Hurco Companies, Inc. (www.hurco.com) reported for its third quarter ended July 31, 2008, net income of $5,826,000, or $.90 per share, a 13 percent increase over the $5,163,000, or $.80 per share, reported for the corresponding period in fiscal 2007. For the first nine months of fiscal 2008, Hurco reported net income of $19,098,000, or $2.96 per share, a 25 percent increase over the $15,239,000, or $2.37 per share, reported for the corresponding period in fiscal 2007.
Sales and service fees for the third quarter of fiscal 2008 totaled $57,318,000, an increase of $8,763,000, or 18 percent, over the third quarter of fiscal 2007, despite a 19 percent decrease in the North American region, which accounts for approximately 13 percent of the worldwide machine tool market. Approximately $5,073,000, or 10 percent, of the year-over-year increase reflects the effect of a weaker U.S. dollar when translating foreign sales to U.S. dollars for financial reporting purposes.
Sales and service fees for the nine months ended July 31, 2008, totaled $176,526,000, an increase of $38,599,000, or 28 percent, over the corresponding period in 2007.
Growth was primarily driven by strong demand in existing European markets, particularly in Germany and the United Kingdom, and continued expansion into Eastern European markets. Growth in the Asia Pacific region was primarily due to increased market demand. The effect of a weaker U.S. dollar when translating foreign sales into U.S. dollars for financial reporting purposes had a favorable impact of approximately 14 percent on the year-over-year increase in both the European and Asia Pacific markets. Sales in North America reflected continued market weakness throughout the United States due to customer concerns over unfavorable economic conditions.
New order bookings in the third quarter of fiscal 2008 were $52,458,000, an increase of $3,813,000, or 8 percent, over the prior year period. European and Asia Pacific orders increased $6,046,000, or 19 percent, and $750,000, or 33 percent, respectively. North American orders decreased $2,983,000, or 22 percent. For the nine months ended July 31, 2008, new orders totaled $172,514,000, an increase of $28,321,000, or 20 percent, over the corresponding period in 2007.
Hurco's gross margin for the third quarter of fiscal 2008 was 36 percent, compared to 38 percent for the 2007 period. The reduction in gross margin was primarily attributable to recent price increases for raw materials which have significantly affected the machine tool industry. The recent price increases for raw materials were partially offset by a more favorable mix of sales by product and region. Selling, general and administrative expenses were $11,829,000 for the third quarter of fiscal 2008, an increase of $1,601,000 over the 2007 period, reflecting greater expenditures for global market expansion and product development. The increase also reflected the unfavorable effect of a weaker U.S. dollar during the 2008 period when translating foreign operating expenses for financial reporting purposes, as well as, stock-based compensation expense recorded for stock options granted to two new directors.
Cash increased by $5,439,000 for the third quarter to $31,048,000 and was primarily driven by increased net income. Inventory increased by $5,754,000 during the third quarter to $74,489,000 resulting from approximately $2,800,000 of increased inventory at our manufacturing facilities associated with the forthcoming launch of new products and a slight shift in mix to higher cost VMX machines to support product demand. The increased inventory was primarily financed through increased cash collections.
"Our results demonstrate the value of our strategic plan that focuses on targeted expansion in emerging markets worldwide, agile product development processes, and a strong global supply chain. While I am satisfied with the overall increase in net income and sales for the third quarter, I think it is important to address the decline in the sales numbers for North America. In spite of adverse economic conditions in the United States, I believe we may see increased activity in the near future due to our new product introductions and the timing of our industry's largest trade show," chief executive officer Michael Doar said.
"The International Manufacturing Technology Show (IMTS) will be held next month in Chicago. We are introducing 14 new machines at this bi-annual show, which is the largest product introduction that we have ever had in our 40-year history. Based on the response from customers who previewed some of these machines at our annual open house last month, we believe our new products will be well received by IMTS attendees given the benefits of our software technology. Specifically, our 5-axis technology is critical to mature markets, such as North America, because business owners in these markets understand that investing in technology is the most expedient way to increase productivity and profitability," Doar said.
Hurco Companies, Inc. is an industrial technology company that designs and produces interactive computer controls, software and computerized machine tools for the worldwide metal cutting and metal forming industry. The end market for the Company's products consists primarily of independent job shops and short-run manufacturing operations within large corporations in industries such as the aerospace, defense, medical equipment, energy, transportation and computer equipment. The Company is based in Indianapolis, Indiana, and has sales, application engineering and service subsidiaries in High Wycombe, England; Munich, Germany; Paris, France; Milan, Italy; Shanghai, China; Chennai, India; Mississauga, Canada; and Singapore, along with manufacturing operations in Taiwan and China. Products are sold through independent agents and distributors in North America, Europe and Asia. The Company also has direct sales organizations in Canada, England, France, Germany, Italy, Singapore and China.