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For Immediate Release: April 07, 2016
Firan Technology Group (FTG) Announces First Quarter 2016 Financial Results
Toronto, April 7, 2016 – Firan Technology Group Corporation (TSX:FTG) 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

Sales: $16,929,000

Gross Margin: $3,752,000
Gross Margin (%): 22.2%

Operating Earnings (1): $1,220,000

• Net R&D Investment: $717,000
• Foreign Exchange gain: ($55,000)
• Recovery of Investment Tax Credits: ($167,000)

Net Earnings before Tax: $725,000

• Current Tax Expense: $16,000
• Deferred Tax expense (non-cash): $259,000
• Non-controlling Interests: $0.00

Net Earnings After Tax: $450,000
Earnings per share
- basic: $0.02
- diluted: $0.02

Q1 2015

Sales: $16,307,000

Gross Margin: $3,069,000
Gross Margin (%): 18.8%

Operating Earnings (1): $554,000

• Net R&D Investment: $1,013,000
• Foreign Exchange gain: ($956,000)
• Recovery of Investment Tax Credits: $0.00

Net Earnings before Tax: $497,000

• Current Tax Expense: $11,000
• Deferred Tax expense (non-cash): $60,000
• Non-controlling Interests: $4,000

Net Earnings After Tax: $422,000
Earnings per share
- basic: $0.02
- diluted: $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:
• 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
• Received initial production orders from two large aerospace customers at the FTG Printronics Circuits joint venture in China
• 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
• 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
o Completed all risk reduction testing successfully
o Built qualification test hardware for test and certification later in 2016

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.


For further information please contact:

Bradley C. Bourne, President and CEO
Tel: (416) 299-4000 x 314
Firan Technology Group Corporation bradbourne@ftgcorp.com

Joseph R. Ricci, Vice President and CFO
Tel: (416) 299-4000 x 309
Firan Technology Group Corporation joericci@ftgcorp.com

Additional information can be found at the Corporation’s website www.ftgcorp.com



Related files

Q1 2016 Financial Statements - 279.6KB