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): February 24, 2010
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 February 24, 2010, FARO Technologies, Inc. (the “Company”) issued a press release announcing its results of operations for the fourth fiscal quarter and fiscal year ended December 31, 2009. 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 exhibits are furnished with this Current Report on Form 8-K:
| Exhibit |
Description | |
| 99.1 | Press release dated February 24, 2010. |
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) | ||||
| February 24, 2010 | /s/ Keith Bair | |||
| By: | Keith Bair | |||
| Its: | Chief Financial Officer | |||
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Press release dated February 24, 2010. |
Exhibit 99.1
Keith Bair, Senior Vice President and CFO
keith.bair@FARO.com, 407-333-9911
FARO Reports Fourth Quarter 2009 Sales of $46 million;
Sequential Growth of 29% and Return to Operating Profit
LAKE MARY, FL, February 24, 2010 – FARO Technologies, Inc. (NASDAQ: FARO) today announced results for the fourth quarter and year ended December 31, 2009. Sales in the fourth quarter of 2009 increased 28.9%, to $46.0 million, from $35.7 million in the third quarter of 2009. The Company returned to operating profitability in the fourth quarter of 2009, with operating income of $2.5 million compared to an operating loss of $2.3 million in the third quarter of 2009.
Net loss for the fourth quarter of 2009 was $0.6 million, or $(0.04) per diluted share, a decrease of $2.8 million, compared to net income of $2.2 million, or $0.13 per diluted share, in the fourth quarter of 2008. The net loss for the fourth quarter of 2009 included a tax settlement with the Internal Revenue Service of $2.6 million, or $.16 per share. Net loss for fiscal 2009 was $10.6 million, or $(0.66) per diluted share, compared to net income of $14.0 million, or $0.83 per diluted share during 2008.
Sales for the fourth quarter of 2009 decreased $10.3 million, or 18.3%, to $46.0 million from $56.3 million in the fourth quarter of 2008. New order bookings for the fourth quarter of 2009 were $53.1 million, a decrease of $3.3 million, or 5.9%, compared to $56.4 million in the fourth quarter of 2008. Fiscal 2009 sales were $147.7 million, a decrease of 29.4% compared to fiscal 2008 sales of $209.2 million. New order bookings for fiscal 2009 were $151.7 million, a decrease of 28.2% from $211.3 million in fiscal 2008.
“Sales increased 29% quarter over quarter and, as expected, the target markets for our products continued to show improvement. The cost reductions we made during the first three quarters of 2009 created a leaner, more efficient operation without sacrificing R&D programs. Ultimately, those moves position us well to execute in 2010,” stated Jay Freeland, FARO’s President and CEO.
Gross margin for the fourth quarter of 2009 was 55.4%, compared to 57.3% in the fourth quarter of 2008. Gross margin decreased primarily due to a change in the sales mix between higher margin product sales and lower margin service revenue. Gross margin for fiscal 2009 was 54.6% compared to 59.8% in fiscal 2008.
Selling expenses as a percentage of sales decreased to 26.4% in the fourth quarter of 2009 from 28.6% in the fourth quarter of 2008, primarily as a result of lower marketing expenses. Selling expenses in the fourth quarter of 2009 decreased by $3.9 million from the fourth quarter of 2008 to $12.2 million. Selling expenses as a percentage of sales for fiscal 2009 were 32.9%, compared to 30.1% in fiscal 2008.
General and administrative expenses increased to 13.8% of sales in the fourth quarter of 2009 from 12.2% in the fourth quarter of 2008. General and administrative expenses in the fourth quarter of 2009 decreased by $0.5 million to $6.4 million from $6.9 million in the fourth quarter of 2008. General and administrative expenses were 16.9% of sales for fiscal 2009 compared to 12.5% in fiscal 2008.
R&D expenses were $3.0 million in the fourth quarter of 2009, a decrease of $0.5 million from $3.5 million in the fourth quarter of 2008. R&D expenses were 6.6% of sales in the fourth quarter of 2009 compared to 6.2% of sales in the fourth quarter of 2008. R&D expenses for both fiscal 2009 and 2008 were $12.6 million.
Operating income for the fourth quarter of 2009 was $2.5 million, a decrease of $2.1 million from $4.6 million in the fourth quarter of 2008. Operating margin for the fourth quarter of 2009 was 5.4% compared to 8.1% in the fourth quarter of 2008. The operating loss for fiscal 2009 was $11.0 million compared to an operating profit of $18.9 million in fiscal 2008.
Income tax expense increased by $1.9 million to $3.3 million for the fourth quarter of 2009 from $1.4 million in the fourth quarter of 2008 due to a $2.6 million tax settlement with the Internal Revenue Service. The tax settlement will not impact the Company’s tax rate going forward.
