Hurco Companies Inc 10-Q for FY2022 Q2

Hurco Companies Inc (HURC)

10-Q 2022-06-03 For: 2022-04-30

Added on April 09, 2026

About this 10-Q

Hurco Companies Inc filed this 10-Q on June 3, 2022, covering the quarter ended April 30, 2022 (FY2022 Q2).

Headline figures

Quarter ended April 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $62.83M; up 8.5% from $57.92M a year earlier
Net income: $2.03M; down 16.7% from net income of $2.44M a year earlier
Diluted EPS: $0.30; down 16.7% from $0.36 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 Six Months Ended April 30, 2022 and 2021	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) Three and Six Months Ended April 30, 2022 and 2021	4

	Condensed Consolidated Balance Sheets as of April 30, 2022 and October 31, 2021	5

	Condensed Consolidated Statements of Cash Flows Three and Six Months Ended April 30, 2022 and 2021	6

	Condensed Consolidated Statements of Changes in Shareholders’ Equity Three and Six Months Ended April 30, 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	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				Six Months Ended
	April 30,				April 30,
	2022		2021		2022		2021

Sales and service fees	$	62,825	$	57,920	$	129,712	$	112,035

Cost of sales and service		47,223		43,126		97,203		85,694

Gross profit		15,602		14,794		32,509		26,341

Selling, general and administrative expenses		12,515		11,273		24,212		21,841

Operating income (loss)		3,087		3,521		8,297		4,500

Interest expense		6		2		13		21

Interest income		—		—		53		16

Investment income		3		25		181		146

Other income (expense), net		(162)		(160)		(418)		(48)

Income (loss) before income taxes		2,922		3,384		8,100		4,593

Provision (benefit) for income taxes		893		947		2,536		1,493

Net income (loss)	$	2,029	$	2,437	$	5,564	$	3,100

Income (loss) per common share

Basic	$	0.30	$	0.37	$	0.83	$	0.47
Diluted	$	0.30	$	0.36	$	0.83	$	0.46

Weighted average common shares outstanding

Basic		6,571		6,596		6,594		6,585
Diluted		6,640		6,612		6,641		6,598

Dividends paid per share	$	0.15	$	0.14	$	0.29	$	0.27


	April 30,		October 31,
	2022		2021
	(unaudited)

ASSETS
Current assets:
Cash and cash equivalents	$	82,042	$	84,063
Accounts receivable, net		34,389		42,620
Inventories, net		153,305		148,216
Derivative assets		3,279		905
Prepaid assets		8,752		13,091
Other		220		975
Total current assets		281,987		289,870
Property and equipment:
Land		868		868
Building		7,352		7,352
Machinery and equipment		28,061		29,533
Leasehold improvements		4,753		5,172
		41,034		42,925
Less accumulated depreciation and amortization		(31,485)		(32,318)
Total property and equipment, net		9,549		10,607
Non–current assets:
Software development costs, less accumulated amortization		7,480		7,553
Intangible assets, net		1,399		1,565
Operating lease - right of use assets, net		9,006		10,624
Deferred income taxes		2,763		3,154
Investments and other assets, net		9,262		9,562
Total non–current assets		29,910		32,458
Total assets	$	321,446	$	332,935

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	49,853	$	48,881
Customer deposits		6,121		8,593
Derivative liabilities		2,195		467
Operating lease liabilities		3,757		4,221
Accrued payroll and employee benefits		8,149		10,389
Accrued income taxes		1,982		1,192
Accrued expenses		5,099		5,911
Accrued warranty expenses		1,387		1,516
Total current liabilities		78,543		81,170
Non–current liabilities:
Deferred income taxes		80		68
Accrued tax liability		1,316		1,749
Operating lease liabilities		5,609		6,794
Deferred credits and other		4,247		4,735
Total non–current liabilities		11,252		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; 6,645,352 and 6,691,052 shares issued and 6,566,994 and 6,617,717 shares outstanding, as of April 30, 2022 and October 31, 2021, respectively		657		662
Additional paid-in capital		62,543		63,924
Retained earnings		179,215		175,574
Accumulated other comprehensive loss		(10,764)		(1,741)
Total shareholders’ equity		231,651		238,419
Total liabilities and shareholders’ equity	$	321,446	$	332,935


