Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Jul. 31, 2019 | Aug. 31, 2019 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jul. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Entity Registrant Name | HURCO COMPANIES INC | |
Entity Central Index Key | 0000315374 | |
Current Fiscal Year End Date | --10-31 | |
Entity Filer Category | Accelerated Filer | |
Trading Symbol | HURC | |
Entity Current Reporting Status | Yes | |
Entity Common Stock, Shares Outstanding | 6,767,237 | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Shell Company | false |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2019 | Jul. 31, 2018 | Jul. 31, 2019 | Jul. 31, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||
Sales and service fees | $ 58,501 | $ 78,752 | $ 203,388 | $ 217,620 |
Cost of sales and service | 41,312 | 54,231 | 142,420 | 153,665 |
Gross profit | 17,189 | 24,521 | 60,968 | 63,955 |
Selling, general and administrative expenses | 12,592 | 15,160 | 40,617 | 41,446 |
Operating income | 4,597 | 9,361 | 20,351 | 22,509 |
Interest expense | 18 | 29 | 44 | 74 |
Interest income | 169 | 78 | 350 | 108 |
Investment income (loss) | (25) | 58 | 346 | 180 |
Other income (expense), net | (77) | (457) | 483 | (868) |
Income before taxes | 4,646 | 9,011 | 21,486 | 21,855 |
Provision for income taxes | 1,155 | 2,511 | 6,089 | 8,667 |
Net income | $ 3,491 | $ 6,500 | $ 15,397 | $ 13,188 |
Income per common share | ||||
Basic | $ 0.51 | $ 0.96 | $ 2.26 | $ 1.95 |
Diluted | $ 0.51 | $ 0.95 | $ 2.24 | $ 1.93 |
Weighted average common shares outstanding | ||||
Basic | 6,767 | 6,717 | 6,756 | 6,694 |
Diluted | 6,813 | 6,788 | 6,815 | 6,774 |
Dividends paid per share | $ 0.12 | $ 0.11 | $ 0.35 | $ 0.32 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2019 | Jul. 31, 2018 | Jul. 31, 2019 | Jul. 31, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income | $ 3,491 | $ 6,500 | $ 15,397 | $ 13,188 |
Other comprehensive income (loss): | ||||
Translation of foreign currency financial statements | (1,899) | (3,689) | (1,976) | (846) |
(Gain) / loss on derivative instruments reclassified into operations, net of tax of $10, $181, $1 and $245, respectively | 39 | 540 | 3 | 733 |
Gain / (loss) on derivative instruments, net of tax of $130, $125, $136 and $(151), respectively | 446 | 375 | 465 | (451) |
Total other comprehensive income (loss) | (1,414) | (2,774) | (1,508) | (564) |
Comprehensive income | $ 2,077 | $ 3,726 | $ 13,889 | $ 12,624 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2019 | Jul. 31, 2018 | Jul. 31, 2019 | Jul. 31, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Realized loss (gains) on derivative instruments reclassified into operations, tax | $ 10 | $ 181 | $ 1 | $ 245 |
Unrealized (loss) gains on derivative instruments, tax | $ 130 | $ 125 | $ 136 | $ (151) |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jul. 31, 2019 | Oct. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 66,103 | $ 77,170 |
Accounts receivable, net | 38,088 | 54,414 |
Inventories, net | 153,700 | 137,609 |
Derivative assets | 1,956 | 3,085 |
Prepaid assets | 8,535 | 7,332 |
Other | 2,395 | 1,825 |
Total current assets | 270,777 | 281,435 |
Property and equipment: | ||
Land | 868 | 868 |
Building | 7,352 | 7,352 |
Machinery and equipment | 27,993 | 26,840 |
Leasehold improvements | 4,629 | 3,801 |
Property and equipment, gross | 40,842 | 38,861 |
Less accumulated depreciation and amortization | (27,314) | (25,902) |
Total property and equipment, net | 13,528 | 12,959 |
Non-current assets: | ||
Software development costs, less accumulated amortization | 8,129 | 7,452 |
Goodwill | 2,332 | 2,377 |
Intangible assets, net | 845 | 938 |
Deferred income taxes | 1,983 | 2,234 |
Investments and other assets, net | 8,295 | 8,012 |
Total non-current assets | 21,584 | 21,013 |
Total assets | 305,889 | 315,407 |
Current liabilities: | ||
Accounts payable | 45,183 | 57,518 |
Derivative liabilities | 663 | 2,020 |
Accrued payroll and employee benefits | 9,882 | 14,032 |
Accrued income tax | 1,888 | 5,180 |
Accrued expenses and other | 4,404 | 4,122 |
Accrued warranty | 2,090 | 2,497 |
Short-term debt | 0 | 1,434 |
Total current liabilities | 64,110 | 86,803 |
Non-current liabilities: | ||
Accrued tax liability | 1,914 | 2,194 |
Deferred credits and other | 3,908 | 3,557 |
Total non-current liabilities | 5,822 | 5,751 |
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, 6,967,719 and 6,891,508 shares issued and 6,767,237 and 6,723,160 shares outstanding, as of July 31, 2019 and October 31, 2018, respectively | 677 | 672 |
Additional paid-in capital | 65,778 | 64,185 |
Retained earnings | 180,873 | 167,859 |
Accumulated other comprehensive loss | (11,371) | (9,863) |
Total shareholders' equity | 235,957 | 222,853 |
Total liabilities and shareholders' equity | $ 305,889 | $ 315,407 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jul. 31, 2019 | Oct. 31, 2018 |
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 | 6,967,719 | 6,891,508 |
Common stock, shares outstanding | 6,767,237 | 6,723,160 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2019 | Jul. 31, 2018 | Jul. 31, 2019 | Jul. 31, 2018 | |
Cash flows from operating activities: | ||||
Net income | $ 3,491 | $ 6,500 | $ 15,397 | $ 13,188 |
Adjustments to reconcile net income to net cash provided by (used for) operating activities: | ||||
Provision for doubtful accounts | (52) | 23 | (191) | 114 |
Deferred income taxes | (3) | (160) | (29) | 480 |
Equity in income of affiliates | (113) | (243) | (521) | (437) |
Depreciation and amortization | 916 | 937 | 2,761 | 2,848 |
Foreign currency (gain) loss | 433 | 864 | 77 | (185) |
Unrealized (gain) loss on derivatives | (326) | (311) | (547) | 180 |
Stock-based compensation | 664 | 606 | 2,097 | 1,784 |
Change in assets and liabilities: | ||||
(Increase) decrease in accounts receivable | 5,768 | (4,979) | 16,168 | 4,060 |
(Increase) decrease in inventories | (6,937) | (4,515) | (17,507) | (17,440) |
(Increase) decrease in prepaid expenses | 362 | (968) | (1,000) | (2,149) |
Increase (decrease) in accounts payable | (4,376) | 1,917 | (11,992) | 12,145 |
Increase (decrease) in accrued expenses | (473) | 1,890 | (4,114) | 153 |
Increase (decrease) in accrued income tax | (523) | 1,131 | (3,268) | 894 |
Net change in derivative assets and liabilities | (82) | (180) | 294 | (597) |
Other | (221) | 1,301 | (690) | 2,232 |
Net cash provided by (used for) operating activities | (1,472) | 3,813 | (3,065) | 17,270 |
Cash flows from investing activities: | ||||
Purchase of property and equipment | (1,328) | (1,152) | (2,609) | (2,826) |
Proceeds from sale of equipment | 37 | 8 | 68 | 94 |
Software development costs | (455) | (526) | (1,424) | (1,748) |
Other investments | 333 | 233 | 333 | 233 |
Net cash provided by (used for) investing activities | (1,413) | (1,437) | (3,632) | (4,247) |
Cash flows from financing activities: | ||||
Dividends paid | (818) | (742) | (2,383) | (2,152) |
Taxes paid related to net settlement of restricted shares | (499) | (545) | ||
Proceeds from exercise of common stock options | 180 | 734 | ||
Repayment of short-term debt | (1,454) | |||
Net cash provided by (used for) financing activities | (818) | (562) | (4,336) | (1,963) |
