UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 24, 2016
FARO TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
| Florida | 0-23081 | 59-3157093 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
250 Technology Park, Lake Mary, Florida 32746
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (407) 333-9911
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On February 24, 2016, FARO Technologies, Inc. (the “Company”) issued a press release announcing its results of operations for the fourth fiscal quarter and fiscal year ended December 31, 2015. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
The information furnished pursuant to Item 2.02 and Exhibit 99.1 of this Current Report on Form 8-K shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. The information in this Current Report shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Current Report, regardless of any general incorporation language in the filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The following exhibit is furnished with this Current Report on Form 8-K:
| Exhibit Number |
Description | |
| 99.1 | Press release dated February 24, 2016 | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FARO Technologies, Inc. (Registrant) | ||||||
| February 24, 2016 |
/s/ Laura A. Murphy-Wolf | |||||
| By: | Laura A. Murphy-Wolf | |||||
| Its: | Senior Vice President and Chief Financial Officer | |||||
EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 | Press release dated February 24, 2016 | |
Exhibit 99.1
| NEWS BULLETIN
|
FARO Technologies, Inc. 250 Technology Park Lake Mary, FL 32746 |
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| The Measure of Success | FOR IMMEDIATE RELEASE | |||
FARO Reports Fourth Quarter and Fiscal Year 2015 Financial Results
LAKE MARY, FL, February 24, 2016 – FARO Technologies, Inc. (NASDAQ: FARO) today announced its financial results for the fourth quarter and fiscal year ended December 31, 2015.
“FARO performed well in 2015 on many levels,” stated Dr. Simon Raab, Chairman and Interim Chief Executive Officer. “Although our financial results did not meet our internal targets, we successfully launched the FARO Freestyle3D laser scanner, completed two acquisitions to expand our position in the AEC and public safety markets, completed our implementation of our new global enterprise resource planning system as well as continued the development of new products in our R&D pipeline, culminating most recently in our January launch of the new FARO Cobalt Array Imager. We will build on these successes and many other initiatives in 2016.”
Fourth quarter results
Revenues for the quarter ended December 31, 2015 were $91.3 million, compared with $104.2 million in the fourth quarter last year.
Gross margin for the quarter was 53.3%, compared with 55.0% in the prior year period reflecting higher costs consistent with lower production volume as well a $0.7 million severance charge for production and service workforce reductions that commenced in the third quarter. Gross profit of $48.7 million in the fourth quarter of 2015 compared with $57.3 million in the fourth quarter of 2014 reflecting lower sales volume.
Operating income for the quarter was $6.8 million compared with $13.0 million in the prior year period, reflecting lower sales volume and a total of $2.0 million in severance charges, partially offset by lower operating expenses.
Net income and EPS for the quarter was $8.9 million and $0.52, respectively, compared with $11.1 million and $0.64, respectively, in the prior year period. Excluding the impact of the $2.0 million in severance costs, EPS would have been $0.60.
In the quarter, FARO repurchased 809,241 shares at a total cost of $22.8 million.
Full year results
Revenues for the full year 2015 were $317.5 million, 7.1% lower than the $341.8 million generated in 2014. Revenues were essentially flat with 2014 when adjusted for a 7% unfavorable foreign exchange impact.
Gross margin for the year was 52.8%, compared with 55.3% in the prior year period primarily reflecting a third quarter inventory reserve adjustment of $7.9 million and fourth quarter severance costs of $0.7 million. Excluding the impact of the inventory adjustment and severance charges, gross margin would have been 55.5%. Gross profit for the year was $167.7 million, or $21.2 million lower than the prior year.
Operating income of $13.1 million was down from $37.3 million in 2014 reflecting lower revenue, an inventory reserve adjustment and severance charges.
Net income for the full year was $12.8 million, or $0.74 per share compared with $33.6 million, or $1.93 per share, in 2014. Excluding the effect of the inventory reserve adjustment and severance charges, EPS would have been $1.15 in 2015.
“As one of FARO’s founders and now assuming the interim CEO position, I am encouraged by the depth of talent in the organization, the robustness of our R&D programs and the strength of our long-standing customer relationships,” stated Dr. Raab. “I am as excited about FARO’s future as I was in the early days of the Company’s formation. There is an array of opportunities to be explored in current and adjacent vertical markets where FARO can leverage its technologies and capabilities. We are undertaking several important initiatives to target specific vertical markets, better leverage our sales organization through process modernization, and harmonize global functions to improve efficiencies and reduce SG&A as a percentage of sales while also accelerating the drumbeat of new product introductions. We are looking forward to sharing these initiatives in more detail on our earnings call.”
The financial information included in this press release is preliminary, as the Company has not yet issued its audited financial statements.
