x |
Quarterly
report pursuant to section 13 or 15(d) of the Securities Exchange
Act of
1934 for the quarterly period ended January 31, 2007
or
|
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)
|
Item
1.
|
Financial
Statements
|
|
Condensed
Consolidated Statement of Operations
Three
months ended January 31, 2007 and 2006
|
3
|
|
Condensed
Consolidated Balance Sheet
As
of January 31, 2007 and October 31, 2006
|
4
|
|
Condensed
Consolidated Statement of Cash Flows
Three
months ended January 31, 2007 and 2006
|
5
|
|
Condensed
Consolidated Statement of Changes in Shareholders' Equity
Three
months
ended January 31, 2007 and 2006
|
6
|
|
Notes
to Condensed Consolidated Financial Statements
|
7
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial
Condition
and Results of Operations
|
11
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
16
|
Item
4.
|
Controls
and Procedures
|
18
|
Item
1.
|
Legal
Proceedings
|
19
|
Item
1A.
|
Risk
Factors
|
19
|
Item
5.
|
Other
Information
|
19
|
Item
6.
|
Exhibits
|
19
|
|
Signatures
|
20
|
Three
Months Ended
|
|||||||
January
31
|
|||||||
2007
|
2006
|
||||||
(unaudited)
|
|||||||
Sales
and service fees
|
$
|
46,878
|
$
|
31,894
|
|||
Cost
of sales and service
|
29,554
|
20,967
|
|||||
Gross
profit
|
17,324
|
10,927
|
|||||
Selling,
general and administrative expenses
|
9,250
|
6,296
|
|||||
Operating
income
|
8,074
|
4,631
|
|||||
Interest
expense
|
43
|
84
|
|||||
Other
expense (income), net
|
(362
|
)
|
(104
|
)
|
|||
Income
before taxes
|
8,393
|
4,651
|
|||||
Provision
for income taxes
|
2,998
|
1,618
|
|||||
Net
income
|
$
|
5,395
|
$
|
3
,033
|
|||
Earnings
per common share
|
|||||||
Basic
|
$
|
0.85
|
$
|
0.49
|
|||
Diluted
|
$
|
0.84
|
$
|
0.48
|
|||
Weighted
average common shares outstanding
|
|||||||
Basic
|
6,362
|
6,242
|
|||||
Diluted
|
6,418
|
6,328
|
January
31
|
October
31
|
||||||
2007
|
2006
|
||||||
(unaudited)
|
(audited)
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
32,326
|
$
|
29,846
|
|||
Accounts
receivable
|
25,169
|
22,248
|
|||||
Inventories
|
40,324
|
43,343
|
|||||
Deferred
tax assets
|
1,910
|
2,768
|
|||||
Other
|
3,170
|
2,677
|
|||||
Total
current assets
|
102,899
|
100,882
|
|||||
Property
and equipment:
|
|||||||
Land
|
761
|
761
|
|||||
Building
|
7,234
|
7,234
|
|||||
Machinery
and equipment
|
13,230
|
12,952
|
|||||
Leasehold
improvements
|
1,167
|
1,147
|
|||||
22,932
|
22,094
|
||||||
Less
accumulated depreciation and amortization
|
(13,262
|
)
|
(12,944
|
)
|
|||
9,130
|
9,150
|
||||||
Non-current
assets:
|
|||||||
Deferred
tax assets
|
1,088
|
1,121
|
|||||
Software
development costs, less accumulated amortization
|
5,894
|
5,580
|
|||||
Investments
and other assets
|
7,812
|
7,381
|
|||||
$
|
126,823
|
$
|
124,114
|
||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
24,227
|
$
|
26,605
|
|||
Accrued
expenses
|
16,338
|
17,599
|
|||||
Current
portion of long-term debt
