Hurco Companies Inc 10-Q for FY2022 Q1

Hurco Companies Inc (HURC)

10-Q 2022-03-04 For: 2022-01-31

Added on April 09, 2026

About this 10-Q

Hurco Companies Inc filed this 10-Q on March 4, 2022, covering the quarter ended January 31, 2022 (FY2022 Q1).

Headline figures

Quarter ended January 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $66.89M; up 23.6% from $54.12M a year earlier
Net income: $3.54M; up 433.2% from net income of $663K a year earlier
Diluted EPS: $0.53; up 430.0% from $0.10 a year earlier

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Indiana		35-1150732
(State or other jurisdiction of		(I.R.S. Employer Identification Number)
incorporation or organization)

One Technology Way
Indianapolis, Indiana		46268
(Address of principal executive offices)		(Zip code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	HURC	The Nasdaq Stock Market LLC

Large accelerated filer ◻	Accelerated filer ⌧
Non-accelerated filer ◻	Smaller reporting company ◻
Emerging growth company ◻

Part I - Financial Information

Item 1.	Financial Statements

	Condensed Consolidated Statements of Operations Three Months Ended January 31, 2022 and 2021	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) Three Months Ended January 31, 2022 and 2021	4

	Condensed Consolidated Balance Sheets as of January 31, 2022 and October 31, 2021	5

	Condensed Consolidated Statements of Cash Flows Three Months Ended January 31, 2022 and 2021	6

	Condensed Consolidated Statements of Changes in Shareholders’ Equity Three Months Ended January 31, 2022 and 2021	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	27

Part II - Other Information

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 5.	Other Information	28

Item 6.	Exhibits	29

Signatures		30


	Three Months Ended
	January 31,
	2022		2021

		(unaudited)
Sales and service fees	$	66,887	$	54,115

Cost of sales and service		49,980		42,568

Gross profit		16,907		11,547

Selling, general and administrative expenses		11,697		10,568

Operating income		5,210		979

Interest expense		7		19

Interest income		53		16

Investment income, net		178		121

Other expense (income), net		256		(112)

Income before income taxes		5,178		1,209

Provision for income taxes		1,643		546

Net income	$	3,535	$	663

Income per common share

Basic	$	0.53	$	0.10
Diluted	$	0.53	$	0.10

Weighted average common shares outstanding

Basic		6,616		6,575
Diluted		6,642		6,584

Dividends paid per share	$	0.14	$	0.13


	January 31,		October 31,
	2022		2021
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	90,029	$	84,063
Accounts receivable, net		39,183		42,620
Inventories, net		152,893		148,216
Derivative assets		1,088		905
Prepaid assets		9,670		13,091
Other		54		975
Total current assets		292,917		289,870
Property and equipment:
Land		868		868
Building		7,352		7,352
Machinery and equipment		29,356		29,533
Leasehold improvements		5,221		5,172
		42,797		42,925
Less accumulated depreciation and amortization		(32,612)		(32,318)
Total property and equipment, net		10,185		10,607
Non–current assets:
Software development costs, less accumulated amortization		7,528		7,553
Intangible assets, net		1,488		1,565
Operating lease - right of use assets, net		9,815		10,624
Deferred income taxes		2,923		3,154
Investments and other assets, net		9,615		9,562
Total non–current assets		31,369		32,458
Total assets	$	334,471	$	332,935
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	52,599	$	48,881
Customer deposits		8,610		8,593
Derivative liabilities		579		467
Operating lease liabilities		4,050		4,221
Accrued payroll and employee benefits		7,832		10,389
Accrued income taxes		2,438		1,192
Accrued expenses		4,813		5,911
Accrued warranty expenses		1,470		1,516
Total current liabilities		82,391		81,170
Non–current liabilities:
Deferred income taxes		98		68
Accrued tax liability		1,752		1,749
Operating lease liabilities		6,150		6,794
Deferred credits and other		4,610		4,735
Total non–current liabilities		12,610		13,346
Shareholders’ equity:
Preferred stock: no par value per share, 1,000,000 shares authorized; no shares issued		—		—
Common stock: no par value, $.10 stated value per share, 12,500,000 shares authorized; 6,681,589 and 6,691,052 shares issued and 6,607,437 and 6,617,717 shares outstanding, as of January 31, 2022 and October 31, 2021, respectively		661		662
Additional paid-in capital		63,404		63,924
Retained earnings		178,172		175,574
Accumulated other comprehensive loss		(2,767)		(1,741)
Total shareholders’ equity		239,470		238,419
Total liabilities and shareholders’ equity	$	334,471	$	332,935


