NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2012, 2011 and 2010
(in thousands, except share and per share
data or as otherwise noted)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 ION, FARO Focus
3D
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.
Principles of Consolidation
The consolidated financial statements of the
Company include the accounts of FARO Technologies, Inc. and its 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.
Revenue Recognition,
Product Warranty and Extended Maintenance Contracts
Revenue related to the Companys measurement systems (integrated combinations of a measurement device, a computer and software loaded on the computer and the measurement device)
is generally recognized upon shipment, as the Company considers the earnings process complete as of the shipping date. 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. The Company separately sells one and three year extended warranties. Extended warranty revenues are recognized on a straight-line basis over the term of the warranty.
Costs relating to extended maintenance plans are recognized as incurred. Revenue from sales of software only is recognized when no further significant production, modification or customization of the software is required and when the following
criteria are met: persuasive evidence of a sales agreement exists, delivery 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 and are deferred when billed in advance of the performance of services. Revenue from the licensing agreements for the use of the Companys technology for medical applications is generally
recognized as licensees use the technology. Amounts representing royalties for the current year and not received as of year-end are estimated as due based on historical data and recognized in the current year.
Cash and Cash Equivalents
The Company considers cash on hand and amounts on deposit with financial
institutions with maturities of three months or less when purchased to be cash and cash equivalents. The Company had deposits with foreign banks totaling $53.2 and $37.5 as of December 31, 2012 and 2011, respectively. The Company does not
intend to repatriate those funds.
39
Accounts Receivable and Related Allowance for Doubtful
Accounts
Credit is extended to customers based on an evaluation of a customers financial condition and, generally, collateral is not required. Accounts receivable are generally due within 30 to 90 days and are stated at amounts
due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. The Company makes judgments as to the collectability of accounts receivable based on historical
trends and future expectations. Management estimates an allowance for doubtful accounts, which adjusts gross trade accounts receivable to its net realizable value. The allowance for doubtful accounts is based on an analysis of all receivables for
possible impairment issues and historical write-off percentages. The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts.
The Company does not generally charge interest on past due receivables.
Inventories
Inventories are stated at the lower of cost or net realizable value using the first-in
first-out method. Shipping and handling costs are classified as a component of cost of sales in the consolidated statements of operations. Sales demonstration inventory is comprised of measuring devices utilized by sales representatives to present
the Companys products to customers. These products remain in sales demonstration inventory for approximately 6 to 12 months and are subsequently sold at prices that produce slightly reduced gross margins. Service inventory is comprised of
inventory that is not expected to be sold within twelve months, such as training and loaned equipment.
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 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
.
Property and Equipment
Property and equipment purchases exceeding a thousand dollars are capitalized
and recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of assets as follows:
|
|
|
|
|
|
|
Machinery and equipment
|
|
|
|
|
|
2 to 5 years
|
Furniture and fixtures
|
|
|
|
|
|
3 to 10 years
|
Leasehold improvements are amortized on a straight-line basis over the lesser of the life
of the asset or the remaining term of the lease, not to exceed 7 years.
Depreciation expense was $5,769,
$5,394 and $4,842 in 2012, 2011 and 2010, respectively. Accelerated methods of depreciation are used for income tax purposes in contrast to book purposes, and as a result, appropriate provisions are made for the related deferred income taxes.
Goodwill and Intangibles
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 or indefinite lived intangible assets 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. The Company elected to early adopt this accounting guidance at the beginning of its fourth quarter of
2011 on a prospective basis for goodwill impairment tests.
If necessary, after performing 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
40
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 years ended December 31, 2012, 2011 and 2010.
Other intangible assets principally include patents, existing product technology and customer relationships that arose in
connection with the Companys acquisitions of iQvolution AG and Dimensional Photonics International. Other intangible assets are recorded at fair value at the date of acquisition and are amortized over their estimated useful lives of 3 to 20
years.
Product technology and patents are recorded at cost. Amortization is computed using the straight-line
method over the lives of the patents.
Long-Lived Assets
Long-lived assets, other than
goodwill and indefinite lived intangible assets, are evaluated for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Management has concluded that there was no
impairment of these assets for the years ended December 31, 2012, 2011 and 2010.
Research and
Development
Research and development costs incurred in the discovery of new knowledge and the resulting translation of this new knowledge into plans and designs for new products, prior to the attainment of the related products
technological feasibility, are recorded as expenses in the period incurred.
