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Firan Technology Group Corporation (“FTG”) Announces Third Quarter 2021 Financial Results

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TORONTO, Oct. 13, 2021 (GLOBE NEWSWIRE) -- Firan Technology Group Corporation (TSX: FTG) today announced financial results for the third quarter of 2021.

  • FTG achieved a third sequential quarter of increased bookings as the aerospace industry recovers from the COVID-19 pandemic.

  • Third quarter bookings are up 7% over Q2 2021 and up 28% over Q4 2020.

  • FTG increased net cash on the balance sheet to $17.1M, an increase of $2.3M in Q3 2021 again showing the cash generating nature of the business. Over the past 21 months, during the pandemic, FTG has generated $13M in Free Cash Flow, after investments in R&D and capital equipment.

  • FTG received forgiveness of USD 1.3M, being the residual of US Paycheck Protection Program funds received by our US operations as a result of FTG maintaining our workforce for the required period of time.

  • FTG was approved for an additional $0.7M in Canada Emergency Wage Subsidy (CEWS) in the quarter which we used to help maintain our workforce in the face of revenue reductions due to COVID-19.

  • Extended the existing $20M USD committed credit facility with our primary lender to July 2026 with improved financial terms.

Third Quarter Results: (three months ended September 3, 2021 compared with three months ended August 28, 2020)

Q3 2021

Q3 2020

Sales

$19,738,000

$24,364,000

Gross Margin

3,796,000

6,722,000

Gross Margin (%)

19.2%

27.6%

Operating Earnings (1):

477,000

3,600,000

• R&D Investment

1,225,000

1,302,000

• R&D Tax Credits

(159,000)

(195,000)

• Foreign Exchange (Gain) Loss

(423,000)

1,011,000

• Amortization of Intangibles

51,000

94,000

• Forgiveness of debt

(1,668,000)

-

Net Earnings before Tax

1,451,000

1,388,000

• Income Tax

703,000

773,000

• Non-controlling Interests

(26,000)

(30,000)

Net Earnings After Tax

$774,000

$645,000

Earnings per share

- basic

$0.03

$0.03

- diluted

$0.03

$0.03

Year-to-Date: (nine months ended September 3, 2021 compared with nine months ended August 28, 2020)

YTD 2021

YTD 2020

Sales

$59,038,000

$75,724,000

Gross Margin

12,886,000

19,356,000

Gross Margin (%)

21.8%

25.6%

Operating Earnings (1):

6,685,000

8,155,000

• R&D Investment

4,112,000

3,966,000

• R&D Tax Credits

(465,000)

(570,000)

• Foreign Exchange Loss

739,000

596,000

• Amortization of Intangibles

210,000

490,000

• Impairment of Intangibles

-

1,145,000

• Forgiveness of debt

(3,004,000)

-

Net Earnings before Tax

2,089,000

2,528,000

• Income Tax

1,779,000

2,544,000

• Non-controlling Interests

(74,000)

(98,000)

Net Earnings After Tax

$384,000

$82,000

Earnings per share

- basic

$0.01

$0.00

- diluted

$0.01

$0.00

(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 Q3 2021 that continue to improve the Corporation and position it for the future, including:

  • Achieved a 1.06:1 book-to-bill ratio for Q3 2021. Increased bookings by 7% compared to Q2 2021, and by 28% compared to Q4 2020 as the Commercial aerospace industry moves into recovery.

  • FTG Aerospace Chatsworth has been awarded a $3.7M CAD after-market contract from the United States Defense Logistics Agency (DLA) to provide electronic assemblies to retrofit airborne radar systems on various US defense aircraft.

  • Shipped first parts to a new customer for a bezel to be used on the new US T-7A trainer jet. Received first orders from a second customer for cockpit panels, also for the US trainer jet program.

  • The Averatek semi-additive circuit board manufacturing equipment in our Circuits Fredericksburg facility completed installation and was operational in Q2. Activities are underway with over 10 potential customers to develop this process to address future industry demands.

  • Subsequent to quarter end, FTG Circuits Chatsworth has been approved for USD 0.4M of funding from the Aviation Manufacturing Jobs Protection (AMJP) program, which will be used to offset eligible employee compensation costs for a six-month period ending March 2022.

