Hurco Reports Second Quarter Results

Fri Jun 7, 2013 8:00am EDT

* Reuters is not responsible for the content in this press release.

INDIANAPOLIS, June 7, 2013 (GLOBE NEWSWIRE) -- Hurco Companies, Inc., (Nasdaq:HURC) today reported net income of $3,183,000, or $0.48 per diluted share, for its second fiscal quarter ended April 30, 2013, compared to $2,962,000, or $0.45 per diluted share, for the corresponding period in fiscal 2012. For the first six months of fiscal 2013, Hurco reported net income of $5,437,000, or $0.83 per diluted share, compared to $7,595,000, or $1.16 per diluted share, for the corresponding period in fiscal 2012.

Sales and service fees for the second quarter of fiscal 2013 totaled $49,619,000, an increase of $3,654,000, or 8%, compared to the second quarter of fiscal 2012. This increase was achieved despite the adverse impact of a weaker Euro and Pound Sterling in the 2013 quarter when translating foreign sales to U.S. Dollars for financial reporting purposes, which reduced reported sales and service fees for that quarter by approximately $788,000, or 2%. Sales and service fees for the six months ended April 30, 2013 totaled $93,704,000, a decrease of $3,387,000, or 3%, compared to the corresponding period in 2012. The adverse impact of foreign currency translation on the six-month comparison was $868,000, or 1%.   

The following table sets forth net sales and service fees by geographic region for the second quarter and first six months of fiscal 2013 and 2012, respectively:

  Three Months Ended
April 30,
Six Months Ended
April 30,
  2013 2012 %
Change
2013 2012 %
Change
North America  $ 13,080  $ 11,996 9%  $ 29,332  $ 27,322 7%
Europe  31,896  26,646 20%  56,566  56,565 0%
Asia Pacific  4,643  7,323 -37%  7,806  13,204 -41%
Total  $ 49,619  $ 45,965 8%  $ 93,704  $ 97,091 -3%

The increase in sales during the second quarter of fiscal 2013 compared to fiscal 2012 was primarily driven by increased shipments in Europe related to orders received in the previous quarter. However, this improvement was partially offset by a continuing decline in sales in the Asia Pacific region, where slowing economies and more restricted credit conditions have resulted in deferred investments in capital equipment by small to medium sized companies in that region.  

The following table sets forth new orders booked by geographic region for the second quarter and first six months of fiscal 2013 and 2012, respectively:

  Three Months Ended
April 30,
Six Months Ended
April 30,
  2013 2012 %
Change
2013 2012 %
Change
North America  $ 13,035  $ 14,042 -7%  $ 27,649  $ 28,425 -3%
Europe  30,756  30,391 1%  61,452  59,648 3%
Asia Pacific  4,980  6,647 -25%  10,772  11,902 -9%
Total  $ 48,771  $ 51,080 -5%  $ 99,873  $ 99,975 0%

Orders for the second quarter of fiscal 2013 were $48,771,000, a decrease of $2,309,000, or 5%, from the corresponding period in fiscal 2012. Orders for the first six months of fiscal 2013 remained relatively stable in comparison to the corresponding period in fiscal 2012. Orders in North America declined in the second quarter as compared to the first quarter, reflecting a softening market. The slight increase in European order activity was a positive sign, considering the ongoing recession in that region. The decrease in order activity in the Asia Pacific region was due to the same factors that impacted sales. The impact of currency translation on orders was consistent with the impact on sales. 

Gross profit for the second quarter of fiscal 2013 was $15,283,000, or 31% of sales, compared to $13,393,000, or 29% of sales, for the prior year period, due primarily to the impact of increased sales in Europe, the primary market for Hurco's larger, higher performance machines. Gross profit for the first six months of fiscal 2013 was $28,199,000, or 30% of sales, compared to $29,877,000, or 31% of sales, for the same period in 2012 due primarily to the lower level of sales.

Selling, general and administrative expenses in the second quarter of fiscal 2013 were $10,679,000, an increase of $1,391,000 from the prior year period primarily due to the timing of the recognition of incentive compensation accruals in the 2013 period. Selling, general and administrative expenses were $19,599,000 for the first six months of fiscal 2013 compared to $19,018,000 for the first six months of fiscal 2012. The year-to-date increase primarily reflects higher sales and marketing expenses relating to our ongoing rebranding initiative.  

Cash and cash equivalents totaled $43,277,000 as of April 30, 2013, compared to $35,770,000 as of October 31, 2012. The increase in cash in the first six months was driven by the collection of receivables and a decrease in refundable taxes and inventory levels.

