UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 5, 2010
FARO TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
| Florida | 0-23081 | 59-3157093 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
250 Technology Park, Lake Mary, Florida 32746
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (407) 333-9911
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On May 5, 2010, FARO Technologies, Inc. (the “Company”) issued a press release announcing its results of operations for the first fiscal quarter ended April 3, 2010. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
The information furnished pursuant to Item 2.02 and Exhibit 99.1 of this Current Report on Form 8-K shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. The information in this Current Report shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Current Report, regardless of any general incorporation language in the filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are furnished with this Current Report on Form 8-K:
| Exhibit |
Description | |
| 99.1 | Press release dated May 5, 2010. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FARO Technologies, Inc. (Registrant) | ||||
| May 5, 2010 | /s/ Keith Bair | |||
| By: | Keith Bair | |||
| Its: | Chief Financial Officer | |||
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Press release dated May 5, 2010. | |
Exhibit 99.1
Keith Bair, Senior Vice President and CFO
keith.bair@FARO.com, 407-333-9911
FARO Reports First Quarter 2010 Sales Growth of 34.4%
Orders Growth of 45.3%
Net Income of $2.1 million
LAKE MARY, FL, May 5, 2010 – FARO Technologies, Inc. (NASDAQ: FARO) today announced results for the first quarter ended April 3, 2010. Sales in the first quarter of 2010 increased 34.4%, to $42.3 million, from $31.4 million in the first quarter of 2009. The Company reported net income of $2.1 million, or $0.13 per share, compared to a net loss of $0.41 per share in the first quarter of 2009.
New order bookings for the first quarter of 2010 were $39.8 million, an increase of $12.4 million, or 45.3%, compared to $27.4 million in the first quarter of 2009.
“All three regions posted strong double-digit sales growth in the first quarter. Even more encouraging was our new orders growth rate of 45%, driven by a 79% increase in Asia and a 60% increase in the Americas. Overall, our top line performance in the first quarter was the result of continued momentum in our end-markets and improved productivity from our sales team,” stated Jay Freeland, FARO’s President and CEO.
Gross margin for the first quarter of 2010 was 60.1%, compared to 51.7% in the first quarter of 2009. Gross margin increased primarily due to an increase in the proportion of higher margin product sales relative to lower margin service revenue.
Selling expenses as a percentage of sales decreased to 26.6% in the first quarter of 2010 from 40.8% in the first quarter of 2009, primarily as a result of an increase in sales and lower compensation costs. Selling expenses in the first quarter of 2010 decreased by $1.6 million from the first quarter of 2009 to $11.2 million.
General and administrative expenses decreased to 14.8% of sales in the first quarter of 2010 from 20.0% in the first quarter of 2009. General and administrative expenses in the first quarter of 2010 decreased by $0.1 million to $6.2 million from $6.3 million in the first quarter of 2009. General and administrative expenses included $0.4 million related to patent litigation expenses in the first quarter of 2010.
R&D expenses were $3.0 million in the first quarter of 2010, a decrease of $0.5 million from $3.5 million in the first quarter of 2009. R&D expenses were 7.1% of sales in the first quarter of 2010 compared to 11.1% of sales in the first quarter of 2009.
Operating income for the first quarter of 2010 increased by $11.0 million, to $3.4 million, from an operating loss of $7.6 million in the first quarter of 2009. Operating margin for the first quarter of 2010 was 8.0% compared to an operating loss of 24.3% in the first quarter of 2009.
Income tax expense increased by $2.4 million to $0.8 million for the first quarter of 2010 from a benefit of $1.6 million in the first quarter of 2009 due to an increase in pretax income of $11.0 million
“In addition to our strong orders and sales performance in the first quarter, we are also pleased by the speed with which gross margin and operating income have improved. This is a direct result of the cost actions and positioning moves we made last year,” Freeland concluded.
This press release contains forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are subject to risks and uncertainties, such as statements about FARO’s focus, plans and strategies, and its future operating results and financial condition. Statements that are not historical facts or that describe the Company’s plans, objectives, projections, expectations, assumptions, strategies, or goals are forward-looking statements. In addition, words such as “intend,” “believe,” “will,” “expect” and similar expressions or discussions of our strategy or other intentions identify forward-looking statements. Forward-looking statements are not guarantees of future performance and are subject to various known and unknown risks, uncertainties, and other factors that may cause actual results, performances, or achievements to differ materially from future results, performances, or achievements expressed or implied by such forward-looking statements. Consequently, undue reliance should not be placed on these forward-looking statements.