	Three Months Ended April 30, 2022 and 2021
								Accumulated
	Common Stock			Additional				Other
	Shares			Paid–in		Retained		Comprehensive
	Outstanding	Amount		Capital		Earnings		Income (Loss)		Total
Balances, January 31, 2021	6,583,626	$	658	$	61,458	$	172,282	$	261	$	234,659
Net income (loss)	—		—		—		2,437		—		2,437
Other comprehensive income (loss)	—		—		—		—		(293)		(293)
Stock–based compensation expense, net of taxes withheld for vested restricted shares	17,780		2		719		—		—		721
Dividends paid	—		—		—		(924)		—		(924)
Balances, April 30, 2021	6,601,406	$	660	$	62,177	$	173,795	$	(32)	$	236,600

Balances, January 31, 2022	6,607,437	$	661	$	63,404	$	178,172	$	(2,767)	$	239,470
Net income (loss)	—		—		—		2,029		—		2,029
Other comprehensive income (loss)	—		—		—		—		(7,997)		(7,997)
Stock–based compensation expense, net of taxes withheld for vested restricted shares	9,321		1		805		—		—		806
Stock repurchases	(49,764)		(5)		(1,666)		—		—		(1,671)
Dividends paid	—		—		—		(986)		—		(986)
Balances, April 30, 2022	6,566,994	$	657	$	62,543	$	179,215	$	(10,764)	$	231,651


	Six Months Ended April 30, 2022 and 2021
								Accumulated
	Common Stock			Additional				Other
	Shares			Paid–in		Retained		Comprehensive
	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 (loss)	—		—		—		3,100		—		3,100
Other comprehensive income (loss)	—		—		—		—		2,958		2,958
Stock–based compensation expense, net of taxes withheld for vested restricted shares	36,243		3		1,180		—		—		1,183
Dividends paid	—		—		—		(1,789)		—		(1,789)
Balances, April 30, 2021	6,601,406	$	660	$	62,177	$	173,795	$	(32)	$	236,600

Balances, October 31, 2021	6,617,717	$	662	$	63,924	$	175,574	$	(1,741)	$	238,419
Net income (loss)	—		—		—		5,564		—		5,564
Other comprehensive income (loss)	—		—		—		—		(9,023)		(9,023)
Stock–based compensation expense, net of taxes withheld for vested restricted shares	33,761		3		1,384		—		—		1,387
Exercise of common stock options	5,437		1		116		—		—		117
Stock repurchases	(89,921)		(9)		(2,881)		—		—		(2,890)
Dividends paid	—		—		—		(1,923)		—		(1,923)
Balances, April 30, 2022	6,566,994	$	657	$	62,543	$	179,215	$	(10,764)	$	231,651


	April 30, 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	$	2,238	Derivative assets	$	646
Foreign exchange forward contracts	Derivative liabilities	$	1,742	Derivative liabilities	$	403

Not Designated as Hedging Instruments:
Foreign exchange forward contracts	Derivative assets	$	1,041	Derivative assets	$	259
Foreign exchange forward contracts	Derivative liabilities	$	453	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
	April 30,					April 30,
	2022		2021			2022		2021
Designated as Hedging Instruments:
(Effective portion)
Foreign exchange forward contracts – Intercompany sales/purchases	$	(41)	$	(75)	Cost of sales and service	$	(77)	$	340
Foreign exchange forward contract – Net investment	$	152	$	30


	Location of Gain
	(Loss) Recognized	Amount of Gain (Loss)
Derivatives	in Operations	Recognized in Operations
		Three Months Ended
		April 30,
		2022		2021
Not Designated as Hedging Instruments:
Foreign exchange forward contracts	Other income (expense), net	$	581	$	(590)


	Foreign Currency		Cash Flow
	Translation		Hedges		Total
Balance, January 31, 2022	$	(3,178)	$	411	$	(2,767)
Other comprehensive income (loss) before reclassifications		(8,033)		(41)		(8,074)
Reclassifications		—		77		77
Balance, April 30, 2022	$	(11,211)	$	447	$	(10,764)


	Foreign		Cash
	Currency		Flow
	Translation		Hedges		Total
Balance, October 31, 2021	$	(1,668)	$	(73)	$	(1,741)
Other comprehensive income (loss) before reclassifications		(9,543)		294		(9,249)
Reclassifications		—		226		226
Balance, April 30, 2022	$	(11,211)	$	447	$	(10,764)


			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 April 30, 2022	$	11,559	$	23.30


	Options Already Vested and
	Currently Exercisable
Number of outstanding options		11,559
Weighted average remaining contractual life (years)		0.62
Weighted average exercise price per share	$	23.3
Intrinsic value of outstanding options	$	58,600


	Three Months Ended				Six Months Ended
	April 30,				April 30,
	2022		2021		2022		2021

