What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-06-04 compared with 2021-03-05 · 114 added, 57 removed, 134 unchanged (56% of the section changed)

13 unchanged sentences

We have both significant foreign sales and significant foreign manufacturing operations.

During the first three months of fiscal 2021, approximately 45% of our revenues were attributable to customers in Europe, where we typically sell more of our higher-performance, higher-priced VMX series machines.

During the first six months of fiscal 2021, approximately 48% of our revenues were attributable to customers in Europe, where we typically sell more of our higher-performance, higher-priced VMX series machines.

Additionally, approximately 14% of our revenues were attributable to customers in the Asia Pacific region, where we encounter greater pricing pressures.

6 unchanged sentences

However, we have added other non-Hurco branded products to our product portfolio that have contributed product diversity and market penetration opportunity.

These non-Hurco branded products are sold by our wholly-owned distributors and are comprised primarily of other general-purpose vertical milling centers and lathes, laser cutting machines, waterjet cutting machines, CNC grinders, compact horizontal machines, metal cutting saws and CNC swill lathes.

ProCobots LLC (“ProCobots”) is our wholly-owned subsidiary that provides automation solutions that can be integrated with any machine tool.

In addition, through our wholly-owned subsidiary in Italy, LCM Precision Technology S.r.l.

Many of these non-Hurco branded products are sold by our wholly-owned distributors and are comprised primarily of other general-purpose vertical milling centers and lathes, laser cutting machines, waterjet cutting machines, CNC grinders, compact horizontal machines, metal cutting saws and CNC swill lathes.

Additionally, ProCobots LLC (“ProCobots”) is our wholly-owned subsidiary that provides automation solutions that can be integrated with any machine tool.

Finally, through our wholly-owned subsidiary in Italy, LCM Precision Technology S.r.l.

(“LCM”), we produce high value machine tool components and accessories.

16 unchanged sentences

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

The COVID-19 pandemic has had a significant impact on our business and industry.

We cannot predict the duration or scope of impact of the COVID-19 pandemic and the negative financial impact to our results cannot be reasonably estimated, but we believe the impact has been material thus far and could continue to be material in the near future.

To date, we have not experienced material disruptions in our supply chain and have not completely ceased operations at any of our global facilities, but have implemented remote working capabilities, as appropriate or otherwise required under local law.

The COVID-19 pandemic has had a significant impact on our business and industry in fiscal 2020.

During the first six months of fiscal 2021, our sales increased year-over-year in all regions as countries began to lift the government-mandated COVID-19 stay-at-home orders or other similar operating restrictions.

However, we cannot predict the duration or scope of impact of the COVID-19 pandemic on a global basis and the impact that any new developments could have on our financial results.

We will continue to evaluate and disclose any trends and uncertainties that have had or are reasonably expected to have, a material effect on our consolidated financial position, results of operations, changes in shareholders’ equity and cash flows for and at the end of each interim period.

2 unchanged sentences

RESULTS OF OPERATIONS

Three Months Ended January 31, 2021 Compared to Three Months Ended January 31, 2020

Three Months Ended April 30, 2021 Compared to Three Months Ended April 30, 2020

Sales and Service Fees.

Sales and service fees for the first quarter of fiscal 2021 were $54.1 million, an increase of $10.5 million, or 24%, compared to the corresponding prior year period, and included a favorable currency impact of $1.6 million, or 4%, when translating foreign sales to U.S.

Sales and service fees for the second quarter of fiscal 2021 were $57.9 million, an increase of $20.8 million, or 56%, compared to the corresponding prior year period, and included a favorable currency impact of $2.7 million, or 7%, when translating foreign sales to U.S.

Dollars for financial reporting purposes.

During fiscal 2020, our operating results were adversely affected by the international business disruption due to the outbreak of coronavirus and the ongoing economic slowdown in Europe, uncertainty surrounding the U.K.

Brexit activities, and political friction in the U.S.

Many of our customers deferred or eliminated investments in capital equipment last year, which we attributed largely to the uncertainty these events created.

During the first quarter of fiscal 2021, our sales increased year-over-year in all regions, particularly in the Americas and Europe, our primary markets for our higher-performance, higher-priced machines.

