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

TORONTO, April 14, 2021 (GLOBE NEWSWIRE) -- Firan Technology Group Corporation (TSX: FTG) today announced financial results for the first quarter 2021.

• FTG continues to manage through the COVID-19 pandemic by focusing on three key strategies:

  • FTG’s long-term market diversification strategy enables the Company to mitigate the dramatic downturn in the commercial aerospace market through its involvement in the defense market and other aerospace sectors

  • FTG continues to carefully manage costs across the Company, balancing decisions on cost reductions with a goal to retain critical skills to ensure the Company is positioned for a faster recovery in the future

  • FTG continues to carefully manage investments and has a stronger balance sheet than before the pandemic

• FTG was approved for an additional $1M 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. The funds were paid to FTG subsequent to quarter end as a result of administrative delays within the government

• FTG received forgiveness of $1.3M in US Paycheck Protection Program funds in the United States as a result of FTG maintaining our workforce for the required period of time

• FTG achieved $14.5M EBITDA for the trailing 12 months, the highest since mid 2019

• FTG increased our net cash on the balance sheet to $13.4M, an increase of $0.8M in Q1 2021

First Quarter Results: (three months ended Mar 5, 2021 compared with three months ended Feb 28, 2020)

		Q1 2021			Q1 2020
Sales		$18,970,000			$24,538,000
Gross Margin		3,662,000			3,960,000
Gross Margin (%)		19.3	%		16.1	%
Operating Earnings (1):		686,000			242,000
• Net R&D Investment		1,382,000			1,081,000
• R&D Tax Credits		(127,000	)		(172,000	)
• Foreign Exchange Loss		618,000			49,000
• Amortization of Intangibles		89,000			299,000
• Forgiveness of debt		(1,336,000	)		-
• Impairment of Intangibles		-			1,145,000
Net (Loss) Earnings before Tax		60,000			(2,160,000	)
• Income Tax		487,000			469,000
• Non-controlling Interests		(27,000	)		(32,000	)
Net (Loss) Earnings After Tax		($400,000	)		($2,597,000	)
(Loss) Earnings per share
- basic		($0.02	)		($0.11	)
- diluted		($0.02	)		($0.11	)

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

• Achieved a 0.96:1 book-to-bill ratio for Q1 2021 and increased bookings by 11% compared to Q4 2020

• Received a new development contract from a major Tier 1 Aerospace company for a family of cockpit assemblies that leads to significant future revenues in 2022 and beyond

• Received a significant new customer approval from a major Tier 1 Aerospace company for our Aerospace Tianjin facility opening up significant new revenue opportunities

• Received a new customer approval from a major Airframe company for our Aerospace Toronto and Aerospace Tianjin facilities opening up significant new revenue opportunities and first production parts were shipped within the quarter

• Continued efforts to pivot towards the defense market and have substantially completed qualification/approval at 5 new customers for our sites in both Canada and the US Supported customers’ efforts to begin to re-shore some procurement of aerospace printed circuit boards in support of new US regulations

• Installed Averatek semi-additive circuit board manufacturing equipment in our Circuits Fredericksburg facility and will begin process development in Q2

• Was approved for an additional $1M in Canada Emergency Wage Subsidy (CEWS) which we used to help maintain our workforce in the face of revenue reductions due to COVID-19 however receipt of the funding was delayed until after the end of Q1 due to administrative delays within the government

• Received forgiveness of $1.3M in PPP loans in the US in the quarter as we achieved the requirements for forgiveness under that program

• Managed cost by extending Christmas holiday shutdowns at sites most impacted by the drop in commercial aerospace activities
  

Overall for FTG, sales decreased by $5.6M or 23% from $24.5M in Q1 2020 to $19M in Q1 2020. The COVID-19 pandemic has negatively impacted commercial aerospace activity and this impacted FTG’s sites predominantly focused on this market, which include Circuits Toronto and the facilities in China.

The Circuits Segment sales in Q1 2021 were down $4.5M, or 27% in Q1 2021 versus Q1 2020. 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. Circuits Chatsworth had a serious COVID-19 event in December and January, and this combined with organizational transitions to strengthen the management team, hurt production and shipments in the quarter.

For the Aerospace Segment, sales in Q1 2021 were $7.0M compared to $8.1M in Q1 last year, a decrease of $1.1M or 14%. Simulator related sales increased by $1.3M in Q1 2021 compared to the same quarter last year, helping to mitigate the downturn in the commercial aerospace market. The Aerospace Tianjin site was down the most at it is exclusively focused on commercial aerospace.

