Hurco Reports Second Quarter Results and Announces Quarterly Cash Dividend

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| Source: Hurco Companies, Inc.

INDIANAPOLIS, June 6, 2014 (GLOBE NEWSWIRE) -- Hurco Companies, Inc. (Nasdaq:HURC) today reported net income of $3,536,000, or $0.54 per diluted share, for its second fiscal quarter ended April 30, 2014, compared to $3,183,000, or $0.48 per diluted share, for the corresponding period in fiscal 2013. For the first six months of fiscal 2014, Hurco reported net income of $5,905,000, or $0.90 per diluted share, compared to $5,437,000, or $0.83 per diluted share, for the corresponding period in fiscal 2013. 

Sales and service fees for the second quarter of fiscal 2014 totaled $53,731,000, an increase of $4,112,000, or 8%, compared to the second quarter of fiscal 2013. Sales and service fees for the six months ended April 30, 2014, totaled $104,701,000, an increase of $10,997,000, or 12%, compared to the corresponding period in fiscal 2013. The year-over-year increases in sales and service fees for the second quarter and the first six months included a favorable currency impact of approximately $1,700,000 for the quarter and $2,301,000 for the six month period, respectively, 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 second quarter and first six months of fiscal 2014 and 2013, respectively (in thousands):

  Three Months Ended
April 30,
Six Months Ended
April 30,
 
2014

2013
$
Change

Change

2014

2013
$
Change

Change
North America  $ 12,287  $ 13,080  $ (793) -6%  $ 28,580  $ 29,332  $ (752) -3%
Europe  35,037  31,896  3,141 10%  64,271  56,566  7,705 14%
Asia Pacific  6,407  4,643  1,764 38%  11,850  7,806  4,044 52%
Total  $ 53,731  $ 49,619  $ 4,112 8%  $ 104,701  $ 93,704  $10,997 12%

Sales in North America decreased during the second quarter of fiscal 2014 compared to the corresponding prior year period. The softening of sales in North America is not unusual in the months prior to the International Manufacturing Technology Show which is held in September of even-numbered years.   European sales and service fees for the second quarter and the first six months of fiscal 2014 included $2,127,000 and $3,803,000, respectively, from sales of electro-mechanical components and accessories manufactured by Hurco's Italian-based subsidiary LCM Precision Technologies (LCM). Hurco acquired the LCM machine tool component business on July 1, 2013. In addition, the increase in European sales and service fees for the second quarter and first six months of fiscal 2014 included a favorable currency impact of approximately $1,823,000 for the quarter and $2,515,000 for the six month period, respectively, due primarily to a stronger Euro when translating foreign sales to U.S. Dollars for financial reporting purposes. The year-over-year increase in Asia Pacific sales and service fees was primarily attributable to increased shipments in China. 

Orders for the second quarter of fiscal 2014 were $53,680,000, an increase of $4,909,000, or 10%, from the corresponding period in fiscal 2013 and included $2,670,000 of orders for LCM products. Orders for the first six months of fiscal 2014 were $110,774,000, an increase of $10,901,000, or 11%, from the corresponding period in fiscal 2013 and included $6,027,000 of orders for LCM products. The impact of currency translation on orders booked in the second quarter and first six months of fiscal 2014 was consistent with the impact on sales in those periods.

The following table sets forth new orders booked by geographic region for the second quarter and first six months of fiscal 2014 and 2013, respectively:

  Three Months Ended
April 30,
Six Months Ended
April 30,
 
2014

2013
$
Change
%
Change

2014

2013
$
Change
%
Change
North America  $ 11,429  $ 13,035  $ (1,606) -12%  $ 26,001  $ 27,649  $ (1,648) -6%
Europe  37,819  30,756  7,063 23%  74,330  61,452  12,878 21%
Asia Pacific  4,432  4,980  (548) -11%  10,443  10,772  (329) -3%
Total  $ 53,680  $ 48,771  $ 4,909 10%  $ 110,774  $ 99,873  $ 10,901 11%

Hurco's gross profit for the second quarter of fiscal 2014 was $16,629,000, or 31% of sales, compared to $15,283,000, or 31% of sales, for the corresponding prior year period. Gross profit for the first six months of fiscal 2014 was $30,548,000, or 29% of sales, compared to $28,199,000, or 30% of sales, for the corresponding prior year period. The increases in gross profit were attributable to increased sales, which included LCM products, and increased cost efficiencies realized from higher production levels during fiscal 2014. 

Selling, general and administrative expenses for the second quarter of fiscal 2014 were $11,206,000, or 21% of sales, compared to $10,679,000, or 22% of sales, in the corresponding quarter of fiscal 2013. Selling, general and administrative expenses for the first six months of fiscal 2014 were $21,806,000, or 21% of sales, compared to $19,599,000, or 21% of sales, for the corresponding prior year period.   The year-over-year increases in selling, general and administrative expenses were primarily due to incremental operating expenses associated with the acquisition of the LCM business.

The effective tax rate for the second quarter of fiscal 2014 was 31%, compared to 29% for the corresponding prior year period. The effective tax rate for the first six months of fiscal 2014 was 30%, compared to 34% for the corresponding prior year period. The changes in effective tax rates in the year-over-year comparisons reflected the shift in geographic mix of income or loss among tax jurisdictions.

Cash and cash equivalents totaled $46,674,000 at April 30, 2014, compared to $42,804,000 at October 31, 2013. 