								Accumulated
	Common Stock			Additional				Other
	Shares			Paid–in		Retained		Comprehensive
(unaudited)	Outstanding	Amount		Capital		Earnings		Income (Loss)		Total
Balances, October 31, 2020	6,565,163	$	657	$	60,997	$	172,484	$	(2,990)	$	231,148
Net income	—		—		—		663		—		663
Other comprehensive income	—		—		—		—		3,251		3,251
Stock–based compensation expense, net of taxes withheld for vested restricted shares	18,463		1		461		—		—		462
Dividends paid	—		—		—		(865)		—		(865)
Balances, January 31, 2021	6,583,626	$	658	$	61,458	$	172,282	$	261	$	234,659

Balances, October 31, 2021	6,617,717	$	662	$	63,924	$	175,574	$	(1,741)	$	238,419
Net income	—		—		—		3,535		—		3,535
Other comprehensive income (loss)	—		—		—		—		(1,026)		(1,026)
Stock–based compensation expense, net of taxes withheld for vested restricted shares	24,440		2		579		—		—		581
Exercise of common stock options	5,437		1		116		—		—		117
Stock repurchases	(40,157)		(4)		(1,215)		—		—		(1,219)
Dividends paid	—		—		—		(937)		—		(937)
Balances, January 31, 2022	6,607,437	$	661	$	63,404	$	178,172	$	(2,767)	$	239,470


	January 31, 2022			October 31, 2021
	Balance Sheet	Fair		Balance Sheet	Fair
Derivatives	Location	Value		Location	Value
Designated as Hedging Instruments:
Foreign exchange forward contracts	Derivative assets	$	917	Derivative assets	$	646
Foreign exchange forward contracts	Derivative liabilities	$	440	Derivative liabilities	$	403

Not Designated as Hedging Instruments:
Foreign exchange forward contracts	Derivative assets	$	171	Derivative assets	$	259
Foreign exchange forward contracts	Derivative liabilities	$	139	Derivative liabilities	$	64


					Location of Gain	Amount of Gain
	Amount of Gain (Loss)				(Loss) Reclassified	(Loss) Reclassified
	Recognized in Other				from Other	from Other
	Comprehensive				Comprehensive	Comprehensive
Derivatives	Income (Loss)				Income (Loss)	Income (Loss)
	Three Months Ended					Three Months Ended
	January 31,					January 31,
	2022		2021			2022		2021
Designated as Hedging Instruments:
(Effective portion)
Foreign exchange forward contracts – Intercompany sales/purchases	$	335	$	(554)	Cost of sales and service	$	(149)	$	379
Foreign exchange forward contract – Net investment	$	69	$	(110)


	Location of Gain
	(Loss) Recognized	Amount of Gain (Loss)
Derivatives	in Operations	Recognized in Operations
		Three Months Ended
		January 31,
		2022		2021
Not Designated as Hedging Instruments:
Foreign exchange forward contracts	Other expense (income), net	$	198	$	(813)


	Foreign Currency		Cash Flow
	Translation		Hedges		Total
Balance, October 31, 2021	$	(1,668)	$	(73)	$	(1,741)
Other comprehensive income (loss) before reclassifications		(1,510)		335		(1,175)
Reclassifications		—		149		149
Balance, January 31, 2022	$	(3,178)	$	411	$	(2,767)


		Weighted Average
	Stock Options	Exercise Price
Outstanding at October 31, 2021	16,996	$	22.71
Options granted	—		—
Options exercised	(5,437)		21.45
Options cancelled	—		—
Outstanding at January 31, 2022	11,559	$	23.30


	Options Already Vested and
	Currently Exercisable
Number of outstanding options		11,559
Weighted average remaining contractual life (years)		0.86
Weighted average exercise price per share	$	23.30
Intrinsic value of outstanding options	$	103,000


		Weighted Average Grant
	Number of Shares	Date Fair Value
Unvested at October 31, 2021	262,556	$	34.84
Shares or units granted	98,700		31.71
Shares or units vested	(24,053)		34.03
Shares or units cancelled	(61,500)		38.41
Shares withheld	(6,806)		34.03
Unvested at January 31, 2022	268,897	$	32.97


	Three Months Ended
	January 31, 2022
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	1,219
Non-cash information:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	849


	Three Months Ended
	January 31,
	2022		2021

		(unaudited)
Cash flows from operating activities:
Net income	$	3,535	$	663
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for doubtful accounts		(86)		81
Deferred income taxes		(14)		132
Equity in (income) loss of affiliates		(114)		57
Foreign currency (gain) loss		367		(956)
Unrealized (gain) loss on derivatives		157		229
Depreciation and amortization		942		1,066
Stock–based compensation		789		659
Change in assets and liabilities:
(Increase) decrease in accounts receivable		3,041		374
(Increase) decrease in inventories		(5,935)		5,714
(Increase) decrease in prepaid expenses		4,156		(1,587)
Increase (decrease) in accounts payable, net of related parties		3,862		1,991
Increase (decrease) in customer deposits		67		(251)
Increase (decrease) in accrued expenses		(922)		(22)
Increase (decrease) in warranty expenses		(35)		18
Increase (decrease) in accrued payroll and employee benefits		(2,557)		218
Increase (decrease) in accrued income tax		1,257		246
Net change in derivative assets and liabilities		48		(229)
Other		853		631
Net cash provided by (used for) operating activities		9,411		9,034

