FARO Exceeds Forecast for Fourth Quarter and Fiscal 2003

FARO Exceeds Forecast for Fourth Quarter and Fiscal 2003
Net Income Rises 81% on 52% Increase in Sales in Fourth Quarter Diluted EPS of
64 Cents on $71.8 Million in Sales in Fiscal 2003 


LAKE MARY, Fla., March 11  /PRNewswire-FirstCall/ -- FARO Technologies, Inc. 
today reported an increase of 81.3% in net income in the fourth quarter of 2003
to $2.9 million, or 22 cents per diluted share, from $1.6 million, or 13 cents
per diluted share in the fourth quarter of 2002. The Company exceeded the high
end of its $2.1-$2.3 million net income forecast by 26.1% primarily because of
higher-than-expected sales. Diluted shares increased 13.2% to 13,418,202 for the
fourth quarter of 2003, compared to 11,853,732 for the year-ago quarter.

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Sales for the quarter increased 52.3% to $23.0 million, a record for any
quarter, from $15.1 million in the fourth quarter of 2002. Sales in the fourth
quarter exceeded the high end of the Company's $18-$20million forecast by 15.0%
as a result of higher-than-expected sales in the Americas. Gross margin was
59.6% in the quarter, a 2.8 percentage point improvement from 56.8% in the
fourth quarter of 2002.

Selling, general and administrative ("SG&A") expenses decreased as a percentage
of sales in the quarter from 41.7% in 2002 to 37.4% in the fourth quarter of
2003. Actual SG&A expenses were $8.6 million in the fourth quarter of 2003, an
increase of $2.3 million, or 36.5% from $6.3 million in the year- ago quarter.

Income from operations increased $1.6 million, or 145.5%, from $1.1 million in
the fourth quarter of 2002 to $2.7 million in the fourth quarter of 2003. This
increase was primarily a result of an increase in gross profit of $5.1 million,
offset by the $2.3 million increase in SG&A expenses noted above.

Summary of 2003 Year

Net income in 2003 increased $10.3 million to $8.3 million, or 64 cents per
diluted share, from a loss of $2.0 million, or 17 cents per share in 2002. Net
income exceeded the high end of the Company's 58-60 cent forecast, issued before
the private placement of Company stock in November, by four cents. Excluding a
$1.1 million gain from settlement of litigation (and the related income tax
effect) in the third quarterof 2003, net income in 2003 was $7.3 million, or 57
cents per diluted share. Diluted shares totaled approximately 12.8 million in
2003, an increase of 900,000 shares from approximately 11.9 million in 2002.

Sales increased $25.6 million, or 55.4% in 2003 to $71.8 million from $46.2
million in 2002. Sales in 2003 exceeded the high end of the Company's $67-$69
million forecast by $2.8 million. Sales grew as a result of a) strong demand for
the new generation Laser Tracker and FaroArm products, which the Company
introduced in mid 2002, b) an increase in sales and marketing activities,
including an increase in headcount from 106 in 2002 to 120 in 2003, and c) an
increase in the percentage of sales to existing customers from approximately 43%
in 2002 to approximately 62% in 2003.  No single customer represented more than
3% of sales in 2003. Gross margin improved 4.5 percentage points to 58.9% in
2003 from 54.4% in 2002.

Regionally, sales in the Americas increased $15.4 million or 68.4% to $37.9
million in 2003 from $22.5 million in 2002. Sales in the Europe/Africa region
increased $9.2 million or 49.7% to $27.7 million in 2003 from $18.5 million in
2002. Sales in the Asia/Pacific region increased $900,000, or 17.0% to $6.2
million in 2003 compared to $5.3 million in 2002.

SG&A expenses as a percentage of sales decreased from 47.2% in 2002 to 38.2% in
2003. Actual SG&A expenses increased $5.6 million or 25.7% to $27.4 million in
2003. The Company's performance-based compensation plan, combined with an
expanded and updated product line, has led to a more motivated sales force and a
drop in selling expenses as a percentage of sales.

Research and development expenses increased $500,000 or 12.5% to $4.5 million
and decreased as a percentage of sales from 8.7% in 2002 to 6.3% in 2003. The
Company had said that R&D expenses would be sustained at a level of 5-7% of
sales as part of its target financial model.

Income from operations increased $10.3 million to $7.4 million or 10.3% of sales
in 2003 from a loss of $2.9 million in 2002.  This increase was primarily a
result of an increase in gross profit of $17.2 million, offset by an increase of
$6.8 million in operating expenses.

The Company's effective tax rate in 2003 was 12.8% of net income before income
tax. The primary reason for this relatively low tax rate was a reduction in a
valuation allowance of approximately $4.0 million, of which $2.8 million related
to the Company's use of net operating losses in foreign jurisdictions, and $1.2
million related to domestic tax assets.

