SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended July 31, 1997
Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________ to
---------.
Commission File No. 0-9143
HURCO COMPANIES, INC.
(Exact name of registrant as specified in its charter)
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)
Registrant's telephone number, including area code (317) 293-5309
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to the filing
requirements for the past 90 days:
Yes X No
The number of shares of the Registrant's common stock outstanding as of
September 8, 1997 was 6,537,771.
<PAGE>
HURCO COMPANIES, INC.
July 1997 Form 10-Q Quarterly Report
Table of Contents
Part I - Financial Information
Page
Item 1 Condensed Consolidated Financial Statements
Condensed Consolidated Statement of Operations -
Three months and nine months ended July 31, 1997 and 1996...3
Condensed Consolidated Balance Sheet -
As of July 31, 1997 and October 31, 1996 ...................4
Condensed Consolidated Statement of Cash Flows -
Three months and nine months ended July 31, 1997 and 1996...5
Notes to Condensed Consolidated Financial Statements ...........6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................9
Part II - Other Information
Item 1 Legal Proceedings .............................................13
Item 4 Submission of Matters to a Vote of Security Holders............14
Item 6 Exhibits and Reports on Form 8-K ..............................15
Signatures ..................................................................15
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HURCO COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per-share data)
Three Months Ended Nine Months Ended
July 31, July 31,
------- -------
1997 1996 1997 1996
------- -------
(unaudited) (unaudited)
Sales and service fees ........... $24,637 $23,039 $69,495 $72,358
Cost of sales and service ........ 17,462 16,051 48,992 51,664
------- ------- ------- -------
Gross profit ................ 7,175 6,988 20,503 20,694
Selling, general and
administrative expenses .......... 5,352 5,223 15,615 15,635
------- ------- ------- -------
Operating income ............ 1,823 1,765 4,888 5,059
Interest expense ................. 473 712 1,533 2,631
License fee income, net .......... 1,221 16 7,396 324
Other expense, net ............... 34 62 84 115
------- ------- ------- -------
Income before taxes ......... 2,537 1,007 10,667 2,637
Provision for foreign income taxes 3 50 917 83
------- ------- ------- -------
Net income ....................... $ 2,534 $ 957 $ 9,750 $ 2,554
======= ======= ======= =======
Earnings
per common share ............ $ .38 $ .16 $ 1.46 $ .45
======= ======= ======= =======
Weighted average common
shares outstanding .......... 6,690 5,920 6,675 5,679
======= ======= ======= =======
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
HURCO COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share data)
July 31, October 31,
1997 1996
ASSETS ............................................... (Unaudited) (Audited)
Current assets:
Cash and cash equivalents ....................... $ 2,117 $ 1,877
Accounts receivable ............................. 15,140 17,162
Inventories ..................................... 25,838 24,215
Other ........................................... 736 854
-------- --------
Total current assets ........................ 43,831 44,108
-------- --------
Long-term license fees receivable .................... 1,074 1,040
-------- --------
Property and equipment:
Land ............................................ 761 761
Building ........................................ 7,067 7,095
Machinery and equipment ......................... 11,483 12,662
Leasehold improvements .......................... 1,164 1,002
Less accumulated depreciation and amortization (11,122) (11,714)
-------- --------
9,353 9,806
-------- --------
Software development costs, less amortization ........ 4,183 3,792
Other assets ......................................... 1,553 1,004
-------- --------
$ 59,994 $ 59,750
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................ $ 9,483 $ 11,407
Accrued expenses ................................ 6,175 7,454
Accrued warranty expenses ....................... 1,534 1,425
Current portion of long-term debt ............... 3,036 3,050
-------- --------
Total current liabilities ................... 20,228 23,336
-------- --------
Non-current liabilities
Long-term debt .................................. 12,950 19,060
Deferred credits and other obligations .......... 1,400 1,213
-------- --------
Total non-current liabilities ............ 14,350 20,273
-------- --------
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 6,537,571
and 6,531,871 shares issued , respectively .... 654 653
Additional paid-in capital ........................ 50,324 50,312
Accumulated deficit ............................... (20,458) (30,208)
Foreign currency translation adjustment ........... (5,104) (4,616)
-------- --------
Total shareholders' equity .................... 25,416 16,141
-------- --------
$ 59,994 $ 59,750
======== ========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
<PAGE>
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
======== ======= ======= ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
The condensed consolidated financial statements as of July 31, 1997 and 1996 are
unaudited but include all adjustments which the Company considers necessary for
a fair presentation of its financial position at those dates and its results of
operations and cash flows for the three months and nine months then ended. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended October 31, 1996.
2. LICENSE FEES
From time to time, the Company's wholly-owned subsidiary, IMS Technology, Inc.
("IMS") enters into agreements for the licensing of its interactive computer
numerical control (CNC) patents. License fees received in a lump sum under a
fully paid-up license are recognized in income, net of legal fees, expenses and
foreign taxes, if any, at the time the license agreement is executed. License
fees received in periodic installments that are contingent upon the continuing
validity of a licensed patent are recognized in income, net of legal fees,
expenses and foreign taxes, if any, over the life of the licensed patent.
During the third quarter ended July 31, 1997, the Company recorded license fee
income, net of expenses, aggregating approximately $1,221,000, nearly all of
which was attributable to two license agreements entered into during the
quarter. Pursuant to those agreements, IMS granted a fully paid-up license of
its interactive CNC patents to each of two manufacturers of machine tools and
CNC systems in exchange for a lump sum payment. One of those manufacturers had
been a defendant in the on-going litigation brought by IMS for infringement of
its interactive CNC patents and the license was entered into as part of a
settlement with that manufacturer.
3. PROVISION FOR FOREIGN INCOME TAXES
The provision for foreign income taxes includes $896,000 which represents
foreign withholding tax on a payment received in the second fiscal quarter of
1997 for a license fee settlement. The remainder of the expense is income tax
related to a foreign subsidiary.
4. HEDGING
The U.S. dollar equivalent notional amount of outstanding foreign currency
forward exchange contracts was approximately $8,501,450 as of July 31, 1997 and
$12,645,000 as of October 31, 1996. Deferred gains related to hedges of
intercompany sales commitments were approximately $200,000 as of July 31, 1997.
Contracts outstanding at July 31, 1997 mature at various times through February
28, 1998.
<PAGE>
5. EARNINGS PER SHARE
Earnings per share of common stock are based on the weighted average number of
common shares outstanding, which includes the effects of outstanding stock
options computed using the treasury stock method. Such common stock equivalents
totaled 154,000 and 141,000 shares for the three and nine month periods ended
July 31, 1997, respectively.
In February, 1997, the Financial Accounting Standards Board released Statement
of Accounting Standards No. 128, "Earnings Per Share" (SFAS 128), which changes
the method of computation of earnings per share (EPS). SFAS 128 replaces Primary
EPS with Basic EPS and replaces Fully Diluted EPS with Diluted EPS. Basic EPS,
unlike Primary EPS, does not consider dilution for potentially dilutive
securities. Diluted EPS uses an average share price for the period whereas Fully
Diluted EPS uses the greater of the average share price or end-of-period share
price. SFAS 128 is effective for fiscal 1998 and earlier adoption is not
permitted. Basic EPS computed under SFAS 128 for the three and nine months ended
July 31, 1997 was $.39 and $1.49, respectively. Diluted EPS computed under SFAS
128 for the three and nine months ended July 31, 1997 was $.38 and $1.46,
respectively.
6. ACCOUNTS RECEIVABLE
The allowance for doubtful accounts was $733,000 as of July 31, 1997 and
$785,000 as of October 31, 1996.
7. INVENTORIES
Inventories, priced at the lower of cost (first-in, first-out method) or market
are summarized below (in thousands):
July 31, 1997 October 31, 1996
Purchased parts and sub-assemblies $ 11,011 $ 12,354
Work-in-Process 1,189 1,942
Finished Goods 13,638 9,919
---------- --------
$ 25,838 $ 24,215
========== =========
8. SUBSEQUENT EVENTS
Subsequent to July 31, 1997, IMS granted a fully paid-up license of its
interactive CNC patent to each of three manufacturers of CNC systems in exchange
for lump sum payments, as a result of which the Company will recognize
additional license fee income, net of legal fees and foreign withholding taxes,
of approximately $1.7 million in the fourth quarter of fiscal 1997. One of the
parties was a defendant in the ongoing IMS patent infringement litigation.
