Firan Technology Group Corporation
TSX : FTG

Firan Technology Group Corporation

October 07, 2015 17:05 ET

Firan Technology Group Corporation ("FTG") Announces Third Quarter 2015 Financial Results

TORONTO, ONTARIO--(Marketwired - Oct. 7, 2015) - Firan Technology Group Corporation (TSX:FTG) today announced financial results for the third quarter 2015.

  • Grew Q3 2015 sales to $18.2M, a 23% increase over Q3 2014
  • R&D spending exceeded 8% of sales in Q3 2015
  • Recorded Q3 2015 profit of $1.6M, an increase of 647% compared to Q3 2014
  • Trailing twelve month earnings per share (diluted) are now $0.21
  • Cash flow from operations in the quarter was $2.6M

"The third quarter of 2015 saw continued strong performance for FTG as a result of past investments in technology, positive impacts from past key new program wins as well as the strengthening of the US dollar," stated Brad Bourne, President and Chief Executive Officer. He added, "These record results are enabling us to report strong earnings while still investing in our future. In the quarter, development continued on control panel assembly programs for the Chinese C919 aircraft and another helicopter related program for a US customer. We continued to invest in R&D across the Corporation to improve our products, our processes and our ability to meet the future demands of our customers."

Third Quarter Results: (three months ended Aug 28, 2015 compared with three months ended Aug 29, 2014)
Q3 2015 Q3 2014
Sales $18,227,000 $14,818,000
Gross Margin 5,109,000 3,392,000
Gross Margin (%) 28.0% 22.9%
Operating Earnings (1): 3,188,000 1,105,000
- Net R&D Investment 1,482,000 822,000
Net Earnings before Tax 1,706,000 283,000
- Tax Expense 69,000 73,000
- Non-controlling Interests 1,000 (9,000)
Net Earnings After Tax $1,636,000 $219,000
Earnings per share
- basic $0.09 $0.01
- diluted $0.08 $0.01
Year-to-Date Results: (nine months ended Aug 28, 2015 compared with nine months ended Aug 29, 2014)
YTD 2015 YTD 2014
Sales $53,303,000 $44,209,000
Gross Margin 13,081,000 10,842,000
Gross Margin (%) 24.5% 24.5%
Operating Earnings: (1) 6,940,000 3,481,000
- Net R&D Investment 3,601,000 2,296,000
Net Earnings before tax 3,339,000 1,185,000
- Income Tax 213,000 218,000
- Non-controlling Interests 11,000 (37,000)
Net Earnings after tax $3,115,000 $1,004,000
Earnings per share
- basic $0.17 $0.06
- diluted $0.15 $0.05
  1. Operating Earnings is not a measure recognized under International Financial Reporting Standards ("IFRS"). Management believes that this measure is important to many of the Corporation's shareholders, creditors and other stakeholders. The Corporation's method of calculating Operating Earnings may differ from other corporations and accordingly may not be comparable to measures used by other corporations.

Business Highlights

FTG accomplished many goals in the third quarter of 2015 that continue to improve the Corporation and position it for the future, including:

  • Received airworthiness tags from Civil Aviation Authority of China (CAAC) for control panel assemblies for the C919 aircraft under development by COMAC
  • Shipped engineering breadboard units of control panel assembly under development for a helicopter program
  • Achieved sales outside of North America of 20% of total sales
  • Renewed NADCAP certification at Circuits Chatsworth
  • Successfully completed annual AS9100C audit in Circuits Toronto

For FTG, overall sales increased by $3.4M or 23% from $14.8M in Q3 2014 to $18.2M in Q3 2015. Both business segments participated in the growth. Revenues also benefited from the weakening of the Canadian dollar versus the US dollar which was down 19 cents in Q3 2015 versus the same quarter last year. Over 80% of FTG's revenues are denominated in US dollars. US dollar currency hedges in place in the quarter reduced reported sales and earnings by $0.7M. As a result, approximately 13% of the growth was due to the weakening of the Canadian dollar and 10% was increased activity. For the year-to-date, sales were up $9.1M or 21%.