Backlog at December 31, 2003 was approximately $7.5 million, compared to
approximately $8.8 million at December 31, 2002, and $7.0 million at the end of
the third quarter of 2003.

"We had a strong finish in 2003thanks to stronger than expected performance in
our Americas region," said Simon Raab, President and CEO. "I am especially
pleased that our initiative to better penetrate existing customers appears to be
paying off. Our 11.8% operating margin for the fourth quarter brought the
operating margin for 2003 to 10.3%, and we are forecasting continued but perhaps
smaller improvements in operating margin in 2004 because of some negative
pressure on selling expenses in the first half of the year with our Asian
expansion."

Outlook For First Quarter and Fiscal 2004.

We are expecting sales for the first quarter of 2004 to be $19-$20 million, a
42%-49% increase compared to $13.4 million in the first quarter of 2003.
However, at this time, we are reiterating our 20-25% sales growth expectation
for all of 2004, and we plan to revise this expectation periodically as we gain
visibility of our growth rate. We expect net income for 2004 to be consistent
with our earlier forecast of a 25%-50% increase in net income in 2004 compared
to 2003 (excluding for this purpose the $.07 per share gain in 2003 from an
extraordinary item).

In recent quarters, we provided quarterly forward guidance because we were
entering into a private placement of our stock and needed to ensure that all
information was disclosed properly to our shareholders.  Going forward, we
intend to discontinue quarterly guidance and the short-term view they engender,
and we will limit our updates to guidance on the entire year.

A conference call reviewing the fourth quarter and fiscal year 2003 results will
be held Friday, March 12, 2004, beginning at 11:00 AM (Eastern)/ 8:00 AM
(Pacific). To participate, please dial 800.245.3043 five minutes prior to start
time. International callers should dial 785.832.2041. The Conference ID is
"FARO." A recording of the call will be available until June 12, 2004 by dialing
800.938.1603. International callers should dial 402.220.1549. No access code is
needed for the replay. The call will be simultaneously broadcast over the
Internet at: http://www.firstcallevents.com/service/ajwz401491449gf12.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 makeour 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 ofour 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 inthe
manufacturing industry and general economic conditions;

* 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 Form10-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

                           Three Months Ended      Year Ended December 31,
                         December 31  December 31
                            2003         2002         2003         2002

  SALES                  $22,954,290$15,110,469  $71,785,980  $46,246,372

  COST OF SALES            9,284,556    6,520,510   29,520,249   21,109,609

  Gross profit            13,669,734    8,589,959   42,265,731   25,136,763

  OPERATING EXPENSES:
   Selling                 5,737,4964,113,516   18,341,409   13,891,917
   General and
    administrative         2,907,363    2,170,680    9,116,166    7,873,338
   Depreciation and
    amortization             519,596      455,889    2,119,030    2,267,763
   Research and
    development            1,451,392      694,633    4,530,467    4,033,462
   Employee stock options    349,376        7,504      718,524        9,526

   Total operating
    expenses              10,965,223    7,442,222   34,825,596   28,076,006

  INCOME (LOSS) FROM
   OPERATIONS              2,704,511    1,147,737    7,440,135   (2,939,243)
  OTHER INCOME
   (EXPENSES)
   Interest income            30,985      218,721       81,680      561,112
  Other income, net          516,181      413,303    1,959,806  601,336
   Interest expense            1,552      (18,355)     (46,351)     (28,036)

  NET INCOME (LOSS)
   BEFORE INCOME TAX       3,253,229    1,761,406    9,435,270   (1,804,831)

  INCOME TAX EXPENSE         356,792      190,073    1,157,530   210,740

  NET INCOME (LOSS)       $2,896,437   $1,571,333   $8,277,740  $(2,015,571)

  NET INCOME (LOSS) PER
   SHARE - BASIC               $0.23        $0.13        $0.68       $(0.17)

  NET INCOME (LOSS) PER
   SHARE - DILUTED             $0.22 $0.13        $0.64       $(0.17)

  Weighted average
   shares - Basic         12,813,200   11,853,732   12,181,221   11,853,732

  Weighted average
   shares - Diluted       13,418,202   11,853,732   12,845,992   11,853,732


  SELECTED CONSOLIDATED
   BALANCE SHEET DATA

                        Dec 31, 2003

  Cash and investments   $33,462,109
  Current assets         $66,577,410
  Total assets           $81,913,888
  Current liabilities    $12,707,843
  Long-term debt             $64,650
  Total liabilities      $12,992,789
  Total shareholders'
   equity                $68,921,099
  Total liabilities and
   shareholders' equity  $81,913,888


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http://www.firstcallevents.com/service/ajwz401491449gf12.htmlDATASOURCE: FARO
Technologies, Inc.



CONTACT:  Greg Fraser, Executive Vice President and CFO, FARO

Technolgies, [phone]; or Vic Allgeier, TTC Group, [phone], for

FARO Technologies



Web site:  http://www.faro.com/ 

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