Firan Technology Group Corporation
TSX : FTG

Firan Technology Group Corporation

July 09, 2012 17:05 ET

Firan Technology Group (FTG) Announces Second Quarter 2012 Financial Results

TORONTO, ONTARIO--(Marketwire - July 9, 2012) - Firan Technology Group Corporation (TSX:FTG) today announced financial results for the second quarter 2012.

  • Grew sales by 4% over second quarter 2011 and by 7% over year-to-date 2011
  • Fifth consecutive profitable quarter
  • Earnings increased 50% over Q2 2011, with $0.2M expenses related to startup of FTG Aerospace Tianjin and FTG Aerospace Chatsworth
  • Began production in FTG Aerospace-Tianjin facility
  • Signed Letter of Intent for first significant program in China on C919 single aisle aircraft being developed

"The second quarter of 2012 saw significant breakthroughs for FTG with the first shipments from our FTG Aerospace - Tianjin facility and the signing of a Letter of Intent for the design and production of Cockpit Panel Assemblies for the Chinese C919 single aisle aircraft currently under development. The business is performing well and strategic initiatives put in place in prior years are coming to fruition", stated Brad Bourne, President and Chief Executive Officer. He added, "FTG continues to invest in equipment and R&D to move FTG up the value chain and capture content on key new aircraft platforms being developed worldwide."

Second Quarter Results: (three months ended June 1, 2012 compared with three months ended May 27, 2011)

Q2 2012 Q2 2011
Sales $ 14,396,000 $ 13,874,000
Operating Earnings (1): 1,286,000 1,260,000
• Net R&D Investment 655,000 840,000
• Tax - -
Net Earnings $ 631,000 $ 420,000
Earnings per share
- basic $ 0.04 $ 0.02
- diluted $ 0.03 $ 0.02
(1) Operating Earnings is not a measure recognized under the 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.

Year-To-Date Results: (six months ended June 1, 2012 compared with six months ended May 27, 2011)

Year-To-Date 2012 Year-To-Date 2011
Sales $ 27,870,000 $ 26,087,000
Operating Earnings(1): 1,901,000 1,738,000
• Net R&D Investment 1,230,000 1,507,000
• Tax 2,000 2,000
Net Earnings $ 669,000 $ 229,000
Earnings per share
- basic $ 0.04 $ 0.01
- diluted $ 0.03 $ 0.01

Business Highlights

FTG accomplished many goals in our second quarter 2012 that continue to improve the Corporation and position it for the future, including:

  • Achieved 4% year-over-year sales growth despite softness in the North American printed circuit board industry
  • Installed third Laser Direct Imaging (LDI) system in FTG Circuits - Toronto
  • Completed 3-year MIL-P-55110 and MIL-P-50884 validation audit at FTG Circuits - Chatsworth
  • Signed Letter of Intent for C919 cockpit panel assemblies
  • Shipped first parts from FTG Aerospace - Tianjin
  • Assembled first parts at FTG Aerospace - Chatsworth
  • Completed implementation of new ERP system for FTG Aerospace - Toronto and began implementation at FTG Aerospace - Tianjin and FTG Aerospace - Chatsworth
  • Completed AS9100 C surveillance audit at FTG Aerospace - Toronto

For FTG overall sales increased by $0.5M (4%), from $13.9M in Q2 2011 to $14.4M in Q2 2012. FTG Aerospace - Toronto drove the growth in the quarter. For the first six months, sales were $27.9M, an increase of $1.8M or 7% over the same period last year.

The Circuits Segment sales were down $0.4M or 4% in Q2 2012 versus Q2 2011. Year-to-date Circuits sales were up $0.5M or 3%.

For the Aerospace segment, sales in Q2 2012 were up $0.9M or 31% to $3.9M compared to $3.0M in Q2 2011. This growth resulted from strong demand for commercial aerospace products. Year-to-date sales were up $1.3M or 21%.

