UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission File
April 30, 1995 No. 0-9143
HURCO COMPANIES, INC.
State of Incorporation IRS Employer ID
Indiana No. 35-1150732
Address of Principal Office:
One Technology Way
Indianapolis, Indiana 46268
Telephone: (317) 293-5309
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to the filing
requirements for at least the past 90 days: Yes X No
--- ---
Shares of common stock outstanding as of May 31, 1995: 5,418,442
HURCO COMPANIES, INC.
April 1995 Form 10-Q Quarterly Report
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Consolidated Statement of Operations -
three and six months ended April 30, 1995 and 1994
Consolidated Balance Sheet
as of April 30, 1995 and October 31, 1994
Consolidated Statement of Cash Flows -
three and six months ended April 30, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HURCO COMPANIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per-share data)
Three Months Ended Six Months Ended
April 30, April 30,
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
SALES AND SERVICE FEES ......... $20,687 $16,209 $39,559 $34,788
COST OF SALES AND SERVICE ...... 15,298 12,831 29,512 27,966
-------- -------- -------- -------
GROSS PROFIT .............. 5,389 3,378 10,047 6,822
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES......... 4,616 4,402 8,862 9,147
----- ----- ----- -----
OPERATING INCOME (LOSS).... 773 (1,024) 1,185 (2,325)
INTEREST EXPENSE................ (974) (793) (1,878) (1,623)
OTHER, NET...................... (38) 31 (19) (6)
----- ----- ----- -----
INCOME (LOSS) BEFORE INCOME TAXES. (239) (1,786) (712) (3,954)
INCOME TAX EXPENSE (BENEFIT).... -- -- -- --
----- ----- ----- -----
NET INCOME (LOSS)............... $ (239) $ (1,786) $ (712) $(3,954)
======== ========= ======== ========
EARNINGS (LOSS)
PER COMMON SHARE........... $ (.04) $ (.33) $ (.13) $ (.73)
======== ======== ======= =======
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING......... 5,417 5,403 5,416 5,401
===== ===== ===== =====
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
HURCO COMPANIES, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
April 30, October 31,
1995 1994
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................... $ 929 $ 1,101
Accounts receivable ......................... 15,520 14,555
Inventories ................................. 26,448 26,341
Other ....................................... 1,236 1,099
-------- --------
Total current assets .................... 44,133 43,096
-------- --------
PROPERTY AND EQUIPMENT ....................... 11,216 11,887
OTHER ASSETS ................................. 4,416 4,575
-------- --------
$ 59,765 $ 59,558
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .......................... $ 8,412 $ 8,438
Accrued expenses .......................... 7,525 8,403
Current portion of long-term debt ......... 5,195 144
-------- --------
Total current liabilities ............. 21,132 16,985
-------- --------
NON-CURRENT LIABILITIES
Long-term debt ............................. 31,408 34,669
Other long-term obligations ................ 567 576
-------- --------
31,975 35,245
-------- --------
SHAREHOLDERS' EQUITY:
Preferred stock: $100 par value per share;
40,000 shares authorized; no shares issued.
