8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT Pursuant

to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): January 4, 2019

Hurco Companies, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Indiana

(State or Other Jurisdiction of Incorporation)

0-9143	35-1150732
(Commission File Number)	(IRS Employer Identification No.)
One Technology Way
Indianapolis, Indiana	46268
(Address of Principal Executive Offices)	(Zip Code)

(317) 293-5309

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 2.02 Results of Operations and Financial Condition

On January 4, 2019, Hurco Companies, Inc. (the "Registrant") reported its results of operations for the fourth fiscal quarter and full fiscal year ended October 31, 2018. The Registrant's earnings release for those periods is attached as Exhibit 99.1 and the information set forth therein is incorporated herein by reference and constitutes a part of this report. The attached Exhibit is furnished pursuant to Item 2.02 of Form 8-K.

Item 9.01 Financial Statements and Exhibits

Exhibit Index

99.1 Press Release of Hurco Companies, Inc. dated January 4, 2019

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 hereunto duly authorized.

Dated: January 4, 2019
HURCO COMPANIES, INC.
By:	/s/ Sonja K. McClelland
	Sonja K. McClelland, Executive Vice President, Secretary, Treasurer and Chief Financial Officer

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

FRIDAY, JANUARY 4, 2019

HURCO REPORTS FOURTH QUARTER AND FULL YEAR RESULTS FOR FISCAL 2018

INDIANAPOLIS, INDIANA – January 4, 2019 — Hurco Companies, Inc. (Nasdaq: HURC) today reported results for the fourth fiscal quarter and fiscal year ended October 31, 2018. Hurco recorded net income of $8,302,000, or $1.22 per diluted share, for the fourth quarter of fiscal 2018 compared to net income of $6,702,000, or $1.00 per diluted share, for the corresponding period in fiscal 2017. For fiscal 2018, Hurco reported net income of $21,490,000, or $3.15 per diluted share, compared to $15,115,000, or $2.25 per diluted share, for fiscal 2017.

Sales and service fees for the fourth quarter of fiscal 2018 were $83,051,000, an increase of $7,120,000, or 9%, compared to the corresponding prior year period and included an unfavorable currency impact of $597,000, or 1%, when translating foreign sales to U.S. dollars for financial reporting purposes. Sales and service fees for fiscal 2018 were $300,671,000, an increase of $57,004,000, or 23%, compared to fiscal 2017, and included a favorable currency impact of $10,486,000, or 4%, when translating foreign sales to U.S. dollars for financial reporting purposes.

Michael Doar, Chief Executive Officer, stated, “This has been a truly special year for Hurco. So many milestones have been achieved this year – the culmination of strategic plans created several years ago. The focus has been to acquire and develop strong brands, improve market penetration in all geographic regions, and improve returns for our shareholders with a sustained commitment to maintaining a strong balance sheet and cash flow. Highlights of the financial milestones achieved this year include exceeding $300 million in sales, $33 million in operating income, and $3 per diluted share. Highlights of product milestones include a broad product offering for each of our brands that partners well with automation and emphasizes our ability to innovate solutions for customers who have both simple and complex machining requirements. This year, we continued to build upon our reputation in mature Hurco machine tool markets, such as the U.S., Germany, France, Italy and the United Kingdom, while establishing more of a presence and reputation in key target markets, such as China, India and smaller Asian Pacific countries. The brands we have acquired over the last several years, LCM/Milltronics/Takumi, each had their best sales year since acquisition and made important contributions to the overall growth in all geographic regions. This has been a remarkable way to celebrate 50 years of innovation and we are grateful to our customers, employees, directors, and shareholders for their continued dedication and support.”

