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FARO Reports Second Quarter 2013 Results

July 30, 2013

LAKE MARY, Fla., July 30, 2013 /PRNewswire/ — FARO Technologies, Inc. (NASDAQ: FARO) today announced results for the second quarter ended June 29, 2013. Sales in the second quarter of 2013 increased to $68.3 million, from $66.8 million in the second quarter of 2012. The Company reported net income of $3.6 million, or $0.21 per share, in the second quarter of 2013, compared to $4.7 million, or $0.28 per share, in the second quarter of 2012.

(Logo: http://photos.prnewswire.com/prnh/20110415/MM84316LOGO )

New order bookings for the second quarter of 2013 were $66.7 million, a decrease of 6.1% from $71.0 million in the second quarter of 2012.

Gross margin for the second quarter of 2013 was 54.0%, compared to 55.5% in the second quarter of 2012. Gross margins were slightly lower primarily due to lower average selling prices for certain metrology products.

The Company’s operating margin for the second quarter decreased to 8.0%, compared to 10.3% in the second quarter of 2012. Operating expenses increased due to staffing costs and related expenses of $1.8 million primarily in our sales and marketing and research and development organizations, offset by lower legal and professional fees of approximately $1.0 million.

“Our results in the second quarter were impacted by ongoing economic softness in Europe and Asia. While interest in FARO products remains strong, many customers have deferred purchase decisions in light of economic uncertainty,” stated Jay Freeland, FARO’s President and CEO. “The Americas region continues to show signs of strength, generating double-digit sales growth in the quarter and our product development pipeline remains robust. To capitalize on anticipated improvement in our markets, we added staff to our sales and research and development organizations, which adversely impacted our second quarter results but positions the Company well looking forward. We expect the second half of 2013 should provide an opportunity for improvement driven by the global increase in new sales account managers. However, if the overall macroeconomic environment remains stagnant for the rest of 2013, our markets may remain under some pressure.”

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, anticipated improvement in the markets in which it operates, its product development pipeline, its ability to capitalize on market conditions, 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;
  • 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, 2012.

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
FARO is the world’s most trusted source for 3D measurement technology. The Company develops and markets computer-aided measurement and imaging devices and software. Technology from FARO permits high-precision 3D measurement, imaging and comparison of parts and complex structures within production and quality assurance processes. The devices are used for inspecting components and assemblies, rapid prototyping, documenting large volume spaces or structures in 3D, surveying and construction, as well as for investigation and reconstruction of accident sites or crime scenes.

Approximately 15,000 customers are operating more than 30,000 installations of FARO’s systems, worldwide. The Company’s global headquarters is located in Lake Mary, FL; its European regional headquarters in Stuttgart, Germany; and its Asia/Pacific regional headquarters in Singapore. FARO has offices in Brazil, Mexico, United Kingdom, France, Spain, Italy, Poland, Netherlands, India, China, Malaysia, Vietnam, Thailand and Japan.

More information is available at http://www.faro.com.


                                         FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF OPERATIONS

                                                        (UNAUDITED)

                                      Three Months Ended                Six Months Ended
                                      ------------------                ----------------

    (in thousands, except share data)    June 29, 2013                    June 30, 2012         June 29, 2013         June 30, 2012
    --------------------------------     -------------                    -------------         -------------         -------------

    SALES

    Product                                           $55,174                          $55,432              $107,656              $109,856

    Service                                            13,155                           11,330                26,043                22,135

    Total Sales                                        68,329                           66,762               133,699               131,991
                                                       ------                           ------               -------               -------

    COST OF SALES

    Product                                            22,921                           22,320                44,260                42,826

    Service                                             8,482                            7,382                15,688                14,919

    Total Cost of Sales (exclusive                     31,403                           29,702                59,948                57,745
    of depreciation and
    amortization, shown
    separately below)

    GROSS PROFIT                                       36,926                           37,060                73,751                74,246

    OPERATING EXPENSES:

    Selling                                            16,716                           15,841                33,366                31,879

