Firan Technology Group Corporation (TSX: FTG) today announced
financial results for the first quarter 2019.
- Achieved sales of $25.4M, a 13%
increase over Q1 2018 after excluding $5M of one-time revenue
adjustment on a development contract from Q1 last year
- Achieved record sales from the FTG
Aerospace Tianjin facility, up 68% over Q1 2018
- Achieved Earnings Before Interest,
Taxes, Depreciation and Amortization (EBITDA) of $3.2M in Q1 2019,
an increase of $1.7M or 122% over last year
- Achieved trailing twelve month
EBITDA of $12.3M
- Achieved net income of $1.2M and
diluted earnings per share of $0.05 in Q1 2019, a $1.5M increase
over Q1 2018
- Achieved bookings of $24.3M in the
quarter.
- Subsequent to the end of Q1 2019,
FTG announced it had entered into a definitive purchase agreement
to acquire a US based printed circuit board manufacturer, subject
to approval of the Committee on Foreign Investment in the United
States (CFIUS) and other customary closing conditions.
“The first quarter of 2019 was the fourth
quarter in a row with strong operating results. Our first
quarter is typically a seasonally slower quarter with lower
profitability as it includes the Christmas period and Chinese
Spring Festival but this year showed improved performance across
the Corporation,” stated Brad Bourne, President and Chief Executive
Officer. He added, “As announced after the quarter, we are excited
about our pending acquisition which will add needed capacity for
standard circuit board manufacturing freeing up capacity in
existing sites for higher end product and expand our offering for
the US defense market.”
First Quarter Results: (three months ended March 1, 2019
compared with three months ended March 2, 2018)
|
|
Q1
2019 |
|
|
Q1
2018 |
|
Sales |
$ |
25,390,000 |
|
$ |
27,528,000 |
|
|
|
|
Gross Margin |
|
6,754,000 |
|
|
4,847,000 |
|
Gross Margin (%) |
|
26.6 |
% |
|
17.6 |
% |
|
|
|
Operating Earnings
(1): |
|
3,318,000 |
|
|
1,561,000 |
|
|
|
|
• Net
R&D Investment |
|
1,061,000 |
|
|
1,150,000 |
|
• Foreign
Exchange Loss (Gain) |
|
156,000 |
|
|
(26,000 |
) |
•
Recovery of Investment Tax Credits |
|
(150,000 |
) |
|
(152,000 |
) |
•
Amortization of Intangibles |
|
271,000 |
|
|
256,000 |
|
|
|
|
Net Earnings before
Tax |
|
1,980,000 |
|
|
333,000 |
|
|
|
|
• Tax
Expense |
|
807,000 |
|
|
654,000 |
|
•
Non-controlling Interests |
|
(45,000 |
) |
|
(28,000 |
) |
Net Earnings (Loss)
After Tax |
$ |
1,218,000 |
|
$ |
(293,000 |
) |
|
|
|
Earnings (Loss) per
share |
|
|
-
basic |
$ |
0.05 |
|
$ |
(0.01 |
) |
-
diluted |
$ |
0.05 |
|
$ |
(0.01 |
) |
|
|
|
- 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 Q1 2019 that
continue to improve the Corporation and position it for the future,
including:
- Achieved record sales from the FTG
Aerospace Tianjin facility, up 68% over Q1 2018
- Developed new Power over Ethernet
(POE) interface solution for simulator products
- Received Canadian Technical
Standard Order (TSO) approval for a Cursor Control Device enabling
FTG to begin production of this product under development over the
past 3 years
- Subsequent to the end of Q1, FTG
announced it has entered into a definitive agreement to acquire a
US based circuit board manufacturer – to add capacity in the
Circuits business and to enable FTG to offer standard circuit board
product to US based defense contractors. The acquisition is
conditional upon approval of the Committee on Foreign Investment in
the United States (CFIUS) and other customary closing
conditions.
For FTG, overall sales decreased by $2.1M or
7.8% from $27.5M in Q1 2018 to $25.4M in Q1 2019. Q1 2018 had
a one-time $5M revenue adjustment for the development program for
the C919 aircraft in China. Excluding this, the first quarter
2019 was up $2.8M or 13%. Against the adjusted baseline, both
the Circuits and Aerospace segments contributed to the growth. The
Canadian dollar was 7 cents weaker in Q1 2019 compared to the same
quarter last year and this contributed approximately $1.5M to the
growth.
