• Hurco Reports Third Quarter Results for Fiscal 2021

    Source: Nasdaq GlobeNewswire / 03 Sep 2021 08:00:00   America/New_York

    INDIANAPOLIS, Sept. 03, 2021 (GLOBE NEWSWIRE) -- Hurco Companies, Inc. (Nasdaq: HURC) today reported results for the third fiscal quarter ended July 31, 2021. Hurco recorded net income of $1,568,000, or $0.23 per diluted share, for the third quarter of fiscal 2021, compared to net income of $2,162,000 or $0.32 per diluted share, for the corresponding period in fiscal 2020. For the nine months of fiscal 2021, Hurco reported net income of $4,668,000, or $0.70 per diluted share, compared to a net loss of $2,658,000, or $(0.39) per diluted share, for the corresponding period in fiscal 2020.

    Sales and service fees for the third quarter of fiscal 2021 were $54,178,000, an increase of $8,796,000, or 19%, compared to the corresponding prior year period, and included a favorable currency impact of $2,287,000, or 5%, when translating foreign sales to U.S. dollars for financial reporting purposes. Sales and service fees for the nine months of fiscal 2021 were $166,213,000, an increase of $40,045,000, or 32%, compared to the corresponding prior year period, and included a favorable currency impact of $6,677,000, or 5%, when translating foreign sales to U.S. dollars for financial reporting purposes. During the nine months of fiscal 2021, sales increased year-over-year in all regions as countries began to lift the government-mandated COVID-19 stay-at-home orders or other similar operating restrictions.

    Greg Volovic, Chief Executive Officer, stated, “Hurco’s order levels continue an upward trend. At $66.7 million, global orders increased for the fourth consecutive quarter and represented the second consecutive quarter of orders exceeding $65.0 million - and more in line with pre-pandemic levels. Hurco’s orders outpaced sales in all geographic regions, a trend we typically see during periods of growing global machine tool growth.  The increase in orders this quarter compared to the same quarter in 2020 in our European regions, where we typically sell more higher-performance and higher-margin machine tool products, was particularly robust.  Even with challenges associated with vendor delays and transportation channel capacity, Hurco sales for the third fiscal quarter and fiscal year to date have also increased 19% and 32% over prior year.  I am also very proud of our engineering team for accomplishing a major milestone in providing multi-axis, multi-spindle turning center machine control to our core single platform WinMax control software.  We will build on this success and remain focused on leveraging the strength of our balance sheet to continue to fund innovations in product development, and advanced software capabilities for the next generation machining centers.”

    The following table sets forth net sales and service fees by geographic region for the third quarter and nine months ended July 31, 2021 and 2020 (dollars in thousands):

              
     Three Months Ended
    July 31,
     Nine Months Ended
    July 31,
      2021 2020$
    Change
    %
    Change
      2021 2020$
    Change
    %
    Change
    Americas$19,150$17,870$1,280 7% $62,121$52,045$10,07619%
    Europe 28,403 19,538 8,865 45%  81,598 54,359 27,23950%
    Asia Pacific 6,625 7,974 (1,349)-17%  22,494 19,764 2,73014%
    Total$54,178$45,382$8,796 19% $166,213$126,168$40,04532%
                       

    Sales in the Americas for the third quarter and nine months of fiscal 2021 increased by 7% and 19%, respectively, compared to the corresponding periods in fiscal 2020. The increases in sales in the Americas for the third quarter and nine months of fiscal 2021 were due to an increased volume of machine shipments, both Hurco and Milltronics, and an increase in sales of ProCobots automation solutions. The improved sales volume of machines primarily reflected increased shipments of Hurco VM and VMX machines as well as Milltronics toolroom machines.

    European sales for the third quarter and nine months of fiscal 2021 increased by 45% and 50%, respectively, compared to the corresponding periods in fiscal 2020, and included a favorable currency impact of 10% for each period, when translating foreign sales to U.S. dollars for financial reporting purposes. The year-over-year increases in European sales were attributable to increased volume of shipments of Hurco and Takumi machines in Germany, the United Kingdom, and Italy, as well as increased shipment of machine tool components and accessories manufactured by our wholly owned subsidiary, LCM Precision Technology S.r.l. (“LCM”). The improved sales volume of machines was primarily attributable to increased shipments of Hurco Lathes, VM and VMX machines.