“We feel good about the Company’s prospects in 2010 and believe we are a stronger organization now than we were at the beginning of last year. We continue to have a strong balance sheet with over $100 million in cash and zero debt and have created a streamlined operating structure from which to execute. Assuming economic conditions continue to improve, we believe our prospects for 2010 are good,” 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 the future state of the economy, FARO’s focus, plans and strategies, , and its future operating results and financial condition. 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 “intend,” “believe,” “will,” “expect” and similar expressions or discussions of our strategy 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 obsolete or less competitive; |
| • | the cyclical nature of the industries of the Company’s customers and material adverse changes in customers’ access to liquidity and capital; |
| • | further 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 financing conditions; |
| • | fluctuations in the Company’s annual and quarterly operating results and the inability to achieve its financial operating targets; |
| • | 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; |
| • | 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, 2008 and in Part II, Item 1A. Risk Factors in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009. |
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 20,000 installations and 10,000 customers globally, FARO Technologies, Inc. designs, develops, and markets portable, computerized measurement and imaging 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 STATEMENTS OF OPERATIONS
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| (in thousands, except share and per share data) |
Dec 31, 2009 | Dec 31, 2008 | Dec 31, 2009 | Dec 31, 2008 | ||||||||||||
| SALES |
||||||||||||||||
| Product |
$ | 38,422 | $ | 48,190 | $ | 117,714 | $ | 179,209 | ||||||||
| Service |
7,604 | 8,125 | 29,989 | 30,040 | ||||||||||||
| Total Sales |
46,026 | 56,315 | 147,703 | 209,249 | ||||||||||||
| COST OF SALES |
||||||||||||||||
| Product |
15,646 | 16,931 | 46,293 | 60,736 | ||||||||||||
| Service |
4,897 | 7,112 | 20,702 | 23,287 | ||||||||||||
| Total Cost of Sales (exclusive of depreciation and amortization, shown separately below) |
20,543 | 24,043 | 66,995 | 84,023 | ||||||||||||
| GROSS PROFIT |
25,483 | 32,272 | 80,708 | 125,226 | ||||||||||||
| OPERATING EXPENSES: |
||||||||||||||||
| Selling |
12,164 | 16,130 | 48,598 | 63,015 | ||||||||||||
| General and administrative |
6,365 | 6,870 | 24,956 | 26,144 | ||||||||||||
| Depreciation and amortization |
1,440 | 1,212 | 5,530 | 4,505 | ||||||||||||
| Research and development |
3,047 | 3,502 | 12,613 | 12,625 | ||||||||||||
| Total operating expenses |
23,016 | 27,714 | 91,697 | 106,289 | ||||||||||||
| (LOSS) INCOME FROM OPERATIONS |
2,467 | 4,558 | (10,989 | ) | 18,937 | |||||||||||
| OTHER (INCOME) EXPENSE |
||||||||||||||||
| Interest income |
(28 | ) | (546 | ) | (253 | ) | (2,170 | ) | ||||||||
| Other (income) expense, net |
(233 | ) | 1,460 | (592 | ) | 2,295 | ||||||||||
| Interest expense |
5 | 2 | 14 | 452 | ||||||||||||
| (LOSS) INCOME BEFORE INCOME TAX EXPENSE |
2,723 | 3,642 | (10,158 | ) | 18,360 | |||||||||||
| INCOME TAX EXPENSE |
3,343 | 1,443 | 424 | 4,408 | ||||||||||||
| NET (LOSS) INCOME |
$ | (620 | ) | $ | 2,199 | $ | (10,582 | ) | $ | 13,952 | ||||||
| NET (LOSS) INCOME PER SHARE - BASIC |
$ | (0.04 | ) | $ | 0.13 | $ | (0.66 | ) | $ | 0.84 | ||||||
| NET (LOSS) INCOME PER SHARE - DILUTED |
$ | (0.04 | ) | $ | 0.13 | $ | (0.66 | ) | $ | 0.83 | ||||||
| Weighted average shares - Basic |
16,101,412 | 16,654,910 | 16,125,449 | 16,632,608 | ||||||||||||
| Weighted average shares - Diluted |
16,101,412 | 16,702,090 | 16,125,449 | 16,734,403 | ||||||||||||
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| (in thousands, except share data) |
December 31, 2009 |
December 31, 2008 |
||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 35,078 | $ | 23,494 | ||||
| Short-term investments |
64,986 | 81,965 | ||||||
| Accounts receivable, net |
42,944 | 49,713 | ||||||
| Inventories |
26,582 | 33,444 | ||||||
| Deferred income taxes, net |
4,473 | 5,581 | ||||||
| Prepaid expenses and other current assets |
6,016 | 7,879 | ||||||
| Total current assets |
180,079 | 202,076 | ||||||
| Property and Equipment: |
||||||||
| Machinery and equipment |
19,867 | 16,748 | ||||||
| Furniture and fixtures |
5,225 | 4,099 | ||||||
