What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-01-09 compared with 2025-01-10 · 148 added, 145 removed, 713 unchanged (29% of the section changed)

6 unchanged sentences

We have audited the accompanying consolidated balance sheet ⁠ of Hurco Companies, Inc.

and its subsidiaries (the "Company") as of October 31, 2024, the related consolidated statements of operations, comprehensive income (loss), cash flows, and changes in shareholders' equity for the period ended October 31, 2024, and the related notes and schedule listed in Item 15(a) (collectively referred to as the "financial statements").

and its subsidiaries(the "Company") as of October 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), cash flows, and changes in shareholders' equity, for each of the two years in the period ended October 31, 2025, and the related notes and the schedule listed in Item 15(a) (collectively referred to as the "financial statements").

We also have audited the Company's internal control over financial reporting as of October 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 31, 2024, and the results of its operations and its cash flows for the period ended October 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years ended October 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

26 unchanged sentences

A valuation allowance is provided to offset deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Judgments related to the existence of sufficient taxable income and the realization of deferred tax assets include consideration of future profitability and market conditions, changes in U.S.

or foreign tax laws and other factors.

Management has determined that it is not more likely than not that sufficient taxable income will be generated in the future to realize its U.S.

deferred tax assets;

therefore, a valuation allowance of $8.3 million was recorded during the year ended October 31, 2024.

As described in Note 6 to the financial statements, as a result of a cumulative three-year loss in the U.S., China and Italy, the Company has a $13.2 million full valuation allowance recorded against their U.S., Chinese and certain Italian deferred tax assets and have not recorded a tax benefit for their net losses in these countries for fiscal year 2025.

The valuation allowance recorded during fiscal year ended October 31, 2025 reflects a full valuation allowance of U.S, Chinese, and certain Italian deferred tax assets and was recorded based on the Company’s conclusion that the deferred tax assets were not more likely than not going to be realized.

Income tax expense for fiscal year included $4.8 million of tax expense directly attributable to the non-cash valuation allowance recorded in fiscal year 2025 on U.S., Chinese and certain Italian deferred tax assets.

Given the determination of whether it is more likely than not that sufficient U.S.

2 unchanged sentences

Our audit procedures related to the determination of whether it is more likely than not that sufficient taxable income will be generated in the future to realize deferred tax assets included the following, among others:

We tested the effectiveness of controls over deferred tax assets, including management’s controls over whether it is more likely than not that the deferred tax assets will be realized.

We evaluated the reasonableness of the methods, assumptions, and judgments used by management to determine whether it is more likely than not that sufficient taxable income will be generated in the future to utilize the net deferred tax assets and therefore whether a valuation allowance was necessary.

We evaluated the reasonableness of management's assessment of the significance and weighting of negative evidence and positive evidence that is objectively verifiable.

With the assistance of our income tax specialists, we evaluated (1) the appropriateness of qualifying tax planning strategies, including whether they were prudent, feasible and would more likely than not result in the realization of U.S.

deferred tax assets and (2) management's assessment of whether sufficient U.S.

taxable income will be generated in the future to realize a portion of the deferred tax assets prior to expiration.

We tested the effectiveness of controls over the income tax provision and deferred tax assets, including management’s controls over whether it is more likely than not that the deferred tax assets will be realized.

We assessed the reasonableness of the methods, assumptions, and judgments used by management to determine the tax provision and valuation allowance.

With the assistance of our income tax specialists, we evaluated management's application of relevant tax laws to its legal entity structure and the effect on the Company's income tax expense, including the Company's calculations of current period income tax expense, by examining and evaluating management's income tax calculations and assessing the Company's compliance with tax laws.

We tested the valuation allowances recorded by testing the mathematical accuracy and management’s conclusions on the realizability of the deferred tax assets.

We tested the income tax provision by selecting a sample of permanent and temporary differences in the U.S., testing the calculation of the effective tax rate and resulting deferred tax assets and liabilities, while considering compliance with tax laws and regulations for those samples.

We tested the income tax provision by selecting a sample of permanent and temporary differences, testing the calculation of the effective tax rate and resulting deferred tax assets and liabilities, while considering compliance with tax laws and regulations for those samples.

We involved professionals in our firm having expertise in accounting for U.S.

and foreign income taxes.

/s/ Deloitte & Touche LLP

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Report of Independent Registered Public Accounting Firm

To the Shareholders

and the Board of Directors

Shareholders and the Board of Directors

of Hurco Companies, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Hurco Companies, Inc.

and its subsidiaries (the Company) as of October 31, 2023, and the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity and cash flows, for each of the two years in the period ended October 31, 2023, and the related notes and schedule listed in Item 15(a) (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2023, and the results of their operations and their cash flows for each of the two years in the period ended October 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinions

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity and cash flows of Hurco Companies, Inc.

(the Company) for the year ended October 31, 2023.

