What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-09-02 compared with 2022-06-03 · 79 added, 76 removed, 165 unchanged (48% 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 2022, approximately 50% 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 2022, approximately 50% 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 12% of our revenues were attributable to customers in the Asia Pacific region, where we encounter greater pricing pressures.

8 unchanged sentences

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.

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

In addition, 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 180 independent agents and distributors throughout the Americas, Europe, and Asia.

1 unchanged sentence

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

The vast majority of our machine tools are manufactured to our specifications primarily by our wholly-owned subsidiary in Taiwan, HML.

The vast majority of our machine tools are manufactured and assembled to our specifications primarily by our wholly-owned subsidiary in Taiwan, HML.

Machine castings to support HML’s production are manufactured at our wholly-owned subsidiary in Ningbo, China, NHML.

13 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.

Our operating results during fiscal years 2020, 2021 and the first six months of fiscal 2022 were affected by the international business disruption due to the outbreak of COVID-19 and continued lockdowns in certain markets, vendor delays, transportation issues, unusually high inflation, volatility of foreign currencies, competitive labor markets, uncertainty surrounding the U.K.

Our operating results during fiscal years 2020, 2021 and the nine months of fiscal 2022 were affected by the international business disruption due to the outbreak of COVID-19 and lockdowns in certain markets, vendor delays, transportation issues, unusually high inflation, volatility of foreign currencies, competitive labor markets, uncertainty surrounding the U.K.

Brexit activities, and political friction in the U.S and many regions of the world.

6 unchanged sentences

RESULTS OF OPERATIONS

Three Months Ended April 30, 2022 Compared to Three Months Ended April 30, 2021

Three Months Ended July 31, 2022 Compared to Three Months Ended July 31, 2021

Sales and Service Fees.

Sales and service fees for the second quarter of fiscal 2022 were $62.8 million, an increase of $4.9 million, or 8%, compared to the corresponding prior year period, and included an unfavorable currency impact of $2.5 million, or 4%, when translating foreign sales to U.S.

Sales and service fees for the third quarter of fiscal 2022 were $57.6 million, an increase of $3.5 million, or 6%, compared to the corresponding prior year period, and included an unfavorable currency impact of $4.3 million, or 8%, 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, 2022 and 2021 (dollars in thousands):

The following table sets forth net sales and service fees by geographic region for the third quarter ended July 31, 2022 and 2021 (dollars in thousands):

Three Months Ended

Sales in the Americas for the second quarter of fiscal 2022 increased by 14%, compared to the corresponding period in fiscal 2021, primarily due to inflationary price increases, increased volume of shipments of higher-performance Hurco machines and increased sales of ProCobots automation solutions.

European sales for the second quarter of fiscal 2022 increased by 7%, compared to the corresponding period in fiscal 2021, and included an unfavorable currency impact of 8%, when translating foreign sales to U.S.

Sales in the Americas for the third quarter of fiscal 2022 increased by 24%, compared to the corresponding period in fiscal 2021, primarily due to inflationary price increases and an increased volume of shipments of higher-performance Hurco and Takumi machines.

European sales for the third quarter of fiscal 2022 increased by 2%, compared to the corresponding period in fiscal 2021, and included an unfavorable currency impact of 14%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

This increase was primarily attributable to inflationary price increases, an increased volume of shipments of Hurco machines in Germany, Italy, and the United Kingdom, as well as increased sales of electro-mechanical components and accessories manufactured by our wholly-owned subsidiary, LCM.

Asian Pacific sales for the second quarter of fiscal 2022 increased by 3%, compared to the corresponding period in fiscal 2021, and included an unfavorable currency impact of 1%, when translating foreign sales to U.S.

This increase was primarily attributable to inflationary price increases, an increased volume of shipments of higher-performance Hurco, Takumi and Milltronics machines in Germany and France, and increased sales of electro-mechanical components and accessories manufactured by our wholly-owned subsidiary, LCM, partially offset by a reduced volume of shipments of Hurco machines in Italy and the United Kingdom.

Asian Pacific sales for the third quarter of fiscal 2022 decreased by 25%, compared to the corresponding period in fiscal 2021, and included an unfavorable currency impact of 5%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

The increase in Asian Pacific sales primarily resulted from inflationary price increases and an increased volume of shipments of Hurco and Takumi machines in Southeast Asia and India, partially offset by a reduced volume of shipments of Hurco machines in China due to recent COVID-19 lockdowns.