    General and administrative                          7,826                            8,134                15,341                14,762

    Depreciation and amortization                       1,736                            1,689                 3,569                 3,368

    Research and development                            5,162                            4,525                10,287                 8,933

    Total operating expenses                           31,440                           30,189                62,563                58,942
                                                       ------                           ------                ------                ------

    INCOME FROM OPERATIONS                              5,486                            6,871                11,188                15,304
                                                        -----                            -----                ------                ------

    OTHER (INCOME) EXPENSE

    Interest income                                       (19)                             (20)                  (35)                 (121)

    Other expense, net                                    504                              401                   619                   261

    Interest expense                                        0                                7                     1                    20
                                                          ---                              ---                   ---                   ---

    INCOME BEFORE INCOME TAX                            5,001                            6,483                10,603                15,144
      EXPENSE

    INCOME TAX EXPENSE                                  1,370                            1,749                 2,398                 3,660

    NET INCOME                                         $3,631                           $4,734                $8,205               $11,484
                                                       ------                           ------                ------               -------

    NET INCOME PER SHARE - BASIC                        $0.21                            $0.28                 $0.48                 $0.68
                                                        -----                            -----                 -----                 -----

    NET INCOME PER SHARE -                              $0.21                            $0.28                 $0.48                 $0.67
      DILUTED
                                                                                                                                       ---

    Weighted average shares - Basic                17,097,973                       16,921,012            17,054,354            16,861,221
                                                   ----------                       ----------            ----------            ----------

    Weighted average shares -                      17,173,015                       17,140,115            17,177,748            17,157,185
      Diluted

                        FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

                              CONSOLIDATED BALANCE SHEETS

                                           June 29,              December 31,

                                                          2013                  2012

    (in
     thousands,
     except share
     data)                               (unaudited)
    -------------                         ----------

    ASSETS

    Current
     Assets:

    Cash and cash
     equivalents                                      $111,308               $93,233

    Short-term
     investments                                        64,993                64,990

    Accounts
     receivable,
     net                                                51,717                62,559

    Inventories,
     net                                                47,781                48,894

    Deferred
     income
     taxes, net                                          5,925                 7,216

    Prepaid
     expenses and
     other
     current
     assets                                             11,823                11,186

    Total current
     assets                                            293,547               288,078
                                                       -------               -------

    Property and
     Equipment:

    Machinery and
     equipment                                          33,296                32,236

    Furniture and
     fixtures                                            6,443                 6,516

    Leasehold
     improvements                                       10,884                10,897
                                                        ------                ------

        Property and
         equipment at
         cost                                           50,623                49,649

    Less:
     accumulated
     depreciation
     and
     amortization                                      (36,326)              (34,305)
                                                       -------               -------

        Property and
         equipment,
         net                                            14,297                15,344
                                                        ------                ------

    Goodwill                                            18,656                18,816

    Intangible
     assets, net                                         7,252                 7,048

    Service
     inventory                                          17,784                19,125

    Deferred
     income
     taxes, net                                          2,370                 2,396

    Total Assets                                      $353,906              $350,807
                                                      --------              --------

    LIABILITIES
     AND
     SHAREHOLDERS'
     EQUITY

    Current
     Liabilities:

    Accounts
     payable                                            $7,386               $10,413

    Accrued
     liabilities                                        16,443                18,216

    Income taxes
     payable                                             1,088                 4,886

    Current
     portion of
     unearned
     service
     revenues                                           19,431                19,460

    Customer
     deposits                                            3,047                 2,662

    Current
     portion of
     obligations
     under
     capital
     leases                                                 15                    45

          Total current
           liabilities                                  47,410                55,682

    Unearned
     service
     revenues -
     less current
     portion                                            11,344                11,221

    Deferred tax
     liability,
     net                                                 1,152                 1,149

    Obligations
     under
     capital
     leases -
     less current
     portion                                                16                    19

    Total
     Liabilities                                        59,922                68,071
                                                        ------                ------

    Commitments
     and
     contingencies

    Shareholders'
     Equity:

