What changed in this filing

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Item 1. Financial Statements

2025-03-07 compared with 2024-09-06 · 92 added, 163 removed, 384 unchanged (40% of the section changed)

4 unchanged sentences

Three Months Ended

Nine Months Ended

Sales and service fees

7 unchanged sentences

(Loss) income before income taxes

Provision for income taxes

(Benefit) provision for income taxes

Net (loss) income

7 unchanged sentences

Three Months Ended

Nine Months Ended

Net (loss) income

2 unchanged sentences

(Gain) / loss on derivative instruments reclassified into operations, net of tax (expense)/ benefit of $ 156 and $ 64 , respectively

Gain / (loss) on derivative instruments, net of tax expense / (benefit) of $( 74 ), $( 128 ), $( 261 ) and $( 430 ), respectively

Gain / (loss) on derivative instruments, net of tax of ($ 29 ) and $ 5 , respectively

Total other comprehensive (loss) income

7 unchanged sentences

Accounts receivable, net

Inventories, net

Derivative assets

11 unchanged sentences

Deferred income taxes

Investments and other assets

Total non–current assets

16 unchanged sentences

Total non–current liabilities

Commitment and contingencies

Shareholders’ equity:

4 unchanged sentences

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

6,607,060 and 6,553,673 shares issued and 6,493,846 and 6,462,138 shares outstanding, as of July 31, 2024 and October 31, 2023, respectively

6,644,286 and 6,548,838 shares issued and 6,483,990 and 6,435,624 shares outstanding, as of January 31, 2025 and October 31, 2024, respectively

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Nine Months Ended

Cash flows from operating activities:

Net (loss) income

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

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

Provision for doubtful accounts

Deferred income taxes

Deferred income tax valuation allowance

Equity in (income) loss of affiliates

Deferred income tax valuation allowances

Equity in loss (income) 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

Net change in deferred tax assets and liabilities

Net cash provided by (used for) operating activities

3 unchanged sentences

Software development costs

Other investments

Net cash provided by (used for) investing activities

Cash flows from financing activities:

Proceeds from exercise of common stock options

Dividends paid

Taxes paid related to net settlement of restricted shares

Stock repurchases

Net cash provided by (used for) financing activities

7 unchanged sentences

(In thousands, except shares outstanding)

Three Months Ended July 31, 2024 and 2023

Comprehensive

Income (Loss)

Balances, April 30, 2023

Net income (loss)

Other comprehensive income (loss)

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

Dividends paid

Balances, July 31, 2023

Balances, April 30, 2024

Net income (loss)

Other comprehensive income (loss)

Deferred income tax valuation allowances

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

Stock repurchases

Balances, July 31, 2024

Nine Months Ended July 31, 2024 and 2023

Three Months Ended January 31, 2025 and 2024

Comprehensive

4 unchanged sentences

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

Exercise of common stock options

Stock repurchases

Dividends paid

Balances, July 31, 2023

Balances, January 31, 2024

Balances, October 31, 2024

1 unchanged sentence

Other comprehensive income (loss)

Deferred income tax valuation allowances

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

Stock repurchases

Dividends paid

Balances, July 31, 2024

Balances, January 31, 2025

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 July 31, 2024 and for the three and nine months ended July 31, 2024 and July 31, 2023 is unaudited.

The condensed consolidated financial information as of January 31, 2025 and for the three months ended January 31, 2025 and January 31, 2024 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.

5 unchanged sentences

We recognize revenues from the sale of machine tools, components and accessories and services, and reflect the consideration to which we expect to be entitled.

We record revenues based on a five-step model in accordance with Financial Accounting Standards Board (“FASB”) guidance codified in Accounting Standard Codification (“ASC”) 606, “Revenue from Contracts with Customers” (“ASC 606”).

We record revenues based on a five-step model in accordance with Financial Accounting Standards Board (“FASB”) guidance codified in Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers” (“ASC 606”).

In accordance with ASC 606, we have defined contracts as agreements with our customers and distributors in the form of purchase orders, packing or shipping documents, invoices, and, periodically, verbal requests for components and accessories.

7 unchanged sentences

In most instances where a machine is sold through a distributor, we have no installation involvement.

If sales are direct or through sales agents, we will typically complete the machine installation, which consists of the reassembly of certain parts that were removed for shipping and the re-testing of the machine to ensure that it is performing within the standard operating specifications.

