TechWeb

FARO Reports Second Quarter 2010 Sales Growth of 32.4%

Aug 04, 2010 (05:08 PM EDT)
URL: http://www.techweb.com/show-press-release/X811965/faro-reports-second-quarter-2010-sales-growth-of-32-4.html

Orders Growth of 24.0%

Net Income of $1.8 million

LAKE MARY, Fla., Aug. 4 /PRNewswire-FirstCall/ -- FARO Technologies, Inc. (Nasdaq: FARO) today announced results for the second quarter ended July 3, 2010.  Sales in the second quarter of 2010 increased 32.4%, to $45.7 million, from $34.6 million in the second quarter of 2009.  The Company reported net income of $1.8 million, or $0.11 per share, compared to a net loss of $0.13 per share in the second quarter of 2009.  Net income in the second quarter of 2010 includes the effects of foreign currency transaction losses of $1.8 million, or $0.08 per share, related to the weakening of the Euro on the value of intercompany account balances.

New order bookings for the second quarter of 2010 were $43.9 million, an increase of $8.5 million, or 24.0%, compared to $35.4 million in the second quarter of 2009.

"FARO's ongoing dedication to serving our customers, combined with strong global demand for our product offerings, drove sales growth of more than 30% in the second quarter," stated Jay Freeland, FARO's President and CEO.  "We continued to see increased activity from all verticals and across all three regions in the second quarter.  Asia showed substantial strength, growing more than 50% for the second quarter in a row, with Europe and the Americas also delivering high double-digit growth."

Gross margin for the second quarter of 2010 was 59.3%, compared to 56.1% in the second 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.

"Gross margin has returned to historical levels and we've been able to maintain stable prices.  Tight cost controls allowed us to leverage the efficiency we created within the business last year and as a result, generated operating margin of 9.9%, or $4.5 million, almost a 20 point improvement from 2009.  I'm very pleased with the Company's performance in the first half and we remain cautiously optimistic about 2010.  However, because of the ongoing economic uncertainty around the world, I am maintaining our practice of not providing guidance for this 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 11,000 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



Six Months Ended





















(in thousands, except share and per share data)


Jul 3, 2010


Jul 4, 2009



Jul 3, 2010


Jul 4, 2009

SALES










Product


$      37,212


$      27,203



$      71,150


$      51,416

Service


8,493


7,313



16,824


14,548

Total Sales


45,705


34,516



87,974


65,964

COST OF SALES










Product


12,620


10,259



23,895


19,386

Service


5,997


4,893



11,600


10,955

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


18,617


15,152



35,495


30,341

GROSS PROFIT


27,088


19,364



52,479


35,623











OPERATING EXPENSES:










Selling


12,027


12,128



23,262


24,952

General and administrative


6,028


6,134



12,275


12,433

Depreciation and amortization


1,515


1,389



3,055


2,680

Research and development


2,997


3,285



5,986


6,764

Total operating expenses


22,567


22,936



44,578


46,829

INCOME (LOSS) FROM OPERATIONS


4,521


(3,572)



7,901


(11,206)

OTHER (INCOME) EXPENSE










Interest income


(26)


(36)



(45)


(194)

Other expense (income), net


1,839


(837)



2,344


(176)

Interest expense


2


4



29


6

INCOME (LOSS) BEFORE INCOME TAX  EXPENSE (BENEFIT)


2,706


(2,703)



5,573


(10,842)

INCOME TAX EXPENSE (BENEFIT)


869


(599)



1,672


(2,153)

NET INCOME (LOSS)


$        1,837


$      (2,104)



$        3,901


$      (8,689)

NET INCOME (LOSS) PER SHARE - BASIC


$          0.11


$        (0.13)



$          0.24


$        (0.53)











NET INCOME (LOSS) PER SHARE - DILUTED


$          0.11


$        (0.13)



$          0.24


$        (0.53)











Weighted average shares - Basic


16,148,233


16,069,312



16,136,447


16,408,259











Weighted average shares - Diluted


16,320,596


16,069,312



16,289,963


16,408,259



FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS








July 3,





2010


December 31,

(in thousands, except share data)


