FARO Q1 Revenue Down 32% to $31M with $6.6M Loss
 LAKE
MARY, FL, Apr 30, 2009 - FARO Technologies, Inc. (Nasdaq: FARO)
today announced results for the first quarter ended April 4, 2009.
Net loss for the first quarter was $6.6 million, or $0.41 per
diluted share, a decrease of $10.0 million, compared to net income
of $3.4 million, or $0.20 per diluted share, in the first quarter of
2008.
Sales for the first quarter of 2009 decreased $14.7 million, or 31.8%, to
$31.4 million from $46.1 million in the first quarter of 2008. New order
bookings for the first quarter were $27.4 million, a decrease of $19.6 million,
or 41.7%, compared with $47.0 million in the first quarter of 2008.
"Orders and sales were significantly lower in the first quarter of this year
and the weakness was consistent across all regions and verticals. Economic
conditions are making it difficult for our customers to make capital goods
purchases," stated Jay Freeland, FARO's President & CEO. "However, lead count
and demo activity remain strong, and despite the current economic climate, we
have a solid balance sheet. As such, we remain committed to finding innovative
ways to meet our customers' needs during their tough times and returning FARO to
a pattern of growth and profitability."
The Company initiated two reductions-in-force during the quarter, effective
February 20, and April 3, 2009, respectively. In aggregate, these initiatives
reduced the Company's workforce by approximately 21% and compensation costs on
an annualized basis by approximately $11.9 million. Total severance costs
incurred in the quarter were approximately $1.7 million.
Gross margin for the first quarter of 2009 was 51.7%, compared to 60.1% in
the first 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.
Selling expenses as a percentage of sales increased to 40.8% in the first
quarter of 2009 from 31.3% in the first quarter of 2008 primarily as a result of
the decline in sales. Selling expenses in the first quarter of 2009 decreased by
$1.6 million to $12.8 million.
General and administrative expenses increased to 20.0% of sales for the first
quarter of 2009 from 12.3% in the first quarter of 2008. General and
administrative expenses in the first quarter of 2009 increased by $0.7 million
to $6.3 million.
R&D expenses were $3.5 million in the first quarter of 2009, an increase from
$2.7 million in the first quarter of 2008. R&D expenses were 11.1% of sales in
the first quarter of 2009 compared to 5.9% of sales in the first quarter of
2008.
The operating loss for the first quarter of 2009 was $7.6 million, a decrease
of $11.5 million from an operating profit of $3.9 million in the first quarter
of 2008.
Income tax expense decreased by $2.5 million to a benefit of $1.6 million for
the first quarter of 2009, from an expense of $0.9 million for the first quarter
of 2008 due to a decrease in pretax income. The Company's effective tax rate
decreased to 19.1% for the first quarter of 2009 from 21.8% in the first quarter
of 2008.
"We expect the economic environment to continue to be weak throughout 2009.
We have taken significant steps to reduce our operating costs through reductions
in force and other cost-cutting measures and will continue to do so as
necessary. These are very challenging times for most companies, but we believe
FARO will remain well-positioned through all of it," 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, our plans and strategies, our ability to grow and achieve profitability
and reduce operating costs, and our future 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 "expect," "believe," "will," 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:
-- our inability to further penetrate our customer base;
-- development by others of new or improved products, processes or
technologies that make our products obsolete or less competitive;
-- our inability to maintain our technological advantage by developing new
products and enhancing our existing products;
-- the cyclical nature of the industries of our customers and material
adverse changes in our 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;
-- difficulty quantifying and predicting the market potential for the CAM2
market and the potential adoption rate for our products;
-- fluctuations in the Company's annual and quarterly operating results and
the inability to achieve its financial operating targets;
-- further reductions in gross margins due to changing mix of products sold
and the different gross margins on different products;
-- the inability of our products to displace traditional measurement devices
and attain broad market acceptance;
-- the impact of competitive products and pricing in the CAM2 market and the
broader market for measurement and inspection devices;
-- the effects of increased competition as a result of recent consolidation
in the CAM2 market;
-- 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;
-- variations in the effective income tax rate and the difficulty in
predicting the tax rate on a quarterly and annual basis; and
-- the loss of key suppliers and the inability to find sufficient alternative
suppliers in a reasonable period or on commercially reasonable terms; and
-- 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.
