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FARO Reports First Quarter 2010 Sales Growth of 34.4%
May 05, 2010 (04:05 PM EDT)


Orders Growth of 45.3%

Net Income of $2.1 million

LAKE MARY, Fla., May 5 /PRNewswire-FirstCall/ -- FARO Technologies, Inc. (Nasdaq: FARO) today announced results for the first quarter ended April 3, 2010.  Sales in the first quarter of 2010 increased 34.4%, to $42.3 million, from $31.4 million in the first quarter of 2009.  The Company reported net income of $2.1 million, or $0.13 per share, compared to a net loss of $0.41 per share in the first quarter of 2009.

New order bookings for the first quarter of 2010 were $39.8 million, an increase of $12.4 million, or 45.3%, compared to $27.4 million in the first quarter of 2009.

"All three regions posted strong double-digit sales growth in the first quarter.  Even more encouraging was our new orders growth rate of 45%, driven by a 79% increase in Asia and a 60% increase in the Americas.  Overall, our top line performance in the first quarter was the result of continued momentum in our end-markets and improved productivity from our sales team," stated Jay Freeland, FARO's President and CEO.

Gross margin for the first quarter of 2010 was 60.1%, compared to 51.7% in the first quarter of 2009. Gross margin increased primarily due to an increase in the proportion of higher margin product sales relative to lower margin service revenue.

Selling expenses as a percentage of sales decreased to 26.6% in the first quarter of 2010 from 40.8% in the first quarter of 2009, primarily as a result of an increase in sales and lower compensation costs.  Selling expenses in the first quarter of 2010 decreased by $1.6 million from the first quarter of 2009 to $11.2 million.

General and administrative expenses decreased to 14.8% of sales in the first quarter of 2010 from 20.0% in the first quarter of 2009.  General and administrative expenses in the first quarter of 2010 decreased by $0.1 million to $6.2 million from $6.3 million in the first quarter of 2009.  General and administrative expenses included $0.4 million related to patent litigation expenses in the first quarter of 2010.    

R&D expenses were $3.0 million in the first quarter of 2010, a decrease of $0.5 million from $3.5 million in the first quarter of 2009.  R&D expenses were 7.1% of sales in the first quarter of 2010 compared to 11.1% of sales in the first quarter of 2009.

Operating income for the first quarter of 2010 increased by $11.0 million, to $3.4 million, from an operating loss of $7.6 million in the first quarter of 2009.  Operating margin for the first quarter of 2010 was 8.0% compared to an operating loss of 24.3% in the first quarter of 2009.

Income tax expense increased by $2.4 million to $0.8 million for the first quarter of 2010 from a benefit of $1.6 million in the first quarter of 2009 due to an increase in pretax income of $11.0 million

"In addition to our strong orders and sales performance in the first quarter, we are also pleased by the speed with which gross margin and operating income have improved.  This is a direct result of the cost actions and positioning moves we made last year," 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 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;

  • 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, 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
(UNAUDITED)



Three Months Ended






(in thousands, except share and per share data)


Apr 3, 2010


Apr 4, 2009

SALES





Product


$      33,938


$      24,214

Service


8,331


7,235

Total Sales


42,269


31,449

COST OF SALES





Product


11,275


9,127

Service


5,603


6,062

Total Cost of Sales (exclusive of depreciation and amortization, shown separately below)


16,878


15,189

GROSS PROFIT


25,391


16,260






OPERATING EXPENSES:





Selling


11,235


12,824

General and administrative


6,247


6,299

Depreciation and amortization


1,540


1,291

Research and development


2,989


3,479

Total operating expenses


22,011


23,893

INCOME (LOSS) FROM OPERATIONS


3,380


(7,633)

OTHER (INCOME) EXPENSE





Interest income


(19)


(158)

Other expense, net


505


661

Interest expense


27


3

INCOME (LOSS) BEFORE INCOME TAX  EXPENSE


2,867


(8,139)

INCOME TAX EXPENSE (BENEFIT)


803


(1,554)

NET INCOME (LOSS)


$        2,064


$      (6,585)

NET INCOME (LOSS) PER SHARE - BASIC


$          0.13


$        (0.41)






