News Release

INDIANAPOLIS, Sept. 06, 2019 (GLOBE NEWSWIRE) -- Hurco Companies, Inc. (Nasdaq Global Select Market: HURC) today reported results for the third fiscal quarter ended July 31, 2019. Hurco recorded net income of $3,491,000, or $0.51 per diluted share, for the third quarter of fiscal 2019 compared to net income of $6,500,000, or $0.95 per diluted share, for the corresponding period in fiscal 2018. For the nine months of fiscal 2019, Hurco reported net income of $15,397,000, or $2.24 per diluted share, compared to $13,188,000, or $1.93 per diluted share, for the corresponding period in fiscal 2018.

Sales and service fees for the third quarter of fiscal 2019 were $58,501,000, a decrease of $20,251,000, or 26%, compared to the corresponding prior year period and included an unfavorable currency impact of $1,870,000, or 2%, when translating foreign sales to U.S. dollars for financial reporting purposes. Sales and service fees for the nine months of fiscal 2019 were $203,388,000, a decrease of $14,232,000, or 7%, compared to the corresponding period in fiscal 2018, and included an unfavorable currency impact of $7,270,000, or 3%, when translating foreign sales to U.S. dollars for financial reporting purposes.

The following table sets forth net sales and service fees by geographic region for the third quarter and nine months ended July 31, 2019 and 2018 (dollars in thousands):

	Three Months Ended												Nine Months Ended
	July 31,												July 31,
		2019			2018		$ Change			% Change				2019			2018		$ Change			% Change
Americas	$	21,044		$	19,478		$	1,566		8	%		$	74,030		$	62,161		$	11,869		19	%
Europe		30,363			44,146			(13,783	)	(31	%)			104,178			120,710			(16,532	)	(14	%)
Asia Pacific		7,094			15,128			(8,034	)	(53	%)			25,180			34,749			(9,569	)	(28	%)
Total	$	58,501		$	78,752		$	(20,251	)	(26	%)		$	203,388		$	217,620		$	(14,232	)	(7	%)

Sales in the Americas for the third quarter and nine months of fiscal 2019 increased by 8% and 19%, respectively, compared to the corresponding periods in fiscal 2018. The increases in sales for the third quarter and nine months of fiscal 2019 were primarily attributable to sales of vertical milling machines from a U.S. machine tool distributor acquired by Hurco in the fourth quarter of fiscal 2018 located in California, one of the largest machine tool markets in the U.S., and increased customer demand for Hurco, Milltronics and Takumi vertical milling machines in the U.S.

European sales for the third quarter and nine months of fiscal 2019 decreased by 31% and 14%, respectively, compared to the corresponding period in fiscal 2018. Sales for the third quarter and nine months of fiscal 2019 included an unfavorable currency impact of 4% and 5%, respectively, when translating foreign sales to U.S. dollars for financial reporting purposes. The decreases in European sales for the third quarter and nine months of fiscal 2019 were primarily attributable to a reduced volume of shipments of Hurco vertical milling machines in Germany and the United Kingdom.

Asian Pacific sales for the third quarter and nine months of fiscal 2019 decreased by 53% and 28%, respectively, compared to the corresponding periods in fiscal 2018. The decrease in Asian Pacific sales for each of the third quarter and nine months of fiscal 2019 was primarily attributable to decreased shipments of Hurco vertical milling machines and Takumi bridge mill machines in China and an unfavorable currency impact of 2% and 3%, respectively, when translating foreign sales to U.S. dollars for financial reporting purposes.

Orders for the third quarter of fiscal 2019 were $52,982,000, a decrease of $23,009,000, or 30%, compared to the corresponding period in fiscal 2018, and included an unfavorable currency impact of $1,820,000, or 2%, when translating foreign orders to U.S. dollars. Orders for the nine months of fiscal 2019 were $188,196,000, a decrease of $44,626,000, or 19%, compared to the corresponding period in fiscal 2018, and included an unfavorable currency impact of $7,192,000, or 3%, 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, 2019 and 2018 (dollars in thousands):

	Three Months Ended												Nine Months Ended
	July 31,												July 31,
		2019			2018		$ Change			% Change				2019			2018		$ Change			% Change
Americas	$	19,749		$	21,522		$	(1,773	)	(8	%)		$	64,747		$	62,905		$	1,842		3	%
Europe		27,035			44,635			(17,600	)	(39	%)			97,185			134,945			(37,760	)	(28	%)
Asia Pacific		6,198			9,834			(3,636	)	(37	%)			26,264			34,972			(8,708	)	(25	%)
Total	$	52,982		$	75,991		$	(23,009	)	(30	%)		$	188,196		$	232,822		$	(44,626	)	(19	%)