|
138
|
136
|
|||||
Total
current liabilities
|
40,703
|
44,340
|
|||||
Non-current
liabilities:
|
|||||||
Long-term
debt
|
3,839
|
3,874
|
|||||
Deferred
credits and other
|
588
|
525
|
|||||
Total
liabilities
|
45,130
|
48,739
|
|||||
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, and 6,380,520 and 6,346,520
|
|||||||
shares
issued and outstanding, respectively
|
638
|
635
|
|||||
Additional
paid-in capital
|
50,528
|
50,011
|
|||||
Retained
earnings
|
33,875
|
28,480
|
|||||
Accumulated
other comprehensive income
|
(3,348
|
)
|
(3,751
|
)
|
|||
Total
shareholders’ equity
|
81,693
|
75,375
|
|||||
$
|
126,823
|
$
|
124,114
|
Three
Months Ended
|
|||||||
January
31
|
|||||||
2007
|
2006
|
||||||
(unaudited)
|
|||||||
Cash
flows from operating activities:
|
|||||||
Net
income
|
$
|
5,395
|
$
|
3,033
|
|||
Adjustments
to reconcile net income to
Net
cash provided by (used for) operating activities:
|
|||||||
Provision
for doubtful accounts
|
(38
|
)
|
16
|
||||
Equity
in (income) loss of affiliates
|
(204
|
)
|
(96
|
)
|
|||
Depreciation
and amortization
|
388
|
365
|
|||||
Stock-based
compensation
|
308
|
5
|
|||||
Change
in assets and liabilities:
|
|||||||
(Increase)
decrease in accounts receivable
|
(2,587
|
)
|
1,606
|
||||
(Increase)
decrease in inventories
|
3,695
|
(979
|
)
|
||||
Increase
(decrease) in accounts payable
|
(2,634
|
)
|
1,967
|
||||
Increase
(decrease) in accrued expenses
|
(1,797
|
)
|
(2,559
|
)
|
|||
Increase
(decrease) in deferred taxes
|
77
|
410
|
|||||
Other
|
306
|
(313
|
)
|
||||
Net
cash provided by operating activities
|
2,909
|
3,455
|
|||||
Cash
flows from investing activities:
|
|||||||
Purchase
of property and equipment
|
(149
|
)
|
(60
|
)
|
|||
Software
development costs
|
(505
|
)
|
(432
|
)
|
|||
Other
investments
|
(299
|
)
|
(159
|
)
|
|||
Net
cash used for investing activities
|
(953
|
)
|
(651
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Repayment
on first mortgage
|
(33
|
)
|
(30
|
)
|
|||
Tax
benefit from exercise of stock options
|
115
|
499
|
|||||
Proceeds
from exercise of common stock options
|
97
|
530
|
|||||
Net
cash provided by financing activities
|
179
|
999
|
|||||
Effect
of exchange rate changes on cash
|
345
|
200
|
|||||
Net
increase in cash and
cash
equivalents
|
2,480
|
4,003
|
|||||
Cash
and cash equivalents
at
beginning of period
|
29,846
|
17,559
|
|||||
Cash
and cash equivalents
at
end of period
|
$
|
32,326
|
$
|
21,562
|
(Dollars
in thousands except Shares Issued and
Outstanding)
|
Common
Stock
|
Additional
|
Retained
|
Accumulated
Other
Comprehensive
|
|||||||||||||||
Shares
Issued
&
Outstanding
|
Amount
|
Paid-In
Capital
|
Earnings
(Deficit)
|
Income
(Loss)
|
Total
|
||||||||||||||
(Dollars
in thousands)
|
|||||||||||||||||||
Balances,
October 31, 2005
|
6,220,220
|
$
|
622
|
$
|
48,701
|
$
|
13,001
|
$
|
(3,380
|
)
|
$
|
58,944
|
|||||||
Net
income
|
--
|
--
|
--
|
3,033
|
--
