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 the earliest event reported)
|
July
29, 2008
|
FARO
TECHNOLOGIES,
INC.
(Exact
Name of Registrant as Specified in Its Charter)
|
Florida
|
0-20381
|
59-3157093
|
|
(State
or Other Jurisdiction
|
(Commission
File
|
(IRS
Employer
|
|
of
Incorporation
|
Number)
|
Identification
No.)
|
|
125
Technology Park, Lake Mary, Florida
|
32746
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
|
(407)
333-9911
|
|
(Registrant’s
Telephone Number, Including Area
Code)
|
|
(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:
|
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230
.425)
|
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
|
|
o
|
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
Statements
|
| Item 7.01 |
Regulation
FD Disclosure
|
On
July
29, 2008, FARO Technologies, Inc. issued a press release announcing its results
of operations for the second quarter ended June 28, 2008. A copy of the press
release is furnished as Exhibit 99.1 hereto and is incorporated herein by
reference.
The
information furnished herewith pursuant to Item 2.02 and Item 7.01 of this
Current Report shall not be deemed to be “filed” for the purpose of Section 18
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or
otherwise subject to the liabilities of that section, and shall not be
incorporated by reference into any registration statement or other document
under the Securities Act of 1933, as amended, or the Exchange Act, except as
shall be expressly set forth by specific reference in such filing.
| Item 9.01 |
Financial
Statements and Exhibits
|
| (d) |
Exhibits
|
| 99.1 |
Press
Release dated as of July 29, 2008
|
Signature
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has
duly
caused this report to be signed on its behalf by the undersigned thereunder
duly
authorized.
|
FARO
Technologies, Inc.
|
||
|
(Registrant)
|
||
|
Date:
July
29, 2008
|
||
|
/s/
Jay Freeland
|
||
|
Jay
Freeland
|
||
|
Chief
Executive Officer
|
EXHIBIT
INDEX
|
Exhibit
No.
|
Description
|
|
99.1
|
Press
Release dated as of July 29, 2008
|
Keith
Bair, Senior Vice President and CFO
keith.bair@FARO.com,
407-333-9911
FARO
Reports Sales Growth of 21.4%,
Net
Income Growth of 10.0%
LAKE
MARY,
FL.,
July 29, 2008 - FARO Technologies, Inc. (NASDAQ: FARO)
today
announced results for the second quarter ended June 28, 2008. Net income for
the
second quarter was $6.4 million, or $0.38 per diluted share, an increase of
$0.6
million, compared to $5.8 million, or $0.39 per diluted share, in the second
quarter of 2007.
Sales
for
the second quarter of 2008 were $57.7 million, an increase of $10.1 million,
or
21.4%, from $47.6 million in the second quarter of 2007. New
order
bookings for the second quarter were $58.7 million, an increase of $8.3 million,
or 16.5%, compared with $50.4 million in the second quarter of 2007.
“This
was
another solid quarter for our company with revenue growing nicely, due to
ongoing demand for our products,” stated Jay Freeland, FARO’s President &
CEO. “Our performance in both European and Asian markets was strong and more
than offset weaknesses in the United States where the market has been affected
by a slowing economy.”
Gross
margin for the second quarter of 2008 was 62.8%, compared to 61.4% in the second
quarter of 2007. Gross margin increased primarily as the result of a change
in
the sales mix resulting from an increase in unit sales of higher margin product
lines.
Selling
expenses as a percentage of sales increased to 29.6% in the second quarter
of
2008, essentially flat with 29.4% in the second quarter of 2007. Increases
in
selling expenses in absolute dollars related to new sales personnel that were
added to continue driving the Company’s growth.
General
and administrative expenses were 12.1% of sales for the second quarter of 2008,
marginally higher than the second quarter of 2007.
The
Company increased spending in research and development to accelerate development
of new product platforms. Accordingly, R&D costs were $3.2 million in the
second quarter of 2008, an increase from $2.3 million in the second quarter
of
2007.
Operating
margin for the second quarter of 2008 was 13.6%, unchanged from the year ago
quarter.
Income
tax expense was $1.5 million for the second quarter of 2008 compared to $1.4
million in the second quarter of 2007 primarily as a result of an increase
in
pretax income. The Company’s effective tax rate was 19.3% in the second quarter
of 2008 compared to 19.6% in the second quarter of 2007 due to an increase
in
taxable income in jurisdictions with lower tax rates.
“Year-to-date,
we continue to execute well, with 18.2% revenue growth and 61.6% gross margin.
