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Firan Technology Group (FTG) Announces Third Quarter 2017 Financial Results

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TORONTO, Oct. 11, 2017 (GLOBE NEWSWIRE) -- Firan Technology Group Corporation (TSX:FTG) today announced financial results for the third quarter 2017.

  • Increased gross margin to over 27% in Q3
  • Realized costs savings due to the closure of the Teledyne PCT facility
  • Achieved book-to-bill ratio of 1.23:1 in Q3 2017
  • Generated $2.3M in cash from operations used to acquire new equipment and pay down debt

"The third quarter of 2017 saw reduced activity, as predicted, as we transitioned the Teledyne PCT equipment to our Chatsworth facilities", stated Brad Bourne, President and Chief Executive Officer. He added, "The quarter's activity was also impacted by the strengthening of the Canadian dollar and the normal slowdown resulting from summer vacations.  With the closure of the Teledyne facility, FTG's cost structure was reduced and this resulted in increased gross margins, despite the above impacts.  As activity in Chatsworth continues to ramp up, we expect to see improving operating results for the Corporation."

Third Quarter Results: (three months ended Sept 1, 2017 compared with three months ended Aug 26, 2016)

    Q3 2017     Q3 2016  
Sales $ 19,144,000   $ 23,187,000  
     
Gross Margin   5,199,000     5,011,000  
Gross Margin (%)   27.2 %   21.6 %
     
Operating Earnings (1):      2,278,000     2,309,000  
     
  •  Net R&D Investment   1,668,000     748,000  
  •  Bargain Purchase Gain   -     (5,578,000 )
  •  Restructuring Expense   -     3,245,000  
  •  Foreign Exchange (Gain) Loss   (272,000 )   13,000  
  •  Recovery of Investment Tax Credits   (166,000 )   (152,000 )
  •  Amortization of Intangibles   273,000     154,000  
     
Net Earnings before Tax   775,000     3,879,000  
     
  •  Tax Expense   637,000     383,000  
  •  Non-controlling Interests   (16,000 )   11,000  
     
Net Earnings After Tax $ 154,000   $ 3,485,000  
     
 

Earnings per share
   
 - basic $ 0.01   $ 0.17  
 - diluted $ 0.01   $ 0.15  
     

Year-to-Date Results:  (nine months ended Sept 01, 2017 compared with nine months ended Aug 26, 2016)

 
    YTD 2017     YTD 2016  
Sales $ 71,829,000   $ 59,881,000  
     
Gross Margin   17,838,000     13,623,000  
Gross Margin (%)   24.8 %   22.8 %
     
Operating Earnings (1):      7,876,000     5,453,000  
     
  •  Net R&D Investment   4,924,000     2,272,000  
  •  Bargain Purchase Gain   -     (7,189,000 )
  •  Restructuring Expense   -     3,915,000  
  •  Foreign Exchange (Gain) Loss   (229,000 )   318,000  
  •  Recovery of Investment Tax Credits   (495,000 )   (499,000 )
  •  Amortization of Intangibles   840,000     198,000  
     
Net Earnings before tax   2,836,000     6,438,000  
     
  •  Income Tax   1,792,000     1,136,000  
  •  Non-controlling Interests   (34,000 )   17,000  
     
Net Earnings after tax $ 1,078,000   $ 5,285,000  
Earnings per share    
 - basic $ 0.05   $ 0.27  
 - diluted $ 0.04   $ 0.25  


(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 third quarter of 2017 that continue to improve the Corporation and position it for the future, including:

  • Completed installation and commissioning of the Teledyne PCT related equipment in the Chatsworth facility. 
  • Increased throughput at Aerospace Chatsworth by 150% over Q2 2017, primarily by increased activity in August.
  • After the quarter, increased throughput at Aerospace Chatsworth by over 160% in September 2017 compared to June 2017, further demonstrating increasing production rates.
  • Achieved $1.9M in sales resulting from the Photo Etch acquisition, above our target of $1.5M per quarter.

For FTG, overall sales decreased by $4.0M or 17% from $23.2M in Q3 2016 to $19.1M in Q3 2017.  The decrease was attributable to both businesses.

Revenues from the Photo Etch acquisition contributed $1.9M in incremental sales during the third quarter, compared to $1.9M in Q3 last year. Revenues from the Teledyne PCT contributed $0.9M in Q3 2017 compared to $3.5M in Q3 last year. Excluding the acquisitions, revenues were down $1.4M compared to Q3 2016, partially due to the strengthening of the Canadian dollar versus the US dollar. Sequentially, revenues were down $6.4M in Q3 versus Q2 2017 due to transition activities, summer vacations and the strengthening of the Canadian dollar.  In addition, the Photo Etch related activity was down $1.0M sequentially due to the end of the current phase of a large military simulator program which is a normal business cycle.  The Teledyne PCT related activity was down sequentially by $5.3M due to the closure of the Teledyne facility and the time taken to commission equipment in the Chatsworth facility and ramp production.  This activity did ramp each month of the quarter as progress was achieved.

The Circuits Segment sales were down by $1.3M or 8.8% in Q3 2017 versus Q3 2016.  The decrease is predominantly due to increased intercompany activity supporting the ramp up in Aerospace Chatsworth which is not reflected in consolidated sales.  On a year-to-date basis, Circuits sales were up $4.0M or 9.6%. 

For the Aerospace segment, sales in Q3 2017 were $5.7M compared to $8.5M in the same quarter last year. The decrease is primarily attributable to the Teledyne PCT transition activities in the quarter.  Year-to-date Aerospace sales were up $8.0M or 43.2%.

Gross margins in Q3 2017 were up $0.2M compared to Q3 2016.  As a percentage, gross margins increased from 21.6% in Q3 last year to 27.2% in Q3 this year.  The increase is principally due to the cost savings from the Teledyne PCT plant closure offset by lower sales. 

Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG for trailing twelve months is $8.0M.

The following table reconciles EBITDA(2)  to the net earnings for Q3 2017 and trailing 12 months.

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Q3 2017
Trailing 12
Months
     
Net earnings $
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