Firan Technology Group Corporation (TSX:FTG) today announced financial results
for the second quarter 2014.
-- Grew sales by $1.2M or 8% compared to same quarter 2013
-- Booked over $16M in new orders in the quarter
-- Grew Q2 activity at FTG Aerospace Tianjin by 121% over Q2 2013
-- Grew Q2 activity at FTG Aerospace Chatsworth by 51% over Q2 2013
-- Improved net income after tax by $0.6M in Q2 2014 compared to the same
period in 2013
-- Generated $1.2M positive cashflow from operations in Q2 2014 compared to
$1.6M usage last year
-- Achieved strong operating performance at both established Circuits
facilities
-- R&D spending remained above 5% of sales
"FTG's momentum has continued through the first half of 2014 with strong results
across the company, particularly at our two new Aerospace facilities in Tianjin
and Chatsworth where we continued to see progress on qualification activities,
strong orders and increased shipments," stated Brad Bourne, President and Chief
Executive Officer. He added, "Our established Circuits facilities both performed
well in the quarter and we made significant progress in getting our Circuits
Joint Venture through its start-up and customer qualification phase so it too
can contribute to our success in the future."
Second Quarter Results: (three months ended May 30, 2014 compared with three
months ended May 31, 2013)
Q2 2014 Q2 2013
--------------------------
Sales $15,402,000 $14,238,000
Gross Margin 4,326,000 3,239,000
Gross Margin (%) 28.1% 22.7%
--------------------------
Operating Earnings: (1) 1,372,000 760,000
- Net R&D Investment 697,000 706,000
Net Earnings before tax 675,000 54,000
- Income Tax 47,000 7,000
- Non-controlling Interests (12,000) -
--------------------------
Net Earnings after tax $ 640,000 $ 47,000
--------------------------
Earnings per share
- basic $ 0.04 $ 0.00
- diluted $ 0.03 $ 0.00
Year-to-Date Results: (six months ended May 30, 2014 compared with six months
ended May 31, 2013)
YTD 2014 YTD 2013
--------------------------
Sales $29,391,000 $27,253,000
Gross Margin 7,450,000 5,321,000
Gross Margin (%) 25.3% 19.5%
--------------------------
Operating Earnings: (1) 2,376,000 688,000
- Net R&D Investment 1,474,000 1,303,000
Net Earnings before tax 902,000 (615,000)
- Income Tax 145,000 29,000
- Non-controlling Interests (28,000) -
--------------------------
Net Earnings (loss) after tax $ 785,000 $ (644,000)
--------------------------
Earnings (loss) per share
- 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 2014 that continue to
improve the Corporation and position it for the future, including:
-- Shipped 10,000th cockpit product from FTG Aerospace Tianjin facility
-- Achieved sales outside of North America of 19% of total sales with
growth in both Europe and Asia
-- Renewed Circuits Toronto facility lease for 5 years at similar costs to
the previous lease
-- Completed Preliminary Design Review (PDR) for the Heads Down Display
control panel assemblies for the Chinese C919 development program.
For FTG, overall sales increased by $1.2M or 8.2% from $14.2M in Q2 2013 to
$15.4M in Q2 2014. FTG Circuits and the new Aerospace facilities drove the
growth. Year-to-date sales were up $2.1M to $29.4M in Q2 2014, compared to the
same period last year.
The Circuits Segment sales were up $2.8M or 30% in Q2 2014 versus Q2 2013. Both
established facilities had strong growth in the quarter. On a year-to-date
basis, sales grew $4.3M or 24% compared to the first six months of last year.
For the Aerospace segment, sales in Q2 2014 were $3.5M compared to $5.1M in the
same quarter last year. Strong increases at the two new facilities in Tianjin
China and Chatsworth California were offset by a drop in activity in Toronto.
The drop was due to the end of a large military simulator program at that
facility. As well, Q2 2013 had a significant shipment of Ground Test Hardware
for the C919 development program compared to no shipment in Q2 2014. For the
first six months of 2014, sales were $7M compared to $9.2M in 2013. Sales
increased dramatically at the two new facilities but were down at the Toronto
facility for the reasons noted above.
