SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ___)
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Hurco Companies, Inc.
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(Name of Registrant as Specified in Its Charter)
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HURCO COMPANIES, INC.
ONE TECHNOLOGY WAY
P.O. BOX 68180
INDIANAPOLIS, INDIANA 46268
(317) 293-5309
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 3, 2003
To Our Shareholders:
The 2003 Annual Meeting of Shareholders of Hurco Companies, Inc., will be
held at the corporate headquarters of Hurco Companies, Inc., One Technology
Way, Indianapolis, Indiana, 46268 at 10:00 a.m. EST on Thursday,
April 3, 2003, for the following purposes:
1. To elect six directors to serve until the next annual meeting or until their
successors are duly elected and qualified.
2. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
If you do not expect to attend the Annual Meeting, please mark, sign and date
the enclosed proxy and return it in the enclosed return envelope which requires
no postage if mailed in the United States.
Only shareholders of record as of the close of business on February 7, 2003, are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof. In the event there are not sufficient votes for approval of one or more
of the above matters at the time of the Annual Meeting, the Annual Meeting may
be adjourned in order to permit further solicitation of proxies.
By order of the Board of Directors,
Roger J. Wolf, Secretary
February 21, 2003
Indianapolis, Indiana
YOUR VOTE IS IMPORTANT
Even if you plan to attend the meeting,
we urge you to mark, sign and date the
enclosed proxy and return it promptly
in the enclosed envelope.
HURCO COMPANIES, INC.
One Technology Way
P. O. Box 68180
Indianapolis, Indiana 46268
Annual Meeting of Shareholders
April 3, 2003
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PROXY STATEMENT
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SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished to the holders (the "Shareholders") of common
stock of Hurco Companies, Inc. ("Hurco" or the "Company") in connection with the
solicitation of proxies by the Board of Directors for the 2003 Annual Meeting of
Shareholders to be held at 10:00 a.m. EST on Thursday, April 3, 2003 at the
corporate headquarters of Hurco Companies, Inc., One Technology Way,
Indianapolis, Indiana, and at any adjournments thereof. This Proxy Statement and
the accompanying form of proxy are being mailed to the Shareholders on or about
February 21, 2003. Proxies are being solicited principally by mail. Directors,
officers and regular employees of Hurco may also solicit proxies personally by
telephone, telegraph or otherwise. All expenses incident to the preparation and
mailing to the Shareholders of the Notice, Proxy Statement and form of Proxy
will be paid by Hurco.
Shareholders of record as of the close of business on February 7, 2003, are
entitled to notice of and vote at the Annual Meeting or any adjournments
thereof. On such record date, Hurco had 5,583,158 shares of common stock
outstanding and entitled to vote. Each share will be entitled to one vote with
respect to each matter submitted to a vote. The presence in person or by proxy
of the holders of a majority of the outstanding shares entitled to vote at the
Annual Meeting is necessary to constitute a quorum for the transaction of
business.
If the enclosed form of proxy is executed and returned, it may be revoked at any
time before it is voted by giving written notice to the Secretary of the
Company. If a Shareholder executes more than one proxy, the proxy having the
latest date will revoke any earlier proxies. Shareholders who attend the Annual
Meeting may revoke their proxies and vote in person.
A proxy, if returned properly executed and not subsequently revoked, will be
voted in accordance with the instructions of the Shareholder in the proxy. If no
instructions are given, the proxy will be voted for the election of the Board of
Directors' nominees named in this Proxy Statement. Directors will be elected by
a plurality of the votes cast. A proxy may indicate that all or a portion of the
shares represented by such proxy are not being voted with respect to a specific
proposal. This could occur, for example, when a broker is not permitted to vote
shares held in street name on certain proposals in the absence of instructions
from the beneficial owners. Shares that are not voted with respect to a specific
proposal will be considered present for purposes of determining a quorum and
voting on other proposals. Abstentions on a specific proposal will be considered
as present, but not as voting in favor of such proposal. Neither the non-voting
of shares nor abstentions will affect the matters to be voted on at the Annual
Meeting.
ELECTION OF DIRECTORS
The Board of Directors currently consists of six members and the Board has
nominated six persons for election as directors. All nominees are currently
directors. Each director will serve for a term of one year, which expires
at the next Annual Meeting of Shareholders of the Company, when his successor
has been elected. The six nominees are: Robert W. Cruickshank, Michael Doar,
Richard T. Niner, O. Curtis Noel, Charles E.Mitchell Rentschler and
Gerald V. Roch. Unless authority is specifically withheld, the shares
represented by the enclosed form of proxy will be voted in favor of these
nominees.