The Circuits Segment sales in Q1 2019 were
$15.2M, up $1.1M or 7.6% versus Q1 2018, of which Circuits Toronto
was up while Circuits Chatsworth was down. Activity in China
was approximately $1M and is reported in the Circuits Toronto sales
as all orders flow through the Toronto site.
For the Aerospace segment, sales in Q1 2019 were
$10.2M compared to $13.4M in Q1 of last year, or $8.4M in Q1 last
year excluding the one-time development program revenue
adjustment. Excluding this amount, sales were up $1.8M or
21.1%. All three Aerospace sites were up year-over-year
against the adjusted Q1 2018 sales.
Gross margins of $6.8M in Q1 2019 were up $1.9M
compared to Q1 2018. In Q1 2019, the gross margin was 26.6%
compared to 17.6% in Q1 2018 (or about 20.2% in Q1 2018 excluding
the $5M one-time revenue and $0.3M one-time margin).
Earnings Before Interest, Tax, Depreciation and
Amortization (EBITDA) for FTG in Q1 2019 was $3.2M compared to
$1.4M in Q1 2018. Trailing twelve month EBITDA is $12.3M.
The following table reconciles EBITDA(2)
to the net earnings for the trailing 12 months as at Mar 1,
2019.
|
Trailing 12 Months |
|
|
Net earnings |
|
4,359,000 |
Add: |
|
Interest |
|
447,000 |
Income
taxes/ITC/JV |
|
2,801,000 |
Depreciation/Amortization |
|
4,655,000 |
|
|
EBITDA |
$ |
12,262,000 |
|
|
|
- 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 profit after tax at FTG in Q1 2019 was $1.2M
compared to a net loss of $0.3M in Q1 2018. Higher margins,
lower R&D spending and lower interest costs were offset by
higher SG&A costs and higher foreign exchange losses.
Five of FTG’s six sites had improved profitability while the FTG
Printronics JV in China was flat.
The Circuits segment net earnings before
corporate and interest and other costs was $2.2M in Q1 2019
compared to $0.8M in Q1 2018.
The Aerospace net earnings before corporate and
interest and other costs in Q1 2019 was $0.5M versus $0.0M in Q1
2018. Q1 2018 had approximately $0.3M benefit from the one-time
revenue adjustment noted above.
As at March 1, 2019, the Corporation’s net
working capital was $30.4M, an increase of $1.7M over year-end
2018. Higher inventories and lower accounts payable/accrued
liabilities were offset by lower cash, lower accounts receivables
and higher bank indebtedness.
Cashflow in Q1 2019 was ($1.9M) compared to
($0.3M) in Q1 last year, after investments in capital
equipment and contract costs. In Q1 2019, cash incentive
compensation payments were $1.0M and cash taxes paid were
$0.7M. The incentive compensation payments were higher in
2019 due to improved performance. The cash tax payments are
the result of being taxable in Ontario and represent a one-time
catch up payment of $0.6M for 2018 and installment payments for Q1
2019.
Net debt to EBITDA was 0.35:1 for the trailing
12 month period.
The Corporation will host a live conference call
on Thursday, April 11, 2019 at 8:30 am (EDT) to discuss the results
of Q1 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 FTG conference call. The Chairperson
is Mr. Brad Bourne. A replay of the call will be available
until May 11, 2019 and will be available on the FTG website at
www.ftgcorp.com. The number to call for a rebroadcast is
416-621-4642 or 1-800-585-8367, Conference ID 7866427.
