Firan Technology Group Corporation ("FTG" or "Corporation") Announces Second Quarter 2017 Financial Results
TORONTO, ONTARIO--(Marketwired - Jul 17, 2017) - Firan Technology Group Corporation (FTG.TO) today announced financial results for the second quarter of 2017.
Achieved sales of $25.5M, an increase of 29% over Q2 2016
Grew Aerospace segment sales by 60% over Q2 last year
Grew Circuits segment sales by 17% over Q2 last year
Gross margins increased by $0.9M or 18% over Q2 last year
Closed the Teledyne PCT facility at the end of Q2
Q2 profitability impacted by the extension of Teledyne PCT operations and ongoing ramp up of activity of Chatsworth operations, which are expected to continue to ramp up through Q3
"The second quarter of 2017 saw continued growth in FTG from last year's acquisitions and progress in transitioning the work into FTG's legacy facilities", stated Brad Bourne, President and Chief Executive Officer. He added, "We continue to achieve the sales growth expectations from the acquisitions but did incur increased costs in the quarter related to the transition due to the extended use of the Hudson facility as well as ramp up costs in Chatsworth. We remain focused on completing all transition tasks to support customer demands and ultimately generating the anticipated returns from the acquisitions."
Second Quarter Results: (three months ended June 2, 2017 compared with three months ended May 27, 2016)
Q2 2017 | Q2 2016 | |||||||
Sales | $ | 25,513,000 | $ | 19,765,000 | ||||
Gross Margin | 5,753,000 | 4,860,000 | ||||||
Gross Margin (%) | 22.5 | % | 24.6 | % | ||||
Operating Earnings (1): | 2,581,000 | 1,912,000 | ||||||
• | Net R&D Investment | 1,846,000 | 807,000 | |||||
• | Bargain Purchase Gain | - | (1,611,000 | ) | ||||
• | Restructuring Expense | - | 670,000 | |||||
• | Foreign Exchange (Gain) Loss | (118,000 | ) | 360,000 | ||||
• | Recovery of Investment Tax Credits | (188,000 | ) | (180,000 | ) | |||
• | Amortization of Intangibles | 286,000 | 32,000 | |||||
Net Earnings before Tax | 755,000 | 1,834,000 | ||||||
• | Tax Expense | 650,000 | 478,000 | |||||
• | Non-controlling Interests | (19,000 | ) | 6,000 | ||||
Net Earnings After Tax | $ | 124,000 | $ | 1,350,000 | ||||
Earnings per share | ||||||||
- basic | $0.01 | $0.07 | ||||||
- diluted | $0.01 | $0.07 | ||||||
Year-to-Date Results: (six months ended June 2, 2017 compared with six months ended May 27, 2016)
YTD 2017 | YTD 2016 | |||||||
Sales | $ | 52,685,000 | $ | 36,694,000 | ||||
Gross Margin | 12,639,000 | 8,612,000 | ||||||
Gross Margin (%) | 24.0 | % | 23.5 | % | ||||
Operating Earnings (1): | 5,598,000 | 3,144,000 | ||||||
• | Net R&D Investment | 3,256,000 | 1,524,000 | |||||
• | Bargain Purchase Gain | - | (1,611,000 | ) | ||||
• | Restructuring Expense | - | 670,000 | |||||
• | Foreign Exchange Loss | 43,000 | 305,000 | |||||
• | Recovery of Investment Tax Credits | (329,000 | ) | (347,000 | ) | |||
• | Amortization of Intangibles | 567,000 | 44,000 | |||||
Net Earnings before tax | 2,061,000 | 2,559,000 | ||||||
• | Income Tax | 1,155,000 | 753,000 | |||||
• | Non-controlling Interests | (18,000 | ) | 6,000 | ||||
Net Earnings after tax | $ | 924,000 | $ | 1,800,000 | ||||
Earnings per share | ||||||||
- basic | $0.04 | $0.10 | ||||||
- diluted | $0.04 | $0.09 | ||||||
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 second quarter of 2017 that continue to improve the Corporation and position it for the future, including:
Closed the Teledyne PCT facility at the end of May
Achieved sales resulting from the PhotoEtch acquisition of $2.9M in the quarter versus the target of $1.5M
Achieved sales resulting from the Teledyne PCT acquisition of $5.0M in the quarter versus the target of $4M
FTG cockpit products flew on the first flight of the COMAC C919 aircraft in China.
