Firan Technology Group Corporation (“FTG”) Announces First Quarter 2021 Financial Results Toronto Stock Exchange:FTG


TORONTO, April 14, 2021 (GLOBE NEWSWIRE) — Firan Technology Group Corporation (TSX: FTG) today announced financial results for the first quarter 2021.

  • FTG continues to manage through the COVID-19 pandemic by focusing on three key strategies:
    • FTG’s long-term market diversification strategy enables the Company to mitigate the dramatic downturn in the commercial aerospace market through its involvement in the defense market and other aerospace sectors
    • FTG continues to carefully manage costs across the Company, balancing decisions on cost reductions with a goal to retain critical skills to ensure the Company is positioned for a faster recovery in the future
    • FTG continues to carefully manage investments and has a stronger balance sheet than before the pandemic
  • FTG was approved for an additional $1M in Canada Emergency Wage Subsidy (CEWS) in the quarter which we used to help maintain our workforce in the face of revenue reductions due to COVID-19. The funds were paid to FTG subsequent to quarter end as a result of administrative delays within the government
  • FTG received forgiveness of $1.3M in US Paycheck Protection Program funds in the United States as a result of FTG maintaining our workforce for the required period of time
  • FTG achieved $14.5M EBITDA for the trailing 12 months, the highest since mid 2019
  • FTG increased our net cash on the balance sheet to $13.4M, an increase of $0.8M in Q1 2021

First Quarter Results: (three months ended Mar 5, 2021 compared with three months ended Feb 28, 2020)

    Q1 2021     Q1 2020  
Sales   $18,970,000     $24,538,000  
     
Gross Margin   3,662,000     3,960,000  
Gross Margin (%)   19.3 %   16.1 %
     
Operating Earnings (1):   686,000     242,000  
     
• Net R&D Investment   1,382,000     1,081,000  
• R&D Tax Credits   (127,000 )   (172,000 )
• Foreign Exchange Loss   618,000     49,000  
• Amortization of Intangibles   89,000     299,000  
• Forgiveness of debt   (1,336,000 )    
• Impairment of Intangibles       1,145,000  
     
Net (Loss) Earnings before Tax   60,000     (2,160,000 )
     
• Income Tax   487,000     469,000  
• Non-controlling Interests   (27,000 )   (32,000 )
     
Net (Loss) Earnings After Tax   ($400,000 )   ($2,597,000 )
     
(Loss) Earnings per share    
– basic   ($0.02 )   ($0.11 )
– diluted   ($0.02 )   ($0.11 )
(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 Q1 2021 that continue to improve the Corporation and position it for the future, including:

  • Achieved a 0.96:1 book-to-bill ratio for Q1 2021 and increased bookings by 11% compared to Q4 2020
  • Received a new development contract from a major Tier 1 Aerospace company for a family of cockpit assemblies that leads to significant future revenues in 2022 and beyond
  • Received a significant new customer approval from a major Tier 1 Aerospace company for our Aerospace Tianjin facility opening up significant new revenue opportunities
  • Received a new customer approval from a major Airframe company for our Aerospace Toronto and Aerospace Tianjin facilities opening up significant new revenue opportunities and first production parts were shipped within the quarter
  • Continued efforts to pivot towards the defense market and have substantially completed qualification/approval at 5 new customers for our sites in both Canada and the US Supported customers’ efforts to begin to re-shore some procurement of aerospace printed circuit boards in support of new US regulations
  • Installed Averatek semi-additive circuit board manufacturing equipment in our Circuits Fredericksburg facility and will begin process development in Q2
  • Was approved for an additional $1M in Canada Emergency Wage Subsidy (CEWS) which we used to help maintain our workforce in the face of revenue reductions due to COVID-19 however receipt of the funding was delayed until after the end of Q1 due to administrative delays within the government
  • Received forgiveness of $1.3M in PPP loans in the US in the quarter as we achieved the requirements for forgiveness under that program
  • Managed cost by extending Christmas holiday shutdowns at sites most impacted by the drop in commercial aerospace activities

Overall for FTG, sales decreased by $5.6M or 23% from $24.5M in Q1 2020 to $19M in Q1 2020.  The COVID-19 pandemic has negatively impacted commercial aerospace activity and this impacted FTG’s sites predominantly focused on this market, which include Circuits Toronto and the facilities in China.