|
3,033
|
|||||||||||||
Translation
of foreign currency financial statements
|
--
|
--
|
--
|
--
|
556
|
556
|
|||||||||||||
Unrealized
gain on derivative instruments
|
--
|
--
|
--
|
--
|
584
|
584
|
|||||||||||||
Comprehensive
income
|
--
|
--
|
--
|
--
|
--
|
4,173
|
|||||||||||||
Exercise
of common stock options
|
120,800
|
12
|
518
|
--
|
--
|
530
|
|||||||||||||
Tax
benefit from exercise of stock options
|
--
|
--
|
499
|
--
|
--
|
499
|
|||||||||||||
Stock-based
compensation expense
|
--
|
--
|
5
|
--
|
--
|
5
|
|||||||||||||
Balances,
January 31, 2006
|
6,341,020
|
$
|
634
|
$
|
49,723
|
$
|
16,034
|
$
|
(2,240
|
)
|
$
|
64,151
|
|||||||
Balances,
October 31, 2006
|
6,346,520
|
$
|
635
|
$
|
50,011
|
$
|
28,480
|
$
|
(3,751
|
)
|
$
|
75,375
|
|||||||
Net
income
|
--
|
--
|
--
|
5,395
|
--
|
5,395
|
|||||||||||||
Translation
of foreign currency financial statements
|
--
|
--
|
--
|
--
|
638
|
638
|
|||||||||||||
Unrealized
loss on derivative instruments
|
--
|
--
|
--
|
--
|
(235
|
)
|
(235
|
)
|
|||||||||||
Comprehensive
income
|
--
|
--
|
--
|
--
|
--
|
5,798
|
|||||||||||||
Exercise
of common stock options
|
34,000
|
3
|
94
|
--
|
--
|
97
|
|||||||||||||
Tax
benefit from exercise of stock options
|
--
|
--
|
115
|
--
|
--
|
115
|
|||||||||||||
Stock-based
compensation expense
|
--
|
--
|
308
|
--
|
--
|
308
|
|||||||||||||
Balances,
January 31, 2007
|
6,380,520
|
$
|
638
|
$
|
50,528
|
$
|
33,875
|
$
|
(
3,348
|
)
|
$
|
81,693
|
|||||||
1. |
GENERAL
|
2. |
HEDGING
|
Stock
Options
|
Weighted
Average Exercise Price
|
||||||
Outstanding
at October 31, 2006
|
88,700
|
$
|
2.46
|
||||
Options
granted
|
40,000
|
$
|
26.69
|
||||
Options
exercised
|
(34,000
|
)
|
$
|
2.86
|
|||
Options
cancelled
|
-
|
-
|
|||||
Outstanding
at January 31, 2007
|
94,700
|
$
|
12.55
|
||||
Outstanding
Stock Options Already Vested and Expected to Vest
|
Options
that are outstanding and Exercisable
|
||||||
Number
of outstanding options
|
94,700
|
64,700
|
|||||
Weighted
average remaining contractual life
|
7.4
|
4.6
|
|||||
Weighted
average exercise price per share
|
$
|
12.55
|
$
|
5.99
|
|||
Intrinsic
value
|
$
|
1,947,000
|
$
|
1,755,000
|
|||
4. |
EARNINGS
PER SHARE
|
5. |
ACCOUNTS
RECEIVABLE
|
6. |
INVENTORIES
|
January
31, 2007
|
October
31, 2006
|
||||||
Purchased
parts and sub-assemblies
|
$
|
8,664
|
$
|
7,645
|
|||
Work-in-process
|
7,263
|
7,608
|
|||||
Finished
goods
|
24,397
|
28,090
|
|||||
$
|
40,324
|
$
|
43,343
|
7. |
SEGMENT
INFORMATION
|
8. |
GUARANTEES
|
Three
months ended
|
|||||||
1/31/07
|
1/31/06
|
||||||
Balance,
beginning of period
|
$
|
1,926
|
$
|
1,618
|
|||
Provision
for warranties during the period
|
599
|
361
|
|||||
Charges
to the accrual
|
(517
|
)
|
(275
|
)
|
|||
Impact
of foreign currency translation
|
27
|
58
|
|||||
Balance,
end of period
|
$
|
2,035
|
$
|
1,762
|
9. |
COMPREHENSIVE
INCOME
|
Three
months ended
|
|||||||
1/31/07
|
1/31/06
|
||||||
