FARO Reports Third Quarter 2009 Results

LAKE MARY, Fla., Nov. 4 /PRNewswire-FirstCall/ -- FARO Technologies, Inc.
(Nasdaq: FARO) today announced results for the third quarter ended October 3,
2009. Net loss for the third quarter was $1.3 million, or $0.08 per diluted
share, a decrease of $3.3 million, compared to net income of $2.0 million, or
$0.12 per diluted share, in the third quarter of 2008.

Sales for the third quarter of 2009 decreased $13.4 million, or 27.3%, to
$35.7 million from $49.1 million in the third quarter of 2008. New order
bookings for the third quarter were $35.8 million, a decrease of $13.4
million, or 27.2%, compared with $49.2 million in the third quarter of 2008.

"Market conditions remain difficult, so we took additional steps in August to
reduce our operating costs through one more reduction in force. As a result,
I believe we are positioned well for the fourth quarter and beyond," stated
Jay Freeland, FARO's President and CEO. "Despite the ongoing market
pressure, sales in the third quarter increased slightly over the second
quarter of this year. Historically, we see about a 10% sequential decline
between these two quarters, and we're starting to see some stability in our
customers' operations and end-markets. We also launched the Ion Laser Tracker
at the end of the third quarter, our latest generation of technology for large
scale measurement. Initial demand for the Ion has been strong, with multiple
orders booked within the first two weeks."

Gross margin for the third quarter of 2009 was 54.9%, compared to 59.1% in the
third quarter of 2008. Gross margin decreased primarily due to a change in the
sales mix between higher margin product sales and lower margin service
revenue.

Selling expenses as a percentage of sales increased to 32.2% in the third
quarter of 2009 from 31.3% in the third quarter of 2008, primarily as a result
of the decline in sales. Selling expenses in the third quarter of 2009
decreased by $3.9 million to $11.5 million.

General and administrative expenses increased to 17.2% of sales for the third
quarter of 2009 from 13.5% in the third quarter of 2008. General and
administrative expenses in the third quarter of 2009 decreased by $0.5 million
to $6.2 million from the third quarter of 2008.

R&D expenses were $2.8 million in the third quarter of 2009, a decrease from
$3.2 million in the third quarter of 2008. R&D expenses were 7.8% of sales in
the third quarter of 2009 compared to 6.6% of sales in the third quarter of
2008.

The operating loss for the third quarter of 2009 was $2.3 million, a decrease
of $4.9 million from an operating profit of $2.6 million in the third quarter
of 2008.

Income tax expense decreased by $1.3 million to a benefit of $0.8 million for
the third quarter of 2009, from an expense of $0.5 million for the third
quarter of 2008 due to a decrease in pretax income. The Company's effective
tax rate increased to a benefit of 37.6% for the third quarter of 2009 from an
expense of 19.9% in the third quarter of 2008 primarily due to taxable losses
in jurisdictions with higher tax rates.

"Despite some of the favorable signs we're starting to see, there is still
uncertainty in the marketplace. In response, we have reduced our operating
costs substantially without sacrificing our global sales presence. More
importantly, we have maintained our spending levels on Research & Development
throughout the downturn, so I believe we are positioned to execute well in
this environment," Mr. 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 the future state of the
economy, FARO's focus, plans and strategies, its ability to further reduce
operating costs, and its future 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 our customers and material
adverse changes in customers' access to liquidity and capital;

-- further 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 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 in Part I, Item 1A. Risk Factors in the Company's
Annual Report on Form 10-K for the year ended December 31, 2008.

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 9,500 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 Nine Months Ended
------------------- ------------------

(in thousands,
except share and
per share data) Oct 3, 2009 Sep 27, 2008 Oct 3, 2009 Sep 27, 2008
----------------- ----------- ------------ ----------- ------------
SALES
Product $27,876 $41,100 $79,292 $131,019
Service 7,837 7,995 22,385 21,915
----- ----- ------ ------
Total Sales 35,713 49,095 101,677 152,934
------ ------ ------- -------
COST OF SALES
Product 11,261 14,223 30,647 43,804
Service 4,850 5,863 15,805 16,176
----- ----- ------ ------
Total Cost of
Sales (exclusive
of depreciation
and amortization,
shown separately
below) 16,111 20,086 46,452 59,980
------ ------ ------ ------
GROSS PROFIT 19,602 29,009 55,225 92,954

OPERATING EXPENSES:
Selling 11,482 15,382 36,434 46,886
General and
administrative 6,158 6,614 18,591 19,274
Depreciation and
amortization 1,410 1,158 4,090 3,293
Research and
development 2,802 3,237 9,566 9,122
----- ----- ----- -----
Total operating
expenses 21,852 26,391 68,681 78,575
------ ------ ------ ------
(LOSS) INCOME FROM
OPERATIONS (2,250) 2,618 (13,456) 14,379
------ ----- ------- ------
OTHER (INCOME) EXPENSE
Interest income (31) (547) (225) (1,624)
Other (income)
expense, net (183) 652 (359) 834
Interest expense 3 2 9 450
--- --- --- ---
(LOSS) INCOME BEFORE
INCOME TAX (BENEFIT)
EXPENSE (2,039) 2,511 (12,881) 14,719
INCOME TAX (BENEFIT)
EXPENSE (766) 500 (2,919) 2,965
---- --- ------ -----
NET (LOSS) INCOME $(1,273) $2,011 $(9,962) $11,754
------- ------ ------- -------
NET (LOSS) INCOME
PER SHARE - BASIC $(0.08) $0.12 $(0.62) $0.71
------ ----- ------ -----

