x |
Annual
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended October 31, 2008
or
|
o |
Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the transition period from _________ to
_________.
|
Indiana
|
35-1150732
|
(State
or other jurisdiction of
|
(I.R.S.
Employer Identification Number)
|
incorporation
or organization)
|
|
One
Technology Way
|
|
Indianapolis, Indiana
|
46268
|
(Address
of principal executive offices)
|
(Zip
code)
|
Securities
registered pursuant to Section 12(b) of the Act:
|
None
|
Securities
registered pursuant to Section 12(g) of the Act:
|
Common Stock, No Par
Value
|
(Title
of Class)
|
Large accelerated filer o |
Accelerated filer
x
|
Non-accelerated
filer o
|
Smaller Reporting
Company o
|
(Do not check if a
smaller reporting company)
|
|
·
|
United
States Machine Tool Consumption – generated by the Association for
Manufacturing Technology and American Machine Tool Distributor
Association, this report includes metal cutting machines of all types and
sizes, including segments in which we do not
compete
|
|
·
|
Purchasing
Manager’s Index - developed by the Institute for Supply
Management and reports activity levels in U.S. manufacturing
plants that purchase machine
tools
|
|
·
|
Capacity
Utilization of Manufacturing Companies – issued by the Federal
Reserve Board
|
Net
Sales and Service Fees by Product Category
|
||||||||||||||||||||||||
(Dollars
in thousands)
|
Year
ended October 31,
|
|||||||||||||||||||||||
2008
|
2007
|
2006
|
||||||||||||||||||||||
Continuing
Products and Services
|
||||||||||||||||||||||||
Computerized
Machine Tools
|
$ | 199,238 | 89.0 | % | $ | 165,832 | 88.2 | % | $ | 128,946 | 86.8 | % | ||||||||||||
Computer
Control Systems and Software *
|
5,678 | 2.5 | % | 5,291 | 2.8 | % | 4,694 | 3.2 | % | |||||||||||||||
Service
Parts
|
13,240 | 5.9 | % | 12,096 | 6.4 | % | 10,494 | 7.0 | % | |||||||||||||||
Service
Fees
|
5,838 | 2.6 | % | 4,828 | 2.6 | % | 4,383 | 3.0 | % | |||||||||||||||
Total
|
$ | 223,994 | 100 | % | $ | 188,047 | 100 | % | $ | 148,517 | 100 | % |
|
·
|
maximize
the efficiency of their human
resources
|
|
·
|
continue
to expand their capability to make more advanced and complex parts from a
wide range of materials using multiple
processes
|
|
·
|
maintain
the ability to incorporate fast moving changes in technology into their
operations to keep their competitive
edge
|
|
·
|
continue
to integrate themselves into the global supply chain of their customers by
supporting small to medium lot sizes for “just in time”
initiatives
|
|
·
|
the
need to continuously improve productivity and shorten cycle
time
|
|
·
|
an
aging machine tool installed base that will require replacement with more
advanced and efficient technology created by shorter product life
cycles
|
|
·
|
the
industrial development of emerging markets in Asia and Eastern
Europe
|
|
·
|
the
declining supply of skilled
machinists
|
Fiscal Year
|
Non-capitalized
research
and
development
|
Capitalized
software
development
|
||||||
2008
|
$ | 3,000 | $ | 900 | ||||
2007
|
3,100 | 1,200 | ||||||
2006
|
2,500 | 2,100 |
|
·
|
trade
barriers
|
|
·
|
regional
economic uncertainty
|
|
·
|
differing
labor regulation
|
|
·
|
risk
of governmental expropriation
|
|
·
|
domestic
and foreign customs and tariffs
|
|
·
|
current
and changing regulatory environments affecting the importation and
exportation of products and raw
materials
|
|
·
|
difficulty
in obtaining distribution support
|
|
·
|
difficulty
in staffing and managing widespread
operations
|
|
·
|
differences
in the availability and terms of
financing
|
|
·
|
political
instability and unrest
|
|
·
|
risks
of changes in taxes
|
|
·
|
tax
implications from repatriation of
funds
|
|
·
|
difficulties
integrating the operations, technologies, products, and personnel of the
acquired companies
|
|
·
|
diversion
of management’s attention from normal daily operations of the
business
|
|
·
|
potential
difficulties completing projects associated with in-process research and
development
|
|
·
|
difficulties
entering markets in which we have no or limited prior experience,
especially when competitors in such markets have stronger market
positions
|
|
·
|
initial
dependence on unfamiliar supply chains or relatively small supply
partners
|
|
·
|
insufficient
revenues to offset increased expenses associated with
acquisitions
|
|
·
|
the
potential loss of key employees of the acquired
companies
|
|
·
|
issue
common stock that would dilute our current shareholders’ percentage
ownership
|
|
·
|
assume
liabilities
|
|
·
|
record
goodwill and non-amortizable intangible assets that will be subject to
impairment testing on a regular basis and potential periodic impairment
charges
|
|
·
|
incur
amortization expenses related to certain intangible
assets
|
|
·
|
incur
large and immediate write-offs, and restructuring and other related
expenses
|
|
·
|
become
subject to litigation
|
|
None.
|
Location
|
Square Footage
|
Principal Uses
|
||||||
Indianapolis,
Indiana
|
165,000
|
(1) |
Corporate
headquarters, design and engineering, product testing, sales and
marketing, application engineering and customer service
|
|||||
Los
Angeles, California
|
13,000 |
Warehouse,
distribution, sales, application engineering and customer
service
|
||||||
Dexter,
Michigan
|
3,000 |
Sales,
design engineering, product testing and customer
service
|
||||||
Mississauga,
Canada
|
3,600 |
Sales,
application engineering andcustomer
service
|
||||||
High
Wycombe, England
|
12,000 |
Sales,
application engineering and customer
service
|
||||||
Paris,
France
|
9,700 |
Sales,
application engineering and customer
service
|
||||||
Munich,
and Rodermark, Germany
|
26,000 |
Sales,
application engineering and customer
service
|
||||||
Milan
and Venice, Italy
|
13,000 |
Sales,
application engineering and customer
service
|
||||||
Singapore
|
9,300 |
Sales,
application engineering and customer
service
|
||||||
Shanghai,
China
|
8,000 |
Sales,
application engineering and customer
service
|
||||||
Guangzhou,
China
|
2,400 |
Sales,
application engineering and customer
service
|
||||||
Chennai,
India
|
5,400 |
Sales,
application engineering and customer
service
|
||||||
Liegnitz,
Poland
|
2,900 |
Sales,
application engineering and customer
service
|
||||||
Taichung,
Taiwan
|
221,000 |
Manufacturing
|
||||||
Ningbo,
China
|
34,000 |
Manufacturing
|
|
(1)
|
Approximately
50,000 square feet is leased to a third-party under a lease, which expires
April 30, 2010.
