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) October
29, 2008
FARO
TECHNOLOGIES, INC.
(Exact
Name of Registrant as Specified in Its Charter)
|
Florida
|
0-20381
|
59-3157093
|
||
|
(State
or Other Jurisdiction
of
Incorporation)
|
(Commission
File
Number)
|
(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)
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
October 29, 2008, FARO Technologies, Inc. issued a press release announcing
its
results of operations for the third quarter ended September 27, 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 October 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:
October 29, 2008
|
|
|
/s/
Jay Freeland
|
|
|
Jay
Freeland
|
|
|
Chief
Executive Officer
|
EXHIBIT
INDEX
|
Description
|
||
|
99.1
|
Press
Release dated as of October 29,
2008
|
|
NEWS
BULLETIN
 |
FARO
Technologies Inc.
125
Technology Park
Lake
Mary, FL 32746
|
The
Measure of Success
Keith
Bair, Senior Vice President and CFO
keith.bair@FARO.com,
407-333-9911
FARO
Reports Sales Growth of 10.3%,
Orders
Grow 12.3%
LAKE
MARY,
FL.,
October 29, 2008 - FARO Technologies, Inc. (NASDAQ: FARO)
today
announced results for the third quarter ended September 27, 2008. Net income
for
the third quarter was $2.0 million, or $0.12 per diluted share, an increase
of
$1.3 million, compared to $0.7 million, or $0.04 per diluted share, in the
third
quarter of 2007.
Sales
for
the third quarter of 2008 were $49.1 million, an increase of $4.6 million,
or
10.3%, from $44.5 million in the third quarter of 2007. New
order
bookings for the third quarter were $49.2 million, an increase of $5.4 million,
or 12.3%, compared with $43.8 million in the third quarter of 2007.
“We
saw
double-digit orders and sales growth in the third quarter, but our deal closure
rate remains below our historical average, continuing the trend we saw in the
first and second quarter of this year,” stated Jay Freeland, President and Chief
Executive Officer of FARO. “New leads and customer demos are at our historical
levels in all three regions, which remains a positive sign for the business.
However, customers continue to delay their purchasing decisions which is
resulting in lower than normal growth rates.”
Gross
margin for the third quarter of 2008 was 59.1%, compared to 59.4% in the third
quarter of 2007. Gross margin decreased primarily as the result of an increase
in service costs as a percentage of sales.
Selling
expenses as a percentage of sales increased to 31.3% in the third quarter of
2008 from 30.6% in the third quarter of 2007 primarily as a result of an
increase in new sales personnel that were added to continue driving the
Company’s growth.
General
and administrative expenses decreased to 13.5% of sales for the third quarter
of
2008 from 17.9% in the third quarter of 2007. General and administrative
expenses in the third quarter of 2007 include the accrual of $2.65 million
for
the estimated fines and penalties related to the settlement of the FCPA matter.
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
third quarter of 2008, an increase from $2.9 million in the third quarter of
2007.
Operating
margin for the third quarter of 2008 increased to 5.3% from 2.2% in the quarter
ended September 29, 2007.
Income
tax expense decreased by $1.1 million to $0.5 million for the three months
ended
September 27, 2008 from $1.6 million for the three months ended September 29,
2007. This decrease was primarily a result of a reduction in the effective
tax
rate to 19.9% for the three months ended September 27, 2008, from 69.5% for
the
three months ended September 29, 2007. The Company’s effective tax rate was
69.5% in the three months ended September 29, 2007 as a result of an increase
in
expenses that are non-deductible for U.S. income tax purposes of $2.65 million
related to the accrual for the previously mentioned FCPA matter. The Company’s
effective income tax rate, excluding this effect, would have been 19.9% for
the
three months ended September 29, 2007.
“In
this
challenging economic environment, I am pleased with our year-to-date sales
growth of more than 15% as well as the strength of our balance sheet with zero
debt and more than $100 million in cash and short term investments. Customer
interest in our solutions remains strong, but their ability and willingness
to
transact has slowed. Because of that uncertainty, we are lowering our full-year
2008 revenue guidance from 15-20% growth to 5-10% growth while maintaining
our
previously issued gross margin guidance of 58-60% of sales. Given the depth
and
breadth of this global uncertainty, we do not plan to issue guidance for fiscal
2009 until we see stability in the macroeconomic environment,” 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;
|
|
·
|
a
slowdown in the manufacturing industry or the domestic and international
economies in the regions of the world where the Company
operates;
|
|
·
|
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;
|
|
·
|
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 18,000 installations and 8,600 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.
