Canada markets open in 29 minutes

FIRAN TECHNOLOGY GROUP CORPORATION (“FTG” OR “THE CORPORATION”) ANNOUNCES FIRST QUARTER 2020 FINANCIAL RESULTS

TORONTO, April 08, 2020 (GLOBE NEWSWIRE) -- Firan Technology Group Corporation (FTG.TO) today announced financial results for the first quarter 2020.

  • Ended Q1 2020 with over $51M in total backlog.  Of this, over $30M is due in Q2 2020
  • Generated $3.5M in cash in Q1 and ended the quarter with $5.2M in net cash on the balance sheet
  • Included in the Q1 2020 net loss was a non-cash expense to reduce the intangible asset from an acquisition in 2016 due to increased market uncertainty going forward

First Quarter Results: (three months ended Feb 28, 2020 compared with three months ended Mar 1, 2019)

  Q1 2020
  Q1 2019
Sales $24,538,000   $25,390,000
     
Gross Margin   3,960,000     6,754,000
Gross Margin (%)   16.1%     26.6%
     
Operating Earnings (1):   242,000     3,318,000
     
•  R&D Investment   1,081,000     1,116,000
•  R&D Tax Credits   (172,000)     (205,000)
•  Foreign Exchange Loss   49,000     156,000
•  Amortization of Intangibles   299,000     271,000
•  Impairment of Intangibles   1,145,000     -
     
Net (Loss) Earnings before Tax   (2,160,000)     1,980,000
     
•  Income Tax   469,000     807,000
•  Non-controlling Interests   (32,000)     (45,000)
     
Net (Loss) Earnings After Tax ($2,597,000)   $1,218,000
     
(Loss) Earnings per share    
- basic ($0.11)   $0.05
- diluted ($0.11)   $0.05
     

(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 Q1 2020 that continue to improve the Corporation and position it for the future, including:

  • Continued to receive orders across FTG at consistent historical rates through Q1
  • Through ongoing improvements in working capital management and some significant advance payments on future orders, improved FTG’s net cash position to $5.2M
  • Went live with FTG standard ERP System in Circuits Fredericksburg site
  • Achieved AS9100 certification of FTG Circuits Fredericksburg site
  • Maintained a number of other certifications across FTG through regularly planned external audits

For FTG, overall sales decreased by $0.9M or 3.4% from $25.4M in Q1 2019 to $24.5M in Q1 2020.  Circuits Fredericksburg contributed $2.1M in Q1 2020, compared to $0 last year.  Impacting sales in Q1 2020 was a $2M drop in simulator related sales compared to Q1 last year.  Also negatively impacting sales in Q1 2020 was the shutdown of FTG’s operations in Tianjin, China for the month of February.

The Circuits Segment sales were up $1.3M, or 8.2% in Q1 2020 versus Q1 2019.  Included in Q1 2020 were sales of $2.1M from Circuits Fredericksburg, acquired in July last year.  The drop in sales at existing sites was at FTG Circuits Toronto.  The lower activity was not due to a reduction in orders, and activity recovered towards the end of Q1.

For the Aerospace segment, sales in Q1 2020 were $8.1M compared to $10.2M in Q1 last year.  Simulator related sales were down $2M in Q1 2020, which impacted all three sites.  Simulator revenues are expected to rebound in the second half of 2020 as the backlog in simulator work at the end of Q1 2020 was over $8.0M.

Gross margins in Q1 2020 were $4.0M or 16.1% compared to $6.8M or 26.6% in Q1 2019.  The lower sales hurt margins in Q1 this year, as did the overhead costs of the Circuits Fredericksburg facility.

Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG for Q1 2020 was $1.0M compared to $3.3M in Q1 2019.

The following table reconciles EBITDA(2)  to the net earnings for the trailing 12 months as at Feb 28, 2020.

  Trailing 12
Months
   
Net earnings to equity holders of FTG   2,243,000
Add:  
Interest, accretion   391,000
Income taxes   3,408,000
Depreciation/Amortization/Stock Comp./Impairment   6,881,000
   
EBITDA $12,923,000

(2)     EBITDA are not measures recognized under International Financial Reporting Standards (“IFRS”).  Management believes that these measures are 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 loss after tax at FTG in Q1 2020 was $2.6M or ($0.11) per diluted share compared to a net profit of $1.2M or $0.05 per diluted share in 2018.  Net profit after tax in Q1 2020 was impacted by the lower sales and by the write down of the intangible asset related to the acquisition of the Teledyne PCT business in 2016, due to increased uncertainty in the aerospace and defense market.

The Circuits segment net earnings before corporate and interest and other costs was $0.8M in Q1 2020 compared to $2.3M in Q1 2019.

