FARO Reports First Quarter 2010 Sales Growth of 34.4%

--Orders Growth of 45.3% --Net Income of $2.1 million

LAKE MARY, Fla., May 5, 2010 /PRNewswire via COMTEX/ --FARO Technologies, Inc. (Nasdaq: FARO) today announced results for the first quarter ended April 3, 2010. Sales in the first quarter of 2010 increased 34.4%, to $42.3 million, from $31.4 million in the first quarter of 2009. The Company reported net income of $2.1 million, or $0.13 per share, compared to a net loss of $0.41 per share in the first quarter of 2009.

New order bookings for the first quarter of 2010 were $39.8 million, an increase of $12.4 million, or 45.3%, compared to $27.4 million in the first quarter of 2009.

"All three regions posted strong double-digit sales growth in the first quarter. Even more encouraging was our new orders growth rate of 45%, driven by a 79% increase in Asia and a 60% increase in the Americas. Overall, our top line performance in the first quarter was the result of continued momentum in our end-markets and improved productivity from our sales team," stated Jay Freeland, FARO's President and CEO.

Gross margin for the first quarter of 2010 was 60.1%, compared to 51.7% in the first quarter of 2009. Gross margin increased primarily due to an increase in the proportion of higher margin product sales relative to lower margin service revenue.

Selling expenses as a percentage of sales decreased to 26.6% in the first quarter of 2010 from 40.8% in the first quarter of 2009, primarily as a result of an increase in sales and lower compensation costs. Selling expenses in the first quarter of 2010 decreased by $1.6 million from the first quarter of 2009 to $11.2 million.

General and administrative expenses decreased to 14.8% of sales in the first quarter of 2010 from 20.0% in the first quarter of 2009. General and administrative expenses in the first quarter of 2010 decreased by $0.1 million to $6.2 million from $6.3 million in the first quarter of 2009. General and administrative expenses included $0.4 million related to patent litigation expenses in the first quarter of 2010.

R&D expenses were $3.0 million in the first quarter of 2010, a decrease of $0.5 million from $3.5 million in the first quarter of 2009. R&D expenses were 7.1% of sales in the first quarter of 2010 compared to 11.1% of sales in the first quarter of 2009.

Operating income for the first quarter of 2010 increased by $11.0 million, to $3.4 million, from an operating loss of $7.6 million in the first quarter of 2009. Operating margin for the first quarter of 2010 was 8.0% compared to an operating loss of 24.3% in the first quarter of 2009.

Income tax expense increased by $2.4 million to $0.8 million for the first quarter of 2010 from a benefit of $1.6 million in the first quarter of 2009 due to an increase in pretax income of $11.0 million

"In addition to our strong orders and sales performance in the first quarter, we are also pleased by the speed with which gross margin and operating income have improved. This is a direct result of the cost actions and positioning moves we made last year," 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 FARO's focus, plans and strategies, and its future operating results and 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 "intend," "believe," "will," "expect" 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:

  • development by others of new or improved products, processes or technologies that make the Company's products obsolete or less competitive;
  • the cyclical nature of the industries of the Company's customers andmaterial adverse changes in customers' access to liquidity and capital;
  • 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 operatesand other general economic, business, and financing conditions;
  • fluctuations in the Company's annual and quarterly operating results and the inability to achieve its financial operating targets;
  • 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;
  • other risks detailed inPart I, Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2009.

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 20,000 installations and 10,000 customers globally, FARO Technologies, Inc. designs, develops, and markets portable, computerized measurement and imaging 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.


                FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF OPERATIONS
                              (UNAUDITED)

                                                 Three Months Ended
                                                 ------------------

    (in thousands, except share and per         Apr 3,           Apr 4,
     share data)                                 2010             2009
    -----------------------------------        -------          -------
    SALES
        Product                                  $33,938          $24,214
        Service                                    8,331            7,235
        Total Sales                               42,269           31,449
                                                  ------           ------
    COST OF SALES
        Product                                   11,275            9,127
        Service                                    5,603            6,062
        Total Cost of Sales (exclusive of
         depreciation and amortization, shown
         separately below)                        16,878           15,189
                                                  ------           ------
    GROSS PROFIT                                  25,391           16,260

    OPERATING EXPENSES:
        Selling                                   11,235           12,824
        General and administrative                 6,247            6,299
        Depreciation and amortization              1,540            1,291
        Research and development                   2,989            3,479
        Total operating expenses                  22,011           23,893
                                                  ------           ------
    INCOME (LOSS) FROM OPERATIONS                  3,380           (7,633)
    OTHER (INCOME) EXPENSE
        Interest income                              (19)            (158)
        Other expense, net                           505              661
        Interest expense                              27                3
                                                     ---              ---
    INCOME (LOSS) BEFORE INCOME TAX
     EXPENSE                                       2,867           (8,139)
    INCOME TAX EXPENSE (BENEFIT)                     803           (1,554)
                                                     ---           ------
    NET INCOME (LOSS)                             $2,064          $(6,585)
                                                  ------          -------
    NET INCOME (LOSS) PER SHARE - BASIC            $0.13           $(0.41)
                                                   -----           ------

    NET INCOME (LOSS) PER SHARE - DILUTED          $0.13           $(0.41)
                                                   -----           ------

    Weighted average shares - Basic           16,124,886       16,227,363
                                              ----------       ----------

