TORONTO, ONTARIO--(Marketwired - Apr 7, 2016) - Firan Technology Group Corporation (FTG.TO) today announced financial results for the first quarter 2016.
-
Achieved record first quarter sales of $16.9M
-
Achieved record first quarter gross margins of 22.2%, up 22% from Q1 2015
-
Achieved record first quarter earnings before tax of $725K, up 46% from Q1 2015
-
Subsequent to quarter end, completed the acquisition of Photo Etch, via an asset purchase, to rapidly increase utilization of our Aerospace - Chatsworth facility.
"We started 2016 with very strong operating performance for FTG as a result of past investments in technology, positive impacts from past key new program wins as well as the strengthening of the US dollar," stated Brad Bourne, President and Chief Executive Officer. He added, "Growth is key to FTG to increase utilization across all facilities, particularly the new ones in Chatsworth, California and Tianjin, China. The acquisition of Photo Etch, subsequent to our quarter end, will enable us to transition work to our Aerospace Chatsworth facility more rapidly than planned. Improved utilization will drive profitability due to high contribution margins on incremental revenues."
First Quarter Results: (three months ended Feb 26, 2016 compared with three months ended Feb 27, 2015)
| | Q1 2016 | | Q1 2015 | |
| | | | | | | |
| Sales | $ | 16,929,000 | | $ | 16,307,000 | |
| | | | | | | |
| Gross Margin | | 3,752,000 | | | 3,069,000 | |
| Gross Margin (%) | | 22.2 | % | | 18.8 | % |
| | | | | | | |
| Operating Earnings(1): | | 1,220,000 | | | 554,000 | |
| | | | | | | |
| | • Net R&D Investment | | 717,000 | | | 1,013,000 | |
| | • Foreign Exchange gain | | (55,000 | ) | | (956,000 | ) |
| | • Recovery of Investment Tax Credits | | (167,000 | ) | | - | |
| | | | | | | |
| Net Earnings before Tax | | 725,000 | | | 497,000 | |
| | | | | | | |
| | • Current Tax Expense | | 16,000 | | | 11,000 | |
| | • Deferred Tax expense (non-cash) | | 259,000 | | | 60,000 | |
| | • Non-controlling Interests | | - | | | 4,000 | |
| | | | | | | |
| Net Earnings After Tax | $ | 450,000 | | $ | 422,000 | |
| Earnings per share | | | | | | |
| | - basic | $ | 0.02 | | $ | 0.02 | |
| | - diluted | $ | 0.02 | | $ | 0.02 | |
| | |
| (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 first quarter of 2016 that continue to improve the Corporation and position it for the future, including:
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Signed two new sourcing agreements with a leading US based Aerospace customer for the Circuits Toronto and Chatsworth businesses for applications in Business, Regional and Air Transport Aircraft and well as Defense and Space applications
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Received initial production orders from two large aerospace customers at the FTG Printronics Circuits joint venture in China
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Completed certification of Circuits Chatsworth facility for rigid flex technology under US Department of Defense MIL-PRF-31032 certification, positioning this site in the top two technology providers worldwide
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Achieved recertification of the FTG Printronics Circuit joint venture under the AS9100 designation
-
Continued work on new development program for a control panel assembly for a helicopter program
For FTG, overall sales increased by $0.6M or 3.8%, from $16.3M in Q1 2015 to $16.9M in Q1 2016.
Revenues benefited from the weakening of the Canadian dollar versus the US dollar which was down 19 cents in Q1 2016 versus Q1 last year. US dollar currency hedges in place that matured in the quarter reduced reported sales and earnings by $0.7M in Q1 2016.
The Circuits Segment sales were down $0.2M or 1.6% in Q1 2016 versus 2015. Circuits Chatsworth experienced reduced demand from a large defense oriented customer, but bookings were strong at that site in the quarter so sales are expected to recover going forward.
For the Aerospace segment, sales in Q1 2016 were $4.4M compared to $3.5M last year resulting in a 23.1% growth rate. All three sites contributed to the growth.
Gross margins in Q1 2016 were up $0.7M compared to Q1 2015, due to strong operating performance across the company, and the weaker Canadian dollar. Margins improved dramatically in Circuits Chatsworth, due to improved performance and product mix, notwithstanding the decreased sales activity. Again, the currency hedges that matured in the quarter reduced revenue, and therefore margins by $0.7M, compared to $0.4M in Q1 last year.
Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG for Q1 2016 was $1.3M, an increase from $1.1M in Q1 2015.