However, we expect continued weakness in the U.S. economy and modest uncertainty
in several European economies through the rest of this year. Accordingly, we
are
lowering our full-year 2008 revenue guidance from 20-25% growth to 15-20% growth
while maintaining our previously issued gross margin guidance of 58-60% of
sales,” 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 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.
2
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:
|
·
|
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;
|
|
·
|
our
inability to successfully identify and acquire target companies or
achieve
expected benefits from acquisitions that are
consummated;
|
|
·
|
the
cyclical nature of the industries of our customers and the financial
condition of our customers;
|
|
·
|
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
inability to protect our patents and other proprietary rights in
the
United States and foreign countries;
|
|
·
|
fluctuations
in our annual and quarterly operating results and the inability to
achieve
our financial operating targets as a result of a number of factors
including, without limitation (i) litigation and regulatory action
brought
against us, (ii) quality issues with our products, (iii) excess or
obsolete inventory, (iv) raw material price fluctuations, (v) expansion
of
our manufacturing capability and other inflationary pressures, (vi)
the
size and timing of customer orders, (vii) the amount of time that
it takes
to fulfill orders and ship our products, (viii) the length of our
sales
cycle to new customers and the time and expense incurred in further
penetrating our existing customer base, (ix) increases in operating
expenses required for product development and new product, marketing,
(x)
costs associated with new product introductions, such as product
development, marketing, assembly line start-up costs and low introductory
period production volumes, (xi) the timing and market acceptance
of new
products and product enhancements, (xii) customer order deferrals
in
anticipation of new products and product enhancements, (xiii) our
success
in expanding our sales and marketing programs, (xiv) start-up costs
associated with opening new sales offices outside of the United States,
(xv) fluctuations in revenue without proportionate adjustments in
fixed
costs, (xvi) the efficiencies achieved in managing inventories and
fixed
assets, (xvii) investments in potential acquisitions or strategic
sales,
product or other initiatives, (xviii) shrinkage or other inventory
losses
due to product obsolescence, scrap or material price changes, (xix)
adverse changes in the manufacturing industry and general economic
conditions, (xx) compliance with government regulations including
health,
safety, and environmental matters, (xxi) the ultimate costs of the
Company’s monitoring obligations in respect of the Foreign Corrupt
Practices Act (“FCPA”) matter; and (xxii) other factors noted herein;
|
|
·
|
changes
in gross margins due to changing product mix of products sold and
the
different gross margins on different
products;
|
|
·
|
our
inability to successfully maintain the requirements of Restriction
of use
of Hazardous Substances (“RoHS”) and Waste Electrical and Electronic
Equipment (“WEEE”) compliance into our
products;
|
|
·
|
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
broader market for measurement and inspection devices;
|
|
·
|
the
effects of increased competition as a result of recent consolidation
in
the CAM2 market;
|
|
·
|
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;
|
3
|
·
|
the
inability to reach a final resolution of the FCPA matter with the
DOJ or
the SEC or reaching a resolution on the FCPA matter that differs
from the
resolution currently anticipated by the Company whether with respect
to
monetary sanctions ultimately paid by the Company to the SEC or DOJ
or
otherwise;
|
|
·
|
unforeseen
developments in our FCPA matter or in complying with the FCPA in
the
future;
|
|
·
|
higher
than expected increases in expenses relating to our Asia Pacific
expansion
or our Singapore manufacturing
facility;
|
|
·
|
our
inability to find less expensive alternatives to stock options to
attract
and retain employees;
|
|
·
|
the
loss of our Chief Executive Officer or other key
personnel;
|
|
·
|
difficulties
in recruiting research and development engineers, and application
engineers;
|
|
·
|
the
failure to effectively manage our
growth;
|
|
·
|
variations
in the effective income tax rate and the difficulty in predicting
the tax
rate on a quarterly and annual basis;
and
|
|
·
|
the
loss of key suppliers and the inability to find sufficient alternative
suppliers in a reasonable period or on commercially reasonable
terms.
|
|
·
|
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.
|
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 17,000 installations and 7,800 customers globally, FARO
Technologies, Inc. designs, develops, and markets portable, computerized
measurement 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.