Gross margins were up in Q2 2014 by $1.1M compared to Q2 2013 due to lower
start-up costs at the new facilities and higher sales in the Circuits business.
Gross margins in Q2 2014 were 28% compared to 23% in Q2 2013. On a year-to-date
basis, gross margins increased to 25.3% compared to 19.5% for the same period
last year. Increased sales and a weaker Canadian dollar helped drive this
increase.
Net profit at FTG in Q2 2014 was $0.6M compared to a net profit of $0.05M in Q2
2013. This improvement is the result of higher gross margins, partially offset
by higher SG&A costs. Taxes are higher in Q2 2014 due to recording taxes on
Canadian profit, offset by a reduction in deferred income taxes. This is a
non-cash item. For the first six months, net profit was $0.8M compared to a net
loss of $0.6M for the same period last year.
The Circuits segment net earnings increased to $1.6M in Q2 2014 compared to
$0.4M in Q2 2013. The improved results were at both established facilities. The
Circuits joint venture in China did not have a material impact on profitability.
On a year-to-date basis, the Circuits segment net earnings were $2.6M compared
to $0.4M in 2013.
The Aerospace net earnings before corporate and interest and other costs
decreased to a loss of $0.1M in Q2 2014 compared to $0.6M profit for the same
period in 2013. This was due to lower profitability in the Toronto facility on
lower activity. Costs related to the development of the C919 cockpit assemblies
of $0.67M in Q2 2014 were treated as deferred development and not expensed.
Year-to-date net earnings were a loss of $0.1M compared to a profit of $0.5M in
the first six months of 2013.
FTG generated $1.2M of positive cashflow in Q2 2014 compared to cash usage of
$1.6M in Q2 2013. The improvement is the result of increased income and lower
accounts receivable, partially offset by higher inventories. As at May 30, 2014,
the Corporation's primary source of liquidity included accounts receivable of
$10.9M and inventory of $9.5M. Net working capital at May 30, 2014 was $12.5M.
The Corporation will host a live conference call on Tuesday, July 15, 2014 at
8:30am (EDT) to discuss the results of Q2 2014.
Anyone wishing to participate in the call should dial 647-788-4922 or
1-877-223-4471and 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 29, 2014 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 23573687.
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 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.
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Balance Sheets
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(unaudited) May 30, November 30,
(in thousands of Canadian dollars) 2014 2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
ASSETS
Current assets
Cash $ 1,860 $ 996
Accounts receivable 10,951 12,275
Taxes receivable 404 264
Inventories 9,533 8,074
Prepaid expenses 528 549
----------------------------------------------------------------------------
23,276 22,158
Non-current assets
Plant and equipment, net 5,272 5,587
Deferred income taxes 2,265 2,385
Intangible assets, net 172 196
----------------------------------------------------------------------------
Total assets $ 30,985 $ 30,326
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----------------------------------------------------------------------------
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness $ - $ 1,062
Accounts payable and accrued liabilities 8,707 8,027
Provisions 475 612
Customer deposits, net of deferred development 1,231 930
Current portion of long-term bank debt 314 307
Current portion of subordinated loan - 510
----------------------------------------------------------------------------
10,727 11,448
Non-current liabilities
Long-term bank debt 1,634 1,753
Subordinated loan 4,063 3,396
Government assistance 562 786
----------------------------------------------------------------------------
Total liabilities 16,986 17,383
----------------------------------------------------------------------------
Contingencies
Equity
Deficit $ (9,317) $ (10,102)
Accumulated other comprehensive income (loss) 32 (249)
----------------------------------------------------------------------------
(9,285) (10,351)
Share capital
Common shares 12,681 12,681
Preferred shares 2,218 2,218
Contributed surplus 8,363 8,347
----------------------------------------------------------------------------
Total equity attributable to FTG's shareholders 13,977 12,895
Non-controlling interest 22 48
----------------------------------------------------------------------------
Total equity 13,999 12,943
----------------------------------------------------------------------------
Total liabilities and equity $ 30,985 $ 30,326
----------------------------------------------------------------------------