    Asian Pacific sales for the third quarter and nine months of fiscal 2021 decreased by 17% and increased by 14%, respectively, compared to the corresponding periods in fiscal 2020, and included a favorable currency impact of 5% and 6%, respectively, when translating foreign sales to U.S. dollars for financial reporting purposes. The year-over-year decrease in Asian Pacific sales for the third quarter of fiscal 2021 was primarily due to decreased sales of Hurco and Takumi machines in China. The year-over-year increase in Asian Pacific sales for the nine months of fiscal 2021 was primarily attributable to increased shipments of Hurco machines in India and Southeast Asia.

    Orders for the third quarter of fiscal 2021 were $66,717,000, an increase of $30,626,000, or 85%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of $2,889,000, or 8%, when translating foreign orders to U.S. dollars. Orders for the nine months of fiscal 2021 were $189,755,000, an increase of $71,532,000, or 61%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of $8,002,000, or 7%, when translating foreign orders to U.S. dollars.

    The following table sets forth new orders booked by geographic region for the third quarter and nine months ended July 31, 2021 and 2020 (dollars in thousands):

              
     Three Months Ended
    July 31,
     Nine Months Ended
    July 31,
      2021 2020$
    Change
    %
    Change
      2021 2020$
    Change
    %
    Change
    Americas$23,837$16,315$7,52246% $66,988$50,400$16,58833%
    Europe 33,998 14,155 19,843140%  94,194 51,476 42,71883%
    Asia Pacific 8,882 5,621 3,26158%  28,573 16,347 12,22675%
    Total$66,717$36,091$30,62685% $189,755$118,223$71,53261%
                      

    Orders in the Americas for the third quarter and nine months of fiscal 2021 increased by 46% and 33%, respectively, compared to the corresponding periods in fiscal 2020. The increased order levels reflected a higher demand for all categories of Hurco, Takumi, and Milltronics machines as well as increased demand for ProCobots automation solutions.

    European orders for the third quarter and nine months of fiscal 2021 increased by 140% and 83%, respectively, compared to the corresponding prior year periods, and included a favorable currency impact of 17% and 13%, respectively, when translating foreign orders to U.S. dollars. The year-over-year increases in orders were driven primarily by increased customer demand for Hurco and Takumi machines in Germany, the United Kingdom, France, and Italy, as well as increased demand for LCM machine tool components and accessories.

    Asian Pacific orders for the third quarter and nine months of fiscal 2021 increased by 58% and 75%, respectively, compared to the corresponding prior year periods, primarily due to increased customer demand for Hurco vertical milling machines and Takumi machines in China and Southeast Asia. Asian Pacific orders for the third quarter and nine months of fiscal 2021 included a favorable currency impact of 9% and 10%, respectively, when translating foreign orders to U.S. dollars.

    Gross profit for the third quarter of fiscal 2021 was $12,974,000, or 24% of sales, compared to $11,069,000, or 24% of sales, for the corresponding prior year period. Gross profit for the nine months of fiscal 2021 was $39,315,000, or 24% of sales, compared to $26,937,000, or 21% of sales, for the corresponding prior year period. The year-over-year increase in gross profit as a percentage of sales in the nine month period reflected improved leverage of fixed overhead costs through higher levels of machine sales, improved pricing due to changes in demand and normalized inventory levels, and the favorable impact of foreign currency translation compared to the corresponding prior year periods. Additionally, approximately $406,000, and $1,243,000 of the gross profit improvement for the third quarter and nine months of fiscal 2021, respectively, was a result of recording the employee retention credit extended to the Company under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act and the American Rescue Plan Act of 2021 (the “employee retention credit”). The improvement in gross profit as a percentage of sales is partially offset by recent inflationary increases in cost of materials and high costs associated with transporting finished goods on a global basis.