Michael Doar, Chief Executive Officer, stated, "The global market for machine tools is seeing the impact of uncertainty related to trade negotiations. Whether impacted directly or indirectly, machine tool suppliers, builders, distributors and customers are all faced with an element of pricing pressure and uncertainty that ultimately impacts the consumption of machine tools. We have successfully survived cycles in demand many times during our fifty-year history and understand the importance of staying focused on the future by continuing to invest in R&D to develop new technologies for our machine tools that can help make our customers more productive and more profitable. This month we will showcase three product lines (Hurco, Milltronics and Takumi) at EMO (Hanover, Germany) and Westec (California, USA), which are two key markets in our industry. I am confident in our ability to stay focused on the future by investing in the development of new technologies, expanding our geographic footprint, and acquiring innovative products while exercising financial discipline that will position us to grow our business for the future.”

Orders in the Americas for the third quarter of fiscal 2019 decreased by 8%, compared to the corresponding period in fiscal 2018, due primarily to decreased customer demand in the U.S. for Hurco vertical milling machines, partially offset by an increase in orders for Takumi vertical milling machines and vertical milling machines sold by the newly acquired distributor in California. Orders in the Americas for the nine months of fiscal 2019 increased by 3% due to increased customer demand for Takumi vertical milling machines and vertical milling machines sold by the newly acquired distributor.

European orders for the third quarter and nine months of fiscal 2019 decreased by 39% and 28%, respectively, compared to the corresponding prior year periods, and included an unfavorable currency impact of 4% in each period when translating foreign orders to U.S. dollars. The year-over-year decreases in orders were driven primarily by decreased customer demand for Hurco vertical milling machines in Germany, the United Kingdom and France, as well as a decrease in customer demand for electro-mechanical components and accessories manufactured by our wholly owned subsidiary in Italy, LCM Precision Technology S.r.l.

Asian Pacific orders for the third quarter of fiscal 2019 decreased by 37%, compared to the corresponding prior year period and included an unfavorable currency impact of 2% when translating foreign orders to U.S. dollars. The decrease in orders for the third quarter of fiscal 2019 was mainly the result of decreased customer demand for Hurco vertical milling machines in India and Southeast Asia and Takumi bridge mill machines in China. Asian Pacific orders for the nine months of fiscal 2019 decreased by 25%, compared to the corresponding prior year period and included an unfavorable currency impact of 4% when translating foreign orders to U.S. dollars. The year-over-year decrease in orders was primarily due to decreased customer demand for Hurco and Takumi machines in China and India.

Gross profit for the third quarter of fiscal 2019 was $17,189,000, or 29% of sales, compared to $24,521,000, or 31% of sales, for the corresponding prior year period. Gross profit for the nine months of fiscal 2019 was $60,968,000, or 30% of sales, compared to $63,955,000, or 29% of sales, for the corresponding prior year period. The gross profit for the third quarter and nine months of fiscal 2019 remained generally stable at approximately 30%, despite the reduction in sales volume year over year, due to an increased mix of larger, higher-priced vertical milling machine sales and margin contribution from vertical milling machine sales from the newly acquired distributor.

Selling, general and administrative expenses for the third quarter of fiscal 2019 were $12,592,000, or 22% of sales, compared to $15,160,000, or 19% of sales, in the corresponding period in fiscal 2018, and included a favorable currency impact of $278,000 when translating foreign expenses to U.S. dollars for financial reporting purposes. Selling, general and administrative expenses for the nine months of fiscal 2019 were $40,617,000, or 20% of sales, compared to $41,446,000, or 19% of sales, in the prior year period and included a favorable currency impact of $1,236,000 when translating foreign expenses to U.S. dollars for financial reporting purposes. The decrease in year-over-year selling, general and administrative expenses in each period was primarily related to decreased variable employee compensation and other operating expense reductions implemented during the year, partially offset by increased operating expenses associated with the newly acquired distributor.

The effective tax rate for the third quarter of fiscal 2019 was 25%, compared to 28% in the corresponding prior year period. The year-over-year decrease in the effective tax rate for the third quarter was primarily due to a shift in taxable income and loss among the various geographic regions. The effective tax rate for the nine months of fiscal 2019 was 28%, compared to 40% in the corresponding prior year period. The year-over-year decrease in the effective tax rate for the nine months was primarily due to one-time charges of $2.9 million related to the U.S. Tax Cuts and Jobs Act of 2017 recorded in the first quarter of fiscal 2018. The impact of these one-time charges increased the effective tax rate by approximately 39% for the first quarter of fiscal 2018. 

