GlobeNewswire Inc | Jun 4, 2021 08:00AM EDT

June 04, 2021

INDIANAPOLIS, June 04, 2021 (GLOBE NEWSWIRE) -- Hurco Companies, Inc. (Nasdaq: HURC) today reported results for the second fiscal quarter ended April 30, 2021. Hurco recorded net income of $2,437,000, or $0.36 per diluted share, for the second quarter of fiscal 2021, compared to a net loss of $3,927,000, or $(0.58) per diluted share, for the corresponding period in fiscal 2020. For the first six months of fiscal 2021, Hurco reported a net income of $3,100,000, or $0.46 per diluted share, compared to a net loss of $4,820,000, or $(0.71) per diluted share, for the corresponding period in fiscal 2020.

Sales and service fees for the second quarter of fiscal 2021 were $57,920,000, an increase of $20,794,000, or 56%, compared to the corresponding prior year period, and included a favorable currency impact of $2,749,000, or 7%, when translating foreign sales to U.S. dollars for financial reporting purposes. Sales and service fees for the first six months of fiscal 2021 were $112,035,000, an increase of $31,249,000, or 39%, compared to the corresponding prior year period, and included a favorable currency impact of $4,390,000, or 5%, when translating foreign sales to U.S. dollars for financial reporting purposes. During the first six months of fiscal 2021, our 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, As Hurco emerges from one of the more challenging business environments in recent history, I am extremely excited about our current position and opportunity for meaningful strategic growth. During our 2021 second fiscal quarter, Hurcos global orders exceeded $65.0 million for the first time since our second fiscal quarter of 2019, prior to the impact of the COVID-19 pandemic. Second quarter orders in Europe and Asia were particularly encouraging, increasing by 121% and 138%, respectively, over the prior year period. Our operating income for the first two quarters of fiscal 2021 represents an improvement of over $10.0 million compared to the prior year period and reflects pricing improvement, efficiencies in our factories, and continued benefits associated with cost management initiatives implemented during fiscal 2020. We remain focused on optimizing shareholder value through a variety of avenues and continue to leverage the benefit of our strong balance sheet to evaluate and pursue acquisition opportunities. Our ability to quickly adapt to significant changes in the business climate and our noteworthy achievements in new product development have positioned us well for a strong recovery in 2021.

The following table sets forth net sales and service fees by geographic region for the second quarter and first six months ended April 30, 2021 and 2020 (dollars in thousands):

Three Months Ended Six Months Ended April 30, April 30, 2021 2020 $ % 2021 2020 $ % Change Change Change ChangeAmericas $ 19,723 $ 16,696 $ 3,027 18 % $ 42,971 $ 34,175 $ 8,796 26 %Europe 28,949 14,736 14,213 96 % 53,195 34,821 18,374 53 %Asia 9,248 5,694 3,554 62 % 15,869 11,790 4,079 35 %PacificTotal $ 57,920 $ 37,126 $ 20,794 56 % $ 112,035 $ 80,786 $ 31,249 39 %

Sales in the Americas for the second quarter and first six months of fiscal 2021 increased by 18% and 26%, respectively, compared to the corresponding periods in fiscal 2020. The increases in sales in the Americas for the second quarter and first six months of fiscal 2021 were due to increased volume of shipments of Hurco VM and VMX machines in Canada, Mexico, and the U.S.

European sales for the second quarter and first six months of fiscal 2021 increased by 96% and 53%, respectively, compared to the corresponding periods in fiscal 2020, and included a favorable currency impact of 15% and 10%, respectively, 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, France 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).

Asian Pacific sales for the second quarter and first six months of fiscal 2021 increased by 62% and 35%, respectively, compared to the corresponding periods in fiscal 2020, and included a favorable currency impact of 9% and 7%, respectively, when translating foreign sales to U.S. dollars for financial reporting purposes. The year-over-year increases in Asian Pacific sales were primarily due to increased sales of Hurco and Takumi machines in China and Taiwan.

Orders for the second quarter of fiscal 2021 were $65,715,000, an increase of $29,162,000, or 80%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of $3,060,000, or 8%, when translating foreign orders to U.S. dollars. Orders for the first six months of fiscal 2021 were $123,038,000, an increase of $40,905,000, or 50%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of $5,113,000, or 6%, when translating foreign orders to U.S. dollars.

