FARO Reports Fourth Quarter 2009 Sales of $46 million;
Sequential Growth of 29% and Return to Operating Profit
LAKE MARY, Fla., Feb. 24 /PRNewswire-FirstCall/ -- FARO Technologies, Inc. (Nasdaq: FARO) today announced results for the fourth quarter and year ended December 31, 2009. Sales in the fourth quarter of 2009 increased 28.9%, to $46.0 million, from $35.7 million in the third quarter of 2009. The Company returned to operating profitability in the fourth quarter of 2009, with operating income of $2.5 million compared to an operating loss of $2.3 million in the third quarter of 2009.
Net loss for the fourth quarter of 2009 was $0.6 million, or $(0.04) per diluted share, a decrease of $2.8 million, compared to net income of $2.2 million, or $0.13 per diluted share, in the fourth quarter of 2008. The net loss for the fourth quarter of 2009 included a tax settlement with the Internal Revenue Service of $2.6 million, or $.16 per share. Net loss for fiscal 2009 was $10.6 million, or $(0.66) per diluted share, compared to net income of $14.0 million, or $0.83 per diluted share during 2008.
Sales for the fourth quarter of 2009 decreased $10.3 million, or 18.3%, to $46.0 million from $56.3 million in the fourth quarter of 2008. New order bookings for the fourth quarter of 2009 were $53.1 million, a decrease of $3.3 million, or 5.9%, compared to $56.4 million in the fourth quarter of 2008. Fiscal 2009 sales were $147.7 million, a decrease of 29.4% compared to fiscal 2008 sales of $209.2 million. New order bookings for fiscal 2009 were $151.7 million, a decrease of 28.2% from $211.3 million in fiscal 2008.
"Sales increased 29% quarter over quarter and, as expected, the target markets for our products continued to show improvement. The cost reductions we made during the first three quarters of 2009 created a leaner, more efficient operation without sacrificing R&D programs. Ultimately, those moves position us well to execute in 2010," stated Jay Freeland, FARO's President and CEO.
Gross margin for the fourth quarter of 2009 was 55.4%, compared to 57.3% in the fourth 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. Gross margin for fiscal 2009 was 54.6% compared to 59.8% in fiscal 2008.
Selling expenses as a percentage of sales decreased to 26.4% in the fourth quarter of 2009 from 28.6% in the fourth quarter of 2008, primarily as a result of lower marketing expenses. Selling expenses in the fourth quarter of 2009 decreased by $3.9 million from the fourth quarter of 2008 to $12.2 million. Selling expenses as a percentage of sales for fiscal 2009 were 32.9%, compared to 30.1% in fiscal 2008.
General and administrative expenses increased to 13.8% of sales in the fourth quarter of 2009 from 12.2% in the fourth quarter of 2008. General and administrative expenses in the fourth quarter of 2009 decreased by $0.5 million to $6.4 million from $6.9 million in the fourth quarter of 2008. General and administrative expenses were 16.9% of sales for fiscal 2009 compared to 12.5% in fiscal 2008.
R&D expenses were $3.0 million in the fourth quarter of 2009, a decrease of $0.5 million from $3.5 million in the fourth quarter of 2008. R&D expenses were 6.6% of sales in the fourth quarter of 2009 compared to 6.2% of sales in the fourth quarter of 2008. R&D expenses for both fiscal 2009 and 2008 were $12.6 million.
Operating income for the fourth quarter of 2009 was $2.5 million, a decrease of $2.1 million from $4.6 million in the fourth quarter of 2008. Operating margin for the fourth quarter of 2009 was 5.4% compared to 8.1% in the fourth quarter of 2008. The operating loss for fiscal 2009 was $11.0 million compared to an operating profit of $18.9 million in fiscal 2008.
Income tax expense increased by $1.9 million to $3.3 million for the fourth quarter of 2009 from $1.4 million in the fourth quarter of 2008 due to a $2.6 million tax settlement with the Internal Revenue Service. The tax settlement will not impact the Company's tax rate going forward.
"We feel good about the Company's prospects in 2010 and believe we are a stronger organization now than we were at the beginning of last year. We continue to have a strong balance sheet with over $100 million in cash and zero debt and have created a streamlined operating structure from which to execute. Assuming economic conditions continue to improve, we believe our prospects for 2010 are good," 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, FARO's focus, plans and strategies, , 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 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:
- 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;
- 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 and in Part II, Item 1A. Risk Factors in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2009.
