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FARO Reports Fourth Quarter 2009 Sales of $46 million;
Feb 24, 2010 (04:02 PM EST)


Sequential Growth of 29% and Return to Operating Profit

LAKE MARY, Fla., Feb. 24 /PRNewswire-FirstCall/ -- FARO Technologies, Inc. (Nasdaq: FARO) today announced results for the fourth quarter and year ended December 31, 2009.  Sales in the fourth quarter of 2009 increased 28.9%, to $46.0 million, from $35.7 million in the third quarter of 2009.  The Company returned to operating profitability in the fourth quarter of 2009, with operating income of $2.5 million compared to an operating loss of $2.3 million in the third quarter of 2009.

Net loss for the fourth quarter of 2009 was $0.6 million, or $(0.04) per diluted share, a decrease of $2.8 million, compared to net income of $2.2 million, or $0.13 per diluted share, in the fourth quarter of 2008.  The net loss for the fourth quarter of 2009 included a tax settlement with the Internal Revenue Service of $2.6 million, or $.16 per share.  Net loss for fiscal 2009 was $10.6 million, or $(0.66) per diluted share, compared to net income of $14.0 million, or $0.83 per diluted share during 2008.

Sales for the fourth quarter of 2009 decreased $10.3 million, or 18.3%, to $46.0 million from $56.3 million in the fourth quarter of 2008.  New order bookings for the fourth quarter of 2009 were $53.1 million, a decrease of $3.3 million, or 5.9%, compared to $56.4 million in the fourth quarter of 2008.  Fiscal 2009 sales were $147.7 million, a decrease of 29.4% compared to fiscal 2008 sales of $209.2 million.  New order bookings for fiscal 2009 were $151.7 million, a decrease of 28.2% from $211.3 million in fiscal 2008.

"Sales increased 29% quarter over quarter and, as expected, the target markets for our products continued to show improvement.  The cost reductions we made during the first three quarters of 2009 created a leaner, more efficient operation without sacrificing R&D programs.  Ultimately, those moves position us well to execute in 2010," stated Jay Freeland, FARO's President and CEO.

Gross margin for the fourth quarter of 2009 was 55.4%, compared to 57.3% in the fourth quarter of 2008. Gross margin decreased primarily due to a change in the sales mix between higher margin product sales and lower margin service revenue. Gross margin for fiscal 2009 was 54.6% compared to 59.8% in fiscal 2008.

Selling expenses as a percentage of sales decreased to 26.4% in the fourth quarter of 2009 from 28.6% in the fourth quarter of 2008, primarily as a result of lower marketing expenses.  Selling expenses in the fourth quarter of 2009 decreased by $3.9 million from the fourth quarter of 2008 to $12.2 million.  Selling expenses as a percentage of sales for fiscal 2009 were 32.9%, compared to 30.1% in fiscal 2008.

General and administrative expenses increased to 13.8% of sales in the fourth quarter of 2009 from 12.2% in the fourth quarter of 2008.  General and administrative expenses in the fourth quarter of 2009 decreased by $0.5 million to $6.4 million from $6.9 million in the fourth quarter of 2008.  General and administrative expenses were 16.9% of sales for fiscal 2009 compared to 12.5% in fiscal 2008.    

R&D expenses were $3.0 million in the fourth quarter of 2009, a decrease of $0.5 million from $3.5 million in the fourth quarter of 2008.  R&D expenses were 6.6% of sales in the fourth quarter of 2009 compared to 6.2% of sales in the fourth quarter of 2008. R&D expenses for both fiscal 2009 and 2008 were $12.6 million.

Operating income for the fourth quarter of 2009 was $2.5 million, a decrease of $2.1 million from $4.6 million in the fourth quarter of 2008.  Operating margin for the fourth quarter of 2009 was 5.4% compared to 8.1% in the fourth quarter of 2008.  The operating loss for fiscal 2009 was $11.0 million compared to an operating profit of $18.9 million in fiscal 2008.

Income tax expense increased by $1.9 million to $3.3 million for the fourth quarter of 2009 from $1.4 million in the fourth quarter of 2008 due to a $2.6 million tax settlement with the Internal Revenue Service.  The tax settlement will not impact the Company's tax rate going forward.

"We feel good about the Company's prospects in 2010 and believe we are a stronger organization now than we were at the beginning of last year.  We continue to have a strong balance sheet with over $100 million in cash and zero debt and have created a streamlined operating structure from which to execute.  Assuming economic conditions continue to improve, we believe our prospects for 2010 are good," Freeland concluded.

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 the future state of the economy, FARO's focus, plans and strategies, , and its future operating results and financial condition. Statements that are not historical facts or that describe the Company's plans, objectives, projections, expectations, assumptions, strategies, or goals are forward-looking statements. In addition, words such as "intend," "believe," "will," "expect" and similar expressions or discussions of our strategy 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:

  • development by others of new or improved products, processes or technologies that make the Company's products obsolete or less competitive;
  • the cyclical nature of the industries of the Company's customers and material adverse changes in customers' access to liquidity and capital;
  • further 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 financing conditions;
  • fluctuations in the Company's annual and quarterly operating results and the inability to achieve its financial operating targets;
  • 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;
  • other risks detailed in Part I, Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2008 and in Part II, Item 1A. Risk Factors in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.