Effect of exchange rate changes on cash | (374) | (1,179) | (34) | (356) |
Net increase (decrease) in cash and cash equivalents | (4,077) | 635 | (11,067) | 10,704 |
Cash and cash equivalents at beginning of period | 70,180 | 76,376 | 77,170 | 66,307 |
Cash and cash equivalents at end of period | $ 66,103 | $ 77,011 | $ 66,103 | $ 77,011 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Total |
Balances at Oct. 31, 2017 | $ 664 | $ 61,344 | $ 149,267 | $ (8,190) | $ 203,085 |
Balances (in shares) at Oct. 31, 2017 | 6,641,197 | ||||
Net income | $ 0 | 0 | 13,188 | 0 | 13,188 |
Other comprehensive income (loss) | 0 | 0 | 0 | (564) | (564) |
Exercise of common stock options | $ 4 | 730 | 0 | 0 | 734 |
Exercise of common stock options (in shares) | 35,418 | ||||
Stock-based compensation | $ 4 | 1,780 | 0 | 0 | 1,784 |
Stock-based compensation (in shares) | 40,283 | ||||
Dividends paid | $ 0 | 0 | (2,152) | 0 | (2,152) |
Balances at Jul. 31, 2018 | $ 672 | 63,854 | 160,303 | (8,754) | 216,075 |
Balances (in shares) at Jul. 31, 2018 | 6,716,898 | ||||
Balances at Apr. 30, 2018 | $ 671 | 63,069 | 154,545 | (5,980) | 212,305 |
Balances (in shares) at Apr. 30, 2018 | 6,711,898 | ||||
Net income | $ 0 | 0 | 6,500 | 0 | 6,500 |
Other comprehensive income (loss) | 0 | 0 | 0 | (2,774) | (2,774) |
Exercise of common stock options | $ 1 | 179 | 0 | 0 | 180 |
Exercise of common stock options (in shares) | 5,000 | ||||
Stock-based compensation | $ 0 | 606 | 0 | 0 | 606 |
Stock-based compensation (in shares) | 0 | ||||
Dividends paid | $ 0 | 0 | (742) | 0 | (742) |
Balances at Jul. 31, 2018 | $ 672 | 63,854 | 160,303 | (8,754) | 216,075 |
Balances (in shares) at Jul. 31, 2018 | 6,716,898 | ||||
Balances at Oct. 31, 2018 | $ 672 | 64,185 | 167,859 | (9,863) | 222,853 |
Balances (in shares) at Oct. 31, 2018 | 6,723,160 | ||||
Net income | $ 0 | 0 | 15,397 | 0 | 15,397 |
Other comprehensive income (loss) | 0 | 0 | 0 | (1,508) | (1,508) |
Stock-based compensation | $ 5 | 2,092 | 0 | 0 | 2,097 |
Stock-based compensation (in shares) | 44,077 | ||||
Taxes withheld for vested restricted shares | $ 0 | (499) | 0 | 0 | (499) |
Dividends paid | 0 | 0 | (2,383) | 0 | (2,383) |
Balances at Jul. 31, 2019 | $ 677 | 65,778 | 180,873 | (11,371) | 235,957 |
Balances (in shares) at Jul. 31, 2019 | 6,767,237 | ||||
Balances at Apr. 30, 2019 | $ 677 | 65,114 | 178,200 | (9,957) | 234,034 |
Balances (in shares) at Apr. 30, 2019 | 6,767,237 | ||||
Net income | $ 0 | 0 | 3,491 | 0 | 3,491 |
Other comprehensive income (loss) | 0 | 0 | 0 | (1,414) | (1,414) |
Stock-based compensation | $ 0 | 664 | 0 | 0 | 664 |
Stock-based compensation (in shares) | 0 | ||||
Dividends paid | $ 0 | 0 | (818) | 0 | (818) |
Balances at Jul. 31, 2019 | $ 677 | $ 65,778 | $ 180,873 | $ (11,371) | $ 235,957 |
Balances (in shares) at Jul. 31, 2019 | 6,767,237 |
CONDENSED CONSOLIDATED STATEM_6
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2019 | Jul. 31, 2018 | Jul. 31, 2019 | Jul. 31, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY | ||||
Dividends paid per share | $ 0.12 | $ 0.11 | $ 0.35 | $ 0.32 |
GENERAL
GENERAL | 9 Months Ended |
Jul. 31, 2019 | |
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, unless the context indicates otherwise, the terms “we”, “us”, “our” and similar language refer to Hurco Companies, Inc. and its consolidated subsidiaries as a whole. We design, manufacture and sell computerized (i.e., Computer Numeric Control, or 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, software options, control upgrades, accessories and replacement parts for our products, as well as customer service, training, and applications support. The condensed financial information as of July 31, 2019 and for the three and nine months ended July 31, 2019 and July 31, 2018 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 consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended October 31, 2018. |
REVENUE RECOGNITION
REVENUE RECOGNITION | 9 Months Ended |
Jul. 31, 2019 | |
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, software options, control upgrades, accessories and replacement parts for our products, as well as customer service, training and applications support. We adopted Accounting Standards Codification (“ASC”) 606 “Revenue from Contracts with Customers” (“ASC 606”) on November 1, 2018, the start of our 2019 fiscal year, and elected the modified retrospective method as of the date of adoption. Prior to the adoption of ASC 606, our revenues were already recognized in the same manner as that required by ASC 606. Therefore, the adoption of ASC 606 did not have an effect on our beginning retained earnings or our overall financial statements as of and for the three and nine months ended July 31, 2019. 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 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 is 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 facilities 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 specifications. We consider the machine installation process for our three-axis machines to be inconsequential and perfunctory. 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 perfunctory 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. |
DERIVATIVE INSTRUMENTS AND HEDG
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 9 Months Ended |
Jul. 31, 2019 | |
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 few major financial institutions. 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, South African Rand, 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 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 reported in Other income (expense), net immediately. 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 July 31, 2019, denominated in Euros, Pounds Sterling and New Taiwan Dollars with set maturity dates ranging from August 2019 through July 2020. The contract amounts, expressed at forward rates in U.S. Dollars at July 31, 2019, were $19.3 million for Euros, $6.5 million for Pounds Sterling and $19.4 million for New Taiwan Dollars. At July 31, 2019, we had approximately $1.2 million of gains, net of tax, related to cash flow hedges deferred in Accumulated other comprehensive loss. Included in this amount were $487,000 of unrealized gains, 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 July 2020, 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 2018. 