INDIANAPOLIS, Sept. 9, 2015 (GLOBE NEWSWIRE) — Hurco Companies, Inc. (Nasdaq:HURC) today reported results for the third fiscal quarter and the first nine months ended July 31, 2015. Hurco recorded net income of $3,683,000, or $0.55 per diluted share, for the third quarter of fiscal 2015 compared to net income of $4,375,000, or $0.66 per diluted share, for the corresponding period in fiscal 2014. For the first nine months of fiscal 2015, Hurco reported net income of $11,410,000, or $1.72 per diluted share, compared to $10,280,000, or $1.56 per diluted share, for the corresponding period in fiscal 2014.

Sales and service fees for the third quarter of fiscal 2015 were $52,535,000, a decrease of $2,844,000, or 5%, compared to the corresponding period in fiscal 2014. This year-over-year decrease in sales reflected growth of $3,348,000, or 6%, and a negative impact of $6,192,000, or 11%, when translating foreign sales to U.S. Dollars for financial reporting purposes. Sales and service fees for the first nine months of fiscal 2015 were $153,690,000, a decrease of $6,390,000, or 4%, compared to the corresponding period in fiscal 2014. Despite year-over-year growth of $9,673,000, or 6%, the year-over-year decrease in sales and service fees included the negative impact of $16,063,000, or 10%, 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 first nine months of fiscal 2015 and 2014 (in thousands):

  Three Months Ended Nine Months Ended
  July 31, July 31,
      $ %     $ %
  2015 2014 Change Change 2015 2014 Change Change
North America $16,238 $13,643 $2,595 19% $44,824 $42,223 $2,601 6%
Europe 31,486 36,627 (5,141) -14% 95,399 100,898 (5,499) -5%
Asia Pacific 4,811 5,109 (298) -6% 13,467 16,959 (3,492) -21%
Total $52,535 $55,379  $ (2,844) -5% $153,690 $160,080  $ (6,390) -4%

North American sales increased during the third quarter and first nine months of fiscal 2015 by 19% and 6%, respectively, compared to the corresponding periods in fiscal 2014. The increases in sales year-over-year were primarily due to increased shipments of higher-performance machines.  North American sales for the third quarter and first nine months of fiscal 2015 included $930,000 attributable to sales of machine tools manufactured by the recently acquired business of Milltronics Manufacturing Company. Hurco acquired the assets of this business in July 2015 and is operating it through its newly-formed subsidiary, Milltronics USA, Inc. Milltronics manufactures and sells knee mills, tool room bed mills, vertical machining centers, combination lathes, slant-bed lathes, and horizontal machining centers.

European sales for the third quarter of fiscal 2015 decreased by 14% compared to the corresponding period in fiscal 2014 and included sales growth of 2%, offset by the adverse impact of a weaker Euro and Pound Sterling when translating foreign sales to U.S. Dollars for financial reporting purposes. European sales for the first nine months of fiscal 2015 decreased by 5% despite sales growth of 10% compared to the corresponding prior year period, primarily reflecting the adverse impact of a weaker Euro and Pound Sterling when translating foreign sales to U.S. Dollars for financial reporting purposes. The year-over-year improvements in European sales were driven by increased shipments of higher-performance machines in Germany, France and Italy.

Asian Pacific sales for the third quarter and first nine months of fiscal 2015 decreased by 6% and 21%, respectively, compared to the corresponding periods in fiscal 2014, primarily due to a softer market in India and China. Asian Pacific sales for the third quarter and first nine months of fiscal 2015 included $73,000 attributable to sales of machine tools designed and manufactured by the recently acquired business Takumi Machinery Co., Ltd. Hurco acquired certain assets of this Taiwan-based business in July 2015 and is operating it through its subsidiary, Hurco Manufacturing Limited.  Takumi designs and manufactures CNC vertical machining centers, double column machining centers, high speed bridge machines and other machine tools equipped with industrial controls.

Orders for the third quarter and the first nine months of fiscal 2015 included $14,336,000 of Milltronics and Takumi orders existing at the respective date of acquisition and new orders for Milltronics booked after the closing date of that acquisition. 

Excluding the impact of the recently acquired Milltronics and Takumi businesses, orders for the third quarter of fiscal 2015 decreased by $7,939,000, or 14%, compared to the corresponding period in fiscal 2014. This year-over-year decrease in orders reflected a reduction in orders of $2,089,000, or 4%, and a negative impact of $5,850,000, or 10%, when translating foreign orders to U.S. Dollars for financial reporting purposes. Excluding the impact of orders related to the Milltronics and Takumi businesses, orders for the first nine months of fiscal 2015 decreased by $20,603,000, or 12%, compared to the corresponding prior year period. The year-over-year decrease in orders reflected a reduction in orders of $4,844,000, or 3%, and a negative impact of $15,759,000, or 9%, when translating foreign orders to U.S. Dollars for financial reporting purposes. 

