UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 30, 2013
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 0-23081
FARO TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Florida | 59-3157093 | |
(State or other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
250 Technology Park, Lake Mary, Florida 32746
(Address of Principal Executive Offices) (Zip Code)
(407) 333-9911
(Registrants Telephone Number, including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | x | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller Reporting Company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
There were 17,091,324 shares of the registrants common stock outstanding as of April 19, 2013.
Quarterly Report on Form 10-Q
Quarter Ended March 30, 2013
INDEX
PAGE | ||||||
PART I. |
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Item 1. |
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a) |
Consolidated Balance Sheets As of March 30, 2013 (Unaudited) and December 31, 2012 |
3 | ||||
b) |
4 | |||||
c) |
5 | |||||
d) |
6 | |||||
e) |
7 | |||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
16 | ||||
Item 3. |
24 | |||||
Item 4. |
24 | |||||
PART II. |
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Item 1. |
25 | |||||
Item 1A. |
26 | |||||
Item 2. |
26 | |||||
Item 6. |
27 | |||||
28 |
2
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) |
March 30, 2013 (unaudited) |
December 31, 2012 | ||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 104,598 | $ | 93,233 | ||||
Short-term investments |
64,991 | 64,990 | ||||||
Accounts receivable, net |
53,721 | 62,559 | ||||||
Inventories, net |
50,024 | 48,894 | ||||||
Deferred income taxes, net |
6,025 | 7,216 | ||||||
Prepaid expenses and other current assets |
13,106 | 11,186 | ||||||
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Total current assets |
292,465 | 288,078 | ||||||
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Property and Equipment: |
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Machinery and equipment |
32,196 | 32,236 | ||||||
Furniture and fixtures |
6,366 | 6,516 | ||||||
Leasehold improvements |
10,812 | 10,897 | ||||||
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Property and equipment at cost |
49,374 | 49,649 | ||||||
Less: accumulated depreciation and amortization |
(34,913 | ) | (34,305 | ) | ||||
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Property and equipment, net |
14,461 | 15,344 | ||||||
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Goodwill |
18,485 | 18,816 | ||||||
Intangible assets, net |
7,186 | 7,048 | ||||||
Service inventory |
18,316 | 19,125 | ||||||
Deferred income taxes, net |
2,345 | 2,396 | ||||||
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Total Assets |
$ | 353,258 | $ | 350,807 | ||||
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current Liabilities: |
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Accounts payable |
$ | 9,460 | $ | 10,413 | ||||
Accrued liabilities |
18,260 | 18,216 | ||||||
Income taxes payable |
2,379 | 4,886 | ||||||
Current portion of unearned service revenues |
19,235 | 19,460 | ||||||
Customer deposits |
2,692 | 2,662 | ||||||
Current portion of obligations under capital leases |
28 | 45 | ||||||
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Total current liabilities |
52,054 | 55,682 | ||||||
Unearned service revenues - less current portion |
11,312 | 11,221 | ||||||
Deferred tax liability, net |
1,118 | 1,149 | ||||||
Obligations under capital leases - less current portion |
17 | 19 | ||||||
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Total Liabilities |
64,501 | 68,071 | ||||||
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Commitments and contingencies - See Note Q |
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Shareholders Equity: |
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Common stock - par value $.001, 50,000,000 shares authorized; 17,771,559 and 17,653,879 issued; 17,091,324 and 16,973,644 outstanding, respectively |
18 | 18 | ||||||
Additional paid-in-capital |
185,969 | 181,094 | ||||||
Retained earnings |
108,933 | 104,358 | ||||||
Accumulated other comprehensive income |
2,912 | 6,341 | ||||||
Common stock in treasury, at cost - 680,235 shares |
(9,075 | ) | (9,075 | ) | ||||
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Total Shareholders Equity |
288,757 | 282,736 | ||||||
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Total Liabilities and Shareholders Equity |
$ | 353,258 | $ | 350,807 | ||||
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The accompanying notes are an integral part of these consolidated financial statements.
3
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended | ||||||||
(in thousands, except share and per share data) |
March 30, 2013 | March 31, 2012 | ||||||
SALES |
||||||||
Product |
$ | 52,482 | $ | 54,424 | ||||
Service |
12,888 | 10,805 | ||||||
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Total Sales |
65,370 | 65,229 | ||||||
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COST OF SALES |
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Product |
21,339 | 20,506 | ||||||
Service |
7,206 | 7,537 | ||||||
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Total Cost of Sales (exclusive of depreciation and amortization, shown separately below) |
28,545 | 28,043 | ||||||
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GROSS PROFIT |
36,825 | 37,186 | ||||||
OPERATING EXPENSES: |
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Selling |
16,650 | 16,038 | ||||||
General and administrative |
7,515 | 6,628 | ||||||
Depreciation and amortization |
1,833 | 1,679 | ||||||
Research and development |
5,125 | 4,408 | ||||||
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Total operating expenses |
31,123 | 28,753 | ||||||
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INCOME FROM OPERATIONS |
5,702 | 8,433 | ||||||
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OTHER (INCOME) EXPENSE |
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Interest income |
(16 | ) | (101 | ) | ||||
Other expense (income), net |
115 | (140 | ) | |||||
Interest expense |
1 | 13 | ||||||
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INCOME BEFORE INCOME TAX EXPENSE |
5,602 | 8,661 | ||||||
INCOME TAX EXPENSE |
1,028 | 1,911 | ||||||
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NET INCOME |
$ | 4,574 | $ | 6,750 | ||||
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NET INCOME PER SHARE - BASIC |
$ | 0.27 | $ | 0.40 | ||||
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NET INCOME PER SHARE - DILUTED |
$ | 0.27 | $ | 0.39 | ||||
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Weighted average shares - Basic |
17,009,773 | 16,788,241 | ||||||
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Weighted average shares - Diluted |
17,176,876 | 17,162,959 | ||||||
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The accompanying notes are an integral part of these consolidated financial statements.
4
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended | ||||||||
(in thousands) |
March 30, 2013 | March 31, 2012 | ||||||
Net income |
$ | 4,574 | $ | 6,750 | ||||
Currency translation adjustments |
(3,429 | ) | 1,334 | |||||
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Comprehensive income |
$ | 1,145 | $ | 8,084 | ||||
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The accompanying notes are an integral part of these consolidated financial statements.
5
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended | ||||||||
(in thousands) |
March 30, 2013 | March 31, 2012 | ||||||
CASH FLOWS FROM: |
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OPERATING ACTIVITIES: |
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Net income |
$ | 4,574 | $ | 6,750 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
1,833 | 1,679 | ||||||
Compensation for stock options and restricted stock units |
1,018 | 773 | ||||||
Provision for bad debts |
274 | 11 | ||||||
Deferred income tax (benefit) expense |
1,162 | (5 | ) | |||||
Change in operating assets and liabilities: |
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Decrease (increase) in: |
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Accounts receivable |
7,541 | 9,254 | ||||||
Inventories, net |
(1,299 | ) | (6,432 | ) | ||||
Prepaid expenses and other current assets |
(2,069 | ) | (1,979 | ) | ||||
Income tax benefit from exercise of stock options |
(808 | ) | (1,056 | ) | ||||
Increase (decrease) in: |
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Accounts payable and accrued liabilities |
(676 | ) | (4,290 | ) | ||||
Income taxes payable |
(1,658 | ) | (774 | ) | ||||
Customer deposits |
5 | (258 | ) | |||||
Unearned service revenues |
376 | 661 | ||||||
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Net cash provided by operating activities |
10,273 | 4,334 | ||||||
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INVESTING ACTIVITIES: |
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Purchases of property and equipment |
(256 | ) | (703 | ) | ||||
Payments for intangible assets |
(494 | ) | (193 | ) | ||||
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Net cash used in investing activities |
(750 | ) | (896 | ) | ||||
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FINANCING ACTIVITIES: |
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Payments on capital leases |
(63 | ) | (131 | ) | ||||
Income tax benefit from exercise of stock options |
808 | 1,056 | ||||||
Proceeds from issuance of stock, net |
3,049 | 5,288 | ||||||
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Net cash provided by financing activities |
3,794 | 6,213 | ||||||
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EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(1,952 | ) | (603 | ) | ||||
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INCREASE IN CASH AND CASH EQUIVALENTS |
11,365 | 9,048 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
93,233 | 64,540 | ||||||
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CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 104,598 | $ | 73,588 | ||||
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The accompanying notes are an integral part of these consolidated financial statements.