###
FARO
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(UNAUDITED)
|
September 27,
|
December 31,
|
||||||
|
(in thousands, except share data)
|
2008
|
2007
|
|||||
|
ASSETS
|
|||||||
|
Current
Assets:
|
|||||||
|
Cash
and cash equivalents
|
$
|
20,160
|
$
|
25,798
|
|||
|
Short-term
investments
|
82,370
|
77,375
|
|||||
|
Accounts
receivable, net
|
45,354
|
54,767
|
|||||
|
Inventories
|
37,237
|
29,100
|
|||||
|
Deferred
income taxes, net
|
6,034
|
2,841
|
|||||
|
Prepaid
expenses and other current assets
|
9,097
|
6,719
|
|||||
|
Total
current assets
|
200,252
|
196,600
|
|||||
|
Property
and Equipment:
|
|||||||
|
Machinery
and equipment
|
18,145
|
12,895
|
|||||
|
Furniture
and fixtures
|
3,909
|
5,008
|
|||||
|
Leasehold
improvements
|
3,523
|
3,296
|
|||||
|
Property
and equipment at cost
|
25,577
|
21,199
|
|||||
|
Less:
accumulated depreciation and amortization
|
(16,068
|
)
|
(13,672
|
)
|
|||
|
Property
and equipment, net
|
9,509
|
7,527
|
|||||
|
Goodwill
|
19,544
|
19,117
|
|||||
|
Intangible
assets, net
|
8,869
|
5,970
|
|||||
|
Service
inventory
|
12,682
|
10,865
|
|||||
|
Deferred
income taxes, net
|
1,931
|
3,460
|
|||||
|
Total
Assets
|
$
|
252,787
|
$
|
243,539
|
|||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|||||||
|
Current
Liabilities:
|
|||||||
|
Accounts
payable
|
$
|
9,526
|
$
|
12,450
|
|||
|
Accrued
liabilities
|
13,290
|
17,989
|
|||||
|
Income
taxes payable
|
1,470
|
2,266
|
|||||
|
Current
portion of unearned service revenues
|
10,846
|
8,594
|
|||||
|
Customer
deposits
|
334
|
337
|
|||||
|
Current
portion of obligations under capital leases
|
15
|
18
|
|||||
|
Total
current liabilities
|
35,481
|
41,654
|
|||||
|
Unearned
service revenues - less current portion
|
6,597
|
6,091
|
|||||
|
Deferred
tax liability, net
|
1,157
|
1,073
|
|||||
|
Obligations
under capital leases - less current portion
|
159
|
222
|
|||||
|
Total
Liabilities
|
43,394
|
49,040
|
|||||
|
Commitments
and contingencies
|
|||||||
|
Shareholders'
Equity:
|
|||||||
|
Common
stock - par value $.001, 50,000,000 shares authorized; 16,733,554
and
16,700,966 issued; 16,653,859 and 16,604,052 outstanding,
respectively
|
17
|
17
|
|||||
|
Additional
paid-in-capital
|
148,782
|
146,489
|
|||||
|
Retained
earnings
|
55,299
|
43,545
|
|||||
|
Accumulated
other comprehensive income
|
5,446
|
4,599
|
|||||
|
Common
stock in treasury, at cost - 40,000 shares
|
(151
|
)
|
(151
|
)
|
|||
|
Total
Shareholders' Equity
|
209,393
|
194,499
|
|||||
|
Total
Liabilities and Shareholders' Equity
|
$
|
252,787
|
$
|
243,539
|
|||
FARO
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
Nine Months Ended
|
|||||||
|
(in thousands)
|
Sep 27, 2008
|
Sep 29, 2007
|
|||||
|
CASH FLOWS FROM:
|
|||||||
|
OPERATING
ACTIVITIES:
|
|||||||
|
Net
income
|
$
|
11,754
|
$
|
9,689
|
|||
|
Adjustments
to reconcile net income to net cash (used in) provided by operating
activities:
|
|||||||
|
Depreciation
and amortization
|
3,293
|
3,013
|
|||||
|
Amortization
of stock options and restricted stock units
|
1,686
|
956
|
|||||
|
Provision
for bad debts
|
446
|
223
|
|||||
|
Deferred
income tax benefit
|
(1,575
|
)
|
(542
|
)
|
|||
|
Change
in operating assets and liabilities:
|
|||||||
|
Decrease
(increase) in:
|
|||||||
|
Accounts
