Hurco Companies (HURC) 8-K Hurco Reports Full Year Results

FOR IMMEDIATE RELEASE

TUESDAY, DECEMBER 15, 2009

HURCO REPORTS FULL YEAR RESULTS

INDIANAPOLIS, INDIANA, — December 15, 2009, Hurco Companies, Inc., (Nasdaq, Global Select Market: HURC) today reported for its fiscal year ending October 31, 2009, a net loss of $2,321,000, or $(0.36) per diluted share, as compared to net income of $22,520,000, or $3.49 per diluted share, for fiscal 2008.  For the fourth quarter of fiscal 2009, Hurco recorded a net loss of $1,163,000, or $(0.18) per diluted share, as compared to net income of $3,422,000, or $0.53 per diluted share, from the corresponding period in fiscal 2008.

Sales and service fees for fiscal 2009 totaled $91,016,000, a decrease of $132,978,000, or 59%, from fiscal 2008.  A stronger U.S. Dollar when translating foreign sales to U.S. Dollars for financial reporting purposes during fiscal 2009 accounted for approximately $7,944,000 of the decrease.  Sales and service fees for the fourth quarter of fiscal 2009 were $23,181,000, a decrease of $24,287,000, or 51%, from the prior year period.

The following table sets forth net sales and service fees by geographic region for the three and twelve month periods ended October 31, 2009 and 2008 (in thousands), respectively:

	Net Sales and Service Fees by Geographic Region
			Three Months Ended							Twelve Months Ended
			October 31,							October 31,
					%							%
	2009		2008		Change			2009		2008		Change
North America	$	4,034	$	12,946		-69	%	$	25,652	$	48,373		-47	%
Europe		17,253		33,031		-48	%		60,132		163,807		-63	%
Asia Pacific		1,894		1,491		27	%		5,232		11,814		-56	%
Total	$	23,181	$	47,468		-51	%	$	91,016	$	223,994		-59	%

Since the beginning of fiscal 2009, our operating results have been adversely affected by the ongoing global recession as our customers deferred or eliminated investments in capital equipment.  Additionally, during the current recession, customers who might otherwise want to purchase capital goods have found it difficult to obtain financing due to disruptions in the credit markets.  During fiscal 2009, these conditions had the greatest impact on our European sales region, the primary market for our more expensive, higher-margin machines.  The European sales region accounted for 66% of sales in fiscal 2009 and 73% in fiscal 2008.

New order bookings in fiscal 2009 were $80,605,000, a decrease of $131,925,000, or 62%, from the prior year.  This decrease was primarily driven by a decline in European orders, which were down $100,763,000, or 65%.  Fiscal 2009 orders in North America decreased $23,934,000, or 51%, and orders in the Asia Pacific sales region decreased $7,228,000, or 65%.  New order bookings for the fourth quarter of fiscal 2009 totaled $20,038,000, a decrease of $19,978,000, or 50%, from the prior year period.  New order bookings declined by $8,624,000, or 67%, in North America, $11,210,000, or 43%, in Europe, and $144,000, or 12%, in Asia.  The impact of currency translation on new orders booked in fiscal 2009 was consistent with its impact on sales.

Hurco’s gross margin for fiscal 2009 was 28%, compared to 37% for fiscal 2008.  Gross margin for the fourth quarter of fiscal 2009 was 29%, compared to 35% for the prior year period.  The decrease in margin as a percentage of sales was due to lower sales of higher-margin VMX machines in the European sales region, the impact of fixed costs on lower sales and production volume, and competitive pricing pressures on a global basis.

Selling, general and administrative expenses were $30,874,000 for fiscal 2009, a decrease of $15,937,000, or 34%, from fiscal 2008, and $8,127,000 for the fourth quarter of fiscal 2009, a decrease of $2,803,000, or 26%, from the fourth quarter of fiscal 2008. These reductions reflect lower sales commissions, the benefit of cost reduction initiatives, and the favorable effect of a stronger U.S. Dollar in 2009 when translating foreign operating expenses to U.S. Dollars for financial reporting purposes, partially offset by severance expense for a former executive officer.

The $2,874,000 increase in other income for fiscal 2009 in comparison to fiscal 2008 was primarily due to net realized gains of $2,028,000 from cash flow hedges of forecasted inter-company sales and purchases that became ineffective as production levels steeply declined during the fiscal year.

Cash and cash equivalents totaled $28,782,000 as of October 31, 2009, compared to $26,394,000 as of October 31, 2008.  Inventory as of October 31, 2009 was $60,281,000, a decrease of $6,087,000 from October 31, 2008.  The decreased inventory reflects our reduction in production levels due to lower market demand.