Our audit also included the financial statement schedule listed in Item 15(a) for the year ended October 31, 2023 (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the results of the Company’s operations and their cash flows for the year ended October 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinions.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ RSM US LLP

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(Loss) income before income taxes

Provision for income taxes

Provision (benefit) for income taxes

Net (loss) income

1 unchanged sentence

Weighted average common shares outstanding

Dividends paid per share

The accompanying notes are an integral part of the consolidated financial statements.

6 unchanged sentences

Translation (loss) gain of foreign currency financial statements

(Gain) / loss on derivative instruments reclassified into operations, net of tax (expense) / benefit of $ 401 , $( 146 ), $ 59 , respectively

Gain / (loss) on derivative instruments, net of tax expense / (benefit) of $( 218 ), $( 439 ), $( 119 ) respectively

(Gain) / loss on derivative instruments reclassified into operations, net of tax (expense)/ benefit of $ 435 , $ 401 , and $( 146 ) , respectively

Gain / (loss) on derivative instruments, net of tax expense (benefit) of $( 172 ) , ($ 218 ) , and ($ 439 ) , respectively

Total other comprehensive (loss) income

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

As of October 31,

(In thousands, except share and per share data)

Current assets:

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Intangible assets, net

Operating lease - right of use assets

Operating lease - right of use assets, net

Deferred income taxes

Investments and other assets

Total non–current assets

2 unchanged sentences

Accounts payable

Accounts payable-related parties

Customer deposits

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Net (loss) income

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:

Adjustments to reconcile net (loss) income to net cash provided by (used for) operating activities:

Provision for doubtful accounts

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Software development costs

Proceeds from surrender of life insurance policies

Other investments

3 unchanged sentences

Dividends paid

Taxes paid related to net settlement of restricted shares

Stock repurchases

Excise tax payable related to stock repurchases

Taxes paid related to net settlement of restricted shares

Net cash provided by (used for) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

1 unchanged sentence

Supplemental disclosures:

Cash paid (received) for:

Cash paid for:

Income taxes, net

10 unchanged sentences

Exercise of common stock options

Stock repurchases

Stock repurchases, net of excise tax payable

Dividends paid ($ 0.63 per share)

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Other comprehensive income (loss)

Deferred income tax valuation allowances

Stock–based compensation expense, net of taxes withheld for vested restricted shares

Exercise of common stock options

Stock repurchases, net of excise tax payable

Stock repurchases

Dividends paid ($ 0.32 per share)

5 unchanged sentences

Stock repurchases

Dividends paid ($ 0.32 per share)

Balances, October 31, 2025

8 unchanged sentences

Our investment in that affiliate was approximately $ 5.5 million and $ 5.3 million as of October 31, 2025 and 2024, respectively.

That investment is included in Investments and other assets, net on the accompanying Consolidated Balance Sheets.

That investment is included in Investments on the accompanying Consolidated Balance Sheets.

Inter-company accounts and transactions have been eliminated.

47 unchanged sentences

This forward contract matured in November 2025 , and we entered into a new forward contract for the same notional amount that is set to mature in November 2026 .

As of October 31, 2024, we had a realized gain of $ 1.2 million and an immaterial amount of unrealized loss, net of tax, recorded as cumulative translation adjustments in Accumulated other comprehensive loss, related to this forward contract.

As of October 31, 2025, we had a realized gain of $ 1.2 million and an unrealized loss of $ 0.2 million, net of tax, recorded as cumulative translation adjustments in Accumulated other comprehensive loss, related to this forward contract.

Derivatives Not Designated as Hedging Instruments

1 unchanged sentence

These derivative instruments are not designated as hedges under FASB guidance and, as a result, changes in their fair value are reported currently as Other expense, net in the Consolidated Statements of Operations consistent with the transaction gain or loss on the related inter-company receivables, payables and loans denominated in foreign currencies.

We had forward contracts outstanding as of October 31, 2024, in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from November 2024 through March 2025 .

We had forward contracts outstanding as of October 31, 2025, in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from November 2025 through June 2026 .

The contract amounts at forward rates in U.S.

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Foreign exchange forward contracts

Cost of sales

– Intercompany sales/purchases

Cost of sales and service

Foreign exchange forward contract

– Net investment

We did no t recognize any gains or losses as a result of hedges deemed ineffective during fiscal years ended October 31, 2024, 2023, and 2022.

We did no t recognize any gains or losses as a result of hedges deemed ineffective during the fiscal years ended October 31, 2025, 2024, and 2023.

We recognized the following gains and losses in our Consolidated Statements of Operations during the fiscal years ended October 31, 2025, 2024, and 2023 on derivative instruments not designated as hedging instruments (in thousands):

10 unchanged sentences

Reclassifications

Deferred income tax valuation allowances

Balance, October 31, 2024

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There were no impairments recognized with respect to the carrying value of intangible assets for the years ended October 31, 2025, 2024, or 2023.

As of October 31, 2024, the balances of intangible assets were as follows (in thousands):

As of October 31, 2025, the balances of intangible assets, other than goodwill, were as follows (in thousands):

Net Intangible

7 unchanged sentences

Customer relationships

Intangible asset amortization expense was $ 237,000 , $ 271,000 , and $ 272,000 for fiscal years 2024, 2023, and 2022, respectively.