The Aerospace net earnings before corporate and interest and other costs in the quarter was ($0.8M) in Q1 2020 (excluding the non-cash intangible asset expense) versus $0.6M in Q1 2019. The drop is due primarily to reduced sales from the simulator related market and the shutdown of Aerospace Tianjin in February due to the COVID-19 pandemic.

As at February 28, 2020, the Corporation’s net working capital was $25.8M, compared to $28.6M at year-end in 2019.  All debt is classified as current as the bank facility agreement currently in place expires in less than 12 months.  Activity is underway to obtain a new bank facility in 2020.

Net cash at the end of Q1 2020 was $5.2M compared to net cash of $2.2M at the end of 2019. 

The Corporation will host a live conference call on Thursday April 9, 2020 at 8:30am (Eastern) to discuss the results of Q1 2020.

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 May 9, 2020 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, Conference ID 7695678.

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, Fredericksburg, Virginia 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 x314
bradbourne@ftgcorp.com

Jamie Crichton, Vice President and CFO                                            
Firan Technology Group Corporation
Tel:(416) 299-4000 x264
jamiecrichton@ftgcorp.com

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



FIRAN TECHNOLOGY GROUP CORPORATION    
Interim Condensed Consolidated Statements of Financial Position  
           
(Unaudited)   February 28, November 30,
(in thousands of Canadian dollars)   2020     2019  
ASSETS      
Current assets    
Cash     $ 10,152   $ 7,647  
Accounts receivable   19,199     21,085  
Contract assets   556     432  
Income tax receivable   247     -  
Inventories     20,489     21,990  
Prepaid expenses   1,476     1,770  
          52,119     52,924  
Non-current assets    
Plant and equipment, net   13,923     13,830  
Right-of-use assets   13,434     -  
Deferred income tax assets   724     724  
Investment tax credits receivable   2,983     3,035  
Deferred development costs   267     279  
Intangible assets and other assets, net   1,152     2,585  
Total assets   $ 84,602   $ 73,377  
LIABILITIES AND EQUITY    
Current liabilities    
Accounts payable and accrued liabilities $ 14,566   $ 17,104  
Provisions     920     946  
Contract liabilities   4,154     216  
Bank debt     4,966     5,416  
Current portion of lease liabilities   1,729     -  
Income tax payable   -     639  
          26,335     24,321  
Non-current liabilities    
Lease liabilities   11,792     -  
Deferred tax payable   1,332     1,297  
Total liabilities   39,459     25,618  
Equity      
Retained earnings $ 15,148   $ 17,745  
Accumulated other comprehensive loss   (1,610 )   (1,554 )
          13,538     16,191  
Share capital    
  Common Shares   19,323     19,323  
  Preferred Shares   2,218     2,218  
Contributed surplus   8,984     8,933  
Total equity attributable to FTG's shareholders   44,063     46,665  
Non-controlling interest   1,080     1,094  
Total equity   45,143     47,759  
Total liabilities and equity $ 84,602   $ 73,377  
           



FIRAN TECHNOLOGY GROUP CORPORATION      
Interim Condensed Consolidated Statements of (Loss) Earnings    
           
       Three months ended
(Unaudited) February 28,   March 1,
(in thousands of Canadian dollars, except per share amounts)   2020       2019  
           
Sales   $ 24,538     $ 25,390  
           
Cost of sales      
  Cost of sales   19,199       17,808  
  Depreciation of plant and equipment   994       828  
  Depreciation of right-of-use assets   385       -  
Total cost of sales   20,578       18,636  
Gross margin   3,960       6,754  
           
Expenses      
  Selling, general and administrative   3,431       3,242  
  Research and development costs   1,081       1,116  
  Recovery of investment tax credits   (172 )     (205 )
  Depreciation of plant and equipment   46       43  
  Depreciation of right-of-use assets   12       -  
  Amortization of intangible assets   299       271  
  Interest expense on bank debt, net   41       77  
  Accretion on lease liabilities   137       -  
  Stock based compensation   51       74  
  Foreign exchange loss   49       156  
  Impairment of intangible assets   1,145       -  
Total expenses   6,120       4,774  
           
(Loss) earnings before income taxes   (2,160 )     1,980  
           
Current income tax expense   434       777  
Deferred income tax expense   35       30  
Total income tax expense   469       807  
           
Net (loss) earnings $ (2,629 )   $ 1,173  
           
Attributable to:      
Non-controlling interest $ (32 )   $ (45 )
Equity holders of FTG $ (2,597 )   $ 1,218  
           
(Loss) earnings per share, attributable to the equity holders of FTG      
  Basic $ (0.11 )   $ 0.05  
  Diluted $ (0.11 )   $ 0.05  
           