Reserve for
Warranties
The Company establishes a liability for the embedded twelve-month warranties included with its products by the creation of a warranty reserve, which is an estimate of the repair expenses likely to be incurred for the
remaining period of the warranty measured in installation-months in each major product group. Warranty reserve is included in accrued liabilities in the accompanying consolidated balance sheets. The warranty expense is estimated by determining the
total repair expenses for each product group in the period and determining a rate of repair expense per installation month and included in Cost of Sales-Service in the accompanying consolidated statements of operations. This repair rate is
multiplied by the number of installation-months of warranty for each product group sold during the period 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. While such expenses have historically been within its
expectations, the Company cannot guarantee this will continue in the future.
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, and tax planning strategies that the Company might employ to
utilize such assets, including net operating loss carryforwards. Based on the positive and negative evidence for recoverability, the Company establishes a valuation allowance against the net deferred tax assets of a taxing jurisdiction in which the
Company operates unless it is more likely than not that the Company 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 the Companys ability to achieve profitability and the Companys ability to predict and achieve future projections of taxable income over a two-year period.
41
The Company recognizes tax benefits related to uncertain tax positions only if it is more
likely than not the tax position will be sustained upon examination by taxing authorities. For those positions where there is less than a 50% likelihood that a tax benefit will be sustained, no tax benefit has been recognized in the financial
statements. 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.
Fair Value of Financial Instruments
The Companys financial instruments include cash and cash
equivalents, short-term investments, accounts receivable and accounts payable and accrued liabilities. Due to their short-term nature, the carrying amounts of such financial instruments approximate their fair value.
Earnings Per Share
Basic earnings per share (EPS) is computed by dividing earnings
available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the effect of all dilutive stock options and equity instruments. A reconciliation of the number of common shares used
in calculation of basic and diluted EPS is presented in Note 15 - Earnings Per Share.
Concentration of
Credit Risk
Financial instruments that expose the Company to concentrations of credit risk consist principally of short-term investments and operating demand deposit accounts. The Companys policy is to place its operating demand
deposit accounts with high credit quality financial institutions.
Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) 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 from those estimates.
Impact of Recently Issued Accounting Standards
In June 2011, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU) 2011-05,
Comprehensive Income (Topic 220): Presentation of
Comprehensive Income (ASU 2011-05)
. ASU 2011-05 requires companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option
to present components of other comprehensive income as part of the changes in shareholders equity. The standard does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be
reclassified to net income. The Company has elected to present the components of net income and other comprehensive income as two consecutive statements. ASU 2011-05 was effective for interim and annual periods beginning after December 15,
2011. The adoption of ASU 2011-05 during the quarter ended March 31, 2012 and for subsequent periods only impacted presentation and did not have any effect on the Companys consolidated financial statements or on its financial condition.
In December 2011, the FASB issued 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 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
42
requirement 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 2012-03)
, which will be effective for reporting periods beginning after December 31, 2012. The specific
requirements of ASU 2013-02 are not expected to have any impact on the Companys consolidated financial statements.
2. SUPPLEMENTAL CASH FLOW INFORMATION
Selected cash payments and non-cash activities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
28
|
|
|
$
|
34
|
|
|
$
|
32
|
|
|
|
|
|
Cash paid for income taxes
|
|
|
5,256
|
|
|
|
5,422
|
|
|
|
2,870
|
|
3. ALLOWANCE FOR DOUBTFUL ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Balance, beginning of year
|
|
$
|
4,585
|
|
|
$
|
4,700
|
|
|
$
|
3,159
|
|
Provision
|
|
|
(23)
|
|
|
|
2,169
|
|
|
|
2,408
|
|
Amounts written off, net of recoveries
|
|
|
(782)
|
|
|
|
(2,284)
|
|
|
|
(867)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
3,780
|
|
|
$
|
4,585
|
|
|
$
|
4,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
4. SHORT-TERM INVESTMENTS
Short-term investments of $65.0 million at December 31, 2012 and 2011 are comprised of U.S. Treasury Bills that
mature through June 13, 2013. The 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
December 31, 2012 and 2011 approximated cost.