    Weighted average shares - Diluted         16,267,231       16,227,363
                                              ----------       ----------


                FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
                       CONSOLIDATED BALANCE SHEETS

                                               April 3,
                                                          December
                                                    2010     31,
    (in thousands, except share data)          Unaudited       2009
    ---------------------------------          ---------       ----
    ASSETS
    Current Assets:
      Cash and cash equivalents                  $38,331    $35,078
      Short-term investments                      64,986     64,986
      Accounts receivable, net                    40,550     42,944
      Inventories, net                            25,811     26,582
      Deferred income taxes, net                   4,482      4,473
      Prepaid expenses and other current
       assets                                      8,805      6,016
        Total current assets                     182,965    180,079
                                                 -------    -------
    Property and Equipment:
      Machinery and equipment                     21,628     19,867
      Furniture and fixtures                       5,095      5,225
      Leasehold improvements                       9,423      9,434
                                                   -----      -----
          Property and equipment at cost          36,146     34,526
      Less: accumulated depreciation and
       amortization                              (21,499)   (20,788)
                                                 -------    -------
          Property and equipment, net             14,647     13,738
                                                  ------     ------
    Goodwill                                      19,091     19,934
    Intangible assets, net                         7,576      7,985
    Service inventory                             12,748     12,079
    Deferred income taxes, net                     1,763      1,895
    Total Assets                                $238,790   $235,710
                                                --------   --------
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities:
       Notes Payable                              $2,490         $-
      Accounts payable                             9,576      8,985
      Accrued liabilities                          9,504      8,173
      Income taxes payable                             -        229
      Current portion of unearned service
       revenues                                   12,158     12,226
      Customer deposits                            1,621      2,173
      Current portion of obligations under
       capital leases                                 60         80
          Total current liabilities               35,409     31,866
    Unearned service revenues -less
     current portion                               5,784      5,910
    Deferred tax liability, net                    1,075      1,143
    Obligations under capital leases -less
     current portion                                 189        193
    Total Liabilities                             42,457     39,112
                                                  ------     ------

    Shareholders' Equity:
       Common stock -par value $.001,
        50,000,000 shares authorized;
        16,815,066 and 16,795,289 issued;
        16,134,831 and 16,115,054 outstanding,
        respectively                                17     17
      Additional paid-in-capital                 153,224    152,380
      Retained earnings                           48,980     46,915
      Accumulated other comprehensive income       3,187      6,361
      Common stock in treasury, at cost -
       680,235 shares                             (9,075)    (9,075)
    Total Shareholders' Equity                   196,333    196,598
    Total Liabilities and Shareholders'
     Equity                                     $238,790   $235,710
                                                --------   --------


                   FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

                                                    Three Months Ended
                                                    ------------------

                                                April  3,       April 4,
    (in thousands)                                 2010            2009
    --------------                             ----------      ---------
    CASH FLOWS FROM:
    OPERATING ACTIVITIES:
      Net income (loss)                            $2,064         $(6,585)
       Adjustments to reconcile net
        income (loss) to net cash
        provided by (used in) operating
        activities:
        Depreciation and amortization               1,540           1,291
        Compensation for stock options and
         restricted stock units                       564             538
        Provision for bad debts                       348             397
        Deferred income tax expense                    34              30
    Change in operating assets and
     liabilities:
      Decrease (increase) in:
        Accounts receivable                           506          17,669
        Inventories, net                           (2,748)         (1,078)
        Prepaid expenses and other current
         assets                                    (3,039)         (1,027)
        Income tax benefit from exercise
         of stock options                              (6)              -
      Increase (decrease) in:
        Accounts payable and accrued
         liabilities                                2,199          (8,835)
        Income taxes payable                         (234)         (2,008)
        Customer deposits                            (540)            (39)
        Unearned service revenues                     348            (441)
                                                      ---            ----
                Net cash provided by (used in)
                 operating activities               1,036             (88)
                                                    -----             ---

    INVESTING ACTIVITIES:
      Purchases of property and
       equipment                                     (613)         (1,647)
      Payments for intangible assets                 (205)           (188)
      Purchases of short-term
       investments                                      -         (32,975)
      Proceeds from sales of short-term
       investments                                      -          81,965
                                                      ---          ------
            Net cash (used in) provided by
             investing activities                    (818)         47,155
                                                     ----          ------

     FINANCING ACTIVITIES:
      Proceeds from notes payable                   2,490               -
      Payments on capital leases                      (19)            (55)
      Income tax benefit from exercise
       of stock options                                 6               -
      Purchases of treasury stock                       -          (8,829)
      Proceeds from issuance of stock,
       net                                            275               -
                                                      ---             ---
            Net cash provided by (used in)
             financing activities                   2,752          (8,884)
                                                    -----          ------

    EFFECT OF EXCHANGE RATE CHANGES ON
     CASH AND CASH EQUIVALENTS                        283            (450)
                                                      ---            ----

    INCREASE  IN CASH AND CASH
     EQUIVALENTS                                    3,253          37,733

    CASH AND CASH EQUIVALENTS,
     BEGINNING OF PERIOD                           35,078          23,494
                                                   ------          ------

    CASH AND CASH EQUIVALENTS, END OF
     PERIOD                                       $38,331         $61,227
                                                  =======         =======



SOURCE FARO Technologies, Inc.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding FARO Technologies Inc's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.