Firan Technology Group Corporation ("FTG" or "the Corporation") Announces Third Quarter 2018 Financial Results
TORONTO, Oct. 10, 2018 (GLOBE NEWSWIRE) -- Firan Technology Group Corporation (TSX:FTG) today announced financial results for the third quarter 2018.
- Achieved record third quarter sales of $25.0M, an increase of 31% over Q3 2017
- Grew Circuits segment by 22% over Q3 last year
- Grew Aerospace segment by 50% over Q3 last year
- Achieved $2.7M EBITDA, an increase of $0.9M over Q3 last year
- Grew Q3 2018 net income by 320% over same period last year
“The third quarter of 2018 came in as expected for the summer months, which typically experience a drop in sales from Q2 due to higher vacations and fewer production days,” stated Brad Bourne, President and Chief Executive Officer. He added, “Sales and profitability were up dramatically from Q3 last year again demonstrating the transition activities are mostly behind us. We will continue to work on managing transition and one-time costs in our Chatsworth operations.”
Third Quarter Results: (three months ended August 31, 2018 compared with three months ended September 1, 2017)
| Q3 2018 | Q3 2017 | |||||
| Sales | $ | 25,001,000 | $ | 19,144,000 | ||
| Gross Margin | 5,909,000 | 5,199,000 | ||||
| Gross Margin (%) | 23.6 | % | 27.2 | % | ||
| Operating Earnings (1): | 2,580,000 | 2,278,000 | ||||
| • Net R&D Investment | 979,000 | 1,668,000 | ||||
| • Foreign Exchange Loss (Gain) | (34,000 | ) | (272,000 | ) | ||
| • Recovery of Investment Tax Credits | (205,000 | ) | (166,000 | ) | ||
| • Amortization of Intangibles | 266,000 | 273,000 | ||||
| Net Earnings before Tax | 1,574,000 | 775,000 | ||||
| • Current Tax Expense | 15,000 | 14,000 | ||||
| • Deferred Tax Expense | 916,000 | 623,000 | ||||
| • Non-controlling Interests | (4,000 | ) | (16,000 | ) | ||
| Net Earnings After Tax | $ | 647,000 | $ | 154,000 | ||
| Earnings per share | ||||||
| - basic | $ | 0.03 | $ | 0.01 | ||
| - diluted | $ | 0.03 | $ | 0.01 | ||
Year-to-Date Results: (nine months ended August 31, 2018 compared with nine months ended September 1, 2017)
| YTD 2018 | YTD 2017 | |||||
| Sales | $ | 81,407,000 | $ | 71,829,000 | ||
| Gross Margin | 17,998,000 | 17,838,000 | ||||
| Gross Margin (%) | 22.1 | % | 24.8 | % | ||
| Operating Earnings (1): | 7,720,000 | 7,876,000 | ||||
| • Restructuring | 195,000 | - | ||||
| • Net R&D Investment | 3,200,000 | 4,924,000 | ||||
| • Foreign Exchange Loss (Gain) | (164,000 | ) | (229,000 | ) | ||
| • Recovery of Investment Tax Credits | (568,000 | ) | (495,000 | ) | ||
| • Amortization of Intangibles | 783,000 | 840,000 | ||||
| Net Earnings before Tax | 4,274,000 | 2,836,000 | ||||
| • Current Tax Expense | 55,000 | (10,000 | ) | |||
| • Deferred Tax Expense | 2,591,000 | 1,802,000 | ||||
| • Non-controlling Interests | (21,000 | ) | (34,000 | ) | ||
| Net Earnings After Tax | $ | 1,649,000 | $ | 1,078,000 | ||
| Earnings per share | ||||||
| - basic | $ | 0.07 | $ | 0.05 | ||
| - diluted | $ | 0.07 | $ | 0.04 | ||
- 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 third quarter of 2018 that continue to improve the Corporation and position it for the future, including:
- Began shipments to Flight Safety International for the KC-46 simulator program
- Shipped first set of the redesigned cockpit control devices for the third test aircraft for the C919 program in China
- Completed qualification testing of the cursor control device for a helicopter program and are progressing through Transport Canada approval
- Completed qualification testing of a cockpit power supply for the LE-700 training aircraft in China
- Achieved sales resulting from the 2016 acquisitions of $5.4M versus our target of $5.5M
- Received Authorization to Proceed on a new military helicopter simulation program with an expected value between $1-2M USD
- Received our first ever patent for High Temperature Rigid Flex circuit board technology in the UK
- Won a contract to develop cockpit panels for the Orion manned spacecraft being developed for NASA
- Completed our first robotic automation project including Industry 4.0 technology at our Circuits Toronto facility
For FTG, overall sales increased by $5.9M or 30.6% from $19.1M in Q3 2017 to $25.0M in Q3 2018. Both the Circuits and Aerospace segments contributed to the growth. Also contributing to the growth was the weakening of the Canadian dollar by 2.5 cents in Q3 this year compared to the same period last year. For the year-to-date, sales were up $9.6M or 13.3% due to the above items plus the one time revenue recognition of $5M from the C919 program in Q1 2018.