The following table reconciles EBITDA(2) to the net earnings for Q1, 2016.
| | Q1 2016 |
| | | |
| Net earnings | $ | 450,000 |
| Add: | | |
| Interest | | 40,000 |
| Income taxes/ITC | | 275,000 |
| Depreciation/Amortization | | 567,000 |
| | | |
| EBITDA | $ | 1,332,000 |
| | |
| (2) | 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 earnings before tax was $0.7M in Q1 2016 versus $0.5M in Q1 2015. The improvement was due to higher gross margins, lower R&D spending, offset by significantly lower foreign exchange gains.
Net earnings after tax at FTG in Q1 2016 was $0.5M compared to $0.4M in Q1 2015. The tax expense is mostly non-cash, drawing down the Corporation's deferred income tax asset. This expense was not reported in Q1 2015 and as such, the more meaningful year-over-year comparison is the net earnings before income taxes.
The Circuits segment net earnings before corporate and interest and other costs was $1.4M in Q1 2016 compared to $1.2M in Q1 2015. The Circuits Chatsworth facility drove the improved results. The Circuits joint venture in China did not have a material impact on profitability.
The Aerospace segment net earnings before corporate and interest and other costs was ($0.2M) in Q1 2016 versus ($0.3M) in Q1 2015. The newer facilities in Chatsworth, California and Tianjin, China were a drag on earnings due to lower utilization rates at the plants as they continue to ramp up with new customers and opportunities. The acquisition announced subsequent to the quarter end provides an opportunity to transition work to the Chatsworth facility and move this site to profitability. The transition is expected to take approximately 6-9 months.
Cash flow from operations after investments in capital equipment and deferred development in Q1 2016 was ($0.6M) compared a cash flow of $0.6M in Q1 2015. Increased working capital primarily drove this change.
As at February 26, 2016, the Corporation's net working capital was $16.0M, a $1.0M increase compared to November 30, 2015.
The Corporation will host a live conference call on Thursday, April 7, 2016 at 11:30 am (Eastern) to discuss the results of Q1 2016.
Anyone wishing to participate in the call should dial 416-340-8527 or 1-800-355-4959 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 April 21, 2016 and will be available on the FTG website at www.ftgcorp.com. The number to call for a rebroadcast is 905-694-9451 or 1-800-408-3053, pass code 8540540.
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.
| FIRAN TECHNOLOGY GROUP CORPORATION | |
| Interim Condensed Consolidated Balance Sheets | |
| | | | |
| (Unaudited)
(in thousands of Canadian dollars) | February 26,
2016 | November 30,
2015 | |
| ASSETS | | | | | |
| Current assets | | | | | |
| Cash | $ | 2,228 | $ | 3,160 | |
| Accounts receivable | | 12,259 | | 12,987 | |
| Taxes receivable | | 300 | | 231 | |
| Inventories | | 11,407 | | 11,122 | |
| Prepaid expenses | | 865 | | 979 | |
| | | 27,059 | | 28,479 | |
| Non-current assets | | | | | |
| Plant and equipment, net | | 5,516 | | 5,644 | |
| Deferred income tax assets | | 2,515 | | 2,876 | |
| Investment tax credits receivable | | 6,903 | | 6,736 | |
| Deferred development costs | | 462 | | 387 | |
| Intangible assets, net | | 88 | | 100 | |
| Total assets | $ | 42,543 | $ | 44,222 | |
| LIABILITIES AND EQUITY | | | | | |
| Current liabilities | | | | | |
| Accounts payable and accrued liabilities | $ | 8,993 | $ | 10,970 | |
| Provisions | | 379 | | 366 | |
| Customer deposits, net of deferred development | | 653 | | 1,044 | |
| Current portion of long-term bank debt | | 1,071 | | 1,058 | |
| | | 11,096 | | 13,438 | |
| Non-current liabilities | | | | | |
| Long-term bank debt | | 4,017 | | 4,234 | |
| Deferred tax payable | | 1,492 | | 1,460 | |
| Total liabilities | | 16,605 | | 19,132 | |
| Equity | | | | | |
| Opening retained earnings (deficit) | $ | 1,628 | $ | (7,909 | ) |
| Net earnings during the period | | 450 | | 9,537 | |