Annual intangible asset amortization expense for the next five years is estimated to be $ 143,000 for fiscal year 2025, $ 118,000 for fiscal year 2026, and $ 45,000 for each of fiscal years 202 7 through 2029.

Intangible asset amortization expense was $ 0.1 million, $ 0.2 million, and $ 0.3 million for fiscal years 2025, 2024, and 2023, respectively.

Annual intangible asset amortization expense for the next five years is estimated to be $ 0.1 million for fiscal year 2026, and less than $ 0.1 million per year for fiscal years 2027 through 2030 .

Impairment of Long–Lived Assets.

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(Loss) income per share

For fiscal years 2025 and 2024, there were an immaterial number of stock options and contingently issuable securities that were excluded from the diluted loss per share calculation because they were anti-dilutive due to the net loss in those periods.

Income Taxes – We account for income taxes and the related accounts under the asset and liability method.

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We operate in the industrial equipment industry and have a global footprint that subjects us to various business risks in many different countries.

During fiscal years 2022 through 2024, there was economic slowdown in Europe, political friction in the U.S.

and many other regions of the world, geopolitical tensions, conflicts, wars in Europe and Asia, competitive labor markets, vendor delays, transportation issues, unusually high inflation, volatility of foreign currencies, and the COVID-19 pandemic.

During fiscal years 2023 through 2025, there were changes in U.S.

and global trade policies, an economic slowdown in Europe, political friction in the U.S.

and many other regions of the world, geopolitical tensions, conflicts, wars in Europe and Asia, and volatility of foreign currencies.

Because of the potential for extended vulnerability due to these and other factors, we have closely evaluated the estimates we have made in preparing the financial statements as of October 31, 2025, with the understanding that these estimates could change in the near term.

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Manufacturing Risk.

At present, our wholly–owned subsidiaries, Hurco Manufacturing Limited (“HML”), Ningbo Hurco Machine Tool Co., Ltd.

(“NHML”), and Milltronics USA, Inc.

(“Milltronics”) produce the vast majority of our machine tools for all three brands, Hurco, Milltronics, and Takumi.

At present, our wholly–owned subsidiaries, Hurco Manufacturing Limited (“HML”) produces the vast majority of our machine tools for all three brands, Hurco, Milltronics, and Takumi.

In addition, we manufacture electro–mechanical components and accessories for machine tools through our wholly–owned subsidiary, LCM Precision Technology S.r.l.

HML, NHML, Milltronics, and LCM manufacture their products in Taiwan, China, the U.S., and Italy, respectively.

HML and LCM manufacture their products in Taiwan and Italy, respectively.

Any interruption in manufacturing at any of these locations would have an adverse effect on our financial operating results.

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entered into a credit agreement with Bank of America, N.A., as the lender, which was subsequently amended on each of March 13, 2020, December 23, 2020, December 17, 2021, January 4, 2023, and December 19, 2023 (as amended, the “2018 Credit Agreement”).

The 2018 Credit Agreement provides for an unsecured revolving credit and letter of credit facility in a maximum aggregate amount of $ 40.0 million.

The 2018 Credit Agreement provides that the maximum amount of outstanding letters of credit at any one time may not exceed $ 10.0 million, the maximum amount of outstanding loans made to our subsidiary Hurco B.V.

at any one time may not exceed $ 20.0 million, and the maximum amount of all outstanding loans denominated in alternative currencies at any one time may not exceed $ 20.0 million.

Under the 2018 Credit Agreement, we and Hurco B.V.

are borrowers, and certain of our other subsidiaries are guarantors.

The 2018 Credit Agreement provided for an unsecured revolving credit and letter of credit facility in a maximum aggregate amount of $ 40.0 million.

The 2018 Credit Agreement provided that the maximum amount of outstanding letters of credit at any one time could not exceed $ 10.0 million, the maximum amount of outstanding loans made to our subsidiary Hurco B.V.

at any one time could not exceed $ 20.0 million, and the maximum amount of all outstanding loans denominated in alternative currencies at any one time could not exceed $ 20.0 million.

The scheduled maturity date of the 2018 Credit Agreement was December 31, 2025 , and on that date, the 2018 Credit Agreement terminated in accordance with its terms.

In March 2019, our wholly-owned subsidiaries in Taiwan, HML, and China, NHML, closed on uncommitted revolving credit facilities with maximum aggregate amounts of 150 million New Taiwan Dollars and 32.5 million Chinese Yuan, respectively.

As uncommitted facilities, both the Taiwan and China credit facilities were subject to review and termination by the respective underlying lending institution from time to time.

In February and December 2023, NHML and HML, respectively, renewed the above-referenced credit facilities on substantially similar terms and identical maximum aggregate limits.

As of October 31, 2025, our credit facilities consisted of a € 1.5 million revolving credit facility in Germany, the 150 million New Taiwan Dollars Taiwan credit facility, the 32.5 million Chinese Yuan China credit facility, and the $ 40.0 million revolving credit facility under the 2018 Credit Agreement.