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 loss, net of tax, in the same manner as the underlying hedged net assets. This forward contract matures in November 2019. As of July 31, 2019, we had $804,000 of realized gains and $114,000 of unrealized gains, net of tax, recorded as cumulative translation adjustments in Accumulated other comprehensive 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 receivables and payables denominated in foreign currencies. These derivative instruments are not designated as hedges under the FASB guidance and, as a result, changes in their fair value are reported currently as Other income (expense), net in the Condensed Consolidated Statements of Income consistent with the transaction gain or loss on the related receivables and payables denominated in foreign currencies. We had forward contracts outstanding as of July 31, 2019, denominated in Euros, Pounds Sterling, South African Rand, and New Taiwan Dollar with set maturity dates ranging from August 2019 through July 2020. The contract amounts, expressed at forward rates in U.S. Dollars at July 31, 2019, totaled $63.0 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 July 31, 2019 and October 31, 2018, all derivative instruments were recorded at fair value on our Consolidated Balance Sheets as follows (in thousands): July 31, 2019 October 31, 2018 Balance Sheet Fair Balance Sheet Fair Derivatives Location Value Location Value Designated as Hedging Instruments: Foreign exchange forward contracts Derivative assets $ 1,263 Derivative assets $ 2,654 Foreign exchange forward contracts Derivative liabilities $ 488 Derivative liabilities $ 1,616 Not Designated as Hedging Instruments: Foreign exchange forward contracts Derivative assets $ 693 Derivative assets $ 431 Foreign exchange forward contracts Derivative liabilities $ 175 Derivative liabilities $ 404 Effect of Derivative Instruments on the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Changes in Shareholders’ Equity and Condensed Consolidated Statements of Income 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 Income, net of tax, during the three months ended July 31, 2019 and 2018 (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 July 31, July 31, 2019 2018 2019 2018 Designated as Hedging Instruments: (Effective portion) Foreign exchange forward contracts – Intercompany sales/purchases $ 446 $ 375 Cost of sales and service $ (39) $ (540) Foreign exchange forward contract – Net investment $ 41 $ 108 We did not recognize any gains or losses as a result of hedges deemed ineffective for the three months ended July 31, 2019 and 2018. We recognized the following gains and losses in our Condensed Consolidated Statements of Income during the three months ended July 31, 2019 and 2018 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 July 31, 2019 2018 Not Designated as Hedging Instruments: Foreign exchange forward contracts Other income (expense), net $ 138 $ (4) The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the three months ended July 31, 2019 (in thousands): Foreign Currency Cash Flow Translation Hedges Total Balance, April 30, 2019 $ (10,669) $ 712 $ (9,957) Other comprehensive income (loss) before reclassifications (1,899) 446 (1,453) Reclassifications — 39 39 Balance, July 31, 2019 $ (12,568) $ 1,197 $ (11,371) 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 Income, net of tax, during the nine months ended July 31, 2019 and 2018 (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) Nine Months Ended Nine Months Ended July 31, July 31, 2019 2018 2019 2018 Designated as Hedging Instruments: (Effective portion) Foreign exchange forward contracts – Intercompany sales/purchases $ 465 $ (451) Cost of sales and service $ (3) $ (733) Foreign exchange forward contract – Net investment $ 113 $ 31 We did not recognize any gains or losses as a result of hedges deemed ineffective for the nine months ended July 31, 2019 and 2018. We recognized the following gains and losses in our Condensed Consolidated Statements of Income during the nine months ended July 31, 2019 and 2018 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 Nine Months Ended July 31, 2019 2018 Not Designated as Hedging Instruments: Foreign exchange forward contracts Other income (expense), net $ 249 $ (1,272) The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the nine months ended July 31, 2019 (in thousands:) Foreign Currency Cash Flow Translation Hedges Total Balance, October 31, 2018 $ (10,592) $ 729 $ (9,863) Other comprehensive income (loss) before reclassifications (1,976) 465 (1,511) Reclassifications — 3 3 Balance, July 31, 2019 $ (12,568) $ 1,197 $ (11,371) |
EQUITY INCENTIVE PLAN
EQUITY INCENTIVE PLAN | 9 Months Ended |
Jul. 31, 2019 | |
EQUITY INCENTIVE PLAN | |
EQUITY INCENTIVE PLAN | 4. EQUITY INCENTIVE PLAN In March 2016, we adopted the Hurco Companies, Inc. 2016 Equity Incentive Plan (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 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 Plan. The total number of shares of our common stock that may be issued pursuant to awards under the 2016 Equity Plan is 856,048, which includes 386,048 shares remaining available for future grants under the 2008 Plan as of March 10, 2016, the date our shareholders approved the 2016 Equity Plan. 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 stock units under the 2016 Equity Plan that are currently outstanding, and we have granted stock options under the 2008 Plan that are currently outstanding. 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 nine-month period ended July 31, 2019, is as follows: Stock Weighted Average Options Exercise Price Outstanding at October 31, 2018 37,045 $ 21.69 Options granted — — Options exercised — — Options cancelled — — Outstanding at July 31, 2019 37,045 $ 21.69 Summarized information about outstanding stock options as of July 31, 2019, that have already vested and are currently exercisable, are as follows: Options Already Vested and Currently Exercisable Number of outstanding options 37,045 Weighted average remaining contractual life (years) 2.53 Weighted average exercise price per share $ 21.69 Intrinsic value of outstanding options $ 463,000 The intrinsic value of an outstanding stock option is calculated as the difference between the stock price as of July 31, 2019 and the exercise price of the option. On March 14, 2019, the Compensation Committee granted a total of 11,824 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 $40.58 per share. On January 2, 2019, the Compensation Committee determined the degree to which the long-term incentive compensation arrangement approved for the fiscal 2016‑2018 performance period was attained, and the resulting payout level relative to the target amount for each of the metrics that were established by the Compensation Committee in 2016. As a result, the Compensation Committee determined that a total of 32,559 performance shares were earned by our executive officers, which performance shares vested on January 2, 2019. The vesting date fair value of the performance shares was based on the closing sales price of our common stock on the vesting date, which was $36.08 per share. On January 2, 2019, the Compensation Committee also approved a long-term incentive compensation arrangement for our executive officers in the form of 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 2019 through fiscal 2021. On that date, the Compensation Committee granted a total of 21,825 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 $36.08 per share. On January 2, 2019, the Compensation Committee also granted a total target number of 30,943 PSUs to our executive officers designated as “PSU – TSR”. These PSUs were weighted as approximately 40% of the overall 2019 executive long-term incentive compensation arrangement and will vest and be paid based upon the total shareholder return of our common stock over the three-year period of fiscal 2019‑2021, relative to the total shareholder return of the companies in a specified peer group over that period. Participants will have the ability to earn between 50% of the target number of the