Gross margins in Q1 2021 were $3.7M or 19.3% compared to $4.0M or 16.1% in Q1 2020. The lower sales impacted the overall margin. The Canadian Emergency Wage Subsidy added $0.9M to gross margin or 4.7 percentage points.

Trailing twelve month (TTM) Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG was $14.5M. Lower sales and the operational challenges in Circuits Chatsworth, were offset by wage subsidies in Canada and the PPP forgiveness in the US.

The following table reconciles EBITDA⁽²⁾ to the net earnings for the trailing 12 months as at March 5, 2021.

	Trailing 12
	Months
Net earnings to equity holders of FTG	3,587,000
Add:
Interest, accretion	754,000
Income taxes	3,402,000
Depreciation/Amortization &Stock Comp	6,767,000
EBITDA	$14,510,000

(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 2021 was $0.4M or $0.02 per diluted share compared to a net loss of $2.6M or $0.11 per diluted share in Q1 2020. Revenues were reduced due to the decline in the Commercial Aerospace market as a result of the COVID-19 pandemic. The impairment of intangible assets in Q1 2020 reduced earnings by $1.1M compared to nil in Q1 2021. The CEWS funding in Canada and the PPP forgiveness in the US in Q1 2021 increased earnings by $2.3M. The COVID-19 event and the organizational transitions in Chatsworth negatively impacted earnings in Q1 2021.

The Circuits Segment net earnings before corporate and interest and other costs was $0.6M in Q1 2021 compared to $0.7M in Q1 2020. The lower sales was the most significant impact on the segment profitability offset by CEWS funding and PPP forgiveness. The COVID-19 event in Chatsworth and the transitions in the management team negatively impacted that site’s results in Q1 2021.

The Aerospace net earnings before corporate and interest and other costs increased to $0.2M in Q1 2021 from a loss of $2.0M in Q1 2020. Increased activity in the simulator related business, improved overall operating performance and PPP forgiveness of $0.7M were partially offset by reduced activity in commercial Aerospace. The impairment of the intangible asset in Q1 2020 reduced earnings by $1.1M in that quarter.

As at March 5, 2021, the Corporation’s net working capital was $39.6M, compared to $39.4M at year-end in 2020.

FTG ended Q1 2021 with $13.4M in net cash as compared to $12.6M at the end of 2020. Cashflow would have been $1M higher in the quarter if the CEWS funding had been received before the end of the quarter.

The Corporation will host a live conference call on Thursday, April 15, 2021 at 8:30am (Eastern) to discuss the results of the first quarter 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. Conference ID is 8719895. The Chairperson is Mr. Brad Bourne. A replay of the call will be available until May 15, 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 8719895.

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)	March 5,		November 30,
(in thousands of Canadian dollars)	2021		2020
ASSETS
Current assets
Cash and cash equivalents	$	18,073	$	19,032
Accounts receivable		13,257		16,795
Contract assets		906		985
Inventories		18,833		19,304
Prepaid expenses and other		5,071		3,363
		56,140		59,479
Non-current assets
Plant and equipment, net		11,768		12,640
Right-of-use assets		11,615		12,130
Investment tax credits recoverable		1,012		1,359
Intangible and other assets, net		957		1,068
Total assets	$	81,492	$	86,676
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	10,808	$	13,904
Provisions		835		885
Contract liabilities		477		388
Current portion of bank debt		2,300		2,931
Current portion of lease liabilities		1,785		1,810
Income tax payable		362		155
		16,567		20,073
Non-current liabilities
Bank debt		2,343		3,464
Lease liabilities		10,238		10,659
Deferred tax payable		1,076		1,192
Total liabilities		30,224		35,388
Equity
Retained earnings	$	18,735	$	19,135
Accumulated other comprehensive income		1,336		958
		20,071		20,093
Share capital
Common Shares		21,881		21,881
Contributed surplus		8,343		8,303
Total equity attributable to FTG's shareholders		50,295		50,277
Non-controlling interest		973		1,011
Total equity		51,268		51,288
Total liabilities and equity	$	81,492	$	86,676

