Firan Technology Group Corporation ("FTG") Announces Third Quarter 2015 Financial Results

TORONTO, ONTARIO--(Marketwired - Oct. 7, 2015) - Firan Technology Group Corporation (TSX:FTG) today announced financial results for the third quarter 2015.

• Grew Q3 2015 sales to $18.2M, a 23% increase over Q3 2014
• R&D spending exceeded 8% of sales in Q3 2015
• Recorded Q3 2015 profit of $1.6M, an increase of 647% compared to Q3 2014
• Trailing twelve month earnings per share (diluted) are now $0.21
• Cash flow from operations in the quarter was $2.6M

"The third quarter of 2015 saw continued strong performance for FTG as a result of past investments in technology, positive impacts from past key new program wins as well as the strengthening of the US dollar," stated Brad Bourne, President and Chief Executive Officer. He added, "These record results are enabling us to report strong earnings while still investing in our future. In the quarter, development continued on control panel assembly programs for the Chinese C919 aircraft and another helicopter related program for a US customer. We continued to invest in R&D across the Corporation to improve our products, our processes and our ability to meet the future demands of our customers."

Third Quarter Results: (three months ended Aug 28, 2015 compared with three months ended Aug 29, 2014)
		Q3 2015	Q3 2014
Sales		$18,227,000	$14,818,000
Gross Margin		5,109,000	3,392,000
Gross Margin (%)		28.0%	22.9%
Operating Earnings (1):		3,188,000	1,105,000
	- Net R&D Investment	1,482,000	822,000
Net Earnings before Tax		1,706,000	283,000
	- Tax Expense	69,000	73,000
	- Non-controlling Interests	1,000	(9,000)
Net Earnings After Tax		$1,636,000	$219,000
Earnings per share
	- basic	$0.09	$0.01
	- diluted	$0.08	$0.01
Year-to-Date Results: (nine months ended Aug 28, 2015 compared with nine months ended Aug 29, 2014)
		YTD 2015	YTD 2014
Sales		$53,303,000	$44,209,000
Gross Margin		13,081,000	10,842,000
Gross Margin (%)		24.5%	24.5%
Operating Earnings: (1)		6,940,000	3,481,000
	- Net R&D Investment	3,601,000	2,296,000
Net Earnings before tax		3,339,000	1,185,000
	- Income Tax	213,000	218,000
	- Non-controlling Interests	11,000	(37,000)
Net Earnings after tax		$3,115,000	$1,004,000
Earnings per share
	- basic	$0.17	$0.06
	- diluted	$0.15	$0.05

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 2015 that continue to improve the Corporation and position it for the future, including:

• Received airworthiness tags from Civil Aviation Authority of China (CAAC) for control panel assemblies for the C919 aircraft under development by COMAC
• Shipped engineering breadboard units of control panel assembly under development for a helicopter program
• Achieved sales outside of North America of 20% of total sales
• Renewed NADCAP certification at Circuits Chatsworth
• Successfully completed annual AS9100C audit in Circuits Toronto

For FTG, overall sales increased by $3.4M or 23% from $14.8M in Q3 2014 to $18.2M in Q3 2015. Both business segments participated in the growth. Revenues also benefited from the weakening of the Canadian dollar versus the US dollar which was down 19 cents in Q3 2015 versus the same quarter last year. Over 80% of FTG's revenues are denominated in US dollars. US dollar currency hedges in place in the quarter reduced reported sales and earnings by $0.7M. As a result, approximately 13% of the growth was due to the weakening of the Canadian dollar and 10% was increased activity. For the year-to-date, sales were up $9.1M or 21%. 

The Circuits Segment sales were up $3.3M or 31% in Q3 2015 versus Q3 2014. All facilities reported increased revenues. On a year-to-date basis, Circuits sales were up $7.4M or 23%.

For the Aerospace segment, sales in Q3 2015 were $4.3M compared to $4.2M in the same quarter last year resulting in a 3% growth rate. On a year-to-date basis, Aerospace sales were up $1.7M or 15%.

Gross margins in Q3 2015 were up $1.7M compared to Q3 2014, as a result of increased sales. Again, the currency hedges that matured in the quarter reduced revenue and therefore margins and earnings were reduced by $0.7M.

Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG for trailing twelve months is $7.1M, an increase from $5.6M from previous quarter.

The following table reconciles EBITDA⁽²⁾ to the net earnings for trailing twelve months ended August 28, 2015.

	Trailing  Twelve  Months
Net earnings	$4,317,000
Add:
Interest	403,000
Income taxes	283,000
Depreciation	1,920,000
Amortization	155,000
EBITDA	$7,078,000

2. 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 at FTG in Q3 2015 was $1.6M compared to a net profit of $0.2M in Q3 2014. This improvement is the result of higher gross margins and foreign exchange gains, offset by higher SG&A and R&D spending.