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 CEOFiran Technology Group
CorporationTel: (416) 299-4000 x314bradbourne@ftgcorp.com
Melinda Diebel, Vice President and CFOFiran Technology Group
CorporationTel:(416) 299-4000 x264melindadiebel@ftgcorp.com
Additional information can be found at the
Corporation’s website www.ftgcorp.com
FIRAN TECHNOLOGY GROUP CORPORATION |
|
|
Interim Condensed Consolidated Balance Sheets |
|
|
|
|
|
(Unaudited) |
March 1, |
November 30, |
(in
thousands of Canadian dollars) |
2019 |
2018 |
ASSETS |
|
|
Current
assets |
|
|
Cash |
$ |
3,626 |
|
$ |
5,026 |
|
Accounts
receivable |
|
17,436 |
|
|
18,051 |
|
Contract assets |
|
131 |
|
|
645 |
|
Taxes receivable |
|
244 |
|
|
189 |
|
Inventories |
|
26,487 |
|
|
24,634 |
|
Prepaid
expenses |
|
1,763 |
|
|
1,816 |
|
|
|
49,687 |
|
|
50,361 |
|
Non-current
assets |
|
|
Plant
and equipment, net |
|
11,649 |
|
|
12,078 |
|
Deferred
income tax assets |
|
732 |
|
|
732 |
|
Investment tax credits receivable |
|
4,304 |
|
|
4,620 |
|
Contract costs |
|
280 |
|
|
276 |
|
Intangible assets and other assets, net |
|
2,806 |
|
|
3,069 |
|
Total assets |
$ |
69,458 |
|
$ |
71,136 |
|
LIABILITIES AND
EQUITY |
|
|
Current
liabilities |
|
|
Bank indebtedness |
$ |
995 |
|
$ |
- |
|
Accounts payable and
accrued liabilities |
|
13,998 |
|
|
16,278 |
|
Provisions |
|
782 |
|
|
849 |
|
Contract
liabilities |
|
1,384 |
|
|
1,966 |
|
Current portion of
long-term bank debt |
|
2,017 |
|
|
2,019 |
|
Income
tax payable |
|
123 |
|
|
563 |
|
|
|
19,299 |
|
|
21,675 |
|
Non-current
liabilities |
|
|
Long-term bank
debt |
|
4,886 |
|
|
5,404 |
|
Deferred
tax payable |
|
1,781 |
|
|
1,750 |
|
Total liabilities |
|
25,966 |
|
|
28,829 |
|
Equity |
|
|
Retained
earnings |
$ |
12,905 |
|
$ |
11,687 |
|
Accumulated other comprehensive (loss) |
|
(876 |
) |
|
(774 |
) |
|
|
12,029 |
|
|
10,913 |
|
Share
capital |
|
|
Common
shares |
|
19,323 |
|
|
19,323 |
|
Preferred
shares |
|
2,218 |
|
|
2,218 |
|
Contributed surplus |
|
8,746 |
|
|
8,672 |
|
Total equity attributable to FTG's
shareholders |
|
42,316 |
|
|
41,126 |
|
Non-controlling
interest |
|
1,176 |
|
|
1,181 |
|
Total equity |
|
43,492 |
|
|
42,307 |
|
Total liabilities and equity |
$ |
69,458 |
|
$ |
71,136 |
|
|
|
|
FIRAN TECHNOLOGY GROUP CORPORATION |
|
|
|
Interim Condensed Consolidated Statements of Earnings
(Loss) |
|
|
|
|
|
|
|
Three months ended |
(Unaudited) |
March 1, |
|
March 2, |
(in
thousands of Canadian dollars, except per share amounts) |
2019 |
|
2018 |
|
|
|
|
Sales |
$ |
25,390 |
|
|
$ |
27,528 |
|
|
|
|
|
Cost of
sales |
|
|
|
Cost of
sales |
|
17,808 |
|
|
|
21,974 |
|
Depreciation of plant and equipment |
|
828 |
|
|
|
707 |
|
Total cost of sales |
|
18,636 |
|
|
|
22,681 |
|
Gross margin |
|
6,754 |
|
|
|
4,847 |
|
|
|
|
|
Expenses |
|
|
|
Selling,
general and administrative |
|
3,316 |
|
|
|
3,105 |
|
Research
and development costs |
|
1,116 |
|
|
|
1,205 |
|
Recovery
of research and development costs |
|
(55 |
) |
|
|
(55 |
) |
Recovery
of investment tax credits |
|
(150 |
) |
|
|
(152 |
) |
Depreciation of plant and equipment |
|
43 |
|
|
|
30 |
|
Amortization of intangible assets |
|
271 |
|
|
|
256 |
|
Interest
expense on short-term debt |
|
3 |
|
|
|