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Loss
	Three months ended
(Unaudited)	March 5,				February 28,
(in thousands of Canadian dollars, except per share amounts)	2021				2020
Sales	$	18,970			$	24,538
Cost of sales
Cost of sales		13,865				19,199
Depreciation of plant and equipment		1,077				994
Depreciation of right-of-use assets		366				385
Total cost of sales		15,308				20,578
Gross margin		3,662				3,960
Expenses
Selling, general and administrative		2,691				3,431
Research and development costs		1,382				1,081
Recovery of investment tax credits		(127	)			(172	)
Depreciation of plant and equipment		63				46
Depreciation of right-of-use assets		17				12
Amortization of intangible assets		89				299
Interest expense on bank debt, net		39				41
Accretion on lease liabilities		126				137
Stock based compensation		40				51
Foreign exchange loss		618				49
Forgiveness of debt		(1,336	)			-
Impairment of intangible assets		-				1,145
Total expenses		3,602				6,120
Earnings before income taxes		60				(2,160	)
Current income tax expense		461				434
Deferred income tax expense		26				35
Total income tax expense		487				469
Net loss	$	(427	)		$	(2,629	)
Attributable to:
Non-controlling interest	$	(27	)		$	(32	)
Equity holders of FTG	$	(400	)		$	(2,597	)
Loss per share, attributable to the equity holders of FTG
Basic	$	(0.02	)		$	(0.11	)
Diluted	$	(0.02	)		$	(0.11	)

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Comprehensive Loss
	Three months ended
(Unaudited)	March 5,				February 28,
(in thousands of Canadian dollars)	2021				2020
Net loss	$	(427	)		$	(2,629	)
Other comprehensive earnings (loss) to be reclassified to
net earnings (loss) in subsequent periods:
Change in foreign currency translation adjustments		(428	)			248
Net gain (loss) on valuation of derivative financial instruments
designated as cash flow hedges		1,060				(382	)
Deferred income taxes		(265	)			96
		367				(38	)
Total comprehensive loss	$	(60	)		$	(2,667	)
Attributable to:
Equity holders of FTG	$	(22	)		$	(2,653	)
Non-controlling interest	$	(38	)		$	(14	)

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Changes in Equity
Three months ended March 5, 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		-		-		(400	)		-		-			(400	)		(27	)		(427	)
Stock-based compensation		-		-		-			40		-			40			-			40
Other comprehensive income (loss)		-		-		-			-		378			378			(11	)		367
Balance, March 5, 2021	$	21,881	$	-	$	18,735		$	8,343	$	1,336		$	50,295		$	973		$	51,268
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		-		-		(2,597	)		-		-			(2,597	)		(32	)		(2,629	)
Stock-based compensation		-		-		-			51		-			51			-			51
Other comprehensive income (loss)		-		-		-			-		(56	)		(56	)		18			(38	)
Balance, February 28, 2020	$	19,323	$	2,218	$	15,148		$	8,984	$	(1,610	)	$	44,063		$	1,080		$	45,143

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Cash Flows
	Three months ended
(Unaudited)	March 5,				February 28,
(in thousands of Canadian dollars)	2021				2020
Net inflow (outflow) of cash related to the following:
Operating activities
Net loss	$	(427	)		$	(2,629	)
Items not affecting cash and cash equivalents:
Stock-based compensation		40				51
Loss on disposal of plant and equipment		1				6
Effect of exchange rates on U.S. dollar bank debt		(189	)			53
Depreciation of plant and equipment		1,140				1,040
Depreciation of right-of-use assets		383				397
Amortization of intangible assets		89				299
Amortization, other		12				3
Impairment of intangible assets		-				1,145
Investment tax credits/deferred income taxes		231				87
Accretion on lease liabilities		126				137
Forgiveness of debt		(1,336	)			-
Net gain (loss) on valuation of derivative financial instruments
designated as cash flow hedges, net of taxes		795				(286	)
Net change in non-cash operating working capital		(465	)			4,022
		400				4,325
Investing activities
Additions to plant and equipment		(378	)			(1,046	)
Recovery of contract and other costs		10				6
Additions to deferred financing costs		(8	)			-
		(376	)			(1,040	)
Net cash flow from operating and investing activities		24				3,285
Financing activities
Repayments of bank debt		(232	)			(503	)
Lease liability payments		(452	)			(446	)
		(684	)			(949	)
Effects of foreign exchange rate changes on cash flow		(299	)			169
Net (decrease) increase in cash flow		(959	)			2,505
Cash and cash equivalents, beginning of the period		19,032				7,647
Cash and cash equivalents, end of period	$	18,073			$	10,152
Disclosure of cash payments
Payment for interest	$	42			$	55
Payments for income taxes	$	197			$	979