Document And Entity Information
Document And Entity Information - USD ($) | 12 Months Ended | ||
Oct. 31, 2019 | Dec. 31, 2019 | Apr. 30, 2019 | |
Document And Entity Information [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Oct. 31, 2019 | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Entity Registrant Name | HURCO COMPANIES INC | ||
Entity Central Index Key | 0000315374 | ||
Current Fiscal Year End Date | --10-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 266,155,000 | ||
Entity Filer Category | Accelerated Filer | ||
Trading Symbol | HURC | ||
Entity Current Reporting Status | Yes | ||
Entity Common Stock, Shares Outstanding | 6,770,233 | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | false | ||
Entity Shell Company | false |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
CONSOLIDATED STATEMENTS OF INCOME | |||
Sales and service fees | $ 263,377 | $ 300,671 | $ 243,667 |
Cost of sales and service | 186,169 | 208,865 | 173,103 |
Gross profit | 77,208 | 91,806 | 70,564 |
Selling, general and administrative expenses | 54,668 | 58,010 | 49,661 |
Operating income | 22,540 | 33,796 | 20,903 |
Interest expense | 62 | 100 | 91 |
Interest income | 462 | 189 | 41 |
Investment income | 356 | 339 | 138 |
Income from equity investments | 583 | 639 | 505 |
Other expense, net | (555) | (2,367) | (780) |
Income before income taxes | 23,324 | 32,496 | 20,716 |
Provision for income taxes | 5,829 | 11,006 | 5,601 |
Net income | $ 17,495 | $ 21,490 | $ 15,115 |
Income per common share - basic (in dollars per share) | $ 2.57 | $ 3.19 | $ 2.27 |
Weighted average common shares outstanding - basic (per share) | 6,759 | 6,700 | 6,615 |
Income per common share - diluted (in dollars per share) | $ 2.55 | $ 3.15 | $ 2.25 |
Weighted average common shares outstanding - diluted (per share) | 6,815 | 6,771 | 6,680 |
Dividends paid per share | $ 0.47 | $ 0.43 | $ 0.39 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 12 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Net Income | $ 17,495 | $ 21,490 | $ 15,115 |
Other comprehensive income (loss): | |||
Translation gain (loss) of foreign currency financial statements | 550 | (3,183) | 4,916 |
(Gain) / loss on derivative instruments reclassified into operations, net of tax of $(70), $453, and $(745), respectively | (235) | 1,355 | (1,354) |
Gain / (loss) on derivative instruments, net of tax of $183, $52, and $(390), respectively | 615 | 155 | (709) |
Total other comprehensive income (loss) | 930 | (1,673) | 2,853 |
Comprehensive income | $ 18,425 | $ 19,817 | $ 17,968 |
CONSOLIDATED STATEMENTS OF CO_2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Realized loss (gains) on derivative instruments reclassified into operations, tax | $ (70) | $ 453 | $ (745) |
Unrealized (loss) gains on derivative instruments, tax | $ 183 | $ 52 | $ (390) |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Oct. 31, 2019 | Oct. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 56,943 | $ 77,170 |
Accounts receivable, less allowance for doubtful accounts of $891 in 2019 and $1,027 in 2018 | 43,279 | 54,414 |
Inventories, net | 148,851 | 137,609 |
Derivative assets | 1,391 | 3,085 |
Prepaid assets | 9,414 | 7,332 |
Other | 1,983 | 1,825 |
Total current assets | 261,861 | 281,435 |
Property and equipment: | ||
Land | 868 | 868 |
Building | 7,352 | 7,352 |
Machinery and equipment | 28,846 | 26,840 |
Leasehold improvements | 4,902 | 3,801 |
Property and equipment, gross | 41,968 | 38,861 |
Less accumulated depreciation and amortization | (28,055) | (25,902) |
Total property and equipment, net | 13,913 | 12,959 |
Non-current assets: | ||
Software development costs, less accumulated amortization | 8,318 | 7,452 |
Goodwill | 5,847 | 2,377 |
Intangible assets, net | 1,096 | 938 |
Deferred income taxes | 1,846 | 2,234 |
Investments and other assets, net | 8,184 | 8,012 |
Total non-current assets | 25,291 | 21,013 |
Total assets | 301,065 | 315,407 |
Current liabilities: | ||
Accounts payable | 33,031 | 54,131 |
Accounts payable-related parties | 938 | 3,387 |
Accrued payroll and employee benefits | 11,564 | 14,032 |
Accrued income taxes | 1,936 | 5,180 |
Accrued expenses and other | 5,015 | 4,122 |
Accrued warranty expenses | 1,760 | 2,497 |
Derivative liabilities | 388 | 2,020 |
Short-term debt | 1,434 | |
Total current liabilities | 54,632 | 86,803 |
Non-current liabilities: | ||
Accrued tax liability | 2,036 | 2,194 |
Deferred income taxes | 160 | |
Deferred credits and other | 3,992 | 3,557 |
Total non-current liabilities | 6,188 | 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 October 31, 2019 and October 31, 2018, respectively | 677 | 672 |
Additional paid-in capital | 66,350 | 64,185 |
Retained earnings | 182,151 | 167,859 |
Accumulated other comprehensive loss | (8,933) | (9,863) |
Total shareholders' equity | 240,245 | 222,853 |
Total liabilities and shareholders' equity | $ 301,065 | $ 315,407 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Oct. 31, 2019 | Oct. 31, 2018 |
CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance for doubtful accounts | $ 891 | $ 1,027 |
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 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
Cash flows from operating activities: | |||
Net income | $ 17,495 | $ 21,490 | $ 15,115 |
Adjustments to reconcile net income to net cash provided by (used for) operating activities, net of acquisitions: | |||
Provision for doubtful accounts | (136) | 388 | (25) |
Deferred income taxes | 260 | (530) | 1,108 |
Equity in income of affiliates | (583) | (639) | (505) |
Foreign currency (gain) loss | 730 | 755 | (851) |
Unrealized (gain) loss on derivatives | (388) | 456 | (411) |
Depreciation and amortization | 3,745 | 3,713 | 3,616 |
Stock-based compensation | 2,670 | 2,504 | 1,698 |
Change in assets and liabilities, net of acquisitions: | |||
(Increase) decrease in accounts receivable | 11,239 | (5,148) | 563 |
(Increase) decrease in inventories | (10,499) | (20,386) | 1,638 |
(Increase) decrease in prepaid expenses | (1,474) | 710 | 80 |
Increase (decrease) in accounts payable | (23,780) | 10,788 | 8,529 |
Increase (decrease) in accrued expenses | (2,354) | 3,090 | 1,331 |
Increase (decrease) in accrued income tax | (3,259) | 2,934 | (704) |
Increase (decrease) in accrued tax liability | (157) | 2,061 | (844) |
Net change in derivative assets and liabilities | 330 | (1,178) | 964 |
Other | (252) | 4 | (930) |
Net cash provided by (used for) operating activities | (6,413) | 21,012 | 30,372 |
Cash flows from investing activities: | |||
Proceeds from sale of property and equipment | 83 | 180 | |
Purchase of property and equipment | (3,169) | (3,537) | (2,181) |
Software development costs | (1,701) | (2,326) | (2,264) |
Other investments | 243 | 233 | 417 |
Acquisition of business | (4,353) | (1,156) | |
Net cash provided by (used for) investing activities | (8,897) | (6,606) | (4,028) |
Cash flows from financing activities: | |||
Proceeds from exercise of common stock options | 847 | 534 | |
Dividends paid | (3,203) | (2,898) | (2,590) |
Taxes paid related to net settlement of restricted shares | (499) | (502) | (295) |
Repayment of short-term debt | (1,450) | ||
Net cash provided by (used for) financing activities | (5,152) | (2,553) | (2,351) |
Effect of exchange rate changes on cash and cash equivalents | 235 | (990) | 1,097 |
Net increase (decrease) in cash and cash equivalents | (20,227) | 10,863 | 25,090 |
Cash and cash equivalents at beginning of year | 77,170 | 66,307 | 41,217 |
Cash and cash equivalents at end of year | 56,943 | 77,170 | 66,307 |
Cash paid for: | |||
Interest | 11 | 64 | 66 |
Income taxes, net | $ 11,025 | $ 6,172 | $ 4,867 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Total |
Balances at Oct. 31, 2016 | $ 657,000 | $ 59,119,000 | $ 136,742,000 | $ (11,043,000) | $ 185,475,000 |
Balances (in shares) at Oct. 31, 2016 | 6,573,103 | ||||
Net income | $ 0 | 0 | 15,115,000 | 0 | 15,115,000 |
Other comprehensive income (loss) | 0 | 0 | 0 | 2,853,000 | 2,853,000 |
Exercise of common stock options | $ 3,000 | 531,000 | 0 | 0 | 534,000 |
Exercise of common stock options (in shares) | 29,164 | ||||
Stock-based compensation | $ 4,000 | 1,694,000 | 0 | 0 | 1,698,000 |
Stock-based compensation (in shares) | 38,930 | ||||
Dividends paid | $ 0 | 0 | (2,590,000) | 0 | (2,590,000) |
Balances at Oct. 31, 2017 | $ 664,000 | 61,344,000 | 149,267,000 | (8,190,000) | 203,085,000 |
Balances (in shares) at Oct. 31, 2017 | 6,641,197 | ||||
Net income | $ 0 | 0 | 21,490,000 | 0 | 21,490,000 |
Other comprehensive income (loss) | 0 | 0 | 0 | (1,673,000) | (1,673,000) |
Exercise of common stock options | $ 4,000 | 843,000 | 0 | 0 | 847,000 |
Exercise of common stock options (in shares) | 41,680 | ||||
Stock-based compensation | $ 4,000 | 1,998,000 | 0 | 0 | 2,002,000 |
Stock-based compensation (in shares) | 40,283 | ||||
Dividends paid | $ 0 | 0 | (2,898,000) | 0 | (2,898,000) |
Balances at Oct. 31, 2018 | $ 672,000 | 64,185,000 | 167,859,000 | (9,863,000) | 222,853,000 |
Balances (in shares) at Oct. 31, 2018 | 6,723,160 | ||||
Net income | $ 0 | 0 | 17,495,000 | 0 | 17,495,000 |
Other comprehensive income (loss) | 0 | 0 | 0 | 930,000 | 930,000 |
Stock-based compensation | $ 5,000 | 2,165,000 | 0 | 0 | 2,170,000 |
Stock-based compensation (in shares) | 44,077 | ||||
Dividends paid | $ 0 | 0 | (3,203,000) | 0 | (3,203,000) |
Balances at Oct. 31, 2019 | $ 677,000 | $ 66,350,000 | $ 182,151,000 | $ (8,933,000) | $ 240,245,000 |
Balances (in shares) at Oct. 31, 2019 | 6,767,237 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Oct. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation . The consolidated financial statements include the accounts of Hurco Companies, Inc. (an Indiana corporation) and its wholly–owned subsidiaries. We have a 35% ownership interest in a Taiwan affiliate that is accounted for using the equity method. Our investment in that affiliate was approximately $4.2 million and $4.0 million as of October 31, 2019 and 2018, respectively. That investment is included in Investments and other assets, net on the accompanying Consolidated Balance Sheets. Intercompany accounts and transactions have been eliminated. Reclassifications. Certain prior year amounts have been reclassified to conform to the current year presentation. This reclassification has no impact on previously reported net income or shareholders’ equity. Statements of Cash Flows . We consider all highly liquid investments with a stated maturity at the date of purchase of three months or less to be cash equivalents. Cash flows from hedges are classified consistent with the items being hedged. Translation of Foreign Currencies . All balance sheet accounts of non–U.S. subsidiaries are translated at the exchange rate as of the end of the year and translation adjustments of foreign currency balance sheets are recorded as a component of Accumulated other comprehensive loss in shareholders’ equity. Income and expenses are translated at the average exchange rates during the year. Cumulative foreign currency translation adjustments, net of gains related to our net investment hedges, as of October 31, 2019, were a net loss of $10.0 million, net of tax, and are included in Accumulated other comprehensive loss. Foreign currency transaction gains and losses are recorded as income or expense as incurred and are recorded in Other expense, net. Hedging. 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. We operate on a global basis and are exposed to the risk that our financial condition, results of operations and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign exchange rate movements on our net equity investment in one of our foreign subsidiaries, and the gross profit and net earnings of certain of our foreign subsidiaries, we enter into derivative financial instruments in the form of foreign exchange forward contracts with a major financial institution. 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 account for derivative instruments as either assets or liabilities and carry them at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For derivative instruments designated as a fair value hedge, the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributed to the risk being hedged. For a derivative instrument designated as a cash flow hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of Accumulated other comprehensive loss in shareholders’ equity and subsequently reclassified into earnings when the hedged exposure affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately. For derivative instruments that are not designated as accounting hedges under the Derivatives and Hedging Topic of the Financial Accounting Standards Board (the “FASB”), changes in fair value are recognized in earnings in the period of change. We do not hold or issue derivative financial instruments for speculative trading purposes. We only enter into derivatives with one counterparty, which is among one of the largest U.S. banks (ranked by assets), in order to minimize credit risk and, to date, that counterparty has not failed to meet its financial obligations under such contracts. 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 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 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 are 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 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 October 31, 2019, in Euros, Pounds Sterling and New Taiwan Dollars with set maturity dates ranging from November 2019 through October 2020. The contract amount at forward rates in U.S. Dollars at October 31, 2019 for Euros and Pounds Sterling was $16.5 million and $5.4 million, respectively. The contract amount at forward rates in U.S. Dollars for New Taiwan Dollars was $18.7 million at October 31, 2019. At October 31, 2019, we had approximately $612,000 of gains, net of tax, related to cash flow hedges deferred in Accumulated other comprehensive loss. Of this amount, $373,000 represented 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 October 2020, in which the corresponding inventory that is the subject of the related hedge contract is sold, as described above. We are 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 the 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, net of tax, in Accumulated other comprehensive loss in the same manner as the underlying hedged net assets. This forward contract matured in November 2019, and we entered into a new forward contract for the same notional amount that is set to mature in November 2020. As of October 31, 2019, we had a realized gain of $804,000 and an unrealized gain of $129,000, net of tax, recorded as cumulative translation adjustments in Accumulated other comprehensive loss, related to these forward contracts. Derivatives Not Designated as Hedging Instruments We 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 FASB guidance and, as a result, changes in their fair value are reported currently as Other expense, net in the 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 October 31, 2019, in Euros, Pound Sterling, South African Rand and New Taiwan Dollars with set maturity dates ranging from November 2019 through October 2020. The contract amounts at forward rates in U.S. Dollars at October 31, 2019 for Euros, Pounds Sterling and South African Rand totaled $36.3 million. The contract amount at forward rates in U.S. Dollars for New Taiwan Dollars was $28.2 million at October 31, 2019. Fair Value of Derivative Instruments We recognize the fair value of derivative instruments as assets and liabilities on a gross basis on our Consolidated Balance Sheets. As of October 31, 2019 and October 31, 2018, all derivative instruments were recorded at fair value on the balance sheets as follows (in thousands): 2019 2018 Balance Sheet Fair Balance Sheet Fair Derivatives Location Value Location Value Designated as Hedging Instruments: Foreign exchange forward contracts Derivative assets $ 751 Derivative assets $ 2,654 Foreign exchange forward contracts Derivative liabilities $ 99 Derivative liabilities $ 1,616 Not Designated as Hedging Instruments: Foreign exchange forward contracts Derivative assets $ 640 Derivative assets $ 431 Foreign exchange forward contracts Derivative liabilities $ 289 Derivative liabilities $ 404 Effect of Derivative Instruments on the Consolidated Balance Sheets, Statements of Changes in Shareholders’ Equity and Statements of Income Derivative instruments had the following effects on our Consolidated Balance Sheets, Statements of Changes in Shareholders’ Equity and Statements of Income, net of tax, during the fiscal years ended October 31, 2019, 2018, and 2017 (in thousands): Location of Amount of Gain (Loss) Gain (Loss) Amount of Gain (Loss) Recognized in Reclassified Reclassified from Other Comprehensive From Other Other Comprehensive Income (Loss) Comprehensive Income (Loss) Derivatives 2019 2018 2017 Income (Loss) 2019 2018 2017 Designated as Hedging Instruments: (Effective Portion) Foreign exchange forward contracts Cost of sales – Intercompany sales/purchases $ 615 $ 155 $ (709) and service $ 235 $ (1,355) $ 1,354 – Net Investment $ 128 $ 136 $ (96) We did not recognize any gains or losses as a result of hedges deemed ineffective during fiscal years ended October 31, 2019 and 2018. We recognized a gain of $18,000 during the fiscal year ended October 31, 2017 as a result of contracts closed early that were deemed ineffective for financial reporting and did not qualify as cash flow hedges. We recognized the following gains and losses in our Consolidated Statements of Income during the fiscal years ended October 31, 2019, 2018, and 2017 on derivative instruments not designated as hedging instruments (in thousands): Amount of Gain (Loss) Location of Gain (Loss) Recognized in Operations Derivatives Recognized in Operations 2019 2018 2017 Not Designated as Hedging Instruments: Foreign exchange forward contracts Other expense, net $ 514 $ (963) $ (1,001) The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the fiscal years ended October 31, 2019 and 2018 (in thousands): Foreign Cash Currency Flow Translation Hedges Total Balance, October 31, 2017 $ (7,409) $ (781) $ (8,190) Other comprehensive income (loss) before reclassifications (3,183) 155 (3,028) Reclassifications — 1,355 1,355 Balance, October 31, 2018 $ (10,592) $ 729 $ (9,863) Other comprehensive income (loss) before reclassifications 550 615 1,165 Reclassifications — (235) (235) Balance, October 31, 2019 $ (10,042) $ 1,109 $ (8,933) Inventories . Inventories are stated at the lower of cost or net realizable value, with cost determined using the first–in, first–out method. Provisions are made to reduce excess or obsolete inventories to their estimated realizable value. Property and Equipment . Property and equipment are carried at cost. Depreciation and amortization of assets are provided primarily under the straight–line method over the shorter of the estimated useful lives or the lease terms as follows: Number of Years Land Indefinite Building 40 Machines 7 – 10 Shop and office equipment 3 – 7 Building & leasehold improvements 3 – 40 Total depreciation and amortization expense recognized for property and equipment was $2.6 million for fiscal 2019 and $2.5 million for each of the fiscal years ended October 31, 2018 and 2017. Revenue Recognition. We design, manufacture and sell computerized machine tools. Our computer control systems and software products are primarily sold as integral components of our computerized machine tool products. We also provide machine tool components, automation equipment and solutions for job shops, software options, control upgrades, accessories and replacement parts for our products, as well as customer service, training and applications support. We 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 twelve months ended October 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 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. Allowance for Doubtful Accounts . The allowance for doubtful accounts is based on our best estimate of probable credit issues and historical experience. We perform credit evaluations of the financial condition of our customers. No collateral is required for sales made on open account terms. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising our customer base and their dispersion across many geographic areas. We consider trade accounts receivable to be past due when payment is not made by the due date as specified on the customer invoice, and we charge off uncollectible balances when all reasonable collection efforts have been exhausted. Product Warranty . Expected future product warranty claims are recorded to expense when the product is sold. Product warranty estimates are established using historical information about the nature, frequency, and average cost of warranty claims. Warranty claims are influenced by factors such as new product introductions, technological developments, the competitive environment, and the costs of component parts. Actual payments for warranty claims could differ from the amounts estimated, requiring adjustments to the liabilities in future periods. See Note 12 of Notes to Consolidated Financial Statements for further discussion of warranties. Research and Development Costs. The costs associated with research and development programs for new products and significant product improvements, other than software development costs which are eligible for capitalization per FASB guidance, are expensed as incurred and are included in Selling, general and administrative expenses. Research and development expenses totaled $4.4 million, $4.7 million, and $4.2 million, in fiscal 2019, 2018, and 2017, respectively. Software Development Costs. We sell software products that are essential to our machine tools. Costs incurred to develop computer software products and significant enhancements to software features of existing products to be sold or otherwise marketed are capitalized, after technological feasibility is established. Software development costs are amortized on a straight–line basis over the estimated product life of the related software, which ranges from three to five years. We capitalized costs of $1.8 million in fiscal 2019, $2.3 million in fiscal 2018, and $2.3 million in fiscal 2017 related to software development projects. Amortization expense for software development costs was $1.0 million, $1.1 million, and $1.0 million, for the fiscal years ended October 31, 2019, 2018, and 2017, respectively. Accumulated amortization at October 31, 2019 and 2018 was $19.5 million and $18.5 million, respectively. Estimated amortization expense for the remaining unamortized software development costs for the fiscal years ending October 31, is as follows (in thousands): Fiscal Year Amortization Expense 2020 $ 1,500 2021 1,950 2022 1,900 2023 1,550 2024 1,000 Goodwill and Intangible Assets. Goodwill and indefinite-lived intangibles arising from a business combination are not amortized and charged to expense over time. Instead, goodwill and indefinite-lived intangibles must be reviewed annually for impairment, or more frequently, if circumstances arise indicating potential impairment. This impairment review was most recently completed as of July 31, 2019. For goodwill, if the carrying amount of the reporting unit containing the goodwill exceeds the fair value of that reporting unit, an impairment loss is recognized for that excess, but only to the extent of the goodwill amount allocated to that reporting unit. For indefinite-lived intangible assets, if the carrying amount exceeds the fair value, an impairment loss is recognized in an amount equal to that excess. Intangible assets that are determined to have a finite life are amortized over their estimated useful lives and are also subject to review for impairment, if indicators of impairment are identified. The changes in the carrying amounts of goodwill for the fiscal year ended October 31, 2019 were as follows (in thousands): Balance as of October 31, 2018 $ 2,377 Goodwill acquired 3,500 Impact of foreign currency translation (30) Balance as of October 31, 2019 $ 5,847 There were no impairments recognized with respect to the carrying value of goodwill or intangible assets for the years ended October 31, 2019, 2018 or 2017. As of October 31, 2019, the balances of intangible assets, other than goodwill, were as follows (in thousands): Weighted Average Gross Amortization Intangible Accumulated Net Intangible Period Assets Amortization Assets Tradenames and trademarks indefinite $ 60 $ — $ 60 Tradenames and trademarks years 408 (114) 294 Customer relationships years 372 (173) 199 Technology years 683 (333) 350 Patents years 2,972 (2,813) 159 Other years 375 (341) 34 Total $ 4,870 $ (3,774) $ 1,096 As of October 31, 2018, the balances of intangible assets, other than goodwill, were as follows (in thousands): Weighted Average Gross Amortization Intangible Accumulated Net Intangible Period Assets Amortization Assets Tradenames and trademarks indefinite $ 60 $ — $ 60 Tradenames and trademarks 13 years 238 (98) 140 Customer relationships 15 years 255 (148) 107 Technology 13 years 692 (284) 408 Patents 6 years 2,973 (2,790) 183 Other 8 years 377 (337) 40 Total $ 4,595 $ (3,657) $ 938 Intangible asset amortization expense was $117,000, $107,000, and $136,000 for fiscal 2019, 2018 and 2017, respectively. Annual intangible asset amortization expense is estimated to be $132,000 per year for fiscal years 2020 through 2024. Impairment of Long–Lived Assets. Annually, or when there are indicators of impairment, we evaluate the carrying value of long–lived assets to be held and used, including property and equipment, software development costs and intangible assets, including goodwill, when events or circumstances warrant such a review. The carrying value of a long–lived asset (or group of assets) to be held and used is considered impaired when the anticipated separately identifiable undiscounted cash flows from such an asset (or group of assets) are less than the carrying value of the asset (or group of assets) in accordance with FASB guidance related to accounting for the impairment or disposal of long–lived assets. Earnings Per Share. Basic earnings per share is calculated by dividing net income by the weighted–average number of common shares actually outstanding during the period. Diluted earnings per share assumes the issuance of additional shares of common stock upon exercise of all outstanding stock options and contingently issuable securities if the effect is dilutive, in accordance with the treasury stock method discussed in FASB guidance on “Earnings Per Share.” The following table presents a reconciliation of our basic and diluted earnings per share computation: Fiscal Year Ended October 31, 2019 2018 2017 (in thousands, except per share amounts) Basic Diluted Basic Diluted Basic Diluted Net income $ 17,495 $ 17,495 $ 21,490 $ 21,490 $ 15,115 $ 15,115 Undistributed earnings allocated to participating shares (147) (147) (132) (132) (100) (100) Net income applicable to common Shareholders $ 17,348 $ 17,348 $ 21,358 $ 21,358 $ 15,015 $ 15,015 Weighted average shares outstanding 6,759 6,759 6,700 6,700 6,615 6,615 Stock options and contingently issuable securities — 56 — 71 — 65 6,759 6,815 6,700 6,771 6,615 6,680 Income per share $ 2.57 $ 2.55 $ 3.19 $ 3.15 $ 2.27 $ 2.25 Income Taxes – We account for income taxes and the related accounts under the asset and liability method. Deferred tax assets and liabilities are measured using enacted income tax rates in each jurisdiction in effect for the year in which the temporary differences are expected to be recovered or settled. These deferred tax assets are reduced by a valuation allowance, which is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Net deferred tax assets and liabilities are classified as non-current in the consolidated financial statements. Our judgment regarding the realization of deferred tax assets may change due to future profitability and market conditions, changes in U.S. or foreign tax laws and other factors. These changes, if any, may require material adjustments to these deferred tax assets and an accompanying reduction or increase in net income in the period when such determinations are made. The determination of our provision for income taxes requires judgment, the use of estimates and the interpretation and application of complex federal, state and foreign tax laws. Our provision for income taxes reflects a combination of income earned and taxed at the federal and state level in the U.S., as well as in various foreign jurisdictions. In addition to the risks to the effective tax rate described above, the future effective tax rate reflected in forward–looking statements is based on currently effective tax laws. Significant changes in those laws could materially affect these estimates. We operate in multiple jurisdictions through wholly-owned subsidiaries, and our global structure is complex. The estimates of our uncertain tax positions involve judgments and assessment of the potential tax implications. We recognize uncertain tax positions when it is more likely than not that the tax position will be sustained upon examination by relevant taxing authorities, based on the technical merits of the position. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Our tax positions are subject to audit by taxing authorities across multiple global jurisdictions and the resolution of such audits may span multiple years. Tax law is complex and often subject to varied interpretations, accordingly, the ultimate outcome with respect to taxes we may owe may differ from the amounts recognized. Stock Compensation. We account for share–based compensation according to FASB guidance relating to share–based payments, which requires the measurement and recognition of compensation expense for all share–based awards made to employees and directors based on estimated fair values on the grant date. This guidance requires that we estimate the fair value of share–based awards on the date of grant and recognize as expense the value of the portion of the award that is ultimately expected to vest over the requisite service period. Estimates. The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles requires us to make estimates and assumptions that affect the reported amounts presented and disclosed in our consolidated financial statements. Significant estimates and assumptions in these consolidated financial statements require the exercise of judgment and are used for, but not limited to, allowance for doubtful accounts, estimates of future cash flows and other assumptions associated with goodwill, intangible and long–lived asset impairment tests, useful lives for depreciation and amortization, warranty programs, stock compensation, income taxes and deferred tax valuation allowances, and contingencies. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. |
BUSINESS OPERATIONS
BUSINESS OPERATIONS | 12 Months Ended |
Oct. 31, 2019 | |
BUSINESS OPERATIONS | |
BUSINESS OPERATIONS | 2. BUSINESS OPERATIONS Nature of Business . We design, manufacture and sell computerized CNC machine tools, computer control systems and software products, machine tool components, automation equipment and solutions for job shops, software options, control upgrades, accessories and replacement parts for our products, as well as customer service and training and applications support, to companies in the metal cutting industry through a worldwide sales, service and distribution network. The machine tool industry is highly cyclical and changes in demand can occur abruptly in the geographic markets we serve. As a result of this cyclicality, we have experienced significant fluctuations in our sales, which, in periods of reduced demand, have adversely affected our results of operations and financial condition. The end market for our products consists primarily of precision tool, die and mold manufacturers, independent job shops, and specialized short–run production applications within large manufacturing operations. Industries served include: aerospace, defense, medical equipment, energy, automotive/transportation, electronics and computer industries. Our products are sold principally through more than 190 independent agents and distributors throughout the Americas, Europe and Asia. We also have our own direct sales and service organizations in China, France, Germany, India, Italy, Poland, Singapore, Taiwan, the United Kingdom, and certain areas of the United States. Credit Risk . We sell products to customers located throughout the world. We perform ongoing credit evaluations of customers and generally do not require collateral. Allowances are maintained for potential credit losses. Concentration of credit risk with respect to trade accounts receivable is limited due to the large number of customers and their dispersion across many geographic areas. Although a significant amount of trade receivables are with distributors primarily located in the United States, no single distributor or region represents a significant concentration of credit risk. Manufacturing Risk. At present, our wholly–owned subsidiaries, Hurco Manufacturing Limited (“HML”), Ningbo Hurco Machine Tool Co., Ltd. (“NHML”) and Milltronics USA, Inc. (“Milltronics”) produce the vast majority of our machine tools for all three brands, Hurco, Milltronics and Takumi. In addition, we manufacture electro–mechanical components and accessories for machine tools through our wholly–owned subsidiary, LCM Precision Technology S.r.l. (“LCM”). HML, NHML, Milltronics and LCM manufacture their products in Taiwan, China, the U.S. and Italy, respectively. Any interruption in manufacturing at any of these locations would have an adverse effect on our financial operating results. Interruption in manufacturing at one of these locations could result from a change in the political environment or a natural disaster, such as trade wars or tariffs, or an earthquake, typhoon, or tsunami. Any interruption with one of our key suppliers may also have an adverse effect on our operating results and our financial condition. |
INVENTORIES
INVENTORIES | 12 Months Ended |
Oct. 31, 2019 | |
INVENTORIES | |
INVENTORIES | 3. INVENTORIES Inventories as of October 31, 2019 and 2018 are summarized below (in thousands): 2019 2018 Purchased parts and sub–assemblies $ 32,074 $ 38,303 Work–in–process 20,901 22,786 Finished goods 95,876 76,520 $ 148,851 $ 137,609 Finished goods inventory consigned to our distributors and agents throughout the Americas, Europe and Asia was $12.0 million and $9.9 million as of October 31, 2019 and 2018, respectively. |
ACQUISITION OF BUSINESS
ACQUISITION OF BUSINESS | 12 Months Ended |
Oct. 31, 2019 | |
ACQUISITION OF BUSINESS | |
ACQUISITION OF BUSINESS | 4. ACQUISITION OF BUSINESS On August 5, 2019, we (through a newly-formed subsidiary, ProCobots, LLC) acquired substantially all of the assets of a U.S.-based automation integration company for approximately $4.4 million. This acquired business provides automation solutions that can be integrated with any machine tool. The purchase price has been preliminarily allocated to the assets acquired and the liabilities assumed based on their fair values, and approximated $4.4 million. The allocation of the opening balance sheet of ProCobots as of August 5, 2019 is as follows (in thousands): Current assets $ 349 Property plant and equipment 452 Intangibles 148 Goodwill 3,500 Total assets 4,449 Current liabilities 96 Total liabilities 96 Total purchase price and cash expended $ 4,353 The acquisition was accounted for in accordance with ASC Topic 805, Business Combinations. Accordingly, the total purchase price was allocated to tangible assets and liabilities based on their fair value and the intangibles and goodwill were allocated on a provisional basis at the date of acquisition. These allocations reflected various provisional estimates that were available at the time and are subject to change during the purchase price allocation period as valuations are in the process of being finalized. The results of operations of ProCobots have been included in the consolidated financial statements from the date of acquisition. |