On December 31, 2025, the 150 million New Taiwan Dollars Taiwan credit facility, the 32.5 million Chinese Yuan China credit facility and the $ 40.0 million revolving credit facility under the 2018 Credit Agreement terminated in accordance with their terms.

We had no debt or borrowings outstanding under any of our credit facilities as of October 31, 2025, or December 31, 2025.

As of October 31, 2025 we had an aggregate of approximately $ 51.2 million available for borrowing under our credit facilities.

On January 5, 2026, we entered into a credit agreement with Bank of America, N.A., as the lender (the “2026 Credit Agreement”).

The 2026 Credit Agreement provides for a secured revolving credit and letter of credit facility in a maximum aggregate amount of $ 20.0 million.

The 2026 Credit Agreement provides that the maximum amount of outstanding letters of credit at any one time may not exceed $ 10.0 million, and the maximum amount of all outstanding loans denominated in alternative currencies at any one time may not exceed $ 20.0 million.

Under the 2026 Credit Agreement, we are the borrower, and certain of our subsidiaries are guarantors.

Our obligations under the 2026 Credit Agreement are secured by a security interest in substantially all of our personal property and substantially all of the personal property of each subsidiary guarantor.

The scheduled maturity date of the 2026 Credit Agreement is December 31, 2026.

2 unchanged sentences

The 2026 Credit Agreement contains customary affirmative and negative covenants and events of default, including covenants (1) restricting us from making certain investments, loans, advances and acquisitions (but permitting us to make investments in subsidiaries of up to $ 10.0 million);

(2) restricting us from making certain payments, including (a) cash dividends, except that we may pay cash dividends as long as immediately before and after giving effect to such payment, the sum of the unused amount of the commitments under the 2018 Credit Agreement plus our cash on hand is not less than $ 10.0 million, and as long as we are not in default before and after giving effect to such dividend payments and (b) payments made to repurchase shares of our common stock, except that we may repurchase shares of our common stock as long as we are not in default before and after giving effect to such repurchases and the aggregate amount of payments made by us for all such repurchases during any fiscal year does not exceed $ 25.0 million;

(3) requiring that we maintain a minimum working capital of $ 125.0 million;

and (4) requiring that we maintain a minimum tangible net worth of $ 176.5 million.

(2) restricting us from making certain payments, including (a) cash dividends, except that we may pay cash dividends as long as immediately before and after giving effect to such payment, the sum of the unused amount of the commitments under the 2026 Credit Agreement plus our cash on hand is not less than $ 10.0 million, we are in pro forma compliance with the maximum consolidated leverage ratio covenant as described below, and we are not in default before and after giving effect to such dividend payments and (b) payments made to repurchase shares of our common stock, except that we may repurchase shares of our common stock as long as we are not in default before and after giving effect to such repurchases and the aggregate amount of payments made by us for all such repurchases during any fiscal year does not exceed $ 10.0 million;

and (3) requiring that we maintain a maximum consolidated leverage ratio of total debt to EBITDA no greater than 2.00 to 1.00, with EBITDA defined as the greater of (i) consolidated EBITDA for the most recently completed measurement period and (ii) $ 1.00 .

We may use the proceeds from advances under the 2026 Credit Agreement for general corporate purposes.

As uncommitted facilities, both the Taiwan and China credit facilities are subject to review and termination by the respective underlying lending institution from time to time.

In February and December 2023, NHML and HML, respectively, renewed the above-referenced credit facilities on substantially similar terms and identical maximum aggregate limits.

As a result, as of October 31, 2024, our existing credit facilities consisted of a € 1.5 million revolving credit facility in Germany, the 150 million New Taiwan Dollars Taiwan credit facility, the 32.5 million Chinese Yuan China credit facility, and the $ 40.0 million revolving credit facility under the 2018 Credit Agreement.

As of October 31, 2024, there were no borrowings under any of our credit facilities and there was approximately $ 50.9 million of available borrowing capacity thereunder.

At October 31, 2024, we believe we were in compliance with all covenants relating thereto.

The maximum consolidated leverage ratio covenant effectively prohibits us from borrowing any amounts under the 2026 Credit Agreement when our consolidated EBITDA for the most recently completed measurement period is negative.

As of the date we entered into the 2026 Credit Agreement, the most recently completed measurement period was our fiscal year ended October 31, 2025, during which our consolidated EBITDA was negative.

In order to borrow in compliance with the maximum consolidated leverage ratio covenant set forth above, we are effectively prohibited from borrowing under the 2026 Credit Agreement until we have positive consolidated EBITDA for our most recently completed four fiscal quarters.

FINANCIAL INSTRUMENTS

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In accordance with this guidance, the following table represents the fair value hierarchy for our financial assets and liabilities measured at fair value as of October 31, 2025 and 2024 (in thousands):

October 31, 2025

October 31, 2024

October 31, 2025

October 31, 2024

Recurring Fair Value Measurements

11 unchanged sentences

Under this method, the provision (benefit) for income taxes represents income taxes payable or refundable for the current year plus the change in deferred taxes during the year.

