EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

Keith Bair, Senior Vice President and CFO

keith.bair@FARO.com, 407-333-9911

FARO Reports Sales Decline of 31.8% for Q1 2009;

Orders Decrease by 41.7%

LAKE MARY, FL., April 29, 2009 – FARO Technologies, Inc. (NASDAQ: FARO) today announced results for the first quarter ended April 4, 2009. Net loss for the first quarter was $6.6 million, or $0.41 per diluted share, a decrease of $10.0 million, compared to net income of $3.4 million, or $0.20 per diluted share, in the first quarter of 2008.

Sales for the first quarter of 2009 decreased $14.7 million, or 31.8%, to $31.4 million from $46.1 million in the first quarter of 2008. New order bookings for the first quarter were $27.4 million, a decrease of $19.6 million, or 41.7%, compared with $47.0 million in the first quarter of 2008.

“Orders and sales were significantly lower in the first quarter of this year and the weakness was consistent across all regions and verticals. Economic conditions are making it difficult for our customers to make capital goods purchases,” stated Jay Freeland, FARO’s President & CEO. “However, lead count and demo activity remain strong, and despite the current economic climate, we have a solid balance sheet. As such, we remain committed to finding innovative ways to meet our customers’ needs during their tough times and returning FARO to a pattern of growth and profitability.”

The Company initiated two reductions-in-force during the quarter, effective February 20, and April 3, 2009, respectively. In aggregate, these initiatives reduced the Company’s workforce by approximately 21% and compensation costs on an annualized basis by approximately $11.9 million. Total severance costs incurred in the quarter were approximately $1.7 million.


Gross margin for the first quarter of 2009 was 51.7%, compared to 60.1% in the first 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.

Selling expenses as a percentage of sales increased to 40.8% in the first quarter of 2009 from 31.3% in the first quarter of 2008 primarily as a result of the decline in sales. Selling expenses in the first quarter of 2009 decreased by $1.6 million to $12.8 million.

General and administrative expenses increased to 20.0% of sales for the first quarter of 2009 from 12.3% in the first quarter of 2008. General and administrative expenses in the first quarter of 2009 increased by $0.7 million to $6.3 million.

R&D expenses were $3.5 million in the first quarter of 2009, an increase from $2.7 million in the first quarter of 2008. R&D expenses were 11.1% of sales in the first quarter of 2009 compared to 5.9% of sales in the first quarter of 2008.

The operating loss for the first quarter of 2009 was $7.6 million, a decrease of $11.5 million from an operating profit of $3.9 million in the first quarter of 2008.

Income tax expense decreased by $2.5 million to a benefit of $1.6 million for the first quarter of 2009, from an expense of $0.9 million for the first quarter of 2008 due to a decrease in pretax income. The Company’s effective tax rate decreased to 19.1% for the first quarter of 2009 from 21.8% in the first quarter of 2008.

“We expect the economic environment to continue to be weak throughout 2009. We have taken significant steps to reduce our operating costs through reductions in force and other cost-cutting measures and will continue to do so as necessary. These are very challenging times for most companies, but we believe FARO will remain well-positioned through all of it,” 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, our plans and strategies, our ability to grow and achieve profitability and reduce operating costs, and our future 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 “expect,” “believe,” “will,” 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:

 

 

our inability to further penetrate our customer base;

 

 

development by others of new or improved products, processes or technologies that make our products obsolete or less competitive;

 

 

our inability to maintain our technological advantage by developing new products and enhancing our existing products;

 

 

the cyclical nature of the industries of our customers and material adverse changes in our 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;

 

 

difficulty quantifying and predicting the market potential for the CAM2 market and the potential adoption rate for our products;

 

 

fluctuations in the Company’s annual and quarterly operating results and the inability to achieve its financial operating targets;

 

 

further reductions in gross margins due to changing mix of products sold and the different gross margins on different products;

 

 

the inability of our products to displace traditional measurement devices and attain broad market acceptance;

 

 

the impact of competitive products and pricing in the CAM2 market and the broader market for measurement and inspection devices;

 

 

the effects of increased competition as a result of recent consolidation in the CAM2 market;

 

 

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;

 

 

variations in the effective income tax rate and the difficulty in predicting the tax rate on a quarterly and annual basis; and

 

 

the loss of key suppliers and the inability to find sufficient alternative suppliers in a reasonable period or on commercially reasonable terms; 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, 2008.

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 19,600 installations and 9,200 customers globally, FARO Technologies, Inc. designs, develops, and markets portable, computerized measurement 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.

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FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

     Three Months Ended  

(in thousands, except share and per share data)

   April 4,
2009
    March 29,
2008
 

SALES

    

Product

   $ 24,214     $ 39,327  

Service

     7,235       6,763  
                

Total Sales

     31,449       46,090  
                

COST OF SALES

    

Product

     9,127       13,534  

Service

     6,062       4,850  
                

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

     15,189       18,384  
                

GROSS PROFIT

     16,260       27,706  

OPERATING EXPENSES:

    

Selling

     12,824       14,428  

General and administrative

     6,299       5,646  

Depreciation and amortization

     1,291       1,015  

Research and development

     3,479       2,713  
                

Total operating expenses

     23,893       23,802  
                

(LOSS) INCOME FROM OPERATIONS

     (7,633 )     3,904  
                

OTHER (INCOME) EXPENSE

    

Interest income

     (158 )     (621 )

Other expense (income), net

     661       (237 )

Interest expense

     3       441  
                

(LOSS) INCOME BEFORE INCOME TAX (BENEFIT) EXPENSE

     (8,139 )     4,321  

INCOME TAX (BENEFIT) EXPENSE

     (1,554 )     943  
                

NET (LOSS) INCOME

   $ (6,585 )   $ 3,378  
                

NET (LOSS) INCOME PER SHARE - BASIC

   $ (0.41 )   $ 0.20  
                

NET (LOSS) INCOME PER SHARE - DILUTED

   $ (0.41 )   $ 0.20  
                

Weighted average shares - Basic

     16,227,363       16,606,673  
                

Weighted average shares - Diluted

     16,227,363       16,738,891  
                


FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

(in thousands, except share data)

   Unaudited
April, 4
2009
    Audited
December 31,
2008
 

ASSETS

    

Current Assets:

    

Cash and cash equivalents

   $ 61,227     $ 23,494  

Short-term investments

     32,975       81,965  

Accounts receivable, net

     30,701       49,713  

Inventories

     33,584       33,444  

Deferred income taxes, net

     6,426       5,581  

Prepaid expenses and other current assets

     8,746       7,879  
                

Total current assets

     173,659       202,076  
                

Property and Equipment:

    

Machinery and equipment

     18,435       22,685  

Furniture and fixtures

     4,833       4,099  

Leasehold improvements

     8,560       3,956  
                

Property and equipment at cost

     31,828       30,740  

Less: accumulated depreciation and amortization

     (17,220 )     (16,604 )
                

Property and equipment, net

     14,608       14,136  
                

Goodwill

     18,679       18,951  

Intangible assets, net

     8,338       8,580  

Service inventory

     12,683       12,843  

Deferred income taxes, net

     1,799       2,728  
                

Total Assets

     229,766       259,314  
                

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

Current Liabilities:

    

Accounts payable

     5,023       10,813  

Accrued liabilities

     10,651       14,032  

Income taxes payable

     —         1,988  

Current portion of unearned service revenues

     11,313       11,501  

Customer deposits

     375       425  

Current portion of obligations under capital leases

     58       87  
                

Total current liabilities

     27,420       38,846  

Unearned service revenues - less current portion

     6,078       6,772  

Deferred tax liability, net

     1,071       1,107  

Obligations under capital leases - less current portion

     256       281  
                

Total Liabilities

     34,825       47,006  
                

Shareholders’ Equity:

    

Common stock - par value $.001, 50,000,000 shares authorized; 16,750,269 and 16,741,488 issued; 16,048,926 and 16,658,552 outstanding, respectively

     17       17  

Additional paid-in-capital

     149,997       149,298  

Retained earnings

     50,913       57,497  

Accumulated other comprehensive income

     3,089       5,742  

Common stock in treasury, at cost - 680,235 and 55,808 shares

     (9,075 )     (246 )
                

Total Shareholders’ Equity

     194,941       212,308  
                

Total Liabilities and Shareholders’ Equity

   $ 229,766     $ 259,314  
                


FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

     Three Months Ended  
     April 4,
2009
    March 29,
2008
 

CASH FLOWS FROM:

    

OPERATING ACTIVITIES:

    

Net (loss) income

   $ (6,585 )   $ 3,378  

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

    

Depreciation and amortization

     1,291       1,015  

Compensation for stock options and restricted stock units

     538       422  

Provision for bad debts

     397       138  

Deferred income tax expense

     30       471  

Change in operating assets and liabilities:

    

Decrease (increase) in:

    

Accounts receivable

     17,669       8,815  

Inventories

     (1,078 )     (7,129 )

Prepaid expenses and other current assets

     (1,027 )     (2,745 )

Income tax benefit from exercise of stock options

     —         (43 )

Increase (decrease) in:

    

Accounts payable and accrued liabilities

     (8,835 )     (4,193 )

Income taxes payable

     (2,008 )     (1,135 )

Customer deposits

     (39 )     177  

Unearned service revenues

     (441 )     921  
                

Net cash (used in) provided by operating activities

     (88 )     92  
                

INVESTING ACTIVITIES:

    

Purchases of property and equipment

     (1,647 )     (577 )

Payments for intangible assets

     (188 )     (331 )

Purchases of short-term investments

     (32,975 )     (32,025 )

Proceeds from sales of short-term investments

     81,965       26,240  
                

Net cash provided by (used in) investing activities

     47,155       (6,693 )
                

FINANCING ACTIVITIES:

    

Payments on capital leases

     (55 )     (58 )

Income tax benefit from exercise of stock options

     —         43  

Repurchases of common stock

     (8,829 )     —    

Proceeds from issuance of stock, net

     —         80  
                

Net cash (used in) provided by financing activities

     (8,884 )     65  
                

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

     (450 )     224  
                

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

     37,733       (6,312 )

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

     23,494       25,798  
                

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 61,227     $ 19,486