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): October 28, 2014
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 October 28, 2014, FARO Technologies, Inc. (the “Company”) issued a press release announcing its results of operations for the third fiscal quarter ended September 27, 2014. 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 exhibit is furnished with this Current Report on Form 8-K:
| Exhibit Number |
Description | |
| 99.1 | Press release dated October 28, 2014 | |
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) | ||||||
| October 28, 2014 |
/s/ Peter G. Abram | |||||
| By: | Peter G. Abram | |||||
| Its: | Senior Vice President and Chief Financial Officer | |||||
EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 | Press release dated October 28, 2014 | |
Exhibit 99.1
| NEWS BULLETIN | FARO Technologies, Inc. 250 Technology Park Lake Mary, FL 32746 |
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| The Measure of Success | FOR IMMEDIATE RELEASE | |||
| Peter Abram, Senior Vice President and CFO | ||||
| Peter.Abram@faro.com, 407-333-9911 | ||||
FARO Reports Third Quarter 2014 Orders Growth of 22%; Sales
Growth of 21% and EPS Growth of 121%
LAKE MARY, FL, October 28, 2014 – FARO Technologies, Inc. (NASDAQ: FARO) today announced results for the third quarter ended September 27, 2014. Sales in the third quarter of 2014 increased 20.6% to $82.2 million from $68.2 million in the third quarter of 2013. Net income increased $6.2 million, or 122.6%, to $11.2 million, or $0.64 per share, in the third quarter of 2014 from $5.0 million, or $0.29 per share, in the third quarter of 2013. In the three months ended September 27, 2014, the Company recorded a discrete tax benefit of $4.5 million due to the reversal of a valuation allowance originally established against certain net operating losses. Excluding the tax benefit, Q3 Net Income would have been $6.7 million or $0.38 per share, up 31.0% from the third quarter of 2013.
New order bookings for the third quarter of 2014 increased $13.7 million, or 21.8%, to $77.0 million from $63.3 million in the third quarter of 2013.
Gross profit increased $7.2 million, or 18.6%, to $46.0 million from $38.8 million in the prior year quarter primarily driven by higher sales volume in laser scanners and arms. Gross margin of 56.0% decreased 90 basis points from the third quarter of 2013 primarily driven by a less favorable sales mix with the strong growth of laser scanner sales and reduced service margin.
Operating margin decreased slightly to 10.9% in the third quarter of 2014 from 11.1% in the third quarter of 2013 primarily due to the lower gross margin and higher investment in R&D. In the third quarter of 2014, R&D spending increased $1.5 million, or 24.9%, to $7.4 million from $5.9 million in the third quarter of 2013.
“FARO performed very well in the third quarter. We produced strong top line growth with solid margins and operating earnings, while continuing to invest in new product development, expansion of our sales organization and IT systems infrastructure. Our sales growth was driven by continued strength in laser scanning and meaningful growth in the arm product line with the release of the new laser line probe. In this quarter, we also acquired The CAD Zone, which we expect will accelerate our penetration in the law enforcement forensic technologies market – keeping in mind the market is still in the early stages of development,” stated Jay Freeland, FARO’s President and CEO. “We expect our revenue for 2014 will be consistent with our targeted longer term organic growth model of mid-teens annual revenue growth. In total, the third quarter was very strong for the Company.”
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 growth, demand for and customer acceptance of FARO’s products, anticipated improvement in the markets in which FARO operates, and FARO’s product development and product launches. 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 “is”, “future,” “will,” and similar expressions or discussions of FARO’s plans 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 less competitive or obsolete; |
| • | the Company’s inability to maintain its technological advantage by developing new products and enhancing its existing products; |
| • | 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 financial conditions; and |
| • | 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, 2013 and Part II, Item 1A. Risk Factors in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 28, 2014. |
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, unless otherwise required by law.
About FARO
FARO is the world’s most trusted source for 3D measurement technology. The Company develops and markets computer-aided measurement and imaging devices and software. Technology from FARO permits high-precision 3D measurement, imaging and comparison of parts and complex structures within production and quality assurance processes. The devices are used for inspecting components and assemblies, rapid prototyping, documenting large volume spaces or structures in 3D, surveying and construction, as well as for investigation and reconstruction of accident sites or crime scenes.
Approximately 15,000 customers are operating more than 30,000 installations of FARO’s systems, worldwide. The Company’s global headquarters is located in Lake Mary, FL; its European regional headquarters in Stuttgart, Germany; and its Asia/Pacific regional headquarters in Singapore. FARO has other offices in the United States, Canada, Mexico, Brazil, Germany, the United Kingdom, France, Spain, Italy, Poland, Turkey, the Netherlands, Switzerland, Portugal, India, China, Malaysia, Vietnam, Thailand, South Korea, and Japan.
