LAKE MARY, Fla., June 29 /PRNewswire-FirstCall/ -- FARO
Technologies, Inc. (NASDAQ:FARO) today announced results for the
first quarter ended April 1, 2006 and that it has filed its Annual
Report on Form 10-K for fiscal year 2005 and its Quarterly Report
on Form 10-Q for the first quarter 2006. The Company previously
announced its financial results for fiscal year ended 2005 on
February 23, 2006. There were no changes to the previously
announced financial results. Net income for the first quarter of
2006 was approximately $0.5 million, or $0.03 per diluted share, a
decrease of $3.0 million compared with $3.5 million or $0.24 per
diluted share in the first quarter of 2005. First quarter results
included pre-tax expenses of approximately $1.6 million for legal
and professional fees, of which $1.0 million was related to the
Company's Foreign Corrupt Practices Act internal investigation and
$0.6 million was related to ongoing patent litigation. Sales for
the first quarter of 2006 were approximately $32.1 million, an
increase of $4.5 million, or 16.3% from $27.6 million in the first
quarter of 2005. New order bookings for the first quarter were
approximately $33.1 million, an increase of $5.8 million, or 21.2%
compared with approximately $27.3 million in the year-ago quarter.
New orders increased 25.7% in the Americas to $13.7 million, from
$10.9 million in the first quarter of 2005. In Europe/Africa, new
orders increased 23.1% to $13.3 million from $10.8 million in the
first quarter of 2005, and in Asia/Pacific, new orders increased
8.9% to $6.1 million, from $5.6 million in the first quarter of
2005. "Our performance in the first quarter is testament to the
overall strength of our company and the markets we serve," said Jay
Freeland, Co-CEO. "Europe's new order growth returned to solid
double-digit levels of 23.1% while the Americas led the Company at
25.7%. Our gross margin was 58.8% and we benefited from the
performance of new sales people we added in previous quarters,
which reduced selling cost as a percentage of sales to 32.0% from
33.7% in the fourth quarter 2005," Freeland continued. "We reduced
our inventory by approximately $1.3 million and held total company
headcount nearly flat with an increase of 7 from year-end 2005.
With three new product releases and the progressive financial
improvements stated previously, I am pleased with our results
considering the distraction and additional expense caused by the
China investigation." Update Regarding FCPA Internal Investigation
As reported in the Company's Annual Report Form 10-K for the year
ended December 31, 2005, the Company learned that its China
subsidiary had made improper payments to certain customers in China
that may have violated the Foreign Corrupt Practices Act and other
applicable laws. The Company's Audit Committee instituted an
internal investigation into this matter in February 2006, and the
Company voluntarily notified the Securities and Exchange Commission
("SEC") and the Department of Justice ("DOJ") of this matter in
March 2006. The Company has provided to the SEC and DOJ information
obtained during the course of this investigation and is cooperating
with both agencies. In conjunction with FARO's First Quarter
earnings release, you are invited to listen to its conference call
that will be broadcast live over the internet on June 30, 2006 at
11:00 a.m. EST. Dial in numbers: 1-800-540-0559 (domestic) or
1-785-832-1523 (International).
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-
eventDetails&c=99722&eventID=1344983 (Please copy and paste
the above URL into browser.) The replay numbers are 1-888-225-1190
(Domestic) and 1-402-220-4971 (International). Statements made
during our June 30, 2006 conference call may constitute
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: * 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; * our inability
to successfully identify and acquire target companies or achieve
expected benefits from acquisitions that are consummated; * the
cyclical nature of the industries of our customers and the
financial condition of our customers; * 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 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
Hexagon's Cimcore-Romer subsidiary against us; * fluctuations in
our annual and quarterly operating results as a result of a number
of factors including, but not limited to litigation brought against
us, quality issues with our products, excess or obsolete inventory,
raw material price fluctuations, expansion of our manufacturing
capability and other inflationary pressures; * fluctuations in our
annual and quarterly operating results, and our inability to keep
our financial results within our target goals, 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 without proportionate adjustments in fixed costs, (xi) the
efficiencies achieved in managing inventories and fixed assets;
(xii) investments in potential acquisitions or strategic sales,
product or other initiatives, (xiii) shrinkage or other inventory
losses due to product obsolescence, scrap or material price
changes, (xiv) adverse changes in the manufacturing industry and
general economic condition, (xv) adverse changes in the
manufacturing industry and general economic condition; and (xvi)
other factors noted herein; * our inability to successfully
implement the requirements of Restriction of use of Hazardous
Substances (RoHS) and Waste Electrical and Electronic Equipment
(WEEE) compliance into our products; * 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 broader market for measurement
and inspection devices; * the effects of increased competition as a
result of recent consolidation in the CAM2 market; * 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; * our inability to continue to
grow sales in the Asia Pacific region; * higher than expected
increases in expenses relating to our Asia Pacific expansion or our
Swiss manufacturing facility; * 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, shrinkage or other inventory
losses due to product obsolescence, scrap or material price
changes; * our inability to find less expensive alternatives to
stock options to attract and retain employees; * the loss of our
co-Chief Executive Officers or our Chief Financial Officer or other
key personnel; * difficulties in recruiting research and
development engineers, and application engineers; * the failure to
effectively manage our growth; * difficulty in predicting our
effective tax rate; * the loss of key suppliers and the inability
to find sufficient alternative suppliers 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.