For FTG, overall sales increased by $5.7M or 29% from $19.8M in Q2 2016 to $25.5M in Q2 2017. Both business segments participated in the growth. Revenues benefited from the PhotoEtch acquisition which closed in March 2016 and contributed $2.9M in sales in Q2 2017 compared to $1.3M in incremental sales during the same quarter last year. Revenues also benefited from the acquisition of Teledyne PCT which contributed $5.0M in incremental sales in Q2 2017. For the year-to-date, sales were up $16.0M or 44%.
The Circuits Segment sales were up $2.4M or 17% in Q2 2017 versus Q2 2016. On a year-to-date basis, Circuits sales were up $5.3M or 20%. Circuits sales in 2017 year-to-date period have been lifted slightly by the inclusion of some incremental revenue from the acquisition of Teledyne PCT.
For the Aerospace segment, sales in Q2 2017 were $8.9M compared to $5.6M in the same quarter last year resulting in a 60% growth rate. Included in the Q2 2017 results are $2.9M in sales from the acquisition of PhotoEtch and the majority of the Teledyne PCT incremental sales. From Q1 to Q2 2017, the sales related to the Teledyne PCT acquisition were down approximately $3.0M as operations wound down in the second half of the quarter and the facility was closed. Activity in Chatsworth has ramped up considerably in Q2 but will continue through Q3 as equipment is moved and installed, inventory is transferred and training continues on the handling of the new equipment and the building of new products. Year-to-date sales were up $10.7M or 107% in the Aerospace segment.
Gross margins in Q2 2017 were up $0.9M compared to Q2 2016. The benefit of increased sales were offset by increased costs related to operations of the Teledyne PCT facility to the end of Q2, as well as transition related costs.
Normalized earnings before interest, tax, depreciation and amortization (EBITDA) for FTG for Q2 2017 was $1.8M and $8.6M for the trailing twelve months.
The following table reconciles EBITDA(2) to the net earnings for Q2, 2017.
Q2 2017 | Trailing | ||||||
Twelve | |||||||
Months | |||||||
Net earnings | $ | 124,000 | 5,039,000 | ||||
Add: | |||||||
Interest | 130,000 | 456,000 | |||||
Income taxes/ITC | 443,000 | 1,442,000 | |||||
Depreciation/Amortization | 1,170,000 | 3,857,000 | |||||
One-time Bargain Purchase Gain/Restructuring | - | (2,197,000 | ) | ||||
EBITDA | $ | 1,867,000 | $ | 8,597,000 |
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 Q2 2017 was $0.1M compared to a net profit of $1.4M in Q2 2016. Q2 2017 had higher R&D costs substantially related to the transition of Teledyne PCT product to Chatsworth, higher operating costs related to the ongoing transition, higher amortization of intangible assets and higher income taxes. Q2 2016 results also included a one-time bargain purchase gain related to the PhotoEtch acquisition.
The Circuits segment net earnings before corporate and interest and other costs was $2.6M in Q2 2017 compared to $1.7M in Q2 2016. The Circuits joint venture in China did not have a material impact on profitability.
The Aerospace segment net loss before interest and income taxes was ($1.0M) versus $0.7M in Q2 2016. The results in Q2 last year included a net $0.9M benefit from the bargain purchase gain offset by the restructuring charge, both related to the acquisition of PhotoEtch. Q2 2017 included the costs of running the Teledyne PCT facility in parallel with ramping up the Aerospace Chatsworth facility, resulting in double costs. This combined with reduced production in the second half of Q2 as the transition of equipment and inventory was initiated hurt short term profitability. There was negligible deferred development on any programs in Q2 2107.
As at June 2, 2017, the Corporation's net working capital was $22.8M, an increase of $0.4M over year-end 2016.
The Corporation will host a live conference call on Monday, July 17, 2017 at 11:30 am (EDT) to discuss the results of Q2 2017.
Anyone wishing to participate in the call should dial 416-340-2220 or 1-866-225-2055 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 July 27, 2017 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 8837518#.
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.
Additional information can be found at the Corporation's website www.ftgcorp.com.
