Hurco Companies (HURC) 8-K Hurco Reports First Quarter Financial Results

FOR IMMEDIATE RELEASE

FRIDAY, FEBRUARY 27, 2009

HURCO REPORTS FIRST QUARTER FINANCIAL RESULTS

INDIANAPOLIS, INDIANA, — February 27, 2009, Hurco Companies, Inc., (Nasdaq, Global Select Market: HURC) today reported net income of $354,000, or $0.05 per diluted share for its first quarter ended January 31, 2009, which is a decrease of 95% from net income of $7,805,000, or $1.21 per diluted share, reported for the corresponding period in fiscal 2008.

Sales and service fees for the first quarter of fiscal 2009 totaled $28,307,000, a decrease of $32,616,000, or 54%, compared to the first quarter of fiscal 2008.  The effect of a stronger U.S. dollar when translating foreign sales to U.S. dollars for financial reporting purposes had an unfavorable impact of approximately 5%, or $2,896,000, on the period-to-period comparison.

The following table sets forth net sales and service fees by geographic region for the first quarter of fiscal 2009 and 2008 (in thousands):

Net Sales and Service Fees by Geographic Region

	Three Months Ended January 31,
	2009		2008		% Change
North America	$	9,636	$	13,079		-26	%
Europe		18,060		45,052		-60	%
Asia Pacific		611		2,792		-78	%
Total	$	28,307	$	60,923		-54	%

Sales were down sharply across all regions due to the current economic disruption that has had an adverse effect on all markets around the world.  In addition to declining volume and the impact of currency translation, approximately 15% of the sales decline was attributable to a drop in sales of VMX machines in the Europe sales region.

New order bookings in the first quarter of fiscal 2009, were $24,516,000, a decrease of $36,631,000, or 60%, compared to the prior year period.  Orders in the North America, Europe and Asia Pacific regions decreased $3,655,000, or 30%, $30,754,000, or 67% and $2,222,000, or 79%, respectively.  The decline in orders we experienced at the end of fiscal 2008 continued and became worse as our customers, consisting primarily of small job shops, reacted to the sudden downturn in the markets they serve.  The impact of currency translation on new orders booked for the first quarter was consistent with the impact on sales.

Hurco’s gross margin for the first quarter of fiscal 2009 was 30%, compared to 41% for the 2008 period.  The decrease in margin rate was primarily due to lower volume and the reduction in sales of VMX machines in the Europe sales region.  Selling, general and administrative expenses were $8,029,000 for the first quarter of fiscal 2009, a decrease of $4,347,000, or 35%, from the 2008 period, reflecting lower sales commissions, cost reduction initiatives and the favorable effect of a stronger U.S. Dollar during the 2009 period when translating foreign operating expenses for financial reporting purposes.

Hurco’s effective tax rate for the first quarter of fiscal 2009 of approximately 36% was relatively unchanged compared to the same period in the prior year.

Cash and cash equivalents totaled $30,126,000 as of January 31, 2009, compared to cash and cash equivalents and short term investments of $33,068,000 as of October 31, 2008.  Hurco had no borrowings outstanding on its $30 million unsecured revolving credit facility.

Michael Doar, Chief Executive Officer, stated, "The steep drop in sales we experienced last quarter is a clear reflection of the impact that current economic conditions are having on a worldwide basis.  In a period of economic uncertainty, investments in capital equipment are being deferred or cut.  In addition, customers who want to purchase capital goods are finding it difficult to secure financing due to tight credit market conditions."

"During this global economic downturn, it’s important to identify what we have done right and what we can do better. We are fortunate to have weathered past downturns in our 40-year history.  From that experience, we learned valuable lessons that have eased the impact of current economic conditions. We learned to embrace our fiscally conservative culture and we learned the value of strategic planning.  Because of this experience, we have a strong balance sheet with cash reserves that enables us to stay committed to our strategic plan of product innovation and targeted penetration of developing markets. We continue to review internal processes to identify new efficiencies that can be realized through further cost-reduction initiatives.  While we can’t predict the future, we are adequately prepared to adapt to the challenges and opportunities that may be encountered.” 

