Firan Technology Group Corporation (“FTG”) Announces Full Year and Fourth Quarter 2020 Financial Results

TORONTO, Feb. 10, 2021 (GLOBE NEWSWIRE) -- Firan Technology Group Corporation (TSX: FTG) today announced financial results for the full year and fourth quarter 2020.

• FTG has managed successfully through the COVID-19 pandemic in 2020 as a result of three key strategies or actions:
  _^ο  FTG’s long-term market diversification strategy enabled the Company to mitigate the dramatic downturn in the commercial aerospace market through its involvement in the stable defense market
  _^ο  FTG carefully managed 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
  _^ο  FTG carefully managed investments in the year and ended 2020 with a stronger balance sheet than before the pandemic
• Achieved over $102M in annual sales, a 9% decline, during a very challenging year for the Aerospace industry
• Maintained gross margins above 25% for the year
• Received $3.2M in Canada Emergency Wage Subsidy (CEWS) which we used to help maintain our workforce in the face of revenue reductions due to COVID-19
• Received $3.3M in US Paycheck Protection Program funds in the United States, which remain classified as loans at year-end
• Achieved $13.4M EBITDA in the year, or 13.1%
• Achieved $11.1M in Free Cash Flow (FCF) for the year, the highest ever achieved at FTG (FCF is defined as operating activities less investing activities, excluding acquisitions, less lease liability payments)
• In Q4 2020, achieved 98.7% of Q4 2019 sales or $26.7M
• Generated $4.1M in FCF in Q4 2020 and ended the quarter with $12.6M in net cash on the balance sheet

Full Year Results: (twelve months ended Nov 30, 2020 compared with twelve months ended Nov 30, 2019)

		Fiscal 2020			Fiscal 2019
Sales	$	102,435,000		$	112,653,000
Gross Margin		26,419,000			30,264,000
Gross Margin (%)		25.8	%		26.9	%
Operating Earnings (1):		11,963,000			15,818,000
• R&D Investment		5,284,000			4,846,000
• R&D Tax Credits		(735,000	)		(669,000	)
• Foreign Exchange Loss		1,042,000			785,000
• Amortization of Intangibles		581,000			1,128,000
• Impairment of Intangibles		1,145,000			-
Net Earnings before Tax		4,646,000			9,728,000
• Income Tax		3,384,000			3,746,000
• Non-controlling Interests		(128,000	)		(76,000	)
Net Earnings After Tax	$	1,390,000		$	6,058,000
Earnings per share
- basic	$	0.06		$	0.27
- diluted	$	0.06		$	0.25

Fourth Quarter Results: (three months ended Nov 30, 2020 compared with three months ended Nov 30, 2019)

		Q4 2020			Q4 2019
Sales	$	26,711,000		$	27,075,000
Gross Margin		7,063,000			5,870,000
Gross Margin (%)		26.4	%		21.7	%
Operating Earnings (1):		3,808,000			2,745,000
• Net R&D Investment		1,318,000			1,339,000
• R&D Tax Credits		(165,000	)		(260,000	)
• Foreign Exchange Loss		446,000			253,000
• Amortization of Intangibles		91,000			301,000
Net Earnings before Tax		2,118,000			1,112,000
• Income Tax		840,000			504,000
• Non-controlling Interests		(30,000	)		33,000
Net Earnings After Tax	$	1,308,000		$	575,000
Earnings per share
- basic	$	0.06		$	0.03
- diluted	$	0.06		$	0.03

(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 2020 that continue to improve the Corporation and position it for the future, including:

• Purchased and installed an automated, highly secure backup system to protect Information Technology data across the Company
• In July, FTG completed a new 2-year committed Credit Facility with our existing financial institution, which includes an operating facility of $USD 10.0 million and a capex facility of $USD 10.0 million, as well as sufficient capacity for foreign exchange forward contracts and precious metal forward contracts
• Received $3.2M in Canada Emergency Wage Subsidy (CEWS) which we used to help maintain our workforce in the face of revenue reductions due to COVID-19
• Received $3.3M in PPP loans in the US, that were classified as loans at the end of 2020
• Reduced overtime across FTG and a series of one-week plant shutdowns (to reduce wage costs) particularly in sites focused on the commercial aerospace markets
• Reduced headcount by approximately 7% through the year primarily through attrition
• Achieved a 0.87:1 book-to-bill ratio for 2020 with increased backlog in the US sites focused more on defense work and decreased backlog in Canadian and Chinese sites focused more on commercial aerospace programs
• Completed integration of FTG Circuits Fredericksburg into FTG including converting to FTG standard ERP system, completing AS9100 certification and achieving NADCAP accreditation
• FTG Aerospace Toronto was approved by Transport Canada as an approved maintenance organization (AMO) opening up future aftermarket opportunities
  

