HURCO COMPANIES INC [HURC] Filings

10-Q 1 hurc-20240731x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

⌧ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended July 31, 2024 or

◻ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _________ to _________.

Commission File No. 0-9143

HURCO COMPANIES, INC.

(Exact name of registrant as specified in its charter)

Indiana		35-1150732
(State or other jurisdiction of		(I.R.S. Employer Identification Number)
incorporation or organization)

One Technology Way
Indianapolis, Indiana		46268
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code (317) 293-5309

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	HURC	The Nasdaq Stock Market LLC

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ◻	Accelerated filer ⌧
Non-accelerated filer ◻	Smaller reporting company ⌧
Emerging growth company ◻

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ◻ No ⌧

The number of shares of the Registrant’s common stock outstanding as of August 30, 2024 was 6,449,494.

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HURCO COMPANIES, INC.

Form 10-Q Quarterly Report for Fiscal Quarter Ended July 31, 2024

Table of Contents

Part I - Financial Information

Item 1.	Financial Statements

	Condensed Consolidated Statements of Operations Three and Nine Months Ended July 31, 2024 and 2023	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) Three and Nine Months Ended July 31, 2024 and 2023	4

	Condensed Consolidated Balance Sheets as of July 31, 2024 and October 31, 2023	5

	Condensed Consolidated Statements of Cash Flows Three and Nine Months Ended July 31, 2024 and 2023	6

	Condensed Consolidated Statements of Changes in Shareholders’ Equity Three and Nine Months Ended July 31, 2024 and 2023	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	29

Part II - Other Information

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 5.	Other Information	30

Item 6.	Exhibits	31

Signatures		32

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PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

HURCO COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2024		2023		2024		2023

		(unaudited)				(unaudited)
Sales and service fees	$	42,651	$	53,201	$	132,882	$	161,702

Cost of sales and service		34,808		39,753		107,325		122,953

Gross profit		7,843		13,448		25,557		38,749

Selling, general and administrative expenses		10,376		12,436		33,352		35,512

Operating (loss) income		(2,533)		1,012		(7,795)		3,237

Interest expense		159		88		426		159

Interest income		172		122		492		259

Investment income, net		59		11		126		47

Other (expense) income, net		(136)		(412)		(1,125)		(131)

(Loss) income before income taxes		(2,597)		645		(8,728)		3,253

Provision for income taxes		6,999		385		6,438		1,286

Net (loss) income	$	(9,596)	$	260	$	(15,166)	$	1,967

(Loss) income per common share

Basic	$	(1.47)	$	0.04	$	(2.33)	$	0.30
Diluted	$	(1.47)	$	0.04	$	(2.33)	$	0.30

Weighted average common shares outstanding

Basic		6,513		6,462		6,505		6,511
Diluted		6,513		6,469		6,505		6,538

Dividends paid per share	$	—	$	0.16	$	0.32	$	0.47

The accompanying notes are an integral part of the condensed consolidated financial statements.

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HURCO COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)


	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2024		2023		2024		2023

		(unaudited)				(unaudited)
Net (loss) income	$	(9,596)	$	260	$	(15,166)	$	1,967

Other comprehensive (loss) income:

Translation (loss) gain of foreign currency financial statements		1,085		(1,315)		1,601		8,346

(Gain) / loss on derivative instruments reclassified into operations, net of tax (expense) / benefit of $112, $(35), $297, and $(75), respectively		373		(117)		992		(249)

Gain / (loss) on derivative instruments, net of tax expense / (benefit) of $(74), $(128), $(261) and $(430), respectively		(248)		(429)		(870)		(1,442)

Total other comprehensive (loss) income		1,210		(1,861)		1,723		6,655

Comprehensive (loss) income	$	(8,386)	$	(1,601)	$	(13,443)	$	8,622

The accompanying notes are an integral part of the condensed consolidated financial statements.