6
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited for the Three Months Ended March 30, 2013 and March 31, 2012
(in thousands, except share and per share data, or as otherwise noted)
NOTE A DESCRIPTION OF BUSINESS
FARO Technologies, Inc. and its subsidiaries (collectively the Company or FARO) design, develop, manufacture, market and support software-based three-dimensional measurement and imaging systems for manufacturing, industrial, building construction and forensic applications. The Companys principal products include the FaroArm, FARO Laser ScanArm and FARO Gage, all articulated electromechanical measuring devices, and the FARO Laser Tracker Vantage, FARO Focus3D and FARO 3D Imager AMP, all laser-based measuring devices. Markets for the Companys products include automobile, aerospace, heavy equipment, and law enforcement agencies. The Company sells the vast majority of its products through a direct sales force located in many of the worlds largest industrialized countries.
NOTE B PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of FARO Technologies, Inc. and all of the Companys subsidiaries, all of which are wholly owned. All intercompany transactions and balances have been eliminated. The financial statements of the Companys foreign subsidiaries are translated into U.S. dollars using exchange rates in effect at period-end for assets and liabilities and average exchange rates during each reporting period for results of operations. Adjustments resulting from financial statement translations are reflected as a separate component of accumulated other comprehensive income.
NOTE C BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements of the Company include all normal recurring accruals and adjustments considered necessary by management for their fair presentation in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. The consolidated results of operations for the three months ended March 30, 2013 are not necessarily indicative of results that may be expected for the year ending December 31, 2013 or any future interim period.
The information included in this Quarterly Report on Form 10-Q, including the interim consolidated financial statements and the accompanying notes, should be read in conjunction with the audited consolidated financial statements and related notes included in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
NOTE D RECLASSIFICATIONS
From time to time the Company may reclassify certain amounts to conform to the current period presentation.
7
NOTE E IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12 defers the specific requirement in ASU No. 2011-05 to present items that are reclassified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income. As part of this update, the FASB did not defer the requirement in ASU No. 2011-05 to report comprehensive income either in a single continuous statement or in two separate but consecutive financial statements. In February 2013, the FASB issued ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income (ASU 2013-02), which became effective during the quarter ended March 30, 2013. The adoption of ASU 2013-02 in the quarter ended March 30, 2013, did not have any impact on the Companys consolidated financial statements.
NOTE F SHARE-BASED COMPENSATION
Share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period, typically the vesting period. The vesting period for the share-based compensation awarded by the Company is generally three years. The Company uses the Black-Scholes option pricing model to determine the fair value of stock option grants. The Company uses the closing market price of its common stock on the date of grant to determine the fair value of restricted stock and restricted stock units.
The Company used the following assumptions for the Black-Scholes option-pricing model to determine the fair value of options granted during the three months ended March 30, 2013 and March 31, 2012:
For the Three Months Ended | ||||||||
March 30, 2013 | March 31, 2012 | |||||||
Risk-free interest rate |
0.55 | % | 0.66 | % | ||||
Expected dividend yield |
0 | % | 0 | % | ||||
Expected option life |
4 years | 4 years | ||||||
Expected volatility |
48.4 | % | 50.7 | % | ||||
Weighted-average expected volatility |
48.4 | % | 50.7 | % |
Historical information was the primary basis for the selection of the expected dividend yield, expected volatility and the expected lives of the options. The risk-free interest rate was based on yields of U.S. zero coupon issues and U.S. Treasury issues, with a term equal to the expected life of the option being valued.
The Company recorded total share-based compensation expense of $1,100 and $836 for the three months ended March 30, 2013 and March 31, 2012, respectively.
8
A summary of stock option activity and weighted-average exercise prices for the three months ended March 30, 2013 follows:
Options | Weighted- Average Exercise Price |
Weighted-Average Remaining Contractual Term |
Aggregate Intrinsic Value as of March 30, 2013 |
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Outstanding at January 1, 2013 |
831,504 | $ | 36.31 | |||||||||||||
Granted |
238,767 | 43.78 | ||||||||||||||
Forfeited |
(35,136 | ) | 44.93 | |||||||||||||
Exercised |
(115,158 | ) | 26.58 | |||||||||||||
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Outstanding at March 30, 2013 |
919,977 | $ | 39.23 | 5.1 | $ | 7,194 | ||||||||||
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Options exercisable at March 30, 2013 |
455,199 | $ | 31.50 | 4.0 | $ | 6,438 | ||||||||||
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The weighted-average grant-date fair value of the stock options granted during the three months ended March 30, 2013 and March 31, 2012 was $14.64 and $22.57 per option, respectively. The total intrinsic value of stock options exercised during the three months ended March 30, 2013 and March 31, 2012 was $2.0 million and $6.1 million, respectively.
The following table summarizes the restricted stock and restricted stock unit activity and weighted average grant-date fair values for the three months ended March 30, 2013:
Shares | Weighted-Average Grant Date Fair Value |
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Non-vested at January 1, 2013 |
31,236 | $ | 45.80 | |||||
Granted |
427 | 44.28 | ||||||
Forfeited |
(1,586 | ) | 51.89 | |||||
Vested |
(3,747 | ) | 38.51 | |||||
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Non-vested at March 30, 2013 |
26,330 | $ | 46.44 | |||||
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As of March 30, 2013, there was $8.8 million of total unrecognized stock-based compensation expense related to non-vested stock-based compensation arrangements. The expense is expected to be recognized over a weighted average period of 2.6 years.
NOTE G SUPPLEMENTAL CASH FLOW INFORMATION
Selected cash payments and non-cash activity were as follows:
Three Months Ended | ||||||||
March 30, 2013 | March 31, 2012 | |||||||
Cash paid for interest |
$ | 1 | $ | 11 | ||||
Cash paid for income taxes |
$ | 3,923 | $ | 2,358 |
9
NOTE H CASH AND CASH EQUIVALENTS
The Company considers cash on hand and all short-term, highly liquid investments that have maturities of three months or less at the time of purchase to be cash and cash equivalents.
NOTE I SHORT TERM INVESTMENTS
Short-term investments at March 30, 2013 and December 31, 2012 included U.S. Treasury Bills totaling $65.0 million that mature through September 19, 2013. The weighted-average interest rate on the U.S. Treasury bills is less than one percent. The investments are classified as held-to-maturity and recorded at cost. The fair value of the U.S. Treasury Bills at March 30, 2013 approximated cost plus accrued interest.