The decrease in Asian Pacific sales primarily resulted from a reduced volume of shipments of Hurco and Takumi machines in China and Southeast Asia, partially offset by an increased volume of shipments of Hurco machines in India.

The reduced volume of shipments of Hurco and Takumi machines in China was primarily due to recent COVID-19 lockdowns and similar restrictions in major Chinese markets pursuant to China’s zero-tolerance COVID-19 policy.

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, 2022 and 2021 (dollars in thousands):

The following table sets forth net sales and service fees by product category for the third quarter ended July 31, 2022 and 2021 (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 tools.

Sales of computerized machine tools for the second quarter of fiscal 2022 increased by 10%, compared to the corresponding prior year period, primarily due to inflationary price increases and increased shipments of higher-performance Hurco machines in Italy, Germany, Southeast Asia and North America.

Sales of computer control systems and software for the second quarter of fiscal 2022 decreased by 14%, compared to the corresponding prior year period, primarily due to a decrease in sales of Hurco software in France.

Sales of service parts and service fees for the second quarter of fiscal 2022 increased by 1% and 12%, respectively, compared to the corresponding prior year period, due mainly to increased aftermarket sales and service of Hurco and Milltronics products in North America and Germany.

Sales of computerized machine tools for the third quarter of fiscal 2022 increased by 7%, compared to the corresponding prior year period, primarily due to inflationary price increases and increased shipments of higher-performance Hurco machines in North America and Germany.

Sales of computer control systems and software for the third quarter of fiscal 2022 increased by 7%, compared to the corresponding prior year period, primarily due to an increase in sales of Hurco software in Germany, North America and France.

Sales of service parts for the third quarter of fiscal 2022 increased by 5%, compared to the corresponding prior year period, due mainly to increased aftermarket sales and service of Hurco products in North America and the United Kingdom.

All product categories included an unfavorable currency impact of 8%, when translating foreign sales to U.S.

Dollars for financial reporting purposes.

Orders for the second quarter of fiscal 2022 were $58.9 million, a decrease of $6.9 million, or 10%, compared to the corresponding period in fiscal 2021, and included an unfavorable currency impact of $1.4 million, or 2%, 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, 2022 and 2021 (dollars in thousands):

Orders for the third quarter of fiscal 2022 were $52.9 million, a decrease of $13.8 million, or 21%, compared to the corresponding period in fiscal 2021, and included an unfavorable currency impact of $4.1 million, or 6%, 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, 2022 and 2021 (dollars in thousands):

Three Months Ended

Orders in the Americas for the second quarter of fiscal 2022 increased by 26%, compared to the corresponding period in fiscal 2021, primarily due to inflationary price increases, increased customer demand for higher-performance Hurco and Milltronics machines, and increased demand for ProCobots automation solutions.

European orders for the second quarter of fiscal 2022 decreased by 19%, compared to the corresponding prior year period, and included an unfavorable currency impact of 3%, when translating foreign orders to U.S.

This decrease was driven primarily by decreased customer demand for Hurco machines in the United Kingdom, Italy and France, as well as decreased customer demand for electro-mechanical components and accessories manufactured by LCM, partially offset by an increase in customer demand for Hurco machines in Germany and Milltronics machines in Italy.

Asian Pacific orders for the second quarter of fiscal 2022 decreased by 45%, compared to the corresponding prior year period, and included an unfavorable currency impact of 2%, when translating foreign orders to U.S.

The decrease in Asian Pacific orders was driven primarily by decreased customer demand for Hurco and Takumi machines in China and Southeast Asia due to recent COVID-19 lockdowns, partially offset by increased demand for Hurco machines in India.

Orders in the Americas for the third quarter of fiscal 2022 decreased by 9%, compared to the corresponding period in fiscal 2021, primarily due to decreased customer demand for Hurco, Takumi and Milltronics machines, partially offset by inflationary price increases implemented during fiscal 2022.

European orders for the third quarter of fiscal 2022 decreased by 22%, compared to the corresponding prior year period, and included an unfavorable currency impact of 11%, when translating foreign orders to U.S.

This decrease was driven primarily by decreased customer demand for Hurco machines across the European region, as well as decreased customer demand for electro-mechanical components and accessories manufactured by LCM, partially offset by inflationary price increases implemented during fiscal 2022 and increased demand for higher-performance Hurco and Takumi machines in Germany.