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HURCO COMPANIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	July 31,		October 31,
	2024		2023
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	36,054	$	41,784
Accounts receivable, net		25,128		39,965
Inventories, net		164,170		157,952
Derivative assets		83		740
Prepaid and other assets		7,777		7,789
Total current assets		233,212		248,230
Property and equipment:
Land		1,046		1,046
Building		7,387		7,387
Machinery and equipment		26,056		26,779
Leasehold improvements		4,545		4,473
		39,034		39,685
Less accumulated depreciation and amortization		(31,843)		(30,826)
Total property and equipment, net		7,191		8,859
Non–current assets:
Software development costs, less accumulated amortization		7,076		7,030
Intangible assets, net		798		994
Operating lease - right of use assets, net		12,158		10,971
Deferred income taxes		1,237		4,749
Investments and other assets		10,704		9,756
Total non–current assets		31,973		33,500
Total assets	$	272,376	$	290,589
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	26,938	$	29,661
Customer deposits		4,341		2,827
Derivative liabilities		1,856		1,821
Operating lease liabilities		3,924		3,712
Accrued payroll and employee benefits		7,985		9,853
Accrued income taxes		830		1,713
Accrued expenses		4,283		4,092
Accrued warranty expenses		1,076		1,294
Total current liabilities		51,233		54,973
Non–current liabilities:
Deferred income taxes		59		83
Accrued tax liability		701		1,293
Operating lease liabilities		8,602		7,606
Deferred credits and other		5,156		4,403
Total non–current liabilities		14,518		13,385
Shareholders’ equity:
Preferred stock: no par value per share, 1,000,000 shares authorized; no shares issued		—		—
Common stock: no par value, $.10 stated value per share, 12,500,000 shares authorized; 6,607,060 and 6,553,673 shares issued and 6,493,846 and 6,462,138 shares outstanding, as of July 31, 2024 and October 31, 2023, respectively		649		646
Additional paid-in capital		61,919		61,665
Retained earnings		162,865		180,124
Accumulated other comprehensive loss		(18,808)		(20,204)
Total shareholders’ equity		206,625		222,231
Total liabilities and shareholders’ equity	$	272,376	$	290,589

The accompanying notes are an integral part of the condensed consolidated financial statements.

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HURCO COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2024		2023		2024		2023

		(unaudited)				(unaudited)
Cash flows from operating activities:
Net (loss) income	$	(9,596)	$	260	$	(15,166)	$	1,967
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Provision for doubtful accounts		20		(33)		(40)		29
Deferred income taxes		(3,395)		(68)		(3,536)		233
Deferred income tax valuation allowance		8,158		—		8,158		—
Equity in (income) loss of affiliates		(181)		(117)		(268)		(339)
Foreign currency (gain) loss		(571)		(144)		(1,177)		(2,387)
Unrealized (gain) loss on derivatives		(418)		272		821		322
Depreciation and amortization		888		1,037		2,678		3,141
Stock–based compensation		269		756		1,080		2,280
Change in assets and liabilities:
(Increase) decrease in accounts receivable		2,141		1,518		15,377		7,472
(Increase) decrease in inventories		1,386		(4,150)		(2,357)		(14,621)
(Increase) decrease in prepaid expenses		1,344		206		(1,068)		(2,450)
Increase (decrease) in accounts payable		(524)		(8,187)		(2,860)		(5,981)
Increase (decrease) in customer deposits		1,049		(309)		1,442		404
Increase (decrease) in accrued expenses		(484)		(227)		(3)		(2,154)
Increase (decrease) in accrued payroll and employee benefits		393		384		(1,865)		(2,420)
Increase (decrease) in accrued income tax		(365)		(257)		(909)		(1,237)
Increase (decrease) in accrued tax liability		4		—		(591)		—
Net change in derivative assets and liabilities		(527)		115		(633)		715
Other		(213)		(203)		(395)		(1,156)
Net cash provided by (used for) operating activities		(622)		(9,147)		(1,312)		(16,182)

Cash flows from investing activities:
Proceeds from sale of property and equipment		1		—		26		1
Purchase of property and equipment		(219)		(154)		(793)		(811)
Software development costs		(516)		(191)		(1,253)		(940)
Other investments		—		—		117		273
Net cash provided by (used for) investing activities		(734)		(345)		(1,903)		(1,477)