NOTE J ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
As of March 30, 2013 |
As of December 31, 2012 |
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Accounts receivable |
$ | 57,620 | $ | 66,339 | ||||
Allowance for doubtful accounts |
(3,899 | ) | (3,780 | ) | ||||
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Total |
$ | 53,721 | $ | 62,559 | ||||
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NOTE K INVENTORIES
Inventories consist of the following:
As of March 30, 2013 |
As of December 31, 2012 |
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Raw materials |
$ | 27,217 | $ | 28,146 | ||||
Finished goods |
8,614 | 6,188 | ||||||
Sales demonstration inventory |
18,460 | 18,729 | ||||||
Reserve for excess and obsolete |
(4,267 | ) | (4,169 | ) | ||||
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Inventory |
$ | 50,024 | $ | 48,894 | ||||
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Service inventory |
$ | 18,316 | $ | 19,125 | ||||
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10
NOTE L EARNINGS PER SHARE
A reconciliation of the number of common shares used in the calculation of basic and diluted earnings per share (EPS) is presented below:
Three Months Ended | ||||||||||||||||
March 30, 2013 | March 31, 2012 | |||||||||||||||
Shares | Per-Share Amount |
Shares | Per-Share Amount |
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Basic EPS |
17,009,773 | $ | 0.27 | 16,788,241 | $ | 0.40 | ||||||||||
Effect of dilutive securities |
167,103 | | 374,718 | (0.01 | ) | |||||||||||
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Diluted EPS |
17,176,876 | $ | 0.27 | 17,162,959 | $ | 0.39 | ||||||||||
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The effect of 450,672 and 240,116 securities were not included in the calculation of weighted average shares outstanding for the three months ended March 30, 2013 and March 31, 2012, respectively, as they were antidilutive.
NOTE M ACCRUED LIABILITIES
Accrued liabilities consist of the following:
As of March 30, 2013 |
As of December 31, 2012 |
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Accrued compensation and benefits |
$ | 9,429 | $ | 9,364 | ||||
Accrued warranties |
2,148 | 2,359 | ||||||
Professional and legal fees |
1,313 | 1,472 | ||||||
Other accrued liabilities |
5,370 | 5,021 | ||||||
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$ | 18,260 | $ | 18,216 | |||||
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Activity related to accrued warranties was as follows:
Three Months Ended | ||||||||
March 30, 2013 | March 31, 2012 | |||||||
Beginning Balance |
$ | 2,359 | $ | 2,365 | ||||
Provision for warranty expense |
873 | 805 | ||||||
Warranty expired |
(1,084 | ) | (700 | ) | ||||
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Ending Balance |
$ | 2,148 | $ | 2,470 | ||||
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11
NOTE N INCOME TAXES
Total deferred income tax assets for the Companys foreign subsidiaries relating to net operating loss carryforwards were $14.8 million at March 30, 2013 and December 31, 2012, respectively. The related valuation allowance was $11.8 million at March 30, 2013 and December 31, 2012, respectively. The Companys effective tax rate decreased to 18.4% for the three months ended March 30, 2013 from 22.1% for the three months ended March 31, 2012 and included a reduction in the income tax rate of 1.4% and 5.0%, respectively, related to the tax benefit of the exercise of employee stock options. The effective tax rate for the three months ended March 30, 2013 also includes the discrete tax benefit of 7.5% related to the retroactive legislative reinstatement on January 2, 2013 of the Research and Development tax credit for the year ended December 31, 2012, which is required to be included in the period the reinstatement was enacted into law. The Companys tax rate continues to be lower than the statutory tax rate in the United States primarily as a result of favorable tax rates in foreign jurisdictions. Significant judgment is required in determining the Companys worldwide provision for income taxes. In the ordinary course of a global business, there are many transactions for which the ultimate tax outcome is uncertain. The Company reviews its tax contingencies on a regular basis and makes appropriate accruals as necessary.
The effective income tax rate for the three months ended March 30, 2013 and 2012 includes a reduction in the statutory corporate tax rates for the Companys operations in Switzerland. The favorable tax rate ruling requires the Company to maintain a certain level of manufacturing operations in Switzerland. The aggregate dollar effect of this favorable tax rate was approximately $0.4 million, or $0.03 per share, in the three month period ended March 30, 2013, and $0.3 million, or $0.02 per share, in the three month period ended March 31, 2012.
In 2005, the Company opened a regional headquarters and began to manufacture certain of its products in Singapore. In the third quarter of 2006, the Company received confirmation of a tax holiday for its operations from the Singapore Economic Development Board for a period of four years commencing January 1, 2006 and an additional six year extension at favorable tax rates subject to certain terms and conditions, including employment, spending, and capital investment. The Company and the Singapore Economic Development Board mutually agreed to end the program as of December 31, 2011, as the Company has expanded its operations in other locations within Asia to meet market demand. The aggregate dollar effect of this favorable tax rate was approximately $0.1 million, or $0.01 per share, during the three month period ended March 31, 2012.
NOTE O FAIR VALUE OF FINANCIAL INSTRUMENTS
The Companys financial instruments include cash and cash equivalents, short-term investments, accounts receivable, customer deposits and accounts payable and accrued liabilities. The carrying amounts of such financial instruments approximate their fair value due to the short-term nature of these instruments.
NOTE P SEGMENT REPORTING
The Company has three reportable segments based upon geographic regions: Americas, Europe/Africa and Asia/Pacific. The Company does not allocate corporate expenses to the Europe/Africa or Asia/Pacific regions. These corporate expenses are included in the Americas region. The Company does not incur Research and Development expenses in its Asia/Pacific region.
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The Company develops, manufactures, markets, supports and sells Computer-Aided Design (CAD)-based quality assurance products integrated with CAD-based inspection and statistical process control software in each of these regions. These activities represent approximately 99% of consolidated sales. The Company evaluates performance and allocates resources based upon profitable growth and assets deployed.
The following table presents information about the Companys reportable segments:
Three Months Ended | ||||||||
March 30, 2013 | March 31, 2012 | |||||||
Americas Region |
||||||||
Net sales to external customers |
$ | 26,109 | $ | 25,059 | ||||
Depreciation and amortization |
1,092 | 1,046 | ||||||
Operating income (loss) |
(1,008 | ) | 538 | |||||
Long-lived assets |
21,499 | 22,829 | ||||||
Capital expenditures |
322 | 562 | ||||||
Total assets |
187,404 | 171,145 | ||||||
Europe/Africa Region |
||||||||
Net sales to external customers |
$ | 21,900 | $ | 23,046 | ||||
Depreciation and amortization |
468 | 403 | ||||||
Operating income (loss) |
1,949 | 2,304 | ||||||
Long-lived assets |
16,233 | 16,851 | ||||||
Capital expenditures |
243 | 182 | ||||||
Total assets |
102,517 | 97,454 | ||||||
Asia Pacific Region |
||||||||
Net sales to external customers |
$ | 17,361 | $ | 17,124 | ||||
Depreciation and amortization |
273 | 230 | ||||||
Operating income |
4,761 | 5,591 | ||||||
Long-lived assets |
2,400 | 2,051 | ||||||
Capital expenditures |
97 | 254 | ||||||
Total assets |
63,337 | 54,334 | ||||||
Totals |
||||||||
Net sales to external customers |
$ | 65,370 | $ | 65,229 | ||||
Depreciation and amortization |
1,833 | 1,679 | ||||||
Operating income (loss) |
5,702 | 8,433 | ||||||
Long-lived assets |
40,132 | 41,731 | ||||||
Capital expenditures |
662 | 998 | ||||||
Total assets |
353,258 | 322,933 |
The geographical sales information presented above represents sales to customers located in each respective region, whereas the long-lived assets information represents assets held in the respective regions. There were no customers that individually accounted for 10% or more of total revenue in each of the periods presented above.
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NOTE Q COMMITMENTS AND CONTINGENCIES
Leases The Company is a party to leases arising in the normal course of business that expire on or before 2019. Total obligations under these leases are approximately $6.2 million for 2013.
Purchase Commitments The Company enters into purchase commitments for products and services in the ordinary course of business. These purchases generally cover production requirements for 60 to 90 days. As of March 30, 2013, the Company does not have any long-term commitments for purchases.
