0001558370-23-010771 | 10-Q | XBRL Viewer

LEASES - Supplemental cash flow information (Details) - USD ($) $ in Thousands	6 Months Ended
	Apr. 30, 2023	Apr. 30, 2022
LEASES
Cash paid for amounts included in the measurement of lease liabilities	$ 2,511	$ 2,370
Right-of-use assets obtained in exchange for new operating lease liabilities	$ 2,372	$ 1,515

INVENTORIES

6 Months Ended

Apr. 30, 2023

INVENTORIES

INVENTORIES

7. INVENTORIES

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


	April 30,		October 31,
	2023		2022
Purchased parts and sub–assemblies	$	48,551	$	46,796
Work–in–process		19,686		16,539
Finished goods		111,283		96,305
Inventories, gross	$	179,520	$	159,640
Reserve for purchased parts and sub-assemblies		(3,689)		(3,433)
Inventories, net	$	175,831	$	156,207

GENERAL	6 Months Ended
Apr. 30, 2023
GENERAL
GENERAL	1. GENERAL The unaudited Condensed Consolidated Financial Statements include the accounts of Hurco Companies, Inc. and its consolidated subsidiaries. As used in this report, the words “we”, “us”, “our”, “Hurco” and the “Company” refer to Hurco Companies, Inc. and its consolidated subsidiaries. We design, manufacture, and sell computerized (i.e., Computer Numeric Control (“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. Although the majority of our computer control systems and software products are proprietary, they predominantly use industry standard personal computer components. Our computer control systems and software products are primarily sold as integral components of our computerized machine tool products. 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. We operate in the industrial equipment industry and have a global footprint that subjects us to various business risks in many different countries. Our operating results during fiscal years 2020 through 2022, and the first six months of fiscal year 2023, were affected by the international business disruption due to the outbreak of COVID-19 and lockdowns in certain markets, vendor delays, transportation issues, unusually high inflation, volatility of foreign currencies, competitive labor markets, and political friction in the U.S, and many regions of the world. Because of the potential for extended vulnerability, we have closely evaluated the estimates we have made in preparing the financial statements as of April 30, 2023, with the understanding that these estimates could change in the near term. We will continue to evaluate and disclose any uncertainty associated with key assumptions underlying fair value estimates, trends, and uncertainties that have had, or are reasonably expected to have, a material effect on our consolidated financial position, results of operations, changes in shareholders' equity, and cash flows for and at the end of each interim period. The condensed financial information as of April 30, 2023 and for the three and six months ended April 30, 2023 and April 30, 2022 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. We suggest that you read these Condensed Consolidated Financial Statements in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended October 31, 2022.

GENERAL

6 Months Ended

Apr. 30, 2023

GENERAL

GENERAL

1. GENERAL

The unaudited Condensed Consolidated Financial Statements include the accounts of Hurco Companies, Inc. and its consolidated subsidiaries. As used in this report, the words “we”, “us”, “our”, “Hurco” and the “Company” refer to Hurco Companies, Inc. and its consolidated subsidiaries.

We design, manufacture, and sell computerized (i.e., Computer Numeric Control (“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. Although the majority of our computer control systems and software products are proprietary, they predominantly use industry standard personal computer components. Our computer control systems and software products are primarily sold as integral components of our computerized machine tool products. 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.

We operate in the industrial equipment industry and have a global footprint that subjects us to various business risks in many different countries. Our operating results during fiscal years 2020 through 2022, and the first six months of fiscal year 2023, were affected by the international business disruption due to the outbreak of COVID-19 and lockdowns in certain markets, vendor delays, transportation issues, unusually high inflation, volatility of foreign currencies, competitive labor markets, and political friction in the U.S, and many regions of the world. Because of the potential for extended vulnerability, we have closely evaluated the estimates we have made in preparing the financial statements as of April 30, 2023, with the understanding that these estimates could change in the near term. We will continue to evaluate and disclose any uncertainty associated with key assumptions underlying fair value estimates, trends, and uncertainties that have had, or are reasonably expected to have, a material effect on our consolidated financial position, results of operations, changes in shareholders' equity, and cash flows for and at the end of each interim period.

The condensed financial information as of April 30, 2023 and for the three and six months ended April 30, 2023 and April 30, 2022 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. We suggest that you read these Condensed Consolidated Financial Statements in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended October 31, 2022.

FINANCIAL INSTRUMENTS

6 Months Ended

Apr. 30, 2023

FINANCIAL INSTRUMENTS

FINANCIAL INSTRUMENTS

13. FINANCIAL INSTRUMENTS

FASB fair value guidance establishes a three-tier fair value hierarchy, which categorizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exist, therefore requiring an entity to develop its own assumptions.

The carrying amounts for cash and cash equivalents approximate their fair values due to the short maturity of these instruments, and such instruments meet the Level 1 criteria of the three–tier fair value hierarchy discussed above. 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 April 30, 2023 and October 31, 2022 (in thousands):



	Assets				Liabilities
	April 30, 2023		October 31, 2022		April 30, 2023		October 31, 2022
Level 1
Deferred compensation	$	2,243	$	1,996	$	—	$	—

Level 2
Derivatives	$	172	$	2,515	$	2,277	$	3,632

Included in Level 1 assets are mutual fund investments under a nonqualified deferred compensation plan. 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 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. 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. The U.S. dollar equivalent notional amounts of these contracts was $98.5 million and $102.8 million at April 30, 2023 and October 31, 2022, 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. The counterparties to the forward exchange contracts are substantial and creditworthy financial institutions. We do not consider either the risk of counterparties’ non-performance or the economic consequences of counterparties’ non-performance to be material risks.

ACCOUNTS RECEIVABLE (Details) - USD ($) $ in Millions	Apr. 30, 2023	Oct. 31, 2022
ACCOUNTS RECEIVABLE
Allowance for Doubtful Accounts Receivable	$ 1.5	$ 1.5

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss [Member]	Total
Balances at Oct. 31, 2021	$ 662	$ 63,924	$ 175,574	$ (1,741)	$ 238,419
Balances (in shares) at Oct. 31, 2021	6,617,717
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	$ 3				1,387
Stock-based compensation expense, net of taxes withheld for vested restricted shares (in shares)	33,761
Stock-based compensation expense, net of taxes withheld for vested restricted shares		1,384
Exercise of common stock options	$ 1	116			117
Exercise of common stock options (in shares)	5,437
Stock repurchases	$ (9)	(2,881)			(2,890)
Stock repurchases (in shares)	(89,921)
Dividends paid			(1,923)		(1,923)
Balances at Apr. 30, 2022	$ 657	62,543	179,215	(10,764)	231,651
Balances (in shares) at Apr. 30, 2022	6,566,994
Balances at Jan. 31, 2022	$ 661	63,404	178,172	(2,767)	239,470
Balances (in shares) at Jan. 31, 2022	6,607,437
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	$ 1				806
Stock-based compensation expense, net of taxes withheld for vested restricted shares (in shares)	9,321
Stock-based compensation expense, net of taxes withheld for vested restricted shares		805
Stock repurchases	$ (5)	(1,666)			(1,671)
Stock repurchases (in shares)	(49,764)
Dividends paid			(986)		(986)
Balances at Apr. 30, 2022	$ 657	62,543	179,215	(10,764)	231,651
Balances (in shares) at Apr. 30, 2022	6,566,994
Balances at Oct. 31, 2022	$ 657	63,635	179,877	(21,525)	222,644
Balances (in shares) at Oct. 31, 2022	6,566,994
Net income (loss)			1,707		1,707
Other comprehensive income (loss)				8,516	8,516
Stock-based compensation expense, net of taxes withheld for vested restricted shares	$ 5				1,211
Stock-based compensation expense, net of taxes withheld for vested restricted shares (in shares)	49,874
Stock-based compensation expense, net of taxes withheld for vested restricted shares		1,206
Exercise of common stock options	$ 1	269			270
Exercise of common stock options (in shares)	11,559
Stock repurchases	$ (17)	(4,592)			(4,609)
Stock repurchases (in shares)	(166,289)
Dividends paid			(2,034)		(2,034)
Balances at Apr. 30, 2023	$ 646	60,518	179,550	(13,009)	227,705
Balances (in shares) at Apr. 30, 2023	6,462,138
Balances at Jan. 31, 2023	$ 659	63,621	180,212	(11,642)	232,850
Balances (in shares) at Jan. 31, 2023	6,587,694
Net income (loss)			377		377
Other comprehensive income (loss)				(1,367)	(1,367)
Stock-based compensation expense, net of taxes withheld for vested restricted shares	$ 1				750
Stock-based compensation expense, net of taxes withheld for vested restricted shares (in shares)	13,914
Stock-based compensation expense, net of taxes withheld for vested restricted shares		749
Stock repurchases	$ (14)	(3,852)			(3,866)
Stock repurchases (in shares)	(139,470)
Dividends paid			(1,039)		(1,039)
Balances at Apr. 30, 2023	$ 646	$ 60,518	$ 179,550	$ (13,009)	$ 227,705
Balances (in shares) at Apr. 30, 2023	6,462,138

