TORONTO, Oct. 11, 2017 (GLOBE NEWSWIRE) — Firan Technology Group Corporation (TSX:FTG) today announced financial results for the third quarter 2017.

  • Increased gross margin to over 27% in Q3
  • Realized costs savings due to the closure of the Teledyne PCT facility
  • Achieved book-to-bill ratio of 1.23:1 in Q3 2017
  • Generated $2.3M in cash from operations used to acquire new equipment and pay down debt

“The third quarter of 2017 saw reduced activity, as predicted, as we transitioned the Teledyne PCT equipment to our Chatsworth facilities”, stated Brad Bourne, President and Chief Executive Officer. He added, “The quarter’s activity was also impacted by the strengthening of the Canadian dollar and the normal slowdown resulting from summer vacations.  With the closure of the Teledyne facility, FTG’s cost structure was reduced and this resulted in increased gross margins, despite the above impacts.  As activity in Chatsworth continues to ramp up, we expect to see improving operating results for the Corporation.”

Third Quarter Results: (three months ended Sept 1, 2017 compared with three months ended Aug 26, 2016)

    Q3 2017     Q3 2016  
Sales $ 19,144,000   $ 23,187,000  
     
Gross Margin   5,199,000     5,011,000  
Gross Margin (%)   27.2 %   21.6 %
     
Operating Earnings (1):      2,278,000     2,309,000  
     
  •  Net R&D Investment   1,668,000     748,000  
  •  Bargain Purchase Gain       (5,578,000 )
  •  Restructuring Expense       3,245,000  
  •  Foreign Exchange (Gain) Loss   (272,000 )   13,000  
  •  Recovery of Investment Tax Credits   (166,000 )   (152,000 )
  •  Amortization of Intangibles   273,000     154,000  
     
Net Earnings before Tax   775,000     3,879,000  
     
  •  Tax Expense   637,000     383,000  
  •  Non-controlling Interests   (16,000 )   11,000  
     
Net Earnings After Tax $ 154,000   $ 3,485,000  
     
 

Earnings per share

   
 – basic $ 0.01   $ 0.17  
 – diluted $ 0.01   $ 0.15  
     

Year-to-Date Results:  (nine months ended Sept 01, 2017 compared with nine months ended Aug 26, 2016)

 
    YTD 2017     YTD 2016  
Sales $ 71,829,000   $ 59,881,000  
     
Gross Margin   17,838,000     13,623,000  
Gross Margin (%)   24.8 %   22.8 %
     
Operating Earnings (1):      7,876,000     5,453,000  
     
  •  Net R&D Investment   4,924,000     2,272,000  
  •  Bargain Purchase Gain       (7,189,000 )
  •  Restructuring Expense       3,915,000  
  •  Foreign Exchange (Gain) Loss   (229,000 )   318,000  
  •  Recovery of Investment Tax Credits   (495,000 )   (499,000 )
  •  Amortization of Intangibles   840,000     198,000  
     
Net Earnings before tax   2,836,000     6,438,000  
     
  •  Income Tax   1,792,000     1,136,000  
  •  Non-controlling Interests   (34,000 )   17,000  
     
Net Earnings after tax $ 1,078,000   $ 5,285,000  
Earnings per share    
 – basic $ 0.05   $ 0.27  
 – diluted $ 0.04   $ 0.25  


(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 in the third quarter of 2017 that continue to improve the Corporation and position it for the future, including:

  • Completed installation and commissioning of the Teledyne PCT related equipment in the Chatsworth facility. 
  • Increased throughput at Aerospace Chatsworth by 150% over Q2 2017, primarily by increased activity in August.
  • After the quarter, increased throughput at Aerospace Chatsworth by over 160% in September 2017 compared to June 2017, further demonstrating increasing production rates.
  • Achieved $1.9M in sales resulting from the Photo Etch acquisition, above our target of $1.5M per quarter.

For FTG, overall sales decreased by $4.0M or 17% from $23.2M in Q3 2016 to $19.1M in Q3 2017.  The decrease was attributable to both businesses.

Revenues from the Photo Etch acquisition contributed $1.9M in incremental sales during the third quarter, compared to $1.9M in Q3 last year. Revenues from the Teledyne PCT contributed $0.9M in Q3 2017 compared to $3.5M in Q3 last year. Excluding the acquisitions, revenues were down $1.4M compared to Q3 2016, partially due to the strengthening of the Canadian dollar versus the US dollar. Sequentially, revenues were down $6.4M in Q3 versus Q2 2017 due to transition activities, summer vacations and the strengthening of the Canadian dollar.  In addition, the Photo Etch related activity was down $1.0M sequentially due to the end of the current phase of a large military simulator program which is a normal business cycle.  The Teledyne PCT related activity was down sequentially by $5.3M due to the closure of the Teledyne facility and the time taken to commission equipment in the Chatsworth facility and ramp production.  This activity did ramp each month of the quarter as progress was achieved.