FIRAN TECHNOLOGY GROUP CORPORATION | ||||||||
Interim Condensed Consolidated Balance Sheets | ||||||||
(Unaudited) | June 02, | November 30, | ||||||
(in thousands of Canadian dollars) | 2017 | 2016 | ||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | 3,636 | $ | 3,152 | ||||
Accounts receivable | 18,689 | 21,022 | ||||||
Taxes receivable | 369 | 259 | ||||||
Inventories | 22,169 | 22,464 | ||||||
Prepaid expenses | 1,234 | 1,776 | ||||||
46,097 | 48,673 | |||||||
Non-current assets | ||||||||
Plant and equipment, net | 10,974 | 8,851 | ||||||
Deferred income tax assets | 278 | 1,327 | ||||||
Investment tax credits receivable | 7,659 | 7,330 | ||||||
Deferred development costs | 582 | 739 | ||||||
Intangible assets, net | 4,521 | 5,066 | ||||||
Total assets | $ | 70,111 | $ | 71,986 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities | ||||||||
Bank indebtedness | $ | 6,752 | $ | 6,983 | ||||
Accounts payable and accrued liabilities | 13,856 | 15,105 | ||||||
Provisions | 893 | 2,349 | ||||||
Customer deposits, net of deferred development | 307 | 308 | ||||||
Current portion of long-term bank debt | 1,519 | 1,510 | ||||||
23,327 | 26,255 | |||||||
Non-current liabilities | ||||||||
Long-term bank debt | 5,355 | 6,079 | ||||||
Deferred tax payable | 1,635 | 1,573 | ||||||
Total liabilities | 30,317 | 33,907 | ||||||
Equity | ||||||||
Retained earnings | $ | 8,467 | $ | 7,543 | ||||
Accumulated other comprehensive income | 366 | 443 | ||||||
8,833 | 7,986 | |||||||
Share capital | ||||||||
Common shares | 19,199 | 19,051 | ||||||
Preferred shares | 2,218 | 2,218 | ||||||
Contributed surplus | 8,263 | 8,381 | ||||||
Total equity attributable to FTG's shareholders | 38,513 | 37,636 | ||||||
Non-controlling interest | 1,281 | 443 | ||||||
Total equity | 39,794 | 38,079 | ||||||
Total liabilities and equity | $ | 70,111 | $ | 71,986 | ||||
FIRAN TECHNOLOGY GROUP CORPORATION | |||||||||||||
Interim Condensed Consolidated Statements of Earnings | |||||||||||||
Three months ended | Six months ended | ||||||||||||
(Unaudited) | June 02, | May 27, | June 02, | May 27, | |||||||||
(in thousands of Canadian dollars, except per share amounts) | 2017 | 2016 | 2017 | 2016 | |||||||||
Sales | $ | 25,513 | $ | 19,765 | $ | 52,685 | $ | 36,694 | |||||
Cost of sales | |||||||||||||
Cost of sales | 18,937 | 14,378 | 38,655 | 27,042 | |||||||||
Depreciation of plant and equipment | 823 | 527 | 1,391 | 1,040 | |||||||||
Total cost of sales | 19,760 | 14,905 | 40,046 | 28,082 | |||||||||
Gross margin | 5,753 | 4,860 | 12,639 | 8,612 | |||||||||
Expenses | |||||||||||||
Selling, general and administrative | 3,008 | 2,858 | 6,722 | 5,310 | |||||||||
Research and development costs | 1,886 | 877 | 3,366 | 1,664 | |||||||||
Recovery of research and development costs | (40 | ) | (70 | ) | (110 | ) | (140 | ) | |||||
Recovery of investment tax credits | (188 | ) | (180 | ) | (329 | ) | (347 | ) | |||||
Depreciation of plant and equipment | 34 | 26 | 66 | 54 | |||||||||
Amortization of intangible assets | 286 | 32 | 567 | 44 | |||||||||
Interest expense on short-term debt | 71 | 20 | 128 | 20 | |||||||||
Interest expense on long-term debt | 59 | 44 | 125 | 84 | |||||||||
Foreign exchange (gain) loss | (118 | ) | 360 | 43 | 305 | ||||||||
Bargain purchase gain | - | (1,611 | ) | - | (1,611 | ) | |||||||
Restructuring expenses | - | 670 | - | 670 | |||||||||
Total expenses | 4,998 | 3,026 | 10,578 | 6,053 | |||||||||
Earnings before income taxes | 755 | 1,834 | 2,061 | 2,559 | |||||||||
Current income tax (recovery) expense | (41 | ) | 15 | (24 | ) | 31 | |||||||