Factors that could cause actual results to differ materially from what is expressed or forecasted in such forward-looking statements include, but are not limited to:
| • | development by others of new or improved products, processes or technologies that make the Company’s products obsolete or less competitive; |
| • | the cyclical nature of the industries of the Company’s customers and material adverse changes in customers’ access to liquidity and capital; |
| • | declines or other adverse changes, or lack of improvement, in industries that the Company serves or the domestic and international economies in the regions of the world where the Company operates and other general economic, business, and financing conditions; |
| • | fluctuations in the Company’s annual and quarterly operating results and the inability to achieve its financial operating targets; |
| • | risks associated with expanding international operations, such as fluctuations in currency exchange rates, difficulties in staffing and managing foreign operations, political and economic instability, compliance with import and export regulations, and the burdens and potential exposure of complying with a wide variety of U.S. and foreign laws and labor practices; |
| • | other risks detailed in Part I, Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. |
Forward-looking statements in this release represent the Company’s judgment as of the date of this release. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.
About FARO
With approximately 20,000 installations and 10,000 customers globally, FARO Technologies, Inc. designs, develops, and markets portable, computerized measurement and imaging devices and software used to create digital models — or to perform evaluations against an existing model — for anything requiring highly detailed 3-D measurements, including part and assembly inspection, factory planning and asset documentation, as well as specialized applications ranging from surveying, recreating accident sites and crime scenes to digitally preserving historical sites.
FARO’s technology increases productivity by dramatically reducing the amount of on-site measuring time, and the various industry-specific software packages enable users to process and present their results quickly and more effectively.
Principal products include the world’s best-selling portable measurement arm — the FaroArm; the world’s best-selling laser tracker — the FARO Laser Tracker X and Xi; the FARO Laser ScanArm; FARO Photon Laser Scanners; the FARO Gage, Gage-PLUS and PowerGAGE; and the CAM2 Q family of advanced CAD-based measurement and reporting software. FARO Technologies is ISO-9001 certified and ISO-17025 laboratory registered.
###
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended | ||||||||
| (in thousands, except share and per share data) |
Apr 3, 2010 | Apr 4, 2009 | ||||||
| SALES |
||||||||
| Product |
$ | 33,938 | $ | 24,214 | ||||
| Service |
8,331 | 7,235 | ||||||
| Total Sales |
42,269 | 31,449 | ||||||
| COST OF SALES |
||||||||
| Product |
11,275 | 9,127 | ||||||
| Service |
5,603 | 6,062 | ||||||
| Total Cost of Sales (exclusive of depreciation and amortization, shown separately below) |
16,878 | 15,189 | ||||||
| GROSS PROFIT |
25,391 | 16,260 | ||||||
| OPERATING EXPENSES: |
||||||||
| Selling |
11,235 | 12,824 | ||||||
| General and administrative |
6,247 | 6,299 | ||||||
| Depreciation and amortization |
1,540 | 1,291 | ||||||
| Research and development |
2,989 | 3,479 | ||||||
| Total operating expenses |
22,011 | 23,893 | ||||||
| INCOME (LOSS) FROM OPERATIONS |
3,380 | (7,633 | ) | |||||
| OTHER (INCOME) EXPENSE |
||||||||
| Interest income |
(19 | ) | (158 | ) | ||||
| Other expense, net |
505 | 661 | ||||||
| Interest expense |
27 | 3 | ||||||
| INCOME (LOSS) BEFORE INCOME TAX EXPENSE |
2,867 | (8,139 | ) | |||||
| INCOME TAX EXPENSE (BENEFIT) |
803 | (1,554 | ) | |||||
| NET INCOME (LOSS) |
$ | 2,064 | $ | (6,585 | ) | |||
| NET INCOME (LOSS) PER SHARE - BASIC |
$ | 0.13 | $ | (0.41 | ) | |||
| NET INCOME (LOSS) PER SHARE - DILUTED |
$ | 0.13 | $ | (0.41 | ) | |||
| Weighted average shares - Basic |
16,124,886 | 16,227,363 | ||||||
| Weighted average shares - Diluted |
16,267,231 | 16,227,363 | ||||||
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| (in thousands, except share data) |
April 3, 2010 Unaudited |
December 31, 2009 |
||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 38,331 | $ | 35,078 | ||||
| Short-term investments |