PSUs – TSR for achieving threshold performance and 200% of the target number of the PSUs – TSR for achieving maximum performance. The grant date fair value of the PSUs – TSR was $40.72 per PSU and was calculated using the Monte Carlo approach. On January 2, 2019, the Compensation Committee also granted a total target number of 30,557 PSUs to our executive officers designated as “PSU – ROIC”. These PSUs were weighted as approximately 35% of the overall 2019 executive long-term incentive compensation arrangement and will vest and be paid based upon the achievement of pre-established goals related to our average return on invested capital over the three-year period of fiscal 2019‑2021. Participants will have the ability to earn between 50% of the target number of the PSUs - ROIC for achieving threshold performance and 200% of the target number of the PSUs - ROIC for achieving maximum performance. The grant date fair value of the PSUs – ROIC was based on the closing sales price of our common stock on the grant date, which was $36.08 per share. On November 14, 2018, the Compensation Committee granted a total of 7,200 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 $40.01 per share. A reconciliation of our restricted stock, performance share and PSU activity and related information for the nine-month period ended July 31, 2019 is as follows: Weighted Average Grant Date Number of Shares Fair Value Unvested at October 31, 2018 168,348 $ 37.24 Shares or units granted 102,349 38.28 Shares or units vested (44,077) 33.29 Shares or units cancelled (12,462) 29.82 Shares withheld (13,676) 29.67 Unvested at July 31, 2019 200,482 $ 39.62 During the nine months of fiscal 2019 and 2018, we recorded $2.1 million and $1.8 million, respectively, of stock-based compensation expense related to grants under the 2008 Plan and the 2016 Equity Plan. As of July 31, 2019, there was an estimated $4.2 million of total unrecognized stock-based compensation cost that we expect to recognize by the end of the first quarter of fiscal 2022. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Jul. 31, 2019 | |
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 July 31, Nine Months Ended July 31, 2019 2018 2019 2018 Basic Diluted Basic Diluted Basic Diluted Basic Diluted Net income $ 3,491 $ 3,491 $ 6,500 $ 6,500 $ 15,397 $ 15,397 $ 13,188 $ 13,188 Undistributed earnings allocated to participating shares (29) (29) (40) (40) (130) (130) (81) (81) Net income applicable to common shareholders $ 3,462 $ 3,462 $ 6,460 $ 6,460 $ 15,267 $ 15,267 $ 13,107 $ 13,107 Weighted average shares outstanding 6,767 6,767 6,717 6,717 6,756 6,756 6,694 6,694 Stock options and contingently issuable securities — 46 — 71 — 59 — 80 6,767 6,813 6,717 6,788 6,756 6,815 6,694 6,774 Income per share $ 0.51 $ 0.51 $ 0.96 $ 0.95 $ 2.26 $ 2.24 $ 1.95 $ 1.93 |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 9 Months Ended |
Jul. 31, 2019 | |
ACCOUNTS RECEIVABLE | |
ACCOUNTS RECEIVABLE | 6. ACCOUNTS RECEIVABLE Accounts receivable are net of allowances for doubtful accounts of $836,000 as of July 31, 2019 and $1.0 million as of October 31, 2018. |
INVENTORIES
INVENTORIES | 9 Months Ended |
Jul. 31, 2019 | |
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): July 31, October 31, 2019 2018 Purchased parts and sub-assemblies $ 37,085 $ 38,303 Work-in-process 22,803 22,786 Finished goods 93,812 76,520 $ 153,700 $ 137,609 |
SEGMENT INFORMATION
SEGMENT INFORMATION | 9 Months Ended |
Jul. 31, 2019 | |
SEGMENT INFORMATION | |
SEGMENT INFORMATION | 8. SEGMENT INFORMATION We operate in a single segment: industrial automation equipment. We design, manufacture and sell computerized 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. 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, software options, control upgrades, accessories and replacement parts for our products, as well as customer service, training and applications support. |
GUARANTEES AND PRODUCT WARRANTI
GUARANTEES AND PRODUCT WARRANTIES | 9 Months Ended |
Jul. 31, 2019 | |
GUARANTEES AND PRODUCT WARRANTIES | |
GUARANTEES AND PRODUCT WARRANTIES | 9. 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). As of July 31, 2019, we had 24 outstanding third party payment guarantees totaling approximately $0.6 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 and control. The customer does not obtain title, however, until the customer 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 certain components 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): Nine Months Ended July 31, 2019 2018 Balance, beginning of period $ 2,497 $ 1,772 Provision for warranties during the period 2,352 3,064 Charges to the reserve (2,747) (2,531) Impact of foreign currency translation (12) (28) Balance, end of period $ 2,090 $ 2,277 The year-over-year decrease in our warranty reserve was primarily due to a decrease in the number of machines under warranty. |
DEBT AGREEMENTS
DEBT AGREEMENTS | 9 Months Ended |
Jul. 31, 2019 | |
DEBT AGREEMENTS | |
DEBT AGREEMENTS | 10. DEBT AGREEMENTS On December 7, 2012, we entered into an agreement, which was subsequently amended on May 9, 2014, June 5, 2014, December 5, 2014 and December 6, 2016 (as amended, the “2012 Credit Agreement”) with JP Morgan Chase Bank, N.A that provided us with an unsecured revolving credit and letter of credit facility. The 2012 Credit Agreement terminated on its scheduled maturity date of December 31, 2018. On December 31, 2018, we and our subsidiary Hurco B.V. entered into a new credit agreement (the “2018 Credit Agreement”) with Bank of America, N.A., as the lender. The 2018 Credit Agreement replaced the 2012 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, 2020. Borrowings under the 2018 Credit Agreement bear interest at floating rates based on, at our option, either (i) a LIBOR-based rate, or other alternative currency-based rate approved by the lender, plus 0.75% 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 LIBOR-based rate plus 1.00%), plus 0.00% per annum. Outstanding letters of credit will carry an annual rate of 0.75%. 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 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; (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 $170.0 million. We may use the proceeds from advances under the 2018 Credit Agreement for general corporate purposes. In December 2018, in connection with our entry into the 2018 Credit Agreement, (1) using cash on hand, we repaid in full the $1.4 million outstanding under, and terminated, our credit facility in China and (2) we terminated our United Kingdom credit facility. In March 2019, our wholly-owned subsidiaries in Taiwan, Hurco Manufacturing Ltd. ("HML"), and China, Ningbo Hurco Machine Tool Co. Ltd. ("NHML"), closed on uncommitted revolving credit facilities with maximum aggregate amounts of 150 million New Taiwan Dollars (the "Taiwan credit facility") and 32.5 million Chinese Yuan (the "China credit facility"), respectively. Both the Taiwan and China credit facilities have a final maturity date of March 5, 2020. As a result, as of July 31, 2019, our existing credit facilities consist of our €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 July 31, 2019, there were no borrowings under any of our credit facilities and there was $51.2 million of available borrowing capacity thereunder. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Jul. 31, 2019 | |