More information is available at http://www.faro.com
Financial tables to follow:
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| (in thousands, except share and per share data) |
September 27, 2014 | September 28, 2013 | September 27, 2014 | September 28, 2013 | ||||||||||||
| SALES |
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| Product |
$ | 67,581 | $ | 55,014 | $ | 194,785 | $ | 162,670 | ||||||||
| Service |
14,658 | 13,176 | 42,888 | 39,219 | ||||||||||||
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| Total sales |
82,239 | 68,190 | 237,673 | 201,889 | ||||||||||||
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| COST OF SALES |
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| Product |
26,640 | 21,372 | 78,185 | 65,632 | ||||||||||||
| Service |
9,558 | 7,997 | 27,847 | 23,685 | ||||||||||||
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| Total cost of sales (exclusive of depreciation and amortization, shown separately below) |
36,198 | 29,369 | 106,032 | 89,317 | ||||||||||||
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| GROSS PROFIT |
46,041 | 38,821 | 131,641 | 112,572 | ||||||||||||
| OPERATING EXPENSES |
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| Selling and marketing |
19,059 | 16,366 | 56,207 | 49,732 | ||||||||||||
| General and administrative |
8,832 | 7,275 | 26,112 | 22,616 | ||||||||||||
| Depreciation and amortization |
1,805 | 1,699 | 5,520 | 5,268 | ||||||||||||
| Research and development |
7,352 | 5,884 | 19,440 | 16,171 | ||||||||||||
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| Total operating expenses |
37,048 | 31,224 | 107,279 | 93,787 | ||||||||||||
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| INCOME FROM OPERATIONS |
8,993 | 7,597 | 24,362 | 18,785 | ||||||||||||
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| OTHER (INCOME) EXPENSE, net |
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| Interest income |
(28 | ) | (19 | ) | (67 | ) | (54 | ) | ||||||||
| Other (income) expense, net |
(89 | ) | 809 | (78 | ) | 1,428 | ||||||||||
| Interest expense |
5 | 2 | 6 | 3 | ||||||||||||
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| INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE |
9,105 | 6,805 | 24,501 | 17,408 | ||||||||||||
| INCOME TAX (BENEFIT) EXPENSE |
(2,118 | ) | 1,763 | 1,974 | 4,161 | |||||||||||
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| NET INCOME |
$ | 11,223 | $ | 5,042 | $ | 22,527 | $ | 13,247 | ||||||||
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| NET INCOME PER SHARE — BASIC |
$ | 0.65 | $ | 0.29 | $ | 1.31 | $ | 0.78 | ||||||||
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| NET INCOME PER SHARE — DILUTED |
$ | 0.64 | $ | 0.29 | $ | 1.29 | $ | 0.77 | ||||||||
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| Weighted average shares — Basic |
17,258,029 | 17,095,066 | 17,233,879 | 17,053,223 | ||||||||||||
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| Weighted average shares — Diluted |
17,410,391 | 17,185,380 | 17,396,788 | 17,191,407 | ||||||||||||
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FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| (in thousands, except share data) |
September 27, 2014 (unaudited) |
December 31, 2013 |
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| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
$ | 116,910 | $ | 124,630 | ||||
| Short-term investments |
64,996 | 64,994 | ||||||
| Accounts receivable, net |
68,939 | 66,309 | ||||||
| Inventories, net |
56,482 | 48,940 | ||||||
| Deferred income taxes, net |
5,883 | 4,601 | ||||||
| Prepaid expenses and other current assets |
15,901 | 14,645 | ||||||
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| Total current assets |
329,111 | 324,119 | ||||||
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| Property and equipment: |
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| Machinery and equipment |
41,115 | 36,924 | ||||||
| Furniture and fixtures |
6,928 | 6,888 | ||||||
| Leasehold improvements |
15,482 | 11,765 | ||||||
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| Property and equipment at cost |
63,525 | 55,577 | ||||||
| Less: accumulated depreciation and amortization |
(41,756 | ) | (39,126 | ) | ||||
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| Property and equipment, net |
21,769 | 16,451 | ||||||
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| Goodwill |
19,579 | 19,358 | ||||||
| Intangible assets, net |
8,834 | 8,112 | ||||||
| Service inventory |
21,589 | 19,033 | ||||||
| Deferred income taxes, net |
8,845 | 4,423 | ||||||
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| Total assets |
$ | 409,727 | $ | 391,496 | ||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Current liabilities: |
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| Accounts payable |
$ | 9,853 | $ | 14,881 | ||||
| Accrued liabilities |
23,434 | 20,133 | ||||||
| Income taxes payable |
418 | 1,690 | ||||||
