Firan Technology Group Corporation
TSX : FTG

Firan Technology Group Corporation

July 07, 2010 16:25 ET

Firan Technology Group (FTG) Returns to Growth in Second Quarter, 2010

TORONTO, ONTARIO--(Marketwire - July 7, 2010) - Firan Technology Group Corporation (TSX:FTG) today announced financial results for the second quarter 2010.



-- Achieved book-to-bill ratio above 1.10:1 in the quarter
-- Grew revenue by 12% over Q1, 2010
-- Net debt decreased by $1.5M in the quarter
-- Subsequent to the end of the quarter, secured $5.1M in Ontario
government funding in support of technology investments in FTG Circuits-
Toronto business


"We are pleased with the increasing activity across FTG. Overall our results are improving and while we did have some challenges in our Chatsworth facility, we are taking steps to address this. The strength of the Canadian dollar continues to provide a headwind for us but we have proven we can compete at the current exchange rates. As we have continuously stated, we believe investments in technology are critical to our future so the Ontario Government support is a huge benefit to us", stated Brad Bourne, President and Chief Executive Officer.

Second Quarter Results: (three months ended May 28, 2010 compared with three months ended May 29, 2009)



Q2 2010 Q2 2009
-------------------- --------------------


Sales $11,604,000 $14,634,000

------------------------------------------
Operating Earnings before (1): 470,000 429,000
- Net R&D,
- Severance
- Tax
------------------------------------------
Net R&D Investment 835,000 736,000
Severance (1,000) 231,000
Tax - 2,000
------------------------------------------
Net Loss (364,000) ($540,000)
------------------------------------------
Loss per share
- basic & diluted ($0.02) ($0.03)


Year-To-Date 2009 Results: (six months ended May 28, 2010 compared with six months ended May 29, 2009)



Year-To-Date 2010 Year-To-Date 2009

Sales 21,964,000 $29,328,000

------------------------------------------
Operating Earnings before (1): 346,000 1,438,000
- Net R&D,
- Severance
- Tax
------------------------------------------
Net R&D Investment 1,161,000 1,810,000
Severance 143,000 231,000
Tax 2,000 4,000
------------------------------------------
Net Loss ($960,000) ($607,000)
------------------------------------------
Loss per share
- basic & diluted ($0.05) ($0.03)

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



-- Completed design and development of first military ground based display
bezel
-- Achieved book-to-bill ratio of 1.10:1 in the quarter
-- Extended collective agreement for one year with the represented staff at
FTG Circuits-Toronto
-- Successfully completed AS9100 surveillance audit for FTG Aerospace
-- Reduced net debt by $1.5M in the quarter
-- Subsequent to the end of the quarter, secured $5.1M in Ontario
government funding in support of technology investments in FTG Circuits-
Toronto business


For FTG, overall sales decreased by 21% from $14.6M in Q2 2009 to $11.6 in Q2 2010, but increased by 12% over Q1, 2010. Year-over-year the decline in the value of the USD was 19%, which has a direct impact on reported sales. Sales in Canada were down 43% year-over year but up 35% from Q1 2010 to Q2 2010. Sales in USD were down 15% including the exchange rate decrease but would show a small increase at constant exchange rates.

The Circuits Segment sales were down $2.7M or 23% in Q2 2010 versus Q2 2009. The Chatsworth facility sales decreased 45% due to some operational and yield issues and the impact of the lower exchange rate. The Toronto facility sales decreased 9%, as activity picked up but the drop in exchange rate more than offset this increase. Compared to Q1 2010, sales increased 8% with both sites showing increases.

For the Aerospace segment, sales in Q2 2010 were down $0.3M or 11% compared to Q2 2009. This business was particularly affected by a drop in activity in Canada. With some key new program wins, this site is expected to continue to show growth going forward. Again, the declining value of the USD negatively impacted the sales in the quarter compared to the same period last year. Compared to Q1 2010, sales increased 26%.

Net loss at FTG in Q2 2010 was $0.4M compared to $0.5M in Q2 2009. Year-over-year operating costs were reduced, severance costs were down $0.2M, while R&D spending was up $0.2M and the exchange rate negatively impacted results.

The Circuits segment net loss before corporate and interest costs was $54,000 in Q2 2010 compared to $13,000 in Q2 2009. In 2010, the Chatsworth facility reported a loss while the Toronto facility was profitable. Operational and yield issues impacted the Chatsworth results.

The Aerospace net income before corporate and interest costs was $343,000 in Q2 2010 versus $160,000 in Q2, 2009. The increase in income was primarily due to higher volume, offset by negative impact of the USD exchange rate.

