Hurco Reports Third Quarter Results
18 August 1999
Hurco Reports Third Quarter Results
Summary Results
(Dollars in millions,
except per share amounts)
Third Quarter Nine Months
Ended July 31, Ended July 31,
1999 1998 % Inc(Dec) 1999 1998 %Inc(Dec)
Sales and
service fees $20.8 $23.4 (11.1%) $63.5 $67.1 (5.4%)
Net income $.4 $1.8 (77.8%) $1.1 $8.3 (86.8%)
Earnings per share
Basic $.07 $.28 (75.0%) $.19 $1.27 (85.0%)
Diluted $.07 $.27 (74.1%) $.19 $1.23 (84.6%)
Order Intake $20.4 $22.1 (7.4%) $65.1 $70.3 (7.3%)
Backlog $8.6 $11.4 (2.5%) $8.6 $11.4 (24.6%)
INDIANAPOLIS, Aug. 18 -- Hurco Companies, Inc.
today announced that for its third fiscal quarter, which ended July 31, 1999,
the Company recorded net income of $400,000, or $.07 per share on a diluted
basis, which compares to $1.8 million, or $.27 per share, reported for the
corresponding period a year ago. For the first nine months of fiscal 1999,
net income totaled $1.1 million, or $.19 per share on a diluted basis,
compared to $8.3 million, or $1.23 per share, for the corresponding 1998
period.
The Company attributed the significant decline in third quarter and
year-to-date net income to the anticipated reduction in income from patent
licensing fees, which had aggregated $1.0 million in the corresponding third
quarter in fiscal 1998 and $6.8 million for the nine months ended
July 31, 1998. Ongoing weakness in demand for machine tools and machining
systems, particularly in the United States, was also a significant
contributing factor.
Sales and service fees for the third quarter of fiscal 1999 of
$20.8 million were approximately 11 percent lower than the $23.4 million
reported for the comparable prior year period. Sales of computerized machine
systems decreased 8.7 percent to $14.8 million. The decline reflected both a
decrease in sales activity in the 1999 third quarter and a higher level of
shipments in the third quarter of fiscal 1998, when the improved availability
of finished products permitted a reduction of backlog. Sales of stand-alone
computer control systems continued to decline due to the previously announced
repositioning of the product line. Revenues from service fees and parts
declined approximately seven percent, reflecting reduced levels of customer
activity and continued improvement in product quality.
New order bookings for the third quarter of fiscal 1999 were
$20.4 million, compared to $22.1 million for the corresponding 1998 period, a
decrease of 7.4 percent. Orders for computerized machine systems, which
constituted 70 percent of total new orders, declined $.8 million, or
5.3 percent. In Europe, the Company experienced a 17 percent decline in order
value, reflecting a 14 percent reduction in unit orders and a 2 percent
decline in the value of local currencies in relation to the U.S. dollar.
Although order rates improved in the United Kingdom, weaker market conditions
prevailed in Germany, France and Italy. Despite very weak market conditions
that have persisted since the third quarter of fiscal 1998, orders for
computerized machine systems in the United States increased 6 percent,
reflecting the market acceptance of new products introduced late in fiscal
1998. Although orders for stand-alone computer control systems continued to
be lower than in the corresponding 1998 period due to product repositioning,
orders for these products improved 12 percent over the second quarter of
fiscal 1999. Backlog was $8.6 million at July 31, 1999, compared to
$9.1 million at April 30, 1999, and $7.5 million at the end of fiscal 1998.
Brian McLaughlin, President and CEO, stated "We are pleased with the
market acceptance of our new products which enabled us to increase orders for
computerized machine systems in the United States, in spite of continued weak
market conditions. We don't expect any significant improvement in the U.S.
market during this fiscal year. Although overseas markets in the United
Kingdom and Southeast Asia appear to be improving, our markets in Germany,
France and Italy have softened recently." Mr. McLaughlin also noted,
"Although our gross profit margin of 28.5 percent was lower than the prior
year period, due to somewhat lower service revenues and the currency effects
of a stronger U.S. dollar, we believe our margins held up very well in spite
of intense price competition. Further, we reduced our operating expenses by
7.5 percent compared to the prior year period."
Mr. McLaughlin further stated, "We are continuing to focus on our product
development programs and sales organization development initiatives in order
to position the Company for future growth as our markets recover."