Asian Pacific orders for the third quarter of fiscal 2022 decreased by 46%, compared to the corresponding prior year period, and included an unfavorable currency impact of 5%, when translating foreign orders to U.S.

The decrease in Asian Pacific orders year-over-year was driven primarily by decreased customer demand for Hurco and Takumi machines in China and Southeast Asia due to recent COVID-19 lockdowns and similar restrictions, slightly offset by increased demand for Hurco machines in India.

Gross Profit .

Gross profit for the second quarter of fiscal 2022 was $15.6 million, or 25% of sales, compared to $14.8 million, or 26% of sales, for the corresponding prior year period.

During the second quarter of fiscal 2021, we recorded approximately $0.8 million, or 1% of sales, for 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 credit”).

While the employee retention credit did not recur in the second quarter of fiscal 2022, gross profit as a percentage of sales for the second quarter of fiscal 2022 benefitted from increased higher-performance machine sales, improved leverage of fixed overhead costs across higher production levels, and improved pricing due to changes in demand and normalized inventory levels.

Gross profit for the third quarter of fiscal 2022 was $14.4 million, or 25% of sales, compared to $13.0 million, or 24% of sales, for the corresponding prior year period.

During the third quarter of fiscal 2021, we recorded approximately $0.4 million, or 1% of sales, for 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 credit”).

While the employee retention credit did not recur in the third quarter of fiscal 2022, gross profit as a percentage of sales in the 2022 period benefited from increased sales of higher-performance machines, improved leverage of fixed overhead costs and inflationary price increases implemented during fiscal 2022.

Operating Expenses .

Selling, general, and administrative expenses for the second quarter of fiscal 2022 were $12.5 million, or 20% of sales, compared to $11.3 million, or 19% of sales, in the corresponding fiscal 2021 period, and included a favorable currency impact of $0.4 million, when translating foreign expenses to U.S.

Selling, general, and administrative expenses for the third quarter of fiscal 2022 were $12.6 million, or 22% of sales, compared to $10.3 million, or 19% of sales, in the corresponding fiscal 2021 period, and included a favorable currency impact of $0.7 million, when translating foreign expenses to U.S.

dollars for financial reporting purposes.

We also recorded approximately $1.1 million, or 2% of sales, for the employee retention credit in selling, general and administrative expenses during the second quarter of fiscal 2021.

The year-over-year increase in selling, general, and administrative expenses was driven primarily by increased agent commissions, marketing and tradeshow expenses, and employee support costs for the global sales operations, partially offset by not recording the employee retention credit in selling, general and administrative expenses in the second quarter of 2022.

The year-over-year increase in selling, general and administrative expenses in the third quarter of fiscal 2022 was driven primarily by increases in marketing and tradeshow expenses, sales commissions, and employee benefit costs, as well as increased one-time costs for administrative services.

The increase in selling, general, and administrative expenses year-over-year also reflected the employee retention credit recorded in those expenses in the third quarter of fiscal 2021 of $0.6 million, or 1% of sales during that period.

Operating Income .

Operating income for the second quarter of fiscal 2022 was $3.1 million compared to $3.5 million for the corresponding period in fiscal 2021.

The decrease in operating income was primarily due to the $1.9 million, or 3% of sales, of employee retention credit recorded during the second quarter of fiscal 2021.

Operating income for the third quarter of fiscal 2022 was $1.8 million compared to $2.6 million for the corresponding period in fiscal 2021.

The decrease in operating income was primarily due to the $1.0 million, or 2% of sales, of employee retention credit recorded during the third quarter of fiscal 2021.

Other Income (Expense), Net .

Other income (expense), net for the second quarter of fiscal 2022 of $0.2 million was consistent with the corresponding prior year period.

Other income (expense), net for the third quarter of fiscal 2022 and fiscal 2021 were each less than $0.1 million.

Income Taxes .

The effective tax rate for the second quarter of fiscal 2022 was 31%, compared to 28%, for 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, various discrete tax items, and changes in income tax laws to address the unfavorable impact of the COVID-19 pandemic.

Six Months Ended April 30, 2022 Compared to Six Months Ended April 30, 2021

The effective tax rate for the third quarter of fiscal 2022 was 28%, compared to 41%, for the corresponding prior year period.

The year-over-year decrease 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 tax items, and changes in income tax laws to address the unfavorable impact of the COVID-19 pandemic.

Nine Months Ended July 31, 2022 Compared to Nine Months Ended July 31, 2021

Sales and Service Fees.

