FARO Reports Fourth Quarter and Fiscal Year 2015 Financial Results

Feb 24, 2016, 16:01 ET from FARO Technologies, Inc.

LAKE MARY, Fla., Feb. 24, 2016 /PRNewswire/ -- FARO Technologies, Inc. (NASDAQ: FARO) today announced its financial results for the fourth quarter and fiscal year ended December 31, 2015. 

"FARO performed well in 2015 on many levels," stated Dr. Simon Raab, Chairman and Interim Chief Executive Officer. "Although our financial results did not meet our internal targets, we successfully launched the FARO Freestyle3D laser scanner, completed two acquisitions to expand our position in the AEC and public safety markets, completed our implementation of our new global enterprise resource planning system as well as continued the development of new products in our R&D pipeline, culminating most recently in our January launch of the new FARO Cobalt Array Imager.  We will build on these successes and many other initiatives in 2016."

Fourth quarter results

Revenues for the quarter ended December 31, 2015 were $91.3 million, compared with $104.2 million in the fourth quarter last year. 

Gross margin for the quarter was 53.3%, compared with 55.0% in the prior year period reflecting higher costs consistent with lower production volume as well a $0.7 million severance charge for production and service workforce reductions that commenced in the third quarter.  Gross profit of $48.7 million in the fourth quarter of 2015 compared with $57.3 million in the fourth quarter of 2014 reflecting lower sales volume.

Operating income for the quarter was $6.8 million compared with $13.0 million in the prior year period, reflecting lower sales volume and a total of $2.0 million in severance charges, partially offset by lower operating expenses.

Net income and EPS for the quarter was $8.9 million and $0.52, respectively, compared with $11.1 million and $0.64, respectively, in the prior year period.  Excluding the impact of the $2.0 million in severance costs, EPS would have been $0.60.

In the quarter, FARO repurchased 809,241 shares at a total cost of $22.8 million.

Full year results

Revenues for the full year 2015 were $317.5 million, 7.1% lower than the $341.8 million generated in 2014.  Revenues were essentially flat with 2014 when adjusted for a 7% unfavorable foreign exchange impact.

Gross margin for the year was 52.8%, compared with 55.3% in the prior year period primarily reflecting a third quarter inventory reserve adjustment of $7.9 million and fourth quarter severance costs of $0.7 million.  Excluding the impact of the inventory adjustment and severance charges, gross margin would have been 55.5%. Gross profit for the year was $167.7 million, or $21.2 million lower than the prior year. 

Operating income of $13.1 million was down from $37.3 million in 2014 reflecting lower revenue, an inventory reserve adjustment and severance charges.

Net income for the full year was $12.8 million, or $0.74 per share compared with $33.6 million, or $1.93 per share, in 2014.  Excluding the effect of the inventory reserve adjustment and severance charges, EPS would have been $1.15 in 2015.

"As one of FARO's founders and now assuming the interim CEO position, I am encouraged by the depth of talent in the organization, the robustness of our R&D programs and the strength of our long-standing customer relationships," stated Dr. Raab.  "I am as excited about FARO's future as I was in the early days of the Company's formation.  There is an array of opportunities to be explored in current and adjacent vertical markets where FARO can leverage its technologies and capabilities.  We are undertaking several important initiatives to target specific vertical markets, better leverage our sales organization through process modernization, and harmonize global functions to improve efficiencies and reduce SG&A as a percentage of sales while also accelerating the drumbeat of new product introductions.  We are looking forward to sharing these initiatives in more detail on our earnings call."

The financial information included in this press release is preliminary as the Company has not yet issued its audited financial statements and may differ from those results.

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 FARO's long-term growth, demand for and customer acceptance of FARO's products, anticipated improvement in the markets in which FARO operates, and FARO's product development and product launches. 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 "is," "are," "expects," "continues," "may," "will," 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:

  • the Company's inability to successfully identify and acquire target companies or achieve expected benefits from acquisitions that are consummated;
  • development by others of new or improved products, processes or technologies that make the Company's products less competitive or obsolete;
  • the Company's inability to maintain its technological advantage by developing new products and enhancing its existing products;
  • 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 financial conditions;
  • the impact of fluctuations of foreign exchange rates; and
  • 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, 2015.

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, unless otherwise required by law.

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.

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 other offices in the United States, Canada, Mexico, Brazil, Germany, the United Kingdom, France, Spain, Italy, Poland, Turkey, the Netherlands, Switzerland, Portugal, India, China, Malaysia, Vietnam, Thailand, South Korea, and Japan.

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

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three Months Ended 

Twelve Months Ended 

(in thousands, except share and per share data)

December 31, 2015

December 31, 2014

December 31, 2015

December 31, 2014

SALES

Product

$                 77,558

$                 89,362

$               259,842

$               284,147

Service

13,769

14,791

57,706

57,679

Total sales

91,327

104,153

317,548

341,826

COST OF SALES 

Product

33,331

36,809

113,983

114,994

Service

9,347

10,071

35,888

37,918

Total cost of sales (exclusive of depreciation and amortization, shown separately below)

42,678

46,880

149,871

152,912

GROSS PROFIT

48,649

57,273

167,677

188,914

OPERATING EXPENSES

Selling and marketing

21,194

23,950

79,306

80,157

General and administrative

10,368

10,367

37,474

36,479

Depreciation and amortization

3,195

1,908

11,217

7,428

Research and development

7,128

8,070

26,558

27,510

Total operating expenses

41,885

44,295

154,555

151,574

INCOME FROM OPERATIONS

6,764

12,978

13,122

37,340

OTHER (INCOME) EXPENSE

Interest expense (income), net

(19)