<PAGE>
Effective September 8, 1997, the Company's Bank Credit Agreement and Senior
Notes Agreement were amended and restated. The principal terms of those
agreements, as amended and restated, are set forth below:
a) Bank Credit Agreement
The Company's bank credit agreement provides for a revolving, unsecured
credit facility expiring May 1, 2000, which permits borrowings, at any
one time outstanding, of up to $22.5 million (inclusive of outstanding
letters of credit of up to $12.0 million). Of such borrowings, up to
$5.0 million may be drawn in designated European currencies. The
agreement also provides for the continuation of the Company's term
loan, of which a balance of $1.25 million (the final installment) is
due and payable on September 30, 1997. Interest on all outstanding
borrowings will be payable at LIBOR plus an amount ranging from .75% to
2.0% based on a prescribed formula, or at the Company's option, prime.
The agreement requires the Company to maintain a specified minimum net
worth and establishes maximum leverage and fixed charge coverage
ratios. Cash dividends and redemptions of capital stock are permitted
subject to certain limitations. The Company is required to maintain
consolidated tangible net worth (as defined) of not less than $20.0
million plus (i) 50% of cumulative net income subsequent to April 30,
1997 and (ii) 75% of the net proceeds from sales of capital stock.
Total consolidated debt may not exceed 50% of consolidated
capitalization (defined as total debt plus consolidated tangible net
worth).
b) Senior Notes
At July 31, 1997, the Company had outstanding approximately $7.1
million of unsecured Senior Notes, bearing an interest rate of 10.87%,
of which approximately $1.8 million is due on December 1, 1997 and the
balance is due in equal annual installments through 2000.
Effective September 8, 1997, the interest rate on the Senior Notes was
reduced to 10.37% and the financial covenants were amended to conform
to those contained in the Company's amended and restated bank credit
agreement.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto appearing elsewhere herein.
Certain statements made in this report may constitute "forward-looking
statements". For a description of risks and uncertainties related to
forward-looking statements, see the Company's Annual Report on Form 10-K for the
year ended October 31, 1996.
<PAGE>
RESULTS OF OPERATIONS
Three Months Ended July 31, 1997 Compared to Three Months Ended July 31, 1996
Sales and service fees for the third quarter of fiscal 1997 increased $1.6
million, or 7.0%, from the corresponding quarter of fiscal 1996, notwithstanding
the approximately $935,000 negative impact of a strengthening U.S. dollar when
translating foreign currency revenues into U.S. dollars for financial reporting
purposes.
Sales of CNC-operated machine tools in the third quarter of fiscal 1997 totaled
$16.4 million, an increase of $2.1 million, or 14.5%, from the corresponding
1996 period. Sales of CNC systems and software (which do not include systems and
software that are sold as an integral part of a machine tool) totaled $4.4
million in the third quarter of 1997, a decline of $174,000, or 3.7%, from the
corresponding 1996 period. Sales of service parts and service fees declined 7.3%
from the corresponding 1996 period, which is attributable to improvements in
recent years in the quality of the Company's products along with a transfer to
the Company's distributors in the United States of responsibility for certain
servicing activities.
The increase in sales of CNC-operated machine tools occurred both in the
domestic market where the increase totaled $896,000, or 17.0%, and in the
European market, where the increase totaled $2.1 million, or 26.9%, in spite of
the unfavorable effect of translating foreign currency sales. These increases
were offset, however, by a decrease of $932,000, or 78.7%, in South East Asia as
a result of adverse economic conditions in that region.
Gross profit as a percentage of sales for the third quarter of fiscal 1997 was
29.1% compared to 30.3% for the corresponding period in fiscal 1996. A reduction
in the effective margin on foreign sales due to the negative impact of
translating foreign currencies into U.S. dollars for financial reporting
purposes was substantially offset by the combined effects of an increased
percentage of higher-margin European sales in the total sales mix, increased
domestic and European sales of higher-margin products introduced in the latter
part of fiscal 1996, and increased sales of software options in connection with
sales of machine tools.
Interest expense for the third quarter of fiscal 1997 decreased approximately
$239,000, or 33.5%, from the amount reported for the corresponding 1996 period
primarily due to a substantial reduction in outstanding borrowings.
<PAGE>
License fee income for the third quarter of fiscal 1997, which represented
approximately 48.1% of income before taxes during that period compared to 1.5%
in the corresponding period in fiscal 1996, was attributable almost entirely to
two agreements entered into during the quarter by the Company's wholly-owned
subsidiary, IMS Technology, Inc. (IMS), pursuant to which it granted fully
paid-up licenses of its interactive CNC patent in exchange for lump sum payments
by the licensees. The Company also expects to recognize additional license fee
income of approximately $1.7 million, net of legal expenses and foreign
withholding taxes in the fourth quarter of fiscal 1997 as a result of three
additional patent license agreements entered into by IMS subsequent to July 31,
1997, all of which provide for lump sum payments to IMS. Also, as of July 31,
1997, additional license fees of approximately $1.2 million, net of legal fees,
related to previous license agreements, have been deferred and will be
recognized in income over the four-year remaining life of the licensed patent.
Further, under a license agreement with Siemens A.G., a principal supplier to
the Company, approximately $650,000 is expected to be received in future periods
in the form of discounts on purchases by the Company, which will be reflected as
a reduction of the cost of such purchases. Although settlements have been
reached with several of the defendants in the on-going IMS patent infringement
litigation, as a result of which those defendants have entered into license
agreements with IMS, the remaining defendants are continuing to contest the IMS
claims. IMS is continuing to pursue the litigation and is also engaged in
licensing discussions with other companies that are not in the litigation. There
can be no assurance that IMS will enter into license agreements with any of the
remaining defendants or any other companies, or that the terms of any future
license agreements will be similar to those previously entered into.
Net income increased by $1.6 million, and was approximately 2.6 times the
corresponding 1996 period, due primarily to increased revenues, the receipt of
license fees and a significant reduction in interest expense.
New order bookings during the third quarter of fiscal 1997 were $25.7 million,
an increase of approximately $1.8 million, or 7.6%, from the corresponding
period of fiscal 1996. The amount of new orders during the 1997 third quarter
was negatively impacted by approximately $713,000 due to the translation effects
of a stronger U.S. dollar on orders expressed in foreign currencies but compares
favorably to the $21.2 million and $22.9 million of new orders reported for the
first and second quarters of fiscal 1997, respectively. Although domestic
machine tool orders during the 1997 third quarter decreased slightly compared to
the corresponding 1996 period, the decrease was more than offset by an increase
in orders in the European market. International orders represented approximately
45% of new order bookings for the third quarter of fiscal 1997 compared to 50%
for the immediately preceding fiscal quarter and 42% for the third quarter of
fiscal 1996. Backlog at July 31, 1997 was $8.3 million compared to $7.5 million
at April 30, 1997.
Nine Months Ended July 31, 1997 Compared to Nine Months Ended July 31, 1996
Sales and service fees for the first nine months of fiscal 1997 decreased $2.9
million, or 4.0%, compared with the corresponding period in fiscal 1996. Of the
total decrease, $1.7 million reflected the net effects of translating foreign
currency revenues into U.S. dollars for financial reporting purposes.
<PAGE>
Sales of CNC-operated machine tools, which totaled $43.9 million in the first
nine months of fiscal 1997, were 6.5% below the $47.0 million recorded during
the corresponding fiscal 1996 period. The decrease occurred in the U.S. market,
with a decline of $2.3 million, or 11.8%, as well as in S. E. Asia, where the
decline of $1.5 million, or 68.8%, was most pronounced and reflected the
economic turmoil in that region. Sales of CNC-operated machine tools in Europe
increased $771,000, or 3.1%, in spite of the adverse impact of foreign currency
translation. In comparing the fiscal 1997 and 1996 results, it also should be
recognized that the first half of fiscal 1996 was marked by an unusually high
level of shipments, as the increasing availability of products from the
Company's contract manufacturers permitted an accelerated reduction of the high
backlog that had resulted from the combined effects of a strengthening machine
tool market, the introduction of the Company's Advantage(R) series product line
and capacity constraints on the part of the Company's contract manufacturers
during fiscal 1995. Sales of CNC systems and software (which do not include
systems and software that are sold as an integral part of a machine tool)
increased during the first half of fiscal 1997 by $603,000, or 4.4%, primarily
due to increased shipments of Autobend(R) control products in response to
improved worldwide market demand. Sales of service parts and service fees
decreased by $417,000, or 3.6%, compared to the first nine months of fiscal
1996.