    Selling, general, and administrative expenses for the third quarter of fiscal 2021 were $10,331,000, or 19% of sales, compared to $9,627,000, or 21% of sales, in the corresponding fiscal 2020 period, and included an unfavorable currency impact of $384,000, when translating foreign expenses to U.S. dollars for financial reporting purposes. Selling, general, and administrative expenses for the nine months of fiscal 2021 were $32,172,000, or 19% of sales, compared to $31,072,000, or 25% of sales, in the corresponding fiscal 2020 period, and included an unfavorable currency impact of $1,133,000, when translating foreign expenses to U.S. dollars for financial reporting purposes. Selling, general and administrative expenses for the third quarter and nine months of fiscal 2021 continued to trend downward as a percentage of sales from fiscal 2020 as a result of the cost management plans implemented during fiscal 2020 and continued during fiscal 2021. Additionally, approximately $583,000, and $1,672,000 of the selling, general, and administrative expense reduction for the third quarter and nine months of fiscal 2021, respectively, was a result of recording the employee retention credit.

    Operating income for the third quarter of fiscal 2021 was $2,643,000, or 5% of sales, compared to $1,442,000, or 3% of sales, for the corresponding prior year period.   Operating income for the nine months of fiscal 2021 was $7,143,000, or 4% of sales, compared to an operating loss of $4,135,000, or (3%) of sales, for the corresponding prior year period. The year-over-year increases in operating income for the third quarter and nine month period were primarily due to increases in the sales volume of Hurco, Takumi and Milltronics machines, LCM components and accessories and ProCobots automation solutions. As discussed above, operating income for the third quarter and nine months of fiscal 2021 included a benefit of $989,000 and $2,915,000, respectively, related to the employee retention credit recorded during fiscal 2021.

    The effective tax rates for the third quarter and nine months of fiscal 2021 were 41% and 36%, respectively, compared to (76%) and 46% in the corresponding prior year periods. The year-over-year change in the effective tax rate was primarily due to changes in geographic mix of income and loss that includes jurisdictions with differing tax rates, various discrete income tax expense items, and more specifically related to the prior year periods, and changes in income tax laws to address the unfavorable impact of the COVID-19 pandemic.

    Cash and cash equivalents totaled $80,471,000 at July 31, 2021, compared to $57,859,000 at October 31, 2020. Working capital was $207,303,000 at July 31, 2021, compared to $200,974,000 at October 31, 2020. The increase in working capital was primarily driven by the increase in cash and cash equivalents and accounts receivable, which was partially offset by increases in accounts payable and customer deposits.

    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 Company also produces high-value machine tool components and accessories and provides automation solutions that can be integrated with any 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, the Netherlands, Poland, Singapore, 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 impact of the COVID-19 pandemic and other public health epidemics on the global economy, 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, governmental actions and initiatives, including import and export restrictions and tariffs, fluctuations in foreign currency exchange rates, innovations by competitors, the United Kingdom’s withdrawal from the European Union (Brexit), our ability to develop new products and expand product offerings, the ability to protect our intellectual property, quality and delivery performance by our vendors, increases in prices of raw materials, loss of key personnel, our ability to effectively integrate acquisitions, failure to comply with data privacy and security regulations, breaches of our network and system security measures, obsolescence of inventory or impairment of assets due to changes in technology or market demand, negative or unforeseen tax consequences, changes in the LIBOR rate, and other risks and uncertainties discussed more fully under the caption “Risk Factors” in our filings with the Securities and Exchange Commission. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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


     
    Hurco Companies, Inc.
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    (In thousands, except per share data)
            
     Three Months Ended July 31, Nine Months Ended July 31,
      2021   2020   2021   2020 
     (unaudited) (unaudited)
    Sales and service fees$54,178  $45,382  $166,213  $126,168 
    Cost of sales and service 41,204   34,313   126,898   99,231 
         Gross profit 12,974   11,069   39,315   26,937 
    Selling, general and administrative expenses 10,331   9,627   32,172   31,072 
         Operating income (loss) 2,643   1,442   7,143   (4,135)
    Interest expense 2   19   23   69 
    Interest income 17   14   33   104 
    Investment income 8   11   154   76 
    Other income (expense), net 11   (223)  (37)  (933)
         Income (loss) before taxes 2,677   1,225   7,270   (4,957)
    Provision (benefit) for income taxes 1,109   (937)  2,602   (2,299)
         Net income (loss)$1,568  $2,162  $4,668  $(2,658)
            