Deferred income tax expense | 691 | 463 | 1,179 | 722 | |||||||||
Total income tax expense | 650 | 478 | 1,155 | 753 | |||||||||
Net earnings | $ | 105 | $ | 1,356 | $ | 906 | $ | 1,806 | |||||
Attributable to: | |||||||||||||
Non-controlling interest | $ | (19 | ) | $ | 6 | $ | (18 | ) | $ | 6 | |||
Equity holders of FTG | $ | 124 | $ | 1,350 | 924 | 1,800 | |||||||
Earnings per share, attributable to the equity holders of FTG | |||||||||||||
Basic | $ | 0.01 | $ | 0.07 | $ | 0.04 | $ | 0.10 | |||||
Diluted | $ | 0.01 | $ | 0.07 | $ | 0.04 | $ | 0.09 | |||||
FIRAN TECHNOLOGY GROUP CORPORATION | |||||||||||||
Interim Condensed Consolidated Statements of Comprehensive Income | |||||||||||||
Three months ended | Six months ended | ||||||||||||
(Unaudited) | June 02, | May 27, | June 02, | May 27, | |||||||||
(in thousands of Canadian dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||
Net earnings | $ | 105 | $ | 1,356 | $ | 906 | $ | 1,806 | |||||
Other comprehensive income (loss) to be reclassified to net earnings in subsequent periods: | |||||||||||||
Foreign currency translation adjustments | 300 | (71 | ) | 813 | 788 | ||||||||
Net unrealized (loss) gain on derivative financial instruments designated as cash flow hedges | (226 | ) | 826 | (1,144 | ) | 181 | |||||||
Tax impact | 57 | (206 | ) | 286 | (45 | ) | |||||||
131 | 549 | (45 | ) | 924 | |||||||||
Total comprehensive income | $ | 236 | $ | 1,905 | $ | 861 | $ | 2,730 | |||||
Attributable to: | |||||||||||||
Equity holders of FTG | $ | 202 | $ | 1,901 | $ | 847 | $ | 2,726 | |||||
Non-controlling interest | $ | 34 | $ | 4 | $ | 14 | $ | 4 | |||||
FIRAN TECHNOLOGY GROUP CORPORATION | ||||||||||||||||||||
Interim Condensed Consolidated Statements of Changes in Equity | ||||||||||||||||||||
Six months ended June 02, 2017 | Attributed to the equity holders of FTG | |||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(in thousands of Canadian dollars) | Common Shares | Preferred Shares | Retained Earnings | Contributed Surplus | Accumulated Other Comprehensive Income (Loss) | Total | Non-controlling interest | Total equity | ||||||||||||
Balance, November 30, 2016 | $ | 19,051 | $ | 2,218 | $ | 7,543 | $ | 8,381 | $ | 443 | $ | 37,636 | $ | 443 | $ | 38,079 | ||||
Net earnings | - | - | 924 | - | - | 924 | (18 | ) | 906 | |||||||||||
Stock-based compensation | - | - | - | 24 | - | 24 | - | 24 | ||||||||||||
Common shares issued on exercise of share options and PSU's | 148 | - | - | (142 | ) | - | 6 | - | 6 | |||||||||||
Foreign currency translation adjustments | - | - | - | - | 781 | 781 | 32 | 813 | ||||||||||||
Net unrealized loss on derivative financial instruments designated as cash flow hedges, net of tax impact | - | - | - | - | (858 | ) | (858 | ) | - | (858 | ) | |||||||||
Contribution from non-controlling interest | - | - | - | - | - | - | 824 | 824 | ||||||||||||
Balance, June 02, 2017 | $ | 19,199 | $ | 2,218 | $ | 8,467 | $ | 8,263 | $ | 366 | $ | 38,513 | $ | 1,281 | $ | 39,794 | ||||
Six months ended May 27, 2016 | Attributed to the equity holders of FTG | |||||||||||||||||||
(in thousands of Canadian dollars) | Common Shares | Preferred Shares | Retained Earnings | Contributed Surplus | Accumulated Other Comprehensive Income (Loss) | Total | Non-controlling interest | Total equity | ||||||||||||
Balance, November 30, 2015 | $ | 13,075 | $ | 2,218 | $ | 1,628 | $ | 8,373 | $ | (233 | ) | $ | 25,061 | $ | 29 | $ | 25,090 | |||
Net earnings | - | - | 1,800 | - | - | 1,800 | 6 | 1,806 | ||||||||||||
