FARO (FARO) 8-K Results of Operations and Financial Condition

Exhibit 99.1

Keith Bair, Senior Vice President and CFO

keith.bair@FARO.com, 407-333-9911

FARO Reports Second Quarter 2010 Sales Growth of 32.4%

Orders Growth of 24.0%

Net Income of $1.8 million

LAKE MARY, FL, August 4, 2010 – FARO Technologies, Inc. (NASDAQ: FARO) today announced results for the second quarter ended July 3, 2010. Sales in the second quarter of 2010 increased 32.4%, to $45.7 million, from $34.6 million in the second quarter of 2009. The Company reported net income of $1.8 million, or $0.11 per share, compared to a net loss of $0.13 per share in the second quarter of 2009. Net income in the second quarter of 2010 includes the effects of foreign currency transaction losses of $1.8 million, or $0.08 per share, related to the weakening of the Euro on the value of intercompany account balances.

New order bookings for the second quarter of 2010 were $43.9 million, an increase of $8.5 million, or 24.0%, compared to $35.4 million in the second quarter of 2009.

“FARO’s ongoing dedication to serving our customers, combined with strong global demand for our product offerings, drove sales growth of more than 30% in the second quarter,” stated Jay Freeland, FARO’s President and CEO. “We continued to see increased activity from all verticals and across all three regions in the second quarter. Asia showed substantial strength, growing more than 50% for the second quarter in a row, with Europe and the Americas also delivering high double-digit growth.”

Gross margin for the second quarter of 2010 was 59.3%, compared to 56.1% in the second quarter of 2009. Gross margin increased primarily due to an increase in the proportion of higher margin product sales relative to lower margin service revenue.

“Gross margin has returned to historical levels and we’ve been able to maintain stable prices. Tight cost controls allowed us to leverage the efficiency we created within the business last year and as a result, generated operating margin of 9.9%, or $4.5 million, almost a 20 point improvement from 2009. I’m very pleased with the Company’s performance in the first half and we remain cautiously optimistic about 2010. However, because of the ongoing economic uncertainty around the world, I am maintaining our practice of not providing guidance for this year,” 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 FARO’s focus, plans and strategies, and its future operating results and 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 the Company’s customers and material adverse changes in customers’ access to liquidity and capital;

• 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, 2009.

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 11,000 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.

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FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except share and per share data)	Three Months Ended						Six Months Ended
	Jul 3, 2010			Jul 4, 2009			Jul 3, 2010			Jul 4, 2009
SALES
Product	$	37,212		$	27,203		$	71,150		$	51,416
Service		8,493			7,313			16,824			14,548
Total Sales		45,705			34,516			87,974			65,964
COST OF SALES
Product		12,620			10,259			23,895			19,386
Service		5,997			4,893			11,600			10,955
Total Cost of Sales (exclusive of depreciation and amortization, shown separately below)		18,617			15,152			35,495			30,341
GROSS PROFIT		27,088			19,364			52,479			35,623
OPERATING EXPENSES:
Selling		12,027			12,128			23,262			24,952
General and administrative		6,028			6,134			12,275			12,433
Depreciation and amortization		1,515			1,389			3,055			2,680
Research and development		2,997			3,285			5,986			6,764
Total operating expenses		22,567			22,936			44,578			46,829
INCOME (LOSS) FROM OPERATIONS		4,521			(3,572	)		7,901			(11,206	)
OTHER (INCOME) EXPENSE
Interest income		(26	)		(36	)		(45	)		(194	)
Other expense (income), net		1,839			(837	)		2,344			(176	)
Interest expense		2			4			29			6
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)		2,706			(2,703	)		5,573			(10,842	)
INCOME TAX EXPENSE (BENEFIT)		869			(599	)		1,672			(2,153	)
NET INCOME (LOSS)	$	1,837		$	(2,104	)	$	3,901		$	(8,689	)
NET INCOME (LOSS) PER SHARE - BASIC	$	0.11		$	(0.13	)	$	0.24		$	(0.53	)
NET INCOME (LOSS) PER SHARE - DILUTED	$	0.11		$	(0.13	)	$	0.24		$	(0.53	)
Weighted average shares - Basic		16,148,233			16,069,312			16,136,447			16,408,259
Weighted average shares - Diluted		16,320,596			16,069,312			16,289,963			16,408,259