The Circuits Segment sales were up $3.0M or 22.1% in Q3 2018 versus Q3 2017. On a year-to-date basis, Circuits sales were up by $1.3M or 2.8%.
For the Aerospace segment, sales in Q3 2018 were $8.6M compared to $5.7M in the same quarter last year resulting in a 50.6% growth rate. Year-to-date sales were up $8.3M or 31.4% in the Aerospace segment.
Gross margins in Q3 2018 were up $0.7M compared to Q3 2017. The benefit of increased sales and lower costs were partially offset by a $0.95M inventory provision in Aerospace Chatsworth against inventory acquired in the two acquisitions in 2016.
Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG for Q3 2018 was $2.7M and $9.2M for the trailing twelve months.
The following table reconciles EBITDA(2) to the net earnings for Q3, 2018 and trailing twelve months.
| Q3 2018 | Trailing Twelve Months | |||
| Net earnings | $ | 643,000 | $ | 1,791,000 |
| Add: | ||||
| Interest | 139,000 | 547,000 | ||
| Income taxes/ITC | 726,000 | 2,414,000 | ||
| Depreciation/Amortization | 1,166,000 | 4,483,000 | ||
| EBITDA | $ | 2,674,000 | $ | 9,235,000 |
- 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 profit after tax at FTG in Q3 2018 was $0.6M compared to a net profit of $0.1M in Q3 2017. Q3 2018 had higher sales, lower R&D spending, offset by an inventory provision increase of $0.95M.
The Circuits segment net earnings before corporate and interest and other costs was $3.0M in Q3 2018 compared to $1.7M in Q3 2017.
The Aerospace net earnings before corporate and interest and other costs in the quarter was ($0.7M) versus ($1.3M) in Q3 2017. Q3 2018 had an inventory provision increase of $0.95M.
As at August 31, 2018, the Corporation’s net working capital was $28.5M, an increase of $4.1M over year end 2017. Higher accounts receivables, inventory and lower bank debt and lower accounts payable was offset by higher customer deposits.
Net debt to EBITDA, was 0.9:1 for the trailing 12 month period.
The Corporation will host a live conference call on Thursday, October 11, 2018 at 8:30 am (EDT) to discuss the results of Q3 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 October 25, 2018 and will be available on the FTG website at The number to call for a rebroadcast is 416-621-4642 or 1-800-585-8367, Conference ID 8565389.
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 CEO
Firan Technology Group Corporation
Tel: (416) 299-4000 x314
Melinda Diebel, Vice President and CFO
Firan Technology Group Corporation
Tel:(416) 299-4000 x264
Additional information can be found at the Corporation’s website
| FIRAN TECHNOLOGY GROUP CORPORATION | |||||
| Interim Condensed Consolidated Balance Sheets | |||||
| (Unaudited) | August 31, | November 30, | |||
| (in thousands of Canadian dollars) | 2018 | 2017 | |||
| ASSETS | |||||
| Current assets | |||||
| Cash | $ | 2,481 | $ | 2,752 | |
| Accounts receivable | 18,477 | 17,983 | |||
| Taxes receivable | 134 | 209 | |||
| Inventories | 26,430 | 25,079 | |||
| Prepaid expenses | 1,242 | 1,506 | |||
| 48,764 | 47,529 | ||||
| Non-current assets | |||||
| Plant and equipment, net | 11,576 | 12,222 | |||
| Deferred income tax assets | 394 | 395 | |||
| Investment tax credits receivable | 5,043 | 6,420 | |||
| Deferred development costs | 268 | 681 | |||
| Intangible assets and other assets, net | 3,207 | 3,768 | |||
| Total assets | $ | 69,252 | $ | 71,015 | |
| LIABILITIES AND EQUITY | |||||
| Current liabilities | |||||
