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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 4, 2004
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., FARO Technologies Second
Quarter 2004 Earnings Release. 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 4, 2004
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
99.1 Press Release, dated August 4, 2004
Exhibit 99.1
FARO's Strong Sales Performance Drives Earnings Growth of
142% to 29 Cents Per Share in Q2 2004 Vs. 12 Cents in Q2 2003
LAKE MARY, Fla., Aug. 4 /PRNewswire-FirstCall/ -- FARO Technologies, Inc.
(Nasdaq: FARO) today reported a 156 % increase in net income in the second
quarter of 2004 to $4.1 million, or 29 cents per diluted share, from $1.6
million, or 12 cents per diluted share in the second quarter of 2003. Sales
for the quarter increased $7.9 million, or 48.8 % to $24.1 million, from $16.2
million in the second quarter of 2003. New orders in the second quarter
increased $5.7 million, or 35.2% to $21.9 million, compared to $16.2 million
in the second quarter of 2003. Gross margin increased 1.3 percentage points to
63.2% in the quarter, from 61.9% in the second quarter of 2003. Selling,
general and administrative ("SG&A") expenses decreased as a percentage of
sales from 41.7 % in the second quarter of 2003 to 36.8% in the second quarter
of 2004.
Income from operations increased $3.0 million from $1.6 million in the
second quarter of 2003 to $4.6 million in the second quarter of 2004. This
increase was primarily a result of an increase in gross profit of $5.1
million, offset by a $2.1 million increase in SG&A expenses. On a sequential
quarter basis, operating margin improved to 19.2% in the second quarter of
2004, compared to 15.9% in the first quarter of 2004.
Income tax expense in the second quarter of 2004 was $760,000 or 15.6% of
income before taxes, compared to $240,000 or 13.3% in the year-ago quarter.
Income tax expense as a percentage of taxable income was lower than the
Company's 20%-25% forecast because the Company was able to realize additional
tax loss carry-forwards in its European operations. The Company expects to
realize additional tax loss carry-forwards through the balance of 2004,
resulting in an estimated income tax rate of 15%-20% in the second half of
2004.
Regionally, sales in the Americas increased 27.2% in the second quarter to
$10.3 million, from $8.1 million in the second quarter of 2003. Sales in the
Europe/Africa region increased 56.5% to $10.8 million, from $6.9 million in
2003. Sales in the Asia/Pacific region grew 130.8% to $3.0 million, from $1.3
million in 2003. The Company also announced that it would add direct sales
offices in South Korea and India to its Asia/Pacific group in the second half
of 2004.
"The second quarter results bring our trailing twelve month's earnings per
share to $0.97, and we are now approaching the target financial model that we
set as a goal several years ago," said Simon Raab, President and CEO. "To
solidify our market leading position and continue our growth momentum, we are
going to ramp up research and development spending to 6%-7% of sales, open
more direct sales offices in Asia/Pacific, and add approximately 20
application engineers to our worldwide sales organization, to provide
additional customer support for our newer Laser Tracker and Faro Gage
products. We will continue to manage our costs vigilantly, but we expect to
incur approximately $500,000 in professional fees in the second half of this
year to assist FARO in its Sarbanes Oxley Section 404 compliance activities.
These additional costs may be offset by higher sales in Asia/Pacific
contingent on ramping our capabilities and activities in this market. As such
we have tempered our revised earnings estimates for 2004."
Outlook for the remainder of 2004.
We expect sales in the third and fourth quarters to reflect the
seasonality apparent in our 5- year experience prior to 2003, rather than the
linear growth seen in 2003. We expect new orders in the second half of 2004 to
be approximately $45-$47 million, compared to $41 million in the first half.
Since we have improved our production metrics, we have brought our backlog
down to a customer-acceptable 2-3 weeks of sales, and we expect sales to track
the new order rate, or the book to bill ratio to be approximately one.
Therefore we are maintaining our forecast for 2004 sales at $90-$93 million.
Given our first half earnings, and the expected impact of the second half
costs mentioned above, we are raising our earlier forecast for net income of
$0.71-$0.86 per diluted share, to $0.85-$1.00 per diluted share in 2004.
A conference call reviewing the second quarter of 2004 will be held
Wednesday, August 4, 2004 beginning at 11:00 AM (Eastern)/ 8:00 AM (Pacific).
To participate please dial 800.795.1259 five minutes prior to start time.
