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.
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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
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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.