64,986 | 64,986 | ||||||
| Accounts receivable, net |
40,550 | 42,944 | ||||||
| Inventories, net |
25,811 | 26,582 | ||||||
| Deferred income taxes, net |
4,482 | 4,473 | ||||||
| Prepaid expenses and other current assets |
8,805 | 6,016 | ||||||
| Total current assets |
182,965 | 180,079 | ||||||
| Property and Equipment: |
||||||||
| Machinery and equipment |
21,628 | 19,867 | ||||||
| Furniture and fixtures |
5,095 | 5,225 | ||||||
| Leasehold improvements |
9,423 | 9,434 | ||||||
| Property and equipment at cost |
36,146 | 34,526 | ||||||
| Less: accumulated depreciation and amortization |
(21,499 | ) | (20,788 | ) | ||||
| Property and equipment, net |
14,647 | 13,738 | ||||||
| Goodwill |
19,091 | 19,934 | ||||||
| Intangible assets, net |
7,576 | 7,985 | ||||||
| Service inventory |
12,748 | 12,079 | ||||||
| Deferred income taxes, net |
1,763 | 1,895 | ||||||
| Total Assets |
$ | 238,790 | $ | 235,710 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Notes Payable |
$ | 2,490 | $ | — | ||||
| Accounts payable |
9,576 | 8,985 | ||||||
| Accrued liabilities |
9,504 | 8,173 | ||||||
| Income taxes payable |
— | 229 | ||||||
| Current portion of unearned service revenues |
12,158 | 12,226 | ||||||
| Customer deposits |
1,621 | 2,173 | ||||||
| Current portion of obligations under capital leases |
60 | 80 | ||||||
| Total current liabilities |
35,409 | 31,866 | ||||||
| Unearned service revenues - less current portion |
5,784 | 5,910 | ||||||
| Deferred tax liability, net |
1,075 | 1,143 | ||||||
| Obligations under capital leases - less current portion |
189 | 193 | ||||||
| Total Liabilities |
42,457 | 39,112 | ||||||
| Shareholders’ Equity: |
||||||||
| Common stock - par value $.001, 50,000,000 shares authorized; 16,815,066 and 16,795,289 issued; 16,134,831 and 16,115,054 outstanding, respectively |
17 | 17 | ||||||
| Additional paid-in-capital |
153,224 | 152,380 | ||||||
| Retained earnings |
48,980 | 46,915 | ||||||
| Accumulated other comprehensive income |
3,187 | 6,361 | ||||||
| Common stock in treasury, at cost - 680,235 shares |
(9,075 | ) | (9,075 | ) | ||||
| Total Shareholders’ Equity |
196,333 | 196,598 | ||||||
| Total Liabilities and Shareholders’ Equity |
$ | 238,790 | $ | 235,710 | ||||
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended | ||||||||
| (in thousands) |
April 3, 2010 | April 4, 2009 | ||||||
| CASH FLOWS FROM: |
||||||||
| OPERATING ACTIVITIES: |
||||||||
| Net income (loss) |
$ | 2,064 | $ | (6,585 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
1,540 | 1,291 | ||||||
| Compensation for stock options and restricted stock units |
564 | 538 | ||||||
| Provision for bad debts |
348 | 397 | ||||||
| Deferred income tax expense |
34 | 30 | ||||||
| Change in operating assets and liabilities: |
||||||||
| Decrease (increase) in: |
||||||||
| Accounts receivable |
506 | 17,669 | ||||||
| Inventories, net |
(2,748 | ) | (1,078 | ) | ||||
| Prepaid expenses and other current assets |
(3,039 | ) | (1,027 | ) | ||||
| Income tax benefit from exercise of stock options |
(6 | ) | — | |||||
| Increase (decrease) in: |
||||||||
| Accounts payable and accrued liabilities |
2,199 | (8,835 | ) | |||||
| Income taxes payable |
(234 | ) | (2,008 | ) | ||||
| Customer deposits |
(540 | ) | (39 | ) | ||||
| Unearned service revenues |
348 | (441 | ) | |||||
| Net cash provided by (used in) operating activities |
1,036 | (88 | ) | |||||
| INVESTING ACTIVITIES: |
||||||||
| Purchases of property and equipment |
(613 | ) | (1,647 | ) | ||||
| Payments for intangible assets |
(205 | ) | (188 | ) | ||||
| Purchases of short-term investments |
— | (32,975 | ) | |||||
| Proceeds from sales of short-term investments |
— | 81,965 | ||||||
| Net cash (used in) provided by investing activities |
(818 | ) | 47,155 | |||||
| FINANCING ACTIVITIES: |
||||||||
| Proceeds from notes payable |
2,490 | — | ||||||
| Payments on capital leases |
(19 | ) | (55 | ) | ||||
| Income tax benefit from exercise of stock options |
6 | — | ||||||
| Purchases of treasury stock |
— | (8,829 | ) | |||||
| Proceeds from issuance of stock, net |
275 | — | ||||||
| Net cash provided by (used in) financing activities |
2,752 | (8,884 | ) | |||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
283 | (450 | ) | |||||
| INCREASE IN CASH AND CASH EQUIVALENTS |
3,253 | 37,733 | ||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
35,078 | 23,494 | ||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 38,331 | $ | 61,227 | ||||