Firan Technology Group Corporation
TSX : FTG

Firan Technology Group Corporation

October 06, 2010 19:58 ET

Firan Technology Group Corporation (FTG) Reports Strong Sequential Growth and a Return to Profitability in Third Quarter 2010

TORONTO, ONTARIO--(Marketwire - Oct. 6, 2010) - Firan Technology Group Corporation (TSX:FTG) today announced financial results for the third quarter 2010.



-- Grew revenue by 14% over Q2 2010 and by 28% over Q1 2010
-- Achieved gross margin of 30% in Q3 2010, up 6% from Q3 2009
-- Achieved book-to-bill ratio above 1.02:1 in the quarter
-- Recorded $138,000 net income or almost $500,000 before one time costs
related to severance, legal and corporate development activities
-- Received first advance of Ontario Government Advanced Manufacturing
Investment Strategy Loan in the amount of $2.66M


"We are pleased with the increasing activity across FTG and our return to profitability. Our results remained strong in our Circuits - Toronto business, Aerospace improved and Circuits - Chatsworth improved dramatically. As we have continuously stated, we believe investments in technology are critical to our future so the Ontario Government support is a huge benefit to us", stated Brad Bourne, President and Chief Executive Officer.



Third Quarter Results: (three months ended August 27, 2010 compared with
three months ended August 28, 2009)

Q3 2010 Q3 2009
------- -------

Sales $ 13,244,000 $ 12,930,000

---------------------------
Operating Earnings before(1): 1,299,000 587,000
-- Net R&D,
-- Severance
-- Tax
---------------------------
Net R&D Investment 918,000 852,000
Severance 243,000 -
Tax - -
---------------------------
Net Income (Loss) 138,000 ($265,000)
---------------------------
Earnings (Loss) per share
- basic & diluted $ 0.00 ($0.01)


Year-To-Date 2010 Results: (nine months ended August 27, 2010 compared with
nine months ended August 28, 2009)

Year-To- Year-To-
Date 2010 Date 2009

Sales 35,208,000 $ 42,258,000

---------------------------
Operating Earnings before(1): 1,645,000 2,025,000
-- Net R&D,
-- Severance
-- Tax
---------------------------
Net R&D Investment 2,079,000 2,662,000
Severance 386,000 231,000
Tax 2,000 4,000
---------------------------
Net Loss ($822,000) ($872,000)
---------------------------
Loss per share
- basic & diluted ($0.05) ($0.05)

(1) Operating Earnings is not a measure recognized under Canadian generally
accepted accounting principles ("GAAP"). 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 2010 that continue to improve the Corporation and position it for the future, including:



-- Shipped first assemblies for $1.5M military cockpit simulator design and
development program ahead of schedule
-- Achieved book-to-bill ratio of 1.02:1 in the quarter
-- Successfully completed AS9100 recertification for FTG Circuits - Toronto
-- Strengthened FTG's team in Quality and Program Management at FTG
Aerospace, Production Control at FTG Circuits Toronto, Operations at FTG
Circuits Chatsworth and IT at the Corporate office
-- Received first advance of Ontario Government Advanced Manufacturing
Investment Strategy Loan in the amount of $2.66M


For FTG, overall sales increased by 2% from $12.9M in Q3 2009 to $13.2M in Q3 2010, but increased by 14% sequentially over Q2 2010. Year-over-year the decline in the value of the USD was 7%, which has a direct impact on reported sales. In Q3 sales in Canada were down 33% year-over-year but up 33% from Q2 2010. Sales in USD were up 3% compared to the same quarter last year while activity was up by another 7% taking into account the impact of the weaker US dollar.

The Circuits Segment sales were down $0.1M or 1% in Q3 2010 versus Q3 2009 but up 17% compared to Q2 2010. Year-to-date, Circuits Segment sales were down 18% due to lower demand earlier in the year and the impact of a significantly weaker US dollar in 2010.

For the Aerospace segment, sales in Q3 2010 were up $0.4M or 19% compared to Q3 2009. New program wins, particularly in higher level assembly products more than offset weak demand in the traditional products with legacy customers. Year-to-date, Aerospace segment sales were down 12%, due to weaker demand from traditional customers, a weaker US dollar, offset by increased activity in new higher level assembly business.

Net profit at FTG in Q3 2010 was $0.1M compared to a net loss of $0.3M in Q3 2009. Operating earnings were up $0.7M offset by increased R&D spending and severance costs. Year-to-date, the net loss was $0.8M compared to $0.9M for the same period last year. Year-over-year operating costs were reduced to offset the lower revenue levels experienced in 2010.

The Circuits segment income before corporate and interest costs was $0.7M in Q3 2010 compared to $0.3M in Q3 2009. For the first nine months of 2010, the Circuits segment income was $0.5M compared to $0.1M for the same period last year. In 2010, the Chatsworth facility reported a loss while the Toronto facility was profitable. Operational and yield issues impacted the Chatsworth results, particularly in the first six months of the year.

