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Firan Technology Group Corporation

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Firan Technology Group Corporation (“FTG” or “Corporation”) Announces Second Quarter 2018 Financial Results

TORONTO, July 11, 2018 (GLOBE NEWSWIRE) -- Firan Technology Group Corporation (TSX:FTG) today announced financial results for the second quarter of 2018.

  • Achieved record sales of $28.9M, an increase of 13% over Q2 2017
  • Grew Aerospace segment by 42% over Q2 last year
  • Gross margins increased by $1.5M or 26% over Q2 last year
  • Generated cash flow from operations of $3.6M compared to cash usage of $0.4M in Q2 2017

“The second quarter of 2018 began to demonstrate the earnings benefits from our acquisitions in 2016,” stated Brad Bourne, President and Chief Executive Officer. He added, “While we continued to experience some increased costs in the quarter related to the transition, we also achieved a dramatic improvement in our net earnings and cash flow.”

 
Second Quarter: (three-months ended June 1, 2018 compared with three-months ended June 2, 2017)
 Q2 2018
 Q2 2017
 
Sales$28,878,000 $25,513,000 
   
Gross margin 7,242,000  5,753,000 
Gross margin (%) 25.1%  22.5% 
   
Operating earnings (1): 3,579,000  2,581,000 
•  Net R&D investment 1,071,000  1,846,000 
•  Recovery of investment tax credits (211,000) (188,000)
•  Amortization of intangibles 261,000  286,000 
•  Foreign exchange (gain) loss (104,000) (118,000)
•  Restructuring expense 195,000  - 
Earnings before income taxes 2,367,000  755,000 
•  Current income tax (recovery) expense 22,000  (41,000)
•  Deferred income tax expense 1,039,000  691,000 
•  Non-controlling interests 11,000  (19,000)
Net earnings, attributable to the equity holders of FTG$1,295,000  $124,000  
Earnings per share, attributable to the equity holders of FTG
Basic$0.06 $0.01 
Diluted$0.05 $0.01 


 
Year-to-Date: (six-months ended June 1, 2018 compared with six-months ended June 2, 2017)
 YTD 2018
 YTD 2017
 
Sales$56,406,000 $52,685,000 
   
Gross margin 12,089,000  12,639,000 
Gross margin (%) 21.4%  24.0% 
   
Operating earnings (1): 5,140,000  5,598,000 
•  Net R&D investment 2,221,000  3,256,000 
•  Recovery of investment tax credits (363,000) (329,000)
•  Amortization of intangibles 517,000  567,000 
•  Foreign exchange (gain) loss (130,000) 43,000 
•  Restructuring expense 195,000  - 
Earnings before income taxes 2,700,000  2,061,000 
•  Current income tax (recovery) expense 40,000  (24,000)
•  Deferred income tax expense 1,675,000  1,179,000 
•  Non-controlling interests (17,000) (18,000)
Net earnings, attributable to the equity holders of FTG$1,002,000  $924,000  
Earnings per share, attributable to the equity holders of FTG
Basic$0.04 $0.04 
Diluted$0.04 $0.04 
  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 second quarter of 2018 that continue to improve the Corporation and position it for the future, including:

  • Completed C-130 contract with CAE on schedule and on cost
  • Renewed contract with Rockwell Collins for Printed Circuit Boards from North American and China facilities
  • Won new cursor control device assembly for use on Airbus aircraft already in service
  • Achieved sales resulting from the PhotoEtch acquisition of $1.5M in the quarter compared to $2.9M in the second quarter of last year and a target of $1.5M. The PhotoEtch related revenues will ramp up significantly in the second half of 2018 as shipments begin on the KC-46 simulator assembly contract.
  • Achieved sales resulting from the Teledyne PCT acquisition of $5.0M in the quarter compared to $5.0M in the second quarter of last year and a target of $4.0M

For FTG, overall sales increased by $3.4M or 13.2% from $25.5M in Q2 2017 to $28.9M in Q2 2018. This increase was experienced by the Aerospace segment and was driven by the shipment of the majority of the C-130 program for CAE from the Aerospace Toronto facility and a ramp up of activity in the Aerospace Chatsworth facility. Offsetting these gains, was the impact of changes in the foreign exchange rates (the Canadian dollar was 6 cents stronger in Q2 this year which translated into a reduction in sales of approximately $1M).

