Firan Technology Group Corporation
TSX : FTG

Firan Technology Group Corporation

April 04, 2007 16:30 ET

Firan Technology Group Corporation (FTG) Announces First Quarter 2007 Earnings

TORONTO, ONTARIO--(CCNMatthews - April 4, 2007) - Firan Technology Group Corporation (TSX:FTG) today announced the first quarter 2007 results for the period ending March 2, 2007.

Net earnings after tax for the first quarter of 2007 rose 171% to $482,000 versus a first quarter profit of $178,000 in 2006.

First Quarter Results: (three months ended March 2, 2007 compared with three months ended March 3, 2006)



Q1 2007 Q1 2006
----------- -----------

Sales $13,911,000 $13,363,000
Gross margin $ 3,121,000 $ 2,847,000
Net earnings after tax $ 482,000 $ 178,000
Earnings per share
- basic $ 0.03 $ 0.01
- diluted $ 0.02 $ 0.01


Sales increased by $548,000 or 4.1%, from $13,363,000 in the first quarter of 2006 to $13,911,000 in the first quarter of 2007. FTG Aerospace grew over the same quarter last year by $801,000 or 36% due to high demand from across the customer base and increased capacity within the business. FTG Circuits was down $253,000 or 2.3% over the same period last year due to slightly lower demand from our customer base early in the quarter offset by stronger demand towards the end of the quarter and increased panel pricing from higher technology products.

Sales in Q1 2007 were up $308,000 or 2.3% sequentially over Q4 2006 even though the first quarter has one less week of available production days due to the Christmas period when all of FTG's plants shut down. FTG Aerospace sales were down $52,000 while FTG Circuits sales were up $360,000 in the first quarter versus Q4 2006.

Gross margin increased by $274,000 to $3,121,000 or 22.4% of sales for the first quarter of 2007 as compared with $2,847,000 or 21.3% of sales in the first quarter of 2006. The increase in gross margins is attributable to the higher throughput in FTG Aerospace, a $395,000 recovery of a Scientific Research and Experimental Development ("SR&ED") tax credit recorded in cost of sales, offset by lower throughput and margins in FTG Circuits. FTG Aerospace margins have improved by 1.8% due to increased throughput and improved efficiency from the ongoing lean manufacturing initiatives. The margins in FTG Circuits decreased due to the lower throughput and higher materials costs, offset by increased panel pricing for higher technology products and the SR&ED tax credit noted above.

Net earnings for the first quarter of 2007 were $482,000, an increase of 171%, or earnings per share of $0.03 (earnings of $0.02 per diluted share) as compared with a profit of $178,000 or $0.01 per share (profit of $0.01 per diluted share) in the first quarter of 2006.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the first quarter were $1,520,000, an increase of $290,000 over Q1 2006. (1)

"The aerospace and defence market remains robust. This bodes well for both of FTG's businesses as we are well positioned in this market and our operational performance is strong. To continue to grow with the market, FTG remains focused on achieving Operational Excellence. In addition, we have made great strides in increasing the level of technology in all of our businesses and this too positions us well for the future." stated Mr. Bradley Bourne, President and CEO.

"To continue to improve our financial results we look to grow our sales and to control our costs. With a strong, integrated sales force we are seeing increased opportunities from existing and new customers. To support the increased sales we are continuing to expand our Aerospace operation and invest in relieving key bottleneck areas in Chatsworth, CA. To control costs, our primary focus is on improving production yields and implementing lean manufacturing techniques across the Company." added Mr. Joe Ricci, Vice President and CFO.

The Company will host a live conference call on April 5, 2007 at 8:30am (EDT) to discuss the results of the first quarter of 2007.

Anyone wishing to participate in the call should dial 416-695-5261 or 1-877-461-2814 and identify that you are calling into the FTG conference call. The Chairperson is Bradley Bourne. A replay of the call will be available until April 12, 2007 and will be available on the FTG website at www.ftgcorp.com. The number to call for a rebroadcast is 416-695-5275 or 1-888-509-0081, pass code 642536.



Q1 Q1
Reconciliation of EBITDA (1): 2007 2006
---- ----

Net earnings / (loss) $ 482,000 $ 178,000

Add:

Income taxes $ 46,000 $ 33,000
Interest expense $ 138,000 $ 105,000
Amortization of machinery and equipment $ 790,000 $ 800,000
Other amortization $ 64,000 $ 114,000
----------- -----------

EBITDA $ 1,520,000 $ 1,230,000
----------- -----------
----------- -----------

(1) EBITDA is not a measure recognized under Canadian generally accepted
accounting principles ("GAAP"). EBITDA is calculated as earnings
before provision for income taxes, interest expense, amortization of
machinery and equipment and amortization of other assets. Management
believes that many of the Company's shareholders, creditors, other
stakeholders and analysts prefer to assess the Company's performance
using EBITDA in addition to the GAAP measures. The Company's method
of calculating EBITDA may differ from other companies and
accordingly may not be comparable to measures used by other companies.