The Circuits segment net earnings before corporate, interest and other costs was $2.1M in Q3 2015 compared to $0.9M in Q3 2014. The Circuits joint venture in China did not have a material impact on profitability.

The Aerospace net earnings before corporate, interest and other costs was $0.0M in Q3 2015 versus $0.0M in Q3 2014. Costs related to the development of the C919 cockpit assemblies and one new program of $0.6M in Q3 2015 were treated as deferred development and not expensed.

Cash flow from operations after investments in capital equipment and deferred development in Q3 2015 was $2.6M compared with a usage of $0.4M in Q3 2014. For the year-to-date, cash flow was $2.8M in 2015 compared to $1.8M in 2014.

As at August 28, 2015, the Corporation's net working capital was $14.5M, an increase of $2.0M over Q3 2014, primarily due to higher cash, accounts receivable and inventories offset by higher accounts payable.

The Corporation will host a live conference call on Thursday, October 8, 2015 at 11:30 am (EDT) to discuss the results of Q3 2015.

Anyone wishing to participate in the call should dial 416-340-2216 or 1-866-225-0198 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 October 22, 2015 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 4347988.

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 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)			August 28,		November 30,
(in thousands of Canadian dollars)			2015			2014
ASSETS
Current assets
Cash		$	2,301		$	641
Accounts receivable			13,715			13,289
Taxes receivable			160			251
Inventories			11,053			10,426
Prepaid expenses			733			564
			27,962			25,171
Non-current assets
Plant and equipment, net			5,369			5,643
Deferred income taxes			1,965			2,145
Deferred development costs			236			-
Intangible assets, net			112			148
Total assets		$	35,644		$	33,107
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities		$	11,019		$	10,021
Provisions			487			410
Customer deposits, net of deferred development			1,518			1,531
Current portion of long-term bank debt			455			251
			13,479			12,213
Non-current liabilities
Long-term bank debt			-			1,232
Subordinated loan			4,471			4,219
Government assistance			-			339
Total liabilities			17,950			18,003
Equity
Deficit		$	(4,794	)	$	(7,909	)
Accumulated other comprehensive (loss)			(1,032	)		(312	)
			(5,826	)		(8,221	)
Share capital
	Common shares		12,869			12,681
	Preferred shares		2,218			2,218
Contributed surplus			8,405			8,411
Total equity attributable to FTG's shareholders			17,666			15,089
Non-controlling interest			28			15
Total equity			17,694			15,104
Total liabilities and equity		$	35,644		$	33,107

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Earnings
			Three months ended						Nine months ended
(Unaudited)		August 28,			August 29,			August 28,			August 29,
(in thousands of Canadian dollars, except per share amounts)			2015			2014			2015			2014
Sales		$	18,227		$	14,818		$	53,303		$	44,209
Cost of sales
	Cost of sales		12,620			10,990			38,781			32,092
	Depreciation of plant and equipment		498			436			1,441			1,275
Total cost of sales			13,118			11,426			40,222			33,367
Gross margin			5,109			3,392			13,081			10,842
Expenses
	Selling, general and administrative		2,663			2,200			7,493			7,002
	Research and development costs		1,552			892			4,023			2,506
	Recovery of research and development costs		(70	)		(70	)		(422	)		(210	)
	Depreciation of plant and equipment, amortization of intangible asset		36			42			118			130
	Interest expense on short-term debt		7			8			34			21
	Interest expense on long-term debt		89			91			273			276
	Foreign exchange (gain)		(874	)		(54	)		(1,777	)		(68	)
Total expenses			3,403			3,109			9,742			9,657
Earnings before income taxes			1,706			283			3,339			1,185
Current income tax expense			9			13			33			38
Deferred income tax expense			60			60			180			180
Net earnings		$	1,637		$	210		$	3,126		$	967
Attributable to:
Non-controlling interest		$	1		$	(9	)		11			(37	)
Equity holders of FTG		$	1,636		$	219			3,115			1,004
Earnings per share, attributable to the equity holders of FTG
	Basic	$	0.09		$	0.01		$	0.17		$	0.06
	Diluted	$	0.08		$	0.01		$	0.15		$	0.05