Sales and service fees for the first six months of fiscal 2022 were $129.7 million, an increase of $17.7 million, or 16%, compared to the corresponding prior year period, and included an unfavorable currency impact of $3.7 million, or 3%, when translating foreign sales to U.S.

Sales and service fees for the nine months of fiscal 2022 were $187.4 million, an increase of $21.1 million, or 13%, compared to the corresponding prior year period, and included an unfavorable currency impact of $7.9 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 six months ended April 30, 2022 and 2021 (dollars in thousands):

Six Months Ended

Sales in the Americas for the first six months of fiscal 2022 increased by 8%, compared to the corresponding period in fiscal 2021, primarily due to inflationary price increases, increased volume of shipments of higher-performance Hurco machines and increased sales of ProCobots automation solutions.

European sales for the first six months of fiscal 2022 increased by 22%, compared to the corresponding period in fiscal 2021, and included an unfavorable currency impact of 7%, 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, 2022 and 2021 (dollars in thousands):

Nine Months Ended

Sales in the Americas for the nine months of fiscal 2022 increased by 13%, compared to the corresponding period in fiscal 2021, primarily due to inflationary price increases and an increased volume of shipments of higher-performance Hurco and Takumi machines.

European sales for the nine months of fiscal 2022 increased by 15%, compared to the corresponding period in fiscal 2021, and included an unfavorable currency impact of 9%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

This increase was primarily attributable to inflationary price increases, an increased volume of shipments of Hurco, Takumi, and Milltronics machines across the European region, as well as increased sales of electro-mechanical components and accessories manufactured by LCM.

Asian Pacific sales for the first six months of fiscal 2022 increased by 15%, compared to the corresponding period in fiscal 2021, and included an unfavorable currency impact of 1%, when translating foreign sales to U.S.

This increase was primarily driven by inflationary price increases, an increased volume of shipments of higher-performance Hurco, Takumi, and Milltronics machines across the European region, as well as increased sales of electro-mechanical components and accessories manufactured by LCM.

Asian Pacific sales for the nine months of fiscal 2022 increased by 3%, compared to the corresponding period in fiscal 2021, and included an unfavorable currency impact of 2%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

The increase primarily resulted from inflationary price increases and an increased volume of shipments of Hurco and Takumi machines in Southeast Asia and India, partially offset by a reduced volume of shipments of Hurco and Takumi machines in China due to recent COVID-19 lockdowns and similar restrictions.

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, 2022 and 2021 (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, 2022 and 2021 (dollars in thousands):

Nine Months Ended

Computerized Machine Tools

2 unchanged sentences

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

Sales of computerized machine tools and computer control systems and software for the first six months of fiscal 2022 increased by 18% and 9%, respectively, compared to the corresponding prior year period, primarily due to inflationary price increases and increased shipments of Hurco and Takumi machines across most regions and countries where our customers are located, other than China.

Sales of service parts for the first six months of fiscal 2022 increased by 6%, compared to the corresponding prior year period, due mainly to aftermarket sales of Hurco products in North America and the United Kingdom.

Service fees for the first six months of fiscal 2022 increased by 8%, compared to the corresponding prior year period, due mainly to aftermarket service of Hurco and Takumi products in Germany, the United Kingdom and France.

Sales of computerized machine tools for the nine months of fiscal 2022 increased by 14%, compared to the corresponding prior year period, primarily due to inflationary price increases and increased shipments of Hurco and Takumi machines across most regions and countries where our customers are located, other than China and the United Kingdom.

Sales of computer control systems and software for the nine months of fiscal 2022 increased by 8%, compared to the corresponding prior year period, primarily due to an increase in software sales in Germany, North America and France.

Sales of service parts for the nine months of fiscal 2022 increased by 6%, compared to the corresponding prior year period, due mainly to aftermarket sales of Hurco products in North America and the United Kingdom.

Service fees for the nine months of fiscal 2022 increased by 5%, compared to the corresponding prior year period, due mainly to aftermarket service of Hurco and Takumi products in Germany, the United Kingdom and France.

All product categories included an unfavorable currency impact of 5%, when translating foreign sales to U.S.

Dollars for financial reporting purposes.

Orders for the first six months of fiscal 2022 were $129.7 million, an increase of $6.7 million, or 5%, compared to the corresponding period in fiscal 2021, and included an unfavorable currency impact of $3.1 million, or 3%, when translating foreign orders to U.S.