If any of these nominees becomes unable to accept election, the persons named in
the proxy will exercise their voting power in favor of such person or persons as
the Board may recommend. All of the nominees have consented to being named in
this Proxy Statement and to serve if elected. The Board of Directors knows of no
reason why any of the nominees would be unable to accept election.
The following information sets forth the name of each director, his age, tenure
as a director, principal occupation and business experience for the last five
years:
Served as a
Name Age Director since
- ---- --- --------------
Robert W. Cruickshank (2,3) 57 2000
Michael Doar (1) 47 2000
Richard T. Niner (1) 63 1986
O. Curtis Noel (3) 67 1993
Charles E. Mitchell Rentschler (2) 63 1986
Gerald V. Roch (2) 71 2001
Robert W. Cruickshank has been owner of R. W. Cruickshank Company, a financial
services firm since 1981. Mr. Cruickshank is also a director of Calgon Carbon
Corporation, a producer of products and services for the purification,
reparation and concentration of liquids and gases, and Friedman's Jewelers,
Inc., a retail jewelry business.
Michael Doar was elected Chairman of the Board of Directors and Chief Executive
Officer on November 14, 2001. Previously, Mr. Doar served as Vice President of
Sales and Marketing of Ingersoll Contract Manufacturing Company, a subsidiary of
Ingersoll International, an international engineering and machine tool systems
business. Mr. Doar had held various management positions with Ingersoll
International since 1989.
Richard T. Niner was appointed Chairman of the Executive / Nominating Committee
of the Board of Directors on November 14, 2001. Prior to that time, Mr. Niner
had been Chairman of the Board of Directors since March 9, 1999. Mr. Niner's
principal occupation since 1998 has been acting as a general partner of Wind
River Associates. Mr. Niner is also a general partner of Brynwood Management II,
L.P., the general partner of Brynwood Partners II, L.P., and until December 31,
1998, his principal occupation was acting as a general partner of Brynwood
Management, the general partner of Brynwood Partners Limited Partnership. Mr.
Niner is a director of Arrow International, Inc., a cardiac and critical care
products business.
O. Curtis Noel has been an independent business consultant for more than ten
years specializing in market and industry studies, competitive analysis and
corporate development programs with clients in the U.S. and abroad.
Charles E. Mitchell Rentschler has been an independent business consultant since
2001, providing general business consulting services to the foundry industry.
Mr. Rentschler served as President and Chief Executive Officer of The Hamilton
Foundry & Machine Co. from 1985 until 2001. The Hamilton Foundry and Machine Co.
filed a petition for relief under Chapter 11 of the Bankruptcy Code on October
10, 2000.
Gerald V. Roch has been an independent business consultant providing general
business and technology consulting services since 1994. Mr. Roch was a
co-founder of Hurco in 1968 and in 1986 was the founder of Made2Manage Systems,
Inc., a manufacturing software company. Mr. Roch served as President and Chief
Executive Officer of Made2Manage Systems, Inc. from 1986 until 1994.
(1) Member of Executive / Nominating Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
The Board of Directors recommends a vote FOR each of the nominees listed above.
Board Meetings and Committees
During the last fiscal year, the Board of Directors held five meetings. All of
the current directors attended at least 75% of the aggregate number of meetings
of the Board and the committees on which they served.
The Board has an Audit Committee that held seven meetings during the last fiscal
year. The Audit Committee has the authority to oversee the Company's accounting
and financial reporting activities, and meets with the Company's independent
accountants and Chief Financial Officer to review the scope, cost and results of
the annual audit and to review internal accounting controls, policies and
procedures. The report of the Audit Committee is included on page 9 of this
Proxy Statement. The Audit Committee selects the independent accountants of
Hurco. See INDEPENDENT ACCOUNTANTS on page 13.
The Board has a Compensation Committee that held two meetings during the last
fiscal year. The Compensation Committee reviews and recommends to the Board the
compensation of the officers and managers of Hurco and guidelines for the
general wage structure of the entire workforce. The Compensation Committee also
oversees the administration of the Company's employee benefit plans. The report
of the Compensation Committee regarding executive compensation is included on
page 7 of this Proxy Statement.