Cash and cash equivalents totaled $66,103,000 at July 31, 2019, compared to $77,170,000 at October 31, 2018. Working capital was $206,667,000 at July 31, 2019, compared to $194,632,000 at October 31, 2018. The increase in working capital was primarily due to an increase in inventories and decreases in accounts payable and accrued payroll and employee benefits.

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, governmental actions and initiatives, including import and export restrictions and tariffs,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 other risks and uncertainties discussed more fully under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended October 31, 2018, and in our subsequent filings with the Securities and Exchange Commission. Weexpressly 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, 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 July 31,								Nine Months Ended July 31,
		2019				2018				2019				2018
	(unaudited)								(unaudited)
Sales and service fees	$	58,501			$	78,752			$	203,388			$	217,620
Cost of sales and service		41,312				54,231				142,420				153,665
Gross profit		17,189				24,521				60,968				63,955
Selling, general and administrative expenses		12,592				15,160				40,617				41,446
Operating income		4,597				9,361				20,351				22,509
Interest expense		18				29				44				74
Interest income		169				78				350				108
Investment income (loss)		(25	)			58				346				180
Other income (expense), net		(77	)			(457	)			483				(868	)
Income before taxes		4,646				9,011				21,486				21,855
Provision for income taxes		1,155				2,511				6,089				8,667
Net income	$	3,491			$	6,500			$	15,397			$	13,188
Income per common share
Basic	$	0.51			$	0.96			$	2.26			$	1.95
Diluted	$	0.51			$	0.95			$	2.24			$	1.93
Weighted average common shares outstanding
Basic		6,767				6,717				6,756				6,694
Diluted		6,813				6,788				6,815				6,774
Dividends per share	$	0.12			$	0.11			$	0.35			$	0.32
OTHER CONSOLIDATED FINANCIAL DATA	Three Months Ended July 31,								Nine Months Ended July 31,
Operating Data:		2019				2018				2019				2018
	(unaudited)								(unaudited)
Gross margin		29	%			31	%			30	%			29	%
SG&A expense as a percentage of sales		22	%			19	%			20	%			19	%
Operating income as a percentage of sales		8	%			12	%			10	%			10	%
Pre-tax income as a percentage of sales		8	%			11	%			11	%			10	%
Effective tax rate		25	%			28	%			28	%			40	%
Depreciation and amortization	$	916			$	937			$	2,761			$	2,848
Capital expenditures	$	1,783			$	1,678			$	4,033			$	4,574
Balance Sheet Data:	7/31/2019				10/31/2018
Working capital	$	206,667			$	194,632
Days sales outstanding (unaudited)		55				47
Inventory turns (unaudited)		1.4				1.6
Capitalization
Total debt	$	-			$	1,434
Shareholders' equity		235,957				222,853
Total	$	235,957			$	224,287

Hurco Companies, Inc.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
	July 31,				October 31,
		2019				2018
ASSETS	(unaudited)				(audited)
Current assets:
Cash and cash equivalents	$	66,103			$	77,170
Accounts receivable, net		38,088				54,414
Inventories, net		153,700				137,609
Derivative assets		1,956				3,085
Prepaid expenses		8,535				7,332
Other		2,395				1,825
Total current assets		270,777		-		281,435
Investment income (loss)
Land		868				868
Building		7,352				7,352
Machinery and equipment		27,993				26,840
Leasehold improvements		4,629				3,801
		40,842		-		38,861
Less accumulated depreciation and amortization		(27,314	)			(25,902	)
Total property and equipment		13,528				12,959
Non-current assets:
Software development costs, less accumulated amortization		8,129				7,452
Goodwill		2,332				2,377
Intangible assets, net		845				938
Deferred income taxes		1,983				2,234
Investments and other assets, net		8,295				8,012
Total non-current assets		21,584				21,013
Total assets	$	305,889			$	315,407
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	45,183			$	57,518
Derivative liabilities		663				2,020
Accrued payroll and employee benefits		9,882				14,032
Accrued income taxes		1,888				5,180
Accrued expenses and other		4,404				4,122
Accrued warranty		2,090				2,497
Short-term debt		-				1,434
Total current liabilities		64,110				86,803
Non-current liabilities:
Accrued tax liability		1,914				2,194
Deferred credits and other obligations		3,908				3,557
Total non-current liabilities		5,822				5,751
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;
6,967,719 and 6,891,508 shares issued and 6,767,237 and 6,723,160 shares outstanding,
as of July 31, 2019 and October 31, 2018, respectively		677				672
Additional paid-in capital		65,778				64,185
Retained earnings		180,873				167,859
Accumulated other comprehensive loss		(11,371	)			(9,863	)
Total shareholders' equity		235,957				222,853
Total liabilities and shareholders' equity	$	305,889			$	315,407

Source: Hurco Companies, Inc.