5. INVENTORIES
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
December 31, 2012
|
|
|
December 31, 2011
|
|
Raw materials
|
|
$
|
28,146
|
|
|
$
|
28,675
|
|
Finished goods
|
|
|
6,188
|
|
|
|
7,251
|
|
Sales demonstration inventory
|
|
|
18,729
|
|
|
|
16,794
|
|
Reserve for excess and obsolete
|
|
|
(4,169)
|
|
|
|
(2,786)
|
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
$
|
48,894
|
|
|
$
|
49,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service inventory
|
|
$
|
19,125
|
|
|
$
|
17,316
|
|
|
|
|
|
|
|
|
|
|
6. GOODWILL
The Companys goodwill at December 31, 2012 and 2011 is related to its previous acquisitions
of three businesses. The Company evaluates each reporting units fair value as compared to its carrying value on December 31 of each year or more frequently if events or changes in circumstances indicate that the carrying value may exceed
the fair value. The Company first performs a qualitative assessment to determine whether it is necessary to perform the two-step goodwill impairment test. If Step 1 of the quantitative goodwill impairment test is performed, fair value of a reporting
unit is measured using a discounted cash flow model incorporating discount rates commensurate with the risks involved for each reporting unit. The key assumptions used in the discounted cash flow model include discount rates, growth rates, cash flow
projections and terminal value rates. These rates are susceptible to change and require significant management judgment. Impairments to goodwill are charged against earnings in the period the impairment is identified. The Company has three reporting
units for which goodwill was tested on December 31, 2012: the Americas Region, the Europe/Africa Region, and the Asia Pacific Region, as shown in the table below. As of December 31, 2012 and 2011, the Company did not have any goodwill that
was identified as impaired. The changes in goodwill of $0.2 million in 2012 and $0.4 million in 2011 are due to adjustments for changes in foreign exchange rates related to an acquisition made in 2005.
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
Beginning
Balance
|
|
|
Additions
|
|
|
Foreign
Currency
Translation
|
|
|
Ending
Balance
|
|
|
|
|
|
|
Americas Region
|
|
$
|
6,994
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,994
|
|
Europe/Africa region
|
|
|
11,616
|
|
|
|
-
|
|
|
|
206
|
|
|
|
11,822
|
|
Asia Pacific Region
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,610
|
|
|
$
|
-
|
|
|
$
|
206
|
|
|
$
|
18,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
Beginning
Balance
|
|
|
Additions
|
|
|
Foreign
Currency
Translation
|
|
|
Ending
Balance
|
|
|
|
|
|
|
Americas Region
|
|
$
|
6,994
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,994
|
|
Europe/Africa region
|
|
|
12,021
|
|
|
|
-
|
|
|
|
(405)
|
|
|
|
11,616
|
|
Asia Pacific Region
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,015
|
|
|
$
|
-
|
|
|
$
|
(405)
|
|
|
$
|
18,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. INTANGIBLE ASSETS
Intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
Amortizable intangible assets:
|
|
|
|
|
|
|
|
|
|
Product technology
|
|
$
|
10,260
|
|
|
$
|
10,009
|
|
|
Patents
|
|
|
8,500
|
|
|
|
7,287
|
|
|
Other
|
|
|
7,749
|
|
|
|
7,535
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
26,509
|
|
|
|
24,831
|
|
|
Accumulated amortization
|
|
|
(19,461)
|
|
|
|
(17,982)
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets - net
|
|
$
|
7,048
|
|
|
$
|
6,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
Amortization expense was $1,207, $1,318 and $1,484 in 2012, 2011 and 2010,
respectively. The estimated amortization expense for each of the years 2013 through 2017 and thereafter is as follows:
|
|
|
|
|
Years ending December 31,
|
|
Amount
|
|
2013
|
|
$
|
1,069
|
|
2014
|
|
|
990
|
|
2015
|
|
|
938
|
|
2016
|
|
|
844
|
|
2017
|
|
|
687
|
|
Thereafter
|
|
|
2,520
|
|
|
|
|
|
|
|
|
$
|
7,048
|
|
|
|
|
|
|
8. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Accrued compensation and benefits
|
|
$
|
9,364
|
|
|
$
|
10,665
|
|
Accrued warranties
|
|
|
2,359
|
|
|
|
2,365
|
|
Professional and legal fees
|
|
|
1,472
|
|
|
|
966
|
|
Other accrued liabilities
|
|
|
5,021
|
|
|
|
4,080
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
18,216
|
|
|
$
|
18,076
|
|
|
|
|
|
|
|
|
|
|
Activity related to
accrued warranties was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Beginning Balance
|
|
$
|
2,365
|
|
|
$
|
1,857
|
|
|
$
|
1,253
|
|
Provision for warranty expense
|
|
|
3,071
|
|
|
|
2,953
|
|
|
|
2,589
|
|
Warranty expired
|
|
|
(3,077)
|
|
|
|
(2,445)
|
|
|
|
(1,985)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
2,359
|
|
|
$
|
2,365
|
|
|
$
|
1,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
9. 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 December 31, 2012, 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 in 2012 and 2011.
10. CAPITAL LEASES
Assets under capital leases were $230 and $401 at December 31, 2012 and 2011, respectively. Accumulated
depreciation on assets under capital leases was $195 and $294 at December 31, 2012 and 2011, respectively.