Unaudited


2009

ASSETS





Current Assets:





Cash and cash equivalents


$   41,929


$        35,078

Short-term investments


64,985


64,986

Accounts receivable, net


40,348


42,944

Inventories, net


27,184


26,582

Deferred income taxes, net


4,242


4,473

Prepaid expenses and other current assets


7,471


6,016

Total current assets


186,159


180,079

Property and Equipment:





Machinery and equipment


21,916


19,867

Furniture and fixtures


5,013


5,225

Leasehold improvements


9,366


9,434

   Property and equipment at cost


36,295


34,526

Less: accumulated depreciation and amortization


(22,040)


(20,788)

   Property and equipment, net


14,255


13,738

Goodwill


18,249


19,934

Intangible assets, net


7,208


7,985

Service inventory


12,192


12,079

Deferred income taxes, net


1,677


1,895

Total Assets


$ 239,740


$      235,710

LIABILITIES AND SHAREHOLDERS' EQUITY





Current Liabilities:





Accounts payable


$     9,701


$          8,985

Accrued liabilities


10,860


8,173

Income taxes payable


-


229

Current portion of unearned service revenues


11,888


12,226

Customer deposits


2,486


2,173

Current portion of obligations under capital leases


43


80

     Total current liabilities


34,978


31,866

Unearned service revenues - less current portion


5,932


5,910

Deferred tax liability, net


1,008


1,143

Obligations under capital leases - less current portion


203


193

Total Liabilities


42,121


39,112






Shareholders' Equity:





Common stock - par value $.001, 50,000,000 shares authorized; 16,839,592 and 16,795,289 issued; 16,159,357 and 16,115,054 outstanding, respectively


17


17

Additional paid-in capital


153,961


152,380

Retained earnings


50,816


46,915

Accumulated other comprehensive income


1,900


6,361

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


(9,075)


(9,075)

Total Shareholders' Equity


197,619


196,598

Total Liabilities and Shareholders' Equity


$ 239,740


$      235,710



FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)








Six Months Ended






(in thousands)


July  3, 2010


July  4, 2009

CASH FLOWS FROM:





OPERATING ACTIVITIES:





Net income (loss)


$         3,901


$       (8,689)

Adjustments to reconcile net income (loss) to net cash provided by





   (used in) operating activities:





Depreciation and amortization


3,055


2,680

Compensation for stock options and restricted stock units


1,203


1,201

Provision for bad debts


806


649

Deferred income tax expense


280


180

Change in operating assets and liabilities:





Decrease (increase) in:





Accounts receivable


(1,388)


16,208

Inventories, net


(4,950)


4,088

Prepaid expenses and other current assets


(1,837)


(2,402)

Income tax benefit from exercise of stock options


(16)


-

Increase (decrease) in:





Accounts payable and accrued liabilities


4,003


(12,451)

Income taxes payable


(275)


(1,990)

Customer deposits


328


462

Unearned service revenues


713


(688)

           Net cash provided by (used in) operating activities


5,823


(752)






INVESTING ACTIVITIES:





Purchases of property and equipment


(1,253)


(2,663)

Payments for intangible assets


(382)


(291)

Purchases of short-term investments


-


(64,972)

Proceeds from sales of short-term investments


-


81,967

       Net cash (used in) provided by investing activities


(1,635)


14,041






FINANCING ACTIVITIES:





Proceeds from notes payable


2,490


-

Payments on notes payable


(2,490)


-

Payments on capital leases


(39)


(61)

Income tax benefit from exercise of stock options


16


-

Purchases of treasury stock


-


(8,829)

Proceeds from issuance of stock, net


363


-

       Net cash provided by (used in) financing activities


340


(8,890)






EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS


2,323


(1,103)






INCREASE  IN CASH AND CASH EQUIVALENTS


6,851


3,296






CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD


35,078


23,494






CASH AND CASH EQUIVALENTS, END OF PERIOD


$       41,929


$       26,790



SOURCE FARO Technologies, Inc.