Cash flows from financing activities:
Proceeds from exercise of common stock options		—		—		—		270
Dividends paid		—		(1,059)		(2,093)		(3,093)
Taxes paid related to net settlement of restricted shares		—		—		(315)		(313)
Stock repurchases		(508)		—		(508)		(4,609)
Net cash provided by (used for) financing activities		(508)		(1,059)		(2,916)		(7,745)

Effect of exchange rate changes on cash and cash equivalents		376		(574)		401		2,512

Net decrease in cash and cash equivalents		(1,488)		(11,125)		(5,730)		(22,892)

Cash and cash equivalents at beginning of period		37,542		52,155		41,784		63,922

Cash and cash equivalents at end of period	$	36,054	$	41,030	$	36,054	$	41,030

The accompanying notes are an integral part of the condensed consolidated financial statements.

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HURCO COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands, except shares outstanding)


	Three Months Ended July 31, 2024 and 2023
								Accumulated
	Common Stock			Additional				Other
	Shares			Paid–in		Retained		Comprehensive
(unaudited)	Outstanding	Amount		Capital		Earnings		Income (Loss)		Total
Balances, April 30, 2023	6,462,138	$	646	$	60,518	$	179,550	$	(13,009)	$	227,705
Net income (loss)	—		—		—		260		—		260
Other comprehensive income (loss)	—		—		—		—		(1,861)		(1,861)
Stock–based compensation expense, net of taxes withheld for vested restricted shares	—		—		756		—		—		756
Dividends paid	—		—		—		(1,059)		—		(1,059)
Balances, July 31, 2023	6,462,138	$	646	$	61,274	$	178,751	$	(14,870)	$	225,801

Balances, April 30, 2024	6,523,259	$	652	$	62,155	$	172,461	$	(19,691)	$	215,577
Net income (loss)	—		—		—		(9,596)		—		(9,596)
Other comprehensive income (loss)	—		—		—		—		1,210		1,210
Deferred income tax valuation allowances									(327)		(327)
Stock–based compensation expense, net of taxes withheld for vested restricted shares	—		—		269		—		—		269
Stock repurchases	(29,413)		(3)		(505)		—		—		(508)
Balances, July 31, 2024	6,493,846	$	649	$	61,919	$	162,865	$	(18,808)	$	206,625


	Nine Months Ended July 31, 2024 and 2023
								Accumulated
	Common Stock			Additional				Other
	Shares			Paid–in		Retained		Comprehensive
(unaudited)	Outstanding	Amount		Capital		Earnings		Income (Loss)		Total
Balances, October 31, 2022	6,566,994	$	657	$	63,635	$	179,877	$	(21,525)	$	222,644
Net income (loss)	—		—		—		1,967		—		1,967
Other comprehensive income (loss)	—		—		—		—		6,655		6,655
Stock–based compensation expense, net of taxes withheld for vested restricted shares	49,874		5		1,962		—		—		1,967
Exercise of common stock options	11,559		1		269		—		—		270
Stock repurchases	(166,289)		(17)		(4,592)		—		—		(4,609)
Dividends paid	—		—		—		(3,093)		—		(3,093)
Balances, July 31, 2023	6,462,138	$	646	$	61,274	$	178,751	$	(14,870)	$	225,801

Balances, October 31, 2023	6,462,138	$	646	$	61,665	$	180,124	$	(20,204)	$	222,231
Net income (loss)	—		—		—		(15,166)		—		(15,166)
Other comprehensive income (loss)	—		—		—		—		1,723		1,723
Deferred income tax valuation allowances									(327)		(327)
Stock–based compensation expense, net of taxes withheld for vested restricted shares	61,121		6		759		—		—		765
Stock repurchases	(29,413)		(3)		(505)		—		—		(508)
Dividends paid	—		—		—		(2,093)		—		(2,093)
Balances, July 31, 2024	6,493,846	$	649	$	61,919	$	162,865	$	(18,808)	$	206,625

The accompanying notes are an integral part of the condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. GENERAL

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

We design, manufacture, and sell computerized (i.e., Computer Numeric Control (“CNC”)) machine tools, consisting primarily of vertical machining centers (mills) and turning centers (lathes), to companies in the metal cutting industry through a worldwide sales, service, and distribution network. Although most of our computer control systems and software products are proprietary, they predominantly use industry standard personal computer components. Our computer control systems and software products are primarily sold as integral components of our computerized machine tool products. We also provide machine tool components, automation integration equipment and solutions for job shops, software options, control upgrades, accessories and replacement parts for our products, as well as customer service, training, and applications support.