| Accumulated other comprehensive income (loss) | | 142 | | (233 | ) |
| | | 2,220 | | 1,395 | |
| Share capital | | | | | |
| | Common shares | | 13,090 | | 13,075 | |
| | Preferred shares | | 2,218 | | 2,218 | |
| Contributed surplus | | 8,381 | | 8,373 | |
| Total equity attributable to FTG's shareholders | | 25,909 | | 25,061 | |
| Non-controlling interest | | 29 | | 29 | |
| Total equity | | 25,938 | | 25,090 | |
| Total liabilities and equity | $ | 42,543 | $ | 44,222 | |
| | | | | |
| FIRAN TECHNOLOGY GROUP CORPORATION | |
| Interim Condensed Consolidated Statements of Earnings | |
| | | | | |
| | Three months ended | |
| (Unaudited)
(in thousands of Canadian dollars, except per share amounts) | February 26,
2016 | | February 27,
2015 | |
| | | | | | | |
| Sales | $ | 16,929 | | $ | 16,307 | |
| | | | | | | |
| Cost of sales | | | | | | |
| | Cost of sales | | 12,664 | | | 12,778 | |
| | Depreciation of plant and equipment | | 513 | | | 460 | |
| Total cost of sales | | 13,177 | | | 13,238 | |
| Gross margin | | 3,752 | | | 3,069 | |
| | | | | | | |
| Expenses | | | | | | |
| | Selling, general and administrative | | 2,452 | | | 2,370 | |
| | Research and development costs | | 787 | | | 1,262 | |
| | Recovery of research and development costs | | (70 | ) | | (249 | ) |
| | Recovery of investment tax credits | | (167 | ) | | - | |
| | Depreciation of plant and equipment and amortization of intangible assets | | 40 | | | 42 | |
| | Interest expense on short-term debt | | - | | | 9 | |
| | Interest expense on long-term debt | | 40 | | | 94 | |
| | Foreign exchange (gain) | | (55 | ) | | (956 | ) |
| Total expenses | | 3,027 | | | 2,572 | |
| | | | | | | |
| Earnings before income taxes | | 725 | | | 497 | |
| | | | | | | |
| Current income tax expense | | 16 | | | 11 | |
| Deferred income tax expense | | 259 | | | 60 | |
| | | 275 | | | 71 | |
| | | | | | | |
| Net earnings | $ | 450 | | $ | 426 | |
| | | | | | | |
| Attributable to: | | | | | | |
| Non-controlling interest | $ | - | | $ | 4 | |
| Equity holders of FTG | $ | 450 | | $ | 422 | |
| | | | | | | |
| Earnings per share, attributable to the equity holders of FTG | | | | | | |
| | Basic | $ | 0.02 | | $ | 0.02 | |
| | Diluted | $ | 0.02 | | $ | 0.02 | |
| | | | | | | |
| FIRAN TECHNOLOGY GROUP CORPORATION | |
| Interim Condensed Consolidated Statements of Comprehensive Income (Loss) | |
| | | | | |
| | Three months ended | |
| (Unaudited)
(in thousands of Canadian dollars) | February 26,
2016 | | February 27,
2015 | |
| | | | | | | |
| Net earnings | $ | 450 | | $ | 426 | |
| | | | | | | |
| Other comprehensive income (loss) to be reclassified to net earnings in subsequent years: | | | | | | |
| | | | | | | |
| | Foreign currency translation adjustments | | 859 | | | 866 | |
| | | | | | | |
| | Net unrealized (loss) on derivative financial instruments designated as cash flow hedges | | (645 | ) | | (1,835 | ) |
| | Tax impact | | 161 | | | - | |
| | | | | | | |
| | | 375 | | | (969 | ) |
| | | | | | | |
| Total comprehensive income (loss) | $ | 825 | | $ | (543 | ) |
| | | | | | | |
| Attributable to: | | | | | | |
| Equity holders of FTG | $ | 825 | | $ | (549 | ) |
| Non-controlling interest | $ | - | | $ | 6 | |
| | | | | | | |
| FIRAN TECHNOLOGY GROUP CORPORATION |
| Interim Condensed Consolidated Statements of Changes in Equity |
| | | | | | | | | | | | | | | | | |
| Three months ended February 26, 2016 | Attributed to the equity holders of FTG | | | | | |
|
(Unaudited)
(in thousands of Canadian dollars)
|
Common
Shares
| |
Preferred
Shares
| |
Opening
Retained
Earnings
| |
Contributed
Surplus
| | Accumulated
Other
Comprehensive
Income (Loss) | |
Total
| |
Non-
controlling
interest
| |
Total
equity
| |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, November 30, 2015 | $ | 13,075 | | $ | 2,218 | | $ | 1,628 | | $ | 8,373 | | $ | (233 | ) | $ | 25,061 | | $ | 29 | | $ | 25,090 | |
| Net earnings | | - | | | - | | | 450 | | | - | | | - | | | 450 | | | - | | | 450 | |