The Board of Directors has an Executive/Nominating Committee that held one
meeting during the last fiscal year. The Executive/Nominating Committee reviews
the structure and composition of the Board of Directors and considers the
qualifications of and recommends all nominees for directors. The
Executive/Nominating Committee will consider candidates whose names are
submitted in writing by shareholders. Shareholders who wish to nominate persons
for election as directors must comply with the advance notice and eligibility
requirements contained in the Company's By-laws, a copy of which is available
upon request. Such requests and any nominations should be addressed to the
Secretary, Hurco Companies, Inc., One Technology Way, P.O. Box 68180,
Indianapolis, Indiana 46268.
The members of these Committees are identified in the table on pages 3 and 4.
Compensation of Directors
Each director who is not a full-time employee of the Company receives a fee of
$1,500 for each meeting of the Board of Directors attended. Each such director
also receives $5,000 per fiscal quarter. Directors are also entitled to receive
reimbursement for travel and other expenses incurred in attending such meetings.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of the
Company's common stock, to file reports of ownership with the Securities and
Exchange Commission and Nasdaq. Such persons are also required to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms received by it,
or written representations from certain reporting persons that they were not
required to file a Form 5 to report previously unreported ownership or changes
in ownership, the Company believes that, during its fiscal year ending October
31, 2002, its officers, directors and greater than 10% beneficial owners
complied with all filing requirements under Section 16(a).
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth all compensation paid or accrued during each of
the last three fiscal years to each of the individuals who served as the
Company's Chief Executive Officer during the fiscal year ended October 31, 2002
and each of the other three executive officers of Hurco (the "Named Executive
Officers") whose salary and bonus exceeded $100,000 during the fiscal year ended
October 31, 2002.
Summary Compensation Table
Long-term
Annual Compensation Compensation
Other Annual Securities All Other
Name and Fiscal Salary Bonus Compensation Underlying Compensation
Principal Position Year ($) ($)(1) ($) Options (2) ($) (4)
- ------------------ ---- ------ ----- ------------- ------------ -------
Michael Doar 2002 207,470 -- -- 80,000 33,564
Chairman and CEO
Brian D. McLaughlin 2002 58,000 -- -- 110,000 313,830 (3)
Former President 2001 288,077 -- -- -- 52,506
and CEO 2000 278,076 90,000 -- 40,000 52,506
James D. Fabris 2002 223,365 -- -- 35,000 24,688
President and 2001 198,077 -- -- -- 24,284
Chief Operating Officer 2000 185,576 65,000 -- 20,000 24,284
Roger J. Wolf 2002 185,000 -- -- 35,000 47,217
Sr. VP, Secretary, 2001 183,077 -- -- -- 48,762
Treasurer and CFO 2000 173,462 50,000 -- 30,000 46,933
David E. Platts 2002 125,000 -- -- 10,000 13,555
Vice President - 2001 121,154 -- -- -- 14,177
Technology 2000 105,182 20,000 -- 10,000 14,577
(1) Represents cash bonuses earned and paid in the subsequent year.
(2) Represents shares of common stock underlying grants of options made during the year. We have not granted any Stock
Appreciation Rights (SARs).
(3) Includes severance compensation.
(4) Represents contributions to defined contribution plans and split dollar
life insurance premiums, as follows.
Defined Contribution Plan Company Paid Split-Dollar
Name Company Match Life Insurance Premiums
Michael Doar $5,908 $27,656
Brian McLaughlin 301 47,406
James D. Fabris 5,504 19,184
Roger J. Wolf 4,451 42,766
David E. Platts 1,340 12,215
Stock Options
- -------------
Option Grants During Fiscal 2002
% of Total Potential Realizable
Number of Options Value at Assumed
Securities Granted to Annual Rates of Stock
Underlying Employees Exercise Price Appreciation for
Options in Fiscal Price Expiration Option term 1
Name Granted 2 Year ($/SH) Date 5%($) 10%($)
- ----- -------- ------- -------- -------- ----- ------
Michael Doar 80,000 24.8% $2.17 12/18/2011 $109,176 $276,674
Brian D. McLaughlin 110,000 34.2% $2.11 11/13/2009 110,887 265,427
James D. Fabris 35,000 10.9% $2.17 12/18/2011 47,765 121,045
Roger J. Wolf 35,000 10.9% $2.17 12/18/2011 47,765 121,045
David E. Platts 10,000 3.1% $2.17 12/18/2011 13,647 34,584
1 The potential realizable value illustrates value that might be realized upon
the exercise of the options immediately prior to the expiration of their terms,
assuming the specified compounded rates of appreciation of Hurco's common stock
from the date of grant through the term of the options.
