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CST: 23/07/2019 15:43:08   

Hurco Reports First Quarter Results for Fiscal 2019

137 Days ago

INDIANAPOLIS, March 08, 2019 (GLOBE NEWSWIRE) -- Hurco Companies, Inc. (Nasdaq Global Select Market: HURC) today reported results for the first fiscal quarter ended January 31, 2019. Hurco recorded net income of $6,654,000, or $0.97 per diluted share, for the first quarter of fiscal 2019 compared to net income of $2,937,000, or $0.43 per diluted share, for the corresponding period in fiscal 2018.

Sales and service fees for the first quarter of fiscal 2019 were $74,213,000, an increase of $5,769,000, or 8%, compared to the corresponding prior year period and included an unfavorable currency impact of $2,484,000, 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 first quarter ended January 31, 2019 and 2018 (dollars in thousands):

    Three Months Ended
    January 31,
      2019   2018   $ Change   % Change  
  Americas $   29,156 $   21,030 $   8,126   39 %
  Europe   35,711   38,318   (2,607 ) (7 %)
  Asia Pacific   9,346   9,096   250   3 %
   Total $   74,213 $   68,444 $    5,769   8 %

Sales in the Americas for the first quarter of fiscal 2019 increased by 39%, compared to the corresponding period in fiscal 2018, and reflected improved U.S. market conditions and demand from U.S. customers for vertical milling machines.

European sales for the first quarter of fiscal 2019 decreased by 7%, compared to the corresponding period in fiscal 2018. The decrease in European sales for the first quarter of fiscal 2019 was primarily attributable to an unfavorable currency impact of 5%, when translating foreign sales to U.S. dollars for financial reporting purposes, and decreased shipments of Hurco vertical milling machines in Italy and France.

Asian Pacific sales for the first quarter of fiscal 2019 increased by 3%, compared to the corresponding period in fiscal 2018, and included an unfavorable currency impact of 6%, when translating foreign sales to U.S. dollars for financial reporting purposes.  The increase in Asian Pacific sales for the first quarter of 2019 was primarily attributable to increased shipments of Hurco vertical milling machines in India and China, partially offset by decreased shipments of Takumi bridge mills in China. 

Orders for the first quarter of fiscal 2019 were $68,007,000, a decrease of $8,900,000, or 12%, compared to the corresponding period in fiscal 2018, and included an unfavorable currency impact of $2,759,000, or 4%, when translating foreign orders to U.S. dollars.

The following table sets forth new orders booked by geographic region for the first quarter ended January 31, 2019 and 2018 (dollars in thousands):

    Three Months Ended
    January 31,
      2019   2018   $ Change   % Change  
  Americas $   24,730 $   20,514 $  4,216   21 %
  Europe   33,310   44,226   (10,916 ) (25 %)
  Asia Pacific   9,967   12,167   (2,200 ) (18 %)
  Total $   68,007 $   76,907 $  (8,900 ) (12 %)

Michael Doar, Chief Executive Officer, stated, "As we begin to see a shift in global demand, I remain confident that we are ready for new opportunities and have the agility to adjust operationally as needed to meet the needs of our customers no matter where they are located around the world.  Our global presence allows us to participate in all markets as they change with continuous commitment to long-term growth and profitability.  We remain focused on our strategic investments in new technologies, targeted product expansion, and quality of service to provide our customers with the most efficient machine tools equipped with sophisticated technologies that help to make their manufacturing businesses more profitable."

Orders in the Americas for the first quarter of fiscal 2019 increased by 21%, compared to the corresponding period in fiscal 2018.  This increase was primarily attributable to increased customer demand in the U.S. for vertical milling machines.

European orders for the first quarter of fiscal 2019 decreased by 25%, compared to the corresponding prior year period, and included an unfavorable currency impact of 4% when translating foreign orders to U.S. dollars. The year-over-year decrease in orders was driven primarily by decreased customer demand for Hurco and Takumi vertical milling machines in Germany, as well as 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 first quarter of fiscal 2019 decreased by 18%, compared to the corresponding prior year period, and included an unfavorable currency impact of 8% when translating foreign orders to U.S. dollars.  The year-over-year decrease in orders was mainly the result of decreased customer demand for Hurco and Takumi machines in China, partially offset by increased customer demand for Hurco machines in Southeast Asia.  

Gross profit for the first quarter of fiscal 2019 was $22,142,000, or 30% of sales, compared to $20,121,000, or 29% of sales, for the corresponding prior year period.  The year-over-year increase in gross profit as a percentage of sales reflected the increased volume of sales of vertical milling machines.

Selling, general and administrative expenses for the first quarter of fiscal 2019 were $13,914,000, or 19% of sales, compared to $12,966,000, or 19% of sales, in the corresponding period in fiscal 2018, and included a favorable currency impact of $455,000 when translating foreign expenses to U.S. dollars for financial reporting purposes.