11. OTHER EXPENSE, NET
Other expense, net consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Foreign exchange transaction losses, net
|
|
$
|
642
|
|
|
$
|
1,049
|
|
|
$
|
2,814
|
|
Other
|
|
|
102
|
|
|
|
168
|
|
|
|
(31)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense, net
|
|
$
|
744
|
|
|
$
|
1,217
|
|
|
$
|
2,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
12. INCOME TAXES
As of December 31, 2012 and 2011, the Companys gross unrecognized tax benefits totaled $0.3 million, which
includes approximately $0.03 million of interest and penalties. The Company estimates that the unrecognized tax benefits will not change significantly within the next year.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Balance at January 1,
|
|
$
|
265
|
|
|
$
|
265
|
|
|
$
|
645
|
|
Additions based on tax positions related to the current year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Additions for tax positions of prior years
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Reductions for tax positions of prior years
|
|
|
-
|
|
|
|
-
|
|
|
|
(380)
|
|
Settlements
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31,
|
|
$
|
265
|
|
|
$
|
265
|
|
|
$
|
265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company and its
subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The table below summarizes the open tax years and ongoing tax examinations in major jurisdictions as of December 31, 2012:
|
|
|
|
|
|
|
Jurisdiction
|
|
Open Years
|
|
Examination
in Process
|
|
|
|
|
United States - Federal Income Tax
|
|
2005, 2008 - 2012
|
|
|
2009
|
|
United States - various states
|
|
2007 - 2012
|
|
|
N/A
|
|
Germany
|
|
2008 - 2012
|
|
|
N/A
|
|
Switzerland
|
|
2012
|
|
|
N/A
|
|
Singapore
|
|
2007 - 2012
|
|
|
N/A
|
|
The Company
recognizes accrued interest and penalties related to unrecognized tax benefits in tax expense. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $0.3 million. FARO does not currently
anticipate that the total amount of unrecognized tax benefits will result in material changes to its financial position. The Company is subject to income taxes at the
48
federal, state and foreign country level. The Companys tax returns are subject to examination at the U.S. federal level from 2005 forward and at the state level subject to a three to five
year statute of limitations.
The United States Internal Revenue Service (IRS) commenced an
examination of the Companys 2009 income tax returns in June 2011 that is currently in process. The Company believes that it has provided appropriately for any uncertain tax positions that may arise.
The effective income tax rate for 2012, 2011, and 2010 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 $0.9
million, or $0.05 per share, in the year ended December 31, 2012, $0.9 million, or $0.05 per share, in the year ended December 31, 2011, and $0.2 million, or $0.01 per share, in the year ended December 31, 2010.
In 2005, the Company opened a regional headquarters and began to manufacture 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 a favorable tax
rate subject to certain terms and conditions including employment, spending, and capital investment.
The aggregate dollar effect of this favorable tax rate was approximately $0.3 million, or $0.02 per share, during the year ended
December 31, 2012, $0.3 million, or $0.02 per share, in the year ended December 31, 2011 and $0.7 million, or $0.04 per share, during the year ended December 31, 2010.
At December 31, 2012 and 2011, the Companys domestic entities had deferred income tax assets in the amount of
$4,264 and $4,957, respectively.
At December 31, 2012 and 2011, the Companys foreign subsidiaries
had deferred income tax assets relating to net operating loss carry forwards, some of which expire in 5 to 15 years and others which can be carried forward indefinitely, of $14,826 and $14,939, respectively. For financial reporting purposes, a
valuation allowance of $11,763 and $11,760, respectively, has been recognized to offset the deferred tax assets relating to net operating losses. The Company maintains a valuation allowance on net operating losses in jurisdictions for which it does
not have a history of earnings over the last three years and where the Company believes that the deferred tax assets are not more-likely-than-not to be realized based upon two-year projections of taxable income. The Company released a valuation
allowance of approximately $1.2 million in the year ended December 31, 2010 related to net operating losses of a subsidiary in Germany as a result of being included in a group consolidated tax filing with net taxable earnings.
The Company has not recognized any U.S. tax expense on undistributed international earnings, as it intends to reinvest
the earnings outside the U.S. for the foreseeable future. The Companys net undistributed international earnings were approximately $67.1 million and $50.8 million at December 31, 2012 and 2011, respectively.
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.