We consider the machine installation process for our three-axis machines to be inconsequential and immaterial within the context of the contract.

For our five-axis machines and automation systems that we install, we estimate the fair value of the installation performance obligation and recognize that installation revenue over the period of the installation process.

We consider the machine installation process for our 3-axis machines to be inconsequential and immaterial within the context of the contract.

For our 5-axis machines that we install, we estimate the fair value of the installation performance obligation and recognize that installation revenue on a prorata basis over the period of the installation process.

From time to time, and depending upon geographic location, we may provide training or freight services.

We consider these services to be immaterial within the context of the contract, as the value of these services typically does not rise to a material level as a component of the total contract value.

Service fees from maintenance contracts are deferred and recognized in earnings over the term of the contract and are generally sold on a stand-alone basis.

Customer discounts and estimated product returns are considered variable consideration and are recorded as a reduction of revenue in the same period that the related sales are recorded.

We have reviewed the overall sales transactions for variable consideration and have determined that these amounts are not significant.

Service fees from maintenance contracts are deferred and recognized in earnings on a prorata basis over the term of the contract and are generally sold on a stand-alone basis.

Customer discounts and estimated product returns are recorded as a reduction of revenue in the same period that the related sales are recorded.

We have reviewed the overall sales transactions for variable consideration and have determined that these amounts are not material.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

11 unchanged sentences

These forward contracts have been designated as cash flow hedge instruments and are recorded in the Condensed Consolidated Balance Sheets at fair value in Derivative assets and Derivative liabilities.

The effective portion of the gains and losses resulting from the changes in the fair value of these hedge contracts is deferred in Accumulated other comprehensive income (loss) and recognized as an adjustment to Cost of sales and service in the period that the corresponding inventory sold that is the subject of the related hedge contract is recognized, thereby providing an offsetting economic impact against the corresponding change in the U.S.

The effective portion of the gains and losses resulting from the changes in the fair value of these hedge contracts is deferred in Accumulated other comprehensive loss and recognized as an adjustment to Cost of sales and service in the period that the corresponding inventory sold that is the subject of the related hedge contract is recognized, thereby providing an offsetting economic impact against the corresponding change in the U.S.

dollar value of the inter-company sale or purchase being hedged.

2 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 July 31, 2024, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from August 2024 through July 2025.

We had forward contracts outstanding as of January 31, 2025, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from February 2025 through January 2026 .

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

dollars at July 31, 2024, were $ 7.5 million for Euros, $ 4.5 million for Pounds Sterling, and $ 14.6 million for New Taiwan Dollars.

At July 31, 2024, we had $ 0.9 million of loss, net of tax, related to cash flow hedges deferred in Accumulated other comprehensive income (loss).

dollars at January 31, 2025, were $ 7.1 million for Euros, $ 4.7 million for Pounds Sterling, and $ 16.3 million for New Taiwan Dollars.

At January 31, 2025, we had $ 0.1 million of realized loss, net of tax, related to cash flow hedges deferred in Accumulated other comprehensive loss.

Included in this amount was $ 0.2 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 July 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 January 2026, 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.

2 unchanged sentences

We selected the forward method under FASB guidance related to the accounting for derivative instruments and hedging activities.

The forward method requires all changes in the fair value of the contract to be reported as a cumulative translation adjustment in Accumulated other comprehensive income (loss), net of tax, in the same manner as the underlying hedged net assets.

The forward method requires all changes in the fair value of the contract to be reported as a cumulative translation adjustment in Accumulated other comprehensive loss, net of tax, in the same manner as the underlying hedged net assets.

This forward contract matures in November 2025 .

As of July 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 January 31, 2025, we had a realized gain of $ 1.2 million and an unrealized gain of $ 0.1 million, 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 July 31, 2024, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from August 2024 through February 2025.

We had forward contracts outstanding as of January 31, 2025, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from February 2025 through December 2025 .

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

dollars at July 31, 2024, totaled $ 52.9 million.

dollars at January 31, 2025, totaled $ 62.3 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 July 31, 2024 and October 31, 2023, all derivative instruments were recorded at fair value on our Condensed Consolidated Balance Sheets as follows (in thousands):

July 31, 2024

As of January 31, 2025 and October 31, 2024, all derivative instruments were recorded at fair value on our Condensed Consolidated Balance Sheets as follows (in thousands):

January 31, 2025

October 31, 2024

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 July 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 July 31, 2024 or 2023.