| Bank indebtedness | $ | 2,611 | $ | 6,444 | |
| Accounts payable and accrued liabilities | 12,779 | 13,341 | |||
| Provisions | 523 | 390 | |||
| Customer deposits | 2,397 | 1,268 | |||
| Current portion of long-term bank debt | 1,935 | 1,726 | |||
| 20,245 | 23,169 | ||||
| Non-current liabilities | |||||
| Long-term bank debt | 5,840 | 6,040 | |||
| Deferred tax payable | 1,810 | 1,696 | |||
| Total liabilities | 27,895 | 30,905 | |||
| Equity | |||||
| Retained earnings | $ | 10,461 | $ | 8,812 | |
| Accumulated other comprehensive income | (412 | ) | 187 | ||
| 10,049 | 8,999 | ||||
| Share capital | |||||
| Common shares | 19,323 | 19,295 | |||
| Preferred shares | 2,218 | 2,218 | |||
| Contributed surplus | 8,598 | 8,384 | |||
| Total equity attributable to FTG's shareholders | 40,188 | 38,896 | |||
| Non-controlling interest | 1,169 | 1,214 | |||
| Total equity | 41,357 | 40,110 | |||
| Total liabilities and equity | $ | 69,252 | $ | 71,015 | |
| FIRAN TECHNOLOGY GROUP CORPORATION | |||||||||||||||
| Interim Condensed Consolidated Statements of Earnings | |||||||||||||||
| Three months ended | Nine months ended | ||||||||||||||
| (Unaudited) (in thousands of Canadian dollars, except per share amounts) | August 31, 2018 | September 01, 2017 | August 31, 2018 | September 01, 2017 | |||||||||||
| Sales | $ | 25,001 | $ | 19,144 | $ | 81,407 | $ | 71,829 | |||||||
| Cost of sales | |||||||||||||||
| Cost of sales | 18,304 | 13,253 | 61,142 | 51,908 | |||||||||||
| Depreciation of plant and equipment | 788 | 692 | 2,267 | 2,083 | |||||||||||
| Total cost of sales | 19,092 | 13,945 | 63,409 | 53,991 | |||||||||||
| Gross margin | 5,909 | 5,199 | 17,998 | 17,838 | |||||||||||
| Expenses | |||||||||||||||
| Selling, general and administrative | 3,156 | 2,787 | 9,757 | 9,509 | |||||||||||
| Research and development costs | 1,034 | 1,723 | 3,365 | 5,089 | |||||||||||
| Recovery of research and development costs | (55 | ) | (55 | ) | (165 | ) | (165 | ) | |||||||
| Recovery of investment tax credits | (205 | ) | (166 | ) | (568 | ) | (495 | ) | |||||||
| Depreciation of plant and equipment | 34 | 25 | 99 | 91 | |||||||||||
| Amortization of intangible assets | 266 | 273 | 783 | 840 | |||||||||||
| Interest expense on short-term debt | 47 | 56 | 200 | 184 | |||||||||||
| Interest expense on long-term debt | 92 | 53 | 222 | 178 | |||||||||||
| Foreign exchange (gain) loss | (34 | ) | (272 | ) | (164 | ) | (229 | ) | |||||||
| Restructuring expenses | - | - | 195 | - | |||||||||||
| Total expenses | 4,335 | 4,424 | 13,724 | 15,002 | |||||||||||
| Earnings before income taxes | 1,574 | 775 | 4,274 | 2,836 | |||||||||||
| Current income tax expense | 15 | 14 | 55 | (10 | ) | ||||||||||
| Deferred income tax expense | 916 | 623 | 2,591 | 1,802 | |||||||||||
| Total income tax expense | 931 | 637 | 2,646 | 1,792 | |||||||||||
| Net earnings | $ | 643 | $ | 138 | $ | 1,628 | $ | 1,044 | |||||||
| Attributable to: | |||||||||||||||
| Non-controlling interest | $ | (4 | ) | $ | (16 | ) | $ | (21 | ) | $ | (34 | ) | |||
| Equity holders of FTG | $ | 647 | $ | 154 | $ | 1,649 | $ | 1,078 | |||||||
| Earnings per share, attributable to the equity holders of FTG | |||||||||||||||
| Basic | $ | 0.03 | $ | 0.01 | $ | 0.07 | $ | 0.05 | |||||||
| Diluted | $ | 0.03 | $ | 0.01 | $ | 0.07 | $ | 0.04 | |||||||
| FIRAN TECHNOLOGY GROUP CORPORATION | ||||||||||||||||