    Income (loss) per common share       
       Basic$0.23  $0.32  $0.70  $(0.39)
       Diluted$0.23  $0.32  $0.70  $(0.39)
    Weighted average common shares outstanding       
       Basic 6,601   6,595   6,591   6,705 
       Diluted 6,618   6,604   6,605   6,705 
            
    Dividends per share$0.14  $0.13  $0.41  $0.38 
            
            
    OTHER CONSOLIDATED FINANCIAL DATA       
     Three Months Ended July 31, Nine Months Ended July 31,
    Operating Data: 2021   2020   2021   2020 
     (unaudited) (unaudited)
    Gross margin 24%  24%  24%  21%
    SG&A expense as a percentage of sales 19%  21%  19%  25%
    Operating income (loss) as a percentage of sales 5%  3%  4%  -3%
    Pre-tax income (loss) as a percentage of sales 5%  3%  4%  -4%
    Effective tax rate 41%  -76%  36%  46%
    Depreciation and amortization$1,034  $1,246  $3,150  $3,418 
    Capital expenditures$552  $325  $1,834  $1,170 
            
    Balance Sheet Data:7/31/2021 10/31/2020    
    Working capital$207,303  $200,974     
    Days sales outstanding (unaudited) 43   45     
    Inventory turns (unaudited) 1.1   0.9     
    Capitalization       
    Total debt --   --     
    Shareholders' equity 236,927   231,148     
    Total$236,927  $231,148     
            



    Hurco Companies, Inc.
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (In thousands, except share and per share data)
        
     July 31, October 31,
      2021   2020 
    ASSETS(unaudited)  
    Current assets:   
    Cash$80,471  $57,859 
    Accounts receivable, net 31,798   27,686 
    Inventories, net 149,326   149,864 
    Derivative assets 444   968 
    Prepaid assets 14,088   13,803 
    Other 191   1,231 
    Total current assets 276,318   251,411 
        
    Property and equipment:   
    Land 868   868 
    Building 7,352   7,352 
    Machinery and equipment 29,663   29,195 
    Leasehold improvements 5,152   4,754 
      43,035   42,169 
    Less accumulated depreciation and amortization (32,047)  (30,248)
    Total property and equipment, net 10,988   11,921 
        
    Non-current assets:   
    Software development costs, less accumulated amortization 7,660   7,840 
    Intangible assets, net 1,645   1,846 
    Operating lease - right of use assets, net 11,105   11,748 
    Deferred income taxes 2,682   2,479 
    Investments and other assets, net 9,348   8,410 
    Total non-current assets 32,440   32,323 
    Total assets$319,746  $295,655 
        
    LIABILITIES AND SHAREHOLDERS' EQUITY   
    Current liabilities:   
    Accounts payable$41,857  $27,643 
    Customer deposits 8,194   5,356 
    Derivative liabilities 909   872 
    Operating lease liabilities 4,245   4,132 
    Accrued payroll and employee benefits 7,218   6,931 
    Accrued income taxes 731   285 
    Accrued expenses 4,529   4,018 
    Accrued warranty expenses 1,332   1,200 
    Total current liabilities 69,015   50,437 
        
    Non-current liabilities:   
    Deferred income taxes 73   131 
    Accrued tax liability 1,819   1,918 
    Operating lease liabilities 7,257   7,989 
    Deferred credits and other 4,655   4,032 
    Total non-current liabilities 13,804   14,070 
        
    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; 6,674,741 and 6,636,906 shares issued and 6,601,406 and 6,565,163 shares outstanding, as of July 31, 2021 and October 31, 2020, respectively 660   657 
    Additional paid-in capital 62,876   60,997 
    Retained earnings 174,412   172,484 
    Accumulated other comprehensive loss (1,021)  (2,990)
    Total shareholders' equity 236,927   231,148 
    Total liabilities and shareholders' equity$319,746  $295,655 
        


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