  • FTG Aerospace Chatsworth, which maintained an engineering office in Dallas-Fort Worth since the acquisition of Photo-Etch in 2016, will close this office by the end of 2021. Some employees will move to a work-from-home model, and some roles will move to the Chatsworth site in California. This will result in a $200K reduction in costs in 2022 and beyond.

Overall for FTG, sales decreased by $4.6M or 19% from $24.4M in Q3 2020 to $19.7M in Q3 2021. The COVID-19 pandemic has negatively impacted commercial aerospace activity as well as the weaker US dollar has negatively impacted sales reported in Canadian currency. The average exchange rate for Q3 2021 was $1.25 as compared to $1.34 for Q3 2020. This represents approximately a $1.6M negative impact on sales in the quarter compared to Q3 last year. On a year-to-date basis, sales were $59.0M compared to $75.7M for the same period last year. The drop is due to the COVID-19 pandemic, timing on Simulator related orders and the year-to-date foreign exchange impact.

The Circuits Segment sales were down $2.6M or 17% from $15.7M in Q3 2020 to $13.1M in Q3 2021. All sites were down but the largest decline was seen in the Circuits Toronto plant which is more heavily exposed to the Commercial Aerospace market. On a year-to-date basis, net sales were $38.1M as compared to $51.7M for the prior year period.

For the Aerospace Segment, sales were down $2.0M or 24% from $8.7M in Q3 2020 to $6.6M in Q3 2021. Simulator related sales were down $2.8M in Q3 2021, which was partially mitigated by the continued strength in military business, which is primarily executed at the FTG Chatsworth site. On a year-to-date basis, net sales were $21.0M as compared to $24.0M for the prior year period.

Gross margins in Q3 2021 were $3.8M or 19.2% compared to $6.7M or 27.6% in Q3 2021. The lower sales impacted the overall margin. The CEWS added $0.7M to gross margin or 3.3 percentage points (Q3 2020 – $0.7M or 2.9 percentage points). On a year-to-date basis, gross margin was $12.9M or 21.8% as compared to $19.4M or 25.6% for the comparable prior year period. The decline in gross margin is due to the lower level of sales, partially offset by CEWS of $2.6M in 2021 as compared to $1.4M in 2020.

Trailing Twelve Month (TTM) earnings before interest, tax, depreciation and amortization (EBITDA) for FTG was $11.3M. Lower sales, unfavourable foreign exchange impact and some operational challenges in Circuits Chatsworth, were partially offset by wage subsidies in Canada and the PPP forgiveness in the US.

The following table reconciles net earnings to EBITDA(2) for the quarter and the trailing 12 months ended September 3, 2021.

Trailing 12 Months

Net earnings to equity holders of FTG

1,693,000

Add:

Interest, accretion

640,000

Income taxes

2,619,000

Depreciation/Amortization Stock Comp./Impairment

6,380,000

EBITDA

$11,332,000

(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 earnings after tax at FTG in Q3 2021 was $0.8M or $0.03 per diluted share compared to $0.6M or $0.03 per diluted share in Q3 2020. Revenues were reduced due to the decline in the Commercial Aerospace market as a result of the COVID-19 pandemic and the weaker US dollar. In Q3 2021, the average FX rate was 1.25 as compared to 1.34 in Q3 2020. The reduction in sales in Q3 2021 is offset by $1.6M of debt forgiveness, whereas Q3 2020 had no debt forgiveness. For the year-to-date period, FTG incurred a net earnings of $0.4M or $0.01 per share as compared to a net earnings of $0.1M or $0.00 per share for the comparable period of 2020. Apart from the reduction in sales, the 2021 year-to-date period included $3.0M of debt forgiveness, whereas the prior year period included $1.1M of impairment of intangible assets.

The Circuits Segment net earnings before corporate and interest and other costs was $1.6M in Q3 2021 compared to $1.1M in Q3 2020. Segment profitability was negatively impacted by lower sales and operational issues at the Chatsworth site. We are addressing the operational issues at Chatsworth through continuous improvement initiatives and investment in capital equipment. PPP debt forgiveness of $1.6M helped offset reduced sales and operational issues.

The Aerospace net earnings before corporate and interest and other costs in the quarter was $0.3M in Q3 2021 versus $1.1M in Q3 2020. Segment profitability was negatively impacted by lower sales and the weaker US dollar.

As at September 3, 2021, the Corporation’s net working capital was $40.5M, compared to $39.4M at year-end in 2020.