4
|
FARO
TECHNOLOGIES, INC. AND SUBSIDIARIES
|
||||
|
CONSOLIDATED
BALANCE SHEETS
|
||||
|
(UNAUDITED)
|
|
June
28,
|
December
31,
|
||||||
|
(in
thousands, except share data)
|
2008
|
2007
|
|||||
|
ASSETS
|
|||||||
|
Current
Assets:
|
|||||||
|
Cash
and cash equivalents
|
$
|
16,757
|
$
|
25,798
|
|||
|
Short-term
investments
|
77,765
|
77,375
|
|||||
|
Accounts
receivable, net
|
52,819
|
54,767
|
|||||
|
Inventories
|
38,140
|
29,100
|
|||||
|
Deferred
income taxes, net
|
5,812
|
2,841
|
|||||
|
Prepaid
expenses and other current assets
|
8,786
|
6,719
|
|||||
|
Total
current assets
|
200,079
|
196,600
|
|||||
|
Property
and Equipment:
|
|||||||
|
Machinery
and equipment
|
16,444
|
12,895
|
|||||
|
Furniture
and fixtures
|
3,953
|
5,008
|
|||||
|
Leasehold
improvements
|
3,604
|
3,296
|
|||||
|
Property
and equipment at cost
|
24,001
|
21,199
|
|||||
|
Less:
accumulated depreciation and amortization
|
(15,853
|
)
|
(13,672
|
)
|
|||
|
Property
and equipment, net
|
8,148
|
7,527
|
|||||
|
Goodwill
|
20,088
|
19,117
|
|||||
|
Intangible
assets, net
|
9,169
|
5,970
|
|||||
|
Service
inventory
|
12,491
|
10,865
|
|||||
|
Deferred
income taxes, net
|
1,930
|
3,460
|
|||||
|
Total
Assets
|
$
|
251,905
|
$
|
243,539
|
|||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||||||
|
Current
Liabilities:
|
|||||||
|
Accounts
payable
|
$
|
9,037
|
$
|
12,450
|
|||
|
Accrued
liabilities
|
13,163
|
17,989
|
|||||
|
Income
taxes payable
|
769
|
2,266
|
|||||
|
Current
portion of unearned service revenues
|
10,331
|
8,594
|
|||||
|
Customer
deposits
|
308
|
337
|
|||||
|
Current
portion of obligations under capital leases
|
32
|
18
|
|||||
|
Total
current liabilities
|
33,640
|
41,654
|
|||||
|
Unearned
service revenues - less current portion
|
7,086
|
6,091
|
|||||
|
Deferred
tax liability, net
|
1,157
|
1,073
|
|||||
|
Obligations
under capital leases - less current portion
|
129
|
222
|
|||||
|
Total
Liabilities
|
42,012
|
49,040
|
|||||
|
Commitments
and contingencies - See Note O
|
|||||||
|
Shareholders'
Equity:
|
|||||||
|
Common
stock - par value $.001, 50,000,000 shares authorized; 16,731,054
and
16,700,966 issued; 16,634,140 and 16,604,052 outstanding,
respectively
|
17
|
17
|
|||||
|
Additional
paid-in-capital
|
147,672
|
146,489
|
|||||
|
Retained
earnings
|
53,289
|
43,545
|
|||||
|
Accumulated
other comprehensive income
|
9,066
|
4,599
|
|||||
|
Common
stock in treasury, at cost - 40,000 shares
|
(151
|
)
|
(151
|
)
|
|||
|
Total
Shareholders' Equity
|
209,893
|
194,499
|
|||||
|
Total
Liabilities and Shareholders' Equity
|
$
|
251,905
|
$
|
243,539
|
|||
5
|
FARO
TECHNOLOGIES, INC. AND SUBSIDIARIES
|
|||||||||
|
CONSOLIDATED
STATEMENTS OF INCOME
|
|||||||||
|
(UNAUDITED)
|
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
|
(in
thousands, except per share data)
|
June
28, 2008
|
June
30, 2007
|
June
28, 2008
|
June
30, 2007
|
|||||||||
|
SALES
|
$
|
57,749
|
$
|
47,579
|
$
|
103,839
|
$
|
87,868
|
|||||
|
COST
OF SALES (exclusive of depreciation and amortization, shown separately
below)
|
21,510
|
18,355
|
39,894
|
34,808
|
|||||||||
|
GROSS
PROFIT
|
36,239
|
29,224
|
63,945
|
53,060
|
|||||||||
|
OPERATING
EXPENSES:
|
|||||||||||||
|
Selling
|
17,076
|
14,022
|
31,504
|
26,326
|
|||||||||
|
General
and administrative
|
7,014
|
5,495
|
12,660
|
10,518
|
|||||||||
|
Depreciation