The Circuits Segment sales in Q1 2021 were down $4.5M, or 27% in Q1 2021 versus Q1 2020. All sites were down but the largest decline was seen in the Circuits Toronto plant which is more heavily exposed to the Commercial Aerospace market. Circuits Chatsworth had a serious COVID-19 event in December and January, and this combined with organizational transitions to strengthen the management team, hurt production and shipments in the quarter.

For the Aerospace Segment, sales in Q1 2021 were $7.0M compared to $8.1M in Q1 last year, a decrease of $1.1M or 14%. Simulator related sales increased by $1.3M in Q1 2021 compared to the same quarter last year, helping to mitigate the downturn in the commercial aerospace market. The Aerospace Tianjin site was down the most at it is exclusively focused on commercial aerospace.

Gross margins in Q1 2021 were $3.7M or 19.3% compared to $4.0M or 16.1% in Q1 2020. The lower sales impacted the overall margin. The Canadian Emergency Wage Subsidy added $0.9M to gross margin or 4.7 percentage points.

Trailing twelve month (TTM) Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG was $14.5M.  Lower sales and the operational challenges in Circuits Chatsworth, were offset by wage subsidies in Canada and the PPP forgiveness in the US.

The following table reconciles EBITDA(2) to the net earnings for the trailing 12 months as at March 5, 2021.

  Trailing 12  
  Months  
     
Net earnings to equity holders of FTG 3,587,000  
Add:    
Interest, accretion 754,000  
Income taxes 3,402,000  
Depreciation/Amortization &Stock Comp 6,767,000  
     
EBITDA $14,510,000  
(2) EBITDA are not measures recognized under International Financial Reporting Standards (“IFRS”). Management believes that these measures are 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 loss after tax at FTG in Q1 2021 was $0.4M or $0.02 per diluted share compared to a net loss of $2.6M or $0.11 per diluted share in Q1 2020. Revenues were reduced due to the decline in the Commercial Aerospace market as a result of the COVID-19 pandemic. The impairment of intangible assets in Q1 2020 reduced earnings by $1.1M compared to nil in Q1 2021. The CEWS funding in Canada and the PPP forgiveness in the US in Q1 2021 increased earnings by $2.3M. The COVID-19 event and the organizational transitions in Chatsworth negatively impacted earnings in Q1 2021.

The Circuits Segment net earnings before corporate and interest and other costs was $0.6M in Q1 2021 compared to $0.7M in Q1 2020.  The lower sales was the most significant impact on the segment profitability offset by CEWS funding and PPP forgiveness. The COVID-19 event in Chatsworth and the transitions in the management team negatively impacted that site’s results in Q1 2021.  

The Aerospace net earnings before corporate and interest and other costs increased to $0.2M in Q1 2021 from a loss of $2.0M in Q1 2020. Increased activity in the simulator related business, improved overall operating performance and PPP forgiveness of $0.7M were partially offset by reduced activity in commercial Aerospace. The impairment of the intangible asset in Q1 2020 reduced earnings by $1.1M in that quarter.

As at March 5, 2021, the Corporation’s net working capital was $39.6M, compared to $39.4M at year-end in 2020.

FTG ended Q1 2021 with $13.4M in net cash as compared to $12.6M at the end of 2020.  Cashflow would have been $1M higher in the quarter if the CEWS funding had been received before the end of the quarter.

The Corporation will host a live conference call on Thursday, April 15, 2021 at 8:30am (Eastern) to discuss the results of the first quarter 2021.

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. Conference ID is 8719895. The Chairperson is Mr. Brad Bourne. A replay of the call will be available until May 15, 2021 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 8719895. 

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, Fredericksburg, Virginia and a joint venture in Tianjin, China.

