LAKE MARY, Fla., Nov. 3 /PRNewswire-FirstCall/ -- FARO
Technologies, Inc. (NASDAQ:FARO) today reported record sales for
the third quarter of 2005 of approximately $32.6 million and an
increase of $9.2 million, or 39.3% from $23.4 million the third
quarter of 2004. New order bookings for the third quarter were
approximately $29.5 million, an increase of $6.5 million, or 28.3%
compared with approximately $23.0 million in the year-ago quarter.
The Company reported net income for the third quarter ended October
1, 2005 of approximately $2.6 million or $0.18 per diluted share,
compared to approximately $3.1 million or $0.22 per diluted share
in the third quarter of 2004. Third quarter 2005 results included a
pre-tax cost of $1.6 million for inventory costing and consumption
variances arising from the Company's implementation of a new
enterprise resource planning ("ERP") system. (Logo:
http://www.newscom.com/cgi-bin/prnh/20000522/FLM035LOGO ) Gross
margin for the third quarter, which was negatively impacted by the
previously mentioned adjustment to cost of goods sold, was 54.3%
compared to 63.1% in the third quarter of 2004. Gross margin for
the first nine months was 58.6%, more in line with the Company's
historical gross margin. The Company has determined that issues
arising from the ERP system migration have been corrected and it
has implemented additional controls. SG&A expenses as a
percentage of sales dropped to the lowest level in eight quarters
to 36.2%, compared to 38.5% in the third quarter of 2004. G&A
expenses were 9.8% of sales in the third quarter compared to 13.7%
in the third quarter of 2004, resulting in part from the Company's
previously announced reductions in G&A expenses. "As part of
our long-term strategy we continue to take initiatives to position
ourselves as the only unified technology and growth leader in the
worldwide CAM2 market, a market which we began to define in 1998,"
said Simon Raab, CEO. "This year these steps include establishing a
regional headquarters and manufacturing facility in Asia, the
acquisition of a key new technology, highly-focused R&D
spending, expansion of our worldwide sales forces, efficiency
improvements, strategically competitive pricing to gain market
share and specific restructuring actions on our administrative
costs to accommodate what we expect will be ongoing legal battles
with a newly consolidated competition. "In the third quarter we
have already seen the benefits from some of these initiatives,
including Asia Pacific leading the way in new order growth, the
successful launch of our new Targeting Laser Tracker, and a
significant reduction in SG&A expenses as a percentage of
sales. Other initiatives will have an impact over the next few
quarters as the sales force we hired for the new Laser Scanner
product ramps up, and our Singapore manufacturing plant starts
shipping." The following table shows the sales and new order growth
by geographic region in the third quarter. All dollar figures are
in millions. 2005 2004 % increase Americas Sales $13.5 $9.9 36.4 %
New Orders $13.0 $10.8 20.4 % Europe/Africa Sales $10.5 $9.9 6.1 %
New Orders $10.7 $9.3 15.1 % Asia/Pacific Sales $8.7 $3.5 148.6 %
New Orders $5.8 $2.9 100.0 % Cash used in operating activities was
$7.4 million year to date primarily to fund working capital needs
commensurate with higher sales, including inventory to equip the
additional sales staff with demo equipment, acquisition and
integration of the new laser scanner product line and to supply the
new Asia service center and production facility. Outlook for the
remainder of 2005 and 2006 We are expecting sales in the fourth
quarter of 2005 to be $33-$35 million, which would bring our fiscal
2005 sales to $124-$126 million. Based on gross margin of 56%-59%
and a 15%-17% tax rate in the fourth quarter we expect earnings to
be $0.19-$0.27, which would result in earnings for fiscal 2005 of
$0.75-$0.83. "In 1998 we stated that our five-year goal was to
position ourselves technologically, by sector and by geography for
what would be major consolidation within five to seven years. Our
strategic planning and significant investment has resulted in a
product line that is complete and leads in price/performance,
strong installations in all major sectors and direct representation
in all the world's major industrial markets," Raab continued. "We
believe that the recent competitive consolidation within the CAM2
market is a direct result of our successes to date." "Our strategy
for the next five years is to use this platform to grow the top
line while fine-tuning the efficiencies and technologies to
increase medium and long-term profitability. One example of this
from the third quarter is the achievement of bringing
Administrative expenses to less than 10% of sales despite the new
Sarbanes-Oxley and litigation expenses. This shows that we are
capable of leveraging our operations and enhancing our
profitability for tomorrow," Raab stated. "Based on the investments
in new markets and sales force expansion we fully expect to be able
to sustain the 25%-30% sales growth rates in 2006 with improved
profitability," Raab concluded. Financial Tables Follow 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 our
plans, objectives, projections, expectations, assumptions,
strategies, or future events. 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 "may,"
"believes," "anticipates," "expects," "intends," "plans," "seeks,"
"estimates," "will," "should," "could," "projects," "forecast,"
"target," "goal," and similar expressions or discussions of our
strategy or other intentions identify forward-looking statements.
Other written or oral statements, which constitute forward-looking
statements, also may be made by the Company from time to time.
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 forward-looking statements include, but are not
limited to: * The inability of our news sales people hired in the
first half of 2005 to become fully trained and effective in 3-6
months such as to reduce our selling expenses as a percentage of
sales in the third half of the year; * the inability to protect our
patents and other proprietary rights in the United States and
foreign countries and the assertion and ultimate outcome of
infringement claims against us, including the pending suit by
Cimcore-Romer against us; * Our inability to effectively integrate
the iQvolution acquisition and achieve the expected benefits from
it; * Our inability to keep our financial results within our target
goals as a result of various potential factors, such as investments
in potential acquisitions or strategic sales, product, or other
initiatives; * The fact that the market potential for the CAM2
market and the potential adoption rate for our products are
difficult to quantify and predict; * The effects of increased
competition as a result of recent consolidation in the CAM2 market;
* Difficulty in predicting our effective tax rate; * 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 the financial condition of our
customers; * 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 broad market for measurement and inspection devices; * Our
inability to continue to grow sales in the Asia Pacific region; *
Our inability to find less expensive alternatives to stock options
to attract and retain employees; * Risks associated with expanding
international operations, such as fluctuations in currency exchange
rates, difficulties in staffing and managing foreign operations,
political and economic instability, and the burdens of complying
with a wide variety of foreign laws and labor practices; * The loss
of our Chief Executive Officer, our President and Chief Operating
Officer, our Executive Vice President and Treasurer, or our Chief
Financial Officer or other key personnel; * The failure to
effectively manage our growth; * The loss of a key supplier and the
inability to find a sufficient alternative supplier in a reasonable
period or on commercially reasonable terms; and * the other risks
detailed in the Company's Annual Report on Form 10-K and other
filings from time to time with the Securities and Exchange
Commission. About FARO: FARO Technologies, Inc. (NASDAQ:FARO) and
its international subsidiaries design, develop, and market software
and portable, computerized measurement devices. The Company's
products allow manufacturers to perform three- dimensional
inspections of parts and assemblies on the shop floor. This helps
eliminate manufacturing errors, and thereby increases productivity
and profitability for a variety of industries in FARO's worldwide
customer base. Principal products include the FARO Gage and
Gage-Plus(TM), Platinum and Titanium model Faro Arms(R), SI and X
model FARO Laser Trackers(R), Laser Scanner LS and a CAM2(R) family
of advanced CAD-based measurement and reporting software. FARO
Technologies is ISO 9001 certified and Guide 25 approved. Learn
more at http://www.faro.com/ . FARO TECHNOLOGIES, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three
Months Ended Nine Months Ended (in thousands, except per Oct 1, Oct
2, Oct 1, Oct 2, share data) 2005 2004 2005 2004 SALES $32,598
$23,376 $91,109 $68,478 COST OF SALES (exclusive of depreciation
and amortization, shown separately below) 14,913 8,619 37,691
25,029 Gross profit 17,685 14,757 53,418 43,449 OPERATING EXPENSES:
Selling 8,631 5,803 25,654 17,600 General and administrative 3,169
3,217 11,005 8,416 Depreciation and amortization 967 567 2,447
1,661 Research and development 1,864 1,336 4,824 3,984 Total
operating expenses 14,631 10,923 43,930 31,661 INCOME FROM
OPERATIONS 3,054 3,834 9,488 11,788 OTHER INCOME (EXPENSE) Interest
income 116 86 419 234 Other (expense) income, net (191) (164) (330)
215 Interest expense (4) (1) (83) (6) INCOME BEFORE INCOME TAX
2,975 3,755 9,494 12,231 INCOME TAX EXPENSE 360 690 1,498 2,215 NET
INCOME $2,615 $3,065 $7,996 $10,016 NET INCOME PER SHARE - BASIC
$0.18 $0.22 $0.56 $0.73 NET INCOME PER SHARE - DILUTED $0.18 $0.22
$0.56 $0.72 FARO TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS (UNAUDITED) October 1, December 31, (in thousands,
except share data) 2005 2004 ASSETS Current Assets: Cash and cash
equivalents $10,959 $16,357 Short-term investments 10,990 22,485
Accounts receivable, net 28,424 22,484 Inventories 26,069 16,378
Deferred income taxes, net 2,772 744 Prepaid expenses and other
current assets 2,943 2,538 Total current assets 82,157 80,986
Property and Equipment: Machinery and equipment 6,630 4,352
Furniture and fixtures 2,881 2,394 Leasehold improvements 1,635 910
Property and equipment at cost 11,146 7,656 Less: accumulated
depreciation and amortization (5,297) (3,641) Property and
equipment, net 5,849 4,015 Goodwill 14,030 8,077 Intangible assets,
net 6,900 3,568 Service Inventory 3,826 4,159 Deferred income
taxes, net 3,286 4,273 Total Assets $116,048 $105,078 LIABILITIES
AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable
$6,355 $4,736 Accrued liabilities 6,416 7,252 Income taxes payable
995 104 Current portion of unearned service revenues 2,230 2,663
Customer deposits 306 441 Current portion of long-term debt and
obligations under capital leases 104 104 Total current liabilities
16,406 15,300 Unearned service revenues - less current portion
1,557 474 Long-term debt and obligations under capital leases -
less current portion 254 146 Total Liabilities 18,217 15,920
Commitments and contingencies - See Note O Shareholders' Equity:
Common stock - par value $.001, 50,000,000 shares authorized;
14,455,222 and 14,004,092 issued; 14,252,778 and 13,964,092
outstanding, respectively 14 14 Additional paid-in-capital 82,641
78,282 Deferred compensation 221 505 Retained earnings 17,073 9,077
Accumulated other comprehensive (loss) income (1,967) 1,431 Common
stock in treasury, at cost - 40,000 shares (151) (151) Total
shareholders' equity 97,831 89,158 Total Liabilities and
Shareholders' Equity $116,048 $105,078 FARO TECHNOLOGIES, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine
Months Ended Oct 1, Oct 2, (in thousands) 2005 2004 CASH FLOWS
FROM: OPERATING ACTIVITIES: Net income $7,996 $10,016 Adjustments
to reconcile net income to net cash (used in) provided by operating
activities: Depreciation and amortization 2,447 1,661 Income tax
benefit from exercise of stock options 407 2,237 Deferred income
taxes (1,041) (588) Employee stock option (income) expense (175) 47
Change in operating assets and liabilities: Decrease (increase) in:
Accounts receivable, net (7,409) (1,672) Inventories (10,169)
(6,865) Prepaid expenses and other current assets (302) (875)
Increase (decrease) in: Accounts payable and accrued liabilities
(772) (215) Income taxes payable 924 (794) Customer deposits (187)
(219) Unearned service revenues 833 625 Net cash (used in) provided
by operating activities (7,448) 3,358 INVESTING ACTIVITIES:
Acquisition of iQvolution (6,385) -- Purchases of property and
equipment (2,936) (1,969) Payments for intangible assets (174)
(584) Purchases of short-term investments (3,300) (28,418) Proceeds
from short-term investments 14,795 21,370 Net cash provided by
(used in) investing activities 2,000 (9,601) FINANCING ACTIVITIES:
Payments on line of credit and capital leases (26) 24 Proceeds from
issuance of stock, net 344 1,122 Net cash provided by financing
activities 318 1,146 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (268) (154) DECREASE IN CASH AND CASH EQUIVALENTS
(5,398) (5,251) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
16,357 17,425 CASH AND CASH EQUIVALENTS, END OF PERIOD $10,959
$12,174 http://www.newscom.com/cgi-bin/prnh/20000522/FLM035LOGO
http://photoarchive.ap.org/ DATASOURCE: FARO Technologies, Inc.
CONTACT: Greg Fraser, EVP, FARO, +1-407-333-9911; or Vic Allgeier,
The TTC Group, +1-212-227-0997, for FARO Web site:
http://www.faro.com/
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