JB HURC research continued:
There are some smart people long on the stock:
The following table sets forth information as of March 26, 1997, regarding
beneficial ownership of the Company's common stock by each director and Named
Executive Officer, by all directors and executive officers as a group,
and by certain other beneficial owners of more than 5% of the common stock.
Each such person has sole voting and investment power with respect to such
securities, except as otherwise noted.
Shares Beneficially Owned
Name and Address Number Percent
Other Beneficial Owners
Brynwood Partners Limited Partnership 1,390,001 21.3%
Two Soundview AvenueGreenwich, Connecticut 06830
Wellington Management Co. 630,500 (1) 9.7%
75 State StreetBoston, Massachusetts 02109
The TCW Group, Inc. 508,200 7.8%
865 South Figueroa StreetLos Angeles, California 90017
It would be nice if someone could look at insider trading activity my
hunch is that we will not find any sellers!
From last 10Q Balance sheet looks good; good working capital; normal
receivables; not too much leverage. Cash flow statatement very nice
free cash flow!!! (i.e., CF from operations - cash flow from
investment activities. This is very good! about the only negative is
a slight decline in sales (this may be misleading does not
necessarily mean down trend will continue). Look at the excellent
and strong CF statement:
HURCO COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Three Months Ended Nine Months Ended
July 31, July 31,
-------- --------
1997 1996 1997 1996
-------- --------
(unaudited) (unaudited)
Cash flows from operating activities:
Net income ................................. $2,534 $ 957 $9,750 $2,554
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ............ 502 517 1,433 2,075
Change in assets and liabilities:
(Increase) decrease in accounts receivable (231) 1,617 1,290 2,683
(Increase) decrease in inventories ....... 1,379 (1,174) (2,248) (745)
Increase (decrease) in accounts payable .. (800) 1,144 (1,844) 99
Increase (decrease) in accrued expenses .. 476 116 (807) (1,129)
Other .................................... (113) (231) 449 216
------- ------- -------- --------
Net cash provided by
operating activities ................... 3,747 2,946 8,023 5,753
-------- ------- -------- --------
Cash flows from investing activities:
Proceeds from sale of equipment ............ 23 1 106 33
Purchase of property and equipment ......... (244) (138) (493) (391)
Software development costs ................. (270) (397) (997) (1,065)
Other investments .......................... (11) (8) (429) 66
------- ------- -------- --------
Net cash provided by (used for)
investing activities ..................... (502) (542) (1,813) (1,357)
------- ------- -------- --------
Cash flows from financing activities:
Advances on bank credit facilities ......... 7,222 7,820 25,279 37,885
Repayment on bank credit facilities ........ (9,722)(11,482) (29,512)(42,632)
Repayment of term debt ..................... -- (3,140) (1,786) (5,090)
Proceeds from the issuance of common stock
and exercises of common stock options ..... 5 4,830 13 4,830
------- ------- -------- --------
Net cash provided by (used for)
financing activities ..................... (2,495) (1,972) (6,006) (5,007)
------- ------- -------- --------
Effect of exchange rate changes on cash ....... 229 26 36 (51)
------- ------- -------- --------
Net increase (decrease) in cash .......... 979 458 240 (662)
Cash and cash equivalents at beginning of period 1,138 952 1,877 2,072
-------- ------- ------- --------
Cash and cash equivalents at end of period .. $2,117 $1,410 $2,117 $1,410
Fundamentals: this is what they do from 10K (I find it to be a nice
business in which they seem to have a competitive advantage. I also
like the fact that they do no BS as much as biotechs with no real
products do)
Hurco Companies, Inc. (the Company) designs and produces computer
numericalcontrol (CNC) systems and software and CNC-operated machine
tools for salethrough its own distribution system to the worldwide
machine tool industry. TheCompany's proprietary CNC systems and
related software products are eitherintegrated with machine tools
marketed by the Company, sold to machine tool endusers or sold to
other machine tool manufacturers who integrate them with theirown
products.The Company pioneered the application of microprocessor technology andconversational programming software to machine tool controls and, since itsfounding in 1968, has been a leader in the introduction of CNC systems thatautomate manufacturing processes and improve productivity in certain segments ofthe metalworking industry. The Company has concentrated on designing"user-friendly" CNC systems that can be operated by both skilled and unskilledmachine tool operators and yet are capable of instructing a machine tool toperform complex tasks. The combination of microprocessor technology and patentedinteractive, conversational software in the Company's CNC systems enablesoperators on the production floor to quickly and easily create a program formachining or forming a particular part
from a blueprint or electronic design andimmediately begin production
of that part.The Company's executive offices and principal design,
engineering, assembly anddistribution facilities are located in
Indianapolis, Indiana. Additional productdesign, assembly and
warehouse facilities are located in Farmington Hills,Michigan; and
sales, application engineering and service offices are located inHigh
Wycombe, England; Munich, Germany; Paris, France; and Singapore.
It looks they have a competitive edge as well:
COMPETITION
Numerous companies compete with the Company's product lines in the
United Statesand international markets. Many of these competitors
are larger and have greaterfinancial resources than the Company. The
Company strives to compete effectivelyby designing into its products
critical proprietary features that offer adistinct value differential
from comparably-priced competitive products in termsof enhanced
productivity, technological capabilities and ease of use. Inaddition,
by offering its products in a range of prices and capabilities,
theCompany seeks to meet the needs of a broad potential market. The
Company alsobelieves that its competitiveness is aided by its reputation for reliability andquality, its strong international sales and distribution organization and itsextensive customer service organization.In the worldwide CNC systems market, the Company is a leader in providing user-friendly, "conversational" programming systems for CNC machinetools, although its principal competitors, such as Fanuc Ltd., MitsubishiMachine Tools, Heidenhain Corp., Siemens Industrial Automation, Inc. Southwestern Industries, Bridgeport Machines, Inc. and Allen-Bradley Co.,also offer "user-friendly" programming features. Fanuc Ltd. is the world'slargest supplier of CNC systems.The Company believes it is one of the largest domestic manufacturers of CNCgauging systems for press brakes. Automec Inc., a CNC gauge manufacturer, andCybelec SA, a control manufacturer, are the Company's major competitors forthese products in the United States. The Company also competes with Cybelec inEurope.In the U.S. market for CNC milling machines, the Company's principal competitors include Bridgeport Machines Inc., Tree Machine Tool Co. Inc., Miltronics Manufacturing Co. and Republic-Lagun Machine Tool Co. Competitionin the United States with respect to CNC machining centers comes from Fadal Engineering (a subsidiary of Giddings & Lewis Inc.), Haas Automation, Inc. andCincinnati Milacron Inc. A large number of foreign builders, includingOkuma Machinery Works Ltd., Yamazaki Mazak Corporation, Mori Seiki Co., Ltd. and Matsuura Machinery Corporation, also compete with the Company in the UnitedStates as well as in international markets.
Bottom line I believe this is a very nice business. (BTW the ratios
p/e p/s etc are very nice as well)Actually the only concern I would
have is the business slowdown in Asia and the possibility of a
recession. Otherwise I would go long rigthaway! (I guess what I
mean is that this is not a shorting situation)
Thanks for your suggestion!
Do not hesitate to pass them over for research. Finding the good
shorts is like mining for gold. Also we may find a good long in the
process.
Regards,
Pancho |