The Circuits Segment sales were down by $1.3M or 8.8% in Q3 2017 versus Q3 2016.  The decrease is predominantly due to increased intercompany activity supporting the ramp up in Aerospace Chatsworth which is not reflected in consolidated sales.  On a year-to-date basis, Circuits sales were up $4.0M or 9.6%. 

For the Aerospace segment, sales in Q3 2017 were $5.7M compared to $8.5M in the same quarter last year. The decrease is primarily attributable to the Teledyne PCT transition activities in the quarter.  Year-to-date Aerospace sales were up $8.0M or 43.2%.

Gross margins in Q3 2017 were up $0.2M compared to Q3 2016.  As a percentage, gross margins increased from 21.6% in Q3 last year to 27.2% in Q3 this year.  The increase is principally due to the cost savings from the Teledyne PCT plant closure offset by lower sales. 

Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG for trailing twelve months is $8.0M.

The following table reconciles EBITDA(2)  to the net earnings for Q3 2017 and trailing 12 months.

  Q3 2017 Trailing 12
Months
     
Net earnings $ 154,000   1,708,000
Add:    
Interest   109,000   488,000
Income taxes/ITC/JV   455,000   1,716,000
Depreciation/Amortization   1,068,000   4,117,000
     
EBITDA $ 1,786,000 $ 7,961,000

(2) EBITDA 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 EBITDA may differ from other corporations and accordingly may not be comparable to measures used by other corporations.

Net earnings attributable to equity holders of FTG in Q3 2017 were $0.2M compared to a net profit of $3.5M in Q3 2016.  The decrease is due to the one-time gains recognized in the prior year with respect to the Photo Etch and Teledyne PCT transactions which contributed $2.3M to last year and the decreased activity in Q3 of this year.

The Circuits segment net earnings before corporate and interest and other costs was $1.7M in Q3 2017 compared to $2.5M in Q3 2016.  

The Aerospace net earnings (loss) before corporate and interest and other costs decreased to ($1.3M) versus $2.0M in Q3 2016. The Q3 2016 results included a one-time net gain of $1.7M related to the acquisition of Teledyne PCT and lower activity. 

As at Sept 1, 2017, the Corporation’s net working capital was $23.6M, an increase of $1.2M over year-end 2016.

The Corporation will host a live conference call on Thursday October 12, 2017 at 8:30 am (EDT) to discuss the results of Q3 2017.

Anyone wishing to participate in the call should dial 416-340-2220 OR 1-866-225-2055 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 22, 2017 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 3440996#.

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, Fort Worth, Texas 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.

For further information please contact:       

Bradley C. Bourne, President and CEO          
Firan Technology Group Corporation
Tel:  (416) 299-4000 x 314
Email:  [email protected]

Melinda Diebel, Vice President and CFO
Firan Technology Group Corporation
Tel:  (416) 299-4000 x 264
Email:  [email protected]

Additional information can be found at the Corporation’s website www.ftgcorp.com

FIRAN TECHNOLOGY GROUP CORPORATION    
Interim Condensed Consolidated Balance Sheets    
           
(Unaudited)   September 01, November 30,
(in thousands of Canadian dollars)   2017   2016
           
ASSETS      
Current assets    
Cash     $    2,439 $ 3,152
Accounts receivable     14,201   21,022
Taxes receivable     154   259
Inventories       23,526   22,464
Prepaid expenses     2,841   1,776
            43,161   48,673
Non-current assets    
Plant and equipment, net     11,167   8,851
Deferred income tax assets         1,327
Investment tax credits receivable     6,765   7,330
Deferred development costs     625   739
Intangible assets, net     3,886   5,066
Total assets   $    65,604 $ 71,986
           
LIABILITIES AND EQUITY    
Current liabilities    
Bank indebtedness $    5,576 $ 6,983
Accounts payable and accrued liabilities     11,739   15,105
Provisions       523   2,349
Customer deposits, net of deferred development     283   308
Current portion of long-term bank debt     1,394   1,510
            19,515   26,255
Non-current liabilities    
Long-term bank debt     4,562   6,079
Deferred tax payable     1,667   1,573
Total liabilities     25,744   33,907
           
