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Hurco Reports Third Quarter Results for Fiscal 2021
Source: Nasdaq GlobeNewswire / 03 Sep 2021 07:00:00 America/Chicago
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%
Change2021 2020 $
Change%
ChangeAmericas $ 19,150 $ 17,870 $ 1,280 7 % $ 62,121 $ 52,045 $ 10,076 19 % Europe 28,403 19,538 8,865 45 % 81,598 54,359 27,239 50 % Asia Pacific 6,625 7,974 (1,349 ) -17 % 22,494 19,764 2,730 14 % Total $ 54,178 $ 45,382 $ 8,796 19 % $ 166,213 $ 126,168 $ 40,045 32 % 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%
Change2021 2020 $
Change%
ChangeAmericas $ 23,837 $ 16,315 $ 7,522 46 % $ 66,988 $ 50,400 $ 16,588 33 % Europe 33,998 14,155 19,843 140 % 94,194 51,476 42,718 83 % Asia Pacific 8,882 5,621 3,261 58 % 28,573 16,347 12,226 75 % Total $ 66,717 $ 36,091 $ 30,626 85 % $ 189,755 $ 118,223 $ 71,532 61 % 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 