As a percentage of sales, gross profit increased to 29.5% in the first nine
months of fiscal 1997, compared to 28.6% for the corresponding period in fiscal
1996. The improvement in margin is attributable to the combined effects of an
increased percentage of higher-margin European shipments in the total sales mix,
increased domestic and European shipments of higher-margin products introduced
in the latter part of fiscal 1996 and increased sales of software options in
connection with sales of machine tools.
Interest expense for the first half of fiscal 1997 decreased approximately $1.1
million, or 41.8%, from the amount reported for the corresponding period in
fiscal 1996, primarily due to a substantial reduction in outstanding borrowings
and the payment during the 1996 period of $240,000 of nonrecurring fees to the
Company's lenders.
License fee income for the first nine months of fiscal 1997 was almost entirely
attributable to new licensing agreements relating to the IMS interactive CNC
patent. The provision for income tax is primarily the result of foreign
withholding taxes related to one of these agreements.
Primarily as a result of the substantial licensing fee income received during
the period, net income for the first nine months of fiscal 1997 increased by
approximately $7.2 million compared to the corresponding period in fiscal 1996.
The increase also reflected the benefits of improved margins and the substantial
reduction in interest expense.
New order bookings during the first nine months of fiscal 1997 were $69.9
million, an increase of 3.1% from the $67.8 million reported for the first nine
months of fiscal 1996, primarily as a result of a 5.9% increase in orders for
machine tools. Backlog at April 30, 1997 was $8.3 million compared to $9.0
million at October 31, 1996.
<PAGE>
The Company manages its foreign currency exposure through the use of foreign
currency forward exchange contracts. The Company does not speculate in the
financial markets and, therefore, does not enter into these contracts for
trading purposes. The Company also moderates its currency risk related to
significant purchase commitments with certain foreign vendors through price
adjustment agreements that provide for a sharing of, or otherwise limit, the
potential adverse effect of currency fluctuations on the costs of purchased
products. The results of these programs achieved management's objectives for the
first nine months of fiscal 1997 and fiscal 1996. See Note 4 to the Condensed
Consolidated Financial Statements.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 1997, the Company had cash and cash equivalents of $2.1 million
compared to $1.9 million at October 31, 1996. Cash provided by operations
totaled $3.7 million in the third quarter of fiscal 1997, compared to $2.9
million in the same period of fiscal 1996. Cash flow from operations was
enhanced by approximately $1.2 million of license fee income received in the
third quarter. In light of an increased level of finished product on hand
available for shipment, the company has reduced scheduled purchases of machine
tool products from its contract manufacturers to reduce finished goods
inventories in the fourth quarter of fiscal 1997 and the first half of fiscal
1998, which will favorably impact future cash flow from operations.
Working capital was $23.6 million at July 31, 1997, compared to $20.8 million at
October 31, 1996. Outstanding borrowings under the Company's revolving credit
facilities were reduced by $2.5 million during the third quarter of fiscal 1997
and $4.2 million for the nine months, primarily as a result of repayments made
with cash flow from operations, including license fees. At July 31, 1997, $13.4
million was available to the Company for either direct borrowings or commercial
letters of credit.
Capital investments for the quarter and nine months ended July 31, 1997
consisted principally of expenditures for property, equipment and software
development projects. Other investments for the nine-month period included
$190,000 in the second fiscal quarter with respect to Hurco Automation, Ltd.
(HAL). As of July 31, 1997, the Company has a commitment to invest an additional
$364,000 in HAL through fiscal 1999. The Company's investment activities for the
nine months ended July 31, 1997 were funded through cash flow from operations.
Effective September 8, 1997, the Company's Bank Credit Agreement and Senior
Notes Agreement were amended and restated. The principal terms of those
agreements as amended and restated are set forth below:
a) Bank Credit Agreement
The Company's bank credit agreement provides for a revolving, unsecured
credit facility expiring May 1, 2000, which permits borrowings, at any
one time outstanding, of up to $22.5 million (inclusive of outstanding
letters of credit of up to $12.0 million). Of such borrowings, up to
$5.0 million may be drawn in designated European currencies. The
agreement also provides for the continuation of the Company's term
loan, of which a balance of $1.25 million (the final installment) is
due and payable on September 30, 1997. Interest on all outstanding
borrowings will be payable at LIBOR plus an amount ranging from .75% to
2.0% based on a prescribed formula, or at the Company's option, prime.
The agreement requires the Company to maintain a specified minimum net
worth and establishes maximum leverage and fixed charge coverage
ratios. Cash dividends and redemptions of capital stock are permitted
subject to certain limitations. The Company is required to maintain
consolidated tangible net worth (as defined) of not less than $20.0
million plus (i) 50% of cumulative net income subsequent to April 30,
1997 and (ii) 75% of the net proceeds from sales of capital stock.
Total consolidated debt may not exceed 50% of consolidated
capitalization (defined as total debt plus consolidated tangible net
worth).
<PAGE>
b) Senior Notes
At July 31, 1997, the Company had outstanding approximately $7.1
million of unsecured Senior Notes, bearing an interest rate of 10.87%,
of which approximately $1.8 million is due on December 1, 1997 and the
balance is due in equal annual installments through 2000.
Effective September 8, 1997, the interest rate on the Senior Notes was
reduced to 10.37% and the financial covenants were amended to conform
to those contained in the Company's amended and restated bank credit
agreement.
Under the terms of the Company's credit facilities, as amended and restated,
$3.0 million of loan payments are due and payable over the twelve month period
ending July 31, 1998. Management believes that cash flow from operations and
borrowings under its credit facilities will be sufficient to meet the Company's
working capital needs for the foreseeable future.
The Company was in compliance with all loan covenants at July 31, 1997.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
As previously reported, IMS and the Company are parties to a number of pending
legal proceedings involving patent infringement and other claims in connection
with an IMS patent for certain interactive CNC technology originally developed
by the Company (the IMS actions). Since March 1997, the Company has
completed settlements with three parties to the IMS actions, Fanuc, Ltd.
Southwestern Industries, Inc. and Bridgeport Machines, Inc. IMS has
agreed to dismiss all infringement claims against Fanuc, Southwestern and
Bridgeport.
On July 3, 1997, IMS commenced an action in the U.S. District Court for the
Eastern District of Virginia alleging infringement of the IMS patent. IMS
amended its complaint on August 11, 1997, naming Haas Automation, Inc.,
Allen-Bradley, Inc. and Fidia S.p.A., controls and machine tool manufacturers,
as defendants in this action. IMS also named three machine tool end-users in
the action. The complaint seeks unspecified damages, attorneys' fees and costs
and injunctive relief.
The Company is involved in various other claims and lawsuits arising in the
ordinary course of business, none of which, in the opinion of management, is
expected to have a material adverse effect on its consolidated financial
position or results of operations.
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of shareholders was held May 29, 1997. At the
meeting, the following seven persons were elected to the Board of Directors by
the votes indicated:
For Against or Withheld Abstentions Broker Non-Votes
Hendrik J. Hartong, Jr. 5,988,553 840 288,047 --
Andrew L. Lewis IV 5,989,393 288,047 --
Brian D. McLaughlin 5,987,953 1,440 288,047 --
E. Keith Moore 5,989,093 300 288,047 --
Richard T. Niner 5,989,393 288,047 --
O. Curtis Noel 5,988,393 1,000 288,047 --
Charles E. M. Rentschler5,989,093 300 288,047 --
Shareholders also approved an amendment of the Company's Amended and Restated
Articles of Incorporation which, among other things, increased the number of
authorized shares of common stock and preferred stock. The results of the voting
with respect to the amendment were as follows:
For Against or Withheld Abstentions Broker Non-Votes
4,800,111 1,173,552 19,739 284,038
Shareholders also approved the Company's 1997 Stock Option and Incentive Plan.
The results of the voting with respect to the plan were:
For Against or Withheld Abstentions Broker Non-Votes
4,717,894 407,416 36,179 1,115,951
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 Amended and Restated Articles of Incorporation.
10.52 1997 Stock Option and Incentive Plan.
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule (electronic filing only).
(b) Reports on Form 8-K: None
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 thereunto duly authorized.
HURCO COMPANIES, INC.
By: /s/ Roger J. Wolf
Roger J. Wolf
Senior Vice President and
Chief Financial Officer
By: /s/ Stephen J. Alesia
Stephen J. Alesia
Corporate Controller and
Principal Accounting Officer
September 10, 1997
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 Amended and Restated Articles of Incorporation.
