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)
|
May
2, 2007
|
|
|
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:
|
¨
|
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
Statements
|
| Item 7.01 |
Regulation
FD Disclosure
|
On
May 2,
2007, FARO Technologies, Inc. issued a press release announcing its results
of
operations for the first quarter ended March 31, 2007. 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 May 2, 2007
|
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:
May 2, 2007
|
|
|
/s/
Jay
Freeland
|
|
|
Jay
Freeland
|
|
|
Chief
Executive Officer
|
|
EXHIBIT
INDEX
| Exhibit No. |
Description
|
| 99.1 |
Press
Release dated as of May 2, 2007
|
Keith
Bair, Senior Vice President and CFO
keith.bair@FARO.com,
407-333-9911
FARO
First Quarter Sales Up 25.5%, New Orders Increase 15.4%
LAKE
MARY,
FL.,
May 2, 2007 - FARO Technologies, Inc. (NASDAQ: FARO)
today
announced results for the first quarter ended March 31, 2007. Net income for
the
first quarter was $3.2 million, or $0.22 per diluted share, an increase of
$2.7
million, compared to $0.5 million, or $0.03 per diluted share, in the first
quarter of 2006.
Sales
for
the first quarter of 2007 were $40.3 million, an increase of $8.2 million,
or
25.5%, from $32.1 million in the first quarter of 2006. New
order
bookings for the first quarter were $38.2 million, an increase of $5.1 million,
or 15.4%, compared with $33.1 million in the year-ago quarter.
“Sales
growth in the first quarter was driven by our strong orders performance in
the
fourth quarter of 2006 and continued demand for our products around the world,”
stated Jay Freeland, President and CEO. “We saw particular strength in the
Americas and total sales for the Company in the first quarter met our internal
targets. As expected, growth in new orders in the first quarter of 2007 was
affected by exceptional order intake in the fourth quarter of 2006 as well
as by
the timing of purchase decisions by our customers. However, we expect that
new
order bookings for the year in total will support our overall growth
targets.”
Gross
margin for the first quarter of 2007 was 59.2%, compared to 58.8% in the first
quarter of 2006. Gross margin increased primarily as the result of a change
in
the sales mix resulting in an increase in unit sales of product lines with
a
lower than average cost of sales. Gross margin for the first quarter of 2007
was
in line with previously issued guidance of approximately 57.0% to 59.0%
Selling
expenses as a percentage of sales decreased to 30.5% in the first quarter of
2007 compared to 32.0% in the first quarter of 2006 primarily due to improved
sales force productivity.
General
and administrative expenses were 12.5% of sales for the first quarter of 2007
compared to 17.6% of sales in the first quarter of 2006. General and
administrative expenses in the first quarter of 2007 included $0.6 million
of
professional fees related to the Company’s Foreign Corrupt Practices Act
(“FCPA”) matter and its recently settled patent litigation compared to $1.6
million in the first quarter of 2006 for these matters.
Research
and development expenses were $2.0 million for the first quarter of 2007, up
slightly from $1.9 million in the first quarter of 2006.
Operating
margin for the first quarter of 2007 was 8.6%, compared to 0.2% in the year
ago
quarter.
Income
tax expense was $0.8 million for the first quarter of 2007 compared to $0.1
million in the first quarter of 2006 primarily as a result of an increase in
pretax income. The Company’s effective tax rate was 20.5% in the first quarter
of 2007 compared to 18.0% in the first quarter of 2006 due to an increase in
taxable income in jurisdictions with higher tax rates.
“The
ongoing strength in our sales performance, combined with gross margin
improvement, sales force productivity and reduced legal expenditures drove
solid
first quarter earnings. We continue to execute according to plan in all aspects
of the business. As such we are maintaining our previously stated full year
guidance ranges of approximately 20% - 25% sales growth and 57% to 59% gross
margin,” 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.
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, but not limited to (i) litigation and regulatory actions
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) 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, and (xx)
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 implement 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, and the burdens of
complying with a wide variety of foreign laws and labor
practices;
|
| · |
unforeseen
developments in our FCPA matter or in complying with the FCPA in
the
future;
|
| · |
the
outcome of the class action securities litigation against
us;
|
| · |
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, our Chief Technology Officer,
our
Chief Financial 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 tax rate and the difficulty predicting the tax rate
on a
quarterly and annual basis;
|
| · |
the
loss of key suppliers and the inability to find sufficient alternative
suppliers 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.
|
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 13,500 installations and 6,500 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 Laser Scanner LS; the FARO Gage, Gage-PLUS
and
PowerGAGE; and the CAM2 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 INCOME
(UNAUDITED)
|
Three
Months Ended
|
|||||||
|
(in
thousands, except per share data)
|
Mar
31, 2007
|
Apr
1, 2006
|
|||||
|
SALES
|
$
|
40,289
|
$
|
32,056
|
|||
|
COST
OF SALES (exclusive of depreciation and amortization, shown separately
below)
|
16,453
|
13,221
|
|||||
|
GROSS
PROFIT
|
23,836
|
18,835
|
|||||
|
OPERATING
EXPENSES:
|
|||||||
|
Selling
|
12,304
|
10,251
|
|||||
|
General
and administrative
|
5,023
|
5,647
|
|||||
|
Depreciation
and amortization
|
1,091
|
1,011
|
|||||
|
Research
and development
|
1,972
|
1,852
|
|||||
|
Total
operating expenses
|
20,390
|
18,761
|
|||||
|
INCOME
FROM OPERATIONS
|
3,446
|
74
|
|||||
|
OTHER
(INCOME) EXPENSE
|
|||||||
|
Interest
(income)
|
(256
|
)
|
(158
|
)
|
|||
|
Other
(income) expense, net
|
(325
|
)
|
(375
|
)
|
|||
|
Interest
expense
|
2
|
2
|
|||||
|
INCOME
BEFORE INCOME TAX
|
4,025
|
605
|
|||||
|
INCOME
TAX EXPENSE
|
827
|
109
|
|||||
|
NET
INCOME
|
$
|
3,198
|
$
|
496
|
|||
|
NET
INCOME PER SHARE - BASIC
|
$
|
0.22
|
$
|
0.03
|
|||
|
NET
INCOME PER SHARE - DILUTED
|
$
|
0.22
|
$
|
0.03
|
|||
FARO
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(UNAUDITED)
|
March
31,
|
December
31,
|
||||||
|
(in
thousands, except share data)
|
2007
|
2006
|
|||||
|
ASSETS
|
|||||||
|
Current
Assets:
|
|||||||
|
Cash
and cash equivalents
|
$
|
17,291
|
$
|
15,689
|
|||
|
Short-term
investments
|
15,790
|
15,790
|
|||||
|
Accounts
receivable, net
|
40,053
|
42,706
|
|||||
|
Inventories
|
21,796
|
23,429
|
|||||
|
Deferred
income taxes, net
|
1,788
|
1,845
|
|||||
|
Prepaid
expenses and other current assets
|
6,442
|
3,222
|
|||||
|
Total
current assets
|
103,160
|
102,681
|
|||||
|
Property
and Equipment:
|
|||||||
|
Machinery
and equipment
|
9,647
|
9,131
|
|||||
|
Furniture
and fixtures
|
4,225
|
3,988
|
|||||
|
Leasehold
improvements
|
2,684
|
2,615
|
|||||
|
Property
and equipment at cost
|
16,556
|
15,734
|
|||||
|
Less:
accumulated depreciation and amortization
|
(9,786
|
)
|
(8,889
|
)
|
|||
|
Property
and equipment, net
|
6,770
|
6,845
|
|||||
|
Goodwill
|
17,535
|
17,266
|
|||||
|
Intangible
assets, net
|
6,080
|
6,221
|
|||||
|
Service
Inventory
|
7,906
|
7,278
|
|||||
|
Deferred
income taxes, net
|
3,970
|
3,985
|
|||||
|
Total
Assets
|
$
|
145,421
|
$
|
144,276
|
|||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||||||
|
Current
Liabilities:
|
|||||||
|
Accounts
payable
|
$
|
8,234
|
$
|
11,182
|
|||
|
Accrued
liabilities
|
7,736
|
10,379
|
|||||
|
Income
taxes payable
|
955
|
2,151
|
|||||
|
Current
portion of unearned service revenues
|
5,427
|
4,569
|
|||||
|
Customer
deposits
|
376
|
618
|
|||||
|
Current
portion of long-term debt and obligations under capital
leases
|
106
|
90
|
|||||
|
Total
current liabilities
|
22,834
|
28,989
|
|||||
|
Unearned
service revenues - less current portion
|
3,642
|
2,917
|
|||||
|
Deferred
tax liability, net
|
1,216
|
1,200
|
|||||
|
Long-term
debt and obligations under capital leases - less current
portion
|
106
|
115
|
|||||
|
Total
Liabilities
|
27,798
|
33,221
|
|||||
|
Commitments
and contingencies
|
|||||||
|
Shareholders'
Equity:
|
|||||||
|
Common
stock - par value $.001, 50,000,000 shares authorized; 14,790,801
and
14,586,402 issued; 14,669,114 and 14,464,715 outstanding,
respectively
|
15
|
14
|
|||||
|
Additional
paid-in-capital
|
88,139
|
85,160
|
|||||
|
Retained
earnings
|
28,651
|
25,452
|
|||||
|
Accumulated
other comprehensive (loss)
|
969
|
580
|
|||||
|
Common
stock in treasury, at cost - 40,000 shares
|
(151
|
)
|
(151
|
)
|
|||
|
Total
Shareholders' Equity
|
117,623
|
111,055
|
|||||
|
Total
Liabilities and Shareholders' Equity
|
$
|
145,421
|
$
|
144,276
|
|||
FARO
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
Three
Months Ended
|
|||||||
|
|
March
31, 2007
|
April
1, 2006
|
|||||
|
CASH
FLOWS FROM:
|
|||||||
|
OPERATING
ACTIVITIES:
|
|||||||
|
Net
income
|
$
|
3,198
|
$
|
496
|
|||
|
Adjustments
to reconcile net income to net cash used in
|
|||||||
|
operating
activities:
|
|||||||
|
Depreciation
and amortization
|
1,092
|
1,011
|
|||||
|
Amortization
of stock options and restricted stock units
|
199
|
113
|
|||||
|
Provision
for bad debts
|
31
|
-
|
|||||
|
Deferred
income tax benefit (expense)
|
111
|
(278
|
)
|
||||
|
Change
in operating assets and liabilities:
|
|||||||
|
Decrease
(increase) in:
|
|||||||
|
Accounts
receivable, net
|
2,960
|
953
|
|||||
|
Inventories
|
1,242
|
1,334
|
|||||
|
Prepaid
expenses and other current assets
|
(3,176
|
)
|
(596
|
)
|
|||
|
Increase
(decrease) in:
|
|||||||
|
Accounts
payable and accrued liabilities
|
(5,509
|
)
|
(6,132
|
)
|
|||
|
Income
taxes payable
|
(1,171
|
)
|
92
|
||||
|
Customer
deposits
|
(266
|
)
|
75
|
||||
|
Unearned
service revenues
|
1,647
|
589
|
|||||
|
Net
cash provided by (used in) operating activities
|
358
|
(2,343
|
)
|
||||
|
INVESTING
ACTIVITIES:
|
|||||||
|
Purchases
of property and equipment
|
(719
|
)
|
(775
|
)
|
|||
|
Payments
for intangible assets
|
(42
|
)
|
(425
|
)
|
|||
|
Proceeds
from short-term investments
|
-
|
600
|
|||||
|
Net
cash used in investing activities
|
(761
|
)
|
(600
|
)
|
|||
|
FINANCING
ACTIVITIES:
|
|||||||
|
Proceeds
from capital leases
|
53
|
67
|
|||||
|
Payments
of capital leases
|
(44
|
)
|
(53
|
)
|
|||
|
Income
tax benefit from exercise of stock options
|
1,422
|
-
|
|||||
|
Proceeds
from issuance of stock, net
|
1,224
|
-
|
|||||
|
Net
cash provided by financing activities
|
2,655
|
14
|
|||||
|
EFFECT
OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
(650
|
)
|
49
|
||||
|
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
1,602
|
(2,880
|
)
|
||||
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
15,689
|
9,278
|
|||||
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$
|
17,291
|
$
|
6,398
|
|||
###