(27)

(55)

(88)

Other expense (income), net

(1,150)

(16)

371

(94)

INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)

7,933

13,021

12,806

37,522

INCOME TAX (BENEFIT) EXPENSE

(952)

1,899

(7)

3,873

NET INCOME 

$                   8,885

$                 11,122

$                 12,813

$                 33,649

NET INCOME PER SHARE - BASIC

$                     0.52

$                     0.64

$                     0.74

$                     1.95

NET INCOME PER SHARE - DILUTED

$                     0.52

$                     0.64

$                     0.74

$                     1.93

Weighted average shares - Basic

17,051,427

17,288,507

17,288,665

17,247,727

Weighted average shares - Diluted

17,103,622

17,467,066

17,389,473

17,416,453

 

 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

December 31,

December 31,

(in thousands, except share data)

2015

2014

ASSETS

Current assets:

Cash and cash equivalents

$      107,356

$      109,289

Short-term investments

42,994

64,995

Accounts receivable, net

69,918

83,959

Inventories, net

45,571

43,094

Deferred income taxes, net

7,792

5,936

Prepaid expenses and other current assets

18,527

16,079

Total current assets

292,158

323,352

Property and equipment:

Machinery and equipment

54,124

45,254

Furniture and fixtures

5,945

6,156

Leasehold improvements

18,471

19,676

    Property and equipment at cost

78,540

71,086

Less: accumulated depreciation and amortization

(42,594)

(41,741)

    Property and equipment, net

35,946

29,345

Goodwill

26,371

19,205

Intangible assets, net

15,985

9,109

Service and sales demonstration inventory, net

33,709

36,886

Deferred income taxes, net

4,050

6,624

Other long-term assets

967

942

Total assets

$      409,186

$      425,463

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$        11,345

$        15,437

Accrued liabilities

22,574

26,127

Current portion of unearned service revenues

26,114

23,572

Customer deposits

2,998

2,046

      Total current liabilities

63,031

67,182

Unearned service revenues - less current portion

15,025

13,799

Deferred income tax liability

686

-

Other long-term liabilities

2,800

628

Total liabilities

81,542

81,609

Shareholders' equity:

Preferred stock - par value $0.01, 10,000,000 shares authorized; none issued

-

-

Common stock - par value $.001, 50,000,000 shares authorized; 18,077,594 and 17,997,665 issued; 16,588,118 and 17,317,430 outstanding, respectively

18

18

Additional paid-in capital

206,996

200,090

Retained earnings

172,329

159,516

Accumulated other comprehensive loss

(19,861)

(6,695)

Common stock in treasury, at cost - 1,489,476 and 680,235 shares, respectively

(31,838)

(9,075)

Total shareholders' equity

327,644

343,854

Total liabilities and shareholders' equity

$      409,186

$      425,463

 

 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

Years ended December 31, 

(in thousands)

2015

2014

2013

Net income

$                 12,813

$                 33,649

$                 21,509

Currency translation adjustments, net of tax

(13,166)

(13,961)

925

Comprehensive (loss) income

$                 (353)

$                 19,688

$                 22,434

 

 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Years Ended December 31,

(in thousands)

2015

2014

2013

CASH FLOWS FROM:

OPERATING ACTIVITIES:

Net income 

$                 12,813

$                 33,649

$                 21,509

Adjustments to reconcile net income to net cash provided by

    operating activities:

Depreciation and amortization

11,217

7,428

7,038

Compensation for stock options and restricted stock units

4,306

4,678

4,367

Provision for bad debts (net recovery of)

346

(306)

1,001

Loss on disposal of assets

947

-

-

Write-down of inventories

10,878

3,272

1,167

Deferred income tax (benefit) expense

(655)

(4,707)

645

Income tax benefit from exercise of stock options

(313)

(169)

(969)

Change in operating assets and liabilities:

Decrease (increase) in:

Accounts receivable

9,584

(24,587)

(4,053)

Inventories

(18,021)

(21,995)

(1,286)

Prepaid expenses and other assets

(2,834)

(3,501)

(3,346)

(Decrease) increase in:

Accounts payable and accrued liabilities

(6,401)

8,867

6,108

Income taxes payable

-

(1,560)

(2,028)

Customer deposits

1,114

(724)

353

Unearned service revenues

5,051

5,313

3,772

        Net cash provided by operating activities

28,032

5,658

34,278

INVESTING ACTIVITIES:

Proceeds from sale of investments

22,001

-

-

Purchases of property and equipment

(14,169)

(18,722)

(4,350)

Payments for intangible assets

(2,140)

(1,221)

(2,204)

Purchase of business acquired, net of cash 

(12,066)

(1,150)

-

        Net cash used in investing activities

(6,374)

(21,093)

(6,554)

 FINANCING ACTIVITIES:

Payments on capital leases

(8)

(8)

(93)

Repurchase of common stock

(22,763)

-

-

Income tax benefit from exercise of stock options

313

169

969

Proceeds from issuance of stock, net

2,287

3,369

5,444

        Net cash (used in) provided by financing activities

(20,171)

3,530

6,320

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

(3,420)

(3,436)

(2,647)

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(1,933)

(15,341)

31,397

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

109,289

124,630

93,233

CASH AND CASH EQUIVALENTS, END OF YEAR

$               107,356

$               109,289

$               124,630

 

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SOURCE FARO Technologies, Inc.



RELATED LINKS

http://www.faro.com