| Interim Condensed Consolidated Statements of Comprehensive Income (Loss) | ||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||
| (Unaudited) (in thousands of Canadian dollars) | August 31, 2018 | September 01, 2017 | August 31, 2018 | September 01, 2017 | ||||||||||||
| Net earnings | $ | 643 | $ | 138 | $ | 1,628 | $ | 1,044 | ||||||||
| Other comprehensive income (loss) to be reclassified to net earnings | ||||||||||||||||
| in subsequent periods: | ||||||||||||||||
| Foreign currency translation adjustments | (166 | ) | (2,424 | ) | (210 | ) | (1,611 | ) | ||||||||
| Net unrealized (loss) gain on derivative financial instruments | ||||||||||||||||
| designated as cash flow hedges | (420 | ) | 2,983 | (551 | ) | 1,839 | ||||||||||
| Tax impact | 105 | (746 | ) | 138 | (460 | ) | ||||||||||
| (481 | ) | (187 | ) | (623 | ) | (232 | ) | |||||||||
| Total comprehensive income (loss) | $ | 162 | $ | (49 | ) | $ | 1,005 | $ | 812 | |||||||
| Attributable to: | ||||||||||||||||
| Equity holders of FTG | $ | 233 | $ | 27 | $ | 1,050 | $ | 874 | ||||||||
| Non-controlling interest | $ | (71 | ) | $ | (76 | ) | $ | (45 | ) | $ | (62 | ) | ||||
| FIRAN TECHNOLOGY GROUP CORPORATION | |||||||||||||||||||||
| Interim Condensed Consolidated Statements of Changes in Equity | |||||||||||||||||||||
| Nine months ended August 31, 2018 | 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 (Loss) | Total | interest | equity | |||||||||||||
| Balance, November 30, 2017 | $ | 19,295 | $ | 2,218 | $ | 8,812 | $ | 8,384 | $ | 187 | $ | 38,896 | $ | 1,214 | $ | 40,110 | |||||
| Net earnings | - | - | 1,649 | - | - | 1,649 | (21 | ) | 1,628 | ||||||||||||
| Stock-based compensation | - | - | - | 222 | - | 222 | - | 222 | |||||||||||||
| Common shares issued on exercise of | |||||||||||||||||||||
| share options and PSU's | 28 | - | - | (8 | ) | - | 20 | - | 20 | ||||||||||||
| Foreign currency translation adjustments | - | - | - | - | (186 | ) | (186 | ) | (24 | ) | (210 | ) | |||||||||
| Net unrealized gain (loss) on derivative financial | |||||||||||||||||||||
| instruments designated as cash flow hedges, net of tax impact | - | - | - | - | (413 | ) | (413 | ) | - | (413 | ) | ||||||||||
| Balance, August 31, 2018 | $ | 19,323 | $ | 2,218 | $ | 10,461 | $ | 8,598 | $ | (412 | ) | $ | 40,188 | $ | 1,169 | $ | 41,357 | ||||
| Nine months ended September 01, 2017 | Attributed to the equity holders of FTG | ||||||||||||||||||||
| Accumulated | |||||||||||||||||||||
| Other | Non- | ||||||||||||||||||||
| Common | Preferred | Retained | Contributed | Comprehensive | controlling | Total | |||||||||||||||
| (in thousands of Canadian dollars) | Shares | Shares | Earnings | Surplus | Income (Loss) | Total | interest | equity | |||||||||||||
| Balance, November 30, 2016 | $ | 19,051 | $ | 2,218 | $ | 7,543 | $ | 8,381 | $ | 443 | $ | 37,636 | $ | 443 | $ | 38,079 | |||||
| Net earnings | - | - | 1,078 | - | - | 1,078 | (34 | ) | 1,044 | ||||||||||||
| Stock-based compensation | - | - | - | 99 | - | 99 | - | 99 | |||||||||||||
| Common shares issued on exercise of | |||||||||||||||||||||
| share options and PSU's | 204 | - | - | (158 | ) | - | 46 | - | 46 | ||||||||||||
| Foreign currency translation adjustments | - | - | - | - | (1,583 | ) | (1,583 | ) | (28 | ) | (1,611 | ) | |||||||||
| Net unrealized gain (loss) on derivative financial | |||||||||||||||||||||
| instruments designated as cash flow hedges net of tax impact | - | - | - | - | 1,379 | 1,379 | - | 1,379 | |||||||||||||
