Firan Technology Group Corporation
TSX : FTG

Firan Technology Group Corporation

February 23, 2011 20:06 ET

Firan Technology Group (FTG) Announces Fourth Quarter And Full Year 2010 Financial Results

TORONTO, ONTARIO--(Marketwire - Feb. 23, 2011) - Firan Technology Group Corporation (TSX:FTG) today announced financial results for the fourth quarter and the fiscal year ended November 30, 2010.

Fourth Quarter Highlights

  • Grew sales by 7% over Q4, 2009, and by 6% over Q3, 2010
  • Strongest quarterly revenue in last 6 quarters or in last 8 quarters on a currency adjusted basis
  • Ended 2010 with order backlog above $14M compared to $13.7M at the end of FY 2009
  • Recorded $1,287,000 operating income excluding R&D expense, goodwill impairment charges and increase in future tax asset carrying value compared to $297,000 for the same period in FY 2009 representing a $990,000 improvement in Q4 2010 over the same quarter of the prior year

Full Year Highlights

  • Improved gross margin by 4.0 percentage points over 2009, on lower revenues
  • Maintained R&D investments at over 6% of revenue to ensure continued growth in technology and capabilities to support new customer demands
  • Reduced net debt by $1.9M during the year, and by $5.2M over past two years.
  • Signed agreement for $5.2M loan under the Ontario Government Advanced Manufacturing Investment Strategy Program and received first installment in the amount of $2.66M

"As I look back on 2010, we accomplished many critical tasks and have ended the year with a stronger and more capable company. The year started at the bottom of the market cycle but improved each quarter. Within FTG we strengthened our team, our technologies and our operating performance. Our accomplishments and our continued focus on Operational Excellence makes me confident the future will continue to improve at FTG", stated Brad Bourne, President and Chief Executive Officer.

Fourth Quarter Results: (three months ended November 30, 2010 compared with three months ended November 30, 2009)

  Q4 2010   Q4 2009  
         
Sales $ 14,052,000   $ 13,122,000  
             
Gross Margin   30.3 %   20.9 %
             
Operating Earnings before: (1) $ 1,287,000   $ 297,000  
  - Net R&D            
  - Severance            
  - Tax and Goodwill            
    Net R&D   871,000     707,000  
    Severance   -     -  
    Tax and Goodwill   2,503,000   $ (192,000 )
             
Net Earnings / (Loss) $ (2,087,000 ) $ (218,000 )

Earnings / (Loss) per share
           
  - basic $ (0.11 ) $ (0.01 )
  - diluted $ (0.11 ) $ (0.01 )

Fiscal Year 2010 Results (twelve months ended November 30, 2010 compared with twelve months ended November 30, 2009)

  FY 2010   FY 2009  
             
Sales $ 49,260,000   $ 55,380,000  
             
Gross Margin   27.5 %   23.5 %
             
Operating Earnings before: (1) $ 2,932,000   $ 2,322,000  
  - Net R&D            
  - Severance            
  - Tax and Goodwill            
    Net R&D   2,950,000     3,369,000  
    Severance   386,000     231,000  
    Tax and Goodwill   2,505,000     (188,000 )
             
Net Loss $ (2,909,000 ) $ (1,090,000 )

Loss per share
           
  - basic $ (0.16 ) $ (0.06 )
  - diluted $ (0.16 ) $ (0.06 )

(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 2010 that continue to improve the Corporation and position it for the future, including:

  • Improved financial results each quarter, excluding one time non-cash charges or income, and in Q4 achieved $1,000,000 improvement in operating earnings compared to Q4 2009
  • Strengthened FTG's team in sales with experienced staff in the U.S. South West and California, Quality and Program Management at FTG Aerospace, Production Control at FTG Circuits Toronto, Operations at FTG Circuits Chatsworth and IT at the Corporate office
  • Designed and shipped over $1,100,000 of higher level assemblies at FTG Aerospace
  • Shipped qualification units for very high volume military ground vehicle display product
  • Ramped production of rigid flex circuit boards in Chatsworth to 20% of total production
  • Ordered advanced Laser Direct Imaging equipment for both Circuits' facilities to improve capabilities and yields
  • Extended collective agreement for one year with the represented staff at FTG Circuits-Toronto
  • Improved yields at both Circuits' facilities
  • Secured $5.1M in Ontario government funding ("AMIS") in support of technology investments in FTG Circuits-Toronto business

For FTG overall, sales decreased by 11%, from $55.4M in 2009 to $49.3M in 2010 due to reduced demand in the first half of the year offset by increased demand in the third and fourth quarters. The declining value of the US dollar compared to 2009 caused a $5.1M (9%) reduction in reported sales as over 85% of sales in 2010 were denominated in US dollars and the average exchange rate declined over $0.15 in the year. 

