Firan Technology Group (FTG) Announces Full Year 2007 Financial Results

For Immediate Release: January 23, 2008

FIRAN TECHNOLOGY GROUP (FTG) ANNOUNCES FULL YEAR 2007 FINANCIAL RESULTS

Toronto, January 23, 2008 – Firan Technology Group Corporation (TSX:FTG) today announced the fourth quarter and the fiscal year ended November 30, 2007.

Fiscal Year 2007 Results (twelve months ended November 30, 2007 compared with twelve months ended November 30, 2006)

Fiscal Year 2007:
Sales: $55,632,000
(Loss)/Earnings Before Tax and
Before SR&ED Tax Credits (2): ($1,523,000)
Taxes and SR&ED Tax Credits: $4,308,000
Net (Loss)/Earnings: ($5,831,000)
(Loss)/Earnings per share
– basic: ($0.33)
– diluted: ($0.33)

Fiscal Year 2006:
Sales: $55,400,000
(Loss)/Earnings Before Tax and
Before SR&ED Tax Credits (2): $948,000
Taxes and SR&ED Tax Credits: ($849,000)
Net (Loss)/Earnings: $1,797,000
(Loss)/Earnings per share
– basic: $0.10
– diluted: $0.09

The Corporation’s revenue grew in fiscal year 2007 to $55,632,000, an increase of $232,000 over 2006 and 115% growth over the past five years. This growth is the result of the corporate development activities including the merger of FTG and Circuit World in 2003 and the acquisition of Young Electronics in December 2004 as well as organic growth through the re-structured, enhanced sales organization. During the year, FTG’s largest customer transitioned some printed circuit board production to the Far East. This impacted FTG’s total revenue by $2,945,000 in 2007, primarily from the Circuits – Toronto facility. When comparing 2007 to 2006, the strengthening of the Canadian dollar versus the US dollar negatively impacted FTG’s revenue by $2,000,000. FTG’s revenue growth excluding the impact of the change in the exchange rate and the transition of revenue from this one customer was $5,210,000 or 9.4%.

Fiscal year 2007 sales for the Circuits’ segment were $43,413,000, a decrease of $1,346,000 or 3% over the comparable period in 2006. The revenue change was slightly positive year-over-year, excluding the impact of the US/Canada exchange rate and was up 7.5% excluding the impact of the transition of revenue from the one customer.

Fiscal year 2007 sales for the Aerospace segment were $12,219,000 compared to $10,641,000 for the comparable period in 2006, an increase of 15%. The increase was over 17% excluding the impact of the strengthening Canada dollar.

FTG had a net loss of $5,831,000 in fiscal year 2007, compared to net earnings of $1,797,000 in fiscal year 2006. The 2006 results include the benefit of $1,120,000 SR&ED tax credits recorded in recovery of research & development whereas the 2007 results have the reversal of the 2006 credits and no new credits.

The Corporation wrote off $4,310,000 of the future tax asset and investment tax credits recoverable based on management’s inability to forecast future trends in exchange rates, decreases in income tax rates, the dynamics associated with the transfer of manufacturing to the Far East and historical cumulative tax losses.

In spite of this write down, management believes they are taking steps to overcome these challenges and return to their expected levels of performance. Such steps include the recent acquisition of Filtran Microcircuits Inc., the major capital asset program initiated in the current year and the expansion of capacity at the FTG Circuits – Chatsworth facility.