Michael Doar, Chairman, Chief Executive Officer, stated, "The second quarter order activity in Europe was positive in light of the lingering recession in the region and performance in North America was steady. Although activity in Asia was down, I was pleased with the level of activity at the China Industrial Machine Tool show last month, where we officially launched the Hurco rebranding initiative to the Chinese market. The key aspect of this rebranding is concise communication of our core value proposition, which is increased profitability for smaller-volume production environments where a variety of parts are manufactured versus mass production environments. I am confident this focused value proposition will differentiate us in the market place."

Hurco Companies, Inc. is an industrial technology company that designs and produces interactive computer controls, software and computerized machine tools 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 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,
  2013 2012 2013 2012
   (unaudited)   (unaudited) 
Sales and service fees  $ 49,619  $ 45,965  $ 93,704  $ 97,091
         
Cost of sales and service  34,336  32,572  65,505  67,214
Gross profit  15,283  13,393  28,199  29,877
         
Selling, general and administrative expenses  10,679  9,288  19,599  19,018
Operating income  4,604  4,105  8,600  10,859
         
Interest expense  55  38  120  62
         
Interest income  31  19  47  41
         
Investment income (expense)  4  (4)  15  2
         
Other (income) expense, net  72  17  331  (121)
         
Income before taxes  4,512  4,065  8,211  10,961
         
Provision for income taxes  1,329  1,103  2,774  3,366
         
Net income  $ 3,183  $ 2,962  $ 5,437  $ 7,595
         
Income per common share        
         
Basic  $ 0.49  $ 0.46  $ 0.83  $ 1.17
Diluted  $ 0.48  $ 0.45  $ 0.83  $ 1.16
         
Weighted average common shares outstanding        
Basic  6,452  6,443  6,449  6,442
Diluted  6,496  6,479  6,489  6,473
         
OTHER CONSOLIDATED FINANCIAL DATA Three Months Ended 
April 30,
Six Months Ended 
April 30,
Operating Data: 2013 2012 2013 2012
   (unaudited)   (unaudited) 
Gross margin 31% 29% 30% 31%
         
SG&A expense as a percentage of sales 22% 20% 21% 20%
         
Operating income as a percentage of sales 9% 9% 9% 11%
         
Pre-tax income as a percentage of sales  9% 9% 9% 11%
         
Effective Tax Rate 29% 27% 34% 31%
         
Depreciation and amortization  798  1,153  1,715  2,240
         
Capital expenditures  453  766  1,289  1,310
         
Balance Sheet Data: 4/30/2013 10/31/2012    
   (unaudited)       
Working capital (excluding cash)  $ 85,652  $ 88,239    
         
Days sales outstanding (unaudited)  48  38    
         
Inventory turns (unaudited)  1.5  1.5    
         
Capitalization        
Total debt  $ 3,244  $ 3,206    
Shareholders' equity  148,327  143,793    
Total  $ 151,571  $ 146,999    
Hurco Companies, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per-share data)
     
  April 30, 2013 October 31, 2012
   (Unaudited)   (Audited) 
ASSETS    
Current assets:    
Cash and cash equivalents  $ 43,277  $ 35,770
Accounts receivable, net  33,602  35,297
Refundable taxes  204  1,459
Inventories, net  90,044  91,320
Deferred income taxes  2,169  1,182
Derivative assets  367  708
Other  8,180  7,645
Total current assets  177,843  173,381
     
Property and equipment:    
Land  782  782
Building  7,326  7,352
Machinery and equipment  17,843  17,411
Leasehold improvements  3,588  3,467
   29,539  29,012
Less accumulated depreciation and amortization  (17,811)  (16,933)
   11,728  12,079
     
Non-current assets:    
 Software development costs, less accumulated amortization  3,885  3,969
 Other assets  6,076  5,883
   $ 199,532  $ 195,312
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
     
Current liabilities:    
Accounts payable  $ 32,899  $ 29,788
Derivative liabilities  1,177  569
Accrued expenses  11,594  15,809
Short-term debt  3,244  3,206
Total current liabilities  48,914  49,372
     
Non-current liabilities:    
Deferred income taxes  920  903
Deferred credits and other obligations  1,371  1,244
Total liabilities  51,205  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; 6,522,141 and 6,502,928 shares issued; and 6,453,685 and 6,447,210 shares outstanding, as of April 30, 2013 and October 31, 2012, respectively  646  645
Additional paid-in capital  53,917  53,415
Retained earnings  96,023  90,586
Accumulated other comprehensive loss  (2,259)  (853)
Total shareholders' equity  148,327  143,793
   $ 199,532  $ 195,312
CONTACT: John G. Oblazney
         Vice President & Chief Financial Officer
         317-293-5309