|
Name
|
Age
|
Position(s) with the
Company
|
||
Michael
Doar
|
53
|
Chairman of the Board
and Chief Executive Officer
|
||
James
D. Fabris
|
57
|
President
and Chief Operating Officer
|
||
John
G. Oblazney
|
40
|
Vice
President, Secretary, Treasurer and Chief Financial
Officer
|
||
Sonja
K. McClelland
|
37
|
Corporate
Controller, Assistant
Secretary
|
2008
|
2007
|
|||||||||||||||
Fiscal Quarter Ended:
|
High
|
Low
|
High
|
Low
|
||||||||||||
January
31
|
$ | 58.68 | $ | 30.24 | $ | 33.18 | $ | 24.61 | ||||||||
April
30
|
52.12 | 33.41 | 47.86 | 33.07 | ||||||||||||
July
31
|
49.30 | 23.11 | 56.28 | 39.12 | ||||||||||||
October
31
|
38.24 | 16.92 | 60.44 | 39.77 |
Year
Ended October 31
|
||||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
Statement
of Operations Data:
|
(Dollars
in thousands, except per share amounts)
|
|||||||||||||||||||
Sales and service
fees
|
$ | 223,994 | $ | 188,047 | $ | 148,517 | $ | 125,509 | $ | 99,572 | ||||||||||
Gross
profit
|
82,617 | 71,082 | 53,325 | 42,558 | 30,298 | |||||||||||||||
Selling, general
and administrative
expenses
|
46,811 | 40,124 | 30,697 | 26,057 | 21,401 | |||||||||||||||
Restructuring expense
(credit) And
other expense, net
|
-- | -- | -- | -- | 465 | |||||||||||||||
Operating
income
|
35,806 | 30,958 | 22,628 | 16,501 | 8,432 | |||||||||||||||
Other income
(expense)*
|
(1,640 | ) | 1,742 | 745 | (64 | ) | (396 | ) | ||||||||||||
Net
income
|
22,520 | 20,889 | 15,479 | 16,443 | 6,269 | |||||||||||||||
Earnings per
common share-diluted
|
3.49 | 3.24 | 2.42 | 2.60 | 1.04 | |||||||||||||||
Weighted average
common shares
outstanding-diluted
|
6,444 | 6,440 | 6,397 | 6,336 | 6,026 |
As
of October 31
|
||||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
Balance
Sheet Data:
|
(Dollars
in thousands)
|
|||||||||||||||||||
Current assets*
|
$ | 151,312 | $ | 139,265 | $ | 103,434 | $ | 73,818 | $ | 56,472 | ||||||||||
Current
liabilities
|
51,129 | 63,215 | 44,340 | 30,761 | 30,125 | |||||||||||||||
Working capital*
|
100,183 | 76,050 | 59,094 | 43,057 | 26,347 | |||||||||||||||
Current ratio
|
3.0 | 2.2 | 2.3 | 2.4 | 1.9 | |||||||||||||||
Total assets*
|
177,444 | 163,781 | 125,545 | 94,114 | 73,446 | |||||||||||||||
Non-current
liabilities*
|
2,838 | 2,963 | 5,830 | 4,409 | 4,866 | |||||||||||||||
Total debt
|
-- | -- | 4,010 | 4,136 | 4,600 | |||||||||||||||
Shareholders’
equity
|
123,477 | 97,603 | 75,375 | 58,944 | 38,455 |
Percentage
of Revenues
|
Year-to-Year
% Change
|
|||||||||||||||||||
2008
|
2007
|
2006
|
Increase
(Decrease)
|
|||||||||||||||||
’08
vs. ’07
|
’07
vs. ’06
|
|||||||||||||||||||
Sales
and service fees
|
100.0 | % | 100.0 | % | 100.0 | % | 19.1 | % | 26.6 | % | ||||||||||
Gross
profit
|
36.9 | % | 37.8 | % | 35.9 | % | 16.2 | % | 33.3 | % | ||||||||||
Selling,
general and administrative
expenses
|
20.9 | % | 21.3 | % | 20.7 | % | 16.7 | % | 30.7 | % | ||||||||||
Operating
income
|
16.0 | % | 16.5 | % | 15.2 | % | 15.7 | % | 36.8 | % | ||||||||||
Other
income (expense)*
|
(0.7 | %) | 0.9 | % | 0.5 | % | (194.1 | %) | 133.8 | % | ||||||||||
Net
income
|
10.1 | % | 11.1 | % | 10.4 | % | 7.8 | % | 35.0 | % |
October
31,
|
Increase
(Decrease)
|
|||||||||||||||||||||||
2008
|
2007
|
Amount
|
%
|
|||||||||||||||||||||
North
America
|
$ | 48,373 | 21.6 | % | $ | 52,133 | 27.7 | % | $ | (3,760 | ) | (7.2 | %) | |||||||||||