Patent Matters On July 11, 2008, Metris USA, Inc. and its affiliates, Metris N.V., Metris IPR N.V. and 3-D Scanners Ltd., filed a complaint against the Company for patent infringement in the U.S. District Court for the District of Massachusetts (the Massachusetts Court) concerning U.S. Patent Nos. 6,611,617 and 7,313,264 (hereinafter, the patents-in-suit). Following an acquisition by Nikon Corporation in late 2009, Metris USA, Inc. subsequently changed its name to Nikon Metrology, Inc., Metris N.V. changed its name to Nikon Metrology NV, and Metris IPR N.V. was dissolved and merged into Nikon Metrology NV. We refer to each of Nikon Metrology, Inc., Nikon Metrology NV, and 3-D Scanners Ltd. as Plaintiffs or Nikon.
The Company responded to the complaint with counterclaims alleging that the patents-in-suit, which are generally directed to laser scanning devices, are invalid, non-infringed, and unenforceable due to fraud during prosecution of the patents in the U.S. Patent and Trademark Office. On August 31, 2009, the Massachusetts Court granted the Companys motion to add counterclaims and defenses for violation of federal and state antitrust and unfair competition laws based on the alleged knowing assertion of invalid and fraudulent patents. The Company also filed an amended counterclaim to add the Plaintiffs parent company, Nikon Corporation, as a counterclaim defendant.
On July 14, 2010, the Company filed a motion for summary judgment of non-infringement of both patents-in-suit. On August 31, 2010, Nikon filed a motion for summary judgment against the Companys counterclaims for antitrust violations and unfair trade practices.
On September 19, 2011, the Massachusetts Court ruled that the Company did not infringe U.S. Patent No. 6,611,617. The Massachusetts Court also granted Nikons motion for summary judgment on the Companys counterclaims for anti-trust violations and unfair trade practices. The Massachusetts Court denied the Companys motion for summary judgment of non-infringement of U.S. Patent No. 7,313,264. The effect of the ruling was to reduce or eliminate the Companys exposure with respect to claims associated with U.S. Patent No. 6,611,617, while the patent dispute with respect to U.S. Patent No. 7,313,264 continued.
On August 10, 2012, following a two-week jury trial on the remaining claims related to U.S. Patent No. 7,313,264, the jury determined the asserted patent claims were invalid, and on August 13, 2012, the Massachusetts Court entered judgment for the Company. The Massachusetts Court sustained this verdict on January 23, 2013, denying all post-trial motions except the Companys motion for attorneys fees. On February 21, 2013, the Court stayed the Companys motion for attorneys fees pending resolution of any appeals to the U.S. Federal Circuit.
On March 20, 2013, the Massachusetts Court entered Final Judgment in the Companys favor, awarding the Company its costs. On April 10, 2013, the Company filed a notice of appeal to the U.S. Federal Circuit with respect to the Massachusetts Courts failure to address the inequitable conduct by the inventor and related patent misuse and anti-trust issues. The Company believes it is entitled to relief for all of its attorneys fees and costs incurred in the litigation, although the amount and eventual recovery are uncertain at this time.
Other than the litigation mentioned above, the Company is not involved in any legal proceedings other than routine litigation arising in the normal course of business, none of which the Company believes will have a material adverse effect on the Companys business, financial condition or results of operations.
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NOTE R LINE OF CREDIT
On July 11, 2006, the Company entered into a loan agreement providing for an available line of credit of $30.0 million, which was most recently amended on March 15, 2012. Loans under the Amended and Restated Loan Agreement, as amended, bear interest at the rate of LIBOR plus a fixed percentage between 1.50% and 2.00% and require the Company to maintain a minimum cash balance and tangible net worth measured at the end of each of the Companys fiscal quarters. As of March 30, 2013, the Company was in compliance with all of the covenants under the Amended and Restated Loan Agreement, as amended. The term of the Amended and Restated Loan Agreement, as amended, expires on March 31, 2015. The Company has not drawn on this line of credit.
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with the Consolidated Financial Statements, including the notes thereto, included elsewhere in this Form 10-Q and Managements Discussion and Analysis of Financial Condition and Results of Operations included in the Companys Annual Report on Form 10-K for the year ended December 31, 2012.
FARO Technologies, Inc. (FARO, the Company, us, we, or our) has made forward-looking statements in this report (within the meaning of the Private Securities Litigation Reform Act of 1995). Statements that are not historical facts or that describe our plans, beliefs, goals, intentions, objectives, projections, expectations, assumptions, strategies, or future events are forward-looking statements. In addition, words such as may, will, believe, plan, should, could, seek, expect, anticipate, intend, estimate, project and similar words, or discussions of our strategy or other intentions, identify forward-looking statements. Specifically, this Quarterly Report on Form 10-Q contains, among others, forward-looking statements regarding:
| the Companys ability to achieve and maintain profitability; |
| the impact of fluctuations in exchange rates; |
| the effect of estimates and assumptions with respect to critical accounting policies and the impact of the adoption of recently issued accounting pronouncements; |
| the impact of changes in technologies on the competitiveness of the Companys products or their components; |
| the magnitude of increased warranty costs from new product introductions and enhancements to existing products; |
| the sufficiency of the Companys plants to meet its manufacturing requirements; |
| the outcome of litigation and its effect on the Companys business, financial condition or results of operations; |
| the continuation of the Companys share repurchase program; |
| the sufficiency of the Companys working capital, cash flow from operations, and credit facility to fund its long-term liquidity requirements; |
| the impact of geographic changes in the manufacturing or sales of the Companys products on its tax rate; and |
| the Companys ability to comply with the requirements for favorable tax rates in foreign jurisdictions. |
Forward-looking statements are not guarantees of future performance and are subject to a number of known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Consequently, undue reliance should not be placed on these forward-looking statements. The Company does not intend to update any forward-looking statements, whether as a result of new information, future events, or otherwise, unless otherwise required by law. Important factors that could cause actual results to differ materially from those contemplated in such forward-looking statements include, among others, the following:
| economic downturn in the manufacturing industry or the domestic and international economies in the regions of the world where the Company operates; |
| the Companys inability to further penetrate its customer base and target markets; |
| development by others of new or improved products, processes or technologies that make the Companys products obsolete or less competitive; |
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| the Companys inability to maintain its technological advantage by developing new products and enhancing its existing products; |
| the Companys inability to successfully identify and acquire target companies or achieve expected benefits from acquisitions that are consummated; |
| the cyclical nature of the industries of the Companys customers and material adverse changes in its customers access to liquidity and capital; |
| the market potential for the computer-aided measurement (CAM2) market and the potential adoption rate for the Companys products are difficult to quantify and predict; |
| the inability to protect the Companys patents and other proprietary rights in the United States and foreign countries; |
| fluctuations in the Companys annual and quarterly operating results and the inability to achieve its financial operating targets as a result of a number of factors, including, without limitation (i) litigation and regulatory action brought against the Company, (ii) quality issues with its products, (iii) excess or obsolete inventory, (iv) raw material price fluctuations, (v) expansion of the Companys 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 the Companys products, (viii) the length of the Companys sales cycle to new customers and the time and expense incurred in further penetrating its 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) the Companys success in expanding its 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, and (xxi) other factors noted herein; |
| changes in gross margins due to changing mix of products sold and the different gross margins on different products and sales channels; |
| the Company may incur additional material costs related to increases in sales of extended product warranties without a corresponding increase in revenue if actual product failure rates, parts and equipment costs, or service labor costs exceed the Companys estimates; |
| the Companys inability to successfully maintain the requirements of Restriction of use of Hazardous Substances (RoHS) and Waste Electrical and Electronic Equipment (WEEE) compliance in its products; |
| the inability of the Companys 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 the Companys Chief Executive Officer or other key personnel; |
| difficulties in recruiting research and development engineers and application engineers; |
| the failure to effectively manage the effects of the Companys growth; |
| the impact of reductions or projected reductions in government spending, particularly in the defense sector; |
| variations in the effective income tax rate and the difficulty in predicting the tax rate on a quarterly and annual basis; |
| the loss of key suppliers and the inability to find sufficient alternative suppliers in a reasonable period or on commercially reasonable terms; and |
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other risks and uncertainties discussed in Part I, Item 1A. Risk Factors in the Companys Annual Report on Form 10-K for the year ended December 31, 2012. Moreover, new risks and uncertainties emerge from time to time, and we undertake no obligation to update publicly or review the risks and uncertainties included in this quarterly report on Form 10-Q.