The following table sets forth new orders booked by geographic region for the second quarter and first six months ended April 30, 2021 and 2020 (dollars in thousands):

Three Months Ended Six Months Ended April 30, April 30, 2021 2020 $ % 2021 2020 $ % Change Change Change ChangeAmericas $ 19,306 $ 15,924 $ 3,382 21 % $ 43,151 $ 34,086 $ 9,065 27 %Europe 34,401 15,575 18,826 121 % 60,196 37,321 22,875 61 %Asia 12,008 5,054 6,954 138 % 19,691 10,726 8,965 84 %PacificTotal $ 65,715 $ 36,553 $ 29,162 80 % $ 123,038 $ 82,133 $ 40,905 50 %

Orders in the Americas for the second quarter and first six months of fiscal 2021 increased by 21% and 27%, respectively, compared to the corresponding periods in fiscal 2020, primarily due to increased customer demand for Hurco machines. The increased order levels, similar to the increased sales levels, reflected a higher demand for Hurco VM and VMX machines in Canada, Mexico, and the U.S.

European orders for the second quarter and first six months of fiscal 2021 increased by 121% and 61%, respectively, compared to the corresponding prior year periods, and included a favorable currency impact of 15% and 11%, 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 second quarter and first six months of fiscal 2021 increased by 138% and 84%, 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 Taiwan. Asian Pacific orders for the second quarter and first six months of fiscal 2021 included a favorable currency impact of 14% and 10%, respectively, when translating foreign orders to U.S. dollars.

Gross profit for the second quarter of fiscal 2021 was $14,794,000, or 26% of sales, compared to $6,709,000, or 18% of sales, for the corresponding prior year period. Gross profit for the first six months of fiscal 2021 was $26,341,000, or 24% of sales, compared to $15,868,000, or 20% of sales, for the corresponding prior year period. The year-over-year increases in gross profit as a percentage of sales 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 $837,000 of the gross profit improvement for the second quarter and first six months of fiscal 2021 was a result of recording the employee retention credit extended to companies 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).

Selling, general, and administrative expenses for the second quarter of fiscal 2021 were $11,273,000, or 19% of sales, compared to $10,599,000, or 29% of sales, in the corresponding fiscal 2020 period, and included an unfavorable currency impact of $471,000, when translating foreign expenses to U.S. dollars for financial reporting purposes. Selling, general, and administrative expenses for the first six months of fiscal 2021 were $21,841,000, or 19% of sales, compared to $21,445,000, or 27% of sales, in the corresponding fiscal 2020 period, and included an unfavorable currency impact of $760,000, when translating foreign expenses to U.S. dollars for financial reporting purposes. Selling, general and administrative expenses for the second quarter and first six 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 $1,089,000 of the selling, general, and administrative expense reduction for the second quarter and first six months of fiscal 2021 was a result of recording the employee retention credit.

Operating income for the second quarter of fiscal 2021 was $3,521,000, or 6% of sales, compared to operating loss of $3,890,000, or (10%) of sales, for the corresponding prior year period. Operating income for the first six months of fiscal 2021 was $4,500,000, or 4% of sales, compared to operating loss of $5,577,000, or (7%) of sales, for the corresponding prior year period. The year-over-year increases from operating losses to operating income for the second quarter and first six months were primarily due to an increase of sales volume of Hurco machines. As discussed above, operating income for the second quarter and first six months of fiscal 2021 included a benefit of $1,926,000 related to the employee retention credit recorded during the second quarter of fiscal 2021.

The effective tax rates for the second quarter and first six months of fiscal 2021 were 28% and 33%, respectively, compared to 16% and 22% in the corresponding prior year periods. The year-over-year increases in the effective tax rates were primarily due to changes in geographic mix of income and loss that includes jurisdictions with differing tax rates, conditional reduced tax rates, and other events that are not consistent from period to period, such as changes in income tax laws to address the unfavorable impact of the COVID-19 pandemic and a discrete income tax expense related to unvested stock awards.

Cash and cash equivalents totaled $73,888,000 at April 30, 2021, compared to $57,859,000 at October 31, 2020. Working capital was $206,186,000 at April 30, 2021, compared to $200,974,000 at October 31, 2020. The increase in working capital was primarily driven by the increase in cash and accounts receivable, which was offset by a decrease in inventory and 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 Companys 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 Companys 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 Kingdoms 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.