and amortization
|
1,120
|
951
|
2,135
|
2,042
|
|||||||||
|
Research
and development
|
3,172
|
2,276
|
5,885
|
4,248
|
|||||||||
|
Total
operating expenses
|
28,382
|
22,744
|
52,184
|
43,134
|
|||||||||
|
INCOME
FROM OPERATIONS
|
7,857
|
6,480
|
11,761
|
9,926
|
|||||||||
|
OTHER
(INCOME) EXPENSE
|
|||||||||||||
|
Interest
income
|
(456
|
)
|
(336
|
)
|
(1,077
|
)
|
(592
|
)
|
|||||
|
Other
(income) expense, net
|
419
|
(382
|
)
|
182
|
(707
|
)
|
|||||||
|
Interest
expense
|
7
|
2
|
448
|
4
|
|||||||||
|
INCOME
BEFORE INCOME TAX
|
7,887
|
7,196
|
12,208
|
11,221
|
|||||||||
|
INCOME
TAX EXPENSE
|
1,522
|
1,410
|
2,465
|
2,237
|
|||||||||
|
NET
INCOME
|
$
|
6,365
|
$
|
5,786
|
$
|
9,743
|
$
|
8,984
|
|||||
|
NET
INCOME PER SHARE - BASIC
|
$
|
0.38
|
$
|
0.39
|
$
|
0.59
|
$
|
0.61
|
|||||
|
NET
INCOME PER SHARE - DILUTED
|
$
|
0.38
|
$
|
0.39
|
$
|
0.58
|
$
|
0.60
|
|||||
|
Weighted
average shares - Basic
|
16,627,540
|
14,712,677
|
16,618,333
|
14,660,993
|
|||||||||
|
Weighted
average shares - Diluted
|
16,784,473
|
14,980,519
|
16,758,363
|
14,877,636
|
|||||||||
6
|
FARO
TECHNOLOGIES, INC. AND SUBSIDIARIES
|
|||||
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|||||
|
(UNAUDITED)
|
|
Six
Months Ended
|
|||||||
|
(in
thousands)
|
June
28, 2008
|
June
30, 2007
|
|||||
|
CASH
FLOWS FROM:
|
|||||||
|
OPERATING
ACTIVITIES:
|
|||||||
|
Net
income
|
$
|
9,743
|
$
|
8,984
|
|||
|
Adjustments
to reconcile net income to net cash (used in) provided by operating
activities:
|
|||||||
|
Depreciation
and amortization
|
2,135
|
2,042
|
|||||
|
Amortization
of stock options and restricted stock units
|
1,060
|
573
|
|||||
|
Provision
for bad debts
|
446
|
28
|
|||||
|
Deferred
income tax benefit
|
(1,329
|
)
|
(188
|
)
|
|||
|
Change
in operating assets and liabilities:
|
|||||||
|
Decrease
(increase) in:
|
|||||||
|
Accounts
receivable
|
4,049
|
(1,769
|
)
|
||||
|
Inventories
|
(8,856
|
)
|
(784
|
)
|
|||
|
Prepaid
expenses and other current assets
|
(1,877
|
)
|
(659
|
)
|
|||
|
Income
tax benefit from exercise of stock options
|
(43
|
)
|
(2,260
|
)
|
|||
|
Increase
(decrease) in:
|
|||||||
|
Accounts
payable and accrued liabilities
|
(8,962
|
)
|
(1,703
|
)
|
|||
|
Income
taxes payable
|
(1,542
|
)
|
(1,163
|
)
|
|||
|
Customer
deposits
|
186
|
(270
|
)
|
||||
|
Unearned
service revenues
|
1,957
|
3,270
|
|||||
|
Net
cash (used in) provided by operating activities
|
(3,033
|
)
|
6,101
|
||||
|
INVESTING
ACTIVITIES:
|
|||||||
|
Purchases
of property and equipment
|
(1,952
|
)
|
(1,345
|
)
|
|||
|
Payments
for intangible assets
|
(3,333
|
)
|
(148
|
)
|
|||
|
Purchases
of short-term investments
|
(390
|
)
|
(5,230
|
)
|
|||
|
Net
cash used in investing activities
|
(5,675
|
)
|
(6,723
|
)
|
|||
|
FINANCING
ACTIVITIES:
|
|||||||
|
Payments
on capital leases
|
(81
|
)
|
(55
|
)
|
|||
|
Income
tax benefit from exercise of stock options
|
43
|
2,260
|
|||||
|
Proceeds
from issuance of stock, net
|
80
|
3,356
|
|||||
|
Net
cash provided by financing activities
|
42
|
5,561
|
|||||
|
EFFECT
OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
(375
|
)
|
(1,415
|
)
|
|||
|
(DECREASE)
INCREASE IN CASH AND CASH EQUIVALENTS
|
(9,041
|
)
|
3,524
|
||||
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
25,798
|
15,689
|
|||||
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$
|
16,757
|
$
|
19,213
|
|||
7