We also saw global machine tool manufacturers price their excess inventories aggressively to compete in the market recovery.

Sales and Service Fees by Geographic Region

The following table sets forth net sales and service fees by geographic region for the first quarter ended January 31, 2021 and 2020 (dollars in thousands):

The following table sets forth net sales and service fees by geographic region for the second quarter ended April 30, 2021 and 2020 (dollars in thousands):

Three Months Ended

Sales in the Americas for the first quarter of fiscal 2021 increased by 33%, compared to the corresponding period in fiscal 2020, primarily due to an increased volume of shipments of Hurco machines.

The increased machine shipments reflected higher sales volumes of lathes and VM and VMX machines, particularly in the southeast and midwest regions of the U.S.

European sales for the first quarter of fiscal 2021 increased by 21%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of 7%, when translating foreign sales to U.S.

Sales in the Americas for the second quarter of fiscal 2021 increased by 18%, compared to the corresponding period in fiscal 2020.

The increase in sales in the Americas for the second quarter of fiscal 2021 was due to increased volume of shipments of Hurco VM and VMX machines in Canada, Mexico, and the U.S.

European sales for the second quarter of fiscal 2021 increased by 96%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of 15%, when translating foreign sales to U.S.

Dollars for financial reporting purposes.

The increase in European sales for the first quarter of fiscal 2021 was primarily attributable to an increased volume of shipments of Hurco machines in the United Kingdom and Germany, partially offset by reduced volumes in France and Italy.

Asian Pacific sales for the first quarter of fiscal 2021 increased by 9%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of 5%, when translating foreign sales to U.S.

The year-over-year increase in European sales was attributable to increased volume of shipments of Hurco and Takumi machines in Germany, the United Kingdom, France and Italy, as well as increased shipment of machine tool components and accessories manufactured by our wholly-owned subsidiary LCM.

Asian Pacific sales for the second quarter of fiscal 2021 increased by 62%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of 9%, when translating foreign sales to U.S.

Dollars for financial reporting purposes.

The year-over-year increase in Asian Pacific sales primarily resulted from an increased volume of shipments of Hurco vertical milling machines in China and Southeast Asia, partially offset by reduced volume of shipments of Hurco machines in India and Takumi machines in China.

The year-over-year increase in Asian Pacific sales was primarily due to increased sales of Hurco and Takumi machines in China and Taiwan.

Sales and Service Fees by Product Category

The following table sets forth net sales and service fees by product category for the first quarter ended January 31, 2021 and 2020 (dollars in thousands):

The following table sets forth net sales and service fees by product category for the second quarter ended April 30, 2021 and 2020 (dollars in thousands):

Three Months Ended

3 unchanged sentences

† Amounts shown do not include computer control systems and software sold as an integrated component of computerized machine systems.

Sales of computerized machine tools and service parts for the first quarter of fiscal 2021 increased by 29% and 6%, respectively, compared to the corresponding prior year period, and each included a favorable currency impact of 4%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

The increases in machine tools and service parts were primarily due to increased shipments of Hurco-branded products across all regions where our customers are located.

Sales of computer control systems and software and service fees decreased by 6% each, compared to the corresponding prior year period, and each included a favorable currency impact of 4%, when translating foreign sales to U.S.

Sales of computerized machine tools for the second quarter of fiscal 2021 increased by 62%, compared to the corresponding prior year period, due to an increase in shipments of Hurco, Takumi and Milltronics products across all regions where our customers are located.

Sales of computer control systems and software and service parts for the second quarter of fiscal 2021 increased by 114% and 33%, respectively, compared to the corresponding prior year period.

The increases in sales of computer control systems and software and service parts were primarily due to increased shipments of Hurco and Takumi-branded products across all regions where our customers are located.

Service fees for the second quarter of fiscal 2021 increased by 17%, compared to the corresponding prior year period, as a result of increased aftermarket services provided to our customers throughout Europe.

The increases in each product category described above included a favorable currency impact of 7%, when translating foreign sales to U.S.

Dollars for financial reporting purposes.

The decreases in control systems and software and service fees primarily resulted from decreased demand in aftermarket software and services in North America.

