What changed in this filing

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Item 1. Financial Statements

2024-06-07 compared with 2024-03-08 · 126 added, 63 removed, 407 unchanged (32% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Sales and service fees

7 unchanged sentences

(Loss) income before income taxes

(Benefit) provision for income taxes

Provision (benefit) for income taxes

Net (loss) income

4 unchanged sentences

HURCO COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

Three Months Ended

Six Months Ended

Net (loss) income

Other comprehensive income:

Translation gain of foreign currency financial statements

(Gain) / loss on derivative instruments reclassified into operations, net of tax of $ 64 and $( 25 ), respectively

Gain / (loss) on derivative instruments, net of tax of $ 5 and $( 48 ), respectively

Total other comprehensive income

Comprehensive income

Other comprehensive (loss) income:

Translation (loss) gain of foreign currency financial statements

(Gain) / loss on derivative instruments reclassified into operations, net of tax (expense) / benefit of $ 121 , $( 15 ), $ 185 , and $( 40 ), respectively

Gain / (loss) on derivative instruments, net of tax expense / (benefit) of $( 192 ), $( 255 ), $( 187 ) and $( 303 ), respectively

Total other comprehensive (loss) income

Comprehensive (loss) income

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

44 unchanged sentences

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

6,613,595 and 6,553,673 shares issued and 6,506,033 and 6,462,138 shares outstanding, as of January 31, 2024 and October 31, 2023, respectively

6,636,473 and 6,553,673 shares issued and 6,523,259 and 6,462,138 shares outstanding, as of April 30, 2024 and October 31, 2023, respectively

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Net (loss) income

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

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

Provision for doubtful accounts

Deferred income taxes

Equity in loss (income) of affiliates

Equity in (income) loss of affiliates

Foreign currency (gain) loss

11 unchanged sentences

Increase (decrease) in accrued income tax

Increase (decrease) in accrued tax liability

Net change in derivative assets and liabilities

4 unchanged sentences

Software development costs

Other investments

Net cash provided by (used for) investing activities

13 unchanged sentences

(In thousands, except shares outstanding)

Three Months Ended January 31, 2024 and 2023

Three Months Ended April 30, 2024 and 2023

Comprehensive

Income (Loss)

Balances, October 31, 2022

Balances, January 31, 2023

Net income (loss)

4 unchanged sentences

Dividends paid

Balances, April 30, 2023

Balances, January 31, 2024

Net income (loss)

Other comprehensive income (loss)

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

Dividends paid

Balances, April 30, 2024

Six Months Ended April 30, 2024 and 2023

Comprehensive

Income (Loss)

Balances, October 31, 2022

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, January 31, 2024

Balances, April 30, 2023

Balances, October 31, 2023

Net income (loss)

Other comprehensive income (loss)

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

Dividends paid

Balances, April 30, 2024

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

8 unchanged sentences

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

The condensed consolidated financial information as of January 31, 2024 and for the first three months ended January 31, 2024 and January 31, 2023 is unaudited.

The condensed consolidated financial information as of April 30, 2024 and for the three and six months ended April 30, 2024 and April 30, 2023 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 January 31, 2024, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from February 2024 through January 2025.

We had forward contracts outstanding as of April 30, 2024, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from May 2024 through April 2025.

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

dollars at January 31, 2024, were $ 11.9 million for Euros, $ 5.7 million for Pounds Sterling, and $ 20.2 million for New Taiwan Dollars.

At January 31, 2024, we had an immaterial amount of gain, net of tax, related to cash flow hedges deferred in Accumulated other comprehensive income (loss).

dollars at April 30, 2024, were $ 8.7 million for Euros, $ 4.4 million for Pounds Sterling, and $ 16.8 million for New Taiwan Dollars.

At April 30, 2024, we had $ 0.6 million of loss, net of tax, related to cash flow hedges deferred in Accumulated other comprehensive income (loss).

Included in this amount was $ 0.6 million 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 January 2025, when the corresponding inventory that is the subject of the related hedge contracts is sold, as described above.

The majority of these deferred gains will be recorded as an adjustment to Cost of sales and service in periods through April 2025, 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 2024.

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

As of April 30, 2024, we had a realized gain of $ 1.2 million and an immaterial amount of unrealized gain, net of tax, recorded as cumulative translation adjustments in Accumulated other comprehensive loss related to this forward contract.

Derivatives Not Designated as Hedging Instruments

1 unchanged sentence

These derivative instruments are not designated as hedges under FASB guidance and, as a result, changes in their fair value are reported currently in Other (expense) income, 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 as of January 31, 2024, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from February 2024 through October 2024.

We had forward contracts outstanding as of April 30, 2024, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from May 2024 through October 2024.