2 Options may be exercised in three annual installments commencing on the first
anniversary of the date of grant except for Brian McLaughlin's options which
vested upon grant.
Aggregated Option Exercises in Fiscal 2002 and Year-End Option Values
Value of
Number of Unexercised
Securities Underlying In-the-Money
Shares Unexercised Options Options
Acquired at FY-End (#) at FY-End ($) (1)
on Value ------------------------ ---------------------
Exercise Realized Exer- Unexer- Exer- Unexer-
Name (#) ($) cisable cisable cisable cisable
- ---- --------- --------- ------- ------- ------- -------
Michael Doar -- -- 15,000 80,000 -- --
Brian D. McLaughlin -- -- 110,000 -- -- --
James D. Fabris 1,500 $3,188 69,833 55,667 -- --
Roger J. Wolf -- -- 85,000 55,000 -- --
David E. Platts -- -- 27,667 17,333 -- --
- -----------------------------------------
(1) Value is calculated based on the closing market price of the common stock on
October 31, 2002 ($ 1.55) less the option exercise price.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are O. Curtis Noel and Robert W.
Cruickshank. None of the Compensation Committee members are involved in a
relationship requiring disclosure as an interlocking executive officer/director
or under Item 404 of Regulation S-K or is a former officer or employee of the
Company or any of its subsidiaries.
Employment Contracts
Michael Doar entered into an employment contract effective November 13, 2001.
The contract term is unspecified. Mr. Doar's salary and bonus arrangements are
set annually by the Compensation Committee of the Board of Directors. Other
compensation, such as stock option grants, is awarded periodically at the
discretion of the Compensation Committee. Mr. Doar is entitled to thirty days
notice and twelve months salary and benefits if he is removed as Chairman and
Chief Executive Officer by action of the Board of Directors.
James D. Fabris entered into an employment contract on November 18, 1997. The
contract term is unspecified. Mr. Fabris' salary and bonus arrangement are set
annually by the Compensation Committee of the Board of Directors. Other
compensation, such as stock option grants, is awarded periodically at the
discretion of the Compensation Committee. As part of the contract, Mr. Fabris is
entitled to 12 months' salary if Hurco terminates his employment for any reason
other than gross misconduct.
Roger J. Wolf entered into an employment contract on January 8, 1993. The
contract term is unspecified. Mr. Wolf's salary and bonus arrangements are set
annually by the Compensation Committee of the Board of Directors. Other
compensation, such as stock option grants, is awarded periodically at the
discretion of the Compensation Committee. Mr. Wolf is entitled to 12 months'
salary if Hurco terminates his employment without just cause.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors establishes policies
relating to the compensation arrangements of the Chief Executive Officer and all
other executive officers and oversees the administration of the Company's
employee benefit plans. All decisions of the Compensation Committee relating to
the compensation of the Company's executive officers are reviewed by the full
Board.
Compensation Policy
The goal of the Company's executive compensation policy is to ensure that an
appropriate relationship exists between executive pay and the creation of
shareholder value, while at the same time motivating and retaining key
employees. To achieve this goal, the Company's executive compensation policy
integrates annual base compensation with incentive compensation plans based upon
corporate performance and individual initiatives and performance. Measurement of
corporate performance is primarily based on Company goals and industry
performance levels. Accordingly, in years in which performance goals and
industry levels are achieved or exceeded, executive compensation tends to be
higher than in years in which performance is below expectations. Annual cash
compensation, together with stock option incentives, are designed to attract and
retain qualified executives and to ensure that such executives have a continuing
stake in the long-term success of the Company.
Stock options are granted from time to time to key employees, based primarily on
such person's potential contribution to the Company's growth and profitability.
The Compensation Committee feels that stock options are an effective incentive
for managers to create value for shareholders since the value of an option bears
a direct relationship to the Company's stock price. The Compensation Committee
believes that linking compensation for the Chief Executive Officer and all other
executive officers to corporate performance results in a better alignment of
compensation with corporate goals and shareholder interest. As performance goals
are met or exceeded, resulting in increased value to shareholders, executives
are rewarded commensurately.