CREDIT AGREEMENTS AND BORROWING
CREDIT AGREEMENTS AND BORROWINGS | 12 Months Ended |
Oct. 31, 2019 | |
CREDIT AGREEMENTS AND BORROWINGS | |
CREDIT AGREEMENTS AND BORROWINGS | 5. CREDIT AGREEMENTS AND BORROWINGS On December 7, 2012, we entered into a credit 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, HML, and China, 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 October 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 October 31, 2019, there were no borrowings under any of our credit facilities and there was $51.2 million of available borrowing capacity thereunder. |
FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS | 12 Months Ended |
Oct. 31, 2019 | |
FINANCIAL INSTRUMENTS | |
FINANCIAL INSTRUMENTS | 6. FINANCIAL INSTRUMENTS Estimated Fair Value of 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 for which little or no market data exists, therefore requiring an entity to develop its own assumptions. The carrying amounts for cash and cash equivalents approximate their fair values due to the short maturity of these instruments, and such instruments meet the Level 1 criteria of the three–tier fair value hierarchy discussed above. The carrying amount of short–term debt approximates fair value due to the variable rate of the interest and the short term nature of the instrument. In accordance with this guidance, the following table represents the fair value hierarchy for our financial assets and liabilities measured at fair value as of October 31, 2019 and 2018 (in thousands): Assets Liabilities October 31, October 31, October 31, October 31, 2019 2018 2019 2018 Level 1 Deferred compensation $ 1,991 $ 1,723 $ — $ — Level 2 Derivatives $ 1,391 $ 3,085 $ 388 $ 2,020 Recurring Fair Value Measurements 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 which are readily available. Included as 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 consolidated financial statements at fair value. We have derivative financial instruments in the form of foreign currency forward exchange contracts as described in Note 1 of Notes to Consolidated Financial Statements in which the U.S. Dollar equivalent notional amount of these contracts was $108.6 million and $145.2 million at October 31, 2019 and 2018, respectively. The fair value of the 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 contract 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 as material risks. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Oct. 31, 2019 | |
INCOME TAXES | |
INCOME TAXES | 7. INCOME TAXES In December 2017, the U.S. Tax Cuts and Jobs Act (the "Tax Reform Act ") was enacted. The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018, and implementing a modified territorial tax system from a global system by adding provisions related to Global Intangible Low Taxed Income ("GILTI") and Foreign-derived Intangible Income ("FDII") among other provisions. The GILTI and FDII provisions under the Tax Reform Act became effective for the Company in fiscal 2019. The Tax Reform Act also imposed a one–time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, which was recorded in fiscal 2018. In December 2017, the United States Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Reform Act. The Tax Reform Act created a new requirement that GILTI income earned by Controlled Foreign Corporations (“CFC’s”) must be included in the gross income of the CFC’s U.S. shareholder effective for us in fiscal 2019 for the Company. Under U.S. Generally Accepted Accounting Principles, 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 the Company’s measurement of its deferred taxes (the “deferred method”). We have elected the period cost method to account for GILTI tax. The Tax Reform Act also created FDII for US companies that derive income from the export of tangible and intangible property and services effective for us in fiscal 2019. We have recorded a deduction attributable to FDII based on our current operations. In the fiscal years set forth below, the provision for income taxes consisted of the following (in thousands): Year Ended October 31, 2019 2018 2017 Current: U.S. taxes $ 1,854 $ 6,333 $ 308 Foreign taxes 3,715 5,203 4,185 5,569 11,536 4,493 Deferred: U.S. taxes (31) (326) 1,236 Foreign taxes 291 (204) (128) 260 (530) 1,108 $ 5,829 $ 11,006 $ 5,601 A comparison of income tax expense at the U.S. statutory rate to the Company’s effective tax rate is as follows (dollars in thousands): Year Ended October 31, 2019 2018 2017 Income before income taxes: Domestic $ 9,793 $ 14,101 $ 5,477 Foreign 13,531 18,395 15,239 $ 23,324 $ 32,496 $ 20,716 Tax rates: U.S. statutory rate 21 % 23 % 34 % Effect of tax rate of international jurisdictions different than U.S. statutory rates 4 % 2 % (5) % Valuation allowance 1 % % 1 % State taxes 1 % % % Tax Credits (2) % (1) % (3) % Effect of Tax Rate Changes % 4 % % Transition Tax (1) % 7 % % US tax on distributed and undistributed earnings 3 % % % US benefit of foreign intangible income (3) % % % Other 1 % (1) % % Effective tax rate 25 % 34 % 27 % The Tax Reform Act also made comprehensive changes to U.S. federal income tax laws by moving from a global to a modified territorial tax regime. As a result, cash repatriated to the U.S. is generally no longer subject to U.S federal income tax. At October 31, 2019, undistributed earnings of our foreign subsidiaries are expected to be permanently reinvested. Accordingly, we have not provided for any withholding taxes on the undistributed earnings of our foreign subsidiaries since January 1, 2018. Deferred income taxes are determined based on the difference between the amounts used for financial reporting purposes and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred taxes are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Net deferred tax assets and liabilities are classified as non-current in the consolidated financial statements. As of October 31, 2019, we had deferred tax assets established for accumulated net operating loss carryforwards of $1.4 million, primarily related to certain states in the U.S. and foreign jurisdictions. We also had deferred tax assets for research and development tax credits of $0.8 million. We have established a valuation allowance against some of these carryforwards due to the uncertainty of their full realization. As of October 31, 2019 and 2018, the balance of this valuation allowance was $2.2 million and $2.1 million, respectively. Significant components of our deferred tax assets and liabilities at October 31, 2019 and 2018 are as follows (in thousands): October 31, 2019 2018 Deferred Tax Assets: Accrued inventory reserves $ 1,224 $ 1,325 Accrued warranty expenses 363 499 Compensation related expenses 2,723 2,644 Unrealized exchange gain/loss 143 159 Other accrued expenses 170 170 Net operating loss carryforwards 1,380 1,316 Other credit carryforwards 766 686 Other 293 350 7,062 7,149 Less: Valuation allowance – net operating loss and other credit carryforwards (2,227) (2,106) Deferred tax assets 4,835 5,043 Deferred Tax Liabilities: Net derivative instruments (313) (208) Property and equipment and capitalized software development costs (2,632) (2,370) Other (204) (231) Net deferred tax assets $ 1,686 $ 2,234 As of October 31, 2019, we had net operating losses carryforwards for international and U.S. income tax purposes of $5.9 million, of which $5.2 million related to foreign jurisdictions will expire within 5 years beginning in fiscal 2020 and $0.7 million will expire between 5 and 20 years. We also had tax credits of $765,000 that will expire between years 2023 and 2030. A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding the related accrual for interest or penalties, is as follows (in thousands): 2019 2018 2017 Balance, beginning of year $ 180 $ 1,101 $ 1,102 Additions based on tax positions related to the current year 36 37 37 Additions (reductions) related to prior year tax positions — (945) (20) Reductions due to statute expiration (23) (18) (74) Other — 5 56 Balance, end of year $ 193 $ 180 $ 1,101 The entire balance of the unrecognized tax benefits and related interest at October 31, 2019, if recognized, could affect the effective tax rate in future periods. We recognize accrued interest and penalties related to unrecognized tax benefits as components of our income tax provision. As of October 31, 2019, the amount of interest accrued, reported in other liabilities, was approximately $32,000, which did not include the federal tax benefit of interest deductions. The statute of limitations with respect to unrecognized tax benefits will expire between July 2020 and August 2023. We file U.S. federal and state income tax returns, as well as tax returns in several foreign jurisdictions. A summary of open tax years by major jurisdiction is presented below: United States federal Fiscal 2016 through the current period Germany¹ Fiscal 2017 through the current period Taiwan Fiscal 2017 through the current period ¹ |
EMPLOYEE BENEFITS
EMPLOYEE BENEFITS | 12 Months Ended |
Oct. 31, 2019 | |
EMPLOYEE BENEFITS | |
EMPLOYEE BENEFITS | 8. EMPLOYEE BENEFITS We have defined contribution plans that include a majority of our employees, under which our matching contributions are primarily discretionary. The purpose of these plans is generally to provide additional financial security during retirement by providing employees with an incentive to save throughout their employment. Our contributions and related expense totaled $1.4 million, $1.2 million, $1.1 million, for the fiscal years ended October 31, 2019, 2018, and 2017, respectively. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 12 Months Ended |
Oct. 31, 2019 | |
STOCK-BASED COMPENSATION | |
STOCK-BASED COMPENSATION | 9. STOCK–BASED COMPENSATION 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 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 the status of the options as of October 31, 2019, 2018 and 2017 and the related activity for the year is as follows: Shares Under Weighted Average Grant Option Date Fair Value Balance October 31, 2016 107,889 $ 20.25 Granted — — Cancelled — — Expired — — Exercised (29,164) $ 18.31 Balance October 31, 2017 78,725 $ 20.97 Granted — — Cancelled — — Expired — — Exercised (41,680) $ 20.33 Balance October 31, 2018 37,045 $ 21.69 Granted — — Cancelled — — Expired — — Exercised — — Balance October 31, 2019 37,045 $ 21.69 The total intrinsic value of stock options exercised during the twelve months ended October 31, 2019, 2018 and 2017 was approximately $0, $847,000 and $771,000, respectively. As of October 31, 2019, the total intrinsic value of stock options that are outstanding and exercisable was $485,000. Stock options outstanding and exercisable on October 31, 2019, were as follows: Weighted Average Weighted Average Range of Exercise Shares Under Exercise Price Per Remaining Contractual Prices Per Share Option Share Life in Years Outstanding and Exercisable 18.13 3,738 18.13 21.45 21,748 21.45 23.30 11,559 23.30 $ 18.13 – 23.30 37,045 $ 21.69 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. On March 15, 2018, the Compensation Committee granted a total of 9,114 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 $46.05 per share. On January 3, 2018, the Compensation Committee determined the degree to which the long–term incentive compensation arrangement approved for the fiscal 2015–2017 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 2015. As a result, the Compensation Committee determined that a total of 23,299 performance shares were earned by our executive officers, which performance shares vested on January 3, 2018. 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 $42.20 per share. All related stock–based compensation cost for these vested performance shares was expensed accordingly during the three–year performance period ended October 31, 2017. On January 3, 2018, the Compensation Committee also approved a long–term incentive compensation arrangement for our executive officers in the form of restricted shares and PSUs under the 2016 Equity Plan, which will be payable in shares of our common stock if earned and vested. The awards were 25% time–based vesting and 75% performance–based vesting. The three–year performance period for the PSUs is fiscal 2018 through fiscal 2020. On that date, the Compensation Committee granted a total of 14,810 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 $42.20 per share. On January 3, 2018, the Compensation Committee also granted a total target number of 21,891 PSUs to our executive officers designated as “PSU – TSR”. These PSUs were weighted as approximately 40% of the overall 2018 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 2018–2020, 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 $45.68 per PSU and was calculated using the Monte Carlo approach. On January 3, 2018, the Compensation Committee also granted a total target number of 20,734 PSUs to our executive officers designated as “PSU – ROIC”. These PSUs were weighted as approximately 35% of the overall 2018 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 2018–2020. 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 $42.20 per share. On November 15, 2017, the Compensation Committee granted a total of 2,364 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 $42.30 per share. On March 9, 2017, the Compensation Committee granted a total of 14,920 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 $26.80 per share. On January 5, 2017, the Compensation Committee determined the degree to which the long-term incentive compensation arrangement approved for the fiscal 2014-2016 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 2014. As a result, the Compensation Committee determined that a total of 30,683 performance shares were earned by our executive officers, which performance shares vested on January 5, 2017. 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 $33.90 per share. All related stock-based compensation cost for these vested performance shares was expensed accordingly during the three-year performance period ended October 31, 2016. On January 5, 2017, the Compensation Committee also approved a long–term incentive compensation arrangement for our executive officers in the form of restricted shares and PSUs under the 2016 Equity Plan, which will be payable in shares of our common stock if earned and vested. The awards were 25% time–based vesting and 75% performance–based vesting. The three–year performance period for the PSUs is fiscal 2017 through fiscal 2019. On that date, the Compensation Committee granted a total of 14,747 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 $33.90 per share. On January 5, 2017, the Compensation Committee also granted a total target number of 18,496 PSUs to our executive officers designated as “PSU – TSR”. These PSUs were weighted as approximately 40% of the overall 2017 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 2017-2019, 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 $43.25 per PSU and was calculated using the Monte Carlo approach. On January 5, 2017, the Compensation Committee also granted a total target number of 20,647 PSUs to our executive officers designated as “PSU – ROIC”. These PSUs were weighted as approximately 35% of the overall 2017 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 2017-2019. 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 $33.90 per share. A reconciliation of our restricted stock, performance share and PSU activity and related information is as follows: Number Weighted Average Grant of Shares Date 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 October 31, 2019 200,482 $ 39.62 During fiscal 2019, 2018, and 2017, we recorded approximately $2.7 million, $2.5 million, and $1.7 million, respectively, of stock–based compensation expense related to grants under the 2008 Plan and the 2016 Equity Plan. As of October 31, 2019, there was an estimated $3.2 million of total unrecognized stock–based compensation cost that we expect to recognize by the end of the first quarter of fiscal 2022. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Oct. 31, 2019 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | 10. RELATED PARTY TRANSACTIONS As of October 31, 2019, we owned approximately 35% of the outstanding shares of a Taiwanese–based contract manufacturer, Hurco Automation, Ltd. (“HAL”). HAL’s scope of activities includes the design, manufacture, sales and distribution of industrial automation products, software systems and related components, including control systems and components produced under contract for sale exclusively to us. We are accounting for this investment using the equity method. The investment of $4.2 million and $4.0 million at October 31, 2019 and 2018, respectively, is included in Investments and other assets, net on the Consolidated Balance Sheets. Purchases of controls from HAL amounted to $8.5 million, $11.3 million and $10.0 million in fiscal 2019, 2018 and 2017, respectively. Sales of control component parts to HAL were $198,000, $197,000 and $139,000 for the fiscal years ended October 31, 2019, 2018 and 2017, respectively. Trade payables to HAL were $938,000 and $3.4 million at October 31, 2019 and 2018, respectively. Trade receivables from HAL were $22,000 and $68,000 at October 31, 2019 and 2018, respectively. Summary unaudited financial information for HAL’s operations and financial condition is as follows (in thousands): 2019 2018 2017 Net Sales $ 15,957 $ 17,841 $ 15,800 Gross Profit 2,322 2,944 2,457 Operating Income 992 1,534 1,037 Net Income 1,490 1,845 1,320 Current Assets $ 12,019 $ 12,870 $ 11,310 Non–current Assets 5,560 4,579 4,440 Current Liabilities 3,674 4,666 3,916 |
