x |
Annual
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended October 31, 2008
or
|
o |
Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the transition period from _________ to
_________.
|
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)
|
Securities
registered pursuant to Section 12(b) of the Act:
|
None
|
Securities
registered pursuant to Section 12(g) of the Act:
|
Common Stock, No Par
Value
|
(Title
of Class)
|
Large accelerated filer o |
Accelerated filer
x
|
Non-accelerated
filer o
|
Smaller Reporting
Company o
|
(Do not check if a
smaller reporting company)
|
|
·
|
United
States Machine Tool Consumption – generated by the Association for
Manufacturing Technology and American Machine Tool Distributor
Association, this report includes metal cutting machines of all types and
sizes, including segments in which we do not
compete
|
|
·
|
Purchasing
Manager’s Index - developed by the Institute for Supply
Management and reports activity levels in U.S. manufacturing
plants that purchase machine
tools
|
|
·
|
Capacity
Utilization of Manufacturing Companies – issued by the Federal
Reserve Board
|
Net
Sales and Service Fees by Product Category
|
||||||||||||||||||||||||
(Dollars
in thousands)
|
Year
ended October 31,
|
|||||||||||||||||||||||
2008
|
2007
|
2006
|
||||||||||||||||||||||
Continuing
Products and Services
|
||||||||||||||||||||||||
Computerized
Machine Tools
|
$ | 199,238 | 89.0 | % | $ | 165,832 | 88.2 | % | $ | 128,946 | 86.8 | % | ||||||||||||
Computer
Control Systems and Software *
|
5,678 | 2.5 | % | 5,291 | 2.8 | % | 4,694 | 3.2 | % | |||||||||||||||
Service
Parts
|
13,240 | 5.9 | % | 12,096 | 6.4 | % | 10,494 | 7.0 | % | |||||||||||||||
Service
Fees
|
5,838 | 2.6 | % | 4,828 | 2.6 | % | 4,383 | 3.0 | % | |||||||||||||||
Total
|
$ | 223,994 | 100 | % | $ | 188,047 | 100 | % | $ | 148,517 | 100 | % |
|
·
|
maximize
the efficiency of their human
resources
|
|
·
|
continue
to expand their capability to make more advanced and complex parts from a
wide range of materials using multiple
processes
|
|
·
|
maintain
the ability to incorporate fast moving changes in technology into their
operations to keep their competitive
edge
|
|
·
|
continue
to integrate themselves into the global supply chain of their customers by
supporting small to medium lot sizes for “just in time”
initiatives
|
|
·
|
the
need to continuously improve productivity and shorten cycle
time
|
|
·
|
an
aging machine tool installed base that will require replacement with more
advanced and efficient technology created by shorter product life
cycles
|
|
·
|
the
industrial development of emerging markets in Asia and Eastern
Europe
|
|
·
|
the
declining supply of skilled
machinists
|
Fiscal Year
|
Non-capitalized
research
and
development
|
Capitalized
software
development
|
||||||
2008
|
$ | 3,000 | $ | 900 | ||||
2007
|
3,100 | 1,200 | ||||||
2006
|
2,500 | 2,100 |
|
·
|
trade
barriers
|
|
·
|
regional
economic uncertainty
|
|
·
|
differing
labor regulation
|
|
·
|
risk
of governmental expropriation
|
|
·
|
domestic
and foreign customs and tariffs
|
|
·
|
current
and changing regulatory environments affecting the importation and
exportation of products and raw
materials
|
|
·
|
difficulty
in obtaining distribution support
|
|
·
|
difficulty
in staffing and managing widespread
operations
|
|
·
|
differences
in the availability and terms of
financing
|
|
·
|
political
instability and unrest
|
|
·
|
risks
of changes in taxes
|
|
·
|
tax
implications from repatriation of
funds
|
|
·
|
difficulties
integrating the operations, technologies, products, and personnel of the
acquired companies
|
|
·
|
diversion
of management’s attention from normal daily operations of the
business
|
|
·
|
potential
difficulties completing projects associated with in-process research and
development
|
|
·
|
difficulties
entering markets in which we have no or limited prior experience,
especially when competitors in such markets have stronger market
positions
|
|
·
|
initial
dependence on unfamiliar supply chains or relatively small supply
partners
|
|
·
|
insufficient
revenues to offset increased expenses associated with
acquisitions
|
|
·
|
the
potential loss of key employees of the acquired
companies
|
|
·
|
issue
common stock that would dilute our current shareholders’ percentage
ownership
|
|
·
|
assume
liabilities
|
|
·
|
record
goodwill and non-amortizable intangible assets that will be subject to
impairment testing on a regular basis and potential periodic impairment
charges
|
|
·
|
incur
amortization expenses related to certain intangible
assets
|
|
·
|
incur
large and immediate write-offs, and restructuring and other related
expenses
|
|
·
|
become
subject to litigation
|
|
None.
|
Location
|
Square Footage
|
Principal Uses
|
||||||
Indianapolis,
Indiana
|
165,000
|
(1) |
Corporate
headquarters, design and engineering, product testing, sales and
marketing, application engineering and customer service
|
|||||
Los
Angeles, California
|
13,000 |
Warehouse,
distribution, sales, application engineering and customer
service
|
||||||
Dexter,
Michigan
|
3,000 |
Sales,
design engineering, product testing and customer
service
|
||||||
Mississauga,
Canada
|
3,600 |
Sales,
application engineering andcustomer
service
|
||||||
High
Wycombe, England
|
12,000 |
Sales,
application engineering and customer
service
|
||||||
Paris,
France
|
9,700 |
Sales,
application engineering and customer
service
|
||||||
Munich,
and Rodermark, Germany
|
26,000 |
Sales,
application engineering and customer
service
|
||||||
Milan
and Venice, Italy
|
13,000 |
Sales,
application engineering and customer
service
|
||||||
Singapore
|
9,300 |
Sales,
application engineering and customer
service
|
||||||
Shanghai,
China
|
8,000 |
Sales,
application engineering and customer
service
|
||||||
Guangzhou,
China
|
2,400 |
Sales,
application engineering and customer
service
|
||||||
Chennai,
India
|
5,400 |
Sales,
application engineering and customer
service
|
||||||
Liegnitz,
Poland
|
2,900 |
Sales,
application engineering and customer
service
|
||||||
Taichung,
Taiwan
|
221,000 |
Manufacturing
|
||||||
Ningbo,
China
|
34,000 |
Manufacturing
|
|
(1)
|
Approximately
50,000 square feet is leased to a third-party under a lease, which expires
April 30, 2010.