Income before income taxes consists of the following:
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Domestic
|
|
$
|
8,310
|
|
|
$
|
14,268
|
|
|
$
|
4,921
|
|
Foreign
|
|
$
|
22,632
|
|
|
|
17,437
|
|
|
|
9,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
30,942
|
|
|
$
|
31,705
|
|
|
$
|
14,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of the income tax expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
4,418
|
|
|
$
|
4,356
|
|
|
$
|
1,008
|
|
State
|
|
|
429
|
|
|
|
423
|
|
|
|
98
|
|
Foreign
|
|
|
5,537
|
|
|
|
4,195
|
|
|
|
2,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,384
|
|
|
|
8,974
|
|
|
|
3,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(1,871)
|
|
|
|
(400)
|
|
|
|
150
|
|
State
|
|
|
(183)
|
|
|
|
(40)
|
|
|
|
15
|
|
Foreign
|
|
|
(386)
|
|
|
|
(206)
|
|
|
|
(757)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,440)
|
|
|
|
(646)
|
|
|
|
(592)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,944
|
|
|
$
|
8,328
|
|
|
$
|
3,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense for the years ended December 31, 2012, 2011, and
2010 differs from the amount computed by applying the federal statutory corporate rate to income before income taxes. The differences are reconciled as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Tax expense (benefit) at statutory rate of 35%
|
|
$
|
10,830
|
|
|
$
|
11,097
|
|
|
$
|
4,975
|
|
State income taxes, net of federal benefit
|
|
|
274
|
|
|
|
471
|
|
|
|
162
|
|
Foreign tax rate difference
|
|
|
(2,858)
|
|
|
|
(2,910)
|
|
|
|
(1,866)
|
|
Research and development credit
|
|
|
-
|
|
|
|
(418)
|
|
|
|
(518)
|
|
Change in valuation allowance
|
|
|
3
|
|
|
|
612
|
|
|
|
545
|
|
Equity based compensation
|
|
|
(225)
|
|
|
|
(91)
|
|
|
|
479
|
|
Tax expense related to uncertain tax positions
|
|
|
-
|
|
|
|
-
|
|
|
|
(380)
|
|
Manufacturing credit
|
|
|
(139)
|
|
|
|
(474)
|
|
|
|
(167)
|
|
Other, net
|
|
|
59
|
|
|
|
41
|
|
|
|
(83)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
$
|
7,944
|
|
|
$
|
8,328
|
|
|
$
|
3,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
The components of the Companys net deferred income tax asset are as
follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
Net deferred income tax asset - Current
|
|
|
|
|
|
|
|
|
Intercompany profit in inventory
|
|
$
|
2,252
|
|
|
$
|
1,483
|
|
Warranty costs
|
|
|
290
|
|
|
|
291
|
|
Bad debt reserve
|
|
|
139
|
|
|
|
120
|
|
Inventory reserve
|
|
|
1,059
|
|
|
|
727
|
|
Unearned service revenue
|
|
|
2,741
|
|
|
|
1,997
|
|
Other, net
|
|
|
735
|
|
|
|
679
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax asset - Current
|
|
$
|
7,216
|
|
|
$
|
5,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax asset - Non-current
|
|
|
|
|
|
|
|
|
Depreciation
|
|
$
|
(1,871)
|
|
|
$
|
(779)
|
|
Goodwill amortization
|
|
|
(1,675)
|
|
|
|
(1,508)
|
|
Product design costs
|
|
|
(190)
|
|
|
|
(87)
|
|
Employee stock options
|
|
|
1,548
|
|
|
|
426
|
|
Unearned service revenue
|
|
|
1,522
|
|
|
|
1,065
|
|
Loss carryforwards
|
|
|
14,825
|
|
|
|
14,939
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax asset - Non-current
|
|
|
14,159
|
|
|
|
14,056
|
|
|
|
|
|
|
|
|
|
|
Valuation Allowance
|
|
|
(11,763)
|
|
|
|
(11,760)
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax asset - Non-current
|
|
$
|
2,396
|
|
|
$
|
2,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax liability - Non-current
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$
|
(1,149)
|
|
|
$
|
(1,148)
|
|
|
|
|
|
|
|
|
|
|
13. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases buildings and equipment under
operating leases through 2019. The following is a schedule of future minimum lease payments required under non-cancelable operating leases with initial terms in excess of one year, in effect at December 31, 2012:
51
|
|
|
|
|
Years ending December 31,
|
|
Amount
|
|
2013
|
|
$
|
6,228
|
|
2014
|
|
|
4,924
|
|
2015
|
|
|
3,441
|
|
2016
|
|
|
2,913
|
|
2017
|
|
|
2,818
|
|
Thereafter
|
|
|
6,677
|
|
|
|
|
|
|
Total future minimum lease payments
|
|
$
|
27,001
|
|
|
|
|
|
|
Rent expense for 2012, 2011 and 2010 was $4,917, $5,176 and $4,044, respectively.
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, and a hearing on the Companys motion for attorneys fees occurred on February 4, 2013. The Company is awaiting the results of that hearing.
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.
