What changed in this filing

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Item 1. Financial Statements

2021-09-03 compared with 2021-06-04 · 80 added, 72 removed, 504 unchanged (23% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Sales and service fees

5 unchanged sentences

Investment income

Other expense, net

Other income (expense), net

Income (loss) before income taxes

9 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Net income (loss)

51 unchanged sentences

no par value, $ .10 stated value per share, 12,500,000 shares authorized;

6,674,741 and 6,636,906 shares issued and 6,601,406 and 6,565,163 shares outstanding, as of April 30, 2021 and October 31, 2020, respectively

6,674,741 and 6,636,906 shares issued and 6,601,406 and 6,565,163 shares outstanding, as of July 31, 2021 and October 31, 2020, respectively

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Cash flows from operating activities:

27 unchanged sentences

Taxes paid related to net settlement of restricted shares

Proceeds from exercise of common stock options

Stock repurchases

8 unchanged sentences

(In thousands, except shares outstanding)

Three Months Ended April 30, 2021 and 2020

Three Months Ended July 31, 2021 and 2020

Comprehensive

Income (Loss)

Balances, January 31, 2020

Balances, April 30, 2020

Net income (loss)

1 unchanged sentence

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

Exercise of common stock options

Stock repurchases

Dividends paid

Balances, July 31, 2020

Balances, April 30, 2021

Balances, January 31, 2021

Net income (loss)

1 unchanged sentence

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

Exercise of common stock options

Stock repurchases

Dividends paid

Balances, April 30, 2021

Six Months Ended April 30, 2021 and 2020

Balances, July 31, 2021

Nine Months Ended July 31, 2021 and 2020

Comprehensive

4 unchanged sentences

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

Exercise of common stock options

Stock repurchases

Dividends paid

Balances, April 30, 2020

Balances, July 31, 2020

Balances, October 31, 2020

2 unchanged sentences

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

Exercise of common stock options

Stock repurchases

Dividends paid

Balances, April 30, 2021

Balances, July 31, 2021

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

12 unchanged sentences

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 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.

Because of the potential for extended vulnerability, we have closely evaluated the estimates we have made in preparing the financial statements as of April 30, 2021 with the understanding that these estimates could change in the near term.

During the nine 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.

Because of the potential for extended vulnerability, we have closely evaluated the estimates we have made in preparing the financial statements as of July 31, 2021, with the understanding that these estimates could change in the near term.

We will continue to evaluate and disclose any uncertainty associated with key assumptions underlying fair value estimates, 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.

The condensed financial information as of April 30, 2021 and for the three and six months ended April 30, 2021 and April 30, 2020 is unaudited.

The condensed financial information as of July 31, 2021 and for the three and nine months ended July 31, 2021 and July 31, 2020 is unaudited.

However, in our opinion, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position, results of operations, changes in shareholders’ equity, and cash flows for and at the end of the interim periods.

41 unchanged sentences

We also assess on a quarterly basis whether there have been adverse developments regarding the risk of a counterparty default.

We had forward contracts outstanding as of April 30, 2021, denominated in Euros, Pounds Sterling and New Taiwan Dollars with set maturity dates ranging from May 2021 through April 2022.

We had forward contracts outstanding as of July 31, 2021, denominated in Euros, Pounds Sterling and New Taiwan Dollars with set maturity dates ranging from August 2021 through July 2022.

The contract amounts, expressed at forward rates in U.S.

Dollars at April 30, 2021, were $ 14.9 million for Euros, $ 7.3 million for Pounds Sterling and $ 23.0 million for New Taiwan Dollars.

At April 30, 2021, we had approximately $ 629,000 of losses, net of tax, related to cash flow hedges deferred in Accumulated other comprehensive loss.

Dollars at July 31, 2021, were $ 16.2 million for Euros, $ 9.5 million for Pounds Sterling and $ 26.0 million for New Taiwan Dollars.

At July 31, 2021, we had approximately $ 906,000 of losses, net of tax, related to cash flow hedges deferred in Accumulated other comprehensive loss.

Included in this amount was $ 402,000 of unrealized loss, net of tax, related to cash flow hedge instruments that remain subject to currency fluctuation risk.

The majority of these deferred gains will be recorded as an adjustment to Cost of sales and service in periods through April 2022, when the corresponding inventory that is the subject of the related hedge contracts is sold, as described above.

The majority of these deferred losses will be recorded as an adjustment to Cost of sales and service in periods through July 2022, when the corresponding inventory that is the subject of the related hedge contracts is sold, as described above.