|
Name
|
Age
|
Position(s) with the
Company
|
||
Michael
Doar
|
53
|
Chairman of the Board
and Chief Executive Officer
|
||
James
D. Fabris
|
57
|
President
and Chief Operating Officer
|
||
John
G. Oblazney
|
40
|
Vice
President, Secretary, Treasurer and Chief Financial
Officer
|
||
Sonja
K. McClelland
|
37
|
Corporate
Controller, Assistant
Secretary
|
2008
|
2007
|
|||||||||||||||
Fiscal Quarter Ended:
|
High
|
Low
|
High
|
Low
|
||||||||||||
January
31
|
$ | 58.68 | $ | 30.24 | $ | 33.18 | $ | 24.61 | ||||||||
April
30
|
52.12 | 33.41 | 47.86 | 33.07 | ||||||||||||
July
31
|
49.30 | 23.11 | 56.28 | 39.12 | ||||||||||||
October
31
|
38.24 | 16.92 | 60.44 | 39.77 |
Year
Ended October 31
|
||||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
Statement
of Operations Data:
|
(Dollars
in thousands, except per share amounts)
|
|||||||||||||||||||
Sales and service
fees
|
$ | 223,994 | $ | 188,047 | $ | 148,517 | $ | 125,509 | $ | 99,572 | ||||||||||
Gross
profit
|
82,617 | 71,082 | 53,325 | 42,558 | 30,298 | |||||||||||||||
Selling, general
and administrative
expenses
|
46,811 | 40,124 | 30,697 | 26,057 | 21,401 | |||||||||||||||
Restructuring expense
(credit) And
other expense, net
|
-- | -- | -- | -- | 465 | |||||||||||||||
Operating
income
|
35,806 | 30,958 | 22,628 | 16,501 | 8,432 | |||||||||||||||
Other income
(expense)*
|
(1,640 | ) | 1,742 | 745 | (64 | ) | (396 | ) | ||||||||||||
Net
income
|
22,520 | 20,889 | 15,479 | 16,443 | 6,269 | |||||||||||||||
Earnings per
common share-diluted
|
3.49 | 3.24 | 2.42 | 2.60 | 1.04 | |||||||||||||||
Weighted average
common shares
outstanding-diluted
|
6,444 | 6,440 | 6,397 | 6,336 | 6,026 |
As
of October 31
|
||||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
Balance
Sheet Data:
|
(Dollars
in thousands)
|
|||||||||||||||||||
Current assets*
|
$ | 151,312 | $ | 139,265 | $ | 103,434 | $ | 73,818 | $ | 56,472 | ||||||||||
Current
liabilities
|
51,129 | 63,215 | 44,340 | 30,761 | 30,125 | |||||||||||||||
Working capital*
|
100,183 | 76,050 | 59,094 | 43,057 | 26,347 | |||||||||||||||
Current ratio
|
3.0 | 2.2 | 2.3 | 2.4 | 1.9 | |||||||||||||||
Total assets*
|
177,444 | 163,781 | 125,545 | 94,114 | 73,446 | |||||||||||||||
Non-current
liabilities*
|
2,838 | 2,963 | 5,830 | 4,409 | 4,866 | |||||||||||||||
Total debt
|
-- | -- | 4,010 | 4,136 | 4,600 | |||||||||||||||
Shareholders’
equity
|
123,477 | 97,603 | 75,375 | 58,944 | 38,455 |
Percentage
of Revenues
|
Year-to-Year
% Change
|
|||||||||||||||||||
2008
|
2007
|
2006
|
Increase
(Decrease)
|
|||||||||||||||||
’08
vs. ’07
|
’07
vs. ’06
|
|||||||||||||||||||
Sales
and service fees
|
100.0 | % | 100.0 | % | 100.0 | % | 19.1 | % | 26.6 | % | ||||||||||
Gross
profit
|
36.9 | % | 37.8 | % | 35.9 | % | 16.2 | % | 33.3 | % | ||||||||||
Selling,
general and administrative
expenses
|
20.9 | % | 21.3 | % | 20.7 | % | 16.7 | % | 30.7 | % | ||||||||||
Operating
income
|
16.0 | % | 16.5 | % | 15.2 | % | 15.7 | % | 36.8 | % | ||||||||||
Other
income (expense)*
|
(0.7 | %) | 0.9 | % | 0.5 | % | (194.1 | %) | 133.8 | % | ||||||||||
Net
income
|
10.1 | % | 11.1 | % | 10.4 | % | 7.8 | % | 35.0 | % |
October
31,
|
Increase
(Decrease)
|
|||||||||||||||||||||||
2008
|
2007
|
Amount
|
%
|
|||||||||||||||||||||
North
America
|
$ | 48,373 | 21.6 | % | $ | 52,133 | 27.7 | % | $ | (3,760 | ) | (7.2 | %) | |||||||||||
Europe
|
163,807 | 73.1 | % | 125,446 | 66.7 | % | 38,361 | 30.6 | % | |||||||||||||||
Asia
Pacific
|
11,814 | 5.3 | % | 10,468 | 5.6 | % | 1,346 | 12.9 | % | |||||||||||||||
Total
|
$ | 223,994 | 100.0 | % | $ | 188,047 | 100.0 | % | $ | 35,947 | 19.1 | % |
October
31,
|
Increase
|
|||||||||||||||||||||||
2008
|
2007
|
Amount
|
|
%
|
||||||||||||||||||||
Computerized
Machine
Tools
|
$ | 199,238 | 88.9 | % | $ | 165,832 | 88.2 | % | $ | 33,406 | 20.1 | % | ||||||||||||
Service
Fees, Parts and
Other
|
24,756 | 11.1 | % | 22,215 | 11.8 | % | 2,541 | 11.4 | % | |||||||||||||||
Total
|
$ | 223,994 | 100.0 | % | $ | 188,047 | 100.0 | % | $ | 35,947 | 19.1 | % |
October
31,
|
Increase
|
|||||||||||||||||||||||
2007
|
2006
|
Amount
|
|
%
|
||||||||||||||||||||
North
America
|
$ | 52,133 | 27.7 | % | $ | 50,563 | 34.0 | % | $ | 1,570 | 3.1 | % | ||||||||||||
Europe
|
125,446 | 66.7 | % | 87,735 | 59.1 | % | 37,711 | 43.0 | % | |||||||||||||||
Asia
Pacific
|
10,468 | 5.6 | % | 10,219 | 6.9 | % | 249 | 2.4 | % | |||||||||||||||
Total
|
$ | 188,047 | 100.0 | % | $ | 148,517 | 100.0 | % | $ | 39,530 | 26.6 | % |
October
31,
|
Increase
|
|||||||||||||||||||||||
2007
|
2006
|
Amount
|
%
|
|||||||||||||||||||||
Computerized
Machine
Tools
|
$ | 165,832 | 88.2 | % | $ | 128,946 | 86.8 | % | $ | 36,886 | 28.6 | % | ||||||||||||
Service
Fees, Parts and
Other
|
22,215 | 11.8 | % | 19,571 | 13.2 | % | 2,644 | 13.5 | % | |||||||||||||||
Total
|
$ | 188,047 | 100.0 | % | $ | 148,517 | 100.0 | % | $ | 39,530 | 26.6 | % |
Payments
Due by Period
|
||||||||||||||||||||
Total
|
Less
than
1
Year
|
1-3
Years
|
3-5
Years
|
More
than 5
Years
|
||||||||||||||||
Operating
Leases
|
$ | 6,500 | $ | 2,533 | $ | 2,410 | $ | 1,017 | $ | 540 | ||||||||||
Deferred
Credits and Other
|
782 | -- | -- | -- | 782 | |||||||||||||||
Total
|
$ | 7,282 | $ | 2,533 | $ | 2,410 | $ | 1,017 | $ | 1,332 |
Contract
Amount at
Forward
Rates in
U.S.
Dollars
|
|||||||||||||||||
Forward
Contracts
|
Notional
Amount
in
Foreign
Currency
|
Weighted
Avg.