As at May 28, 2010, the Corporation's primary source of liquidity included accounts receivable of $8.1M and inventory of $8.1M. Net working capital at May 28, 2010 was $7.7M.

The Corporation will host a live conference call on Thursday, July 8, 2010 at 11:00am (EDT) to discuss the results of Q2 2010.

Anyone wishing to participate in the call should dial 416-695-7848 or 1-800-952-4972 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 22, 2010 and will be available on the FTG website at www.ftgcorp.com. The number to call for a rebroadcast is 416-695-5800 or 1-800-408-3053, pass code 4378104.

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
Interim Consolidated Balance Sheets

----------------------------------------------------------------------------
----------------------------------------------------------------------------
May 28, 2010 November 30, 2009
(in thousands of dollars) (unaudited) (audited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

ASSETS

CURRENT
Cash $ - $ 20
Accounts receivable 8,146 9,490
Taxes receivable 435 450
Inventories 8,091 7,618
Prepaid expenses 453 737
Future income taxes 231 232
----------------------------------------------------------------------------
17,356 18,547

CAPITAL ASSETS 5,213 6,099
GOODWILL 4,053 4,063
OTHER INTANGIBLE ASSETS 360 384
----------------------------------------------------------------------------
$ 26,982 $ 29,093
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES

CURRENT
Bank indebtedness $ 808 $ 157
Accounts payable and accrued
liabilities 6,525 6,727
Unearned revenue 606 -
Current portion of long-term debt 1,688 2,075
----------------------------------------------------------------------------
9,627 8,959
LONG-TERM DEBT 3,658 5,219
----------------------------------------------------------------------------
13,285 14,178
----------------------------------------------------------------------------

SHAREHOLDERS' EQUITY

Deficit (8,742) (7,782)
Accumulated other comprehensive loss (634) (351)
----------------------------------------------------------------------------
(9,376) (8,133)
Share capital
Common shares 12,681 12,681
Preferred shares 2,218 2,218
Contributed surplus 8,174 8,149
----------------------------------------------------------------------------
13,697 14,915
----------------------------------------------------------------------------

$ 26,982 $ 29,093
----------------------------------------------------------------------------


FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Loss



----------------------------------------------- ---------------------------
----------------------------------------------- ---------------------------
Three Months Ended Six Months Ended
---------------------------- ---------------------------
May 28, May 29, May 28, May 29,
2010 2009 2010 2009
(in thousands of
dollars except per
share amounts) (unaudited) (unaudited) (unaudited) (unaudited)
----------------------------------------------- ---------------------------
----------------------------------------------- ---------------------------

SALES $ 11,604 $ 14,634 $ 21,964 $ 29,328
COST OF SALES 8,633 11,284 16,748 22,177
----------------------------------------------- ---------------------------
2,971 3,350 5,216 7,151
----------------------------------------------- ---------------------------

EXPENSES
Selling, general
and
administrative 1,765 1,850 3,374 3,610
Research and
development
costs 910 736 1,553 1,860
Recovery of
research and
development
costs (75) - (392) (50)
Amortization of
capital assets 516 617 1,050 1,261
Amortization of
intangible
assets 12 12 24 24
Loss from sale of
capital assets 1 - 1 -
Interest expense
on long-term
debt 87 111 190 233
Interest expense
on short-term
debt 20 27 34 52
Severance
expenses (1) 231 143 231
Foreign exchange
loss 100 304 197 533
----------------------------------------------- ---------------------------
3,335 3,888 6,174 7,754
----------------------------------------------- ---------------------------

LOSS BEFORE INCOME
TAXES (364) (538) (958) (603)

PROVISION FOR
INCOME TAXES - 2 2 4
----------------------------------------------- ---------------------------
----------------------------------------------- ---------------------------

NET LOSS $ (364) $ (540) $ (960) $ (607)
----------------------------------------------- ---------------------------
----------------------------------------------- ---------------------------

NET LOSS PER SHARE
Basic $ (0.02) $ (0.03) $ (0.05) $ (0.03)
Diluted $ (0.02) $ (0.03) $ (0.05) $ (0.03)
----------------------------------------------- ---------------------------
----------------------------------------------- ---------------------------


FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Shareholders' Equity and Comprehensive
Loss
(in thousands of dollars) (unaudited)
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Common Preferred Contributed
Shares Shares Surplus
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Balance, November 30, 2009 $ 12,681 $ 2,218 $ 8,149
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Net loss
Other comprehensive loss:
Foreign currency translation
adjustments