The Inflation Reduction Act of 2022 (the “Inflation Reduction Act” or “IRA”) was signed into law on August 16, 2022.

The IRA provides investment in clean energy, promotes reductions in carbon emissions, and extends select Affordable Care Act premium reductions.

We currently do not expect that the Inflation Reduction Act will have a material impact on its income taxes.

The Budget Reconciliation Act (H.R.

1) (“OBBB”) was signed into law on July 4, 2025.

The OBBB did not have a material impact on our consolidated financial statements and related disclosures as of and for the fiscal year ended October 31, 2025.

While further evaluation is ongoing, the OBBB is not expected to have a material impact on our consolidated financial statements and related disclosures in future years.

The components of income (loss) before taxes are (in thousands):

5 unchanged sentences

Foreign taxes

Total current and deferred income taxes:

Valuation Allowance

Provision (benefit) for income taxes

A comparison of income tax expense at the U.S.

6 unchanged sentences

US benefit of foreign intangible income

US tax on distributed and undistributed earnings

Stock-based compensation

Tax attribute expiration

Effective tax rate

12 unchanged sentences

Income tax expense for fiscal year 2025 was $ 2.9 million, compared to $ 6.8 million for fiscal year 2024.

The year-over-year increase in income tax expense for the fiscal year ended October 31, 2024 was primarily due to an $ 8.4 million non-cash valuation allowance on U.S.

and China deferred tax assets, changes in geographic mix of income and loss that includes jurisdictions with differing tax rates, and discrete items related to unvested stock compensation.

As a result of a cumulative three-year loss in the U.S., we have an $ 8.3 million valuation allowance recorded against our U.S.

deferred tax assets, and we did not record a tax benefit for our U.S.

net losses for fiscal year ended October 31, 2024.

The valuation allowance recorded during fiscal year ended October 31, 2024 reflects a full valuation allowance of the U.S.

deferred tax assets and was recorded based on our conclusion that the deferred tax assets were not more likely than not going to be realized.

The year-over-year decrease in annual income tax expense was primarily due to an $ 8.4 million non-cash change in valuation allowance recorded in fiscal year 2024 on U.S.

and China deferred tax assets, compared to a $ 4.8 million non-cash change in valuation allowance recorded in fiscal year 2025 on U.S., China, and certain Italian deferred tax assets.

Additionally, income taxes were also impacted by a change in geographic mix of income and loss that includes jurisdictions with differing tax rates and discrete items related to unvested stock compensation.

As a result of a cumulative three-year loss in the U.S., China and Italy, we have a $ 13.2 million full valuation allowance recorded against our U.S., Chinese and certain Italian deferred tax assets and we did not record a tax benefit for our net losses in these countries for fiscal year 2025.

The valuation allowance recorded during the fiscal year ended October 31, 2025 reflects a full valuation allowance of U.S, Chinese, and certain Italian deferred tax assets and was recorded based on our conclusion that the deferred tax assets were not more likely than not going to be realized.

As of October 31, 2025, we had deferred tax assets established for accumulated net operating loss carryforwards of $ 8.6 million, primarily related to federal, state and foreign jurisdictions.

17 unchanged sentences

Deferred Tax Liabilities:

Unrealized exchange loss

Property and equipment and capitalized software development costs

6 unchanged sentences

Our foreign net operating losses will either expire at various tax years from 2026 to 2030 or have unlimited carryforward potential.

We also have tax credits of $ 0.9 million which will expire at various tax years from 2025 to 2044 .

As of October 31, 2025, we also have tax credits of $ 2.2 million which will expire at various tax years from 2026 to 2045 .

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding the related accrual for interest or penalties, is as follows (in thousands):

Balance, beginning of year

Additions based on tax positions related to the current year

Additions (reductions) related to prior year tax positions

Reductions due to statute expiration

Balance, end of year

The entire balance of the unrecognized tax benefits and related interest on October 31, 2024, if recognized, could affect the effective tax rate in future periods.

We recognize accrued interest and penalties related to unrecognized tax benefits as components of our income tax provision.

As of October 31, 2024, the amount of interest accrued, reported in other liabilities, was approximately $ 7,000 which did not include the federal tax benefit of interest deductions.

The statute of limitations with respect to unrecognized tax benefits will expire in August 2025 .

The balance of the unrecognized tax benefits and related interest was zero on October 31, 2025 because all previous balances expired as of August 2025 due to the statute of limitations with respect to unrecognized tax benefits.

federal and state income tax returns, as well as tax returns in applicable foreign jurisdictions.

1 unchanged sentence

United States federal

Fiscal year 2021 through the current period

Fiscal year 2022 through the current period

Fiscal year 2019 through the current period

Fiscal 2022 through the current period

Fiscal 2020 through the current period

United Kingdom

Fiscal year 2018 through the current period

Fiscal 2019 through the current period

Includes federal as well as state, provincial or similar local jurisdictions, as applicable.