Europe
|
163,807 | 73.1 | % | 125,446 | 66.7 | % | 38,361 | 30.6 | % | |||||||||||||||
Asia
Pacific
|
11,814 | 5.3 | % | 10,468 | 5.6 | % | 1,346 | 12.9 | % | |||||||||||||||
Total
|
$ | 223,994 | 100.0 | % | $ | 188,047 | 100.0 | % | $ | 35,947 | 19.1 | % |
October
31,
|
Increase
|
|||||||||||||||||||||||
2008
|
2007
|
Amount
|
|
%
|
||||||||||||||||||||
Computerized
Machine
Tools
|
$ | 199,238 | 88.9 | % | $ | 165,832 | 88.2 | % | $ | 33,406 | 20.1 | % | ||||||||||||
Service
Fees, Parts and
Other
|
24,756 | 11.1 | % | 22,215 | 11.8 | % | 2,541 | 11.4 | % | |||||||||||||||
Total
|
$ | 223,994 | 100.0 | % | $ | 188,047 | 100.0 | % | $ | 35,947 | 19.1 | % |
October
31,
|
Increase
|
|||||||||||||||||||||||
2007
|
2006
|
Amount
|
|
%
|
||||||||||||||||||||
North
America
|
$ | 52,133 | 27.7 | % | $ | 50,563 | 34.0 | % | $ | 1,570 | 3.1 | % | ||||||||||||
Europe
|
125,446 | 66.7 | % | 87,735 | 59.1 | % | 37,711 | 43.0 | % | |||||||||||||||
Asia
Pacific
|
10,468 | 5.6 | % | 10,219 | 6.9 | % | 249 | 2.4 | % | |||||||||||||||
Total
|
$ | 188,047 | 100.0 | % | $ | 148,517 | 100.0 | % | $ | 39,530 | 26.6 | % |
October
31,
|
Increase
|
|||||||||||||||||||||||
2007
|
2006
|
Amount
|
%
|
|||||||||||||||||||||
Computerized
Machine
Tools
|
$ | 165,832 | 88.2 | % | $ | 128,946 | 86.8 | % | $ | 36,886 | 28.6 | % | ||||||||||||
Service
Fees, Parts and
Other
|
22,215 | 11.8 | % | 19,571 | 13.2 | % | 2,644 | 13.5 | % | |||||||||||||||
Total
|
$ | 188,047 | 100.0 | % | $ | 148,517 | 100.0 | % | $ | 39,530 | 26.6 | % |
Payments
Due by Period
|
||||||||||||||||||||
Total
|
Less
than
1
Year
|
1-3
Years
|
3-5
Years
|
More
than 5
Years
|
||||||||||||||||
Operating
Leases
|
$ | 6,500 | $ | 2,533 | $ | 2,410 | $ | 1,017 | $ | 540 | ||||||||||
Deferred
Credits and Other
|
782 | -- | -- | -- | 782 | |||||||||||||||
Total
|
$ | 7,282 | $ | 2,533 | $ | 2,410 | $ | 1,017 | $ | 1,332 |
Contract
Amount at
Forward
Rates in
U.S.
Dollars
|
|||||||||||||||||
Forward
Contracts
|
Notional
Amount
in
Foreign
Currency
|
Weighted
Avg.
Forward
Rate
|
Contract
Date
|
October
31,
2008
|
Maturity
Dates
|
||||||||||||
Sale
Contracts:
|
|||||||||||||||||
Euro
|
33,400,000 | $ | 1.5046 | $ | 52,252,730 | $ | 42,500,042 |
Nov
2008-Oct 2009
|
|||||||||
Sterling
|
4,215,000 | $ | 1.9247 | $ | 8,112,611 | $ | 6,756,793 |
Nov
2008-Oct 2009
|
|||||||||
Purchase
Contracts:
|
|||||||||||||||||
New
Taiwan Dollar
|
990,000,000 | 30.15 | * | $ | 32,834,950 | $ | 30,266,754 |
Nov
2008-Oct
2009
|
Contract
Amount at
Forward
Rates in
U.S.
Dollars
|
|||||||||||||||||
Forward
Contracts
|
Notional
Amount
in
Foreign
Currency
|
Weighted
Avg.
Forward
Rate
|
Contract
Date
|
October
31,
2008
|
Maturity
Dates
|
||||||||||||
Sale
Contracts:
|
|||||||||||||||||
Euro
|
18,403,269 | $ | 1.4094 | $ | 25,937,568 | $ | 23,437,198 |
Nov
2008-Mar 2009
|
|||||||||
Singapore
Dollar
|
1,116,718 | $ | 1.4139 | $ | 789,814 | $ | 753,305 |
Nov
2008
|
|||||||||
Sterling
|
1,755,731 | $ | 1.6809 | $ | 2,951,168 | $ | 2,825,637 |
Nov
2008-Jan 2009
|
|||||||||
Purchase
Contracts:
|
|||||||||||||||||
New
Taiwan Dollar
|
94,155,000 | 32.36 | * | $ | 2,909,327 | $ | 2,852,891 |
Nov
2008
|
|
|
Contract
Amount at
Forward
Rates in
U.S. Dollars
|
|||||||||||||||
Forward
Contracts
|
Notional
Amount
in
Foreign
Currency
|
Weighted
Avg.