Stock-based compensation | - | - | - | 24 | - | 24 | - | 24 | ||||||||||||
Common shares issued on exercise of share options | 34 | - | - | (9 | ) | - | 25 | - | 25 | |||||||||||
Foreign currency translation adjustments | - | - | - | - | 790 | 790 | (2 | ) | 788 | |||||||||||
Net unrealized gain on derivative financial instruments designated as cash flow | - | - | - | - | 136 | 136 | - | 136 | ||||||||||||
Balance, May 27, 2016 | $ | 13,109 | $ | 2,218 | $ | 3,428 | $ | 8,388 | $ | 693 | $ | 27,836 | $ | 33 | $ | 27,869 | ||||
FIRAN TECHNOLOGY GROUP CORPORATION | |||||||||||||
Interim Condensed Consolidated Statements of Cash Flows | |||||||||||||
Three months ended | Six months ended | ||||||||||||
(Unaudited) | June 02, | May 27, | June 02, | May 27, | |||||||||
(in thousands of Canadian dollars) | 2017 | 2016 | 2017 | 2016 | |||||||||
Net inflow (outflow) of cash related to the following | |||||||||||||
Operating activities | |||||||||||||
Net earnings | $ | 105 | $ | 1,356 | $ | 906 | $ | 1,806 | |||||
Items not affecting cash: | |||||||||||||
Non-controlling interest share of net loss (earnings | 19 | (6 | ) | 18 | (6 | ) | |||||||
Stock-based compensation | 24 | 12 | 24 | 24 | |||||||||
(Gain) on disposal of plant and equipmen | (15 | ) | - | (18 | ) | - | |||||||
Effect of exchange rates on US dollar deb | 84 | (188 | ) | 65 | (110 | ) | |||||||
Depreciation of plant and equipment | 857 | 553 | 1,457 | 1,094 | |||||||||
Amortization of intangible assets | 286 | 32 | 567 | 44 | |||||||||
Amortization of deferred financing costs | 3 | 3 | 6 | 5 | |||||||||
Deferred income tax | 633 | 669 | 1,111 | 1,062 | |||||||||
Investment tax credits (recovery | (188 | ) | (180 | ) | (329 | ) | (347 | ) | |||||
(Increase) decrease in net unrealized loss on derivative financial instruments designated as cash flow hedges | (170 | ) | 620 | (201 | ) | 1,019 | |||||||
Net change in non-cash operating working capital | 594 | (5,119 | ) | 400 | (7,006 | ) | |||||||
2,232 | (2,248 | ) | 4,006 | (2,415 | ) | ||||||||
Investing activities | |||||||||||||
Additions to plant and equipment, ne | (2,594 | ) | (322 | ) | (3,487 | ) | (711 | ) | |||||
Additions to plant and equipment - acquisitions | - | (418 | ) | - | (418 | ) | |||||||
Additions to intangible assets - acquisitions | - | (940 | ) | - | (940 | ) | |||||||
(Additions) recovery of deferred development costs | (19 | ) | 64 | 116 | (11 | ) | |||||||
Proceeds from disposal of plant and equipmen | 15 | - | 18 | - | |||||||||
(2,598 | ) | (1,616 | ) | (3,353 | ) | (2,080 | ) | ||||||
Net cash flow from operating and investing activities | (366 | ) | (3,864 | ) | 653 | (4,495 | ) | ||||||
Financing activities | |||||||||||||
Increase (decrease) in bank indebtedness | 1,399 | 3,520 | (231 | ) | 3,520 | ||||||||
Repayments of long-term bank debt | (395 | ) | (260 | ) | (782 | ) | (542 | ) | |||||
Funding from non-controlling interests | - | - | 824 | - | |||||||||
Proceeds from issue of Common shares | 3 | 14 | 6 | 25 | |||||||||
1,007 | 3,274 | (183 | ) | 3,003 | |||||||||
Effects of foreign exchange rate changes on cash flow | 194 | 133 | 14 | 103 | |||||||||
Net increase (decrease) in cash flow | 835 | (457 | ) | 484 | (1,389 | ) | |||||||
Cash, beginning of the period | 2,801 | 2,228 | 3,152 | 3,160 | |||||||||
Cash, end of the period | $ | 3,636 | $ | 1,771 | 3,636 | $ | 1,771 | ||||||
Disclosure of cash payments | |||||||||||||
Payment for interest | $ | 130 | $ | 64 | $ | 259 | $ | 104 | |||||
Payments for income taxes | $ | - | $ | 7 | $ | 4 | $ | 14 | |||||