SEGMENT INFORMATION (Narrative) (Details)	6 Months Ended
SEGMENT INFORMATION (Narrative) (Details)	Apr. 30, 2023 segment
SEGMENT INFORMATION
Number of operating segments	1

EQUITY INCENTIVE PLAN

6 Months Ended

Apr. 30, 2023

EQUITY INCENTIVE PLAN

EQUITY INCENTIVE PLAN

4. EQUITY INCENTIVE PLAN

In March 2016, we adopted the Hurco Companies, Inc. 2016 Equity Incentive Plan (as amended as described below, the “2016 Equity Plan”), which allows us to grant awards of stock options, stock appreciation rights, restricted stock, stock units and other stock-based awards. The 2016 Equity Plan replaced the Hurco Companies, Inc. 2008 Equity Incentive Plan (the “2008 Equity Plan”) and is the only active plan under which equity awards may be made by us to our employees and non-employee directors. No further awards will be made under our 2008 Equity Plan. The total number of shares of our common stock that may be issued pursuant to awards under the 2016 Equity Plan initially was 856,048, which included 386,048 shares remaining available for future grants under the 2008 Equity Plan as of March 10, 2016, the date our shareholders approved the 2016 Equity Plan. On March 10, 2022, our shareholders approved the Amended and Restated Hurco Companies, Inc. 2016 Equity Incentive Plan, which, among other items, increased the aggregate number of shares that may be issued under the 2016 Equity Plan by 850,000 shares.

The Compensation Committee of our Board of Directors has the authority to determine the officers, directors and key employees who will be granted awards under the 2016 Equity Plan; designate the number of shares subject to each award; determine the terms and conditions upon which awards will be granted; and prescribe the form and terms of award agreements. We have granted restricted shares and performance units under the 2016 Equity Plan that are currently outstanding. We have previously granted stock options under the 2008 Equity Plan, none of which remained outstanding as of April 30, 2023. No stock option may be exercised more than ten years after the date of grant or such shorter period as the Compensation Committee may determine at the date of grant. 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.

A summary of stock option activity for the six-month period ended April 30, 2023, is as follows:


		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 April 30, 2023	—	$	-

As of April 30, 2023, no stock options were outstanding.

On March 9, 2023, the Compensation Committee granted a total of 17,226 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 $27.86 per share.

On January 3, 2023, 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. The awards were approximately 25% time-based vesting and approximately 75% performance-based vesting. The three-year performance period for the PSUs is fiscal year 2023 through fiscal year 2025.

On that date, the Compensation Committee granted a total of 29,376 shares of time-based restricted stock to our executive officers. The restricted shares vest in thirds over three years from the date of grant provided the recipient remains employed through that date. 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 $26.38 per share.

On January 3, 2023, the Compensation Committee also granted a total target number of 47,003 PSUs to our executive officers designated as “PSU – NI”. These PSUs were weighted as approximately 40% of the overall 2023 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 2023-2025. 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 grant date, which was $26.38 per PSU.

On January 3, 2023, the Compensation Committee also granted a total target number of 41,126 PSUs to our executive officers designated as “PSU –FCF”. These PSUs were weighted as approximately 35% of the overall 2023 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 2023-2025. 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. The grant date fair value of the PSUs – FCF was based on the closing sales price of our common stock on the grant date, which was $26.38 per PSU.

On November 9, 2022, the Compensation Committee granted a total of 12,223 shares of time-based restricted stock to our non-executive employees. The restricted shares vest in thirds over three years from the date of grant provided the recipient remains employed through that date. 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 $24.53 per share.

A reconciliation of our restricted stock and PSU activity and related information for the six-month period ended April 30, 2023 is as follows:


		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 April 30, 2023	318,317	$	28.27

During the first six months of fiscal 2023 and 2022, we recorded approximately $1.5 million and $1.6 million, respectively, of stock-based compensation expense, related to grants under the 2016 Equity Plan. As of April 30, 2023, there was an estimated $5.4 million of total unrecognized stock-based compensation cost that we expect to recognize by the end of the first quarter of fiscal year 2026.

GUARANTEES AND PRODUCT WARRANTIES - Additional Information (Details) $ in Millions	6 Months Ended
	Apr. 30, 2023 USD ($)
GUARANTEES AND PRODUCT WARRANTIES
Number Of Guarantees	9
Guarantor Obligations, Maximum Exposure, Undiscounted	$ 0.9
Term of Product Warranty	1 year

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Apr. 30, 2023	Oct. 31, 2022
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred stock, no par value	$ 0	$ 0
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Common Stock, No Par Value	$ 0	$ 0
Common stock, stated value per share	$ 0.10	$ 0.10
Common stock, shares authorized	12,500,000	12,500,000
Common stock, shares issued	6,553,673	6,645,352
Common stock, shares outstanding	6,462,138	6,566,994

EQUITY INCENTIVE PLAN - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions				6 Months Ended
	Mar. 09, 2023	Jan. 03, 2023	Nov. 09, 2022	Apr. 30, 2023	Apr. 30, 2022	Oct. 31, 2022	Mar. 10, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized Stock-based compensation expense				$ 5.4
Restricted stock granted				146,954
Restricted stock vested				49,874
Grant date fair value of restricted stock				$ 28.27		$ 32.90
Performance period				3 years
Stock-based compensation expense				$ 1.5	$ 1.6
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option expiration period				10 years
Options outstanding				0		11,559
2016 Equity Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total number of shares of common stock that may be issued as awards under 2016 Plan				850,000			856,048
2008 Equity Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares Available for Grant under the 2008 Plan							386,048
Options outstanding				0
Restricted stock granted				0
PSU TSR \| Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of target number of shares to be earned		50.00%
PSU ROIC \| Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of target number of shares to be earned		200.00%
PSU ROIC \| Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of target number of shares to be earned		50.00%
Time Based
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock granted		29,376	12,223
Grant date fair value of restricted stock		$ 26.38	$ 24.53
Percentage of incentive compensation arrangement		25.00%
Performance period				3 years
Time Based \| Non-employee Directors and Non-Executive Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock granted	17,226
Grant date fair value of restricted stock	$ 27.86
Performance period	1 year
Performance Based
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of incentive compensation arrangement		75.00%
Performance period				3 years
Performance Based \| PSU TSR
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock granted		47,003
Grant date fair value of restricted stock		$ 26.38
Percentage of incentive compensation arrangement		40.00%
Performance Based \| PSU TSR \| Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of target number of shares to be earned		200.00%
Performance Based \| PSU ROIC
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock granted		41,126
Grant date fair value of restricted stock		$ 26.38
Percentage of incentive compensation arrangement		35.00%
Performance period				3 years

EARNINGS PER SHARE (Tables)