Sonja K. McClellandContact: 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 April 30, Six Months Ended April 30, 2021 2020 2021 2020 (unaudited) (unaudited)Sales and $ 57,920 $ 37,126 $ 112,035 $ 80,786 service feesCost of sales 43,126 30,417 85,694 64,918 and serviceGross profit 14,794 6,709 26,341 15,868 Selling,general and 11,273 10,599 21,841 21,445 administrativeexpenses Operating 3,521 (3,890 ) 4,500 (5,577 )income (loss) Interest 2 32 21 50 expenseInterest - 20 16 90 incomeInvestment 25 3 146 65 incomeOther expense, (160 ) (793 ) (48 ) (710 )netIncome (loss) 3,384 (4,692 ) 4,593 (6,182 )before taxesProvision(benefit) for 947 (765 ) 1,493 (1,362 )income taxesNet income $ 2,437 $ (3,927 ) $ 3,100 $ (4,820 )(loss)Income (loss)per common shareBasic $ 0.37 $ (0.58 ) $ 0.47 $ (0.71 )Diluted $ 0.36 $ (0.58 ) $ 0.46 $ (0.71 )Weightedaverage common sharesoutstandingBasic 6,596 6,739 6,585 6,760 Diluted 6,612 6,739 6,598 6,760 Dividends per $ 0.14 $ 0.13 $ 0.27 $ 0.25 share OTHERCONSOLIDATED FINANCIAL DATA Three Months Ended April 30, Six Months Ended April 30,Operating 2021 2020 2021 2020 Data: (unaudited) (unaudited)Gross margin 26 % 18 % 24 % 20 %SG&A expenseas a 19 % 29 % 19 % 27 %percentage ofsalesOperatingincome (loss)as a 6 % -10 % 4 % -7 %percentage ofsalesPre-tax income(loss) as a 6 % -13 % 4 % -8 %percentage ofsalesEffective tax 28 % 16 % 33 % 22 %rateDepreciationand $ 1,050 $ 1,067 $ 2,116 $ 2,172 amortizationCapital $ 660 $ 396 $ 1,282 $ 845 expenditures Balance Sheet 4/30/2021 10/31/2020 Data:Working $ 206,186 $ 200,974 capitalDays salesoutstanding 45 45 (unaudited)Inventoryturns 1.0 0.9 (unaudited)Capitalization Total debt -- -- Shareholders' 236,600 231,148 equityTotal $ 236,600 $ 231,148

Hurco Companies, Inc.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except share and per share data) April 30, October 31, 2021 2020 ASSETS (unaudited) Current assets: Cash and cash equivalents $ 73,888 $ 57,859 Accounts receivable, net 37,041 27,686 Inventories, net 145,308 149,864 Derivative assets 410 968 Prepaid assets 14,461 13,803 Other 248 1,231 Total current assets 271,356 251,411 Property and equipment: Land 868 868 Building 7,352 7,352 Machinery and equipment 29,938 29,195 Leasehold improvements 5,093 4,754 43,251 42,169 Less accumulated depreciation and amortization (31,866 ) (30,248 ) Total property and equipment, net 11,385 11,921 Non-current assets: Software development costs, less accumulated 7,788 7,840 amortizationIntangible assets, net 1,721 1,846 Operating lease - right of use assets, net 11,532 11,748 Deferred income taxes 2,869 2,479 Investments and other assets, net 9,175 8,410 Total non-current assets 33,085 32,323 Total assets $ 315,826 $ 295,655 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 37,808 $ 27,643 Customer deposits 8,321 5,356 Derivative liabilities 928 872 Operating lease liabilities 4,282 4,132 Accrued payroll and employee benefits 7,766 6,931 Accrued income taxes 516 285 Accrued expenses 4,132 4,018 Accrued warranty expenses 1,417 1,200 Total current liabilities 65,170 50,437 Non-current liabilities: Deferred income taxes 91 131 Accrued tax liability 1,761 1,918 Operating lease liabilities 7,646 7,989 Deferred credits and other 4,558 4,032 Total non-current liabilities 14,056 14,070 Shareholders' equity: Preferred stock: no par value per share, - - 1,000,000 shares authorized; no shares issuedCommon stock: no par value, $.10 stated valueper share, 12,500,000 shares authorized;6,674,741 and 6,636,906 shares issued and 660 657 6,601,406 and 6,565,163 shares outstanding,as of April 30, 2021 and October 31, 2020,respectivelyAdditional paid-in capital 62,177 60,997 Retained earnings 173,795 172,484 Accumulated other comprehensive loss (32 ) (2,990 ) Total shareholders' equity 236,600 231,148 Total liabilities and shareholders' equity $ 315,826 $ 295,655