Orders for the first quarter of fiscal 2021 were $57.3 million, an increase of $11.7 million, or 26%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of $2.1 million, or 5%, when translating foreign orders to U.S.

The following table sets forth new orders booked by geographic region for the first quarter ended January 31, 2021 and 2020 (dollars in thousands):

Orders for the second quarter of fiscal 2021 were $65.7 million, an increase of $29.2 million, or 80%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of $3.1 million, or 8%, when translating foreign orders to U.S.

The following table sets forth new orders booked by geographic region for the second quarter ended April 30, 2021 and 2020 (dollars in thousands):

Three Months Ended

Orders in the Americas for the first quarter of fiscal 2021 increased by 31%, compared to the corresponding period in fiscal 2020, primarily due to increased customer demand for Hurco machines.

The increased order levels, similar to the increased sales levels, reflected a higher demand for lathes and VM and VMX machines.

European orders for the first quarter of fiscal 2021 increased by 19%, compared to the corresponding prior year period, and included a favorable currency impact of 8%, when translating foreign orders to U.S.

The year-over-year increase in orders was driven primarily by increased customer demand for Hurco machines in Germany, France and the United Kingdom.

Asian Pacific orders for the first quarter of fiscal 2021 increased by 35%, compared to the corresponding prior year period, and included a favorable currency impact of 7%, when translating foreign orders to U.S.

The year-over-year increase in Asian Pacific orders was driven primarily by an increase in customer demand for Hurco vertical milling machines in China and Southeast Asia, partially offset by decreased demand for Takumi machines in China.

Orders in the Americas for the second quarter of fiscal 2021 increased by 21%, compared to the corresponding period in fiscal 2020, primarily due to increased customer demand for Hurco machines.

The increased order level, similar to the increased sales level, reflected a higher demand for Hurco VM and VMX machines in Canada, Mexico, and the U.S.

European orders for the second quarter of fiscal 2021 increased by 121%, compared to the corresponding prior year period, and included a favorable currency impact of 15%, when translating foreign orders to U.S.

The year-over-year increase in orders was driven primarily by increased customer demand for Hurco and Takumi machines in Germany, the United Kingdom, France and Italy, as well as increased demand for LCM machine tool components and accessories.

Asian Pacific orders for the second quarter of fiscal 2021 increased by 138%, compared to the corresponding prior year period, primarily due to increased customer demand for Hurco vertical milling machines and Takumi machines in China and Taiwan.

Asian Pacific orders for the second quarter of fiscal 2021 included a favorable currency impact of 14%, when translating foreign orders to U.S.

Gross Profit .

Gross profit for the first quarter of fiscal 2021 was $11.5 million, or 21% of sales, compared to $9.2 million, or 21% of sales, for the corresponding prior year period.

Gross profit as a percentage of sales remained relatively unchanged year-over-year on a higher level of sales, as global excess inventory levels continue to apply competitive pricing pressure on the machine tool industry.

Additionally, similar to fiscal 2020, the first quarter of fiscal 2021 gross profit continued to be impacted by the allocation of fixed costs on lower production volumes year-to-date.

Gross profit for the second quarter of fiscal 2021 was $14.8 million, or 26% of sales, compared to $6.7 million, or 18% of sales, for the corresponding prior year period.

The year-over-year increases in gross profit as a percentage of sales reflected improved leverage of fixed overhead costs through higher levels of machine sales, improved pricing due to changes in demand and normalized inventory levels, and the favorable impact of foreign currency translation compared to the corresponding prior year period.

Additionally, approximately $0.8 million of the gross profit improvement for the second quarter is a result of recording the employee retention credit extended to companies under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act and the American Rescue Plan Act of 2021 (the “employee retention act”).

Operating Expenses .

Selling, general, and administrative expenses for the first quarter of fiscal 2021 were $10.6 million, or 20% of sales, compared to $10.8 million, or 25% of sales, in the corresponding fiscal 2020 period, and included an unfavorable currency impact of $0.3 million, when translating foreign expenses to U.S.

