Firan Technology Group Corporation
TSX : FTG

Firan Technology Group Corporation

February 02, 2015 17:05 ET

Firan Technology Group (FTG) Announces Full Year and Fourth Quarter 2014 Financial Results

TORONTO, ONTARIO--(Marketwired - Feb. 2, 2015) - Firan Technology Group Corporation (TSX:FTG) today announced financial results for the full year and fourth quarter 2014.

  • Grew 2014 sales by 8.4% over full year 2013.
  • Grew Circuits segment 2014 sales by 19.4% over full year 2013.
  • Grew sales outside of North America to $10.9M or 18% of total sales, from 13.4% in 2013.
  • Grew Aerospace Tianjin and Chatsworth activity by 62% and 88% respectively over full year 2013.
  • Improved profitability by $3.2M compared to the previous year.
  • Paid down net debt by $1.4M, after investing $1.7M in capital equipment and maintaining R&D spending above 5% of sales.

"Our globalization strategy began to bear fruit in 2014. Significant cost had been incurred in previous years to achieve this objective but it has now positioned FTG favorably in the marketplace and enabled significant growth," stated Brad Bourne, President and Chief Executive Officer. He added, "This growth, coupled with strong operating performance and benefits from some external factors, such as the weakening of the Canadian dollar and lower commodity prices, resulted in much improved profitability in 2014."

Full Year 2014 Results: (twelve months ended November 30, 2014 compared with twelve months ended November 30, 2013)

Year-To-Date
2014
Year-To-Date
2013
Sales $ 60,699,000 $ 55,998,000
Operating Earnings(1): 5,805,000 787,000
- Net R&D Investment 3,359,000 2,766,000
Net Earnings (Loss) before Tax 2,446,000 (1,979,000 )
- Tax Expense (Recovery) 288,000 (941,000 )
- Non-controlling Interests (35,000 ) (40,000 )
Net Earnings (Loss) After Tax $ 2,193,000 $ (998,000 )
Earnings per share
- basic $ 0.12 $ (0.06 )
- diluted $ 0.11 $ (0.06 )

Fourth Quarter Results: (three months ended November 30, 2014 compared with three months ended November 30, 2013)

Q4 2014 Q4 2013
Sales $ 16,490,000 $ 15,426,000
Operating Earnings (1): 2,324,000 238,000
- Net R&D Investment 1,063,000 1,032,000
Net Earnings (Loss) before Tax 1,261,000 (794,000 )
- Tax Expense (Recovery) 70,000 (977,000 )
- Non-controlling Interests 2,000 (14,000 )
Net Earnings After Tax $ 1,189,000 $ 197,000
Earnings per share
- basic $ 0.06 $ 0.01
- diluted $ 0.06 $ 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 2014 that continue to improve the Corporation and position it for the future, including:

  • Signed Letter of Intent for cockpit control assemblies for C919 Heads Up Display system in China, completed Preliminary Design Review (PDR), Critical Design Review (CDR) and shipped first sets of ground test hardware.
  • Completed Preliminary Design Review (PDR) and shipped four additional sets of ground test hardware for the Heads Down Display Control Panel Assemblies for the Chinese C919 development program.
  • Produced parts for 11 different customers from Aerospace Tianjin.
  • Produced parts for 27 different customer sites from Aerospace Chatsworth, including 14 for rigid flex assembly work and 13 for cockpit products.
  • Shipped 15,000th cockpit product from FTG Aerospace Tianjin facility, since production started.
  • Achieved sales outside of North America of 18% of total sales with growth in both Europe and Asia
  • Completed AS9100C recertification in Aerospace Toronto and Tianjin, adding design to the certification for Tianjin.
  • Added design to the AS9100C certification in Aerospace Chatsworth.
  • Completed Nadcap AC7119 certification in Circuits Toronto, and qualified for 2 year merit recertification program.
  • Achieved approval for FTG Printronics joint venture from first major North American Aerospace customer after successfully passing site audit and all testing of qualification products.

For FTG, overall sales increased by $4.7M (8.4%), from $56.0M in FY2013 to $60.7M in FY2014. FTG Circuits, and the new facilities, drove the growth in the year. For the fourth quarter, sales were $16.5M, an increase of $1.1M or 6.9% versus the same period last year.