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FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Earnings (Loss)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Six months ended
----------------------------------------------------------------------------
(unaudited)
(in thousands of Canadian dollars, May 30, May 31, May 30, May 31,
except per share amounts) 2014 2013 2014 2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Sales $ 15,402 $ 14,238 $ 29,391 $ 27,253
----------------------------------------------------------------------------
Cost of sales
Cost of sales 10,654 10,568 21,102 21,091
Depreciation of plant and
equipment 422 431 839 841
----------------------------------------------------------------------------
Total cost of sales 11,076 10,999 21,941 21,932
----------------------------------------------------------------------------
Gross margin 4,326 3,239 7,450 5,321
----------------------------------------------------------------------------
Expenses
Selling, general and
administrative 2,710 2,330 4,802 4,404
Research and development costs 767 776 1,614 1,443
Recovery of research and
development costs (70) (70) (140) (140)
Depreciation/amortization of plant
and equipment and intangible
assets 43 38 88 76
Interest expense on short-term
debt 14 19 28 33
Interest expense on long-term debt 84 82 170 160
Foreign exchange loss (gain) 103 10 (14) (40)
----------------------------------------------------------------------------
Total expenses 3,651 3,185 6,548 5,936
----------------------------------------------------------------------------
Earnings (loss) before income taxes 675 54 902 (615)
Income tax expense 47 7 145 29
----------------------------------------------------------------------------
Net earnings (loss) $ 628 $ 47 $ 757 $ (644)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Attributable to:
Non-controlling interest (12) - (28) -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Equity holders of FTG 640 47 785 (644)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings (loss) per share,
attributable to the equity holders
of FTG
Basic $ 0.04 $ - $ 0.04 $ (0.04)
Diluted $ 0.03 $ - $ 0.04 $ (0.04)
----------------------------------------------------------------------------
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FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Comprehensive Income (Loss)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Six months ended
----------------------------------------------------------------------------
(unaudited) May 30, May 31, May 30, May 31,
(in thousands of Canadian dollars) 2014 2013 2014 2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings (loss) $ 628 $ 47 $ 757 $ (644)
----------------------------------------------------------------------------
Other comprehensive income (loss) to
be reclassified to net earnings
(loss) in subsequent periods:
Foreign currency translation
adjustments (67) 41 461 183
Net unrealized gain (loss) on
derivative financial instruments
designated as cash flow hedges 568 (145) (180) (382)
----------------------------------------------------------------------------
501 (104) 281 (199)
----------------------------------------------------------------------------
Total comprehensive income (loss) $ 1,129 $ (57) $ 1,038 $ (843)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Attributable to:
Equity holders of FTG $ 1,141 $ (57) $ 1,066 $ (843)
Non-controlling interest $ (12) $ - $ (28) $ -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Changes in Equity
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six months ended May
30, 2014 Attributed to the equity holders of FTG
------------------------------------------------------
------------------------------------------------------
(unaudited)
(in thousands of Common Preferred Contributed
Canadian dollars) Shares Shares Deficit Surplus
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance, November 30,
2013 $ 12,681 $ 2,218 $ (10,102) $ 8,347
Net earnings (loss) - - 785 -
Stock-based
compensation - - - 16
Foreign currency
translation
adjustments - - - -
Net unrealized loss on
derivative financial
instruments
designated as cash
flow hedges - - - -
----------------------------------------------------------------------------
Balance, May 30, 2014 $ 12,681 $ 2,218 $ (9,317) $ 8,363
----------------------------------------------------------------------------
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----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six months ended May Attributed to the equity
30, 2014 holders of FTG
----------------------------
----------------------------
Accumulated
(unaudited) Other Non-
(in thousands of Comprehensive controlling Total
Canadian dollars) (Loss) Income Total interest equity
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance, November 30,
2013 $ (249) $ 12,895 $ 48 $ 12,943
Net earnings (loss) - 785 (26) 759