The following table sets forth net sales and service fees by geographic region for the fourth quarter and fiscal year ended October 31, 2018 and 2017 (dollars in thousands):

	Three Months Ended										Fiscal Year Ended
	October 31,										October 31,
					$			%							$		%
	2018		2017		Change			Change			2018		2017		Change		Change
Americas	$	28,741	$	23,597	$	5,144			22	%	$	90,902	$	75,540	$	15,362		20	%
Europe		45,492		42,714		2,778			7	%		166,202		133,671		32,531		24	%
Asia Pacific		8,818		9,620		(802	)		-8	%		43,567		34,456		9,111		26	%
Total	$	83,051	$	75,931	$	7,120			9	%	$	300,671	$	243,667	$	57,004		23	%

Sales in the Americas for the fourth quarter of fiscal 2018 increased by 22%, compared to the corresponding period in fiscal 2017, due primarily to increased sales volume of Hurco and Takumi machines following the International Manufacturing Technology Show held in September 2018. Sales in the Americas for fiscal 2018 increased by 20% compared to fiscal 2017, due primarily to improved U.S. market conditions and increased demand from U.S. customers for the Hurco and Milltronics product lines. The increase in sales year-over-year for both periods was attributable to an increased sales volume of vertical milling and lathe machines from all product lines (Hurco, Milltronics and Takumi).  

European sales for the fourth quarter of fiscal 2018 increased by 7%, compared to the corresponding period in fiscal 2017, and included an unfavorable currency impact of less than 1%, when translating foreign sales to U.S. dollars for financial reporting purposes. European sales for fiscal 2018 increased by 24%, compared to fiscal 2017, and included a favorable currency impact of 7%, when translating foreign sales to U.S. dollars for financial reporting purposes. The increases in European sales for the fourth quarter and for fiscal 2018 were primarily due to increased customer demand for Hurco and Takumi machines in Germany, France and the United Kingdom, as well as increased customer demand for electro-mechanical components and accessories manufactured by our wholly-owned subsidiary, LCM Precision Technology S.r.l. (“LCM”).

Asian Pacific sales for the fourth quarter of fiscal 2018 decreased by 8%, compared to the corresponding period in fiscal 2017, and included a negative currency impact of 4%, when translating foreign sales to U.S. dollars for financial reporting purposes. The reduction in Asian Pacific sales primarily resulted from a reduction in customer demand for Takumi vertical milling machines in China, partially offset by increased customer demand for Hurco vertical milling and lathe machines in China, Southeast Asia and India. Asian Pacific sales for fiscal 2018 increased by 26%, compared to fiscal 2017, and included a favorable currency impact of 3%, when translating foreign sales to U.S. dollars for financial reporting purposes. The increase in Asian Pacific sales for fiscal 2018 was primarily attributable to increased customer demand for Hurco and Takumi machines in all Asian Pacific countries, particularly in China, the largest market for consumption of machines tools in the world.

Orders for the fourth quarter of fiscal 2018 were $73,023,000, a slight decrease of $657,000, or 1%, compared to the corresponding period in fiscal 2017, and included a negative currency impact of $71,000, or less than 1%, when translating foreign orders to U.S. dollars. Orders for fiscal 2018 were a record $305,845,000, an increase of $45,236,000, or 17%, compared to fiscal 2017, and included a favorable currency impact of $13,814,000, or 5%, when translating foreign orders to U.S. dollars.

The following table sets forth new orders booked by geographic region for the fourth quarter and fiscal year ended October 31, 2018 and 2017 (dollars in thousands):

	Three Months Ended										Fiscal Year Ended
	October 31,										October 31,
					$			%							$		%
	2018		2017		Change			Change			2018		2017		Change		Change
Americas	$	31,255	$	26,526	$	4,729			18	%	$	94,160	$	85,070	$	9,090		11	%
Europe		35,421		36,881		(1,460	)		-4	%		170,366		137,622		32,744		24	%
Asia Pacific		6,347		10,273		(3,926	)		-38	%		41,319		37,917		3,402		9	%
Total	$	73,023	$	73,680	$	(657	)		-1	%	$	305,845	$	260,609	$	45,236		17	%

Orders in the Americas for the fourth quarter and fiscal 2018 increased by 18% and 11%, respectively, compared to the corresponding periods in fiscal 2017. These increases were largely attributable to improved customer demand for Hurco and Takumi vertical milling and lathe machines.