Fiscal 2002 Executive Compensation
For fiscal 2002, the Company's compensation program for the Chief Executive
Officer and all other executive officers consisted of (i) base salary; (ii)
bonus awards based upon the performance measurements described above; and (iii)
stock option awards. During fiscal year 2002, the annual compensation of the
Chief Executive Officer consisted of base salary and stock options, which were
established at the time of his appointment in November 2001. In evaluating 2002
performance, the Committee considered the Company's financial performance in
relation to its business plan and other corporate performance criteria and
determined that no bonuses would be awarded to the Chief Executive Officer and
other corporate executive officers. The Committee believes that compensation
levels for the Chief Executive Officer and all other executive officers and key
employees during fiscal 2002 adequately reflect the Company's compensation goals
and policies.
O. Curtis Noel
Robert W. Cruickshank
REPORT OF AUDIT COMMITTEE
The Company's Audit Committee is comprised of three Directors. The Board of
Directors and the Audit Committee believe that the Audit Committee's current
composition satisfies the rule of the National Association of Securities
Dealers, Inc. ("NASD") that governs audit committee composition, including the
requirement that audit committee members all be "independent directors" as that
term is defined by NASDAQ rules.
The primary function of the Audit Committee is to assist the Board in fulfilling
its oversight responsibilities by reviewing the financial information which will
be provided to the shareholders and others, the system of internal controls
which management has established, and the audit process. In doing so, it is the
responsibility of the Audit Committee to provide an open avenue of communication
between the Board of Directors, management, and the independent accountants.
The Audit Committee has adopted a formal, written charter which was approved by
the full Board of Directors of the Company on February 4, 2003. The Charter
specifies the scope of the Audit Committee's responsibilities and how it should
carry out those responsibilities. A copy of the Charter is attached as Exhibit A
to this proxy statement.
The Audit Committee has reviewed and discussed the audited financial statements
of the Company for the fiscal year ended October 31, 2002, with the Company's
management. The Audit Committee has discussed with PricewaterhouseCoopers LLP,
the Company's independent public accountants, the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended (Communication
with Audit Committees). The Audit Committee has also received the written
disclosures and the letter from PricewaterhouseCoopers LLP required by
Independence Standards Board Standard No. 1 (Independence Discussion with Audit
Committees) and the Audit Committee has discussed the independence of
PricewaterhouseCoopers LLP with that firm.
The members of the Audit Committee have also confirmed that there have been no
new circumstances or developments since their appointment to the Committee that
would impair any member's ability to act independently.
Based on the review and discussions with the Company's independent auditors for
the fiscal year ended October 31, 2002, the Audit Committee recommended to the
Board of Directors that the financial statements be included in the Company's
Annual Report on Form 10-K for filing with the Securities and Exchange
Commission.
Robert W. Cruickshank
Charles E. M. Rentschler
Gerald V. Roch
PERFORMANCE GRAPH *
The following graph illustrates the cumulative total shareholder return on Hurco
common stock for the five-year period ended October 31, 2002, as compared to the
Russell 2000 Small Company Index and a peer group consisting of traded
securities for U.S. companies in the same three digit SIC group as Hurco (SIC
3540-3549 - Metal Working Machinery and Equipment). The comparisons in this
table are required by the Securities and Exchange Commission and are not
intended to forecast or be indicative of possible future performance of Hurco
common stock.
[OBJECT OMITTED]
*
$100 INVESTED ON 10/31/97 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF DIVIDENDS.
Fiscal year ending October 31.
INCORPORATION BY REFERENCE
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that may incorporate future filings (including
this Proxy Statement, in whole or in part), the preceding Audit Committee
Report, Compensation Committee Report on Executive Compensation and the stock
price Performance Graph shall not be incorporated by reference in any such
filings.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 14, 2003, regarding
beneficial ownership of the Company's common stock by each director and Named
Executive Officer, by all directors and executive officers as a group, and by
certain other beneficial owners of more than 5% of the common stock. Each such
person has sole voting and investment power with respect to such securities,
except as otherwise noted.