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Comprehensive Income
			Three months ended						Nine months ended
(Unaudited)		August 28,			August 29,			August 28,			August 29,
(in thousands of Canadian dollars)			2015			2014			2015			2014
Net earnings		$	1,637		$	210		$	3,126		$	967
Other comprehensive (loss) income to be reclassified to net earnings in subsequent
	Foreign currency translation adjustments		56			23			937			486
	Net unrealized (loss) gain on derivative financial instruments designated as cash flow hedges		(425	)		112			(1,655	)		(68	)
			(369	)		135			(718	)		418
Total comprehensive income		$	1,268		$	345		$	2,408		$	1,385
Attributable to:
Equity holders of FTG		$	1,267		$	354		$	2,395		$	1,420
Non-controlling interest		$	1		$	(9	)	$	13		$	(35	)

FIRAN TECHNOLOGY GROUP CORPORATION

Interim Condensed Consolidated Statements of Changes in Equity

Nine months ended August 28, 2015	Attributed to the equity holders of FTG
												Accumulated
												Other
												Compre-						Non-
(in thousands	Common			Preferred					Contributed			hensive						controlling		Total
of Canadian dollars)	Shares			Shares		Deficit			Surplus			(Loss)		Total				interest		equity
Balance, November 30, 2014	$	12,681	$	2,218	$	(7,909	)	$	8,411		$	(312	)	$	15,089		$	15		$	15,104
Net earnings		-		-		3,115			-			-			3,115			11			3,126
Stock-based compensation		-		-		-			39			-			39			-			39
Common shares issued on exercise of share options		188							(45	)					143						143
Foreign currency translation adjustments		-		-		-			-			935			935			2			937
Net unrealized loss on derivative financial instruments designated as cash flow hedges		-		-		-			-			(1,655	)		(1,655	)		-			(1,655	)
Balance, August 28, 2015	$	12,869	$	2,218	$	(4,794	)	$	8,405		$	(1,032	)	$	17,666		$	28		$	17,694

Nine months ended August 29, 2014	Attributed to the equity holders of FTG
												Accumulated
(unaudited)												Other
(in thousands  of Canadian	Common			Preferred					Contributed			Compre- hensive (Loss)						Non- controlling		Total
dollars)	Shares			Shares		Deficit			Surplus			Income		Total				interest		equity
Balance, November 30, 2013	$	12,681	$	2,218	$	(10,102	)	$	8,347		$	(249	)	$	12,895		$	48		$	12,943
Net earnings (loss)		-		-		1,004			-			-			1,004			(37	)		967
Stock-based compensation		-		-		-			23			-			23			-			23
Foreign currency translation		-		-		-			-			484			484			2			486
Net unrealized loss on derivative financial instruments designated as cash flow hedges		-		-		-			-			(68	)		(68	)		-			(68	)
Balance, August 29, 2014	$	12,681	$	2,218	$	(9,098	)	$	8,370		$	167		$	14,338		$	13		$	14,351

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Cash Flows
			Three months ended						Nine months ended
		August 28,			August 29,			August 28,			August 29,
(in thousands of Canadian dollars)			2015			2014			2015			2014
Net inflow (outflow) of cash related to the following:
Operating activities
Net earnings		$	1,637		$	210		$	3,126		$	967
Items not affecting cash:
	Non-controlling interest share of net (earnings) loss		(1	)		9			(11	)		37
	Stock-based compensation		13			7			39			23
	Effect of exchange rates on US dollar debt		40			7			172			89
	Depreciation of plant and equipment		522			466			1,523			1,369
	Amortization of intangible assets		12			12			36			36
	Amortization of deferred financing costs		7			7			21			21
	Deferred income tax expense		60			60			180			180
	AMIS interest accretion		84			78			252			234
	Amortization of government assistance		(113	)		(112	)		(339	)		(336	)
	Increase in net unrealized loss on derivative financial instruments designated as cash flow hedges		(426	)		112			(961	)		337
Net change in non-cash operating working capital			1,120			(764	)		(78	)		(184	)
			2,955			92			3,960			2,773
Investing activities
	Additions to plant and equipment		(278	)		(448	)		(945	)		(1,002	)
	Additions to deferred development costs		(120	)		-			(236	)		-
			(398	)		(448	)		(1,181	)		(1,002	)
Net cash flow from operating and investing activities			2,557			(356	)		2,779			1,771
Financing activities
	Increase (decrease) in bank indebtedness		-			537			-			(563	)
	Repayments of long-term bank debt		(479	)		(494	)		(1,221	)		(665	)
	Common shares issued		62			-			143			-
			(417	)		43			(1,078	)		(1,228	)
Effects of foreign exchange rate changes on cash flow			(42	)		(1	)		(41	)		7
Net increase (decrease) in cash flow			2,098			(314	)		1,660			550
Cash, beginning of the period			203			1,860			641			996
Cash, end of period		$	2,301		$	1,546			2,301		$	1,546
Disclosure of cash payments
	Payment for interest	$	17		$	21		$	57		$	69
	Payments for income taxes	$	1		$	-		$	6		$	25