For the year-to-date period, sales were up $3.7M or 7.1% due to the items noted above and the one-time revenue recognition of $5.0M from the C919 program with SAVIC in the first quarter of this year.

Sales in the Circuits segment were down $0.4M or 2.3% comparing Q2 2018 versus Q2 2017. On a year-to-date basis, Circuits segment sales were down by $1.7M or 5.3%.

For the Aerospace segment, sales in Q2 2018 were $12.7M compared to $8.9M in the same quarter last year resulting in a 41.8% growth rate. Included in the Q2 2018 results are $1.5M in sales from the acquisition of PhotoEtch and approximately $4.5M of Teledyne PCT incremental sales. Year-to-date sales were up $5.4M or 26.1% in the Aerospace segment.

Gross margins in Q2 2018 were up $1.5M or 25.9% compared to Q2 2017. The benefit of increased sales and the cost savings of closing the Teledyne PCT facility was partially offset by some transition related costs.

Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG for Q2 2018 was $3.4M and $8.4M for the trailing twelve months.

The following table reconciles EBITDA(2)  to the net earnings for Q2 2018 and trailing twelve months.

 Q2 2018Trailing Twelve
Months
Net earnings$1,295,0001,347,000
Add:  
   
•  Interest132,000517,000
•  Income taxes/ITC850,0002,159,000
•  Depreciation/Amortization1,144,0004,385,000
EBITDA$3,421,000$8,408,000
  1. 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 at FTG in Q2 2018 were $1.3M compared to a net profit of $0.1M in Q2 2017. Q2 2018 had higher sales and the elimination of the Teledyne PCT facility costs as well as reductions in R&D spending.  These improvements were partially offset by some restructuring costs this year.

The Circuits segment net earnings before corporate and interest and other costs was $2.8M in Q2 2018 compared to $2.6M in Q2 2017. The Circuits joint venture in China was profitable in Q2 of this year.

The Aerospace segment’s net earnings before corporate and interest and other costs was $0.1M versus ($1.0M) in Q2 2017. Q2 2017 included operating and transitional costs for the Teledyne PCT facility which was closed during that quarter. FTG Aerospace Tianjin was profitable in Q2 of this year.

As at June 1, 2018, the Corporation’s net working capital was $27.8M, an increase of $3.4M over 2017 year end. Higher accounts receivables and net bank debt was offset by higher customer deposits.

The Corporation will host a live conference call on Thursday, July 12, 2018 at 8:30 am (EDT) to discuss the results of Q2 2018.

Anyone wishing to participate in the call should dial 647-427-2311 or 1-866-521-4909 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 26, 2018 and will be available on the FTG website at www.ftgcorp.com. The number to call for a rebroadcast is 416-621-4642 or 1-800-585-8367, pass code 3678495.

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 CEOTel: (416) 299-4000 x314
Firan Technology Group Corporationbradbourne@ftgcorp.com
  
Melinda Diebel, Vice President and CFOTel:(416) 299-4000 x264
Firan Technology Group Corporationmelindadiebel@ftgcorp.com

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

 
 