Forward
Rate
|
Contract
Date
|
October
31,
2008
|
Maturity
Dates
|
||||||||||||
Sale
Contracts:
|
|||||||||||||||||
Euro
|
33,400,000 | $ | 1.5046 | $ | 52,252,730 | $ | 42,500,042 |
Nov
2008-Oct 2009
|
|||||||||
Sterling
|
4,215,000 | $ | 1.9247 | $ | 8,112,611 | $ | 6,756,793 |
Nov
2008-Oct 2009
|
|||||||||
Purchase
Contracts:
|
|||||||||||||||||
New
Taiwan Dollar
|
990,000,000 | 30.15 | * | $ | 32,834,950 | $ | 30,266,754 |
Nov
2008-Oct
2009
|
Contract
Amount at
Forward
Rates in
U.S.
Dollars
|
|||||||||||||||||
Forward
Contracts
|
Notional
Amount
in
Foreign
Currency
|
Weighted
Avg.
Forward
Rate
|
Contract
Date
|
October
31,
2008
|
Maturity
Dates
|
||||||||||||
Sale
Contracts:
|
|||||||||||||||||
Euro
|
18,403,269 | $ | 1.4094 | $ | 25,937,568 | $ | 23,437,198 |
Nov
2008-Mar 2009
|
|||||||||
Singapore
Dollar
|
1,116,718 | $ | 1.4139 | $ | 789,814 | $ | 753,305 |
Nov
2008
|
|||||||||
Sterling
|
1,755,731 | $ | 1.6809 | $ | 2,951,168 | $ | 2,825,637 |
Nov
2008-Jan 2009
|
|||||||||
Purchase
Contracts:
|
|||||||||||||||||
New
Taiwan Dollar
|
94,155,000 | 32.36 | * | $ | 2,909,327 | $ | 2,852,891 |
Nov
2008
|
|
|
Contract
Amount at
Forward
Rates in
U.S. Dollars
|
|||||||||||||||
Forward
Contracts
|
Notional
Amount
in
Foreign
Currency
|
Weighted
Avg.
Forward
Rate
|
Contract
Date
|
October
31,
2008
|
Maturity
Date
|
||||||||||||
Sale
Contracts:
|
|||||||||||||||||
Euro
|
3,000,000 | $ | 1.4837 | $ | 4,451,100 | $ | 3,827,010 |
November
2008
|
Year
Ended October 31
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
(Dollars
in thousands, except per share amounts)
|
||||||||||||
Sales
and service
fees
|
$ | 223,994 | $ | 188,047 | $ | 148,517 | ||||||
Cost
of sales and
service
|
141,377 | 116,965 | 95,192 | |||||||||
Gross
profit
|
82,617 | 71,082 | 53,325 | |||||||||
Selling,
general and administrative
expenses
|
46,811 | 40,124 | 30,697 | |||||||||
Operating
income
|
35,806 | 30,958 | 22,628 | |||||||||
Interest
expense
|
63 | 201 | 359 | |||||||||
Interest
income
|
542 | 699 | 527 | |||||||||
Investment
income
|
465 | 339 | 9 | |||||||||
Earnings
from equity
investments
|
12 | 1,048 | 865 | |||||||||
Other
income (expense),
net
|
(2,596 | ) | (78 | ) | (556 | ) | ||||||
Income before income
taxes
|
34,166 | 32,765 | 23,114 | |||||||||
Provision
for income taxes (Note
7)
|
11,646 | 11,876 | 7,635 | |||||||||
Net
income
|
$ | 22,520 | $ | 20,889 | $ | 15,479 | ||||||
Earnings
per common share –
basic
|
$ | 3.51 | $ | 3.27 | $ | 2.45 | ||||||
Weighted
average common shares outstanding – basic
|
6,415 | 6,382 | 6,317 | |||||||||
Earnings
per common share –
diluted
|
$ | 3.49 | $ | 3.24 | $ | 2.42 | ||||||
Weighted
average common shares outstanding – diluted
|
6,444 | 6,440 | 6,397 |
As
of October 31
|
||||||||
2008
|
2007
|
|||||||
Current
assets:
|
(Dollars
in thousands, except per share amounts)
|
|||||||
Cash
and cash
equivalents
|
$ | 26,394 | $ | 29,760 | ||||
Short-term
investments
|
6,674 | 10,000 | ||||||
Accounts
receivable, less allowance for doubtful accounts of $678
in 2008 and $751 in
2007
|
31,952 | 28,625 | ||||||
Inventories
|
66,368 | 61,121 | ||||||
Deferred
tax assets,
net
|
5,444 | 8,258 | ||||||
Derivative
assets
|
12,463 | 485 | ||||||
Other
|
2,017 | 1,016 | ||||||
Total current
assets
|
151,312 | 139,265 | ||||||
Property
and equipment:
|
||||||||
Land
|
782 | 776 | ||||||
Building
|
7,127 | 7,135 | ||||||
Machinery and
equipment
|
14,885 | 13,629 | ||||||
Leasehold
improvements
|
1,765 | 1,473 | ||||||
24,559 | 23,013 | |||||||
Less accumulated depreciation and
amortization
|
(10,961 | ) | (11,617 | ) | ||||
13,598 | 11,396 | |||||||
Software
development costs, less accumulated amortization
|
5,711 | 5,960 | ||||||
Investments
and other
assets
|
6,823 | 7,160 | ||||||
$ | 177,444 | $ | 163,781 | |||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 26,691 | $ | 33,056 | ||||
Accounts payable-related
parties
|
1,612 | 2,430 | ||||||
Accrued expenses and
other
|
17,598 | 21,558 | ||||||
Accrued warranty
expenses
|
2,536 | 2,449 | ||||||
Derivative
liabilities
|
2,692 | 3,722 | ||||||
Total current
liabilities
|
51,129 | 63,215 | ||||||
Non-current
liabilities:
|
||||||||
Deferred
tax liability,
net
|
2,056 | 1,956 | ||||||
Deferred credits and
other
|
782 | 1,007 | ||||||
2,838 | 2,963 | |||||||
Commitments
and contingencies (Notes 11 and 12)
|
||||||||
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, 6,420,851 and 6,392,220 shares issued and outstanding
in 2008 and 2007, respectively
|
642 | 639 | ||||||
Additional paid-in
capital
|
51,690 | 50,971 | ||||||
Retained
earnings
|
71,889 | 49,369 | ||||||
Accumulated other comprehensive
loss
|
(744 | ) | (3,376 | ) | ||||
Total shareholders’
equity
|
123,477 | 97,603 | ||||||
$ | 177,444 | $ | 163,781 |
Year
Ended October 31
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Cash
flows from operating activities:
|
(Dollars
in thousands)
|
|||||||||||
Net
income
|
$ | 22,520 | $ | 20,889 | $ | 15,479 | ||||||
Adjustments
to reconcile net income to Net
cash provided by operating activities:
|
||||||||||||
Provision for doubtful
accounts
|
(73 | ) | 116 | (207 | ) | |||||||
Deferred Tax
Provision
|
1,048 | 1,216 | 491 | |||||||||
Equity in income of
affiliates
|
(12 | ) | (1,048 | ) | (865 | ) | ||||||
Depreciation and
amortization
|
3,023 | 2,106 | 1,504 | |||||||||
Stock-based
Compensation
|
535 | 480 | 17 | |||||||||
Change in
assets/liabilities
|
||||||||||||
(Increase) decrease in accounts
receivable
|
(6,260 | ) | (1,742 | ) | (1,312 | ) | ||||||
(Increase) decrease in
inventories
|
(11,832 | ) | (14,116 | ) | (12,726 | ) | ||||||