We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the three months ended July 31, 2024 and 2023 on derivative instruments not designated as hedging instruments (in thousands):

We did not recognize any gains or losses as a result of hedges deemed ineffective for either of the three months ended January 31, 2025 or 2024.

We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the three months ended January 31, 2025 and 2024 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 July 31, 2024 (in thousands):

Foreign Currency

Balance, April 30, 2024

Other comprehensive income (loss) before reclassifications

Reclassifications

Deferred income tax valuation allowances

Balance, July 31, 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 nine months ended July 31, 2024 and 2023 (in thousands):

Location of Gain

Amount of Gain

Amount of Gain (Loss)

(Loss) Reclassified

Recognized in Other

Comprehensive

Income (Loss)

Nine 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 nine months ended July 31, 2024 or 2023.

We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the nine months ended July 31, 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

Nine 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 nine months ended July 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 January 31, 2025 (in thousands):

Balance, October 31, 2024

2 unchanged sentences

Deferred income tax valuation allowances

Balance, July 31, 2024

Balance, January 31, 2025

EQUITY INCENTIVE PLAN

12 unchanged sentences

We have granted restricted shares and performance stock units under the 2016 Equity Plan that are currently outstanding.

We previously granted stock options under the 2008 Equity Plan.

No stock options remained outstanding as of July 31, 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 7, 2025, 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.

5 unchanged sentences

On January 7, 2025, the Compensation Committee also granted a total target number of 50,078 PSUs to our executive officers designated as “PSU – NI”.

These PSUs were weighted as approximately 40 % of the overall 2024 executive long-term incentive compensation arrangement and will vest and be paid based upon the achievement of pre-established goals related to our average net income over the three-year period of fiscal 2024-2026.

These PSUs were weighted as approximately 30 % of the overall 2025 executive long-term incentive compensation arrangement and will vest and be paid based upon the achievement of pre-established goals related to our average net income over the three-year period of fiscal years 2025-2027.

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 the 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 grant date, which was $ 19.81 per PSU.

On January 7, 2025, the Compensation Committee also granted a total target number of 41,735 PSUs to our executive officers designated as “PSU –FCF”.

These PSUs were weighted as approximately 35 % of the overall 2024 executive long-term incentive compensation arrangement and will vest and be paid based upon the achievement of pre-established goals related to our average free cash flow over the three-year period of fiscal 2024-2026.

These PSUs were weighted as approximately 25 % of the overall 2025 executive long-term incentive compensation arrangement and will vest and be paid based upon the achievement of pre-established goals related to our average free cash flow over the three-year period of fiscal years 2025-2027.

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

3 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 $ 21.80 per share.

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

A reconciliation of our restricted stock and PSU activity and related information for the three-month period ended January 31, 2025 is as follows:

Weighted Average Grant

6 unchanged sentences

Shares withheld

Unvested at July 31, 2024

During the nine months of fiscal 2024 and 2023, we recorded approximately $ 1.1 million and $ 2.3 million, respectively, of stock-based compensation expense, related to grants under the 2016 Equity Plan.

As of July 31, 2024, there was an estimated $ 2.8 million of total unrecognized stock-based compensation cost that we expect to recognize by the end of the first quarter of fiscal year 2027.

EARNINGS PER SHARE

Unvested at January 31, 2025

During each of the first three months of fiscal 2025 and 2024, we recorded approximately $ 0.6 million, of stock-based compensation expense related to grants under the 2016 Equity Plan.

As of January 31, 2025, there was an estimated $ 5.2 million of total unrecognized stock-based compensation cost that we expect to recognize by the end of the first quarter of fiscal year 2028.

EARNINGS (LOSS) PER SHARE

Per share results have been computed based on the average number of common shares outstanding over the period in question.

1 unchanged sentence

Three Months Ended

Nine Months Ended

Net (loss) income

5 unchanged sentences

ACCOUNTS RECEIVABLE

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

Accounts receivable is net of provision for credit losses of $ 1.5 million as of each of January 31, 2025 and October 31, 2024.