Comprehensive loss

Stock based compensation 25

-------------------------------------------------------------------------
Balance, May 28, 2010 $ 12,681 $ 2,218 $ 8,174
-------------------------------------------------------------------------
-------------------------------------------------------------------------


----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accumulated
Other Total
Comprehensive Shareholders'
Deficit Loss ("AOCL") Equity
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Balance, November 30, 2009 (7,782) (351) $ 14,915
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net loss (960) (960)
Other comprehensive loss:
Foreign currency translation
adjustments (283) (283)
---------------
Comprehensive loss (1,243)
---------------
---------------
Stock based compensation 25

----------------------------------------------------------------------------
Balance, May 28, 2010 $ (8,742) $ (634) $ 13,697
----------------------------------------------------------------------------
----------------------------------------------------------------------------


-------------------------------------------------------------------
-------------------------------------------------------------------


Common Preferred Contributed
Shares Shares Surplus
-------------------------------------------------------------------
-------------------------------------------------------------------

Balance, November 30,
2008 $ 12,681 $ 2,218 $ 8,071
-------------------------------------------------------------------
-------------------------------------------------------------------

Net loss
Other comprehensive loss:
Foreign currency
translation
adjustments
Net unrealized gain on
derivative financial
instruments designated
as cash flow hedges

Comprehensive loss

Stock based compensation 36

-------------------------------------------------------------------
Balance, May 29, 2009 $ 12,681 $ 2,218 $ 8,107
-------------------------------------------------------------------
-------------------------------------------------------------------


----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accumulated
Other Total
Comprehensive Shareholders'
Deficit Income ("AOCI") Equity
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Balance, November 30,
2008 (6,692) 324 $ 16,602
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net loss (607) (607)
Other comprehensive loss:
Foreign currency
translation
adjustments (702) (702)
Net unrealized gain on
derivative financial
instruments designated
as cash flow hedges 688 688
-----------------
Comprehensive loss (621)
-----------------
-----------------
Stock based compensation 36

----------------------------------------------------------------------------
Balance, May 29, 2009 (7,299) $ 310 $ 16,017
----------------------------------------------------------------------------
----------------------------------------------------------------------------



FIRAN TECHNOLOGY GROUP CORPORATION
Interim Consolidated Statements of Cash Flows
----------------------------------------------- ----------------------------
----------------------------------------------- ----------------------------
Three Months Ended Six Months Ended
---------------------------- ----------------------------
May 28, 2010 May 29, 2009 May 28, 2010 May 29, 2009
(in thousands of
dollars) (unaudited) (unaudited) (unaudited) (unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
NET (OUTFLOW)
INFLOW OF CASH
RELATED TO THE
FOLLOWING
ACTIVITIES:

OPERATING
Net loss $ (364) $ (540) $ (960) $ (607)
Items not
affecting cash
Stock based
compensation
expense 11 2 25 36
Loss from sale of
capital assets 1 - 1 -
Effect of exchange
rates on U.S.
dollar Canadian
debt (11) (621) (25) (501)
Amortization of
capital assets 516 617 1,050 1,261
Amortization of
intangible assets 12 12 24 24
Changes in non-
cash operating
working capital 1,432 197 1,547 1,103
----------------------------------------------- ----------------------------
1,597 (333) 1,662 1,316
----------------------------------------------- ----------------------------

INVESTING
Proceeds from
sales of capital
assets 5 - 5 -
Additions to
capital assets (74) (295) (181) (1,211)
----------------------------------------------- ----------------------------
(69) (295) (176) (1,211)
----------------------------------------------- ----------------------------

FINANCING
(Decrease)/increase
in bank
indebtedness (1,093) (1,090) 667 (999)
Proceeds from
capital
expenditure
facility - 1,667 - 1,667
Repayments of
long-term debt (409) (459) (1,914) (925)
----------------------------------------------- ----------------------------
(1,502) 118 (1,247) (257)
----------------------------------------------- ----------------------------

Effect of foreign
exchange rate
changes on cash
flow (26) 733 (259) 509
----------------------------------------------- ----------------------------

NET CASH FLOW - 223 (20) 357

CASH, BEGINNING OF
PERIOD - 304 20 170
----------------------------------------------- ----------------------------

CASH, END OF PERIOD $ - $ 527 $ - $ 527
----------------------------------------------- ----------------------------

DISCLOSURE OF CASH
PAYMENTS
Payments for
interest $ 107 $ 138 $ 224 $ 285
Payments for
income taxes $ - $ 2 $ 2 $ 4
Refund of income
taxes $ 182 $ - $ 182 $ -
----------------------------------------------- --------------------------

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