NET (LOSS) INCOME
PER SHARE - DILUTED $(0.08) $0.12 $(0.62) $0.70
------ ----- ------ -----

Weighted average
shares - Basic 16,093,759 16,637,497 16,131,680 16,624,784
---------- ---------- ---------- ----------

Weighted average
shares - Diluted 16,093,759 16,731,064 16,131,680 16,751,679
---------- ---------- ---------- ----------

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

October 3, December 31,
(in thousands, except share data) 2009 2008
--------------------------------- ---- ----
ASSETS Unaudited
Current Assets:
Cash and cash equivalents $27,401 $23,494
Short-term investments 64,979 81,965
Accounts receivable, net 35,697 49,713
Inventories 28,212 33,444
Deferred income taxes, net 4,541 5,581
Prepaid expenses and other current assets 12,225 7,879
------ -----
Total current assets 173,055 202,076
------- -------
Property and Equipment:
Machinery and equipment 19,557 22,685
Furniture and fixtures 5,250 4,099
Leasehold improvements 9,399 3,956
----- -----
Property and equipment at cost 34,206 30,740
Less: accumulated depreciation and amortization (19,800) (16,604)
------- -------
Property and equipment, net 14,406 14,136
------ ------
Goodwill 19,822 18,951
Intangible assets, net 8,199 8,580
Service inventory 12,751 12,843
Deferred income taxes, net 1,909 2,728
----- -----
Total Assets $230,142 $259,314
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $5,460 $10,813
Accrued liabilities 8,368 14,032
Income taxes payable - 1,988
Current portion of unearned service revenues 11,551 11,501
Customer deposits 626 425
Current portion of obligations under capital
leases 27 87
--- ---
Total current liabilities 26,032 38,846
Unearned service revenues - less current portion 5,591 6,772
Deferred tax liability, net 1,152 1,107
Obligations under capital leases - less
current portion 285 281
--- ---
Total Liabilities 33,060 47,006
------ ------

Shareholders' Equity:
Common stock - par value $.001, 50,000,000
shares authorized; 16,793,289 and 16,741,488
issued; 16,102,331 and 16,658,552
outstanding, respectively 17 17
Additional paid-in-capital 151,487 149,298
Retained earnings 47,537 57,497
Accumulated other comprehensive income 7,116 5,742
Common stock in treasury, at cost - 680,235
and 55,808 shares, respectively (9,075) (246)
------ ----
Total Shareholders' Equity 197,082 212,308
------- -------
Total Liabilities and Shareholders' Equity $230,142 $259,314
-------- --------

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

Nine Months Ended
-----------------

(in thousands) October 3, 2009 September 27, 2008
-------------- --------------- ------------------
CASH FLOWS FROM:
OPERATING ACTIVITIES:
Net (loss) income $(9,962) $11,754
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation and amortization 4,090 3,293
Compensation for stock options
and restricted stock units 1,827 1,686
Provision for bad debts 961 446
Deferred income tax expense
(benefit) 1,919 (1,575)
Change in operating assets and
liabilities:
Decrease (increase) in:
Accounts receivable 14,040 9,198
Inventories 6,202 (9,681)
Prepaid expenses and other
current assets (4,234) (2,369)
Income tax benefit from
exercise of stock options (2) (45)
Increase (decrease) in:
Accounts payable and accrued
liabilities (11,220) (7,654)
Income taxes payable (1,965) (771)
Customer deposits 186 (11)
Unearned service revenues (1,490) 2,671
------ -----
Net cash provided by operating
activities 352 6,942
--- -----

INVESTING ACTIVITIES:
Purchases of property and equipment (2,919) (4,377)
Payments for intangible assets (504) (3,584)
Purchases of short-term investments (64,979) (4,995)
Proceeds from sales of short-term
investments 81,965 -
------ ---
Net cash provided by (used in)
investing activities 13,563 (12,956)
------ -------

FINANCING ACTIVITIES:
Payments on capital leases (55) (68)
Income tax benefit from exercise
of stock options 2 45
Repurchases of common stock (8,829) -
Proceeds from issuance of stock, net 45 128
--- ---
Net cash (used in) provided by
financing activities (8,837) 105
------ ---

EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS (1,171) 271
------ ---

INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 3,907 (5,638)

CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 23,494 25,798
------ ------

CASH AND CASH EQUIVALENTS, END OF
PERIOD $27,401 $20,160
======= =======

SOURCE FARO Technologies, Inc.

Keith Bair, Senior Vice President and CFO, FARO Technologies, Inc.,
keith.bair@FARO.com, +1-407-333-9911