Firan Technology Group Corporation
TSX : FTG

Firan Technology Group Corporation

January 30, 2014 17:05 ET

Firan Technology Group (FTG) Announces Full Year and Fourth Quarter 2013 Financial Results

TORONTO, ONTARIO--(Marketwired - Jan. 30, 2014) - Firan Technology Group Corporation (TSX:FTG) today announced financial results for the full year and fourth quarter 2013.

  • Grew Q4 2013 sales by 12% over Q4 2012
  • Grew full year sales by 1% over full year 2012
  • Grew Aerospace segment sales by 18% over full year 2012
  • Invested over $1.5M in start-up expenses for new Aerospace facilities in Tianjin, China and Chatsworth, California compared to $1.1M in 2012
  • Generated sales of more than $2.2M from the two new Aerospace facilities in 2013
  • R&D spending remained above 5% of sales

"As 2013 ended, FTG had achieved its strategic objective for both its Circuits and Aerospace businesses of establishing manufacturing footprints in Canada, our home base, the United States, the largest aerospace and defense market, and Asia, the fastest growing aerospace market," stated Brad Bourne, President and Chief Executive Officer. He added, "Significant costs have been incurred to achieve this objective but it has positioned FTG favourably for the future. Our strong growth in our fourth quarter is an indication of the benefit of these investments."

Full Year 2013 Results: (twelve months ended November 30, 2013 compared with twelve months ended November 30, 2012)

Full Year 2013 Full Year 2012
Sales $55,998,000 $55,646,000
Operating Earnings(1): 3,726,000 4,608,000
• Net R&D Investment 2,766,000 2,533,000
• Aerospace Tianjin and Chatsworth Start-up Losses 1,561,000 1,062,000
• Goodwill 1,039,000 -
• Severance 299,000 54,000
• Income Tax (941,000) 31,000
Net (Loss) Earnings ($998,000) $928,000
(Loss) Earnings per share
- basic ($0.06) $0.05
- diluted ($0.06) $0.05

Fourth Quarter Results: (three months ended November 30, 2013 compared with three months ended November 30, 2012)

Q4 2013 Q4 2012
Sales $15,426,000 $13,719,000
Operating Earnings (1): 1,883,000 1,135,000
• Net R&D Investment 1,032,000 589,000
• Aerospace Tianjin and Chatsworth Start-up Losses 293,000 419,000
• Goodwill 1,039,000 -
• Severance 299,000
• Income Tax (977,000) 23,000
Net Earnings $197,000 $104,000
Earnings per share
- basic $0.01 $0.01
- diluted $0.01 $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 throughout 2013 that continue to improve the Corporation and position it for the future, including:

  • Held Grand Opening of FTG Aerospace - Chatsworth facility
  • Completed AS9100C certification for FTG Aerospace - Chatsworth
  • Shipped over 6,000 cockpit panels from FTG Aerospace - Tianjin
  • Shipped four sets of cockpit control panel assemblies to SAVIC for C919 single aisle aircraft program for use in their ground test program
  • Grew Aerospace business by 18% in 2013 compared to 2012
  • Grew Aerospace sales to 33% of FTG's total business in 2013
  • Achieved sales outside of North America of $7.5M or 13% of total sales
  • Established joint venture with Tianjin Printronics Circuits Ltd ("TPC") to provide superior quality circuit boards to Aerospace customers from an Asian source
  • Invested $1.7M in capital assets across FTG to complete the build out of new Aerospace facilities in Tianjin and Chatsworth, to increase test capabilities in Aerospace Toronto and to improve engineering tools across the Corporation

For FTG, overall sales increased by $0.4M (0.6%), from $55.6M in FY2012 to $56.0M in FY2013. FTG Aerospace drove the growth in the year. For the fourth quarter, FTG sales were $15.4M, an increase of $1.7M or 12.4% versus the same period last year.

The Circuits Segment sales were down $2.5M or 6.2% in FY2013 versus FY2012. In the fourth quarter, Circuits Segment sales were up $1.3M or 13.4% compared to the same quarter last year.

For the Aerospace segment, sales in FY2013 were up $2.9M or 18.5% compared to FY2012. Sales from the two new sites totaled $2.2M in FY 2013 compared to $0.9M in 2012. In Q4, Aerospace Segment sales were up $0.4M, or 10.1% compared to the same quarter last year.

