FARO Reports Third Quarter 2015 Financial Results

03 Nov, 2015, 16:02 ET from FARO Technologies, Inc.

LAKE MARY, Fla., Nov. 3, 2015 /PRNewswire/ -- FARO Technologies, Inc. (NASDAQ: FARO) today announced its financial results for the third quarter ended September 26, 2015.

The Company's third quarter 2015 sales at $72.5 million decreased 11.8% from $82.2 million in the third quarter of 2014.  Adjusted for $6.4 million of unfavorable foreign exchange impacts, sales were 4% lower than the prior year period. 

Gross margin for the quarter was 48.1%, compared with 56.0% in the prior year period.  Based upon the planned timing of new product introductions and in light of lower-than-anticipated 2015 sales, the inventory reserve was increased by $7.9 million in the quarter.  Excluding this adjustment, gross margin was 59.0%, benefitting from continuing strong sales momentum of the Laser Line Probe HD and a more favorable product mix.

Operating income for the quarter was a loss of $0.9 million, compared with income of $9.0 million in the prior year period, reflecting lower sales and an increase in the inventory reserve offset by certain expense reductions.  In the third quarter of 2015, the Company continued its commitment to new, disruptive product development by investing $5.8 million, or 8.0% of sales, in research and development spending.

Net income was a loss of $0.9 million, or a loss of $0.05 per share, in the third quarter of 2015 compared with income of $11.2 million, or $0.64 per share, in the prior year period.  In the third quarter of 2014, excluding a discrete tax benefit of $4.5 million, net income was $6.7 million, or $0.38 per share.

The Board of Directors has authorized an increase in the existing share repurchase program from $30 million to $50 million of FARO common stock.   The Company plans to repurchase shares opportunistically, subject to trading restrictions and other legal requirements.

"Third quarter sales primarily reflect continued unfavorable foreign currency translation, slow-down of capital spending around the world, particularly in China and Japan, and macro-economic turmoil in Brazil," stated Jay Freeland, FARO's President and CEO.  "A number of our vertical markets experienced a slow-down late in the third quarter, especially the Architecture, Engineering and Construction vertical challenging our closure rate of Focus Laser Scanner sales.  In response to weaker customer capital spending, we are re-aligning our cost structure immediately by reducing our global work force by approximately 8% and implementing further cost reduction initiatives, without inhibiting our long-term growth strategy." 

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, 2014.

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 

Nine Months Ended 

(in thousands, except share and per share data)

September 26, 2015

September 27, 2014

September 26, 2015

September 27, 2014

SALES

Product

$                57,803

$                67,581

$              182,284

$              194,785

Service

14,704

14,658

43,937

42,888

Total sales

72,507

82,239

226,221

237,673

COST OF SALES 

Product

28,943

26,640

80,652

78,185

Service

8,693

9,558

26,541

27,847

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

37,636

36,198

107,193

106,032

GROSS PROFIT

34,871

46,041

119,028

131,641

OPERATING EXPENSES

Selling and marketing

18,944

19,059

58,112

56,207

General and administrative

8,239

8,832

27,106

26,112

Depreciation and amortization

2,790

1,805

8,022

5,520

Research and development

5,820

7,352

19,430

19,440

Total operating expenses

35,793

37,048

112,670

107,279

(LOSS) INCOME FROM OPERATIONS

(922)

8,993

6,358

24,362

OTHER (INCOME) EXPENSE

Interest expense (income), net

7

(23)

(36)

(61)

Other expense (income), net

131

(89)

1,521

(78)

(LOSS) INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)

(1,060)

9,105

4,873

24,501

INCOME TAX (BENEFIT) EXPENSE

(176)

(2,118)

945

1,974

NET (LOSS) INCOME 

$                   (884)

$                11,223

$                  3,928

$                22,527

NET (LOSS) INCOME PER SHARE - BASIC

$                  (0.05)

$                   0.65

$                   0.23

$                   1.31

NET (LOSS) INCOME PER SHARE - DILUTED

$                  (0.05)

$                   0.64

$                   0.22

$                   1.29

Weighted average shares - Basic

17,395,824

17,258,029

17,372,562

17,233,879

Weighted average shares - Diluted

17,395,824

17,410,391

17,496,190

17,396,788

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

September 26,

2015

December 31,

(in thousands, except share data)

(unaudited)

2014

ASSETS

Current assets:

 Cash and cash equivalents

$        95,975

$      109,289

 Short-term investments

64,984

64,995

 Accounts receivable, net

63,811

83,959

 Inventories, net

55,110

43,094

 Deferred income taxes, net

5,508

5,936

 Prepaid expenses and other current assets

21,997

17,021

 Total current assets

307,385

324,294

Property and equipment:

 Machinery and equipment

50,493

45,254

 Furniture and fixtures

5,921

6,156

 Leasehold improvements

19,537

19,676

     Property and equipment at cost

75,951

71,086

 Less: accumulated depreciation and amortization

(42,215)

(41,741)

     Property and equipment, net

33,736

29,345

Goodwill

26,600

19,205

Intangible assets, net

16,171

9,109

Service and demonstration inventory, net

32,666

36,886

Deferred income taxes, net

6,498

6,624

Total assets

$      423,056

$      425,463

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

 Accounts payable

$        12,473

$        15,437

 Accrued liabilities

21,230

26,127

 Current portion of unearned service revenues

23,771

23,572

 Customer deposits

1,517

2,046

       Total current liabilities

58,991

67,182

Unearned service revenues - less current portion

13,176

13,799

Deferred income tax liability

1,942

-

Other long-term liabilities

2,858

628

Total liabilities

76,967

81,609

Shareholders' equity:

 Common stock - par value $.001, 50,000,000 shares authorized; 18,077,594 and 17,997,665 issued; 17,397,359 and 17,317,430 outstanding, respectively

18

18

 Additional paid-in capital

206,459

200,090

 Retained earnings

163,444

159,516

 Accumulated other comprehensive loss

(14,757)

(6,695)

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

(9,075)

(9,075)

Total shareholders' equity

346,089

343,854

Total liabilities and shareholders' equity

$      423,056

$      425,463

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Nine Months Ended

(in thousands)

September 26, 2015

September 27, 2014

CASH FLOWS FROM:

OPERATING ACTIVITIES:

 Net income 

$                   3,928

$                 22,527

 Adjustments to reconcile net income to net cash provided by 

    operating activities:

   Depreciation and amortization

8,022

5,520

   Compensation for stock options and restricted stock units

3,791

3,669

   Provision for (net recovery of) bad debts

462

(272)

   Loss on disposal of assets

877

-

   Write-down of inventories

9,560

3,588

   Deferred income tax expense (benefit) 

556

(5,804)

   Income tax benefit from exercise of stock options

(292)

(137)

Change in operating assets and liabilities:

 Decrease (increase) in:

   Accounts receivable

17,205

(5,392)

   Inventories

(21,693)

(16,553)

   Prepaid expenses and other current assets

(5,740)

(3,032)

 (Decrease) increase in:

   Accounts payable and accrued liabilities

(8,779)

(805)

   Customer deposits

(473)

(1,659)

   Unearned service revenues

467

2,827

         Net cash provided by operating activities

7,891

4,477

INVESTING ACTIVITIES:

 Purchases of property and equipment

(8,462)

(10,306)

 Payments for intangible assets

(1,751)

(1,080)

 Purchase of businesses acquired, net of cash

(12,066)

(1,000)

        Net cash used in investing activities

(22,279)

(12,386)

FINANCING ACTIVITIES:

 Payments on capital leases

(6)

(6)

 Income tax benefit from exercise of stock options

292

137

 Proceeds from issuance of stock, net

2,286

2,522

         Net cash provided by financing activities

2,572

2,653

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

(1,498)

(2,464)

DECREASE IN CASH AND CASH EQUIVALENTS

(13,314)

(7,720)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

109,289

124,630

CASH AND CASH EQUIVALENTS, END OF PERIOD

$                 95,975

$               116,910

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

Three Months Ended 

Nine Months Ended 

(in thousands)

September 26, 2015

September 27, 2014

September 26, 2015

September 27, 2014

Net (loss) income

$                   (884)

$                11,223

$                  3,928

$                22,527

Currency translation adjustments, net of tax

(3,475)

(7,817)

(8,062)

(7,799)

Comprehensive (loss) income

$                (4,359)

$                  3,406

$                (4,134)

$                14,728

 

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SOURCE FARO Technologies, Inc.



RELATED LINKS

http://www.faro.com