Selling, general, and administrative expenses for the second quarter of fiscal 2021 were $11.3 million, or 19% of sales, compared to $10.6 million, or 29% of sales, in the corresponding fiscal 2020 period, and included an unfavorable currency impact of $0.5 million, when translating foreign expenses to U.S.

Dollars for financial reporting purposes.

The year-over-year reduction in selling, general, and administrative expenses was primarily due to operating cost reduction measures implemented in the first two quarters of fiscal 2020, partially offset by increases in incentive compensation.

Selling, general and administrative expenses for the second quarter of fiscal 2021 continued to trend downward as a percentage of sales from the corresponding period in fiscal 2020 as a result of the cost management plans implemented during fiscal 2020 and continued during fiscal 2021.

Additionally, approximately $1.1 million of selling, general, and administrative expense reduction for the second quarter was a result of recording the employee retention credit.

Operating Income (Loss) .

Operating income for the first quarter of fiscal 2021 was $1.0 million compared to an operating loss of $1.7 million for the corresponding period in fiscal 2020.

The increase in operating income was primarily driven by the increased volume of sales.

Other Income, Net .

Other income, net in the first quarter of fiscal 2021 was $0.1 million compared to $0.1 million for the corresponding period in fiscal 2020.

Operating income for the second quarter of fiscal 2021 was $3.5 million, or 6% of sales, compared to an operating loss of $3.9 million, or (10)% of sales, for the corresponding prior year period.

The year-over-year increase from an operating loss to operating income for the second quarter was primarily due to an increase of sales volume of Hurco machines.

As discussed above, operating income for the second quarter of fiscal 2021 included a benefit of $1.9 million related to the employee retention credit recorded during the second quarter of fiscal 2021.

Other Income (Expense), Net .

Other expense, net in the second quarter of fiscal 2021 was $0.2 million compared to $0.8 million for the corresponding period in fiscal 2020.

The decrease in other expense, net was due mainly to a reduction in foreign currency exchange losses in the second quarter of fiscal 2021, compared to the corresponding prior year period.

Income Taxes .

The effective tax rate for the first quarter of fiscal 2021 was 45%, compared to 40% in the corresponding prior year period.

The year-over-year increase in the effective tax rate was primarily due to changes in geographic mix of income and loss which includes jurisdictions with differing tax rates and other events that are not consistent from period to period, such as changes in income tax laws to address the unfavorable impact of the COVID-19 pandemic and a discrete income tax expense related to unvested stock awards in the first quarter of fiscal 2021.

The effective tax rate for the second quarter of fiscal 2021 was 28%, compared to 16% in the corresponding prior year period.

The year-over-year increase in the effective tax rate was primarily due to changes in geographic mix of income and loss that includes jurisdictions with differing tax rates, conditional reduced tax rates, and other events that are not consistent from period to period, such as changes in income tax laws to address the unfavorable impact of the COVID-19 pandemic and a discrete income tax expense related to unvested stock awards.

Six Months Ended April 30, 2021 Compared to Six Months Ended April 30, 2020

Sales and Service Fees.

Sales and service fees for the first six months of fiscal 2021 were $112.0 million, an increase of $31.2 million, or 39%, compared to the corresponding prior year period, and included a favorable currency impact of $4.4 million, or 5%, when translating foreign sales to U.S.

Dollars for financial reporting purposes.

Sales and Service Fees by Geographic Region

The following table sets forth net sales and service fees by geographic region for the first six months ended April 30, 2021 and 2020 (dollars in thousands):

Six Months Ended

Sales in the Americas for the first six months of fiscal 2021 increased by 26%, compared to the corresponding period in fiscal 2020.

The increase in sales in the Americas for the first six months of fiscal 2021 was due to increased volume of shipments of Hurco VM and VMX machines in Canada, Mexico, and the U.S.

European sales for the first six months of fiscal 2021 increased by 53%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of 10%, when translating foreign sales to U.S.

Dollars for financial reporting purposes.

Asian Pacific sales for the first six months of fiscal 2021 increased by 35%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of 7%, when translating foreign sales to U.S.

Dollars for financial reporting purposes.

The year-over-year increase in Asian Pacific sales was primarily due to increased sales of Hurco and Takumi machines in China and Taiwan.