ABOUT FIRAN TECHNOLOGY GROUP CORPORATION

FTG is an aerospace and defence electronics product and subsystem supplier to the North American marketplace. FTG has two operating units.

FTG Circuits is a manufacturer of high technology/high reliability printed circuit boards. Our customers are leaders in the aviation, defence, and high technology industries. FTG Circuits has operations in Toronto, Ontario and Chatsworth, California.

FTG Aerospace manufactures illuminated cockpit panels, keyboards and sub-assemblies for original equipment manufacturers of avionics products as well as airframe manufacturers.

The Company's shares are traded on the Toronto Stock Exchange under the symbol FTG.

This news release may contain certain forward-looking statements. Such statements are based on the current expectations of management of the Company and inherently involve numerous risks and uncertainties, known and unknown, including economic factors and the Company's industry, generally. The preceding list is not exhaustive of all possible factors. Such forward-looking statements are not guarantees of future performance and actual events and results could differ materially from those expressed or implied by forward-looking statements made by the Company. The reader is cautioned to consider these and other factors carefully when making decisions with respect to the Company and not place undue reliance on forward-looking statements. The Company does not undertake and has no specific intention to update any forward-looking statements, written or oral that may be made from time to time by or on its behalf whether as a result of new information, future events or otherwise.

Additional information can be found at the Company's website; www.ftgcorp.com.



FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Balance Sheets
(in thousands of dollars)
---------------------------------------------------------------------------
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March 2, 2007 November 30, 2006
(unaudited) (audited)
------------- -----------------

ASSETS

CURRENT
Cash $ 1,073 $ 2,348
Accounts receivable 10,479 10,432
Income taxes recoverable 224 254
Inventories 8,723 7,622
Prepaid expenses 411 329
---------------------------------------------------------------------------
20,910 20,985

DUE FROM RELATED PARTY 154 154
MACHINERY AND EQUIPMENT 7,089 6,969
FUTURE INCOME TAXES (Note 4) 4,742 4,350
GOODWILL 4,549 4,549
OTHER ASSETS 147 162
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$ 37,591 $ 37,169
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LIABILITIES

CURRENT
Accounts payable and accrued liabilities $ 8,567 $ 8,567
Current portion of long-term debt and
capital leases 1,020 990
---------------------------------------------------------------------------
9,587 9,557
LONG-TERM DEBT AND CAPITAL LEASES 5,433 5,561
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15,020 15,118
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SHAREHOLDERS' EQUITY

Share capital
Common shares 12,681 12,681
Preferred shares 2,218 2,218
Contributed surplus (Note 3(a)) 7,851 7,804
Deficit (171) (653)
Accumulated other comprehensive
income (Note 2) (8) 1
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22,571 22,051
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$ 37,591 $ 37,169
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FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Earnings
(in thousands of dollars except per share amounts)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Three Months Ended
--------------------------------
March 2, 2007 March 3, 2006
(unaudited) (unaudited)
-------------- --------------

SALES $ 13,911 $ 13,363
COST OF SALES (Note 4) 10,790 10,516
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3,121 2,847
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EXPENSES
Selling, general and administrative 1,665 1,731
Amortization of machinery and equipment 790 800
Interest expense on long-term debt 138 105
---------------------------------------------------------------------------
2,593 2,636
---------------------------------------------------------------------------

OPERATING EARNINGS BEFORE INCOME TAXES 528 211

INCOME TAXES 46 33
---------------------------------------------------------------------------

NET EARNINGS $ 482 $ 178
---------------------------------------------------------------------------
---------------------------------------------------------------------------

NET EARNINGS PER SHARE
Basic (Note 3(b)) $ 0.03 $ 0.01
Diluted (Note 3(b)) $ 0.02 $ 0.01
---------------------------------------------------------------------------
---------------------------------------------------------------------------



FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Changes in Shareholders' Equity
(in thousands of dollars) (unaudited)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Accum-
ulated
Other
Compre- Total Total
Contrib- hensive Deficit Share-
Common Preferred Total uted Income and holders'
Shares Shares Capital Surplus Deficit ("AOCI") AOCI Equity
------------------------------------------------------------------