Cash flows from operating activities:
Net income (loss)	$	2,029	$	2,437	$	5,564	$	3,100
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities, net of acquisitions:
Provision for doubtful accounts		(107)		146		(193)		227
Deferred income taxes		79		379		65		511
Equity in loss (income) of affiliates		(276)		(93)		(390)		(36)
Foreign currency (gain) loss		815		296		1,182		(660)
Unrealized (gain) loss on derivatives		(485)		(372)		(328)		(143)
Depreciation and amortization		965		1,050		1,907		2,116
Stock–based compensation		806		721		1,595		1,380
Change in assets and liabilities, net of acquisitions:
(Increase) decrease in accounts receivable		3,521		(9,247)		6,562		(8,873)
(Increase) decrease in inventories		(6,741)		1,640		(12,676)		7,354
(Increase) decrease in prepaid expenses		1,226		426		5,382		(1,161)
Increase (decrease) in accounts payable		(111)		7,351		3,751		9,342
Increase (decrease) in customer deposits		(2,211)		3,048		(2,144)		2,797
Increase (decrease) in accrued expenses		784		56		(138)		34
Increase (decrease) in accrued payroll and employee benefits		317		617		(2,240)		835
Increase (decrease) in accrued income tax		(377)		(30)		880		216
Net change in derivative assets and liabilities		(77)		392		(29)		163
Other		(1,256)		83		(438)		732
Net cash provided by (used for) operating activities		(1,099)		8,900		8,312		17,934

Cash flows from investing activities:
Proceeds from sale of property and equipment		94		3		101		3
Purchase of property and equipment		(231)		(378)		(508)		(676)
Software development costs		(295)		(282)		(598)		(606)
Other investments		262		(42)		—		(182)
Net cash provided by (used for) investing activities		(170)		(699)		(1,005)		(1,461)

Cash flows from financing activities:
Proceeds from exercise of common stock options		—		—		117		—
Dividends paid		(986)		(924)		(1,923)		(1,789)
Taxes paid related to net settlement of restricted shares		—		—		(208)		(197)
Stock repurchases		(1,671)		—		(2,890)		—


			Weighted Average Grant
	Number of Shares		Date Fair Value
Unvested at October 31, 2021	$	262,556	$	34.84
Shares or units granted		112,614		32.05
Shares or units vested		(33,761)		34.90
Shares or units cancelled		(61,500)		38.41
Shares withheld		(6,806)		34.03
Unvested at April 30, 2022	$	273,103	$	32.90


	April 30,		October 31,
	2022		2021
Purchased parts and sub–assemblies	$	45,233	$	37,527
Work–in–process		17,541		17,559
Finished goods		90,531		93,130
	$	153,305	$	148,216


Remainder of 2022	$	2,206
2023		3,229
2024		1,724
2025		931
2026		581
2026 and thereafter		1,020
Total		9,691
Less: Imputed interest		(325)
Present value of operating lease liabilities	$	9,366


	Six Months Ended
	April 30, 2022
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	2,370
Non-cash information:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,515



	Assets				Liabilities
	April 30, 2022		October 31, 2021		April 30, 2022		October 31, 2021
Level 1
Deferred compensation	$	2,111	$	2,481	$	—	$	—

Level 2
Derivatives	$	3,279	$	905	$	2,195	$	467


				Contract Amount at
	Notional	Weighted		Forward Rates in
	Amount	Avg.		U.S. Dollars
Forward	in Foreign	Forward		Contract	April 30,
Contracts	Currency	Rate		Date	2022	Maturity Dates
Sale Contracts:
Euro	23,250	1.1270		26,203	24,743	May 2022 - April 2023
Sterling	5,750	1.3463		7,741	7,243	May 2022 - April 2023

Purchase Contracts:
New Taiwan Dollar	865,000	27.4840	*	31,473	29,748	May 2022 - April 2023


			Contract Amount at Forward Rates in
	Notional	Weighted	U.S. Dollars
Forward	Amount	Avg.	Contract	April 30,
Contracts	in Foreign Currency	Forward Rate	Date	2022	Maturity Date
Sale Contracts:
Euro	3,000	1.1557	3,467	3,204	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⁽¹⁾	Programs⁽¹⁾		($ in thousands) ⁽¹⁾
February 2022	26,460	$	33.43	26,460	$	4,895
March 2022	23,304	$	33.72	23,304	$	4,110
April 2022	—	$	—	—	$	4,110
Total	49,764			49,764

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		Hurco Companies, Inc. 2016 Equity Incentive Plan, as amended and restated as of March 10, 2022 (incorporated by reference to Appendix A to the Company’s definitive proxy statement for its 2022 annual meeting of shareholders filed on January 24, 2022).
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 April 30, 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
June 3, 2022


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