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Balance Sheets
 
(Unaudited)June 01,November 30,
(in thousands of Canadian dollars)2018 2017
ASSETS  
Current assets  
Cash$   3,797 $2,752
Accounts receivable   19,942  17,983
Taxes receivable   319  209
Inventories   25,216  25,079
Prepaid expenses   936  1,506
    50,210  47,529
Non-current assets  
Plant and equipment, net   11,986  12,222
Deferred income tax assets   394  395
Investment tax credits receivable   5,285  6,420
Deferred development costs   269  681
Intangible assets and other assets, net   3,454  3,768
Total assets$   71,598 $71,015
LIABILITIES AND EQUITY  
Current liabilities  
Bank indebtedness$   3,889 $6,444
Accounts payable and accrued liabilities   13,135  13,341
Provisions   414  390
Customer deposits   3,074  1,268
Current portion of long-term bank debt   1,921  1,726
    22,433  23,169
Non-current liabilities  
Long-term bank debt   6,283  6,040
Deferred tax payable   1,769  1,696
Total liabilities   30,485  30,905
Equity  
Retained earnings$   9,814 $8,812
Accumulated other comprehensive income   2  187
    9,816  8,999
Share capital  
Common shares   19,312  19,295
Preferred shares   2,218  2,218
Contributed surplus   8,527  8,384
Total equity attributable to FTG's shareholders   39,873  38,896
Non-controlling interest   1,240  1,214
Total equity   41,113  40,110
Total liabilities and equity$   71,598 $71,015
 


 
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Earnings
 
 Three months ended  Six months ended
(Unaudited)June 01, June 02,  June 01, June 02,
(in thousands of Canadian dollars, except per share amounts)2018 2017  2018 2017
         
Sales$   28,878   $25,513   $   56,406   $52,685 
         
Cost of sales        
Cost of sales   20,864    18,937      42,838    38,655 
Depreciation of plant and equipment   772    823      1,479    1,391 
Total cost of sales   21,636    19,760      44,317    40,046 
Gross margin   7,242    5,753      12,089    12,639 
          
Expenses        
Selling, general and administrative   3,496    3,008      6,601    6,722 
Research and development costs   1,126    1,886      2,331    3,366 
Recovery of research and development costs   (55)  (40)     (110)  (110)
Recovery of investment tax credits   (211)  (188)     (363)  (329)
Depreciation of plant and equipment   35    34      65    66 
Amortization of intangible assets   261    286      517    567 
Interest expense on short-term debt   67    71      153    128 
Interest expense on long-term debt   65    59      130    125 
Foreign exchange (gain) loss   (104)  (118)     (130)  43 
Restructuring expenses   195    -      195    - 
Total expenses   4,875    4,998      9,389    10,578 
         
Earnings before income taxes   2,367    755      2,700    2,061 
         
Current income tax expense   22    (41)     40    (24)
Deferred income tax expense   1,039    691      1,675    1,179 
Total income tax expense   1,061    650      1,715    1,155 
         
Net earnings$   1,306   $105   $   985   $906 
          
Attributable to:        
Non-controlling interest$   11   $(19)  $   (17) $(18)
Equity holders of FTG$   1,295   $124      1,002    924 
         
Earnings per share, attributable to the equity holders of FTG        
Basic$   0.06   $0.01   $   0.04   $0.04 
Diluted$   0.05   $0.01   $   0.04   $0.04 
 


 
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Comprehensive Income
 
  Three months ended Six months ended
(Unaudited) June 01, June 02, June 01, June 02,
(in thousands of Canadian dollars) 2018 2017 2018 2017
         
Net earnings $   1,306   $105  $   985   $906 
         
Other comprehensive income (loss) to be reclassified to net earnings        
in subsequent periods:        
         
Foreign currency translation adjustments    68    300     (44)  813 
Net unrealized (loss) on derivative financial instruments        
designated as cash flow hedges    (367)  (226)    (131)  (1,144)
Tax impact    92    57     33    286 
         
     (207)  131     (142)  (45)
         
Total comprehensive income $   1,099   $236  $   843   $861 
         
Attributable to:        
Equity holders of FTG $   1,095   $202  $   817   $847 
Non-controlling interest $   4   $34  $   26   $14 
 


 
FIRAN TECHNOLOGY GROUP CORPORATION 
Interim Condensed Consolidated Statements of Changes in Equity
  
 
Six months ended June 01, 2018  Attributed to the equity holders of FTG   
     Accumulated   
     Other  Non- 
(Unaudited)CommonPreferredRetainedContributedComprehensive  controlling Total
(in thousands of Canadian dollars)SharesSharesEarningsSurplusIncome (Loss)Totalinterestequity
         