10.52 1997 Stock Option and Incentive Plan.
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule (electronic filing only).
(b) Reports on Form 8-K: None
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 thereunto duly authorized.
HURCO COMPANIES, INC.
By:________________________
Roger J. Wolf
Senior Vice President and
Chief Financial Officer
By:________________________
Stephen J. Alesia
Corporate Controller and
Principal Accounting Officer
September 10, 1997
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
HURCO COMPANIES, INC.
(As Amended Through June 2, 1997)
ARTICLE I
Name
The name of the Corporation is HURCO COMPANIES, INC.
ARTICLE II
Purposes
The purposes for which the Corporation is organized are to
engage in, either alone or as a partner, joint venturer or otherwise, the
invention, design, manufacture, production, sale and lease of products and
equipment of all types to be used in the metal working industry, and to engage
in and transact any and all other lawful business for which corporations may be
incorporated under the Indiana Business Corporation Law, as the same may, from
time to time, be amended (the "Corporation Law").
ARTICLE III
Term of Existence
The period during which the Corporation shall continue is
perpetual.
ARTICLE IV
Number of Shares
The total number of shares which the Corporation shall have
authority to issue is 13,500,000 consisting of 12,500,000 shares of Common
Stock, no par value (the "Common Stock"), and 1,000,000 shares of Preferred
Stock, no par value (the "Preferred Stock").
<PAGE>
ARTICLE V
Terms of Authorized Shares
Section 1. Designation. The authorized shares of the Corporation shall be
divided into two (2)classes, as follows:
(i) 12,500,000 shares of Common Stock. The shares of
Common Stock shall be identical with each other in
all respects.
(ii) 1,000,000 shares of Preferred Stock, which shares may
hereafter be issued in one or more series as provided
in Section 2.
Section 2. Rights, Privileges, Limitations and Restrictions of
Preferred Stock. Except as otherwise provided in these Articles, the Board of
Directors is vested with authority to determine and state the designation and
the relative preferences, limitations, voting rights, if any, and other rights
of each series of Preferred Stock by the adoption and filing in accordance with
the Corporation Law, before the issuance of any shares of such series of
Preferred Stock, of an amendment or amendments to these Articles of
Incorporation, as the same may, from time to time, be amended, determining the
terms of such series of Preferred Stock. All shares of Preferred Stock of the
same series shall be identical with each other in all respects. Without limiting
the generality of the foregoing, the Board of Directors shall have the authority
to determine the following:
(i) The designation of such series, the number of shares
which shall initially constitute such series and the
stated value thereof if different from the par value
thereof;
(ii) Whether the shares of such series shall have voting
rights, in addition to any voting rights provided by
law, and, if so, the terms of such voting rights,
which may be special, conditional or limited or no
voting rights except as required by law;
(iii) The rate or rates and the time or times at which
dividends and other distributions on the shares of
such series shall be paid, the relationship or
priority of such dividends to those payable on Common
Stock or to other series of Preferred Stock, and
whether or not any such dividends shall be
cumulative;
(iv) The amount payable on the shares of such series in
the event of the voluntary or involuntary
liquidation, dissolution or winding up of the affairs
of the Corporation, and the relative priorities, if
any, to be accorded such payments in liquidation;
(v) The terms and conditions upon which either the
Corporation may exercise a right to redeem shares of
such series or upon which the holder of such shares
may exercise a right to require redemption of such
shareholder's Preferred Stock, including any premiums
or penalties applicable to exercise of such rights;
(vi) Whether or not a sinking fund shall be created for
the redemption of the shares of such series, and the
terms and conditions of any such fund;
(vii) Rights, if any, to convert any shares of such series,
either into shares of Common Stock or into other
series of Preferred Stock and the prices, premiums or
penalties, ratios and other terms applicable to any
such conversion;
(viii) Restrictions on acquisition, rights of first refusal
or other limitations on transfer as may be applicable
to such series, including any series intended to be
offered to a special class or group; and
(ix) Any other relative rights, preferences, limitations,
qualifications or restrictions on such series of
Preferred Stock, including rights and remedies in the
event of default in connection with dividends, other
distributions or redemptions.
Section 3. Liquidation Rights. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, the
holders of the shares of Common Stock shall be entitled, after payment or
provision for payment of the debts and other liabilities of the Corporation and
any preferential amounts to be distributed to holders of the Preferred Stock and
any other class or series of stock then outstanding having a priority over the
Common Stock, in the event of voluntary or involuntary liquidation, dissolution
or winding up, to share ratably in the remaining net assets of the Corporation.
Section 4. Issuance of Shares. The Board of Directors has
authority to authorize and direct the issuance by the Corporation of shares of
Preferred Stock and Common Stock at such times, in such amounts, to such
persons, for such considerations and upon such terms and conditions as it may,
from time to time, determine upon, subject only to the restrictions,
limitations, conditions and requirements imposed by the Corporation Law, other
applicable law and these Articles of Incorporation, as the same may, from time
to time, be amended.
Section 5. Distributions Upon Shares. The Board of Directors
has authority to authorize and direct the payment of dividends and the making of
other distributions by the Corporation in respect of the issued and outstanding
shares of Preferred Stock and Common Stock (i) at such times, in such amount and
forms, from such sources and upon such terms and conditions as it may, from time
to time, determine upon, subject only to the restrictions, limitations,
conditions and requirements imposed by the Corporation Law, other applicable law
and these Articles of Incorporation, as the same may, from time to time, be
amended; and (ii) in shares of the same class or series or in shares of any
other class or series without obtaining the affirmative vote or the written
consent of the holders of the shares of the class or series in which the payment
or distribution is to be made.
Section 6. Acquisition of Shares. The Board of Directors has
authority to authorize and direct the acquisition by the Corporation of the
issued and outstanding shares of Preferred Stock and Common Stock at such times,
in such amounts, from such persons, for such consideration, from such sources,
and upon such terms and conditions as it may, from time to time, determine upon,
subject only to the restrictions, limitations, conditions and requirements
imposed by the Corporation Law, other applicable law and these Articles of
Incorporation, as the same may, from time to time, be amended.
Section 7. No Pre-emptive Rights. The holders of the Common
Stock and the holders of any series of the Preferred Stock shall have no
pre-emptive rights to subscribe to or purchase any shares of Common Stock,
Preferred Stock, or other securities of the Corporation.
Section 8. Record Ownership of Shares or Rights. The
Corporation, to the extent permitted by law, shall be entitled to treat the
person in whose name any share or right of the Corporation is registered on the
books of the Corporation as the owner thereof for all purposes, and shall not be
bound to recognize any equitable or any other claim to, or interest in, such
share or right on the part of any other person, whether or not the Corporation
shall have notice thereof.
ARTICLE VI
Voting Rights of Shares
The shares of the Corporation shall have the following voting rights.
Section 1. Common Stock. Except as otherwise provided by the
Corporation Law or by these Articles, the record holder of each authorized,
issued and outstanding share of Common Stock shall be entitled to one (1) vote
for each such share on all matters submitted to shareholders for a vote.
Section 2. Preferred Stock. Except as specifically provided in
the Corporation Law, holders of outstanding shares of Preferred Stock of any
series shall have such voting rights, if any, as provided in the amendment or
amendments to these Articles of Incorporation determining the terms of such
series of Preferred Stock.
<PAGE>
ARTICLE VII
Directors
Section 1. Number. The number of directors may be fixed from
time to time by the By-Laws of the Corporation at any number not less than three
(3). In the absence of a by-law fixing the number of directors, the number shall
be nine (9).
Section 2. Qualification. Directors shall be American
citizens and may, but need not be, shareholders of the Corporation.
Section 3. Staggered Terms. If there are nine (9) or more
directors, the By-Laws of the Corporation may provide for staggering their terms
by dividing the total number of directors into two (2) or three (3) groups, with
each group containing one-half (l/2) or one-third (1/3) of the total, as near as
may be.
Section 4. Removal of Directors. At any meeting of
shareholders of the Corporation called for the purpose of removing directors,
the shareholders may remove any director for cause, by a majority vote of shares
entitled to vote, and may remove any director without cause by a seventy-five
percent (75%) vote of shares entitled to vote. Record holders of outstanding
shares of Common Stock and Preferred Stock of the Corporation may only vote in
respect to the removal of directors elected by said class of stock.
