FTG Circuits Segment Reports 2.3% Drop in Q2 2018 Sales

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Firan Technology Group Corporation today announced financial results for the second quarter of 2018.

• Achieved record sales of $28.9 million, an increase of 13% over Q2 2017
• Grew aerospace segment by 42% over Q2 last year
• Gross margins increased by $1.5 million or 26% over Q2 last year
• Generated cash flow from operations of $3.6 million compared to cash usage of $0.4 million in Q2 2017

"The second quarter of 2018 began to demonstrate the earnings benefits from our acquisitions in 2016," stated Brad Bourne, president and chief executive officer. "While we continued to experience some increased costs in the quarter related to the transition, we also achieved a dramatic improvement in our net earnings and cash flow."

Business Highlights

FTG accomplished many goals in the second quarter of 2018 that continue to improve the Corporation and position it for the future, including:

• Completed C-130 contract with CAE on schedule and on cost
• Renewed contract with Rockwell Collins for Printed Circuit Boards from North American and China facilities
• Won new cursor control device assembly for use on Airbus aircraft already in service
• Achieved sales resulting from the PhotoEtch acquisition of $1.5 million in the quarter compared to $2.9 million in the second quarter of last year and a target of $1.5 million. The PhotoEtch related revenues will ramp up significantly in the second half of 2018 as shipments begin on the KC-46 simulator assembly contract.
• Achieved sales resulting from the Teledyne PCT acquisition of $5 million in the quarter compared to $5 million in the second quarter of last year and a target of $4 million.

For FTG, overall sales increased by $3.4 million or 13.2% from $25.5 million in Q2 2017 to $28.9 million in Q2 2018. This increase was experienced by the Aerospace segment and was driven by the shipment of the majority of the C-130 program for CAE from the Aerospace Toronto facility and a ramp up of activity in the Aerospace Chatsworth facility. Offsetting these gains, was the impact of changes in the foreign exchange rates (the Canadian dollar was 6 cents stronger in Q2 this year which translated into a reduction in sales of approximately $1 million).

For the year-to-date period, sales were up $3.7 million or 7.1% due to the items noted above and the one-time revenue recognition of $5 million from the C919 program with SAVIC in the first quarter of this year.

Sales in the Circuits segment were down $0.4 million or 2.3% comparing Q2 2018 versus Q2 2017. On a year-to-date basis, Circuits segment sales were down by $1.7 million or 5.3%.

For the Aerospace segment, sales in Q2 2018 were $12.7 million compared to $8.9 million in the same quarter last year resulting in a 41.8% growth rate. Included in the Q2 2018 results are $1.5 million in sales from the acquisition of PhotoEtch and approximately $4.5 million of Teledyne PCT incremental sales. Year-to-date sales were up $5.4 million or 26.1% in the Aerospace segment.

Gross margins in Q2 2018 were up $1.5 million or 25.9% compared to Q2 2017. The benefit of increased sales and the cost savings of closing the Teledyne PCT facility was partially offset by some transition related costs.

Earnings before interest, tax, depreciation and amortization (EBITDA) for FTG for Q2 2018 was $3.4 million and $8.4 million for the trailing 12 months.

Net earnings at FTG in Q2 2018 were $1.3 million compared to a net profit of $0.1 million in Q2 2017. Q2 2018 had higher sales and the elimination of the Teledyne PCT facility costs as well as reductions in R&D spending.  These improvements were partially offset by some restructuring costs this year.

The Circuits segment net earnings before corporate and interest and other costs was $2.8 million in Q2 2018 compared to $2.6 million in Q2 2017. The Circuits joint venture in China was profitable in Q2 of this year.

The Aerospace segment’s net earnings before corporate and interest and other costs was $0.1 million versus ($1 million) in Q2 2017. Q2 2017 included operating and transitional costs for the Teledyne PCT facility which was closed during that quarter. FTG Aerospace Tianjin was profitable in Q2 of this year.

As at June 1, 2018, the Corporation’s net working capital was $27.8 million, an increase of $3.4 million over 2017 year end. Higher accounts receivables and net bank debt was offset by higher customer deposits.

About FTG

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.