Common stock: no par value; $.10 stated value per
share; 7,500,000 shares authorized; 5,418,442
and 5,413,682 shares issued, respectively ..... 542 541
Additional paid-in capital ...................... 45,556 45,546
Accumulated deficit ............................. (35,388) (34,676)
Foreign currency translation adjustment ......... (4,052) (4,083)
------- -------
Total shareholders' equity .................. 6,658 7,328
------- -------
$ 59,765 $59,558
======= =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
HURCO COMPANIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Three Months Ended Six Months Ended
April 30, April 30,
--------------- ---------------
1995 1994 1995 1994
---- ---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................. $(239) $(1,786) $ (712) $(3,954)
Adjustments to reconcile net loss to
net cash provided by (used for)
operating activities:
Depreciation and amortization .......... 671 804 1,314 1,581
(Inc) dec in accounts receivable ....... (689) 2,542 (803) 961
(Inc) dec in inventories ............... 845 1,691 (77) 6,008
Inc (dec) in accounts payable .......... 1,084 371 (57) (703)
Inc (dec) in accrued expenses .......... (261) (911) (949) (1,731)
Other .................................. 247 28 354 (480)
------ ------ ------ ------
NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES ................... 1,658 2,739 (930) 1,682
----- ----- ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment ........ -- 207 -- 304
Purchase of property and equipment ..... (148) (139) (232) (264)
Software development costs ............. (261) (154) (484) (311)
Other .................................. (153) -- (140) --
----- ----- ----- -----
NET CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES............... (562) (86) (856) (271)
----- ----- ----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short term borrowings (repayment). (4) (451) (2) (69)
Proceeds from long-term borrowings ... 24,946 1,850 38,272 4,263
Repayment of long-term borrowings .... (26,009) (4,480) (36,548) (5,453)
Proceeds from issuance of common stock
under options......................... 7 18 11 18
------- ------- ------- ------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES................ (1,060) (3,063) 1,733 (1,241)
------- ------- ------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.. (146) (81) 119 (50)
------ ------- ------- ------
NET INCREASE (DECREASE) IN CASH..... (110) (491) (172) 120
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD.............................. 1,039 2,097 1,101 1,486
----- ----- ----- -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD.$ 929 $ 1,606 $ 929 $ 1,606
====== ======== ======= =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The condensed financial information as of April 30, 1995 and 1994 is unaudited
but includes all adjustments which the Company considers necessary for a fair
presentation of financial position, results of operations and cash flows. It is
suggested that those condensed financial statements be read in conjunction with
the financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended October 31, 1994.
2. HEDGING
The Company enters into foreign currency contracts periodically to provide a
hedge against the effect of foreign currency fluctuations on receivables
denominated in foreign currencies and net investments in foreign subsidiaries.
Gains and losses related to these contracts are recorded in the same manner as
the offsetting gains and losses related to the items being hedged.
The Company also enters into foreign currency exchange contracts to hedge
certain firm purchase and sale commitments denominated in foreign currencies
(primarily pound sterling and German marks). The purpose of these instruments is
to protect the Company from the risk that the U.S. dollar net cash inflows
resulting from the sale of products to foreign customers will be adversely
affected by changes in exchange rates. Gains and losses on these hedge contracts
are deferred and recognized as an adjustment of the cost of the related sales
transactions.
As of April 30, 1995, the U.S. dollar equivalent notional value of outstanding
foreign currency contracts was approximately $10.5 million. Deferred losses
related to hedges of future sales transactions was approximately $120,000.
Contracts outstanding at April 30, 1995, mature at various times through
November 3, 1995. Counterparties to these agreements are major financial
institutions.
3. EARNINGS PER SHARE
Earnings per share of common stock are based on the weighted average number of
common shares outstanding. No effect has been given to options outstanding under
the Company's Stock Option Plan as no dilution would result from their exercise
for the operating periods presented.
4. ACCOUNTS RECEIVABLE
The allowance for doubtful accounts was $1,093,000 as of April 30, 1995 and
$1,046,000 as of October 31, 1994.
5. INVENTORIES
Inventories, priced at the lower of cost (first-in, first-out method), or market
are summarized below (in thousands):
APRIL 30, 1995 OCTOBER 31, 1994
-------------- ----------------
Purchased parts and sub-assemblies $ 18,244 $ 15,252
Work-in-Process 3,528 3,929
Finished Goods 4,676 7,160
---------- ---------
$ 26,448 $ 26,341
========== =========
6. DEBT AGREEMENTS
Under the terms of the senior notes and bank term notes, principal installment
payments of $5.1 million become due and payable on or before February 1, 1996.
These amounts are classified as current liabilities as of April 30, 1995 in the
accompanying balance sheet.
As of May 31, 1995, the bank and senior note agreements were amended to extend
the maturity date of the bank credit facilities from February 1, 1996 to May 1,
1996 and to extend the modification of the financial debt covenants required for
the senior notes from January 31, 1996 to April 30, 1996. Accordingly, the
amounts payable under the bank credit facilities and installment payments due
subsequent to April 30, 1996, are classified as long-term debt in the
accompanying balance sheet.