Overview
The Company designs, develops, manufactures, markets and supports portable, software driven, 3-D measurement and imaging systems that are used in a broad range of manufacturing, industrial, building construction and forensic applications. The Companys FaroArm®, FARO Laser ScanArm® and FARO Gage articulated measuring devices, the FARO Laser Tracker Vantage, the FARO Focus3D, the FARO 3D Imager AMP and their companion CAM2® software, provide for Computer-Aided Design, or CAD, -based inspection and/or factory-level statistical process control, and high-density surveying. Together, these products integrate the measurement, quality inspection, and reverse engineering functions with CAD software to improve productivity, enhance product quality and decrease rework and scrap in the manufacturing process. The Company uses the acronym CAM2 for this process, which stands for computer-aided measurement.
As of March 30, 2013, the Companys products have been purchased by approximately 15,000 customers worldwide, ranging from small machine shops to such large manufacturing and industrial companies as Audi, Bell Helicopter, Bombadier, Boeing, British Aerospace, Caterpillar, Daimler AG, Ford, General Electric, General Motors, Honda, Johnson Controls, Komatsu America International, Lockheed Martin, NASA, Nissan, Northrup Grumman, Siemens and Volkswagen, among many others.
The Company derives revenues primarily from the sale of its FaroArm, FARO Laser ScanArm, FARO Gage, FARO Laser Tracker ION and FARO Focus3D measurement equipment, and their related multi-faceted software. Revenue related to these products is generally recognized upon shipment. In addition, the Company sells one and three-year extended warranties and training and technology consulting services relating to its products. The Company recognizes the revenue from extended warranties on a straight-line basis. The Company also receives royalties from licensing agreements for its historical medical technology and recognizes the revenue from these royalties as licensees use the technology.
The Company manufactures its FaroArm, FARO Gage, FARO 3D Imager AMP, and FARO Laser Tracker ION products in the Companys manufacturing facilities located in Florida and Pennsylvania for customer orders from the Americas, in its manufacturing facility located in Switzerland for customer orders from the Europe/Africa region, and in its manufacturing facility located in Singapore for customer orders from the Asia/Pacific region. The Company manufactures its FARO Focus3D product in its facility located in Stuttgart, Germany. The Company expects all its existing plants to have the production capacity necessary to support its volume requirements through 2013.
The Company operates in international markets throughout the world. It maintains sales offices in the United States, Brazil, Mexico, France, Germany, Great Britain, Italy, Netherlands, Poland, Spain, China, India, Japan, Malaysia, Singapore, Thailand, and Vietnam. The Company manages and reports its global sales in three regions: the Americas, Europe/Africa and Asia/Pacific.
In the first quarter of 2013, 39.9% of the Companys sales were in the Americas compared to 38.4% in the first three months of 2012, 33.5% were in the Europe/Africa region compared to 35.3% in the first quarter of 2012, and 26.6% were in the Asia/Pacific region compared to 26.3% in the same prior year period. In the first quarter of 2013, new order bookings increased $2.5 million, or 4.0%, to $64.6 million from $62.1 million in the prior year period. New orders in the first quarter of 2013 increased $5.5 million, or 25.2%, in the Americas to $27.3 million from $21.8 million in the prior year period. New orders in the first quarter of 2013 decreased $1.8 million, or 7.9%, to $21.0 million in Europe/Africa from $22.8 million in the first quarter of 2012. In Asia/Pacific, new orders in the first three months of 2013 decreased $1.2 million, or 6.9%, to $16.3 million from $17.5 million in the first quarter of 2012.
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The Company accounts for wholly owned foreign subsidiaries in the currency of the respective foreign jurisdiction; therefore, fluctuations in exchange rates may have an impact on inter-company accounts reflected in the Companys consolidated financial statements. The Company is aware of the availability of off-balance sheet financial instruments to hedge exposure to foreign currency exchange rates, including cross-currency swaps, forward contracts and foreign currency options (see Foreign Exchange Exposure below). However, it does not regularly use such instruments, and none were utilized in 2012 or the three months ended March 30, 2013.
The Company was profitable in each quarter in the years ended December 31, 2012, 2011, and 2010. The Company incurred a net loss in the year ended December 31, 2009, primarily as a result of a decrease in product sales. The Company attributes the decrease in product sales principally to the decline of the global economy. Prior to 2009, the Company had a history of sales and earnings growth and 26 consecutive profitable quarters through December 31, 2008. Its historical sales and earnings growth were the result of a number of factors, including: continuing market demand for and acceptance of the Companys products, increased sales activity in part through additional sales staff worldwide, new products and product enhancements such as the FARO Edge Arm and FARO Focus3D, and the effect of acquisitions. However, the Companys historical financial performance is not indicative of its future financial performance.
Results of Operations
Three Months Ended March 30, 2013 Compared to the Three Months Ended March 31, 2012
Sales increased by $0.2 million, or 0.3%, to $65.4 million in the three months ended March 30, 2013 from $65.2 million for the three months ended March 31, 2012. This increase resulted primarily from an increase in service revenue. Product sales decreased by $1.9 million, or 3.6%, to $52.5 million for the three months ended March 30, 2013 from $54.4 million for the first quarter of 2012 primarily as a result of lower average selling prices across all regions in response to more competitive pricing pressure on the Companys products. Service revenue increased by $2.1 million, or 19.3%, to $12.9 million for the three months ended March 30, 2013 from $10.8 million in the same period during the prior year, primarily due to an increase in warranty revenue.
Sales in the Americas region increased $1.0 million, or 4.0%, to $26.1 million for the three months ended March 30, 2013 from $25.1 million in the three months ended March 31, 2012. Product sales in the Americas region decreased by $0.2 million, or 1.0%, to $20.4 million for the three months ended March 30, 2013 from $20.6 million in the first quarter of the prior year. Service revenue in the Americas region increased by $1.2 million, or 28.0%, to $5.7 million for the three months ended March 30, 2013 from $4.5 million in the same period during the prior year, primarily due to an increase in warranty revenue.
Sales in the Europe/Africa region decreased $1.1 million, or 4.8%, to $21.9 million for the three months ended March 30, 2013 from $23.0 million in the three months ended March 31, 2012. Product sales in the Europe/Africa region decreased by $1.8 million, or 9.6%, to $17.0 million for the three months ended March 30, 2013 from $18.8 million in the first quarter of the prior year. Service revenue in the Europe/Africa region increased $0.7 million, or 15.8%, to $4.9 million for the three months ended March 30, 2013 from $4.2 million in the same period during the prior year.
Sales in the Asia/Pacific region increased $0.3 million, or 1.8%, to $17.4 million for the three months ended March 30, 2013 from $17.1 million in the three months ended March 31, 2012. Product sales in the Asia/Pacific region increased by $0.1 million, or 0.5%, to $15.1 million for the three months ended March 30, 2013 from $15.0 million in the first quarter of the prior year. Service revenue in the Asia/Pacific region increased by $0.2 million, or 7.7%, to $2.3 million for the three months ended March 30, 2013 from $2.1 million in the same period during the prior year.
