October 31, 2012 at 16:02 PM EDT
FARO Reports Third Quarter 2012 Results

LAKE MARY, Fla., Oct. 31, 2012 /PRNewswire/ -- FARO Technologies, Inc. (NASDAQ: FARO) today announced results for the third quarter ended September 29, 2012.  Sales in the third quarter of 2012 decreased 6.3% to $60.7 million, from $64.8 million in the third quarter of 2011.  The Company reported net income decreased to $3.7 million, or $0.21 per share, in the third quarter of 2012, from $6.4 million, or $0.38 per share, in the third quarter of 2011.

New order bookings for the third quarter of 2012 were $61.0 million, an increase of 1.3% from $60.2 million in the third quarter of 2011. 

"Customer interest was strong in the third quarter, with leads and demos at historical rates, but economic weakness and uncertainty, particularly in Europe, resulted in delayed customer purchase decisions," stated Jay Freeland, FARO's President and CEO.  "We successfully launched the new Vantage Laser Tracker which received positive customer response and we undertook several product promotions.  However, these initiatives were still not sufficient to offset the impact of the difficult economic climate overall."    

Gross margin for the third quarter of 2012 was 53.2%, compared to 56.1% in the third quarter of 2011 and reflects lower average selling prices across major product lines, due to promotions for older model products and other pricing initiatives as well as additional manufacturing costs related to the introduction of the new Vantage Laser Tracker.

The Company's operating margin for the third quarter decreased to 8.3%, compared to 15.4% in the third quarter of 2011 and included approximately $1.0 million of professional fees related to the Company's patent litigation.

"In anticipation of continuing economic uncertainty, we intend to aggressively pursue all available sales channels, invest in R&D and maintain tight cost controls across all areas of the business," 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 demand for its products, 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 FARO's plans 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;

  • production delays caused by shortages of raw materials incorporated in the Company's products;

  • 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;

  • risks associated with 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, 2011.

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 over 30,000 installations and 15,000 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 Vantage; the FARO Laser ScanArm; FARO Focus 3D Laser Scanner; 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 BALANCE SHEETS








September 29,





2012


December 31,

(in thousands, except share data)


Unaudited


2011

ASSETS





Current Assets:





Cash and cash equivalents


$        80,505


$        64,540

Short-term investments


64,989


64,997

Accounts receivable, net


51,014


57,512

Inventories, net


53,348


49,934

Deferred income taxes, net


6,090


5,297

Prepaid expenses and other current assets


10,383


9,207

Total current assets


266,329


251,487

Property and Equipment:





Machinery and equipment


31,427


29,171

Furniture and fixtures


6,406


5,963

Leasehold improvements


10,780


10,233

    Property and equipment at cost


48,613


45,367

Less: accumulated depreciation and amortization


(32,776)


(29,134)

    Property and equipment, net


15,837


16,233

Goodwill


18,517


18,610

Intangible assets, net


6,727


6,849

Service inventory


19,535


17,316

Deferred income taxes, net


2,270


2,296

Total Assets


$      329,215


$      312,791

LIABILITIES AND SHAREHOLDERS' EQUITY





Current Liabilities:





Accounts payable


$          7,995


$        13,396

Accrued liabilities


16,242


18,076

Income taxes payable


1,611


2,682

Current portion of unearned service revenues


17,163


15,638

Customer deposits


2,347


4,072

Current portion of obligations under capital leases


18


84

      Total current liabilities


45,376


53,948

Unearned service revenues - less current portion


9,648


9,540

Deferred tax liability, net


1,259


1,148

Obligations under capital leases - less current portion


66


257

Total Liabilities


56,349


64,893

Commitments and contingencies 










Shareholders' Equity:










Common stock - par value $.001, 50,000,000 shares authorized; 17,651,780

and 17,381,110 issued; 16,971,545 and 16,700,875 outstanding, respectively


18


17

Additional paid-in-capital


179,975


169,780

Retained earnings


96,519


81,360

Accumulated other comprehensive income


5,429


5,816

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


(9,075)


(9,075)

Total Shareholders' Equity


272,866


247,898

Total Liabilities and Shareholders' Equity


$      329,215


$      312,791

  