Net cash at the end of Q3 2021 was $17.1M compared to net cash of $12.6M at the end of 2020.

The Corporation will host a live conference call on Thursday, October 14, 2021 at 8:30am (Eastern) to discuss the results of Q3 2021.

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 November 14, 2021 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 6469182.

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 and repairs 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)

September 3,

November 30,

(in thousands of Canadian dollars)

2021

2020

ASSETS

Current assets

Cash and cash equivalents

19,547

19,032

Accounts receivable

13,809

16,795

Contract assets

533

985

Inventories

17,598

19,304

Prepaid expenses and other

5,168

3,363

56,655

59,479

Non-current assets

Plant and equipment, net

11,142

12,640

Right-of-use assets

10,806

12,130

Investment tax credits recoverable

539

1,359

Intangible and other assets, net

824

1,068

Total assets

79,966

86,676

LIABILITIES AND EQUITY

Current liabilities

Accounts payable and accrued liabilities

11,715

13,904

Provisions

571

885

Contract liabilities

409

388

Current portion of bank debt

884

2,931

Current portion of lease liabilities

1,753

1,810

Income tax payable

830

155

16,162

20,073

Non-current liabilities

Bank debt

1,543

3,464

Lease liabilities

9,588

10,659

Deferred tax payable

760

1,192

Total liabilities

28,053

35,388

Equity

Retained earnings

19,519

19,135

Accumulated other comprehensive income

1,291

958

20,810

20,093

Share capital

Common Shares

21,881

21,881

Contributed surplus

8,329

8,303

Total equity attributable to FTG's shareholders

51,020

50,277

Non-controlling interest

893

1,011

Total equity

51,913

51,288

Total liabilities and equity

79,966

86,676


FIRAN TECHNOLOGY GROUP CORPORATION

Interim Condensed Consolidated Statements of Earnings (Loss)

Three months ended

Nine months ended

(Unaudited)

September 3,

August 28,

September 3,

August 28,

(in thousands of Canadian dollars, except per share amounts)

2021

2020

2021

2020

Sales

19,738

24,364

59,038

75,724

Cost of sales

Cost of sales

14,540

16,203

41,898

52,080

Depreciation of plant and equipment

1,028

1,048

3,142

3,111

Depreciation of right-of-use assets

374

391

1,112

1,177

Total cost of sales

15,942

17,642

46,152

56,368

Gross margin

3,796

6,722

12,886

19,356

Expenses

Selling, general and administrative

3,144

2,827

8,494

10,314

Research and development costs

1,225

1,302

4,112

3,966

Recovery of investment tax credits

(159

)

(195

)

(465

)

(570

)

Depreciation of plant and equipment

60

62

185

162

Depreciation of right-of-use assets

17

12

51

37

Amortization of intangible assets

51

94

210

490

Interest expense on bank debt, net

14

61

81

159

Accretion on lease liabilities

120

139

368

417

Stock based compensation

(36

)

21

26

112

Foreign exchange loss

(423

)

1,011

739

596

Forgiveness of debt

(1,668

)

-

(3,004

)

-

Impairment of intangible assets

-

-

-

1,145

Total expenses

2,345

5,334

10,797

16,828

Earnings before income taxes

1,451

1,388

2,089

2,528

Current income tax expense

670

734

1,685

2,429

Deferred income tax expense

33

39

94

115

Total income tax expense

703

773

1,779

2,544

Net earnings (loss)

748

615

310

(16

)

Attributable to:

Non-controlling interest

(26

)

(30

)

(74

)

(98

)

Equity holders of FTG

774

645

384

82

Earnings (loss) per share, attributable to the equity holders of FTG

Basic

$

0.03

$

0.03

$

0.02

$

0.00

Diluted

$

0.03

$

0.03

$

0.02

$

0.00


FIRAN TECHNOLOGY GROUP CORPORATION

Interim Condensed Consolidated Statements of Comprehensive Income (Loss)

Three months ended

Nine months ended

(Unaudited)

September 3,

August 28,

September 3,

August 28,

(in thousands of Canadian dollars)

2021

2020

2021

2020

Net earnings (loss)

$

748

$

615

$

310

$

(16

)

Other comprehensive earnings (loss) to be reclassified to

net earnings (loss) in subsequent periods:

Change in foreign currency translation adjustments

$

862

$

(1,071

)

$

(645

)

