Hurco Companies (HURC) 8-K Hurco Reports Record Sales and Operating Income In Its Second Quarter 2006 Results

FOR IMMEDIATE RELEASE

THURSDAY, MAY 18, 2006

HURCO REPORTS RECORD SALES AND OPERATING INCOME IN ITS SECOND QUARTER 2006 RESULTS

INDIANAPOLIS, INDIANA, — May 18, 2006—Hurco Companies, Inc. (Nasdaq:HURC) today announced that for its second fiscal quarter, which ended April 30, 2006, it recorded net income of $3,929,000, or $.62 per share, compared to $3,299,000, or $.52 per share, for the corresponding quarter of 2005. For the first six months of fiscal 2006, Hurco recorded net income of $6,962,000 or $1.09 per share, compared to $6,329,000 or $1.00 per share, for the corresponding 2005 period.

The company noted that its provision for income taxes increased from prior periods by approximately $1,500,000 during the second quarter of fiscal 2006 and $2,700,000 for the six month period, due primarily to the company’s prior utilization of substantially all of its domestic net operating loss carryforwards. Income before taxes for the latest quarter was $6,179,000, an increase of 51% over the $4,080,000 reported in the same period one year ago.

Sales and service fees for the second quarter of fiscal 2006 were the highest in the company’s history and totaled $36,861,000, an increase of $5,871,000, or 19%, from the amount recorded in the corresponding quarter of 2005, which was also a record at that time. Due to the effects of a stronger U.S. Dollar when translating foreign sales for financial reporting purposes, sales and service fees for the second quarter of fiscal 2006 were approximately $1,600,000 less than would have been the case if foreign sales had been translated at the same rate of exchange that was utilized for the second quarter of 2005. The company attributed the significant growth in its second quarter revenues to a 27% increase in unit sales of its higher margin VMX computerized machine tools, which was most pronounced in the United States and Europe. Sales and Service fees for the six months ended April 30, 2006 totaled $68,755,000, an increase of $7,519,000, or 12%. Sales and service fees for the six months were unfavorably affected by approximately $3,400,000 due to currency translation.

New orders booked in the second quarter of fiscal 2006 totaled $36,990,000, an increase of $4,058,000, or 12%, from the amount recorded in the second quarter of 2005. For the six months ended April 30, 2006, new orders totaled $74,721,000, an increase of $14,904,000, or 25%, over the 2005 amount. The impact of currency translation on new orders booked was consistent with the impact on sales and service fees.

Gross margin for the second quarter of fiscal 2006 was 35.8% compared to 34.7% for the prior year period. The improvement was primarily due to the increased unit sales partially offset by the unfavorable effects of a strengthening U.S. Dollar compared to the prior year period. Selling, general and administrative expenses were $7,140,000 for the 2006 period, an increase of $777,000, or 12%, over the amount recorded for the corresponding 2005 period, primarily due to increased sales and marketing expenses.

Operating income for the second quarter of fiscal 2006 was a record for Hurco and totaled $6,039,000 or 16% of sales and service fees, compared to $4,404,000, or 14% of sales and service fees, for the same period in the prior year.

Michael Doar, Chief Executive Officer, stated, "The financial results for our second quarter are very satisfying. Our sales and service fees reached record levels and orders remained strong. We are continuing to increase our production capacity to fulfill orders received in the first half of fiscal 2006 and future orders.”

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 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 High Wycombe, England; Munich, Germany; Paris, France; Milan, Italy; Shanghai, China and Singapore, along with manufacturing operations in Taiwan. Products are sold through independent agents and distributors in the United States, Europe and Asia. The Company also has direct sales forces in the United Kingdom, Germany, France, Italy, and Asia.

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, 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, quality and delivery performance by our contract manufacturers and governmental actions and initiatives including import and export restrictions and tariffs.

Contact: Stephen J. Alesia

Vice President & CFO

317-293-5309

Hurco Companies, Inc.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per-share data)

	Three Months Ended April 30,					Six Months Ended April 30,
	2006		2005			2006		2005
	(unaudited)					(unaudited)
Sales and service fees	$	36,861	$	30,990		$	68,755	$	61,236
Cost of sales and service		23,682		20,223			44,649		40,729
Gross profit		13,179		10,767			24,106		20,507
Selling, general and administrative expenses		7,140		6,363			13,436		12,550
Operating income		6,039		4,404			10,670		7,957
Interest expense		80		86			164		169
Other income (expense), net		220		(238	)		325		(309	)
Income before taxes		6,179		4,080			10,831		7,479
Provision for income taxes		2,250		781			3,869		1,150
Net income	$	3,929	$	3,299		$	6,962	$	6,329
Earnings per common share
Basic	$	0.62	$	0.53		$	1.11	$	1.03
Diluted	$	0.62	$	0.52		$	1.09	$	1.00
Weighted average common shares outstanding
Basic		6,291		6,193			6,291		6,131
Diluted		6,377		6,370			6,377		6,307

OTHER CONSOLIDATED FINANCIAL DATA	Three Months Ended April 30,						Six Months Ended April 30,
Operating Data:	2006			2005			2006			2005
	(unaudited)						(unaudited)
Gross margin		35.8	%		34.7	%		35.1	%		33.5	%
SG&A expense as a percentage of sales		19.4	%		20.5	%		19.5	%		20.5	%
Operating income as a percentage of sales		16.4	%		14.2	%		15.5	%		13.0	%
Income before taxes as a percentage of sales		16.8	%		13.2	%		15.8	%		12.2	%
Effective Tax Rate		36.4	%		19.1	%		35.7	%		15.4	%
Depreciation		367			305			732			622
Capital expenditures		704			452			1,196			1,075
Balance Sheet Data:	4/30/2006			4/30/2005
Working capital (excluding short term debt)	$	50,761		$	35,504
Days sales outstanding		45			44
Inventory turns		2.5			2.3
Capitalization
Total debt	$	4,074		$	4,395
Shareholders' equity		67,624			48,246
Total	$	71,698		$	52,641

Hurco Companies, Inc.

CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands, except per-share data)

	April 30,			October 31,
	2006			2005
	(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	24,210		$	17,559
Accounts receivable		24,631			20,100
Inventories		36,308			29,530
Deferred tax assets, net		2,267			3,043
Other		4,072			3,586
Total current assets		91,488			73,818
Property and equipment:
Land		761			761
Building		7,234			7,205
Machinery and equipment		13,533			13,170
Leasehold improvements		1,111			1,102
		22,639			22,238
Less accumulated depreciation and amortization		(13,765	)		(13,187	)
		8,874			9,051
Deferred tax assets, net		1,303			1,346
Software development costs, less amortization		4,471			3,752
Investments and other assets		6,796			6,147
	$	112,932		$	94,114
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	28,023		$	17,051
Accrued expenses		12,704			13,584
Current portion of long-term debt		131			126
Total current liabilities		40,858			30,761
Non-current liabilities:
Long-term debt		3,943			4,010
Deferred credits and other obligations		507			399
Total liabilities		45,308			35,170
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 6,341,020 and 6,220,220 shares issued, respectively		634			622
Additional paid-in capital		49,727			48,701
Retained earnings		19,962			13,001
Accumulated other comprehensive income		(2,699	)		(3,380	)
Total shareholders' equity		67,624			58,944
	$	112,932		$	94,114