We are also exposed to foreign currency exchange risk related to our investment in net assets in foreign countries.

4 unchanged sentences

This forward contract matures in November 2021.

As of April 30, 2021, we had a realized gain of $ 813,000 and an unrealized loss of $ 42,000 , net of tax, recorded as cumulative translation adjustments in Accumulated other comprehensive loss related to this forward contract.

As of July 31, 2021, we had a realized gain of $ 813,000 and a minimal amount of unrealized loss 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 Condensed Consolidated Statements of Operations consistent with the transaction gain or loss on the related receivables and payables denominated in foreign currencies.

We had forward contracts outstanding not designated as hedges under FASB guidance as of April 30, 2021, denominated in Euros, Pounds Sterling, and New Taiwan Dollar with set maturity dates ranging from May 2021 through April 2022.

We had forward contracts outstanding not designated as hedges under FASB guidance as of July 31, 2021, denominated in Euros, Pounds Sterling, and New Taiwan Dollar with set maturity dates ranging from August 2021 through May 2022.

The contract amounts, expressed at forward rates in U.S.

Dollars at April 30, 2021, totaled $ 30.8 million.

Dollars at July 31, 2021, totaled $ 37.5 million.

Fair Value of Derivative Instruments

We recognize the fair value of derivative instruments as assets and liabilities on a gross basis on our Condensed Consolidated Balance Sheets.

As of April 30, 2021 and October 31, 2020, all derivative instruments were recorded at fair value on our Condensed Consolidated Balance Sheets as follows (in thousands):

April 30, 2021

As of July 31, 2021 and October 31, 2020, all derivative instruments were recorded at fair value on our Condensed Consolidated Balance Sheets as follows (in thousands):

July 31, 2021

October 31, 2020

16 unchanged sentences

Effect of Derivative Instruments on the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Changes in Shareholders’ Equity and Condensed Consolidated Statements of Operations

Derivative instruments had the following effects on our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Changes in Shareholders’ Equity, and Condensed Consolidated Statements of Operations, net of tax, during the three months ended April 30, 2021 and 2020 (in thousands):

Location of Gain

19 unchanged sentences

– Net investment

We did no t recognize any gains or losses as a result of hedges deemed ineffective for either of the three months ended April 30, 2021 or 2020.

We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the three months ended April 30, 2021 and 2020 on derivative instruments not designated as hedging instruments (in thousands):

We did no t recognize any gains or losses as a result of hedges deemed ineffective for either of the three months ended July 31, 2021 or 2020.

We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the three months ended July 31, 2021 and 2020 on derivative instruments not designated as hedging instruments (in thousands):

Location of Gain

7 unchanged sentences

Other expense, net

The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the three months ended April 30, 2021 (in thousands):

The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the three months ended July 31, 2021 (in thousands):

Foreign Currency

Balance, January 31, 2021

Balance, April 30, 2021

Other comprehensive income (loss) before reclassifications

Reclassifications

Balance, April 30, 2021

Derivative instruments had the following effects on our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Changes in Shareholders’ Equity, and Condensed Consolidated Statements of Operations, net of tax, during the six months ended April 30, 2021 and 2020 (in thousands):

Balance, July 31, 2021

Derivative instruments had the following effects on our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Changes in Shareholders’ Equity, and Condensed Consolidated Statements of Operations, net of tax, during the nine months ended July 31, 2021 and 2020 (in thousands):

Location of Gain

10 unchanged sentences

Income (Loss)

Six Months Ended

Nine Months Ended

Designated as Hedging Instruments:

5 unchanged sentences

– Net investment

We did no t recognize any gains or losses as a result of hedges deemed ineffective for either of the six months ended April 30, 2021 or 2020.

We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the six months ended April 30, 2021 and 2020 on derivative instruments not designated as hedging instruments (in thousands):

We did no t recognize any gains or losses as a result of hedges deemed ineffective for either of the nine months ended July 31, 2021 or 2020.

We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the nine months ended July 31, 2021 and 2020 on derivative instruments not designated as hedging instruments (in thousands):

Location of Gain

3 unchanged sentences

Recognized in Operations

Six Months Ended

Nine Months Ended

Not Designated as Hedging Instruments:

1 unchanged sentence

Other expense, net

The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the six months ended April 30, 2021 (in thousands):

The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the nine months ended July 31, 2021 (in thousands):

Foreign Currency

Balance, October 31, 2020

1 unchanged sentence

Reclassifications

Balance, April 30, 2021

Balance, July 31, 2021

EQUITY INCENTIVE PLAN

12 unchanged sentences

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.