FIRAN TECHNOLOGY GROUP CORPORATION        
Interim Condensed Consolidated Statements of Comprehensive (Loss) Income
             
         Three months ended
(Unaudited)   February 28,   March 1,
(in thousands of Canadian dollars)     2020       2019  
             
Net (loss) earnings   $ (2,629 )   $ 1,173  
             
Other comprehensive loss to be reclassified to net (loss) earnings        
  in subsequent periods:        
             
  Change in foreign currency translation adjustments     248       (12 )
  Change in net unrealized loss on derivative financial instruments        
    designated as cash flow hedges     (382 )     (67 )
  Change in tax impact     96       17  
             
          (38 )     (62 )
             
Total comprehensive (loss) income   $ (2,667 )   $ 1,111  
             
Attributable to:        
Equity holders of FTG   $ (2,653 )   $ 1,116  
Non-controlling interest   $ (14 )   $ (5 )
             



FIRAN TECHNOLOGY GROUP CORPORATION            
Interim Condensed Consolidated Statements of Changes in Equity          
                   
                   
Three months ended February 28, 2020     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 loss Total interest equity
Balance, November 30, 2019 $ 19,323 $ 2,218 $ 17,745   $ 8,933 $ (1,554 ) $ 46,665   $ 1,094   $ 47,759  
Net (loss) earnings   -   -   (2,597 )   -   -     (2,597 )   (32 )   (2,629 )
Stock-based compensation   -   -   -     51   -     51     -     51  
Change in foreign currency translation adjustments     -   -   -     -   230     230     18     248  
Change in net unrealized loss on derivative financial              
instruments designated as cash flow hedges, net of              
tax impact   -   -   -     -   (286 )   (286 )   -     (286 )
Balance, February 28, 2020 $ 19,323 $ 2,218 $ 15,148   $ 8,984 $ (1,610 ) $ 44,063   $ 1,080   $ 45,143  
                   
Three months ended March 1, 2019     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 loss Total interest equity
Balance, November 30, 2018 $ 19,323 $ 2,218 $ 11,687   $ 8,672 $ (774 ) $ 41,126   $ 1,181   $ 42,307  
Net earnings (loss)   -   -   1,218     -   -     1,218     (45 )   1,173  
Stock-based compensation   -   -   -     74   -     74     -     74  
Foreign currency translation adjustments   -   -   -     -   (52 )   (52 )   40     (12 )
Net unrealized loss on derivative financial                
instruments designated as cash flow hedges                
net of tax impact   -   -   -     -   (50 )   (50 )   -     (50 )
Balance, March 1, 2019 $ 19,323 $ 2,218 $ 12,905   $ 8,746 $ (876 ) $ 42,316   $ 1,176   $ 43,492  
                   
                   



FIRAN TECHNOLOGY GROUP CORPORATION        
Interim Condensed Consolidated Statements of Cash Flows      
               
          Three months ended
(Unaudited)   February 28,   March 1,
(in thousands of Canadian dollars)     2020       2019  
Net inflow (outflow) of cash related to the following:        
Operating activities        
Net (loss) earnings   $ (2,629 )   $ 1,173  
Items not affecting cash:        
  Stock-based compensation     51       74  
  Loss on disposal of plant and equipment     6       7  
  Effect of exchange rates on US dollar debt     53       (14 )
  Depreciation of plant and equipment     1,040       871  
  Depreciation of right-of-use assets     397       -  
  Amortization of intangible assets     299       271  
  Amortization of deferred financing costs     3       3  
  Impairment of intangible assets     1,145       -  
  Investment tax credits/deferred income taxes     87       346  
  Accretion on lease liabilities     137       -  
  Increase in net unrealized loss on derivative financial instruments        
    designated as cash flow hedges, net of taxes     (286 )     (50 )
Net change in non-cash operating working capital     4,022       (4,087 )
            4,325       (1,406 )
Investing activities        
  Additions to plant and equipment     (1,046 )     (391 )
  Recovery (additions) of contract and other costs     6       (18 )
            (1,040 )     (409 )
Net cash flow from (used in) operating and investing activities     3,285       (1,815 )
Financing activities        
  Increase in bank indebtedness     -       995  
  Repayments of bank debt     (503 )     (509 )
  Lease liability payments     (446 )     -  
            (949 )     486  
Effects of foreign exchange rate changes on cash flow     169       (71 )
Net increase (decrease) in cash flow     2,505       (1,400 )
Cash, beginning of the period     7,647       5,026  
Cash, end of period   $ 10,152     $ 3,626  
               
Disclosure of cash payments        
  Payment for interest   $ 55     $ 81  
  Payments for income taxes   $ 979     $ 738