The condensed consolidated financial information as of July 31, 2024 and for the three and nine months ended July 31, 2024 and July 31, 2023 is unaudited. However, in our opinion, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position, results of operations, changes in shareholders’ equity, and cash flows for and at the end of the interim periods. We suggest that you read these Condensed Consolidated Financial Statements in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended October 31, 2023.

2. REVENUE RECOGNITION

We design, manufacture, and sell computerized machine tools. Our computer control systems and software products are primarily sold as integral components of our computerized machine tool products. We also provide machine tool components, automation integration equipment and solutions for job shops, software options, control upgrades, accessories and replacement parts for our products, as well as customer service, training, and applications support.

We recognize revenues from the sale of machine tools, components and accessories, and services and reflect the consideration to which we expect to be entitled. We record revenues based on a five-step model in accordance with Financial Accounting Standards Board (“FASB”) guidance codified in Accounting Standard Codification (“ASC”) 606, “Revenue from Contracts with Customers” (“ASC 606”). In accordance with ASC 606, we have defined contracts as agreements with our customers and distributors in the form of purchase orders, packing or shipping documents, invoices, and, periodically, verbal requests for components and accessories. For each contract, we identify our performance obligations, which are delivering goods or services, determine the transaction price, allocate the contract transaction price to each of the performance obligations (when applicable), and recognize the revenue when (or as) the performance obligation to the customer is fulfilled.

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

Depending upon geographic location, after shipment, a machine may be installed at the customer’s facility by a distributor, independent contractor, or by one of our service technicians. In most instances, where a machine is sold through a distributor, we have no installation involvement. If sales are direct or through sales agents, we will typically complete the machine installation, which consists of the reassembly of certain parts that were removed for shipping and the re-testing of the machine to ensure that it is performing within the standard operating specifications. We consider the machine installation process for our three-axis machines to be inconsequential and immaterial within the context of the contract. For our five-axis machines and automation systems that we install, we estimate the fair value of the installation performance obligation and recognize that installation revenue over the period of the installation process.

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From time to time, and depending upon geographic location, we may provide training or freight services. We consider these services to be immaterial within the context of the contract, as the value of these services typically does not rise to a material level as a component of the total contract value. Service fees from maintenance contracts are deferred and recognized in earnings 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.

3. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

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

Derivatives Designated as Hedging Instruments

We enter into foreign currency forward exchange contracts periodically to hedge certain forecasted inter-company sales and purchases denominated in the following foreign currencies: the Pound Sterling, Euro and New Taiwan Dollar. The purpose of these instruments is to mitigate the risk that the U.S. dollar net cash inflows and outflows resulting from sales and purchases denominated in foreign currencies will be adversely affected by changes in exchange rates. These forward contracts have been designated as cash flow hedge instruments and are recorded in the Condensed Consolidated Balance Sheets at fair value in Derivative assets and Derivative liabilities. The effective portion of the gains and losses resulting from the changes in the fair value of these hedge contracts is deferred in Accumulated other comprehensive income (loss) and recognized as an adjustment to Cost of sales and service in the period that the corresponding inventory sold that is the subject of the related hedge contract is recognized, thereby providing an offsetting economic impact against the corresponding change in the U.S. dollar value of the inter-company sale or purchase being hedged. The ineffective portion of gains and losses resulting from the changes in the fair value of these hedge contracts is immediately reported in Other income (expense), net. We perform quarterly assessments of hedge effectiveness by verifying and documenting the critical terms of the hedge instrument and determining that forecasted transactions have not changed significantly. We also assess on a quarterly basis whether there have been adverse developments regarding the risk of a counterparty default.