Balance,
November
30,
2006 12,681 2,218 14,899 7,804 (653) 1 (652) 22,051
Other
compre-
hesive
income:
Net
earn-
ings 482 - 482 482
For-
eign
curr-
ency
trans-
lation
adjus-
tments - (9) (9) (9)
---------------------------------
Other
compre-
hesive
income 482 (9) 473 473
Stock
based
compen-
sation
(Note
3(a)) 47 47
------------------------------------------------------------------
Balance,
March 2,
2007 12,681 2,218 14,899 7,851 (171) (8) (179) 22,571
------------------------------------------------------------------



Accum-
ulated
Other
Compre- Total Total
Contrib- hensive Deficit Share-
Common Preferred Total uted Income and holders'
Shares Shares Capital Surplus Deficit ("AOCI") AOCI Equity
------------------------------------------------------------------


Balance,
November
30,
2005 12,681 2,218 14,899 7,604 (2,450) (4) (2,454) 20,049
Other
compre-
hesive
income:
Net
earn-
ings 178 - 178 178
---------------------------------
Other
compre-
hesive
income 178 - 178 178
Stock
based
compen-
sation 48 48
------------------------------------------------------------------
Balance,
March 3,
2006 12,681 2,218 14,899 7,652 (2,272) (4) (2,276) 20,275
------------------------------------------------------------------



FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Cash Flows
(in thousands of dollars)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Three Months Ended
--------------------------------
March 2, 2007 March 3, 2006
(unaudited) (unaudited)
-------------- --------------

NET INFLOW (OUTFLOW) OF CASH RELATED
TO THE FOLLOWING ACTIVITIES:

OPERATING
Net earnings $ 482 $ 178
Items not affecting cash
Stock based compensation expense 47 48
Future income taxes (Note 4) 3 -
Scientific research and experimental
development tax credits (Note 4) (395) -
Amortization of other assets 17 66
Amortization of machinery and equipment 790 800
Effect of exchange rates on Canadian
U.S. dollar debt 63 69
Changes in non-cash operating working
capital items (1,129) (1,016)
---------------------------------------------------------------------------
(122) 145
---------------------------------------------------------------------------

INVESTING
Additions to machinery and equipment (860) (832)
---------------------------------------------------------------------------

FINANCING
Payment of long-term debt and capital leases (266) (574)
---------------------------------------------------------------------------

Effects of foreign exchange rate changes on
cash flow (27) 35
---------------------------------------------------------------------------

NET CASH FLOW (1,275) (1,226)

CASH, BEGINNING OF PERIOD 2,348 2,051
---------------------------------------------------------------------------

CASH, END OF PERIOD $ 1,073 $ 825
---------------------------------------------------------------------------
---------------------------------------------------------------------------

DISCLOSURE OF CASH PAYMENTS
Interest $ 138 $ 98
Income taxes $ - $ 343



FIRAN TECHNOLOGY GROUP CORPORATION
Notes to the Interim Consolidated Financial Statements
(Unaudited) (in thousands of dollars except per share amounts)
---------------------------------------------------------------------------
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1. BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles on a basis consistent with those followed in the November 30, 2006 audited consolidated financial statements of Firan Technology Group Corporation and are presented in Canadian dollars. These unaudited interim consolidated financial statements do not include all the information and note disclosures required by Canadian generally accepted accounting principles for annual financial statements and therefore should be read in conjunction with the said November 30,2006 audited consolidated financial statements and the notes below.

In the opinion of management, the unaudited interim consolidated financial statements include all adjustments (consisting of normal recurring accruals) considered necessary by management to present a fair statement of the results of operations, financial position and cash flows. The unaudited interim consolidated financial statements were prepared using the same accounting policies and methods as those used in the Corporation's audited financial statements for the year ended November 30, 2006, except as explained in note 2.

The unaudited interim consolidated financial statements include the accounts of Firan Technology Group Corporation (the "Corporation") and its 100% owned subsidiaries, FTG Circuits Inc. ("FTG Circuits - Chatsworth") and Firan Technology Group (USA) Corporation.

2. CHANGES IN ACCOUNTING POLICY

Effective December 1, 2006, the Corporation adopted CICA Handbook Section 1530, Comprehensive Income, CICA handbook Section 3855, Financial Instruments - Recognition and Measurement and CICA handbook Section 3865, Hedges. These new Handbook Sections provide comprehensive requirements for the recognition and measurement of financial instruments, as well as standards on when and how hedge accounting may be applied. Handbook Section 1530 also introduces a new component of equity referred to as other comprehensive income.

In accordance with the provisions of these new standards, the Corporation reflected the following adjustments as of December 1, 2006:

- A presentational reclassification of amounts previously recorded in "Cumulative translation adjustment" to "Accumulated other comprehensive income."

