FARO's Earnings Per Share Jump to 20 Cents From 4 Cents on 57%
Sales Increase LAKE MARY, Fla., May 6 /PRNewswire-FirstCall/ --
FARO Technologies, Inc. today reported a 473% increase in net
income in the first quarter of 2004 to $2.8 million, or 20 cents
per diluted share, from $489,000, or four cents per diluted share
in the first quarter of 2003. Fully diluted shares grew
approximately two million shares or 16.5% to 14.1 million shares at
April 3, 2004, from 12.1 million shares at March 29, 2003. Sales
for the quarter increased 56.7% to $21.0 million, from $13.4
million in the first quarter of 2003. Gross margin increased eight
percentage points to 64.0% in the quarter, from 56.0% in the first
quarter of 2003, as a result of lower service expenses, less price
discounting, and increased production efficiencies. (Logo:
http://www.newscom.com/cgi-bin/prnh/20000522/FLM035LOGO ) Selling,
general and administrative ("SG&A") expenses decreased as a
percentage of sales from 41.4% in the first quarter of 2003 to
38.6% in the first quarter of 2004. On a sequential quarter basis
SG&A expenses as a percentage of sales increased 0.9 percentage
points compared to 37.7% in the fourth quarter of 2003, resulting
from higher selling expenses as a percentage of sales, partially
offset by lower general and administrative expenses as a percentage
of sales. The Company had forecast this increase in selling
expenses as a percentage of sales in the first half of 2004,
primarily as a result of costs related to the expansion of its
worldwide sales force. Income from operations increased $2.8
million from $459,000 in the first quarter of 2003 to $3.3 million
in the first quarter of 2004. This increase was primarily a result
of an increase in gross profit of $6.0 million, offset by a $2.5
million increase in SG&A expenses. On a sequential quarter
basis, operating margin improved to 15.9% in the first quarter of
2004, compared to 11.8% in the fourth quarter of 2003. Income tax
expense in the first quarter of 2004 was $765,000 or 21.2% of
taxable income, in line with the 20%-25% guidance given by the
Company for 2004, and compared to $72,000, or 12.9% of taxable
income in the year-ago quarter. "We showed continued strong
year-over-year growth in the first quarter, continuing a trend
shown throughout 2003," said Simon Raab, President and CEO. "We
took a number of initiatives in the quarter to help continue our
penetration into the large, underserved CAM2 market. These included
expansion of our sales force around the world, with an emphasis in
the Asia/Pacific, and the establishment of service centers in key
newer markets including Brazil, Japan, and China. Besides expanding
into new geographic regions, we are also focused on further
penetrating our larger existing customers. Sales to existing
customers represented 68% of total sales in the quarter, compared
to 62% in all of 2003." Regionally, sales in the Americas increased
57.4% in the first quarter of 2004 to $8.5 million, from $5.4
million in the first quarter of 2003. Sales in the Europe/Africa
region increased 65.6% to $10.1 million, from $6.1 million in 2003.
Sales in the Asia/Pacific region grew 26.3% to $2.4 million, from
$1.9 million in 2003. Market Evolution and Size Assessment "We
believe that the growth in the CAM2 market (Computer Aided
Manufacturing Measurement) should parallel the growth already seen
in the first two stages of the CAD (Computer Aided Design)
revolution which started in earnest over three decades ago,"
continued Raab. "CAD is now virtually 100% adopted in the
industrial design environment, and has grown to a multi-billion
dollar market. The CAM (Computer Aided Machining) stage of the CAD
revolution followed next. CAM allowed single parts to be machined
on computer-controlled machine tools using CAD data. Eventually the
majority of machine shops around the world required such CAM
hardware and software, and this market has also grown into the
billions. The penetration of CAD/CAM into the manufacturing
environment was however incomplete. Once the single parts
manufactured through CAM are brought to assembly, where very little
CAD exists and problems with dimensional fit, tooling and scrap
occur, that is where the CAM2 market emerges. Today this market is
at an early stage of its evolution, at an estimated amount of
approximately $200 million. We expect that this market will
continue to grow as the manufacturing evolution that started with
CAD and CAM continues. The penetration of CAD-based measurement
tools adaptable to the manufacturing environment is the final stage
of the CAD evolution. In fact, we believe that our continued strong
year-over-year growth in orders is in part at the expense of a
diminishing market for conventional, non-portable coordinate
measuring machines and check fixtures but more importantly due to
the inevitable expansion of the CAM2 market." Outlook for the
Remainder of 2004. As stated in an earlier news release, on the
basis of new order growth in the first quarter, we are now
expecting sales for 2004 to be $90-$93 million, a 25%-30% increase
compared to $71.8 million in 2003. We expect gross margins to be in
a range of 59%-63% in the remaining quarters of 2004, and we expect
that the higher gross margins will be somewhat offset by taxes at
the higher end of our 20-25% guidance, so we are maintaining our
earlier forecast for net income at $0.71-$0.86 per diluted share.
