FARO Q3 Revenue Down 27% to $36M, Loses to $1.3M
 LAKE
MARY, FL, Nov 5, 2009 - FARO Technologies, Inc. (Nasdaq: FARO) today announced results for the third
quarter ended October 3, 2009. Net loss for the third quarter was $1.3 million,
or $0.08 per diluted share, a decrease of $3.3 million, compared to net income
of $2.0 million, or $0.12 per diluted share, in the third quarter of 2008.
Sales for the third quarter of 2009 decreased $13.4 million, or 27.3%, to
$35.7 million from $49.1 million in the third quarter of 2008. New order
bookings for the third quarter were $35.8 million, a decrease of $13.4
million, or 27.2%, compared with $49.2 million in the third quarter of 2008.
"Market conditions remain difficult, so we took additional steps in
August to reduce our operating costs through one more reduction in force. As
a result, I believe we are positioned well for the fourth quarter and
beyond," stated Jay Freeland, FARO's President and CEO. "Despite the ongoing
market pressure, sales in the third quarter increased slightly over the
second quarter of this year. Historically, we see about a 10% sequential
decline between these two quarters, and we're starting to see some stability
in our customers' operations and end-markets. We also launched the Ion Laser
Tracker at the end of the third quarter, our latest generation of technology
for large scale measurement. Initial demand for the Ion has been strong,
with multiple orders booked within the first two weeks."
Gross margin for the third quarter of 2009 was 54.9%, compared to 59.1%
in the third 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 32.2% in the third
quarter of 2009 from 31.3% in the third quarter of 2008, primarily as a
result of the decline in sales. Selling expenses in the third quarter of
2009 decreased by $3.9 million to $11.5 million.
General and administrative expenses increased to 17.2% of sales for the
third quarter of 2009 from 13.5% in the third quarter of 2008. General and
administrative expenses in the third quarter of 2009 decreased by $0.5
million to $6.2 million from the third quarter of 2008.
R&D expenses were $2.8 million in the third quarter of 2009, a decrease
from $3.2 million in the third quarter of 2008. R&D expenses were 7.8% of
sales in the third quarter of 2009 compared to 6.6% of sales in the third
quarter of 2008.
The operating loss for the third quarter of 2009 was $2.3 million, a
decrease of $4.9 million from an operating profit of $2.6 million in the
third quarter of 2008.
Income tax expense decreased by $1.3 million to a benefit of $0.8 million
for the third quarter of 2009, from an expense of $0.5 million for the third
quarter of 2008 due to a decrease in pretax income. The Company's effective
tax rate increased to a benefit of 37.6% for the third quarter of 2009 from
an expense of 19.9% in the third quarter of 2008 primarily due to taxable
losses in jurisdictions with higher tax rates.
"Despite some of the favorable signs we're starting to see, there is
still uncertainty in the marketplace. In response, we have reduced our
operating costs substantially without sacrificing our global sales presence.
More importantly, we have maintained our spending levels on Research &
Development throughout the downturn, so I believe we are positioned to
execute well in this environment," 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.
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 9,500 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.
For more information, visit
http://www.faro.com/.
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
------------------- ------------------
(in thousands, except share
and per share data)
Oct 3, Sep 27, Oct 3
Sep 27
2009 2008
2009 2008
-----------------
--------- --------- -------- --------
SALES
Product
$27,876 $41,100 $79,292
$131,019
Service
7,837 7,995
22,385 21,915
Total Sales
35,713 49,095 101,677
152,934
COST OF SALES
Product
11,261 14,223 30,647
43,804
Service
4,850 5,863
15,805 16,176
Total Cost of Sales
(exclusive of depreciation
and amortization, shown
separately below)
16,111 20,086 46,452
59,980
GROSS PROFIT
19,602 29,009 55,225
92,954
OPERATING
EXPENSES:
Selling
11,482 15,382 36,434
46,886
General and administrative 6,158
6,614 18,591
19,274
Depreciation and amortization 1,410 1,158
4,090 3,293
Research and development 2,802
3,237 9,566
9,122
Total operating expenses 21,852
26,391 68,681
78,575
(LOSS) INCOME FROM
OPERATIONS (2,250) 2,618
(13,456) 14,379
OTHER (INCOME)