52
14. STOCK COMPENSATION PLANS
The Company has four stock option plans that provide for the granting of stock options and other share-based awards to
key employees and non-employee members of the Board of Directors. The 1997 Employee Stock Option Plan (1997 Plan) provides for granting incentive stock options and nonqualified stock options to officers and key employees of the Company.
The 1997 Non-employee Director Stock Option Plan provides for granting nonqualified stock options and formula options to non-employee directors. The 2004 Equity Incentive Plan (2004 Plan) and the 2009 Equity Incentive Plan (2009
Plan) provide for granting options, restricted stock, restricted stock units or stock appreciation rights to employees and non-employee directors.
The Company was authorized to grant awards for up to 1,400,000 shares of common stock under the 1997 Plan, of which no options are outstanding. The Company was also authorized to grant awards for up to
250,000 shares of common stock under the 1997 Non-employee Stock Option Director Plan, of which 3,000 options are currently outstanding at an exercise price of $21.56. The Company was also authorized to grant awards for up to 1,750,000 shares of
common stock under the 2004 Plan, of which 230,019 options are currently outstanding at exercise prices between $13.04 and $31.06, and 944 restricted stock units are outstanding at a stock price of $24.30. These options and restricted stock units
have a 10-year term (7 years on grants beginning in 2010) and vest over a 3-year period. The Company will not make any further grants under the 1997 Plan, the 1997 Non-employee Stock Option Director Plan or the 2004 Plan. The Company is authorized
to grant awards for up to 1,781,546 shares of common stock under the 2009 Plan, as well as any shares underlying awards outstanding under the 2004 Plan as of the effective date of the 2009 Plan that thereafter terminate or expire unexercised or are
canceled, forfeited or lapse for any reason. There are 598,485 options currently outstanding under the 2009 Plan at exercise prices between $17.04 and $57.01. Prior to 2009, upon election to the Board, each non-employee director was granted 3,400
restricted shares of common stock that vested ratably over three years. On the day following the Annual Meeting of Shareholders, each non-employee director, other than a non-employee director who received the initial equity grant in that same year,
was granted 2,200 restricted shares of common stock that vested ratably over three years.
Beginning in 2009, upon election to
the Board, each non-employee director receives an initial equity grant of shares of restricted common stock with a value equal to $100,000, calculated using the closing share price on the date of the non-employee directors election to the
Board. The initial restricted stock grant vests on the third anniversary of the grant date, subject to the non-employee directors continued membership on the board. Annually on the first business day following the annual meeting of
shareholders, each non-employee director is granted restricted shares of common stock with a value equal to $70,000, calculated as of the closing share price on that day. The shares of restricted stock vest on the day prior to the following
years annual meeting date, subject to a directors continued membership on the Board. The Company records compensation cost associated with its restricted stock unit grants on a straight-line basis over the vesting term.
Compensation costs charged to operations associated with the Companys stock incentive plans were $4,080, $2,756, and $2,416 in
2012, 2011, and 2010, respectively. The changes in stock option associated compensation cost were due to the vesting of options and the accrual of expenses relating to the issuance of restricted stock.
The Company used the Black-Scholes option-pricing model to determine the fair value of grants made using the following
assumptions:
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Risk-free interest rate
|
|
|
0.50% - 0.66%
|
|
|
|
0.66% and 1.83%
|
|
|
|
1.85% and 2.14%
|
|
|
|
|
|
Expected dividend yield
|
|
|
0%
|
|
|
|
0%
|
|
|
|
0%
|
|
|
|
|
|
Expected option life
|
|
|
4 years
|
|
|
|
4 years
|
|
|
|
4 years
|
|
|
|
|
|
Expected volatility
|
|
|
50.4% - 50.7%
|
|
|
|
47.9% - 48.7%
|
|
|
|
43.5% and 46.5%
|
|
|
|
|
|
Weighted-average expected volatility
|
|
|
50.7%
|
|
|
|
48.7%
|
|
|
|
46.5%
|
|
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.
A summary of stock option activity and weighted average exercise prices follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
Weighted-
Average
Exercise Price
|
|
|
Weighted-Average
Remaining
Contractual Term
|
|
|
Aggregate Intrinsic
Value as of
December 31, 2012
|
|
|
|
|
|
|
Outstanding at January 1, 2012
|
|
|
865,445
|
|
|
$
|
26.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
249,866
|
|
|
|
56.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(25,377)
|
|
|
|
32.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(258,430)
|
|
|
|
23.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2012
|
|
|
831,504
|
|
|
$
|
36.31
|
|
|
|
4.6
|
|
|
$
|
4,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 31, 2012
|
|
|
361,964
|
|
|
$
|
24.85
|
|
|
|
3.3
|
|
|
$
|
3,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
weighted-average grant-date fair value of the stock options granted during the years ended December 31, 2012, 2011 and 2010 was $22.28, $14.15 and $9.30, respectively. The aggregate intrinsic value of stock options exercised during the years
ended December 31, 2012, 2011 and 2010 was $7.1 million, $10.4 million and $0.7 million, respectively. The total fair value of stock options using the Black-Scholes option pricing model vested during the years ended December 31, 2012, 2011
and 2010 was $1.7 million, $1.6 million and $1.7 million, respectively.
