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Mail Stop 0306
April 6, 2005
Via: US Mail and Facsimile to (317) 347-6201
Mr. Stephen J. Alesia
Vice President and Chief Financial Officer
Hurco Companies, Inc.
One Technology Way
Indianapolis, IN 46268
RE: Hurco Companies, Inc.
Form 10-K for the fiscal year ended October 31,
2004
Form 10-Q for the quarter ended January 31, 2005
File No. 000-09143
Dear Mr. Alesia:
We have reviewed your filing and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and will make no further review of your
documents. Where indicated, we think you should revise your
document
in future filings in response to these comments. If you disagree,
we
will consider your explanation as to why our comment is
inapplicable
or a revision is unnecessary. Please be as detailed as necessary
in
your explanation. In some of our comments, we may ask you to
provide
us with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the fiscal year ended October 31, 2004
Item 7. Management`s Discussion and Analysis - Page 15
Results of Operations - Page 17
Selling, General and Administrative Expenses (SG&A) - Page
19
1. When you cite more than one factor in explaining the change in
a
financial statement line item, the amounts of the individual
factors
cited, including offsetting factors, should be separately
quantified.
For example, revise future filings to quantify the key drivers of
higher SG&A expenses in fiscal 2004 such as increased currency
translation effects and higher sales commissions paid. In
addition,
each significant factor that contributed to the significant
variances
in net sales and expenses should also be quantified and discussed.
Please apply throughout MD&A to the extent practicable in future
filings.
Restructuring Charges
2. We note that you discontinued the production and sale of
underperforming products. In future filings, please disclose the
products discontinued and make quantified disclosures about
anticipated and actual cost savings derived from your
restructuring
efforts during the periods presented.
Financial Statements
Report of Independent Registered Public Accounting Firm - Page 28
3. The audit report included in the Form 10-K filed in EDGAR is
not
signed. In future filings ensure that the audit report includes
the
conformed signature of your independent auditor. Refer to
Regulation
S-X, Article 2.
Consolidated Statements of Operations
4. It appears that your service fee revenues were over 10 percent
of
total revenues for the periods presented. In future filings revise
your income statement to separately disclose revenues from the
sale
of products, services, and other products if revenues from any
individual referenced component are more than 10 percent of the
total
revenue for the year. Related costs and expenses should also be
disclosed separately. Refer to Regulation S-X, Article 5-03(b)(1)
and (2).
5. We note that "variable options expense" is included as a non-
operating expense in your consolidated statement of operations.
In
future filings, please revise to include as part of operating
expense
or tell us why the current presentation is appropriate.
Note 1: Summary of Significant Accounting Policies
Hedging
6. We note that you entered into forward currency forward exchange
contracts to hedge inter-company liabilities and commitments
denominated in foreign currencies. We also note that you are
accounting for them as cash flow hedges. Please explain how you
met
the criteria in paragraph 40 of SFAS 133, including subparagraphs
A,
B, and C as applicable.
Revenue Recognition
7. Describe the significant terms of your agreements with
distributors, including payment, return, exchange, and other
significant matters. Supplementally explain and support when you
believe it is appropriate to recognize revenue of products sent to
distributors. Revise future filings as necessary. Refer to SAB
104
and to SFAS 48 in your response.
8. We note that title is retained for products sent to certain
foreign locations under a "retention of title clause." Tell us
more
about this. For example, who has the risk of loss in the event of
theft or physical destruction or damage to the product? Who
carries
insurance on the property after the products are shipped? Tell us
in
greater detail why you believe your current accounting complies
with
GAAP.
9. Supplementally describe the existing inventive programs
currently
in place. Are these shown as a reduction of revenue? When are
they
recorded and how are they measured? Tell us how volume discounts
and
sales incentives are estimated at the time of shipment. Refer to
EITF 01-9 in your response.
10. If shipping and handling fees and/or costs are material,
please
quantify these revenues and costs and explain in future filings
how
they are classified in the income statement. Refer to EITF 00-10
in
your response.
11. Supplementally and in detail, explain the nature of your
product
or products. Do you sell hardware and software separately or
together? If together, how do you allocate revenue to these
elements? Are customers provided with a right to receive
additional
software products free or at a reduced price? Does your fee also
cover PCS or other service elements? How is revenue allocated and
recognized for PCS and other service arrangements? Explain how
you
comply with SOP 97-2. Note that reference to accounting
literature
is not sufficient disclosure.
Note 8 - Stock Options
12. In future filings please relocate the disclosures required by
SFAS 148 to include in the summary of significant accounting
policies
in your financial statements.
Note 9. Related Party Transactions
13. We note that you have presented summarized financial
information
for two affiliates accounted for using the equity method. We
assume
that the affiliates do not meet the significance criteria set
forth
under Rule 3-09. Please confirm and provide your calculation. You
need only provide your detailed computations for the income test
(condition 3) as outlined in Rule 1-02(w).
Note 14 - Segment Information - Page 52
14. Disclosure of long-lived assets by geographic area under SFAS
131
should present tangible assets only and should not include
intangibles or investments. See question 22 in the FASB Staff
Implementation Guide to Statement 131. Revise future filings as
necessary.
15. If revenues derived from any particular foreign country are
material, revise future filings to disclose the name of the
country
and the amount of revenue from the country. Refer to paragraph
38(a)
SFAS 131.
* * * *
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a cover letter with your response that keys your
responses to our comments and provides any requested supplemental
information. Detailed cover letters greatly facilitate our
review.
Please file your cover letter on EDGAR. Please understand that we
may have additional comments after reviewing your responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require.
Since the company and its management are in possession of all
facts
relating to a company`s disclosure, they are responsible for the
accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Patrick Enunwaonye, Staff Accountant, at
(202)
824-5529 or me, at (202) 942-1731 if you have questions regarding
comments on the financial statements and related matters. In this
regard, do not hesitate to contact Martin James, Senior Assistant
Chief Accountant, at (202) 942-1984 with any other concerns.
Sincerely,
Angela Crane
Accounting Branch Chief
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Mr. Stephen J. Alesia
Hurco Companies, Inc.
April 6, 2005
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