Balance, November 30, 2017$  19,295 $   2,218 $   8,812 $   8,384  $   187  $  38,896  $   1,214  $  40,110  
Net earnings   -     -     1,002    -      -      1,002     (17)   985  
Stock-based compensation   -     -     -     148     -      148     -      148  
Common shares issued on exercise of        
share options and PSU's   17    -     -     (5)   -      12     -      12  
Foreign currency translation adjustments   -     -     -     -      (87)   (87)   43     (44)
Net unrealized (loss) on derivative financial        
instruments designated as cash flow hedges,        
net of tax impact   -     -     -     -      (98)   (98)   -      (98)
Balance, June 01, 2018$  19,312 $   2,218 $   9,814 $   8,527  $   2  $  39,873  $   1,240  $  41,113  
         
Six months ended June 02, 2017  Attributed to the equity holders of FTG   
     Accumulated   
     Other Non- 
 CommonPreferredRetainedContributedComprehensive controllingTotal
(in thousands of Canadian dollars)SharesSharesEarningsSurplusIncome (Loss)Totalinterestequity
         
Balance, November 30, 2016$19,051$2,218$7,543$8,381 $443 $37,636 $443 $38,079 
Net earnings - - 924 -  -  924  (18) 906 
Stock-based compensation - - - 24  -  24  -  24 
Common shares issued on exercise of        
share options and PSU's 148 - - (142) -  6  -  6 
Foreign currency translation adjustments - - - -  781  781  32  813 
Net unrealized (loss) on derivative financial        
instruments designated as cash flow hedges        
net of tax impact - - - -  (858) (858) -  (858)
Contribution from non-controlling interest - - - -  -  -  824  824 
Balance, June 02, 2017$19,199$2,218$8,467$8,263 $366 $38,513 $1,281 $39,794 
 


 
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Cash Flows
 
  Three months ended Six months ended
(Unaudited) June 01, June 02, June 01, June 02,
(in thousands of Canadian dollars) 2018 2017 2018 2017
Net inflow (outflow) of cash related to the following:        
Operating activities        
Net earnings $   1,306   $105  $   985   $906 
Items not affecting cash:        
Non-controlling interest share of net loss (earnings)    (11)  19     17    18 
Stock-based compensation    74    24     148    24 
(Gain) on disposal of plant and equipment    -     (15)    -     (18)
Effect of exchange rates on US dollar debt    68    84     70    65 
Depreciation of plant and equipment    806    857     1,543    1,457 
Amortization of intangible assets    261    286     517    567 
Amortization of deferred financing costs    3    3     6    6 
Deferred income tax expense    947    633     1,572    1,111 
Investment tax credits (recovery)    (211)  (188)    (363)  (329)
Decrease in net unrealized gain on derivative        
financial instruments designated as cash flow        
hedges    (229)  (170)    (264)  (201)
Net change in non-cash operating working capital    1,031    594     (22)  400 
     4,045    2,232     4,209    4,006 
Investing activities        
Additions to plant and equipment    (414)  (2,594)    (1,206)  (3,487)
Recovery (additions) of deferred development costs, other    (67)  (19)    221    116 
Proceeds from disposal of plant and equipment    -     15     -     18 
     (481)  (2,598)    (985)  (3,353)
Net cash flow from operating and investing activities    3,564    (366)    3,224    653 
Financing activities        
(Decrease) increase in bank indebtedness    (1,912)  1,399     (2,555)  (231)
Proceeds from long-term bank debt    -     -     1,289    - 
Repayments of long-term bank debt    (491)  (395)    (927)  (782)
Funding from non-controlling interest    -     -     -     824 
Proceeds from issue of Common shares    -     3     12    6 
     (2,403)  1,007     (2,181)  (183)
Effects of foreign exchange rate changes on cash flow    (3)  194     2    14 
Net increase in cash flow    1,158    835     1,045    484 
Cash, beginning of the period    2,639    2,801     2,752    3,152 
Cash, end of period $   3,797   $3,636     3,797   $3,636 
         
Disclosure of cash payments        
Payment for interest $   144   $130  $   300   $259 
Payments for income taxes $   6   $-  $   13   $4 
 

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