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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) August 9, 2005
FARO TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Florida 0-23081 59-3157093
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
125 Technology Park, Lake Mary, Florida 32746
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (407) 333-9911
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(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))
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ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ITEM 7.01 REGULATION FD DISCLOSURE
On August 8, 2005, FARO Technologies announced via press release, subject: Faro
Reports 45% New Order Growth In First Half Of 2005 And Lower Earnings In The
Second Quarter With Major Investments In Growth. A copy of the press release is
attached hereto.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
99.1 Press release dated as of August 8, 2005
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FARO TECHNOLOGIES, INC.
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(Registrant)
Date August 8, 2005
/s/ GREGORY A. FRASER
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Gregory A. Fraser
Executive Vice President,
Secretary and Treasurer
Exhibit 99.1
FARO REPORTS 45% NEW ORDER GROWTH IN FIRST HALF OF 2005 AND LOWER EARNINGS IN
THE SECOND QUARTER WITH MAJOR INVESTMENTS IN GROWTH
LAKE MARY, Fla., Aug. 8 /PRNewswire-FirstCall/ -- FARO Technologies, Inc.
(Nasdaq: FARO) today reported sales for the second quarter of 2005 of
approximately $30.9 million, an increase of $6.8 million, or 28.2% from $24.1
million the second quarter of 2004. New order bookings for the second quarter
were approximately $34.5 million, an increase of $12.6 million, or 57.5%
compared with approximately $21.9 million in the year-ago quarter. That brought
new order bookings for the first half of 2005 to approximately $59.6 million, an
increase of $18.6 million, or 45.4% compared to $41.0 million in the first half
of 2004. The Company reported net income for the second quarter ended July 2,
2005 of approximately $1.9 million or $0.13 per diluted share, a 53.7% decrease
compared with approximately $4.1 million or $0.29 per diluted share in the
second quarter of 2004.
(Logo: http://www.newscom.com/cgi-bin/prnh/20000522/FLM035LOGO )
Regionally sales increased 45.6% in the Americas to $15.0 million, from
$10.3 million in the second quarter of 2004. Sales increased 12.0% in
Europe/Africa to $12.1 million from $10.8 million in the second quarter of 2004.
In the Asia/Pacific region sales increased 26.7% to $3.8 million from $3.0
million in the first quarter of 2004. New orders increased 64.4% in the Americas
to $14.3 million, from $8.7 million in the second quarter of 2004. New orders
increased 22.2% to $13.2 million in Europe/Africa from $10.8 million in the
second quarter of 2004. In Asia/Pacific new orders grew 119% to $7.0 million
from $3.2 million in the second quarter of 2004.
"We increased our sales force by 53 or 35% in the first half of 2005," said
Simon Raab, Chief Executive Officer. "We continued to aggressively price our
products to grow market demand. This investment has resulted in a dramatic
increase in new orders, continued acceleration in growth rate and expansion of
the CAM2 market. We are cutting G&A costs to drive profitability and we are
increasing manufacturing capacity worldwide to meet this growing demand."
Gross margin for the second quarter of 2005 was approximately 59.5%,
compared to 63.2% in the second quarter of 2004. Gross margin declined primarily
as a result of higher price discounts and the impact of the integration of
iQvolution (1.3%), which the Company acquired on March 29, 2005.
Selling, general and administrative ("SG&A") expenses were approximately
$13.7 million, or 44.3% of sales in the second quarter, an increase of $4.8
million from $8.9 million or 36.9% of sales in the second quarter of 2004. SG&A
expenses as a percentage of sales were higher in the second quarter primarily as
a result of the Company's ongoing expansion of sales offices ($1.7 million), and
higher expenses related to Sarbanes-Oxley 404 compliance ($313,000) and legal
defense costs ($336,000). The Company hired 53 new sales people in the first
half of 2005 and expects a ramp up time of approximately 3-6 months for new
sales people to become fully effective.