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 19,600 installations and 9,200 customers globally, FARO
Technologies, Inc. designs, develops, and markets portable, computerized
measurement 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 INCOME
(UNAUDITED)
Three Months Ended
-------------------
(in thousands, except share and per
share data) April 4, 2009 March 29, 2008
----------------------------------- ------------- --------------
SALES
Product $24,214 $39,327
Service 7,235 6,763
----- -----
Total Sales 31,449 46,090
------ ------
COST OF SALES
Product 9,127 13,534
Service 6,062 4,850
----- -----
Total Cost of Sales (exclusive of
depreciation and amortization, shown
separately below) 15,189 18,384
------ ------
GROSS PROFIT 16,260 27,706
OPERATING EXPENSES:
Selling 12,824 14,428
General and administrative 6,299 5,646
Depreciation and amortization 1,291 1,015
Research and development 3,479 2,713
----- -----
Total operating expenses 23,893 23,802
------ ------
(LOSS) INCOME FROM OPERATIONS (7,633) 3,904
------ -----
OTHER (INCOME) EXPENSE
Interest income (158) (621)
Other expense (income), net 661 (237)
Interest expense 3 441
----- -----
(LOSS) INCOME BEFORE INCOME TAX (BENEFIT)
EXPENSE (8,139) 4,321
INCOME TAX (BENEFIT) EXPENSE (1,554) 943
------ ------
NET (LOSS) INCOME $(6,585) $3,378
------- ------
NET (LOSS) INCOME PER SHARE - BASIC $(0.41) $0.20
------ -----
NET (LOSS) INCOME PER SHARE - DILUTED $(0.41) $0.20
------ -----
Weighted average shares - Basic 16,227,363 16,606,673
---------- ----------
Weighted average shares - Diluted 16,227,363 16,738,891
---------- ----------
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Unaudited Audited
April, 4 December 31,
(in thousands, except share data) 2009 2008
--------------------------------- ---- ----
ASSETS
Current Assets:
Cash and cash equivalents $61,227 $23,494
Short-term investments 32,975 81,965
Accounts receivable, net 30,701 49,713
Inventories 33,584 33,444
Deferred income taxes, net 6,426 5,581
Prepaid expenses and other current assets 8,746 7,879
----- -----
Total current assets 173,659 202,076
------- -------
Property and Equipment:
Machinery and equipment 18,435 22,685
Furniture and fixtures 4,833 4,099
Leasehold improvements 8,560 3,956
----- -----
Property and equipment at cost 31,828 30,740
Less: accumulated depreciation and
amortization (17,220) (16,604)
------- -------
Property and equipment, net 14,608 14,136
------ ------
Goodwill 18,679 18,951
Intangible assets, net 8,338 8,580
Service inventory 12,683 12,843
Deferred income taxes, net 1,799 2,728
----- -----
Total Assets 229,766 259,314
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable 5,023 10,813
Accrued liabilities 10,651 14,032
Income taxes payable - 1,988
Current portion of unearned service revenues 11,313 11,501
Customer deposits 375 425
Current portion of obligations under capital
leases 58 87
------ ------
Total current liabilities 27,420 38,846
Unearned service revenues - less current
portion 6,078 6,772
Deferred tax liability, net 1,071 1,107
Obligations under capital leases - less
current portion 256 281
------ ------
Total Liabilities 34,825 47,006
------ ------
Shareholders' Equity:
Common stock - par value $.001, 50,000,000
shares authorized; 16,750,269 and
16,741,488 issued; 16,048,926 and
16,658,552 outstanding, respectively 17 17
Additional paid-in-capital 149,997 149,298
Retained earnings 50,913 57,497
Accumulated other comprehensive income 3,089 5,742
Common stock in treasury, at cost -
680,235 and 55,808 shares (9,075) (246)
------ ----
Total Shareholders' Equity 194,941 212,308
------- -------
Total Liabilities and Shareholders' Equity $229,766 $259,314
-------- --------