Michael Doar, President and Chief Executive Officer, stated, “I firmly believe that our organizational agility to implement cost savings initiatives quickly and our fiscally conservative culture have minimized the impact of the sales decline we experienced in fiscal 2009. We have maintained a strong cash position and zero debt despite the worldwide economic contraction.  As a result, we have been able to maintain schedules for technology innovation, which is fundamental to our product development. This leaves Hurco poised to benefit from the expected economic recovery.”

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 aerospace, defense, medical equipment, energy, transportation and computer equipment. The Company is based in Indianapolis, Indiana, with manufacturing operations in Taiwan and China, and sells its products through direct and indirect sales forces throughout North America, Europe, and Asia. The company has sales, application engineering support and service subsidiaries in Canada, China, England, France, Germany, India, Italy, Poland, Singapore, South Africa, Spain, and the United States of America.  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 recession, 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 October 31,						Twelve Months Ended October 31,
	2009			2008			2009			2008
	(unaudited)						(unaudited)
Sales and service fees	$	23,181		$	47,468		$	91,016		$	223,994
Cost of sales and service		16,366			30,918			65,188			141,377
Gross profit		6,815			16,550			25,828			82,617
Selling, general and administrative expenses		8,127			10,930			30,874			46,811
Operating income (loss)		(1,312	)		5,620			(5,046	)		35,806
Interest expense		2			18			35			63
Interest income		5			106			190			542
Investment income		(16	)		102			16			465
Other income (expense), net		(765	)		(1,272	)		1,063			(2,584	)
Income (loss) before taxes		(2,090	)		4,538			(3,812	)		34,166
Provision (benefit) for income taxes		(927	)		1,116			(1,491	)		11,646
Net income (loss)	$	(1,163	)	$	3,422		$	(2,321	)	$	22,520
Earnings (loss) per common share
Basic	$	(0.18	)	$	0.53		$	(0.36	)	$	3.51
Diluted	$	(0.18	)	$	0.53		$	(0.36	)	$	3.49
Weighted average common shares outstanding
Basic		6,441			6,415			6,429			6,415
Diluted		6,441			6,436			6,429			6,444

OTHER CONSOLIDATED FINANCIAL DATA	Three Months Ended October 31,						Twelve Months Ended October 31,
Operating Data:	2009  (unaudited)			2008			2009  (unaudited)			2008
Gross margin		29.4	%		34.9	%		28.4	%		36.9	%
SG&A expense as a percentage of sales		35.1	%		23.0	%		33.9	%		20.9	%
Operating income (loss) as a percentage of sales		-5.7	%		11.8	%		-5.5	%		16.0	%
Pre-tax income as a percentage of sales		-9.0	%		9.6	%		-4.2	%		15.3	%
Effective Tax Rate		44.4	%		24.6	%		39.1	%		34.1	%
Depreciation		844			833			3,295			3,023
Capital expenditures		737			2,058			3,697			5,514
Balance Sheet Data:	10/31/2009			10/31/2008
Working capital (excluding cash)	$	68,675		$	73,789
Days sales outstanding		39			39
Inventory turns		1.0			2.0
Capitalization
Total debt	$	-		$	-
Shareholders' equity		120,376			123,477
Total	$	120,376		$	123,477

Hurco Companies, Inc.

CONDENSED CONSOLIDATED BALANCE SHEET

(In thousands, except per-share data)

	October 31,			October 31,
	2009			2008
	(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	28,782		$	26,394
Short-term investments		-			6,674
Accounts receivable, net		13,988			31,952
Refundable taxes		7,121			-
Inventories, net		60,281			66,368
Deferred tax assets and other, net		5,890			5,444
Derivative assets		376			12,463
Other		1,826			2,017
Total current assets		118,264			151,312
Property and equipment:
Land		782			782
Building		7,116			7,127
Machinery and equipment		14,995			14,885
Leasehold improvements		2,021			1,765
		24,914			24,559
Less accumulated depreciation and amortization		(11,802	)		(10,961	)
		13,112			13,598
Non-current assets:
Software development costs, less accumulated amortization		6,503			5,711
Other assets		6,864			6,823
	$	144,743		$	177,444
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	8,262		$	28,303
Derivative liabilities		2,234			2,692
Accrued expenses		10,311			20,134
Total current liabilities		20,807			51,129
Non-current liabilities:
Deferred tax liabilities, net		2,570			2,056
Deferred credits and other obligations		990			782
Total liabilities		24,367			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 6,440,851 and 6,420,851
shares issued and outstanding, respectively		644			642
Additional paid-in capital		52,003			51,690
Retained earnings		69,563			71,889
Accumulated other comprehensive loss		(1,834	)		(744	)
Total shareholders' equity		120,376			123,477
	$	144,743		$	177,444