Increase (decrease) in accounts
payable
|
(7,649 | ) | 7,821 | 9,318 | ||||||||
Increase (decrease) in accrued
expenses
|
3,304 | 6,474 | 3,423 | |||||||||
Other
|
(4,443 | ) | (8,003 | ) | (1,076 | ) | ||||||
Net cash provided by operating
activities
|
161 | 14,193 | 14,046 | |||||||||
Cash
flows from investing activities:
|
||||||||||||
Proceeds from sale of property and
equipment
|
17 | -- | 16 | |||||||||
Purchase of property and
equipment
|
(4,580 | ) | (3,325 | ) | (1,212 | ) | ||||||
Purchase
of
investments
|
(9,100 | ) | (24,000 | ) | -- | |||||||
Sale
of
investments
|
12,100 | 14,000 | -- | |||||||||
Software development
costs
|
(934 | ) | (1,185 | ) | (2,089 | ) | ||||||
Other proceeds
(investments)
|
(80 | ) | 1,898 | (335 | ) | |||||||
Net cash used for investing
activities
|
(2,577 | ) | (12,612 | ) | (3,620 | ) | ||||||
Cash
flows from financing activities:
|
||||||||||||
Repayment
of first
mortgage
|
-- | (4,010 | ) | (126 | ) | |||||||
Tax
benefit from exercise of stock options
|
36 | 298 | 744 | |||||||||
Proceeds
from exercise of common stock options
|
151 | 186 | 562 | |||||||||
Net cash provided by (used for)
financing activities
|
187 | (3,526 | ) | 1,180 | ||||||||
Effect
of exchange rate changes on
cash
|
(1,137 | ) | 1,859 | 681 | ||||||||
Net increase (decrease) in
cash
|
(3,366 | ) | (86 | ) | 12,287 | |||||||
Cash
and cash equivalents at beginning of year
|
29,760 | 29,846 | 17,559 | |||||||||
Cash
and cash equivalents at end of
year
|
$ | 26,394 | $ | 29,760 | $ | 29,846 | ||||||
Supplemental
disclosures:
|
||||||||||||
Cash paid
for:
|
||||||||||||
Interest
|
$ | 12 | $ | 157 | $ | 314 | ||||||
Income
taxes
|
$ | 15,799 | $ | 9,971 | $ | 3,920 |
Common
Stock
|
Additional
|
Accumulated
Other
Comprehensive
|
||||||||||||||||||||||
(Dollars
in thousands, except Shares Issued and Outstanding)
|
Shares
Issued
&
Outstanding
|
Amount
|
Paid-In
Capital
|
Retained
Earnings
|
Income
(Loss)
|
Total
|
||||||||||||||||||
Balances,
October 31, 2005
|
6,220,220 | $ | 622 | $ | 48,701 | $ | 13,001 | $ | (3,380 | ) | $ | 58,944 | ||||||||||||
Net
income
|
-- | -- | -- | 15,479 | -- | 15,479 | ||||||||||||||||||
Translation
of foreign currency financial statements
|
-- | -- | -- | -- | 1,288 | ,288 | ||||||||||||||||||
Unrealized
loss of derivative instruments, net of tax
|
-- | -- | -- | -- | (1,659 | ) | (1,659 | ) | ||||||||||||||||
Comprehensive
income
|
15,108 | |||||||||||||||||||||||
Exercise
of common stock options
|
126,300 | 13 | 549 | -- | -- | 562 | ||||||||||||||||||
Tax
benefit from exercise of stock options
|
-- | -- | 744 | -- | -- | 744 | ||||||||||||||||||
Stock-based
compensation expense
|
-- | -- | 17 | -- | -- | 17 | ||||||||||||||||||
Balances,
October 31, 2006
|
6,346,520 | 635 | 50,011 | 28,480 | (3,751 | ) | 75,375 | |||||||||||||||||
Net
income
|
-- | -- | -- | 20,889 | -- | 20,889 | ||||||||||||||||||
Translation
of foreign currency financial statements
|
-- | -- | -- | -- | 2,568 | 2,568 | ||||||||||||||||||
Unrealized
loss of derivative instruments, net of tax
|
-- | -- | -- | -- | (2,193 | ) | (2,193 | ) | ||||||||||||||||
Comprehensive
income
|
21,264 | |||||||||||||||||||||||
Exercise
of common stock options
|
45,700 | 4 | 182 | -- | -- | 186 | ||||||||||||||||||
Tax
benefit from exercise of stock options
|
-- | -- | 298 | -- | -- | 298 | ||||||||||||||||||
Stock-based
compensation expense
|
-- | -- | 480 | -- | -- | 480 | ||||||||||||||||||
Balances,
October 31, 2007
|
6,392,220 | 639 | $ | 50,971 | 49,369 | (3,376 | ) | 97,603 | ||||||||||||||||
Net
income
|
-- | -- | -- | 22,520 | -- | 22,520 | ||||||||||||||||||
Translation
of foreign currency financial statements
|
-- | -- | -- | -- | (3,747 | ) | (3,747 | ) | ||||||||||||||||
Unrealized
gain of derivative instruments, net of tax
|
-- | -- | -- | -- | 6,581 | 6,581 | ||||||||||||||||||
Unrealized
loss on investments, net of tax
|
-- | -- | -- | -- | (202 | ) | (202 | ) | ||||||||||||||||
Comprehensive
income
|
25,152 | |||||||||||||||||||||||
Exercise
of common stock options
|
28,631 | 3 | 148 | -- | -- | 151 | ||||||||||||||||||
Tax
benefit from exercise of stock options
|
-- | -- | 36 | -- | -- | 36 | ||||||||||||||||||
Stock-based
compensation expense
|
-- | -- | 535 | -- | -- | 535 | ||||||||||||||||||
Balances,
October 31, 2008
|
6,420,851 | $ | 642 | $ | 51,690 | $ | 71,889 | $ | (744 | ) | $ | 123,477 |
Number of Years
|
|
Building
|
40
|
Machines
|
7-10
|
Shop
and office equipment
|
3-7
|
Leasehold
improvements
|
3-40
|
Fiscal Year
|
Amortization
Expense
|
|||
2009
|
$ | 1,211 | ||
2010
|
1,102 | |||
2011
|
1,102 | |||
2012
|
651 | |||
2013
|
28 |
2008
|
2007
|
|||||||
Purchased
parts and sub assemblies
|
$ | 13,098 | $ | 10,956 | ||||
Work-in-process
|
11,243 | 11,692 | ||||||
Finished
goods
|
42,027 | 38,473 | ||||||
$ | 66,368 | $ | 61,121 |
Year
Ended October 31
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Current:
|
||||||||||||
U.S. taxes
|
$ | 8,768 | $ | 9,290 | $ | 5,359 | ||||||
Foreign taxes
|
3,926 | 3,802 | 2,767 | |||||||||
12,694 | 13,092 | 8,126 | ||||||||||
Deferred:
|
||||||||||||
U.S. taxes
|
(1,163 | ) | (1,657 | ) | (787 | ) | ||||||
Foreign taxes
|
115 | 441 | 296 | |||||||||
(1,048 | ) | (1,216 | ) | (491 | ) | |||||||
$ | 11,646 | $ | 11,876 | $ | 7,635 |
Income
before income taxes (in thousands):
|
Year
Ended October 31
|
|||||||||||
2008
|
2007
|
2006
|
||||||||||
Domestic
|
$ | 20,856 | $ | 20,463 | $ | 13,688 | ||||||
Foreign
|
$ | 13,310 | $ | 12,302 | $ | 9,426 | ||||||
Earnings
before taxes on income
|
$ | 34,166 | $ | 32,765 | $ | 23,114 | ||||||
Tax rates: | ||||||||||||
U.S.