CONTINGENCIES AND LITIGATION
CONTINGENCIES AND LITIGATION | 12 Months Ended |
Oct. 31, 2019 | |
CONTINGENCIES AND LITIGATION | |
CONTINGENCIES AND LITIGATION | 11. CONTINGENCIES AND LITIGATION From time to time, we are involved in various claims and lawsuits arising in the normal course of business. Pursuant to applicable accounting rules, we accrue the minimum liability for each known claim when the estimated outcome is a range of possible loss and no one amount within that range is more likely than another. We maintain insurance policies for such matters, and we record insurance recoveries when we determine such recovery to be probable. We do not expect any of these claims, individually or in the aggregate, to have a material adverse effect on our consolidated financial position or results of operations. We believe that the ultimate resolution of claims for any losses will not exceed our insurance policy coverages. |
GUARANTEES AND PRODUCT WARRANTI
GUARANTEES AND PRODUCT WARRANTIES | 12 Months Ended |
Oct. 31, 2019 | |
GUARANTEES AND PRODUCT WARRANTIES | |
GUARANTEES AND PRODUCT WARRANTIES | 12. 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 October 31, 2019, we had 21 outstanding third party payment guarantees totaling approximately $0.5 million. The terms of these guarantees are consistent with the underlying customer financing terms. Upon shipment of a machine, the customer assumes the risk of ownership. The customer does not obtain title, however, until it has paid for the machine. A retention of title clause allows us to recover the machine if the customer defaults on the financing. We accrue liabilities under these guarantees at fair value, which amounts are insignificant. We provide warranties on our products with respect to defects in material and workmanship. The terms of these warranties are generally one year for machines and shorter periods for service parts. We recognize a reserve with respect to this obligation at the time of product sale, with subsequent warranty claims recorded against the reserve. The amount of the warranty reserve is determined based on historical trend experience and any known warranty issues that could cause future warranty costs to differ from historical experience. A reconciliation of the changes in our warranty reserve is as follows (in thousands): 2019 2018 2017 Balance, beginning of year $ 2,497 $ 1,772 $ 1,523 Provision for warranties during the year 2,246 4,121 3,379 Charges to the accrual (2,991) (3,326) (3,203) Impact of foreign currency translation 8 (70) 73 Balance, end of year $ 1,760 $ 2,497 $ 1,772 The decrease in our warranty reserve from fiscal 2018 to fiscal 2019 was primarily due to a decrease in the number of machines under warranty resulting from decreased sales volume. The increase in our warranty reserve from fiscal 2017 to fiscal 2018 was primarily due to an increase in the number of machines under warranty resulting from increased sales volume. |
OPERATING LEASES
OPERATING LEASES | 12 Months Ended |
Oct. 31, 2019 | |
OPERATING LEASES | |
OPERATING LEASES | 13. OPERATING LEASES We lease facilities, certain equipment and vehicles under operating leases that expire at various dates through 2029. Future payments required under operating leases as of October 31, 2019, are summarized as follows (in thousands): 2020 $ 4,015 2021 3,149 2022 2,224 2023 1,482 2024 and thereafter 2,531 Total $ 13,401 Lease expense for the fiscal years ended October 31, 2019, 2018, and 2017 was $5.1 million, $4.5 million, and $4.4 million, respectively. |
QUARTERLY FINANCIAL INFORMATION
QUARTERLY FINANCIAL INFORMATION | 12 Months Ended |
Oct. 31, 2019 | |
QUARTERLY FINANCIAL INFORMATION | |
QUARTERLY FINANCIAL INFORMATION | 14. QUARTERLY FINANCIAL INFORMATION (Unaudited) First Second Third Fourth Quarter Quarter Quarter Quarter 2019 (In thousands, except per share data) Sales and service fees $ 74,213 $ 70,674 $ 58,501 $ 59,989 Gross profit 22,142 21,637 17,189 16,240 Gross profit margin 30 % 31 % 29 % 27 % Selling, general and administrative expenses 13,914 14,111 12,592 14,051 Operating income 8,228 7,526 4,597 2,189 Provision for income taxes 2,453 2,481 1,155 (260) Net income 6,654 5,252 3,491 2,098 Income per common share – basic $ 0.98 $ 0.77 $ 0.51 $ 0.31 Income per common share – diluted $ 0.97 $ 0.76 $ 0.51 $ 0.31 First Second Third Fourth Quarter Quarter Quarter Quarter 2018 (In thousands, except per share data) Sales and service fees $ 68,444 $ 70,424 $ 78,752 $ 83,051 Gross profit 20,121 19,313 24,521 27,851 Gross profit margin 29 % 27 % 31 % 34 % Selling, general and administrative expenses 12,966 13,320 15,160 16,564 Operating income 7,155 5,993 9,361 11,287 Provision for income taxes 4,500 1,656 2,511 2,339 Net income 2,937 3,751 6,500 8,302 Income per common share – basic $ 0.44 $ 0.55 $ 0.96 $ 1.24 Income per common share – diluted $ 0.43 $ 0.55 $ 0.95 $ 1.22 |
SEGMENT INFORMATION
SEGMENT INFORMATION | 12 Months Ended |
Oct. 31, 2019 | |
SEGMENT INFORMATION | |
SEGMENT INFORMATION | 15. SEGMENT INFORMATION We operate in a single segment: industrial automation equipment. We design, manufacture and sell computerized (i.e., Computer Numeric Control) machine tools, consisting primarily of vertical machining centers (mills) and turning centers (lathes), to companies in the metal cutting industry through a worldwide sales, service and distribution network. Although the majority of our computer control systems and software products are proprietary, they predominantly use industry standard personal computer components. Our computer control systems and software products are primarily sold as integral components of our computerized machine tool products. We also provide machine tool components, automation equipment and solutions for job shops, software options, control upgrades, accessories and replacement parts for our products, as well as customer service and training and applications support. We principally sell our products through more than 190 independent agents and distributors throughout the Americas, Europe and Asia. Our line is the primary line for the majority of our distributors globally even though some may carry competitive products. We also have our own direct sales and service organizations in China, France, Germany, India, Italy, Poland, Singapore, Taiwan, the United Kingdom, and certain areas of the United States, which are among the world's principal machine tool consuming countries. During fiscal 2019, no distributor accounted for more than 5% of our sales and service fees. In fiscal 2019, approximately 64% of our revenues were from customers located outside of the U.S., including customers located in Canada, Mexico and Central and South America, and no single end-user of our products accounted for more than 5% of our total sales and service fees. The following table sets forth the contribution of each of our product groups and services to our total sales and service fees during each of the past three fiscal years (in thousands): Net Sales and Service Fees by Product Category Year ended October 31, 2019 2018 2017 Computerized Machine Tools $ 223,735 $ 261,710 $ 209,311 Computer Control Systems and Software † 2,818 2,870 2,324 Service Parts 27,854 27,501 24,255 Service Fees 8,970 8,590 7,777 Total $ 263,377 $ 300,671 $ 243,667 † Amounts shown do not include computer control systems and software sold as an integrated component of computerized machine systems. The following table sets forth revenues by geographic area, based on customer location, for each of the past three fiscal years (in thousands): Revenues by Geographic Area Year Ended October 31, 2019 2018 2017 United States of America $ 95,196 $ 87,231 $ 70,912 Canada 2,580 2,915 3,801 Central & South Americas 1,409 2,194 1,844 Total Americas 99,185 92,340 76,557 Germany 52,002 62,346 48,786 United Kingdom 29,349 34,216 28,019 Italy 14,772 16,691 13,416 France 14,346 15,815 13,917 Other Europe 20,028 32,034 27,583 Total Europe 130,497 161,102 131,721 China 15,706 27,748 22,456 Other Asia Pacific 16,858 17,937 10,238 Total Asia Pacific 32,564 45,685 32,694 Other Foreign 1,131 1,544 2,695 Grand Total $ 263,377 $ 300,671 $ 243,667 Long–lived tangible assets, net by geographic area, were (in thousands): As of October 31, 2019 2018 2017 United States of America $ 7,967 $ 8,375 $ 7,599 Foreign countries 8,006 6,617 6,185 $ 15,973 $ 14,992 $ 13,784 Net assets by geographic area were (in thousands): As of October 31, 2019 2018 2017 Americas $ 103,863 $ 96,348 $ 86,432 Europe 71,411 74,558 70,536 Asia Pacific 64,971 51,947 46,117 $ 240,245 $ 222,853 $ 203,085 |
NEW ACCOUNTING PRONOUNCEMENTS
NEW ACCOUNTING PRONOUNCEMENTS | 12 Months Ended |
Oct. 31, 2019 | |
NEW ACCOUNTING PRONOUNCEMENTS | |
NEW ACCOUNTING PRONOUNCEMENTS | 16. NEW ACCOUNTING PRONOUNCEMENTS Recently Adopted Accounting Pronouncements: Between May 2014 and December 2016, FASB issued Accounting Standards Update (“ASU”) No. 2014–09, Revenue from Contracts with Customers (Topic 606) , and various related updates, establishing a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This standard provides a five–step analysis in determining when and how revenue is recognized. The new model requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services and supersedes most of the prior revenue recognition guidance, including industry specific guidance. We had the option of applying this new standard retrospectively to each prior period presented (“full retrospective approach”) or retrospectively with the cumulative effect recognized in retained earnings as of the date of adoption (“modified retrospective approach”). Topic 606 was effective for us beginning November 1, 2018 and we adopted it on that date using the modified retrospective approach. 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 twelve months ended October 31, 2019. In January 2017, FASB issued ASU No. 2017-04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test of Goodwill Impairment , which eliminates Step 2 from the goodwill impairment test (i.e., the requirement for an entity to calculate the implied fair value of goodwill in measuring a goodwill impairment loss). ASU 2017-04 provides that a company should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying value and should recognize an impairment charge if the carrying value exceeds the fair value of the reporting unit, but only to the extent of the goodwill amount allocated to that reporting unit. Companies still have the option to perform a qualitative assessment to determine if the quantitative impairment test is necessary. ASU 2017-04 is effective for our fiscal year 2021, including interim periods within the fiscal year. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates on or after January 1, 2017. We early adopted this standard in the fourth quarter of fiscal 2019. This standard did not have a significant effect on our accounting policies or on our consolidated financial statements and related disclosures. Between February 2016 and February 2019, FASB issued ASU No. 2016-02, Leases (Topic 842) , and various related updates, which establish a comprehensive new lease accounting model. Topic 842 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. Under Topic 842, the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. Topic 842 is effective for our fiscal year 2020, including interim periods within the fiscal year, and requires modified retrospective application. We adopted Topic 842 on November 1, 2019 utilizing the transition method allowed per ASU 2018-11, and accordingly, comparative period financial information will not be adjusted for the effects of adopting Topic 842. No cumulative-effect adjustment was required to the opening balance of retained earnings on the adoption date. We have substantially completed an assessment of the new standard’s impact and determined the new standards will not have a material impact on our Condensed Consolidated Statements of Income or Cash Flows; however, the estimated impact of adopting Topic 842 will result in the recognition of a right-of-use (“ROU”) asset and lease liability on the Condensed Consolidated Balance Sheets subsequent to October 31, 2019 in the range of approximately $12-14 million, based on the lease portfolio existing as of this date. While the ROU asset will be classified as a noncurrent asset, approximately one-third of the lease liability amount is expected to be classified as a current liability, with the remainder being classified as noncurrent. We are also in the process of updating our systems, policies, and internal controls over financial reporting related to the adoption of this standard. Upon adoption of Topic 842, we utilized the following elections and practical expedients: · We have elected to combine non-lease components with lease components. · If at the lease commencement date, a lease has a lease term of 12 months or less and does not include a purchase option that is reasonably certain to be exercised, we have elected not to apply Topic 842 recognition requirements. Nonetheless, we intend to include leases of less than 12 months within the updated footnote disclosures, if material. · We have elected not to use the portfolio method if we enter into a large number of leases in the same month with the same terms and conditions. · As we have applied the new transition method allowed per ASU 2018-11, we have elected to not reassess arrangements entered into prior to November 1, 2019 for whether an arrangement is or contains a lease, the lease classification applied or to separate initial direct costs. · We have elected not to use hindsight in determining the lease term for lease contracts that have historically been renewed or amended. We have no significant lease agreements in place for which we are a lessor, and substantially all of our leases for which we are a lessee are classified as operating leases under the guidance in Topic 840 as of October 31, 2019. As such, due to the practical expedient election to not reassess lease classification, substantially all our leases will continue to be classified as operating leases under Topic 842. When available, we will utilize the rate implicit in the lease as the discount rate to determine the lease liability in accordance with Topic 842. However, if this rate is not available, we will use our incremental borrowing rate as the discount rate, which is the rate, at inception of the lease, we would incur to borrow over a similar term the funds needed to purchase the leased asset. Our lease portfolio includes leased production and assembly facilities, warehouses and distribution centers, office space, vehicles, material handling equipment utilized in our production and assembly facilities, laptops and other information technology equipment, as well as other miscellaneous leased equipment. Most of the leased production and assembly facilities have lease terms ranging from two to five years, although the terms and conditions of our leases can vary significantly from lease to lease. We have assessed the specific terms and conditions of each lease to determine the amount of the lease payments and the length of the lease term, which includes the minimum period over which lease payments are required plus any renewal options that are both within our control to exercise and reasonably certain of being exercised upon lease commencement. In determining whether or not a renewal option is reasonably certain of being exercised, we assessed all relevant factors to determine if sufficient incentives exist as of lease commencement to conclude renewal is reasonably certain. There are no material residual value guarantees provided by us, nor any restrictions or covenants imposed by the leases to which we are a party. In determining the lease liability, we utilize our incremental borrowing rate to discount the future lease payments over the lease term to present value. As of October 31, 2019, the weighted-average remaining term of our lease portfolio was approximately 3.1 years. New Accounting Pronouncements: In February 2018, 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. In August 2017, 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. There have been no other significant changes in the Company’s critical accounting policies and estimates during the fiscal year ended October 31, 2019. |
Schedule II - Valuation and Qua
Schedule II - Valuation and Qualifying Accounts and Reserves | 12 Months Ended |
Oct. 31, 2019 | |
Schedule II - Valuation and Qualifying Accounts and Reserves | |
Schedule II - Valuation and Qualifying Accounts and Reserves | Schedule II – Valuation and Qualifying Accounts and Reserves for the Years Ended October 31, 2019, 2018 and 2017 (Dollars in thousands) Charged to/ (Recovered Balance at from) Charged Balance Beginning Costs and to Other at End Description of Period Expenses Accounts Deductions of Period Allowance for doubtful accounts for the year ended: October 31, 2019 $ 1,027 $ (136) $ — $ — (1) $ 891 October 31, 2018 $ 639 $ 394 $ — $ 6 (1) $ 1,027 October 31, 2017 $ 664 $ 46 $ — $ 71 (1) $ 639 Income tax valuation allowance for the year ended: October 31, 2019 $ 2,106 $ 458 $ — $ 337 $ 2,227 October 31, 2018 $ 2,282 $ 253 $ — $ 429 $ 2,106 October 31, 2017 $ 2,067 $ 515 $ — $ 300 $ 2,282 (1) Receivable write–offs. All other financial statement schedules are omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Oct. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Consolidation | Consolidation . The consolidated financial statements include the accounts of Hurco Companies, Inc. (an Indiana corporation) and its wholly–owned subsidiaries. We have a 35% ownership interest in a Taiwan affiliate that is accounted for using the equity method. Our investment in that affiliate was approximately $4.2 million and $4.0 million as of October 31, 2019 and 2018, respectively. That investment is included in Investments and other assets, net on the accompanying Consolidated Balance Sheets. Intercompany accounts and transactions have been eliminated. |