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

dollars at January 31, 2024, totaled $ 58.2 million.

dollars at April 30, 2024, totaled $ 54.1 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 January 31, 2024 and October 31, 2023, all derivative instruments were recorded at fair value on our Condensed Consolidated Balance Sheets as follows (in thousands):

January 31, 2024

As of April 30, 2024 and October 31, 2023, all derivative instruments were recorded at fair value on our Condensed Consolidated Balance Sheets as follows (in thousands):

April 30, 2024

October 31, 2023

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 January 31, 2024 and 2023 (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 January 31, 2024 or 2023.

We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the three months ended January 31, 2024 and 2023 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 April 30, 2024 or 2023.

We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the three months ended April 30, 2024 and 2023 on derivative instruments not designated as hedging instruments (in thousands):

Location of Gain

7 unchanged sentences

Other (expense) income, net

The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the three months ended January 31, 2024 (in thousands):

The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the three months ended April 30, 2024 (in thousands):

Foreign Currency

Balance, January 31, 2024

Other comprehensive income (loss) before reclassifications

Reclassifications

Balance, April 30, 2024

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, 2024 and 2023 (in thousands):

Location of Gain

Amount of Gain

Amount of Gain (Loss)

(Loss) Reclassified

Recognized in Other

Comprehensive

Income (Loss)

Six Months Ended

Designated as Hedging Instruments:

(Effective Portion)

Foreign exchange forward contracts

– Intercompany sales/purchases

Cost of sales and service

Foreign exchange forward contract

– Net investment

We did no t recognize any gains or losses as a result of hedges deemed ineffective for either of the six months ended April 30, 2024 or 2023.

We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the six months ended April 30, 2024 and 2023 on derivative instruments not designated as hedging instruments (in thousands):

Location of Gain

(Loss) Recognized

Amount of Gain (Loss)

in Operations

Recognized in Operations

Six Months Ended

Not Designated as Hedging Instruments:

Foreign exchange forward contracts

Other (expense) income, 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, 2024 (in thousands):

Balance, October 31, 2023

1 unchanged sentence

Reclassifications

Balance, January 31, 2024

Balance, April 30, 2024

EQUITY INCENTIVE PLAN

13 unchanged sentences

We previously granted stock options under the 2008 Equity Plan.

No stock options remained outstanding as of January 31, 2024.

No stock options remained outstanding as of April 30, 2024.

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.

On March 14, 2024, the Compensation Committee granted a total of 22,878 shares of time-based restricted stock to our non-employee directors.

The restricted shares vest in full one year from the date of grant provided the recipient remains on the board of directors through that date.

The grant date fair value of the restricted shares was based on the closing sales price of our common stock on the grant date, which was $ 20.98 per share.

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

7 unchanged sentences

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

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

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

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

5 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 $ 19.78 per share.

A reconciliation of our restricted stock and PSU activity and related information for the three-month period ended January 31, 2024 is as follows:

A reconciliation of our restricted stock and PSU activity and related information for the six-month period ended April 30, 2024 is as follows:

Weighted Average Grant

6 unchanged sentences

Shares withheld

Unvested at January 31, 2024

During the first three months of fiscal 2024 and 2023, we recorded approximately $ 0.6 million and $ 0.8 million, respectively, of stock-based compensation expense, related to grants under the 2016 Equity Plan.

As of January 31, 2024, there was an estimated $ 5.8 million of total unrecognized stock-based compensation cost that we expect to recognize by the end of the first quarter of fiscal year 2027.

Unvested at April 30, 2024

During the first six months of fiscal 2024 and 2023, we recorded approximately $ 0.8 million and $ 1.5 million, respectively, of stock-based compensation expense, related to grants under the 2016 Equity Plan.

As of April 30, 2024, 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 year 2027.

EARNINGS PER SHARE

2 unchanged sentences

Three Months Ended

Six Months Ended

Net (loss) income

5 unchanged sentences

ACCOUNTS RECEIVABLE

Accounts receivable are net of provision for credit losses of $ 1.4 million and $ 1.5 million as of January 31, 2024 and October 31, 2023, respectively.

Accounts receivable is net of provision for credit losses of $ 1.5 million as of each of April 30, 2024 and October 31, 2023.

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

10 unchanged sentences

We record a right-of-use asset and lease liability on our Condensed Consolidated Balance Sheets for all leases that, at the commencement date, have a lease term of more than 12 months and are classified as operating leases.

We recorded total operating lease expense of $ 1.3 million for each of the three months ended January 31, 2024 and 2023, 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 January 31, 2024.

The following table summarizes supplemental cash flow information and non-cash activity related to operating leases for the three months ended January 31, 2024 and 2023 (in thousands):

Three Months Ended

We recorded total operating lease expenses of $ 1.5 million and $ 1.3 million for the three months ended April 30, 2024 and 2023, respectively and $ 2.8 million and $ 2.6 million for the six months ended April 30, 2024 and 2023, respectively, which are 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 that are immaterial.