The results in 2007 were negatively impacted by the following items:

-The non-cash write down of future income taxes of $4,310,000 – including the $1,120,000 of SR&ED tax credits noted above
-The strengthening of the Canadian dollar of $1,100,000
-Increased expenses associated with outside subcontracted manufacturing services during the year, before new equipment was installed, of $1,000,000
-The move of FTG Aerospace into a new facility of $300,000
-Increased material and other costs of $800,000

FTG accomplished many goals in 2007 that continue to improve the company and position it for the future, including:

-Contract wins, new/increased qualification levels, new programs with Honeywell, Rockwell Collins, General Electric, Harris Corp, Northrop Grumman, Benchmark Electronics, ACSS, Jabil, Sanmina-SCI, Bombardier, Embraer, Lockheed Martin, BAe, and others.
-New Manufacturing Resource Planning (” MRP”) system in FTG Circuits-Chatsworth
-New engineering system in FTG Circuits-Toronto
-New facility for FTG Aerospace
-Increased technical capabilities in the Circuits business including rigid flex, high density interconnects, high frequency materials, buried passive components, micro-vias and stacked micro-vias
-Increased technical capabilities in the Aerospace business including lighting power supplies, increased range of Light Emitting Diodes (“LED”) applications, increased electronic design and test capabilities
-Continued improving performance on quality and delivery metrics with customers
-Strengthened management team with additions and promotions across the Corporation.

Earnings before interest, taxes, depreciation and amortization (EBITDA) (1) for the full year were $2,229,000, a decrease of $3,573,000 or 61.5% over 2006.

Fourth Quarter Results (three months ended November 30, 2007 compared with three months ended November 30, 2006)

Q4 2007:
Sales: $12,563,000
(Loss)/Earnings Before Tax and
Before SR&ED Tax Credits (2): ($1,716,000)
Taxes and SR&ED Tax Credits: $4,757,000
Net (Loss)/Earnings: ($6,473,000)
(Loss)/Earnings per share
– basic: ($0.37)
– diluted: ($0.37)

Q4 2006:
Sales: $13,603,000
(Loss)/Earnings Before Tax and
Before SR&ED Tax Credits (2): $121,000
Taxes and SR&ED Tax Credits: ($790,000)
Net (Loss)/Earnings: $911,000
(Loss)/Earnings per share
– basic: $0.05
– diluted: $0.04

Sales for the fourth quarter of 2007 were $12,563,000, a decrease of 8% compared with $13,603,000 for the fourth quarter of 2006. Excluding the impact of the strengthening Canadian dollar, sales increased 1% versus the prior year.

The Circuits segment sales for the quarter were $9,708,000, a decrease of $815,000 or 8% over the prior year. The reduction was due partly to the strength of the Canadian dollar compared to the prior year that reduced sales by more than $1,000,000 and partly due to reduced shipments to FTG’s largest customer who transitioned some business to Far East suppliers. Offsetting these negative factors was increased activity from other customers and the addition of new customers.

The Aerospace segment sales for the current quarter ended at $2,855,000 which was a decrease of 7% versus the same quarter last year. The fourth quarter shipments were impacted $200,000 by the strengthening exchange rate and by the move of the business into a new, larger facility.

Net loss for the fourth quarter was $6,473,000 or loss of $0.37 per share ($0.37 per diluted share) as compared with net income of $911,000 or $0.05 per share ($0.04 earnings per diluted share) in the same period in 2006. In addition to the write down of the future tax asset by $4,850,000, including the reversal of the SR&ED tax credits recorded in recovery of research & development costs, the quarter was impacted by:

-The impact of change in the U.S. exchange rate of $1,200,000
-The impact of the move of the Aerospace facility of $300,000
-The impact of the an aggressive plan to reduce inventories by $1,346,000

As at November 30, 2007, the Corporation’s primary source of liquidity included, accounts receivable of $10,761,000 and inventory of $7,621,000. Working capital at November 30, 2007 was $9,730,000.

Subsequent to the year-end, FTG acquired substantially all the assets of Filtran Microcircuits, Inc., for $1,450,000 plus the assumption of some liabilities. The acquisition will accelerate FTG’s penetration of very high frequency circuit board applications. FTG intends to transition the activities of Filtran into its existing facilities in Toronto, Ontario and Chatsworth California. In addition to the strategic benefit of penetrating a new market segment, the acquisition immediately offsets the loss of revenues from business transitioned to Far East suppliers.

