UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 3, 2015
FARO TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Florida | 0-23081 | 59-3157093 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
250 Technology Park, Lake Mary, Florida 32746
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (407) 333-9911
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On November 3, 2015, FARO Technologies, Inc. (the Company) issued a press release announcing its results of operations for the third fiscal quarter ended September 26, 2015. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
The information furnished pursuant to Item 2.02 and Exhibit 99.1 of this Current Report on Form 8-K shall not be deemed to be filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section. The information in this Current Report shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Current Report, regardless of any general incorporation language in the filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The following exhibit is furnished with this Current Report on Form 8-K:
Exhibit Number |
Description | |
99.1 | Press release dated November 3, 2015 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
FARO Technologies, Inc. (Registrant) | ||||||
November 3, 2015 |
/s/ Laura A. Murphy | |||||
By: | Laura A. Murphy | |||||
Its: | Senior Vice President and Chief Financial Officer |
EXHIBIT INDEX
Exhibit Number |
Description | |
99.1 | Press release dated November 3, 2015 |
Exhibit 99.1
NEWS BULLETIN
|
FARO Technologies, Inc. 250 Technology Park Lake Mary, FL 32746 | |
The Measure of Success | FOR IMMEDIATE RELEASE |
FARO Reports Third Quarter 2015 Financial Results
LAKE MARY, FL, November 3, 2015 FARO Technologies, Inc. (NASDAQ: FARO) today announced its financial results for the third quarter ended September 26, 2015.
The Companys third quarter 2015 sales at $72.5 million decreased 11.8% from $82.2 million in the third quarter of 2014. Adjusted for $6.4 million of unfavorable foreign exchange impacts, sales were 4% lower than the prior year period.
Gross margin for the quarter was 48.1%, compared with 56.0% in the prior year period. Based upon the planned timing of new product introductions and in light of lower-than-anticipated 2015 sales, the inventory reserve was increased by $7.9 million in the quarter. Excluding this adjustment, gross margin was 59.0%, benefitting from continuing strong sales momentum of the Laser Line Probe HD and a more favorable product mix.
Operating income for the quarter was a loss of $0.9 million, compared with income of $9.0 million in the prior year period, reflecting lower sales and an increase in the inventory reserve offset by certain expense reductions. In the third quarter of 2015, the Company continued its commitment to new, disruptive product development by investing $5.8 million, or 8.0% of sales, in research and development spending.
Net income was a loss of $0.9 million, or a loss of $0.05 per share, in the third quarter of 2015 compared with income of $11.2 million, or $0.64 per share, in the prior year period. In the third quarter of 2014, excluding a discrete tax benefit of $4.5 million, net income was $6.7 million, or $0.38 per share.
The Board of Directors has authorized an increase in the existing share repurchase program from $30 million to $50 million of FARO common stock. The Company plans to repurchase shares opportunistically, subject to trading restrictions and other legal requirements.
Third quarter sales primarily reflect continued unfavorable foreign currency translation, slow-down of capital spending around the world, particularly in China and Japan, and macro-economic turmoil in Brazil, stated Jay Freeland, FAROs President and CEO. A number of our vertical markets experienced a slow-down late in the third quarter, especially the Architecture, Engineering and Construction vertical challenging our closure rate of Focus Laser Scanner sales. In response to weaker customer capital spending, we are re-aligning our cost structure immediately by reducing our global work force by approximately 8% and implementing further cost reduction initiatives, without inhibiting our long-term growth strategy.
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 FAROs long-term growth, demand for and customer acceptance of FAROs products, anticipated improvement in the markets in which FARO operates, and FAROs product development and product launches. Statements that are not historical facts or that describe the Companys plans, objectives, projections, expectations, assumptions, strategies, or goals are forward-looking statements. In addition, words such as is, are, expects, continues, may, will, and similar expressions or discussions of FAROs plans or other intentions identify forward-looking statements. Forward-looking statements are not guarantees of future performance and are subject to various known and unknown risks, uncertainties, and other factors that may cause actual results, performances, or achievements to differ materially from future results, performances, or achievements expressed or implied by such forward-looking statements. Consequently, undue reliance should not be placed on these forward-looking statements.
Factors that could cause actual results to differ materially from what is expressed or forecasted in such forward-looking statements include, but are not limited to:
| the Companys inability to successfully identify and acquire target companies or achieve expected benefits from acquisitions that are consummated; |
| development by others of new or improved products, processes or technologies that make the Companys products less competitive or obsolete; |
| the Companys inability to maintain its technological advantage by developing new products and enhancing its existing products; |
| declines or other adverse changes, or lack of improvement, in industries that the Company serves or the domestic and international economies in the regions of the world where the Company operates and other general economic, business, and financial conditions; |
| the impact of fluctuations of foreign exchange rates; and |
| Other risks detailed in Part I, Item 1A. Risk Factors in the Companys Annual Report on Form 10-K for the year ended December 31, 2014. |
Forward-looking statements in this release represent the Companys judgment as of the date of this release. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, unless otherwise required by law.
