Hurco Reports First Quarter Results for Fiscal 2019

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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.

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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 DATAThree 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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