The following table sets forth new orders booked by geographic region for the third quarter and the first nine months of fiscal 2015 and 2014 (in thousands):

  Three Months Ended Nine Months Ended
  July 31, July 31,
      $ %     $ %
  2015 2014 Change Change 2015 2014 Change Change
North America $20,823 $14,039 $6,784 48% $50,454 $40,040 $10,414 26%
Europe 29,555 36,368 (6,813) -19% 89,200 110,698 (21,498) -19%
Asia Pacific 12,397 5,971 6,426 108% 21,231 16,414 4,817 29%
Total $62,775 $56,378 $6,397 11% $160,885 $167,152  $ (6,267) -4%

Excluding the $5,764,000 in orders related to the recently acquired Milltronics business, orders for North America increased by 7% and 12% for the third quarter and first nine months of fiscal 2015, respectively, compared to the corresponding prior year periods due to increased customer demand for higher-performance machines.   

European orders for the third quarter of fiscal 2015 decreased by 19% compared to the corresponding period in fiscal 2014 and reflected an order reduction of 3% and a negative impact of 16% due to a weaker Euro and Pound Sterling when translating foreign orders to U.S. Dollars for financial reporting purposes. European orders for the first nine months of fiscal 2015 decreased by 19% compared to the corresponding prior year period and reflected an order reduction of 5% and a negative impact of 14% due to a weaker Euro and Pound Sterling when translating foreign orders to U.S. Dollars for financial reporting purposes. The year-over-year reductions in European orders were primarily driven by the adverse impact of foreign currency translation and fluctuating customer demand for electro-mechanical components and accessories manufactured by Hurco’s Italian-based subsidiary, LCM Precision Technologies (LCM).

Excluding the $8,572,000 orders related to the recently acquired Takumi business, Asian Pacific orders for the third quarter and the first nine months of fiscal 2015 decreased by 36% and 23%, respectively, compared to the corresponding periods in fiscal 2014. The year-over-year reductions in Asian Pacific orders reflected softer market conditions in India and China.

Gross profit for the third quarter of fiscal 2015 was $16,630,000, or 32% of sales, compared to $18,012,000, or 33% of sales, for the corresponding prior year period. The year-over-year decrease in gross profit as a percentage of sales in the three month period was due to increased pricing pressure in North America and Europe. Gross profit for the first nine months of fiscal 2015 was $49,736,000, or 32% of sales, compared to $48,560,000, or 30% of sales, for the corresponding prior year period. The year-over-year improvement in gross profit as a percentage of sales in the nine month period was primarily attributable to increased sales of higher-performance machines across all regions, net of the pricing pressure experienced in Europe and North America.

Selling, general and administrative expenses for the third quarter of fiscal 2015 were $11,351,000, or 22% of sales, compared to $11,869,000, or 21% of sales, in the corresponding period in fiscal 2014. The third quarter expenses included approximately $890,000 related to Milltronics and Takumi, of which $647,000 represented one-time acquisition costs. Selling, general and administrative expenses for the first nine months of fiscal 2015 were $32,655,000, or 21% of sales, compared to $33,675,000, or 21% of sales, in the corresponding period in fiscal 2014. Year-to-date expenses included approximately $975,000 related to Milltronics and Takumi, of which $732,000 represented one-time acquisition costs. Selling, general and administrative expenses were favorably impacted by approximately $904,000, or 2% of sales, and $2,227,000, or 1% of sales, for the third quarter and the first nine months of fiscal 2015, respectively, when translating foreign expenses to U.S. Dollars for financial reporting purposes. 

The effective tax rate for the third quarter of fiscal 2015 was 30%, compared to 28% for the corresponding period in fiscal 2014. The effective tax rate for the first nine months of fiscal 2015 was 32%, compared to 29% for corresponding period in fiscal 2014. The increases in the effective tax rates year-over-year were primarily due to a shift in geographic mix of income and loss among tax jurisdictions.

Cash and cash equivalents totaled $49,998,000 at July 31, 2015, compared to $53,846,000 at October 31, 2014. Working capital, excluding cash and cash equivalents, was $100,911,000 at July 31, 2015 compared to $90,105,000 at October 31, 2014. The increase in working capital, excluding cash, was primarily attributable to inventories acquired from Milltronics and Takumi in July 2015. 

Hurco also announced today that its Board of Directors approved the payment of a cash dividend of $0.08 per share. The dividend will be paid on October 5, 2015, to shareholders of record as of the close of business on September 21, 2015. Future declarations of dividends are subject to approval of the Board of Directors and may be adjusted as business needs or market conditions change.

