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Firan Technology Group (FTG) Announces First Quarter 2014 Financial Results

TORONTO, ONTARIO -- (Marketwired) -- 04/08/14 -- Firan Technology Group Corporation (TSX: FTG) today announced financial results for the first quarter 2014.


--  Booked over $15M in new orders in the quarter
--  Grew Q1 2014 sales by 7% over Q1 2013
--  Grew Q1 activity at FTG Aerospace Tianjin by 245% over Q1 2013
--  Grew Q1 activity at FTG Aerospace Chatsworth by 185% over Q1 2013
--  Improved net income after tax by $0.8M in Q1 2014 compared to the same
    period in 2013
--  Generated $1.3M positive cashflow from operations in Q1 2014 compared to
    $0.2M last year
--  Achieved strong operating performance at both established Circuits
    facilities
--  R&D spending remained above 5% of sales

"The momentum from the end of 2013 has continued into the start of 2014 with strong results across the company, particularly at our two new Aerospace facilities in Tianjin and Chatsworth," stated Brad Bourne, President and Chief Executive Officer. He added, "Our established Circuits facilities both performed well in the quarter and we are working hard to get our Circuits Joint Venture through its start-up and customer qualification phase so it too can contribute to our success in the future."

First Quarter Results: (three months ended February 28, 2014 compared with three months ended March 1, 2013)


----------------------------------------------------------------------------
                                                     Q1 2014        Q1 2013

Sales                                          $  13,989,000  $  13,015,000
Gross Margin                                       3,124,000      2,082,000
Gross Margin (%)                                        22.3%          16.0%

Operating Earnings/Loss: (1)                       1,020,000        (72,000)

  - Net R&D Investment                               777,000        597,000
                                              ------------------------------
Net Earnings before tax                              227,000       (669,000)
                                              ------------------------------
  - Income Tax                                        98,000         22,000
  - Non-controlling Interests                        (16,000)             -

                                              ------------------------------
Net Earnings after tax                         $     145,000  $    (691,000)
                                              ------------------------------
Earnings per share
  - basic and diluted                          $        0.01  $       (0.04)
----------------------------------------------------------------------------

(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 first quarter of 2014 that continue to improve the Corporation and position it for the future, including:


--  Signed Letter of Intent for cockpit control assemblies for C919 Heads Up
    Display system in China
--  Grew Aerospace activity at the two new facilities to almost $1M in Q1
    2014
--  Achieved sales outside of North America of 16% of total sales
--  Reached full and final settlement of environmental lawsuit with Emmanuel
    Tannenbaum and June Realty Ltd with no material impact on the company

For FTG, overall sales increased by $1.0M or 7.5% from $13.0M in Q1 2013 to $14.0M in Q1 2014. FTG Circuits and the new Aerospace facilities drove the growth.

The Circuits Segment sales were up $1.6M or 18% in Q1 2014 versus Q1 2013. Both established facilities had strong growth in the quarter.

For the Aerospace segment, sales in Q1 2014 were $3.5M compared to $4.1M in the same quarter last year. Strong increases at the two new facilities in Tianjin China and Chatsworth California were offset by a drop in activity in Toronto. The drop was due to the end of a large military simulator program at that facility.

Gross margins were up in Q1 2014 by $1.0M compared to Q1 2013 due to lower start-up costs at the new facilities and higher sales in the Circuits business. Gross margins in Q1 2014 were 22% compared to 16% in Q1 2013.

Net profit at FTG in Q1 2014 was $0.15M compared to a net loss of $0.7M in Q1 2013. This improvement is the result of higher gross margins and stable SG&A costs. Taxes are higher in Q1 2014 due to recording taxes on Canadian profit, offset by a reduction in deferred income taxes. This is a non-cash item.

The Circuits segment net earnings before corporate and interest and other costs increased to $0.9M in Q1 2014 compared to $0.1M in Q1 2013, on $1.6M higher sales. The improved results were at both established facilities. The Circuits joint venture in China did not have a material impact on profitability.

The Aerospace net earnings before corporate and interest and other costs increased slightly as start-up losses at the two new facilities decreased, offset by lower profitability in the Toronto facility due to lower activity. Costs related to the development of the C919 cockpit assemblies of $0.6M in Q1 2014 were treated as deferred development and not expensed.

As at February 28, 2014, the Corporation's primary source of liquidity included accounts receivable of $12.2M and inventory of $8.6M. Net working capital at February 28, 2014 was $11.4M.

The Corporation will host a live conference call on Wednesday, April 9, 2014 at 11:30am (EDT) to discuss the results of Q1 2014.

Anyone wishing to participate in the call should dial 647-788-4922 or 1-877-223-4471 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 April 23, 2014 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, pass code 25504567.