Gross margins were down in FY2013 by $1.2M compared to FY2012 due to higher start-up costs at the new facilities and lower sales in the Circuits business. Gross margins in Q4 2013 were up $1.0M compared to the same period in 2012 as start-up costs diminished and sales increased.

Net losses at FTG in FY2013 were $1.0M compared to net earnings of $0.9M in FY2012. As noted above, gross margins were lower in FY2013. In addition, SG&A costs were higher in FY 2013, as were R&D costs and restructuring costs. Goodwill of $1.0M was also written off. These higher costs were partially offset by lower foreign exchange losses and a $1.0M increase in deferred income taxes in 2013. In Q4 2013, net profit was $0.2M compared to $0.1M in Q4 2012. The increase was due to higher margins offset by higher SG&A costs, higher R&D costs, higher restructuring costs and the goodwill write down, offset by an increase in deferred income taxes.

The Circuits segment net earnings before corporate and interest and other costs decreased to $0.2M in FY2013 compared to $3.4M in FY2012, on $2.5M lower sales. Operational issues at Circuits Toronto as well as the write down of Goodwill, negatively impacted results.

The Aerospace net earnings before corporate and interest and other costs increased to $1.0M in FY2013 versus $0.4M in FY2012. The net earnings this year increased due to $2.9M higher sales offset by $1.6M start-up expenses for the two new facilities. Costs related to development for the C919 cockpit assemblies of $0.7M in FY2013 and $0.5M in FY2012 were treated as deferred development and not expensed in either year.

As at November 30, 2013, the Corporation's primary source of liquidity included accounts receivable of $12.3M and inventory of $8.1M. Net working capital at November 30, 2013 was $10.7M compared to $11.0M at November 30, 2012.

The Corporation will host a live conference call on Friday, January 31, 2014 at 8:30 am (EDT) to discuss the results of FY2013.

Anyone wishing to participate in the call should dial 416-340-8527 or 1-800-565-0813 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 February 14, 2014 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 3311213.

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
Consolidated Balance Sheets
(in thousands of Canadian dollars) November 30, November 30,
As at 2013 2012
ASSETS
Current assets
Cash $ 996 $ 1,446
Accounts receivable 12,275 10,276
Taxes receivable 264 250
Inventories 8,074 7,927
Prepaid expenses 549 432
22,158 20,331
Non-current assets
Plant and equipment, net 5,587 5,608
Goodwill - 1,039
Deferred income taxes 2,385 1,375
Intangible assets 196 244
Total assets $ 30,326 $ 28,597
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness $ 1,062 $ 994
Accounts payable and accrued liabilities 8,027 7,249
Provisions 612 244
Customer deposits, net of deferred development 930 843
Current portion of long-term bank debt 307 44
Current portion of subordinated loan 510 -
11,448 9,374
Non-current liabilities
Long-term bank debt 1,753 361
Subordinated loan 3,396 3,613
Government assistance 786 1,234
Total liabilities 17,383 14,582
Commitments and contingencies
Equity
Deficit $ (10,102) $ (9,104)
Accumulated other comprehensive loss (249) (85)
(10,351) (9,189)
Share capital
Common shares 12,681 12,681
Preferred shares 2,218 2,218
Contributed surplus 8,347 8,305
Total equity attributable to FTG's shareholders 12,895 14,015
Non-controlling interests 48 -
Total equity 12,943 14,015
Total liabilities and equity $ 30,326 $ 28,597
FIRAN TECHNOLOGY GROUP CORPORATION
Consolidated Statements of (Loss) Earnings
Years ended
November 30, November 30,
(in thousands of Canadian dollars, except per share amounts) 2013 2012
Sales $ 55,998 $ 55,646
Cost of sales
Cost of sales 42,914 41,413
Depreciation of plant and equipment 1,688 1,605
Total cost of sales 44,602 43,018
Gross margin 11,396 12,628
Expenses
Selling, general and administrative 8,747 8,259
Research and development costs 3,046 2,823
Recovery of research and development costs (280) (290)
Depreciation/amortization of plant and equipment and intangible assets 156 140
Goodwill impairment 1,039 -
Interest expense on short-term debt 67 75
Interest expense on long-term debt 328 273
Severance and restructuring expenses 299 54
Foreign exchange (gain) loss (27) 335
Total expenses 13,375 11,669
(Loss) earnings before income taxes (1,979) 959
Deferred income tax recovery (1,010) -
Income tax expense 69 31
Net (loss) earnings $ (1,038) $ 928
Attributable to:
Non-controlling interests (40) -
Equity holders of FTG (998) 928
(Loss) earnings per share, attributable to the equity holders of FTG
Basic $ (0.06) $ 0.05
Diluted $ (0.06) $ 0.05
FIRAN TECHNOLOGY GROUP CORPORATION
Consolidated Statements of Comprehensive (loss) income
Years ended
November 30, November 30,
(in thousands of Canadian dollars) 2013 2012
Net (loss) earnings $ (1,038) $ 928
Other comprehensive income (loss) to be reclassified to net (loss) earnings in subsequent years:
Foreign currency translation adjustments (net of income taxes of $nil) 241 (97)
Net unrealized loss on derivative financial instruments designated as cash flow hedges (net of income taxes of $nil) (405) -
(164) (97)
Total comprehensive (loss) income $ (1,202) $ 831
Attributable to:
Equity holders of FTG $ (1,162) $ 831
Non-controlling interests $ (40) $ -
FIRAN TECHNOLOGY GROUP CORPORATION
Consolidated Statements of Changes in Equity
Years ended November 30, 2013 and 2012
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
interests


