FARO Q2 Revenue Down 40% to $35M, Loses $2.1M
 LAKE
MARY, FL, Jul 30, 2009 - FARO Technologies, Inc. (Nasdaq: FARO) today
announced results for the second quarter ended July 4, 2009. Net loss for
the second quarter was $2.1 million, or $0.13 per diluted share, a decrease
of $8.5 million, compared to net income of $6.4 million, or $0.38 per
diluted share, in the second quarter of 2008.
Sales for the second quarter of 2009 decreased $23.1 million, or 40.2%,
to $34.6 million from $57.7 million in the second quarter of 2008. New order
bookings for the second quarter were $35.4 million, a decrease of $23.3
million, or 39.7%, compared with $58.7 million in the second quarter of
2008.
"The global recession continued to adversely affect customers in the
markets we serve. As a result, our second quarter orders and sales declined
substantially year-over-year," stated Jay Freeland, FARO's President and
CEO. "Customers have significantly reduced their budgets for capital
expenditures and financing remains difficult for them to arrange. In light
of the current economic conditions, they continue to be exceptionally
cautious. However, we are maintaining our strong share of the market and our
pipeline for new orders remains robust, as leads and demos continue to grow.
New sales initiatives and programs like the FARO Test Drive have had some
success in bringing deals to closure, which enabled sequential sales growth
of 9.8% over the first quarter of 2009. However, we continue to believe that
market conditions will remain weak at least through the end of this year."
Gross margin for the second quarter of 2009 was 56.1%, compared to 62.8%
in the second 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 35.1% in the
second quarter of 2009 from 29.6% in the second quarter of 2008, primarily
as a result of the decline in sales. Selling expenses in the second quarter
of 2009 decreased by $5.0 million to $12.1 million.
General and administrative expenses increased to 17.8% of sales for the
second quarter of 2009 from 12.1% in the second quarter of 2008. General and
administrative expenses in the second quarter of 2009 decreased by $0.9
million to $6.1 million.
R&D expenses were $3.3 million in the second quarter of 2009, an increase
from $3.2 million in the second quarter of 2008. R&D expenses were 9.5% of
sales in the second quarter of 2009 compared to 5.5% of sales in the second
quarter of 2008.
The operating loss for the second quarter of 2009 was $3.6 million, a
decrease of $11.5 million from an operating profit of $7.9 million in the
second quarter of 2008.
Income tax expense decreased by $2.1 million to a benefit of $0.6 million
for the second quarter of 2009, from an expense of $1.5 million for the
second quarter of 2008 due to a decrease in pretax income. The Company's
effective tax rate increased to 22.2% for the second quarter of 2009 from
19.3% in the second quarter of 2008.
"The cost actions we took in the first quarter provided significant
savings in Q2, and we believe they will continue to yield benefits for the
duration of the year. In the second quarter of 2009, we also implemented
cost containment measures that we expect to yield an additional $1 million
in savings in the second half of the year. Although we continue to focus on
generating sales to improve our current performance, we also intend to
remain diligent in adjusting the cost structure of the Company to align with
sales revenue and volumes," Mr. Freeland concluded.
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 our 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.
About FARO
FARO Technologies, Inc. designs, develops, and markets portable,
computerized measurement devices and software used to create digital models
- or to perform evaluation and analysis against an existing model - for
anything requiring highly detailed 3D 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.
For more information, visit www.faro.com.