International callers should dial 785.832.0326. The Conference ID is "FARO". A
recording of the call will be available until November 4, 2004 by dialing
800.934.8367. International callers should dial 402.220.6994. No access code
is needed for the replay. The call will be simultaneously broadcast over the
Internet at:
http://www.firstcallevents.com/service/ajwz409192750gf12.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," "projects," "forecast," 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 maintain historical or projected sales growth rates;
- our inability to maintain or reduce operating expenses or maintain or
increase our gross margin or operating margin;
- difficulties in ramping up sales in Asia;
- increases in expenses relating to our Asian expansion or our Swiss
manufacturing facility;
- difficulties in recruiting research and development engineers, and
application engineers
- 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;
- the cyclical nature of the industries of our customers and the financial
condition of our customers;
- the inability to protect our patents and other proprietary rights in the
United States and foreign countries and the assertion of infringement
claims against us;
- fluctuations in our annual and quarterly operating results as a result
of (i) the size and timing of customer orders, (ii) the amount of time
that it takes to fulfill orders and ship our products, (iii) the length
of our sales cycle to new customers and the time and expense incurred in
further penetrating our existing customer base, (iv) increases in
operating expenses required for product development and new product
marketing, (v) costs associated with new product introductions, such as
assembly line start-up costs and low introductory period production
volumes, (vi) the timing and market acceptance of new products and
product enhancements, (vii) customer order deferrals in anticipation of
new products and product enhancements, (viii) our success in expanding
our sales and marketing programs, (ix) start-up costs associated with
opening new sales offices outside of the United States, (x) fluctuations
in revenue and without proportionate adjustments in fixed costs, (xi)
the efficiencies achieved in managing inventories and fixed assets; and
(xii) adverse changes in the manufacturing industry and general economic
condition;
- 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 broad market for measurement and inspection devices;
- 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;
- the loss of our CEO or Executive VP or other key personnel;
- our inability to identify, consummate, or achieve expected benefits from
acquisitions;
- the failure to effectively manage our growth;
- the loss of a key supplier and the inability to find a sufficient
alternative supplier 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.
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
SUMMARY FINANCIAL TABLE
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
July 3, June 28, July 3, June 28,
2004 2003 2004 2003
SALES $24,076,847 $16,243,469 $45,102,039 $29,647,734
COST OF SALES 8,848,915 6,183,034 16,410,272 12,082,614
Gross profit 15,227,932 10,060,435 28,691,767 17,565,120
OPERATING EXPENSES:
Selling 6,233,296 4,484,859 11,795,991 8,272,298
General and
administrative 2,621,353 2,297,315 5,150,736 4,047,880
Depreciation and
amortization 537,936 538,991 1,094,695 1,127,645
Research and
development 1,206,337 1,066,155 2,647,749 1,943,623
Employee stock options 11,364 108,290 48,841 149,738
Total Operating
Expenses 10,610,286 8,495,610 20,738,012 15,541,184
INCOME (LOSS) FROM
OPERATIONS 4,617,646 1,564,825 7,953,755 2,023,936
OTHER INCOME
(EXPENSES)
Interest income 74,415 33,489 147,979 36,154
Other income, net 173,029 218,730 379,158 334,470
Interest expense (2,581) (18,661) (4,723) (34,558)
NET INCOME BEFORE
INCOME TAX 4,862,509 1,798,383 8,476,169 2,360,002
INCOME TAX EXPENSE 759,918 240,334 1,525,170 312,589
NET INCOME $4,102,591 $1,558,049 $6,950,999 $2,047,413
NET INCOME PER SHARE -
BASIC $0.30 $0.13 $0.51 $0.17
NET INCOME PER SHARE -
DILUTED $0.29 $0.12 $0.50 $0.16
Weighted average
shares - Basic 13,766,588 11,936,466 13,565,132 11,903,112
Weighted average
shares - Diluted 14,154,243 12,721,397 14,039,826 12,471,833
SELECTED CONSOLIDATED BALANCE SHEET DATA
(UNAUDITED)
July 3, 2004
Cash and investments $32,866,039
Current assets $73,464,587
Total assets $92,014,069
Current liabilities $11,235,895
Long-term debt $78,159
Total liabilities $11,947,115
Total shareholders' equity $80,066,954
Total liabilities and
shareholders' equity $92,014,069
SELECTED CONSOLIDATED STATEMENT OF CASH FLOWS DATA
(UNAUDITED)
July 3, 2004
Net cash provided by (used in)
operating activities $254,698
Net cash provided by (used in)
investing activities $(5,629,198)
Net cash provided by (used in)
financing activities $1,069,405
Effect of Exchange Rate Changes
on Cash $(438,767)
Cash and Cash Equivalents,
Beginning of Period $17,424,901
Cash and Cash Equivalents,
End of Period $12,681,039
SOURCE FARO Technologies, Inc.
-0- 08/04/2004
/CONTACT: Greg Fraser, Executive Vice President & CFO, FARO Technologies,
Inc., +1-407-333-9911; or Vic Allgeier, The TTC Group, +1-212-227-0997, for
FARO Technologies, Inc./
/Photo: http://www.newscom.com/cgi-bin/prnh/20000522/FLM035LOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com/
/Web site: http://www.faro.com /
/Audio: http://www.firstcallevents.com/service/ajwz409192750gf12.html /
(FARO)
CO: FARO Technologies, Inc.
ST: Florida
IN: AUT MAC STW CPR
SU: ERN ERP CCA MAV