The Circuits Segment sales were up $3.3M or 31% in Q3 2015 versus Q3 2014. All facilities reported increased revenues. On a year-to-date basis, Circuits sales were up $7.4M or 23%.

For the Aerospace segment, sales in Q3 2015 were $4.3M compared to $4.2M in the same quarter last year resulting in a 3% growth rate. On a year-to-date basis, Aerospace sales were up $1.7M or 15%.

Gross margins in Q3 2015 were up $1.7M compared to Q3 2014, as a result of increased sales. Again, the currency hedges that matured in the quarter reduced revenue and therefore margins and earnings were reduced by $0.7M.

Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG for trailing twelve months is $7.1M, an increase from $5.6M from previous quarter.

The following table reconciles EBITDA(2) to the net earnings for trailing twelve months ended August 28, 2015.

Trailing
Twelve
Months
Net earnings $4,317,000
Add:
Interest 403,000
Income taxes 283,000
Depreciation 1,920,000
Amortization 155,000
EBITDA $7,078,000
  1. EBITDA is not a measure recognized under International Financial Reporting Standards ("IFRS"). Management believes that this measure is important to many of the Corporation's shareholders, creditors and other stakeholders. The Corporation's method of calculating EBITDA may differ from other corporations and accordingly may not be comparable to measures used by other corporations.

Net profit at FTG in Q3 2015 was $1.6M compared to a net profit of $0.2M in Q3 2014. This improvement is the result of higher gross margins and foreign exchange gains, offset by higher SG&A and R&D spending.

The Circuits segment net earnings before corporate, interest and other costs was $2.1M in Q3 2015 compared to $0.9M in Q3 2014. The Circuits joint venture in China did not have a material impact on profitability.

The Aerospace net earnings before corporate, interest and other costs was $0.0M in Q3 2015 versus $0.0M in Q3 2014. Costs related to the development of the C919 cockpit assemblies and one new program of $0.6M in Q3 2015 were treated as deferred development and not expensed.

Cash flow from operations after investments in capital equipment and deferred development in Q3 2015 was $2.6M compared with a usage of $0.4M in Q3 2014. For the year-to-date, cash flow was $2.8M in 2015 compared to $1.8M in 2014.

As at August 28, 2015, the Corporation's net working capital was $14.5M, an increase of $2.0M over Q3 2014, primarily due to higher cash, accounts receivable and inventories offset by higher accounts payable.

The Corporation will host a live conference call on Thursday, October 8, 2015 at 11:30 am (EDT) to discuss the results of Q3 2015.

Anyone wishing to participate in the call should dial 416-340-2216 or 1-866-225-0198 and identify that you are calling to participate in the FTG conference call. The Chairperson is Mr. Brad Bourne. A replay of the call will be available until October 22, 2015 and will be available on the FTG website at www.ftgcorp.com. The number to call for a rebroadcast is 905-694-9451 or 1-800-408-3053, pass code 4347988.

ABOUT FIRAN TECHNOLOGY GROUP CORPORATION

FTG is an aerospace and defense electronics product and subsystem supplier to customers around the globe. 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, defense, and high technology industries. FTG Circuits has operations in Toronto, Ontario, Chatsworth, California and a joint venture in Tianjin, China.

FTG Aerospace manufactures illuminated cockpit panels, keyboards and sub-assemblies for original equipment manufacturers of aerospace and defense equipment. FTG Aerospace has operations in Toronto, Ontario, Chatsworth, California and Tianjin, China.

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

FORWARD-LOOKING STATEMENTS

This news release contains certain forward-looking statements. These forward-looking statements are related to, but not limited to, FTG's operations, anticipated financial performance, business prospects and strategies. Forward-looking information typically contains words such as "anticipate", "believe", "expect", "plan" or similar words suggesting future outcomes. Such statements are based on the current expectations of management of the Corporation and inherently involve numerous risks and uncertainties, known and unknown, including economic factors and the Corporation'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 Corporation. The reader is cautioned to consider these and other factors carefully when making decisions with respect to the Corporation and not place undue reliance on forward-looking statements. Other than as may be required by law, FTG disclaims any intention or obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.

