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Firan Technology Group Corp
Symbol FTG
Shares Issued 22,716,201
Close 2020-02-13 C$ 3.48
Recent Sedar Documents

Firan earns $5.98-million in fiscal 2019

2020-02-13 23:02 ET - News Release

Mr. Bradley Bourne reports

FIRAN TECHNOLOGY GROUP CORPORATION ANNOUNCES FULL YEAR AND FOURTH QUARTER 2019 FINANCIAL RESULTS

Firan Technology Group Corp. has released financial results for the full year and fourth quarter 2019.

  • Achieved record full-year sales of $112.7-million, an increase of $8.2-million after excluding a $5-million revenue adjustment on a development contract from first quarter last year;
  • Achieved EBITDA (earnings before interest, taxes, depreciation and amortization) of $14.6-million, an increase of $4.1-million (39 per cent) over last year;
  • Achieved net income of $6.1-million and diluted earnings per share of 25 cents, an increase of 111 per cent over 2018;
  • Generated $8.5-million in full-year free cash flow, inclusive of capital expenditures of $3.1-million but exclusive of $3.8-million of net cash consideration paid for the Colonial business (now referred to as FTG Circuits-Fredericksburg);
  • At year-end, had net cash of $2.2-million on the balance sheet.

Business highlights

Firan accomplished many goals in 2019 that continue to improve the corporation and position it for the future, including:

  • Received Canadian Technical Standard Order (TSO) approval for a cursor control device, enabling Firan to begin production of this product under development over the past three years;
  • On July 15, 2019, Firan closed the acquisition of Colonial Circuits Inc. in Fredericksburg, Va.;
  • Achieved sales from Colonial of approximately $3.6-million from July to November;
  • Began the certification process for the Colonial facility to the Aerospace AS9100 certification with completion planned for early 2020, opening up significant new market opportunities for that site;
  • Worked with key suppliers to achieve material cost savings for the Colonial site, in line with costs at other existing Firan sites;
  • In November, Firan reached agreement with its represented staff at FTG Aerospace Toronto; the contract is for four years, with improvements in benefits and wages in line with typical collective agreements in Ontario this year.

For Firan, overall sales increased by $3.2-million or 3.0 per cent from $109.4-million in 2018 to $112.7-million in 2019. Adjusting for the revenue recognition impact of $5-million from the C919 program in first quarter 2018, the increase in sales is $8.2-million or 7.9 per cent. In fourth quarter, Firan was the subject of a cyberattack that impacted all sites in North America, except the recently acquired business in Fredericksburg, Va. The affected sites lost production from a few days to a few weeks. This impacted the 2019 sales in the quarter and the year as deliveries were delayed beyond year-end. The acquisition of FTG Circuits Fredericksburg business, which closed July 15, 2019, contributed $3.6-million to 2019 sales. Also contributing to the growth was the weakening of the Canadian dollar by 3.8 cents in 2019 compared with the prior year, which added approximately $3-million to annual sales.

Firan's Chinese sites were not impacted by the cyberattack in fourth quarter. They are, however, being impacted by measures taken by the Chinese government in first quarter 2020 to control the spread of the coronavirus outbreak and are expected to lose approximately 10 days of production in the quarter.

Fourth quarter 2019 sales of $27.1-million were $900,000 lower than fourth quarter 2018, net of the contribution of $2.4-million from the acquisition of the FTG Circuits Fredericksburg business. In September, 2019, Firan was the subject of a cyberattack, which impacted Firan's systems across North America. Overall lost production was approximately 10 per cent of normal quarterly sales. Also in fourth quarter 2019 compared with fourth quarter 2018, shipments of products for the simulator market were down temporarily by approximately $3-million as previous orders were completed and new orders could not be assembled until the arrival of longer lead components. Simulator-related revenues are expected to rebound in the second half of 2020.

The Circuits segment sales were $71.4-million, up $7.4-million or 11.5 per cent in 2019 versus 2018. In fourth quarter, sales were $18.6-million compared with $17.4-million in fourth quarter last year. In fourth quarter 2019, sales were impacted by the cyberattack but offset by the incremental $2.4-million in sales from the acquired business in Virginia.

For the Aerospace segment, sales in 2019 were $41.2-million compared with $45.3-million last year. Two thousand eighteen had the $5-million one-time adjustment in program revenue. In fourth quarter 2019, sales were $8.4-million compared with $10.7-million in fourth quarter 2018. The drop in fourth quarter 2019 is due partly to the cyberattack, as well as a drop in simulator activity of $3-million year over year. The drop in simulator activity is the result of the conclusion of existing orders and a gap in shipments until longer lead components arrive. Simulator revenues are expected to rebound in the second half of 2020 as the backlog in simulator work at year-end was over $8.0-million.