FTG Aerospace manufactures and repairs 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 
Firan Technology Group Corporation
Tel: (416) 299-4000 x314
bradbourne@ftgcorp.com

Jamie Crichton, Vice President and CFO 
Firan Technology Group Corporation
Tel: (416) 299-4000 x264
jamiecrichton@ftgcorp.com 

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

       
FIRAN TECHNOLOGY GROUP CORPORATION 
Interim Condensed Consolidated Statements of Financial Position
       
(Unaudited) March 5, November 30,  
(in thousands of Canadian dollars)  2021  2020  
ASSETS      
Current assets      
Cash and cash equivalents $ 18,073 $ 19,032  
Accounts receivable   13,257   16,795  
Contract assets   906   985  
Inventories   18,833   19,304  
Prepaid expenses and other   5,071   3,363  
    56,140   59,479  
Non-current assets      
Plant and equipment, net   11,768   12,640  
Right-of-use assets   11,615   12,130  
Investment tax credits recoverable   1,012   1,359  
Intangible and other assets, net   957   1,068  
Total assets $ 81,492 $ 86,676  
LIABILITIES AND EQUITY      
Current liabilities      
Accounts payable and accrued liabilities $ 10,808 $ 13,904  
Provisions   835   885  
Contract liabilities   477   388  
Current portion of bank debt   2,300   2,931  
Current portion of lease liabilities   1,785   1,810  
Income tax payable   362   155  
    16,567   20,073  
Non-current liabilities      
Bank debt   2,343   3,464  
Lease liabilities   10,238   10,659  
Deferred tax payable   1,076   1,192  
Total liabilities   30,224   35,388  
Equity      
Retained earnings $ 18,735 $ 19,135  
Accumulated other comprehensive income   1,336   958  
    20,071   20,093  
Share capital      
Common Shares   21,881   21,881  
Contributed surplus   8,343   8,303  
Total equity attributable to FTG’s shareholders   50,295   50,277  
Non-controlling interest   973   1,011  
Total equity   51,268   51,288  
Total liabilities and equity $ 81,492 $ 86,676  
       
FIRAN TECHNOLOGY GROUP CORPORATION   
Interim Condensed Consolidated Statements of Loss   
    
  Three months ended  
(Unaudited) March 5,     February 28,  
(in thousands of Canadian dollars, except per share amounts)  2021      2020  
       
Sales $ 18,970     $ 24,538  
       
Cost of sales      
Cost of sales   13,865       19,199  
Depreciation of plant and equipment   1,077       994  
Depreciation of right-of-use assets   366       385  
Total cost of sales   15,308       20,578  
Gross margin   3,662       3,960  
       
Expenses      
Selling, general and administrative   2,691       3,431  
Research and development costs   1,382       1,081  
Recovery of investment tax credits   (127 )     (172 )
Depreciation of plant and equipment   63       46  
Depreciation of right-of-use assets   17       12  
Amortization of intangible assets   89       299  
Interest expense on bank debt, net   39       41  
Accretion on lease liabilities   126       137  
Stock based compensation   40       51  
Foreign exchange loss   618       49  
Forgiveness of debt   (1,336 )      
Impairment of intangible assets         1,145  
Total expenses   3,602       6,120  
       
Earnings before income taxes   60       (2,160 )
       
Current income tax expense   461       434  
Deferred income tax expense   26       35  
Total income tax expense   487       469  
       
Net loss $ (427 )   $ (2,629 )
       
Attributable to:      
Non-controlling interest $ (27 )   $ (32 )
Equity holders of FTG $ (400 )   $ (2,597 )
       
Loss per share, attributable to the equity holders of FTG      
Basic $ (0.02 )   $ (0.11 )
Diluted $ (0.02 )   $ (0.11 )
       
FIRAN TECHNOLOGY GROUP CORPORATION    
Interim Condensed Consolidated Statements of Comprehensive Loss
     
  Three months ended  
(Unaudited) March 5,     February 28,  
(in thousands of Canadian dollars)  2021      2020  
       
Net loss $ (427 )   $ (2,629 )
       
Other comprehensive earnings (loss) to be reclassified to      
net earnings (loss) in subsequent periods:      
       