EXPENSE
Interest income
(31) (547)
(225) (1,624)
Other (income) expense, net (183)
652 (359)
834
Interest expense
3 2
9 450
(LOSS) INCOME
BEFORE INCOME TAX
(BENEFIT) EXPENSE
(2,039) 2,511 (12,881)
14,719
INCOME TAX
(BENEFIT) EXPENSE (766)
500 (2,919)
2,965
NET (LOSS) INCOME
$(1,273) $2,011 $(9,962)
$11,754
NET (LOSS) INCOME
PER
SHARE - BASIC
$(0.08) $0.12 $(0.62)
$0.71
NET (LOSS) INCOME
PER
SHARE - DILUTED
$(0.08) $0.12 $(0.62)
$0.70
Weighted average
shares - Basic
16,093,759 16,637,497 16,131,680 16,624,784
Weighted average
shares - Diluted
16,093,759 16,731,064 16,131,680 16,751,679
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
October 3, December 31,(in
thousands, except share data)
2009
2008
---------------------------------
--------- ----------
ASSETS
Unaudited
Current Assets:
Cash and cash equivalents
$27,401 $23,494
Short-term investments
64,979 81,965
Accounts receivable, net
35,697 49,713
Inventories
28,212 33,444
Deferred income taxes, net
4,541
5,581
Prepaid expenses and other current
assets
12,225
7,879
Total current assets
173,055 202,076
Property and
Equipment:
Machinery and equipment
19,557 22,685
Furniture and fixtures
5,250
4,099
Leasehold improvements
9,399
3,956
Property and
equipment at cost
34,206 30,740
Less: accumulated depreciation
and amortization
(19,800) (16,604)
Property and
equipment, net
14,406 14,136
Goodwill
19,822 18,951
Intangible assets, net
8,199
8,580
Service inventory
12,751 12,843
Deferred income taxes, net
1,909
2,728
Total Assets
$230,142 $259,314
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Liabilities:
Accounts payable
$5,460 $10,813
Accrued liabilities
8,368 14,032
Income taxes payable
-
1,988
Current portion of unearned
service revenues
11,551 11,501
Customer deposits
626
425
Current portion of obligations under
capital leases
27
87
Total current liabilities
26,032 38,846
Unearned service
revenues - less
current portion
5,591
6,772
Deferred tax liability, net
1,152
1,107
Obligations under capital leases - less
current portion
285
281
Total Liabilities
33,060 47,006
Shareholders'
Equity: Common
stock - par value $.001, 50,000,000
shares authorized; 16,793,289 and 16,741,488
issued; 16,102,331 and 16,658,552
outstanding, respectively
17
17
Additional paid-in-capital
151,487 149,298
Retained earnings
47,537 57,497
Accumulated other comprehensive income
7,116
5,742
Common stock in treasury, at
cost - 680,235 and 55,808 shares, respectively (9,075)
(246)
Total Shareholders' Equity
197,082 212,308
Total Liabilities and Shareholders'
Equity
$230,142 $259,314
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
(in thousands)
October 3, September 27,
2009
2008
--------------
--------------- --------------
CASH FLOWS FROM:
OPERATING ACTIVITIES:
Net (loss) income
$(9,962) $11,754
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities: Depreciation
and amortization
4,090
3,293
Compensation for stock options and
restricted stock units
1,827
1,686
Provision for bad debts 961 446
Deferred income tax expense (benefit)
1,919
(1,575)
Change in operating assets and
liabilities: Decrease (increase) in:
Accounts receivable
14,040
9,198
Inventories
6,202
(9,681)
Prepaid expenses and other current assets (4,234)
(2,369)
Income tax benefit from exercise of
stock options
(2)
(45)
Increase (decrease) in: Accounts
payable and accrued liabilities
(11,220)
(7,654)
Income taxes payable
(1,965)
(771)
Customer deposits
186
(11)
Unearned service revenues
(1,490)
2,671
Net cash provided by operating activities 352
6,942
INVESTING ACTIVITIES:
Purchases of
property and equipment
(2,919)
(4,377)
Payments for intangible assets
(504)
(3,584)
Purchases of short-term investments
(64,979)
(4,995)
Proceeds from sales of short-term investments 81,965
-
Net cash provided
by (used in) investing
activities
13,563
(12,956)
FINANCING ACTIVITIES:
Payments on
capital leases
(55)
(68)
Income tax benefit from exercise
of stock options
2
45
Repurchases of common stock
(8,829)
-
Proceeds from issuance of stock, net
45
128
Net cash (used in) provided by
financing activities
(8,837)
105
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS
(1,171)
271
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
3,907
(5,638)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD
23,494
25,798
CASH AND CASH EQUIVALENTS,
END OF PERIOD
$27,401 $20,160
----------
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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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