The Circuits Segment sales were up $7.3M or 19.4% in FY2014 versus FY2013. In the fourth quarter, Circuits Segment sales were up $1.1M or 10.2% compared to the same quarter last year.

For the Aerospace segment, sales in FY2014 were down $2.6M or 14.4% compared to FY2013. Excluding one large military simulator program from 2013, activity in Aerospace was up $1.6M or 11.6%. Activity from the two new sites totaled $3.9M in FY 2014 compared to $2.3M in 2013. In Q4, Aerospace Segment sales were flat compared to the same quarter last year.

Gross margins were up in FY 2014 by $3.8M compared to FY 2013 due to higher activity across the company, cost saving initiatives, lower start-up costs in the new facilities and the weakening of the Canadian dollar. Gross margins in Q4 2014 were up $0.4M compared to the same period in 2013 as start-up costs diminished and revenues increased.

Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG for FY2014 was $4.7M an increase of $3.4M from 2013.

Net profit at FTG in FY2014 was $2.2M compared to a net loss of $1.0M in FY2013. SG&A costs were higher due to higher performance compensation in FY 2014, net R&D costs were higher, and these were offset by lower restructuring costs, and foreign exchange gains. In Q4 2014, net profit was $1.2M compared to $0.2M in Q4 2013. The increase was due to higher revenues, higher margins, lower restructuring costs and foreign exchange gains.

The Circuits segment net earnings before corporate and interest costs increased to $5.3M in FY2014 compared to $0.2M in FY2013, on $7.3M higher sales.

The Aerospace net earnings before corporate and interest costs decreased to $0.1M in FY2014 versus $1.0 M in FY2013. The net earnings this year decreased due to $2.6M lower revenue offset by lower start-up expenses for the two new facilities. Costs related to development for the C919 heads down display cockpit assemblies of $1.0M in FY2014 and $0.7M in FY2013 were treated as deferred development and not expensed in either year. Total deferred development on this program is $2.2M.

As at November 30, 2014, the Corporation's primary source of liquidity included accounts receivable of $13.2M and inventory of $10.4M. Net working capital at November 30, 2012 was $ 13.0M.

The Corporation will host a live conference call on Tuesday, February 3, 2015 at 11:00 am (EDT) to discuss the results of FY2014.

Anyone wishing to participate in the call should dial 647-788-4922 or 1-877-223-4471 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 12, 2015 and will be available on the FTG website at www.ftgcorp.com. The number to call for a rebroadcast is 1-800-585-8367 or 416-621-4642, pass code 64994388.