Hurco also announced today that its Board of Directors approved the payment of a cash dividend of $0.07 per share. The dividend will be paid on July 7, 2014, to shareholders of record as of the close of business on June 17, 2014. 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, "Overall, I am pleased with our financial results, with marked improvement in Asia where we are targeting customers involved in complex manufacturing since those businesses realize the most benefit from our advanced control technology.   Europe continues to show signs of recovery from its recession. As for North America, a comparison to the results in 2012 is a better indicator than a comparison to the 2013 results since the largest manufacturing show, the International Manufacturing Technology Show, is held in September during even-numbered years. Typically, we see activity slow in the months leading up to the show as customers delay purchases so they can evaluate new offerings at the show. Hurco will be highlighting new technologies at IMTS, such as AdaptiPathTM and our 3D printing capability. In addition, we will be previewing the next generation console for our control, which includes more than 80 new features that were suggested by customers who participated in usability testing. We will also be showcasing one of our largest machines taken to IMTS, the HBMX55i horizontal boring mill."

Hurco Companies, Inc. is an industrial technology company that designs and produces computerized machine tools, interactive computer control systems and software, machine tool components, and accessories 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 Italy, Taiwan 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, changes in operations due to acquisitions or loss of key personnel, 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 
April 30,
Six Months Ended 
April 30,
  2014 2013 2014 2013
   (unaudited)   (unaudited) 
Sales and service fees  $ 53,731  $ 49,619  $ 104,701  $ 93,704
         
Cost of sales and service  37,102  34,336  74,153  65,505
Gross profit  16,629  15,283  30,548  28,199
         
Selling, general and administrative expenses  11,206  10,679  21,806  19,599
Operating income  5,423  4,604  8,742  8,600
         
Interest expense  54  55  131  120
         
Interest income  16  31  32  47
         
Investment income (expense)  5  4  36  15
         
Other (income) expense, net  269  72  285  331
         
Income before taxes  5,121  4,512  8,394  8,211
         
Provision for income taxes  1,585  1,329  2,489  2,774
         
Net income  $ 3,536  $ 3,183  $ 5,905  $ 5,437
         
Income per common share        
Basic  $ 0.54  $ 0.49  $ 0.90  $ 0.83
Diluted  $ 0.54  $ 0.48  $ 0.90  $ 0.83
         
Weighted average common shares outstanding        
Basic  6,498  6,452  6,487  6,449
Diluted  6,531  6,496  6,520  6,489
         
OTHER CONSOLIDATED FINANCIAL DATA Three Months Ended 
April 30,
Six Months Ended 
April 30,
Operating Data: 2014 2013 2014 2013
   (unaudited)   (unaudited) 
Gross margin 31% 31% 29% 30%
         
SG&A expense as a percentage of sales 21% 22% 21% 21%
         
Operating income as a percentage of sales 10% 9% 8% 9%
         
Pre-tax income as a percentage of sales 10% 9% 8% 9%
         
Effective tax rate 31% 29% 30% 34%
         
Depreciation and amortization  816  798  1,551  1,715
         
Capital expenditures  855  453  1,374  1,289
         
Balance Sheet Data: 4/30/2014 10/31/2013    
   (unaudited)       
Working capital (excluding cash)  $ 88,604  $ 86,512    
         
Days sales outstanding (unaudited)  47  45    
         
Inventory turns (unaudited)  1.5  1.4    
         
Capitalization        
Total debt  $ 3,195  $ 3,665    
Shareholders' equity  157,092  151,491    
Total  $ 160,287  $ 155,156    
 
 
Hurco Companies, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per-share data)
     
  April 30,
2014
October 31,
2013
   (Unaudited)   (Audited) 
ASSETS    
Current assets:    
Cash and cash equivalents  $ 46,674  $ 42,804
Accounts receivable, net  37,739  36,139
Refundable taxes  3  6
Inventories, net  95,599  95,260
Deferred income taxes  2,594  2,080
Derivative assets  53  699
Other  9,176  8,014
Total current assets  191,838  185,002
     
Property and equipment:    
Land  782  782
Building  7,314  7,326
Machinery and equipment  19,419  19,059
Leasehold improvements  3,577  3,634
   31,092  30,801
Less accumulated depreciation and amortization  (19,045)  (18,502)
   12,047  12,299
     
Non-current assets:    
Software development costs, less accumulated amortization  3,638  3,714
Goodwill  2,861  2,807
Intangible assets, net  1,958  2,155
Other assets  5,586  5,258
   $ 217,928  $ 211,235
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
     
Current liabilities:    
Accounts payable  $ 36,964  $ 35,527
Derivative liabilities  1,737  1,212
Accrued expenses  14,664  15,282
Short-term debt  3,195  3,665
Total current liabilities  56,560  55,686
     
Non-current liabilities:    
Deferred income taxes  747  743
Accrued tax liability  1,167  1,103
Deferred credits and other obligations  2,362  2,212
Total liabilities  60,836  59,744
     
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; 6,585,918 and 6,533,510 shares; and 6,504,880 and 6,465,054 shares outstanding, as of April 30, 2014 and October 31, 2013, respectively  651  647
Additional paid-in capital  55,386  54,698
Retained earnings  103,255  98,130
Accumulated other comprehensive loss  (2,200)  (1,984)
Total shareholders' equity  157,092  151,491
   $ 217,928  $ 211,235
Sonja K. McClelland
Vice President, Secretary, Treasurer & Chief Financial Officer
317-293-5309