The adoption of these standards had no impact on the Corporation's interim consolidated statement of earnings. The unrealized gains and losses included in "Accumulated other comprehensive income" were recorded net of taxes, which were nil.

3. SHARE CAPITAL

(a) Stock based compensation to employees

The Corporation recognized stock based compensation expense in the interim consolidated statement of earnings of $47 for the first quarter of 2007 as compared to $48 for the first quarter of 2006. Of the first quarter 2007 amount, approximately $5 relates to 150,000 options granted on January 23, 2007. The 150,000 options granted have an expiry date of January 23, 2013, an option price of $1.35 and a vesting period of 3 years. The remainder of the amount relates to amortization of compensation expense for options previously granted. This amount was expensed in the current period and credited to contributed surplus. The fair value of options granted were estimated at the date of the grant using the Black-Scholes valuation model with the following assumptions: risk-free rate of 6%; expected life of three years; volatility of 55% and a dividend yield of nil.

(b) Earnings per share

The Corporation has 1,775,000 voting convertible preferred shares outstanding. While the convertible preferred shares have the same voting rights as common shares they are not considered in calculating basic earnings per share but are included in calculating diluted earnings per share and will receive no dividends. The first quarter 2007 weighted average number of shares used in calculating basic and diluted earnings per share were 17,800,227 and 19,575,227 respectively.

4. INCOME TAXES

The Corporation accounts for income taxes under the liability method. Under the liability method, a future tax asset would be recorded only to the extent that based on available evidence; it is more likely than not that a future tax asset would be realized. The valuation allowance is reviewed and adjusted for each reporting period. Should management estimates of taxable income change in future periods, it may be necessary to adjust the valuation allowance, which could affect the results of operations in the period such a determination was made.

Recorded in cost of sales for the first quarter of 2007 is $395 of non cash Scientific Research & Experimental Development ("SR&ED") tax credits as a result of increased certainty that these tax credits will be utilized. There were no SR&ED tax credits recorded in the first quarter of 2006.

The income tax expense for the first quarter of 2007 consists of a non cash Canadian provision of $3 at a 34.0% income tax rate and a cash U.S. provision of $43 at a 45.4% income tax rate. This compares to a $33 cash U.S. provision at a 45.4% income tax rate for the first quarter of 2006.

5. SEGMENTED INFORMATION

The Corporation operates in two operating segments, FTG Circuits and FTG Aerospace. FTG Circuits is a leading manufacturer of high technology/high reliability printed circuit boards within the North American marketplace. FTG Aerospace is a manufacturer of illuminated cockpit panels, keyboards, bezels and sub assemblies for original equipment manufacturers of avionic products and airframe manufacturers. FTG Circuits and FTG Aerospace financial information is shown below:



March 2, 2007 March 3, 2006
----------------------------- -----------------------------
Circuits Aerospace Total Circuits Aerospace Total
-------- --------- -------- -------- --------- --------

Sales $ 10,882 $ 3,029 $ 13,911 $ 11,135 $ 2,228 $ 13,363
Amortization
of machinery
and equipment 728 62 790 747 53 800
Operating
income before
interest,
taxes,
severance
costs and
other costs 465 201 666 273 43 316
Interest
expense on
long-term debt 138 - 138 105 - 105
Income taxes (22) 68 46 33 - 33
----------------------------- -----------------------------
Net earnings 349 133 482 135 43 178
----------------------------- -----------------------------
----------------------------- -----------------------------

Segment assets 30,067 7,524 37,591 27,286 6,026 33,312
Goodwill 4,549 - 4,549 4,549 - 4,549
Additions to
plant and
equipment 720 140 860 813 19 832



Geographic location


March 2, 2007 March 3, 2006
----------------------------- -----------------------------
United United
Canada States Total Canada States Total
-------- ------- ------- -------- ------- -------

Sales (by
location of
customer) $ 2,179 $ 11,732 $ 13,911 $ 1,590 $ 11,773 $ 13,363
Goodwill (by
location of
division) 1,039 3,510 4,549 1,039 3,510 4,549
Capital
assets (by
location
of division) 5,497 1,592 7,089 6,899 292 7,191


6. FOREIGN CURRENCY RISK

As at March 2, 2007, the Corporation had entered into U.S. dollar forward sales contracts maturing in the second quarter of 2007 of U.S. $2,000 at rates between $1.1517 and $1.1740. The unrealized loss of the contracts was $23 and was recorded in the interim consolidated statement of earnings as an increase in selling, general and administrative costs and accounts payable and accrued liabilities.

7. COMPARATIVE FIGURES

Certain of the comparative figures in the interim consolidated statements of cash flows have been reclassified to conform with the current periods presentation.

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