10 unchanged sentences

No further awards will be made under our 2008 Equity Plan.

The total number of shares of our common stock that may be issued pursuant to awards under the 2016 Equity Plan initially was 856,048 , which included 386,048 shares that remained available for future grants under the 2008 Equity Plan as of March 10, 2016, the date our shareholders approved the 2016 Equity Plan.

The total number of shares of our common stock that may be issued pursuant to awards under the 2016 Equity Plan was initially 856,048 , which included 386,048 shares that remained available for future grants under the 2008 Equity Plan as of March 10, 2016, the date our shareholders approved the 2016 Equity Plan.

On March 10, 2022, our shareholders approved the Amended and Restated Hurco Companies, Inc.

2016 Equity Incentive Plan, which, among other items, increased the aggregate number of shares that may be issued under the 2016 Equity Plan by 850,000 shares.

On March 13, 2025, our shareholders approved an amendment to the 2016 Equity Plan, which increased the aggregate number of shares that may be issued thereunder by an additional 850,000 shares.

The Compensation Committee of our Board of Directors has the authority to determine the officers, directors, and key employees who will be granted awards under the 2016 Equity Plan;

2 unchanged sentences

and prescribe the form and terms of award agreements.

We have granted restricted shares and performance units under the 2016 Equity Plan that are currently outstanding.

We previously granted stock options under the 2008 Equity Plan;

none of which remained outstanding as of October 31, 2024.

We have granted restricted shares and performance stock units under the 2016 Equity Plan that are currently outstanding.

The market value of a share of our common stock, for purposes of the 2016 Equity Plan, is the closing sale price as reported by the Nasdaq Global Select Market on the date in question or, if not a trading day, on the last preceding trading date.

Stock Options

A summary of the status of the stock options as of October 31, 2024, 2023, and 2022, and the related activity for the year is as follows:

Weighted Average Grant

Date Fair Value

Balance October 31, 2021

Balance October 31, 2022

Balance October 31, 2023

Balance October 31, 2024

The total intrinsic value of stock options exercised during the fiscal year ended October 31, 2024, 2023, and 2022, was approximately $ 0 , $ 0 , $ 9,000 , respectively.

The final 11,559 shares remaining available under option were exercised during the fiscal year ended October 31, 2023.

There were no stock options outstanding as of October 31, 2025 and 2024.

Time-based Restricted Shares and Performance Stock Units

On March 14, 2024, March 9, 2023, and March 10, 2022, the Compensation Committee granted a total of 22,878 shares, 17,226 shares, and 13,914 shares of time-based restricted shares, respectively, to our non-employee directors, which vest in full one year from the date of grant provided the recipient remains on the board of directors through that date.

On March 13, 2025, March 14, 2024, and March 9, 2023, the Compensation Committee granted a total of 29,868 shares, 22,878 shares, and 17,226 shares of time-based restricted stock, respectively, to our non-employee directors, which vest in full one year from the date of grant provided the recipient remains on the board of directors through that date.

The grant date fair values of the restricted shares were based on the closing sales price of our common stock on the grant dates, which were $ 16.07 , $ 20.98 , and $ 27.86 per share, respectively.

On November 8, 2023, November 9, 2022, and November 10, 2021, the Compensation Committee granted a total of 16,673 shares, 12,223 shares, and 8,234 shares of time-based restricted shares, respectively, to our non-executive employees.

On November 13, 2024, November 8, 2023, and November 9, 2022, the Compensation Committee granted a total of 13,525 shares, 16,673 shares, and 12,223 shares of time-based restricted stock, respectively, to our non-executive employees.

The restricted shares vest in thirds over three years from the date of grant provided the recipient remains employed through that date.

The grant date fair values of the restricted shares were based upon the closing sales price of our common stock on the dates of grant, which were $ 21.80 , $ 19.78 , and $ 24.53 per shares, respectively.

On January 4, 2024, the Compensation Committee approved a long-term incentive compensation arrangement for our executive officers in the form of time-based restricted shares and performance stock units (“PSUs”) under the 2016 Equity Plan, which will be payable in shares of our common stock if earned and vested.

On January 7, 2025, the Compensation Committee approved a long-term incentive compensation arrangement for our executive officers in the form of time-based restricted shares and performance stock units (“PSUs”), which will be payable in shares of our common stock if earned and vested.

The awards were approximately 45 % time-based vesting and approximately 55 % performance-based vesting.

The three-year performance period for the PSUs is fiscal year 2025 through fiscal year 2027.

On that date, the Compensation Committee granted a total of 36,574 shares of time-based restricted shares to our executive officers.

On that date, the Compensation Committee granted a total of 75,119 shares of time-based restricted stock to our executive officers.

The restricted shares vest in thirds over three years from the date of grant provided the recipient remains employed through that date.

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Participants will have the ability to earn between 50 % of the target number of the PSUs – NI for achieving threshold performance and 200 % of the target number of the PSUs – NI for achieving maximum performance.