Equity      
Retained earnings $    8,621 $ 7,543
Accumulated other comprehensive income     239   443
            8,860   7,986
Share capital      
Common shares     19,255   19,051
Preferred shares     2,218   2,218
Contributed surplus           8,322   8,381
Total equity attributable to FTG’s shareholders           38,655   37,636
Non-controlling interest     1,205   443
Total equity       39,860   38,079
Total liabilities and equity $    65,604 $ 71,986
           

 

FIRAN TECHNOLOGY GROUP CORPORATION              
Interim Condensed Consolidated Statements of Earnings            
                 
     Three months ended     Nine months ended 
(Unaudited) September 01,   August 26,   September 01,   August 26,
(in thousands of Canadian dollars, except per share amounts)   2017       2016       2017       2016  
                 
Sales   $    19,144     $ 23,187     $    71,829     $ 59,881  
                 
Cost of sales              
Cost of sales     13,253       17,567         51,908       44,609  
Depreciation of plant and equipment     692       609         2,083       1,649  
Total cost of sales     13,945       18,176         53,991       46,258  
Gross margin     5,199       5,011         17,838       13,623  
                 
Expenses              
Selling, general and administrative     2,787       2,595         9,509       7,905  
Research and development costs     1,723       818         5,089       2,482  
Recovery of research and development costs     (55 )     (70 )       (165 )     (210 )
Recovery of investment tax credits     (166 )     (152 )       (495 )     (499 )
Depreciation of plant and equipment     25       30         91       84  
Amortization of intangible assets     273       154         840       198  
Interest expense on short-term debt     56       31         184       51  
Interest expense on long-term debt     53       46         178       130  
Foreign exchange (gain) loss     (272 )     13         (229 )     318  
Bargain purchase gain           (5,578 )               (7,189 )
Restructuring expenses           3,245                 3,915  
Total expenses     4,424       1,132         15,002       7,185  
                 
Earnings before income taxes     775       3,879         2,836       6,438  
                 
Current income tax expense (recovery)     14       15         (10 )     46  
Deferred income tax expense     623       368         1,802       1,090  
Total income tax expense     637       383         1,792       1,136  
                 
Net earnings $    138     $ 3,496     $    1,044     $ 5,302  
                 
Attributable to:              
Non-controlling interest $    (16 )   $ 11     $    (34 )   $ 17  
Equity holders of FTG $    154     $ 3,485         1,078       5,285  
                 
Earnings per share, attributable to the equity holders of FTG              
Basic $    0.01     $ 0.17     $    0.05     $ 0.27  
Diluted $    0.01     $ 0.15     $    0.04     $ 0.25  
                 

 

FIRAN TECHNOLOGY GROUP CORPORATION              
Interim Condensed Consolidated Statements of Comprehensive Income (loss)        
                 
     Three months ended     Nine months ended 
(Unaudited)   September 01,   August 26,   September 01,   August 26,
(in thousands of Canadian dollars)     2017       2016       2017       2016  
                 
Net earnings   $    138     $ 3,496     $    1,044     $ 5,302  
                 
Other comprehensive income (loss) to be reclassified to net earnings                
in subsequent periods:                
                 
Foreign currency translation adjustments       (2,424 )     (100 )       (1,611 )     688  
Net unrealized gain (loss) on derivative financial instruments                
designated as cash flow hedges       2,983       143         1,839       324  
Tax impact       (746 )     (36 )       (460 )     (81 )
                 
        (187 )     7         (232 )     931  
                 
Total comprehensive income (loss)   $    (49 )   $ 3,503     $    812     $ 6,233  
                 
Attributable to:                
Equity holders of FTG   $    27     $ 3,493     $    874     $ 6,219  
Non-controlling interest   $    (76 )   $ 10     $    (62 )   $ 14  
                 

 

FIRAN TECHNOLOGY GROUP CORPORATION          
Interim Condensed Consolidated Statements of Changes in Equity        
                 