statutory rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
Effect
of tax rate of international jurisdictions In excess of (less than) U.S.
statutory rates
|
(1.9 | )% | 0.1 | % | (0.2 | )% | ||||||
State
income taxes
|
1.9 | % | 2.4 | % | 3.8 | % | ||||||
Permanent
items
|
0.1 | % | 0.8 | % | (2.7 | )% | ||||||
All
other
|
(1.0 | )% | (2.1 | )% | (1.9 | )% | ||||||
Effective
tax rate
|
34.1 | % | 36.2 | % | 34.0 | % |
October
31
|
||||||||
2008
|
2007
|
|||||||
Deferred
Tax Assets:
|
||||||||
Current:
|
||||||||
Inter-company profit in
inventory
|
$ | 5,575 | $ | 5,176 | ||||
Derivative
liabilities(assets)
|
(2,477 | ) | 1,451 | |||||
Accrued inventory
reserves
|
1,070 | 991 | ||||||
Accrued warranty
expenses
|
148 | 158 | ||||||
Deferred
compensation
|
264 | 214 | ||||||
Other accrued
expenses
|
864 | 280 | ||||||
Other
|
- | (12 | ) | |||||
Current deferred tax assets,
net
|
5,444 | 8,258 | ||||||
Deferred Tax Liabilities: | ||||||||
Non-current:
|
||||||||
Depreciation and
amortization
|
(2,717 | ) | (2,730 | ) | ||||
Other
|
661 | 774 | ||||||
Non-current
deferred tax liabilities, net
|
(2,056 | ) | (1,956 | ) | ||||
Net
deferred tax assets
|
$ | 3,388 | $ | 6,302 |
Balance,
at November 1, 2007
|
$ | 576 | |||
Additions
based on tax positions related to the current year
|
- | ||||
Additions
for tax positions of prior years
|
40 | ||||
Reduction
for tax positions of prior years
|
- | ||||
Settlements
|
- | ||||
Reductions
due to statute expiration
|
(3 | ) | |||
Balance,
at October 31, 2008
|
$ | 613 |
United
States federal
|
Fiscal
2005 through the current period
|
Indiana
|
Fiscal
2005 through the current period
|
California
|
Fiscal
2004 through the current period
|
Germany¹
|
Fiscal
2004 through the current period
|
Taiwan
|
Fiscal
2003 through the current
period
|
Shares
Under
Option
|
Weighted
Average
Exercise
Price Per Share
|
|||||||
Balance
October 31, 2005
|
215,400 | $ | 3.63 | |||||
Granted
|
-- | -- | ||||||
Cancelled
|
-- | -- | ||||||
Expired
|
(400 | ) | 2.15 | |||||
Exercised
|
(126,300 | ) | $ | 4.45 | ||||
Balance
October 31, 2006
|
88,700 | $ | 2.46 | |||||
Granted
|
40,000 | 26.69 | ||||||
Cancelled
|
-- | -- | ||||||
Expired
|
-- | -- | ||||||
Exercised
|
(45,700 | ) | $ | 4.08 | ||||
Balance
October 31, 2007
|
83,000 | $ | 13.24 | |||||
Granted
|
10,000 | 35.83 | ||||||
Cancelled
|
-- | -- | ||||||
Expired
|
-- | -- | ||||||
Exercised
|
(28,631 | ) | $ | 5.26 | ||||
Balance
October 31, 2008
|
64,369 | $ | 20.29 |
Range
of Exercise
Prices
Per Share
|
Shares
Under
Option
|
Weighted
Average
Exercise
Price
Per
Share
|
Weighted
Average
Remaining
Contractual
Life
in Years
|
|||||||||||
Outstanding
|
||||||||||||||
$ |
2.13
– 5.13
|
20,500 | $ | 2.15 | 3.1 | |||||||||
5.81
– 8.25
|
|
-- | -- | -- | ||||||||||
26.69
|
|
33,869 | $ | 26.69 | 8.0 | |||||||||
35.83
|
|
10,000 | $ | 35.83 | 9.6 | |||||||||
$ |
2.13
– 35.83
|
|
64,369 | $ | 20.29 | 6.7 | ||||||||
Exercisable
|
|
|||||||||||||
$ |
2.13
– 5.13
|
|
20,500 | $ | 2.15 | -- | ||||||||
5.81
– 8.25
|
|
-- | -- | -- | ||||||||||
26.69
|
|
13,869 | $ | 26.69 | -- | |||||||||
35.83
|
10,000 | $ | 35.83 | -- | ||||||||||
$ |
2.13
– 26.69
|
44,369 | $ | 17.41 | -- |
(in
thousands)
|
2008
|
2007
(1)
|
2006
|
|||||||||
Net
Sales
|
$ | 11,935 | $ | 58,053 | $ | 58,286 | ||||||
Gross
Profit
|
1,883 | 10,061 | 10,932 | |||||||||
Operating
Income
|
159 | 3,757 | 4,209 | |||||||||
Net
Income
|
147 | 3,467 | 3,727 | |||||||||
Current
Assets
|
$ | 8,658 | $ | 36,945 | $ | 27,903 | ||||||
Non-current
Assets
|
2,195 | 10,636 | 7,684 | |||||||||
Current
Liabilities
|
3,176 | 18,785 | 20,156 |
10/31/08
|
10/31/07
|
|||||||
Balance,
beginning of period
|
$ | 2,449 | $ | 1,926 | ||||
Provision
for warranties during the period
|
2,944 | 2,459 | ||||||
Charges
to the accrual
|
(2,666 | ) | (2,087 | ) | ||||
Impact
of foreign currency translation
|
(189 | ) | 151 | |||||
Balance,
end of period
|
$ | 2,536 | $ | 2,449 |
2009
|
$ | 2,533 | ||
2010
|
1,483 | |||
2011
|
927 | |||
2012
|
575 | |||
2013 | 442 | |||
Thereafter
|
540 | |||
Total
|
$ | 6,500 |
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
|||||||||||||
2008 (In thousands, except per share
data)
|
||||||||||||||||
Sales
and service
fees
|
$ | 60,923 | $ | 58,285 | $ | 57,318 | $ | 47,468 | ||||||||
Gross
profit
|
24,857 | 20,331 | 20,879 | 16,550 | ||||||||||||
Gross
profit
margin
|
40.8 | % | 34.9 | % | 36.4 | % | 34.9 | % | ||||||||
Selling,
general and administrative expenses
|
12,376 | 11,676 | 11,829 | 10,930 | ||||||||||||
Operating
income
|
12,481 | 8,655 | 9,050 | 5,620 | ||||||||||||
Provision
for income
taxes
|
4,522 | 3,054 | 2,954 | 1,116 | ||||||||||||
Net
income
|
7,805 | 5,467 | 5,826 | 3,422 | ||||||||||||
Income
per common share – basic
|
$ | 1.22 | $ | 0.85 | $ | 0.91 | $ | 0.51 | ||||||||
Income
per common share – diluted
|
$ | 1.21 | $ | 0.85 | $ | 0.90 | $ | 0.50 | ||||||||
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
|||||||||||||
2007 (In thousands, except per share
data)
|
||||||||||||||||
Sales
and service
fees
|
$ | 46,878 | $ | 42,494 | $ | 48,555 | $ | 50,120 | ||||||||
Gross
profit
|
17,324 | 16,349 | 18,417 | 18,992 | ||||||||||||
Gross
profit
margin
|
37.0 | % | 38.5 | % | 37.9 | % | 37.9 | % | ||||||||
Selling,
general and administrative expenses
|
9,250 | 9,405 | 10,228 | 11,241 | ||||||||||||
Operating
income
|