Gross profit decreased by $0.4 million, or 1.0%, to $36.8 million for the three months ended March 30, 2013 from $37.2 million for the three months ended March 31, 2012. Gross margin decreased to 56.3% for
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the three months ended March 30, 2013 from 57.0% for the three months ended March 31, 2012. The decrease in gross margin is primarily due to a decrease in gross margin from product sales to 59.3% in the three months ended March 30, 2013 from 62.3% for the three months ended March 31, 2012. Gross margin from product sales decreased primarily as a result of lower average selling prices and an increase in the sales mix of Laser Scanner product sold to distributors. Gross margin from service revenues increased to 44.1% in the three months ended March 30, 2013 from 30.0% in the same period in the prior year due to increased warranty revenue.
Selling expenses increased by $0.7 million, or 3.8%, to $16.7 million for the three months ended March 30, 2013 from $16.0 million for three months ended March 31, 2012. This increase was primarily due to an increase in travel related costs of $0.6 million and an increase in compensation of $0.4 million partially related to additional headcount, offset by a decrease in trade show expenses of $0.3 million.
Worldwide sales and marketing headcount increased by 60, or 17.8%, to 398 at March 30, 2013 from 338 at March 31, 2012. Regionally, the Companys sales and marketing headcount increased by 26, or 27.7%, to 120 from 94 for the Americas; decreased by 19, or 16.8%, in Europe/Africa to 132 from 113; and increased by 15, or 11.5%, in Asia/Pacific to 146 from 131.
As a percentage of sales, selling expenses increased to 25.5% of sales in the three months ended March 30, 2013 from 24.6% of sales in the three months ended March 31, 2012. Regionally, selling expenses were 21.6% of sales in the Americas for the quarter ended March 30, 2013 compared to 22.4% of sales in the first quarter of 2012; 30.5% of sales for Europe/Africa in the first quarter of 2013 compared to 27.8% of sales from the same period in the prior year; and 24.9% of sales for Asia/Pacific compared to 23.4% of sales from the same period in the prior year.
General and administrative expenses increased by $0.9 million to $7.5 million in the three months ended March 30, 2013 from $6.6 million in the prior year quarter, as a result of an increase in compensation of $0.7 million and bad debt expense of $0.2 million, offset by lower professional and legal fees of $0.2 million.
Depreciation and amortization expenses increased slightly to $1.8 million for the three months ended March 30, 2013 from $1.7 million for the three months ended March 31, 2012.
Research and development expenses increased to $5.1 million for the three months ended March 30, 2013 from $4.4 million for the three months ended March 31, 2012, primarily as a result of an increase in compensation and subcontractor expense of $0.7 million. Research and development expenses as a percentage of sales increased to 7.8% for the three months ended March 30, 2013 from 6.8% for the three months ended March 31, 2012.
Other (income) expense, net increased to an expense of $0.1 million for the three months ended March 30, 2013 compared to income of $0.2 million in the three months ended March 31, 2012, and consisted primarily of net foreign currency transaction gains resulting from changes in foreign exchange rates on the value of the current intercompany account balances of the Companys subsidiaries denominated in different currencies and other expenses.
Income tax expense decreased by $0.9 million to $1.0 million for the three months ended March 30, 2013 from $1.9 million for the three months ended March 31, 2012. This decrease was primarily due to a decrease in pretax income. The Companys effective tax rate decreased to 18.4% for the three months ended March 30, 2013 from 22.1% in the prior year period and included a reduction in the income tax rates of 1.4% and 5.0%, respectively, related to the tax benefit of the exercise of employee stock options. The effective tax rate for the three months ended March 30, 2013 also includes the discrete tax benefit of 7.5% related to the retroactive legislative reinstatement on January 2, 2013 of the Research and Development tax credit for the year ended December 31, 2012, which is required to be included in the period the reinstatement was enacted into law. The Companys tax rate continues to be lower than the statutory tax rate in the United States, primarily as a result of favorable tax rates in foreign jurisdictions. However, the Companys tax rate could be impacted positively or negatively by geographic changes in the manufacturing or sales of its products and the resulting effect on taxable income in each jurisdiction.
Net income decreased by $2.1 million to $4.6 million for the three months ended March 30, 2013 from $6.7 million for the three months ended March 31, 2012 as a result of the factors described above.
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Liquidity and Capital Resources
Cash and cash equivalents increased by $11.4 million to $104.6 million at March 30, 2013 from $93.2 million at December 31, 2012. The increase was primarily attributable to net income and non-cash expenses of $8.9 million, proceeds from stock option exercises of $3.0 million and a decrease in working capital of $2.2 million, offset by purchases of equipment and intangible assets of $0.7 million, and the effect of exchange rate changes on cash of $2.0 million.
On July 11, 2006, the Company entered into a loan agreement providing for an available line of credit of $30.0 million, which was most recently amended effective March 15, 2012. Loans under the Amended and Restated Loan Agreement, as amended, bear interest at the rate of LIBOR plus a fixed percentage between 1.50% and 2.00% and require the Company to maintain a minimum cash balance and tangible net worth measured at the end of each of the Companys fiscal quarters. As of March 30, 2013, the Company was in compliance with all of the covenants under the Amended and Restated Loan Agreement, as amended. The term of the Amended and Restated Loan Agreement, as amended, expires on March 31, 2015. The Company has not drawn on this line of credit.
The Company believes that its working capital, anticipated cash flow from operations, and credit facility will be sufficient to fund its long-term liquidity requirements for the foreseeable future.
The Company has no off balance sheet arrangements.
Critical Accounting Policies
The preparation of the Companys consolidated financial statements requires the Companys management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as disclosure of contingent assets and liabilities. The Company bases its estimates on historical experience, along with various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Some of these judgments can be subjective and complex and, consequently, actual results may differ from these estimates under different assumptions or conditions. While for any given estimate or assumption made by the Companys management there may be other estimates or assumptions that are reasonable, the Company believes that, given the current facts and circumstances, it is unlikely that applying any such other reasonable estimate or assumption would materially impact the Companys financial statements.
In response to the SECs financial reporting release FR-60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, the Company has selected its critical accounting policies for purposes of explaining the methodology used in its calculations, in addition to any inherent uncertainties pertaining to the possible effects on its financial condition. The critical policies discussed below are the Companys processes of recognizing revenue, the reserve for excess and obsolete inventory, income taxes, the reserve for warranties and goodwill impairment. These policies affect current assets and operating results and are therefore critical in assessing the Companys financial and operating status. These policies involve certain assumptions that, if incorrect, could have an adverse impact on the Companys operations and financial position.
Revenue Recognition
Revenue related to the Companys measurement equipment and related software is generally recognized upon shipment, as the Company considers the earnings process complete as of the shipping date. Revenue from sales of software only is recognized when no further significant production, modification or customization of the software is required and where persuasive evidence of a sales agreement exists, delivery
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has occurred, and the sales price is fixed or determinable and deemed collectible. Revenues resulting from sales of comprehensive support, training and technology consulting services are recognized as such services are performed. Extended maintenance plan revenues are recognized on a straight-line basis over the life of the plan. The Company warrants its products against defects in design, materials and workmanship for one year. A provision for estimated future costs relating to warranty expense is recorded when products are shipped. Costs relating to extended maintenance plans are recognized as incurred. Revenue from the licensing agreements for the use of the Companys historical technology for medical applications is recognized when the technology is used by the licensees.
Reserve for Excess and Obsolete Inventory
Since the value of inventory that will ultimately be realized cannot be known with exact certainty, the Company relies upon both past sales history and future sales forecasts to provide a basis for the determination of the reserve. Inventory is considered obsolete if the Company has withdrawn those products from the market or had no sales of the product for the past 12 months and has no sales forecasted for the next 12 months. Inventory is considered excess if the quantity on hand exceeds 12 months of expected remaining usage. The resulting obsolete and excess parts are then reviewed to determine if a substitute usage or a future need exists. Items without an identified current or future usage are reserved in an amount equal to 100% of the FIFO cost of such inventory. The Companys products are subject to changes in technologies that may make certain of its products or their components obsolete or less competitive, which may increase its historical provisions to the reserve.