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)












Three Months Ended 


Nine Months Ended 










(in thousands, except share and per share data)


Sept 29, 2012


Oct 1, 2011


Sept 29, 2012


Oct 1, 2011

SALES









Product


$       49,274


$    54,032


$     159,130


$  146,682

Service


11,460


10,775


33,595


30,402

Total Sales


60,734


64,807


192,725


177,084










COST OF SALES 









Product


21,107


21,605


63,933


56,527

Service


7,323


6,813


22,242


20,380

Total Cost of Sales (exclusive of depreciation and

amortization, shown separately below)


28,430


28,418


86,175


76,907










GROSS PROFIT


32,304


36,389


106,550


100,177










OPERATING EXPENSES:









Selling 


14,154


14,696


46,033


44,157

General and administrative


7,266


6,424


22,028


19,931

Depreciation and amortization


1,796


1,711


5,164


5,047

Research and development


4,065


3,591


12,998


11,037

Total operating expenses


27,281


26,422


86,223


80,172










INCOME FROM OPERATIONS


5,023


9,967


20,327


20,005










OTHER (INCOME) EXPENSE









Interest income


(20)


(19)


(141)


(84)

Other expense, net


(46)


780


215


775

Interest expense


2


2


22


33










INCOME BEFORE INCOME TAX  EXPENSE 


5,087


9,204


20,231


19,281










INCOME TAX EXPENSE 


1,414


2,775


5,074


5,376










NET INCOME 


$         3,673


$      6,429


$       15,157


$    13,905










NET INCOME PER SHARE - BASIC


$           0.22


$        0.39


$           0.90


$        0.85










NET INCOME PER SHARE - DILUTED


$           0.21


$        0.38


$           0.88


$        0.83










Weighted average shares - Basic


16,944,120


16,609,005


16,892,338


16,435,337










Weighted average shares - Diluted


17,094,102


16,849,282


17,148,555


16,788,776

  

                                                      FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

                                            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)












Three Months Ended 


Nine Months Ended 

(in thousands)


Sept 29, 2012


Oct 1, 2011


Sept 29, 2012


Oct 1, 2011



















Net income


$        3,673


$              6,429


$       15,157


$    13,905

Currency translation adjustments


1,303


(4,578)


(385)


764

Comprehensive income


$        4,976


$              1,851


$       14,772


$    14,669

  

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)








Nine Months Ended






(in thousands)


Sept 29, 2012


Oct 1, 2011

CASH FLOWS FROM:





OPERATING ACTIVITIES:





Net income 


$          15,157


$       13,905

Adjustments to reconcile net income to net cash provided by (used in)





    operating activities:





Depreciation and amortization


5,164


5,047

Compensation for stock options and restricted stock units


2,956


2,042

Provision for bad debts


(155)


1,620

Deferred income tax (benefit) expense


(670)


111

Change in operating assets and liabilities:





Decrease (increase) in:





Accounts receivable


6,398


(460)

Inventories, net 


(5,998)


(23,682)

Prepaid expenses and other current assets


(1,231)


(2,707)

Income tax benefit from exercise of stock options


(1,135)


(1,412)

Increase (decrease) in:





Accounts payable and accrued liabilities


(7,307)


1,068

Income taxes payable


82


597

Customer deposits


(1,707)


(1,116)

Unearned service revenues


1,730


3,593

            Net cash provided by (used in) operating activities


13,284


(1,394)






INVESTING ACTIVITIES:





Purchases of property and equipment


(3,139)


(3,370)

Payments for intangible assets


(772)


(646)

        Net cash used in investing activities


(3,911)


(4,016)






FINANCING ACTIVITIES:





Payments on capital leases


(119)


(140)

Income tax benefit from exercise of stock options


1,135


1,412

Proceeds from issuance of stock, net


6,107


7,727

        Net cash provided by financing activities


7,123


8,999






EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS


(531)


34






INCREASE  IN CASH AND CASH EQUIVALENTS


15,965


3,623






CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD


64,540


50,722






CASH AND CASH EQUIVALENTS, END OF PERIOD


$          80,505


$       54,345

 

SOURCE FARO Technologies, Inc.

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