8,074 | 6,944 | 8,189 | 7,751 | ||||||||||||
Provision
for income
taxes
|
2,998 | 2,764 | 3,659 | 2,455 | ||||||||||||
Net
income
|
5,395 | 4,680 | 5,163 | 5,651 | ||||||||||||
Income
per common share – basic
|
$ | 0.85 | $ | 0.73 | $ | 0.81 | $ | 0.88 | ||||||||
Income
per common share – diluted
|
$ | 0.84 | $ | 0.73 | $ | 0.80 | $ | 0.88 |
Net
Sales and Service Fees by Product Category
|
Year
ended October 31,
|
|||||||||||
2008
|
2007
|
2006
|
||||||||||
Computerized
Machine
Tools
|
$ | 199,238 | $ | 165,832 | $ | 128,946 | ||||||
Computer
Control Systems and Software *
|
5,677 | 5,291 | 4,694 | |||||||||
Service
Parts
|
13,240 | 12,096 | 10,494 | |||||||||
Service
Fees
|
5,838 | 4,828 | 4,383 | |||||||||
Total
|
$ | 223,994 | $ | 188,047 | $ | 148,517 |
Revenues
by Geographic Area
|
Year
Ended October 31
|
|||||||||||
2008
|
2007
|
2006
|
||||||||||
North
America
|
$ | 48,087 | $ | 50,010 | $ | 48,711 | ||||||
Germany
|
81,945 | 58,860 | 39,764 | |||||||||
United
Kingdom
|
20,877 | 19,326 | 16,089 | |||||||||
France
|
13,412 | 11,019 | 9,107 | |||||||||
Other
Europe
|
46,531 | 35,245 | 22,113 | |||||||||
Total Europe
|
162,765 | 124,450 | 87,073 | |||||||||
Asia
|
11,816 | 12,493 | 11,866 | |||||||||
Other
Foreign
|
1,326 | 1,094 | 867 | |||||||||
Total Foreign
|
175,907 | 138,037 | 99,806 | |||||||||
$ | 223,994 | $ | 188,047 | $ | 148,517 |
As
of October 31
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
United
States
|
$ | 8,421 | $ | 7,795 | $ | 8,308 | ||||||
Foreign
countries
|
6,996 | 5,489 | 2,934 | |||||||||
$ | 15,417 | $ | 13,284 | $ | 11,242 |
10/03
|
10/04
|
10/05
|
10/06
|
10/07
|
10/08
|
||
Hurco
Companies, Inc.
|
100.00
|
557.59
|
693.77
|
1014.01
|
2221.79
|
875.49
|
|
Russell
2000
|
100.00
|
111.73
|
125.23
|
150.25
|
164.18
|
108.09
|
|
Peer
Group - SIC Codes 3540-3549
|
100.00
|
159.75
|
170.26
|
177.47
|
220.27
|
116.68
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights (a) (#)
|
Weighted-average
exercise price of outstanding options, warrants and rights (b)
($)
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column (a)) (c)
(#)
|
|||
Equity
compensation plans approved by security holders
|
64,369
|
$20.29
|
740,000
|
|||
Equity
compensation plans not approved by security holders
|
--
|
--
|
--
|
|||
Total
|
64,369
|
$20.29
|
740,000
|
(a)
|
1.
|
Financial
Statements. The following consolidated financial
statements of Registrant are included herein under Item 8 of Part
II:
|
||
Page
|
||||
Report
of Independent Registered Public Accounting Firm – Crowe Horwath
LLP
|
27
|
|||
Consolidated
Statements of Income – years ended October
31, 2008, 2007 and 2006
|
29
|
|||
Consolidated
Balance Sheets – as of October 31, 2008 and 2007
|
30
|
|||
Consolidated
Statements of Cash Flows – years ended
October 31, 2008, 2007 and 2006
|
31
|
|||
Consolidated
Statements of Changes in Shareholders’ Equity – years
ended October 31, 2008, 2007 and 2006
|
32
|
|||
Notes
to Consolidated Financial Statements
|
33
|
2.
|
Financial Statement
Schedule. The following financial statement schedule is
included in this Item.
|
|||
Page
|
||||
Schedule
II - Valuation and Qualifying Accounts
and
Reserves
|
53
|
All
other financial statement schedules are omitted because they are not
applicable or the required information is included in the consolidated
financial statements or notes thereto.
|
||||
(b)
|
Exhibits
|
|||
Exhibits
being filed with this Form 10-K or incorporated herein by reference are
listed on page 54.
|
Description
|
Balance
at
Beginning
of
Period
|
Charged
to
Costs
and
Expenses
|
Charged
To
Other
Accounts
|
Deductions
|
Balance
At
End
Of
Period
|
||||||||||||||||||
Allowance
for doubtful Accounts
for the year ended:
|
|||||||||||||||||||||||
October
31,
2008
|
$ | 751 | $ | (42 | ) | -- | $ | 31 | (1) | $ | 678 | ||||||||||||
October
31,
2007
|
$ | 635 | $ | 128 | -- | $ | 12 | (2) | $ | 751 | |||||||||||||
October
31,
2006
|
$ | 842 | $ | (227 | ) | -- | $ | (20 | ) | (3) | $ | 635 | |||||||||||
Accrued
warranty expenses For
the year ended:
|
|||||||||||||||||||||||
October
31,
2008
|
$ | 2,449 | $ | 2,755 | -- | $ | 2,666 | $ | 2,536 | ||||||||||||||
October
31,
2007
|
$ | 1,926 | $ | 2,610 | -- | $ | 2,087 | $ | 2,449 | ||||||||||||||
October
31,
2006
|
$ | 1,618 | $ | 2,201 | -- | $ | 1,893 | $ | 1,926 |
10.1*
|
Summary
compensation table.
|
10.2*
|
Form
of restated split-dollar insurance agreement
|
11
|
Statement
re: computation of per share earnings.
|
21
|
Subsidiaries
of the Registrant.
|
23.1
|
Consent
of Independent Registered Public Accounting Firm, Crowe Horwath
LLP
|
31.1
|
Certification
by the Chief Executive Officer, pursuant to Rule 13a-15(b) under the
Securities and Exchange Act of 1934, as amended.
|
31.2
|
Certification
by the Chief Financial Officer, pursuant to Rule 13a-15(b) under the
Securities and Exchange Act of 1934, as amended.
|
32.1
|
Certification
by the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification
by the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
3.1
|
Amended
and Restated Articles of Incorporation of the Registrant, incorporated by
reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended July 31, 2000.
|
3.2
|
Amended
and Restated By-Laws of the Registrant as amended through September 27,
2006, incorporated by reference to Exhibit 3.1 to the Registrant’s Current
Report on Form 8-K filed on September 27, 2006.
