FARO Reports Second Quarter 2012 Sales and Net Income Growth of 11.8%

LAKE MARY, Fla., July 31, 2012 /PRNewswire/ -- FARO Technologies, Inc. (NASDAQ: FARO) today announced results for the second quarter ended June 30, 2012.  Sales in the second quarter of 2012 increased 11.8% to $66.8 million, from $59.7 million in the second quarter of 2011.  The Company reported net income increased by 11.8% to $4.7 million, or $0.28 per share, in the second quarter of 2012, from $4.2 million, or $0.25 per share, in the second quarter of 2011.

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

New order bookings for the second quarter of 2012 were $71.0 million, an increase of 13.6% from $62.5 million in the second quarter of 2011. 

"We had strong results in Asia and the Americas with sales increasing by 28.8% and 17.4%, respectively, over the second quarter of last year.  Despite a sluggish and uncertain European economy, sales in Europe increased 9.4% when measured in Euros. However, due to the strengthening of the US dollar, European sales showed a modest decline of 2.9% when translated to US dollars," stated Jay Freeland, FARO's President and CEO.  "Net income grew at the same pace as revenue even after absorbing considerable expenses related to litigation, the completion of FCPA monitoring activities and the unfavorable effect of exchange rates."    

Gross margin for the second quarter of 2012 was 55.5%, compared to 56.1% in the second quarter of 2011 and reflects lower average selling prices resulting from promotions to reduce inventory in preparation for new product introductions and an increase in sales of the Laser Scanner products sold through our distributor channel.

The Company's operating margin for the second quarter increased to 10.3%, compared to 9.6% in the second quarter of 2011 and included approximately $1.2 million of professional fees related to the final review by the FCPA Monitor and an increase in patent litigation expenses of $0.4 million.  The Company does not expect to incur further expenses related to FCPA matter going forward.

"In the second half of the year, we expect continuing economic headwinds in Europe that could spill over to other regions.  Accordingly, we will be vigilant in cost containment while continuing to invest in product development and driving aggressive sales and marketing activities," 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 X and Xi; 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













June 30,


December 31,



2012


2011

(in thousands, except share data)


(Unaudited)



ASSETS





Current Assets:





  Cash and cash equivalents


$ 74,748


$ 64,540

  Short-term investments


64,989


64,997

  Accounts receivable, net


53,246


57,512

  Inventories, net


54,057


49,934

  Deferred income taxes, net


6,190


5,297

  Prepaid expenses and other current assets


10,617


9,207

    Total current assets


263,847


251,487

Property and Equipment:





  Machinery and equipment


30,587


29,171

  Furniture and fixtures


6,197


5,963

  Leasehold improvements


10,728


10,233

       Property and equipment at cost


47,512


45,367

Less: accumulated depreciation and amortization


(31,373)


(29,134)

       Property and equipment, net


16,139


16,233

Goodwill


18,339


18,610

Intangible assets, net


6,670


6,849

Service inventory


18,160


17,316

Deferred income taxes, net


2,240


2,296






Total Assets


$ 325,395


$ 312,791

LIABILITIES AND SHAREHOLDERS' EQUITY





Current Liabilities:





  Accounts payable


$ 9,295


$ 13,396

  Accrued liabilities


15,674


18,076

  Income taxes payable


2,448


2,682

  Current portion of unearned service revenues


16,751


15,638

  Customer deposits


4,339


4,072

  Current portion of obligations under capital leases


38


84

       Total current liabilities


48,545


53,948

Unearned service revenues - less current portion


9,232


9,540

Deferred tax liability, net


1,279


1,148

Obligations under capital leases - less current portion


65


257






Total Liabilities


59,121


64,893






Shareholders' Equity:





  Common stock - par value $.001, 50,000,000 shares authorized; 17,626,558
  and 17,381,110 issued; 16,946,323 and 16,700,875 outstanding, respectively


18


17

  Additional paid-in capital


178,361


169,780

  Retained earnings


92,844


81,360

  Accumulated other comprehensive income


4,126


5,816

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


(9,075)


(9,075)






Total Shareholders' Equity


266,274


247,898






Total Liabilities and Shareholders' Equity


$ 325,395


$ 312,791












FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)













Three Months Ended



Six Months Ended





















(in thousands, except share and per share data)


June 30, 2012


July 2, 2011



June 30, 2012


July 2, 2011

SALES










Product


$ 55,432


$ 49,692



$ 109,856


$ 92,650

Service


11,330


10,019



22,135


19,627

Total Sales


66,762


59,711



131,991


112,277

COST OF SALES










Product


22,320


19,349



42,826


34,922

Service


7,382


6,846



14,919


13,567

Total Cost of Sales (exclusive of depreciation and amortization, shown separately below)


29,702


26,195



57,745


48,489

GROSS PROFIT


37,060


33,516



74,246


63,788











OPERATING EXPENSES:










Selling


15,841


15,309



31,879


29,461

General and administrative


8,134


6,917



14,762


13,507

Depreciation and amortization


1,689


1,722



3,368


3,336

Research and development


4,525


3,814



8,933


7,446

Total operating expenses


30,189


27,762



58,942


53,750

INCOME FROM OPERATIONS


6,871


5,754



15,304


10,038

OTHER (INCOME) EXPENSE










Interest income


(20)


(39)



(121)


(65)

Other (income) expense, net


401


124



261


(5)

Interest expense


7


2



20


31

INCOME BEFORE INCOME TAX EXPENSE


6,483


5,667



15,144


10,077

INCOME TAX EXPENSE


1,749


1,434



3,660


2,601

NET INCOME


$ 4,734


$ 4,233



$ 11,484


$ 7,476

NET INCOME PER SHARE - BASIC


$ 0.28


$ 0.26



$ 0.68


$ 0.46











NET INCOME PER SHARE - DILUTED


$ 0.28


$ 0.25



$ 0.67


$ 0.45











Weighted average shares - Basic


16,921,012


16,448,229



16,861,221


16,349,190











Weighted average shares - Diluted


17,140,115


16,845,877



17,157,185


16,724,019










FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)












Three Months Ended


Six Months Ended

(in thousands)


June 30, 2012


July 2, 2011


June 30, 2012


July 2, 2011



















Net income


$ 4,734


$ 4,233


$ 11,484


$ 7,476

Currency translation adjustments


(3,022)


2,771


(1,688)


5,342

Comprehensive income


$ 1,712


$ 7,004


$ 9,796


$ 12,818
















FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)








Six Months Ended






(in thousands)


June 30, 2012


July 2, 2011

CASH FLOWS FROM:





OPERATING ACTIVITIES:





  Net income


$ 11,484


$ 7,476

  Adjustments to reconcile net income to net cash provided by





  operating activities:





    Depreciation and amortization


3,368


3,336

    Compensation for stock options and restricted stock units


1,866


1,366

    Provision for (net recovery of) bad debts


(84)


1,082

    Deferred income tax benefit


(744)


(16)

  Change in operating assets and liabilities:





     Decrease (increase) in:





    Accounts receivable


3,535


5,920

    Inventories, net


(6,173)


(14,773)

    Prepaid expenses and other current assets


(1,569)


(2,032)

    Income tax benefit from exercise of stock options


(1,114)


(1,013)

  Increase (decrease) in:





    Accounts payable and accrued liabilities


(6,313)


44

    Income taxes payable


933


197

    Customer deposits


317


(1,723)

    Unearned service revenues


1,191


2,200

             Net cash provided by operating activities


6,697


2,064






INVESTING ACTIVITIES:





   Purchases of property and equipment


(2,533)


(2,534)

   Payments for intangible assets


(443)


(425)

             Net cash used in investing activities


(2,976)


(2,959)






FINANCING ACTIVITIES:





   Payments on capital leases


(98)


(117)

   Income tax benefit from exercise of stock options


1,114


1,013

   Proceeds from issuance of stock, net


5,601


6,875

            Net cash provided by financing activities


6,617


7,771






EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS


(130)


(259)






INCREASE IN CASH AND CASH EQUIVALENTS


10,208


6,617






CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD


64,540


50,722






CASH AND CASH EQUIVALENTS, END OF PERIOD


$ 74,748


$ 57,339

 

SOURCE FARO Technologies, Inc.



RELATED LINKS
http://www.faro.com

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