Other Beneficial Owners
Shares Beneficially Owned
Name and Address Number Percent
Richard T. Niner 942,312 (1) 15.8%
Wind River Associates, LP
1055 Washington Blvd.
Box 9-5th Floor
Stamford, CT 06901
Bridgeway Capital Management 549,900 (2) 9.8%
5615 Kirby Drive, Suite 518
Houston, Texas 77005
Dimensional Fund Advisors Inc. 414,100 (3) 7.4%
1299 Ocean Avenue
Santa Monica, CA 90401
FMR Corp. 387,428 (4) 6.9%
82 Devonshire Street
Boston, Massachusetts 02109
Royce & Associates, Inc. 493,700 (5) 8.8%
1414 Avenue of the Americas
New York, NY 10019
Directors and Executive Officers
Richard T. Niner 942,312 (1) 15.8%
Robert W. Cruickshank 45,000 (7) 0.8%
Michael Doar 48,667 (12) 0.8%
Charles E. Mitchell Rentschler 63,100 (1,6) 1.1%
O. Curtis Noel 25,000 (1) 0.4%
Gerald V. Roch 15,000 (7) 0.3%
James D. Fabris 89,167 (10) 1.5%
David E. Platts 48,033 (8) 0.8%
Roger J. Wolf 130,459 (9) 1.7%
Brian D. McLaughlin 142,320 (11,13) 2.4%
Executive officers and directors 1,248,751 (14) 21.0%
as a group (10 persons)
(1) Includes 25,000 shares subject to options that are exercisable within
60 days.
(2) According to a Schedule 13G, filed January 15, 2003 Bridgeway Capital
Management has shared voting power for all shares.
(3) According to a Schedule 13G, filed February 12, 2003, Dimensional
Fund Advisors has sole voting power for all shares.
(4) According to a Schedule 13G, filed February 14, 2002, FMR Corporation
has sole power to dispose all shares.
(5) According to Schedule 13G, filed February 11, 2003, Royce & Associates
has sole voting power for all shares.
(6) Includes 11,100 shares owned by Mr. Rentschler's wife, as to which he
may be deemed to have beneficial ownership.
(7) Includes 15,000 shares subject to options that are exercisable within
60 days.
(8) Includes 36,333 shares subject to options that are exercisable within
60 days.
(9) Includes 86,667 shares subject to options that are exercisable within
60 days.
(10) Includes 87,667 shares subject to options that are exercisable within
60 days.
(11) Includes 110,000shares subject to options that are exercisable within
60 days.
(12) Includes 41,667 shares subject to options that are exercisable within
60 days.
(13) Includes 1,320 shares owned by Mr. McLaughlin's wife and children,
as to which he may be deemed to have beneficial ownership.
(14) Includes 258,667 shares subject to options that are exercisable within
60 days.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers, LLP ("PwC") served as the Company's independent
accountants for fiscal 2002. A representative of PwC is expected to be present
at the Annual Meeting and will have the opportunity to make a statement if
desired, and such representative is expected to be available to respond to
appropriate questions. As recommended by the Audit Committee, PwC has been
reappointed as independent auditors for fiscal 2003.
On May 31, 2002, Hurco dismissed Arthur Andersen LLP ("Andersen") as its
independent accountants. This decision was approved by the Audit Committee of
the Board of Directors. Andersen's reports on Hurco's financial statements for
the two years ended October 31, 2001 and 2000, did not contain an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles. During the two most recent
fiscal years ended October 31, 2001 and 2000, and the subsequent interim period
through May 31, 2002, there were no disagreements with Andersen on any matter of
accounting principle or practices, financial statement disclosure or auditing
scope or procedure which, if not resolved to Andersen's satisfaction, would have
caused Andersen to make reference to the subject matter in its report on Hurco's
consolidated financial statements for such year; nor were there any reportable
events as defined in Item 304(a)(1)(v) of Regulation S-K.
On June 27, 2002, the Board of Directors approved the recommendation of its
Audit Committee to engage PwC as Hurco's independent accountants. During the
years ended October 31, 2001 and 2000 and the subsequent interim period through
June 27, 2002, Hurco did not consult PwC with respect to the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on Hurco's financial
statements, or any other matters or reportable events as set forth in Items
304(a)(2)(i) and (ii) of Regulation S-K.
The Company incurred the following fees for services performed by PwC and
Andersen for the fiscal year ended October 31, 2002:
Audit Fees. Fees for the audit and review of Forms 10-Q were $242,500
and $40,500, paid to PwC and Andersen, respectively.
Financial Information Systems Design and Implementation Fees. There
were no fees paid for services related to financial information systems design
and implementation.
All Other Fees. Aggregate fees billed for all other services rendered
by PwC and Andersen were approximately $3,900 and $65,000, respectively.
SHAREHOLDER PROPOSALS
The date by which shareholder proposals must be received by the Company for
inclusion in proxy materials relating to the 2004 Annual Meeting of Shareholders
is October 31, 2003.