    Common stock
     -par value
     $.001,
     50,000,000
     shares
     authorized;                                            18                    18
      17,788,200
       and
       17,653,879
       issued;
       17,107,965
       and
       16,973,644
      outstanding,
       respectively

    Additional
     paid-in
     capital                                           187,098               181,094

    Retained
     earnings                                          112,563               104,358

    Accumulated
     other
     comprehensive
     income                                              3,380                 6,341

    Common stock
     in treasury,
     at cost -
     680,235
     shares                                             (9,075)               (9,075)

    Total
     Shareholders'
     Equity                                            293,984               282,736

    Total
     Liabilities
     and
     Shareholders'
     Equity                                           $353,906              $350,807
                                                      --------              --------
                                                                FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

                                                                  CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                               (UNAUDITED)

                                                                                                         Six Months Ended
                                                                                                         ----------------

    (in thousands)                                                                                         June 29, 2013           June 30, 2012
    -------------                                                                                          -------------           -------------

    CASH FLOWS FROM:

    OPERATING ACTIVITIES:

    Net income                                                                                                             $8,205                $11,484

    Adjustments to reconcile net income to net cash provided by

        operating activities:

    Depreciation and amortization                                                                                           3,569                  3,368

    Compensation for stock options and restricted stock units                                                               2,105                  1,866

    Provision for bad debts                                                                                                   315                    (84)

    Deferred income tax expense (benefit) expense                                                                           1,281                   (744)

    Change in operating assets and liabilities:

    Decrease (increase) in:

    Accounts receivable                                                                                                     9,644                  3,535

    Inventories, net                                                                                                        1,101                 (6,173)

    Prepaid expenses and other current assets                                                                                (765)                (1,569)

    Income tax benefit from exercise of stock options                                                                        (814)                (1,114)

    Increase (decrease) in:

    Accounts payable and accrued liabilities                                                                               (4,565)                (6,313)

    Income taxes payable                                                                                                   (2,868)                   933

    Customer deposits                                                                                                         458                    317

    Unearned service revenues                                                                                                 594                  1,191
                                                                                                                              ---                  -----

                Net cash provided by operating activities                                                                  18,260                  6,697
                                                                                                                           ------                  -----

    INVESTING ACTIVITIES:

    Purchases of property and equipment                                                                                      (891)                (2,533)

    Payments for intangible assets                                                                                           (832)                  (443)
                                                                                                                             ----                   ----

            Net cash used in investing activities                                                                          (1,723)                (2,976)
                                                                                                                           ------                 ------

     FINANCING ACTIVITIES:

    Payments on capital leases                                                                                                (76)                   (98)

    Income tax benefit from exercise of stock options                                                                         814                  1,114

    Proceeds from issuance of stock, net                                                                                    3,084                  5,601
                                                                                                                            -----                  -----

            Net cash provided by financing activities                                                                       3,822                  6,617
                                                                                                                            -----                  -----

    EFFECT OF EXCHANGE RATE CHANGES ON CASH AND                                                                            (2,284)                  (130)
      CASH EQUIVALENTS

    INCREASE  IN CASH AND CASH EQUIVALENTS                                                                                 18,075                 10,208

    CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                                         93,233                 64,540
                                                                                                                           ------                 ------

    CASH AND CASH EQUIVALENTS, END OF PERIOD                                                                             $111,308                $74,748
                                                                                                                         ========                =======


                                         FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

                                      CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                                     (UNAUDITED)

                                     Three Months Ended                Six Months Ended
                                     ------------------                ----------------

    (in thousands)                      June 29, 2013                    June 30, 2012         June 29, 2013         June 30, 2012
    -------------                       -------------                    -------------         -------------         -------------

    Net income                                        $3,631                           $4,734                $8,205               $11,484

    Currency translation adjustments                     468                           (3,022)               (2,961)               (1,688)

    Comprehensive income                              $4,099                           $1,712                $5,244                $9,796
                                                      ======                           ======                ======                ======

SOURCE FARO Technologies, Inc.


Source: PR Newswire