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 10,000 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 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 OPERATIONS
Three Months Ended Twelve Months Ended
------------------ -------------------
(in thousands, except
share and per share Dec 31, Dec 31, Dec 31, Dec 31,
data) 2009 2008 2009 2008
------------------- -------- -------- -------- -------
SALES
Product $38,422 $48,190 $117,714 $179,209
Service 7,604 8,125 29,989 30,040
------- ------- -------- --------
Total Sales 46,026 56,315 147,703 209,249
------- ------- -------- --------
COST OF SALES
Product 15,646 16,931 46,293 60,736
Service 4,897 7,112 20,702 23,287
------ ------ ------ ------
Total Cost of Sales
(exclusive of
depreciation and
amortization, shown
separately below) 20,543 24,043 66,995 84,023
------ ------ ------ ------
GROSS PROFIT 25,483 32,272 80,708 125,226
OPERATING EXPENSES:
Selling 12,164 16,130 48,598 63,015
General and
administrative 6,365 6,870 24,956 26,144
Depreciation and
amortization 1,440 1,212 5,530 4,505
Research and
development 3,047 3,502 12,613 12,625
------ ------ ------ ------
Total operating
expenses 23,016 27,714 91,697 106,289
------ ------ ------ -------
(LOSS) INCOME FROM
OPERATIONS 2,467 4,558 (10,989) 18,937
------ ------ -------- ------
OTHER (INCOME) EXPENSE
Interest income (28) (546) (253) (2,170)
Other (income)
expense, net (233) 1,460 (592) 2,295
Interest expense 5 2 14 452
----- ----- ----- -----
(LOSS) INCOME BEFORE
INCOME TAX EXPENSE 2,723 3,642 (10,158) 18,360
INCOME TAX EXPENSE 3,343 1,443 424 4,408
----- ----- --- -----
NET (LOSS) INCOME $(620) $2,199 $(10,582) $13,952
------ ------ -------- -------
NET (LOSS) INCOME PER
SHARE - BASIC $(0.04) $0.13 $(0.66) $0.84
------- ----- ------ -----
NET (LOSS) INCOME PER
SHARE - DILUTED $(0.04) $0.13 $(0.66) $0.83
------- ----- ------ -----
Weighted average
shares - Basic 16,101,412 16,654,910 16,125,449 16,632,608
---------- ---------- ---------- ----------
Weighted average
shares - Diluted 16,101,412 16,702,090 16,125,449 16,734,403
---------- ---------- ---------- ----------
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
(in thousands, except share data) 2009 2008
--------------------------------- ----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $35,078 $23,494
Short-term investments 64,986 81,965
Accounts receivable, net 42,944 49,713
Inventories 26,582 33,444
Deferred income taxes, net 4,473 5,581
Prepaid expenses and other current assets 6,016 7,879
------- -------
Total current assets 180,079 202,076
------- -------
Property and Equipment:
Machinery and equipment 19,867 16,748
Furniture and fixtures 5,225 4,099
Leasehold improvements 9,434 9,893
------ ------
Property and equipment at cost 34,526 30,740
Less: accumulated depreciation and
amortization (20,788) (16,604)
------- -------
Property and equipment, net 13,738 14,136
------- -------
Goodwill 19,934 18,951
Intangible assets, net 7,985 8,580
Service inventory 12,079 12,843
Deferred income taxes, net 1,895 2,728
-------- --------
Total Assets $235,710 $259,314
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $8,985 $10,813
Accrued liabilities 8,173 14,032
Income taxes payable 229 1,988
Current portion of unearned service
revenues 12,226 11,501
Customer deposits 2,173 425
Current portion of obligations under
capital leases 80 87
------ ------
Total current liabilities 31,866 38,846
Unearned service revenues - less current
portion 5,910 6,772
Deferred tax liability, net 1,143 1,107
Obligations under capital leases - less
current portion 193 281
------ ------
Total Liabilities 39,112 47,006
------ ------
Commitments and contingencies
Shareholders' Equity:
Common stock - par value $.001, 50,000,000
shares authorized; 16,795,289 and 16,741,488
issued; 16,115,054 and 16,658,552
outstanding, respectively 17 17
Additional paid-in-capital 152,380 149,298
Retained earnings 46,915 57,497
Accumulated other comprehensive income 6,361 5,742
Common stock in treasury, at cost -
680,235 and 55,808 shares, respectively (9,075) (246)
-------- --------
Total Shareholders' Equity 196,598 212,308
-------- --------
Total Liabilities and Shareholders' Equity $235,710 $259,314
-------- --------
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
------------------------------
(in thousands) 2009 2008 2007
------------------------------ --------- ------- -------
CASH FLOWS FROM:
OPERATING ACTIVITIES:
Net (loss) income $(10,582) $13,952 $18,093
Adjustments to reconcile
net (loss) income to net
cash provided by operating
activities:
Depreciation and amortization 5,530 4,505 4,034
Compensation for stock
options and restricted
stock units 2,449 2,237 1,216
Provision for bad debts 1,852 1,092 373
Deferred income tax
expense (benefit) 1,986 (1,972) (464)
Change in operating
assets and liabilities:
Decrease (increase) in:
Accounts receivable 5,769 2,993 (9,121)
Inventories, net 8,301 (6,429) (7,265)
Prepaid expenses and
other current assets 1,964 (1,187) (3,208)
Income tax benefit from
exercise of stock
options (4) (45) (963)
Increase (decrease) in:
Accounts payable and
accrued liabilities (7,891) (5,317) 9,884
Income taxes payable (1,749) (355) 1,278
Customer deposits 1,736 82 (269)
Unearned service
revenues (396) 3,710 8,007
----- ------ ------
Net cash provided by
operating activities 8,965 13,266 21,595
----- ------ ------
INVESTING ACTIVITIES:
Purchases of property
and equipment (3,387) (9,705) (2,930)
Payments for intangible
assets (670) (3,766) (359)
Purchases of short-term
investments (64,986) (81,965) (77,375)
Proceeds from sales of
short-term investments 81,965 77,375 15,790
------ -------- --------
Net cash provided by
(used in) investing
activities 12,922 (18,061) (64,874)
------ -------- --------
FINANCING ACTIVITIES:
Payments on capital leases (88) (11) (92)
Income tax benefit from
exercise of stock options 4 45 963
Purchases of treasury stock (8,829) (95) -
Proceeds from issuance of stock,
net 83 92 58,421
------ ----- ------
Net cash (used in)
provided by financing
activities (8,830) 31 59,292
------ ----- ------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS (1,473) 2,460 (5,904)
------- ----- -------
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 11,584 (2,304) 10,109
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 23,494 25,798 15,689
------- ------- -------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $35,078 $23,494 $25,798
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SOURCE FARO Technologies, Inc.
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