INCOME TAXES | |
INCOME TAXES | 11. INCOME TAXES In December 2017, the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”) was enacted. The Tax Reform Act lowered the U.S. corporate tax rate from 35% to 21%, implemented a territorial tax system from a worldwide system, imposed a tax on deemed repatriation of earnings of foreign subsidiaries, and added provisions related to Global Intangible Low Taxed Income (“GILTI”) and Foreign-Derived Intangible Income (”FDII”), among other provisions. The Tax Reform Act created a new requirement that GILTI income earned by Controlled Foreign Corporations (“CFCs”) must be included in the gross income of the CFC’s U.S. shareholder effective in fiscal 2019. Under U.S. generally accepted accounting principles (“U.S. GAAP”), we are allowed to make an accounting policy choice of either (1) treating taxes due on U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the “period cost method”) or (2) factoring such amounts into our measurement of deferred taxes (the “deferred method”). We have included an estimate of the GILTI tax using the period cost method in our annualized effective tax rate used to determine tax expense for the nine months ended July 31, 2019. The Tax Reform Act also created the FDII for U.S. companies that derive income from the export of tangible and intangible property and services effective in fiscal 2019. We have included an estimate of the deduction attributable to FDII in our annualized effective tax rate used to determine tax expense for the nine months ended July 31, 2019. We recorded income tax expense during the nine months of fiscal 2019 of $6.1 million compared to $8.7 million for the same period in fiscal 2018. Our effective tax rate for the nine months of fiscal 2019 was 28%, compared to 40% in the corresponding prior year period. Our unrecognized tax benefits were $209,000 as of July 31, 2019 and $205,000 as of October 31, 2018, 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 July 31, 2019, the gross amount of interest accrued, reported in Accrued expenses and other, was approximately $29,000, 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 July 2020 and August 2022. The tax audit of our German subsidiary for the fiscal year 2013 to 2016 is now complete with no tax adjustment. Currently, our Taiwan subsidiary is under tax audit for the fiscal year 2016 and 2017. |
FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS | 9 Months Ended |
Jul. 31, 2019 | |
FINANCIAL INSTRUMENTS | |
FINANCIAL INSTRUMENTS | 12. 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. 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 July 31, 2019 and October 31, 2018 (in thousands): Assets Liabilities July 31, October 31, July 31, October 31, 2019 2018 2019 2018 Level 1 Deferred Compensation $ 1,969 $ 1,723 $ — $ — Level 2 Derivatives $ 1,956 $ 3,085 $ 663 $ 2,020 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 amount of these contracts was $114.0 million and $145.2 million at July 31, 2019 and October 31, 2018, 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 counterparty to the forward exchange contracts is a substantial and creditworthy financial institution. We do not consider either the risk of counterparty non-performance or the economic consequences of counterparty non-performance to be material risks. |
CONTINGENCIES AND LITIGATION
CONTINGENCIES AND LITIGATION | 9 Months Ended |
Jul. 31, 2019 | |
CONTINGENCIES AND LITIGATION | |
CONTINGENCIES AND LITIGATION | 13. CONTINGENCIES AND LITIGATION From time to time, we are involved in 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
NEW ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Jul. 31, 2019 | |
NEW ACCOUNTING PRONOUNCEMENTS | |
NEW ACCOUNTING PRONOUNCEMENTS | 14. NEW ACCOUNTING PRONOUNCEMENTS New Accounting Pronouncements: Between February 2016 and March 2019, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842), and various related updates, which establish a comprehensive new lease accounting model. ASU 2016-02 clarifies the definition of a lease, requires a dual approach to lease classification similar to current lease classifications, and requires lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than twelve months. ASU 2016-02 is effective for our fiscal year 2020, including interim periods within the fiscal year, and requires modified retrospective application. Early adoption is permitted. We are currently assessing the impact this new accounting guidance will have on our consolidated financial statements and disclosures. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which simplifies the application of hedge accounting and enables companies to better portray the economics of their risk management activities in their financial statements. ASU 2017-12 is effective for our fiscal year 2020, including interim periods within the fiscal year, and requires modified retrospective application. Early adoption is permitted. We do not anticipate that the adoption of this new accounting guidance will have a material impact on our consolidated financial statements and disclosures. In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which will allow a reclassification from accumulated other comprehensive income to retained earnings for the tax effects resulting from the Tax Reform Act that are stranded in accumulated other comprehensive income. This standard also requires certain disclosures about stranded tax effects. This ASU, however, does not change the underlying guidance that requires the effect of a change in tax laws or rates be included in income from continuing operations. ASU 2018-02 will be effective for our fiscal year 2020, with the option to early adopt at any time prior to the effective date. It must be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Reform Act is recognized. We are currently assessing the impact this new accounting guidance will have on our consolidated financial statements and disclosures. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Jul. 31, 2019 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 15. SUBSEQUENT EVENTS On August 5, 2019, we (through a newly-formed subsidiary) acquired substantially all of the assets of a U.S.-based robotics integration company for approximately $4.5 million. This acquired business sells standardized robotic machine-tending systems for small to midsize machine shops and other manufacturing companies that utilize CNC machine tools. The acquired business will operate as a wholly-owned subsidiary of Hurco Companies, Inc. |
DERIVATIVE INSTRUMENTS AND HE_2
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables) | 9 Months Ended |
Jul. 31, 2019 | |
Schedule of 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 July 31, 2019 and October 31, 2018, all derivative instruments were recorded at fair value on our Consolidated Balance Sheets as follows (in thousands): July 31, 2019 October 31, 2018 Balance Sheet Fair Balance Sheet Fair Derivatives Location Value Location Value Designated as Hedging Instruments: Foreign exchange forward contracts Derivative assets $ 1,263 Derivative assets $ 2,654 Foreign exchange forward contracts Derivative liabilities $ 488 Derivative liabilities $ 1,616 Not Designated as Hedging Instruments: Foreign exchange forward contracts Derivative assets $ 693 Derivative assets $ 431 Foreign exchange forward contracts Derivative liabilities $ 175 Derivative liabilities $ 404 |