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

Purchased parts and sub–assemblies, net

Purchased parts and sub–assemblies

Work–in–process

Finished goods

Inventories, net

Our lease portfolio includes leased production and assembly facilities, warehouses and distribution centers, office space, vehicles, material handling equipment utilized in our production and assembly facilities, laptops and other information technology equipment, as well as other miscellaneous leased equipment.

4 unchanged sentences

In determining the lease liability, we utilize our incremental borrowing rate to discount the future lease payments over the lease term to present value.

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 expenses of $ 1.3 million for each of the three months ended July 31, 2024 and 2023, and $ 4.1 million and $ 3.9 million for the nine months ended July 31, 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 July 31, 2024.

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

We record a right-of-use asset and lease liability on our Consolidated Balance Sheets for all leases that, at the commencement date, have a lease term of more than 12 months and are classified as leases under ASC 842.

We recorded total operating lease expense of $ 1.3 million for each of the three months ended January 31, 2025 and 2024, 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, 2025.

The following table summarizes supplemental cash flow information and non-cash activity related to operating leases for the three months ended January 31, 2025 and 2024 (in thousands):

Three Months Ended

Nine Months Ended

Three Months Ended

January 31, 2025

January 31, 2024

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 July 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 January 31, 2025 (in thousands):

Remainder of 2025

2 unchanged sentences

Present value of operating lease liabilities

As of July 31, 2024, the weighted-average remaining term of our lease portfolio was approximately 4.1 years and the weighted-average discount rate was approximately 3.5 %.

As of January 31, 2025, the weighted-average remaining term of our lease portfolio was approximately 3.7 years and the weighted-average discount rate was approximately 3.5 %.

SEGMENT INFORMATION

We operate in a single segment :

We operate in a single operating and reportable segment:

industrial automation equipment.

We design, manufacture, and sell computerized (i.e., CNC) machine tools, consisting primarily of vertical machining centers (mills) and turning centers (lathes), to companies in the metal cutting industry through a worldwide sales, service, and distribution network.

We design, manufacture, and sell computerized (i.e., Computer Numeric Control) machine tools, consisting primarily of vertical machining centers (mills) and turning centers (lathes), to companies in the metal cutting industry through a worldwide sales, service, and distribution network.

Although most of our computer control systems and software products are proprietary, they predominantly use industry standard personal computer components.

1 unchanged sentence

The following table sets forth sales and service fees by product group and services for the three and nine months ended July 31, 2024 and 2023 (in thousands):

Three Months Ended July 31,

Nine Months Ended July 31,

The following table sets forth sales and service fees by product group and services for the fiscal quarter ended January 31, 2025 and 2024 (dollars in thousands):

Three Months Ended January 31,

Computerized Machine Tools

5 unchanged sentences

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

As of July 31, 2024, we had nine outstanding third party payment guarantees totaling approximately $ 0.9 million.

As of January 31, 2025, we had eight outstanding third party payment guarantees totaling approximately $ 0.8 million.

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

5 unchanged sentences

The terms of these warranties are generally one year for machines and shorter periods for service parts.

We recognize a reserve with respect to this obligation at the time of product sale, with subsequent warranty claims recorded against the reserve.

The amount of the warranty reserve is determined based on historical trend experience and any known warranty issues that could cause future warranty costs to differ from historical experience.

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

Nine Months Ended

We recognize an estimated liability with respect to this obligation at the time of product sale, with subsequent warranty claims recorded against the estimated liability.

The amount of the warranty estimated liability is determined based on historical trend experience and any known warranty issues that could cause future warranty costs to differ from historical experience.

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

Three Months Ended

Balance, beginning of period

Provision for warranties during the period

Charges to the reserve

Charges to the estimated liability

Impact of foreign currency translation

Balance, end of period

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.

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

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 July 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 July 31, 2024, there were no borrowings under any of our credit facilities and there was approximately $ 50.7 million of available borrowing capacity thereunder.

As of January 31, 2025, 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, 2025, there were no borrowings under any of our credit facilities and there was approximately $ 50.6 million of available borrowing capacity thereunder.

There were also no borrowings under any of our credit facilities as of October 31, 2024.

Our provision for income taxes and effective tax rate is affected by the geographic 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 expense during the first nine months of fiscal 2024 of $ 6.4 million compared to $ 1.3 million for the same period in fiscal 2023.