$

(305

)

Net gain (loss) on valuation of derivative financial instruments

designated as cash flow hedges

$

(2,511

)

$

4,117

$

1,246

$

3,257

Deferred income taxes on net gain (loss) on valuation of

derivative financial instruments designated as cash flow hedges

$

628

$

(1,030

)

$

(312

)

$

(814

)

$

(1,021

)

$

2,016

$

289

$

2,138

Total comprehensive income (loss)

$

(273

)

$

2,631

$

599

$

2,122

Attributable to:

Equity holders of FTG

$

(247

)

$

2,685

$

756

$

2,219

Non-controlling interest

$

(26

)

$

(54

)

$

(157

)

$

(97

)


FIRAN TECHNOLOGY GROUP CORPORATION

Interim Condensed Consolidated Statements of Changes in Equity

Nine months ended September 3, 2021

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

Total

interest

equity

Balance, November 30, 2020

21,881

-

19,135

8,303

958

50,277

1,011

51,288

Net loss

-

-

384

-

-

384

(74

)

310

Stock-based compensation

-

-

-

26

-

26

-

26

Other comprehensive income (loss)

-

-

-

-

333

333

(44

)

289

Balance, September 3, 2021

21,881

-

19,519

8,329

1,291

51,020

893

51,913

Nine months ended August 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)

-

-

82

-

-

82

(98

)

(16

)

Stock-based compensation

-

-

-

112

-

112

-

112

Transfer from contributed surplus to share capital for

PSU’s exercised

760

(760

)

-

-

-

-

Common shares repurchase and issue on exercise

of PSU's

(420

)

-

-

-

-

(420

)

-

(420

)

Other comprehensive income (loss)

-

-

-

-

2,137

2,137

1

2,138

Balance, August 28, 2020

$

19,663

$

2,218

$

17,827

$

8,285

$

583

$

48,576

$

997

$

49,573


FIRAN TECHNOLOGY GROUP CORPORATION

Interim Condensed Consolidated Statements of Cash Flows

Three months ended

Nine months ended

(Unaudited)

September 3,

August 28,

September 3,

August 28,

(in thousands of Canadian dollars)

2021

2020

2021

2020

Net inflow (outflow) of cash related to the following:

Operating activities

Net income (loss)

$

748

$

615

$

310

$

(16

)

Items not affecting cash and cash equivalents:

Stock-based compensation

(36

)

21

26

112

Loss on disposal of plant and equipment

-

-

1

6

Effect of exchange rates on U.S. dollar bank debt

90

(415

)

(194

)

(217

)

Depreciation of plant and equipment

1,088

1,111

3,327

3,274

Depreciation of right-of-use assets

390

403

1,162

1,214

Amortization of intangible assets

51

94

210

490

Amortization, other

9

17

35

28

Impairment of intangible assets

-

-

-

1,145

Investment tax credits/deferred income taxes

155

950

201

1,555

Accretion on lease liabilities

120

139

368

417

Forgiveness of debt

(1,668

)

-

(3,004

)

-

Net change in non-cash operating working capital

708

434

2,578

3,030

1,655

3,369

5,020

11,038

Investing activities

Additions to plant and equipment

(956

)

(236

)

(1,951

)

(2,721

)

Recovery of contract and other costs

(2

)

11

20

60

Additions to deferred financing costs

(54

)

-

(62

)

-

(1,012

)

(225

)

(1,993

)

(2,661

)

Net cash flow from operating and investing activities

643

3,144

3,027

8,377

Financing activities

Proceeds from bank debt

-

-

-

3,309

Repayments of bank debt

(227

)

(514

)

(685

)

(1,552

)

Lease liability payments

(443

)

(448

)

(1,343

)

(1,360

)

Repurchase of common shares on exercise of PSU's

-

-

-

(420

)

(670

)

(962

)

(2,028

)

(23

)

Effects of foreign exchange rate changes on cash flow

515

(730

)

(484

)

(291

)

Net (decrease) increase in cash flow

488

1,452

515

8,063

Cash and cash equivalents, beginning of the period

19,059

14,258

19,032

7,647

Cash and cash equivalents, end of period

$

19,547

$

15,710

$

19,547

$

15,710

Disclosure of cash payments

Payment for interest

$

31

$

46

$

102

$

155

Payments for income taxes

$

112

$

18

$

706

$

1,136


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