Firan Technology Group Corporation
TSX : FTG

Firan Technology Group Corporation

October 10, 2012 17:05 ET

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

TORONTO, ONTARIO--(Marketwire - Oct. 10, 2012) - Firan Technology Group Corporation (TSX:FTG) today announced financial results for the third quarter 2012.

  • Grew sales by 3% over Q3, 2011 and by 5% year-to-date over the same period 2011
  • Sixth consecutive profitable quarter
  • Expensed $234,000 in Q3 in starting up new Aerospace facilities in Tianjin, China and Chatsworth, California
  • Generated revenues over $300,000 from the two new Aerospace sites in the quarter
  • R&D spending remained above 5% of sales

"FTG's investments in our new Aerospace facilities continue and we are seeing great interest from existing and new customers in utilizing these plants in the future", stated Brad Bourne, President and Chief Executive Officer. He added, "Our Tianjin plant has successfully completed registration of its quality management system to the AS9100 C requirements, ensuring our commitment to quality remains consistent across the Corporation."

Third Quarter Results: (three months ended August 31, 2012 compared with three months ended August 26, 2011)

Q3 2012 Q3 2011
Sales $14,057,000 $13,662,000
Operating Earnings (1): 1,163,000 1,071,000
• Net R&D Investment 714,000 702,000
• Aerospace Tianjin and Chatsworth start-up expenses 234,000 37,000
• Severance 54,000 -
• Tax 6,000 -
Net Earnings $155,000 $332,000
Earnings per share
- basic & diluted $0.01 $0.02

Year-To-Date 2011 Results: (nine months ended August 31, 2012 compared with nine months ended August 26, 2011)

Year-To-Date 2012 Year-To-Date 2011
Sales $41,927,000 $39,749,000
Operating Earnings(1): 3,471,000 2,875,000
• Net R&D Investment 1,944,000 2,209,000
• Aerospace Tianjin and Chatsworth Start-up Expenses 641,000 103,000
• Severance 54,000 -
• Income Tax 8,000 2,000
Net Earnings $824,000 $561,000
Earnings per share
- basic $0.05 $0.03
- diluted $0.04 $0.03
(1) Operating Earnings (Loss) 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 (Loss) 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 third quarter of 2012 that continue to improve the Corporation and position it for the future, including:

  • Continued year-over-year sales growth.
  • Achieved profit of $443,000 in the quarter before start-up costs at the two new Aerospace facilities and severance costs.
  • Completed the implementation of a new ERP system in the existing Aerospace facility in Toronto. This same ERP system is being implemented in the new facilities in Tianjin and Chatsworth.
  • Invested $487,000 in the quarter and $1,966,000 year-to-date to build out two new facilities and increase technological capabilities in our Circuits' facilities.
  • Successfully completed AS9100 audit for FTG Circuits - Tianjin to Revision C

For FTG, overall sales increased by $0.4M (3%), from $13.7M in Q3 2011 to $14.1M in Q3 2012. Again, FTG Aerospace drove the growth in the quarter. For the first nine months, sales were $41.9M, an increase of $2.2M or 5% versus the same period last year.

The Circuits Segment sales were down $0.9M or 8% in Q3 2012 versus Q3 2011. Year-to-date Circuits Segment sales were down $0.4M or 1%. Both reductions are due to lower customer demand, from US based customers.

For the Aerospace segment, sales in Q3 2012 were up $1.3M or 47% compared to Q3 2011. Sales from FTG Aerospace Toronto were up 36% with the balance of the growth coming from the two new facilities. For the year-to-date Aerospace segment sales were up $2.5M or 29%.

Gross margins were essentially flat in the quarter, again while incurring start-up costs for the two new Aerospace facilities. Net earnings at FTG in Q3 2012 were $0.2M compared to net earnings of $0.3M in Q3 2011. Administrative costs were up slightly due to foreign exchange losses, severance expenses and higher R&D costs, compared to the same quarter last year.