6 Months Ended

Apr. 30, 2023

EARNINGS PER SHARE

Schedule of computation of basic and diluted net income (loss) per share


	Three Months Ended								Six Months Ended
	April 30,								April 30,
	2023				2022				2023				2022
	Basic		Diluted		Basic		Diluted		Basic		Diluted		Basic		Diluted
Net income	$	377	$	377	$	2,029	$	2,029	$	1,707	$	1,707	$	5,564	$	5,564
Undistributed earnings allocated to participating shares		(5)		(5)		(24)		(24)		(24)		(24)		(65)		(65)
Net income applicable to common shareholders	$	372	$	372	$	2,005	$	2,005	$	1,683	$	1,683	$	5,499	$	5,499

Weighted average shares outstanding		6,486		6,486		6,571		6,571		6,536		6,536		6,594		6,594
Stock options and contingently issuable securities		—		30		—		69		—		34		—		47
		6,486		6,516		6,571		6,640		6,536		6,570		6,594		6,641
Income per share	$	0.06	$	0.06	$	0.30	$	0.30	$	0.26	$	0.26	$	0.83	$	0.83

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

6 Months Ended

Apr. 30, 2023

Schedule of Fair Value of Derivative Instruments


	April 30, 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	$	108	Derivative assets	$	2,273
Foreign exchange forward contracts	Derivative liabilities	$	1,627	Derivative liabilities	$	2,891

Not Designated as Hedging Instruments:
Foreign exchange forward contracts	Derivative assets	$	64	Derivative assets	$	242
Foreign exchange forward contracts	Derivative liabilities	$	650	Derivative liabilities	$	741

Schedule of changes in the components of Accumulated other comprehensive loss, net of tax

The following table presents the changes in the components of Accumulated other comprehensive income (loss), net of tax, for the three months ended April 30, 2023 (in thousands):


	Foreign Currency		Cash Flow
	Translation		Hedges		Total
Balance, January 31, 2023	$	(11,128)	$	(514)	$	(11,642)
Other comprehensive income (loss) before reclassifications		(470)		(847)		(1,317)
Reclassifications		—		(50)		(50)
Balance, April 30, 2023	$	(11,598)	$	(1,411)	$	(13,009)

The following table presents the changes in the components of Accumulated other comprehensive income (loss), net of tax, for the six months ended April 30, 2023 (in thousands):


	Foreign		Cash
	Currency		Flow
	Translation		Hedges		Total
Balance, October 31, 2022	$	(21,259)	$	(266)	$	(21,525)
Other comprehensive income (loss) before reclassifications		9,661		(1,013)		8,648
Reclassifications		—		(132)		(132)
Balance, April 30, 2023	$	(11,598)	$	(1,411)	$	(13,009)

Designated as Hedging Instrument

Schedule of Effect of Derivative Instruments on the Balance Sheets, Statements of Changes in Shareholders' Equity and 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 April 30, 2023 and 2022 (in thousands):


					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,
	2023		2022			2023		2022
Designated as Hedging Instruments:
(Effective portion)
Foreign exchange forward contracts – Intercompany sales/purchases	$	(847)	$	(41)	Cost of sales and service	$	50	$	(77)
Foreign exchange forward contract – Net investment	$	(25)	$	152

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 six months ended April 30, 2023 and 2022 (in thousands):

					Location of Gain	Amount of Gain
	Amount of Gain (Loss)				(Loss) Reclassified	(Loss) Reclassified
	Recognized in Other				from Other	from Other
	Comprehensive				Comprehensive	Comprehensive
	Income (Loss)				Income (Loss)	Income (Loss)
	Six Months Ended					Six Months Ended
	April 30,					April 30,
Derivatives	2023		2022			2023		2022
Designated as Hedging Instruments:
(Effective Portion)
Foreign exchange forward contracts – Intercompany sales/purchases	$	(1,013)	$	294	Cost of sales and service	$	132	$	(226)
Foreign exchange forward contract – Net investment	$	(224)	$	221

Not Designated as Hedging Instrument

Schedule of derivative instruments not designated as hedging instruments

We recognized the following gains in our Condensed Consolidated Statements of Operations during the three months ended April 30, 2023 and 2022 on derivative instruments not designated as hedging instruments (in thousands):We recognized the following gains in our Condensed Consolidated Statements of Operations during the six months ended April 30, 2023 and 2022 on derivative instruments not designated as hedging instruments (in thousands):

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Additional Information (Details) $ in Thousands, € in Millions	3 Months Ended		6 Months Ended
	Apr. 30, 2023 USD ($)	Apr. 30, 2022 USD ($)	Apr. 30, 2023 USD ($)	Nov. 30, 2022 EUR (€)	Oct. 31, 2022 USD ($)
Derivative financial instruments:
Notional principal of foreign exchange contracts	$ 98,500		$ 98,500		$ 102,800
Gain (loss), net of tax, related to cash flow hedged	(1,000)		(1,000)
Unrealized gain (loss), net of tax, to be reclassified in next 12 months	1,000		1,000
Designated as Hedging Instrument
Derivative financial instruments:
Gains or (losses) from hedges deemed ineffective	0	$ 0
Not Designated as Hedging Instrument
Derivative financial instruments:
Notional principal of foreign exchange contracts	53,200		53,200
Forward Contracts \| Designated as Hedging Instrument
Derivative financial instruments:
Notional principal of foreign exchange contracts \| €				€ 3.0
Realized gain, net of tax, recorded as cumulative translation adjustments in Accumulated Other Comprehensive Loss	1,300		1,300
Unrealized gain, net of tax, recorded as cumulative translation adjustments in Accumulated Other Comprehensive Loss			(200)
Euros \| Designated as Hedging Instrument
Derivative financial instruments:
Notional principal of foreign exchange contracts	14,300		14,300
Pounds Sterling \| Designated as Hedging Instrument
Derivative financial instruments:
Notional principal of foreign exchange contracts	6,100		6,100
New Taiwan Dollars [Member] \| Designated as Hedging Instrument
Derivative financial instruments:
Notional principal of foreign exchange contracts	$ 22,200		$ 22,200

SEGMENT INFORMATION

6 Months Ended

Apr. 30, 2023

SEGMENT INFORMATION

SEGMENT INFORMATION

9. SEGMENT INFORMATION

We operate in a single 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. Although the majority of our computer control systems and software products are proprietary, they predominantly use industry standard personal computer components. Our computer control systems and software products are primarily sold as integral components of our computerized machine tool products. 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.

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

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+ Details

Document And Entity Information - shares	6 Months Ended
Document And Entity Information - shares	Apr. 30, 2023	May 25, 2023
Document And Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Apr. 30, 2023
Entity File Number	0-9143
Entity Registrant Name	HURCO COMPANIES, INC.
Entity Incorporation, State or Country Code	IN
Entity Tax Identification Number	35-1150732
Entity Address, Address Line One	One Technology Way
Entity Address, City or Town	Indianapolis
Entity Address, State or Province	IN
Entity Address, Postal Zip Code	46268
City Area Code	317
Local Phone Number	293-5309
Title of 12(b) Security	Common Stock, no par value
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		6,462,138
Entity Central Index Key	0000315374
Current Fiscal Year End Date	--10-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Amendment Flag	false
Trading Symbol	HURC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	Apr. 30, 2022	Apr. 30, 2023	Apr. 30, 2022
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Sales and service fees	$ 53,819	$ 62,825	$ 108,501	$ 129,712
Cost of sales and service	41,236	47,223	83,200	97,203
Gross profit	12,583	15,602	25,301	32,509
Selling, general and administrative expenses	11,592	12,515	23,076	24,212
Operating income	991	3,087	2,225	8,297
Interest expense	55	6	71	13
Interest income	85		137	53
Investment income, net	7	3	36	181
Other income (expense), net	(360)	(162)	281	(418)
Income before income taxes	668	2,922	2,608	8,100
Provision for income taxes	291	893	901	2,536
Net income	$ 377	$ 2,029	$ 1,707	$ 5,564
Income (loss) per common share - basic	$ 0.06	$ 0.30	$ 0.26	$ 0.83
Income (loss) per common share - diluted	$ 0.06	$ 0.30	$ 0.26	$ 0.83
Weighted average common shares outstanding - basic	6,486	6,571	6,536	6,594
Weighted average common shares outstanding - diluted	6,516	6,640	6,570	6,641
Dividends paid per share	$ 0.16	$ 0.15	$ 0.31	$ 0.29

ACCOUNTS RECEIVABLE

6 Months Ended

Apr. 30, 2023

ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE

6. ACCOUNTS RECEIVABLE

Accounts receivable are net of allowances for doubtful accounts of $1.5 million as of each of April 30, 2023 and October 31, 2022.

