Hirsch International Reports 2008 Fourth Quarter and Full Year Results

Hirsch International Corp. (NASDAQ: HRSH, http://www.hirschinternational.com) today announced financial results for the fourth quarter and year ended December 31, 2008.

For the fourth quarter of 2008, net sales were $10.1 million, compared to $14.5 million in the fourth quarter of 2007. Net loss in the fourth quarter of 2008 was $3.3 million compared to a net income of $0.6 million in the prior year.

Gross profit for the fourth quarter of 2008 was $2.3 million, or 23% of net sales, compared to $5.2 million, or 36% of net sales, in the fourth quarter of 2007 and selling, general and administrative expenses were $4.7 million for both 2008 and 2007. Overall operating expenses for the fourth quarter of 2008 were $5.6 million as compared to $4.7 million in 2007 which, in 2008, included a non-cash impairment charge of $845,000 in U. S. Graphic Arts Inc.’s customer list.

For 2008, net sales were $42.5 million, compared to $52.6 million in 2007. The Company reported a net loss of $6.9 million, or $0.73 per diluted share, for 2008, as compared to net income for 2007 of $2.1 million, or $0.22 per diluted share. The twelve month results include sales of U.S. Graphic’s of $4.2 million with a net loss of $2.3 million or $0.24 per diluted share. U.S. Graphics was acquired on August 4, 2008.

Management Comment

Paul Gallagher, President and CEO of the Company, stated, "The fourth quarter was extraordinarily difficult as our order flow continued to deteriorate. The weakness was most evident in core embroidery product sales which decreased $14 million this year or 38%. This decrease was partially offset by continued market penetration of screen and digital print products, however in addition to the overall market weakness, we also saw severe price and margin pressure resulting from the continued weakness in the U.S. dollar as compared to the Japanese Yen.”

Mr. Gallagher continued, "As business conditions continued to deteriorate during the fourth quarter and into 2009, we have accelerated our cost and expense reduction programs. To date, the Company has initiated actions which it expects will result in annualized cost savings of almost $6 million. Without a doubt, 2009 will be a very tough year during which we will continue to take actions necessary to return the Company to profitability while continuing to provide the industry with the most innovative and highest quality products and the most advanced customer education and support systems, while taking whatever steps necessary to maintain our position as market leader.”

Income Summary

(Unaudited)

(in thousands, except EPS)

Three Months Ended

Twelve Months Ended

December

31, 2008

December

31, 2007

December

31, 2008

December

31, 2007

Revenues

$

10,093

$

14,475

$

42,527

$

52,619

Gross Profit

2,290

5,244

12,836

19,679

% of Revenues

23

%

36

%

30

%

37

%

Operating Expenses:

Selling, General and administrative

4,706

4,684

19,029

18,229

Impairment of Customer List

845

-

845

-

Litigation Settlement

-

-

-

(450

)

Operating Expenses

5,551

4,684

19,874

17,779

Operating (Loss) Income

(3,261

)

560

(7,038

)

1,900

Other Expense (Income)

14

(142

)

(127

)

(345

)

Net (Loss) Income Before Taxes

(3,275

)

702

(6,911

)

2,245

Income Tax (Benefit) Provision

(13

)

74

(2

)

158

Net (Loss) Income

$

(3,262

)

$

628

$

(6,909

)

$

2,087

(Loss) Income Per Share:

Basic

$

(0.34

)

$

0.07

$

(0.73

)

$

0.23

Diluted

$

(0.34

)

$

0.06

$

(0.73

)

$

0.22

Balance Sheet

(in thousands)

        
        
           
        
        
        
        
           
        
        
        
      
      
        
        
        
        
        
          December 30, 2008
        
        
        
        
          December 31, 2007
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Cash (including restricted cash)
        
        
        
        
          $
        
        
          4,852
        
        
        
        
          $
        
        
          16,706
        
      
      
        
          Accounts Receivable, net
        
        
        
        
        
        
          4,961
        
        
        
        
        
        
          5,798
        
      
      
        
          Inventories, net
        
        
        
        
        
        
          8,527
        
        
        
        
        
        
          5,725
        
      
      
        
          Other Current Assets
        
        
        
        
        
        
          258
        
        
        
        
        
        
          518
        
      
      
        
          Property, Plant & Equipment, net
        
        
        
        
        
        
          1,915
        
        
        
        
        
        
          512
        
      
      
        
          Other Assets
        
        
        
        
           
        
        
          517
        
        
        
        
           
        
        
          41
        
      
      
        
          Total Assets
        
        
        
        
          $
        
        
          21,030
        
        
        
        
          $
        
        
          29,300
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Accounts Payable & Accrued Expenses
        
        
        
        
          $
        
        
          7,071
        
        
        
        
          $
        
        
          8,962
        
      
      
        
          Customer Deposits
        
        
        
        
        
        
          852
        
        
        
        
        
        
          621
        
      
      
        
          Other Liabilities
        
        
        
        
           
        
        
          48
        
        
        
        
           
        
        
          111
        
      
      
        
          Total Liabilities
        
        
        
        
        
        
          7,971
        
        
        
        
        
        
          9,694
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Stockholders’ Equity
        
        
        
        
           
        
        
          13,059
        
        
        
        
           
        
        
          19,606
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total Liabilities and Stockholders’ Equity
        
        
        
        
          $
        
        
          21,030
        
        
        
        
          $
        
        
          29,300
        
      
    
    

About Hirsch International Corp.

Hirsch is a leading provider of equipment and education and support services to the graphic and decorated apparel industry. The Company exclusively represents the decorated apparel industry’s leading brands including Tajima embroidery equipment, MHM screen printing equipment, SEIT textile bridge lasers, Pulse Microsystems digitizing and design software and now Kornit and Mimaki digital garment printers, and through its U.S. Screen and Inkjet Technologies subsidiary, T-Jet digital garment printers and a full line of screenprint and digital print support products. Hirsch’s and US Screen’s customer groups include: a wide range of contract manufacturers that outsource their embellishment requirements; manufacturers who use embroidery, screenprinting, laser etching or digital printing to embellish their apparel and fashion accessories; promotional products, uniform, and sportswear companies; retail stores; and graphic and decorated apparel entrepreneurs servicing the athletic apparel, corporate logo-wear, and advertising specialties markets.

The Company is led by a strong and experienced management team focused on continuing to grow its core business through sound acquisitions of products and processes, as well as through related business ventures in which the Company can build and maximize stockholder value. The Company was founded in 1968 and is headquartered in Hauppauge, N.Y.

Safe Harbor Statement

This press release contains forward-looking statements which are made pursuant to the safe harbor provisions set within the meaning of the Private Securities Litigation Reform Act of 1995. Except for historical information contained herein, the matters set forth in this news release are forward-looking statements. Readers should note that forward-looking statements set forth above involve a number of risks and uncertainties that could cause actual results to differ materially from any such statement, including, without limitation, the risks and uncertainties discussed under the caption “Risk Factors” in the Company’s Form 10-K for calendar 2008, which may be updated by our subsequent periodic reports, which discussion is incorporated herein by reference. Readers are also urged to read the periodic filings and current reports on Form 8-K of the Company.