The Company also announced that it will begin to issue all of its
non- financial product-related press releases to its financial
press release distribution list. Interested investors can view
previous product-related press releases at the Company's website
at: http://www.faro.com/Newsroom/Press_Releases.asp "We are doing
this to allow investors to stay abreast of our new product and
other non-financial developments as they occur, and to help them
understand the dynamics and specifics of the CAM2 market," said
Raab. A conference call reviewing the first quarter of 2004 will be
held Friday, May 7, 2004 beginning at 11:00 AM (Eastern)/ 8:00 AM
(Pacific). To participate please dial 800.795.1259 five minutes
prior to start time. International callers should dial
785.832.1508. The Conference ID is "FARO." A recording of the call
will be available until August 7, 2004 by dialing 800.934.7776.
International callers should dial 402.220.6983. No access code is
needed for the replay. The call will be simultaneously broadcast
over the Internet at:
http://www.firstcallevents.com/service/ajwz405723578gf12.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 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 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 in the manufacturing
industry and general economic condition; * 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 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. FARO TECHNOLOGIES, INC.
AND SUBSIDIARIES SUMMARY FINANCIAL TABLE CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED) Three Months Ended Apr 3, Mar 29, 2004 2003
SALES $21,025,192 $13,404,265 COST OF SALES 7,561,357 5,899,580
Gross profit 13,463,835 7,504,685 OPERATING EXPENSES: Selling
5,562,695 3,787,438 General and administrative 2,529,383 1,750,566
Depreciation and amortization 556,759 588,653 Research and
development 1,441,412 877,468 Employee stock options 37,477 41,448
Total operating expenses 10,127,726 7,045,573 INCOME (LOSS) FROM
OPERATIONS 3,336,109 459,112 OTHER INCOME (EXPENSES) Interest
income 73,564 2,665 Other income, net 206,129 115,739 Interest
expense (2,142) (15,897) NET INCOME BEFORE INCOME TAX 3,613,660
561,619 INCOME TAX EXPENSE 765,252 72,255 NET INCOME $2,848,408
$489,364 NET INCOME PER SHARE - BASIC $0.21 $0.04 NET INCOME PER
SHARE - DILUTED $0.20 $0.04 Weighted average shares - Basic
13,522,921 11,893,037 Weighted average shares - Diluted 14,080,103
12,096,639 SELECTED CONSOLIDATED BALANCE SHEET DATA (UNAUDITED) Apr
3, 2004 Cash and investments $32,940,321 Current assets $66,348,435
Total assets $82,116,972 Current liabilities $10,207,508 Long-term
debt $59,007 Total liabilities $10,676,135 Total shareholders'
equity $71,440,837 Total liabilities and shareholders' equity
$82,116,972 SELECTED CONSOLIDATED STATEMENT OF CASH FLOWS DATA
(UNAUDITED) Apr 3, 2004 Net cash provided by (used in) operating
activities $2,363,119 Net cash provided by (used in) investing
activities $(7,069,573) Net cash provided by (used in) financing
activities $165,422 Effect of Exchange Rate Changes on Cash
$(2,028,548) Cash and Cash Equivalents, Beginning of Period
$17,424,901 Cash and Cash Equivalents, End of Period $10,855,321
http://www.newscom.com/cgi-bin/prnh/20000522/FLM035LOGO
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http://www.firstcallevents.com/service/ajwz405723578gf12.htmlDATASOURCE:
FARO Technologies, Inc. CONTACT: Greg Fraser, Executive Vice
President & CFO, FARO, +1-407-333-9911; or Vic Allgeier, The
TTC Group, +1-212-227-0997, for FARO Web site: http://www.faro.com/
http://www.faro.com/Newsroom/Press_Releases.asp
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