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CST: 21/11/2019 07:02:43   

Hurco Reports Third Quarter Results for Fiscal 2019

75 Days ago

INDIANAPOLIS, Sept. 06, 2019 (GLOBE NEWSWIRE) -- Hurco Companies, Inc. (Nasdaq Global Select Market: HURC) today reported results for the third fiscal quarter ended July 31, 2019. Hurco recorded net income of $3,491,000, or $0.51 per diluted share, for the third quarter of fiscal 2019 compared to net income of $6,500,000, or $0.95 per diluted share, for the corresponding period in fiscal 2018. For the nine months of fiscal 2019, Hurco reported net income of $15,397,000, or $2.24 per diluted share, compared to $13,188,000, or $1.93 per diluted share, for the corresponding period in fiscal 2018.

Sales and service fees for the third quarter of fiscal 2019 were $58,501,000, a decrease of $20,251,000, or 26%, compared to the corresponding prior year period and included an unfavorable currency impact of $1,870,000, or 2%, when translating foreign sales to U.S. dollars for financial reporting purposes. Sales and service fees for the nine months of fiscal 2019 were $203,388,000, a decrease of $14,232,000, or 7%, compared to the corresponding period in fiscal 2018, and included an unfavorable currency impact of $7,270,000, 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 third quarter and nine months ended July 31, 2019 and 2018 (dollars in thousands):

  Three Months Ended   Nine Months Ended
  July 31,   July 31,
    2019     2018   $
Change
%
Change
    2019     2018   $
Change
%
Change
Americas $ 21,044   $ 19,478   $ 1,566   8 %   $ 74,030   $ 62,161   $ 11,869   19 %
Europe   30,363     44,146     (13,783 ) (31 %)     104,178     120,710     (16,532 ) (14 %)
Asia Pacific   7,094     15,128     (8,034 ) (53 %)     25,180     34,749     (9,569 ) (28 %)
Total $ 58,501   $ 78,752   $ (20,251 ) (26 %)   $ 203,388   $ 217,620   $ (14,232 ) (7 %)

Sales in the Americas for the third quarter and nine months of fiscal 2019 increased by 8% and 19%, respectively, compared to the corresponding periods in fiscal 2018. The increases in sales for the third quarter and nine 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, Milltronics and Takumi vertical milling machines in the U.S.

European sales for the third quarter and nine months of fiscal 2019 decreased by 31% and 14%, respectively, compared to the corresponding period in fiscal 2018. Sales for the third quarter and nine months of fiscal 2019 included an unfavorable currency impact of 4% and 5%, respectively, when translating foreign sales to U.S. dollars for financial reporting purposes. The decreases in European sales for the third quarter and nine months of fiscal 2019 were primarily attributable to a reduced volume of shipments of Hurco vertical milling machines in Germany and the United Kingdom.

Asian Pacific sales for the third quarter and nine months of fiscal 2019 decreased by 53% and 28%, respectively, compared to the corresponding periods in fiscal 2018. The decrease in Asian Pacific sales for each of the third quarter and nine 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 3%, respectively, when translating foreign sales to U.S. dollars for financial reporting purposes.

Orders for the third quarter of fiscal 2019 were $52,982,000, a decrease of $23,009,000, or 30%, compared to the corresponding period in fiscal 2018, and included an unfavorable currency impact of $1,820,000, or 2%, when translating foreign orders to U.S. dollars. Orders for the nine months of fiscal 2019 were $188,196,000, a decrease of $44,626,000, or 19%, compared to the corresponding period in fiscal 2018, and included an unfavorable currency impact of $7,192,000, or 3%, when translating foreign orders to U.S. dollars.