54
The following table summarizes the restricted stock activity and weighted
average grant-date fair values for the year ended December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted-Average
Grant Date
Fair
Value
|
|
Non-vested at January 1, 2012
|
|
|
43,527
|
|
|
$
|
32.31
|
|
Granted
|
|
|
12,719
|
|
|
|
49.98
|
|
Forfeited
|
|
|
(1,619)
|
|
|
|
27.39
|
|
Vested
|
|
|
(23,391)
|
|
|
|
30.28
|
|
|
|
|
|
|
|
|
|
|
Non-vested at December 31, 2012
|
|
|
31,236
|
|
|
$
|
45.80
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012, there was $6.5 million in 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 1.9 years.
15. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
December 31, 2012
|
|
|
|
|
December 31, 2011
|
|
|
|
|
December 31, 2010
|
|
|
|
Shares
|
|
|
Per-Share
Amount
|
|
|
|
|
Shares
|
|
|
Per-Share
Amount
|
|
|
|
|
Shares
|
|
|
Per-Share
Amount
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
16,910,830
|
|
|
$
|
1.36
|
|
|
|
|
|
16,503,773
|
|
|
$
|
1.42
|
|
|
|
|
|
16,153,831
|
|
|
$
|
0.69
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
218,298
|
|
|
|
(0.02
|
)
|
|
|
|
|
364,698
|
|
|
|
(0.03
|
)
|
|
|
|
|
211,995
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
17,129,128
|
|
|
$
|
1.34
|
|
|
|
|
|
16,868,471
|
|
|
$
|
1.39
|
|
|
|
|
|
16,365,826
|
|
|
$
|
0.68
|
|
The effect of 238,266, 0, and 605,506 potentially dilutive securities were not included for 2012, 2011
and 2010 respectively, as they were antidilutive.
16. EMPLOYEE RETIREMENT BENEFIT PLAN
The Company maintains a 401(k) defined contribution retirement plan for its eligible U.S. employees.
The Company terminated matching contributions on April 18, 2009 and reinstated them on
55
March 1, 2011. Costs charged to operations in connection with the 401(k) plan during 2012 and 2011 aggregated $876 and $640, respectively.
17. SEGMENT REPORTING
The Company has three reportable segments based upon geographic regions: Americas, Europe/Africa and
Asia Pacific. The Company includes costs related to Corporate in its Americas region. The Company does not incur R&D expenses in its Asia region.
The Company develops, manufactures, markets, supports and sells 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.
56
The following table presents information about the Companys
reportable segments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Years Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Americas Region
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers
|
|
$
|
108,616
|
|
|
$
|
97,484
|
|
|
$
|
72,383
|
|
Depreciation and amortization
|
|
|
4,294
|
|
|
|
4,008
|
|
|
|
3,753
|
|
Operating income
|
|
|
2,949
|
|
|
|
8,864
|
|
|
|
185
|
|
Long-lived assets
|
|
|
21,775
|
|
|
|
23,024
|
|
|
|
22,182
|
|
Capital expenditures
|
|
|
1,435
|
|
|
|
3,371
|
|
|
|
1,864
|
|
Total assets
|
|
|
179,594
|
|
|
|
167,579
|
|
|
|
140,667
|
|
|
|
|
|
Europe/Africa Region
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers
|
|
$
|
100,111
|
|
|
$
|
99,568
|
|
|
$
|
74,724
|
|
Depreciation and amortization
|
|
|
1,658
|
|
|
|
1,807
|
|
|
|
1,610
|
|
Operating income
|
|
|
10,703
|
|
|
|
6,909
|
|
|
|
6,362
|
|
Long-lived assets
|
|
|
16,871
|
|
|
|
16,592
|
|
|
|
17,212
|
|
Capital expenditures
|
|
|
1,672
|
|
|
|
1,748
|
|
|
|
2,236
|
|
Total assets
|
|
|
110,152
|
|
|
|
92,231
|
|
|
|
83,691
|
|
|
|
|
|
Asia Pacific Region
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers
|
|
$
|
64,668
|
|
|
$
|
57,112
|
|
|
$
|
44,668
|
|
Depreciation and amortization
|
|
|
1,024
|
|
|
|
897
|
|
|
|
963
|
|
Operating income
|
|
|
17,902
|
|
|
|
17,085
|
|
|
|
10,380
|
|
Long-lived assets
|
|
|
2,562
|
|
|
|
2,076
|
|
|
|
2,065
|
|
Capital expenditures
|
|
|
1,565
|
|
|
|
869
|
|
|
|
653
|
|
Total assets
|
|
|
61,061
|
|
|
|
52,981
|
|
|
|
41,661
|
|
|
|
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales to external customers
|
|
$
|
273,395
|
|
|
$
|
254,164
|
|
|
$
|
191,775
|
|
Depreciation and amortization
|
|
|
6,976
|
|
|
|
6,712
|
|
|
|
6,326
|
|
Operating income
|
|
|
31,554
|
|
|
|
32,858
|
|
|
|
16,927
|
|
Long-lived assets
|
|
|
41,208
|
|
|
|
41,692
|
|
|
|
41,459
|
|
Capital expenditures
|
|
|
4,672
|
|
|
|
5,988
|
|
|
|
4,753
|
|
Total assets
|
|
|
350,807
|
|
|
|
312,791
|
|
|
|
266,019
|
|
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 consolidated revenue.
