Hurco Companies Inc 10-Q for FY2023 Q3

Hurco Companies Inc (HURC)

10-Q 2023-09-08 For: 2023-07-31

Added on April 09, 2026

About this 10-Q

Hurco Companies Inc filed this 10-Q on September 8, 2023, covering the quarter ended July 31, 2023 (FY2023 Q3).

Headline figures

Quarter ended July 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $53.2M; down 7.7% from $57.64M a year earlier
Net income: $260K; down 79.0% from net income of $1.24M a year earlier
Diluted EPS: $0.04; down 77.8% from $0.18 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 and Nine Months Ended July 31, 2023 and 2022	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) Three and Nine Months Ended July 31, 2023 and 2022	4

	Condensed Consolidated Balance Sheets as of July 31, 2023 and October 31, 2022	5

	Condensed Consolidated Statements of Cash Flows Three and Nine Months Ended July 31, 2023 and 2022	6

	Condensed Consolidated Statements of Changes in Shareholders’ Equity Three and Nine Months Ended July 31, 2023 and 2022	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	30

Part II - Other Information

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 5.	Other Information	31

Item 6.	Exhibits	32

Signatures		33



	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2023		2022		2023		2022

		(unaudited)				(unaudited)
Sales and service fees	$	53,201	$	57,640	$	161,702	$	187,352

Cost of sales and service		39,753		43,241		122,953		140,444

Gross profit		13,448		14,399		38,749		46,908

Selling, general and administrative expenses		12,436		12,647		35,512		36,859

Operating income		1,012		1,752		3,237		10,049

Interest expense		88		9		159		22

Interest income		122		16		259		69

Investment income (loss), net		11		(11)		47		170

Other income (expense), net		(412)		(22)		(131)		(440)

Income before income taxes		645		1,726		3,253		9,826

Provision for income taxes		385		488		1,286		3,024

Net income	$	260	$	1,238	$	1,967	$	6,802

Income per common share

Basic	$	0.04	$	0.19	$	0.30	$	1.02
Diluted	$	0.04	$	0.18	$	0.30	$	1.01

Weighted average common shares outstanding

Basic		6,462		6,567		6,511		6,585
Diluted		6,469		6,629		6,538		6,637

Dividends paid per share	$	0.16	$	0.15	$	0.47	$	0.44


	July 31,		October 31,
	2023		2022
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	41,030	$	63,922
Accounts receivable, net		33,281		38,444
Inventories, net		178,423		156,207
Derivative assets		169		2,515
Prepaid and other assets		9,060		6,981
Total current assets		261,963		268,069
Property and equipment:
Land		1,046		868
Building		7,392		7,352
Machinery and equipment		27,940		26,532
Leasehold improvements		4,638		4,351
		41,016		39,103
Less accumulated depreciation and amortization		(33,119)		(30,620)
Total property and equipment, net		7,897		8,483
Non–current assets:
Software development costs, less accumulated amortization		7,085		7,302
Intangible assets, net		1,071		1,246
Operating lease - right of use assets, net		10,921		8,460
Deferred income taxes		4,305		3,442
Investments and other assets, net		9,975		9,235
Total non–current assets		33,357		29,685
Total assets	$	303,217	$	306,237
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	36,338	$	40,707
Customer deposits		5,502		4,839
Derivative liabilities		2,603		3,632
Operating lease liabilities		3,945		3,973
Accrued payroll and employee benefits		8,331		10,751
Accrued income taxes		1,545		2,611
Accrued expenses		4,261		5,397
Accrued warranty expenses		1,318		1,426
Total current liabilities		63,843		73,336
Non–current liabilities:
Deferred income taxes		88		67
Accrued tax liability		1,290		1,281
Operating lease liabilities		7,342		4,814
Deferred credits and other		4,853		4,095
Total non–current liabilities		13,573		10,257
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; 6,553,673 and 6,645,352 shares issued and 6,462,138 and 6,566,994 shares outstanding, as of July 31, 2023 and October 31, 2022, respectively		646		657
Additional paid-in capital		61,274		63,635
Retained earnings		178,751		179,877
Accumulated other comprehensive loss		(14,870)		(21,525)
Total shareholders’ equity		225,801		222,644
Total liabilities and shareholders’ equity	$	303,217	$	306,237


	Three Months Ended July 31, 2023 and 2022
								Accumulated
	Common Stock			Additional				Other
	Shares			Paid–in		Retained		Comprehensive
(unaudited)	Outstanding	Amount		Capital		Earnings		Income (Loss)		Total
Balances, April 30, 2022	6,566,994	$	657	$	62,543	$	179,215	$	(10,764)	$	231,651
Net income (loss)	—		—		—		1,238		—		1,238
Other comprehensive income (loss)	—		—		—		—		(2,908)		(2,908)
Stock–based compensation expense, net of taxes withheld for vested restricted shares	—		—		791		—		—		791
Dividends paid	—		—		—		(1,004)		—		(1,004)
Balances, July 31, 2022	6,566,994	$	657	$	63,334	$	179,449	$	(13,672)	$	229,768