European orders for the fourth quarter of fiscal 2018 decreased by 4%, compared to the corresponding period in fiscal 2017, and included a favorable currency impact of 1%, when translating foreign orders to U.S. dollars. The year-over-year reduction in fourth quarter orders was due primarily to a decrease in customer demand for Hurco vertical milling and lathe machines in the United Kingdom. European orders for fiscal 2018 increased by 24%, compared to fiscal 2017, and included a favorable currency impact of 9%, when translating foreign orders to U.S. dollars. The year-over-year increase in European orders was largely driven by increased customer demand for Hurco and Takumi vertical milling and lathe machines in Germany and France, as well as increased demand for electro-mechanical components and accessories manufactured by LCM.

Asian Pacific orders for the fourth quarter of fiscal 2018 decreased by 38%, compared to the corresponding prior year period, and included a negative currency impact of 3%, when translating foreign orders to U.S. dollars. The year-over-year decrease in Asian Pacific orders was driven primarily by a reduction in customer demand for Hurco and Takumi machines in China. Asian Pacific orders for fiscal 2018 increased by 9%, compared to fiscal 2017, and included a favorable currency impact of 3%, when translating foreign orders to U.S. dollars. The year-over-year increase in Asian Pacific orders was largely due to increased customer demand for Hurco vertical milling machines in India, China and Southeast Asia.

Gross profit for the fourth quarter of fiscal 2018 was $27,851,000, or 34% of sales, compared to $23,370,000, or 31% of sales, for the corresponding prior year period. Gross profit for fiscal 2018 was $91,806,000, or 31% of sales, compared to $70,564,000, or 29% of sales, for fiscal 2017. The year-over-year increase in gross profit as a percentage of sales reflected increased machine sales across all three regions and product lines and the favorable impact of foreign currency translation compared to the corresponding prior year period.

Selling, general and administrative expenses for the fourth quarter of fiscal 2018 were $16,564,000, or 20% of sales, compared to $14,385,000, or 19% of sales, in the corresponding period in fiscal 2017, and included a favorable currency impact of $214,000, when translating foreign expenses to U.S. dollars for financial reporting purposes. Selling, general and administrative expenses for fiscal 2018 were $58,010,000, or 19% of sales, compared to $49,661,000, or 20% of sales, in fiscal 2017, and included an unfavorable currency impact of $1,326,000, when translating foreign expenses to U.S. dollars for financial reporting purposes. The year-over-year increases in selling, general and administrative expenses were driven by increased expenses for trade shows, global sales and marketing, employee incentive compensation and the unfavorable impact of foreign currency translation compared to the corresponding prior year period.

The effective tax rates for the fourth quarter and fiscal 2018 were 22% and 34%, respectively, compared to 25% and 27% in the corresponding prior year periods. The year-over-year decrease in the effective tax rate for the fourth quarter of fiscal 2018 principally resulted from a shift in geographic mix of income and loss among tax jurisdictions and the impact of a lower U.S. income tax rate compared to the prior year. The year-over-year increase in the effective tax rate for fiscal 2018 was primarily attributable to one-time charges of $2,757,000 related to the Tax Cuts and Jobs Act that was enacted in December 2017. The impact of these one-time charges increased the effective tax rate by approximately 39% for the first quarter of fiscal 2018.  Excluding the impact of these charges, earnings per diluted share would have been $0.41 higher than the earnings per diluted share we reported for fiscal 2018. 

Cash and cash equivalents totaled $77,170,000 at October 31, 2018, compared to $66,307,000 at October 31, 2017. Working capital was $194,632,000 at October 31, 2018 compared to $175,526,000 at October 31, 2017. The increase in working capital was mostly driven by an increase in cash and inventories, partially offset by an increase in accounts payable.

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, 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 governmental actions and initiatives, including import and export restrictions and tariffs.