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

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Balance Sheets
(Unaudited) August 28, November 30,
(in thousands of Canadian dollars) 2015 2014
ASSETS
Current assets
Cash $ 2,301 $ 641
Accounts receivable 13,715 13,289
Taxes receivable 160 251
Inventories 11,053 10,426
Prepaid expenses 733 564
27,962 25,171
Non-current assets
Plant and equipment, net 5,369 5,643
Deferred income taxes 1,965 2,145
Deferred development costs 236 -
Intangible assets, net 112 148
Total assets $ 35,644 $ 33,107
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 11,019 $ 10,021
Provisions 487 410
Customer deposits, net of deferred development 1,518 1,531
Current portion of long-term bank debt 455 251
13,479 12,213
Non-current liabilities
Long-term bank debt - 1,232
Subordinated loan 4,471 4,219
Government assistance - 339
Total liabilities 17,950 18,003
Equity
Deficit $ (4,794 ) $ (7,909 )
Accumulated other comprehensive (loss) (1,032 ) (312 )
(5,826 ) (8,221 )
Share capital
Common shares 12,869 12,681
Preferred shares 2,218 2,218
Contributed surplus 8,405 8,411
Total equity attributable to FTG's shareholders 17,666 15,089
Non-controlling interest 28 15
Total equity 17,694 15,104
Total liabilities and equity $ 35,644 $ 33,107
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Earnings
Three months ended Nine months ended
(Unaudited) August 28, August 29, August 28, August 29,
(in thousands of Canadian dollars, except per share amounts) 2015 2014 2015 2014
Sales $ 18,227 $ 14,818 $ 53,303 $ 44,209
Cost of sales
Cost of sales 12,620 10,990 38,781 32,092
Depreciation of plant and equipment 498 436 1,441 1,275
Total cost of sales 13,118 11,426 40,222 33,367
Gross margin 5,109 3,392 13,081 10,842
Expenses
Selling, general and administrative 2,663 2,200 7,493 7,002
Research and development costs 1,552 892 4,023 2,506
Recovery of research and development costs (70 ) (70 ) (422 ) (210 )
Depreciation of plant and equipment, amortization of intangible asset 36 42 118 130
Interest expense on short-term debt 7 8 34 21
Interest expense on long-term debt 89 91 273 276
Foreign exchange (gain) (874 ) (54 ) (1,777 ) (68 )
Total expenses 3,403 3,109 9,742 9,657
Earnings before income taxes 1,706 283 3,339 1,185
Current income tax expense 9 13 33 38
Deferred income tax expense 60 60 180 180
Net earnings $ 1,637 $ 210 $ 3,126 $ 967
Attributable to:
Non-controlling interest $ 1 $ (9 ) 11 (37 )
Equity holders of FTG $ 1,636 $ 219 3,115 1,004
Earnings per share, attributable to the equity holders of FTG
Basic $ 0.09 $ 0.01 $ 0.17 $ 0.06
Diluted $ 0.08 $ 0.01 $ 0.15 $ 0.05
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Comprehensive Income
Three months ended Nine months ended
(Unaudited) August 28, August 29, August 28, August 29,
(in thousands of Canadian dollars) 2015 2014 2015 2014
Net earnings $ 1,637 $ 210 $ 3,126 $ 967
Other comprehensive (loss) income to be reclassified to net earnings in subsequent
Foreign currency translation adjustments 56 23 937 486
Net unrealized (loss) gain on derivative financial instruments designated as cash flow hedges (425 ) 112 (1,655 ) (68 )
(369 ) 135 (718 ) 418
Total comprehensive income $ 1,268 $ 345 $ 2,408 $ 1,385
Attributable to:
Equity holders of FTG $ 1,267 $ 354 $ 2,395 $ 1,420
Non-controlling interest $ 1 $ (9 ) $ 13 $ (35 )
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Changes in Equity
Nine months ended
August 28, 2015
Attributed to the
equity holders of FTG
Accumulated
Other
Compre- Non-
(in thousands Common Preferred Contributed hensive controlling Total
of Canadian dollars) Shares Shares Deficit Surplus (Loss) Total interest equity
Balance, November 30, 2014 $ 12,681 $ 2,218 $ (7,909 ) $ 8,411 $ (312 ) $ 15,089 $ 15 $ 15,104
Net earnings - - 3,115 - - 3,115 11 3,126
Stock-based compensation - - - 39 - 39 - 39
Common shares issued on exercise of share options 188 (45 ) 143 143
Foreign currency translation adjustments - - - - 935 935 2 937
Net unrealized loss on derivative financial instruments designated as cash flow hedges - - - - (1,655 ) (1,655 ) - (1,655 )
Balance, August 28, 2015 $ 12,869 $ 2,218 $ (4,794 ) $ 8,405 $ (1,032 ) $ 17,666 $ 28 $ 17,694
Nine months ended
August 29, 2014
Attributed to the
equity holders of FTG
Accumulated
(unaudited) Other