Balances, April 30, 2023	6,462,138	$	646	$	60,518	$	179,550	$	(13,009)	$	227,705
Net income (loss)	—		—		—		260		—		260
Other comprehensive income (loss)	—		—		—		—		(1,861)		(1,861)
Stock–based compensation expense, net of taxes withheld for vested restricted shares	—		—		756		—		—		756
Dividends paid	—		—		—		(1,059)		—		(1,059)
Balances, July 31, 2023	6,462,138	$	646	$	61,274	$	178,751	$	(14,870)	$	225,801


	Nine Months Ended July 31, 2023 and 2022
								Accumulated
	Common Stock			Additional				Other
	Shares			Paid–in		Retained		Comprehensive
	Outstanding	Amount		Capital		Earnings		Income (Loss)		Total
Balances, October 31, 2021	6,617,717	$	662	$	63,924	$	175,574	$	(1,741)	$	238,419
Net income (loss)	—		—		—		6,802		—		6,802
Other comprehensive income (loss)	—		—		—		—		(11,931)		(11,931)
Stock–based compensation expense, net of taxes withheld for vested restricted shares	33,761		3		2,175		—		—		2,178
Exercise of common stock options	5,437		1		116		—		—		117
Stock repurchases	(89,921)		(9)		(2,881)		—		—		(2,890)
Dividends paid	—		—		—		(2,927)		—		(2,927)
Balances, July 31, 2022	6,566,994	$	657	$	63,334	$	179,449	$	(13,672)	$	229,768

Balances, October 31, 2022	6,566,994	$	657	$	63,635	$	179,877	$	(21,525)	$	222,644
Net income (loss)	—		—		—		1,967		—		1,967
Other comprehensive income (loss)	—		—		—		—		6,655		6,655
Stock–based compensation expense, net of taxes withheld for vested restricted shares	49,874		5		1,962		—		—		1,967
Exercise of common stock options	11,559		1		269		—		—		270
Stock repurchases	(166,289)		(17)		(4,592)		—		—		(4,609)
Dividends paid	—		—		—		(3,093)		—		(3,093)
Balances, July 31, 2023	6,462,138	$	646	$	61,274	$	178,751	$	(14,870)	$	225,801


	July 31, 2023			October 31, 2022
	Balance Sheet	Fair		Balance Sheet	Fair
Derivatives	Location	Value		Location	Value
Designated as Hedging Instruments:
Foreign exchange forward contracts	Derivative assets	$	7	Derivative assets	$	2,273
Foreign exchange forward contracts	Derivative liabilities	$	1,457	Derivative liabilities	$	2,891

Not Designated as Hedging Instruments:
Foreign exchange forward contracts	Derivative assets	$	162	Derivative assets	$	242
Foreign exchange forward contracts	Derivative liabilities	$	1,146	Derivative liabilities	$	741


					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
	July 31,					July 31,
	2023		2022			2023		2022
Designated as Hedging Instruments:
(Effective portion)
Foreign exchange forward contracts – Intercompany sales/purchases	$	(429)	$	95	Cost of sales and service	$	117	$	(76)
Foreign exchange forward contract – Net investment	$	14	$	89


	Location of Gain
	(Loss) Recognized	Amount of Gain (Loss)
Derivatives	in Operations	Recognized in Operations
		Three Months Ended
		July 31,
		2023		2022
Not Designated as Hedging Instruments:
Foreign exchange forward contracts	Other income (expense), net	$	(1,040)	$	1,059


	Foreign Currency		Cash Flow
	Translation		Hedges		Total
Balance, April 30, 2023	$	(11,598)	$	(1,411)	$	(13,009)
Other comprehensive income (loss) before reclassifications		(1,315)		(429)		(1,744)
Reclassifications		—		(117)		(117)
Balance, July 31, 2023	$	(12,913)	$	(1,957)	$	(14,870)


	Foreign		Cash
	Currency		Flow
	Translation		Hedges		Total
Balance, October 31, 2022	$	(21,259)	$	(266)	$	(21,525)
Other comprehensive income (loss) before reclassifications		8,346		(1,442)		6,904
Reclassifications		—		(249)		(249)
Balance, July 31, 2023	$	(12,913)	$	(1,957)	$	(14,870)


		Weighted Average
	Stock Options	Exercise Price
Outstanding at October 31, 2022	11,559	$	23.30
Options granted	—		—
Options exercised	(11,559)		23.30
Options cancelled	—		—
Outstanding at July 31, 2023	—	$	—