Total
equity
Balance, November 30, 2011 $ 12,681 $ 2,218 $ (10,032) $ 8,249 $ 12 $ 13,128 $ - $ 13,128
Net earnings - - 928 - - 928 - $ 928
Stock-based compensation - - - 56 - 56 - $ 56
Foreign currency translation adjustments - - - - (97) (97) - (97)
Balance, November 30, 2012 $ 12,681 $ 2,218 $ (9,104) $ 8,305 $ (85) $ 14,015 $ - $ 14,015
Net loss - - (998) - - (998) (40) (1,038)
Stock-based compensation - - - 42 - 42 - $ 42
Foreign currency translation adjustments - - - - 241 241 - $ 241
Net unrealized loss on derivative financial instruments designated as cash flow hedges - - - - (405) (405) - (405)
Contribution from non-controlling interests - - - - - - 88 $ 88
Balance, November 30, 2013 $ 12,681 $ 2,218 $ (10,102) $ 8,347 $ (249) $ 12,895 $ 48 $ 12,943
FIRAN TECHNOLOGY GROUP CORPORATION
Consolidated Statements of Cash Flows
Years ended
November 30, November 30,
(in thousands of Canadian dollars) 2013 2012
Net inflow (outflow) of cash related to the following:
Operating activities
Net (loss) earnings $ (1,038) $ 928
Items not affecting cash:
Non-controlling interest share of loss 40 -
Stock-based compensation 42 56
Loss on disposal of plant and equipment 11 12
Effect of exchange rates on US dollar debt 192 (15)
Depreciation of plant and equipment 1,796 1,696
Amortization of intangible assets 48 49
Amortization of deferred financing costs 27 50
Impairment of goodwill 1,039 -
Deferred income tax recovery (1,010) -
AMIS interest accretion 293 251
Amortization of government assistance (448) (403)
Changes in non-cash operating working capital (1,025) (1,629)
(33) 995
Investing activities
Additions to plant and equipment (1,711) (2,889)
Proceeds from disposal of plant and equipment 67 23
Additions to deferred financing costs - (108)
(1,644) (2,974)
Net cash flow from operating and investing activities (1,677) (1,979)
Financing activities
(Decrease) increase in bank indebtedness (123) 994
Proceeds from subordinated loan and government assistance - 1,490
Proceeds from long-term bank debt 1,746 497
Repayments of long-term bank debt (206) (1,423)
Funding from non-controlling interests 88 -
1,505 1,558
Effects of foreign exchange rate changes on cash flow (278) (77)
Net cash flow (450) (498)
Cash, beginning of year 1,446 1,944
Cash, end of year 996 $ 1,446
Disclosure of cash payments
Payment for interest $ 95 $ 95
Payments for income taxes $ 52 $ 31
See accompanying notes.

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