Sales and Service Fees by Product Category

The following table sets forth net sales and service fees by product category for the first six months ended April 30, 2021 and 2020 (dollars in thousands):

Six Months Ended

Computerized Machine Tools

Computer Control Systems and Software †

Service Parts

† Amounts shown do not include computer control systems and software sold as an integrated component of computerized machine systems.

Sales of computerized machine tools for the first six months of fiscal 2021 increased by 44%, compared to the corresponding prior year period, due to an increase in shipments of Hurco, Takumi and Milltronics products across all regions where our customers are located.

Sales of computer control systems and software and service parts for the first six months fiscal 2021 increased by 39% and 19%, respectively, compared to the corresponding prior year period.

Increases in each of the product categories described above included a favorable currency impact of 5%, when translating foreign sales to U.S.

Dollars for financial reporting purposes.

Orders for the first six months of fiscal 2021 were $123.0 million, an increase of $40.9 million, or 50%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of $5.1 million, or 6%, when translating foreign orders to U.S.

The following table sets forth new orders booked by geographic region for the first six months ended April 30, 2021 and 2020 (dollars in thousands):

Six Months Ended

Orders in the Americas for the first six months of fiscal 2021 increased by 27%, compared to the corresponding period in fiscal 2020, primarily due to increased customer demand for Hurco machines.

The increased order levels, similar to the increased sales levels, reflected a higher demand for Hurco VM and VMX machines in Canada, Mexico, and the U.S.

European orders for the first six months of fiscal 2021 increased by 61%, compared to the corresponding prior year period, and included a favorable currency impact of 11%, when translating foreign orders to U.S.

Asian Pacific orders for the first six months of fiscal 2021 increased by 84%, compared to the corresponding prior year period, primarily due to increased customer demand for Hurco vertical milling machines and Takumi machines in China and Taiwan.

Asian Pacific orders for the first six months of fiscal 2021 included a favorable currency impact of 10%, when translating foreign orders to U.S.

Gross Profit .

Gross profit for the first six months of fiscal 2021 was $26.3 million, or 24% of sales, compared to $15.9 million, or 20% of sales, for the corresponding prior year period.

The year-over-year increase in gross profit as a percentage of sales reflected improved leverage of fixed overhead costs through higher levels of machine sales, improved pricing due to changes in demand and normalized inventory levels, and the favorable impact of foreign currency translation compared to the corresponding prior year period.

Additionally, approximately $0.8 million of the gross profit improvement for the first six months of fiscal 2021 was a result of recording the employee retention credit.

Operating Expenses .

Selling, general, and administrative expenses for the first six months of fiscal 2021 were $21.8 million, or 19% of sales, compared to $21.4 million, or 27% of sales, in the corresponding fiscal 2020 period, and included an unfavorable currency impact of $0.8 million, when translating foreign expenses to U.S.

Dollars for financial reporting purposes.

Selling, general and administrative expenses for the first six months of fiscal 2021 continued to trend downward as a percentage of sales from the corresponding period in fiscal 2020 as a result of the cost management plans implemented during fiscal 2020 and continued during fiscal 2021.

Additionally, approximately $1.1 million of the selling, general, and administrative expense reduction for the first six months of fiscal 2021 was a result of recording the employee retention credit.

Operating Income (Loss) .

Operating income for the first six months of fiscal 2021 was $4.5 million, or 4% of sales, compared to operating loss of $5.6 million, or (7)% of sales, for the corresponding prior year period.

The year-over-year increase from an operating loss to operating income for the first six months was primarily due to an increase of sales volume of Hurco machines.

As discussed above, operating income for the first six months of fiscal 2021 included a benefit of $1.9 million related to the employee retention credit recorded during the second quarter of fiscal 2021.

Other Income (Expense), Net .

Other expense, net in the first six months of fiscal 2021 was less than $0.1 million compared to $0.7 million for the corresponding period in fiscal 2020.

The decrease in other expense, net was due mainly to a reduction in foreign currency exchange losses in the first six months of fiscal 2021, compared to the corresponding prior year period.

Income Taxes .

The effective tax rate for the first six months of fiscal 2021 was 33%, compared to 22% in the corresponding prior year period.