ARTICLE VIII
Provisions for Regulation of Business
and Conduct of Affairs of Corporation
Section 1. Meetings of Shareholders. Meetings of the
shareholders of the Corporation shall be held at such place, within or without
the State of Indiana, as may be specified in the By-Laws of the Corporation or
in the respective notices or waivers of notice thereof. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing setting forth the action so taken is signed by
all of the shareholders entitled to vote with respect thereto and such written
consent is filed with the minutes of the proceedings of the shareholders.
Section 2. Meetings of Directors. Meetings of the directors of
the Corporation shall be held at such place, within or without the State of
Indiana, as may be specified in the By-Laws of the Corporation or in the
respective notices, or waivers of notice, thereof. Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if a consent in writing
setting forth the action so taken is signed by all members of the Board or of
such committee, as the case may be, and such written consent is filed with the
minutes of the proceedings of such Board or committee.
Section 3. By-Laws. The Board of Directors of the Corporation
shall have power, without the assent or vote of the shareholders, to make,
alter, amend or repeal the By-Laws of the Corporation, but the affirmative vote
of two-thirds (2/3) of the members of the Board of Directors, if it consists of
more than nine (9) members, or a majority of the members of the Board of
Directors, if it consists of nine (9) or fewer members, for the time being,
shall be necessary to effect any alteration, amendment or repeal.
Section 4. Special Transactions. The affirmative vote of the
holders of not less than three-fourths (3/4) of all outstanding shares of Common
Stock of this Corporation shall be required for the approval of any proposal
that (1) this Corporation merge or consolidate with any other corporation or
entity if such other corporation or entity or any of its affiliates, singly or
in the aggregate, are directly or indirectly the beneficial owners of more than
five percent (5%) of the total outstanding shares of Common Stock of this
Corporation (such other corporation or entity being herein referred to as the
"Related Corporation"); or that (2) this Corporation sell or exchange all or
substantially all of its assets or business to or with such Related Corporation;
or that (3) this Corporation issue or deliver any stock or other securities of
its issue in exchange or payment for any properties or assets of such Related
Corporation or securities issued by such Related Corporation; or (4) involves a
merger of any affiliate of this Corporation with or into such Related
Corporation or any of its affiliates, and to effect such transaction the
approval of shareholders of this Corporation is required by law; or (5) this
Corporation be merged or consolidated into a subsidiary which does not have in
its Articles of Incorporation the provisions contained in this Section 7;
provided, however, that the foregoing shall not apply to any such merger,
consolidation, sale or exchange, or issuance or delivery of stock or other
securities which was (i) approved by resolution of the Board of Directors
adopted by the affirmative vote of not less than two-thirds (2/3) of the then
authorized number of directors; or (ii) approved by resolution of the Board of
Directors prior to the acquisition of the beneficial ownership of more than five
percent (5%) of the total voting power of all outstanding shares of the voting
stock of the Corporation by such Related Corporation and its affiliates. For the
purposes hereof, an "affiliate" is any person (including a corporation,
partnership, trust, estate or individual) who directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the person specified; "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, by
contract or otherwise; and in computing the percentage of outstanding Common
Stock beneficially owned by any person the shares outstanding and the shares
owned shall be determined as of the record date fixed to determine the
stockholders entitled to vote or express consent with respect to such proposal.
The shareholder vote, if any, required for mergers, consolidation, sales or
exchanges of assets or issuances of stock or other securities not expressly
provided for in this Article, shall be such as may be required by the
Corporation Law.
Section 5. Amendment of Articles of Incorporation. The
Corporation reserves the right to increase or decrease the number of its
authorized shares, or any class or series thereof, and to reclassify the same,
and to amend, alter, change or repeal any provisions contained in these Articles
of Incorporation or in any amendment hereto, or to add any provision to the
Articles of Incorporation or to any amendment hereto, in the manner now or
hereafter prescribed or permitted by the Corporation Law or any other applicable
laws, and all rights and powers conferred upon shareholders in these Articles of
Incorporation, or any amendment hereto, are granted subject to this reservation.
Notwithstanding the foregoing, however, Article VII and Sections 3 and 4 of
Article VIII hereof may not be amended or appealed in any respect unless such
repeal or amendment is approved by the affirmative vote of three-fourths (3/4)
of the outstanding shares of Common Stock.
Exhibit 10.52
1997 STOCK OPTION AND INCENTIVE PLAN
<PAGE>
HURCO COMPANIES, INC.
1997 STOCK OPTION AND INCENTIVE PLAN
1. Plan Purpose. The purpose of the Plan is to promote the
long-term interests of the Company and its shareholders by providing a means for
attracting and retaining officers and key employees of the Company and its
Affiliates.
2. Definitions. The following definitions are applicable to
the Plan:
"Affiliate" -- means any "parent corporation" or "subsidiary
corporation" of the Company as such terms are defined in Code sections 424(e)
and (f), respectively.
"Affiliated SAR" -- means a SAR that is granted in connection
with a related Option, and which automatically will be deemed to be exercised at
the same time that the related Option is exercised. The deemed exercise of an
Affiliated SAR shall not necessitate a reduction in the number of Shares subject
to the related Option.
"Award" -- means the grant by the Committee of Incentive Stock
Options, Non-Qualified Stock Options, SARs, Restricted Shares, Performance
Shares or any combination thereof, as provided in the Plan.
"Award Agreement" -- means the written agreement setting forth
the terms and provisions applicable to each Award granted under the Plan.
"Base Price" -- means the amount over which the appreciation
in value of a Share will be measured upon exercise of an SAR.
"Board" -- means the Board of Directors of the Company.
"Change in Control" -- means each of the events specified in
the following clauses (i) through (iii): (i) any third person, including a
"group" as defined in Section 13(d)(3) of the Exchange Act after the date of the
adoption of the Plan by the Board, first becomes the beneficial owner of shares
of the Company with respect to which 25% or more of the total number of votes
for the election of the Board of Directors of the Company may be cast, (ii) as a
result of, or in connection with, any cash tender offer, exchange offer, merger
or other business combination, sale of assets or contested election, or
combination of the foregoing, the persons who were directors of the Company
shall cease to constitute a majority of the Board of Directors of the Company or
(iii) the shareholders of the Company shall approve an agreement providing
either for a transaction in which the Company will cease to be an independent
publicly owned entity or for a sale or other disposition of all or substantially
all the assets of the Company; provided, however, that the occurrence of any of
such events shall not be deemed a Change in Control if, prior to such
occurrence, a resolution specifically approving such occurrence shall have been
adopted by at least a majority of the Board of Directors of the Company.
"Code" -- means the Internal Revenue Code of 1986, as amended.
"Committee" -- means the Committee appointed by the Board
pursuant to Section 3 of the Plan.
"Company" -- means Hurco Companies, Inc., an Indiana
corporation.
"Continuous Service" -- means the absence of any interruption
or termination of service as an Employee of the Company or an Affiliate. Service
shall not be considered interrupted in the case of sick leave, military leave or
any other leave of absence approved by the Company or in the case of any
transfer between the Company and an Affiliate or any successor to the Company.
"Director" -- means any individual who is a member of the
Board.
"Disability" -- means total and permanent disability as
determined by the Committee pursuant to Code section 22(e)(3).
"Employee" -- means any person, including an officer or
Director, who is employed by the Company or
any Affiliate.
"Exchange Act" -- means the Securities Exchange Act of 1934,
as amended.
"Exercise Price" -- means the price per Share at which the
Shares subject to an Option may be purchased upon exercise of the Option.
"Freestanding SAR" -- means a SAR that is granted
independently of any Option.
"Incentive Stock Option" -- means an option to purchase Shares
granted by the Committee pursuant to the terms of the Plan which is intended to
qualify under Code section 422.
"Market Value" -- means the last reported sale price on the
date in question (or, if there is no reported sale on such date, on the last
preceding date on which any reported sale occurred) of one Share on the
principal exchange on which the Shares are listed for trading, or if the Shares
are not listed for trading on any exchange, the average trading price of one
share on the date in question as reported on the Nasdaq National Market or any
similar system then in use, or, if the Shares are not listed on the Nasdaq
National Market, the mean between the closing high bid and low asked quotations
of one Share on the date in question as reported by Nasdaq or any similar system
then in use, or, if no such quotations are available, the fair market value on
such date of one Share as the Committee shall determine.
"Non-Qualified Stock Option" -- means an option to purchase
Shares granted by the Committee pursuant to the terms of the Plan, which option
is not intended to qualify under Code section 422.
"Option" -- means an Incentive Stock Option or a Non-Qualified
Stock Option.
"Participant" -- means any Employee of the Company or any
Affiliate who is selected by the Committee to receive an Award.