For FTG in 2020, overall sales decreased by $10.2M or 9% from $112.7M in 2019 to $102.4M in 2020.   The COVID-19 pandemic has negatively impacted commercial aerospace activity this year and this impacted FTG’s sites predominantly focused on this market, which include Circuits Toronto and the facilities in China. In our fourth quarter, sales were down 1.3% from $27.1 in Q4 2019 to $26.7M in Q4 2020. The drop is due to the COVID-19 pandemic offset by strong shipments in our simulator related business, primarily focused on defense programs. In Q4 2019, FTG was also subjected to a cyberattack that negatively impacted operating results in that quarter.

The Circuits Segment sales in 2020 were down $5.6M, or 8% in 2020 versus 2019. The largest decline was seen in the Circuits Toronto plant which is more heavily exposed to the Commercial Aerospace market. Offsetting this was 140% growth for the Circuits Fredericksburg site as it was part of FTG for the full year in 2020 as compared to only 4 ½ months in 2019. For the full year, operating performance in Circuits Chatsworth was below 2019 levels and as a result organizational improvements were made in the fourth quarter and subsequent to year-end. In the fourth quarter, sales in the Circuits Segment were $14.1M vs $18.6M in Q4 2019. Again, Circuits Toronto saw the largest decline, while Circuits Chatsworth was up Q4 over Q4. The increase at Circuits Chatsworth was primarily due to their focus on the defense market.

For the Aerospace Segment, sales in 2020 were $36.6M compared to $41.2M last year, a decrease of $4.6M or 11%. Simulator related sales remained strong for the full year as FTG’s activity in that market primarily relates to defense simulators. For the full year, simulator sales were up 8% compared to 2019. In Q4 2020, Aerospace Segment sales were up $4.2M or 50% primarily due to timing of simulator related shipments which were very strong in Q4 2020. Simulator related sales were up over $6M in Q4 2020 compared to Q4 2019.

Gross margins in 2020 were $26.4M or 25.8% compared to $30.3M or 26.9% in 2019. The lower sales impacted the overall margin. The Canadian Emergency Wage Subsidy added $2.8M to gross margin or 2.7 percentage points. In the fourth quarter, gross margins were $7.1M compared to $5.9M in Q4 2019. The CEWS added $1.4M to the Q4 2020 gross margin or 5.2 percentage points.

Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG in 2020 was $13.4M compared to $14.6M in 2019.   Lower sales and profitability were offset by wage subsidies in Canada of $3.2M.

The following table reconciles net earnings to EBITDA⁽²⁾ for the year ended November 30, 2020.

		Fiscal 2020
Net earnings		1,390,000
Add:
Interest & Accretion		767,000
Income taxes		3,384,000
Depreciation/Amortization/Stock Comp & Impairment		7,883,000
EBITDA	$	13,424,000

(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 profit after tax at FTG in 2020 was $1.4M or $0.06 per diluted share compared to a net profit of $6.1M or $0.25 per diluted share in 2019. Revenues were reduced due to the decline in the Commercial Aerospace market as a result of the COVID-19 pandemic which reduced margins and profitability. The impairment of intangible assets in 2020 reduced earnings by $1.1M compared to nil in 2019. In the fourth quarter, net profit was $1.3M compared to $0.6M in Q4 2019. Included in Q4 2020 was a recovery of $0.3M resulting from insurance proceeds from the fire in Fredericksburg earlier in the year, offset by $0.2M for preferred share conversion premium expense.

The Circuits Segment net earnings before corporate and interest and other costs was $6.9M in 2020 compared to $12.5M in 2019.   The lower sales was the most significant impact on the segment profitability.   For the full year, operating performance in Circuits Chatsworth was below 2019 levels and as a result, organizational improvements were made in the fourth quarter and subsequent to year-end. This site’s operations have also been the site most affected by COVID-19 due to various absences over the course of the year.