LIQUIDITY AND CAPITAL RESOURCES

At January 31, 2021, we had cash and cash equivalents of $66.6 million, compared to $57.9 million at October 31, 2020.

At April 30, 2021, we had cash and cash equivalents of $73.9 million, compared to $57.9 million at October 31, 2020.

Approximately 12% of the $73.9 million of cash and cash equivalents was denominated in U.S.

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We do not believe that the indefinite reinvestment of these funds offshore impairs our ability to meet our domestic working capital needs.

Working capital was $204.0 million at January 31, 2021 compared to $201.0 million at October 31, 2020.

The increase in working capital was primarily driven by an increase in prepaid expenses, offset by a reduction in inventory and an increase in accounts payable.

Capital expenditures of $0.6 million during the first three months of fiscal 2021 were primarily for capital improvements in existing facilities and software development costs.

Working capital was $206.2 million at April 30, 2021 compared to $201.0 million at October 31, 2020.

The increase in working capital was primarily driven by the increase in cash and accounts receivable, which was offset by a decrease in inventory and increases in accounts payable and customer deposits.

Capital expenditures of $1.3 million during the first six months of fiscal 2021 were primarily for capital improvements in existing facilities and software development costs.

We funded these expenditures with cash on hand.

In addition, during the three months ended January 31, 2021, we paid cash dividends to our shareholders of $0.9 million.

On March 12, 2021, we announced that our Board of Directors approved a share repurchase program in an aggregate amount of up to $7.0 million.

Repurchases under the program may be made in the open market or through privately-negotiated transactions from time to time through March 10, 2023, subject to applicable laws, regulations and contractual provisions.

The program may be amended, suspended or discontinued at any time and does not commit us to repurchase any shares of our common stock.

We did not repurchase any shares of our common stock under this program during the second quarter of fiscal 2021.

In addition, during the six months ended April 30, 2021, we paid cash dividends to our shareholders of $1.8 million.

Future dividends are subject to approval of our Board of Directors and will depend upon many factors, including our results of operations, financial condition, capital requirements, regulatory and contractual restrictions, our business strategy and other factors deemed relevant by our Board of Directors from time to time.

13 unchanged sentences

(4) requiring that we maintain a minimum tangible net worth of $170.0 million;

and (5) providing that if the total amount of indebtedness outstanding owed by the Company and its Taiwanese and Chinese subsidiaries to the lender or its affiliates (the “Specified Outstanding Amount”) exceeds $25.0 million, then the Company will not permit the amount of unrestricted cash-on-hand of the Company and its subsidiaries to be less than the Specified Outstanding Amount.

and (5) providing that if the Specified Outstanding Amount exceeds $25.0 million, then the Company will not permit the amount of unrestricted cash-on-hand of the Company and its subsidiaries to be less than the Specified Outstanding Amount.

We may use the proceeds from advances under the 2018 Credit Agreement for general corporate purposes.

1 unchanged sentence

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.

As of January 31, 2021, our existing credit facilities consisted of our €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.

We had no debt or borrowings under any of our credit facilities at January 31, 2021.

At January 31, 2021, we had an aggregate of $52.2 million available for borrowing under our credit facilities and were in compliance with all covenants relating thereto.

As of April 30, 2021, our existing credit facilities consisted of our €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.

We had no debt or borrowings under any of our credit facilities at April 30, 2021.

At April 30, 2021, we had an aggregate of approximately $52.2 million available for borrowing under our credit facilities and were in compliance with all covenants relating thereto.

We have an international cash pooling strategy that generally provides access to available cash deposits and credit facilities when needed in the U.S., Europe or Asia Pacific.

5 unchanged sentences

If our future experience differs materially from these estimates and assumptions, our results of operations and financial condition would be affected.

There were no material changes to our critical accounting policies during the first three months of fiscal 2021.

There were no material changes to our critical accounting policies during the first six months of fiscal 2021.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

3 unchanged sentences

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

As of January 31, 2021, we had 15 outstanding third party payment guarantees totaling approximately $0.8 million.

As of April 30, 2021, we had 13 outstanding third party payment guarantees totaling approximately $0.7 million.

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

35 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis