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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 the earliest event reported) August 6, 2003
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Commission File Number 0-23081
FARO TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Florida 59-3157093
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(State or Other Jurisdiction of Incorporation) (IRS Employer 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)
Item 9. Regulation FD Disclosure
Item 12. Results of Operations and Financial Condition
The following information is being furnished under Item 9 and Item 12 of
Form 8-K: Press release by FARO Technologies, Inc. announcing its results of
operations for the Second Quarter 2003 ended June 28, 2003. A copy of this press
release is attached as Exhibit 99.1 to this Form 8-K.
Signature
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 thereunder duly authorized.
FARO TECHNOLOGIES, INC.
By: /s/ Gregory A. Fraser
----------------------------------------
Gregory A. Fraser
Executive Vice President, Secretary, and
Treasurer
Date: August 6, 2003
EXHIBIT INDEX
Exhibit Number Description
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99.1 Press Release, dated August 5, 2003
Exhibit 99.1
FARO Technologies Reports Second Quarter 2003 Results
Sales Hit $16.2 Million -- a Record;
Gross Margin Improves to 61.9%
LAKE MARY, Fla., Aug. 5 /PRNewswire-FirstCall/ -- FARO Technologies, Inc.
(Nasdaq: FARO) today reported its fourth consecutive profitable quarter,
fueled by increases in sales and gross margin.
(Photo: http://www.newscom.com/cgi-bin/prnh/20000522/FLM035LOGO )
Net income was $1.6 million, or 12 cents per diluted share, in the quarter
that ended June 28, 2003, compared to a net loss of $2.0 million, or a net
loss of 17 cents per diluted share in the year-ago quarter, which ended June
30, 2002.
Sales for the quarter were $16.2 million, a Company record for any quarter
and a 57.3% increase from $10.3 million in the second quarter of 2002. Sales
increased primarily from higher laser tracker unit sales and from price
increases on the laser tracker and FaroArm products in January 2003. The
Company reported new order bookings of approximately $16.2 million during the
quarter compared with approximately $13.3 million in the first quarter of
2003, and approximately $11.5 million in the year-ago quarter.
Gross margin was 61.9% for the second quarter of 2003 compared to 49.5% in
the second quarter of 2002, and 56.0% in the first quarter of 2003. Gross
margin improved on a year over year and sequential quarter basis primarily as
a result of improved production and service efficiencies, and increased
selling prices.
Selling, general and administrative ("SG&A") expenses were $6.8 million in
the second quarter of 2003, an increase of $1.2 million, or 21.4% from $5.6
million in the year-ago quarter. As a percentage of sales, SG&A expenses were
42.0% in the second quarter of 2003 compared to 54.4% in the year ago quarter.
On a sequential basis, SG&A expenses as a percentage of sales in the second
quarter of 2003 increased slightly from 41.4% in the first quarter of 2003.
Income from operations increased $3.8 million, from a loss of $2.2 million
in the second quarter of 2002 to income of $1.6 million in the second quarter
of 2003. This increase was primarily a result of an increase in gross profit
of $5.0 million, offset by the $1.2 million increase in SG&A expenses noted
above.
The Company also said that as a result of its recently announced planned
expansion into China, it would report regional sales under three new
geographic groupings: the Americas (North and South America), Europe (Europe
and Africa), and Asia Pacific. This reporting format corresponds to the
Company's regional management assignments. In the second quarter of 2003 sales
in the Americas grew 52.8% to $8.1 million compared to $5.3 million in the
second quarter of 2002. Sales in Europe increased 81.6% in the second quarter
of 2003 to $6.9 million, compared to $3.8 million in the year ago quarter.
Sales in Asia Pacific in the second quarter increased 8.3% to $1.3 million,
from $1.2 million in 2002. For the six months ended June 28, 2003 sales in the
Americas, Europe and Asia Pacific increased 44.3%, 78.0% and 33.8%
respectively.
"Despite the sluggish economies in most of our major markets, our new
order rate was the strongest in Company history, said Simon Raab, President
and CEO. Sales in Europe are especially strong year-to-date. As I had
suggested last quarter, gross margin improved significantly in the second
quarter, exceeding our traditional 60% level. I expect gross margins to
settle back within the 58-59% range for the rest of the year, and overall I
expect to leverage our existing cost structure for a record year in 2003, and
next year."
The Company also announced that it filed on July 9, 2003, a demand for
arbitration with the American Arbitration Association in connection with the
acquisition of SpatialMetriX Corporation (SMX). The Company acquired SMX, a
leading manufacturer and supplier of laser trackers, metrology software and
contract inspection services, in January 2002, in exchange for 850,000 shares
of FARO common stock to be delivered to SMX's creditors and former
stockholders and the assumption or satisfaction of SMX's debt.
The Company is seeking indemnification for various breaches of the
representations and warranties in connection with the acquisition. To satisfy
the indemnity obligations, the Company previously asserted its right to set
off 422,956 shares of FARO common stock that have not been delivered to the
former SMX stockholders. However, all of 850,000 shares that were to be
issued in connection with the SMX acquisition are considered issued and
outstanding shares and are taken into account when computing earnings per
share. The representative of the former SMX shareholders has denied any
obligation to indemnify the Company and has filed counterclaims against the
Company relating to the remaining shares of FARO common stock that have not
been delivered to the former SMX shareholders.
Outlook For 2003 and 2004.
"We are issuing guidance this quarter to help investors better understand
our expectations for the remainder of 2003 and 2004," continued Raab. "In the
past I have said that we would modify our approach over time as required, to
meet our medium and long term objectives in each market and product sector.
This philosophy has allowed us to meet the five-year objectives set at the
time of our IPO in 1997. We will continue to employ this philosophy going
forward, which may, when combined with unpredictable market and political
conditions, negatively impact our short term results as compared to those
projections outlined below," Raab concluded.
We are anticipating sales for the third quarter of 2003 to be $16-$17
million and net income to be $1.0-$1.1 million, or $0.08-$0.09 per diluted
share. We expect earnings per share in the third quarter to be lower than the
second quarter of 2003 primarily from a reduced gross margin of 58-59%. Gross
margin is expected to be somewhat lower in the third and fourth quarters as we
ramp up production in our new Swiss manufacturing plant. In addition selling
expenses are expected to be slightly higher due to start-up expenses related
to our new sales office in China. Based on our historical proportion of fourth
quarter sales of 25-30% of total annual sales, we expect fourth quarter sales
to be $17-$18 million, and total sales in 2003 to be $63-$65 million.
Based on our historical growth rate, and the recent positive trends in our
business, for calendar 2004 we expect sales to grow by 15-20%. We anticipate
that a portion of growth in 2004 will be from the new FARO Gage product, which
we are introducing in 2003, and increased sales of our existing product line.
Based on our current cost structure, and expected continued improvements in
our business model, we expect the 15-20% increase in sales to result in a 30-
50% increase in net income in 2004.
A conference call reviewing the second quarter 2003 results will be held
Wednesday, August 6, 2003 beginning at 11:00 AM (Eastern)/ 8:00 AM (Pacific).
To participate please dial 800-903-0247 five minutes prior to start time.
International callers should dial 785-832-2041. The Conference ID is "FARO". A
recording of the call will be available until October 29, 2003 by dialing
800-839-9815. International callers should dial 402-220-2190. No access code
is needed for the replay. The call will be simultaneously broadcast over the
Internet at:
http://www.firstcallevents.com/service/ajwz386238830gf12.html
The call will be archived at the Company's website at http://www.faro.com.
Financial Tables Follow
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," and similar expressions are intended to 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 potential loss of material customers,
* The failure to properly manage growth and successfully integrate
acquired businesses,
* inability of the Company's products to attain broad market acceptance,
* inability of the Company to maintain historical sales growth rates,
* inability of the Company to maintain or reduce operating expenses or
maintain its historical gross margin,
* inability of the Company to ramp up production in Europe or complete the
opening of its sales office in China in 2003,
* foreign exchange rate fluctuations,
* risks associated with establishing manufacturing operations outside of
the U.S. and increased sales occurring outside of the U.S., such as
difficulties in staffing and managing facilities located outside of the U.S.,
political and economic instability, potentially adverse tax consequences, the
burden of complying with complex foreign laws and treaties, and trade
protection laws.
* the impact of competitive products and pricing,
* fluctuations in quarterly operating results as a result of factors such
as the size, timing and recognition of revenue from significant orders,
increases in operating expenses required for product development and sales and
marketing, the timing and market acceptance of new products and product
enhancements; customer order deferrals in anticipation of new products and
product enhancements; the Company's success in expanding its sales and
marketing programs, and general economic conditions,
* increased length of the Company's sales cycle,
* uncertainties in patent enforcement or the protection of other
proprietary rights,
* dependence on Simon Raab and Gregory A. Fraser and other key personnel,
the cyclical nature of the Company's business and the industries of the
Company's customers,
* the financial condition of the Company's customers,
* 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.
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
SUMMARY FINANCIAL TABLE
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
June 28 June 30 June 28 June 30
2003 2002 2003 2002
SALES $16,243,469 $10,309,596 $29,647,734 $19,031,207
COST OF SALES 6,183,034 5,207,726 12,082,614 9,036,359
Gross profit 10,060,435 5,101,870 17,565,120 9,994,848
OPERATING EXPENSES:
Selling 4,484,859 3,415,740 8,272,298 6,642,663
General and
administrative 2,297,315 2,169,447 4,047,880 3,727,128
Depreciation and
amortization 538,991 621,027 1,127,645 1,282,386
Research and
development 1,066,155 1,149,625 1,943,623 2,372,431
Employee stock
options 108,290 (11,375) 149,738 2,022
Total operating
expenses 8,495,610 7,344,464 15,541,184 14,026,630
INCOME (LOSS) FROM
OPERATIONS 1,564,824 (2,242,594) 2,023,936 (4,031,782)
OTHER INCOME
(EXPENSES)
Interest income 33,489 35,723 36,154 241,451
Other income
(expense), net 218,730 199,915 334,470 171,529
Interest expense (18,661) (1,981) (34,558) (3,097)
NET INCOME BEFORE
INCOME TAX 1,798,382 (2,008,937) 2,360,002 (3,621,899)
INCOME TAX EXPENSE 240,334 (2,801) 312,589 37,000
NET INCOME (LOSS) $1,558,049 $(2,006,136) $2,047,413 $(3,658,899)
NET INCOME (LOSS) PER
SHARE - BASIC $0.13 $(0.17) $0.17 $(0.31)
Weighted average
shares - Basic 11,936,466 11,885,252 11,932,804 11,809,697
NET INCOME (LOSS) PER
SHARE - DILUTED $0.12 $(0.17) $0.16 $(0.31)
Weighted average
shares - Diluted 12,721,397 11,885,252 12,717,735 11,809,697
SELECTED CONSOLIDATED BALANCE SHEET DATA
(UNAUDITED)
June 28, 2003
Cash and investments $5,154,525
Current assets $32,063,820
Total assets $47,061,611
Current liabilities $11,234,879
Long-term debt $35,645
Total liabilities $12,266,893
Total shareholders'
equity 34,794,718
Total liabilities and
shareholders' equity $47,061,611
SOURCE FARO Technologies, Inc.
-0- 08/05/2003
/CONTACT: Greg Fraser, Executive Vice President & CFO, FARO,
+1-407-333-9911, or Vic Allgeier, The TTC Group, +1-212-227-0997, for FARO/
/Photo: http://www.newscom.com/cgi-bin/prnh/20000522/FLM035LOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, 888-776-6555 or 212-782-2840/
/Web site: http://www.faro.com/
/Audio: http://www.firstcallevents.com/service/ajwz386238830gf12.html/
(FARO)
CO: FARO Technologies, Inc.
ST: Florida
IN: AUT MAC STW
SU: ERN ERP CCA