The Circuits segment net earnings before corporate and interest costs was $0.6M in Q3 201 compared to $0.6M in Q3 2011, on lower sales. On a year-to-date basis, the Circuits business net earnings before corporate and interest costs was $2.2M compared to $1.6M for the same period last year. The improvement is due to lower manufacturing costs ($0.7M), lower R&D costs ($0.4M), offset by lower revenues ($0.4M) and higher foreign exchange losses ($0.2M).

The Aerospace net earnings before corporate and interest costs was $0.1M in Q3 2012 versus $0.2M in Q3, 2011. The net earnings this year are reduced by the $0.2M start-up expenses for the two new facilities. On a year-to-date basis, the net earnings before corporate and interest cost was $0.4M compared to $0.6M for the same period last year. Start-up expenses for the 9 month period year-to-date were $0.6M. Also in this year's expenses were costs related to implementing and new ERP system in our Toronto facility.

As at August 31, 2012, the Corporation's primary source of liquidity included accounts receivable of $9.4M and inventory of $8.3M. Inventories are down $0.5M in the quarter, due to a continued focus on lean manufacturing and cash management. Net working capital at August 31, 2012 was $ 10.9M.

The Corporation will host a live conference call on Thursday, October 11, 2012 at 11:30 am (EDT) to discuss the results of Q3 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 October 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)
(in thousands of dollars)
August 31,
2012
November 30,
2011
December 1,
2010
ASSETS
Current assets
Cash $ 720 $ 1,944 $ 305
Accounts receivable 9,415 9,592 9,332
Taxes receivable 174 378 448
Inventories 8,268 7,973 8,726
Prepaid expenses 511 349 669
19,088 20,236 19,480
Non-current assets
Plant and equipment, net 5,093 4,474 4,024
Goodwill 1,039 1,039 1,039
Deferred income taxes 1,375 1,375 667
Intangible and other assets 354 293 336
Total assets $ 26,949 $ 27,417 $ 25,546
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ 842 $ - $ 109
Accounts payable and accrued liabilities 6,618 8,123 7,420
Provisions 341 485 544
Unearned revenue 260 714 152
Customer deposit, net of deferred development 141 - -
Current portion of long-term bank debt - 1,458 3,059
8,202 10,780 11,284
Non-current liabilities
Subordinated loan 3,545 2,444 1,746
Government assistance 1,346 1,065 914
Total liabilities 13,093 14,289 13,944
Contingencies and commitments
Shareholders' equity
Deficit $ (9,208 ) $ (10,032 ) $ (11,506 )
Accumulated other comprehensive (loss) income (124 ) 12 -
(9,332 ) (10,020 ) (11,506 )
Share capital
Common shares 12,681 12,681 12,681
Preferred shares 2,218 2,218 2,218
Contributed surplus 8,289 8,249 8,209
Total shareholders' equity 13,856 13,128 11,602
Total liabilities and shareholders' equity $ 26,949 $ 27,417 $ 25,546
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Earnings
Three months ended Nine months ended
(unaudited)
(in thousands of dollars, except per share amounts)
August 31,
2012
August 26,
2011
August 31,
2012
August 26,
2011
Sales $ 14,057 $ 13,662
$
41,927 $ 39,749
Cost of sales
Cost of sales 10,516 10,062 30,912 28,945
Depreciation of plant and equipment 419 453 1,245 1,389
Total cost of sales 10,935 10,515 32,157 30,334
Gross margin 3,122 3,147 9,770 9,415
Expenses
Selling, general and administrative 1,962 2,003 6,382 6,218
Research and development costs 778 732 2,168 2,303
Recovery of research and development costs (64 ) (30 ) (224 ) (94 )
Depreciation / amortization of office equipment and intangible assets 35 28 99 84
Interest expense on short-term debt 11 46 56 133
Interest expense on long-term debt 69 60 204 166