Forward
Rate
|
Contract
Date
|
October
31,
2008
|
Maturity
Date
|
||||||||||||
Sale
Contracts:
|
|||||||||||||||||
Euro
|
3,000,000 | $ | 1.4837 | $ | 4,451,100 | $ | 3,827,010 |
November
2008
|
Year
Ended October 31
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
(Dollars
in thousands, except per share amounts)
|
||||||||||||
Sales
and service
fees
|
$ | 223,994 | $ | 188,047 | $ | 148,517 | ||||||
Cost
of sales and
service
|
141,377 | 116,965 | 95,192 | |||||||||
Gross
profit
|
82,617 | 71,082 | 53,325 | |||||||||
Selling,
general and administrative
expenses
|
46,811 | 40,124 | 30,697 | |||||||||
Operating
income
|
35,806 | 30,958 | 22,628 | |||||||||
Interest
expense
|
63 | 201 | 359 | |||||||||
Interest
income
|
542 | 699 | 527 | |||||||||
Investment
income
|
465 | 339 | 9 | |||||||||
Earnings
from equity
investments
|
12 | 1,048 | 865 | |||||||||
Other
income (expense),
net
|
(2,596 | ) | (78 | ) | (556 | ) | ||||||
Income before income
taxes
|
34,166 | 32,765 | 23,114 | |||||||||
Provision
for income taxes (Note
7)
|
11,646 | 11,876 | 7,635 | |||||||||
Net
income
|
$ | 22,520 | $ | 20,889 | $ | 15,479 | ||||||
Earnings
per common share –
basic
|
$ | 3.51 | $ | 3.27 | $ | 2.45 | ||||||
Weighted
average common shares outstanding – basic
|
6,415 | 6,382 | 6,317 | |||||||||
Earnings
per common share –
diluted
|
$ | 3.49 | $ | 3.24 | $ | 2.42 | ||||||
Weighted
average common shares outstanding – diluted
|
6,444 | 6,440 | 6,397 |
As
of October 31
|
||||||||
2008
|
2007
|
|||||||
Current
assets:
|
(Dollars
in thousands, except per share amounts)
|
|||||||
Cash
and cash
equivalents
|
$ | 26,394 | $ | 29,760 | ||||
Short-term
investments
|
6,674 | 10,000 | ||||||
Accounts
receivable, less allowance for doubtful accounts of $678
in 2008 and $751 in
2007
|
31,952 | 28,625 | ||||||
Inventories
|
66,368 | 61,121 | ||||||
Deferred
tax assets,
net
|
5,444 | 8,258 | ||||||
Derivative
assets
|
12,463 | 485 | ||||||
Other
|
2,017 | 1,016 | ||||||
Total current
assets
|
151,312 | 139,265 | ||||||
Property
and equipment:
|
||||||||
Land
|
782 | 776 | ||||||
Building
|
7,127 | 7,135 | ||||||
Machinery and
equipment
|
14,885 | 13,629 | ||||||
Leasehold
improvements
|
1,765 | 1,473 | ||||||
24,559 | 23,013 | |||||||
Less accumulated depreciation and
amortization
|
(10,961 | ) | (11,617 | ) | ||||
13,598 | 11,396 | |||||||
Software
development costs, less accumulated amortization
|
5,711 | 5,960 | ||||||
Investments
and other
assets
|
6,823 | 7,160 | ||||||
$ | 177,444 | $ | 163,781 | |||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 26,691 | $ | 33,056 | ||||
Accounts payable-related
parties
|
1,612 | 2,430 | ||||||
Accrued expenses and
other
|
17,598 | 21,558 | ||||||
Accrued warranty
expenses
|
2,536 | 2,449 | ||||||
Derivative
liabilities
|
2,692 | 3,722 | ||||||
Total current
liabilities
|
51,129 | 63,215 | ||||||
Non-current
liabilities:
|
||||||||
Deferred
tax liability,
net
|
2,056 | 1,956 | ||||||
Deferred credits and
other
|
782 | 1,007 | ||||||
2,838 | 2,963 | |||||||
Commitments
and contingencies (Notes 11 and 12)
|
||||||||
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, 13,250,000 shares
authorized, 6,420,851 and 6,392,220 shares issued and outstanding
in 2008 and 2007, respectively
|
642 | 639 | ||||||
Additional paid-in
capital
|
51,690 | 50,971 | ||||||
Retained
earnings
|
71,889 | 49,369 | ||||||
Accumulated other comprehensive
loss
|
(744 | ) | (3,376 | ) | ||||
Total shareholders’
equity
|
123,477 | 97,603 | ||||||
$ | 177,444 | $ | 163,781 |
Year
Ended October 31
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Cash
flows from operating activities:
|
(Dollars
in thousands)
|
|||||||||||
Net
income
|
$ | 22,520 | $ | 20,889 | $ | 15,479 | ||||||
Adjustments
to reconcile net income to Net
cash provided by operating activities:
|
||||||||||||
Provision for doubtful
accounts
|
(73 | ) | 116 | (207 | ) | |||||||
Deferred Tax
Provision
|
1,048 | 1,216 | 491 | |||||||||
Equity in income of
affiliates
|
(12 | ) | (1,048 | ) | (865 | ) | ||||||
Depreciation and
amortization
|
3,023 | 2,106 | 1,504 | |||||||||
Stock-based
Compensation
|
535 | 480 | 17 | |||||||||
Change in
assets/liabilities
|
||||||||||||
(Increase) decrease in accounts
receivable
|
(6,260 | ) | (1,742 | ) | (1,312 | ) | ||||||
(Increase) decrease in
inventories
|
(11,832 | ) | (14,116 | ) | (12,726 | ) | ||||||
Increase (decrease) in accounts
payable
|
(7,649 | ) | 7,821 | 9,318 | ||||||||
Increase (decrease) in accrued
expenses
|
3,304 | 6,474 | 3,423 | |||||||||
Other
|
(4,443 | ) | (8,003 | ) | (1,076 | ) | ||||||
Net cash provided by operating
activities
|
161 | 14,193 | 14,046 | |||||||||
Cash
flows from investing activities:
|
||||||||||||
Proceeds from sale of property and
equipment
|
17 | -- | 16 | |||||||||
Purchase of property and
equipment
|
(4,580 | ) | (3,325 | ) | (1,212 | ) | ||||||
Purchase
of
investments
|
(9,100 | ) | (24,000 | ) | -- | |||||||
Sale
of
investments
|
12,100 | 14,000 | -- | |||||||||