Change in foreign currency translation adjustments   (428 )     248  
Net gain (loss) on valuation of derivative financial instruments      
designated as cash flow hedges   1,060       (382 )
Deferred income taxes   (265 )     96  
       
    367       (38 )
       
Total comprehensive loss $ (60 )   $ (2,667 )
       
Attributable to:      
Equity holders of FTG $ (22 )   $ (2,653 )
Non-controlling interest $ (38 )   $ (14 )
       
FIRAN TECHNOLOGY GROUP CORPORATION   
Interim Condensed Consolidated Statements of Changes in Equity
                 
                 
Three months ended March 5, 2021   Attributed to the equity holders of FTG    
          Accumulated      
          other   Non-  
(Unaudited) Common Preferred Retained Contributed comprehensive   controlling Total
(in thousands of Canadian dollars) shares shares earnings surplus income Total interest equity
Balance, November 30, 2020 $ 21,881 $ $ 19,135   $ 8,303 $ 958   $ 50,277   $ 1,011   $ 51,288  
Net loss       (400 )         (400 )   (27 )   (427 )
Stock-based compensation           40       40         40  
Other comprehensive income (loss)             378     378     (11 )   367  
Balance, March 5, 2021 $ 21,881 $ $ 18,735   $ 8,343 $ 1,336   $ 50,295   $ 973   $ 51,268  
                 
Three months ended February 28, 2020   Attributed to the equity holders of FTG    
          Accumulated      
          other   Non-  
(Unaudited) Common Preferred Retained Contributed comprehensive   controlling Total
(in thousands of Canadian dollars) shares shares earnings surplus loss Total interest equity
Balance, November 30, 2019 $ 19,323 $ 2,218 $ 17,745   $ 8,933 $ (1,554 ) $ 46,665   $ 1,094   $ 47,759  
Net loss       (2,597 )         (2,597 )   (32 )   (2,629 )
Stock-based compensation           51       51         51  
Other comprehensive income (loss)             (56 )   (56 )   18     (38 )
Balance, February 28, 2020 $ 19,323 $ 2,218 $ 15,148   $ 8,984 $ (1,610 ) $ 44,063   $ 1,080   $ 45,143  
                 
FIRAN TECHNOLOGY GROUP CORPORATION   
Interim Condensed Consolidated Statements of Cash Flows   
    
  Three months ended  
(Unaudited) March 5,     February 28,  
(in thousands of Canadian dollars)  2021      2020  
Net inflow (outflow) of cash related to the following:      
Operating activities      
Net loss $ (427 )   $ (2,629 )
Items not affecting cash and cash equivalents:      
Stock-based compensation   40       51  
Loss on disposal of plant and equipment   1       6  
Effect of exchange rates on U.S. dollar bank debt   (189 )     53  
Depreciation of plant and equipment   1,140       1,040  
Depreciation of right-of-use assets   383       397  
Amortization of intangible assets   89       299  
Amortization, other   12       3  
Impairment of intangible assets         1,145  
Investment tax credits/deferred income taxes   231       87  
Accretion on lease liabilities   126       137  
Forgiveness of debt   (1,336 )      
Net gain (loss) on valuation of derivative financial instruments      
designated as cash flow hedges, net of taxes   795       (286 )
Net change in non-cash operating working capital   (465 )     4,022  
    400       4,325  
Investing activities      
Additions to plant and equipment   (378 )     (1,046 )
Recovery of contract and other costs   10       6  
Additions to deferred financing costs   (8 )      
    (376 )     (1,040 )
Net cash flow from operating and investing activities   24       3,285  
Financing activities      
Repayments of bank debt   (232 )     (503 )
Lease liability payments   (452 )     (446 )
    (684 )     (949 )
Effects of foreign exchange rate changes on cash flow   (299 )     169  
Net (decrease) increase in cash flow   (959 )     2,505  
Cash and cash equivalents, beginning of the period   19,032       7,647  
Cash and cash equivalents, end of period $ 18,073     $ 10,152  
       
Disclosure of cash payments      
Payment for interest $ 42     $ 55  
Payments for income taxes $ 197     $ 979  
       

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