DEBT AGREEMENTS

6 Months Ended

Apr. 30, 2023

DEBT AGREEMENTS

DEBT AGREEMENTS

11. DEBT AGREEMENTS

On December 31, 2018, we and our subsidiary Hurco B.V. entered into a credit agreement with Bank of America, N.A., as the lender, which was subsequently amended on each of March 13, 2020, December 23, 2020, December 17, 2021, and January 4, 2023 (as amended, the “2018 Credit Agreement”). The 2018 Credit Agreement provides for an unsecured revolving credit and letter of credit facility in a maximum aggregate amount of $40.0 million. The 2018 Credit Agreement provides that the maximum amount of outstanding letters of credit at any one time may not exceed $10.0 million, the maximum amount of outstanding loans made to our subsidiary Hurco B.V. at any one time may not exceed $20.0 million, and the maximum amount of all outstanding loans denominated in alternative currencies at any one time may not exceed $20.0 million. Under the 2018 Credit Agreement, we and Hurco B.V. are borrowers, and certain of our other subsidiaries are guarantors. The scheduled maturity date of the 2018 Credit Agreement is December 31, 2023.

Borrowings under the 2018 Credit Agreement bear interest at floating rates based on, at our option, either (i) a rate based upon the secured overnight financing rate (“SOFR”), the Sterling Overnight Index Average Reference Rate, the Euro Interbank Offering Rate, or another alternative currency-based rate approved by the lender, depending on the term of the loan and the currency in which such loan is denominated, plus 1.00% per annum, or (ii) a base rate (which is the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate or (c) the one month SOFR-based rate plus 1.00%), plus 0.00% per annum. Outstanding letters of credit will carry an annual rate of 1.00%.

The 2018 Credit Agreement contains customary affirmative and negative covenants and events of default, including covenants (1) restricting us from making certain investments, loans, advances and acquisitions (but permitting us to make investments in subsidiaries of up to $10.0 million); (2) restricting us from making certain payments, including (a) cash dividends, except that we may pay cash dividends as long as immediately before and after giving effect to such payment, the sum of the unused amount of the commitments under the 2018 Credit Agreement plus our cash on hand is not less than $10.0 million, and as long as we are not in default before and after giving effect to such dividend payments and (b) payments made to repurchase shares of our common stock, except that we may repurchase shares of our common stock as long as we are not in default before and after giving effect to such repurchases and the aggregate amount of payments made by us for all such repurchases during any fiscal year does not exceed $25.0 million; (3) requiring that we maintain a minimum working capital of $125.0 million; and (4) requiring that we maintain a minimum tangible net worth of $176.5 million. We may use the proceeds from advances under the 2018 Credit Agreement for general corporate purposes.

In March 2019, our wholly-owned subsidiaries in Taiwan (Hurco Manufacturing Limited (“HML”)) and China (Ningbo Hurco Machine Tool, Ltd. (“NHML”)), closed on uncommitted revolving credit facilities with maximum aggregate amounts of 150 million New Taiwan Dollars and 32.5 million Chinese Yuan, respectively. As uncommitted facilities, both the Taiwan and China credit facilities are subject to review and termination by the respective underlying lending institution from time to time. In February 2023, NHML renewed the above-referenced credit facility on substantially similar terms and an identical maximum aggregate limit.

As a result, as of April 30, 2023, 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 April 30, 2023, there were no borrowings under any of our credit facilities and there was approximately $51.2 million of available borrowing capacity thereunder. There were also no borrowings under any of our credit facilities as of October 31, 2022.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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+ Details

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Changes in components of accumulated other comprehensive loss (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	Apr. 30, 2022	Apr. 30, 2023	Apr. 30, 2022
Derivative [Line Items]
Beginning Balance	$ (11,642)		$ (21,525)
Other comprehensive income (loss) before reclassifications	(1,317)		8,648
Reclassifications	(50)	$ 77	(132)	$ 226
Ending Balance	(13,009)		(13,009)
Foreign Currency Translation
Derivative [Line Items]
Beginning Balance	(11,128)		(21,259)
Other comprehensive income (loss) before reclassifications	(470)		9,661
Ending Balance	(11,598)		(11,598)
Cash Flow Hedging
Derivative [Line Items]
Beginning Balance	(514)		(266)
Other comprehensive income (loss) before reclassifications	(847)		(1,013)
Reclassifications	(50)		(132)
Ending Balance	$ (1,411)		$ (1,411)

- Definition

Accumulated change in equity from transactions and other events and circumstances from non-owner sources, net of tax effect, at period end. Excludes Net Income (Loss), and accumulated changes in equity from transactions resulting from investments by owners and distributions to owners. Includes foreign currency translation items, certain pension adjustments, unrealized gains and losses on certain investments in debt and equity securities, other than temporary impairment (OTTI) losses related to factors other than credit losses on available-for-sale and held-to-maturity debt securities that an entity does not intend to sell and it is not more likely than not that the entity will be required to sell before recovery of the amortized cost basis, as well as changes in the fair value of derivatives related to the effective portion of a designated cash flow hedge.

+ References + Details

INVENTORIES (Details) - USD ($) $ in Thousands	Apr. 30, 2023	Oct. 31, 2022
INVENTORIES
Purchased parts and sub-assemblies	$ 48,551	$ 46,796
Work-in-process	19,686	16,539
Finished goods	111,283	96,305
Inventories, gross	179,520	159,640
Reserve for purchased parts and sub-assemblies	(3,689)	(3,433)
Inventories, net	$ 175,831	$ 156,207

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	Apr. 30, 2022	Apr. 30, 2023	Apr. 30, 2022
Cash flows from operating activities:
Net income (loss)	$ 377	$ 2,029	$ 1,707	$ 5,564
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for doubtful accounts	(22)	(107)	62	(193)
Deferred income taxes	149	79	301	65
Equity in (income) loss of affiliates	(232)	(276)	(222)	(390)
Foreign currency (gain) loss	(656)	815	(2,243)	1,182
Unrealized (gain) loss on derivatives	438	(485)	50	(328)
Depreciation and amortization	1,050	965	2,104	1,907
Stock-based compensation	750	806	1,524	1,595
Change in assets and liabilities:
(Increase) decrease in accounts receivable	203	3,521	5,954	6,562
(Increase) decrease in inventories	(7,487)	(6,741)	(10,471)	(12,676)
(Increase) decrease in prepaid expenses	548	1,226	(2,656)	5,382
Increase (decrease) in accounts payable	7,450	(111)	2,206	3,751
Increase (decrease) in customer deposits	(102)	(2,211)	713	(2,144)
Increase (decrease) in accrued expenses	(111)	784	(1,927)	(138)
Increase (decrease) in accrued payroll and employee benefits	504	317	(2,804)	(2,240)
Net change in deferred tax assets and liabilities	(1,381)	(377)	(980)	880
Net change in derivative assets and liabilities	47	(77)	600	(29)
Other	(574)	(994)	(953)	(438)
Net cash provided by (used for) operating activities	951	(837)	(7,035)	8,312
Cash flows from investing activities:
Proceeds from sale of property and equipment	1	94	1	101
Purchase of property and equipment	(443)	(231)	(657)	(508)
Software development costs	(364)	(295)	(749)	(598)
Other investments	273		273
Net cash provided by (used for) investing activities	(533)	(432)	(1,132)	(1,005)
Cash flows from financing activities:
Proceeds from exercise of common stock options			270	117
Dividends paid	(1,039)	(986)	(2,034)	(1,923)
Taxes paid related to net settlement of restricted shares			(313)	(208)
Stock repurchases	(3,866)	(1,671)	(4,609)	(2,890)
Net cash provided by (used for) financing activities	(4,905)	(2,657)	(6,686)	(4,904)
Effect of exchange rate changes on cash and cash equivalents	(246)	(4,061)	3,086	(4,424)
Net increase (decrease) in cash and cash equivalents	(4,733)	(7,987)	(11,767)	(2,021)
Cash and cash equivalents at beginning of period	56,888	90,029	63,922	84,063
Cash and cash equivalents at end of period	52,155	$ 82,042	52,155	$ 82,042
Cash and cash equivalents at beginning of period			63,922
Cash and cash equivalents at end of period	$ 52,155		$ 52,155