Our effective tax rate for the first nine months of fiscal 2024 was ( 74 %), compared to 40 % in the corresponding prior year period.

The year-over-year increase in income tax expense for the nine months of fiscal 2024 was primarily due to an $8.2 million non-cash valuation allowance on U.S.

deferred tax assets, changes in geographic mix of income and loss that includes jurisdictions with differing tax rates, and discrete items related to unvested stock compensation.

Because we have a valuation allowance recorded against our U.S.

deferred tax assets, we did not record a tax benefit for our U.S.

net losses for the nine months ended July 31, 2024.

The valuation allowance recorded during the third quarter of fiscal 2024 reflects a full valuation allowance of the U.S.

deferred tax assets and was recorded based on our conclusion that the deferred tax assets were not more likely than not going to be realized.

Our unrecognized tax benefits were $ 192,000 as of July 31, 2024, and $ 182,000 as of October 31, 2023, and in each case included accrued interest.

We recorded an income tax expense during the first three months of fiscal 2025 of $ 2.0 million, compared to an income tax benefit $ 0.6 million, for the same period in fiscal 2024.

Our effective tax rate for the first three months of fiscal 2025 was ( 90 %), compared to 27 % in the corresponding prior year period.

The year-over-year change was primarily due to a $ 2.4 million non-cash valuation allowance recorded on our Italian, U.S.

and China deferred tax assets, as well as changes in geographic mix of income and loss that includes jurisdictions with differing tax rates, and discrete items related to unvested stock compensation.

Because we have a valuation allowance recorded against our Italian, U.S.

and China deferred tax assets, we did not record a tax benefit of $ 1.2 million for our U.S., Italy and China pre-tax losses for the three months ended January 31, 2025.

The valuation allowance recorded during the first quarter of fiscal 2025 reflected a full valuation allowance and was recorded based on our conclusion that the deferred tax assets were not more likely than not going to be realized.

Our unrecognized tax benefits were $ 28,000 as of each of January 31, 2025 and October 31, 2024, 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 July 31, 2024, the gross amount of interest accrued, reported in Accrued expenses, was approximately $ 54,000 , which did not include the federal tax benefit of interest deductions.

As of January 31, 2025, the gross amount of interest accrued, reported in Accrued expenses, was approximately $ 7,000 , 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.

The statutes of limitations with respect to unrecognized tax benefits will expire between August 2024 and August 2025.

The statutes of limitations with respect to unrecognized tax benefits will expire this fiscal year.

FINANCIAL INSTRUMENTS

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

July 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 January 31, 2025 and October 31, 2024 (in thousands):

January 31, 2025

October 31, 2024

July 31, 2024

January 31, 2025

October 31, 2024

1 unchanged sentence

We estimate the fair value of these investments on a recurring basis using market prices that are readily available.

Included in Level 2 fair value measurements are derivative assets and liabilities related to gains and losses on foreign currency forward exchange contracts, as described in Note 3 of Notes to the Condensed Consolidated Financial Statements, entered into with a third party.

Included in Level 2 fair value measurements are derivative assets and liabilities related to gains and losses on foreign currency forward exchange contracts entered into with a third party.

We estimate the fair value of these derivatives on a recurring basis using foreign currency exchange rates obtained from active markets.

Derivative instruments are reported in the accompanying Condensed Consolidated Financial Statements at fair value.

dollar equivalent notional amounts of these contracts were $ 84.3 million and $ 97.8 million at July 31, 2024 and October 31, 2023, respectively.

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 $ 95.6 million and $ 85.1 million at January 31, 2025 and October 31, 2024, 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 November 2023, the FASB issued A ccounting Standards Update (“ASU”) No.

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

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance.

This update will be effective for our fiscal year 2025, with the option to early adopt.

This update will be effective for our fiscal year 2025 annual reporting and subsequent interim periods.

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

4 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 nine months ended July 31, 2024.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires companies to disclose disaggregated information about any relevant expense caption presented on the face of the income statement within continuing operations into the following required natural expense categories, as applicable:

(1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization (“DD&A”) recognized as part of oil- and gas-producing activities or other depletion expenses.

This update will be effective for our fiscal year 2028 annual reporting.

Early adoption is permitted.

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

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