86 |
|
Interest
expense on long-term debt |
|
74 |
|
|
|
65 |
|
Foreign
exchange loss (gain) |
|
156 |
|
|
|
(26 |
) |
Total expenses |
|
4,774 |
|
|
|
4,514 |
|
|
|
|
|
Earnings before income taxes |
|
1,980 |
|
|
|
333 |
|
|
|
|
|
Current
income tax expense |
|
777 |
|
|
|
625 |
|
Deferred
income tax expense |
|
30 |
|
|
|
29 |
|
Total income tax
expense |
|
807 |
|
|
|
654 |
|
|
|
|
|
Net earnings (loss) |
$ |
1,173 |
|
|
$ |
(321 |
) |
|
|
|
|
Attributable
to: |
|
|
|
Non-controlling interest |
$ |
(45 |
) |
|
$ |
(28 |
) |
Equity holders of FTG |
$ |
1,218 |
|
|
$ |
(293 |
) |
|
|
|
|
Earnings (loss) per share, attributable to the equity
holders of FTG |
|
|
|
Basic |
$ |
0.05 |
|
|
$ |
(0.01 |
) |
Diluted |
$ |
0.05 |
|
|
$ |
(0.01 |
) |
|
|
|
|
FIRAN TECHNOLOGY GROUP CORPORATION |
|
|
|
Interim Condensed Consolidated Statements of Comprehensive
Income (Loss) |
|
|
|
|
|
Three months ended |
(Unaudited) |
March 1, |
|
March 2, |
(in
thousands of Canadian dollars) |
2019 |
|
2018 |
|
|
|
|
Net earnings
(loss) |
$ |
1,173 |
|
|
$ |
(321 |
) |
|
|
|
|
Other comprehensive
income (loss) to be reclassified to net earnings in subsequent
periods: |
|
|
|
|
|
|
|
Foreign
currency translation adjustments |
|
1,181 |
|
|
|
(112 |
) |
Net
unrealized (loss) gain on derivative financial instruments
designated as cash flow hedges |
|
(1,658 |
) |
|
|
236 |
|
Tax
impact |
|
415 |
|
|
|
(59 |
) |
|
|
|
|
|
|
(62 |
) |
|
|
65 |
|
|
|
|
|
Total comprehensive income (loss) |
$ |
1,111 |
|
|
$ |
(256 |
) |
|
|
|
|
Attributable
to: |
|
|
|
Equity holders of
FTG |
$ |
1,116 |
|
|
$ |
(278 |
) |
Non-controlling interest |
$ |
(5 |
) |
|
$ |
22 |
|
|
|
|
|
FIRAN TECHNOLOGY GROUP CORPORATION |
|
|
|
|
|
|
Interim Condensed Consolidated Statements of Changes in
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended March 1, 2019 |
|
|
Attributed to the equity holders of
FTG |
|
|
|
(Unaudited)(in thousands of Canadian dollars) |
CommonShares |
PreferredShares |
RetainedEarnings |
ContributedSurplus |
AccumulatedOtherComprehensiveIncome
(Loss) |
Total |
Non-controllinginterest |
Totalequity |
Balance, November 30,
2018 |
$ |
19,323 |
$ |
2,218 |
$ |
11,687 |
|
$ |
8,672 |
|
$ |
(774 |
) |
$ |
41,126 |
|
$ |
1,181 |
|
$ |
42,307 |
|
Net earnings
(loss) |
|
- |
|
- |
|
1,218 |
|
|
- |
|
|
- |
|
|
1,218 |
|
|
(45 |
) |
|
1,173 |
|
Stock-based
compensation |
|
- |
|
- |
|
- |
|
|
74 |
|
|
- |
|
|
74 |
|
|
- |
|
|
74 |
|
Common shares issued on
exercise of share options and PSU's |
|
- |
|
- |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Foreign currency
translation adjustments |
|
- |
|
- |
|
- |
|
|
- |
|
|
1,141 |
|
|
1,141 |
|
|
40 |
|
|
1,181 |
|
Net unrealized (loss)
gain on derivative financial instruments designated as cash flow
hedges, net of tax impact |
|
- |
|
- |
|
- |
|
|
- |
|
|
(1,243 |
) |
|
(1,243 |
) |
|
- |
|
|
(1,243 |
) |
Balance, March 1, 2019 |
$ |
19,323 |
$ |
2,218 |
$ |
12,905 |
|
$ |
8,746 |
|
$ |
(876 |
) |
$ |
42,316 |
|
$ |
1,176 |
|
$ |
43,492 |
|
|
|
|
|
|
|
|
|
|
Three months ended
March 02, 2018 |
|
|
Attributed to the equity holders of FTG |
|
|
|
(Unaudited)(in thousands of Canadian dollars) |
CommonShares |
PreferredShares |
RetainedEarnings |
ContributedSurplus |