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Effect of derivative instruments (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	Apr. 30, 2022	Apr. 30, 2023	Apr. 30, 2022
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss)	$ (847)	$ (41)	$ (1,013)	$ 294
Amount of Gain (Loss) Reclassified from Other Comprehensive Income (Loss)	50	(77)	132	(226)
Designated as Hedging Instrument
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain (Loss) Reclassified from Other Comprehensive Income (Loss)			132	(226)
Designated as Hedging Instrument \| Foreign Exchange Forward \| Intercompany sales/purchases [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss)	(847)	(41)	(1,013)	294
Amount of Gain (Loss) Reclassified from Other Comprehensive Income (Loss)	50	(77)
Designated as Hedging Instrument \| Foreign Exchange Forward \| Net Investment Hedging
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss)	(25)	152	(224)	221
Not Designated as Hedging Instrument \| Foreign Exchange Forward \| Other Income And Expense
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain (Loss) Recognized in Operations	$ (1,109)	$ 581	$ (1,464)	$ 779

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

6 Months Ended

Apr. 30, 2023

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

3. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to certain market risks relating to our ongoing business operations, including foreign currency risk, interest rate risk and credit risk. We manage our exposure to these and other market risks through regular operating and financing activities. Currently, the only risk that we manage through the use of derivative instruments is foreign currency risk, for which we enter into derivative instruments in the form of foreign currency forward exchange contracts with a major financial institution.

We enter into these forward exchange contracts to reduce the potential effects of foreign exchange rate movements on our net equity investment in one of our foreign subsidiaries, to reduce the impact on gross profit and net earnings from sales and purchases denominated in foreign currencies, and to reduce the impact on our net earnings of foreign currency fluctuations on receivables and payables denominated in foreign currencies that are different than the subsidiaries’ functional currency. We are primarily exposed to foreign currency exchange rate risk with respect to transactions and net assets denominated in Euros, Pounds Sterling, Indian Rupee, Singapore Dollars, Chinese Yuan, Polish Zloty, and New Taiwan Dollars. We record all derivative instruments as assets or liabilities at fair value.

Derivatives Designated as Hedging Instruments

We enter into foreign currency forward exchange contracts periodically to hedge certain forecasted inter-company sales and purchases denominated in the following foreign currencies: the Pound Sterling, Euro and New Taiwan Dollar. The purpose of these instruments is to mitigate the risk that the U.S. dollar net cash inflows and outflows resulting from sales and purchases denominated in foreign currencies will be adversely affected by changes in exchange rates. 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. dollar value of the inter-company sale or purchase being hedged. The ineffective portion of gains and losses resulting from the changes in the fair value of these hedge contracts is immediately reported in Other income (expense), net. We perform quarterly assessments of hedge effectiveness by verifying and documenting the critical terms of the hedge instrument and determining that forecasted transactions have not changed significantly. 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 April 30, 2023, denominated in Euros, Pounds Sterling and New Taiwan Dollars with set maturity dates ranging from May 2023 through April 2024. The contract amounts, expressed at forward rates in U.S. dollars at April 30, 2023, were $14.3 million for Euros, $6.1 million for Pounds Sterling and $22.2 million for New Taiwan Dollars. At April 30, 2023, we had approximately $1.0 million of loss, net of tax, related to cash flow hedges deferred in Accumulated other comprehensive income (loss). Included in this amount was $1.0 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 April 2024, 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. To manage this risk, we entered into a forward contract with a notional amount of €3.0 million in November 2022. We designated this forward contract as a hedge of our net investment in Euro denominated assets. 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. This forward contract matures in November 2023. As of April 30, 2023, we had a realized gain of $1.3 million and an unrealized loss of $0.2 million, net of tax, recorded as cumulative translation adjustments in Accumulated other comprehensive income (loss) related to this forward contract.

Derivatives Not Designated as Hedging Instruments

We also enter into foreign currency forward exchange contracts to protect against the effects of foreign currency fluctuations on inter-company receivables, payables and loans denominated in foreign currencies. 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 income (expense), 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 April 30, 2023, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from May 2023 through December 2023. The contract amounts, expressed at forward rates in U.S. dollars at April 30, 2023, totaled $53.2 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 April 30, 2023 and October 31, 2022, all derivative instruments were recorded at fair value on our Condensed Consolidated Balance Sheets as follows (in thousands):


	April 30, 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	$	108	Derivative assets	$	2,273
Foreign exchange forward contracts	Derivative liabilities	$	1,627	Derivative liabilities	$	2,891

Not Designated as Hedging Instruments:
Foreign exchange forward contracts	Derivative assets	$	64	Derivative assets	$	242
Foreign exchange forward contracts	Derivative liabilities	$	650	Derivative liabilities	$	741

Effect of Derivative Instruments on the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Changes in Shareholders’ Equity and Condensed Consolidated Statements of Operations


					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,
	2023		2022			2023		2022
Designated as Hedging Instruments:
(Effective portion)
Foreign exchange forward contracts – Intercompany sales/purchases	$	(847)	$	(41)	Cost of sales and service	$	50	$	(77)
Foreign exchange forward contract – Net investment	$	(25)	$	152

We did not recognize any gains or losses as a result of hedges deemed ineffective for either of the three months ended April 30, 2023 or 2022. We recognized the following gains in our Condensed Consolidated Statements of Operations during the three months ended April 30, 2023 and 2022 on derivative instruments not designated as hedging instruments (in thousands):


	Location of Gain
	(Loss) Recognized	Amount of Gain (Loss)
Derivatives	in Operations	Recognized in Operations
		Three Months Ended
		April 30,
		2023		2022
Not Designated as Hedging Instruments:
Foreign exchange forward contracts	Other income (expense), net	$	(1,109)	$	581

The following table presents the changes in the components of Accumulated other comprehensive income (loss), net of tax, for the three months ended April 30, 2023 (in thousands):


	Foreign Currency		Cash Flow
	Translation		Hedges		Total
Balance, January 31, 2023	$	(11,128)	$	(514)	$	(11,642)
Other comprehensive income (loss) before reclassifications		(470)		(847)		(1,317)
Reclassifications		—		(50)		(50)
Balance, April 30, 2023	$	(11,598)	$	(1,411)	$	(13,009)

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 six months ended April 30, 2023 and 2022 (in thousands):

					Location of Gain	Amount of Gain
	Amount of Gain (Loss)				(Loss) Reclassified	(Loss) Reclassified
	Recognized in Other				from Other	from Other
	Comprehensive				Comprehensive	Comprehensive
	Income (Loss)				Income (Loss)	Income (Loss)
	Six Months Ended					Six Months Ended
	April 30,					April 30,
Derivatives	2023		2022			2023		2022
Designated as Hedging Instruments:
(Effective Portion)
Foreign exchange forward contracts – Intercompany sales/purchases	$	(1,013)	$	294	Cost of sales and service	$	132	$	(226)
Foreign exchange forward contract – Net investment	$	(224)	$	221

We did not recognize any gains or losses as a result of hedges deemed ineffective for either of the six months ended April 30, 2023 or 2022. We recognized the following gains in our Condensed Consolidated Statements of Operations during the six months ended April 30, 2023 and 2022 on derivative instruments not designated as hedging instruments (in thousands):


	Location of Gain
	(Loss) Recognized	Amount of Gain (Loss)
Derivatives	in Operations	Recognized in Operations
		Six Months Ended
		April 30,
Derivatives		2023		2022
Not Designated as Hedging Instruments:
Foreign exchange forward contracts	Other income (expense), net	$	(1,464)	$	779