Software development
costs
|
(934 | ) | (1,185 | ) | (2,089 | ) | ||||||
Other proceeds
(investments)
|
(80 | ) | 1,898 | (335 | ) | |||||||
Net cash used for investing
activities
|
(2,577 | ) | (12,612 | ) | (3,620 | ) | ||||||
Cash
flows from financing activities:
|
||||||||||||
Repayment
of first
mortgage
|
-- | (4,010 | ) | (126 | ) | |||||||
Tax
benefit from exercise of stock options
|
36 | 298 | 744 | |||||||||
Proceeds
from exercise of common stock options
|
151 | 186 | 562 | |||||||||
Net cash provided by (used for)
financing activities
|
187 | (3,526 | ) | 1,180 | ||||||||
Effect
of exchange rate changes on
cash
|
(1,137 | ) | 1,859 | 681 | ||||||||
Net increase (decrease) in
cash
|
(3,366 | ) | (86 | ) | 12,287 | |||||||
Cash
and cash equivalents at beginning of year
|
29,760 | 29,846 | 17,559 | |||||||||
Cash
and cash equivalents at end of
year
|
$ | 26,394 | $ | 29,760 | $ | 29,846 | ||||||
Supplemental
disclosures:
|
||||||||||||
Cash paid
for:
|
||||||||||||
Interest
|
$ | 12 | $ | 157 | $ | 314 | ||||||
Income
taxes
|
$ | 15,799 | $ | 9,971 | $ | 3,920 |
Common
Stock
|
Additional
|
Accumulated
Other
Comprehensive
|
||||||||||||||||||||||
(Dollars
in thousands, except Shares Issued and Outstanding)
|
Shares
Issued
&
Outstanding
|
Amount
|
Paid-In
Capital
|
Retained
Earnings
|
Income
(Loss)
|
Total
|
||||||||||||||||||
Balances,
October 31, 2005
|
6,220,220 | $ | 622 | $ | 48,701 | $ | 13,001 | $ | (3,380 | ) | $ | 58,944 | ||||||||||||
Net
income
|
-- | -- | -- | 15,479 | -- | 15,479 | ||||||||||||||||||
Translation
of foreign currency financial statements
|
-- | -- | -- | -- | 1,288 | ,288 | ||||||||||||||||||
Unrealized
loss of derivative instruments, net of tax
|
-- | -- | -- | -- | (1,659 | ) | (1,659 | ) | ||||||||||||||||
Comprehensive
income
|
15,108 | |||||||||||||||||||||||
Exercise
of common stock options
|
126,300 | 13 | 549 | -- | -- | 562 | ||||||||||||||||||
Tax
benefit from exercise of stock options
|
-- | -- | 744 | -- | -- | 744 | ||||||||||||||||||
Stock-based
compensation expense
|
-- | -- | 17 | -- | -- | 17 | ||||||||||||||||||
Balances,
October 31, 2006
|
6,346,520 | 635 | 50,011 | 28,480 | (3,751 | ) | 75,375 | |||||||||||||||||
Net
income
|
-- | -- | -- | 20,889 | -- | 20,889 | ||||||||||||||||||
Translation
of foreign currency financial statements
|
-- | -- | -- | -- | 2,568 | 2,568 | ||||||||||||||||||
Unrealized
loss of derivative instruments, net of tax
|
-- | -- | -- | -- | (2,193 | ) | (2,193 | ) | ||||||||||||||||
Comprehensive
income
|
21,264 | |||||||||||||||||||||||
Exercise
of common stock options
|
45,700 | 4 | 182 | -- | -- | 186 | ||||||||||||||||||
Tax
benefit from exercise of stock options
|
-- | -- | 298 | -- | -- | 298 | ||||||||||||||||||
Stock-based
compensation expense
|
-- | -- | 480 | -- | -- | 480 | ||||||||||||||||||
Balances,
October 31, 2007
|
6,392,220 | 639 | $ | 50,971 | 49,369 | (3,376 | ) | 97,603 | ||||||||||||||||
Net
income
|
-- | -- | -- | 22,520 | -- | 22,520 | ||||||||||||||||||
Translation
of foreign currency financial statements
|
-- | -- | -- | -- | (3,747 | ) | (3,747 | ) | ||||||||||||||||
Unrealized
gain of derivative instruments, net of tax
|
-- | -- | -- | -- | 6,581 | 6,581 | ||||||||||||||||||
Unrealized
loss on investments, net of tax
|
-- | -- | -- | -- | (202 | ) | (202 | ) | ||||||||||||||||
Comprehensive
income
|
25,152 | |||||||||||||||||||||||
Exercise
of common stock options
|
28,631 | 3 | 148 | -- | -- | 151 | ||||||||||||||||||
Tax
benefit from exercise of stock options
|
-- | -- | 36 | -- | -- | 36 | ||||||||||||||||||
Stock-based
compensation expense
|
-- | -- | 535 | -- | -- | 535 | ||||||||||||||||||
Balances,
October 31, 2008
|
6,420,851 | $ | 642 | $ | 51,690 | $ | 71,889 | $ | (744 | ) | $ | 123,477 |
Number of Years
|
|
Building
|
40
|
Machines
|
7-10
|
Shop
and office equipment
|
3-7
|
Leasehold
improvements
|
3-40
|
Fiscal Year
|
Amortization
Expense
|
|||
2009
|
$ | 1,211 | ||
2010
|
1,102 | |||
2011
|
1,102 | |||
2012
|
651 | |||
2013
|
28 |
2008
|
2007
|
|||||||
Purchased
parts and sub assemblies
|
$ | 13,098 | $ | 10,956 | ||||
Work-in-process
|
11,243 | 11,692 | ||||||
Finished
goods
|
42,027 | 38,473 | ||||||
$ | 66,368 | $ | 61,121 |
Year
Ended October 31
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Current:
|
||||||||||||
U.S. taxes
|
$ | 8,768 | $ | 9,290 | $ | 5,359 | ||||||
Foreign taxes
|
3,926 | 3,802 | 2,767 | |||||||||
12,694 | 13,092 | 8,126 | ||||||||||
Deferred:
|
||||||||||||
U.S. taxes
|
(1,163 | ) | (1,657 | ) | (787 | ) | ||||||
Foreign taxes
|
115 | 441 | 296 | |||||||||
(1,048 | ) | (1,216 | ) | (491 | ) | |||||||
$ | 11,646 | $ | 11,876 | $ | 7,635 |
Income
before income taxes (in thousands):
|
Year
Ended October 31
|
|||||||||||
2008
|
2007
|
2006
|
||||||||||
Domestic
|
$ | 20,856 | $ | 20,463 | $ | 13,688 | ||||||
Foreign
|
$ | 13,310 | $ | 12,302 | $ | 9,426 | ||||||
Earnings
before taxes on income
|
$ | 34,166 | $ | 32,765 | $ | 23,114 | ||||||
Tax rates: | ||||||||||||
U.S.