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

  Three Months Ended   Nine Months Ended
  July 31,   July 31,
    2019     2018   $
Change
%
Change
    2019     2018   $
Change
%
Change
Americas $ 19,749   $ 21,522   $ (1,773 ) (8 %)   $ 64,747   $ 62,905   $ 1,842   3 %
Europe   27,035     44,635     (17,600 ) (39 %)     97,185     134,945     (37,760 ) (28 %)
Asia Pacific   6,198     9,834     (3,636 ) (37 %)     26,264     34,972     (8,708 ) (25 %)
Total $ 52,982   $ 75,991   $ (23,009 ) (30 %)   $ 188,196   $ 232,822   $ (44,626 ) (19 %)

Michael Doar, Chief Executive Officer, stated, "The global market for machine tools is seeing the impact of uncertainty related to trade negotiations. Whether impacted directly or indirectly, machine tool suppliers, builders, distributors and customers are all faced with an element of pricing pressure and uncertainty that ultimately impacts the consumption of machine tools. We have successfully survived cycles in demand many times during our fifty-year history and understand the importance of staying focused on the future by continuing to invest in R&D to develop new technologies for our machine tools that can help make our customers more productive and more profitable. This month we will showcase three product lines (Hurco, Milltronics and Takumi) at EMO (Hanover, Germany) and Westec (California, USA), which are two key markets in our industry. I am confident in our ability to stay focused on the future by investing in the development of new technologies, expanding our geographic footprint, and acquiring innovative products while exercising financial discipline that will position us to grow our business for the future.”

Orders in the Americas for the third quarter of fiscal 2019 decreased by 8%, compared to the corresponding period in fiscal 2018, due primarily to decreased customer demand in the U.S. for Hurco vertical milling machines, partially offset by an increase in orders for Takumi vertical milling machines and vertical milling machines sold by the newly acquired distributor in California. Orders in the Americas for the nine months of fiscal 2019 increased by 3% due to increased customer demand for Takumi vertical milling machines and vertical milling machines sold by the newly acquired distributor.

European orders for the third quarter and nine months of fiscal 2019 decreased by 39% and 28%, respectively, compared to the corresponding prior year periods, and included an unfavorable currency impact of 4% 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 vertical milling machines in Germany, the United Kingdom and France, as well as a decrease in customer demand for electro-mechanical components and accessories manufactured by our wholly owned subsidiary in Italy, LCM Precision Technology S.r.l.

Asian Pacific orders for the third quarter of fiscal 2019 decreased by 37%, compared to the corresponding prior year period and included an unfavorable currency impact of 2% when translating foreign orders to U.S. dollars. The decrease in orders for the third quarter of fiscal 2019 was mainly the result of decreased customer demand for Hurco vertical milling machines in India and Southeast Asia and Takumi bridge mill machines in China. Asian Pacific orders for the nine months 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 primarily due to decreased customer demand for Hurco and Takumi machines in China and India.

Gross profit for the third quarter of fiscal 2019 was $17,189,000, or 29% of sales, compared to $24,521,000, or 31% of sales, for the corresponding prior year period. Gross profit for the nine months of fiscal 2019 was $60,968,000, or 30% of sales, compared to $63,955,000, or 29% of sales, for the corresponding prior year period. The gross profit for the third quarter and nine months of fiscal 2019 remained generally stable at approximately 30%, despite the reduction in sales volume year over year, due to 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 third quarter of fiscal 2019 were $12,592,000, or 22% of sales, compared to $15,160,000, or 19% of sales, in the corresponding period in fiscal 2018, and included a favorable currency impact of $278,000 when translating foreign expenses to U.S. dollars for financial reporting purposes. Selling, general and administrative expenses for the nine months of fiscal 2019 were $40,617,000, or 20% of sales, compared to $41,446,000, or 19% of sales, in the prior year period and included a favorable currency impact of $1,236,000 when translating foreign expenses to U.S. dollars for financial reporting purposes. The decrease in year-over-year selling, general and administrative expenses in each period was primarily related to decreased variable employee compensation and other operating expense reductions implemented during the year, partially offset by increased operating expenses associated with the newly acquired distributor.

The effective tax rate for the third quarter of fiscal 2019 was 25%, compared to 28% in the corresponding prior year period. The year-over-year decrease in the effective tax rate for the third quarter was primarily due to a shift in taxable income and loss among the various geographic regions. The effective tax rate for the nine months of fiscal 2019 was 28%, compared to 40% in the corresponding prior year period. The year-over-year decrease in the effective tax rate for the nine 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 $66,103,000 at July 31, 2019, compared to $77,170,000 at October 31, 2018. Working capital was $206,667,000 at July 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, 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
July 31,
  Nine Months Ended
July 31,
    2019       2018       2019       2018  
                               
