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Firan Technology Group Corp
Symbol C : FTG
Shares Issued 22,701,201
Close 2018-07-11 C$ 2.25
Recent Sedar Documents

Firan earns $1.3-million in Q2

2018-07-11 17:58 ET - News Release

Mr. Bradley Bourne reports

FIRAN TECHNOLOGY GROUP CORPORATION ANNOUNCES SECOND QUARTER 2018 FINANCIAL RESULTS

Firan Technology Group Corp. has released financial results for the second quarter of 2018.

  • Achieved record sales of $28.9-million, an increase of 13 per cent over second quarter 2017;
  • Expanded aerospace segment by 42 per cent over second quarter last year;
  • Gross margins increased by $1.5-million or 26 per cent over second quarter last year;
  • Generated cash flow from operations of $3.6-million compared with cash usage of $400,000 in second quarter 2017.

"The second quarter of 2018 began to demonstrate the earnings benefits from our acquisitions in 2016," stated Brad Bourne, president and chief executive officer.

He added, "While we continued to experience some increased costs in the quarter related to the transition, we also achieved a dramatic improvement in our net earnings and cash flow."

                             SECOND QUARTER RESULTS 
   (three months ended June 1, 2018, compared with three months ended June 2, 2017)

                                                                 Q2 2018         Q2 2017

Sales                                                        $28,878,000     $25,513,000
Gross margin                                                   7,242,000       5,753,000
Gross margin (%)                                                    25.1%           22.5%
Operating earnings (1)                                         3,579,000       2,581,000
Net R&D investment                                             1,071,000       1,846,000
Recovery of investment tax credits                              (211,000)       (188,000)
Amortization of intangibles                                      261,000         286,000
Foreign exchange (gain) loss                                    (104,000)       (118,000)
Restructuring expense                                            195,000               -
Earnings before income taxes                                   2,367,000         755,000
Current income tax (recovery) expense                             22,000         (41,000)
Deferred income tax expense                                    1,039,000         691,000
Non-controlling interests                                         11,000         (19,000)
Net earnings, attributable to the equity holders of FTG       $1,295,000        $124,000
Earnings per share, attributable to the equity holders
of FTG
Basic                                                              $0.06           $0.01
Diluted                                                            $0.05           $0.01

(1) Operating earnings are 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 with measures used by other 
corporations.

                               YEAR-TO-DATE RESULTS
       (six months ended June 1, 2018, compared with six months ended June 2, 2017)

                                                                 YTD 2018        YTD 2017

Sales                                                         $56,406,000     $52,685,000
Gross margin                                                   12,089,000      12,639,000
Gross margin (%)                                                     21.4%           24.0%
Operating earnings (1)                                          5,140,000       5,598,000
Net R&D investment                                              2,221,000       3,256,000
Recovery of investment tax credits                               (363,000)       (329,000)
Amortization of intangibles                                       517,000         567,000
Foreign exchange (gain) loss                                     (130,000)         43,000
Restructuring expense                                             195,000               -
Earnings before income taxes                                    2,700,000       2,061,000
Current income tax (recovery) expense                              40,000         (24,000)
Deferred income tax expense                                     1,675,000       1,179,000
Non-controlling interests                                         (17,000)        (18,000)
Net earnings, attributable to the equity holders of FTG        $1,002,000        $924,000
Earnings per share, attributable to the equity holders
of FTG
Basic                                                               $0.04           $0.04
Diluted                                                             $0.04           $0.04       

(1) Operating earnings are 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 with measures used by other 
corporations.

Business highlights

FTG accomplished many goals in the second quarter of 2018 that continue to improve the corporation and position it for the future, including:

  • Completed C-130 contract with CAE on schedule and on cost;
  • Renewed contract with Rockwell Collins for printed circuit boards from North American and Chinese facilities;
  • Won new cursor control device assembly for use on Airbus aircraft already in service;
  • Achieved sales resulting from the PhotoEtch acquisition of $1.5-million in the quarter compared with $2.9-million in the second quarter of last year and a target of $1.5-million; the PhotoEtch-related revenues will ramp up significantly in the second half of 2018 as shipments begin on the KC-46 simulator assembly contract;
  • Achieved sales resulting from the Teledyne PCT acquisition of $5.0-million in the quarter compared with $5.0-million in the second quarter of last year and a target of $4.0-million.

For FTG, overall sales increased by $3.4-million or 13.2 per cent from $25.5-million in second quarter 2017 to $28.9-million in second quarter 2018. This increase was experienced by the aerospace segment and was driven by the shipment of the majority of the C-130 program for CAE from the Aerospace Toronto facility and a ramp-up of activity in the Aerospace Chatsworth facility. Offsetting these gains was the impact of changes in the foreign exchange rates (the Canadian dollar was six cents stronger in second quarter this year, which translated into a reduction in sales of approximately $1-million).