statutory rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
Effect
of tax rate of international jurisdictions In excess of (less than) U.S.
statutory rates
|
(1.9 | )% | 0.1 | % | (0.2 | )% | ||||||
State
income taxes
|
1.9 | % | 2.4 | % | 3.8 | % | ||||||
Permanent
items
|
0.1 | % | 0.8 | % | (2.7 | )% | ||||||
All
other
|
(1.0 | )% | (2.1 | )% | (1.9 | )% | ||||||
Effective
tax rate
|
34.1 | % | 36.2 | % | 34.0 | % |
October
31
|
||||||||
2008
|
2007
|
|||||||
Deferred
Tax Assets:
|
||||||||
Current:
|
||||||||
Inter-company profit in
inventory
|
$ | 5,575 | $ | 5,176 | ||||
Derivative
liabilities(assets)
|
(2,477 | ) | 1,451 | |||||
Accrued inventory
reserves
|
1,070 | 991 | ||||||
Accrued warranty
expenses
|
148 | 158 | ||||||
Deferred
compensation
|
264 | 214 | ||||||
Other accrued
expenses
|
864 | 280 | ||||||
Other
|
- | (12 | ) | |||||
Current deferred tax assets,
net
|
5,444 | 8,258 | ||||||
Deferred Tax Liabilities: | ||||||||
Non-current:
|
||||||||
Depreciation and
amortization
|
(2,717 | ) | (2,730 | ) | ||||
Other
|
661 | 774 | ||||||
Non-current
deferred tax liabilities, net
|
(2,056 | ) | (1,956 | ) | ||||
Net
deferred tax assets
|
$ | 3,388 | $ | 6,302 |
Balance,
at November 1, 2007
|
$ | 576 | |||
Additions
based on tax positions related to the current year
|
- | ||||
Additions
for tax positions of prior years
|
40 | ||||
Reduction
for tax positions of prior years
|
- | ||||
Settlements
|
- | ||||
Reductions
due to statute expiration
|
(3 | ) | |||
Balance,
at October 31, 2008
|
$ | 613 |
United
States federal
|
Fiscal
2005 through the current period
|
Indiana
|
Fiscal
2005 through the current period
|
California
|
Fiscal
2004 through the current period
|
Germany¹
|
Fiscal
2004 through the current period
|
Taiwan
|
Fiscal
2003 through the current
period
|
Shares
Under
Option
|
Weighted
Average
Exercise
Price Per Share
|
|||||||
Balance
October 31, 2005
|
215,400 | $ | 3.63 | |||||
Granted
|
-- | -- | ||||||
Cancelled
|
-- | -- | ||||||
Expired
|
(400 | ) | 2.15 | |||||
Exercised
|
(126,300 | ) | $ | 4.45 | ||||
Balance
October 31, 2006
|
88,700 | $ | 2.46 | |||||
Granted
|
40,000 | 26.69 | ||||||
Cancelled
|
-- | -- | ||||||
Expired
|
-- | -- | ||||||
Exercised
|
(45,700 | ) | $ | 4.08 | ||||
Balance
October 31, 2007
|
83,000 | $ | 13.24 | |||||
Granted
|
10,000 | 35.83 | ||||||
Cancelled
|
-- | -- | ||||||
Expired
|
-- | -- | ||||||
Exercised
|
(28,631 | ) | $ | 5.26 | ||||
Balance
October 31, 2008
|
64,369 | $ | 20.29 |
Range
of Exercise
Prices
Per Share
|
Shares
Under
Option
|
Weighted
Average
Exercise
Price
Per
Share
|
Weighted
Average
Remaining
Contractual
Life
in Years
|
|||||||||||
Outstanding
|
||||||||||||||
$ |
2.13
– 5.13
|
20,500 | $ | 2.15 | 3.1 | |||||||||
5.81
– 8.25
|
|
-- | -- | -- | ||||||||||
26.69
|
|
33,869 | $ | 26.69 | 8.0 | |||||||||
35.83
|
|
10,000 | $ | 35.83 | 9.6 | |||||||||
$ |
2.13
– 35.83
|
|
64,369 | $ | 20.29 | 6.7 | ||||||||
Exercisable
|
|
|||||||||||||
$ |
2.13
– 5.13
|
|
20,500 | $ | 2.15 | -- | ||||||||
5.81
– 8.25
|
|
-- | -- | -- | ||||||||||
26.69
|
|
13,869 | $ | 26.69 | -- | |||||||||
35.83
|
10,000 | $ | 35.83 | -- | ||||||||||
$ |
2.13
– 26.69
|
44,369 | $ | 17.41 | -- |
(in
thousands)
|
2008
|
2007
(1)
|
2006
|
|||||||||
Net
Sales
|
$ | 11,935 | $ | 58,053 | $ | 58,286 | ||||||
Gross
Profit
|
1,883 | 10,061 | 10,932 | |||||||||
Operating
Income
|
159 | 3,757 | 4,209 | |||||||||
Net
Income
|
147 | 3,467 | 3,727 | |||||||||
Current
Assets
|
$ | 8,658 | $ | 36,945 | $ | 27,903 | ||||||
Non-current
Assets
|
2,195 | 10,636 | 7,684 | |||||||||
Current
Liabilities
|
3,176 | 18,785 | 20,156 |
10/31/08
|
10/31/07
|
|||||||
Balance,
beginning of period
|
$ | 2,449 | $ | 1,926 | ||||
Provision
for warranties during the period
|
2,944 | 2,459 | ||||||
Charges
to the accrual
|
(2,666 | ) | (2,087 | ) | ||||
Impact
of foreign currency translation
|
(189 | ) | 151 | |||||
Balance,
end of period
|
$ | 2,536 | $ | 2,449 |
2009
|
$ | 2,533 | ||
2010
|
1,483 | |||
2011
|
927 | |||
2012
|
575 | |||
2013 | 442 | |||
Thereafter
|
540 | |||
Total
|
$ | 6,500 |
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
|||||||||||||
2008 (In thousands, except per share