The Aerospace net earnings before corporate and interest and other costs in the full year was $1.5M in 2020 versus $1.1M in 2019. While sales were down in 2020, operating performance at the Toronto and Chatsworth sites more than offset the impact of the lower sale and the $1.1M asset impairment charge taken in this segment in Q1 2020.

As at November 30, 2020, the Corporation’s net working capital was $39.1M, compared to $28.6M at year-end in 2019. The increase is due to higher cash and lower accounts payable offset by lower accounts receivable and inventories.

FTG ended 2020 with $12.6M in net cash as compared to $2.2M at the end of 2019.  

The Corporation will host a live conference call on Thursday, February 11, 2021 at 8:30am (Eastern) to discuss the results of fiscal year 2020.

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 March 12, 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 9077906.        

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: [phone] x314
[e-mail]

Jamie Crichton, Vice President and CFO                                                
Firan Technology Group Corporation
Tel:[phone] x264
[e-mail]

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

FIRAN TECHNOLOGY GROUP CORPORATION
Consolidated Statements of Financial Position
As at				November 30,		November 30,
(in thousands of Canadian dollars)				2020		2019
ASSETS
Current assets
Cash and cash equivalents				$	19,032	$	7,647
Accounts receivable					16,795		21,085
Contract assets					985		432
Inventories					19,304		21,990
Prepaid expenses and other					3,363		1,770
					59,479		52,924
Non-current assets
Plant and equipment, net					12,640		13,830
Right-of-use assets					12,130		-
Deferred income tax assets					-		724
Investment tax credits recoverable					1,359		3,035
Intangible and other assets, net					1,068		2,864
Total assets				$	86,676	$	73,377
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities				$	13,904	$	17,104
Provisions					885		946
Contract liabilities					388		216
Current portion of bank debt					2,931		5,416
Current portion of lease liabilities					1,810		-
Income tax payable					155		639
					20,073		24,321
Non-current liabilities
Bank debt					3,464		-
Lease liabilities					10,659		-
Deferred tax payable					1,192		1,297
Total liabilities					35,388		25,618
Equity
Retained earnings				$	19,135	$	17,745
Accumulated other comprehensive income (loss)					958		(1,554	)
					20,093		16,191
Share capital
	Common Shares				21,881		19,323
	Preferred Shares				-		2,218
Contributed surplus					8,303		8,933
Total equity attributable to FTG's shareholders					50,277		46,665
Non-controlling interest					1,011		1,094
Total equity					51,288		47,759
Total liabilities and equity				$	86,676	$	73,377

FIRAN TECHNOLOGY GROUP CORPORATION
Consolidated Statements of Earnings
			Years ended
			November 30,				November 30,
(in thousands of Canadian dollars, except per share amounts)			2020				2019
Sales			$	102,435			$	112,653
Cost of sales
	Cost of sales			70,307				78,788
	Depreciation of plant and equipment			4,146				3,601
	Depreciation of right-of-use assets			1,563				-
Total cost of sales				76,016				82,389
Gross margin				26,419				30,264
Expenses
	Selling, general and administrative			13,286				13,732
	Research and development costs			5,284				4,846
	Recovery of investment tax credits, net			(735	)			(669	)
	Depreciation of plant and equipment			221				163
	Depreciation of right-of-use assets			52				-
	Amortization of intangible assets			581				1,128
	Interest expense on bank debt, net			211				290
	Accretion on lease liabilities			556				-
	Stock based compensation			130				261
	Foreign exchange loss			1,042				785
	Impairment of intangible assets			1,145				-
Total expenses				21,773				20,536
Earnings before income taxes				4,646				9,728
Current income tax expense				3,715				4,296
Deferred income tax recovery				(331	)			(550	)
Total income tax expense, net				3,384				3,746
Net earnings			$	1,262			$	5,982
Attributable to:
Non-controlling interest			$	(128	)		$	(76	)
Equity holders of FTG			$	1,390			$	6,058
Earnings per share, attributable to the equity holders of FTG
	Basic		$	0.06			$	0.27
	Diluted		$	0.06			$	0.25