Reclassifications | Reclassifications. Certain prior year amounts have been reclassified to conform to the current year presentation. This reclassification has no impact on previously reported net income or shareholders’ equity. |
Statements of Cash Flows | Statements of Cash Flows . We consider all highly liquid investments with a stated maturity at the date of purchase of three months or less to be cash equivalents. Cash flows from hedges are classified consistent with the items being hedged. |
Translation of Foreign Currencies | Translation of Foreign Currencies . All balance sheet accounts of non–U.S. subsidiaries are translated at the exchange rate as of the end of the year and translation adjustments of foreign currency balance sheets are recorded as a component of Accumulated other comprehensive loss in shareholders’ equity. Income and expenses are translated at the average exchange rates during the year. Cumulative foreign currency translation adjustments, net of gains related to our net investment hedges, as of October 31, 2019, were a net loss of $10.0 million, net of tax, and are included in Accumulated other comprehensive loss. Foreign currency transaction gains and losses are recorded as income or expense as incurred and are recorded in Other expense, net. |
Hedging | Hedging. 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. We operate on a global basis and are exposed to the risk that our financial condition, results of operations and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign exchange rate movements on our net equity investment in one of our foreign subsidiaries, and the gross profit and net earnings of certain of our foreign subsidiaries, we enter into derivative financial instruments in the form of foreign exchange forward contracts with a major financial institution. 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 account for derivative instruments as either assets or liabilities and carry them at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For derivative instruments designated as a fair value hedge, the gain or loss is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributed to the risk being hedged. For a derivative instrument designated as a cash flow hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of Accumulated other comprehensive loss in shareholders’ equity and subsequently reclassified into earnings when the hedged exposure affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately. For derivative instruments that are not designated as accounting hedges under the Derivatives and Hedging Topic of the Financial Accounting Standards Board (the “FASB”), changes in fair value are recognized in earnings in the period of change. We do not hold or issue derivative financial instruments for speculative trading purposes. We only enter into derivatives with one counterparty, which is among one of the largest U.S. banks (ranked by assets), in order to minimize credit risk and, to date, that counterparty has not failed to meet its financial obligations under such contracts. 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 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 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 are 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 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 October 31, 2019, in Euros, Pounds Sterling and New Taiwan Dollars with set maturity dates ranging from November 2019 through October 2020. The contract amount at forward rates in U.S. Dollars at October 31, 2019 for Euros and Pounds Sterling was $16.5 million and $5.4 million, respectively. The contract amount at forward rates in U.S. Dollars for New Taiwan Dollars was $18.7 million at October 31, 2019. At October 31, 2019, we had approximately $612,000 of gains, net of tax, related to cash flow hedges deferred in Accumulated other comprehensive loss. Of this amount, $373,000 represented 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 October 2020, in which the corresponding inventory that is the subject of the related hedge contract is sold, as described above. We are 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 the 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, net of tax, in Accumulated other comprehensive loss in the same manner as the underlying hedged net assets. This forward contract matured in November 2019, and we entered into a new forward contract for the same notional amount that is set to mature in November 2020. As of October 31, 2019, we had a realized gain of $804,000 and an unrealized gain of $129,000, net of tax, recorded as cumulative translation adjustments in Accumulated other comprehensive loss, related to these forward contracts. Derivatives Not Designated as Hedging Instruments We 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 FASB guidance and, as a result, changes in their fair value are reported currently as Other expense, net in the 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 October 31, 2019, in Euros, Pound Sterling, South African Rand and New Taiwan Dollars with set maturity dates ranging from November 2019 through October 2020. The contract amounts at forward rates in U.S. Dollars at October 31, 2019 for Euros, Pounds Sterling and South African Rand totaled $36.3 million. The contract amount at forward rates in U.S. Dollars for New Taiwan Dollars was $28.2 million at October 31, 2019. Fair Value of Derivative Instruments We recognize the fair value of derivative instruments as assets and liabilities on a gross basis on our Consolidated Balance Sheets. As of October 31, 2019 and October 31, 2018, all derivative instruments were recorded at fair value on the balance sheets as follows (in thousands): 2019 2018 Balance Sheet Fair Balance Sheet Fair Derivatives Location Value Location Value Designated as Hedging Instruments: Foreign exchange forward contracts Derivative assets $ 751 Derivative assets $ 2,654 Foreign exchange forward contracts Derivative liabilities $ 99 Derivative liabilities $ 1,616 Not Designated as Hedging Instruments: Foreign exchange forward contracts Derivative assets $ 640 Derivative assets $ 431 Foreign exchange forward contracts Derivative liabilities $ 289 Derivative liabilities $ 404 Effect of Derivative Instruments on the Consolidated Balance Sheets, Statements of Changes in Shareholders’ Equity and Statements of Income Derivative instruments had the following effects on our Consolidated Balance Sheets, Statements of Changes in Shareholders’ Equity and Statements of Income, net of tax, during the fiscal years ended October 31, 2019, 2018, and 2017 (in thousands): Location of Amount of Gain (Loss) Gain (Loss) Amount of Gain (Loss) Recognized in Reclassified Reclassified from Other Comprehensive From Other Other Comprehensive Income (Loss) Comprehensive Income (Loss) Derivatives 2019 2018 2017 Income (Loss) 2019 2018 2017 Designated as Hedging Instruments: (Effective Portion) Foreign exchange forward contracts Cost of sales – Intercompany sales/purchases $ 615 $ 155 $ (709) and service $ 235 $ (1,355) $ 1,354 – Net Investment $ 128 $ 136 $ (96) We did not recognize any gains or losses as a result of hedges deemed ineffective during fiscal years ended October 31, 2019 and 2018. We recognized a gain of $18,000 during the fiscal year ended October 31, 2017 as a result of contracts closed early that were deemed ineffective for financial reporting and did not qualify as cash flow hedges. We recognized the following gains and losses in our Consolidated Statements of Income during the fiscal years ended October 31, 2019, 2018, and 2017 on derivative instruments not designated as hedging instruments (in thousands): Amount of Gain (Loss) Location of Gain (Loss) Recognized in Operations Derivatives Recognized in Operations 2019 2018 2017 Not Designated as Hedging Instruments: Foreign exchange forward contracts Other expense, net $ 514 $ (963) $ (1,001) The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the fiscal years ended October 31, 2019 and 2018 (in thousands): Foreign Cash Currency Flow Translation Hedges Total Balance, October 31, 2017 $ (7,409) $ (781) $ (8,190) Other comprehensive income (loss) before reclassifications (3,183) 155 (3,028) Reclassifications — 1,355 1,355 Balance, October 31, 2018 $ (10,592) $ 729 $ (9,863) Other comprehensive income (loss) before reclassifications 550 615 1,165 Reclassifications — (235) (235) Balance, October 31, 2019 $ (10,042) $ 1,109 $ (8,933) |
Inventories | Inventories . Inventories are stated at the lower of cost or net realizable value, with cost determined using the first–in, first–out method. Provisions are made to reduce excess or obsolete inventories to their estimated realizable value. |
Property and Equipment | Property and Equipment . Property and equipment are carried at cost. Depreciation and amortization of assets are provided primarily under the straight–line method over the shorter of the estimated useful lives or the lease terms as follows: Number of Years Land Indefinite Building 40 Machines 7 – 10 Shop and office equipment 3 – 7 Building & leasehold improvements 3 – 40 Total depreciation and amortization expense recognized for property and equipment was $2.6 million for fiscal 2019 and $2.5 million for each of the fiscal years ended October 31, 2018 and 2017. |
Revenue Recognition | Revenue Recognition. We design, manufacture and sell computerized machine tools. Our computer control systems and software products are primarily sold as integral components of our computerized machine tool products. We also provide machine tool components, automation equipment and solutions for job shops, software options, control upgrades, accessories and replacement parts for our products, as well as customer service, training and applications support. We 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 twelve months ended October 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 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. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts . The allowance for doubtful accounts is based on our best estimate of probable credit issues and historical experience. We perform credit evaluations of the financial condition of our customers. No collateral is required for sales made on open account terms. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising our customer base and their dispersion across many geographic areas. We consider trade accounts receivable to be past due when payment is not made by the due date as specified on the customer invoice, and we charge off uncollectible balances when all reasonable collection efforts have been exhausted. |
Product Warranty | Product Warranty . Expected future product warranty claims are recorded to expense when the product is sold. Product warranty estimates are established using historical information about the nature, frequency, and average cost of warranty claims. Warranty claims are influenced by factors such as new product introductions, technological developments, the competitive environment, and the costs of component parts. Actual payments for warranty claims could differ from the amounts estimated, requiring adjustments to the liabilities in future periods. See Note 12 of Notes to Consolidated Financial Statements for further discussion of warranties. |
Research and Development Costs | Research and Development Costs. The costs associated with research and development programs for new products and significant product improvements, other than software development costs which are eligible for capitalization per FASB guidance, are expensed as incurred and are included in Selling, general and administrative expenses. Research and development expenses totaled $4.4 million, $4.7 million, and $4.2 million, in fiscal 2019, 2018, and 2017, respectively. |
Software Development Costs | Software Development Costs. We sell software products that are essential to our machine tools. Costs incurred to develop computer software products and significant enhancements to software features of existing products to be sold or otherwise marketed are capitalized, after technological feasibility is established. Software development costs are amortized on a straight–line basis over the estimated product life of the related software, which ranges from three to five years. We capitalized costs of $1.8 million in fiscal 2019, $2.3 million in fiscal 2018, and $2.3 million in fiscal 2017 related to software development projects. Amortization expense for software development costs was $1.0 million, $1.1 million, and $1.0 million, for the fiscal years ended October 31, 2019, 2018, and 2017, respectively. Accumulated amortization at October 31, 2019 and 2018 was $19.5 million and $18.5 million, respectively. Estimated amortization expense for the remaining unamortized software development costs for the fiscal years ending October 31, is as follows (in thousands): Fiscal Year Amortization Expense 2020 $ 1,500 2021 1,950 2022 1,900 2023 1,550 2024 1,000 |
Goodwill and Intangible Assets | Goodwill and Intangible Assets. Goodwill and indefinite-lived intangibles arising from a business combination are not amortized and charged to expense over time. Instead, goodwill and indefinite-lived intangibles must be reviewed annually for impairment, or more frequently, if circumstances arise indicating potential impairment. This impairment review was most recently completed as of July 31, 2019. For goodwill, if the carrying amount of the reporting unit containing the goodwill exceeds the fair value of that reporting unit, an impairment loss is recognized for that excess, but only to the extent of the goodwill amount allocated to that reporting unit. For indefinite-lived intangible assets, if the carrying amount exceeds the fair value, an impairment loss is recognized in an amount equal to that excess. Intangible assets that are determined to have a finite life are amortized over their estimated useful lives and are also subject to review for impairment, if indicators of impairment are identified. The changes in the carrying amounts of goodwill for the fiscal year ended October 31, 2019 were as follows (in thousands): Balance as of October 31, 2018 $ 2,377 Goodwill acquired 3,500 Impact of foreign currency translation (30) Balance as of October 31, 2019 $ 5,847 There were no impairments recognized with respect to the carrying value of goodwill or intangible assets for the years ended October 31, 2019, 2018 or 2017. As of October 31, 2019, the balances of intangible assets, other than goodwill, were as follows (in thousands): Weighted Average Gross Amortization Intangible Accumulated Net Intangible Period Assets Amortization Assets Tradenames and trademarks indefinite $ 60 $ — $ 60 Tradenames and trademarks years 408 (114) 294 Customer relationships years 372 (173) 199 Technology years 683 (333) 350 Patents years 2,972 (2,813) 159 Other years 375 (341) 34 Total $ 4,870 $ (3,774) $ 1,096 As of October 31, 2018, the balances of intangible assets, other than goodwill, were as follows (in thousands): Weighted Average Gross Amortization Intangible Accumulated Net Intangible Period Assets Amortization Assets Tradenames and trademarks indefinite $ 60 $ — $ 60 Tradenames and trademarks 13 years 238 (98) 140 Customer relationships 15 years 255 (148) 107 Technology 13 years 692 (284) 408 Patents 6 years 2,973 (2,790) 183 Other 8 years 377 (337) 40 Total $ 4,595 $ (3,657) $ 938 Intangible asset amortization expense was $117,000, $107,000, and $136,000 for fiscal 2019, 2018 and 2017, respectively. Annual intangible asset amortization expense is estimated to be $132,000 per year for fiscal years 2020 through 2024. |
Impairment of Long-Lived Assets | Impairment of Long–Lived Assets. Annually, or when there are indicators of impairment, we evaluate the carrying value of long–lived assets to be held and used, including property and equipment, software development costs and intangible assets, including goodwill, when events or circumstances warrant such a review. The carrying value of a long–lived asset (or group of assets) to be held and used is considered impaired when the anticipated separately identifiable undiscounted cash flows from such an asset (or group of assets) are less than the carrying value of the asset (or group of assets) in accordance with FASB guidance related to accounting for the impairment or disposal of long–lived assets. |
Earnings Per Share | Earnings Per Share. Basic earnings per share is calculated by dividing net income by the weighted–average number of common shares actually outstanding during the period. Diluted earnings per share assumes the issuance of additional shares of common stock upon exercise of all outstanding stock options and contingently issuable securities if the effect is dilutive, in accordance with the treasury stock method discussed in FASB guidance on “Earnings Per Share.” The following table presents a reconciliation of our basic and diluted earnings per share computation: Fiscal Year Ended October 31, 2019 2018 2017 (in thousands, except per share amounts) Basic Diluted Basic Diluted Basic Diluted Net income $ 17,495 $ 17,495 $ 21,490 $ 21,490 $ 15,115 $ 15,115 Undistributed earnings allocated to participating shares (147) (147) (132) (132) (100) (100) Net income applicable to common Shareholders $ 17,348 $ 17,348 $ 21,358 $ 21,358 $ 15,015 $ 15,015 Weighted average shares outstanding 6,759 6,759 6,700 6,700 6,615 6,615 Stock options and contingently issuable securities — 56 — 71 — 65 6,759 6,815 6,700 6,771 6,615 6,680 Income per share $ 2.57 $ 2.55 $ 3.19 $ 3.15 $ 2.27 $ 2.25 |