Income Taxes
The Company reviews its deferred tax assets on a regular basis to evaluate their recoverability based upon expected future reversals of deferred tax liabilities, projections of future taxable income over a two-year period, and tax planning strategies that it might employ to utilize such assets, including net operating loss carryforwards. Based on the positive and negative evidence of recoverability, the Company establishes a valuation allowance against the net deferred assets of a taxing jurisdiction in which it operates unless it is more likely than not that it will recover such assets through the above means. In the future, the Companys evaluation of the need for the valuation allowance will be significantly influenced by its ability to achieve profitability and its ability to predict and achieve future projections of taxable income.
Significant judgment is required in determining the Companys worldwide provision for income taxes. In the ordinary course of operating a global business, there are many transactions for which the ultimate tax outcome is uncertain. The Company establishes provisions for income taxes when, despite the belief that tax positions are fully supportable, there remain certain positions that do not meet the minimum probability threshold as described by ASC 740, which is a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority. In the ordinary course of business, the Company and its subsidiaries are examined by various federal, state, and foreign tax authorities. The Company regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of its provision for income taxes. The Company assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, the current tax liability and deferred taxes in the period in which the facts that gave rise to a revision become known.
Reserve for Warranties
The Company establishes at the time of sale a liability for the one year warranty included with the initial purchase price of equipment, based upon an estimate of the repair expenses likely to be incurred for the warranty period. The warranty period is measured in installation-months for each major product group. The warranty reserve is reflected in accrued liabilities in the accompanying consolidated balance sheets. The warranty expense is estimated by applying the actual total repair expenses for each product group in the prior
22
period and determining a rate of repair expense per installation-month. This repair rate is multiplied by the number of installation-months of warranty for each product group to determine the provision for warranty expenses for the period. The Company evaluates its exposure to warranty costs at the end of each period using the estimated expense per installation-month for each major product group, the number of units remaining under warranty and the remaining number of months each unit will be under warranty. The Company has a history of new product introductions and enhancements to existing products, which may result in unforeseen issues that increase its warranty costs. While such expenses have historically been within expectations, the Company cannot guarantee this will continue in the future.
Goodwill Impairment
Goodwill represents the excess cost of a business acquisition over the fair value of the net assets acquired. Indefinite-life identifiable intangible assets and goodwill are not amortized but are tested for impairment. The Company performs an annual review in the fourth quarter of each year, or more frequently if indicators of potential impairment exist, to determine if the carrying value of the recorded goodwill is impaired. If an asset is impaired, the difference between the value of the asset reflected on the financial statements and its current fair value is recognized as an expense in the period in which the impairment occurs.
The Company first performs a qualitative assessment to determine whether it is necessary to perform the two-step goodwill impairment test. If the Company believes, as a result of its qualitative assessment, that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the first and second steps of the goodwill impairment test are unnecessary.
If necessary as a result of the qualitative assessment, the goodwill impairment test is applied using a two-step approach. In performing the first step, the Company calculates the fair values of the reporting units using discounted cash flows (DCF) of each reporting unit. If the carrying amount of the reporting unit exceeds the fair value, the second step is performed to measure the amount of the impairment loss, if any. In the second step, the implied fair value of the goodwill is estimated as the fair value of the reporting unit as calculated in the first step, less the fair values of the net tangible and intangible assets of the reporting unit other than goodwill. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of the goodwill. Management has concluded there was no goodwill impairment in the three months ended March 30, 2013 or the year ended December 31, 2012.
23
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Foreign Exchange Exposure
The Company conducts a significant portion of its business outside the United States. As of March 30, 2013, 60.1% of its revenues were invoiced, and a significant portion of its operating expenses paid, in foreign currencies. Fluctuations in exchange rates between the U.S. dollar and such foreign currencies may have a material adverse effect on the Companys business, results of operations and financial condition, and could specifically result in foreign exchange gains and losses. The impact of future exchange rate fluctuations on the results of the Companys operations cannot be accurately predicted. To the extent that the percentage of its non-U.S. dollar revenues derived from international sales increases (or decreases) in the future, the Companys exposure to risks associated with fluctuations in foreign exchange rates may increase (or decrease). The Company is aware of the availability of off-balance sheet financial instruments to hedge exposure to foreign currency exchange rates, including cross-currency swaps, forward contracts and foreign currency options. However, it does not regularly use such instruments, and none were utilized in the first quarter of 2013.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to the Companys management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, the Companys management carried out an evaluation, under the supervision and with the participation of its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the Companys disclosure controls and procedures. Based upon that evaluation, the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures, as defined by Rule 13a-15(e) under the Exchange Act, were effective as of March 30, 2013.
Changes in Internal Control Over Financial Reporting
There were no changes in the Companys internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended March 30, 2013 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
24
Patent Matters On July 11, 2008, Metris USA, Inc. and its affiliates, Metris N.V., Metris IPR N.V. and 3-D Scanners Ltd., filed a complaint against the Company for patent infringement in the U.S. District Court for the District of Massachusetts (the Massachusetts Court) concerning U.S. Patent Nos. 6,611,617 and 7,313,264 (hereinafter, the patents-in-suit). Following an acquisition by Nikon Corporation in late 2009, Metris USA, Inc. subsequently changed its name to Nikon Metrology, Inc., Metris N.V. changed its name to Nikon Metrology NV, and Metris IPR N.V. was dissolved and merged into Nikon Metrology NV. We refer to each of Nikon Metrology, Inc., Nikon Metrology NV, and 3-D Scanners Ltd. as Plaintiffs or Nikon.
The Company responded to the complaint with counterclaims alleging that the patents-in-suit, which are generally directed to laser scanning devices, are invalid, non-infringed, and unenforceable due to fraud during prosecution of the patents in the U.S. Patent and Trademark Office. On August 31, 2009, the Massachusetts Court granted the Companys motion to add counterclaims and defenses for violation of federal and state antitrust and unfair competition laws based on the alleged knowing assertion of invalid and fraudulent patents. The Company also filed an amended counterclaim to add the Plaintiffs parent company, Nikon Corporation, as a counterclaim defendant.
On July 14, 2010, the Company filed a motion for summary judgment of non-infringement of both patents-in-suit. On August 31, 2010, Nikon filed a motion for summary judgment against the Companys counterclaims for antitrust violations and unfair trade practices.
On September 19, 2011, the Massachusetts Court ruled that the Company did not infringe U.S. Patent No. 6,611,617. The Massachusetts Court also granted Nikons motion for summary judgment on the Companys counterclaims for anti-trust violations and unfair trade practices. The Massachusetts Court denied the Companys motion for summary judgment of non-infringement of U.S. Patent No. 7,313,264. The effect of the ruling was to reduce or eliminate the Companys exposure with respect to claims associated with U.S. Patent No. 6,611,617, while the patent dispute with respect to U.S. Patent No. 7,313,264 continued.
On August 10, 2012, following a two-week jury trial on the remaining claims related to U.S. Patent No. 7,313,264, the jury determined the asserted patent claims were invalid, and on August 13, 2012, the Massachusetts Court entered judgment for the Company. The Massachusetts Court sustained this verdict on January 23, 2013, denying all post-trial motions except the Companys motion for attorneys fees. On February 21, 2013, the Court stayed the Companys motion for attorneys fees pending resolution of any appeals to the U.S. Federal Circuit.
On March 20, 2013, the Massachusetts Court entered Final Judgment in the Companys favor, awarding the Company its costs. On April 10, 2013, the Company filed a notice of appeal to the U.S. Federal Circuit with respect to the Massachusetts Courts failure to address the inequitable conduct by the inventor and related patent misuse and anti-trust issues. The Company believes it is entitled to relief for all of its attorneys fees and costs incurred in the litigation, although the amount and eventual recovery are uncertain at this time.