Michael Doar, Chief Executive Officer, stated, “The asset purchases of Milltronics in the USA and Takumi in Taiwan will serve all Hurco stakeholders well. While our strong financial position has afforded us the opportunity to expand our product line and focus on R&D activities during the past five years, these acquisitions will enable us to accelerate the product development process to meet the needs of our customers. We officially released the MAX5 control at the end of the third quarter, which has immense benefits for the end user. Preliminary reviews from customers have been overwhelmingly positive as the final control design incorporated more than 80 suggestions derived from customer usability tests. Sales in Europe continue to reflect increased shipments of higher-performance machines.  In North America, our customers are adopting higher end products, especially machines equipped with 5-axis technology. We continue to monitor Asia for opportunities to serve those diverse markets. We are fortunate that our fiscal discipline affords us the resources to weather a slowdown in that region without having an impact on innovation, which ultimately results in machine tool technologies that make our customers more profitable.” 

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, U.S. and China, and sells its products through direct and indirect sales forces throughout North and South 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, the United States of America, and Taiwan. Web Site: www.hurco.com

Certain statements in this news release are 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, 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 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,
  2015 2014 2015 2014
   (unaudited)   (unaudited) 
Sales and service fees  $ 52,535  $ 55,379  $ 153,690  $ 160,080
         
Cost of sales and service  35,905  37,367  103,954  111,520
Gross profit  16,630  18,012  49,736  48,560
         
Selling, general and administrative expenses  11,351  11,869  32,655  33,675
Operating income  5,279  6,143  17,081  14,885
         
Interest expense  48  65  174  196
         
Interest income  32  23  75  55
         
Investment income (expense)  4  4  75  40
         
Other (income) expense, net  11  46  159  331
         
Income before taxes  5,256  6,059  16,898  14,453
         
Provision for income taxes  1,573  1,684  5,488  4,173
         
Net income  $ 3,683  $ 4,375  $ 11,410  $ 10,280
         
Income per common share        
         
Basic  $ 0.56  $ 0.67  $ 1.73  $ 1.57
Diluted  $ 0.55  $ 0.66  $ 1.72  $ 1.56
         
Weighted average common shares outstanding        
Basic  6,552  6,505  6,540  6,493
Diluted  6,594  6,548  6,584  6,529
         
OTHER CONSOLIDATED FINANCIAL DATA Three Months Ended Nine Months Ended
   July 31,  July 31,
Operating Data: 2015 2014 2015 2014
   (unaudited)   (unaudited) 
Gross margin 32% 33% 32% 30%
         
SG&A expense as a percentage of sales 22% 21% 21% 21%
         
Operating income as a percentage of sales 10% 11% 11% 9%
         
Pre-tax income as a percentage of sales 10% 11% 11% 9%
         
Effective tax rate 30% 28% 32% 29%
         
Depreciation and amortization  809  808  2,256  2,359
         
Capital expenditures  859  761  2,474  2,135
         
Balance Sheet Data: 7/31/2015 10/31/2014    
   (unaudited)     
Working capital (excluding cash)  $ 100,911  $ 90,105    
         
Days sales outstanding (unaudited)  49  45    
         
Inventory turns (unaudited)  1.5  1.5    
         
Capitalization        
Total debt  $ 1,611  $ 3,272    
Shareholders’ equity  171,679  164,645    
Total  $ 173,290  $ 167,917    
         
         
Hurco Companies, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per-share data)
     
  July 31, October 31,
  2015 2014
   (unaudited)   (audited) 
ASSETS    
Current assets:    
Cash and cash equivalents  $ 49,998  $ 53,846
Accounts receivable, net  36,354  45,435
Inventories, net  111,978  95,992
Deferred income taxes  954  2,062
Derivative assets  2,399  3,127
Prepaid expenses  10,141  8,927
Other  1,521  1,365
Total current assets  213,345  210,754
     
Property and equipment:    
Land  782  782
Building  7,314  7,314
Machinery and equipment  22,982  19,432
Leasehold improvements  3,338  3,523
   34,416  31,051
Less accumulated depreciation and amortization  (22,126)  (19,546)
   12,290  11,505
     
Non-current assets:    
Software development costs, less accumulated amortization  3,821  3,519
Goodwill  2,315  2,606
Intangible assets, net  1,327  1,635
Other assets  6,807  6,912
   $ 239,905  $ 236,931
     
LIABILITIES AND SHAREHOLDERS’ EQUITY    
     
Current liabilities:    
Accounts payable  $ 43,032  $ 42,718
Derivative liabilities  1,340  705
Accrued expenses  16,453  20,108
Short-term debt  1,611  3,272
Total current liabilities  62,436  66,803
     
Non-current liabilities:    
Deferred income taxes  1,111  993
Accrued tax liability  948  1,054
Deferred credits and other obligations  3,731  3,436
Total liabilities  68,226  72,286
     
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; 6,650,517 and 6,589,918 shares issued; and 6,551,718 and 6,508,880 shares outstanding, as of July 31, 2015 and October 31, 2014, respectively  655  651
Additional paid-in capital  57,108  55,974
Retained earnings  121,482  111,580
Accumulated other comprehensive loss  (7,566)  (3,560)
Total shareholders’ equity  171,679  164,645
   $ 239,905  $ 236,931
     
CONTACT: Sonja K. McClelland
         Vice President, Secretary,
         Treasurer & Chief Financial Officer
         317-293-5309