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 October 31,				Twelve Months Ended October 31,
	2018		2017		2018		2017
	(unaudited)
Sales and service fees	$	83,051	$	75,931	$	300,671	$	243,667
Cost of sales and service		55,200		52,561		208,865		173,103
Gross profit		27,851		23,370		91,806		70,564
Selling, general and administrative expenses		16,564		14,385		58,010		49,661
Operating income		11,287		8,985		33,796		20,903
Interest expense		26		25		100		91
Interest income		81		9		189		41
Investment income		159		53		339		138
Other expense, net		860		82		1,728		275
Income before taxes		10,641		8,940		32,496		20,716
Provision for income taxes		2,339		2,238		11,006		5,601
Net income	$	8,302	$	6,702	$	21,490	$	15,115
Income per common share
Basic	$	1.24	$	1.01	$	3.19	$	2.27
Diluted	$	1.22	$	1.00	$	3.15	$	2.25
Weighted average common shares outstanding
Basic		6,719		6,635		6,700		6,615
Diluted		6,792		6,723		6,771		6,680

OTHER CONSOLIDATED FINANCIAL DATA

	Three Months Ended October 31,						Twelve Months Ended October 31,
Operating Data:	2018			2017			2018			2017
	(unaudited)
Gross margin		34	%		31	%		31	%		29	%
SG&A expense as a percentage of sales		20	%		19	%		19	%		20	%
Operating income as a percentage of sales		14	%		12	%		11	%		9	%
Pre-tax income as a percentage of sales		13	%		12	%		11	%		9	%
Effective tax rate		22	%		25	%		34	%		27	%
Depreciation and amortization	$	865		$	898		$	3,713		$	3,616
Capital expenditures	$	1,289		$	1,078		$	5,863		$	4,445
Balance Sheet Data:		10/31/2018			10/31/2017
Working capital	$	194,632		$	175,526
Days sales outstanding (unaudited)		47			46
Inventory turns (unaudited)		1.6			1.5
Capitalization
Total debt	$	1,434		$	1,507
Shareholders' equity		222,853			203,085
Total	$	224,287		$	204,592

Hurco Companies, Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per-share data)

	October 31,			October 31,
	2018			2017
ASSETS
Current assets:
Cash and cash equivalents	$	77,170		$	66,307
Accounts receivable, net		54,414			50,094
Inventories, net		137,609			119,948
Derivative assets		3,085			596
Prepaid expenses		7,332			7,913
Other		1,825			1,557
Total current assets		281,435			246,415
Property and equipment:
Land		868			841
Building		7,352			7,352
Machinery and equipment		26,840			25,652
Leasehold improvements		3,801			3,503
		38,861			37,348
Less accumulated depreciation and amortization		(25,902	)		(25,167	)
Total property and equipment		12,959			12,181
Non-current assets:
Software development costs, less accumulated amortization		7,452			6,226
Goodwill		2,377			2,440
Intangible assets, net		938			1,076
Deferred income taxes		2,234			2,339
Investments and other assets, net		8,012			7,131
Total non-current assets		21,013			19,212
Total assets	$	315,407		$	277,808
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	57,518		$	47,638
Derivative liabilities		2,020			1,732
Accrued payroll and employee benefits		14,032			11,210
Accrued income taxes		5,180			2,362
Accrued expenses		4,122			4,668
Accrued warranty		2,497			1,772
Short-term debt		1,434			1,507
Total current liabilities		86,803			70,889
Non-current liabilities:
Accrued tax liability		2,194			117
Deferred credits and other obligations		3,557			3,717
Total non-current liabilities		5,751			3,834
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; 6,891,508 and 6,799,006 shares issued; and 6,723,160 and 6,641,197 shares outstanding, as of October 31, 2018 and October 31, 2017, respectively		672			664
Additional paid-in capital		64,185			61,344
Retained earnings		167,859			149,267
Accumulated other comprehensive loss		(9,863	)		(8,190	)
Total shareholders' equity		222,853			203,085
Total liabilities and shareholders' equity	$	315,407		$	277,808