A summary of stock option activity for the six-month period ended April 30, 2021, is as follows:

A summary of stock option activity for the nine-month period ended July 31, 2021, is as follows:

Weighted Average

5 unchanged sentences

Options cancelled

Outstanding at April 30, 2021

Summarized information about outstanding stock options as of April 30, 2021, that have already vested and are currently exercisable, are as follows:

Outstanding at July 31, 2021

Summarized information about outstanding stock options as of July 31, 2021, that have already vested and are currently exercisable, are as follows:

Options Already Vested and

4 unchanged sentences

Intrinsic value of outstanding options

The intrinsic value of an outstanding stock option is calculated as the difference between the stock price as of April 30, 2021 and the exercise price of the option.

The intrinsic value of an outstanding stock option is calculated as the difference between the stock price as of July 31, 2021 and the exercise price of the option.

On March 11, 2021, the Compensation Committee granted a total of 9,708 shares of time-based restricted stock to our non-employee directors.

18 unchanged sentences

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 $ 29.30 per share.

A reconciliation of our restricted stock and PSU activity and related information for the six-month period ended April 30, 2021 is as follows:

A reconciliation of our restricted stock and PSU activity and related information for the nine-month period ended July 31, 2021 is as follows:

Weighted Average Grant

6 unchanged sentences

Shares withheld

Unvested at April 30, 2021

During the first six months of fiscal 2021 and 2020, we recorded approximately $ 1.4 million and $ 0.8 million, respectively, of stock-based compensation expense related to grants under the 2016 Equity Plan.

As of April 30, 2021, there was an estimated $ 4.4 million of total unrecognized stock-based compensation cost that we expect to recognize by the end of the first quarter of fiscal 2024.

Unvested at July 31, 2021

During the nine months of fiscal 2021 and 2020, we recorded approximately $ 2.1 million and $ 1.4 million, respectively, of stock-based compensation expense related to grants under the 2016 Equity Plan.

As of July 31, 2021, there was an estimated $ 3.7 million of total unrecognized stock-based compensation cost that we expect to recognize by the end of the first quarter of fiscal 2024.

EARNINGS PER SHARE

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands, except per share amounts)

6 unchanged sentences

ACCOUNTS RECEIVABLE

Accounts receivable are net of allowances for doubtful accounts of $ 1.6 million as of April 30, 2021 and $ 1.4 million as of October 31, 2020.

Accounts receivable are net of allowances for doubtful accounts of $ 1.6 million as of July 31, 2021 and $ 1.4 million as of October 31, 2020.

Inventories, priced at the lower of cost (first-in, first-out method) or net realizable value, are summarized below (in thousands):

19 unchanged sentences

All our leases for which we are a lessee are classified as operating leases under the guidance in Topic 840.

We recorded total operating lease expense of $ 2.6 million and $ 2.5 million for the six months ended April 30, 2021 and 2020, respectively, which is classified within Cost of sales and service and Selling, general and administrative expenses within the Condensed Consolidated Statements of Operations.

We recorded total operating lease expense of $ 3.9 million and $ 3.7 million for the nine months ended July 31, 2021 and 2020, respectively, which is classified within Cost of sales and service and Selling, general and administrative expenses within the Condensed Consolidated Statements of Operations.

Operating lease expense includes short-term leases and variable lease payments which are immaterial.

There have been no lease costs capitalized on the Condensed Consolidated Balance Sheets as of April 30, 2021.

The following table summarizes supplemental cash flow information and non-cash activity related to operating leases for the six months ended April 30, 2021 (in thousands):

Six Months Ended

April 30, 2021

There were no lease costs capitalized on the Condensed Consolidated Balance Sheets as of July 31, 2021.

The following table summarizes supplemental cash flow information and non-cash activity related to operating leases for the nine months ended July 31, 2021 (in thousands):

Nine Months Ended

July 31, 2021

Operating cash flow information:

2 unchanged sentences

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 April 30, 2021 (in thousands):

The following table summarizes the maturities of undiscounted cash flows of lease commitments reconciled to the total lease liability as of July 31, 2021 (in thousands):

Remainder of 2021

2 unchanged sentences

Present value of operating lease liabilities

As of April 30, 2021, the weighted-average remaining term of our lease portfolio was approximately 4.1 years and the weighted-average discount rate was approximately 1.6 %.