NET INCOME (LOSS) PER SHARE - DILUTED


$          0.13


$        (0.41)






Weighted average shares - Basic


16,124,886


16,227,363






Weighted average shares - Diluted


16,267,231


16,227,363



FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS



April 3,





2010


December 31,

(in thousands, except share data)


Unaudited


2009

ASSETS





Current Assets:





Cash and cash equivalents


$   38,331


$   35,078

Short-term investments


64,986


64,986

Accounts receivable, net


40,550


42,944

Inventories, net


25,811


26,582

Deferred income taxes, net


4,482


4,473

Prepaid expenses and other current assets


8,805


6,016

Total current assets


182,965


180,079

Property and Equipment:





Machinery and equipment


21,628


19,867

Furniture and fixtures


5,095


5,225

Leasehold improvements


9,423


9,434

   Property and equipment at cost


36,146


34,526

Less: accumulated depreciation and amortization


(21,499)


(20,788)

   Property and equipment, net


14,647


13,738

Goodwill


19,091


19,934

Intangible assets, net


7,576


7,985

Service inventory


12,748


12,079

Deferred income taxes, net


1,763


1,895

Total Assets


$ 238,790


$ 235,710

LIABILITIES AND SHAREHOLDERS' EQUITY





Current Liabilities:





  Notes Payable


$     2,490


$           -

Accounts payable


9,576


8,985

Accrued liabilities


9,504


8,173

Income taxes payable


-


229

Current portion of unearned service revenues


12,158


12,226

Customer deposits


1,621


2,173

Current portion of obligations under capital leases


60


80

     Total current liabilities


35,409


31,866

Unearned service revenues - less current portion


5,784


5,910

Deferred tax liability, net


1,075


1,143

Obligations under capital leases - less current portion


189


193

Total Liabilities


42,457


39,112






Shareholders' Equity:





Common stock - par value $.001, 50,000,000 shares authorized; 16,815,066 and 16,795,289 issued; 16,134,831 and 16,115,054 outstanding, respectively


17


17

Additional paid-in-capital


153,224


152,380

Retained earnings


48,980


46,915

Accumulated other comprehensive income


3,187


6,361

Common stock in treasury, at cost - 680,235 shares


(9,075)


(9,075)

Total Shareholders' Equity


196,333


196,598

Total Liabilities and Shareholders' Equity


$ 238,790


$ 235,710



FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)



Three Months Ended






(in thousands)


April  3, 2010


April 4, 2009

CASH FLOWS FROM:





OPERATING ACTIVITIES:





Net income (loss)


$   2,064


$ (6,585)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:





Depreciation and amortization


1,540


1,291

Compensation for stock options and restricted stock units


564


538

Provision for bad debts


348


397

Deferred income tax expense


34


30

Change in operating assets and liabilities:





Decrease (increase) in:





Accounts receivable


506


17,669

Inventories, net


(2,748)


(1,078)

Prepaid expenses and other current assets


(3,039)


(1,027)

Income tax benefit from exercise of stock options


(6)


-

Increase (decrease) in:





Accounts payable and accrued liabilities


2,199


(8,835)

Income taxes payable


(234)


(2,008)

Customer deposits


(540)


(39)

Unearned service revenues


348


(441)

           Net cash provided by (used in) operating activities


1,036


(88)






INVESTING ACTIVITIES:





Purchases of property and equipment


(613)


(1,647)

Payments for intangible assets


(205)


(188)

Purchases of short-term investments


-


(32,975)

Proceeds from sales of short-term investments


-


81,965

       Net cash (used in) provided by investing activities


(818)


47,155






FINANCING ACTIVITIES:





Proceeds from notes payable


2,490


-

Payments on capital leases


(19)


(55)

Income tax benefit from exercise of stock options


6


-

Purchases of treasury stock


-


(8,829)

Proceeds from issuance of stock, net


275


-

       Net cash provided by (used in) financing activities


2,752


(8,884)






EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS


283


(450)






INCREASE  IN CASH AND CASH EQUIVALENTS


3,253


37,733






CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD


35,078


23,494






CASH AND CASH EQUIVALENTS, END OF PERIOD


$ 38,331


$ 61,227



SOURCE FARO Technologies, Inc.