|
10.2
|
Credit
Agreement dated as of December 7, 2007, between Hurco Companies, Inc. And
JP Morgan Chase Bank, N.A. incorporated by reference to Exhibit 10.1 to
the Registrant’s Current Report on Form 8-K filed December 12,
2007.
|
10.3*
|
Employment
Agreement between the Registrant and John G. Oblazney dated January 12,
2007, incorporated by reference to Exhibit 10.1 to the Registrant’s Annual
Report on Form 10-K for the year ended October 31,
2006.
|
10.4*
|
Employment
Agreement between the Registrant and James D. Fabris dated November 18,
1997, incorporated by reference as Exhibit 10.15 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended January 31,
1998.
|
10.5*
|
Employment
Agreement between the Registrant and Michael Doar dated November 13, 2001,
incorporated by reference as Exhibit 10.2 to the Registrant’s Quarterly
Report on Form 10-Q for the quarter ended January 31,
2002.
|
10.6*
|
Amended
1997 Stock Option and Incentive Plan incorporated by reference as Exhibit
10 to the Registrant’s Quarterly Report on Form 10-Q filed for the quarter
ended July 31, 2005.
|
10.7
|
Hurco
Companies, Inc. 2008 Equity Incentive Plan incorporated by reference to
Appendix A of the Registrant’s definitive Proxy Statement on Schedule 14A
filed January 28, 2008.
|
*
|
The
indicated exhibit is a management contract, compensatory plan or
arrangement required to be listed by Item 601 of Regulation
S-K.
|
HURCO COMPANIES, INC. | |||
|
By:
|
/s/ John G. Oblazney | |
John G. Oblazney | |||
Vice-President, Secretary, Treasurer and Chief Financial Officer | |||
Signature and Title(s)
|
Date
|
|
/s/ Michael Doar
|
January
12, 2009
|
|
Michael
Doar, Chairman of the Board,
|
||
Chief
Executive Officer and Director
|
||
of
Hurco Companies, Inc.
|
||
(Principal
Executive Officer)
|
||
/s/ John G.
Oblazney
|
January
12, 2009
|
|
John
G. Oblazney
|
||
Vice-President,
|
||
Secretary,
Treasurer and
|
||
Chief
Financial Officer
|
||
of
Hurco Companies, Inc.
|
||
(Principal
Financial Officer)
|
||
/s/ Sonja
K. McClelland
|
January
12, 2009
|
|
Sonja
K. McClelland
|
||
Corporate
Controller, Assistant Secretary
|
||
of
Hurco Companies, Inc.
|
||
(Principal
Accounting Officer)
|
/s/ Stephen H. Cooper
|
January
12, 2009
|
|
Stephen
H. Cooper, Director
|
||
/s/ Robert W. Cruickshank
|
January
12, 2009
|
|
Robert
W. Cruickshank, Director
|
||
/s/ Philip James
|
January
12, 2009
|
|
Philip
James, Director
|
||
/s/ Michael P. Mazza
|
||
Michael
P. Mazza, Director
|
January
12, 2009
|
|
/s/ Richard T. Niner
|
January
12, 2009
|
|
Richard
T. Niner, Director
|
||
/s/ Charlie Rentschler
|
January
12, 2009
|
|
Charlie
Rentschler, Director
|
||
/s/ Janaki Sivanesan
|
January
12, 2009
|
|
Janaki
Sivanesan, Director
|
||
|
·
|
Audit
Committee Chair - $5,000 per fiscal
quarter.
|
|
·
|
All
other Committee Chairs - $2,500 per fiscal
quarter.
|
|
·
|
Audit
Committee Members - $2,500 per fiscal
quarter
|
Michael
Doar
Chairman
and Chief Executive Officer
|
$375,000
|
John
G. Oblazney
Secretary,
Treasurer and Chief
Financial Officer
|
$185,000
|
James
D. Fabris
President
and Chief Operating Officer
|
$335,000
|
Sonja
K. McClelland
Corporate
Controller and Assistant
Secretary
|
$130,000
|
Michael
Doar
Chairman
and Chief Executive Officer
|
$
670,000
|
John
G. Oblazney
Secretary,
Treasurer and Chief
Financial Officer
|
$ 100,000
|
James
D. Fabris
President
and Chief Operating Officer
|
$
600,000
|
Sonja
K. McClelland
Corporate
Controller and Assistant
Secretary
|
$ 90,000
|
A.
|
The
Employee is a valued employee of the Employer, and the Employer wishes to
retain him in its employ.
|
B.
|
The
Employer, as an inducement to such continued employment, has determined to
assist the Employee with his personal life insurance
program.
|
C.
|
Prior
to the execution of this restated agreement, the Employer has been
operating a split-dollar insurance program pursuant to which it became the
owner of certain life insurance policies (the "Policies") issued by The
Northwestern Mutual Life Insurance Company on the life of the Employee,
naming the Employer as an insured party and providing the Employee with
the right to designate the beneficiary for a portion of the life insurance
proceeds and certain other
rights.
|
D.
|
The
Employer and the Employee now wish to amend and restate the terms of the
program by entering into this Restated Split-Dollar Insurance Agreement
(the "Restated Agreement").
|
1.
|
The
Employer will continue to be the sole owner of the
Policies.
|
2.
|
In
the event of the Employee's death, the beneficiaries of the Policies shall
have the following interests in the proceeds of the
Policies:
|
|
(a)
|
The
Employer shall be the direct beneficiary of the Policies to the extent of
(i) the total premium advances paid to the Insurer, plus (ii) the
Employer's other cash payments to or on behalf of the Employee related to
the Policies, less (iii) the outstanding indebtedness on the Policies
("Primary Interest").
|
|
(b)
|
If
the proceeds of the Policies exceed the amount of the Primary Interest,
the Employee's designated beneficiaries shall be the direct beneficiaries
of the remaining proceeds to the extent of 200% of the Employee's annual
compensation rate at his date of death, plus 100% of the Employee's most
recently received bonus as of his date of death ("Secondary
Interest").
|
|
(c)
|
If
the proceeds of the Policies exceed the sum of the Primary Interest and
the Secondary Interest, the Employer shall be the direct beneficiary of
any remaining proceeds.
|
3.
|
The
Employee shall have the right to designate and change direct and
contingent beneficiaries of the Secondary Interest and to elect and change
a payment plan for such beneficiaries with respect to the Secondary
Interest.
|
4.
|
The
Employer shall pay all premiums on the Policies as they become
due.
|
5.
|
Policy
dividends shall be applied to purchase paid-up additional insurance
protection.
|
6.
|
The
Employer shall not sell, surrender, change the insured, or transfer
ownership of the Policies while this Restated Agreement is in
effect.
|
7.
|
In
the event of the Employee's termination for any reason other than death,
the Restated Agreement shall terminate, and the Employee shall have the
option, for a period of 60 days, to purchase the Policies by paying the
Employer in cash an amount equal to the Primary Interest. The
60-day purchase period will begin six months following the Employee's
termination date. If the Employee does not purchase a Policy
pursuant to this Section, the Employer may sell, surrender, change the
insured, or transfer ownership of the Policy, and the Employee shall
forfeit all rights under the
Policy.
|
8.