For the full year, the Circuits Segment sales were down $6.1M or 14% in FY2010 versus FY2009. Approximately 60% of the decline was due to the declining value of the US dollar while the balance resulted from lower demand in the first six months of the year. In Q4 sales were flat compared to the same quarter last year.

For the Aerospace segment, sales in FY 2010 were flat compared to FY2009. This business followed a similar trend with reduced sales in the first six months and then strong growth thereafter. The business reached record sales levels in the fourth quarter. This increase was primarily the result of new programs where the equipment being supplied includes higher end assemblies including both hardware and software development. Also during the year, activity progressed towards establishing FTG Aerospace – Tianjin in China with related expenses totaling $133,000 incurred in 2010.

In fiscal year 2010 compared to fiscal year 2009, FTG's net loss increased by $1.8M to $2.9M. Excluding the positive effect of the increased carrying value of a future tax asset offset by the impairment of the goodwill, FTG's bottom line improved by $0.7M year-over-year. The profitability was negatively impacted by the drop in revenue and the lower US dollar exchange rate, offset by increased yields in the Circuits business and ongoing, aggressive cost management across the company. Key investments in R&D were maintained at over 6% of revenue for the full year.

As at November 30, 2010, the Corporation's primary source of liquidity included accounts receivable of $9.3M, inventory of $8.7M, $2.4M of availability on its AMIS term loan and U.S. $6M of availability remaining on its revolving line of credit. Net working capital at November 30, 2010 was $8.8M after the reclassification of $2.3M of its term loan which matures July 14, 2011. Net debt decreased by $1.9M to $5.5M in 2010 due in part to the revaluation of U.S. dollar denominated debt and management of the balance sheet.

The Corporation will host a live conference call on February 25, 2011 at 8:30 am (EST) to discuss the results of 2010.

Anyone wishing to participate in the call should dial 416-340-2216 or 1-877-440-9795 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 March 10, 2011 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 7774268.

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  
Consolidated Balance Sheets  
         
As at November 30, 2010 and 2009 (in thousands of dollars) 2010   2009  
             
ASSETS            
             
CURRENT            
  Cash $ 196   $ -  
  Accounts receivable   9,332     9,490  
  Taxes receivable   448     450  
  Inventories   8,726     7,618  
  Prepaid expenses   669     737  
  Future income taxes   667     232  
    20,038     18,527  
             
CAPITAL ASSETS   4,024     6,099  
GOODWILL   1,039     4,063  
INTANGIBLE ASSETS   336     384  
  $ 25,437   $ 29,073  
             
LIABILITIES            
             
CURRENT            
  Bank indebtedness $ -   $ 137  
  Accounts payable and accrued liabilities   7,964     6,727  
  Unearned revenue   152     -  
  Current portion of long-term bank debt   3,059     2,075  
    11,175     8,939  
LONG-TERM LIABILITIES            
  Long term portion of long-term bank debt   -     5,219  
  Subordinated loan   1,746     -  
  Government assistance   914     -  
    13,835     14,158  
             
CONTINGENCIES AND COMMITMENTS            
             
SHAREHOLDERS' EQUITY            
             
  Accumulated deficit $ (10,691 ) $ (7,782 )
  Accumulated other comprehensive loss   (801 )   (351 )
    (11,492 )   (8,133 )
  Share capital            
    Common shares   12,681     12,681  
    Preferred shares   2,218     2,218  
  Contributed surplus   8,195     8,149  
    11,602     14,915  
  $ 25,437   $ 29,073  
   
   
FIRAN TECHNOLOGY GROUP CORPORATION  
Consolidated Statements of Loss  
         
Years ended November 30, 2010 and 2009    
(in thousands of dollars except per share amounts) 2010   2009  
             