AccumulatedOtherComprehensiveIncome (Loss) |
Total |
Non-controllinginterest |
Totalequity |
Balance, November 30,
2017 |
$ |
19,295 |
$ |
2,218 |
$ |
8,812 |
|
$ |
8,384 |
|
$ |
187 |
|
$ |
38,896 |
|
$ |
1,214 |
|
$ |
40,110 |
|
Net (loss) |
|
- |
|
- |
|
(293 |
) |
|
- |
|
|
- |
|
|
(293 |
) |
|
(28 |
) |
|
(321 |
) |
Stock-based
compensation |
|
- |
|
- |
|
- |
|
|
74 |
|
|
- |
|
|
74 |
|
|
- |
|
|
74 |
|
Common shares issued on
exercise of share options and PSU's |
|
17 |
|
- |
|
- |
|
|
(5 |
) |
|
- |
|
|
12 |
|
|
- |
|
|
12 |
|
Foreign currency
translation adjustments |
|
- |
|
- |
|
- |
|
|
- |
|
|
(163 |
) |
|
(163 |
) |
|
51 |
|
|
(112 |
) |
Net unrealized gain
(loss) on derivative financial instruments designated as cash flow
hedges, net of tax impact |
|
- |
|
- |
|
- |
|
|
- |
|
|
177 |
|
|
177 |
|
|
- |
|
|
177 |
|
Balance, March 2, 2018 |
$ |
19,312 |
$ |
2,218 |
$ |
8,519 |
|
$ |
8,453 |
|
$ |
201 |
|
$ |
38,703 |
|
$ |
1,237 |
|
$ |
39,940 |
|
|
|
|
|
|
|
|
|
|
FIRAN TECHNOLOGY GROUP CORPORATION |
|
|
|
Interim Condensed Consolidated Statements of Cash
Flows |
|
|
|
|
|
|
|
|
Three months ended |
(Unaudited) |
March 1, |
|
March 2, |
(in
thousands of Canadian dollars) |
2019 |
|
2018 |
Net inflow (outflow) of
cash related to the following: |
|
|
|
Operating activities |
|
|
|
Net earnings (loss) |
$ |
1,173 |
|
|
$ |
(321 |
) |
Items not affecting
cash: |
|
|
|
Non-controlling interest share of net loss |
|
45 |
|
|
|
28 |
|
Stock-based compensation |
|
74 |
|
|
|
74 |
|
Loss on
disposal of plant and equipment |
|
7 |
|
|
|
- |
|
Effect of
exchange rates on US dollar debt |
|
(14 |
) |
|
|
2 |
|
Depreciation of plant and equipment |
|
871 |
|
|
|
737 |
|
Amortization of intangible assets |
|
271 |
|
|
|
256 |
|
Amortization of deferred financing costs |
|
3 |
|
|
|
3 |
|
Current/deferred income tax expense |
|
496 |
|
|
|
625 |
|
Investment tax credits (recovery) |
|
(150 |
) |
|
|
(152 |
) |
(Increase) in net unrealized loss, decrease in net unrealized gain
on derivative financial instruments designated as cash flow
hedges |
|
(220 |
) |
|
|
(35 |
) |
Net
change in non-cash operating working capital |
|
(4,087 |
) |
|
|
(1,053 |
) |
|
|
(1,531 |
) |
|
|
164 |
|
Investing
activities |
|
|
|
Additions
to plant and equipment |
|
(391 |
) |
|
|
(792 |
) |
Additions
to contract costs, other |
|
(18 |
) |
|
|
288 |
|
|
|
(409 |
) |
|
|
(504 |
) |
Net cash flow used by operating and investing
activities |
|
(1,940 |
) |
|
|
(340 |
) |
Financing
activities |
|
|
|
Increase
(decrease) in bank indebtedness |
|
995 |
|
|
|
(643 |
) |
Proceeds
from long-term bank debt |
|
- |
|
|
|
1,289 |
|
Repayments of long-term bank debt |
|
(509 |
) |
|
|
(436 |
) |
Proceeds from issue of Common shares |
|
- |
|
|
|
12 |
|
|
|
486 |
|
|
|
222 |
|
Effects of foreign exchange rate changes on cash
flow |
|
54 |
|
|
|
5 |
|
Net (decrease) in cash flow |
|
(1,400 |
) |
|
|
(113 |
) |
Cash,
beginning of the period |
|
5,026 |
|
|
|
2,752 |
|
Cash, end of period |
$ |
3,626 |
|
|
$ |
2,639 |
|
|
|
|
|
Disclosure of
cash payments |
|
|
|
Payment
for interest |
$ |
81 |
|
|
$ |
156 |
|
Payments for income taxes |
$ |
738 |
|
|
$ |
7 |
|
|
|
|
|
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