About FARO
FARO is the worlds most trusted source for 3D measurement technology. The Company develops and markets computer-aided measurement and imaging devices and software. Technology from FARO permits high-precision 3D measurement, imaging and comparison of parts and complex structures within production and quality assurance processes. The devices are used for inspecting components and assemblies, rapid prototyping, documenting large volume spaces or structures in 3D, surveying and construction, as well as for investigation and reconstruction of accident sites or crime scenes.
The Companys global headquarters is located in Lake Mary, FL; its European regional headquarters in Stuttgart, Germany; and its Asia Pacific regional headquarters in Singapore. FARO has other offices in the United States, Canada, Mexico, Brazil, Germany, the United Kingdom, France, Spain, Italy, Poland, Turkey, the Netherlands, Switzerland, Portugal, India, China, Malaysia, Vietnam, Thailand, South Korea, and Japan.
More information is available at http://www.faro.com
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended | Nine Months Ended | |||||||||||||||
(in thousands, except share and per share data) |
September 26, 2015 | September 27, 2014 | September 26, 2015 | September 27, 2014 | ||||||||||||
SALES |
||||||||||||||||
Product |
$ | 57,803 | $ | 67,581 | $ | 182,284 | $ | 194,785 | ||||||||
Service |
14,704 | 14,658 | 43,937 | 42,888 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total sales |
72,507 | 82,239 | 226,221 | 237,673 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
COST OF SALES |
||||||||||||||||
Product |
28,943 | 26,640 | 80,652 | 78,185 | ||||||||||||
Service |
8,693 | 9,558 | 26,541 | 27,847 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total cost of sales (exclusive of depreciation and amortization, shown separately below) |
37,636 | 36,198 | 107,193 | 106,032 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
GROSS PROFIT |
34,871 | 46,041 | 119,028 | 131,641 | ||||||||||||
OPERATING EXPENSES |
||||||||||||||||
Selling and marketing |
18,944 | 19,059 | 58,112 | 56,207 | ||||||||||||
General and administrative |
8,239 | 8,832 | 27,106 | 26,112 | ||||||||||||
Depreciation and amortization |
2,790 | 1,805 | 8,022 | 5,520 | ||||||||||||
Research and development |
5,820 | 7,352 | 19,430 | 19,440 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
35,793 | 37,048 | 112,670 | 107,279 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
(LOSS) INCOME FROM OPERATIONS |
(922 | ) | 8,993 | 6,358 | 24,362 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
OTHER (INCOME) EXPENSE |
||||||||||||||||
Interest expense (income), net |
7 | (23 | ) | (36 | ) | (61 | ) | |||||||||
Other expense (income), net |
131 | (89 | ) | 1,521 | (78 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
(LOSS) INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) |
(1,060 | ) | 9,105 | 4,873 | 24,501 | |||||||||||
INCOME TAX (BENEFIT) EXPENSE |
(176 | ) | (2,118 | ) | 945 | 1,974 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
NET (LOSS) INCOME |
$ | (884 | ) | $ | 11,223 | $ | 3,928 | $ | 22,527 | |||||||
|
|
|
|
|
|
|
|
|||||||||
NET (LOSS) INCOME PER SHARE - BASIC |
$ | (0.05 | ) | $ | 0.65 | $ | 0.23 | $ | 1.31 | |||||||
|
|
|
|
|
|
|
|
|||||||||
NET (LOSS) INCOME PER SHARE - DILUTED |
$ | (0.05 | ) | $ | 0.64 | $ | 0.22 | $ | 1.29 | |||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average shares - Basic |
17,395,824 | 17,258,029 | 17,372,562 | 17,233,879 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average shares - Diluted |
17,395,824 | 17,410,391 | 17,496,190 | 17,396,788 | ||||||||||||
|
|
|
|
|
|
|
|
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) |
September 26, 2015 (unaudited) |
December 31, 2014 |
||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 95,975 | $ | 109,289 | ||||
Short-term investments |
64,984 | 64,995 | ||||||
Accounts receivable, net |
63,811 | 83,959 | ||||||
Inventories, net |
55,110 | 43,094 | ||||||
Deferred income taxes, net |
5,508 | 5,936 | ||||||
Prepaid expenses and other current assets |
21,997 | 17,021 | ||||||
|
|
|
|
|||||
Total current assets |
307,385 | 324,294 | ||||||
|
|
|
|
|||||
Property and equipment: |
||||||||
Machinery and equipment |
50,493 | 45,254 | ||||||
Furniture and fixtures |
5,921 | 6,156 | ||||||
Leasehold improvements |
19,537 | 19,676 | ||||||
|
|
|
|
|||||
Property and equipment at cost |
75,951 | 71,086 | ||||||