“While the end of 2007 brought a number of new challenges to FTG, we are confident that we can overcome them and return to our expected levels of performance. We will remain committed to Operational Excellence and to exceeding the expectations of our customers” stated Mr. Brad Bourne, President and Chief Executive Officer. “While the transition of work from FTG to the Far East is another challenge, we are accelerating our plans to be able to address this demand for all our customers. Such steps include the recent acquisition of Filtran Microcircuits Inc., the major capital asset program initiated in the current year and the expansion of capacity at the FTG Circuits – Chatsworth facility. While we are not overly concerned with our level of customer concentration, we continue to take steps to add key new customers to reduce the impact of any one customer on our total business”, he added.

Mr. Bourne added, “The Corporation’s external focus will continue to be in the aerospace and defense markets and on strengthening our leadership positions in the market segments in which we participate. Our customer base is forecasting continued growth. With a solid business foundation and a great management team, we continue to proactively take steps to further improve the company. We look to advance our technology levels in both businesses, continue our never-ending focus on operational excellence and proactively investigate acquisitions. We will continue to drive towards creating shareholder value everyday.”

Reconciliation of EBITDA (1) Full Year 2007:
Net (loss)/earnings: ($5,831,000)
Add:
Income taxes and SR&ED credits: $4,310,000
Interest expense: $578,000
Amortization of capital assets: $2,977,000
Amortization of other financing costs: $195,000
EBITDA: $2,229,000

Reconciliation of EBITDA (1) Full Year 2006:
Net (loss) earnings: $1,797,000
Add:
Income taxes and SR&ED credits: $271,000
Interest expense: $483,000
Amortization of capital assets: $3,099,000
Amortization of ther financing costs: $152,000
EBITDA: 5,802,000

(1) EBITDA is not a measure recognized under Canadian generally accepted accounting principles (“GAAP”). EBITDA is calculated as earnings before provision for income taxes, interest expense, amortization of capital assets and other financing costs. Management believes that many of the Corporation’s shareholders, creditors, other stakeholders and analysts prefer to assess the Corporation’s performance using EBITDA in addition to the GAAP measures. The Corporation’s method of calculating EBITDA may differ from other companies and accordingly may not be comparable to measures used by other companies.

(2) (Loss) / Earnings Before Tax and Before SR&ED Tax Credits is not a measure recognized under Canadian generally accepted accounting principles (“GAAP”). It is calculated as (Loss) / Earnings Before Income Taxes of $2,643,000 less the impact of the $1,120,000 of Scientific Research & Experimental Development (“SRED”) tax credits. Management believes that many of the Corporation’s shareholders, creditors, other stakeholders and analysts prefer to assess the Corporation’s performance using this measure in addition to the GAAP measures.

The Corporation will host a live conference call on January 24, 2008 at 8:30am (EDT) to discuss the results of 2007.

Anyone wishing to participate in the call should dial 416-695-9748 or 1-866-902-2211 and identify that you are calling to participate in the FTG conference call. The Chairperson is Mr. Bradley Bourne. A replay of the call will be available until February 7, 2008 and will be available on the FTG website at www.ftgcorp.com. The number to call for a rebroadcast is 416-695-5800 or 1-800-408-3053, pass code 3249124.

ABOUT FIRAN TECHNOLOGY GROUP CORPORATION

FTG is an aerospace and defense electronics product and subsystem supplier to the North American marketplace. 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 and Chatsworth, California.

FTG Aerospace manufactures illuminated cockpit panels, keyboards and sub-assemblies for original equipment manufacturers of avionics products as well as airframe manufacturers.

The Company’s shares are traded on the Toronto Stock Exchange under the symbol FTG.

This news release contains certain forward-looking statements. Such statements are based on the current expectations of management of the Company and inherently involve numerous risks and uncertainties, known and unknown, including economic factors and the Company’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 Company. The reader is cautioned to consider these and other factors carefully when making decisions with respect to the Company and not place undue reliance on forward-looking statements.

Link To Spreadsheet

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 Company’s web site www.ftgcorp.com