U.S. Markets closed

Hurco Reports Fourth Quarter and Full Year Results for Fiscal 2018

INDIANAPOLIS, Jan. 04, 2019 (GLOBE NEWSWIRE) -- Hurco Companies, Inc. (HURC) today reported results for the fourth fiscal quarter and fiscal year ended October 31, 2018. Hurco recorded net income of $8,302,000, or $1.22 per diluted share, for the fourth quarter of fiscal 2018 compared to net income of $6,702,000, or $1.00 per diluted share, for the corresponding period in fiscal 2017. For fiscal 2018, Hurco reported net income of $21,490,000, or $3.15 per diluted share, compared to $15,115,000, or $2.25 per diluted share, for fiscal 2017.

Sales and service fees for the fourth quarter of fiscal 2018 were $83,051,000, an increase of $7,120,000, or 9%, compared to the corresponding prior year period and included an unfavorable currency impact of $597,000, or 1%, when translating foreign sales to U.S. dollars for financial reporting purposes. Sales and service fees for fiscal 2018 were $300,671,000, an increase of $57,004,000, or 23%, compared to fiscal 2017, and included a favorable currency impact of $10,486,000, or 4%, when translating foreign sales to U.S. dollars for financial reporting purposes.

Michael Doar, Chief Executive Officer, stated, “This has been a truly special year for Hurco. So many milestones have been achieved this year – the culmination of strategic plans created several years ago. The focus has been to acquire and develop strong brands, improve market penetration in all geographic regions, and improve returns for our shareholders with a sustained commitment to maintaining a strong balance sheet and cash flow. Highlights of the financial milestones achieved this year include exceeding $300 million in sales, $33 million in operating income, and $3 per diluted share. Highlights of product milestones include a broad product offering for each of our brands that partners well with automation and emphasizes our ability to innovate solutions for customers who have both simple and complex machining requirements. This year, we continued to build upon our reputation in mature Hurco machine tool markets, such as the U.S., Germany, France, Italy and the United Kingdom, while establishing more of a presence and reputation in key target markets, such as China, India and smaller Asian Pacific countries. The brands we have acquired over the last several years, LCM/Milltronics/Takumi, each had their best sales year since acquisition and made important contributions to the overall growth in all geographic regions. This has been a remarkable way to celebrate 50 years of innovation and we are grateful to our customers, employees, directors, and shareholders for their continued dedication and support.”

The following table sets forth net sales and service fees by geographic region for the fourth quarter and fiscal year ended October 31, 2018 and 2017 (dollars in thousands):

       
  Three Months Ended   Fiscal Year Ended
  October 31,   October 31,
      $ %       $ %
  2018 2017 Change Change   2018 2017 Change Change
Americas $ 28,741 $ 23,597 $ 5,144   22 %   $ 90,902 $ 75,540 $ 15,362 20 %
Europe   45,492   42,714   2,778   7 %     166,202   133,671   32,531 24 %
Asia Pacific   8,818   9,620   (802 ) -8 %     43,567   34,456   9,111 26 %
Total $ 83,051 $ 75,931 $ 7,120   9 %   $ 300,671 $ 243,667 $ 57,004 23 %
                                     

Sales in the Americas for the fourth quarter of fiscal 2018 increased by 22%, compared to the corresponding period in fiscal 2017, due primarily to increased sales volume of Hurco and Takumi machines following the International Manufacturing Technology Show held in September 2018. Sales in the Americas for fiscal 2018 increased by 20% compared to fiscal 2017, due primarily to improved U.S. market conditions and increased demand from U.S. customers for the Hurco and Milltronics product lines. The increase in sales year-over-year for both periods was attributable to an increased sales volume of vertical milling and lathe machines from all product lines (Hurco, Milltronics and Takumi).

European sales for the fourth quarter of fiscal 2018 increased by 7%, compared to the corresponding period in fiscal 2017, and included an unfavorable currency impact of less than 1%, when translating foreign sales to U.S. dollars for financial reporting purposes. European sales for fiscal 2018 increased by 24%, compared to fiscal 2017, and included a favorable currency impact of 7%, when translating foreign sales to U.S. dollars for financial reporting purposes. The increases in European sales for the fourth quarter and for fiscal 2018 were primarily due to increased customer demand for Hurco and Takumi machines in Germany, France and the United Kingdom, as well as increased customer demand for electro-mechanical components and accessories manufactured by our wholly-owned subsidiary, LCM Precision Technology S.r.l. (“LCM”).

Asian Pacific sales for the fourth quarter of fiscal 2018 decreased by 8%, compared to the corresponding period in fiscal 2017, and included a negative currency impact of 4%, when translating foreign sales to U.S. dollars for financial reporting purposes. The reduction in Asian Pacific sales primarily resulted from a reduction in customer demand for Takumi vertical milling machines in China, partially offset by increased customer demand for Hurco vertical milling and lathe machines in China, Southeast Asia and India. Asian Pacific sales for fiscal 2018 increased by 26%, compared to fiscal 2017, and included a favorable currency impact of 3%, when translating foreign sales to U.S. dollars for financial reporting purposes. The increase in Asian Pacific sales for fiscal 2018 was primarily attributable to increased customer demand for Hurco and Takumi machines in all Asian Pacific countries, particularly in China, the largest market for consumption of machines tools in the world.