| Contribution from non-controlling interest | - | - | - | - | - | - | 824 | 824 | |||||||||||||
| Balance, September 01, 2017 | $ | 19,255 | $ | 2,218 | $ | 8,621 | $ | 8,322 | $ | 239 | $ | 38,655 | $ | 1,205 | $ | 39,860 | |||||
| FIRAN TECHNOLOGY GROUP CORPORATION | ||||||||||||||||
| Interim Condensed Consolidated Statements of Cash Flows | ||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||
| (Unaudited) (in thousands of Canadian dollars) | August 31, 2018 | September 01, 2017 | August 31, 2018 | September 01, 2017 | ||||||||||||
| Net inflow (outflow) of cash related to the following: | ||||||||||||||||
| Operating activities | ||||||||||||||||
| Net earnings | $ | 643 | $ | 138 | $ | 1,628 | $ | 1,044 | ||||||||
| Items not affecting cash: | ||||||||||||||||
| Non-controlling interest share of net loss (earnings) | 4 | 16 | 21 | 34 | ||||||||||||
| Stock-based compensation | 74 | 75 | 222 | 99 | ||||||||||||
| (Gain) on disposal of plant and equipment | (2 | ) | (3 | ) | (2 | ) | (21 | ) | ||||||||
| Effect of exchange rates on US dollar debt | 69 | (547 | ) | 139 | (482 | ) | ||||||||||
| Depreciation of plant and equipment | 823 | 717 | 2,366 | 2,174 | ||||||||||||
| Amortization of intangible assets | 266 | 273 | 783 | 840 | ||||||||||||
| Amortization of deferred financing costs | 3 | 3 | 9 | 9 | ||||||||||||
| Deferred income tax expense | 488 | 1,370 | 2,060 | 2,481 | ||||||||||||
| Investment tax credits (recovery) expense | (205 | ) | (166 | ) | (568 | ) | (495 | ) | ||||||||
| Decrease in net unrealized gain on derivative | ||||||||||||||||
| financial instruments designated as cash flow | ||||||||||||||||
| hedges | (360 | ) | 1,217 | (624 | ) | 1,016 | ||||||||||
| Net change in non-cash operating working capital | (837 | ) | (817 | ) | (859 | ) | (417 | ) | ||||||||
| 966 | 2,276 | 5,175 | 6,282 | |||||||||||||
| Investing activities | ||||||||||||||||
| Additions to plant and equipment | (481 | ) | (1,419 | ) | (1,687 | ) | (4,906 | ) | ||||||||
| Recovery (additions) of deferred development costs, other | 5 | (1 | ) | 226 | 115 | |||||||||||
| Proceeds from disposal of plant and equipment | 3 | - | 3 | 18 | ||||||||||||
| (473 | ) | (1,420 | ) | (1,458 | ) | (4,773 | ) | |||||||||
| Net cash flow from operating and investing activities | 493 | 856 | 3,717 | 1,509 | ||||||||||||
| Financing activities | ||||||||||||||||
| (Decrease) in bank indebtedness | (1,278 | ) | (1,177 | ) | (3,833 | ) | (1,408 | ) | ||||||||
| Proceeds from long-term bank debt | - | - | 1,289 | - | ||||||||||||
| Repayments of long-term bank debt | (501 | ) | (377 | ) | (1,428 | ) | (1,159 | ) | ||||||||
| Funding from non-controlling interest | - | - | - | 824 | ||||||||||||
| Proceeds from issue of Common shares | 8 | 40 | 20 | 46 | ||||||||||||
| (1,771 | ) | (1,514 | ) | (3,952 | ) | (1,697 | ) | |||||||||
| Effects of foreign exchange rate changes on cash flow | (38 | ) | (539 | ) | (36 | ) | (525 | ) | ||||||||
| Net (decrease) in cash flow | (1,316 | ) | (1,197 | ) | (271 | ) | (713 | ) | ||||||||
| Cash, beginning of the period | 3,797 | 3,636 | 2,752 | 3,152 | ||||||||||||
| Cash, end of period | $ | 2,481 | $ | 2,439 | $ | 2,481 | $ | 2,439 | ||||||||
| Disclosure of cash payments | ||||||||||||||||
| Payment for interest | $ | 125 | $ | 111 | $ | 425 | $ | 370 | ||||||||
| Payments for income taxes | $ | 1 | $ | 1 | $ | 14 | $ | 5 | ||||||||