Income Taxes | Income Taxes – We account for income taxes and the related accounts under the asset and liability method. Deferred tax assets and liabilities are measured using enacted income tax rates in each jurisdiction in effect for the year in which the temporary differences are expected to be recovered or settled. These deferred tax assets are reduced by a valuation allowance, which is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Net deferred tax assets and liabilities are classified as non-current in the consolidated financial statements. Our judgment regarding the realization of deferred tax assets may change due to future profitability and market conditions, changes in U.S. or foreign tax laws and other factors. These changes, if any, may require material adjustments to these deferred tax assets and an accompanying reduction or increase in net income in the period when such determinations are made. The determination of our provision for income taxes requires judgment, the use of estimates and the interpretation and application of complex federal, state and foreign tax laws. Our provision for income taxes reflects a combination of income earned and taxed at the federal and state level in the U.S., as well as in various foreign jurisdictions. In addition to the risks to the effective tax rate described above, the future effective tax rate reflected in forward–looking statements is based on currently effective tax laws. Significant changes in those laws could materially affect these estimates. We operate in multiple jurisdictions through wholly-owned subsidiaries, and our global structure is complex. The estimates of our uncertain tax positions involve judgments and assessment of the potential tax implications. We recognize uncertain tax positions when it is more likely than not that the tax position will be sustained upon examination by relevant taxing authorities, based on the technical merits of the position. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Our tax positions are subject to audit by taxing authorities across multiple global jurisdictions and the resolution of such audits may span multiple years. Tax law is complex and often subject to varied interpretations, accordingly, the ultimate outcome with respect to taxes we may owe may differ from the amounts recognized. |
Stock Compensation | Stock Compensation. We account for share–based compensation according to FASB guidance relating to share–based payments, which requires the measurement and recognition of compensation expense for all share–based awards made to employees and directors based on estimated fair values on the grant date. This guidance requires that we estimate the fair value of share–based awards on the date of grant and recognize as expense the value of the portion of the award that is ultimately expected to vest over the requisite service period. |
Estimates | Estimates. The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles requires us to make estimates and assumptions that affect the reported amounts presented and disclosed in our consolidated financial statements. Significant estimates and assumptions in these consolidated financial statements require the exercise of judgment and are used for, but not limited to, allowance for doubtful accounts, estimates of future cash flows and other assumptions associated with goodwill, intangible and long–lived asset impairment tests, useful lives for depreciation and amortization, warranty programs, stock compensation, income taxes and deferred tax valuation allowances, and contingencies. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Oct. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of Fair Value of Derivative Instruments | 2019 2018 Balance Sheet Fair Balance Sheet Fair Derivatives Location Value Location Value Designated as Hedging Instruments: Foreign exchange forward contracts Derivative assets $ 751 Derivative assets $ 2,654 Foreign exchange forward contracts Derivative liabilities $ 99 Derivative liabilities $ 1,616 Not Designated as Hedging Instruments: Foreign exchange forward contracts Derivative assets $ 640 Derivative assets $ 431 Foreign exchange forward contracts Derivative liabilities $ 289 Derivative liabilities $ 404 |
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 Consolidated Balance Sheets, Statements of Changes in Shareholders’ Equity and Statements of Income, net of tax, during the fiscal years ended October 31, 2019, 2018, and 2017 (in thousands): Location of Amount of Gain (Loss) Gain (Loss) Amount of Gain (Loss) Recognized in Reclassified Reclassified from Other Comprehensive From Other Other Comprehensive Income (Loss) Comprehensive Income (Loss) Derivatives 2019 2018 2017 Income (Loss) 2019 2018 2017 Designated as Hedging Instruments: (Effective Portion) Foreign exchange forward contracts Cost of sales – Intercompany sales/purchases $ 615 $ 155 $ (709) and service $ 235 $ (1,355) $ 1,354 – Net Investment $ 128 $ 136 $ (96) |
Schedule of Derivatives Not Designated as Hedging Instruments | We recognized the following gains and losses in our Consolidated Statements of Income during the fiscal years ended October 31, 2019, 2018, and 2017 on derivative instruments not designated as hedging instruments (in thousands): Amount of Gain (Loss) Location of Gain (Loss) Recognized in Operations Derivatives Recognized in Operations 2019 2018 2017 Not Designated as Hedging Instruments: Foreign exchange forward contracts Other expense, net $ 514 $ (963) $ (1,001) |
Schedule of Accumulated Other Comprehensive Loss | The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the fiscal years ended October 31, 2019 and 2018 (in thousands): Foreign Cash Currency Flow Translation Hedges Total Balance, October 31, 2017 $ (7,409) $ (781) $ (8,190) Other comprehensive income (loss) before reclassifications (3,183) 155 (3,028) Reclassifications — 1,355 1,355 Balance, October 31, 2018 $ (10,592) $ 729 $ (9,863) Other comprehensive income (loss) before reclassifications 550 615 1,165 Reclassifications — (235) (235) Balance, October 31, 2019 $ (10,042) $ 1,109 $ (8,933) |
Schedule of Property and Equipment Estimated Useful Lives | Number of Years Land Indefinite Building 40 Machines 7 – 10 Shop and office equipment 3 – 7 Building & leasehold improvements 3 – 40 |
Schedule of Estimated Amortization Expense | Estimated amortization expense for the remaining unamortized software development costs for the fiscal years ending October 31, is as follows (in thousands): Fiscal Year Amortization Expense 2020 $ 1,500 2021 1,950 2022 1,900 2023 1,550 2024 1,000 |
Schedule of changes in the carrying amount of goodwill | Balance as of October 31, 2018 $ 2,377 Goodwill acquired 3,500 Impact of foreign currency translation (30) Balance as of October 31, 2019 $ 5,847 |
Schedule of Intangible Assets | As of October 31, 2019, the balances of intangible assets, other than goodwill, were as follows (in thousands): Weighted Average Gross Amortization Intangible Accumulated Net Intangible Period Assets Amortization Assets Tradenames and trademarks indefinite $ 60 $ — $ 60 Tradenames and trademarks years 408 (114) 294 Customer relationships years 372 (173) 199 Technology years 683 (333) 350 Patents years 2,972 (2,813) 159 Other years 375 (341) 34 Total $ 4,870 $ (3,774) $ 1,096 As of October 31, 2018, the balances of intangible assets, other than goodwill, were as follows (in thousands): Weighted Average Gross Amortization Intangible Accumulated Net Intangible Period Assets Amortization Assets Tradenames and trademarks indefinite $ 60 $ — $ 60 Tradenames and trademarks 13 years 238 (98) 140 Customer relationships 15 years 255 (148) 107 Technology 13 years 692 (284) 408 Patents 6 years 2,973 (2,790) 183 Other 8 years 377 (337) 40 Total $ 4,595 $ (3,657) $ 938 |
Schedule of computation of basic and diluted net income per share | The following table presents a reconciliation of our basic and diluted earnings per share computation: Fiscal Year Ended October 31, 2019 2018 2017 (in thousands, except per share amounts) Basic Diluted Basic Diluted Basic Diluted Net income $ 17,495 $ 17,495 $ 21,490 $ 21,490 $ 15,115 $ 15,115 Undistributed earnings allocated to participating shares (147) (147) (132) (132) (100) (100) Net income applicable to common Shareholders $ 17,348 $ 17,348 $ 21,358 $ 21,358 $ 15,015 $ 15,015 Weighted average shares outstanding 6,759 6,759 6,700 6,700 6,615 6,615 Stock options and contingently issuable securities — 56 — 71 — 65 6,759 6,815 6,700 6,771 6,615 6,680 Income per share $ 2.57 $ 2.55 $ 3.19 $ 3.15 $ 2.27 $ 2.25 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 12 Months Ended |
Oct. 31, 2019 | |
INVENTORIES | |
Schedule of Inventories | Inventories as of October 31, 2019 and 2018 are summarized below (in thousands): 2019 2018 Purchased parts and sub–assemblies $ 32,074 $ 38,303 Work–in–process 20,901 22,786 Finished goods 95,876 76,520 $ 148,851 $ 137,609 |
ACQUISITION OF BUSINESS (Tables
ACQUISITION OF BUSINESS (Tables) | 12 Months Ended |
Oct. 31, 2019 | |
ACQUISITION OF BUSINESS | |
Schedule of Recognised assets acquired and liabilities assumed | Current assets $ 349 Property plant and equipment 452 Intangibles 148 Goodwill 3,500 Total assets 4,449 Current liabilities 96 Total liabilities 96 Total purchase price and cash expended $ 4,353 |
FINANCIAL INSTRUMENTS (Tables)
FINANCIAL INSTRUMENTS (Tables) | 12 Months Ended |
Oct. 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 October 31, 2019 and 2018 (in thousands): Assets Liabilities October 31, October 31, October 31, October 31, 2019 2018 2019 2018 Level 1 Deferred compensation $ 1,991 $ 1,723 $ — $ — Level 2 Derivatives $ 1,391 $ 3,085 $ 388 $ 2,020 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Oct. 31, 2019 | |
INCOME TAXES | |
Schedule of Income Taxes Provision (Benefit) | In the fiscal years set forth below, the provision for income taxes consisted of the following (in thousands): Year Ended October 31, 2019 2018 2017 Current: U.S. taxes $ 1,854 $ 6,333 $ 308 Foreign taxes 3,715 5,203 4,185 5,569 11,536 4,493 Deferred: U.S. taxes (31) (326) 1,236 Foreign taxes 291 (204) (128) 260 (530) 1,108 $ 5,829 $ 11,006 $ 5,601 |
Schedule of Reconciliation of Statutory Tax Rate to Effective Tax Rate | A comparison of income tax expense at the U.S. statutory rate to the Company’s effective tax rate is as follows (dollars in thousands): Year Ended October 31, 2019 2018 2017 Income before income taxes: Domestic $ 9,793 $ 14,101 $ 5,477 Foreign 13,531 18,395 15,239 $ 23,324 $ 32,496 $ 20,716 Tax rates: U.S. statutory rate 21 % 23 % 34 % Effect of tax rate of international jurisdictions different than U.S. statutory rates 4 % 2 % (5) % Valuation allowance 1 % % 1 % State taxes 1 % % % Tax Credits (2) % (1) % (3) % Effect of Tax Rate Changes % 4 % % Transition Tax (1) % 7 % % US tax on distributed and undistributed earnings 3 % % % US benefit of foreign intangible income (3) % % % Other 1 % (1) % % Effective tax rate 25 % 34 % 27 % |
Schedule of Deferred Tax Assets and Liabilities | Significant components of our deferred tax assets and liabilities at October 31, 2019 and 2018 are as follows (in thousands): October 31, 2019 2018 Deferred Tax Assets: Accrued inventory reserves $ 1,224 $ 1,325 Accrued warranty expenses 363 499 Compensation related expenses 2,723 2,644 Unrealized exchange gain/loss 143 159 Other accrued expenses 170 170 Net operating loss carryforwards 1,380 1,316 Other credit carryforwards 766 686 Other 293 350 7,062 7,149 Less: Valuation allowance – net operating loss and other credit carryforwards (2,227) (2,106) Deferred tax assets 4,835 5,043 Deferred Tax Liabilities: Net derivative instruments (313) (208) Property and equipment and capitalized software development costs (2,632) (2,370) Other (204) (231) Net deferred tax assets $ 1,686 $ 2,234 |
Schedule of Income Tax Expense | A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding the related accrual for interest or penalties, is as follows (in thousands): 2019 2018 2017 Balance, beginning of year $ 180 $ 1,101 $ 1,102 Additions based on tax positions related to the current year 36 37 37 Additions (reductions) related to prior year tax positions — (945) (20) Reductions due to statute expiration (23) (18) (74) Other — 5 56 Balance, end of year $ 193 $ 180 $ 1,101 |
Summary of open tax years by major jurisdiction | United States federal Fiscal 2016 through the current period Germany¹ Fiscal 2017 through the current period Taiwan Fiscal 2017 through the current period ¹ |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 12 Months Ended |
Oct. 31, 2019 | |
STOCK-BASED COMPENSATION | |
Summary of Stock Option Activity | A summary of the status of the options as of October 31, 2019, 2018 and 2017 and the related activity for the year is as follows: Shares Under Weighted Average Grant Option Date Fair Value Balance October 31, 2016 107,889 $ 20.25 Granted — — Cancelled — — Expired — — Exercised (29,164) $ 18.31 Balance October 31, 2017 78,725 $ 20.97 Granted — — Cancelled — — Expired — — Exercised (41,680) $ 20.33 Balance October 31, 2018 37,045 $ 21.69 Granted — — Cancelled — — Expired — — Exercised — — Balance October 31, 2019 37,045 $ 21.69 |
Schedule of Stock Options Outstanding and Exercisable | Stock options outstanding and exercisable on October 31, 2019, were as follows: Weighted Average Weighted Average Range of Exercise Shares Under Exercise Price Per Remaining Contractual Prices Per Share Option Share Life in Years Outstanding and Exercisable 18.13 3,738 18.13 21.45 21,748 21.45 23.30 11,559 23.30 $ 18.13 – 23.30 37,045 $ 21.69 |
Schedule of Restricted Stock Activity | A reconciliation of our restricted stock, performance share and PSU activity and related information is as follows: Number Weighted Average Grant of Shares Date 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 October 31, 2019 200,482 $ 39.62 |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 12 Months Ended |
Oct. 31, 2019 | |
RELATED PARTY TRANSACTIONS | |
Schedule of Financial Information | Summary unaudited financial information for HAL’s operations and financial condition is as follows (in thousands): 2019 2018 2017 Net Sales $ 15,957 $ 17,841 $ 15,800 Gross Profit 2,322 2,944 2,457 Operating Income 992 1,534 1,037 Net Income 1,490 1,845 1,320 Current Assets $ 12,019 $ 12,870 $ 11,310 Non–current Assets 5,560 4,579 4,440 Current Liabilities 3,674 4,666 3,916 |
GUARANTEES AND PRODUCT WARRAN_2
GUARANTEES AND PRODUCT WARRANTIES (Tables) | 12 Months Ended |
Oct. 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): 2019 2018 2017 Balance, beginning of year $ 2,497 $ 1,772 $ 1,523 Provision for warranties during the year 2,246 4,121 3,379 Charges to the accrual (2,991) (3,326) (3,203) Impact of foreign currency translation 8 (70) 73 Balance, end of year $ 1,760 $ 2,497 $ 1,772 |
OPERATING LEASES (Tables)
OPERATING LEASES (Tables) | 12 Months Ended |
Oct. 31, 2019 | |
OPERATING LEASES | |
Schedule of Future Minimum Payments under Operating Leases | We lease facilities, certain equipment and vehicles under operating leases that expire at various dates through 2029. Future payments required under operating leases as of October 31, 2019, are summarized as follows (in thousands): 2020 $ 4,015 2021 3,149 2022 2,224 2023 1,482 2024 and thereafter 2,531 Total $ 13,401 |
QUARTERLY FINANCIAL INFORMATI_2
QUARTERLY FINANCIAL INFORMATION (Tables) | 12 Months Ended |
Oct. 31, 2019 | |
QUARTERLY FINANCIAL INFORMATION | |
Schedule of Selected Quarterly Financial Information | First Second Third Fourth Quarter Quarter Quarter Quarter 2019 (In thousands, except per share data) Sales and service fees $ 74,213 $ 70,674 $ 58,501 $ 59,989 Gross profit 22,142 21,637 17,189 16,240 Gross profit margin 30 % 31 % 29 % 27 % Selling, general and administrative expenses 13,914 14,111 12,592 14,051 Operating income 8,228 7,526 4,597 2,189 Provision for income taxes 2,453 2,481 1,155 (260) Net income 6,654 5,252 3,491 2,098 Income per common share – basic $ 0.98 $ 0.77 $ 0.51 $ 0.31 Income per common share – diluted $ 0.97 $ 0.76 $ 0.51 $ 0.31 First Second Third Fourth Quarter Quarter Quarter Quarter 2018 (In thousands, except per share data) Sales and service fees $ 68,444 $ 70,424 $ 78,752 $ 83,051 Gross profit 20,121 19,313 24,521 27,851 Gross profit margin 29 % 27 % 31 % 34 % Selling, general and administrative expenses 12,966 13,320 15,160 16,564 Operating income 7,155 5,993 9,361 11,287 Provision for income taxes 4,500 1,656 2,511 2,339 Net income 2,937 3,751 6,500 8,302 Income per common share – basic $ 0.44 $ 0.55 $ 0.96 $ 1.24 Income per common share – diluted $ 0.43 $ 0.55 $ 0.95 $ 1.22 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 12 Months Ended |
Oct. 31, 2019 | |
SEGMENT INFORMATION | |
Schedule of Net Sales and Service Fees by Product Category | The following table sets forth the contribution of each of our product groups and services to our total sales and service fees during each of the past three fiscal years (in thousands): Net Sales and Service Fees by Product Category Year ended October 31, 2019 2018 2017 Computerized Machine Tools $ 223,735 $ 261,710 $ 209,311 Computer Control Systems and Software † 2,818 2,870 2,324 Service Parts 27,854 27,501 24,255 Service Fees 8,970 8,590 7,777 Total $ 263,377 $ 300,671 $ 243,667 † Amounts shown do not include computer control systems and software sold as an integrated component of computerized machine systems. |