Orders for the fourth quarter of fiscal 2018 were $73,023,000, a slight decrease of $657,000, or 1%, compared to the corresponding period in fiscal 2017, and included a negative currency impact of $71,000, or less than 1%, when translating foreign orders to U.S. dollars. Orders for fiscal 2018 were a record $305,845,000, an increase of $45,236,000, or 17%, compared to fiscal 2017, and included a favorable currency impact of $13,814,000, or 5%, when translating foreign orders to U.S. dollars.

The following table sets forth new orders booked by geographic region for the fourth quarter and fiscal year ended October 31, 2018 and 2017 (dollars in thousands):

       
  Three Months Ended   Fiscal Year Ended
  October 31,   October 31,
      $ %       $ %
  2018 2017 Change Change   2018 2017 Change Change
Americas $ 31,255 $ 26,526 $ 4,729   18 %   $ 94,160 $ 85,070 $ 9,090 11 %
Europe   35,421   36,881   (1,460 ) -4 %     170,366   137,622   32,744 24 %
Asia Pacific   6,347   10,273   (3,926 ) -38 %     41,319   37,917   3,402 9 %
Total $ 73,023 $ 73,680 $ (657 ) -1 %   $ 305,845 $ 260,609 $ 45,236 17 %
                                     

Orders in the Americas for the fourth quarter and fiscal 2018 increased by 18% and 11%, respectively, compared to the corresponding periods in fiscal 2017. These increases were largely attributable to improved customer demand for Hurco and Takumi vertical milling and lathe machines.

European orders for the fourth quarter of fiscal 2018 decreased by 4%, compared to the corresponding period in fiscal 2017, and included a favorable currency impact of 1%, when translating foreign orders to U.S. dollars. The year-over-year reduction in fourth quarter orders was due primarily to a decrease in customer demand for Hurco vertical milling and lathe machines in the United Kingdom. European orders for fiscal 2018 increased by 24%, compared to fiscal 2017, and included a favorable currency impact of 9%, when translating foreign orders to U.S. dollars. The year-over-year increase in European orders was largely driven by increased customer demand for Hurco and Takumi vertical milling and lathe machines in Germany and France, as well as increased demand for electro-mechanical components and accessories manufactured by LCM.

Asian Pacific orders for the fourth quarter of fiscal 2018 decreased by 38%, compared to the corresponding prior year period, and included a negative currency impact of 3%, when translating foreign orders to U.S. dollars. The year-over-year decrease in Asian Pacific orders was driven primarily by a reduction in customer demand for Hurco and Takumi machines in China. Asian Pacific orders for fiscal 2018 increased by 9%, compared to fiscal 2017, and included a favorable currency impact of 3%, when translating foreign orders to U.S. dollars. The year-over-year increase in Asian Pacific orders was largely due to increased customer demand for Hurco vertical milling machines in India, China and Southeast Asia.

Gross profit for the fourth quarter of fiscal 2018 was $27,851,000, or 34% of sales, compared to $23,370,000, or 31% of sales, for the corresponding prior year period. Gross profit for fiscal 2018 was $91,806,000, or 31% of sales, compared to $70,564,000, or 29% of sales, for fiscal 2017. The year-over-year increase in gross profit as a percentage of sales reflected increased machine sales across all three regions and product lines and the favorable impact of foreign currency translation compared to the corresponding prior year period.

Selling, general and administrative expenses for the fourth quarter of fiscal 2018 were $16,564,000, or 20% of sales, compared to $14,385,000, or 19% of sales, in the corresponding period in fiscal 2017, and included a favorable currency impact of $214,000, when translating foreign expenses to U.S. dollars for financial reporting purposes. Selling, general and administrative expenses for fiscal 2018 were $58,010,000, or 19% of sales, compared to $49,661,000, or 20% of sales, in fiscal 2017, and included an unfavorable currency impact of $1,326,000, when translating foreign expenses to U.S. dollars for financial reporting purposes. The year-over-year increases in selling, general and administrative expenses were driven by increased expenses for trade shows, global sales and marketing, employee incentive compensation and the unfavorable impact of foreign currency translation compared to the corresponding prior year period.

The effective tax rates for the fourth quarter and fiscal 2018 were 22% and 34%, respectively, compared to 25% and 27% in the corresponding prior year periods. The year-over-year decrease in the effective tax rate for the fourth quarter of fiscal 2018 principally resulted from a shift in geographic mix of income and loss among tax jurisdictions and the impact of a lower U.S. income tax rate compared to the prior year. The year-over-year increase in the effective tax rate for fiscal 2018 was primarily attributable to one-time charges of $2,757,000 related to the Tax Cuts and Jobs Act that was enacted in December 2017. The impact of these one-time charges increased the effective tax rate by approximately 39% for the first quarter of fiscal 2018. Excluding the impact of these charges, earnings per diluted share would have been $0.41 higher than the earnings per diluted share we reported for fiscal 2018.