| Leasehold improvements |
9,434 | 9,893 | ||||||
| Property and equipment at cost |
34,526 | 30,740 | ||||||
| Less: accumulated depreciation and amortization |
(20,788 | ) | (16,604 | ) | ||||
| Property and equipment, net |
13,738 | 14,136 | ||||||
| Goodwill |
19,934 | 18,951 | ||||||
| Intangible assets, net |
7,985 | 8,580 | ||||||
| Service inventory |
12,079 | 12,843 | ||||||
| Deferred income taxes, net |
1,895 | 2,728 | ||||||
| Total Assets |
$ | 235,710 | $ | 259,314 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Accounts payable |
$ | 8,985 | $ | 10,813 | ||||
| Accrued liabilities |
8,173 | 14,032 | ||||||
| Income taxes payable |
229 | 1,988 | ||||||
| Current portion of unearned service revenues |
12,226 | 11,501 | ||||||
| Customer deposits |
2,173 | 425 | ||||||
| Current portion of obligations under capital leases |
80 | 87 | ||||||
| Total current liabilities |
31,866 | 38,846 | ||||||
| Unearned service revenues - less current portion |
5,910 | 6,772 | ||||||
| Deferred tax liability, net |
1,143 | 1,107 | ||||||
| Obligations under capital leases - less current portion |
193 | 281 | ||||||
| Total Liabilities |
39,112 | 47,006 | ||||||
| Commitments and contingencies |
||||||||
| Shareholders’ Equity: |
||||||||
| Common stock - par value $.001, 50,000,000 shares authorized; 16,795,289 and 16,741,488 issued; 16,115,054 and 16,658,552 outstanding, respectively |
17 | 17 | ||||||
| Additional paid-in-capital |
152,380 | 149,298 | ||||||
| Retained earnings |
46,915 | 57,497 | ||||||
| Accumulated other comprehensive income |
6,361 | 5,742 | ||||||
| Common stock in treasury, at cost - 680,235 and 55,808 shares, respectively |
(9,075 | ) | (246 | ) | ||||
| Total Shareholders’ Equity |
196,598 | 212,308 | ||||||
| Total Liabilities and Shareholders’ Equity |
$ | 235,710 | $ | 259,314 | ||||
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Years Ended December 31, | ||||||||||||
| (in thousands) |
2009 | 2008 | 2007 | |||||||||
| CASH FLOWS FROM: |
||||||||||||
| OPERATING ACTIVITIES: |
||||||||||||
| Net (loss) income |
$ | (10,582 | ) | $ | 13,952 | $ | 18,093 | |||||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
||||||||||||
| Depreciation and amortization |
5,530 | 4,505 | 4,034 | |||||||||
| Compensation for stock options and restricted stock units |
2,449 | 2,237 | 1,216 | |||||||||
| Provision for bad debts |
1,852 | 1,092 | 373 | |||||||||
| Deferred income tax expense (benefit) |
1,986 | (1,972 | ) | (464 | ) | |||||||
| Change in operating assets and liabilities: |
||||||||||||
| Decrease (increase) in: |
||||||||||||
| Accounts receivable |
5,769 | 2,993 | (9,121 | ) | ||||||||
| Inventories, net |
8,301 | (6,429 | ) | (7,265 | ) | |||||||
| Prepaid expenses and other current assets |
1,964 | (1,187 | ) | (3,208 | ) | |||||||
| Income tax benefit from exercise of stock options |
(4 | ) | (45 | ) | (963 | ) | ||||||
| Increase (decrease) in: |
||||||||||||
| Accounts payable and accrued liabilities |
(7,891 | ) | (5,317 | ) | 9,884 | |||||||
| Income taxes payable |
(1,749 | ) | (355 | ) | 1,278 | |||||||
| Customer deposits |
1,736 | 82 | (269 | ) | ||||||||
| Unearned service revenues |
(396 | ) | 3,710 | 8,007 | ||||||||
| Net cash provided by operating activities |
8,965 | 13,266 | 21,595 | |||||||||
| INVESTING ACTIVITIES: |
||||||||||||
| Purchases of property and equipment |
(3,387 | ) | (9,705 | ) | (2,930 | ) | ||||||
| Payments for intangible assets |
(670 | ) | (3,766 | ) | (359 | ) | ||||||
| Purchases of short-term investments |
(64,986 | ) | (81,965 | ) | (77,375 | ) | ||||||
| Proceeds from sales of short-term investments |
81,965 | 77,375 | 15,790 | |||||||||
| Net cash provided by (used in) investing activities |
12,922 | (18,061 | ) | (64,874 | ) | |||||||
| FINANCING ACTIVITIES: |
||||||||||||
| Payments on capital leases |
(88 | ) | (11 | ) | (92 | ) | ||||||
| Income tax benefit from exercise of stock options |
4 | 45 | 963 | |||||||||
| Purchases of treasury stock |
(8,829 | ) | (95 | ) | — | |||||||
| Proceeds from issuance of stock, net |
83 | 92 | 58,421 | |||||||||
| Net cash (used in) provided by financing activities |
(8,830 | ) | 31 | 59,292 | ||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(1,473 | ) | 2,460 | (5,904 | ) | |||||||
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
11,584 | (2,304 | ) | 10,109 | ||||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
23,494 | 25,798 | 15,689 | |||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 35,078 | $ | 23,494 | $ | 25,798 | ||||||