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
------------------
April 4, 2009 March 29, 2008
------------- --------------
CASH FLOWS FROM:
OPERATING ACTIVITIES:
Net (loss) income $(6,585) $3,378
Adjustments to reconcile net (loss)
income to net cash (used in) provided
by operating activities:
Depreciation and amortization 1,291 1,015
Compensation for stock options and
restricted stock units 538 422
Provision for bad debts 397 138
Deferred income tax expense 30 471
Change in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable 17,669 8,815
Inventories (1,078) (7,129)
Prepaid expenses and other current assets (1,027) (2,745)
Income tax benefit from exercise of stock
options - (43)
Increase (decrease) in:
Accounts payable and accrued liabilities (8,835) (4,193)
Income taxes payable (2,008) (1,135)
Customer deposits (39) 177
Unearned service revenues (441) 921
------ ------
Net cash (used in) provided by
operating activities (88) 92
------ ------
INVESTING ACTIVITIES:
Purchases of property and equipment (1,647) (577)
Payments for intangible assets (188) (331)
Purchases of short-term investments (32,975) (32,025)
Proceeds from sales of short-term
investments 81,965 26,240
------ ------
Net cash provided by (used in)
investing activities 47,155 (6,693)
------ ------
FINANCING ACTIVITIES:
Payments on capital leases (55) (58)
Income tax benefit from exercise of stock
options - 43
Repurchases of common stock (8,829) -
Proceeds from issuance of stock, net - 80
------ ------
Net cash (used in) provided by
financing activities (8,884) 65
------ ------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (450) 224
------ ------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 37,733 (6,312)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 23,494 25,798
------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD $61,227 $19,486
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See Also
FARO
website
CAM Products and Companies
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Additional News
Nov 5 - FARO Q3 Revenue Down 27% to $36M, Loses to $1.3M
Nov 4 - FARO to Present at 2009 Robert Baird Industrial Conference
Oct 29 - FARO Q3 Conference Call on Nov 5, 11AM ET
Sep 22 - FARO Releases 3D Laser Tracker ION
Aug 26 - FARO Cuts Staff Additional 8%
Jul 30 - FARO Q2 Revenue Down 40% to $35M, Loses to $2.1M
Jul 30 - FARO Names Lynn Brubaker to Board
Jul 27 - FARO Q2 Conference Call on Jul 30, 11AM ET
Jun 11 - FARO Supports Pratt & Miller in GT1 Race
Jun 4 - FARO to Present at Noble Financial Equity Conference
May 6 - FARO Part of Discovery Channel's Shades of Green Episode
Apr 30 - FARO Q1 Revenue Down 32% to $31.4M, Profit Down to $6.6M
Apr 27 - FARO Q1 Conference Call on April 29, 11AM ET
Apr 24 - FARO Offers Technology Test Drive Program
Apr 7 - FARO Announces 14% Workforce Cut to Save $7.4M
Feb 23 - FARO to Settle Shareholder Lawsuit, Pay $400K
Feb 20 - FARO 7% Workforce Cut to Save $4.5M
Feb 13 - FARO Q4 Sales Down 5% to $56M, Finishes FY08 Up 9% to $209M
Feb 10 - FARO Q4 Conference Call on February 13, 11AM ET
Jan 21 - FARO Gets Defense Manufacturing Excellence Award
Jan 2 - FARO to Present at Needham Growth Conference
Dec 18 - FARO Gets Order for 11 Quantum, Platinum FaroArms
Nov 19 - FARO Delivers 6 Photon Laser Scanners to Quantapoint
Nov 6 - FARO to Present at Robert Baird Industrial Conference
Oct 23 - FARO Q3 Conference Call on Oct 30, 11AM ET
Sep 10 - FARO Announces CAM2 Q 1.1 for Metrology Measurement
Jul 30 - FARO Q2 Revenue Up 21% to $58M with $6.4M Profit
Jul 8 - FARO Names Yuri Malinkevich as Director of Engineering
Jul 2 - FARO Offers 'Gage-PLUS' Online Video for QC Technology
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