Firan Technology Group Corporation
TSX : FTG

Firan Technology Group Corporation

April 09, 2015 17:05 ET

Firan Technology Group (FTG) Announces First Quarter 2015 Financial Results

TORONTO, ONTARIO--(Marketwired - April 9, 2015) - Firan Technology Group Corporation (TSX:FTG) today announced financial results for the first quarter of 2015.

  • Booked over $20M in new orders in the quarter
  • Grew Q1 2015 sales by 16% over Q1 2014
  • Circuits segment grew by 22% in the quarter, with FTG Printronics in China growing by 280%
  • R&D spending exceeded 6% of sales
  • Profit increased by 190% in Q1 2015, compared to Q1 2014
  • Earnings of $1.1M before one-time costs related to unexpected program cancellation and inventory adjustment and increased net R&D for development of common controller card/power card for cockpit control assemblies.
  • Paid down net debt by $0.5M, after investing $1.0M in net R&D and $250K in capital equipment.

"The first quarter of 2015 saw continued progress in key initiatives across the company including our development cockpit control assembly programs in China and related R&D efforts that depressed earnings slightly but continue to position the Company for future long term success," stated Brad Bourne, President and Chief Executive Officer. He added, "Our established Circuits facilities both performed well in the quarter even with a couple of one-time costs related to a program cancellation and inventory adjustment while our Circuits Joint Venture in China began to see revenue growth resulting from the customer qualification activities over the past 18 months."

First Quarter Results: (three months ended February 27, 2015 compared with three months ended February 28, 2014)

Q1 2015 Q1 2014
Sales $ 16,307,000 $ 13,989,000
Gross Margin 3,069,000 3,124,000
Gross Margin (%) 18.8 % 22.3 %
Operating Earnings (1): 1,510,000 1,004,000
• Net R&D Investment 1,013,000 777,000
Net Earnings before Tax 497,000 227,000
• Tax Expense 71,000 98,000
• Non-controlling Interests 4,000 (16,000 )
Net Earnings After Tax $ 422,000 $ 145,000
Earnings per share
- basic $ 0.02 $ 0.01
- diluted $ 0.02 $ 0.01
(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 first quarter of 2015 that continue to improve the Corporation and position it for the future, including:

  • Signed Master Contract for cockpit control assemblies for C919 Heads Down Display system in China
  • Signed new enterprise sourcing agreement with Rockwell Collins for the Circuits business with an estimated 15% increase in activity
  • Achieved sales outside of North America of 18% of total sales
  • Subsequent to quarter end, completed certification of Aerospace Toronto facility in accordance with US Department of Defense MIL-DTL-7788
  • Subsequent to quarter end, completed additional certification of Circuits Toronto facility to include rigid flex technology under US Department of Defense MIL-PRF-31032 certification

For FTG, overall sales increased by $2.3M or 16.6% from $14.0M in Q1 2014 to $16.3M in Q1 2015. FTG Circuits drove the growth, aided by the new Aerospace facilities. Revenues also benefitted from the weakening of the Canadian dollar versus the US dollar which was down 11 cents or 10% in Q1 2015 versus the same quarter last year. Over 80% of FTG's revenues are denominated in US dollars.

The Circuits Segment sales were up $2.3M or 22% in Q1 2015 versus Q1 2014. Both established facilities had strong growth in the quarter.

For the Aerospace segment, sales in Q1 2015 were $3.5M compared to $3.5M in the same quarter last year. Increases at the two new facilities in Tianjin China and Chatsworth California were offset by a drop in activity in Toronto.

Gross margins in Q1 2015 were relatively flat compared to Q1 2014. In Circuits, Gross margins were up, after absorbing $0.5M in unexpected one-time costs related to a program cancellation and inventory adjustment. Gross margins in Aerospace were down due to lower sales in the Toronto facility. Also driving gross margins is total throughput which includes the change in work-in-process (WIP) and finished goods (FGI) to determine total activity in the quarter. In Q1 2015, WIP and FGI were down $0.1M as compared to being up $0.4M in Q1 2014, causing a reduction in margins this year but improving inventory turns.

Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG for trailing twelve months is $5.0M, an increase from $4.7M from previous quarter.

Net profit at FTG in Q1 2015 was $0.4M compared to a net profit of $0.15M in Q1 2014. This improvement is the result of stable gross margin offset by higher R&D spending in the Aerospace business but benefiting from increased foreign exchange gains on balance sheet items due to the weakening of the Canadian dollar.

The Circuits segment net earnings before corporate and interest and other costs increased to $1.2M in Q1 2015 compared to $0.9M in Q1 2014. The Circuits joint venture in China did not have a material impact on profitability.

The Aerospace net earnings before corporate and interest and other costs decreased by $0.3M due to lower sales in the Toronto facility and increased R&D costs. Costs related to the development of the C919 cockpit assemblies of $0.12M in Q1 2015 were treated as deferred development and not expensed.

As at February 27, 2015, the Corporation's primary source of liquidity included accounts receivable of $12.6M and inventory of $10.5M. Net working capital at February 27, 2015 was $12.1M.

The Corporation will host a live conference call on Friday, April 10, 2015 at 11:30am (Eastern) to discuss the results of Q1 2015.

Anyone wishing to participate in the call should dial 416-340-2216 or 1-866-223-7781 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 April 24, 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 3332882.

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.

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Balance Sheets
(Unaudited) February 27, November 30,
(in thousands of Canadian dollars) 2015 2014
ASSETS
Current assets
Cash $ 518 $ 641
Accounts receivable 12,628 13,289
Taxes receivable 321 251
Inventories 10,510 10,426
Prepaid expenses 538 564
24,515 25,171
Non-current assets
Plant and equipment, net 5,586 5,643
Deferred income taxes 2,085 2,145
Intangible assets, net 136 148
Total assets $ 32,322 $ 33,107
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 10,432 $ 10,021
Provisions 438 410
Customer deposits, net of deferred development 1,418 1,531
Current portion of long-term bank debt 152 251
12,440 12,213
Non-current liabilities
Long-term bank debt 778 1,232
Subordinated loan 4,303 4,219
Government assistance 226 339
Total liabilities 17,747 18,003
Equity
Deficit $ (7,487 ) $ (7,909 )
Accumulated other comprehensive (loss) (1,283 ) (312 )
(8,770 ) (8,221 )
Share capital
Common shares 12,681 12,681
Preferred shares 2,218 2,218
Contributed surplus 8,425 8,411
Total equity attributable to FTG's shareholders 14,554 15,089
Non-controlling interest 21 15
Total equity 14,575 15,104
Total liabilities and equity $ 32,322 $ 33,107
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Earnings
Three months ended
(Unaudited) February 27, February 28,
(in thousands of Canadian dollars, except per share amounts) 2015 2014
Sales $ 16,307 $ 13,989
Cost of sales
Cost of sales 12,778 10,448
Depreciation of plant and equipment 460 417
Total cost of sales 13,238 10,865
Gross margin 3,069 3,124
Expenses
Selling, general and administrative 2,370 2,092
Research and development costs 1,262 847
Recovery of research and development costs (249 ) (70 )
Depreciation/amortization of plant and equipment and intangible assets 42 45
Interest expense on short-term debt 9 8
Interest expense on long-term debt 94 92
Foreign exchange gain (956 ) (117 )
Total expenses 2,572 2,897
Earnings before income taxes 497 227
Deferred income tax expense 60 78
Current income tax expense 11 20
Net earnings $ 426 $ 129
Attributable to:
Non-controlling interest $ 4 $ (16 )
Equity holders of FTG $ 422 $ 145
Earnings per share, attributable to the equity holders of FTG
Basic $ 0.02 $ 0.01
Diluted $ 0.02 $ 0.01
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Comprehensive (Loss)
Three months ended
(Unaudited) February 27, February 28,
(in thousands of Canadian dollars) 2015 2014
Net earnings $ 426 $ 129
Other comprehensive (loss) to be reclassified to net earnings in subsequent years:
Foreign currency translation adjustments 866 531
Net unrealized loss on derivative financial instruments designated as cash flow hedges (1,835 ) (748 )
(969 ) (217 )
Total comprehensive (loss) $ (543 ) $ (88 )
Attributable to:
Equity holders of FTG $ (549 ) $ (75 )
Non-controlling interest $ 6 $ (13 )
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Changes in Equity
Three months ended February 27, 2015 Attributed to the equity holders of FTG