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)                                  February 28,      November 30,
(in thousands of Canadian dollars)                   2014              2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
ASSETS
Current assets
Cash                                     $          1,744  $            996
Accounts receivable                                12,173            12,275
Taxes receivable                                      334               264
Inventories                                         8,606             8,074
Prepaid expenses                                      611               549
----------------------------------------------------------------------------
                                                   23,468            22,158
Non-current assets
Plant and equipment, net                            5,419             5,587
Deferred income taxes                               2,307             2,385
Intangible assets                                     184               196
----------------------------------------------------------------------------
Total assets                             $         31,378  $         30,326
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND EQUITY
Current liabilities
Bank indebtedness                        $          1,107  $          1,062
Accounts payable and accrued liabilities            8,698             8,027
Provisions                                            479               612
Customer deposits, net of deferred
 development                                        1,502               930
Current portion of long-term bank debt                321               307
Current portion of subordinated loan                    -               510
----------------------------------------------------------------------------
                                                   12,107            11,448
Non-current liabilities
Long-term bank debt                                 1,749             1,753
Subordinated loan                                   3,984             3,396
Government assistance                                 674               786
----------------------------------------------------------------------------
Total liabilities                                  18,514            17,383
----------------------------------------------------------------------------
Equity
Deficit                                  $         (9,957) $        (10,102)
Accumulated other comprehensive loss                 (469)             (249)
----------------------------------------------------------------------------
                                                  (10,426)          (10,351)
Share capital
  Common shares                                    12,681            12,681
  Preferred shares                                  2,218             2,218
Contributed surplus                                 8,356             8,347
----------------------------------------------------------------------------
Total equity attributable to FTG's
 shareholders                                      12,829            12,895
Non-controlling interests                              35                48
----------------------------------------------------------------------------
Total equity                                       12,864            12,943
----------------------------------------------------------------------------
Total liabilities and equity             $         31,378  $         30,326
----------------------------------------------------------------------------
----------------------------------------------------------------------------

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Earnings (Loss)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                    Three months ended
----------------------------------------------------------------------------
(unaudited)                                     February 28,       March 1,
(in thousands of Canadian dollars, except per
 share amounts)                                         2014           2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Sales                                          $      13,989  $      13,015
----------------------------------------------------------------------------

Cost of sales
  Cost of sales                                       10,448         10,523
  Depreciation of plant and equipment                    417            410
----------------------------------------------------------------------------
Total cost of sales                                   10,865         10,933
----------------------------------------------------------------------------
Gross margin                                           3,124          2,082
----------------------------------------------------------------------------

Expenses
  Selling, general and administrative                  2,092          2,074
  Research and development costs                         847            667
  Recovery of research and development costs             (70)           (70)
  Depreciation/amortization of plant and
   equipment and intangible assets                        45             38
  Interest expense on short-term debt                     14             14
  Interest expense on long-term debt                      86             78
  Foreign exchange gain                                 (117)           (50)
----------------------------------------------------------------------------
Total expenses                                         2,897          2,751
----------------------------------------------------------------------------

Earnings (loss) before income taxes                      227           (669)

Income tax expense                                        98             22
----------------------------------------------------------------------------

Net earnings (loss)                            $         129  $        (691)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Attributable to:
Non-controlling interests                                (16)             -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Equity holders of FTG                                    145           (691)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Earnings (loss) per share, attributable to the
 equity holders of FTG
  Basic                                        $        0.01  $       (0.04)
  Diluted                                      $        0.01  $       (0.04)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Comprehensive loss

----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                       Three months ended
----------------------------------------------------------------------------
                                                       February
(unaudited)                                                 28,    March 1,
(in thousands of Canadian dollars)                         2014        2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net earnings (loss)                                  $      129  $     (691)
----------------------------------------------------------------------------

Other comprehensive income (loss) to be reclassified
 to net earnings (loss) in subsequent periods:

  Foreign currency translation adjustments                  528         142
  Net unrealized loss on derivative financial
   instruments designated as cash flow hedges              (748)       (237)
----------------------------------------------------------------------------
                                                           (220)        (95)
----------------------------------------------------------------------------

Total comprehensive loss                             $      (91) $     (786)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Attributable to:
Equity holders of FTG                                $      (75) $     (786)
Non-controlling interests                            $      (16) $        -
----------------------------------------------------------------------------
----------------------------------------------------------------------------


FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Changes in Equity


----------------------------------------------------------------------
----------------------------------------------------------------------
Three months ended
 February 28, 2014          Attributed to the equity holders of FTG
                        ----------------------------------------------
                        ----------------------------------------------

(unaudited)
(in thousands of           Common   Preferred              Contributed
 Canadian dollars)         Shares      Shares   Deficit        Surplus
----------------------------------------------------------------------
----------------------------------------------------------------------