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, 2015. |
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 | Twelve Months Ended | |||||||||||||||
| (in thousands, except share and per share data) |
December 31, 2015 | December 31, 2014 | December 31, 2015 | December 31, 2014 | ||||||||||||
| SALES |
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| Product |
$ | 77,558 | $ | 89,362 | $ | 259,842 | $ | 284,147 | ||||||||
| Service |
13,769 | 14,791 | 57,706 | 57,679 | ||||||||||||
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| Total sales |
91,327 | 104,153 | 317,548 | 341,826 | ||||||||||||
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| COST OF SALES |
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| Product |
33,331 | 36,809 | 113,983 | 114,994 | ||||||||||||
| Service |
9,347 | 10,071 | 35,888 | 37,918 | ||||||||||||
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| Total cost of sales (exclusive of depreciation and amortization, shown separately below) |
42,678 | 46,880 | 149,871 | 152,912 | ||||||||||||
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| GROSS PROFIT |
48,649 | 57,273 | 167,677 | 188,914 | ||||||||||||
| OPERATING EXPENSES |
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| Selling and marketing |
21,194 | 23,950 | 79,306 | 80,157 | ||||||||||||
| General and administrative |
10,368 | 10,367 | 37,474 | 36,479 | ||||||||||||
| Depreciation and amortization |
3,195 | 1,908 | 11,217 | 7,428 | ||||||||||||
| Research and development |
7,128 | 8,070 | 26,558 | 27,510 | ||||||||||||
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| Total operating expenses |
41,885 | 44,295 | 154,555 | 151,574 | ||||||||||||
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| INCOME FROM OPERATIONS |
6,764 | 12,978 | 13,122 | 37,340 | ||||||||||||
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| OTHER (INCOME) EXPENSE |
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| Interest expense (income), net |
(19 | ) | (27 | ) | (55 | ) | (88 | ) | ||||||||
| Other expense (income), net |
(1,150 | ) | (16 | ) | 371 | (94 | ) | |||||||||
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| INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) |
7,933 | 13,021 | 12,806 | 37,522 | ||||||||||||
| INCOME TAX (BENEFIT) EXPENSE |
(952 | ) | 1,899 | (7 | ) | 3,873 | ||||||||||
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| NET INCOME |
$ | 8,885 | $ | 11,122 | $ | 12,813 | $ | 33,649 | ||||||||
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| NET INCOME PER SHARE - BASIC |
0.52 | $ | 0.64 | $ | 0.74 | $ | 1.95 | |||||||||
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| NET INCOME PER SHARE - DILUTED |
$ | 0.52 | $ | 0.64 | $ | 0.74 | $ | 1.93 | ||||||||
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| Weighted average shares - Basic |
17,051,427 | 17,288,507 | 17,288,665 | 17,247,727 | ||||||||||||
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| Weighted average shares - Diluted |
17,103,622 | 17,467,066 | 17,389,473 | 17,416,453 | ||||||||||||
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FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| (in thousands, except share data) |
December 31, 2015 |
December 31, 2014 |
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| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
$ | 107,356 | $ | 109,289 | ||||
| Short-term investments |
42,994 | 64,995 | ||||||
| Accounts receivable, net |
69,918 | 83,959 | ||||||
| Inventories, net |
45,571 | 43,094 | ||||||
| Deferred income taxes, net |
7,792 | 5,936 | ||||||
| Prepaid expenses and other current assets |
18,527 | 16,079 | ||||||
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| Total current assets |
292,158 | 323,352 | ||||||
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| Property and equipment: |
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| Machinery and equipment |
54,124 | 45,254 | ||||||
| Furniture and fixtures |
5,945 | 6,156 | ||||||
| Leasehold improvements |
18,471 | 19,676 | ||||||
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| Property and equipment at cost |
78,540 | 71,086 | ||||||
| Less: accumulated depreciation and amortization |
(42,594 | ) | (41,741 | ) | ||||
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| Property and equipment, net |
35,946 | 29,345 | ||||||
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| Goodwill |
26,371 | 19,205 | ||||||
| Intangible assets, net |
15,985 | 9,109 | ||||||
| Service and sales demonstration inventory, net |
33,709 | 36,886 | ||||||
| Deferred income taxes, net |
4,050 | 6,624 | ||||||
| Other long-term assets |
967 | 942 | ||||||
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| Total assets |
$ | 409,186 | $ | 425,463 | ||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Current liabilities: |
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| Accounts payable |
$ | 11,345 | $ | 15,437 | ||||
| Accrued liabilities |
22,574 | 26,127 | ||||||
| Current portion of unearned service revenues |
26,114 | 23,572 | ||||||
| Customer deposits |
2,998 | 2,046 | ||||||
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| Total current liabilities |
63,031 | 67,182 | ||||||