The following table sets forth new orders booked by geographic region for the six months ended April 30, 2022 and 2021 (dollars in thousands):

Six Months Ended

Orders in the Americas for the first six months of fiscal 2022 increased by 8%, compared to the corresponding period in fiscal 2021, primarily due to inflationary price increases and increased customer demand for higher-performance Hurco machines and ProCobots automation solutions.

European orders for the first six months of fiscal 2022 increased by 14%, compared to the corresponding prior year period, and included an unfavorable currency impact of 5%, when translating foreign orders to U.S.

The increase in orders was driven primarily by inflationary price increases and increased customer demand for Hurco and Takumi machines in Germany, France, and Italy, partially offset by decreased customer demand for Hurco machines in the United Kingdom and electro-mechanical components and accessories manufactured by LCM.

Asian Pacific orders for the first six months of fiscal 2022 decreased by 26%, compared to the corresponding prior year period, and included an unfavorable currency impact of 1%, when translating foreign orders to U.S.

The decrease in Asian Pacific orders year-over-year was driven primarily by decreased customer demand for Hurco and Takumi machines in China and Southeast Asia due to recent COVID-19 lockdowns, partially offset by increased demand for Hurco machines in India.

Orders for the nine months of fiscal 2022 were $182.6 million, a decrease of $7.2 million, or 4%, compared to the corresponding period in fiscal 2021, and included an unfavorable currency impact of $7.2 million, or 4%, 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, 2022 and 2021 (dollars in thousands):

Nine Months Ended

Orders in the Americas for the nine months of fiscal 2022 increased by 2%, compared to the corresponding period in fiscal 2021, primarily due to inflationary price increases, partially offset by decreased customer demand for Hurco and Milltronics machines.

European orders for the nine months of fiscal 2022 increased by 1%, compared to the corresponding prior year period, and included an unfavorable currency impact of 7%, when translating foreign orders to U.S.

This increase was primarily attributable to inflationary price increases and increased customer demand for Hurco, Takumi and Milltronics machines in Germany, partially offset by decreased customer demand for Hurco machines in France, the United Kingdom, and Italy, and for electro-mechanical components and accessories manufactured by LCM.

Asian Pacific orders for the nine months of fiscal 2022 decreased by 32%, compared to the corresponding prior year period, and included an unfavorable currency impact of 2%, when translating foreign orders to U.S.

Gross Profit .

Gross profit for the first six months of fiscal 2022 was $32.5 million, or 25% of sales, compared to $26.3 million, or 24% of sales, for the corresponding prior year period.

While the $0.8 million recorded in the prior year period for the employee retention credit did not recur in the current year period, gross profit as a percentage of sales for the first six months of fiscal 2022 benefitted from increased higher-performance machine sales, improved leverage of fixed overhead costs across higher production levels, and improved pricing due to changes in demand and normalized inventory levels.

Gross profit for the nine months of fiscal 2022 was $46.9 million, or 25% of sales, compared to $39.3 million, or 24% of sales, for the corresponding prior year period.

During the nine months of fiscal 2021, we recorded approximately $1.2 million, or 1% of sales, for the employee retention credit.

While the employee retention credit did not recur in the nine months of fiscal 2022, gross profit as a percentage of sales in the 2022 period benefited from increased sales of higher-performance machines, improved leverage of fixed overhead costs and inflationary price increases implemented during fiscal 2022.

Operating Expenses .

Selling, general, and administrative expenses for the first six months of fiscal 2022 were $24.2 million, or 19% of sales, compared to $21.8 million, or 19% of sales, in the corresponding fiscal 2021 period, and included a favorable currency impact of $0.6 million, when translating foreign expenses to U.S.

Selling, general, and administrative expenses for the nine months of fiscal 2022 were $36.9 million, or 20% of sales, compared to $32.2 million, or 19% of sales, in the corresponding fiscal 2021 period, and included a favorable currency impact of $1.3 million, when translating foreign expenses to U.S.

dollars for financial reporting purposes.

The increase in selling, general, and administrative expenses was driven primarily by increases in agent commissions, marketing and tradeshow expenses, and employee support costs for the global sales operations, partially offset by not recording any amounts in the fiscal 2022 period related to the employee retention credit, for which $1.1 million was recorded in selling, general and administrative expenses in the fiscal 2021 period.