In order to be considered at the 2004 Annual Meeting, shareholder proposals must
comply with the advance notice and eligibility requirements contained in the
Company's By-Laws. The Company's By-Laws provide that shareholders are required
to give advance notice to the Company of any business to be brought by a
shareholder before an annual shareholders' meeting. For business to be properly
brought before an annual meeting by a shareholder, the shareholder must give
timely written notice thereof to the Secretary of the Company. In order to be
timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the Company not less than 60 days prior to
the meeting. In the event that less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made to shareholders, notice
by the shareholder must be received not later than the close of business on the
tenth day following the day on which notice of the date of the meeting was
mailed or public disclosure was made. The notice must contain specified
information about the proposed business and the shareholder making the proposal.
A copy of the Company's By-Laws is available upon request. Such requests and any
shareholder proposals should be sent to Roger J. Wolf, Secretary, Hurco
Companies, Inc., One Technology Way, P.O. Box 68180, Indianapolis, Indiana,
46268, the principal executive offices of the Company.
ANNUAL REPORT ON FORM 10-K
The Company filed its Annual Report on Form 10-K for the fiscal year ended
October 31, 2002 with the Securities and Exchange Commission. Shareholders
may obtain a copy of the Form 10-K by writing to Roger J. Wolf, Senior
Vice-President and Chief Financial Officer, Hurco Companies, Inc., One
Technology Way, P. O. Box 68180, Indianapolis, Indiana 46268. A copy of the
10-K can also be obtained at hurco.com or SEC.gov.
OTHER BUSINESS
The Board of Directors knows of no other matters which may be presented at the
Annual Meeting. If any other matters should properly come before the Annual
Meeting, the persons named in the enclosed form of proxy will vote in accordance
with their business judgment on such matters.
Exhibit A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF
HURCO COMPANIES, INC.
Purpose
The Audit Committee of the Board of Directors of Hurco Companies, Inc. (the
"Company") is appointed by the Board to assist the Board in monitoring (1) the
integrity of the Company's financial statements, (2) the independent auditor's
qualifications and independence, (3) the performance of the Company's
independent auditor, and (4) the Company's compliance with legal and regulatory
requirements.
The Audit Committee is also responsible for producing the annual Audit Committee
report required by the rules of the Securities and Exchange Commission (the
"SEC") to be included in the Company's proxy statement.
Committee Membership
The Audit Committee shall consist of at least three directors. The members of
the Audit Committee shall meet the independence and experience requirements of
the NASDAQ Stock Market, Section 10A(m)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and SEC rules and regulations.
The members and the Chair of the Audit Committee shall be appointed by the
Board. Audit Committee members may be replaced by the Board.
Meetings
The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly. The Audit Committee shall meet periodically with
management and the independent auditor in separate executive sessions. The Audit
Committee may request any officer or employee of the Company or the Company's
outside counsel or independent auditor to attend a meeting of the Committee or
to meet with any members of, or advisors to, the Committee.
Committee Authority and Responsibilities
The Audit Committee shall be directly and solely responsible for the
appointment, determination of compensation and oversight of the work of the
independent auditor, including resolution of disagreements between management
and the independent auditor regarding financial reporting, as required by
Section 10A(m)(2) of the Exchange Act. The Audit Committee shall preapprove all
auditing services and permitted non-audit services, including the fees and terms
thereof. The independent auditor shall report directly to the Audit Committee.
The Audit Committee shall have the authority, to the extent it deems necessary
or appropriate and without seeking Board approval, to retain independent legal,
accounting or other advisors. The Company shall provide for appropriate funding,
as determined by the Audit Committee, for payment of compensation to the
independent auditor for the purpose of rendering or issuing an audit report and
to any advisors employed by the Audit Committee.
The Audit Committee may form and delegate authority to subcommittees consisting
of one or more members when appropriate, including the authority to grant
preapprovals of audit and permitted non-audit services, provided that decisions
of such subcommittee to grant preapprovals shall be presented to the Audit
Committee at its next scheduled meeting.
The Audit Committee shall make regular reports to the Board. The Audit Committee
shall review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval. The Audit Committee, to the
extent it deems necessary or appropriate, shall:
Financial Statement and Disclosure Matters
1. Review and discuss with management and the independent auditor the annual
audited financial statements, including disclosures made in management's
discussion and analysis, and recommend to the Board whether the audited
financial statements should be included in the Company's Form 10-K.