As of July 31, 2021, the weighted-average remaining term of our lease portfolio was approximately 4.0 years and the weighted-average discount rate was approximately 1.6 %.

SEGMENT INFORMATION

4 unchanged sentences

Our computer control systems and software products are primarily sold as integral components of our computerized machine tool products.

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, and training and applications support.

GUARANTEES AND PRODUCT WARRANTIES

1 unchanged sentence

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

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

As of July 31, 2021, we had 12 outstanding third party payment guarantees totaling approximately $ 1.0 million.

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

8 unchanged sentences

A reconciliation of the changes in our warranty reserve is as follows (in thousands):

Six Months Ended

Nine Months Ended

Balance, beginning of period

23 unchanged sentences

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

As a result, 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.

As of April 30, 2021, there were no borrowings under any of our credit facilities and there was approximately $ 52.2 million of available borrowing capacity thereunder.

As a result, as of July 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.

As of July 31, 2021, there were no borrowings under any of our credit facilities and there was approximately $ 52.2 million of available borrowing capacity thereunder.

Our provision for income taxes and effective tax rate are affected by the geographical composition of pre-tax income which 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.

7 unchanged sentences

As a result, we recorded a benefit of $ 2.9 million related to the employee retention credit during the

second quarter of fiscal 2021.

During the second quarter of fiscal 2021, we assessed and recorded the estimated year to date impact of recent changes in income tax laws to address the unfavorable impact of the COVID-19 pandemic.

nine months of fiscal 2021.

During the third quarter of fiscal 2021, we assessed and recorded the estimated year to date impact of recent changes in income tax laws to address the unfavorable impact of the COVID-19 pandemic.

The CARES Act included economic relief and modifications, most notably the net operating loss carryback provisions for the U.S.

We recorded an income tax expense during the six months of fiscal 2021 of $ 1.5 million compared to an income tax benefit of $ 1.4 million for the same period in 2020.

Our effective tax rate for the first six months of fiscal 2021 was 33 %, compared to 22 % 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, 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 in fiscal 2021.

Our unrecognized tax benefits were $ 211,000 as of April 30, 2021 and $ 204,000 as of October 31, 2020, and in each case included accrued interest.

We recorded an income tax expense during the nine months of fiscal 2021 of $ 2.6 million compared to an income tax benefit of $ 2.3 million for the same period in 2020.

Our effective tax rate for the nine months of fiscal 2021 was 36 %, compared to 46 % in the corresponding prior year period.

The year-over-year change in the effective tax rate was primarily due to changes in geographic mix of income and loss that includes jurisdictions with differing tax rates, various discrete income tax expense items, and more specifically related to the prior year period, and changes in income tax laws to address the unfavorable impact of the COVID-19 pandemic.

Our unrecognized tax benefits were $ 268,000 as of July 31, 2021 and $ 204,000 as of October 31, 2020, and in each case included accrued interest.

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

As of April 30, 2021, the gross amount of interest accrued, reported in Accrued expenses, was approximately $ 39,000 , which did not include the federal tax benefit of interest deductions.

As of July 31, 2021, the gross amount of interest accrued, reported in Accrued expenses, was approximately $ 41,000 , which did not include the federal tax benefit of interest deductions.

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

7 unchanged sentences

and Level 3, defined as unobservable inputs in which little or no market data exist, therefore requiring an entity to develop its own assumptions.

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 April 30, 2021 and October 31, 2020 (in thousands):

April 30, 2021

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 July 31, 2021 and October 31, 2020 (in thousands):

July 31, 2021

October 31, 2020

April 30, 2021

July 31, 2021

October 31, 2020

6 unchanged sentences

We have derivative financial instruments in the form of foreign currency forward exchange contracts as described in Note 3 of Notes to the Condensed Consolidated Financial Statements.

Dollar equivalent notional amounts of these contracts was $ 79.1 million and $ 70.8 million at April 30, 2021 and October 31, 2020, respectively.

Dollar equivalent notional amounts of these contracts was $ 93.6 million and $ 70.8 million at July 31, 2021 and October 31, 2020, respectively.

The fair value of our foreign currency forward exchange contracts and the related currency positions are subject to offsetting market risk resulting from foreign currency exchange rate volatility.

29 unchanged sentences

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

There have been no other significant changes in the Company’s critical accounting policies and estimates during the six months ended April 30, 2021.

There have been no other significant changes in the Company’s critical accounting policies and estimates during the nine months ended July 31, 2021.

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 1. Financial Statements