The grant date fair value of the PSUs – NI was based on the closing sales price of our common stock on grant date, which was $ 26.38 per PSU.

The grant date fair value of the PSUs – NI was based on the closing sales price of our common stock on the grant date, which was $ 21.53 per PSU.

On January 4, 2024, the Compensation Committee also granted a total target number of 51,205 PSUs to our executive officers designated as “PSU – FCF”.

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The grant date fair value of the restricted shares was based upon the closing sales price of our common stock on the date of grant, which was $ 26.38 per share.

On January 4, 2022, the Compensation Committee also granted a total target number of 34,203 PSUs to our executive officers designated as “PSU – TSR”.

These PSUs were weighted as approximately 40 % of the overall 2022 executive long-term incentive compensation arrangement and will vest and be paid based upon the total shareholder return of our common stock over the three-year period of fiscal years 2022-2024, relative to the total shareholder return of the companies in a specified peer group over that period.

Participants will have the ability to earn between 50 % of the target number of the PSUs – TSR for achieving threshold performance and 200 % of the target number of the PSUs – TSR for achieving maximum performance.

The grant date fair value of the PSUs – TSR was $ 33.33 per PSU and was calculated using the Monte Carlo approach.

On January 4, 2022, the Compensation Committee also granted a total target number of 32,821 PSUs to our executive officers designated as “PSU – ROIC”.

These PSUs were weighted as approximately 35 % of the overall 2022 executive long-term incentive compensation arrangement and will vest and be paid based upon the achievement of pre-established goals related to our average return on invested capital over the three-year period of fiscal years 2022-2024.

Participants will have the ability to earn between 50 % of the target number of the PSUs – ROIC for achieving threshold performance and 200 % of the target number of the PSUs – ROIC for achieving maximum performance.

The grant date fair value of the PSUs – ROIC was based on the closing sales price of our common stock on the grant date, which was $ 30.39 per share.

On January 3, 2023, the Compensation Committee also granted a total target number of 47,003 PSUs to our executive officers designated as “PSU – NI”.

These PSUs were weighted as approximately 40 % of the overall 2023 executive long-term incentive compensation arrangement and will vest and be paid based upon the achievement of pre-established goals related to our average net income over the three-year period of fiscal years 2023-2025.

The grant date fair value of the PSUs – NI was based on the closing sales price of our common stock on grant date, which was $ 26.38 per PSU.

On January 3, 2023, the Compensation Committee also granted a total target number of 41,126 PSUs to our executive officers designated as “PSU – FCF”.

These PSUs were weighted as approximately 35 % of the overall 2023 executive long-term incentive compensation arrangement and will vest and be paid based upon the achievement of pre-established goals related to our average free cash flow over the three-year period of fiscal years 2023-2025.

Participants will have the ability to earn between 50 % of the target number of the PSUs – FCF for achieving threshold performance and 200 % of the target number of the PSUs – FCF for achieving maximum performance.

The grant date fair value of the PSUs – FCF was based on the closing sales price of our common stock on the grant date, which was $ 26.38 per PSU.

A reconciliation of our restricted shares and PSU activity and related information is as follows:

Number of Restricted

Weighted Average Grant

Shares and PSUs

Number of Shares

Date Fair Value

Unvested as of October 31, 2023

Unvested at October 31, 2024

Shares or units granted

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Shares withheld

Unvested as of October 31, 2024

Unvested at October 31, 2025

During fiscal years 2025, 2024, and 2023, we recorded approximately $ 1.7 million, $ 1.6 million, and $ 2.7 million, respectively, of stock–based compensation expense related to grants under the 2016 Equity Plan.

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Purchases of control systems and components from HAL amounted to $ 6.1 million, $ 6.6 million, and $ 10.2 million in fiscal years 2025, 2024, and 2023, respectively.

Sales of control component parts to HAL were less than $ 0.1 million, $ 0.1 million, and $ 0.3 million for the fiscal years ended October 31, 2024, 2023, and 2022, respectively.

Sales of control component parts to HAL were less than $ 0.1 million for each of the fiscal years ended October 31, 2025, 2024, and 2023.

Trade payables to HAL were $ 1.2 million and $ 0.7 million as of October 31, 2025 and 2024, respectively.

Trade receivables from HAL each were immaterial as of October 31, 2024 and 2023.

There were no trade receivables outstanding from HAL as of October 31, 2025 and 2024.

Summary financial information for HAL’s operations and financial condition is as follows (in thousands):

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We follow FASB guidance for accounting for guarantees (codified in ASC 460).

As of October 31, 2024, we had nine outstanding third party payment guarantees totaling approximately $ 0.9 million.

As of October 31, 2025, we had four outstanding third party payment guarantees totaling approximately $ 0.4 million.

The terms of these guarantees are consistent with the underlying customer financing terms.