|
The
Restated Agreement shall terminate automatically with respect to the
Policies at the end of the 15th policy year of the first-issued
Policy. In that event, the Employee shall have the option, for
60 days following the Restated Agreement's termination date, to purchase
the Policies by paying the Employer in cash an amount equal to the Primary
Interest. If the Employee does not purchase a Policy pursuant
to this Section, the Employer may sell, surrender, change the insured, or
transfer ownership of the Policy, and the Employee shall forfeit all
rights under the Policy.
|
9.
|
The
Insurer shall be bound only by the provisions of the Policies and any
endorsements, and any payments made or action taken by it in accordance
with the Policies and any endorsements shall fully discharge it from all
claims, suits and demands of all persons whatsoever. It shall
in no way be bound by or be deemed to have notice of the provisions of
this Restated Agreement.
|
10.
|
The
Employee shall have the right to assign any part or all of the Employee's
interest in the Policies and this Restated Agreement to any person, trust,
or other entity by execution of a written assignment delivered to the
Employer and to the Insurer.
|
11.
|
Subject
to Section 13, the Employer and Employee may amend this Restated Agreement
at any time by written amendment signed by the Employer and
Employee
|
12.
|
This
Restated Agreement shall bind and inure to the benefit of the Employer and
its successors and assigns; the Employee and his heirs, executors,
administrators and assigns; and any beneficiary of the
Policies.
|
13.
|
This
Restated Agreement shall be interpreted and applied in a manner consistent
with the applicable standards for nonqualified deferred compensation plans
established by Internal Code Section 409A and its interpretive regulations
and other regulatory guidance. To the extent that any terms of
this Restated Agreement would subject the Employee to gross income
inclusion, interest, or additional tax pursuant to Code Section 409A,
those terms are to that extent superseded by, and shall be adjusted to the
minimum extent necessary to satisfy, the applicable Code Section 409A
standards.
|
14.
|
The
following provisions are part of this Restated Agreement and are intended
to meet the requirements of the Employee Retirement Income Security Act of
1974 with respect to the benefit plan ("Plan") established by this
Restated Agreement:
|
|
(a)
|
The
named fiduciary shall be the
Employer.
|
|
(b)
|
The
funding policy under this Plan is that all premiums on the Policies be
remitted to the Insurer when due.
|
|
(c)
|
Direct
payment by the insurer is the basis of payment of benefits under this
Plan, with those benefits in turn being based on the payment of premiums
as provided in the Plan.
|
|
(d)
|
For
claims procedure purposes, the "Claims Manager" shall be the
Employer.
|
|
(1)
|
The
Employee may claim Plan benefits by filing a written application with the
Claims Manager. The Claims Manager will notify the claimant of
its decision within 90 days of the date the claim is filed. If
special circumstances require an extension of time, the Claims Manager may
extend the period for up to 90 days by notifying the claimant of the
extension in writing, the reason for the extension, and the expected
decision date.
|
|
(2)
|
If
a claim for Plan benefits is denied, the Claims Manager will deliver to
the claimant a written explanation setting forth the specific reasons for
the denial; references to the specific Plan provisions on which the denial
is based; a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why
such material or information is necessary; and a description of the Plan's
review procedures and the claimant's right to bring a civil action in
federal court following any denial of the claim on
review.
|
|
(3)
|
The
claimant shall have 60 days following receipt of the claim denial to file
with the Claims Manager a written request, signed by the claimant or his
authorized representative, for review of the denial. For such
review, the claimant or his representative may submit written comments,
documents, records, and other information relating to the
claim. In addition, the claimant may, upon request and free of
charge, have reasonable access to and copies of all documents, records,
and other information relevant to the
claim.
|
|
(4)
|
In
completing the review, the Claims Manager will take into account all
submitted information, without regard to whether it was submitted as part
of the initial claim. Within 60 days of the request for review,
the Claims Manager will decide the issue on review and notify the
claimant. If special circumstances require an extension of
time, the Claims Manager may extend the period for up to 60 days by
notifying claimant of the extension in writing, the reason for the
extension, and the expected decision
date.
|
|
(5)
|
If
the claim in denied on review, the Claims Manager will notify the claimant
of the decision in writing and will include specific reasons for the
denial; specific references to the pertinent Plan provisions on which the
denial is based; a description of the claimant's right to receive, upon
request and free of charge, reasonable access to and copies of all
documents, records, and other information relevant to the claim; and an
explanation of the claimant's right to bring a civil action in federal
court.
|
HURCO
COMPANIES, INC.
by
_______________________________
Signature
_______________________________
Title
EMPLOYEE
__________________________________
Signature
|
Three
Months Ended
|
Twelve
Months Ended
|
|||||||||||||||||||||||||||||||
October
31,
|
October
31,
|
|||||||||||||||||||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||||||||||||||||||
(in
thousands, except per share amount)
|
||||||||||||||||||||||||||||||||
Basic
|
Diluted
|
Basic
|
Diluted
|
Basic
|
Diluted
|
Basic
|
Diluted
|
|||||||||||||||||||||||||
Net
income
|
$ | 3,422 | $ | 5,648 | $ | 5,648 | $ | 5,648 | $ | 20,520 | $ | 20,520 | $ | 20,889 | $ | 20,889 | ||||||||||||||||
Weighted
average shares outstanding
|
6,415 | 6,415 | 6,382 | 6,382 | 6,415 | 6,415 | 6,382 | 6,382 | ||||||||||||||||||||||||
Assumed
issuances under stock options plans
|
-- | 21 | -- | 63 | -- | 29 | -- | 58 | ||||||||||||||||||||||||
6,415 | 6,436 | 6,382 | 6,445 | 6,415 | 6,444 | 6,382 | 6,440 | |||||||||||||||||||||||||
Income
per common share
|
$ | .53 | $ | .53 | $ | .88 | $ | .88 | $ | 3.51 | $ | 3.49 | $ | 3.27 | $ | 3.24 |
Jurisdiction
|
|
Name
|
Of Incorporation
|
Hurco
B.V.
|
the
Netherlands
|
Hurco
Europe Limited
|
United
Kingdom
|
Hurco
GmbH
|
Federal
Republic of Germany
|
Hurco
Manufacturing Ltd.
|
Taiwan
R.O.C.
|
Hurco
S.a.r.l.
|
France
|
Hurco
S.r.l.
|
Italy
|
Hurco
(S.E. Asia) Pte Ltd.
|
Singapore
|
|
1.
|
I
have reviewed this annual report on Form 10-K of Hurco Companies,
Inc.;
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures [as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] and internal
control over financial reporting [as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)] for the registrant and
have:
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
(b)
|
Designed
such internal control over financing reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with U.S. Generally Accepted Accounting
Principles.
|
|
(c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
(d)
|
Disclosed
in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
|
|
5.
|
The
registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent
functions):
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
/s/ Michael
Doar
|
Michael
Doar,
|
|
I,
John G. Oblazney, certify that:
|
|
1.
|
I
have reviewed this annual report on Form 10-K of Hurco Companies,
Inc.;
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
4.
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures [as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)] and internal
control over financial reporting [as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)] for the registrant and
have:
|
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
(b)
|
Designed
such internal control over financing reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with U.S. Generally Accepted Accounting
Principles.
|
|
(c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
|
(d)
|
Disclosed
in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
|
|
5.
|
The
registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent
functions):
|
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
|
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
|
/s/ John
G.
Oblazney
|
John
G. Oblazney
|
(1)
|
The
Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934;
and
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
|
(1)
|
The
Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934;
and
|
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|