Less: accumulated depreciation and amortization |
(42,215 | ) | (41,741 | ) | ||||
|
|
|
|
|||||
Property and equipment, net |
33,736 | 29,345 | ||||||
|
|
|
|
|||||
Goodwill |
26,600 | 19,205 | ||||||
Intangible assets, net |
16,171 | 9,109 | ||||||
Service and demonstration inventory, net |
32,666 | 36,886 | ||||||
Deferred income taxes, net |
6,498 | 6,624 | ||||||
|
|
|
|
|||||
Total assets |
$ | 423,056 | $ | 425,463 | ||||
|
|
|
|
|||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 12,473 | $ | 15,437 | ||||
Accrued liabilities |
21,230 | 26,127 | ||||||
Current portion of unearned service revenues |
23,771 | 23,572 | ||||||
Customer deposits |
1,517 | 2,046 | ||||||
|
|
|
|
|||||
Total current liabilities |
58,991 | 67,182 | ||||||
Unearned service revenues - less current portion |
13,176 | 13,799 | ||||||
Deferred income tax liability |
1,942 | | ||||||
Other long-term liabilities |
2,858 | 628 | ||||||
|
|
|
|
|||||
Total liabilities |
76,967 | 81,609 | ||||||
|
|
|
|
|||||
Shareholders equity: |
||||||||
Common stock - par value $.001, 50,000,000 shares authorized; 18,077,594 and 17,997,665 issued; 17,397,359 and 17,317,430 outstanding, respectively |
18 | 18 | ||||||
Additional paid-in capital |
206,459 | 200,090 | ||||||
Retained earnings |
163,444 | 159,516 | ||||||
Accumulated other comprehensive loss |
(14,757 | ) | (6,695 | ) | ||||
Common stock in treasury, at cost - 680,235 shares |
(9,075 | ) | (9,075 | ) | ||||
|
|
|
|
|||||
Total shareholders equity |
346,089 | 343,854 | ||||||
|
|
|
|
|||||
Total liabilities and shareholders equity |
$ | 423,056 | $ | 425,463 | ||||
|
|
|
|
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended | ||||||||
(in thousands) |
September 26, 2015 | September 27, 2014 | ||||||
CASH FLOWS FROM: |
||||||||
OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 3,928 | $ | 22,527 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
8,022 | 5,520 | ||||||
Compensation for stock options and restricted stock units |
3,791 | 3,669 | ||||||
Provision for (net recovery of) bad debts |
462 | (272 | ) | |||||
Loss on disposal of assets |
877 | | ||||||
Write-down of inventories |
9,560 | 3,588 | ||||||
Deferred income tax expense (benefit) |
556 | (5,804 | ) | |||||
Income tax benefit from exercise of stock options |
(292 | ) | (137 | ) | ||||
Change in operating assets and liabilities: |
||||||||
Decrease (increase) in: |
||||||||
Accounts receivable |
17,205 | (5,392 | ) | |||||
Inventories |
(21,693 | ) | (16,553 | ) | ||||
Prepaid expenses and other current assets |
(5,740 | ) | (3,032 | ) | ||||
(Decrease) increase in: |
||||||||
Accounts payable and accrued liabilities |
(8,779 | ) | (805 | ) | ||||
Customer deposits |
(473 | ) | (1,659 | ) | ||||
Unearned service revenues |
467 | 2,827 | ||||||
|
|
|
|
|||||
Net cash provided by operating activities |
7,891 | 4,477 | ||||||
|
|
|
|
|||||
INVESTING ACTIVITIES: |
||||||||
Purchases of property and equipment |
(8,462 | ) | (10,306 | ) | ||||
Payments for intangible assets |
(1,751 | ) | (1,080 | ) | ||||
Purchase of businesses acquired, net of cash |
(12,066 | ) | (1,000 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities |
(22,279 | ) | (12,386 | ) | ||||
|
|
|
|
|||||
FINANCING ACTIVITIES: |
||||||||
Payments on capital leases |
(6 | ) | (6 | ) | ||||
Income tax benefit from exercise of stock options |
292 | 137 | ||||||
Proceeds from issuance of stock, net |
2,286 | 2,522 | ||||||
|
|
|
|
|||||
Net cash provided by financing activities |
2,572 | 2,653 | ||||||
|
|
|
|
|||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(1,498 | ) | (2,464 | ) | ||||
|
|
|
|
|||||
DECREASE IN CASH AND CASH EQUIVALENTS |
(13,314 | ) | (7,720 | ) | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
109,289 | 124,630 | ||||||
|
|
|
|
|||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 95,975 | $ | 116,910 | ||||
|
|
|
|
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
Three Months Ended | Nine Months Ended | |||||||||||||||
(in thousands) |
September 26, 2015 | September 27, 2014 | September 26, 2015 | September 27, 2014 | ||||||||||||
Net (loss) income |
$ | (884 | ) | $ | 11,223 | $ | 3,928 | $ | 22,527 | |||||||
Currency translation adjustments, net of tax |
(3,475 | ) | (7,817 | ) | (8,062 | ) | (7,799 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive (loss) income |
$ | (4,359 | ) | $ | 3,406 | $ | (4,134 | ) | $ | 14,728 | ||||||
|
|
|
|
|
|
|
|
/C_,3FJ!C*28$/*_.MZ/Y:LJ(4%"