Operating margin for the second quarter of 2005 was approximately 7.3%,
compared to 19.2% in the second quarter of 2004. The effective income tax rate
in the second quarter of 2005 was approximately 14.1% compared to 15.6% in the
year-ago quarter. Subsequent to the second quarter the Company has taken steps
to reduce expenses. The Company expects that these steps will result in
approximately $700,000 of reduced expenses for the remainder of 2005, of which
approximately $500,000 will be directly related to SG&A and the remainder will
lower production costs.
Outlook for the remainder of 2005
Based on the year-to-date new order growth, and on our historically stronger
second half compared to the first half, we are maintaining our overall sales
guidance at $125 - $132 million for fiscal 2005.
We expect our Gross Margin in the second half to be similar in aggregate to
the first half, or approximately 60%-62%. We expect SG&A expenses as a
percentage of sales to be less in the second half of 2005 than in the first
half, as our new sales force becomes fully productive, and acquisition
integration expenses begin to decline compared to the second quarter. There will
be ongoing expense for the establishment of the Singapore regional headquarters
and manufacturing facility as well as Sarbanes-Oxley compliance and litigation
costs.
"We will continue to vigorously defend ourselves in the previously reported
patent issue with Cimcore-Romer, and our previously announced design work-around
of the infinite rotation issue effectively removes the threat of injunction and
minimizes the distraction of this case as we execute our growth plan this year
and beyond," Raab said.
Therefore, based on these items, our first half results, revenue projections
in the second half of the year, and an expected 15%-20% income tax rate, we are
expecting earnings per share for 2005 to be in the lower end of our existing
guidance of $1.15-$1.45.
Financial Table Follows
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 our plans, objectives,
projections, expectations, assumptions, strategies, or future events. 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 "may," "believes," "anticipates,"
"expects," "intends," "plans," "seeks," "estimates," "will," "should," "could,"
"projects," "forecast," "target," "goal," and similar expressions or discussions
of our strategy or other intentions identify forward-looking statements. Other
written or oral statements, which constitute forward-looking statements, also
may be made by the Company from time to time. 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 forward-looking statements include, but are not
limited to:
* The inability of our news sales people hired in the first half of 2005 to
become fully trained and effective in 3-6 months such as to reduce our selling
expenses as a percentage of sales in the second half of the year;
* the inability to protect our patents and other proprietary rights in the
United States and foreign countries and the assertion and ultimate outcome of
infringement claims against us, including the pending suit by Cimcore-Romer
against us;
* Our inability to effectively integrate the iQvolution acquisition and
achieve the expected benefits from it;
* Our inability to keep our financial results within our target goals as a
result of various potential factors, such as investments in potential
acquisitions or strategic sales, product, or other initiatives;
* The fact that the market potential for the CAM2 market and the potential
adoption rate for our products are difficult to quantify and predict;
* The effects of increased competition as a result of recent consolidation
in the CAM2 market;
* Difficulty in predicting our effective tax rate;
* Our inability to further penetrate our customer base;
* Development by others of new or improved products, processes or
technologies that make our products obsolete or less competitive;
* Our inability to maintain our technological advantage by developing new
products and enhancing our existing products;
* The cyclical nature of the industries of our customers and the financial
condition of our customers;
* Fluctuations in our annual and quarterly operating results as a result
of a number of factors;
* The inability of our products to displace traditional measurement devices
and attain broad market acceptance;
* The impact of competitive products and pricing in the CAM2 market and the
broad market for measurement and inspection devices;
* Our inability to continue to grow sales in the Asia Pacific region;
* Our inability to find less expensive alternatives to stock options to
attract and retain employees;
* Risks associated with expanding international operations, such as
fluctuations in currency exchange rates, difficulties in staffing and managing
foreign operations, political and economic instability, and the burdens of
complying with a wide variety of foreign laws and labor practices;
* The loss of our Chief Executive Officer, our President and Chief
Operating Officer, our Executive Vice President and Treasurer, or our Chief
Financial Officer or other key personnel;
* The failure to effectively manage our growth;
* The loss of a key supplier and the inability to find a sufficient
alternative supplier in a reasonable period or on commercially reasonable
terms; and
* the other risks detailed in the Company's Annual Report on Form 10-K and
other filings from time to time with the Securities and Exchange Commission.