| Stock-based compensation | | - | | | - | | | - | | | 12 | | | - | | | 12 | | | - | | | 12 | |
| Common shares issued on exercise of share options | | 15 | | | | | | | | | (4 | ) | | - | | | 11 | | | - | | | 11 | |
| Foreign currency translation adjustments | | - | | | - | | | - | | | - | | | 859 | | | 859 | | | - | | | 859 | |
| Net unrealized loss on derivative financial instruments designated as cash flow hedges, net of tax impact | | - | | | - | | | - | | | - | | | (484 | ) | | (484 | ) | | - | | | (484 | ) |
| Balance, February 26, 2016 | $ | 13,090 | | $ | 2,218 | | $ | 2,078 | | $ | 8,381 | | $ | 142 | | $ | 25,909 | | $ | 29 | | $ | 25,938 | |
| | | | | | | | | | | | | | | | | |
| Three months ended February 27, 2015 | Attributed to the equity holders of FTG | | | | | |
|
(Unaudited)
(in thousands of Canadian dollars)
|
Common
Shares
| |
Preferred
Shares
| |
Opening
Retained
(Deficit)
| |
Contributed
Surplus
| | Accumulated
Other
Comprehensive
Income (Loss) | |
Total
| |
Non-
controlling
interest
| |
Total
equity
| |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance, November 30, 2014 | $ | 12,681 | | $ | 2,218 | | $ | (7,909 | ) | $ | 8,411 | | $ | (312 | ) | $ | 15,089 | | $ | 15 | | $ | 15,104 | |
| Net earnings | | - | | | - | | | 422 | | | - | | | - | | | 422 | | | 4 | | | 426 | |
| Stock-based compensation | | - | | | - | | | - | | | 14 | | | - | | | 14 | | | - | | | 14 | |
| Foreign currency translation adjustments | | - | | | - | | | - | | | - | | | 864 | | | 864 | | | 2 | | | 866 | |
| Net unrealized loss on derivative financial instruments designated as cash flow hedges | | - | | | - | | | - | | | - | | | (1,835 | ) | | (1,835 | ) | | - | | | (1,835 | ) |
| Balance, February 27, 2015 | $ | 12,681 | | $ | 2,218 | | $ | (7,487 | ) | $ | 8,425 | | $ | (1,283 | ) | $ | 14,554 | | $ | 21 | | $ | 14,575 | |
| | | | | |
| FIRAN TECHNOLOGY GROUP CORPORATION | |
| Interim Condensed Consolidated Statements of Cash Flows | |
| | | | | |
| | Three months ended | |
| (Unaudited)
(in thousands of Canadian dollars) | February 26,
2016 | | February 27,
2015 | |
| Net inflow (outflow) of cash related to the following: | | | | | | |
| Operating activities | | | | | | |
| Net earnings | $ | 450 | | $ | 426 | |
| Items not affecting cash: | | | | | | |
| | Non-controlling interest share of net (earnings) | | - | | | (4 | ) |
| | Stock-based compensation | | 12 | | | 14 | |
| | Effect of exchange rates on US dollar debt | | 78 | | | 138 | |
| | Depreciation of plant and equipment | | 541 | | | 490 | |
| | Amortization of intangible assets | | 12 | | | 12 | |
| | Amortization of deferred financing costs | | 2 | | | 7 | |
| | Deferred income tax expense | | 393 | | | 60 | |
| | Investment tax credits (recovery) | | (167 | ) | | - | |
| | AMIS interest accretion | | - | | | 84 | |
| | Amortization of government assistance | | - | | | (113 | ) |
| | Decrease (increase) in net unrealized loss on derivative financial instruments designated as cash flow hedges | | 399 | | | (1,140 | ) |
| Net change in non-cash operating working capital | | (1,887 | ) | | 863 | |
| | | (167 | ) | | 837 | |
| Investing activities | | | | | | |
| | Additions to plant and equipment | | (389 | ) | | (242 | ) |
| | Additions to deferred development costs | | (75 | ) | | - | |
| | | (464 | ) | | (242 | ) |
| Net cash flow from operating and investing activities | | (631 | ) | | 595 | |
| Financing activities | | | | | | |
| | Repayments of long-term bank debt | | (282 | ) | | (698 | ) |
| | Proceeds from issue of Common shares | | 11 | | | - | |
| | | (271 | ) | | (698 | ) |
| Effects of foreign exchange rate changes on cash flow | | (30 | ) | | (20 | ) |
| Net (decrease) in cash flow | | (932 | ) | | (123 | ) |
| Cash, beginning of the period | | 3,160 | | | 641 | |
| Cash, end of period | $ | 2,228 | | $ | 518 | |
| | | | | | | |
| Disclosure of cash payments | | | | | | |
| | Payment for interest | $ | 40 | | $ | 20 | |
| | Payments for income taxes | $ | 7 | | $ | 2 | |