		Weighted Average Grant
	Number of Shares	Date Fair Value
Unvested at October 31, 2022	273,103	$	32.90
Shares or units granted	146,954		26.40
Shares or units vested	(49,874)		36.23
Shares or units cancelled	(39,916)		40.22
Shares withheld	(11,950)		37.84
Unvested at July 31, 2023	318,317	$	28.27


	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2023		2022		2023		2022

		(unaudited)				(unaudited)
Cash flows from operating activities:
Net income	$	260	$	1,238	$	1,967	$	6,802
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for doubtful accounts		(33)		14		29		(179)
Deferred income taxes		(68)		(70)		233		(5)
Equity in (income) loss of affiliates		(117)		(72)		(339)		(462)
Foreign currency (gain) loss		(144)		836		(2,387)		2,018
Unrealized (gain) loss on derivatives		272		152		322		(176)
Depreciation and amortization		1,037		1,049		3,141		2,956
Stock–based compensation		756		791		2,280		2,386
Change in assets and liabilities:
(Increase) decrease in accounts receivable		1,518		(2,154)		7,472		4,408
(Increase) decrease in inventories		(4,150)		(9,518)		(14,621)		(22,194)
(Increase) decrease in prepaid expenses		206		256		(2,450)		5,638
Increase (decrease) in accounts payable		(8,187)		(814)		(5,981)		2,937
Increase (decrease) in customer deposits		(309)		220		404		(1,924)
Increase (decrease) in accrued expenses		(227)		1,195		(2,154)		1,057
Increase (decrease) in accrued payroll and employee benefits		384		667		(2,420)		(1,573)
Increase (decrease) in accrued income tax		(257)		(67)		(1,237)		813
Net change in derivative assets and liabilities		115		104		715		75
Other		(203)		302		(1,156)		(136)
Net cash provided by (used for) operating activities		(9,147)		(5,871)		(16,182)		2,441

Cash flows from investing activities:
Proceeds from sale of property and equipment		—		2		1		103
Purchase of property and equipment		(154)		(320)		(811)		(828)
Software development costs		(191)		(202)		(940)		(800)
Other investments		—		—		273		—
Net cash provided by (used for) investing activities		(345)		(520)		(1,477)		(1,525)

Cash flows from financing activities:
Proceeds from exercise of common stock options		—		—		270		117
Dividends paid		(1,059)		(1,004)		(3,093)		(2,927)
Taxes paid related to net settlement of restricted shares		—		—		(313)		(208)


	July 31,		October 31,
	2023		2022
Purchased parts and sub–assemblies	$	46,884	$	46,796
Work–in–process		19,446		16,539
Finished goods		115,852		96,305
Inventories, gross	$	182,182	$	159,640
Reserve for purchased parts and sub-assemblies		(3,759)		(3,433)
Inventories, net	$	178,423	$	156,207


Remainder of 2023	$	1,241
2024		3,808
2025		2,290
2026		1,415
2027		1,239
2028 and thereafter		2,075
Total		12,068
Less: Imputed interest		(781)
Present value of operating lease liabilities	$	11,287


	Three Months Ended
	July 31,
	2023				2022				$ Change		% Change
Americas	$	18,272	34	%	$	23,736	41	%	$	(5,464)	(23)	%
Europe		31,162	59	%		28,932	50	%		2,230	8	%
Asia Pacific		3,767	7	%		4,972	9	%		(1,205)	(24)	%
Total	$	53,201	100	%	$	57,640	100	%	$	(4,439)	(8)	%



	Assets				Liabilities
	July 31, 2023		October 31, 2022		July 31, 2023		October 31, 2022
Level 1
Deferred compensation	$	2,400	$	1,996	$	—	$	—

Level 2
Derivatives	$	169	$	2,515	$	2,603	$	3,632


				Contract Amount at
	Notional	Weighted		Forward Rates in
	Amount	Avg.		U.S. Dollars
Forward	in Foreign	Forward		Contract	July 31,
Contracts	Currency	Rate		Date	2023	Maturity Dates
Sale Contracts:
Euro	10,500	1.0888		11,432	11,643	Aug 2023 - Jul 2024
Sterling	4,100	1.2210		5,006	5,267	Aug 2023 - Jul 2024

Purchase Contracts:
New Taiwan Dollar	565,000	29.6782	*	19,038	18,291	Aug 2023 - Jul 2024



	Notional	Weighted	Contract Amount at Forward Rates in
	Amount	Avg.	U.S. Dollars
Forward	in Foreign	Forward	Contract	July 31,	Maturity
Contracts	Currency	Rate	Date	2023	Date
Sale Contracts:
Euro	3,000	1.0275	3,083	3,314	Nov 2023

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.

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 July 31, 2023, 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
		September 8, 2023

Arch
/s/ Gregory Volovic
Gregory Volovic
Chief Executive Officer
September 8, 2023