Other than the litigation mentioned above, the Company is not involved in any legal proceedings other than routine litigation arising in the normal course of business, none of which the Company believes will have a material adverse effect on the Companys business, financial condition or results of operations.
25
In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed under Risk Factors in the Companys Form 10-K for the year ended December 31, 2012, as filed with the SEC. These risks could materially and adversely affect the Companys business, financial condition, and results of operations. The risks described in the Companys Form 10-K for the year ended December 31, 2012 are not the only risks it faces. The Companys operations could also be affected by additional factors that are not presently known to the Company or by factors that it currently considers immaterial to its business.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer Under the Share Repurchase Program
On November 24, 2008, the Companys Board of Directors approved a $30 million share repurchase program. Acquisitions for the share repurchase program will be made from time to time at prevailing prices as permitted by securities laws and other legal requirements, and subject to market conditions and other factors. The share repurchase program may be discontinued at any time. There is no restriction date or other restriction governing the period over which the Company can repurchase shares under the program. The Company made no stock repurchases during the three month period ended March 30, 2013 under this program.
Other Purchases of Equity Securities by the Issuer
During the first quarter of fiscal 2013, the Company indirectly repurchased shares outside of the share repurchase program through net share settlement to satisfy minimum statutory tax withholding requirements upon vesting of shares of restricted stock held by employees. The following table summarizes this repurchase activity during the three months ended March 30, 2013:
Period |
Total Number of Shares Purchased (a) |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs |
||||||||||||
January 1 - January 31 |
| $ | | | $ | 21,094,621 | ||||||||||
February 1 - February 29 |
595 | 35.05 | | $ | 21,094,621 | |||||||||||
March 1 - March 30 |
630 | 44.28 | | $ | 21,094,621 | |||||||||||
Total |
1,225 | $ | 39.80 | | $ | 21,094,621 |
26
3.1 | Articles of Incorporation, as amended (Filed as Exhibit 3.1 to Registrants Registration Statement on Form S-1, No. 333-32983, and incorporated herein by reference) | |
3.2 | Amended and Restated Bylaws (Filed as Exhibit 3.1 to Current Report on Form 8-K, dated February 3, 2010 and incorporated herein by reference) | |
4.1 | Specimen Stock Certificate (Filed as Exhibit 4.1 to Registrants Registration Statement on Form S-1, No. 333-32983, and incorporated herein by reference) | |
10.1 | Separation Agreement, General Release of All Claims and Covenant Not to Sue, dated February 8, 2013, by and between FARO Technologies, Inc. and David Morse (Filed as Exhibit 10.1 to Registrants Current Report on Form 8-K/A, dated February 12, 2013 and incorporated herein by reference) | |
31-A | Certification of the President and Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31-B | Certification of the Principal Financial and Accounting Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32-A | Certification of the President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32-B | Certification of the Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Schema Document | |
101.CAL | XBRL Calculation Linkbase Document | |
101.DEF | XBRL Definition Linkbase Document | |
101.LAB | XBRL Label Linkbase Document | |
101.PRE | XBRL Presentation Linkbase Document |
27
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 thereunto duly authorized.
FARO Technologies, Inc. | ||||||
(Registrant) | ||||||
Date: April 30, 2013 | By: | /s/ Keith S. Bair | ||||
Keith S. Bair | ||||||
Senior Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) |
28
EXHIBIT INDEX
3.1 | Articles of Incorporation, as amended (Filed as Exhibit 3.1 to Registrants Registration Statement on Form S-1, No. 333-32983, and incorporated herein by reference) | |
3.2 | Amended and Restated Bylaws (Filed as Exhibit 3.1 to Current Report on Form 8-K, dated February 3, 2010 and incorporated herein by reference) | |
4.1 | Specimen Stock Certificate (Filed as Exhibit 4.1 to Registrants Registration Statement on Form S-1, No. 333-32983, and incorporated herein by reference) | |
10.1 | Separation Agreement, General Release of All Claims and Covenant Not to Sue, dated February 8, 2013, by and between FARO Technologies, Inc. and David Morse (Filed as Exhibit 10.1 to Registrants Current Report on Form 8-K/A, dated February 12, 2013 and incorporated herein by reference) | |
31-A | Certification of the President and Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31-B | Certification of the Principal Financial and Accounting Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32-A | Certification of the President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32-B | Certification of the Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Schema Document | |
101.CAL | XBRL Calculation Linkbase Document | |
101.DEF | XBRL Definition Linkbase Document | |
101.LAB | XBRL Label Linkbase Document | |
101.PRE | XBRL Presentation Linkbase Document |
29
Exhibit 31-A
FARO Technologies, Inc.
Certification Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Jay W. Freeland, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of FARO Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: April 30, 2013 | ||
/s/ Jay W. Freeland | ||
Name: | Jay W. Freeland | |
Title: | President and Chief Executive Officer | |
(Principal Executive Officer) |
Exhibit 31-B
FARO Technologies, Inc.
Certification Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Keith S. Bair, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of FARO Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: April 30, 2013 | ||
/s/ Keith S. Bair | ||
Name: |
Keith S. Bair | |
Title: | Senior Vice President and Chief Financial Officer | |
(Principal Financial Officer) |
Exhibit 32-A
FARO Technologies, Inc.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, the undersigned President and Chief Executive Officer and Director of FARO Technologies, Inc. (the Company), hereby certify that the Quarterly Report on Form 10-Q for the quarter ended March 30, 2013 (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Jay W. Freeland |
Jay W. Freeland |
President and Chief Executive Officer |
(Principal Executive Officer) |
April 30, 2013 |
Exhibit 32-B
FARO Technologies, Inc.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Solely for the purposes of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, the undersigned Senior Vice President and Chief Financial Officer of FARO Technologies, Inc. (the Company), hereby certify that the Quarterly Report on Form 10-Q for the quarter ended March 30, 2013 (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Keith S. Bair |
Keith S. Bair |
Senior Vice President and Chief Financial Officer |
(Principal Financial Officer) |
April 30, 2013 |
Accounts Receivable (Detail) (USD $)
In Thousands, unless otherwise specified |
Mar. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Accounts receivable | $ 57,620 | $ 66,339 |
Allowance for doubtful accounts | (3,899) | (3,780) |
Total | $ 53,721 | $ 62,559 |
Commitments and Contingencies - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified |
3 Months Ended |
---|---|
Mar. 30, 2013
|
|
Commitments and Contingencies Disclosure [Line Items] | |
Lease future expiration date, year | 2019 |
Total lease obligations | $ 6.2 |
Minimum
|
|
Commitments and Contingencies Disclosure [Line Items] | |
Length of purchase commitments, in days | 60 days |
Maximum
|
|
Commitments and Contingencies Disclosure [Line Items] | |
Length of purchase commitments, in days | 90 days |
Segment Reporting - Additional Information (Detail)
|
3 Months Ended |
---|---|
Mar. 30, 2013
Customer
Segment
|
|
Segment Reporting Disclosure [Line Items] | |
Number of reportable segments | 3 |
Percentage of product sales to consolidated sales | 99.00% |
Customers that individually accounted for 10% or more of total revenue | 0 |
Fair Value of Options Granted (Detail)
|
3 Months Ended | |
---|---|---|
Mar. 30, 2013
|
Mar. 31, 2012
|
|
Fair Value, Option, Quantitative Disclosures [Line Items] | ||
Risk-free interest rate | 0.55% | 0.66% |
Expected dividend yield | 0.00% | 0.00% |
Expected option life | 4 years | 4 years |
Expected volatility | 48.40% | 50.70% |
Weighted-average expected volatility | 48.40% | 50.70% |
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