There have been no lease costs capitalized on the Condensed Consolidated Balance Sheets as of April 30, 2024.

The following table summarizes supplemental cash flow information and non-cash activity related to operating leases for the three and six months ended April 30, 2024 and 2023 (in thousands):

Three Months Ended

January 31, 2024

January 31, 2023

Six Months Ended

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 January 31, 2024 (in thousands):

The following table summarizes the maturities of undiscounted cash flows of lease commitments reconciled to the total lease liability as of April 30, 2024 (in thousands):

Remainder of 2024

2 unchanged sentences

Present value of operating lease liabilities

As of January 31, 2024, the weighted-average remaining term of our lease portfolio was approximately 4.2 years and the weighted-average discount rate was approximately 3.3 %.

As of April 30, 2024, the weighted-average remaining term of our lease portfolio was approximately 4.3 years and the weighted-average discount rate was approximately 3.5 %.

SEGMENT INFORMATION

5 unchanged sentences

The following table sets forth sales and service fees by product group and services for the first fiscal quarter ended January 31, 2024 and 2023 (dollars in thousands):

Three months ended January 31,

The following table sets forth sales and service fees by product group and services for the three and six months ended April 30, 2024 and 2023 (in thousands):

Three Months Ended April 30,

Six Months Ended April 30,

Computerized Machine Tools

5 unchanged sentences

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

As of January 31, 2024, we had nine outstanding third party payment guarantees totaling approximately $ 1.0 million.

As of April 30, 2024, we had nine outstanding third party payment guarantees totaling approximately $ 0.9 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):

Three Months Ended

Six Months Ended

Balance, beginning of period

3 unchanged sentences

Balance, end of period

The year-over-year decrease in our warranty reserve was primarily due to a lower volume of machine sales.

The year-over-year decrease in our warranty reserve was primarily due to a lower volume of machines subject to warranty as machine sales levels decreased.

DEBT AGREEMENTS

18 unchanged sentences

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

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

As of January 31, 2024, there were no borrowings under any of our credit facilities and there was approximately $ 51.0 million of available borrowing capacity thereunder.

As of April 30, 2024, our existing credit facilities consisted of a € 1.5 million revolving credit facility in Germany, the 150 million New Taiwan Dollars Taiwan credit facility, the 32.5 million Chinese Yuan China credit facility, and the $ 40.0 million revolving credit facility under the 2018 Credit Agreement.

As of April 30, 2024, there were no borrowings under any of our credit facilities and there was approximately $ 50.7 million of available borrowing capacity thereunder.

There were also no borrowings under any of our credit facilities as of October 31, 2023.

Our provision for income taxes and effective tax rate is 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.

We recorded an income tax benefit during the first three months of fiscal 2024 of $ 0.6 million compared to income tax expense of $ 0.6 million for the same period in 2023.

Our effective tax rate for the first three months of fiscal 2024 was 27 %, compared to 31 % in 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 and a discrete item related to stock compensation.

Our unrecognized tax benefits were $ 0.2 million as of each of January 31, 2024 and October 31, 2023, and in each case included accrued interest.

We recorded an income tax benefit during the first six months of fiscal 2024 of $ 0.6 million compared to income tax expense of $ 0.9 million for the same period in 2023.

Our effective tax rate for the first six months of fiscal 2024 was 9 %, compared to 35 % in 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, a discrete item related to stock compensation, and the impact of valuation allowances on an overall lower level of income before taxes.

Our unrecognized tax benefits were $ 189,000 as of April 30, 2024 and $ 182,000 as of October 31, 2023, 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 January 31, 2024, the gross amount of interest accrued, reported in Accrued expenses, was approximately $ 47,000 , which did not include the federal tax benefit of interest deductions.

As of April 30, 2024, the gross amount of interest accrued, reported in Accrued expenses, was approximately $ 51,000 , 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.

8 unchanged sentences

The carrying amount of short-term debt approximates fair value due to the variable rate of the interest and the short-term nature of the instrument.

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 January 31, 2024 and October 31, 2023 (in thousands):

January 31, 2024

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, 2024 and October 31, 2023 (in thousands):

April 30, 2024

October 31, 2023

January 31, 2024

April 30, 2024

October 31, 2023

5 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 were $ 99.3 million and $ 97.8 million at January 31, 2024 and October 31, 2023, respectively.

dollar equivalent notional amounts of these contracts were $ 90.0 million and $ 97.8 million at April 30, 2024 and October 31, 2023, 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.

9 unchanged sentences

New Accounting Pronouncements:

In December 2023, the FASB issued ASU No.

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

2023-09, Income Taxes (Topic 740):

2 unchanged sentences

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

There have been no other significant changes in the Company’s critical accounting policies and estimates during the three months ended January 31, 2024.

There have been no other significant changes in the Company’s critical accounting policies and estimates during the six months ended April 30, 2024.

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