Schedule of Revenues by Geographic Area | The following table sets forth revenues by geographic area, based on customer location, for each of the past three fiscal years (in thousands): Revenues by Geographic Area Year Ended October 31, 2019 2018 2017 United States of America $ 95,196 $ 87,231 $ 70,912 Canada 2,580 2,915 3,801 Central & South Americas 1,409 2,194 1,844 Total Americas 99,185 92,340 76,557 Germany 52,002 62,346 48,786 United Kingdom 29,349 34,216 28,019 Italy 14,772 16,691 13,416 France 14,346 15,815 13,917 Other Europe 20,028 32,034 27,583 Total Europe 130,497 161,102 131,721 China 15,706 27,748 22,456 Other Asia Pacific 16,858 17,937 10,238 Total Asia Pacific 32,564 45,685 32,694 Other Foreign 1,131 1,544 2,695 Grand Total $ 263,377 $ 300,671 $ 243,667 |
Schedule of Assets by Geographic Area | Long–lived tangible assets, net by geographic area, were (in thousands): As of October 31, 2019 2018 2017 United States of America $ 7,967 $ 8,375 $ 7,599 Foreign countries 8,006 6,617 6,185 $ 15,973 $ 14,992 $ 13,784 Net assets by geographic area were (in thousands): As of October 31, 2019 2018 2017 Americas $ 103,863 $ 96,348 $ 86,432 Europe 71,411 74,558 70,536 Asia Pacific 64,971 51,947 46,117 $ 240,245 $ 222,853 $ 203,085 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Fair Value of Derivative Instruments (Details) - USD ($) $ in Thousands | Oct. 31, 2019 | Oct. 31, 2018 |
Derivatives, Fair Value [Line Items] | ||
Derivative assets | $ 1,391 | $ 3,085 |
Derivative liabilities | 388 | 2,020 |
Foreign Exchange Forward [Member] | Designated as Hedging Instrument [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 751 | 2,654 |
Derivative liabilities | 99 | 1,616 |
Foreign Exchange Forward [Member] | Not Designated as Hedging Instrument [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Derivative assets | 640 | 431 |
Derivative liabilities | $ 289 | $ 404 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Effect of Derivative Instruments on Consolidated Balance Sheets, Statements of Changes in Shareholders' Equity and Statements of Income (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
Derivative Instruments, Gain (Loss) [Line Items] | |||
Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) | $ 615 | $ 155 | $ (709) |
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) | 615 | 155 | (709) |
Designated as Hedging Instrument [Member] | Foreign Exchange Forward [Member] | Cost of Sales [Member] | |||
Derivative Instruments, Gain (Loss) [Line Items] | |||
Amount of Gain (Loss) Reclassified from Other Comprehensive Income (Loss) | 235 | (1,355) | 1,354 |
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) | 128 | 136 | (96) |
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 | $ 514 | $ (963) | $ (1,001) |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Changes in Components of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
Derivative [Line Items] | |||
Beginning Balance | $ (9,863) | $ (8,190) | |
Other comprehensive income (loss) before reclassifications | 1,165 | (3,028) | |
Reclassifications | (235) | 1,355 | $ (1,354) |
Ending Balance | (8,933) | (9,863) | (8,190) |
Foreign Currency Translation [Member] | |||
Derivative [Line Items] | |||
Beginning Balance | (10,592) | (7,409) | |
Other comprehensive income (loss) before reclassifications | 550 | (3,183) | |
Ending Balance | (10,042) | (10,592) | (7,409) |
Cash Flow Hedging [Member] | |||
Derivative [Line Items] | |||
Beginning Balance | 729 | (781) | |
Other comprehensive income (loss) before reclassifications | 615 | 155 | |
Reclassifications | (235) | 1,355 | |
Ending Balance | $ 1,109 | $ 729 | $ (781) |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Estimated Useful Lives (Details) | 12 Months Ended |
Oct. 31, 2019 | |
Building [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 40 years |
Machines [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 7 years |
Machines [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 10 years |
Shop and Office Equipment [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 3 years |
Shop and Office Equipment [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 7 years |
Building And Leasehold Improvements [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 3 years |
Building And Leasehold Improvements [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life | 40 years |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Estimated Amortization Expense (Details) $ in Thousands | Oct. 31, 2019USD ($) |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
2020 | $ 1,500 |
2021 | 1,950 |
2022 | 1,900 |
2023 | 1,550 |
2024 | $ 1,000 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Carrying amount of goodwill (Details) $ in Thousands | 12 Months Ended |
Oct. 31, 2019USD ($) | |
Changes in the carrying amount of goodwill | |
Beginning balance | $ 2,377 |
Goodwill acquired | 3,500 |
Impact of foreign currenct translation | (30) |
Ending balance | $ 5,847 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Oct. 31, 2019 | Oct. 31, 2018 | |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Intangible Assets | $ 4,870 | $ 4,595 |
Accumulated Amortization | (3,774) | (3,657) |
Net Intangible Assets | 1,096 | 938 |
Customer Relationships [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Intangible Assets | 372 | 255 |
Accumulated Amortization | (173) | (148) |
Net Intangible Assets | $ 199 | $ 107 |
Weighted Average Amortization Period | 15 years | 15 years |
Technology [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Intangible Assets | $ 683 | $ 692 |
Accumulated Amortization | (333) | (284) |
Net Intangible Assets | $ 350 | $ 408 |
Weighted Average Amortization Period | 13 years | 13 years |
Patents [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Intangible Assets | $ 2,972 | $ 2,973 |
Accumulated Amortization | (2,813) | (2,790) |
Net Intangible Assets | $ 159 | $ 183 |
Weighted Average Amortization Period | 6 years | 6 years |
Other [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Intangible Assets | $ 375 | $ 377 |
Accumulated Amortization | (341) | (337) |
Net Intangible Assets | $ 34 | $ 40 |
Weighted Average Amortization Period | 8 years | 8 years |
Tradenames and trademarks [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Intangible Assets | $ 408 | $ 238 |
Accumulated Amortization | (114) | (98) |
Net Intangible Assets | 294 | 140 |
Indefinite tradenames and trademarks | $ 60 | $ 60 |
Weighted Average Amortization Period | 13 years | 13 years |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Reconciliation of Basic and Diluted Earnings (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Oct. 31, 2019 | Jul. 31, 2019 | Apr. 30, 2019 | Jan. 31, 2019 | Oct. 31, 2018 | Jul. 31, 2018 | Apr. 30, 2018 | Jan. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||||
Net income | $ 2,098 | $ 3,491 | $ 5,252 | $ 6,654 | $ 8,302 | $ 6,500 | $ 3,751 | $ 2,937 | $ 17,495 | $ 21,490 | $ 15,115 |
Undistributed earnings allocated to participating shares - Basic | (147) | (132) | (100) | ||||||||
Undistributed earnings allocated to participating shares - Diluted | (147) | (132) | (100) | ||||||||
Net income applicable to common shareholders - Basic | 17,348 | 21,358 | 15,015 | ||||||||
Net income applicable to common shareholders - Diluted | $ 17,348 | $ 21,358 | $ 15,015 | ||||||||
Weighted average shares outstanding - Basic | 6,759 | 6,700 | 6,615 | ||||||||
Weighted average shares outstanding -Diluted | 6,815 | 6,771 | 6,680 | ||||||||
Stock options and contingently issuable securities | 56 | 71 | 65 | ||||||||
Income per share -Basic | $ 0.31 | $ 0.51 | $ 0.77 | $ 0.98 | $ 1.24 | $ 0.96 | $ 0.55 | $ 0.44 | $ 2.57 | $ 3.19 | $ 2.27 |
Income per share - Diluted | $ 0.31 | $ 0.51 | $ 0.76 | $ 0.97 | $ 1.22 | $ 0.95 | $ 0.55 | $ 0.43 | $ 2.55 | $ 3.15 | $ 2.25 |
SUMMARY OF SIGNIFICANT ACCOU_12
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional information (Details) € in Millions | 1 Months Ended | 12 Months Ended | |||
Dec. 31, 2017 | Oct. 31, 2019USD ($) | Oct. 31, 2018USD ($) | Oct. 31, 2017USD ($) | Nov. 30, 2018EUR (€) | |
Translation of Foreign Currencies | |||||
Cumulative foreign currency translation adjustments | $ 10,000,000 | ||||
Derivative financial instruments: | |||||
Notional principal of foreign exchange contracts | 108,600,000 | $ 145,200,000 | |||
(Losses) gains, net of tax, related to cash flow hedges deferred in Accumulated Other Comprehensive Loss | 612,000 | ||||
Unrealized gain (loss), net of tax, to be reclassified in next 12 months | 373,000 | ||||
Gain (loss) on hedge ineffectiveness | $ 18,000 | ||||
Property and Equipment | |||||
Depreciation and amortization expense | 2,600,000 | 2,500,000 | 2,500,000 | ||
Research and Development Costs | |||||
Research and development expenses | 4,400,000 | 4,700,000 | 4,200,000 | ||
Software Development Costs | |||||
Capitalized costs | 1,800,000 | 2,300,000 | 2,300,000 | ||
Accumulated amortization | 19,500,000 | 18,500,000 | |||
Capitalized Computer Software, Amortization | 1,000,000 | 1,100,000 | 1,000,000 | ||
Goodwill and Intangible Assets | |||||
Intangible assets amortization expense | 117,000 | $ 107,000 | $ 136,000 | ||
Expected future amortization expense, 2020 | 132,000 | ||||
Expected future amortization expense, 2021 | 132,000 | ||||
Expected future amortization expense, 2022 | 132,000 | ||||
Expected future amortization expense, 2023 | 132,000 | ||||
Expected future amortization expense, 2024 | $ 132,000 | ||||
Income Tax | |||||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 35.00% | 21.00% | 23.00% | 34.00% | |
Forward Contracts [Member] | Designated as Hedging Instrument [Member] | |||||
Derivative financial instruments: | |||||
Notional principal of foreign exchange contracts | € | € 3 | ||||
Realized gain on net investment hedge | $ 804,000 | ||||
Unrealized gain (loss), net of tax, recorded as cumulative translation adjustments in Accumulated Other Comprehensive Loss | $ 129,000 | ||||
Derivative maturity date | November 2020 | ||||
Euros [Member] | Designated as Hedging Instrument [Member] | |||||
Derivative financial instruments: | |||||
Notional principal of foreign exchange contracts | $ 16,500,000 | ||||
Pounds Sterling [Member] | Designated as Hedging Instrument [Member] | |||||
Derivative financial instruments: | |||||
Notional principal of foreign exchange contracts | 5,400,000 | ||||
New Taiwan Dollars [Member] | Designated as Hedging Instrument [Member] | |||||
Derivative financial instruments: | |||||
Notional principal of foreign exchange contracts | 18,700,000 | ||||
New Taiwan Dollars [Member] | Not Designated as Hedging Instrument [Member] | |||||
Derivative financial instruments: | |||||
Notional principal of foreign exchange contracts | $ 28,200,000 | ||||
Forward Contracts Denominated In Euros Pounds Sterling And New Taiwan [Member] | Designated as Hedging Instrument [Member] | |||||
Derivative financial instruments: | |||||
Derivative maturity date | November 2019 through October 2020 | ||||
Forward Contracts Denominated In Euros Pounds Sterling and South African Rand [Member] | Not Designated as Hedging Instrument [Member] | |||||
Derivative financial instruments: | |||||
Notional principal of foreign exchange contracts | $ 36,300,000 | ||||
Derivative maturity date | November 2019 through October 2020 | ||||
Hurco Automation Ltd [Member] | |||||
Consolidation | |||||
Ownership interest | 35.00% | ||||
Equity investment in affiliate | $ 4,200,000 | $ 4,000,000 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Oct. 31, 2019 | Oct. 31, 2018 |
INVENTORIES | ||
Purchased parts and sub-assemblies | $ 32,074 | $ 38,303 |
Work-in-process | 20,901 | 22,786 |
Finished goods | 95,876 | 76,520 |
Inventories | $ 148,851 | $ 137,609 |
INVENTORIES - Additional inform
INVENTORIES - Additional information (Details) - USD ($) $ in Millions | Oct. 31, 2019 | Oct. 31, 2018 |
INVENTORIES | ||
Finished goods inventory consigned to distributors and agents | $ 12 | $ 9.9 |
ACQUISITION OF BUSINESS (Detail
ACQUISITION OF BUSINESS (Details) - USD ($) $ in Thousands | Aug. 05, 2019 | Oct. 31, 2019 | Oct. 31, 2018 |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | |||
Current assets | $ 349 | ||
Property plant and equipment | 452 | ||
Intangibles | 148 | ||
Goodwill | 3,500 | $ 5,847 | $ 2,377 |
Total assets | 4,449 | ||
Current liabilities | 96 | ||
Total liabilities | 96 | ||
Total purchase price and cash expended | 4,353 | ||
ProCobots [Member] | |||
Business Acquisition [Line Items] | |||
Purchase Consideration | $ 4,400 |
CREDIT AGREEMENTS AND BORROWI_2
CREDIT AGREEMENTS AND BORROWINGS (Narrative) (Details) € in Millions, ¥ in Millions, $ in Millions, $ in Millions | 1 Months Ended | ||||||
Mar. 31, 2019TWD ($) | Dec. 31, 2018USD ($) | Oct. 31, 2019TWD ($) | Oct. 31, 2019CNY (¥) | Oct. 31, 2019EUR (€) | Oct. 31, 2019USD ($) | Mar. 31, 2019CNY (¥) | |
Line Of Credit Agreement 2018 [Member] | |||||||
Line of Credit Facility [Line Items] | |||||||
Line of credit, maximum borrowing capacity | $ 40 | $ 40 | |||||
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 | ||||||
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 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] | |||||||
Line of credit, maximum borrowing capacity | ¥ | ¥ 32.5 | ¥ 32.5 | |||||
Line of credit, maturity date | Mar. 5, 2020 | ||||||
Repayments of Credit Facility | $ 1.4 | ||||||
Taiwan credit facility [Member] | |||||||
Line of Credit Facility [Line Items] | |||||||
Line of credit, maximum borrowing capacity | $ 150 | $ 150 | |||||
Line of credit, maturity date | Mar. 5, 2020 |
FINANCIAL INSTRUMENTS - Fair va
FINANCIAL INSTRUMENTS - Fair value hierarchy (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands | Oct. 31, 2019 | Oct. 31, 2018 |
Fair Value, Inputs, Level 1 [Member] | ||
Assets | ||
Deferred Compensation | $ 1,991 | $ 1,723 |
Liabilities | ||
Deferred Compensation | 0 | |
Fair Value, Inputs, Level 2 [Member] | ||
Assets | ||
Derivatives | 1,391 | 3,085 |
Liabilities | ||
Derivatives | $ 388 | $ 2,020 |
FINANCIAL INSTRUMENTS - Additio
FINANCIAL INSTRUMENTS - Additional Information (Details) - USD ($) $ in Millions | Oct. 31, 2019 | Oct. 31, 2018 |
FINANCIAL INSTRUMENTS | ||
Notional amount of contracts | $ 108.6 | $ 145.2 |
INCOME TAXES (Schedule of Provi
INCOME TAXES (Schedule of Provision for Income Taxes) (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Oct. 31, 2019 | Jul. 31, 2019 | Apr. 30, 2019 | Jan. 31, 2019 | Oct. 31, 2018 | Jul. 31, 2018 | Apr. 30, 2018 | Jan. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
Current: | |||||||||||
U.S. taxes | $ 1,854 | $ 6,333 | $ 308 | ||||||||
Foreign taxes | 3,715 | 5,203 | 4,185 | ||||||||
Current provision for income taxes | 5,569 | 11,536 | 4,493 | ||||||||
Deferred: | |||||||||||
U.S. taxes | (31) | (326) | 1,236 | ||||||||
Foreign taxes | 291 | (204) | (128) | ||||||||
Deferred Income Tax Expense (Benefit), Total | 260 | (530) | 1,108 | ||||||||
Income Tax Expense (Benefit), Total | $ (260) | $ 1,155 | $ 2,481 | $ 2,453 | $ 2,339 | $ 2,511 | $ 1,656 | $ 4,500 | $ 5,829 | $ 11,006 | $ 5,601 |
INCOME TAXES (Schedule of Compa
INCOME TAXES (Schedule of Comparison of Income Tax Expense) (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | ||
Dec. 31, 2017 | Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
Income before income taxes: | ||||
Domestic | $ 9,793 | $ 14,101 | $ 5,477 | |
Foreign | 13,531 | 18,395 | 15,239 | |
Earnings (Loss) before taxes on income | $ 23,324 | $ 32,496 | $ 20,716 | |
Tax rates: | ||||
U.S. statutory rate | 35.00% | 21.00% | 23.00% | 34.00% |
Effect of tax rate of international jurisdictions different than U.S. statutory rates | 4.00% | 2.00% | (5.00%) | |
Valuation allowance | 1.00% | 0.00% | 1.00% | |
State taxes | 1.00% | 0.00% | 0.00% | |
Tax Credits | (2.00%) | (1.00%) | (3.00%) | |
Effect of Tax Rate Changes | 0.00% | 4.00% | 0.00% | |
Transition Tax | (1.00%) | 7.00% | 0.00% | |
US tax on distributed and undistributed earnings | 3.00% | 0.00% | 0.00% | |
US benefit of foreign intangible income | (3.00%) | 0.00% | 0.00% | |
Other | 1.00% | (1.00%) | 0.00% | |
Effective Income Tax Rate Reconciliation, Percent, Total | 25.00% | 34.00% | 27.00% |
INCOME TAXES (Schedule of Defer
INCOME TAXES (Schedule of Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands | Oct. 31, 2019 | Oct. 31, 2018 |
Deferred Tax Assets: | ||
Accrued inventory reserves | $ 1,224 | $ 1,325 |
Accrued warranty expenses | 363 | 499 |
Compensation related expenses | 2,723 | 2,644 |
Unrealized exchange gain/loss | 143 | 159 |
Other accrued expenses | 170 | 170 |
Net operating loss carryforwards | 1,380 | 1,316 |
Other credit carryforwards | 766 | 686 |
Other | 293 | 350 |
Deferred tax assets, gross | 7,062 | 7,149 |
Less: Valuation allowance - net operating loss and other credit carryforwards | (2,227) | (2,106) |
Deferred tax assets | 4,835 | 5,043 |
Deferred Tax Liabilities: | ||
Net derivative instruments | (313) | (208) |
Property and equipment and capitalized software development costs | (2,632) | (2,370) |
Other | (204) | (231) |
Net deferred tax assets | $ 1,686 | $ 2,234 |
INCOME TAXES (Schedule of Incom
INCOME TAXES (Schedule of Income Tax Expense) (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
INCOME TAXES | |||
Unrecognized Tax Benefits, Beginning Balance | $ 180 | $ 1,101 | $ 1,102 |
Additions based on tax positions related to the current year | 36 | 37 | 37 |
Additions (reductions) related to prior year tax positions | (945) | (20) | |
Reductions due to statute expiration | (23) | (18) | (74) |
Other | 5 | 56 | |
Unrecognized Tax Benefits, Ending Balance | $ 193 | $ 180 | $ 1,101 |
INCOME TAXES (Summary of Open T
INCOME TAXES (Summary of Open Tax Years) (Details) | 12 Months Ended | |
Oct. 31, 2019 | ||
United States federal [Member] | ||
Income Tax Contingency [Line Items] | ||
Open tax years | Fiscal 2016 through the current period | |
Germany [Member] | ||
Income Tax Contingency [Line Items] | ||
Open tax years | Fiscal 2017 through the current period | [1] |
Taiwan [Member] | ||
Income Tax Contingency [Line Items] | ||
Open tax years | Fiscal 2017 through the current period | |
[1] | Includes federal as well as state, provincial or similar local jurisdictions, as applicable. |