In June, 1995, the Company obtained from its principal bank, a discretionary,
supplemental $2 million letter of credit authorization to support the Company's
increased machine tool sourcing capacity in the third and fourth quarters of
fiscal 1995. The supplemental facility is intended to provide for certain
supplier shipments through September 30, 1995 and will expire on January 31,
1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1995 COMPARED TO THREE MONTHS ENDED APRIL 30, 1994
Sales for the second quarter of fiscal 1995 were $4.5 million, or 28%, above
sales for the second quarter of fiscal 1994. Improvements in the availability of
machine tool products generated $3.9 million of that sales increase. Strong
worldwide demand for the Company's machine tools resulted in a 62% increase in
total new orders booked during the second quarter as compared with the
corresponding 1994 period. As a result, the Company's backlog at April 30, 1995
was $16.0 million, an increase of 50% from the $10.7 million backlog at January
31, 1995.
In the United States, sales for the second quarter of 1995 increased $1.8
million over 1994. Machine tools sales increased $1.2 million because of
availability of, and demand for, the Company's new "Advantage" series product
line; control sales increased approximately $600,000 primarily due to greater
demand for the Autobend products. Machine tool orders for the second quarter of
1995 were 70% higher than the same period one year ago.
European revenues, which accounted for 32% of total sales in the quarter
compared to 24% for the prior year quarter, increased $2.7 million over those in
1994. Approximately $600,000 of the increase represents the favorable foreign
exchange effect when translating sales made in European currencies to U.S.
dollars. The balance of the increase resulted from continued strengthening of
the economies in both the United Kingdom and Germany and enhanced product
availability. Machine tool orders for the second quarter of 1995 were 56% higher
than the same 1994 period.
Cost of sales and services for the second quarter of 1995 were $2.5 million
above those for the second quarter of 1994, resulting in a gross profit margin
of 26.1% in the 1995 period compared to 20.8% for the 1994 period and to 24.7%
in the first quarter of 1995. The improving gross profit margins reflect cost
reductions achieved as well as the transition to higher margin products and the
benefits of favorable foreign exchange rates with respect to foreign sales.
Selling, general and administrative expenses for the second quarter of 1995
increased 5% from those for the comparable 1994 period. Over two-thirds of the
increase resulted from the foreign exchange effect of translating European
currencies.
Because of higher revenues and improvement in the gross profit margin, the
Company had operating income of $773,000 for the second quarter of 1995 compared
to an operating loss of $1.0 million in the same quarter of 1994.
Interest expense for the second quarter increased 23% over the amount reported
in 1994 due to increases in interest rates and amortization of the fees paid
under the Company's amended credit agreements.
The Company manages its foreign currency exposure through the use of negotiated
currency risk sharing arrangements with certain foreign vendors with whom it has
significant purchase commitments, and through the use of foreign currency
contracts as described in Note 2 to the Consolidated Financial Statements. The
results of the program achieved management's objectives for the three months
ended April 30, 1995 and 1994.
SIX MONTHS ENDED APRIL 30, 1995 COMPARED TO SIX MONTHS ENDED APRIL 30, 1994
Sales for the first half of fiscal 1995 were $4.8 million, or 14%, above the
sales level for the same period of fiscal 1994. Substantially all of that
increase was the result of strengthening European economies and improved machine
tool product availability in Europe. Approximately $1.3 million of the increase
represents the favorable foreign exchange effect when translating sales made in
European currencies to U.S. dollars.
Continuing strong demand for the Company's new family of machine tools, controls
and related software products resulted in a 47% increased in total worldwide new
orders booked during the six-month period of 1995 compared to the corresponding
period of 1994.
Cost of sales and services for the first half of 1995 were $1.5 million above
the same period of 1994, resulting in a gross profit margin of 25.4% for the
period compared to 19.6% for the 1994 period. The improved gross profit margins
reflect cost reductions achieved along with the transition to higher margin
products and the benefits of favorable foreign exchange rates with respect to
foreign sales.
Selling, general and administrative expenses for the first half of 1995
decreased approximately $300,000, or 3%, from the comparable 1994 period. The
total improvement of approximately $600,000 resulting from previously
implemented reductions in operating expenses was offset by approximately
$300,000 of unfavorable foreign exchange effect when translating expenses of
foreign operations to U.S. dollars.