data)
|
||||||||||||||||
Sales
and service
fees
|
$ | 60,923 | $ | 58,285 | $ | 57,318 | $ | 47,468 | ||||||||
Gross
profit
|
24,857 | 20,331 | 20,879 | 16,550 | ||||||||||||
Gross
profit
margin
|
40.8 | % | 34.9 | % | 36.4 | % | 34.9 | % | ||||||||
Selling,
general and administrative expenses
|
12,376 | 11,676 | 11,829 | 10,930 | ||||||||||||
Operating
income
|
12,481 | 8,655 | 9,050 | 5,620 | ||||||||||||
Provision
for income
taxes
|
4,522 | 3,054 | 2,954 | 1,116 | ||||||||||||
Net
income
|
7,805 | 5,467 | 5,826 | 3,422 | ||||||||||||
Income
per common share – basic
|
$ | 1.22 | $ | 0.85 | $ | 0.91 | $ | 0.51 | ||||||||
Income
per common share – diluted
|
$ | 1.21 | $ | 0.85 | $ | 0.90 | $ | 0.50 | ||||||||
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
|||||||||||||
2007 (In thousands, except per share
data)
|
||||||||||||||||
Sales
and service
fees
|
$ | 46,878 | $ | 42,494 | $ | 48,555 | $ | 50,120 | ||||||||
Gross
profit
|
17,324 | 16,349 | 18,417 | 18,992 | ||||||||||||
Gross
profit
margin
|
37.0 | % | 38.5 | % | 37.9 | % | 37.9 | % | ||||||||
Selling,
general and administrative expenses
|
9,250 | 9,405 | 10,228 | 11,241 | ||||||||||||
Operating
income
|
8,074 | 6,944 | 8,189 | 7,751 | ||||||||||||
Provision
for income
taxes
|
2,998 | 2,764 | 3,659 | 2,455 | ||||||||||||
Net
income
|
5,395 | 4,680 | 5,163 | 5,651 | ||||||||||||
Income
per common share – basic
|
$ | 0.85 | $ | 0.73 | $ | 0.81 | $ | 0.88 | ||||||||
Income
per common share – diluted
|
$ | 0.84 | $ | 0.73 | $ | 0.80 | $ | 0.88 |
Net
Sales and Service Fees by Product Category
|
Year
ended October 31,
|
|||||||||||
2008
|
2007
|
2006
|
||||||||||
Computerized
Machine
Tools
|
$ | 199,238 | $ | 165,832 | $ | 128,946 | ||||||
Computer
Control Systems and Software *
|
5,677 | 5,291 | 4,694 | |||||||||
Service
Parts
|
13,240 | 12,096 | 10,494 | |||||||||
Service
Fees
|
5,838 | 4,828 | 4,383 | |||||||||
Total
|
$ | 223,994 | $ | 188,047 | $ | 148,517 |
Revenues
by Geographic Area
|
Year
Ended October 31
|
|||||||||||
2008
|
2007
|
2006
|
||||||||||
North
America
|
$ | 48,087 | $ | 50,010 | $ | 48,711 | ||||||
Germany
|
81,945 | 58,860 | 39,764 | |||||||||
United
Kingdom
|
20,877 | 19,326 | 16,089 | |||||||||
France
|
13,412 | 11,019 | 9,107 | |||||||||
Other
Europe
|
46,531 | 35,245 | 22,113 | |||||||||
Total Europe
|
162,765 | 124,450 | 87,073 | |||||||||
Asia
|
11,816 | 12,493 | 11,866 | |||||||||
Other
Foreign
|
1,326 | 1,094 | 867 | |||||||||
Total Foreign
|
175,907 | 138,037 | 99,806 | |||||||||
$ | 223,994 | $ | 188,047 | $ | 148,517 |
As
of October 31
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
United
States
|
$ | 8,421 | $ | 7,795 | $ | 8,308 | ||||||
Foreign
countries
|
6,996 | 5,489 | 2,934 | |||||||||
$ | 15,417 | $ | 13,284 | $ | 11,242 |
10/03
|
10/04
|
10/05
|
10/06
|
10/07
|
10/08
|
||
Hurco
Companies, Inc.
|
100.00
|
557.59
|
693.77
|
1014.01
|
2221.79
|
875.49
|
|
Russell
2000
|
100.00
|
111.73
|
125.23
|
150.25
|
164.18
|
108.09
|
|
Peer
Group - SIC Codes 3540-3549
|
100.00
|
159.75
|
170.26
|
177.47
|
220.27
|
116.68
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights (a) (#)
|
Weighted-average
exercise price of outstanding options, warrants and rights (b)
($)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column (a)) (c)
(#)
|
|||
Equity
compensation plans approved by security holders
|
64,369
|
$20.29
|
740,000
|
|||
Equity
compensation plans not approved by security holders
|
--
|
--
|
--
|
|||
Total
|
64,369
|
$20.29
|
740,000
|
(a)
|
1.
|
Financial
Statements. The following consolidated financial
statements of Registrant are included herein under Item 8 of Part
II:
|
||
Page
|
||||
Report
of Independent Registered Public Accounting Firm – Crowe Horwath
LLP
|
27
|
|||
Consolidated
Statements of Income – years ended October
31, 2008, 2007 and 2006
|
29
|
|||
Consolidated
Balance Sheets – as of October 31, 2008 and 2007
|
30
|
|||
Consolidated
Statements of Cash Flows – years ended
October 31, 2008, 2007 and 2006
|
31
|
|||
Consolidated
Statements of Changes in Shareholders’ Equity – years
ended October 31, 2008, 2007 and 2006
|
32
|
|||
Notes
to Consolidated Financial Statements
|
33
|
2.