We had forward contracts outstanding as of July 31, 2024, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from August 2024 through July 2025. The contract amounts, expressed at forward rates in U.S. dollars at July 31, 2024, were $7.5 million for Euros, $4.5 million for Pounds Sterling, and $14.6 million for New Taiwan Dollars. At July 31, 2024, we had $0.9 million of loss, net of tax, related to cash flow hedges deferred in Accumulated other comprehensive income (loss). Included in this amount was $0.6 million of unrealized loss, net of tax, related to cash flow hedge instruments that remain subject to currency fluctuation risk. The majority of these deferred gains will be recorded as an adjustment to Cost of sales and service in periods through July 2025, when the corresponding inventory that is the subject of the related hedge contracts is sold, as described above.

We are also exposed to foreign currency exchange risk related to our investment in net assets in foreign countries. To manage this risk, we entered into a forward contract with a notional amount of €3.0 million in November 2023. We designated this forward contract as a hedge of our net investment in Euro denominated assets. We selected the forward method under FASB guidance related to the accounting for derivative instruments and hedging activities. The forward method requires all changes in the fair value of the contract to be reported as a cumulative translation adjustment in Accumulated other comprehensive income (loss), net of tax, in the same manner as the underlying hedged net assets. This forward contract matures in November 2024. As of July 31, 2024, we had a realized gain of $1.2 million and an immaterial amount of unrealized loss, net of tax, recorded as cumulative translation adjustments in Accumulated other comprehensive loss related to this forward contract.

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Derivatives Not Designated as Hedging Instruments

We also enter into foreign currency forward exchange contracts to protect against the effects of foreign currency fluctuations on inter-company receivables, payables and loans denominated in foreign currencies. These derivative instruments are not designated as hedges under FASB guidance and, as a result, changes in their fair value are reported currently in Other (expense) income, net in the Condensed Consolidated Statements of Operations consistent with the transaction gain or loss on the related receivables and payables denominated in foreign currencies.

We had forward contracts outstanding as of July 31, 2024, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from August 2024 through February 2025. The contract amounts, expressed at forward rates in U.S. dollars at July 31, 2024, totaled $52.9 million.

Fair Value of Derivative Instruments

We recognize the fair value of derivative instruments as assets and liabilities on a gross basis on our Condensed Consolidated Balance Sheets. As of July 31, 2024 and October 31, 2023, all derivative instruments were recorded at fair value on our Condensed Consolidated Balance Sheets as follows (in thousands):


	July 31, 2024			October 31, 2023
	Balance Sheet	Fair		Balance Sheet	Fair
Derivatives	Location	Value		Location	Value
Designated as Hedging Instruments:
Foreign exchange forward contracts	Derivative assets	$	48	Derivative assets	$	363
Foreign exchange forward contracts	Derivative liabilities	$	798	Derivative liabilities	$	1,232

Not Designated as Hedging Instruments:
Foreign exchange forward contracts	Derivative assets	$	35	Derivative assets	$	377
Foreign exchange forward contracts	Derivative liabilities	$	1,058	Derivative liabilities	$	589

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

Derivative instruments had the following effects on our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Changes in Shareholders’ Equity, and Condensed Consolidated Statements of Operations, net of tax, during the three months ended July 31, 2024 and 2023 (in thousands):


					Location of Gain	Amount of Gain
	Amount of Gain (Loss)				(Loss) Reclassified	(Loss) Reclassified
	Recognized in Other				from Other	from Other
	Comprehensive				Comprehensive	Comprehensive
Derivatives	Income (Loss)				Income (Loss)	Income (Loss)
	Three Months Ended					Three Months Ended
	July 31,					July 31,
	2024		2023			2024		2023
Designated as Hedging Instruments:
(Effective portion)
Foreign exchange forward contracts – Intercompany sales/purchases	$	(248)	$	(429)	Cost of sales and service	$	(373)	$	117
Foreign exchange forward contract – Net investment	$	(20)	$	14

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We did not recognize any gains or losses as a result of hedges deemed ineffective for either of the three months ended July 31, 2024 or 2023. We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the three months ended July 31, 2024 and 2023 on derivative instruments not designated as hedging instruments (in thousands):


		Location of Gain