Gross margins in 2019 were $30.3-million or 26.9 per cent compared with $25.3-million or 23.1 per cent in 2018. The benefit of increased sales was combined with improving operational efficiency across the company. The cyberattack in fourth quarter 2019 negatively impacted gross margins in the quarter and the full year.

Earnings before interest, tax, depreciation and amortization for Firan for 2019 were $14.6-million compared with $10.5-million in 2018.

Net profit after tax at Firan in 2019 was $6.1-million or 25 cents per diluted share compared with a net profit of $2.9-million or 12 cents per diluted share in 2018. Net profit after tax in fourth quarter 2019 was $600,000, a decrease of $600,000 compared with fourth quarter 2018. The decrease is the result of lower sales (cyberattack and lower simulator activity) offset by the income from the new Virginia facility.

The Circuits segment net earnings before corporate and interest and other costs were $12.0-million in 2019 compared with $9.4-million in 2018.

The Aerospace net earnings before corporate and interest and other costs in the quarter were $700,000 in 2019 versus ($400,000) in 2018.

As at Nov. 30, 2019, the corporation's net working capital was $28.6-million, compared with $28.7-million at year-end in 2018. At year-end 2019, all debt is classified as current as the bank facility agreement currently in place expires in fewer than 12 months. Activity is under way to obtain a new bank facility in 2020.

Net cash at the end of 2019 was $2.2-million compared with net debt of $2.4-million at the end of 2018. Excluding the Colonial purchase price of $3.8-million, the year-end 2019 net cash position would have been $6.0-million, with annual free cash flow of $8.5-million.

The corporation will host a live conference call on Feb. 14, 2020, at 10 a.m. Eastern Time to discuss the results of 2019.

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 Firan conference call. The chairperson is Brad Bourne. A replay of the call will be available until March 15, 2020, and will be available on the Firan website. The number to call for a rebroadcast is 416-621-4642 or 1-800-585-8367, conference ID 8595811.

About Firan Technology Group Corp.

Firan is an aerospace and defence electronics product and subsystem supplier to customers around the globe. Firan has two operating units:

  • FTG Circuits is a manufacturer of high-technology, high-reliability printed circuit boards.
  • FTG Aerospace manufactures illuminated cockpit panels, keyboards and subassemblies for original equipment manufacturers of aerospace and defence equipment.

                                                    
                      CONSOLIDATED STATEMENTS OF EARNINGS          
              (in thousands of dollars, except per-share amounts)  
                                                                    Years ended       
                                                                Nov. 30,     Nov. 30,
                                                                   2019         2018    
                                                                                      
Sales                                                          $112,653     $109,420  
                                                               --------     --------
Cost of sales                                                                         
Cost of sales                                                    78,788       81,143  
Depreciation of plant and equipment                               3,601        3,015
                                                               --------     --------  
Total cost of sales                                              82,389       84,158
                                                               --------     --------  
Gross margin                                                     30,264       25,262
                                                               --------     --------  
Expenses                                                                              
Selling, general and administrative                              13,732       13,333  
Research and development costs                                    4,846        4,740  
Recovery of investment tax credits                                 (669)      (1,016) 
Depreciation of plant and equipment                                 163          134  
Amortization of intangible assets                                 1,128        1,049  
Interest expense on bank debt                                       290          521  
Stock-based compensation                                            261          296  
Foreign exchange loss (gain)                                        785          (75) 
                                                               --------     --------
Total expenses                                                   20,536       18,982
                                                               --------     --------  
Earnings before income taxes                                      9,728        6,280
                                                               --------     --------  
Current income tax expense                                        4,296        3,230  
Deferred income tax (recovery) expense                             (550)         185  
                                                               --------     --------
Total income tax expense                                          3,746        3,415  
Net earnings                                                      5,982        2,865
                                                               --------     --------  
Attributable to                                                                      
Non-controlling interest                                            (76)         (10) 
                                                               --------     --------
Equity holders of Firan                                           6,058        2,875
                                                               --------     --------  
Earnings per share, attributable to the equity holders of Firan                         
Basic                                                              0.27         0.13  
Diluted                                                            0.25         0.12  
                                                               --------     --------

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