The following table presents the changes in the components of Accumulated other comprehensive income (loss), net of tax, for the six months ended April 30, 2023 (in thousands):


	Foreign		Cash
	Currency		Flow
	Translation		Hedges		Total
Balance, October 31, 2022	$	(21,259)	$	(266)	$	(21,525)
Other comprehensive income (loss) before reclassifications		9,661		(1,013)		8,648
Reclassifications		—		(132)		(132)
Balance, April 30, 2023	$	(11,598)	$	(1,411)	$	(13,009)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	Apr. 30, 2022	Apr. 30, 2023	Apr. 30, 2022
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Gain) / loss on derivative instruments reclassified into operations, tax	$ (15)	$ 24	$ (40)	$ 70
Gain / (loss) on derivative instruments, tax	$ (255)	$ (11)	$ (303)	$ 91

EQUITY INCENTIVE PLAN - Reconciliation of restricted stock activity (Details)	6 Months Ended
	Apr. 30, 2023 $ / shares shares
Number of Shares
Unvested at October 31, 2022 \| shares	273,103
Shares or units granted \| shares	146,954
Shares or units vested \| shares	(49,874)
Shares or units cancelled \| shares	(39,916)
Shares or units withheld \| shares	(11,950)
Unvested at January 31, 2023 \| shares	318,317
Weighted Average Grant Date Fair Value
Unvested at October 31, 2022 \| $ / shares	$ 32.90
Shares or units granted \| $ / shares	26.40
Shares or units vested \| $ / shares	36.23
Shares or units cancelled \| $ / shares	40.22
Shares or units withheld \| $ / shares	37.84
Unvested at January 31, 2023 \| $ / shares	$ 28.27

EQUITY INCENTIVE PLAN (Tables)

6 Months Ended

Apr. 30, 2023

EQUITY INCENTIVE PLAN

Schedule of stock option activity

A summary of stock option activity for the six-month period ended April 30, 2023, is as follows:


		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 April 30, 2023	—	$	-

Schedule of reconciliation of our restricted stock, performance share and PSU activity and related information

A reconciliation of our restricted stock and PSU activity and related information for the six-month period ended April 30, 2023 is as follows:


		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 April 30, 2023	318,317	$	28.27

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Fair value of derivative instruments (Details) - USD ($) $ in Thousands	Apr. 30, 2023	Oct. 31, 2022
Derivatives, Fair Value [Line Items]
Derivative assets	$ 172	$ 2,515
Derivative liabilities	2,277	3,632
Foreign Exchange Forward \| Designated as Hedging Instrument
Derivatives, Fair Value [Line Items]
Derivative assets	108	2,273
Derivative liabilities	1,627	2,891
Foreign Exchange Forward \| Not Designated as Hedging Instrument
Derivatives, Fair Value [Line Items]
Derivative assets	64	242
Derivative liabilities	$ 650	$ 741

INCOME TAXES

6 Months Ended

Apr. 30, 2023

INCOME TAXES

INCOME TAXES

12. INCOME TAXES

Our provision for income taxes and effective tax rate is affected by the geographical 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.

The Inflation Reduction Act of 2022 (the “Inflation Reduction Act” or “IRA”) was signed into law on August 16, 2022. The IRA provides investment in clean energy, promotes reductions in carbon emissions, and extends select Affordable Care Act premium reductions. The IRA is paid for through the implementation of a 15 percent corporate minimum tax on corporations with over $1 billion of financial statement income, budget increases for the Internal Revenue Service, an excise tax on stock repurchases, and changes to Medicare rules. The Company does not currently expect that the Inflation Reduction Act will have a material impact on its income taxes.

We recorded an income tax expense during the six months of fiscal year 2023 of $0.9 million compared to income tax expense of $2.5 million for the same period in 2022. Our effective tax rate for the first six months of fiscal year 2023 was 35%, compared to 31% in the corresponding prior year period. The year-over-year increase in the effective tax rate was primarily due to changes in geographic mix of income and loss that includes jurisdictions with differing tax rates and a discrete item related to stock compensation.

Our unrecognized tax benefits were $176,000 as of April 30, 2023, and $171,000 as of October 31, 2022, 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 April 30, 2023, the gross amount of interest accrued, reported in Accrued expenses, was approximately $38,000, which did not include the federal tax benefit of interest deductions.

We file U.S. 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 2023 and September 2024.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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+ Details

DEBT AGREEMENTS (Details) $ in Thousands, € in Millions, ¥ in Millions, $ in Millions	6 Months Ended
	Apr. 30, 2023 USD ($)	Apr. 30, 2023 EUR (€)	Apr. 30, 2023 CNY (¥)	Apr. 30, 2023 TWD ($)	Oct. 31, 2022 USD ($)	Mar. 31, 2019 CNY (¥)	Mar. 31, 2019 TWD ($)
Line of Credit Facility [Line Items]
Line of credit	$ 0				$ 0
Line Of Credit Agreement 2018 [Member]
Line of Credit Facility [Line Items]
Line of credit, maximum borrowing capacity	40,000
Line of credit, maximum borrowing capacity in alternative currencies	$ 20,000
Variable interest rate	0.00%
Line of Credit, covenant, minimum cash on hand before dividends are paid	$ 10,000
Minimum working capital requirement	125,000
Minimum tangible net worth requirement	176,500
Line of Credit, covenant, maximum annual share repurchase	$ 25,000
Line of credit, maturity date	Dec. 31, 2023
Allowable investments in alternative investments	$ 10,000
Borrowings available under credit facility	51,200
Hurco BV [Member] \| Line Of Credit Agreement 2018 [Member]
Line of Credit Facility [Line Items]
Line of credit, maximum borrowing capacity	$ 20,000
SOFR \| Line Of Credit Agreement 2018 [Member]
Line of Credit Facility [Line Items]
Variable interest rate	1.00%
Federal funds \| Line Of Credit Agreement 2018 [Member]
Line of Credit Facility [Line Items]
Variable interest rate	0.50%
Letter of Credit [Member] \| Line Of Credit Agreement 2018 [Member]
Line of Credit Facility [Line Items]
Line of credit, maximum borrowing capacity	$ 10,000
Stated interest rate	1.00%	1.00%	1.00%	1.00%
Revolving Credit Facility [Member] \| Line Of Credit Agreement 2018 [Member]
Line of Credit Facility [Line Items]
Line of credit, maximum borrowing capacity	$ 40,000
Revolving Credit Facility [Member] \| Germany [Member]
Line of Credit Facility [Line Items]
Line of credit, maximum borrowing capacity \| €		€ 1.5
Taiwan credit facility [Member]
Line of Credit Facility [Line Items]
Line of credit, maximum borrowing capacity				$ 150			$ 150
China credit facility [Member]
Line of Credit Facility [Line Items]
Line of credit, maximum borrowing capacity \| ¥			¥ 32.5			¥ 32.5

FINANCIAL INSTRUMENTS - Additional Information (Details) - USD ($) $ in Millions	Apr. 30, 2023	Oct. 31, 2022
FINANCIAL INSTRUMENTS
Notional amount of contracts	$ 98.5	$ 102.8

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	Apr. 30, 2022	Apr. 30, 2023	Apr. 30, 2022
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)	$ 377	$ 2,029	$ 1,707	$ 5,564
Other comprehensive income (loss):
Translation gain (loss) of foreign currency financial statements	(470)	(8,033)	9,661	(9,543)
(Gain) / loss on derivative instruments reclassified into operations, net of tax of $(25) and $46, respectively	(50)	77	(132)	226
(Gain) / loss on derivative instruments reclassified into operations, net of tax of $(25) and $46, respectively	(847)	(41)	(1,013)	294
Total other comprehensive income (loss)	(1,367)	(7,997)	8,516	(9,023)
Comprehensive income (loss)	$ (990)	$ (5,968)	$ 10,223	$ (3,459)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

REVENUE RECOGNITION

6 Months Ended

Apr. 30, 2023

REVENUE RECOGNITION

REVENUE RECOGNITION

2. REVENUE RECOGNITION

We design, manufacture and sell computerized machine tools. Our computer control systems and software products are primarily sold as integral components of our computerized machine tool products. 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.

