LAKE MARY, Fla., Feb. 22, 2017 /PRNewswire/ — FARO® (NASDAQ: FARO), the world’s most trusted source for 3D measurement and imaging solutions for factory metrology, construction BIM-CIM, product design, public safety forensics, and 3D solutions, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2016.

«2016 was a transformative year for FARO.  We undertook a major reorganization that aligned and harmonized our resources by global vertical market segments, and modernized the efficiency of our sales processes and other functional areas.  We accelerated and streamlined R&D to attain a sustained drumbeat of new and enhanced product introductions, and increased acquisition activity to further build out our product lines and technological capabilities.  We expect to complete the remaining primary reorganization initiatives by mid-2017,» stated Dr. Simon Raab, President and Chief Executive Officer.  «In light of the substantial reorganizational disruption, FARO was able to increase sales, gross margin, and operating income, as well as generate cash flow from operations sufficient to self-fund $27.7 million of acquisitions.»

Fiscal Year 2016

Sales for fiscal year 2016 were $325.6 million, up 2.5% compared with $317.5 million for fiscal year ended December 31, 2015.  Excluding an unfavorable foreign exchange impact of approximately $1.8 million, fiscal year 2016 sales would have increased by 3.1%.  Our sales increase was primarily driven by marginally higher average selling prices and higher service revenue, partially offset by a modest decrease in units sold.  New order bookings at $330.7 million increased by 1.6% compared with $325.6 million for the prior fiscal year.

Gross margin was 54.7%, representing an increase of 2.0 percentage points over the comparable prior year period mostly due to higher average selling prices and improved inventory management.

Operating income was $13.3 million, up 1.2% compared with $13.1 million for the prior year, reflecting an increase in gross margin on slightly higher sales offset partly by an increase in operating expenses arising largely from our investment in new product development, acquisition-related expenses, higher headcount, and increased incentive compensation.  Operating margin was 4.1% for both of our fiscal years 2016 and 2015.

Net income at $11.1 million or $0.67 per diluted share in 2016 was $1.7 million lower than prior year, reflecting increased income taxes more than offsetting higher operating income.

FARO generated $37.6 million in cash flow from operations in 2016, up $9.6 million over the prior year largely as a result of improved working capital management.  The majority of this cash was deployed for acquisitions, aggregating to $27.7 million for 2016.  As of December 31, 2016 cash and short-term investments totaled $149.1 million, of which $87.3 million was held by foreign subsidiaries.

Fourth Quarter 2016

Sales for the quarter ended December 31, 2016 were $91.7 million, up 0.4% compared with $91.3 million in the fourth quarter last year.  Excluding the effect of approximately $1.5 million in unfavorable foreign exchange impacts, fourth quarter 2016 sales would have increased by 2.0% over fourth quarter of 2015.  Our sales increase was primarily driven by a significant increase in service revenue, partially offset by lower product sales due both to lower average selling prices arising from reducing service and sales demonstration inventory and a decrease in units sold.  New order bookings were $95.8 million for the fourth quarter of 2016, down 4.6% compared with $100.4 million for the fourth quarter of 2015.

Gross margin for the quarter was 53.1% unchanged compared with the prior year period primarily due to strong service margin, offset by lower average selling prices.

Operating income for the quarter was $3.6 million compared with $6.8 million in the prior year period reflecting growth-related initiatives to increase selling headcount and accelerate new product development.  Operating margin was 3.9% in the fourth quarter of 2016, compared with 7.4% in the prior year period.

Net income for the quarter was $3.5 million or $0.21 per diluted share, compared with $8.9 million or $0.52 per diluted share in the prior year period.

Dr. Raab further stated, «In the fourth quarter, we introduced our next generation Focuss Laser Scanner, acquired MWF-Technology GmbH to provide our broad customer base with an innovative product offering in augmented reality technology, and invested in customer facing staffing to drive higher sales in the upcoming year.»