Period One [Member] | |
Schedule of Changes in Components of Accumulated Other Comprehensive Loss | The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the three months ended July 31, 2019 (in thousands): Foreign Currency Cash Flow Translation Hedges Total Balance, April 30, 2019 $ (10,669) $ 712 $ (9,957) Other comprehensive income (loss) before reclassifications (1,899) 446 (1,453) Reclassifications — 39 39 Balance, July 31, 2019 $ (12,568) $ 1,197 $ (11,371) The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the nine months ended July 31, 2019 (in thousands:) Foreign Currency Cash Flow Translation Hedges Total Balance, October 31, 2018 $ (10,592) $ 729 $ (9,863) Other comprehensive income (loss) before reclassifications (1,976) 465 (1,511) Reclassifications — 3 3 Balance, July 31, 2019 $ (12,568) $ 1,197 $ (11,371) |
Period One [Member] | Designated as Hedging Instrument [Member] | |
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 Income, net of tax, during the three months ended July 31, 2019 and 2018 (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 July 31, July 31, 2019 2018 2019 2018 Designated as Hedging Instruments: (Effective portion) Foreign exchange forward contracts – Intercompany sales/purchases $ 446 $ 375 Cost of sales and service $ (39) $ (540) Foreign exchange forward contract – Net investment $ 41 $ 108 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 Income, net of tax, during the nine months ended July 31, 2019 and 2018 (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) Nine Months Ended Nine Months Ended July 31, July 31, 2019 2018 2019 2018 Designated as Hedging Instruments: (Effective portion) Foreign exchange forward contracts – Intercompany sales/purchases $ 465 $ (451) Cost of sales and service $ (3) $ (733) Foreign exchange forward contract – Net investment $ 113 $ 31 |
Period One [Member] | Not Designated as Hedging Instrument [Member] | |
Schedule of Derivatives Not Designated as Hedging Instruments | We recognized the following gains and losses in our Condensed Consolidated Statements of Income during the three months ended July 31, 2019 and 2018 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 July 31, 2019 2018 Not Designated as Hedging Instruments: Foreign exchange forward contracts Other income (expense), net $ 138 $ (4) We recognized the following gains and losses in our Condensed Consolidated Statements of Income during the nine months ended July 31, 2019 and 2018 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 Nine Months Ended July 31, 2019 2018 Not Designated as Hedging Instruments: Foreign exchange forward contracts Other income (expense), net $ 249 $ (1,272) |
EQUITY INCENTIVE PLAN (Tables)
EQUITY INCENTIVE PLAN (Tables) | 9 Months Ended |
Jul. 31, 2019 | |
EQUITY INCENTIVE PLAN | |
Summary of Stock Option Activity | A summary of stock option activity for the nine-month period ended July 31, 2019, is as follows: Stock Weighted Average Options Exercise Price Outstanding at October 31, 2018 37,045 $ 21.69 Options granted — — Options exercised — — Options cancelled — — Outstanding at July 31, 2019 37,045 $ 21.69 |
Summary of Stock Options Already Vested and Currently Exercisable | Summarized information about outstanding stock options as of July 31, 2019, that have already vested and are currently exercisable, are as follows: Options Already Vested and Currently Exercisable Number of outstanding options 37,045 Weighted average remaining contractual life (years) 2.53 Weighted average exercise price per share $ 21.69 Intrinsic value of outstanding options $ 463,000 |
Summary of Reconciliation of Restricted Stock Activity and Related Information | A reconciliation of our restricted stock, performance share and PSU activity and related information for the nine-month period ended July 31, 2019 is as follows: Weighted Average Grant Date Number of Shares Fair Value Unvested at October 31, 2018 168,348 $ 37.24 Shares or units granted 102,349 38.28 Shares or units vested (44,077) 33.29 Shares or units cancelled (12,462) 29.82 Shares withheld (13,676) 29.67 Unvested at July 31, 2019 200,482 $ 39.62 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Jul. 31, 2019 | |
EARNINGS PER SHARE | |
Schedule of computation of basic and diluted net income per share | 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 July 31, Nine Months Ended July 31, 2019 2018 2019 2018 Basic Diluted Basic Diluted Basic Diluted Basic Diluted Net income $ 3,491 $ 3,491 $ 6,500 $ 6,500 $ 15,397 $ 15,397 $ 13,188 $ 13,188 Undistributed earnings allocated to participating shares (29) (29) (40) (40) (130) (130) (81) (81) Net income applicable to common shareholders $ 3,462 $ 3,462 $ 6,460 $ 6,460 $ 15,267 $ 15,267 $ 13,107 $ 13,107 Weighted average shares outstanding 6,767 6,767 6,717 6,717 6,756 6,756 6,694 6,694 Stock options and contingently issuable securities — 46 — 71 — 59 — 80 6,767 6,813 6,717 6,788 6,756 6,815 6,694 6,774 Income per share $ 0.51 $ 0.51 $ 0.96 $ 0.95 $ 2.26 $ 2.24 $ 1.95 $ 1.93 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Jul. 31, 2019 | |
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): July 31, October 31, 2019 2018 Purchased parts and sub-assemblies $ 37,085 $ 38,303 Work-in-process 22,803 22,786 Finished goods 93,812 76,520 $ 153,700 $ 137,609 |
GUARANTEES AND PRODUCT WARRAN_2
GUARANTEES AND PRODUCT WARRANTIES (Tables) | 9 Months Ended |
Jul. 31, 2019 | |
GUARANTEES AND PRODUCT WARRANTIES | |
Schedule of Reconciliation of Warranty Reserve | A reconciliation of the changes in our warranty reserve is as follows (in thousands): Nine Months Ended July 31, 2019 2018 Balance, beginning of period $ 2,497 $ 1,772 Provision for warranties during the period 2,352 3,064 Charges to the reserve (2,747) (2,531) Impact of foreign currency translation (12) (28) Balance, end of period $ 2,090 $ 2,277 |
FINANCIAL INSTRUMENTS (Tables)
FINANCIAL INSTRUMENTS (Tables) | 9 Months Ended |
Jul. 31, 2019 | |
FINANCIAL INSTRUMENTS | |
Schedule of Assets and Liabilities Fair Value | 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 July 31, 2019 and October 31, 2018 (in thousands): Assets Liabilities July 31, October 31, July 31, October 31, 2019 2018 2019 2018 Level 1 Deferred Compensation $ 1,969 $ 1,723 $ — $ — Level 2 Derivatives $ 1,956 $ 3,085 $ 663 $ 2,020 |
DERIVATIVE INSTRUMENTS AND HE_3
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Fair value of derivative instruments (Details) - USD ($) $ in Thousands | Jul. 31, 2019 | Oct. 31, 2018 |
Derivatives, Fair Value [Line Items] | ||
Derivative assets | $ 1,956 | $ 3,085 |
Derivative liabilities | 663 | 2,020 |
Foreign Exchange Forward [Member] | Designated as Hedging Instrument [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 1,263 | 2,654 |
Derivative liabilities | 488 | 1,616 |
Foreign Exchange Forward [Member] | Not Designated as Hedging Instrument [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 693 | 431 |