(in thousands of Canadian dollars)


Common
Shares


Preferred
Shares



Deficit


Contributed
Surplus
Accumulated
Other
Comprehensive
(Loss)



Total

Non-
controlling
interest


Total
equity
Balance, November 30, 2014 $ 12,681 $ 2,218 $ (7,909 ) $ 8,411 $ (312 ) $ 15,089 $ 15 $ 15,104
Net earnings - - 422 - - 422 4 426
Stock-based compensation - - - 14 - 14 - 14
Foreign currency translation adjustments - - - - 864 864 2 866
Net unrealized loss on derivative financial instruments designated as cash flow hedges - - - - (1,835 ) (1,835 ) - (1,835 )
Balance, February 27, 2015 $ 12,681 $ 2,218 $ (7,487 ) $ 8,425 $ (1,283 ) $ 14,554 $ 21 $ 14,575
Three months ended February 28, 2014 Attributed to the equity holders of FTG


Common
Shares


Preferred
Shares



Deficit


Contributed
Surplus
Accumulated
Other
Comprehensive
(Loss)



Total

Non-
controlling
interest


Total
equity
(unaudited)
(in thousands of Canadian dollars)
Balance, November 30, 2013 $ 12,681 $ 2,218 $ (10,102 ) $ 8,347 $ (249 ) $ 12,895 $ 48 $ 12,943
Net earnings (loss) - - 145 - - 145 (16 ) 129
Stock-based compensation - - - 9 - 9 - 9
Foreign currency translation adjustments - - - - 528 528 3 531
Net unrealized loss on derivative financial instruments designated as cash flow hedges - - - - (748 ) (748 ) - (748 )
Balance, February 28, 2014 $ 12,681 $ 2,218 $ (9,957 ) $ 8,356 $ (469 ) $ 12,829 $ 35 $ 12,864
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Cash Flows
Three months ended
February 27, February 28,
(in thousands of Canadian dollars) 2015 2014
Net inflow (outflow) of cash related to the following:
Operating activities
Net earnings $ 426 $ 129
Items not affecting cash:
Non-controlling interest share of net (earnings) loss (4 ) 16
Stock-based compensation 14 9
Effect of exchange rates on US dollar debt 138 89
Depreciation of plant and equipment 490 450
Amortization of intangible assets 12 12
Amortization of deferred financing costs 7 7
Deferred income tax expense 60 78
AMIS interest accretion 84 78
Amortization of government assistance (113 ) (112 )
Increase in net unrealized loss on derivative financial instruments designated as cash flow hedges (1,140 ) (343 )
Net change in non-cash operating working capital 863 524
837 937
Investing activities
Additions to plant and equipment (242 ) (197 )
(242 ) (197 )
Net cash flow from operating and investing activities 595 740
Financing activities
Repayments of long-term bank debt (698 ) (85 )
(698 ) (85 )
Effects of foreign exchange rate changes on cash flow (20 ) 93
Net decrease in cash flow (123 ) 748
Cash, beginning of the period 641 996
Cash, end of period $ 518 $ 1,744
Disclosure of cash payments
Payment for interest $ 20 $ 29
Payments for income taxes $ 2 $ 25

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