FIRAN TECHNOLOGY GROUP CORPORATION
Consolidated Statements of Comprehensive Income (Loss)
			Years ended
			November 30,				November 30,
(in thousands of Canadian dollars)			2020				2019
Net earnings			$	1,262			$	5,982
Other comprehensive earnings (loss) to be reclassified to
	net earnings in subsequent periods:
	Change in foreign currency translation adjustments			(296	)			(308	)
	Net gain (loss) on valuation of derivative financial instruments
		designated as cash flow hedges		3,803				(644	)
	Deferred income taxes			(950	)			161
				2,557				(791	)
Total comprehensive income			$	3,819			$	5,191
Attributable to:
Equity holders of FTG			$	3,902			$	5,278
Non-controlling interest			$	(83	)		$	(87	)

FIRAN TECHNOLOGY GROUP CORPORATION
Consolidated Statements of Changes in Equity
								Years ended November 30, 2020 and November 30, 2019
								Attributed to the equity holders of FTG
													Accumulated
													other						Non-
		Common			Preferred			Retained		Contributed			comprehensive						controlling			Total
(in thousands of Canadian dollars)		shares			shares			earnings		surplus			income (loss)			Total			interest			equity
Balance, November 30, 2018		$	19,323		$	2,218		$	11,687	$	8,672		$	(774	)	$	41,126		$	1,181		$	42,307
Net earnings (loss)			-			-			6,058		-			-			6,058			(76	)		5,982
Stock-based compensation			-			-			-		261			-			261			-			261
Other comprehensive loss			-			-			-		-			(780	)		(780	)		(11	)		(791	)
Balance, November 30, 2019		$	19,323		$	2,218		$	17,745	$	8,933		$	(1,554	)	$	46,665		$	1,094		$	47,759
Net earnings (loss)			-			-			1,390		-			-			1,390			(128	)		1,262
Stock-based compensation			-			-			-		130			-			130			-			130
Transfer from contributed surplus to share capital for
	PSU’s exercised		760								(760	)		-			-			-			-
Common shares repurchase and issue on exercise
	of PSU's		(420	)		-			-		-			-			(420	)		-			(420	)
Common shares issued on exercise of option to convert
	Preferred shares into Common shares		2,218			(2,218	)		-		-			-			-			-			-
Other comprehensive income			-			-			-		-			2,512			2,512			45			2,557
Balance, November 30, 2020		$	21,881		$	-		$	19,135	$	8,303		$	958		$	50,277		$	1,011		$	51,288

FIRAN TECHNOLOGY GROUP CORPORATION
Consolidated Statements of Cash Flows
				Years ended
				November 30,				November 30,
(in thousands of Canadian dollars)				2020				2019
Net inflow (outflow) of cash related to the following:
Operating activities
Net earnings				$	1,262			$	5,982
Items not affecting cash and cash equivalents:
	Stock-based compensation				130				261
	Conversion of preferred shares				155				-
	Gain on disposal of plant and equipment				(302	)			(53	)
	Effect of exchange rates on US dollar debt				(292	)			24
	Depreciation of plant and equipment				4,367				3,764
	Depreciation of right-of-use assets				1,615				-
	Amortization of intangible assets				581				1,128
	Amortization, other				45				12
	Impairment of intangible assets				1,145				-
	Investment tax credits/deferred income taxes				2,295				877
	Accretion on lease liabilities				556				-
	Net gain (loss) on valuation of derivative financial instruments
		designated as cash flow hedges, net of taxes			2,853				(483	)
Net change in non-cash operating working capital					1,369				395
					15,779				11,907
Investing activities
	Additions to plant and equipment				(3,219	)			(3,069	)
	Acquisition of Colonial Circuits Inc., net of cash acquired				-				(3,817	)
	Recovery (additions) of contract and other costs				56				(11	)
	Additions to deferred financing costs				(28	)			-
	Proceeds from disposal of plant and equipment				324				53
					(2,867	)			(6,844	)
Net cash flow from operating and investing activities					12,912				5,063
Financing activities
	Proceeds from bank debt				3,309				-
	Repayments of bank debt				(2,056	)			(2,031	)
	Lease liability payments				(1,845	)			-
	Repurchase of common shares on exercise of PSU's				(420	)			-
	Payment on conversion of preferred shares				(155	)			-
					(1,167	)			(2,031	)
Effects of foreign exchange rate changes on cash flow					(360	)			(411	)
Net increase in cash flow					11,385				2,621
Cash and cash equivalents, beginning of the year					7,647				5,026
Cash and cash equivalents, end of year				$	19,032			$	7,647
Disclosure of cash payments
	Payment for interest			$	197			$	306
	Payments for income taxes			$	1,779			$	1,750