(in thousands
of Canadian
Common Preferred Contributed Compre-
hensive
(Loss)
Non-
controlling
Total
dollars) Shares Shares Deficit Surplus Income Total interest equity
Balance, November 30, 2013 $ 12,681 $ 2,218 $ (10,102 ) $ 8,347 $ (249 ) $ 12,895 $ 48 $ 12,943
Net earnings (loss) - - 1,004 - - 1,004 (37 ) 967
Stock-based compensation - - - 23 - 23 - 23
Foreign currency translation - - - - 484 484 2 486
Net unrealized loss on derivative financial instruments designated as cash flow hedges - - - - (68 ) (68 ) - (68 )
Balance, August 29, 2014 $ 12,681 $ 2,218 $ (9,098 ) $ 8,370 $ 167 $ 14,338 $ 13 $ 14,351
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Cash Flows
Three months ended Nine months ended
August 28, August 29, August 28, August 29,
(in thousands of Canadian dollars) 2015 2014 2015 2014
Net inflow (outflow) of cash related to the following:
Operating activities
Net earnings $ 1,637 $ 210 $ 3,126 $ 967
Items not affecting cash:
Non-controlling interest share of net (earnings) loss (1 ) 9 (11 ) 37
Stock-based compensation 13 7 39 23
Effect of exchange rates on US dollar debt 40 7 172 89
Depreciation of plant and equipment 522 466 1,523 1,369
Amortization of intangible assets 12 12 36 36
Amortization of deferred financing costs 7 7 21 21
Deferred income tax expense 60 60 180 180
AMIS interest accretion 84 78 252 234
Amortization of government assistance (113 ) (112 ) (339 ) (336 )
Increase in net unrealized loss on derivative financial instruments designated as cash flow hedges (426 ) 112 (961 ) 337
Net change in non-cash operating working capital 1,120 (764 ) (78 ) (184 )
2,955 92 3,960 2,773
Investing activities
Additions to plant and equipment (278 ) (448 ) (945 ) (1,002 )
Additions to deferred development costs (120 ) - (236 ) -
(398 ) (448 ) (1,181 ) (1,002 )
Net cash flow from operating and investing activities 2,557 (356 ) 2,779 1,771
Financing activities
Increase (decrease) in bank indebtedness - 537 - (563 )
Repayments of long-term bank debt (479 ) (494 ) (1,221 ) (665 )
Common shares issued 62 - 143 -
(417 ) 43 (1,078 ) (1,228 )
Effects of foreign exchange rate changes on cash flow (42 ) (1 ) (41 ) 7
Net increase (decrease) in cash flow 2,098 (314 ) 1,660 550
Cash, beginning of the period 203 1,860 641 996
Cash, end of period $ 2,301 $ 1,546 2,301 $ 1,546
Disclosure of cash payments
Payment for interest $ 17 $ 21 $ 57 $ 69
Payments for income taxes $ 1 $ - $ 6 $ 25

Contact Information

  • Firan Technology Group Corporation
    Bradley C. Bourne
    President and CEO
    (416) 299-4000 x314
    bradbourne@ftgcorp.com

    Firan Technology Group Corporation
    Joseph R. Ricci
    Vice President and CFO
    (416) 299-4000 x309
    joericci@ftgcorp.com