Hurco Companies, Inc., Indianapolis, IN, announced that, in light of a significant decline in machine tool consumption in the U.S and early indications of a coming decline in Europe, it is implementing a comprehensive program to reduce costs and product inventories.
The most significant element of the program is a restructuring of the company's U.S. operations, which will involve a nearly 20% reduction in its domestic workforce and generate an annual cost savings of approximately $3.2 million. The company has set aside a reserve for severance costs of approximately $360,000 that will be a charge to results for its third fiscal quarter, which ends July 31. As a result of the decline in domestic demand, continued weakness of the Euro relative to the U.S. dollar and the reserve for severance costs, the company expects to report a loss for that quarter when it announces its quarterly results in August.
The company stated that, for the four months ended May 31, U.S. machine tool consumption declined approximately 40% compared to the corresponding period in 2000, with a nearly equal decrease in Hurco's U.S. orders for its computerized machine system products, resulting in an increase in its inventories of finished products and its outstanding bank borrowings. In order to adjust its inventory levels to the declining market demand and to reduce indebtedness, the company also announced it is reducing monthly production by its contract manufacturers and will be offering special sales promotions on several product models currently in inventory.
Brian McLaughlin, Hurco's president and CEO, commented that the decline in U.S. demand, which he had previously noted when Hurco reported its second quarter results in May, appears likely to continue at least through the balance of the company's current fiscal year, which ends Oct. 31.
In addition, McLaughlin observed that, although new orders in Europe had been quite strong during the first half of fiscal 2001, the company's European customers are beginning to defer purchasing decisions in response to forecasts of a softening European economy in 2002. 'The actions we are now taking are preemptive, and are intended not only to offset the impact of adverse market conditions but to enable Hurco to operate profitably and generate positive cash flow at lower sales levels,' McLaughlin said.
Hurco Companies, Inc. is an industrial automation company that produces interactive computer controls, software and computerized machine systems 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.
Products are sold through independent agents and distributors in the U.S., Europe and Asia. The company also has direct sales forces in the U.S., United Kingdom, Germany, France, Italy and Asia.