Derivative liabilities | $ 175 | $ 404 |
DERIVATIVE INSTRUMENTS AND HE_4
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Effect of derivative instruments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2019 | Jul. 31, 2018 | Jul. 31, 2019 | Jul. 31, 2018 | |
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) | $ 446 | $ 375 | $ 465 | $ (451) |
Designated as Hedging Instrument [Member] | Foreign Exchange Forward [Member] | Intercompany sales/purchases [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) | 446 | 375 | 465 | (451) |
Amount of Gain (Loss) Reclassified from Other Comprehensive Income (Loss) | (39) | (540) | (3) | (733) |
Designated as Hedging Instrument [Member] | Foreign Exchange Forward [Member] | Net Investment Hedging [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) | 41 | 108 | 113 | 31 |
Not Designated as Hedging Instrument [Member] | Foreign Exchange Forward [Member] | Other Income And Expense [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amount of Gain (Loss) Recognized in Operations | $ 138 | $ (4) | $ 249 | $ (1,272) |
DERIVATIVE INSTRUMENTS AND HE_5
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Changes in components of accumulated other comprehensive loss (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2019 | Jul. 31, 2018 | Jul. 31, 2019 | Jul. 31, 2018 | |
Derivative [Line Items] | ||||
Beginning Balance | $ (9,957) | $ (9,863) | ||
Other comprehensive income (loss) before reclassifications | (1,453) | (1,511) | ||
Reclassifications | 39 | $ 540 | 3 | $ 733 |
Ending Balance | (11,371) | (11,371) | ||
Foreign Currency Translation [Member] | ||||
Derivative [Line Items] | ||||
Beginning Balance | (10,669) | (10,592) | ||
Other comprehensive income (loss) before reclassifications | (1,899) | (1,976) | ||
Reclassifications | 0 | |||
Ending Balance | (12,568) | (12,568) | ||
Cash Flow Hedging [Member] | ||||
Derivative [Line Items] | ||||
Beginning Balance | 712 | 729 | ||
Other comprehensive income (loss) before reclassifications | 446 | 465 | ||
Reclassifications | 39 | 3 | ||
Ending Balance | $ 1,197 | $ 1,197 |
DERIVATIVE INSTRUMENTS AND HE_6
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - Additional Information (Details) € in Millions | 9 Months Ended | ||
Jul. 31, 2019USD ($) | Nov. 30, 2018EUR (€) | Oct. 31, 2018USD ($) | |
Derivative financial instruments: | |||
Notional principal of foreign exchange contracts | $ 114,000,000 | $ 145,200,000 | |
Unrealized gain (loss), net of tax, to be reclassified in next 12 months | 487,000 | ||
Not Designated as Hedging Instrument [Member] | |||
Derivative financial instruments: | |||
Notional principal of foreign exchange contracts | 63,000,000 | ||
Forward Contracts [Member] | Designated as Hedging Instrument [Member] | |||
Derivative financial instruments: | |||
Notional principal of foreign exchange contracts | € | € 3 | ||
Realized gain, net of tax, recorded as cumulative translation adjustments in Accumulated Other Comprehensive Loss | 804,000 | ||
Unrealized gain, net of tax, recorded as cumulative translation adjustments in Accumulated Other Comprehensive Loss | 114,000 | ||
Euros [Member] | Designated as Hedging Instrument [Member] | |||
Derivative financial instruments: | |||
Notional principal of foreign exchange contracts | 19,300,000 | ||
Pounds Sterling [Member] | Designated as Hedging Instrument [Member] | |||
Derivative financial instruments: | |||
Notional principal of foreign exchange contracts | 6,500,000 | ||
New Taiwan Dollars [Member] | Designated as Hedging Instrument [Member] | |||
Derivative financial instruments: | |||
Notional principal of foreign exchange contracts | $ 19,400,000 |
EQUITY INCENTIVE PLAN - Stock o
EQUITY INCENTIVE PLAN - Stock option activity (Details) - Employee Stock Option [Member] | 9 Months Ended |
Jul. 31, 2019$ / sharesshares | |
Stock Options | |
Outstanding at October 31, 2018 | shares | 37,045 |
Options granted | shares | 0 |
Options exercised | shares | 0 |
Options cancelled | shares | 0 |
Outstanding at July 31, 2019 | shares | 37,045 |
Weighted Average Exercise Price | |
Outstanding at October 31, 2018 | $ / shares | $ 21.69 |
Options granted | $ / shares | 0 |
Options exercised | $ / shares | 0 |
Options cancelled | $ / shares | 0 |
Outstanding at July 31, 2019 | $ / shares | $ 21.69 |
EQUITY INCENTIVE PLAN - Outstan
EQUITY INCENTIVE PLAN - Outstanding stock options vested (Details) | 9 Months Ended |
Jul. 31, 2019USD ($)$ / sharesshares | |
Options Currently Exercisable | |
Number of outstanding options | shares | 37,045 |
Weighted average remaining contractual life (years) | 2 years 6 months 11 days |
Weighted average exercise price per share | $ / shares | $ 21.69 |
Intrinsic value of outstanding options | $ | $ 463,000 |
EQUITY INCENTIVE PLAN - Reconci
EQUITY INCENTIVE PLAN - Reconciliation of restricted stock activity (Details) | 9 Months Ended |
Jul. 31, 2019$ / sharesshares | |
Number of Shares | |
Unvested at October 31, 2018 | shares | 168,348 |
Shares or units granted | shares | 102,349 |
Shares or units vested | shares | (44,077) |
Shares or units cancelled | shares | (12,462) |
Shares withheld | shares | (13,676) |
Unvested at July 31, 2019 | shares | 200,482 |
Weighted Average Grant Date Fair Value | |
Unvested at October 31, 2018 | $ / shares | $ 37.24 |
Shares or units granted | $ / shares | 38.28 |
Shares or units vested | $ / shares | 33.29 |
Shares or units cancelled | $ / shares | 29.82 |
Shares withheld | $ / shares | 29.67 |
Unvested at July 31, 2019 | $ / shares | $ 39.62 |
EQUITY INCENTIVE PLAN - Additio
EQUITY INCENTIVE PLAN - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions | Mar. 14, 2019 | Jan. 02, 2019 | Nov. 14, 2018 | Jul. 31, 2019 | Jul. 31, 2018 | Oct. 31, 2018 | Mar. 10, 2016 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Stock-based compensation expense | $ 2.1 | $ 1.8 | |||||
Unrecognized Stock-based compensation expense | $ 4.2 | ||||||
Restricted stock granted | 102,349 | ||||||
Grant date fair value of restricted stock | $ 39.62 | $ 37.24 | |||||
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 | 856,048 | ||||||
2008 Equity Plan [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of Shares Available for Grant under the 2008 Plan | 386,048 | ||||||
Non-employee Directors and Non-Executive Employees [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Restricted stock granted | 11,824 | 7,200 | |||||
Grant date fair value of restricted stock | $ 40.58 | $ 40.01 | |||||
PSU TSR [Member] | Minimum [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Percentage of target number of shares to be earned | 50.00% | ||||||
PSU ROIC [Member] | Maximum [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Percentage of target number of shares to be earned | 200.00% | ||||||
PSU ROIC [Member] | Minimum [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Percentage of target number of shares to be earned | 50.00% | ||||||
Time Based [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Restricted stock granted | 21,825 | ||||||
Grant date fair value of restricted stock | $ 36.08 | ||||||
Percentage of incentive compensation arrangement | 25.00% | ||||||
Performance Based [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Restricted stock granted | 32,559 | ||||||