| Current portion of unearned service revenues |
22,464 | 21,331 | ||||||
| Customer deposits |
1,223 | 2,910 | ||||||
| Current portion of obligations under capital leases |
8 | 8 | ||||||
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| Total current liabilities |
57,400 | 60,953 | ||||||
| Unearned service revenues — less current portion |
13,635 | 13,414 | ||||||
| Deferred income tax liability |
1,203 | 1,171 | ||||||
| Obligations under capital leases — less current portion |
2 | 8 | ||||||
| Other long-term liabilities |
481 | — | ||||||
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| Total liabilities |
72,721 | 75,546 | ||||||
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| Shareholders’ equity: |
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| Common stock — par value $.001, 50,000,000 shares authorized; 17,954,933 and 17,868,372 issued; 17,274,698 and 17,188,137 outstanding, respectively |
18 | 18 | ||||||
| Additional paid-in capital |
198,202 | 191,874 | ||||||
| Retained earnings |
148,394 | 125,867 | ||||||
| Accumulated other comprehensive income |
(533 | ) | 7,266 | |||||
| Common stock in treasury, at cost — 680,235 shares |
(9,075 | ) | (9,075 | ) | ||||
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| Total shareholders’ equity |
337,006 | 315,950 | ||||||
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| Total liabilities and shareholders’ equity |
$ | 409,727 | $ | 391,496 | ||||
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FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended | ||||||||
| (in thousands) |
September 27, 2014 | September 28, 2013 | ||||||
| CASH FLOWS FROM: |
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| OPERATING ACTIVITIES: |
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| Net income |
$ | 22,527 | $ | 13,247 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation and amortization |
5,520 | 5,268 | ||||||
| Compensation for stock options and restricted stock units |
3,669 | 3,237 | ||||||
| (Net recovery of) provision for bad debts |
(272 | ) | 426 | |||||
| Deferred income tax (benefit) expense |
(5,804 | ) | 996 | |||||
| Income tax benefit from exercise of stock options |
(137 | ) | (814 | ) | ||||
| Change in operating assets and liabilities: |
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| Decrease (increase) in: |
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| Accounts receivable |
(5,392 | ) | 8,951 | |||||
| Inventories, net |
(12,965 | ) | 620 | |||||
| Prepaid expenses and other current assets |
(1,881 | ) | (3,365 | ) | ||||
| (Decrease) increase in: |
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| Accounts payable and accrued liabilities |
(805 | ) | (925 | ) | ||||
| Income taxes payable |
(1,151 | ) | (3,700 | ) | ||||
| Customer deposits |
(1,659 | ) | (258 | ) | ||||
| Unearned service revenues |
2,827 | 512 | ||||||
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| Net cash provided by operating activities |
4,477 | 24,195 | ||||||
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| INVESTING ACTIVITIES: |
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| Purchases of property and equipment |
(10,306 | ) | (1,883 | ) | ||||
| Payments for intangible assets |
(1,080 | ) | (1,787 | ) | ||||
| Purchase of business acquired |
(1,000 | ) | — | |||||
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| Net cash used in investing activities |
(12,386 | ) | (3,670 | ) | ||||
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| FINANCING ACTIVITIES: |
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| Payments on capital leases |
(6 | ) | (76 | ) | ||||
| Income tax benefit from exercise of stock options |
137 | 814 | ||||||
| Proceeds from issuance of stock, net |
2,522 | 3,267 | ||||||
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| Net cash provided by financing activities |
2,653 | 4,005 | ||||||
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| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(2,464 | ) | (858 | ) | ||||
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| (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
(7,720 | ) | 23,672 | |||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
124,630 | 93,233 | ||||||
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| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 116,910 | $ | 116,905 | ||||
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FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| (in thousands) |
September 27, 2014 | September 28, 2013 | September 27, 2014 | September 28, 2013 | ||||||||||||
| Net income |
$ | 11,223 | $ | 5,042 | $ | 22,527 | $ | 13,247 | ||||||||
| Currency translation adjustments, net of tax |
(7,817 | ) | 3,558 | (7,799 | ) | 597 | ||||||||||
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| Comprehensive income |
$ | 3,406 | $ | 8,600 | $ | 14,728 | $ | 13,844 | ||||||||
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