                 
Nine months ended September 01, 2017     Attributed to the equity holders of FTG      
          Accumulated      
          Other    Non-  
(Unaudited) Common Preferred Retained Contributed Comprehensive    controlling  Total
(in thousands of Canadian dollars) Shares Shares Earnings Surplus Income (Loss) Total interest equity
Balance, November 30, 2016 $   19,051 $    2,218 $    7,543 $    8,381   $    443   $   37,636   $    443   $   38,079  
Net earnings                 1,078                     1,078       (34 )     1,044  
Stock-based compensation                       99               99               99  
Common shares issued on exercise of                
share options and PSU’s     204                 (158 )             46               46  
Foreign currency translation adjustments                               (1,583 )     (1,583 )     (28 )     (1,611 )
Net unrealized gain on derivative financial                
instruments designated as cash flow                
hedges, net of tax impact                               1,379       1,379               1,379  
Contribution from non-controlling                
interest                                               824       824  
Balance, September 01, 2017 $   19,255 $    2,218 $    8,621 $    8,322   $    239   $   38,655   $    1,205   $   39,860  
                 
Nine months ended August 26, 2016     Attributed to the equity holders of FTG      
          Accumulated      
          Other   Non-  
  Common Preferred Retained Contributed Comprehensive   controlling Total
(in thousands of Canadian dollars) Shares Shares Earnings Surplus Income (Loss) Total interest equity
                 
Balance, November 30, 2015 $ 13,075 $ 2,218 $ 1,628 $ 8,373   $ (233 ) $ 25,061   $ 29   $ 25,090  
Net earnings       5,285           5,285     17     5,302  
Stock-based compensation         35         35         35  
Common shares issued on exercise of                
share options   78       (20 )       58         58  
Common shares issued   5,819               5,819         5,819  
Foreign currency translation adjustments             691     691     (3 )   688  
Net unrealized gain on derivative financial                
instruments designated as cash flow hedges             243     243         243  
Balance, August 26, 2016 $ 18,972 $ 2,218 $ 6,913 $ 8,388   $ 701   $ 37,192   $ 43   $ 37,235  
                 

 

FIRAN TECHNOLOGY GROUP CORPORATION                
Interim Condensed Consolidated Statements of Cash Flows            
                   
       Three months ended     Nine months ended 
(Unaudited)   September 01,   August 26,   September 01,   August 26,
(in thousands of Canadian dollars)     2017       2016       2017       2016  
Net inflow (outflow) of cash related to the following:                
Operating activities                
Net earnings   $    138     $ 3,496     $    1,044     $ 5,302  
Items not affecting cash:                
Non-controlling interest share of net loss (earnings)       16       (11 )       34       (17 )
Stock-based compensation       75       11         99       35  
(Gain) on disposal of plant and equipment       (3 )             (21 )      
Effect of exchange rates on US dollar debt       (547 )     (22 )       (482 )     (132 )
Depreciation of plant and equipment       717       640         2,174       1,734  
Amortization of intangible assets       273       154         840       198  
Amortization of deferred financing costs       3       3         9       8  
Deferred income tax       310       403         1,421       1,465  
Investment tax credits expense (recovery)       894       (152 )       565       (499 )
(Increase) decrease in net unrealized loss on derivative                                
financial instruments designated as cash flow                                
hedges       1,217       107         1,016       1,126  
Net change in non-cash operating working capital       (817 )     (5,891 )       (417 )     (12,897 )
          2,276       (1,262 )       6,282       (3,677 )
Investing activities                
Additions to plant and equipment, net       (1,419 )     (451 )       (4,906 )     (1,162 )
Additions to plant and equipment – acquisitions               (2,922 )               (3,340 )
Additions to intangible assets – acquisitions               (4,340 )               (5,280 )
(Additions) recovery of deferred development costs       (1 )     (292 )       115       (303 )
Additions to deferred financing costs               (11 )               (11 )
Proceeds from disposal of plant and equipment                       18        
          (1,420 )     (8,016 )       (4,773 )     (10,096 )
Net cash flow from operating and investing activities       856       (9,278 )       1,509       (13,773 )
Financing activities                
Increase (decrease) in bank indebtedness       (1,177 )     1,550         (1,408 )     5,070  
Proceeds from long-term bank debt               3,390                 3,390  
Repayments of long-term bank debt       (377 )     (300 )       (1,159 )     (842 )
Funding from non-controlling interests                       824        
Proceeds from issue of Common shares       40       5,851         46       5,876  
          (1,514 )     10,491         (1,697 )     13,494  
Effects of foreign exchange rate changes on cash flow       (539 )     113         (525 )     216  
Net increase (decrease) in cash flow       (1,197 )     1,326         (713 )     (63 )
Cash, beginning of the period       3,636       1,771         3,152       3,160  
Cash, end of the period   $    2,439     $ 3,097         2,439     $ 3,097  
                   
Disclosure of cash payments                
Payment for interest   $    111     $ 77     $    370     $ 181  
Payments for income taxes   $    1     $     $    5     $ 14