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.
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)
Nov. 30, Nov. 30,
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
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
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
We seek Safe Harbor.
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