Net earnings at FTG in Q2 2012 were $0.6M compared to $0.4M in Q2 2011. Included in this year's earnings are expenses of $0.2M incurred in the quarter related to the startup of FTG Aerospace - Tianjin and FTG Aerospace - Chatsworth. For the six month period, net earnings were $0.7M versus $0.2M last year, an increase of 190%.

The Circuits segment net earnings before corporate, interest and tax costs was $1.2M in Q2 2012 compared to $0.9M in Q2 2011. On a year-to-date basis, earnings were $1.6M, an increase of $0.6m or 60%. The improvement was due to higher activity and strong operational performance.

The Aerospace net earnings before corporate and interest costs was $0M in Q2 2012 versus $0.1M in Q2 2011. The results are due to higher activity, offset by implementation costs related to the new ERP system and startup costs at the two new facilities in California and China. For the first six months 2012, earnings were $0.3M, a drop of $0.1M, again due to the above noted one-time costs.

As at June 1, 2012, the Corporation's primary source of liquidity included cash of $0.3M, accounts receivable of $10.7M and inventory of $8.8M. Inventories increased in the quarter due to higher activity and ongoing investment in one large aerospace program where shipments began late in Q2. Net working capital at November 30, 2011 was $10.9M.

The Corporation will host a live conference call on July 11, 2012 at 11:30 am (EST) to discuss the results of the second quarter 2012.

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 July 25, 2012 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 8807452.

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 and Chatsworth, California.
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
Interim Consolidated Balance Sheets
(unaudited) June 1, November 30, December 1,
(in thousands of dollars) 2012 2011 2010
ASSETS
Current assets
Cash $ 318 $ 1,944 $ 305
Accounts receivable 10,667 9,592 9,332
Taxes receivable 364 378 448
Inventories 8,790 7,973 8,726
Prepaid expenses 551 349 669
20,690 20,236 19,480
Non-current assets
Plant and equipment, net 5,120 4,474 4,024
Goodwill 1,039 1,039 1,039
Deferred income taxes 1,375 1,375 667
Intangible and other assets 375 293 336
Total assets $ 28,599 $ 27,417 $ 25,546
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ - $ - $ 109
Accounts payable and accrued liabilities 8,426 8,123 7,420
Provisions 356 485 544
Unearned revenue 779 714 152
Customer deposit 205 - -
Current portion of long-term bank debt - 1,458 3,059
9,766 10,780 11,284
Non-current liabilities
Subordinated loan 3,476 2,444 1,746
Government assistance 1,458 1,065 914
Total liabilities 14,700 14,289 13,944
Contingencies and commitments
Shareholders' equity
Deficit $ (9,363 ) $ (10,032 ) $ (11,506 )
Accumulated other comprehensive income 89 12 -
(9,274 ) (10,020 ) (11,506 )
Share capital
Common shares 12,681 12,681 12,681
Preferred shares 2,218 2,218 2,218
Contributed surplus 8,274 8,249 8,209
Total shareholders' equity 13,899 13,128 11,602
Total liabilities and shareholders' equity $ 28,599 $ 27,417 $ 25,546
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Earnings
Three months ended Six months ended
(unaudited)
(in thousands of dollars except per share amounts)
June 1,
2012
May 27,
2011
June 1,
2012
May 27,
2011
Sales $ 14,396 $ 13,874 $ 27,870 $ 26,087
Cost of sales
Cost of sales 10,344 9,787 20,396 18,883
Depreciation of plant and equipment 432 458 826 936
Total cost of sales 10,776 10,245 21,222 19,819
3,620 3,629 6,648 6,268
Expenses
Selling, general and administrative 2,272 2,249 4,420 4,215
Research and development costs 785 870 1,390 1,571
Recovery of research and development costs (130 ) (30 ) (160 ) (64 )
Depreciation/amortization of office equipment and intangible assets 35 29 64 56
Interest expense on short-term debt 24 43 45 87
Interest expense on long-term debt 74 67 135 106
Foreign exchange (gain) loss (71 ) (19 ) 83 66
Total expenses 2,989 3,209 5,977 6,037
Earnings before income taxes 631 420 671 231
Income tax expense - - 2 2
Net earnings $ 631 $ 420 $ 669 $ 229
Earnings per share
Basic $ 0.04 $ 0.02 $ 0.04 $ 0.01
Diluted $ 0.03 $ 0.02 $ 0.03 $ 0.01
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Comprehensive Income (Loss)
Three months ended Six months ended
(unaudited) June 1, May 27, June 1, May 27,
(in thousands of dollars) 2012 2011 2012 2011
Net earnings $ 631 $ 420 $ 669 $ 229
Other comprehensive income (loss)
Foreign currency translation adjustments 195 (160 ) 77 (314 )
195 (160 ) 77 (314 )
Total comprehensive income (loss) $ 826 $ 260 $ 746 $ (85 )
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Changes in Shareholders' Equity
Six months ended June 1, 2012 and May 27, 2011