INCOME TAXES (Narrative) (Detai
INCOME TAXES (Narrative) (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Dec. 31, 2017 | Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
Income Tax Contingency [Line Items] | ||||
Operating Loss Carryforwards, Valuation Allowance | $ 2,227,000 | $ 2,106,000 | ||
Deferred Tax Assets, Operating Loss Carryforwards | 1,380,000 | $ 1,316,000 | ||
Deferred Tax Assets, Operating Loss Carryforwards, Subject to Expiration | $ 5,900,000 | |||
Unrecognized Tax Benefits Expiration Term | expire between July 2020 and August 2023 | |||
Unrecognized tax benefits, interest accrued | $ 32,000 | |||
Deferred Tax Assets for Research and Development Tax Credits | $ 800,000 | |||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 35.00% | 21.00% | 23.00% | 34.00% |
Effective Income Tax Rate Reconciliation, Percent | 25.00% | 34.00% | 27.00% | |
Expirations Within Five Years [Member] | ||||
Income Tax Contingency [Line Items] | ||||
Deferred Tax Assets, Operating Loss Carryforwards, Subject to Expiration | $ 5,200,000 | |||
Expiration maximum term | 5 years | |||
Expirations After Six Years [Member] | ||||
Income Tax Contingency [Line Items] | ||||
Deferred Tax Assets, Operating Loss Carryforwards, Subject to Expiration | $ 700,000 | |||
Expiration minimum term | 5 years | |||
Expiration maximum term | 20 years | |||
Tax Credits [Member] | ||||
Income Tax Contingency [Line Items] | ||||
Deferred Tax Assets, Operating Loss Carryforwards, Subject to Expiration | $ 765,000 | |||
Tax Credits Expiration Term | expire between years 2023 and 2030 |
EMPLOYEE BENEFITS (Narrative) (
EMPLOYEE BENEFITS (Narrative) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
EMPLOYEE BENEFITS | |||
Contributions to defined contribution plans | $ 1.4 | $ 1.2 | $ 1.1 |
STOCK-BASED COMPENSATION (Summa
STOCK-BASED COMPENSATION (Summary of Stock Option Activity and Related Information) (Details) - $ / shares | 12 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
Stock Options | |||
Beginning balance | 37,045 | 78,725 | 107,889 |
Ending balance | 37,045 | 37,045 | 78,725 |
Employee Stock Option [Member] | |||
Stock Options | |||
Options granted | 0 | 0 | 0 |
Options cancelled | 0 | 0 | 0 |
Options Expired | 0 | 0 | 0 |
Options exercised | 0 | (41,680) | (29,164) |
Weighted Average Exercise Price | |||
Beginning balance | $ 21.69 | $ 20.97 | $ 20.25 |
Options granted | 0 | 0 | 0 |
Options cancelled | 0 | 0 | 0 |
Options Expired | 0 | 0 | 0 |
Options exercised | 0 | 20.33 | 18.31 |
Ending balance | $ 21.69 | $ 21.69 | $ 20.97 |
STOCK-BASED COMPENSATION (Sched
STOCK-BASED COMPENSATION (Schedule of Options Outstanding and Exercisable) (Details) | 12 Months Ended |
Oct. 31, 2019shares | |
Outstanding and Exercisable | |
Shares Under Option | 37,045 |
Weighted Average Exercise Price Per Share | 21.69 |
Weighted Average Remaining Contractual Life in Years | 2 years 3 months 18 days |
$ 18.13 [Member] | |
Outstanding and Exercisable | |
Shares Under Option | 3,738 |
Weighted Average Exercise Price Per Share | 18.13 |
Weighted Average Remaining Contractual Life in Years | 6 months |
$ 21.45 [Member] | |
Outstanding and Exercisable | |
Shares Under Option | 21,748 |
Weighted Average Exercise Price Per Share | 21.45 |
Weighted Average Remaining Contractual Life in Years | 2 years 1 month 6 days |
$ 23.30 [Member] | |
Outstanding and Exercisable | |
Shares Under Option | 11,559 |
Weighted Average Exercise Price Per Share | 23.30 |
Weighted Average Remaining Contractual Life in Years | 3 years 1 month 6 days |
STOCK-BASED COMPENSATION (Recon
STOCK-BASED COMPENSATION (Reconciliation of Restricted Stock Activity and Related Information) (Details) | 12 Months Ended |
Oct. 31, 2019$ / sharesshares | |
Number of Shares | |
Unvested at October 31, 2018 | shares | 168,348 |
Restricted stock 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 October 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 October 31, 2019 | $ / shares | $ 39.62 |
STOCK-BASED COMPENSATION (Narra
STOCK-BASED COMPENSATION (Narrative) (Details) - USD ($) | Mar. 14, 2019 | Jan. 02, 2019 | Nov. 14, 2018 | Mar. 15, 2018 | Jan. 03, 2018 | Nov. 15, 2017 | Mar. 09, 2017 | Jan. 05, 2017 | Mar. 10, 2016 | Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 |
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 | |||||||||||
Unrecognized Stock-based compensation expense | $ 3,200,000 | |||||||||||
Restricted stock granted | 102,349 | |||||||||||
Grant date fair value per share | $ 38.28 | |||||||||||
Grant date fair value of restricted stock | $ 39.62 | $ 37.24 | ||||||||||
Total intrinsic value of stock options exercised | $ 0 | $ 847,000 | $ 771,000 | |||||||||
Total intrinsic value of outstanding stock options vested and expected to vest and intrinsic value of options outstanding and exercisable | 485,000 | |||||||||||
2016 Equity Plan [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Expiration period of options granted | 10 years | |||||||||||
Stock-based compensation expense | $ 2,700,000 | $ 2,500,000 | $ 1,700,000 | |||||||||
2008 Equity Plan [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant | 386,048 | |||||||||||
Time Based [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Vesting period | 3 years | 3 years | ||||||||||
Percentage of incentive compensation arrangement | 25.00% | 25.00% | 25.00% | |||||||||
Time Based [Member] | 2016 Equity Plan [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Restricted stock granted | 11,824 | 21,825 | 7,200 | 9,114 | 14,810 | 2,364 | 14,920 | 14,747 | ||||
Grant date fair value per share | $ 40.58 | $ 36.08 | $ 40.01 | $ 46.05 | $ 42.20 | $ 42.30 | $ 26.80 | |||||
Grant date fair value of restricted stock | $ 33.90 | |||||||||||
Vesting period | 1 year | 3 years | 3 years | 1 year | 3 years | 3 years | 1 year | 3 years | ||||
Performance Based [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Restricted stock granted | 32,559 | 23,299 | 30,683 | |||||||||
Grant date fair value of restricted stock | $ 36.08 | $ 42.20 | $ 33.90 | |||||||||
Vesting period | 3 years | |||||||||||
Performance period | 3 years | 3 years | ||||||||||
Percentage of incentive compensation arrangement | 75.00% | 75.00% | 75.00% | |||||||||
Performance Based [Member] | Performance Shares TSR [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Percentage of incentive compensation arrangement | 40.00% | 40.00% | 40.00% | |||||||||
Performance Based [Member] | Performance Shares TSR [Member] | 2016 Equity Plan [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Restricted stock granted | 30,943 | 21,891 | 18,496 | |||||||||
Grant date fair value per share | $ 43.25 | |||||||||||
Grant date fair value of restricted stock | $ 40.72 | $ 45.68 | ||||||||||
Vesting period | 3 years | 3 years | 3 years | |||||||||
Performance Based [Member] | Performance Shares 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% | 200.00% | 200.00% | |||||||||
Performance Based [Member] | Performance Shares 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% | 50.00% | 50.00% | |||||||||
Performance Based [Member] | Performance Shares ROIC [Member] | 2016 Equity Plan [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Restricted stock granted | 30,557 | 20,734 | 20,647 | |||||||||
Grant date fair value of restricted stock | $ 36.08 | $ 42.20 | $ 33.90 | |||||||||
Vesting period | 3 years | 3 years | ||||||||||
Percentage of incentive compensation arrangement | 35.00% | 35.00% | 35.00% | |||||||||
Performance Based [Member] | Performance Shares 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% | 200.00% | 200.00% | |||||||||
Performance Based [Member] | Performance Shares 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% | 50.00% | 50.00% |
RELATED PARTY TRANSACTIONS (Nar
RELATED PARTY TRANSACTIONS (Narrative) (Details) - USD ($) | 12 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
Related Party Transaction [Line Items] | |||
Accounts Payable, Related Parties, Current | $ 938,000 | $ 3,387,000 | |
Hurco Automation Ltd [Member] | |||
Related Party Transaction [Line Items] | |||
Equity Method Investment, Ownership Percentage | 35.00% | ||
Equity Method Investments | $ 4,200,000 | 4,000,000 | |
Related Party Transaction, Purchases from Related Party | 8,500,000 | 11,300,000 | $ 10,000,000 |
Revenue from Related Parties | 198,000 | 197,000 | $ 139,000 |
Accounts Payable, Related Parties, Current | 938,000,000,000 | 3,400,000 | |
Accounts Receivable, Related Parties, Current | $ 22,000 | $ 68,000 |
RELATED PARTY TRANSACTIONS (Sch
RELATED PARTY TRANSACTIONS (Schedule of unaudited financial information for HAL's operations and financial conditions ) (Details) - Hurco Automation Ltd [Member] - USD ($) $ in Thousands | 12 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
Related Party Transaction [Line Items] | |||
Net Sales | $ 15,957 | $ 17,841 | $ 15,800 |
Gross Profit | 2,322 | 2,944 | 2,457 |
Operating Income | 992 | 1,534 | 1,037 |
Net Income | 1,490 | 1,845 | 1,320 |
Current Assets | 12,019 | 12,870 | 11,310 |
Non-current Assets | 5,560 | 4,579 | 4,440 |
Current Liabilities | $ 3,674 | $ 4,666 | $ 3,916 |
GUARANTEES AND PRODUCT WARRAN_3
GUARANTEES AND PRODUCT WARRANTIES - Reconciliation of the changes in warranty reserve (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
GUARANTEES AND PRODUCT WARRANTIES | |||
Balance, beginning of period | $ 2,497 | $ 1,772 | $ 1,523 |
Provision for warranties during the period | 2,246 | 4,121 | 3,379 |
Charges to the reserve | (2,991) | (3,326) | (3,203) |
Impact of foreign currency translation | 8 | (70) | 73 |
Balance, end of period | $ 1,760 | $ 2,497 | $ 1,772 |
GUARANTEES AND PRODUCT WARRAN_4
GUARANTEES AND PRODUCT WARRANTIES - Additional Information (Details) $ in Millions | 12 Months Ended |
Oct. 31, 2019USD ($) | |
GUARANTEES AND PRODUCT WARRANTIES | |
Number Of Guarantees | 21 |
Guarantor Obligations, Maximum Exposure, Undiscounted | $ 0.5 |
Term of Product Warranty | 1 year |
OPERATING LEASES (Schedule of f
OPERATING LEASES (Schedule of future payments required under operating leases) (Details) $ in Thousands | Oct. 31, 2019USD ($) |
OPERATING LEASES | |
2020 | $ 4,015 |
2021 | 3,149 |
2022 | 2,224 |
2023 | 1,482 |
2024 and thereafter | 2,531 |
Total | $ 13,401 |
OPERATING LEASES (Narrative) (D
OPERATING LEASES (Narrative) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
OPERATING LEASES | |||
Lease expense | $ 5.1 | $ 4.5 | $ 4.4 |
QUARTERLY FINANCIAL INFORMATI_3
QUARTERLY FINANCIAL INFORMATION (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Oct. 31, 2019 | Jul. 31, 2019 | Apr. 30, 2019 | Jan. 31, 2019 | Oct. 31, 2018 | Jul. 31, 2018 | Apr. 30, 2018 | Jan. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
QUARTERLY FINANCIAL INFORMATION | |||||||||||
Sales and service fees | $ 59,989 | $ 58,501 | $ 70,674 | $ 74,213 | $ 83,051 | $ 78,752 | $ 70,424 | $ 68,444 | $ 263,377 | $ 300,671 | $ 243,667 |
Gross profit | $ 16,240 | $ 17,189 | $ 21,637 | $ 22,142 | $ 27,851 | $ 24,521 | $ 19,313 | $ 20,121 | 77,208 | 91,806 | 70,564 |
Gross profit margin | 27.00% | 29.00% | 31.00% | 30.00% | 34.00% | 31.00% | 27.00% | 29.00% | |||
Selling, general and administrative expenses | $ 14,051 | $ 12,592 | $ 14,111 | $ 13,914 | $ 16,564 | $ 15,160 | $ 13,320 | $ 12,966 | 54,668 | 58,010 | 49,661 |
Operating income | 2,189 | 4,597 | 7,526 | 8,228 | 11,287 | 9,361 | 5,993 | 7,155 | 22,540 | 33,796 | 20,903 |
Provision for income taxes | (260) | 1,155 | 2,481 | 2,453 | 2,339 | 2,511 | 1,656 | 4,500 | 5,829 | 11,006 | 5,601 |
Net income | $ 2,098 | $ 3,491 | $ 5,252 | $ 6,654 | $ 8,302 | $ 6,500 | $ 3,751 | $ 2,937 | $ 17,495 | $ 21,490 | $ 15,115 |
Income per common share - basic (in dollars per share) | $ 0.31 | $ 0.51 | $ 0.77 | $ 0.98 | $ 1.24 | $ 0.96 | $ 0.55 | $ 0.44 | $ 2.57 | $ 3.19 | $ 2.27 |
Income per common share - diluted (in dollars per share) | $ 0.31 | $ 0.51 | $ 0.76 | $ 0.97 | $ 1.22 | $ 0.95 | $ 0.55 | $ 0.43 | $ 2.55 | $ 3.15 | $ 2.25 |
SEGMENT INFORMATION (Schedule o
SEGMENT INFORMATION (Schedule of Net Sales and Service Fees by Product Category) (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||||
Oct. 31, 2019 | Jul. 31, 2019 | Apr. 30, 2019 | Jan. 31, 2019 | Oct. 31, 2018 | Jul. 31, 2018 | Apr. 30, 2018 | Jan. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | ||
Revenue from External Customer [Line Items] | ||||||||||||
Net Sales and Service Fees | $ 59,989 | $ 58,501 | $ 70,674 | $ 74,213 | $ 83,051 | $ 78,752 | $ 70,424 | $ 68,444 | $ 263,377 | $ 300,671 | $ 243,667 | |
Computerized Machine Tools [Member] | ||||||||||||
Revenue from External Customer [Line Items] | ||||||||||||
Net Sales and Service Fees | 223,735 | 261,710 | 209,311 | |||||||||
Computer Control Systems and Software [Member] | ||||||||||||
Revenue from External Customer [Line Items] | ||||||||||||
Net Sales and Service Fees | [1] | 2,818 | 2,870 | 2,324 | ||||||||
Service Parts [Member] | ||||||||||||
Revenue from External Customer [Line Items] | ||||||||||||
Net Sales and Service Fees | 27,854 | 27,501 | 24,255 | |||||||||
Service Fees [Member] | ||||||||||||
Revenue from External Customer [Line Items] | ||||||||||||
Net Sales and Service Fees | $ 8,970 | $ 8,590 | $ 7,777 | |||||||||
[1] | Amounts shown do not include computer control systems and software sold as an integrated component of computerized machine systems. |
SEGMENT INFORMATION (Schedule_2
SEGMENT INFORMATION (Schedule of Revenues by Geographic Area) (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Oct. 31, 2019 | Jul. 31, 2019 | Apr. 30, 2019 | Jan. 31, 2019 | Oct. 31, 2018 | Jul. 31, 2018 | Apr. 30, 2018 | Jan. 31, 2018 | Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | $ 59,989 | $ 58,501 | $ 70,674 | $ 74,213 | $ 83,051 | $ 78,752 | $ 70,424 | $ 68,444 | $ 263,377 | $ 300,671 | $ 243,667 |
United States of America [Member] | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 95,196 | 87,231 | 70,912 | ||||||||
Canada [Member] | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 2,580 | 2,915 | 3,801 | ||||||||
Central & South America [Member] | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 1,409 | 2,194 | 1,844 | ||||||||
Total Americas [Member] | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 99,185 | 92,340 | 76,557 | ||||||||
Germany [Member] | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 52,002 | 62,346 | 48,786 | ||||||||
United Kingdom [Member] | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 29,349 | 34,216 | 28,019 | ||||||||
Italy [Member] | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 14,772 | 16,691 | 13,416 | ||||||||
France [Member] | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 14,346 | 15,815 | 13,917 | ||||||||
Other Europe [Member] | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 20,028 | 32,034 | 27,583 | ||||||||
Total Europe [Member] | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 130,497 | 161,102 | 131,721 | ||||||||
China [Member] | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 15,706 | 27,748 | 22,456 | ||||||||
Other Asia Pacific [Member] | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 16,858 | 17,937 | 10,238 | ||||||||
Asia Pacific [Member] | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | 32,564 | 45,685 | 32,694 | ||||||||
Foreign [Member] | |||||||||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||||||||
Revenues | $ 1,131 | $ 1,544 | $ 2,695 |
SEGMENT INFORMATION (Schedule_3
SEGMENT INFORMATION (Schedule of Long-Lived Tangible Assets and net assets, Net by Geographic Area) (Details) - USD ($) $ in Thousands | Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 |
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Long-Lived Assets | $ 15,973 | $ 14,992 | $ 13,784 |
Net Assets | 240,245 | 222,853 | 203,085 |
United States of America [Member] | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Long-Lived Assets | 7,967 | 8,375 | 7,599 |
Foreign [Member] | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Long-Lived Assets | 8,006 | 6,617 | 6,185 |
Americas [Member] | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Net Assets | 103,863 | 96,348 | 86,432 |
Total Europe [Member] | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Net Assets | 71,411 | 74,558 | 70,536 |
Asia Pacific [Member] | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Net Assets | $ 64,971 | $ 51,947 | $ 46,117 |
NEW ACCOUNTING PRONOUNCEMENTS (
NEW ACCOUNTING PRONOUNCEMENTS (Narrative) (Details) - Accounting Standards Update 2016-09 [Member] - USD ($) $ in Millions | Nov. 01, 2019 | Oct. 31, 2019 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating Lease, Weighted Average Remaining Lease Term | 3 years 1 month 6 days | |
Subsequent Event [Member] | Minimum [Member] | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating Lease, Liability | $ 12 | |
Operating Lease, Right-of-Use Asset | 12 | |
Subsequent Event [Member] | Maximum [Member] | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating Lease, Liability | 14 | |
Operating Lease, Right-of-Use Asset | $ 14 |
Schedule II - Valuation and Q_2
Schedule II - Valuation and Qualifying Accounts and Reserves (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Oct. 31, 2019 | Oct. 31, 2018 | Oct. 31, 2017 | ||
Schedule II - Valuation and Qualifying Accounts and Reserves | ||||
Allowance for Doubtful Accounts Receivable, Beginning Balance | $ 1,027 | $ 639 | $ 664 | |
Charged to Costs and Expenses | 394 | 46 | ||
Recovered from Costs and Expenses | (136) | |||
Deductions | [1] | 6 | 71 | |
Allowance for Doubtful Accounts Receivable, Ending Balance | 891 | 1,027 | 639 | |
Income tax valuation allowance Balance at Beginning of Period | 2,106 | 2,282 | 2,067 | |
Charged to/ (Recovered from) Costs and Expenses | 458 | 253 | 515 | |
Deductions | 337 | 429 | 300 | |
Income tax valuation allowance Balance at End of Period | $ 2,227 | $ 2,106 | $ 2,282 | |
[1] | Receivable write-offs |