57
Net sales to external customers is based upon the geographic location of the
customer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
Net sales to external customers
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
United States
|
|
$
|
97,912
|
|
|
$
|
91,452
|
|
|
$
|
70,123
|
|
Americas-Other
|
|
|
10,704
|
|
|
|
6,032
|
|
|
|
2,260
|
|
Germany
|
|
|
42,413
|
|
|
|
45,658
|
|
|
|
36,975
|
|
Europe-Other
|
|
|
57,698
|
|
|
|
53,910
|
|
|
|
37,749
|
|
Asia
|
|
|
64,668
|
|
|
|
57,112
|
|
|
|
44,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
273,395
|
|
|
$
|
254,164
|
|
|
$
|
191,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long lived assets consist primarily of property, plant, and
equipment and goodwill, and are attributed to the geographic area in which they are located or originated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
Long-Lived Assets
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
United States
|
|
$
|
20,824
|
|
|
$
|
22,041
|
|
|
$
|
21,442
|
|
Americas-Other
|
|
|
951
|
|
|
|
983
|
|
|
|
740
|
|
Germany
|
|
|
16,630
|
|
|
|
16,180
|
|
|
|
16,574
|
|
Europe-Other
|
|
|
241
|
|
|
|
412
|
|
|
|
638
|
|
Asia
|
|
|
2,562
|
|
|
|
2,076
|
|
|
|
2,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
41,208
|
|
|
$
|
41,692
|
|
|
$
|
41,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
18. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
|
|
March 31,
2012
|
|
|
June 30,
2012
|
|
|
September 29,
2012
|
|
|
December 31,
2012
|
|
|
|
|
|
|
|
Sales
|
|
|
|
$
|
65,229
|
|
|
$
|
66,762
|
|
|
$
|
60,734
|
|
|
$
|
80,670
|
|
Gross profit
|
|
|
|
|
37,186
|
|
|
|
37,060
|
|
|
|
32,304
|
|
|
|
43,069
|
|
Net income
|
|
|
|
|
6,750
|
|
|
|
4,734
|
|
|
|
3,673
|
|
|
|
7,841
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
$
|
0.40
|
|
|
$
|
0.28
|
|
|
$
|
0.22
|
|
|
$
|
0.46
|
|
Diluted
|
|
|
|
$
|
0.39
|
|
|
$
|
0.28
|
|
|
$
|
0.21
|
|
|
$
|
0.46
|
|
|
|
|
|
|
|
Quarter ended
|
|
|
|
April 2,
2011
|
|
|
July 2,
2011
|
|
|
October 1,
2011
|
|
|
December 31,
2011
|
|
|
|
|
|
|
|
Sales
|
|
|
|
$
|
52,566
|
|
|
$
|
59,711
|
|
|
$
|
64,807
|
|
|
$
|
77,080
|
|
Gross profit
|
|
|
|
|
30,272
|
|
|
|
33,516
|
|
|
|
36,389
|
|
|
|
43,512
|
|
Net income
|
|
|
|
|
3,243
|
|
|
|
4,233
|
|
|
|
6,429
|
|
|
|
9,472
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
$
|
0.20
|
|
|
$
|
0.26
|
|
|
$
|
0.39
|
|
|
$
|
0.57
|
|
Diluted
|
|
|
|
$
|
0.20
|
|
|
$
|
0.25
|
|
|
$
|
0.38
|
|
|
$
|
0.56
|
|
59