"Performance Cycle" -- means the period of time, designated
by the Committee, over which Performance Shares may be earned.
"Performance Shares" -- means Shares awarded pursuant to
Section 12 of the Plan.
"Plan" -- means the Hurco Companies, Inc., 1997 Stock Option
and Incentive Plan.
"Reorganization" -- means the liquidation or dissolution of
the Company or any merger, consolidation or combination of the Company (other
than a merger, consolidation or combination in which the Company is the
continuing entity and which does not result in the outstanding Shares being
converted into or exchanged for different securities, cash or other property or
any combination thereof).
"Restricted Period" -- means the period of time selected by
the Committee for the purpose of determining when restrictions are in effect
under Section 10 of the Plan with respect to Restricted Shares.
"Restricted Shares" -- means Shares which have been
contingently awarded to a Participant by the Committee subject to the
restrictions referred to in Section 10 of the Plan, so long as such restrictions
are in effect.
"Retirement" -- means a Participant's cessation of Continuous
Service on or after age 65 or such other age as set forth in the Company's
retirement policy as in effect from time to time.
"Stock Appreciation Right" or "SAR" -- means an Award,
granted alone or in connection with a related Option, pursuant to Section 11 of
the Plan.
"Securities Act" -- means the Securities Act of 1933, as
amended.
"Shares" -- means the shares of common stock, no par value,
of the Company.
"Tandem SAR" -- means a SAR that is granted in connection with
a related Option, the exercise of which shall require forfeiture of the right to
purchase an equal number of Shares under the related Option (and when a Share is
purchased under the Option, the SAR shall be canceled to the same extent).
3. Administration. The Plan shall be administered by the
Committee, which shall consist of two or more members of the Board, each of whom
shall be a "non-employee director" as provided under Rule 16b-3 of the Exchange
Act, and an "outside director" as provided under Code section 162(m). The
members of the Committee shall be appointed by the Board. Except as limited by
the express provisions of the Plan, the Committee shall have sole and complete
authority and discretion to (a) select Participants and grant Awards; (b)
determine the number of Shares to be subject to types of Awards generally, as
well as to individual Awards granted under the Plan; (c) determine the terms and
conditions upon which Awards shall be granted under the Plan; (d) prescribe the
form and terms of Award Agreements; (e) establish procedures and regulations for
the administration of the Plan; (f) interpret the Plan; and (g) make all
determinations deemed necessary or advisable for the administration of the Plan.
A majority of the Committee shall constitute a quorum, and the
acts of a majority of the members present at any meeting at which a quorum is
present, or acts approved in writing by all members of the Committee without a
meeting, shall be acts of the Committee. All determinations and decisions made
by the Committee pursuant to the provisions of the Plan shall be final,
conclusive, and binding on all persons, and shall be given the maximum deference
permitted by law.
4. Participants. The Committee may select from time to time
Participants in the Plan from those officers and key Employees of the Company or
its Affiliates who, in the opinion of the Committee, have the capacity for
contributing in a substantial measure to the successful performance of the
Company or its Affiliates.
5. Shares Subject to Plan, Limitations on Grants and Exercise
Price. Subject to adjustment by the operation of Section 13 hereof:
(a) The maximum number of Shares which may be issued
with respect to Awards made under the Plan is 500,000 Shares.
The Shares with respect to which Awards may be made under the
Plan may either be authorized and unissued shares or unissued
shares heretofore or hereafter reacquired and held as treasury
shares. Any Award which expires, terminates or is surrendered
for cancellation or with respect to Restricted Shares which is
forfeited (so long as any cash dividends paid on such Shares
are also forfeited), may be subject to new Awards under the
Plan with respect to the number of Shares as to which a
termination or forfeiture has occurred.
(b) The number of Shares which may be granted under
the Plan to any Participant during the term of the Plan under
all forms of Awards shall not exceed 100,000 Shares.
(c) Notwithstanding any other provision under the
Plan, the Exercise Price for any Incentive Stock Option and
the Base Price for any Tandem or Affiliated SAR granted in
connection with an Incentive Stock Option awarded under the
Plan may not be less than the Market Value of the Shares on
the date of grant.
6. General Terms and Conditions of Options. The Committee
shall have full and complete authority and discretion, except as expressly
limited by the Plan, to grant Options and to prescribe the terms and conditions
(which need not be identical among Participants) of the Options. Each Option
shall be evidenced by an Award Agreement that shall specify: (a) the Exercise
Price, (b) the number of Shares subject to the Option, (c) the expiration date
of the Option, (d) the manner, time and rate (cumulative or otherwise) of
exercise of the Option, (e) the restrictions, if any, to be placed upon the
Option or upon Shares which may be issued upon exercise of the Option, (f) the
conditions, if any, under which a Participant may transfer or assign Options,
and (g) any other terms and conditions as the Committee, in its sole discretion,
shall determine. The Committee may, as a condition of granting any Option,
require that a Participant agree to surrender for cancellation one or more
Options previously granted to such Participant.
7. Exercise of Options.
(a) Except as provided in Section 16, an Option
granted under the Plan shall be exercisable during the
lifetime of the Participant to whom such Option was granted
only by such Participant, and except as provided in Section 8
of the Plan, no Option may be exercised unless at the time the
Participant exercises the Option, the Participant has
maintained Continuous Service since the date of the grant of
the Option.
(b) To exercise an Option under the Plan, the
Participant must give written notice to the Company specifying
the number of Shares with respect to which the Participant
elects to exercise the Option together with full payment of
the Exercise Price. The date of exercise shall be the date on
which the notice is received by the Company. Payment may be
made either (i) in cash (including check, bank draft or money
order), (ii) by tendering Shares already owned by the
Participant and having a Market Value on the date of exercise
equal to the Exercise Price, (iii) by requesting that the
Company withhold Shares issuable upon exercise of the Option
having a Market Value equal to the Exercise Price, or (iv) by
any other means determined by the Committee in its sole
discretion.
8. Termination of Options. Unless otherwise specifically
provided by the Committee in the Award Agreement or any amendment thereto,
Options shall terminate as provided in this Section.
(a) Unless sooner terminated under the provisions of
this Section, Options shall expire on the earlier of the date
specified in the Award Agreement or the expiration of ten (10)
years from the date of grant.
(b) If the Continuous Service of a Participant is
terminated for cause, or voluntarily by the Participant for
any reason other than death, Disability or Retirement, all
rights under any Options granted to the Participant shall
terminate immediately upon the Participant's cessation of
Continuous Service.
(c) If the Continuous Service of a Participant is
terminated by reason of Retirement or terminated by the
Company without cause, the Participant may exercise
outstanding Options to the extent that the Participant was
entitled to exercise the Options at the date of cessation of
Continuous Service, but only within the period of three (3)
months immediately succeeding the Participant's cessation of
Continuous Service, and in no event after the applicable
expiration dates of the Options.
(d) In the event of the Participant's death or
Disability, the Participant or the Participant's beneficiary,
as the case may be, may exercise outstanding Options to the
extent that the Participant was entitled to exercise the
Options at the date of cessation of Continuous Service, but
only within the one-year period immediately succeeding the
Participant's cessation of Continuous Service by reason of
death or Disability, and in no event after the applicable
expiration date of the Options.
9. Incentive Stock Options. Incentive Stock Options may be
granted only to Participants who are Employees. Any provisions of the Plan to
the contrary notwithstanding, (a) no Incentive Stock Option shall be granted
more than ten years from the earlier of the date the Plan is adopted by the
Board of Directors of the Company or approved by the Company's Shareholders, (b)
no Incentive Stock Option shall be exercisable more than ten years from the date
the Incentive Stock Option is granted, (c) the Exercise Price of any Incentive
Stock Option shall not be less than the Market Value per Share on the date such
Incentive Stock Option is granted, (d) any Incentive Stock Option shall not be
transferable by the Participant to whom such Incentive Stock Option is granted
other than by will or the laws of descent and distribution and shall be
exercisable during such Participant's lifetime only by such Participant, (e) no
Incentive Stock Option shall be granted which would permit a Participant to
acquire, through the exercise of Incentive Stock Options in any calendar year,
under all plans of the Company and its Affiliate, Shares having an aggregate
Market Value (determined as of the time any Incentive Stock Option is granted)
in excess of $100,000 (determined by assuming that the Participant will exercise
each Incentive Stock Option on the date that such Option first becomes
exercisable), and (f) no Incentive Stock Option may be exercised more than three
(3) months after the Participant's cessation of Continuous Service (one (1) year
in the case of Disability) for any reason other than death. Notwithstanding the
foregoing, in the case of any Participant who, at the date of grant, owns shares
possessing more than 10% of the total combined voting power of all classes of
capital stock of the Company or any Affiliate, the Exercise Price of any
Incentive Stock Option shall not be less than 110% of the Market Value per Share
on the date such Incentive Stock Option is granted and such Incentive Stock
Option shall not be exercisable more than five years from the date such
Incentive Stock Option is granted.