Severance 54 - 54 -
Foreign exchange loss (gain) 116 (24 ) 199 42
Total expenses 2,961 2,815 8,938 8,852
Earnings before income taxes 161 332 832 563
Income tax expense 6 - 8 2
Net earnings $ 155 $ 332 $ 824 $ 561
Earnings per share
Basic $ 0.01 $ 0.02 $ 0.05 $ 0.03
Diluted $ 0.01 $ 0.02 $ 0.04 $ 0.03
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Comprehensive (Loss) Income
Three months ended Nine months ended
(unaudited) August 31, August 26, August 31, August 26,
(in thousands of dollars) 2012 2011 2012 2011
Net earnings $ 155 $ 332 $ 824 $ 561
Other comprehensive (loss) income
Foreign currency translation adjustments (213 ) 195 (136 ) (119 )
(213 ) 195 (136 ) (119 )
Total comprehensive (loss) income $ (58 ) $ 527 $ 688 $ 442
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Changes in Shareholders' Equity
Nine months ended August 31, 2012 and August 26, 2011
Accumulated
Other Total
(unaudited) Common Preferred Contributed Comprehensive Shareholders'
(in thousands of dollars) Shares Shares Deficit Surplus (Loss) Income Equity
Balance, December 1, 2010 $ 12,681 $ 2,218 $ (11,506 ) $ 8,209 $ - $ 11,602
Net earnings - - 561 - - 561
Stock-based compensation - - - 29 - 29
Foreign currency translation adjustments - - - - (119 ) (119 )
Balance, August 26, 2011 12,681 2,218 (10,945 ) 8,238 (119 ) 12,073
Net earnings - - 913 - - 913
Stock-based compensation - - - 11 - 11
Foreign currency translation adjustments - - - - 131 131
Balance, November 30, 2011 12,681 2,218 (10,032 ) 8,249 12 13,128
Net earnings - - 824 - - 824
Stock-based compensation - - - 40 - 40
Foreign currency translation adjustments - - - - (136 ) (136 )
Balance, August 31, 2012 $ 12,681 $ 2,218 $ (9,208 ) $ 8,289 $ (124 ) $ 13,856
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Cash Flows
Three months ended Nine months ended
(unaudited) August 31, August 26, August 31, August 26,
(in thousands of dollars) 2012 2011 2012 2011
Net inflow (outflow) of cash related to the following:
Operating activities
Net earnings $ 155 $ 332 $ 824 $ 561
Items not affecting cash:
Stock-based compensation 15 11 40 29
Gain from disposal of plant and equipment - - (2 ) (1 )
Effect of exchange rates on U.S. dollar Canadian debt - 5 (17 ) (76 )
Depreciation of plant and equipment 442 469 1,308 1,437
Amortization of intangible assets 12 12 36 36
Amortization of deferred financing costs 7 - 43 28
AMIS interest accretion 69 44 183 104
Amortization of government assistance (111 ) (71 ) (291 ) (190 )
Changes in non-cash operating working capital (407 ) (129 ) (2,280 ) (632 )
182 673 (156 ) 1,296
Investing activities
Additions to plant and equipment (487 ) (471 ) (1,966 ) (1,959 )
Proceeds from disposals of plant and equipment - - 3 27
Additions to deferred financing costs - - (108 ) -
Net change to customer deposits/deferred development (48 ) - 141 -
(535 ) (471 ) (1,930 ) (1,932 )
Financing activities
Increase in bank indebtedness 842 278 842 706
Proceeds from subordinated loan and government assistance - - 1,490 960
Repayments of long-term debt - (208 ) (1,423 ) (1,316 )
842 70 909 350
Effects of foreign exchange rate changes on cash flow (87 ) (113 ) (47 ) 140
Net cash flow 402 159 (1,224 ) (146 )
Cash, beginning of period 318 - 1,944 305
Cash, end of period $ 720 $ 159 $ 720 $ 159
Disclosure of cash payments
Payment for interest $ 12 $ 62 $ 78 $ 195
Payments for income taxes $ 6 $ - $ 8 $ 2

Contact Information

  • Firan Technology Group Corporation
    Bradley C. Bourne
    President and CEO
    (416) 299-4000 x314
    bradbourne@ftgcorp.com

    Firan Technology Group Corporation
    Joseph R. Ricci
    Vice President and CFO
    (416) 299-4000 x309
    joericci@ftgcorp.com