Hurco Companies, Inc. is an industrial technology company that designs and produces interactive computer controls, software and computerized machine tools for the worldwide metal cutting and metal forming industry.  The end market for the Company's products consists primarily of independent job shops and short-run manufacturing operations within large corporations in industries such as the aerospace, defense, medical equipment, energy, transportation and computer equipment.  The Company is based in Indianapolis, Indiana, and has sales, application engineering and service subsidiaries in Mississauga, Canada; Shanghai, China; High Wycombe, England; Paris, France; Munich, Germany; Chennai, India; Milan, Italy; and Singapore, along with manufacturing operations in Taiwan and China.  Products are sold through independent agents and distributors in North America, Europe and Asia.  The Company also has direct sales forces in the Canada, France, Germany, Italy, Singapore and the United Kingdom.

Web Site:  www.hurco.com

This news release contains forward looking statements which involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  These factors include, among others, the impact of the current global economic crisis, including disruption in credit markets, other changes in general economic and business conditions that affect demand for computerized machine systems, computer numerical control systems and software products, changes in manufacturing markets, innovations by competitors, our ability to protect our intellectual property, fluctuations in exchange rates, fluctuations in prices of raw materials, changes in market demands, quality and delivery performance by our contract manufacturers and governmental actions and initiatives including import and export restrictions and tariffs.

Contact:  John Oblazney

    Vice President & Chief Financial Officer

    317-293-5309

HURCO COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per-share data)
	Three Months Ended  January 31,
	2009			2008
	(unaudited)
Sales and service fees	$	28,307		$	60,923
Cost of sales and service		19,765			36,066
Gross profit		8,542			24,857
Selling, general and administrative expenses		8,029			12,376
Operating income		513			12,481
Interest expense		23			11
Interest Income		104			149
Investment Income		28			172
Other expense, net		73			464
Income before taxes		549			12,327
Provision for income taxes		195			4,522
Net income	$	354		$	7,805
Earnings per common share
Basic	$	0.06		$	1.22
Diluted	$	0.05		$	1.21
Weighted average common shares outstanding
Basic		6,421			6,401
Diluted		6,438			6,433
OTHER CONSOLIDATED FINANCIAL DATA	Three Months Ended January 31,
Operating Data:	2009			2008
	(unaudited)
Gross margin		30.2	%		40.8	%
SG&A expense as a percentage of sales		28.4	%		20.3	%
Operating income as a percentage of sales		1.8	%		20.5	%
Pre-tax income as a percentage of sales		1.9	%		20.2	%
Effective Tax Rate		35.5	%		36.7	%
Depreciation		791			683
Capital expenditures		1,351			1,147
Balance Sheet Data:	1/31/2009			10/31/2008
Working capital (excluding cash and short term debt)	$	69,170		$	73,789
Days sales outstanding		57			39
Inventory turns		1.9			2.0
Capitalization
Total debt	$	-		$	-
Shareholders' equity		123,051			123,477
Total	$	123,051		$	123,477

HURCO COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share and per-share data)
	January 31,			October 31,
	2009			2008
	(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	30,126		$	26,394
Short-term investments		-			6,674
Accounts receivable, net		18,587			31,952
Inventories, net		63,294			66,368
Deferred tax assets, net		6,489			5,444
Derivative assets		8,762			12,463
Other		1,824			2,017
Total current assets		129,082			151,312
Property and equipment:
Land		782			782
Building		7,127			7,127
Machinery and equipment		15,396			14,885
Leasehold improvements		1,827			1,765
		25,132			24,559
Less accumulated depreciation and amortization		(11,300	)		(10,961	)
		13,832			13,598
Non-current assets:
Software development costs, less accumulated amortization		5,967			5,711
Other assets		6,825			6,823
	$	155,706		$	177,444
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	14,587		$	28,303
Derivative liabilities		3,094			2,692
Accrued expenses		12,105			20,134
Total current liabilities		29,786			51,129
Non-current liabilities:
Deferred tax liability, net		2,083			2,056
Deferred credits and other obligations		786			782
Total liabilities		32,655			53,967
Shareholders' equity:
Preferred stock:  no par value per share; 1,000,000 shares
authorized; no shares issued
Common stock:  no par value; $.10 stated value per share;
13,250,000 shares authorized; and 6,420,851 and
6,392,220 shares issued, respectively		642			642
Additional paid-in capital		51,747			51,690
Retained earnings		72,243			71,889
Accumulated other comprehensive income		(1,581	)		(744	)
Total shareholders' equity		123,051			123,477
	$	155,706		$	177,444