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)	July 3, 2010 Unaudited			December 31, 2009
ASSETS
Current Assets:
Cash and cash equivalents	$	41,929		$	35,078
Short-term investments		64,985			64,986
Accounts receivable, net		40,348			42,944
Inventories, net		27,184			26,582
Deferred income taxes, net		4,242			4,473
Prepaid expenses and other current assets		7,471			6,016
Total current assets		186,159			180,079
Property and Equipment:
Machinery and equipment		21,916			19,867
Furniture and fixtures		5,013			5,225
Leasehold improvements		9,366			9,434
Property and equipment at cost		36,295			34,526
Less: accumulated depreciation and amortization		(22,040	)		(20,788	)
Property and equipment, net		14,255			13,738
Goodwill		18,249			19,934
Intangible assets, net		7,208			7,985
Service inventory		12,192			12,079
Deferred income taxes, net		1,677			1,895
Total Assets	$	239,740		$	235,710
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	9,701		$	8,985
Accrued liabilities		10,860			8,173
Income taxes payable		—			229
Current portion of unearned service revenues		11,888			12,226
Customer deposits		2,486			2,173
Current portion of obligations under capital leases		43			80
Total current liabilities		34,978			31,866
Unearned service revenues - less current portion		5,932			5,910
Deferred tax liability, net		1,008			1,143
Obligations under capital leases - less current portion		203			193
Total Liabilities		42,121			39,112
Shareholders’ Equity:
Common stock - par value $.001, 50,000,000 shares authorized; 16,839,592 and 16,795,289 issued; 16,159,357 and 16,115,054 outstanding, respectively		17			17
Additional paid-in capital		153,961			152,380
Retained earnings		50,816			46,915
Accumulated other comprehensive income		1,900			6,361
Common stock in treasury, at cost - 680,235 shares		(9,075	)		(9,075	)
Total Shareholders’ Equity		197,619			196,598
Total Liabilities and Shareholders’ Equity	$	239,740		$	235,710

FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended
(in thousands)	July 3, 2010			July 4, 2009
CASH FLOWS FROM:
OPERATING ACTIVITIES:
Net income (loss)	$	3,901		$	(8,689	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		3,055			2,680
Compensation for stock options and restricted stock units		1,203			1,201
Provision for bad debts		806			649
Deferred income tax expense		280			180
Change in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable		(1,388	)		16,208
Inventories, net		(4,950	)		4,088
Prepaid expenses and other current assets		(1,837	)		(2,402	)
Income tax benefit from exercise of stock options		(16	)		—
Increase (decrease) in:
Accounts payable and accrued liabilities		4,003			(12,451	)
Income taxes payable		(275	)		(1,990	)
Customer deposits		328			462
Unearned service revenues		713			(688	)
Net cash provided by (used in) operating activities		5,823			(752	)
INVESTING ACTIVITIES:
Purchases of property and equipment		(1,253	)		(2,663	)
Payments for intangible assets		(382	)		(291	)
Purchases of short-term investments		—			(64,972	)
Proceeds from sales of short-term investments		—			81,967
Net cash (used in) provided by investing activities		(1,635	)		14,041
FINANCING ACTIVITIES:
Proceeds from notes payable		2,490			—
Payments on notes payable		(2,490	)		—
Payments on capital leases		(39	)		(61	)
Income tax benefit from exercise of stock options		16			—
Purchases of treasury stock		—			(8,829	)
Proceeds from issuance of stock, net		363			—
Net cash provided by (used in) financing activities		340			(8,890	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		2,323			(1,103	)
INCREASE IN CASH AND CASH EQUIVALENTS		6,851			3,296
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		35,078			23,494
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	41,929		$	26,790