For the year-to-date period, sales were up $3.7-million or 7.1 per cent due to the items noted herein and the one-time revenue recognition of $5.0-million from the C919 program with SAVIC in the first quarter of this year.

Sales in the circuits segment were down $400,000 or 2.3 per cent comparing second quarter 2018 versus second quarter 2017. On a year-to-date basis, circuits segment sales were down by $1.7-million or 5.3 per cent.

For the aerospace segment, sales in second quarter 2018 were $12.7-million compared with $8.9-million in the same quarter last year, resulting in a 41.8-per-cent growth rate. Included in the second quarter 2018 results are $1.5-million in sales from the acquisition of PhotoEtch and approximately $4.5-million of Teledyne PCT incremental sales. Year-to-date sales were up $5.4-million or 26.1 per cent in the aerospace segment.

Gross margins in second quarter 2018 were up $1.5-million or 25.9 per cent compared with second quarter 2017. The benefit of increased sales and the cost savings of closing the Teledyne PCT facility was partially offset by some transition-related costs.

Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG for second quarter 2018 were $3.4-million and $8.4-million for the trailing 12 months.

Net earnings at FTG in second quarter 2018 were $1.3-million compared with a net profit of $100,000 in second quarter 2017. Second quarter 2018 had higher sales and the elimination of the Teledyne PCT facility costs, as well as reductions in research and development spending. These improvements were partially offset by some restructuring costs this year.

The circuits segment net earnings before corporate and interest and other costs were $2.8-million in second quarter 2018 compared with $2.6-million in second quarter 2017. The circuits joint venture in China was profitable in second quarter of this year.

The aerospace segment's net earnings before corporate and interest and other costs were $100,000 versus ($1.0-million) in second quarter 2017. Second quarter 2017 included operating and transitional costs for the Teledyne PCT facility, which was closed during that quarter. FTG Aerospace Tianjin was profitable in the second quarter of this year.

As at June 1, 2018, the corporation's net working capital was $27.8-million, an increase of $3.4-million over year-end 2017. Higher accounts receivables and net bank debt were offset by higher customer deposits.

The corporation will host a live conference call on July 12, 2018, at 8:30 a.m. EDT, to discuss the results of second quarter 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. Bourne. A replay of the call will be available until July 26, 2018, and will be available on the FTG website. The number to call for a rebroadcast is 416-621-4642 or 1-800-585-8367, passcode 3678495.

About Firan Technology Group Corp.

FTG is an aerospace and defence 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. Its customers are leaders in the aviation, defence and high-technology industries.
  • FTG aerospace manufactures illuminated cockpit panels, keyboards and subassemblies for original equipment manufacturers of aerospace and defence equipment.

                                                                          
                       INTERIM CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS                                                           
                        (in thousands of dollars, except per-share amounts)                                     
                                                                            
                                                        Three months ended            Six months ended           
                                                      June 1,       June 2,       June 1,       June 2,
                                                        2018          2017          2018          2017

Sales                                                $28,878       $25,513       $56,406       $52,685
Cost of sales
Cost of sales                                         20,864        18,937        42,838        38,655
Depreciation of plant and equipment                      772           823         1,479         1,391
Total cost of sales                                   21,636        19,760        44,317        40,046
Gross margin                                           7,242         5,753        12,089        12,639
Expenses
Selling, general and administrative                    3,496         3,008         6,601         6,722
Research and development costs                         1,126         1,886         2,331         3,366
Recovery of research and development costs               (55)          (40)         (110)         (110)
Recovery of investment tax credits                      (211)         (188)         (363)         (329)
Depreciation of plant and equipment                       35            34            65            66
Amortization of intangible assets                        261           286           517           567
Interest expense on short-term debt                       67            71           153           128
Interest expense on long-term debt                        65            59           130           125
Foreign exchange (gain) loss                            (104)         (118)         (130)           43
Restructuring expenses                                   195             -           195             -
Total expenses                                         4,875         4,998         9,389        10,578
Earnings before income taxes                           2,367           755         2,700         2,061
Current income tax expense                                22           (41)           40           (24)
Deferred income tax expense                            1,039           691         1,675         1,179
Total income tax expense                               1,061           650         1,715         1,155
Net earnings                                           1,306           105           985           906
Attributable to
Non-controlling interest                                  11           (19)          (17)          (18)
Equity holders of FTG                                  1,295           124         1,002           924
Earnings per share, attributable to
the equity holders of FTG
Basic                                                   0.06          0.01          0.04          0.04
Diluted                                                 0.05          0.01          0.04          0.04

We seek Safe Harbor.

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