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 2014 2013
ASSETS
Current assets
Cash $ 641 $ 996
Accounts receivable 13,289 12,275
Taxes receivable 251 264
Inventories 10,426 8,074
Prepaid expenses 564 549
25,171 22,158
Non-current assets
Plant and equipment, net 5,643 5,587
Deferred income taxes 2,145 2,385
Intangible assets, net 148 196
Total assets $ 33,107 $ 30,326
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness $ - $ 1,062
Accounts payable and accrued liabilities 10,021 8,027
Provisions 410 612
Customer deposits, net of deferred development 1,531 930
Current portion of long-term bank debt 251 307
Current portion of subordinated loan - 510
12,213 11,448
Non-current liabilities
Long-term bank debt 1,232 1,753
Subordinated loan 4,219 3,396
Government assistance 339 786
Total liabilities 18,003 17,383
Equity
Deficit $ (7,909 ) $ (10,102 )
Accumulated other comprehensive income (loss) (312 ) (249 )
(8,221 ) (10,351 )
Share capital
Common shares 12,681 12,681
Preferred shares 2,218 2,218
Contributed surplus 8,411 8,347
Total equity attributable to FTG's shareholders 15,089 12,895
Non-controlling interest 15 48
Total equity 15,104 12,943
Total liabilities and equity $ 33,107 $ 30,326
FIRAN TECHNOLOGY GROUP CORPORATION
Consolidated Statements of Earnings (Loss)
Years ended
(in thousands of Canadian dollars, except per share amounts) November 30,
2014
November 30,
2013
Sales $ 60,699 $ 55,998
Cost of sales
Cost of sales 43,867 42,914
Depreciation of plant and equipment 1,646 1,688
Total cost of sales 45,513 44,602
Gross margin 15,186 11,396
Expenses
Selling, general and administrative 9,430 8,747
Research and development costs 3,777 3,046
Recovery of research and development costs (418 ) (280 )
Depreciation/amortization of plant and equipment and intangible assets 168 156
Goodwill impairment - 1,039
Interest expense on short-term debt 29 67
Interest expense on long-term debt 364 328
Severance and restructuring expenses - 299
Foreign exchange gain (610 ) (27 )
Total expenses 12,740 13,375
Earnings (loss) before income taxes 2,446 (1,979 )
Deferred income tax expense (recovery) 240 (1,010 )
Current income tax expense 48 69
Net earnings (loss) $ 2,158 $ (1,038 )
Attributable to:
Non-controlling interest (35 ) (40 )
Equity holders of FTG 2,193 (998 )
Earnings (loss) per share, attributable to the equity holders of FTG
Basic $ 0.12 $ (0.06 )
Diluted $ 0.11 $ (0.06 )
FIRAN TECHNOLOGY GROUP CORPORATION
Consolidated Statements of Comprehensive Income (Loss)
Years ended
(in thousands of Canadian dollars) November 30,
2014
November 30,
2013
Net earnings (loss) $ 2,158 $ (1,038 )
Other comprehensive income (loss) to be reclassified to net earnings (loss) in subsequent years:
Foreign currency translation adjustments 634 241
Net unrealized loss on derivative financial instruments designated as cash flow hedges (695 ) (405 )
(61 ) (164 )
Total comprehensive income (loss) $ 2,097 $ (1,202 )
Attributable to:
Equity holders of FTG $ 2,130 $ (1,162 )
Non-controlling interest $ (33 ) $ (40 )
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Changes in Equity
Years ended November 30, 2014 and 2013
Attributed to the equity holders of FTG
(in thousands of Canadian dollars) Common
Shares
Preferred
Shares
Deficit Contributed
Surplus
Accumulated
Other
Comprehensive
(Loss) Income
Total Non-
controlling
interest
Total
equity
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
Net earnings (loss) - - 2,193 - - 2,193 (35 ) 2,158
Stock-based compensation - - - 64 - 64 - 64
Foreign currency translation adjustments - - - - 632 632 2 634
Net unrealized loss on derivative financial instruments designated as cash flow hedges - - - - (695 ) (695 ) - (695 )
Balance, November 30, 2014 $ 12,681 $ 2,218 $ (7,909 ) $ 8,411 $ (312 ) $ 15,089 $ 15 $ 15,104
FIRAN TECHNOLOGY GROUP CORPORATION
Consolidated Statements of Cash Flows
Years ended
(in thousands of Canadian dollars) November 30,
2014
November 30,
2013
Net inflow (outflow) of cash related to the following:
Operating activities
Net earnings (loss) $ 2,158 $ (1,038 )
Items not affecting cash:
Non-controlling interest share of net loss 35 40
Stock-based compensation 64 42
Loss on disposal of plant and equipment 8 11
Effect of exchange rates on US dollar debt 181 192
Depreciation of plant and equipment 1,766 1,796
Amortization of intangible assets 48 48
Amortization of deferred financing costs 27 27
Goodwill impairment - 1,039
Deferred income tax expense (recovery) 240 (1,010 )
AMIS interest accretion 313 293
Amortization of government assistance (447 ) (448 )
Net change in non-cash operating working capital (1,003 ) (1,025 )
3,390 (33 )
Investing activities
Additions to plant and equipment (1,678 ) (1,711 )
Proceeds from disposal of plant and equipment - 67
(1,678 ) (1,644 )
Net cash flow (used in) from operating and investing activities 1,712 (1,677 )
Financing activities
Decrease in bank indebtedness (1,113 ) (123 )
Proceeds from long-term bank debt - 1,746
Repayments of long-term bank debt (734 ) (206 )
Funding from non-controlling interests - 88
(1,847 ) 1,505
Effects of foreign exchange rate changes on cash flow (220 ) (278 )
Net decrease in cash flow (355 ) (450 )
Cash, beginning of the period 996 1,446
Cash, end of period 641 $ 996
Disclosure of cash payments
Payment for interest $ 87 $ 95
Payments for income taxes $ 25 $ 52

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