About FARO:
FARO Technologies, Inc. (Nasdaq: FARO) and its international subsidiaries
design, develop, and market software and portable, computerized measurement
devices. The Company's products allow manufacturers to perform three-
dimensional inspections of parts and assemblies on the shop floor. This helps
eliminate manufacturing errors, and thereby increases productivity and
profitability for a variety of industries in FARO's worldwide customer base.
Principal products include the FARO Gage and Gage-Plus(TM), Platinum and
Titanium model Faro Arms(R), SI and X model FARO Laser Trackers(R) , Laser
Scanner LS and a CAM2(R) family of advanced CAD-based measurement and reporting
software. FARO Technologies is ISO 9001 certified and Guide 25 approved. Learn
more at http://www.faro.com .
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
SUMMARY FINANCIAL TABLE
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
(amounts in thousands, --------------------------- ---------------------------
except share and per Jul. 2, Jul. 3, Jul. 2, Jul. 3,
share data) 2005 2004 2005 2004
- -------------------------- ------------ ------------ ------------ ------------
SALES $ 30,895 $ 24,077 $ 58,511 $ 45,102
COST OF SALES 12,505 8,849 22,778 16,410
Gross profit 18,390 15,228 35,733 28,692
OPERATING EXPENSES:
Selling 9,358 6,233 17,024 11,796
General and administrative 4,368 2,633 7,836 5,200
Depreciation and
amortization 789 538 1,480 1,094
Research and development 1,633 1,206 2,960 2,648
Total operating expenses 16,148 10,610 29,300 20,738
INCOME FROM OPERATIONS 2,242 4,618 6,433 7,954
OTHER INCOME (EXPENSES)
Interest income 170 74 302 148
Other income, net (111) 173 (139) 379
Interest expense (76) (2) (78) (5)
INCOME BEFORE INCOME TAX 2,225 4,863 6,518 8,476
INCOME TAX EXPENSE 313 760 1,137 1,525
NET INCOME $ 1,912 $ 4,103 $ 5,381 $ 6,951
NET INCOME PER SHARE -
BASIC $ 0.13 $ 0.30 $ 0.38 $ 0.51
NET INCOME PER SHARE -
DILUTED $ 0.13 $ 0.29 $ 0.37 $ 0.50
Weighted average shares -
Basic 14,226,540 13,766,588 14,131,266 13,565,132
Weighted average shares -
Diluted 14,578,313 14,154,243 14,491,672 14,039,826
SELECTED CONSOLIDATED BALANCE SHEET DATA
(UNAUDITED)
(in thousands)
Jul. 2, 2005
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Cash and investments $ 25,740
Current assets $ 80,082
Total assets $ 112,223
Current liabilities $ 15,932
Obligations under capital leases -
less current portion $ 265
Total liabilities $ 17,365
Total shareholders' equity $ 94,858
Total liabilities and shareholders'
equity $ 112,223
SELECTED CONSOLIDATED STATEMENT OF CASH FLOWS DATA
(UNAUDITED)
(in thousands)
Jul. 2, 2005
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Net cash used in operating activities $ (4,529)
Net cash provided by investing activities $ 354
Net cash provided by financing activities $ 272
Effect of Exchange Rate Changes on Cash $ (1,504)
Cash and Cash Equivalents, Beginning of Period $ 16,357
Cash and Cash Equivalents, End of Period $ 10,950
SOURCE FARO Technologies, Inc.
-0- 08/08/2005
/CONTACT: Greg Fraser, EVP of FARO, +1-407-333-9911; or Vic Allgeier of
The TTC Group, +1-212-227-0997, for FARO/
/Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20000522/FLM035LOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com /
/Web site: http://www.faro.com /