Hurco Reports Third Quarter Results

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

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