Forward-looking statements in this release represent the Company's judgment as of the date of this release. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

About FARO

With approximately 20,000 installations and 10,000 customers globally, FARO Technologies, Inc. designs, develops, and markets portable, computerized measurement and imaging devices and software used to create digital models -- or to perform evaluations against an existing model -- for anything requiring highly detailed 3-D measurements, including part and assembly inspection, factory planning and asset documentation, as well as specialized applications ranging from surveying, recreating accident sites and crime scenes to digitally preserving historical sites.

FARO's technology increases productivity by dramatically reducing the amount of on-site measuring time, and the various industry-specific software packages enable users to process and present their results quickly and more effectively.

Principal products include the world's best-selling portable measurement arm -- the FaroArm; the world's best-selling laser tracker -- the FARO Laser Tracker X and Xi; the FARO Laser ScanArm; FARO Photon Laser Scanners; the FARO Gage, Gage-PLUS and PowerGAGE; and the CAM2 Q family of advanced CAD-based measurement and reporting software. FARO Technologies is ISO-9001 certified and ISO-17025 laboratory registered.

    
    
                      FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF OPERATIONS
    
                                Three Months Ended        Twelve Months Ended
                                ------------------        -------------------
     (in thousands, except
     share and per share       Dec 31,     Dec 31,       Dec 31,      Dec 31,
     data)                      2009        2008          2009         2008
    -------------------        --------    --------      --------     -------
    SALES
        Product                $38,422     $48,190       $117,714    $179,209
        Service                  7,604       8,125         29,989      30,040
                               -------     -------       --------    --------
        Total Sales             46,026      56,315        147,703     209,249
                               -------     -------       --------    --------
    COST OF SALES
        Product                 15,646      16,931         46,293      60,736
        Service                  4,897       7,112         20,702      23,287
                                ------      ------         ------      ------
        Total Cost of Sales
         (exclusive of
         depreciation and
         amortization, shown
         separately below)      20,543      24,043         66,995      84,023
                                ------      ------         ------      ------
      
    GROSS PROFIT                25,483      32,272         80,708     125,226
    
    OPERATING EXPENSES:
        Selling                 12,164      16,130         48,598      63,015
        General and
         administrative          6,365       6,870         24,956      26,144
        Depreciation and
         amortization            1,440       1,212          5,530       4,505
        Research and
         development             3,047       3,502         12,613      12,625
                                ------      ------         ------      ------
        Total operating
         expenses               23,016      27,714         91,697     106,289
                                ------      ------         ------     -------
    (LOSS) INCOME FROM
     OPERATIONS                  2,467       4,558       (10,989)      18,937
                                ------      ------       --------      ------
    OTHER (INCOME) EXPENSE
        Interest income           (28)       (546)          (253)     (2,170)
        Other (income)
         expense, net            (233)       1,460          (592)       2,295
        Interest expense             5           2             14         452
                                 -----       -----          -----       -----
    (LOSS) INCOME BEFORE
     INCOME TAX EXPENSE          2,723       3,642       (10,158)      18,360
    
    INCOME TAX EXPENSE           3,343       1,443            424       4,408
                                 -----       -----            ---       -----
    NET (LOSS) INCOME           $(620)      $2,199      $(10,582)     $13,952
                                ------      ------       --------     -------
    NET (LOSS) INCOME PER
     SHARE - BASIC             $(0.04)       $0.13        $(0.66)       $0.84
                               -------       -----         ------       -----
    
    NET (LOSS) INCOME PER
     SHARE - DILUTED           $(0.04)       $0.13        $(0.66)       $0.83
                               -------       -----         ------       -----
    
    Weighted  average
     shares - Basic         16,101,412  16,654,910     16,125,449  16,632,608
                            ----------  ----------     ----------  ----------
    
    Weighted average
     shares - Diluted       16,101,412  16,702,090     16,125,449  16,734,403
                            ----------  ----------     ----------  ----------
    