Stock-based
compensation - 16 - 16
Foreign currency
translation
adjustments 461 461 - 461
Net unrealized loss on
derivative financial
instruments
designated as cash
flow hedges (180) (180) - (180)
----------------------------------------------------------------------------
Balance, May 30, 2014 $ 32 $ 13,977 $ 22 $ 13,999
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six months ended May
31, 2013 Attributed to the equity holders of FTG
------------------------------------------------------
(unaudited)
(in thousands of Common Preferred Contributed
Canadian dollars) Shares Shares Deficit Surplus
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance, November 30,
2012 $ 12,681 $ 2,218 $ (9,104) $ 8,305
Net loss - - (644) -
Stock-based
compensation - - - 20
Foreign currency
translation
adjustments - - - -
Net unrealized loss on
derivative financial
instruments
designated as cash
flow hedges - - - -
----------------------------------------------------------------------------
Balance, May 31, 2013 $ 12,681 $ 2,218 $ (9,748) $ 8,325
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Six months ended May Attributed to the equity
31, 2013 holders of FTG
----------------------------
Accumulated
(unaudited) Other Non-
(in thousands of Comprehensive controlling Total
Canadian dollars) Loss Total interest equity
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance, November 30,
2012 $ (85) $ 14,015 $ - $ 14,015
Net loss - (644) - (644)
Stock-based
compensation - 20 - 20
Foreign currency
translation
adjustments 183 183 - 183
Net unrealized loss on
derivative financial
instruments
designated as cash
flow hedges (382) (382) - (382)
----------------------------------------------------------------------------
Balance, May 31, 2013 $ (284) $ 13,192 $ - $ 13,192
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FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Cash Flows
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended Six months ended
----------------------------------------------------------------------------
(unaudited) May 30, May 31, May 30, May 31,
(in thousands of Canadian dollars) 2014 2013 2014 2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net inflow (outflow) of cash related
to the following:
Operating activities
Net earnings (loss) $ 628 $ 47 $ 757 $ (644)
Items not affecting cash:
Non-controlling interest share of
loss 12 - 28 -
Stock-based compensation 7 11 16 20
Gain on disposal of plant and
equipment - - - (25)
Effect of exchange rates on US
dollar debt (7) 58 82 108
Depreciation of plant and
equipment 453 457 903 893
Amortization of intangible assets 12 12 24 24
Amortization of deferred financing
costs 7 7 14 14
Income tax expense 42 - 120 -
AMIS interest accretion 78 73 156 146
Amortization of government
assistance (112) (112) (224) (224)
Changes in non-cash operating
working capital 56 (2,178) 580 (1,712)
----------------------------------------------------------------------------
1,176 (1,625) 2,456 (1,400)
----------------------------------------------------------------------------
Investing activities
Additions to plant and equipment (357) (364) (554) (1,081)
Proceeds from disposal of plant
and equipment - - - 25
----------------------------------------------------------------------------
(357) (364) (554) (1,056)
----------------------------------------------------------------------------
Net cash flow from (used in)
operating and investing activities 819 (1,989) 1,902 (2,456)
----------------------------------------------------------------------------
Financing activities
(Decrease) increase in bank
indebtedness (1,100) 1,484 (1,100) 661
Proceeds from long-term bank debt - 510 - 1,227
Repayments of long-term bank debt (86) (44) (171) (62)
----------------------------------------------------------------------------
(1,186) 1,950 (1,271) 1,826
----------------------------------------------------------------------------
Effects of foreign exchange rate
changes on cash flow 483 (104) 233 (259)
----------------------------------------------------------------------------
Net increase (decrease) in cash flow 116 (143) 864 (889)
Cash, beginning of the period 1,744 700 996 1,446
----------------------------------------------------------------------------
Cash, end of period $ 1,860 $ 557 1,860 $ 557
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Disclosure of cash payments
Payment for interest $ 19 $ 28 $ 48 $ 47
Payments for income taxes $ - $ - $ 25 $ 17
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FOR FURTHER INFORMATION PLEASE CONTACT:
Firan Technology Group Corporation
Bradley C. Bourne
President and CEO
(416) 299-4000 x314
bradbourne@ftgcorp.com
Firan Technology Group Corporation
Joseph R. Ricci
Vice President and CFO
(416) 299-4000 x309
joericci@ftgcorp.com
www.ftgcorp.com
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