| Unearned service revenues - less current portion |
15,025 | 13,799 | ||||||
| Deferred income tax liability |
686 | — | ||||||
| Other long-term liabilities |
2,800 | 628 | ||||||
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| Total liabilities |
81,542 | 81,609 | ||||||
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| Shareholders’ equity: |
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| Preferred stock - par value $0.01, 10,000,000 shares authorized; none issued |
— | — | ||||||
| Common stock - par value $.001, 50,000,000 shares authorized; 18,077,594 and 17,997,665 issued; 16,588,118 and 17,317,430 outstanding, respectively |
18 | 18 | ||||||
| Additional paid-in capital |
206,996 | 200,090 | ||||||
| Retained earnings |
172,329 | 159,516 | ||||||
| Accumulated other comprehensive loss |
(19,861 | ) | (6,695 | ) | ||||
| Common stock in treasury, at cost - 1,489,476 and 680,235 shares, respectively |
(31,838 | ) | (9,075 | ) | ||||
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| Total shareholders’ equity |
327,644 | 343,854 | ||||||
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| Total liabilities and shareholders’ equity |
$ | 409,186 | $ | 425,463 | ||||
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FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
| Years ended December 31, | ||||||||||||
| (in thousands) |
2015 | 2014 | 2013 | |||||||||
| Net income |
$ | 12,813 | $ | 33,649 | $ | 21,509 | ||||||
| Currency translation adjustments, net of tax |
(13,166 | ) | (13,961 | ) | 925 | |||||||
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| Comprehensive (loss) income |
$ | (353 | ) | $ | 19,688 | $ | 22,434 | |||||
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FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Years Ended December 31, | ||||||||||||
| (in thousands) |
2015 | 2014 | 2013 | |||||||||
| CASH FLOWS FROM: |
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| OPERATING ACTIVITIES: |
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| Net income |
$ | 12,813 | $ | 33,649 | $ | 21,509 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation and amortization |
11,217 | 7,428 | 7,038 | |||||||||
| Compensation for stock options and restricted stock units |
4,306 | 4,678 | 4,367 | |||||||||
| Provision for bad debts (net recovery of) |
346 | (306 | ) | 1,001 | ||||||||
| Loss on disposal of assets |
947 | — | — | |||||||||
| Write-down of inventories |
10,878 | 3,272 | 1,167 | |||||||||
| Deferred income tax (benefit) expense |
(655 | ) | (4,707 | ) | 645 | |||||||
| Income tax benefit from exercise of stock options |
(313 | ) | (169 | ) | (969 | ) | ||||||
| Change in operating assets and liabilities: |
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| Decrease (increase) in: |
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| Accounts receivable |
9,584 | (24,587 | ) | (4,053 | ) | |||||||
| Inventories |
(18,021 | ) | (21,995 | ) | (1,286 | ) | ||||||
| Prepaid expenses and other assets |
(2,834 | ) | (3,501 | ) | (3,346 | ) | ||||||
| (Decrease) increase in: |
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| Accounts payable and accrued liabilities |
(6,401 | ) | 8,867 | 6,108 | ||||||||
| Income taxes payable |
— | (1,560 | ) | (2,028 | ) | |||||||
| Customer deposits |
1,114 | (724 | ) | 353 | ||||||||
| Unearned service revenues |
5,051 | 5,313 | 3,772 | |||||||||
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| Net cash provided by operating activities |
28,032 | 5,658 | 34,278 | |||||||||
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| INVESTING ACTIVITIES: |
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| Proceeds from sale of investments |
22,001 | — | — | |||||||||
| Purchases of property and equipment |
(14,169 | ) | (18,722 | ) | (4,350 | ) | ||||||
| Payments for intangible assets |
(2,140 | ) | (1,221 | ) | (2,204 | ) | ||||||
| Purchase of business acquired, net of cash |
(12,066 | ) | (1,150 | ) | — | |||||||
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| Net cash used in investing activities |
(6,374 | ) | (21,093 | ) | (6,554 | ) | ||||||
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| FINANCING ACTIVITIES: |
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| Payments on capital leases |
(8 | ) | (8 | ) | (93 | ) | ||||||
| Repurchase of common stock |
(22,763 | ) | — | — | ||||||||
| Income tax benefit from exercise of stock options |
313 | 169 | 969 | |||||||||
| Proceeds from issuance of stock, net |
2,287 | 3,369 | 5,444 | |||||||||
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| Net cash (used in) provided by financing activities |
(20,171 | ) | 3,530 | 6,320 | ||||||||
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| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(3,420 | ) | (3,436 | ) | (2,647 | ) | ||||||
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| (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
(1,933 | ) | (15,341 | ) | 31,397 | |||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR |
109,289 | 124,630 | 93,233 | |||||||||
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| CASH AND CASH EQUIVALENTS, END OF YEAR |
$ | 107,356 | $ | 109,289 | $ | 124,630 | ||||||
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