What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-09-03 compared with 2021-06-04 · 99 added, 92 removed, 156 unchanged (55% of the section changed)

13 unchanged sentences

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

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.

During the nine months of fiscal 2021, approximately 49% 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.

8 unchanged sentences

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.

Finally, through our wholly-owned subsidiary in Italy, LCM, we produce high value machine tool components and accessories.

We principally sell our products through more than 200 independent agents and distributors throughout the Americas, Europe, and Asia.

15 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 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.

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

We are currently participating in challenging global market conditions, with continued COVID-19 business restrictions, vendor delays, chronic logistics issues and inflationary increases in cost of materials.

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.

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, including variants and surges, 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 April 30, 2021 Compared to Three Months Ended April 30, 2020

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

Sales and Service Fees.

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.

Sales and service fees for the third quarter of fiscal 2021 were $54.2 million, an increase of $8.8 million, or 19%, compared to the corresponding prior year period, and included a favorable currency impact of $2.3 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 second quarter ended April 30, 2021 and 2020 (dollars in thousands):

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

Three Months Ended

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.

Sales in the Americas for the third quarter of fiscal 2021 increased by 7%, compared to the corresponding period in fiscal 2020.

The increase in sales in the Americas for the third quarter of fiscal 2021 was due to an increased volume of machine shipments, both Hurco and Milltronics, and an increase in sales of ProCobots automation solutions.

The improved sales volume of machines primarily reflected increased shipments of Hurco VM and VMX machines as well as Milltronics toolroom machines.

European sales for the third quarter of fiscal 2021 increased by 45%, 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.

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.

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, and Italy, as well as increased shipments of machine tool components and accessories manufactured by LCM.

The improved sales volume of machines was primarily attributable to increased shipments of Hurco Lathes, VM and VMX machines.

Asian Pacific sales for the third quarter of fiscal 2021 decreased by 17%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of 5%, 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.

The year-over-year decrease in Asian Pacific sales for the third quarter of fiscal 2021 was primarily due to decreased sales of Hurco and Takumi machines in China.

Sales and Service Fees by Product Category

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):

The following table sets forth net sales and service fees by product category for the third quarter ended July 31, 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 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.

Sales of computerized machine tools for the third quarter of fiscal 2021 increased by 20%, compared to the corresponding prior year period, due mainly to increased volume of shipments of Hurco, Takumi and Milltronics products, particularly in the Americas and Europe.

Sales of computer control systems and software and service fees for the third quarter of fiscal 2021 increased by 45% and 43%, respectively, compared to the corresponding prior year period, primarily due to increased software sales and services provided across all regions where our customers are located.

Service parts for the third quarter of fiscal 2021 increased by 7%, compared to the corresponding prior year period, due mainly to increased aftermarket parts sales for Hurco products in Germany and France.

The increases in each product category described above included a favorable currency impact of 5%, when translating foreign sales to U.S.

Dollars for financial reporting purposes.

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):

Orders for the third quarter of fiscal 2021 were $66.7 million, an increase of $30.6 million, or 85%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of $2.9 million, or 8%, when translating foreign orders to U.S.

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

Three Months Ended

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.

Orders in the Americas for the third quarter of fiscal 2021 increased by 46%, compared to the corresponding period in fiscal 2020.

The increased order levels reflected higher demand for all categories of Hurco, Takumi, and Milltronics machines as well as increased demand for ProCobots automation solutions.

European orders for the third quarter of fiscal 2021 increased by 140%, compared to the corresponding prior year period, and included a favorable currency impact of 17%, when translating foreign orders to U.S.

The year-over-year increases in orders were 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 third quarter of fiscal 2021 increased by 58%, compared to the corresponding prior year period, primarily due to increased customer demand for Hurco vertical milling machines and Takumi machines in China and Southeast Asia.

Asian Pacific orders for the third quarter of fiscal 2021 included a favorable currency impact of 9%, when translating foreign orders to U.S.

Gross Profit .

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”).

Gross profit for the third quarter of fiscal 2021 was $13.0 million, or 24% of sales, compared to $11.1 million, or 24% of sales, for the corresponding prior year period.

The year-over-year increase in gross profit 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 periods.

Approximately $0.4 million of the gross profit improvement for the third quarter of fiscal 2021 was a result of recording the employee retention credit extended to the Company under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act and the American Rescue Plan Act of 2021 (the “employee retention credit”).

The improvement in gross profit as a percentage of sales is partially offset by recent inflationary increases in cost of materials and high costs associated with transporting finished goods on a global basis.

Operating Expenses .

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.

Selling, general, and administrative expenses for the third quarter of fiscal 2021 were $10.3 million, or 19% of sales, compared to $9.6 million, or 21% of sales, in the corresponding fiscal 2020 period, and included an unfavorable currency impact of $0.4 million, when translating foreign expenses to U.S.

Dollars for financial reporting purposes.

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 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.

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

Additionally, approximately $0.6 million of the selling, general, and administrative expense reduction for the third quarter of fiscal 2021 was a result of recording the employee retention credit.

Operating Income .

Operating income for the third quarter of fiscal 2021 was $2.6 million, or 5% of sales, compared to $1.4 million, or 3% of sales, for the corresponding prior year period.

The year-over-year increase in operating income for the third quarter was primarily due to increases in the sales volume of Hurco, Takumi and Milltronics machines, LCM components and accessories, and ProCobots automation solutions.

As discussed above, operating income for the third quarter of fiscal 2021 included a benefit of $1.0 million, related to the employee retention credit recorded during the third 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.