FARO TECHNOLOGIES, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
(in thousands, except share and per sharedata)
July 4, June 28, July 4, June28,
2009 2008
2009 2008
SALES
Product
$27,203 $50,591 $51,416
$89,918
Service
7,313 7,158 14,548
13,921
Total Sales
34,516 57,749 65,964
103,839
COST OF SALES
Product
10,259 16,044 19,386
29,580
Service
4,893 5,466 10,955
10,314
Total Cost of Sales
(exclusive of depreciation
and amortization, shown
separately below)
15,152 21,510 30,341
39,894
GROSS PROFIT
19,364 36,239 35,623
63,945
OPERATING EXPENSES:
Selling
12,128 17,076 24,952
31,504
General and administrative
6,134 7,014 12,433
12,660
Depreciation and amortization 1,389
1,120 2,680
2,135
Research and development
3,285 3,172
6,764 5,885
Total operating expenses
22,936 28,382 46,829
52,184
(LOSS) INCOME FROM OPERATIONS
(3,572) 7,857 (11,206)
11,761
OTHER (INCOME) EXPENSE
Interest income
(36) (456)
(194) (1,077)
Other (income) expense, net (837)
419 (176)
182
Interest expense
4 7
6 448
(LOSS) INCOME BEFORE
INCOME TAX (BENEFIT) EXPENSE (2,703) 7,887 (10,842) 12,208
INCOME TAX (BENEFIT) EXPENSE (599) 1,522 (2,153) 2,465
NET (LOSS) INCOME
$(2,104) $6,365 $(8,689)
$9,743
NET (LOSS) INCOME PER SHARE
- BASIC
$(0.13) $0.38 $(0.53)
$0.59
NET (LOSS) INCOME PER SHARE
- DILUTED
$(0.13) $0.38 $(0.53)
$0.58
Weighted average shares
- Basic
16,069,312 16,627,540 16,408,259 16,618,333
Weighted average shares
- Diluted
16,069,312 16,784,473 16,408,259 16,758,363
FARO TECHNOLOGIES, INC. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
July 4, December 31,
(in thousands, except share data)
2009 2008
ASSETS
(Unaudited)
Current Assets:
Cash and cash equivalents
$26,790 $23,494
Short-term investments
64,973 81,965
Accounts receivable, net
32,901 49,713
Inventories
29,580 33,444
Deferred income taxes, net
6,278 5,581
Prepaid expenses and other current assets
10,291 7,879
Total current assets
170,813 202,076
Property and Equipment:
Machinery and equipment
19,043 22,685
Furniture and fixtures
5,142 4,099
Leasehold improvements
9,217 3,956
Property and equipment at cost
33,402 30,740
Less: accumulated depreciation and
amortization
(18,509) (16,604)
Property and equipment, net
14,893 14,136
Goodwill
19,198 18,951
Intangible assets, net
8,222 8,580
Service inventory
12,551 12,843
Deferred income taxes, net
1,856 2,728
Total Assets
$227,533 $259,314
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable
$4,471 $10,813
Accrued liabilities
7,915 14,032
Income taxes payable
-
1,988
Current portion of unearned service revenues 11,675
11,501
Customer deposits
887
425
Current portion of obligations under capital
leases
41
87
Total current liabilities
24,989 38,846
Unearned service revenues - less current portion
5,882 6,772
Deferred tax liability, net
1,114 1,107
Obligations under capital leases - less current
portion
266
281
Total Liabilities
32,251 47,006
Shareholders' Equity:
Common stock - par value $.001, 50,000,000 shares authorized; 16,785,058 and
16,741,488 issued; 16,083,730 and 16,658,552 outstanding, respectively 17 17
Additional paid-in-capital
150,662 149,298
Retained earnings
48,809 57,497
Accumulated other comprehensive income
4,869
5,742
Common stock in treasury, at cost -
680,235 and 55,808 shares
(9,075)
(246)
Total Shareholders' Equity
195,282 212,308
Total Liabilities and Shareholders'
Equity
$227,533 $259,314
FARO TECHNOLOGIES, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
(in thousands)
July 4, June 28
2009 2008
CASH FLOWS FROM:
OPERATING ACTIVITIES:
Net (loss) income
$(8,689) $9,743
Adjustments to reconcile net (loss) income to net cash used in operating
activities:
Depreciation and amortization
2,680 2,135
Compensation for stock options and
restricted stock units
1,201 1,060
Provision for bad debts
649
446
Deferred income tax expense
180 (1,329)
Change in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable
16,208 4,049
Inventories
4,088 (8,856)
Prepaid expenses and other current assets
(2,402) (1,877)
Income tax benefit from exercise of stock options -
(43)
Increase (decrease) in:
Accounts payable and accrued liabilities
(12,451) (8,962)
Income taxes payable
(1,990) (1,542)
Customer deposits
462
186
Unearned service revenues
(688) 1,957
Net cash used in operating activities
(752) (3,033)
INVESTING ACTIVITIES:
Purchases of property and equipment
(2,663) (1,952)
Payments for intangible assets
(291) (3,333)
Purchases of short-term investments
(64,972) (37,125)
Proceeds from sales of short-term investments 81,967
36,735
Net cash provided by (used in)
investing activities
14,041 (5,675)
FINANCING ACTIVITIES:
Payments on capital leases
(61)
(81)
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
(8,890)
42
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS
(1,103)
(375)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
3,296
(9,041)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
23,494
25,798
CASH AND CASH EQUIVALENTS, END OF PERIOD
$26,790 $16,757
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Additional News
Feb 19 - FARO Announces Q4 Earnings Call on Feb 25
Feb 09 - FARO Unveils Scene 4.7 Software for Laser Scanner
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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