    
                    FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
    
    
                                                December 31,    December 31,
    (in thousands, except share data)              2009            2008
    ---------------------------------           -----------     -----------
    ASSETS
    Current Assets:
      Cash and cash equivalents                      $35,078         $23,494
      Short-term investments                          64,986          81,965
      Accounts receivable, net                        42,944          49,713
      Inventories                                     26,582          33,444
      Deferred income taxes, net                       4,473           5,581
      Prepaid expenses and other current assets        6,016           7,879
                                                     -------         -------
        Total current assets                         180,079         202,076
                                                     -------         -------
    Property and Equipment:
      Machinery and equipment                         19,867          16,748
      Furniture and fixtures                           5,225           4,099
      Leasehold improvements                           9,434           9,893
                                                      ------          ------
          Property and equipment at cost              34,526          30,740
      Less: accumulated depreciation and
       amortization                                 (20,788)        (16,604)
                                                     -------         -------
          Property and equipment, net                 13,738          14,136
                                                     -------         -------
    Goodwill                                          19,934          18,951
    Intangible assets, net                             7,985           8,580
    Service inventory                                 12,079          12,843
    Deferred income taxes, net                         1,895           2,728
                                                    --------        --------
    Total Assets                                    $235,710        $259,314
                                                    --------        --------
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities:
      Accounts payable                                $8,985         $10,813
      Accrued liabilities                              8,173          14,032
      Income taxes payable                               229           1,988
      Current portion of unearned service
       revenues                                       12,226          11,501
      Customer deposits                                2,173             425
      Current portion of obligations under
       capital leases                                     80              87
                                                      ------          ------
          Total current liabilities                   31,866          38,846
    Unearned service revenues - less current
     portion                                           5,910           6,772
    Deferred tax liability, net                        1,143           1,107
    Obligations under capital leases - less
     current portion                                     193             281
                                                      ------          ------
    Total Liabilities                                 39,112          47,006
                                                      ------          ------
    Commitments and contingencies
    
    Shareholders' Equity:
      Common stock - par value $.001, 50,000,000
       shares authorized; 16,795,289 and 16,741,488
       issued; 16,115,054 and 16,658,552
       outstanding, respectively                          17              17
      Additional paid-in-capital                     152,380         149,298
      Retained earnings                               46,915          57,497
      Accumulated other comprehensive income           6,361           5,742
      Common stock in treasury, at cost -           
       680,235 and 55,808 shares, respectively       (9,075)           (246)
                                                    --------        --------
    Total Shareholders' Equity                       196,598         212,308
                                                    --------        --------
    Total Liabilities and Shareholders' Equity      $235,710        $259,314
                                                    --------        --------
    
    
                   FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
    
                                         Years Ended December 31,
                                      ------------------------------
    
    (in thousands)                        2009      2008      2007
    ------------------------------    ---------    -------   -------
    CASH FLOWS FROM:
    OPERATING ACTIVITIES:
      Net (loss) income              $(10,582)     $13,952   $18,093
      Adjustments to reconcile
       net (loss) income to net
       cash provided by operating
       activities:
        Depreciation and amortization    5,530       4,505     4,034
        Compensation for stock
         options and restricted
         stock units                     2,449       2,237     1,216
        Provision for bad debts          1,852       1,092       373
        Deferred income tax
         expense (benefit)               1,986     (1,972)     (464)
    Change in operating
     assets and liabilities:
      Decrease (increase) in:
        Accounts receivable              5,769       2,993   (9,121)
        Inventories, net                 8,301     (6,429)   (7,265)
        Prepaid expenses and
         other current assets            1,964     (1,187)   (3,208)
        Income tax benefit from
         exercise of stock
         options                           (4)        (45)     (963)
      Increase (decrease) in:
        Accounts payable and
         accrued liabilities           (7,891)     (5,317)     9,884
        Income taxes payable           (1,749)       (355)     1,278
        Customer deposits                1,736          82     (269)
        Unearned service
         revenues                        (396)       3,710     8,007
                                         -----      ------    ------
           Net cash provided by
            operating activities         8,965      13,266    21,595
                                         -----      ------    ------
    
    INVESTING ACTIVITIES:
      Purchases of property
       and equipment                   (3,387)     (9,705)   (2,930)
      Payments for intangible
       assets                            (670)     (3,766)     (359)
      Purchases of short-term
       investments                    (64,986)    (81,965)  (77,375)
      Proceeds from sales of
       short-term investments           81,965      77,375    15,790
                                        ------    --------  --------
           Net cash provided by
            (used in) investing
            activities                  12,922    (18,061)  (64,874)
                                        ------    --------  --------
    
     FINANCING ACTIVITIES:
      Payments on capital leases          (88)        (11)      (92)
      Income tax benefit from
       exercise of stock options             4          45       963
      Purchases of treasury stock      (8,829)        (95)         -
      Proceeds from issuance of stock,
       net                                  83          92    58,421
                                        ------       -----    ------
            Net cash (used in)
             provided by financing
             activities                (8,830)          31    59,292
                                        ------       -----    ------
    
    EFFECT OF EXCHANGE RATE CHANGES
     ON CASH AND CASH EQUIVALENTS      (1,473)       2,460   (5,904)
                                       -------       -----   -------
    
    INCREASE (DECREASE) IN
     CASH AND CASH EQUIVALENTS          11,584      (2,304)   10,109
    
    CASH AND CASH EQUIVALENTS,
     BEGINNING OF PERIOD                23,494      25,798    15,689
                                       -------     -------   -------
    
    CASH AND CASH EQUIVALENTS,
     END OF PERIOD                     $35,078     $23,494   $25,798
                                       =======     =======   =======

SOURCE FARO Technologies, Inc.