  (unaudited)   (unaudited)
Sales and service fees $ 58,501     $ 78,752     $ 203,388     $ 217,620  
Cost of sales and service   41,312       54,231       142,420       153,665  
               
Gross profit   17,189       24,521       60,968       63,955  
Selling, general and administrative expenses   12,592       15,160       40,617       41,446  
               
Operating income   4,597       9,361       20,351       22,509  
               
Interest expense   18       29       44       74  
Interest income   169       78       350       108  
Investment income (loss)   (25 )     58       346       180  
Other income (expense), net   (77 )     (457 )     483       (868 )
Income before taxes   4,646       9,011       21,486       21,855  
Provision for income taxes   1,155       2,511       6,089       8,667  
Net income $ 3,491     $ 6,500     $ 15,397     $ 13,188  
Income per common share              
Basic $ 0.51     $ 0.96     $ 2.26     $ 1.95  
Diluted $ 0.51     $ 0.95     $ 2.24     $ 1.93  
Weighted average common shares outstanding              
Basic   6,767       6,717       6,756       6,694  
Diluted   6,813       6,788       6,815       6,774  
               
Dividends per share $ 0.12     $ 0.11     $ 0.35     $ 0.32  
               
               
OTHER CONSOLIDATED FINANCIAL DATA Three Months Ended
July 31,
  Nine Months Ended
July 31,
Operating Data:   2019       2018       2019       2018  
                               
  (unaudited)   (unaudited)
Gross margin   29 %     31 %     30 %     29 %
SG&A expense as a percentage of sales   22 %     19 %     20 %     19 %
Operating income as a percentage of sales   8 %     12 %     10 %     10 %
Pre-tax income as a percentage of sales   8 %     11 %     11 %     10 %
Effective tax rate   25 %     28 %     28 %     40 %
Depreciation and amortization $ 916     $ 937     $ 2,761     $ 2,848  
Capital expenditures $ 1,783     $ 1,678     $ 4,033     $ 4,574  
               
Balance Sheet Data: 7/31/2019   10/31/2018        
Working capital $ 206,667     $ 194,632          
Days sales outstanding (unaudited)   55       47          
Inventory turns (unaudited)   1.4       1.6          
Capitalization              
Total debt $ -     $ 1,434          
Shareholders' equity   235,957       222,853          
Total $ 235,957     $ 224,287          


Hurco Companies, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
  July 31,   October 31,
    2019       2018  
ASSETS (unaudited)   (audited)
Current assets:      
Cash and cash equivalents $ 66,103     $ 77,170  
Accounts receivable, net   38,088       54,414  
Inventories, net   153,700       137,609  
Derivative assets   1,956       3,085  
Prepaid expenses   8,535       7,332  
Other   2,395       1,825  
Total current assets   270,777   -   281,435  
       
Investment income (loss)      
Land   868       868  
Building   7,352       7,352  
Machinery and equipment   27,993       26,840  
Leasehold improvements   4,629       3,801  
    40,842   -   38,861  
Less accumulated depreciation and amortization   (27,314 )     (25,902 )
Total property and equipment   13,528       12,959  
       
Non-current assets:      
Software development costs, less accumulated amortization   8,129       7,452  
Goodwill   2,332       2,377  
Intangible assets, net   845       938  
Deferred income taxes   1,983       2,234  
Investments and other assets, net   8,295       8,012  
Total non-current assets   21,584       21,013  
Total assets $ 305,889     $ 315,407  
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
       
Current liabilities:      
Accounts payable $ 45,183     $ 57,518  
Derivative liabilities   663       2,020  
Accrued payroll and employee benefits   9,882       14,032  
Accrued income taxes   1,888       5,180  
Accrued expenses and other   4,404       4,122  
Accrued warranty   2,090       2,497  
Short-term debt   -       1,434  
Total current liabilities   64,110       86,803  
Non-current liabilities:      
Accrued tax liability   1,914       2,194  
Deferred credits and other obligations   3,908       3,557  
Total non-current liabilities   5,822       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 July 31, 2019 and October 31, 2018, respectively   677       672  
Additional paid-in capital   65,778       64,185  
Retained earnings   180,873       167,859  
Accumulated other comprehensive loss   (11,371 )     (9,863 )
Total shareholders' equity   235,957       222,853  
Total liabilities and shareholders' equity $ 305,889     $ 315,407  

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