The financial information included in this press release is preliminary as the Company has not yet issued its audited financial statements and may differ from those results.

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.

FARO’s global headquarters is located in Lake Mary, Florida.  The Company also has a technology center and manufacturing facility consisting of approximately 90,400 square feet located in Exton, Pennsylvania containing research and development, manufacturing and service operations of our FARO Laser TrackerTM and FARO Cobalt Array Imager product lines.  The Company’s European regional headquarters is located in Stuttgart, Germany and its Asia Pacific regional headquarters is located in Singapore. FARO has other offices in Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Malaysia, Mexico, the Netherlands, Poland, Portugal, Singapore, South Korea, Spain, Switzerland, Thailand, Turkey, the United Kingdom, the United States, and Vietnam.

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, 2016

December 31, 2015

December 31, 2016

December 31, 2015

SALES

Product

$

73,778

$

77,558

$

256,010

$

259,842

Service

17,920

13,769

69,574

57,706

Total sales

91,698

91,327

325,584

317,548

COST OF SALES

Product

33,032

33,406

107,965

114,257

Service

9,989

9,398

39,659

36,055

Total cost of sales (exclusive of depreciation and amortization, shown separately below)

43,021

42,804

147,624

150,312

GROSS PROFIT

48,677

48,523

177,960

167,236

OPERATING EXPENSES

Selling and marketing

23,634

21,328

79,870

79,837

General and administrative

9,477

10,041

40,813

36,370

Depreciation and amortization

4,135

3,195

13,868

11,217

Research and development

7,815

7,195

30,125

26,690

Total operating expenses

45,061

41,759

164,676

154,114

INCOME FROM OPERATIONS

3,616

6,764

13,284

13,122

OTHER (INCOME) EXPENSE

Interest income, net

(45)

(19)

(164)

(55)

Other (income) expense, net

(2)

(1,150)

822

371

INCOME BEFORE INCOME TAX EXPENSE (BENEFIT)

3,663

7,933

12,626

12,806

INCOME TAX EXPENSE (BENEFIT)

118

(952)

1,519

(7)

NET INCOME

$

3,545

$

8,885

$

11,107

$

12,813

NET INCOME PER SHARE – BASIC

$

0.21

$

0.52

$

0.67

$

0.74

NET INCOME PER SHARE – DILUTED

$

0.21

$

0.52

$

0.67

$

0.74

Weighted average shares – Basic

16,676,764

17,051,427

16,654,786

17,288,665

Weighted average shares – Diluted

16,720,571

17,103,622

16,681,710

17,389,473

 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share data)

December 31, 2016

December 31, 2015

ASSETS

Current assets:

Cash and cash equivalents

$

106,169

$

107,356

Short-term investments

42,942

42,994

Accounts receivable, net

61,364

69,918

Inventories, net

51,886

45,571

Deferred income tax assets, net

7,565

7,792

Prepaid expenses and other current assets

16,304

18,527

Total current assets

286,230

292,158

Property and equipment:

Machinery and equipment

57,063

54,124

Furniture and fixtures

6,099

5,945

Leasehold improvements

18,778

18,471

Property and equipment at cost

81,940

78,540

Less: accumulated depreciation and amortization

(50,262)

(42,594)

Property and equipment, net

31,678

35,946

Goodwill

46,744

26,371

Intangible assets, net

22,279

15,985

Service and sales demonstration inventory, net

29,136

33,709

Deferred income tax assets, net

6,742

4,050

Other long-term assets

905

967

Total assets

$

423,714

$

409,186

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

11,126

$

11,345

Accrued liabilities

24,572

22,574

Income taxes payable

618

Current portion of unearned service revenues

27,422

26,114

Customer deposits

2,872

2,998

Total current liabilities

66,610

63,031

Unearned service revenues – less current portion

13,813

15,025

Deferred income tax liabilities

1,409

686

Other long-term liabilities

2,225

2,800

Total liabilities

84,057

81,542

Shareholders’ equity:

Preferred stock – par value $0.01, 10,000,000 shares authorized; none issued

Common stock – par value $.001, 50,000,000 shares authorized; 18,170,267 and 18,077,594 issued; 16,680,791 and 16,588,118 outstanding, respectively

18

18

Additional paid-in capital

212,602

206,996

Retained earnings

183,436

172,329

Accumulated other comprehensive loss

(24,561)

(19,861)

Common stock in treasury, at cost – 1,489,476 shares

(31,838)

(31,838)

Total shareholders’ equity

339,657

327,644

Total liabilities and shareholders’ equity

$

423,714

$

409,186

 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

Years ended December 31,

(in thousands)

2016

2015

2014

Net income

$

11,107

$

12,813

$

33,649

Currency translation adjustments, net of tax

(4,700)

(13,166)

(13,961)

Comprehensive income (loss)

$

6,407

$

(353)

$

19,688

 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Years Ended December 31,

(in thousands)

2016

2015

2014

CASH FLOWS FROM:

OPERATING ACTIVITIES:

Net income

$

11,107

$

12,813

$

33,649

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

13,868

11,217

7,428

Compensation for stock options and restricted stock units

5,374

4,306

4,678

Provision for bad debts (net recovery of)

898

346

(306)

Loss on disposal of assets

860

947

Write-down of inventories

4,134

10,878

3,272

Deferred income tax benefit

(2,002)

(655)

(4,707)

Income tax benefit from exercise of stock options

(357)

(313)

(169)

Change in operating assets and liabilities:

Decrease (increase) in:

Accounts receivable, net

6,727

9,584

(24,587)

Inventories, net

(6,729)

(18,021)

(21,995)

Prepaid expenses and other assets

3,588

(2,834)

(3,501)

(Decrease) increase in:

Accounts payable and accrued liabilities

534

(6,401)

8,867

Income taxes payable

618

(1,560)

Customer deposits

(1,310)

1,114

(724)

Unearned service revenues

273

5,051

5,313

Net cash provided by operating activities

37,583

28,032

5,658

INVESTING ACTIVITIES:

Proceeds from sale of investments

22,001

Purchases of property and equipment

(7,720)

(14,169)

(18,722)

Payments for intangible assets

(1,657)

(2,140)

(1,221)

Acquisition of business, net of cash received

(27,708)

(12,066)

(1,150)

Net cash used in investing activities

(37,085)

(6,374)

(21,093)

FINANCING ACTIVITIES:

Payments on capital leases

(8)

(8)

(8)

Payments of contingent consideration for acquisitions

(774)

Repurchase of common stock

(22,763)

Income tax benefit from exercise of stock options

357

313

169

Proceeds from issuance of stock, net

674

2,287

3,369

Net cash provided by (used in) financing activities

249

(20,171)

3,530

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

(1,934)

(3,420)

(3,436)

DECREASE IN CASH AND CASH EQUIVALENTS

(1,187)

(1,933)

(15,341)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

107,356

109,289

124,630

CASH AND CASH EQUIVALENTS, END OF YEAR

$

106,169

$

107,356

$

109,289

 

 

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

SEGMENT REPORTING SCHEDULES

(UNAUDITED)

Factory
Metrology

Construction
BIM-CIM

Other

 Total

2016

Net sales to external customers

$

236,313

$

65,056

$

24,215

$

325,584

Segment profit

$

69,845

$

18,250

$

9,995

$

98,090

General and administrative

40,813

Depreciation and amortization

13,868

Research and development

30,125

Income from operations

$

13,284

 

Factory
Metrology

Construction
BIM-CIM

Other

 Total

2015

Net sales to external customers

$

222,745

$

70,849

$

23,954

$

317,548

Segment profit

$

63,463

$

16,299

$

7,637

$

87,399

General and administrative

36,370

Depreciation and amortization

11,217

Research and development

26,690

Income from operations

$

13,122

 

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SOURCE FARO Technologies, Inc.