The Company had operating income of $1.2 million for the first six months of
1995 compared to the $2.3 million operating loss for the 1994 period because of
the improvements in revenues and gross profit margins combined with the
operating expense reductions.
Interest expense for the first half of fiscal 1995 was approximately $250,000
higher than the same 1994 period despite a decrease of approximately $1.3
million in average borrowings due to increases in the interest rates and
amortization of the fees paid under the Company's amended credit agreement.
The Company manages its foreign currency exposure through the use of negotiated
currency risk sharing arrangements with certain foreign vendors with whom it has
significant purchase commitments, and through the use of foreign currency
contracts as described in Note 2 to the Consolidated Financial Statements. The
results of the program achieved management's objectives for the six months ended
April 30, 1995 and 1994.
LIQUIDITY AND CAPITAL RESOURCES
Total debt was reduced $1.1 million during the quarter ended April 30, 1995
through the application of cash provided by operations.
Working capital was $23.0 million at April 30, 1995 compared to $26.1 million at
October 31, 1994. The decrease is due to the classification of $5.1 million of
term debt payable on, or before, February 1, 1996 as current liabilities. As of
May 31, 1995, the bank and senior note agreements were amended to extend the
maturity date of the bank credit facilities from February 1, 1996 to May 1, 1996
and to extend the modification of the financial covenants required for the
senior notes from January 31, 1996 to April 30, 1996. It is management's goal to
refinance this debt prior to its scheduled maturity. Preliminary discussions
have been held with the Company's lenders and specific refinancing plans are
expected to be developed during the last six months of fiscal 1995. There is no
assurance that such a refinancing will be accomplished or that the terms thereof
would be acceptable to the Company. Failure to either refinance the debt prior
to its maturity date or negotiate an additional extension would result in the
Company being in default under its loan agreements.
As of April 30, 1995, the Company had unutilized credit facilities of $2.7
million available for either direct borrowings or commercial letters of credit.
In June, 1995, the Company obtained from its principal bank, a discretionary,
supplemental $2 million letter of credit authorization to support the Company's
increased machine tool sourcing capacity in the third and fourth quarters of
fiscal 1995.
The Company believes that cash flow from operations over the next twelve months
will be sufficient to meet working capital requirements. This expectation is
based upon increased shipment levels, consistent with increased order rates and
increased availability of machine tool and control products, along with the
continued reduction of certain inventories related to discontinued product
models and excess parts. Management believes that net cash provided by future
operations, along with available borrowings under the credit facilities will be
sufficient to maintain liquidity for the twelve-month period ended April 30,
1996.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the matter of Stamatio et. al. vs. Hurco Companies, Inc. et. al., on April
25, 1995, the plaintiff filed a motion in the United States District Court for
the Southern District of Indiana requesting that Chief Judge Sarah Evans Barker
reconsider her dismissal of the case, or in the alternative, to alter the
judgment to a "without prejudice dismissal". The Company intends to vigorously
oppose the plaintiff's motion.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None.
(b) Reports on Form 8-K
1. The Company filed a Form 8K/A on April 13, 1995
reporting clarifications of the change in
Registrant's independent accountant in July 1994.
2. The Company filed a Form 8K on April 26, 1995
reporting the dismissal of a class action shareholder
lawsuit against the Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HURCO COMPANIES, INC.
By: /S/ ROGER J. WOLF
Roger J. Wolf
Senior Vice President and
Chief Financial Officer
By: /S/ THOMAS L. BROWN
Thomas L. Brown
Corporate Controller and
Principal Accounting Officer
June 14, 1995
5
0000315374
DAWN HIATT
1,000
6-MOS
OCT-31-1995
NOV-01-1994
APR-30-1995
929
0
16,613
1,093
26,448
44,133
22,862
11,646
59,765
21,132
0
542
0
0
6,116
59,765
39,559
39,559
29,512
29,512
0
0
1,878
(712)
0
(712)
0
0
0
(712)
(.13)
(.13)