Other income, net in the third quarter of fiscal 2021 was less than $0.1 million, compared to other expense, net of $0.2 million in the corresponding period in fiscal 2020.

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

Income Taxes .

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

The effective tax rate for the third quarter of fiscal 2021 was 41%, compared to (76)% 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.

Nine Months Ended July 31, 2021 Compared to Nine Months Ended July 31, 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.

Sales and service fees for the nine months of fiscal 2021 were $166.2 million, an increase of $40.0 million, or 32%, compared to the corresponding prior year period, and included a favorable currency impact of $6.7 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.

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

Nine Months Ended

Sales in the Americas for the nine months of fiscal 2021 increased by 19%, compared to the corresponding period in fiscal 2020.

The increase in sales in the Americas for the nine months of fiscal 2021 was due to an increased volume of machine shipments, both Hurco and Milltronics, and an increase in sales of ProCobots automation solutions.

The improved sales volume of machines primarily reflected increased shipments of Hurco VM and VMX machines as well as Milltronics toolroom machines.

European sales for the nine months of fiscal 2021 increased by 50%, 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.

The improved sales volume of machines was primarily attributable to increased shipments of Hurco Lathes, VM and VMX machines.

Asian Pacific sales for the nine months of fiscal 2021 increased by 14%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of 6%, 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.

The year-over-year increase in sales for the nine months of fiscal 2021 was attributable to increased shipments of Hurco machines in India and Southeast Asia.

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

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

Nine Months Ended

Computerized Machine Tools

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† 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.

Sales of computerized machine tools for the nine months of fiscal 2021 increased by 35%, compared to the corresponding prior year period, due to an increased volume of 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 nine months of fiscal 2021 increased by 41% and 15%, respectively, compared to the corresponding prior year period, due mainly to increased aftermarket sales for Hurco and Takumi products across all regions where our customers are located.

Service fees for the nine months of fiscal 2021 increased by 15%, compared to the corresponding prior year period, mainly due to increased services provided to customers in Europe for Hurco, Takumi and LCM products.

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.

Orders for the nine months of fiscal 2021 were $189.8 million, an increase of $71.5 million, or 61%, compared to the corresponding period in fiscal 2020, and included a favorable currency impact of $8.0 million, or 7%, when translating foreign orders to U.S.

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

Nine Months Ended

Orders in the Americas for the nine months of fiscal 2021 increased by 33%, compared to the corresponding period in fiscal 2020.

The increased order levels reflected higher demand for all categories of Hurco, Takumi, and Milltronics machines as well as increased demand for ProCobots automation solutions.

European orders for the nine months of fiscal 2021 increased by 83%, compared to the corresponding prior year period, and included a favorable currency impact of 13%, 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.

Asian Pacific orders for the nine months of fiscal 2021 increased by 75%, compared to the corresponding prior year period, primarily due to increased customer demand for Hurco vertical milling machines and Takumi machines in China and Southeast Asia.

Asian Pacific orders for the nine 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.

Gross profit for the nine months of fiscal 2021 was $39.3 million, or 24% of sales, compared to $26.9 million, or 21% of sales, for the corresponding prior year period.

Additionally, approximately $1.2 million of the gross profit improvement for the nine 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.

Selling, general, and administrative expenses for the nine months of fiscal 2021 were $32.2 million, or 19% of sales, compared to $31.1 million, or 25% of sales, in the corresponding fiscal 2020 period, and included an unfavorable currency impact of $1.1 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.

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

Additionally, approximately $1.7 million of the selling, general, and administrative expense reduction for the nine 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.

Operating income for the nine months of fiscal 2021 was $7.1 million, or 4% of sales, compared to operating loss of $4.1 million, or (3)% of sales, for the corresponding prior year period.

The year-over-year increase from an operating loss to operating income for the nine month period was primarily due to increases in the of sales volume of Hurco, Takumi and Milltronics machines, LCM components and accessories, and ProCobots automation solutions.

As discussed above, operating income for the nine months of fiscal 2021 included a benefit of $2.9 million related to the employee retention credit recorded during 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.

Other expense, net in the nine months of fiscal 2021 was less than $0.1 million compared to $0.9 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 nine 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.

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

LIQUIDITY AND CAPITAL RESOURCES

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

At July 31, 2021, we had cash and cash equivalents of $80.5 million, compared to $57.9 million at October 31, 2020.

Approximately 25% of the $80.5 million of cash and cash equivalents was denominated in U.S.

1 unchanged sentence

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 $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.

Working capital was $207.3 million at July 31, 2021 compared to $201.0 million at October 31, 2020.

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

Capital expenditures of $1.8 million during the nine months of fiscal 2021 were primarily for capital improvements in existing facilities and software development costs.

We funded these expenditures with cash on hand.

2 unchanged sentences

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.

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

In addition, during the nine months ended July 31, 2021, we paid cash dividends to our shareholders of $2.7 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.

On December 31, 2018, we and our subsidiary Hurco B.V.

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

entered into the 2018 Credit Agreement with Bank of America, N.A., as the lender, which was subsequently amended on each of March 13, 2020 and December 23, 2020.

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

10 unchanged sentences

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

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.

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 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.

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.

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

At July 31, 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 six months of fiscal 2021.

There were no material changes to our critical accounting policies during the nine 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 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.

5 unchanged sentences

Certain statements made in this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the statements.

Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may

cause our actual results, performance or achievements to be materially different from those expressed or implied by the statements.

These risks, uncertainties and other factors include, but are not limited to:

27 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis