FARO Exceeds Forecast for Fourth Quarter and Fiscal 2003 Net Income
Rises 81% on 52% Increase in Sales in Fourth Quarter Diluted EPS of
64 Cents on $71.8 Million in Sales in Fiscal 2003 LAKE MARY, Fla.,
March 11 /PRNewswire-FirstCall/ -- FARO Technologies, Inc. today
reported an increase of 81.3% in net income in the fourth quarter
of 2003 to $2.9 million, or 22 cents per diluted share, from $1.6
million, or 13 cents per diluted share in the fourth quarter of
2002. The Company exceeded the high end of its $2.1-$2.3 million
net income forecast by 26.1% primarily because of
higher-than-expected sales. Diluted shares increased 13.2% to
13,418,202 for the fourth quarter of 2003, compared to 11,853,732
for the year-ago quarter. (Logo:
http://www.newscom.com/cgi-bin/prnh/20000522/FLM035LOGO ) Sales for
the quarter increased 52.3% to $23.0 million, a record for any
quarter, from $15.1 million in the fourth quarter of 2002. Sales in
the fourth quarter exceeded the high end of the Company's
$18-$20million forecast by 15.0% as a result of
higher-than-expected sales in the Americas. Gross margin was 59.6%
in the quarter, a 2.8 percentage point improvement from 56.8% in
the fourth quarter of 2002. Selling, general and administrative
("SG&A") expenses decreased as a percentage of sales in the
quarter from 41.7% in 2002 to 37.4% in the fourth quarter of 2003.
Actual SG&A expenses were $8.6 million in the fourth quarter of
2003, an increase of $2.3 million, or 36.5% from $6.3 million in
the year- ago quarter. Income from operations increased $1.6
million, or 145.5%, from $1.1 million in the fourth quarter of 2002
to $2.7 million in the fourth quarter of 2003. This increase was
primarily a result of an increase in gross profit of $5.1 million,
offset by the $2.3 million increase in SG&A expenses noted
above. Summary of 2003 Year Net income in 2003 increased $10.3
million to $8.3 million, or 64 cents per diluted share, from a loss
of $2.0 million, or 17 cents per share in 2002. Net income exceeded
the high end of the Company's 58-60 cent forecast, issued before
the private placement of Company stock in November, by four cents.
Excluding a $1.1 million gain from settlement of litigation (and
the related income tax effect) in the third quarterof 2003, net
income in 2003 was $7.3 million, or 57 cents per diluted share.
Diluted shares totaled approximately 12.8 million in 2003, an
increase of 900,000 shares from approximately 11.9 million in 2002.
Sales increased $25.6 million, or 55.4% in 2003 to $71.8 million
from $46.2 million in 2002. Sales in 2003 exceeded the high end of
the Company's $67-$69 million forecast by $2.8 million. Sales grew
as a result of a) strong demand for the new generation Laser
Tracker and FaroArm products, which the Company introduced in mid
2002, b) an increase in sales and marketing activities, including
an increase in headcount from 106 in 2002 to 120 in 2003, and c) an
increase in the percentage of sales to existing customers from
approximately 43% in 2002 to approximately 62% in 2003. No single
customer represented more than 3% of sales in 2003. Gross margin
improved 4.5 percentage points to 58.9% in 2003 from 54.4% in 2002.
Regionally, sales in the Americas increased $15.4 million or 68.4%
to $37.9 million in 2003 from $22.5 million in 2002. Sales in the
Europe/Africa region increased $9.2 million or 49.7% to $27.7
million in 2003 from $18.5 million in 2002. Sales in the
Asia/Pacific region increased $900,000, or 17.0% to $6.2 million in
2003 compared to $5.3 million in 2002. SG&A expenses as a
percentage of sales decreased from 47.2% in 2002 to 38.2% in 2003.
Actual SG&A expenses increased $5.6 million or 25.7% to $27.4
million in 2003. The Company's performance-based compensation plan,
combined with an expanded and updated product line, has led to a
more motivated sales force and a drop in selling expenses as a
percentage of sales. Research and development expenses increased
$500,000 or 12.5% to $4.5 million and decreased as a percentage of
sales from 8.7% in 2002 to 6.3% in 2003. The Company had said that
R&D expenses would be sustained at a level of 5-7% of sales as
part of its target financial model. Income from operations
increased $10.3 million to $7.4 million or 10.3% of sales in 2003
from a loss of $2.9 million in 2002. This increase was primarily a
result of an increase in gross profit of $17.2 million, offset by
an increase of $6.8 million in operating expenses. The Company's
effective tax rate in 2003 was 12.8% of net income before income
tax. The primary reason for this relatively low tax rate was a
reduction in a valuation allowance of approximately $4.0 million,
of which $2.8 million related to the Company's use of net operating
losses in foreign jurisdictions, and $1.2 million related to
domestic tax assets. Backlog at December 31, 2003 was approximately
$7.5 million, compared to approximately $8.8 million at December
31, 2002, and $7.0 million at the end of the third quarter of 2003.
"We had a strong finish in 2003thanks to stronger than expected
performance in our Americas region," said Simon Raab, President and
CEO. "I am especially pleased that our initiative to better
penetrate existing customers appears to be paying off. Our 11.8%
operating margin for the fourth quarter brought the operating
margin for 2003 to 10.3%, and we are forecasting continued but
perhaps smaller improvements in operating margin in 2004 because of
some negative pressure on selling expenses in the first half of the
year with our Asian expansion." Outlook For First Quarter and
Fiscal 2004. We are expecting sales for the first quarter of 2004
to be $19-$20 million, a 42%-49% increase compared to $13.4 million
in the first quarter of 2003. However, at this time, we are
reiterating our 20-25% sales growth expectation for all of 2004,
and we plan to revise this expectation periodically as we gain
visibility of our growth rate. We expect net income for 2004 to be
consistent with our earlier forecast of a 25%-50% increase in net
income in 2004 compared to 2003 (excluding for this purpose the
$.07 per share gain in 2003 from an extraordinary item). In recent
quarters, we provided quarterly forward guidance because we were
entering into a private placement of our stock and needed to ensure
that all information was disclosed properly to our shareholders.
Going forward, we intend to discontinue quarterly guidance and the
short-term view they engender, and we will limit our updates to
guidance on the entire year. A conference call reviewing the fourth
quarter and fiscal year 2003 results will be held Friday, March 12,
2004, beginning at 11:00 AM (Eastern)/ 8:00 AM (Pacific). To
participate, please dial 800.245.3043 five minutes prior to start
time. International callers should dial 785.832.2041. The
Conference ID is "FARO." A recording of the call will be available
until June 12, 2004 by dialing 800.938.1603. International callers
should dial 402.220.1549. No access code is needed for the replay.
The call will be simultaneously broadcast over the Internet at:
http://www.firstcallevents.com/service/ajwz401491449gf12.html The
call will be archived at the Company's website at
http://www.faro.com/. 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," 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: * our inability to maintain historical or projected
sales growth rates; * our inability to maintain or reduce operating
expenses or maintain or increase our gross margin or operating
margin; * difficulties in ramping-up production in our new
manufacturing facility in Switzerland and completing the opening
and staffing of our sales offices in Asia; * increases in expenses
relating to our Asian expansion or our Swiss manufacturing
facility; * our inability to further penetrate our customer base; *
development by others of new or improved products, processes or
technologies that makeour 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 ofour customers; * the inability to protect our patents
and other proprietary rights in the United States and foreign
countries and the assertion of infringement claims against us; *
fluctuations in our annual and quarterly operating results as a
result of (i) the size and timing of customer orders, (ii) the
amount of time that it takes to fulfill orders and ship our
products, (iii) the length of our sales cycle to new customers and
the time and expense incurred in further penetrating our existing
customer base, (iv) increases in operating expenses required for
product development and new product marketing, (v) costs associated
with new product introductions, such as assembly line start-up
costs and low introductory period production volumes, (vi) the
timing and market acceptance of new products and product
enhancements, (vii) customer order deferrals in anticipation of new
products and product enhancements, (viii) our success in expanding
our sales and marketing programs, (ix) start- up costs associated
with opening new sales offices outside of the United States, (x)
fluctuations in revenue and without proportionate adjustments in
fixed costs, (xi) the efficiencies achieved in managing inventories
and fixed assets; and (xii) adverse changes inthe manufacturing
industry and general economic conditions; * 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; * 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 CEO
or Executive VP or other key personnel; * our inability to
identify, consummate, or achieve expected benefits from
acquisitions; * 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; * the other risks detailed in the Company's
Annual Report on Form10-K and other filings from time to time with
the Securities and Exchange Commission. 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. FARO TECHNOLOGIES, INC.
AND SUBSIDIARIES SUMMARY FINANCIAL TABLE CONSOLIDATED STATEMENTS OF
OPERATIONS Three Months Ended Year Ended December 31, December 31
December 31 2003 2002 2003 2002 SALES $22,954,290$15,110,469
$71,785,980 $46,246,372 COST OF SALES 9,284,556 6,520,510
29,520,249 21,109,609 Gross profit 13,669,734 8,589,959 42,265,731
25,136,763 OPERATING EXPENSES: Selling 5,737,4964,113,516
18,341,409 13,891,917 General and administrative 2,907,363
2,170,680 9,116,166 7,873,338 Depreciation and amortization 519,596
455,889 2,119,030 2,267,763 Research and development 1,451,392
694,633 4,530,467 4,033,462 Employee stock options 349,376 7,504
718,524 9,526 Total operating expenses 10,965,223 7,442,222
34,825,596 28,076,006 INCOME (LOSS) FROM OPERATIONS 2,704,511
1,147,737 7,440,135 (2,939,243) OTHER INCOME (EXPENSES) Interest
income 30,985 218,721 81,680 561,112 Other income, net 516,181
413,303 1,959,806 601,336 Interest expense 1,552 (18,355) (46,351)
(28,036) NET INCOME (LOSS) BEFORE INCOME TAX 3,253,229 1,761,406
9,435,270 (1,804,831) INCOME TAX EXPENSE 356,792 190,073 1,157,530
210,740 NET INCOME (LOSS) $2,896,437 $1,571,333 $8,277,740
$(2,015,571) NET INCOME (LOSS) PER SHARE - BASIC $0.23 $0.13 $0.68
$(0.17) NET INCOME (LOSS) PER SHARE - DILUTED $0.22 $0.13 $0.64
$(0.17) Weighted average shares - Basic 12,813,200 11,853,732
12,181,221 11,853,732 Weighted average shares - Diluted 13,418,202
11,853,732 12,845,992 11,853,732 SELECTED CONSOLIDATED BALANCE
SHEET DATA Dec 31, 2003 Cash and investments $33,462,109 Current
assets $66,577,410 Total assets $81,913,888 Current liabilities
$12,707,843 Long-term debt $64,650 Total liabilities $12,992,789
Total shareholders' equity $68,921,099 Total liabilities and
shareholders' equity $81,913,888
http://www.newscom.com/cgi-bin/prnh/20000522/FLM035LOGO
http://photoarchive.ap.org/
http://www.firstcallevents.com/service/ajwz401491449gf12.htmlDATASOURCE:
FARO Technologies, Inc. CONTACT: Greg Fraser, Executive Vice
President and CFO, FARO Technolgies, +1-407-333-9911; or Vic
Allgeier, TTC Group, +1-212-227-0997, for FARO Technologies Web
site: http://www.faro.com/
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