10. Terms and Conditions of Restricted Shares. The Committee
shall have full and complete authority, subject to the limitations of the Plan,
to grant Awards of Restricted Shares and to prescribe the terms and conditions
(which need not be identical among Participants) in respect of the Awards.
Unless the Committee otherwise specifically provides in the Award Agreement, an
Award of Restricted Shares shall be subject to the following provisions:
(a) At the time of an Award of Restricted Shares, the
Committee shall establish for each Participant a Restricted
Period during which, or at the expiration of which, the
Restricted Shares shall vest. Subject to paragraph (e) of this
Section, the Participant shall have all the rights of a
shareholder with respect to the Restricted Shares, including
but not limited to, the right to receive all dividends paid on
the Restricted Shares and the right to vote the Restricted
Shares. The Committee shall have the authority, in its
discretion, to accelerate the time at which any or all of the
restrictions shall lapse with respect to any Restricted Shares
prior to the expiration of the Restricted Period, or to remove
any or all restrictions, whenever it may determine that such
action is appropriate by reason of changes in applicable tax
or other laws or other changes in circumstances occurring
after the commencement of the Restricted Period.
(b) If a Participant ceases Continuous Service for
any reason, including death, before the Restricted Shares have
vested, a Participant's rights with respect to the unvested
portion of the Restricted Shares shall terminate and be
returned to the Company.
(c) Each certificate issued in respect to Restricted
Shares shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power
endorsed in blank, with the Company and shall bear the
following (or a similar) legend:
"The transferability of this certificate and the
shares represented hereby are subject to the terms and
conditions (including forfeiture) contained in the 1997 Stock
Option and Incentive Plan of Hurco Companies, Inc., and an
Award Agreement entered into between the registered owner and
Hurco Companies, Inc. Copies of the Plan and Award Agreement
are on file in the office of the Secretary of the Company."
(d) At the time of an Award of Restricted Shares, the
Participant shall enter into an Award Agreement with the
Company in a form specified by the Committee agreeing to the
terms and conditions of the Award.
(e) At the time of an Award of Restricted Shares, the
Committee may, in its discretion, determine that the payment
to the Participant of dividends declared or paid on the
Restricted Shares by the Company, or a specified portion
thereof, shall be deferred until the earlier to occur of (i)
the lapsing of the restrictions imposed with respect to the
Restricted Shares, or (ii) the forfeiture of such Restricted
Shares under paragraph (b) of this Section, and shall be held
by the Company for the account of the Participant until such
time. In the event of deferral, there shall be credited at the
end of each year (or portion thereof) interest on the amount
of the account at the beginning of the year at a rate per
annum as the Committee, in its discretion, may determine.
Payment of deferred dividends, together with accrued interest,
shall be made upon the earlier to occur of the events
specified in (i) and (ii) of this paragraph.
(f) At the expiration of the restrictions imposed by
this Section, the Company shall redeliver to the Participant
the certificate(s) and stock power deposited with the Company
pursuant to paragraph (c) of this Section and the Shares
represented by the certificate(s) shall be free of all
restrictions.
(g) No Award of Restricted Shares may be
assigned, transferred or encumbered.
11. Grant of SARs. Subject to the terms and conditions of the
Plan, a SAR Award may be made to Participants at any time and from time to time
as shall be determined by the Committee, in its sole discretion. The Committee
may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination
thereof as follows:
(a) The Committee, subject to the limitations of the
Plan, shall have complete discretion to determine the Exercise
Price and other terms and conditions of SARs granted under the
Plan. Each SAR Award shall be evidenced by an Award Agreement
specifying the terms and conditions of the Award, including
its term, the Base Price and the conditions of exercise.
(b) The Base Price of Shares with respect to a Tandem
or Affiliated SAR Award shall equal the Exercise Price of the
Shares under the related Option.
(c) Tandem SARs may be exercised for all or part of
the Shares subject to the related Option upon the surrender of
the right to exercise the equivalent portion of the related
Option. A Tandem SAR may be exercised only with respect to the
Shares for which its related Option is then exercisable. With
respect to a Tandem SAR granted in connection with an
Incentive Stock Option: (i) the Tandem SAR shall expire no
later than the expiration of the underlying Incentive Stock
Option; (ii) the value of the payout with respect to the
Tandem SAR shall be for no more than one hundred percent
(100%) of the difference between the Exercise Price of the
underlying Incentive Stock Option and the Market Value of the
Shares subject to the underlying Incentive Stock Option at the
time the Tandem SAR is exercised; and (iii) the Tandem SAR
shall be exercisable only when the Market Value of the Shares
subject to the Incentive Stock Option exceeds the Exercise
Price of the Incentive Stock Option.
(d) Upon exercise of a SAR, a Participant shall be
entitled to receive payment from the Company in an amount
determined by multiplying:
(i) The difference between the Market Value
of a Share on the date of exercise over the Base
Price; times
(ii) The number of Shares with respect to
which the SAR Award is exercised.
At the discretion of the Committee, payment for a SAR
may be in cash, Shares or a combination thereof.
12. Performance Shares. The Committee, in its sole discretion,
may from time to time authorize the grant of Performance Shares upon the
achievement of performance goals (which may be cumulative and/or alternative) as
may be established, in writing, by the Committee based on any one or any
combination of the following business criteria: (a) earnings per Share; (b)
return on equity; (c) return on assets; (d) operating income; or (e) Market
Value per Share. At the time as it is certified, in writing, by the Committee
that the performance goals established by the Committee have been attained or
otherwise satisfied within the Performance Cycle, the Committee shall authorize
the payment of cash in lieu of Performance Shares or the issuance of Performance
Shares registered in the name of the Participant, or a combination of cash and
Shares. The grant of an Award of Performance Shares shall be evidenced by an
Award Agreement containing the terms and conditions of the Award as determined
by the Committee. To the extent required under Code Section 162(m), the business
criteria under which performance goals are determined by the Committee shall be
resubmitted to shareholders for reapproval no later than the first shareholder
meeting that occurs in the fifth year following the year in which shareholders
previously approved the Plan.
If the Participant ceases Continuous Service before the end of
a Performance Cycle for any reason other than Retirement, Disability, or death,
the Participant shall forfeit all rights with respect to any Performance Shares
that were being earned during the Performance Cycle. The Committee, in its sole
discretion, may establish guidelines providing that if a Participant ceases
Continuous Service before the end of a Performance Cycle by reason of
Retirement, Disability, or death, the Participant shall be entitled to a
prorated payment with respect to any Performance Shares that were being earned
during the Performance Cycle.
13. Adjustments Upon Changes in Capitalization. In the event
of any change in the outstanding Shares subsequent to the effective date of the
Plan by reason of any reorganization, recapitalization, stock split, stock
dividend, combination or exchange of shares, merger, consolidation or any change
in the corporate structure or Shares of the Company, the maximum aggregate
number and class of shares as to which Awards may be granted under the Plan and
the number and class of shares with respect to which Awards theretofore have
been granted under the Plan shall be appropriately adjusted by the Committee to
prevent the dilution or diminution of Awards. The Committee's determination with
respect to any adjustments shall be conclusive. Any shares or other securities
received, as a result of any of the foregoing, by a Participant with respect to
Restricted Shares shall be subject to the same restrictions and the
certificate(s) or other instruments representing or evidencing the shares or
other securities shall be legended and deposited with the Company in the manner
provided in Section 10 of this Agreement.
14. Effect of Reorganization. Unless otherwise provided by the
Committee in the Award Agreement, Awards will be affected by a Reorganization as
follows:
(a) If the Reorganization is a dissolution or
liquidation of the Company then (i) the restrictions on
Restricted Shares shall lapse and (ii) each outstanding Option
or SAR Award shall terminate, but each Participant to whom the
Option or SAR was granted shall have the right, immediately
prior to the dissolution or liquidation to exercise the Option
or SAR in full, notwithstanding the provisions of Section 9,
and the Company shall notify each Participant of such right
within a reasonable period of time prior to any dissolution or
liquidation.