The Aerospace net income before corporate costs was $0.1M in Q3 2010 versus $0.0M in Q3 2009. Year-to-date net income before corporate costs was $0.4M compared to $0.7M for the same period last year.

As at August 27, 2010, the Corporation's primary source of liquidity included accounts receivable of $9.9M and inventory of $8.4M. Net working capital at August 27, 2010 was $7.5M.

During the quarter, Aquilini Capital Inc. acquired 100% of the Preferred Shares of FTG Corporation. For further information, please go to www.sedar.com.

The Corporation will host a live conference call on Thursday, October 7, 2010 at 11:00am (EDT) to discuss the results of Q3 2010.

Anyone wishing to participate in the call should dial 416-340-8527 or 1-877-240-9772 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 21, 2010 and will be available on the FTG website at www.ftgcorp.com. The number to call for a rebroadcast is 416-695-5800 or 1-800-408-3053, pass code 2726517.

ABOUT FIRAN TECHNOLOGY GROUP CORPORATION

FTG is an aerospace and defense 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,
defense, 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 located in Toronto, Ontario.


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 Consolidated Balance Sheets

---------------------------------------------------------------------------
---------------------------------------------------------------------------
August 27, 2010 November 30,
(in thousands of dollars) (unaudited) 2009 (audited)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

ASSETS

CURRENT
Cash $ - $ 20
Accounts receivable 9,895 9,490
Taxes receivable 435 450
Inventories 8,431 7,618
Prepaid expenses 419 737
Future income taxes 232 232
---------------------------------------------------------------------------
19,412 18,547

CAPITAL ASSETS 4,740 6,099
GOODWILL 4,054 4,063
OTHER INTANGIBLE ASSETS 348 384
---------------------------------------------------------------------------
$ 28,554 $ 29,093
---------------------------------------------------------------------------
---------------------------------------------------------------------------

LIABILITIES

CURRENT
Bank indebtedness $ 877 $ 157
Accounts payable and accrued
liabilities 7,236 6,727
Unearned revenue 397 -
Current portion of long-term debt 3,408 2,075
---------------------------------------------------------------------------
11,918 8,959
LONG-TERM DEBT 2,800 5,219
---------------------------------------------------------------------------
14,718 14,178
---------------------------------------------------------------------------

SHAREHOLDERS' EQUITY

Deficit (8,604) (7,782)
Accumulated other comprehensive loss (645) (351)
---------------------------------------------------------------------------
(9,249) (8,133)
Share capital
Common shares 12,681 12,681
Preferred shares 2,218 2,218
Contributed surplus 8,186 8,149
---------------------------------------------------------------------------
13,836 14,915
---------------------------------------------------------------------------
$ 28,554 $ 29,093
---------------------------------------------------------------------------

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Income Statements

--------------------------- ----------------------- -----------------------
--------------------------- ----------------------- -----------------------
Three Months Ended Nine Months Ended
----------------------- -----------------------
August August August August
27, 2010 28, 2009 27, 2010 28, 2009
(in thousands of dollars (unaudi- (unaudi- (unaudi- (unaudi-
except per share amounts) ted) ted) ted) ted)
--------------------------- ----------------------- -----------------------
--------------------------- ----------------------- -----------------------

SALES $ 13,244 $ 12,930 $ 35,208 $ 42,258
COST OF SALES 9,233 $ 9,838 25,981 32,015
--------------------------- ----------------------- -----------------------
4,011 3,092 9,227 10,243
--------------------------- ----------------------- -----------------------

EXPENSES
Selling, general and
administrative $ 2,030 $ 1,630 5,404 5,240
Research and development
costs 918 852 2,471 2,712
Recovery of research and
development costs - - (392) (50)
Amortization of capital
assets 540 579 1,590 1,840
Amortization of intangible
assets 12 11 36 35
(Gain) from sales of
capital assets (26) - (25) -
Interest expense on long-
term debt 66 121 256 354
Interest expense on short-
term debt 28 22 62 74
Severance expenses 243 - 386 231
Foreign exchange loss 62 142 259 675
--------------------------- ----------------------- -----------------------
3,873 3,357 10,047 11,111
--------------------------- ----------------------- -----------------------

PROFIT/(LOSS) BEFORE INCOME
TAXES 138 (265) (820) (868)

PROVISION FOR INCOME TAXES $ - - 2 4
--------------------------- ----------------------- -----------------------
--------------------------- ----------------------- -----------------------

NET PROFIT/(LOSS) $ 138 $ (265) $ (822) $ (872)
--------------------------- ----------------------- -----------------------
--------------------------- ----------------------- -----------------------

NET LOSS PER SHARE
Basic $ - $ (0.01) $ (0.05) $ (0.05)
Diluted $ - $ (0.01) $ (0.05) $ (0.05)
--------------------------- ----------------------- -----------------------
--------------------------- ----------------------- -----------------------

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Shareholders' Equity and Comprehensive
Loss
(in thousands of dollars) (unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Common Preferred Contributed
Shares Shares Surplus
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Balance, November 30, 2009 $ 12,681 $ 2,218 $ 8,149
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net loss
Other comprehensive loss:
Foreign currency
translation adjustments
Comprehensive loss
Stock based compensation 37