Cash and cash equivalents totaled $77,170,000 at October 31, 2018, compared to $66,307,000 at October 31, 2017. Working capital was $194,632,000 at October 31, 2018 compared to $175,526,000 at October 31, 2017. The increase in working capital was mostly driven by an increase in cash and inventories, partially offset by an increase in accounts payable.

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 and governmental actions and initiatives, including import and export restrictions and tariffs.

   
Contact: Sonja K. McClelland
  Executive Vice President, Secretary, Treasurer, & Chief Financial Officer
  317-293-5309


Hurco Companies, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per-share data)
               
  Three Months Ended
October 31,
  Twelve Months Ended
October 31,
   
    2018       2017       2018       2017  
                               
  (unaudited)    
Sales and service fees $ 83,051     $ 75,931     $ 300,671     $ 243,667  
Cost of sales and service   55,200       52,561       208,865       173,103  
Gross profit   27,851       23,370       91,806       70,564  
Selling, general and administrative expenses   16,564       14,385       58,010       49,661  
Operating income   11,287       8,985       33,796       20,903  
Interest expense   26       25       100       91  
Interest income   81       9       189       41  
Investment income   159       53       339       138  
Other expense, net   860       82       1,728       275  
Income before taxes   10,641       8,940       32,496       20,716  
Provision for income taxes   2,339       2,238       11,006       5,601  
Net income $ 8,302     $ 6,702     $ 21,490     $ 15,115  
Income per common share              
Basic $ 1.24     $ 1.01     $ 3.19     $ 2.27  
Diluted $ 1.22     $ 1.00     $ 3.15     $ 2.25  
Weighted average common shares outstanding              
Basic   6,719       6,635       6,700       6,615  
Diluted   6,792       6,723       6,771       6,680  
               
OTHER CONSOLIDATED FINANCIAL DATA Three Months Ended
October 31,
  Twelve Months Ended
October 31,
   
Operating Data:   2018       2017       2018       2017  
                               
  (unaudited)    
Gross margin   34 %     31 %     31 %     29 %
SG&A expense as a percentage of sales   20 %     19 %     19 %     20 %
Operating income as a percentage of sales   14 %     12 %     11 %     9 %
Pre-tax income as a percentage of sales   13 %     12 %     11 %     9 %
Effective tax rate   22 %     25 %     34 %     27 %
Depreciation and amortization $ 865     $ 898     $ 3,713     $ 3,616  
Capital expenditures $ 1,289     $ 1,078     $ 5,863     $ 4,445  
               
Balance Sheet Data: 10/31/2018   10/31/2017        
Working capital $ 194,632     $ 175,526          
Days sales outstanding (unaudited)   47       46          
Inventory turns (unaudited)   1.6       1.5          
Capitalization              
Total debt $ 1,434     $ 1,507          
Shareholders' equity   222,853       203,085          
Total $ 224,287     $ 204,592          


Hurco Companies, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per-share data)
  October 31,   October 31,
    2018       2017  
ASSETS      
Current assets:      
Cash and cash equivalents $ 77,170     $ 66,307  
Accounts receivable, net   54,414       50,094  
Inventories, net   137,609       119,948  
Derivative assets   3,085       596  
Prepaid expenses   7,332       7,913  
Other   1,825       1,557  
Total current assets   281,435       246,415  
Property and equipment:      
Land   868       841  
Building   7,352       7,352  
Machinery and equipment   26,840       25,652  
Leasehold improvements   3,801       3,503  
    38,861       37,348  
Less accumulated depreciation and amortization   (25,902 )     (25,167 )
Total property and equipment   12,959       12,181  
Non-current assets:      
Software development costs, less accumulated amortization   7,452       6,226  
Goodwill   2,377       2,440  
Intangible assets, net   938       1,076  
Deferred income taxes   2,234       2,339  
Investments and other assets, net   8,012       7,131  
Total non-current assets   21,013       19,212  
Total assets $ 315,407     $ 277,808  
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities:      
Accounts payable $ 57,518     $ 47,638  
Derivative liabilities   2,020       1,732  
Accrued payroll and employee benefits   14,032       11,210  
Accrued income taxes   5,180       2,362  
Accrued expenses   4,122       4,668  
Accrued warranty   2,497       1,772  
Short-term debt   1,434       1,507  
Total current liabilities   86,803       70,889  
Non-current liabilities:      
Accrued tax liability   2,194       117  
Deferred credits and other obligations   3,557       3,717  
Total non-current liabilities   5,751       3,834  
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;      
6,891,508 and 6,799,006 shares issued; and 6,723,160 and 6,641,197 shares outstanding,      
as of October 31, 2018 and October 31, 2017, respectively   672       664  
Additional paid-in capital   64,185       61,344  
Retained earnings   167,859       149,267  
Accumulated other comprehensive loss   (9,863 )     (8,190 )
Total shareholders' equity   222,853       203,085  
Total liabilities and shareholders' equity $ 315,407     $ 277,808