Balance, November 30,
 2013                    $ 12,681 $     2,218 $ (10,102) $       8,347
Net earnings (loss)             -           -       145              -
Stock-based compensation        -           -         -              9
Foreign currency
 translation adjustments        -           -         -              -
Net unrealized loss on
 derivative financial
 instruments designated
 as cash flow hedges            -           -         -              -
----------------------------------------------------------------------
Balance, February 28,
 2014                    $ 12,681 $     2,218 $  (9,957) $       8,356
----------------------------------------------------------------------
----------------------------------------------------------------------

----------------------------------------------------------------------
Three months ended March
 1, 2013                     Attributed to the equity holders of FTG
                        ----------------------------------------------
(unaudited)
(in thousands of
 Canadian dollars)         Common   Preferred              Contributed
                           Shares      Shares   Deficit        Surplus
----------------------------------------------------------------------
----------------------------------------------------------------------

Balance, November 30,
 2012                    $ 12,681 $     2,218 $  (9,104) $       8,305
Net loss                        -           -      (691)             -
Stock-based compensation        -           -         -              9
Foreign currency
 translation adjustments        -           -         -              -
Net unrealized loss on
 derivative financial
 instruments designated
 as cash flow hedges            -           -         -              -
----------------------------------------------------------------------
Balance, March 1, 2013   $ 12,681 $     2,218 $  (9,795) $       8,314
----------------------------------------------------------------------


FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Changes in Equity


----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three months ended       Attributed to the equity
 February 28, 2014            holders of FTG
                        ---------------------------
                        ---------------------------
                             Accumulated
(unaudited)                        Other                     Non-
(in thousands of           Comprehensive              controlling     Total
 Canadian dollars)                (Loss)     Total      interests    equity
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Balance, November 30,
 2013                    $          (249) $ 12,895  $          48  $ 12,943
Net earnings (loss)                    -       145            (13)      132
Stock-based compensation               -         9              -         9
Foreign currency
 translation adjustments             528       528              -       528
Net unrealized loss on
 derivative financial
 instruments designated
 as cash flow hedges                (748)     (748)             -      (748)
----------------------------------------------------------------------------
Balance, February 28,
 2014                    $          (469) $ 12,829  $          35  $ 12,864
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Three months ended March Attributed to the equity
 1, 2013                      holders of FTG
                        ---------------------------
(unaudited)                  Accumulated
(in thousands of                   Other                     Non-
 Canadian dollars)         Comprehensive              controlling     Total
                                   (Loss)    Total      interests    equity
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Balance, November 30,
 2012                    $           (85) $ 14,015  $           -  $ 14,015
Net loss                               -      (691)             -      (691)
Stock-based compensation               -         9              -         9
Foreign currency
 translation adjustments             142       142              -       142
Net unrealized loss on
 derivative financial
 instruments designated
 as cash flow hedges                (237)     (237)             -      (237)
----------------------------------------------------------------------------
Balance, March 1, 2013   $          (180) $ 13,238  $           -  $ 13,238
----------------------------------------------------------------------------

FIRAN TECHNOLOGY GROUP CORPORATION
Interim Condensed Consolidated Statements of Cash Flows
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                      Three months ended
----------------------------------------------------------------------------
(unaudited)                                       February 28,     March 1,
(in thousands of Canadian dollars)                        2014         2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net inflow (outflow) of cash related to the
 following:
Operating activities
Net earnings (loss)                                $       129  $      (691)
Items not affecting cash:
  Non-controlling interest share of loss                    16            -
  Stock-based compensation                                   9            9
  Gain on disposal of plant and equipment                    -          (25)
  Effect of exchange rates on US dollar debt                89           50
  Depreciation of plant and equipment                      450          436
  Amortization of intangible assets                         12           12
  Amortization of deferred financing costs                   7            7
  Income tax expense                                        78            -
  AMIS interest accretion                                   78           73
  Amortization of government assistance                   (112)        (112)
Changes in non-cash operating working capital              524          466
----------------------------------------------------------------------------
                                                         1,280          225
----------------------------------------------------------------------------
Investing activities
  Additions to plant and equipment                        (197)        (717)
  Proceeds from disposal of plant and equipment              -           25
----------------------------------------------------------------------------
                                                          (197)        (692)
----------------------------------------------------------------------------
Net cash flow from (used in) operating and
 investing activities                                    1,083         (467)
----------------------------------------------------------------------------
Financing activities
  Decrease in bank indebtedness                              -         (823)
  Proceeds from long-term bank debt                          -          717
  Repayments of long-term bank debt                        (85)         (18)
----------------------------------------------------------------------------
                                                           (85)        (124)
----------------------------------------------------------------------------
Effects of foreign exchange rate changes on cash
 flow                                                     (250)        (155)
----------------------------------------------------------------------------
Net increase (decrease) in cash flow                       748         (746)
Cash, beginning of year                                    996        1,446
----------------------------------------------------------------------------
Cash, end of period                                $     1,744  $       700
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Disclosure of cash payments
  Payment for interest                             $        29  $        19
  Payments for income taxes                        $        25  $        17
----------------------------------------------------------------------------
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