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”). 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. For each contract, we identify our performance obligations, which are delivering goods or services, determine the transaction price, allocate the contract transaction price to each of the performance obligations (when applicable), and recognize the revenue when (or as) the performance obligation to the customer is fulfilled.

A good or service is transferred when the customer obtains control of that good or service. Our computerized machine tools are general purpose computer-controlled machine tools that are typically used in stand-alone operations. Prior to shipment, we test each machine to ensure the machine’s compliance with standard operating specifications. We deem that the customer obtains control upon delivery of the product and that obtaining control is not contingent upon contractual customer acceptance. Therefore, we recognize revenue from sales of our machine tool systems upon delivery of the product to the customer or distributor, which is normally at the time of shipment.

Depending upon geographic location, after shipment, a machine may be installed at the customer’s facility by a distributor, independent contractor, or by one of our service technicians. 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 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 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 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.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

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+ Details

LEASES

6 Months Ended

Apr. 30, 2023

LEASES

LEASES

8. LEASES

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. Most of the leased production and assembly facilities have lease terms ranging from two to five years, although the terms and conditions of our leases can vary significantly from lease to lease. We have assessed the specific terms and conditions of each lease to determine the amount of the lease payments and the length of the lease term, which includes the minimum period over which lease payments are required plus any renewal options that are both within our control to exercise and reasonably certain of being exercised upon lease commencement. In determining whether or not a renewal option is reasonably certain of being exercised, we assessed all relevant factors to determine if sufficient incentives exist as of lease commencement to conclude renewal is reasonably certain. There are no material residual value guarantees provided by us, nor any restrictions or covenants imposed by the leases to which we are a party. 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 expense of $2.6 million for each of the six months ended April 30, 2023 and 2022, 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 April 30, 2023.

The following table summarizes supplemental cash flow information and non-cash activity related to operating leases for the six months ended April 30, 2023 and 2022 (in thousands):


		Six Months Ended		Six Months Ended
		April 30, 2023		April 30, 2022
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	2,511	$	2,370
Non-cash information:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	2,372	$	1,515

The following table summarizes the maturities of undiscounted cash flows of lease commitments reconciled to the total lease liability as of April 30, 2023 (in thousands):


Remainder of 2023	$	2,422
2024		3,274
2025		1,624
2026		824
2027		628
2028 and thereafter		725
Total		9,497
Less: Imputed interest		(384)
Present value of operating lease liabilities	$	9,113

As of April 30, 2023, the weighted-average remaining term of our lease portfolio was approximately 3.2 years and the weighted-average discount rate was approximately 2.6%.

EARNINGS PER SHARE

6 Months Ended

Apr. 30, 2023

EARNINGS PER SHARE

EARNINGS PER SHARE

5. EARNINGS PER SHARE

Per share results have been computed based on the average number of common shares outstanding over the period in question. The computation of basic and diluted net income per share is determined using net income applicable to common shareholders as the numerator and the number of shares outstanding as the denominator as follows (in thousands, except per share amounts):


	Three Months Ended								Six Months Ended
	April 30,								April 30,
	2023				2022				2023				2022
	Basic		Diluted		Basic		Diluted		Basic		Diluted		Basic		Diluted
Net income	$	377	$	377	$	2,029	$	2,029	$	1,707	$	1,707	$	5,564	$	5,564
Undistributed earnings allocated to participating shares		(5)		(5)		(24)		(24)		(24)		(24)		(65)		(65)
Net income applicable to common shareholders	$	372	$	372	$	2,005	$	2,005	$	1,683	$	1,683	$	5,499	$	5,499

Weighted average shares outstanding		6,486		6,486		6,571		6,571		6,536		6,536		6,594		6,594
Stock options and contingently issuable securities		—		30		—		69		—		34		—		47
		6,486		6,516		6,571		6,640		6,536		6,570		6,594		6,641
Income per share	$	0.06	$	0.06	$	0.30	$	0.30	$	0.26	$	0.26	$	0.83	$	0.83

LEASES (Details) - USD ($) $ in Millions	6 Months Ended
LEASES (Details) - USD ($) $ in Millions	Apr. 30, 2023	Apr. 30, 2022
LEASES
Operating lease expense	$ 2.6	$ 2.6
Weighted-average remaining term	3 years 2 months 12 days
Weighted-average discount rate	2.60%
Capitalized lease costs	$ 0.0
Minimum
LEASES
Lease term (in years)	2 years
Maximum
LEASES
Lease term (in years)	5 years

GUARANTEES AND PRODUCT WARRANTIES (Tables)

6 Months Ended

Apr. 30, 2023

GUARANTEES AND PRODUCT WARRANTIES

Schedule of reconciliation of the changes in warranty reserve


	Six Months Ended
	April 30,
	2023		2022
Balance, beginning of period	$	1,426	$	1,516
Provision for warranties during the period		1,417		1,263
Charges to the reserve		(1,475)		(1,330)
Impact of foreign currency translation		67		(62)
Balance, end of period	$	1,435	$	1,387

CONTINGENCIES AND LITIGATION

6 Months Ended

Apr. 30, 2023

CONTINGENCIES AND LITIGATION

CONTINGENCIES AND LITIGATION

14. CONTINGENCIES AND LITIGATION

From time to time, we are involved in various claims and lawsuits arising in the normal course of business. Pursuant to applicable accounting rules, we accrue the minimum liability for each known claim when the estimated outcome is a range of possible loss and no one amount within that range is more likely than another. We maintain insurance policies for such matters, and we record insurance recoveries when we determine such recovery to be probable. We do not expect any of these claims, individually or in the aggregate, to have a material adverse effect on our consolidated financial position or results of operations. We believe that the ultimate resolution of claims for any losses will not exceed our insurance policy coverages.

NEW ACCOUNTING PRONOUNCEMENTS

6 Months Ended

Apr. 30, 2023

NEW ACCOUNTING PRONOUNCEMENTS

NEW ACCOUNTING PRONOUNCEMENTS

15. NEW ACCOUNTING PRONOUNCEMENTS

We reviewed all recently issued accounting pronouncements and concluded they are either not applicable or not expected to have a significant impact on our consolidated financial statements as of April 30, 2023.

- Definition

The entire disclosure for change in accounting principle. Includes, but is not limited to, nature, reason, and method of adopting amendment to accounting standards or other change in accounting principle.

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-Subparagraph (e)(3)
-URI https://asc.fasb.org/extlink&oid=126983955&loc=SL121967933-165497

Reference 31: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 848
-SubTopic 10
-Section 65
-Paragraph 2
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=125980421&loc=SL125981372-237846

Reference 32: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 1
-Subparagraph (c)(1)
-URI https://asc.fasb.org/extlink&oid=124431687&loc=d3e22499-107794

Reference 33: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 1
-Subparagraph (b)(1)
-URI https://asc.fasb.org/extlink&oid=124431687&loc=d3e22499-107794

Reference 34: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 65
-Paragraph 8
-Subparagraph (e)(3)
-URI https://asc.fasb.org/extlink&oid=126983759&loc=SL121830611-158277

+ Details

GUARANTEES AND PRODUCT WARRANTIES - Reconciliation of the changes in warranty reserve (Details) - USD ($) $ in Thousands	6 Months Ended
	Apr. 30, 2023	Apr. 30, 2022
GUARANTEES AND PRODUCT WARRANTIES
Balance, beginning of period	$ 1,426	$ 1,516
Provision for warranties during the period	1,417	1,263
Charges to the reserve	(1,475)	(1,330)
Impact of foreign currency translation	67	(62)
Balance, end of period	$ 1,435	$ 1,387

GUARANTEES AND PRODUCT WARRANTIES

6 Months Ended

Apr. 30, 2023

GUARANTEES AND PRODUCT WARRANTIES

GUARANTEES AND PRODUCT WARRANTIES

10. GUARANTEES AND PRODUCT WARRANTIES

From time to time, our subsidiaries guarantee third party payment obligations in connection with the sale of machines to customers that use financing. We follow FASB guidance for accounting for guarantees (codified in ASC 460 Guarantees). As of April 30, 2023, we had nine outstanding third party payment guarantees totaling approximately $0.9 million. The terms of these guarantees are consistent with the underlying customer financing terms. Upon shipment of a machine, the customer assumes the risk of ownership. The customer does not obtain title, however, until it has paid for the machine. A retention of title clause allows us to recover the machine if the customer defaults on the financing. We accrue liabilities under these guarantees at fair value, which amounts are insignificant.