Hurco Companies, Inc. is an industrial automation company that designs and
produces interactive computer controls, software and computerized machine
systems 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, and has sales,
application engineering and service subsidiaries in Farmington Hills, Mich.;
High Wycombe, England; Munich, Germany; Paris, France and Singapore. Products
are sold through independent agents and distributors in the United States,
Europe and Asia. The Company also has direct sales forces in the United
States, the United Kingdom, Germany, France, and Asia.
This news release contains forward looking statements which involve known
and unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements of the machine took industry to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors
include, among others, (i) changes in general economic and business conditions
that affect demand for computerized machine systems, computer numerical
control systems and software products, (ii) changes in manufacturing markets,
(iii) innovations by competitors, (iv) quality and delivery performance by our
contract manufacturers and (v) governmental actions and initiatives including
import and export restrictions and tariffs.
For more information on Hurco via fax, free of charge, dial 1-800-PRO-INFO
and enter the ticker "HURC".
Hurco Companies, Inc.
Consolidated Statement of Operations
(In thousands, except per-share data)
Three Months Nine Months
Ended July 31, Ended July 31,
1999 1998 1999 1998
(unaudited) (unaudited)
Sales and service fees $20,783 $23,444 $63,463 $67,106
Cost of sales and service 14,868 16,464 45,686 47,716
Gross profit 5,915 6,980 17,777 19,390
Selling, general and
administrative expenses 5,152 5,573 15,839 15,951
Restructuring credit -- -- (103) --
Operating income 763 1,407 2,041 3,439
License fee income
and litigation
settlement fees, net 73 1,025 242 6,810
Interest expense 333 149 973 633
Other expense, net 9 72 115 97
Income before taxes 494 2,211 1,195 9,519
Provision for
foreign income taxes 94 381 66 1,233
Net income $400 $1,830 $1,129 $8,286
Earnings per common share
Basic $.07 $.28 $.19 $1.27
Diluted $.07 $.27 $.19 $1.23
Weighted average common
shares outstanding
Basic 5,947 6,472 5,989 6,528
Diluted 6,044 6,664 6,076 6,720
Other Consolidated Financial Data
Three Months Nine Months
1999 1998 1999 1998
Gross Margin 28.5% 29.8% 28.0% 28.9%
SG&A expense as
a percentage of sales 24.8% 23.8% 25.0% 23.8%
Operating income as
a percentage of sales 3.7% 6.0% 3.2% 5.1%
Pre-tax income as
a percentage of sales 2.4% 9.4% 1.9% 14.2%
License fees and
litigation settlement
fees, net of expenses
and foreign
withholding taxes $73 $1,025 $242 $6,234
EBITDA $1,349 $2,891 $3,673 $11,755
Depreciation and
amortization 522 531 1,505 1,603
Capital Expenditures 516 456 1,692 1,375
Balance Sheet Data 7-31-99 7-31-98 7-31-99 7-31-98
Working Capital
(ex. Short Term Debt) $33,733 $27,850 $33,733 $27,850
Days Sales Outstanding 53 55 53 55
Inventory turns 1.8 2.7 1.8 2.7
Net assets per $ of
revenue (trailing
twelve months)
Cash and temporary
investments $.04 $.08 $.04 $.08
Operating working
capital, net .34 .22 .34 .22
All other .17 .16 .17 .16
Total $.55 $.46 $.55 $.46
Hurco Companies, Inc.
Condensed Consolidated Balance Sheet
(Dollars in thousands)
July 31, October 31,
1999 1998
Assets (Unaudited) (Audited)
Current assets:
Cash and temporary investments $3,182 $3,276
Accounts receivable 14,600 18,896
Inventories 33,151 30,817
Other 1,811 2,154
Total current assets 52,744 55,143
Long-term license fees receivable 622 797
Property and equipment:
Land 761 761
Building 7,141 7,067
Machinery and equipment 10,967 11,184
Leasehold improvements 1,043 1,107
Less accumulated depreciation
and amortization (10,943) (11,037)
8,969 9,082
Software development costs,
less amortization 4,320 4,231
Other assets 3,301 2,443
$69,956 $71,696
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $11,870 $15,791
Accrued expenses 7,141 8,217
Current portion of long-term debt 1,786 1,786
Total current liabilities 20,797 25,794
Non-current liabilities:
Long-term debt 12,263 6,572
Deferred credits and other obligations 1,532 1,590
Total non-current liabilities 13,795 8,162
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;
and 5,950,459 and 6,544,831 shares
issued and outstanding, respectively 595 634
Additional paid-in capital 46,337 48,662
Accumulated deficit (6,021) (7,150)
Foreign currency translation adjustment (5,547) (4,406)
Total shareholders' equity 35,364 37,740
$69,956 $71,696