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Firan Technology Group Corporation (TSX:FTG) today announced financial results for the first quarter 2018.
- Achieved first quarter sales of $27.5M in Q1 2018, compared to $27.2M in Q1 2017
- Booked over $40M in orders in Q1 2018
- Net loss in Q1 2018 of $0.3M versus net earnings of $0.8M in Q1 2017
- Cash usage from operations was ($0.3M) in Q1 2018 compared to cash inflow of $1.0M in Q1 last year
“The first quarter of 2018 saw very strong bookings across our customer base reflecting the strength of the aerospace and defense markets and the benefit from past acquisitions,” stated Brad Bourne, President and Chief Executive Officer. He added, “We are continuing to address costs and margins in a few of our operations to achieve the expected profitability for the Corporation.”
FTG accomplished many goals in the first quarter of 2018 that continue to improve the Corporation and position it for the future, including:
- Signed multimillion dollar contract with FlightSafety for KC-46 simulator cockpit assemblies
- Shipped first simulator cockpit assemblies from FTG Tianjin to CAE in Montreal
- Booked and shipped simulator hardware from FTG Tianjin to Rockwell’s simulator operations also in Tianjin China
- Signed contract amendment with Shanghai Avionics for C919 cockpit product assemblies for the C919 program valued at $4M USD in total
For FTG, overall sales increased by $0.4M or 1.3%, from $27.2M in Q1 2017 to $27.5M in Q1 2018. In Q1 2018, as a result of new funding, some activity previously recognized as cost recovery on deferred development programs is now shown as revenue in accordance with our policy for revenue recognition on a percentage completion basis. As a result, $5.0M in revenue was recognized in Q1 2018 which represents the percentage completed to-date for this activity. In Q1 2018, the Canadian dollar versus the US dollar was $0.06 stronger than Q1 last year and this impacted sales by over $1.0M.
Revenues from the PhotoEtch acquisition contributed about $1.6M in incremental sales during Q1 2018 compared to $2.0M in Q1 2017 and our target of $1.5M per quarter. The decrease from last year was due to minor fluctuations in demand from various customers. The PhotoEtch related revenues will ramp up significantly in the second half of 2018 as shipments begin on the KC-46 simulator assembly contract. Revenues from Teledyne PCT contributed $3.1M in Q1 2018 compared to $8.0M in Q1 last year and our target of $4M per quarter. Sales in Q1 last year were from the Teledyne PCT facility and were high as customers purchased safety stock ahead of the plant closure. Sales in Q1 2018 were below the target due to some temporary component shortages that delayed shipments late in the quarter from the Chatsworth facility.
The Circuits segment sales were down $1.3M or 8.5% in Q1 2018 versus Q1 2017. Both North America sites were down. Demand dipped briefly in December in Toronto but has been strong after that. In Chatsworth, Q1 started slowly as momentum had been lost due to production issues reported in Q4. Momentum and solid production rates were achieved by the end of Q1, along with normalized scrap rates.
For the Aerospace segment, sales in Q1 2018 were $13.4M compared to $11.7M in Q1 2017 resulting in a 14.2% growth rate. Q1 2017 was unusually high due to the production rates in the Teledyne PCT facility to support safety stock demand. Q1 2018 had the unusually high development program revenue recognition of $5M. As noted above, shipments from Aerospace Chatsworth were low in February due to temporary component shortages.
Gross margins in Q1 2018 were $4.8M, or 17.6% compared to $6.9M or 25.3% in Q1 2017. Excluding the impact of the development program, which has a low margin, the margin in Q1 2018 was 21.3%. The drop in gross margin is due partially to the decreased activity revenue this year, offset by reduced operating cost from the closure of the Teledyne PCT facility. As noted at year end, there are activities at three FTG sites underway to improve margins including increased engineering development activities in Aerospace Toronto, reduced scrap at Circuits Chatsworth and reduced transition related costs of outsourcing, expedite fees, travel, and overtime at Aerospace Chatsworth.
Earnings before interest, tax, depreciation and amortization (EBITDA) for Q1 2018 was $1.4M, a decrease from $2.2M in Q1 2017.
Net loss at FTG in Q1 2018 was $0.3M compared to a net profit of $0.8M in Q1 2017. The loss in Q1 2018 was impacted by a $0.06 strengthening of the Canadian dollar versus the US dollar negatively impacting Canadian operations profitability. Also impacting profitability was lower activity revenue and the temporary operating cost issues noted above. Offsetting this, SG&A and related expenses were $1.0M lower in Q1 2018 compared to Q1 2017 due primarily to the closure of the Teledyne PCT plant, and lower R&D expenses.
The Circuits segment net earnings before corporate and interest and other costs was $0.8M in Q1 2018 compared to $2.4M in Q1 2017.
The Aerospace net earnings before corporate and interest and other costs was $0.0M in Q1 2018 versus ($0.3M) in Q1 2017.
Cash outflow from operations after investments in capital equipment and deferred development, was ($0.3M) in Q1 2018 compared to cash inflow of $1.0M in Q1 2017. Capital asset additions in Q1 2018 were $0.8M versus $0.9M in Q1 2017.Accounts receivable increased $1.1M in the quarter. Inventories increased $1.1M. Accounts payable and accrued liabilities decreased $2.2M. These were offset by an increase of $3.4M in customer deposits.
As at March 2, 2018, the Corporation’s net working capital was $25.7M, an increase of $1.4M over November 30, 2017.
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, Fort Worth, Texas and Tianjin, China.