The effective tax rate for the first quarter of fiscal 2019 was 27%, compared to 61% in the corresponding prior year period. The decrease in the effective tax rate for the first quarter of fiscal 2019 compared to the corresponding prior year period was primarily due to a one-time provisional adjustment related to the Tax Cuts and Jobs Act (the “Tax Reform Act”) that was enacted in the first quarter of fiscal 2018. The Tax Reform Act, among other things, lowered the U.S. corporate tax rate from 35% to 21% effective January 1, 2018, implemented a territorial tax system and imposed a tax on the deemed repatriated earnings of foreign subsidiaries.  As a result of the changes in tax law, a one-time non-cash tax charge of $394,000 related to the revaluation of deferred tax assets and liabilities was recorded in the first quarter of fiscal 2018. In addition, a one-time charge of $2,500,000 related to the transition tax on deemed repatriation of accumulated foreign income was recorded in the first quarter of fiscal 2018. The impact of these charges increased the effective tax rate by approximately 39% for the first quarter of fiscal 2018.

Cash and cash equivalents totaled $69,758,000 at January 31, 2019, compared to $77,170,000 at October 31, 2018. Working capital was $201,095,000 at January 31, 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, 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, governmental actions and initiatives, including import and export restrictions and tariffs, 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
(Dollars in thousands, except per-share data)
       
  Three Months Ended
January 31,
 
    2019       2018  
               
  (unaudited)
Sales and service fees $ 74,213     $ 68,444  
Cost of sales and service   52,071       48,323  
Gross profit   22,142       20,121  
Selling, general and administrative expenses   13,914       12,966  
Operating income   8,228       7,155  
Interest expense   12       20  
Interest income   82       18  
Investment income   242       116  
Other income (expense), net   567       168  
Income before taxes   9,107       7,437  
Provision for income taxes   2,453       4,500  
Net income $ 6,654     $ 2,937  
Income per common share      
Basic $ 0.98     $ 0.44  
Diluted $ 0.97     $ 0.43  
Weighted average common shares outstanding      
Basic   6,735       6,659  
Diluted   6,807       6,745  
       
Dividends per share $ 0.11     $ 0.10  
       
       
OTHER CONSOLIDATED FINANCIAL DATA Three Months Ended
January 31,
 
Operating Data:   2019       2018  
               
  (unaudited)
Gross margin   30 %     29 %
SG&A expense as a percentage of sales   19 %     19 %
Operating income as a percentage of sales   11 %     10 %
Pre-tax income as a percentage of sales   12 %     11 %
Effective tax rate   27 %     61 %
Depreciation and amortization   939       888  
Capital expenditures   1,243       1,480  
       
Balance Sheet Data: 1/31/19   10/31/18
Working capital $ 201,095     $ 194,632  
Days sales outstanding (unaudited)   56       47  
Inventory turns (unaudited)   1.5       1.6  
Capitalization      
Total debt $ -     $ 1,434  
Shareholders' equity   230,021       222,853  
Total $ 230,021     $ 224,287  
       



       
Hurco Companies, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
  January 31,   October 31,
    2019       2018  
ASSETS      
       
Current assets:      
Cash and cash equivalents $ 69,758     $ 77,170  
Accounts receivable, net   53,045       54,414  
Inventories, net   146,715       137,609  
Derivative assets   1,092       3,085  
Prepaid expenses   8,418       7,332  
Other   2,183       1,825  
Total current assets   281,211       281,435  
       
Property and equipment:      
Land   868       868  
Building   7,352       7,352  
Machinery and equipment   27,722       26,840  
Leasehold improvements   4,011       3,801  
    39,953       38,861  
Less accumulated depreciation and amortization   (26,762 )     (25,902 )
Total property and equipment   13,191       12,959  
       
Non-current assets:      
Software development costs, less accumulated amortization   7,641       7,452  
Goodwill   2,403       2,377  
Intangible assets, net   916       938  
Deferred income taxes   2,326       2,234  
Investments and other assets, net   8,388       8,012  
Total non-current assets   21,674       21,013  
Total assets $ 316,076     $ 315,407  
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
       
Current liabilities:      
Accounts payable $ 55,244     $ 57,518  
Derivative liabilities   1,241       2,020  
Accrued payroll and employee benefits   8,515       14,032  
Accrued income taxes   7,587       5,180  
Accrued expenses   4,909       4,122  
Accrued warranty   2,620       2,497  
Short-term debt   -       1,434  
Total current liabilities   80,116       86,803  
       
Non-current liabilities:      
Deferred income taxes   3       -  
Accrued tax liability   2,212       2,194  
Deferred credits and other obligations   3,724       3,557  
Total non-current liabilities   5,939       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;      
6,955,895 and 6,891,508 shares issued; and 6,758,123 and 6,723,160 shares outstanding,      
as of January 31, 2019 and October 31, 2018, respectively   676       672  
Additional paid-in capital   64,391       64,185  
Retained earnings   173,766       167,859  
Accumulated other comprehensive loss   (8,812 )     (9,863 )
Total shareholders' equity   230,021       222,853  
Total liabilities and shareholders' equity $ 316,076     $ 315,407  
       

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