Item 2.02. Results of Operations and Financial Condition.
On August 4, 2020, FARO Technologies, Inc. (the "Company") issued a press
release announcing its results of operations for the second fiscal quarter ended
June 30, 2020. 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 8.01. Other Events.
In accordance with its standard practice, at the beginning of fiscal year 2020,
the Compensation Committee (the "Committee") of the Board of Directors (the
"Board") of the Company determined that revenue and adjusted EBITDA, each at a
50% weighting, would be the metrics used for determining awards under the
Company's short-term incentive plan ("STIP"), which provides an annual cash
incentive to the Company's management team, including its executive officers.
Threshold, target and maximum levels for each metric were established based on
the Company's 2020 annual operating plan at that time.
Primarily as a result of the COVID-19 pandemic, second quarter 2020 customer
orders for the Company's products decreased 42% year on year. These lower orders
resulted in the Company's first six month's revenue falling $47 million or 25%
below the comparable period last year. The Company also incurred a net loss of
$23.4 million for the first half of the year. The Company does not expect the
global economy to materially recover in the second half of 2020 and has adjusted
its internal forecast accordingly.
In light of results to date and the revised forecast, the Committee reviewed the
original STIP goals to determine whether those goals were realistically
achievable and would continue to provide appropriate incentive compensation
opportunities. As a result of this review, on August 4, 2020, the Committee
concluded that retaining the original STIP goals no longer provided realistic
incentives and new goals should be established for each metric taking into
consideration the second half of fiscal 2020 forecast. The new STIP goals
provide a continued incentive for management to maximize the Company's revenue
and profitability performance given the impact of the COVID-19 pandemic. To
ensure that the new goals do not have an excessive impact on the short-term
incentive plan funding, the Committee set the attainment of the new goals at a
consistent level of difficulty with the original targets. The Committee also set
an upper funding limit to be less than the amount that would have been funded
had the Company achieved the target level of performance under the original
STIP.
Given the significant disruption from the COVID-19 pandemic on the Company's
operations and financial performance, the Committee believes the new goals are
better aligned and provide a more realistic incentive to drive shareholder value
for fiscal 2020 while retaining the Company's pay-for-performance philosophy.
The new goals also reflect continuing to progress the execution of its strategic
plan, including a global restructuring announced in February 2020 and also takes
into consideration the Company's deployment of significant resources to maintain
its operations, to operate in a new virtual work environment as well as
supporting key customers throughout this pandemic.
The Committee did not make any adjustments to the Company's long-term equity
incentive plan.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are furnished with this Current Report on Form 8-K:

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