receivable
|
9,198
|
(218
|
)
|
||||
|
Inventories
|
(9,681
|
)
|
(4,798
|
)
|
|||
|
Prepaid
expenses and other current assets
|
(2,369
|
)
|
(695
|
)
|
|||
|
Income
tax benefit from exercise of stock options
|
(45
|
)
|
(2,993
|
)
|
|||
|
Increase
(decrease) in:
|
|||||||
|
Accounts
payable and accrued liabilities
|
(7,654
|
)
|
2,499
|
||||
|
Income
taxes payable
|
(771
|
)
|
(785
|
)
|
|||
|
Customer
deposits
|
(11
|
)
|
(314
|
)
|
|||
|
Unearned
service revenues
|
2,671
|
5,064
|
|||||
|
Net
cash provided by operating activities
|
6,942
|
11,099
|
|||||
|
INVESTING
ACTIVITIES:
|
|||||||
|
Purchases
of property and equipment
|
(4,377
|
)
|
(1,807
|
)
|
|||
|
Payments
for intangible assets
|
(3,584
|
)
|
(264
|
)
|
|||
|
Purchases
of short-term investments
|
(4,995
|
)
|
(56,990
|
)
|
|||
|
Net
cash used in investing activities
|
(12,956
|
)
|
(59,061
|
)
|
|||
|
FINANCING
ACTIVITIES:
|
|||||||
|
Payments
on capital leases
|
(68
|
)
|
(60
|
)
|
|||
|
Income
tax benefit from exercise of stock options
|
45
|
2,993
|
|||||
|
Proceeds
from issuance of stock, net
|
128
|
58,409
|
|||||
|
Net
cash provided by financing activities
|
105
|
61,342
|
|||||
|
EFFECT
OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
271
|
(3,660
|
)
|
||||
|
(DECREASE)
INCREASE IN CASH AND CASH EQUIVALENTS
|
(5,638
|
)
|
9,720
|
||||
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
25,798
|
15,689
|
|||||
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$
|
20,160
|
$
|
25,409
|
|||
FARO
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
(UNAUDITED)
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||
|
(in thousands, except per share data)
|
Sep 27, 2008
|
Sep 29, 2007
|
Sep 27, 2008
|
Sep 29, 2007
|
|||||||||
|
SALES
|
$
|
49,095
|
$
|
44,521
|
$
|
152,934
|
$
|
132,389
|
|||||
|
COST
OF SALES (exclusive of depreciation and amortization, shown separately
below)
|
20,086
|
18,065
|
59,980
|
52,873
|
|||||||||
|
GROSS
PROFIT
|
29,009
|
26,456
|
92,954
|
79,516
|
|||||||||
|
OPERATING
EXPENSES:
|
|||||||||||||
|
Selling
|
15,382
|
13,625
|
46,886
|
39,951
|
|||||||||
|
General
and administrative
|
6,614
|
7,978
|
19,274
|
18,496
|
|||||||||
|
Depreciation
and amortization
|
1,158
|
971
|
3,293
|
3,013
|
|||||||||
|
Research
and development
|
3,237
|
2,881
|
9,122
|
7,129
|
|||||||||
|
Total
operating expenses
|
26,391
|
25,455
|
78,575
|
68,589
|
|||||||||
|
INCOME
FROM OPERATIONS
|
2,618
|
1,001
|
14,379
|
10,927
|
|||||||||
|
OTHER
(INCOME) EXPENSE
|
|||||||||||||
|
Interest
income
|
(547
|
)
|
(590
|
)
|
(1,624
|
)
|
(1,182
|
)
|
|||||
|
Other
(income) expense, net
|
652
|
(720
|
)
|
834
|
(1,427
|
)
|
|||||||
|
Interest
expense
|
2
|
3
|
450
|
7
|
|||||||||
|
INCOME
BEFORE INCOME TAX
|
2,511
|
2,308
|
14,719
|
13,529
|
|||||||||
|
INCOME
TAX EXPENSE
|
500
|
1,603
|
2,965
|
3,840
|
|||||||||
|
NET
INCOME
|
$
|
2,011
|
$
|
705
|
$
|
11,754
|
$
|
9,689
|
|||||
|
NET
INCOME PER SHARE - BASIC
|
$
|
0.12
|
$
|
0.04
|
$
|
0.71
|
$
|
0.64
|
|||||
|
NET
INCOME PER SHARE - DILUTED
|
$
|
0.12
|
$
|
0.04
|
$
|
0.70
|
$
|
0.63
|
|||||
|
Weighted
average shares - Basic
|
16,637,497
|
15,726,009
|
16,624,784
|
15,037,745
|
|||||||||
|
Weighted
average shares - Diluted
|
16,731,064
|
15,988,788
|
16,751,679
|
15,315,996
|
|||||||||