FARO TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Years Ended December 31,

(in thousands)

CASH FLOWS FROM:

OPERATING ACTIVITIES:

Net (loss) income

$          (39,964)

$                 629

Adjustments to reconcile net (loss) income to net cash used by operating activities:

Depreciation and amortization

13,396

14,239

Stock-based compensation

11,456

8,314

Provision for bad debts (net of recoveries)

176

440

Loss on disposal of assets

218

383

Provision for excess and obsolete inventory

2,297

1,349

Impairment of goodwill

—

—

Impairment of acquired intangibles

—

—

Impairment of loan to affiliate

—

—

Deferred income tax benefit

24,706

(28,444)

Change in operating assets and liabilities, net of acquisitions:

(Increase) decrease in:

Accounts receivable, net

(15,577)

12,346

Inventories

(6,706)

10,343

Prepaid expenses and other assets

5,996

3,862

(Decrease) increase in:

Accounts payable and accrued liabilities

(13,260)

2,390

Income taxes payable

847

(3,357)

Customer deposits

2,627

(374)

Unearned service revenues

312

(726)

Net cash (used in) provided by operating activities

(13,476)

21,394

INVESTING ACTIVITIES:

Purchases of investments

—

—

Proceeds from sale of investments

—

25,000

Purchases of property and equipment

(7,035)

(4,774)

Cash paid for technology development, patents and licenses

(4,905)

(1,298)

Acquisition of business, net of cash received

(33,800)

(6,036)

Other

—

1,015

Net cash provided by (used in) investing activities

(45,740)

13,907

FINANCING ACTIVITIES:

Payments on capital leases

(296)

(338)

Payments of contingent consideration for acquisitions

—

(733)

Payments for taxes related to net share settlement of equity awards

(4,002)

(2,602)

Proceeds from issuance of stock related to stock option exercises

5,880

14,731

Net cash provided by financing activities

1,582

11,058

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

(6,010)

5,640

INCREASE IN CASH AND CASH EQUIVALENTS

(63,644)

51,999

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

185,633

133,634

CASH AND CASH EQUIVALENTS, END OF YEAR

$         121,989

$         185,633