The year-over-year increase in selling, general and administrative expenses in the nine months of 2022 was driven primarily by increases in marketing and tradeshow expenses, sales commissions, and employee benefit costs, as well as increased one-time costs for administrative services.

The increase in selling, general, and administrative expenses year-over-year also reflected the employee retention credit recorded in those expenses in the nine months of fiscal 2021 of $1.7 million, or 1% of sales during that period.

Operating Income .

Operating income for the first six months of fiscal 2022 was $8.3 million compared to $4.5 million for the corresponding period in fiscal 2021.

Operating income for the nine months of fiscal 2022 was $10.0 million compared to $7.1 million for the corresponding period in fiscal 2021.

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

Other Income (Expense), Net .

Other income (expense), net for the first six months of fiscal 2022 decreased by $0.4 million from the corresponding period in fiscal 2021, due mainly to an increase in foreign currency exchange losses in the first six months of fiscal 2022 compared to the same period in fiscal 2021.

Other income (expense), net for the nine months of fiscal 2022 decreased by $0.4 million from the corresponding period in fiscal 2021, due mainly to an increase in foreign currency exchange losses in the nine months of fiscal 2022 compared to the same period in fiscal 2021.

Income Taxes .

The effective tax rate for the first six months of fiscal 2022 was 31%, compared to 33% for the corresponding prior year period.

The effective tax rate for the nine months of fiscal 2022 was 31%, compared to 36% for the corresponding prior year period.

LIQUIDITY AND CAPITAL RESOURCES

At April 30, 2022, we had cash and cash equivalents of $82.0 million, compared to $84.1 million at October 31, 2021.

At July 31, 2022, we had cash and cash equivalents of $73.5 million, compared to $84.1 million at October 31, 2021.

Approximately 14% of the $73.5 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 $203.4 million at April 30, 2022, compared to $208.7 million at October 31, 2021.

The decrease in working capital was primarily driven by decreases in accounts receivable, prepaid assets, partially offset by an increase in inventories and a decrease in customer deposits.

Capital expenditures of $1.1 million during the first six months of fiscal 2022 were primarily for capital improvements in existing facilities and software development costs.

Working capital was $202.3 million at July 31, 2022, compared to $208.7 million at October 31, 2021.

The decrease in working capital was primarily driven by decreases in cash and cash equivalents, accounts receivable and prepaid assets, partially offset by an increase in inventories, net.

Capital expenditures of $1.6 million during the nine months of fiscal 2022 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.

During the first six months of fiscal 2022, we repurchased $2.9 million in shares of our common stock, and $4.1 million remained available under the program as of April 30, 2022.

In addition, during the six months ended April 30, 2022, we paid cash dividends to our shareholders of $1.9 million.

During the nine months of fiscal 2022, we repurchased $2.9 million in shares of our common stock, and $4.1 million remained available under the program as of July 31, 2022.

In addition, during the nine months ended July 31, 2022, we paid cash dividends to our shareholders of $2.9 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.

16 unchanged sentences

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, 2022, our existing credit facilities consisted of the €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, 2022.

At April 30, 2022, we had an aggregate of approximately $51.6 million available for borrowing under our credit facilities and were in compliance with all covenants relating thereto.

As of July 31, 2022, our existing credit facilities consisted of a €1.5 million revolving credit facility in Germany, the 150 million New Taiwan Dollars Taiwan credit facility, the 32.5 million Chinese Yuan China credit facility and the $40.0 million revolving credit facility under the 2018 Credit Agreement.

We had no debt or borrowings under any of our credit facilities at July 31, 2022.

At July 31, 2022, we had an aggregate of approximately $51.4 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.

2 unchanged sentences

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S.

Our MD&A is based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S.

Generally Accepted Accounting Principles.

3 unchanged sentences

Our accounting policies, which are described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021, are frequently evaluated as our judgment and estimates are based upon historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

During the first six months of fiscal 2022, there were no material changes to our critical accounting estimates as described in the MD&A included in our Annual Report on Form 10-K for the year ended October 31, 2021.

During the nine months of fiscal 2022, there were no material changes to our critical accounting estimates as described in the MD&A included in our Annual Report on Form 10-K for the year ended October 31, 2021.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

3 unchanged sentences

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

As of April 30, 2022, we had eight outstanding third party payment guarantees totaling approximately $0.8 million.

As of July 31, 2022, we had eight outstanding third party payment guarantees totaling approximately $0.7 million.

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

33 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