(unaudited)
(in thousands of dollars)


Common
Shares


Preferred
Shares



Deficit


Contributed
Surplus
Accumulated
Other
Comprehensive
Income (Loss)

Total
Shareholders'
Equity
Balance, December 1, 2010 $ 12,681 $ 2,218 $ (11,506 ) $ 8,209 $ - $ 11,602
Net earnings - - 229 - - 229
Stock-based compensation - - - 18 - 18
Foreign currency translation adjustments - - - - (314 ) (314 )
Balance, May 27, 2011 12,681 2,218 (11,277 ) 8,227 (314 ) 11,535
Net earnings - - 1,245 - - 1,245
Stock-based compensation - - - 22 - 22
Foreign currency translation adjustments - - - - 326 326
Balance, November 30, 2011 12,681 2,218 (10,032 ) 8,249 12 13,128
Net earnings - - 669 - - 669
Stock-based compensation - - - 25 - 25
Foreign currency translation adjustments - - - - 77 77
Balance, June 1, 2012 $ 12,681 $ 2,218 $ (9,363 ) $ 8,274 $ 89 $ 13,899
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Cash Flows
Three months ended Six months ended
(unaudited) June 1, May 27, June 1, May 27,
(in thousands of dollars) 2012 2011 2012 2011
Net inflow (outflow) of cash related to the following:
Operating activities
Net earnings $ 631 $ 420 $ 669 $ 229
Items not affecting cash:
Stock-based compensation 16 10 25 18
Gain from disposal of plant and equipment - (3 ) (2 ) (1 )
Effect of exchange rates on U.S. dollar Canadian debt 38 (3 ) (17 ) (81 )
Depreciation of plant and equipment 455 475 866 968
Amortization of intangible assets 12 12 24 24
Amortization of deferred financing costs 12 14 36 28
AMIS interest accretion 67 44 114 60
Amortization of government assistance (109 ) (71 ) (180 ) (119 )
Changes in non-cash operating working capital (13 ) (64 ) (1,873 ) (503 )
1,109 834 (338 ) 623
Investing activities
Additions to plant and equipment (1,116 ) (326 ) (1,479 ) (1,488 )
Proceeds from disposals of plant and equipment - 7 3 27
Additions to deferred financing costs (108 ) - (108 ) -
Net additions to customer deposits 205 - 205 -
(1,019 ) (319 ) (1,379 ) (1,461 )
Financing activities
(Decrease) increase in bank indebtedness - (307 ) - 536
Proceeds from subordinated loan and government assistance 318 - 1,490 960
Repayments of long-term debt (1,206 ) (208 ) (1,423 ) (1,108 )
(888 ) (515 ) 67 388
Effects of foreign exchange rate changes on cash flow 111 - 24 254
Net cash flow (687 ) - (1,626 ) (196 )
Cash, beginning of period 1,005 - 1,944 196
Cash, end of period $ 318 $ - $ 318 $ -
Disclosure of cash payments
Payment for interest $ 26 $ 66 $ 66 $ 133
Payments for income taxes $ - $ - $ 2 $ 2

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