Net
income
|
$
|
5,395
|
$
|
3,033
|
|||
Translation
of foreign currency financial statements
|
638
|
556
|
|||||
Unrealized
gain (loss) on derivative instruments
|
(235
|
)
|
584
|
||||
Comprehensive
income
|
$
|
5,798
|
$
|
4,173
|
Net
Sales and Service Fees by Geographic
Region
|
|||||||||||
January
31,
|
Increase
|
||||||||||
2007
|
2006
|
Amount
|
%
|
||||||||
North
America
|
$13,223
|
28.2%
|
$12,331
|
38.6%
|
$892
|
7.2%
|
|||||
Europe | 31,494 | 67.2% | 18,044 | 56.6% | 13,450 | 74.5% | |||||
Asia
Pacific
|
2,161
|
4.6%
|
1,519
|
4.8%
|
642
|
42.3%
|
|||||
Total
|
$46,878
|
100.0%
|
$31,894
|
100.0%
|
$14,984
|
46.9%
|
Net
Sales and Service Fees by Product Category
|
|||||||||||
January
31,
|
Increase
|
||||||||||
2007
|
2006
|
Amount
|
%
|
||||||||
Computerized
Machine Tools
|
$41,746
|
89.1%
|
$27,364
|
85.8%
|
$14,382
|
52.6%
|
|||||
Service
Fees, Parts and Other
|
5,132
|
10.9%
|
4,530
|
14.2%
|
602
|
13.3%
|
|||||
Total
|
$46,878
|
100.0%
|
$31,894
|
100.0%
|
$14,984
|
46.9%
|
· |
The
cyclical nature of the machine tool
industry;
|
· |
The
risks of our international
operations;
|
· |
The
limited number of our manufacturing
sources;
|
· |
The
effects of changes in currency exchange
rates;
|
· |
Our
dependence on new product
development;
|
· |
The
need to make technological
advances;
|
· |
Competition
with larger companies that have greater financial
resources;
|
· |
Changes
in the prices of raw materials, especially steel and iron
products;
|
· |
Possible
obsolescence of our technology;
|
· |
Impairment
of our goodwill or other assets;
|
· |
The
need to protect our intellectual property assets; and
|
· |
The
effect of the loss of key
personnel.
|
Notional
Amount
|
Weighted
Avg.
|
Contract
Amount at Forward
Rates
in U.S.
Dollars
|
|||
Forward
Contracts
|
in
Foreign Currency
|
Forward
Rate
|
Contract
Date
|
January
31, 2007
|
Maturity
Dates
|
Sale
Contracts:
|
|||||
Euro
|
24,600000
|
1.2949
|
31,854,540
|
32,245,739
|
February
2007-December 2007
|
Pound
Sterling
|
4,000,000
|
1.8891
|
7,556,400
|
7,846,315
|
February
2007-December 2007
|
Purchase
Contracts:
|
|||||
New
Taiwan Dollar
|
600,000,000
|
32.40*
|
18,518,519
|
18,341,782
|
February
2007-October 2007
|
Contract
Amount at Forward
Rates
in U.S.
Dollars
|
|||||
Forward
Contracts
|
Notional
Amount in Foreign Currency
|
Weighted
Avg. Forward Rate
|
Contract
Date
|
January
31, 2007
|
Maturity
Dates
|
Sale
Contracts:
|
|||||
Euro
|
9,329,723
|
1.3020
|
12,147,300
|
12,182,010
|
February
2007-March 2007
|
Singapore
Dollar
|
8,829,738
|
0.6451
|
5,696,064
|
5,765,939
|
February
2007-May 2007
|
Pound
Sterling
|
947,102
|
1.9494
|
1,846,280
|
1,859,646
|
February
2007-March 2007
|
Purchase
Contracts:
|
|||||
New
Taiwan Dollar
|
363,900,000
|
32.62*
|
11,155,733
|
11,081,131
|
February
2007 - April 2007
|
11
|
Computation
of per share earnings.
|
|
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.
|