|
Financial Statement
Schedule. The following financial statement schedule is
included in this Item.
|
|||
Page
|
||||
Schedule
II - Valuation and Qualifying Accounts
and
Reserves
|
53
|
All
other financial statement schedules are omitted because they are not
applicable or the required information is included in the consolidated
financial statements or notes thereto.
|
||||
(b)
|
Exhibits
|
|||
Exhibits
being filed with this Form 10-K or incorporated herein by reference are
listed on page 54.
|
Description
|
Balance
at
Beginning
of
Period
|
Charged
to
Costs
and
Expenses
|
Charged
To
Other
Accounts
|
Deductions
|
Balance
At
End
Of
Period
|
||||||||||||||||||
Allowance
for doubtful Accounts
for the year ended:
|
|||||||||||||||||||||||
October
31,
2008
|
$ | 751 | $ | (42 | ) | -- | $ | 31 | (1) | $ | 678 | ||||||||||||
October
31,
2007
|
$ | 635 | $ | 128 | -- | $ | 12 | (2) | $ | 751 | |||||||||||||
October
31,
2006
|
$ | 842 | $ | (227 | ) | -- | $ | (20 | ) | (3) | $ | 635 | |||||||||||
Accrued
warranty expenses For
the year ended:
|
|||||||||||||||||||||||
October
31,
2008
|
$ | 2,449 | $ | 2,755 | -- | $ | 2,666 | $ | 2,536 | ||||||||||||||
October
31,
2007
|
$ | 1,926 | $ | 2,610 | -- | $ | 2,087 | $ | 2,449 | ||||||||||||||
October
31,
2006
|
$ | 1,618 | $ | 2,201 | -- | $ | 1,893 | $ | 1,926 |
10.1*
|
Summary
compensation table.
|
10.2*
|
Form
of restated split-dollar insurance agreement
|
11
|
Statement
re: computation of per share earnings.
|
21
|
Subsidiaries
of the Registrant.
|
23.1
|
Consent
of Independent Registered Public Accounting Firm, Crowe Horwath
LLP
|
31.1
|
Certification
by the Chief Executive Officer, pursuant to Rule 13a-15(b) under the
Securities and Exchange Act of 1934, as amended.
|
31.2
|
Certification
by the Chief Financial Officer, pursuant to Rule 13a-15(b) under the
Securities and Exchange Act of 1934, as amended.
|
32.1
|
Certification
by the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification
by the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
3.1
|
Amended
and Restated Articles of Incorporation of the Registrant, incorporated by
reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended July 31, 2000.
|
3.2
|
Amended
and Restated By-Laws of the Registrant as amended through September 27,
2006, incorporated by reference to Exhibit 3.1 to the Registrant’s Current
Report on Form 8-K filed on September 27, 2006.
|
10.2
|
Credit
Agreement dated as of December 7, 2007, between Hurco Companies, Inc. And
JP Morgan Chase Bank, N.A. incorporated by reference to Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K filed December 12,
2007.
|
10.3*
|
Employment
Agreement between the Registrant and John G. Oblazney dated January 12,
2007, incorporated by reference to Exhibit 10.1 to the Registrant’s Annual
Report on Form 10-K for the year ended October 31,
2006.
|
10.4*
|
Employment
Agreement between the Registrant and James D. Fabris dated November 18,
1997, incorporated by reference as Exhibit 10.15 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended January 31,
1998.
|
10.5*
|
Employment
Agreement between the Registrant and Michael Doar dated November 13, 2001,
incorporated by reference as Exhibit 10.2 to the Registrant’s Quarterly
Report on Form 10-Q for the quarter ended January 31,
2002.
|
10.6*
|
Amended
1997 Stock Option and Incentive Plan incorporated by reference as Exhibit
10 to the Registrant’s Quarterly Report on Form 10-Q filed for the quarter
ended July 31, 2005.
|
10.7
|
Hurco
Companies, Inc. 2008 Equity Incentive Plan incorporated by reference to
Appendix A of the Registrant’s definitive Proxy Statement on Schedule 14A
filed January 28, 2008.
|
*
|
The
indicated exhibit is a management contract, compensatory plan or
arrangement required to be listed by Item 601 of Regulation
S-K.
|
HURCO COMPANIES, INC. | |||
|
By:
|
/s/ John G. Oblazney | |
John G. Oblazney | |||
Vice-President, Secretary, Treasurer and Chief Financial Officer | |||
Signature and Title(s)
|
Date
|
|
/s/ Michael Doar
|
January
12, 2009
|
|
Michael
Doar, Chairman of the Board,
|
||
Chief
Executive Officer and Director
|
||
of
Hurco Companies, Inc.
|
||
(Principal
Executive Officer)
|
||
/s/ John G.
Oblazney
|
January
12, 2009
|
|
John
G. Oblazney
|
||
Vice-President,
|
||
Secretary,
Treasurer and
|
||
Chief
Financial Officer
|
||
of
Hurco Companies, Inc.
|
||
(Principal
Financial Officer)
|
||
/s/ Sonja
K. McClelland
|
January
12, 2009
|
|
Sonja
K. McClelland
|
||
Corporate
Controller, Assistant Secretary
|
||
of
Hurco Companies, Inc.
|
||
(Principal
Accounting Officer)
|
/s/ Stephen H. Cooper
|
January
12, 2009
|
|
Stephen
H. Cooper, Director
|
||
/s/ Robert W. Cruickshank
|
January
12, 2009
|
|
Robert
W. Cruickshank, Director
|
||
/s/ Philip James
|
January
12, 2009
|
|
Philip
James, Director
|
||
/s/ Michael P. Mazza
|
||
Michael
P. Mazza, Director
|
January
12, 2009
|
|
/s/ Richard T. Niner
|
January
12, 2009
|
|
Richard
T. Niner, Director
|
||
/s/ Charlie Rentschler
|
January
12, 2009
|
|
Charlie
Rentschler, Director
|
||
/s/ Janaki Sivanesan
|
January
12, 2009
|
|
Janaki
Sivanesan, Director
|
||