SALES $ 49,260   $ 55,380  
COST OF SALES   35,723     42,393  
    13,537     12,987  
             
EXPENSES            
  Selling, general and administrative   7,467     6,948  
  Research and development costs   3,359     3,509  
  Recovery of research and development costs   (409 )   (140 )
  Amortization of capital assets   2,182     2,390  
  Amortization of intangible assets   48     47  
  Goodwill impairment   2,941     -  
  Loss on disposal of capital assets   148     -  
  Interest expense on short-term debt   106     91  
  Interest expense on long-term debt   345     468  
  Severance   386     231  
  Foreign Exchange loss   309     721  
    16,882     14,265  
             
LOSS BEFORE INCOME TAXES   (3,345 )   (1,278 )
             
RECOVERY OF INCOME TAXES   (436 )   (188 )
             
NET LOSS $ (2,909 ) $ (1,090 )
             
NET LOSS PER SHARE            
  Basic $ (0.16 ) $ (0.06 )
  Diluted $ (0.16 ) $ (0.06 )
 
 
FIRAN TECHNOLOGY GROUP CORPORATION    
Consolidated Statements of Shareholders' Equity and Accumulated Other Comprehensive Loss
Years Ended November 30, 2010 and 2009 (in thousands of dollars)   
 

Common
Shares


Preferred
Shares


Contributed
Surplus



Deficit
  Accumulated
Other
Comprehensive
Loss
 
Total
Shareholders'
Equity
 
   
Balance, November 30, 2009 $ 12,681 $ 2,218 $ 8,149 $ (7,782 ) $ (351 ) $ 14,915  
                               
Net loss               (2,909 )         (2,909 )
Other comprehensive loss:                              
  Foreign currency translation adjustments                     (450 )   (450 )
  Net unrealized gain on derivative financial instruments designated as cash flow hedges                     -     -  
Comprehensive loss   -   -   -   (2,909 )   (450 )   (3,359 )
                               
Stock based compensation           46               46  
                               
Balance, November 30, 2010 $ 12,681 $ 2,218 $ 8,195 $ (10,691 ) $ (801 ) $ 11,602  
                               
                   
 
 Common
Shares

 Preferred
Shares

 Contributed
Surplus

 Deficit
 
 Accumulated
Other
Comprehensive
Loss
 
 Total
Shareholders'
Equity
 
                               
Balance, November 30, 2008 $ 12,681 $ 2,218 $ 8,071 $ (6,692 ) $ 324   $ 16,602  
                               
Net loss               (1,090 )         (1,090 )
Other comprehensive loss:                              
  Foreign currency translation adjustments                     (898 )   (898 )
  Net unrealized gain on derivative financial instruments designated as cash flow hedges                     223     223  
Comprehensive loss   -   -   -   (1,090 )   (675 )   (1,765 )
                               
Stock based compensation           78               78  
                               
Balance, November 30, 2009 $ 12,681 $ 2,218 $ 8,149 $ (7,782 ) $ (351 ) $ 14,915  
   
   
FIRAN TECHNOLOGY GROUP CORPORATION  
Consolidated Statements of Cash Flows  
Years ended November 30, 2010 and 2009    
(in thousands of dollars) 2010   2009  
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES:            
             
  OPERATING            
    Net loss $ (2,909 ) $ (1,090 )
    Items not affecting cash            
      Stock based compensation expense   46     78  
      Loss from disposal of capital assets   148     -  
      Effect of exchange rates on U.S. dollar Canadian debt   68     (678 )
      Amortization of capital assets   2,182     2,390  
      Amortization of intangible assets   48     47  
      Recovery of future income taxes   (436 )   -  
      Goodwill impairment   2,941     -  
      Changes in non-cash operating working capital   513     2,538  
    2,601     3,285  
             
  INVESTING            
    Proceeds from sales of capital assets   32     -  
    Deposit placed for capital assets additions   (194 )   -  
    Additions to capital assets   (325 )   (1,548 )
    (487 )   (1,548 )
             
  FINANCING            
    Decrease in bank indebtedness   (146 )   (2,709 )
    Proceeds from capital expenditure facility   -     2,217  
    Proceeds from subordinated loan   2,660     -  
    Repayments of long-term debt   (4,127 )   (1,746 )
    (1,613 )   (2,238 )
             
  Effects of foreign exchange rate changes on cash flow   (305 )   331  
             
NET CASH INFLOW (OUTFLOW)   196     (170 )
             
CASH, BEGINNING OF PERIOD   -     170  
             
CASH, END OF PERIOD $ 196   $ -  
             
DISCLOSURE OF CASH PAYMENTS (RECEIPTS)            
  Payments for interest $ 403   $ 559  
  Payments for income taxes   6   $ 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