----------------------------------------------------------------------------
Balance, August 27, 2010 $ 12,681 $ 2,218 $ 8,186
----------------------------------------------------------------------------
----------------------------------------------------------------------------


----------------------------------------------------------------------------
----------------------------------------------------------------------------


Common Preferred Contributed
Shares Shares Surplus
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Balance, November 30, 2008 $ 12,681 $ 2,218 $ 8,071
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net loss
Other comprehensive loss:
Foreign currency
translation adjustments
Net unrealized gain on
derivative financial
instruments designated as
cash flow hedges
Comprehensive loss
Stock based compensation 55

----------------------------------------------------------------------------
Balance, August 28, 2009 $ 12,681 $ 2,218 $ 8,126
----------------------------------------------------------------------------
----------------------------------------------------------------------------

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Shareholders' Equity and Comprehensive
Loss
(in thousands of dollars) (unaudited)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Accumulated
Other Total
Comprehensive Shareholders'
Deficit Loss ("AOCL") Equity
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Balance, November 30, 2009 (7,782) (351) $ 14,915
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Net loss (822) (822)
Other comprehensive loss:
Foreign currency
translation adjustments (294) (294)
---------------
Comprehensive loss (1,116)
---------------
---------------
Stock based compensation 37

---------------------------------------------------------------------------
Balance, August 27, 2010 $ (8,604) $ (645) $ 13,836
---------------------------------------------------------------------------
---------------------------------------------------------------------------


----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accumulated
Other
Comprehensive Total
Income Shareholders'
Deficit ("AOCI") Equity
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Balance, November 30, 2008 (6,692) 324 $ 16,602
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Net loss (872) (872)
Other comprehensive loss:
Foreign currency
translation adjustments (702) (702)
Net unrealized gain on
derivative financial
instruments designated as
cash flow hedges 413 413
---------------
Comprehensive loss (1,161)
---------------
---------------
Stock based compensation 55

----------------------------------------------------------------------------
Balance, August 28, 2009 (7,564) $ 35 $ 15,496
---------------------------------------------------------------------------
---------------------------------------------------------------------------

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Cash Flows
----------------------------------------------- ---------------------------
----------------------------------------------- ---------------------------
Three Months Ended Nine Months Ended
--------------------------- ---------------------------
August 27, August 28, August 27, August 28,
(in thousands of 2010 2009 2010 2009
dollars) (unaudited) (unaudited) (unaudited) (unaudited)
----------------------------------------------- ---------------------------
----------------------------------------------- ---------------------------
NET (OUTFLOW) INFLOW
OF CASH RELATED
TO THE FOLLOWING
ACTIVITIES:

OPERATING
Net profit/(loss) $ 138 $ (265) $ (822) $ (872)
Items not affecting
cash
Stock based
compensation expense 12 19 37 55
(Gain) from sale
of capital assets (26) - (25) -
Effect of exchange
rates on U.S. dollar
Canadian debt 14 2 (11) (499)
Amortization of
capital assets 540 579 1,590 1,840
Amortization of
intangible assets 12 11 36 35
Changes in non-
cash operating
working capital (1,539) 299 8 1,402
----------------------------------------------- ---------------------------
(849) 645 813 1,961
----------------------------------------------- ---------------------------

INVESTING
Proceeds from sales of
capital assets 27 - 32 -
Additions to
capital assets (68) (91) (249) (1,302)
---------------------------------------------- ---------------------------
(41) (91) (217) (1,302)
----------------------------------------------- ---------------------------

FINANCING
(Decrease)/increase
in bank
indebtedness 67 (123) 734 (1,122)
Proceeds from
capital expenditure
facility - 550 - 2,217
Proceeds from
subordinated loan 2,660 - 2,660 -
Repayments of
long-term debt (1,802) (418) (3,716) (1,343)
----------------------------------------------- ---------------------------
925 9 (322) (248)
----------------------------------------------- ---------------------------

Effect of foreign
exchange rate
changes on cash flow (35) (82) (294) 427
----------------------------------------------- ---------------------------

NET CASH FLOW - 481 (20) 838

CASH, BEGINNING OF
PERIOD - 527 20 170
----------------------------------------------- ---------------------------

CASH, END OF PERIOD $ - $ 1,008 $ - $ 1,008
----------------------------------------------- ---------------------------

DISCLOSURE OF CASH
PAYMENTS
Payments for
interest $ 94 $ 143 $ 318 $ 428
Payments for income
taxes $ - $ - $ 2 $ 4
Refund of income
taxes $ - $ - $ 182 $ -
----------------------------------------------- ---------------------------



Contact Information

  • Firan Technology Group Corporation
    Bradley C. Bourne
    President and CEO
    (416) 299-4000 x314
    bradbourne@ftgcorp.com
    or
    Firan Technology Group Corporation
    Joseph R. Ricci
    Vice President and CFO
    (416) 299-4000 x309
    joericci@ftgcorp.com