We provide warranties on our products with respect to defects in material and workmanship. 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):


	Six Months Ended
	April 30,
	2023		2022
Balance, beginning of period	$	1,426	$	1,516
Provision for warranties during the period		1,417		1,263
Charges to the reserve		(1,475)		(1,330)
Impact of foreign currency translation		67		(62)
Balance, end of period	$	1,435	$	1,387

The year-over-year increase in our warranty reserve was primarily due to the impact of foreign currency translation. The warranty reserve decreased year over year due to a lower volume of machine sales, however, this reduction was partially offset by an increased number of higher performance machines under warranty.

FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Apr. 30, 2023

FINANCIAL INSTRUMENTS

Schedule of fair value hierarchy for financial assets and liabilities measured at fair value



	Assets				Liabilities
	April 30, 2023		October 31, 2022		April 30, 2023		October 31, 2022
Level 1
Deferred compensation	$	2,243	$	1,996	$	—	$	—

Level 2
Derivatives	$	172	$	2,515	$	2,277	$	3,632

FINANCIAL INSTRUMENTS - Fair value hierarchy (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Apr. 30, 2023	Oct. 31, 2022
Fair Value, Inputs, Level 1
Assets
Deferred Compensation	$ 2,243	$ 1,996
Liabilities
Deferred Compensation	0	0
Fair Value, Inputs, Level 2
Assets
Derivatives	172	2,515
Liabilities
Derivatives	$ 2,277	$ 3,632

INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
INCOME TAXES (Details) - USD ($) $ in Thousands	Apr. 30, 2023	Apr. 30, 2022	Apr. 30, 2023	Apr. 30, 2022	Oct. 31, 2022
INCOME TAXES
Income Tax Expense (Benefit)	$ 291	$ 893	$ 901	$ 2,536
Effective Income Tax Rate Reconciliation			35.00%	31.00%
Unrecognized Tax Benefits	176		$ 176		$ 171
Unrecognized tax benefits, interest accrued	$ 38		$ 38

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

LEASES (Tables)

6 Months Ended

Apr. 30, 2023

LEASES

Schedule of supplemental cash flow information and non-cash activity related to operating leases

The following table summarizes supplemental cash flow information and non-cash activity related to operating leases for the six months ended April 30, 2023 and 2022 (in thousands):


		Six Months Ended		Six Months Ended
		April 30, 2023		April 30, 2022
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities	$	2,511	$	2,370
Non-cash information:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	2,372	$	1,515

Schedule of maturities of undiscounted cash flows of lease commitments reconciled to the total lease liability

The following table summarizes the maturities of undiscounted cash flows of lease commitments reconciled to the total lease liability as of April 30, 2023 (in thousands):


Remainder of 2023	$	2,422
2024		3,274
2025		1,624
2026		824
2027		628
2028 and thereafter		725
Total		9,497
Less: Imputed interest		(384)
Present value of operating lease liabilities	$	9,113

EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2023	Apr. 30, 2022	Apr. 30, 2023	Apr. 30, 2022
Basic
Net income (loss)	$ 377	$ 2,029	$ 1,707	$ 5,564
Undistributed earnings (loss) allocated to participating shares	(5)	(24)	(24)	(65)
Net income (loss) applicable to common shareholders	$ 372	$ 2,005	$ 1,683	$ 5,499
Weighted average shares outstanding	6,486	6,571	6,536	6,594
Income (loss) per share	$ 0.06	$ 0.30	$ 0.26	$ 0.83
Diluted
Net income (loss)	$ 377	$ 2,029	$ 1,707	$ 5,564
Undistributed earnings (loss) allocated to participating shares	(5)	(24)	(24)	(65)
Net income (loss) applicable to common shareholders	$ 372	$ 2,005	$ 1,683	$ 5,499
Weighted average shares outstanding prior to dilution effect	6,486	6,571	6,536	6,594
Stock options and contingently issuable shares	30	69	34	47
Weighted average shares outstanding	6,516	6,640	6,570	6,641
Income (loss) per share	$ 0.06	$ 0.30	$ 0.26	$ 0.83

LEASES - Maturities of undiscounted cash flows of lease commitments (Details) $ in Thousands	Apr. 30, 2023 USD ($)
LEASES
Remainder of 2023	$ 2,422
2024	3,274
2025	1,624
2026	824
2027	628
2028 and thereafter	725
Total	9,497
Less: Imputed interest	(384)
Present value of operating lease liabilities	$ 9,113

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Apr. 30, 2023	Oct. 31, 2022
Current assets:
Cash and cash equivalents	$ 52,155	$ 63,922
Accounts receivable, net	34,895	38,444
Inventories, net	175,831	156,207
Derivative assets	172	2,515
Prepaid assets	9,443	6,981
Total current assets	272,496	268,069
Property and equipment:
Land	1,046	868
Building	7,392	7,352
Machinery and equipment	28,018	26,532
Leasehold improvements	4,677	4,351
Property and equipment, gross	41,133	39,103
Less accumulated depreciation and amortization	(32,888)	(30,620)
Total property and equipment, net	8,245	8,483
Non-current assets:
Software development costs, less accumulated amortization	7,298	7,302
Intangible assets, net	1,139	1,246
Operating lease - right of use assets, net	8,754	8,460
Deferred income taxes	3,984	3,442
Investments and other assets, net	9,886	9,235
Total non-current assets	31,061	29,685
Total assets	311,802	306,237
Current liabilities:
Accounts payable	45,171	40,707
Customer deposits	5,866	4,839
Derivative liabilities	2,277	3,632
Operating lease liabilities	4,081	3,973
Accrued payroll and employee benefits	7,947	10,751
Accrued income taxes	1,801	2,611
Accrued expenses	4,416	5,397
Accrued warranty expenses	1,435	1,426
Total current liabilities	72,994	73,336
Non-current liabilities:
Accrued tax liability	1,287	1,281
Operating lease liabilities	5,032	4,814
Deferred income taxes	84	67
Deferred credits and other	4,700	4,095
Total non-current liabilities	11,103	10,257
Shareholders' equity:
Preferred stock: no par value per share, 1,000,000 shares authorized; no shares issued	0	0
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 April 30, 2023 and October 31, 2022, respectively	646	657
Additional paid-in capital	60,518	63,635
Retained earnings	179,550	179,877
Accumulated other comprehensive loss	(13,009)	(21,525)
Total shareholders' equity	227,705	222,644
Total liabilities and shareholders' equity	$ 311,802	$ 306,237

INVENTORIES (Tables)

6 Months Ended

Apr. 30, 2023

INVENTORIES

Schedule of inventories

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


	April 30,		October 31,
	2023		2022
Purchased parts and sub–assemblies	$	48,551	$	46,796
Work–in–process		19,686		16,539
Finished goods		111,283		96,305
Inventories, gross	$	179,520	$	159,640
Reserve for purchased parts and sub-assemblies		(3,689)		(3,433)
Inventories, net	$	175,831	$	156,207

EQUITY INCENTIVE PLAN - Stock option activity (Details) - Employee Stock Option	6 Months Ended
	Apr. 30, 2023 $ / shares shares
Stock Options
Outstanding at beginning of period \| shares	11,559
Options granted \| shares	0
Options exercised \| shares	(11,559)
Options cancelled \| shares	0
Outstanding at end of period \| shares	0
Weighted Average Exercise Price
Outstanding at beginning of period \| $ / shares	$ 23.30
Options granted \| $ / shares	0
Options exercised \| $ / shares	23.30
Options cancelled \| $ / shares	0
Outstanding at end of period \| $ / shares	$ 0