FARO Reports Third Quarter 2015 Financial Results

Nov 03, 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
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