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 more than 10,800 installations and 4,900
customers globally, FARO Technologies, Inc. (NASDAQ:FARO) and its
international subsidiaries design, develop, manufacture and market
software and portable, computerized measurement devices. The
Company's products allow manufacturers to perform 3-D 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 TrackArm; FARO
Laser ScanArm; FARO Laser Scanner LS; FARO Gage and Gage-PLUS;
Platinum, Digital Template, Titanium, Advantage FaroArms; the FARO
Laser Tracker X and Xi; and the CAM2 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 INCOME (UNAUDITED)
Three Months Ended (in thousands, except per share data) Apr 1,
2006 Apr 2, 2005 SALES $32,056 $27,617 COST OF SALES (exclusive of
depreciation and amortization, shown separately below) 13,221
10,274 Gross profit 18,835 17,343 OPERATING EXPENSES: Selling
10,251 7,666 General and administrative 5,647 3,467 Depreciation
and amortization 1,011 690 Research and development 1,852 1,327
Total operating expenses 18,761 13,150 INCOME FROM OPERATIONS 74
4,193 OTHER INCOME (EXPENSE) Interest income 158 132 Other income
(expense), net 375 (29) Interest expense (2) (2) INCOME BEFORE
INCOME TAX 605 4,294 INCOME TAX EXPENSE 109 825 NET INCOME $496
$3,469 NET INCOME PER SHARE - BASIC $0.03 $0.25 NET INCOME PER
SHARE - DILUTED $0.03 $0.24 FARO TECHNOLOGIES, INC. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) April 1,
December 31, (in thousands, except share data) 2006 2005 ASSETS
Current Assets: Cash and cash equivalents $6,398 $9,278 Short-term
investments 15,890 16,490 Accounts receivable, net 28,011 28,654
Inventories 27,392 28,650 Deferred income taxes, net 2,561 2,155
Prepaid expenses and other current assets 2,818 2,200 Total current
assets 83,070 87,427 Property and Equipment: Machinery and
equipment 7,390 6,940 Furniture and fixtures 3,461 3,334 Leasehold
improvements 2,033 1,710 Property and equipment at cost 12,884
11,984 Less: accumulated depreciation and amortization (6,646)
(5,920) Property and equipment, net 6,238 6,064 Goodwill 16,344
14,574 Intangible assets, net 6,299 6,395 Service Inventory 4,371
4,333 Deferred income taxes, net 3,581 3,855 Total Assets $119,903
$122,648 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities:
Accounts payable $5,750 $12,301 Accrued liabilities 6,070 5,569
Income taxes payable 1,520 1,406 Current portion of unearned
service revenues 3,413 3,168 Customer deposits 280 201 Current
portion of long-term debt and obligations under capital leases 134
163 Total current liabilities 17,167 22,808 Unearned service
revenues - less current portion 1,193 803 Deferred tax liability,
net 1,200 - Long-term debt and obligations under capital leases -
less current portion 223 177 Total Liabilities 19,783 23,788
Commitments and contingencies Shareholders' Equity: Common stock -
par value $.001, 50,000,000 shares authorized; 14,489,178 and
14,481,178 issued; 14,341,500 and 14,290,917 outstanding,
respectively 14 14 Additional paid-in-capital 84,229 83,940
Retained earnings 17,752 17,256 Accumulated other comprehensive
(loss) income (1,724) (2,199) Common stock in treasury, at cost -
40,000 shares (151) (151) Total shareholders' equity 100,120 98,860
Total Liabilities and Shareholders' Equity $119,903 $122,648 FARO
TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED) Three Months Ended April 1, 2006 April 2, 2005
CASH FLOWS FROM: OPERATING ACTIVITIES: Net income $496 $3,469
Adjustments to reconcile net income to net cash (used in) provided
by operating activities: Depreciation and amortization 1,011 690
Amortization of Stock Options and Restricted Stock Units 95 -
Income tax benefit from exercise of stock options - 157 Deferred
income tax expense (benefit) (278) 310 Employee stock option
(income) expense 18 (121) Change in operating assets and
liabilities: Decrease (increase) in: Accounts receivable 953 (498)
Inventories 1,334 (2,541) Prepaid expenses and other current assets
(596) 437 Increase (decrease) in: Accounts payable and accrued
liabilities (6,132) (1,129) Income taxes payable 92 605 Customer
deposits 75 (68) Unearned service revenues 589 432 Net cash
provided by operating activities (2,343) 1,743 INVESTING
ACTIVITIES: Acquisition of iQvolution - (4,270) Purchases of
property and equipment (775) (663) Payments for intangible assets
(425) (249) Purchases of short-term investments - (900) Proceeds
from short-term investments 600 1,900 Net cash used in investing
activities (600) (4,182) FINANCING ACTIVITIES: Long-term debt
acquired 67 - (Payments) Proceeds from capital leases (53) (25)
Proceeds from issuance of stock, net - 209 Net cash provided by
financing activities 14 184 EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 49 (601) DECREASE IN CASH AND CASH EQUIVALENTS
(2,880) (2,856) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
9,278 16,357 CASH AND CASH EQUIVALENTS, END OF PERIOD $6,398
$13,501 DATASOURCE: FARO Technologies, Inc. CONTACT: Barbara Smith,
Chief Financial Officer of FARO Technologies, Inc., +1-407-333-9911
Web site: http://www.faro.com/
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