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Balance, end of period

The decreases in our warranty estimated liability from October 31, 2023 to October 31, 2024 and from October 31, 2022 to October 31, 2023 were primarily due to decreases in the number of machines under warranty from decreased sales volume in fiscal years 2024 and 2023.

The decreases in our warranty estimated liability from October 31, 2024 to October 31, 2025 and from October 31, 2023 to October 31, 2024 were primarily due to lower overall sales volume of vertical milling machines.

Our lease portfolio includes leased production and assembly facilities, warehouses and distribution centers, office space, vehicles, material handling equipment utilized in our production and assembly facilities, laptops and other information technology equipment, as well as other miscellaneous leased equipment.

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Operating cash flow information:

Cash paid for amounts included in the measurement of lease liabilities

Noncash information:

Right-of-use assets obtained in exchange for new operating lease liabilities

Cash paid for amounts included in the

measurement of lease liabilities

Non-cash information:

Right-of-use assets obtained in exchange for

new operating lease liabilities

The following table summarizes the maturities of undiscounted cash flows of lease commitments reconciled to the total lease liability as of October 31, 2025 (in thousands):

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Imputed interest

Operating lease liabilities

Present value of operating lease liabilities

As of October 31, 2025, the weighted-average remaining term of our lease portfolio was approximately 3.3 years, and the weighted-average discount rate was approximately 3.3 %.

SEGMENT INFORMATION

We operate in a single operating and reportable segment:

We are organized and managed as a single operating and reportable segment:

industrial automation equipment.

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We also provide machine tool components, automation integration equipment and solutions for job shops, software options, control upgrades, accessories, and replacement parts for our products, as well as customer service, training, and applications support.

We principally sell our products through approximately 180 independent agents and distributors throughout the Americas, Europe, and Asia.

Our line is the primary line for the majority of our distributors globally, even though some may carry competitive products.

We also have our own direct sales and service organizations in China, the Czech Republic, France, Germany, India, Italy, the Netherlands, Poland, Singapore, Taiwan, the United Kingdom, and certain areas of the United States, which are among the world's principal machine tool consuming countries.

Our products are marketed and sold internationally through a broad network of independent distributors and agents and direct sales.

In fiscal year 2025, approximately 62 % of our revenues were from customers located outside of the Americas , and no single distributor or end-user of our products accounted for more than 5% of our total sales and service fees.

Our chief operating decision maker ("CODM") is the President and Chief Executive Officer, who reviews financial information presented on a consolidated basis.

The CODM uses consolidated sales and service fees, gross profit, operating (loss) income and net (loss) income, as shown on the Consolidated Statements of Operations, to assess financial performance and allocate resources.

The consolidated financial metrics are used by the CODM to make key operating decisions, such as the allocation of capital between reinvestment in the business, the payment of dividends, and acquisitions.

While the CODM receives some additional detailed financial information related to operating expenses, consolidated selling, general and administrative expenses is the significant expense he uses to manage operations.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

The following table sets forth the contribution of each of our product groups and services to our total sales and service fees during each of the past three fiscal years (in thousands):

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United States of America

Central & South Americas

Other Americas

Total Americas

United Kingdom

Other Asia Pacific

Total Asia Pacific

Other Foreign

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New Accounting Pronouncements:

In November 2023, the FASB issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance.

This update will be effective for our fiscal year 2025 annual reporting and subsequent interim periods.

We are currently assessing the impact this new accounting guidance will have on our consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to income tax disclosures, which aims to improve disclosures and presentation requirements to the transparency of the income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction.

The amendments will be effective for our fiscal year 2026, with the option to early adopt at any time prior to the effective date.

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which is intended to enhance the transparency and usefulness of income tax disclosures by providing incremental and disaggregated income tax disclosures pertaining to the effective tax rate reconciliation and income taxes paid by jurisdiction.

This standard is effective for fiscal years beginning after December 31, 2024, with early adoption permitted.

The standard allows for prospective or retrospective application upon adoption.

We are currently assessing the impact this new accounting guidance will have on our consolidated financial statements and disclosures.

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2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires companies to disclose disaggregated information about any relevant expense caption presented on the face of the income statement within continuing operations into the following required natural expense categories, as applicable:

(1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization (“DD&A”) recognized as part of oil- and gas-producing activities or other depletion expenses.

(1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities or other depletion expenses.

This update will be effective for our fiscal year 2028 annual reporting.

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We are currently assessing the impact this new accounting guidance will have on our consolidated financial statements and disclosures.

In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815):

Hedge Accounting Improvements, which enables entities to apply hedge accounting to a greater number of highly effective economic hedges in the following five areas:

(1) similar risk assessment for cash flow hedges, (2) hedging forecasted interest payments on choose-your-rate debt instruments, (3) cash flow hedges of nonfinancial forecasted transactions, (4) net written options as hedging instruments, and (5) foreign-currency-denominated debt instrument as hedging instrument and hedged item (dual hedge).

This ASU is effective for fiscal year 2028.

Early adoption is permitted.

We are currently assessing the impact this new accounting guidance will have on our consolidated financial statements and disclosures.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data