2. Review and discuss with management and the independent auditor the
Company's quarterly financial statements prior to the filing of its Form
10-Q, including the results of the independent auditor's reviews of the
quarterly financial statements.
3. In connection with such quarterly reviews and annual audit, discuss with
management and the independent auditor major issues regarding accounting
principles and financial statement presentations, including any significant
changes in the Company's selection or application of accounting principles,
any major issues as to the adequacy of the Company's internal controls and
any special audit steps adopted in light of material control deficiencies.
4. Discuss with the independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61, as amended relating to the
conduct of the audit, including any difficulties encountered in the course
of the audit work, any restrictions on the scope of activities or access to
requested information, and any significant disagreements with management.
5. Review and discuss quarterly reports from the independent auditor on:
a. changes in critical accounting policies and practices used;
b. all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with management,
ramifications of the use of such alternative disclosures and treatments,
and the treatment preferred by the independent auditor;
c. management's disposition of significant audit adjustments as
identified by the external auditor;
d. any proposed changes by regulatory authorities in accounting
standards or financial disclosures that could materially affect the
Company's financial statements; and
e. other material written communications between the independent auditor
and management, such as any management letter with respect to internal
control deficiencies.
6. Discuss with management and the independent auditor, the Company's earnings
press releases prior to issuance, including the use of any "pro forma" or
"adjusted" non-GAAP information.
7. Discuss with management and the independent auditor the effect of any
material off-balance sheet structures on the Company's financial
statements.
8. Discuss with management at least annually the Company's major financial
risk exposures and the steps management has taken to monitor and control
such exposures, including the Company's risk assessment and risk management
policies.
9. Review disclosures made to the Audit Committee by the Company's CEO and CFO
during their certification process for the Form 10-K and Forms 10-Q about
any significant deficiencies in the design or operation of disclosure
controls and internal controls or material weaknesses therein and any fraud
involving management or other employees who have a significant role in the
company's disclosure controls and internal controls.
10. Review and approve all related-party transactions, i.e. with Directors,
Executive Officers, significant shareholders or affiliated entities in
which such persons have material interests of the Company.
Oversight of the Company's Relationship with the Independent Auditor
11. Review and evaluate the lead partner of the independent auditor team.
12. Obtain annually, to the extent made available, and review a report from the
independent auditor regarding (a) the independent auditor's internal
quality-control procedures, (b) any material issues raised by the most
recent internal quality-control review, or peer review, of the firm, or by
any inquiry or investigation by governmental or professional authorities
within the preceding five years respecting one or more independent audits
carried out by the firm, (c) any steps taken to deal with any such issues,
and (d) any relationships between the independent auditor and the Company,
that may impact their objectivity or independence
13. Evaluate annually the qualifications, performance and independence of the
independent auditor, including considering whether the auditor's quality
controls are adequate and the provision of permitted non-audit services is
compatible with maintaining the auditor's independence, and taking into
account the opinions of management. The Audit Committee shall present its
conclusions with respect to the independent auditor to the Board.
14. Ensure the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner responsible for
reviewing the audit every five years or as otherwise required by Section
10A(j) of the Exchange Act.
15. Ensure that the Company's Chief Executive Officer, Chief Financial Officer,
Corporate Controller or other principal accounting officer did not
participate in the audit of the Company in any capacity as an employee of
the independent auditing firm within one year preceding the appointment of
such firm for any audit.
16. Meet with the independent auditor prior to the audit to discuss the
planning, scope and staffing of the audit.
Compliance Oversight Responsibilities
17. Obtain from the independent auditor assurance that any reportable events
under the provisions of Section l0A(b) of the Exchange Act respecting the
detection and reporting of illegal acts, of which they are aware, have been
communicated to the Committee.
18. Establish and maintain procedures for the receipt, retention and treatment
of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters and the confidential, anonymous
submission by Company employees of concerns regarding questionable
accounting or auditing matters.
19. Discuss with management and the independent auditor any correspondence with
regulators or governmental agencies and any published reports which raise
material issues regarding the Company's financial statements or accounting
policies.
20. Discuss, as deemed necessary, with the Company's outside counsel, legal
matters that may have a material impact on the financial statements or the
Company's compliance policies.
Limitation of Audit Committee's Role
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements and disclosures are
complete and accurate and are in accordance with generally accepted accounting
principles and applicable rules and regulations. These are the responsibilities
of management and the independent auditor.