(b) If the Reorganization is a merger or
consolidation, other than a Change in Control subject to
Section 15 of this Plan, upon the effective date of the
Reorganization (i) each Participant shall be entitled, upon
exercise of an Option in accordance with all of the terms and
conditions of the Plan, to receive in lieu of Shares, shares
or other securities or consideration as the holders of Shares
shall be entitled to receive pursuant to the terms of the
Reorganization; and (ii) each holder of Restricted Shares
shall receive shares or other securities as the holders of
Shares received which shall be subject to the restrictions set
forth in Section 10 unless the Committee accelerates the lapse
of such restrictions and the certificate(s) or other
instruments representing or evidencing the shares or other
securities shall be legended and deposited with the Company in
the manner provided in Section 10 of this Plan.
The adjustments contained in this Section and the manner of
application of such provisions shall be determined solely by the Committee.
15. Effect of Change of Control. If the Continuous Service of
any Participant of the Company or any Affiliate is involuntarily terminated, for
whatever reason, at any time within twelve months after a Change in Control,
unless the Committee shall have otherwise provided in the Award Agreement, (a)
any Restricted Period with respect to an Award of Restricted Shares shall lapse
upon the Participant's termination of Continuous Service and all Shares of
Restricted Shares shall become fully vested in the Participant to whom the award
was made; and (b) with respect to Performance Shares, the Participant shall be
entitled to receive a prorata payment of Shares to the same extent as if the
Participant ceases Continuous Service by reason of Retirement under Section 12
of the Plan. If a tender offer or exchange offer for Shares (other than such an
offer by the Company) is commenced, or if the event specified in clause (iii) of
the definition of a Change in Control contained in Section 2 shall occur, unless
the Committee shall have otherwise provided in the Award Agreement, all Option
and SAR Awards theretofore granted and not fully exercisable shall become
exercisable in full upon the happening of such event and shall remain
exercisable in accordance with their terms; provided, however, that no Option or
SAR shall be exercisable by a director or officer of the Company within six
months of the date of grant of the Option or SAR and no Option or SAR which has
previously been exercised or otherwise terminated shall become exercisable.
16. Assignments and Transfers. Except as otherwise expressly
authorized by the Committee in the Award Agreement or any amendment thereto
during the lifetime of a Participant no Award nor any right or interest of a
Participant in any Award under the Plan may be assigned, encumbered or
transferred otherwise than by will or the laws of descent and distribution.
17. Employee Rights Under the Plan. No officer, Employee or
other person shall have a right to be selected as a Participant nor, having been
so selected, to be selected again as a Participant and no officer, Employee or
other person shall have any claim or right to be granted an Award under the Plan
or under any other incentive or similar plan of the Company or any Affiliate.
Neither the Plan nor any action taken under the Plan shall be construed as
giving any Employee any right to be retained in the employ of the Company or any
Affiliate.
18. Delivery and Registration of Shares. The Company's
obligation to deliver Shares with respect to an Award shall, if the Committee
requests, be conditioned upon the receipt of a representation as to the
investment intention of the Participant to whom such Shares are to be delivered,
in such form as the Committee shall determine to be necessary or advisable to
comply with the provisions of the Securities Act or any other applicable federal
or state securities laws. It may be provided that any representation requirement
shall become inoperative upon a registration of the Shares or other action
eliminating the necessity of the representation under the Securities Act or
other state securities laws. The Company shall not be required to deliver any
Shares under the Plan prior to (i) the admission of such Shares to listing on
any stock exchange or system on which Shares may then be listed, and (ii) the
completion of any registration or other qualification of the Shares under any
state or federal law, rule or regulation, as the Company shall determine to be
necessary or advisable.
19. Withholding Tax. Prior to the delivery of any Shares or
cash pursuant to an Award, the Company shall have the right and power to deduct
or withhold, or require the Participant to remit to the Company, an amount
sufficient to satisfy all applicable tax withholding requirements. The
Committee, in its sole discretion and pursuant to such procedures as it may
specify from time to time, may permit or require a Participant to satisfy all or
part of the tax withholding obligations in connection with an Award by (a)
having the Company withhold otherwise deliverable Shares, or (b) delivering to
the Company Shares already owned having a Market Value equal to the amount
required to be withheld. The amount of the withholding requirement shall be
deemed to include any amount which the Committee determines, not to exceed the
amount determined by using the maximum federal, state or local marginal income
tax rates applicable to the Participant with respect to the Award on the date
that the amount of tax to be withheld is to be determined for these purposes.
For these purposes, the value of the Shares to be withheld or delivered shall be
equal to the Market Value as of the date that the taxes are required to be
withheld.
20. Termination, Amendment and Modification of Plan. The Board
may at any time terminate, and may at any time and from time to time and in any
respect amend or modify, the Plan; provided however, that to the extent
necessary and desirable to comply with Rule 16b-3 under the Exchange Act or Code
section 422 (or any other applicable law or regulation, including requirements
of any stock exchange or quotation system on which the Company's common stock is
listed or quoted) shareholder approval of any Plan amendment shall be obtained
in the manner and to the degree as is required by the applicable law or
regulation; and provided further, that no termination, amendment or modification
of the Plan shall in any manner affect any Award theretofore granted pursuant to
the Plan without the consent of the Participant to whom the Award was granted or
transferee of the Award.
21. Effective Date and Term of Plan. The Plan shall become
effective upon its adoption by the Board of Directors, subject to ratification
by the shareholders of the Company at the next annual meeting, and shall
continue in effect for a term of ten years from the date of adoption by the
Board of Directors unless sooner terminated under Section 20 of the Plan.
22. Governing Law. The Plan and Award Agreements shall be
construed in accordance with and governed by the laws of the State of Indiana.
23. Awards to Foreign Nationals and Employees Outside the
United States. To the extent the Committee deems it necessary, appropriate or
desirable to comply with foreign law or practice and to further the purpose of
this Plan, the Committee may, without amending this Plan, (a) establish special
rules applicable to Awards granted to Participants who are foreign nationals,
are employed outside the United States, or both, including rules that differ
from those set forth in this Plan, and (b) grant Awards to such Participants in
accordance with those rules.
Adopted by the Board of Directors of
Hurco Companies, Inc.
as of March 6, 1997
Adopted by the Shareholders of
Hurco Companies, Inc.
as of May 29, 1997
Exhibit 11
COMPUTATION OF PER SHARE EARNINGS
<PAGE>
Exhibit 11
Statement Re: Computation of Per Share Earnings
Three Months Ended Nine Months Ended
July 31, July 31,
------------------- ------------------
1997 1996 1997 1996
------ ------ ------ ------
Fully Fully Fully Fully
Primary Diluted Primary Diluted Primary Diluted Primary Diluted
(in thousands, except per share amount)
Net income ............. $2,534 $2,534 $957 $957 $9,750 $9,750 $2,554 $2,554
Weighted average shares
outstanding .......... 6,536 6,536 5,759 5,759 6,535 6,535 5,538 5,538
Assumed issuances under
stock options plans .. 154 164 161 161 140 164 141 141
----- ----- ----- ----- ----- ----- ----- -----
6,690 6,700 5,920 5,920 6,675 6,699 5,679 5,679
===== ===== ===== ===== ===== ===== ===== =====
Earnings per common share $0.38 $0.38 $0.16 $0.16 $1.46 $1.46 $0.45 $0.45
===== ===== ===== ===== ===== ===== ===== =====
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT 10-Q FOR THE PERIOD ENDED JULY 31, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000315374
<NAME> SONJA BUCKLES
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> JUL-31-1997
<EXCHANGE-RATE> 1
<CASH> 2,117
<SECURITIES> 0
<RECEIVABLES> 15,873
<ALLOWANCES> 733
<INVENTORY> 25,838
<CURRENT-ASSETS> 43,831
<PP&E> 20,475
<DEPRECIATION> 11,122
<TOTAL-ASSETS> 59,994
<CURRENT-LIABILITIES> 20,228
<BONDS> 0
0
0
<COMMON> 654
<OTHER-SE> 24,762
<TOTAL-LIABILITY-AND-EQUITY> 59,994
<SALES> 69,495
<TOTAL-REVENUES> 69,495
<CGS> 48,992
<TOTAL-COSTS> 48,992
<OTHER-EXPENSES> (7,312)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,533
<INCOME-PRETAX> 10,667
<INCOME-TAX> 917
<INCOME-CONTINUING> 9,750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,750
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 1.46
</TABLE>