Grant date fair value of restricted stock | $ 36.08 | ||||||
Percentage of incentive compensation arrangement | 75.00% | ||||||
Performance Based [Member] | PSU TSR [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Restricted stock granted | 30,943 | ||||||
Grant date fair value of restricted stock | $ 40.72 | ||||||
Percentage of incentive compensation arrangement | 40.00% | ||||||
Performance Based [Member] | PSU TSR [Member] | Maximum [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Percentage of target number of shares to be earned | 200.00% | ||||||
Performance Based [Member] | PSU ROIC [Member] | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Restricted stock granted | 30,557 | ||||||
Grant date fair value of restricted stock | $ 36.08 | ||||||
Percentage of incentive compensation arrangement | 35.00% |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Jul. 31, 2019 | Jul. 31, 2018 | Jul. 31, 2019 | Jul. 31, 2018 | |
EARNINGS PER SHARE | ||||
Net income | $ 3,491 | $ 6,500 | $ 15,397 | $ 13,188 |
Undistributed earnings allocated to participating shares | (29) | (40) | (130) | (81) |
Net income applicable to common shareholders | $ 3,462 | $ 6,460 | $ 15,267 | $ 13,107 |
Weighted average shares outstanding, Basic | 6,767 | 6,717 | 6,756 | 6,694 |
Stock options and contingently issuable shares | 46 | 71 | 59 | 80 |
Weighted average shares outstanding, Diluted | 6,813 | 6,788 | 6,815 | 6,774 |
Income per share, Basic | $ 0.51 | $ 0.96 | $ 2.26 | $ 1.95 |
Income per share, Diluted | $ 0.51 | $ 0.95 | $ 2.24 | $ 1.93 |
ACCOUNTS RECEIVABLE (Details)
ACCOUNTS RECEIVABLE (Details) - USD ($) | Jul. 31, 2019 | Oct. 31, 2018 |
ACCOUNTS RECEIVABLE | ||
Allowance for Doubtful Accounts Receivable | $ 836,000 | $ 1,000,000 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Jul. 31, 2019 | Oct. 31, 2018 |
INVENTORIES | ||
Purchased parts and sub-assemblies | $ 37,085 | $ 38,303 |
Work-in-process | 22,803 | 22,786 |
Finished goods | 93,812 | 76,520 |
Inventories | $ 153,700 | $ 137,609 |
GUARANTEES AND PRODUCT WARRAN_3
GUARANTEES AND PRODUCT WARRANTIES - Reconciliation of the changes in warranty reserve (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Jul. 31, 2019 | Jul. 31, 2018 | |
GUARANTEES AND PRODUCT WARRANTIES | ||
Balance, beginning of period | $ 2,497 | $ 1,772 |
Provision for warranties during the period | 2,352 | 3,064 |
Charges to the reserve | (2,747) | (2,531) |
Impact of foreign currency translation | (12) | (28) |
Balance, end of period | $ 2,090 | $ 2,277 |
GUARANTEES AND PRODUCT WARRAN_4
GUARANTEES AND PRODUCT WARRANTIES - Additional Information (Details) $ in Millions | 9 Months Ended |
Jul. 31, 2019USD ($) | |
GUARANTEES AND PRODUCT WARRANTIES | |
Number Of Guarantees | 24 |
Guarantor Obligations, Maximum Exposure, Undiscounted | $ 0.6 |
Term of Product Warranty | 1 year |
DEBT AGREEMENTS (Details)
DEBT AGREEMENTS (Details) € in Millions, ¥ in Millions, $ in Millions, $ in Millions | Mar. 05, 2019TWD ($) | Dec. 31, 2018USD ($) | Jul. 31, 2019EUR (€) | Jul. 31, 2019USD ($) | Mar. 05, 2019CNY (¥) | Dec. 31, 2018TWD ($) | Dec. 31, 2018CNY (¥) | Dec. 31, 2018USD ($) |
Line Of Credit Agreement 2018 [Member] | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Line of credit, maximum borrowing capacity | $ 40 | |||||||
Minimum working capital requirement | $ 125 | |||||||
Minimum tangible net worth requirement | 170 | |||||||
Line of Credit, interest rate description | Borrowings under the 2018 Credit Agreement bear interest at floating rates based on, at our option, either (i) a LIBOR-based rate, or other alternative currency-based rate approved by the lender, plus 0.75% 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 LIBOR-based rate plus 1.00%), plus 0.00% per annum. Outstanding letters of credit will carry an annual rate of 0.75%. | |||||||
Line of credit, maturity date | Dec. 31, 2020 | |||||||
Allowable investments in subsidiaries | $ 10 | |||||||
Borrowings available under credit facility | $ 51.2 | |||||||
Line of Credit Facility, Covenant Terms | 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 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; (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 $170.0 million. | |||||||
Hurco BV [Member] | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Line of credit, maximum borrowing capacity | $ 40 | |||||||
Hurco BV [Member] | Line Of Credit Agreement 2018 [Member] | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Line of Credit Facility, Description | On December 31, 2018, we and our subsidiary Hurco B.V. entered into a new credit agreement (the "2018 Credit Agreement") with Bank of America, N.A., as the lender. The 2018 Credit Agreement replaced the 2012 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. | |||||||
Germany [Member] | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Line of credit, maximum borrowing capacity | € | € 1.5 | |||||||
China [Member] | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Repayments of Credit Facility | $ 1.4 | |||||||
China, Yuan Renminbi | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Line of credit, maximum borrowing capacity | ¥ | ¥ 32.5 | |||||||
Taiwan, New Dollars | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Line of credit, maximum borrowing capacity | $ 150 | |||||||
Taiwan credit facility [Member] | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Line of credit, maximum borrowing capacity | $ 150 | |||||||
Line of credit, maturity date | Mar. 5, 2020 | |||||||
China credit facility [Member] | ||||||||
Line of Credit Facility [Line Items] | ||||||||
Line of credit, maximum borrowing capacity | ¥ | ¥ 32.5 | |||||||
Line of credit, maturity date | Mar. 5, 2020 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2017 | Jul. 31, 2019 | Jul. 31, 2018 | Jul. 31, 2019 | Jul. 31, 2018 | Oct. 31, 2018 | |
INCOME TAXES | ||||||
Unrecognized tax benefits, interest accrued | $ 29,000 | $ 29,000 | ||||
Effective Income Tax Rate Reconciliation, Percent | 28.00% | 40.00% | ||||
Income Tax Expense (Benefit) | 1,155,000 | $ 2,511,000 | $ 6,089,000 | $ 8,667,000 | ||
Unrecognized Tax Benefits | $ 209,000 | $ 209,000 | $ 205,000 | |||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 35.00% | 21.00% | ||||
Unrecognized Tax Benefits Expiration Term | expire between July 2019 and July 2022 |
FINANCIAL INSTRUMENTS - Fair va
FINANCIAL INSTRUMENTS - Fair value hierarchy (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands | Jul. 31, 2019 | Oct. 31, 2018 |
Fair Value, Inputs, Level 1 [Member] | ||
Assets | ||
Deferred Compensation | $ 1,969 | $ 1,723 |
Liabilities | ||
Deferred Compensation | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | ||
Assets | ||
Derivatives | 1,956 | 3,085 |
Liabilities | ||
Derivatives | $ 663 | $ 2,020 |
FINANCIAL INSTRUMENTS - Additio
FINANCIAL INSTRUMENTS - Additional Information (Details) - USD ($) $ in Millions | Jul. 31, 2019 | Oct. 31, 2018 |
FINANCIAL INSTRUMENTS | ||
Notional amount of contracts | $ 114 | $ 145.2 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) $ in Millions | Aug. 05, 2019USD ($) |
Subsequent Event [Member] | |
Subsequent Event [Line Items] | |
Business Combination, Consideration Transferred | $ 4.5 |