5         1.6            
Capitalization                
Total debt $   -      $   1,434            
Shareholders' equity     234,034         222,853            
Total $   234,034     $   224,287            
                 


       
Hurco Companies, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
  April 30,   October 31,
    2019       2018  
ASSETS  (unaudited)     (audited) 
Current assets:      
Cash and cash equivalents $   70,180     $   77,170  
Accounts receivable, net     44,255         54,414  
Inventories, net     148,688         137,609  
Derivative assets     1,514         3,085  
Prepaid expenses     8,839         7,332  
Other     2,197         1,825  
Total current assets     275,673         281,435  
Property and equipment:      
Land     868         868  
Building     7,352         7,352  
Machinery and equipment     27,943         26,840  
Leasehold improvements     4,028         3,801  
      40,191         38,861  
Less accumulated depreciation and amortization     (27,219 )       (25,902 )
Total property and equipment     12,972         12,959  
Non-current assets:      
  Software development costs, less accumulated amortization     7,904         7,452  
  Goodwill     2,358         2,377  
  Intangible assets, net     881         938  
  Deferred income taxes     2,190         2,234  
  Investments and other assets, net     8,498         8,012  
Total non-current assets     21,831         21,013  
Total assets $   310,476     $   315,407  
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities:      
Accounts payable $   50,109     $   57,518  
Derivative liabilities     961         2,020  
Accrued payroll and employee benefits     10,102         14,032  
Accrued income taxes     2,440         5,180  
Accrued expenses     4,586         4,122  
Accrued warranty     2,345         2,497  
Short-term debt     -         1,434  
Total current liabilities     70,543         86,803  
Non-current liabilities:      
Accrued tax liability     2,058         2,194  
Deferred credits and other obligations     3,841         3,557  
Total non-current liabilities     5,899         5,751  
       
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;      
6,967,719 and 6,891,508 shares issued and 6,767,237 and 6,723,160 shares outstanding,      
as of April 30, 2019 and October 31, 2018, respectively     677         672  
Additional paid-in capital     65,114         64,185  
Retained earnings     178,200         167,859  
Accumulated other comprehensive loss     (9,957 )       (9,863 )
Total shareholders' equity     234,034         222,853  
Total liabilities and shareholders' equity $   310,476     $   315,407  
       

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