Cash flows from investing activities:
Proceeds from sale of property and equipment		7		—
Purchase of property and equipment		(277)		(298)
Software development costs		(303)		(324)
Other investments		(262)		(140)
Net cash provided by (used for) investing activities		(835)		(762)

Cash flows from financing activities:
Proceeds from exercise of common stock options		117		—
Dividends paid		(937)		(865)


	January 31,		October 31,
	2022		2021
Purchased parts and sub–assemblies	$	44,011	$	37,527
Work–in–process		17,483		17,559
Finished goods		91,399		93,130
	$	152,893	$	148,216


Remainder of 2022	$	3,347
2023		3,122
2024		1,525
2025		841
2026		609
2026 and thereafter		1,089
Total		10,533
Less: Imputed interest		(333)
Present value of operating lease liabilities	$	10,200


	Three Months Ended
	January 31,
	2022				2021				$ Change		% Change
Americas	$	24,009	36	%	$	23,248	43	%	$	761	3	%
Europe		34,118	51	%		24,246	45	%		9,872	41	%
Asia Pacific		8,760	13	%		6,621	12	%		2,139	32	%
Total	$	66,887	100	%	$	54,115	100	%	$	12,772	24	%



	Assets				Liabilities
	January 31, 2022		October 31, 2021		January 31, 2022		October 31, 2021
Level 1
Deferred compensation	$	2,355	$	2,481	$	—	$	—

Level 2
Derivatives	$	1,088	$	905	$	579	$	467


				Contract Amount at
	Notional	Weighted		Forward Rates in
	Amount	Avg.		U.S. Dollars
Forward	in Foreign	Forward		Contract	January 31,
Contracts	Currency	Rate		Date	2022	Maturity Dates
Sale Contracts:
Euro	20,900	1.1591		24,224	23,566	Feb 2022 - Jan 2023
Sterling	6,550	1.3655		8,944	8,795	Feb 2022 - Jan 2023

Purchase Contracts:
New Taiwan Dollar	865,000	27.1758	*	31,830	31,432	Feb 2022 - Jan 2023



	Notional	Weighted	Contract Amount at Forward Rates in
	Amount	Avg.	U.S. Dollars
Forward	in Foreign	Forward	Contract	January 31,	Maturity
Contracts	Currency	Rate	Date	2022	Date
Sale Contracts:
Euro	3,000	1.1557	3,467	3,400	Nov 2022


								Approximate
						Total Number of		Dollar Value of
						Shares		Shares that
						Purchased as		May Yet Be
						Part of Publicly		Purchased
	Total Number			Average Price		Announced		Under Plans or
	of Shares			Paid per		Plans or		Programs
	Purchased			Share		Programs⁽¹⁾		($ in thousands)⁽¹⁾
November 2021	525	⁽²⁾	$	34.44		0	$	7,000
December 2021	17,847		$	29.46		17,847	$	6,474
January 2022	28,591	⁽²⁾	$	31.80	⁽³⁾	22,310	$	5,778
Total	46,963					40,157

3.1		Amended and Restated Articles of Incorporation of the Registrant, incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 31, 1997.

3.2		Amended and Restated By-Laws of the Registrant as amended through March 12, 2021, incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on March 12, 2021.

10.1		Third Amendment to Credit Agreement, dated as of December 17, 2021, to the Credit Agreement, dated as of December 31, 2018, among Hurco Companies, Inc. and Hurco B.V., as the Borrowers, certain subsidiaries party thereto, as the Guarantors, and Bank of America, N.A., as the Lender, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed December 23, 2021.
10.2		First Amendment to Employment Agreement, dated as of November 11, 2021, by and between Hurco Companies, Inc. and Michael Doar, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 17, 2021.
10.3		First Amendment to Employment Agreement, dated as of November 11, 2021, by and between Hurco Companies, Inc. and Gregory S. Volovic, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 17, 2021.
31.1		Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

31.2		Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

32.1		Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2022, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Operations; (ii) Condensed Consolidated Statements of Comprehensive Income (Loss); (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Cash Flows; (v) Condensed Consolidated Statements of Changes in Shareholders’ Equity; and (vi) Notes to Condensed Consolidated Financial Statements.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

	HURCO COMPANIES, INC.


	By:	/s/ Sonja K. McClelland
		Sonja K. McClelland
		Executive Vice President, Treasurer
		& Chief Financial Officer

Arch
/s/ Gregory Volovic
Gregory Volovic
Chief Executive Officer
March 4, 2022


/s/ Sonja K. McClelland
Sonja K. McClelland
Executive Vice President, Treasurer & Chief Financial Officer