MONTREAL, QUEBEC--(Marketwired - Jul 10, 2014) - Velan Inc. (VLN.TO) (the "Company"), a world-leading manufacturer of industrial valves, announced today its financial results for its first quarter ended May 31, 2014.
Highlights
-
Sales of US$103.1 million for the quarter
-
Net earnings1 of US$4.0 million for the quarter
-
Order backlog of US$483.1 million at the end of the quarter
-
Order bookings of US$114.3 million for the quarter
-
Net cash2 of US$70.7 million at the end of the quarter
| | | Three-month periods ended | |
|
(millions of U.S. dollars, excluding per share amounts)
| | May 31,
2014 | | May 31,
2013 | |
| Sales | | $ | 103.1 | | $ | 132.2 | |
| | | | | | | | |
| Gross Profit | | | 26.5 | | | 30.7 | |
| Gross margin % | | | 25.7 | % | | 23.2 | % |
| | | | | | | | |
| Net income (loss) attributable to Multiple and Subordinate Voting Shares | | | 4.0 | | | 5.8 | |
| | | | | | | | |
| Net income (loss) per share - | Basic | | 0.18 | | | 0.26 | |
| | Diluted | | 0.18 | | | 0.26 | |
First Quarter Fiscal 2015 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the first quarter of fiscal 2014):
-
Net earnings1 amounted to $4.0 million or $0.18 per share compared to $5.8 million or $0.26 per share last year. The $1.8 million decrease in net earnings1 is primarily attributable to lower sales volume which was partially offset by improved gross margins and lower administration costs.
-
Sales amounted to $103.1 million, a decrease of $29.1 million or 22.0%. The decrease in sales is primarily attributable to decreased shipments of certain large export project orders.
-
Net new orders received ("bookings") amounted to $114.3 million, an increase of $7.6 million or 7.1% compared to last year, continuing the positive trend which started during the latter half of the prior year.
-
The Company ended the quarter with a backlog of $483.1 million, an increase of $11.4 million or 2.4% since the beginning of the current fiscal year. This increase is mainly attributable to the higher bookings outpacing the lower sales output in the quarter.
-
Gross margin increased by 2.5 percentage points from 23.2% to 25.7%. This increase is mainly attributable to a product mix with a greater proportion of higher margin product sales, particularly spare parts and valves without third party actuators.
-
Administration costs amounted to $21.3 million, a decrease of $0.4 million or 1.8%. The decrease is primarily attributable to a decrease in sales commissions and freight to customers on project orders which was partially offset by an increase in costs recognized in connection with the Company's ongoing asbestos litigation. The increase in asbestos costs is due more to the fact that the prior year settlement payments in the quarter were unusually low compared to other periods over recent years.
-
The Company generated net cash2 from operations of $11.4 million in the quarter. This source of net cash2 was primarily attributable to positive cash net earnings1 and non-cash working capital movements. The Company ended the quarter with net cash2 of $70.7 million, an increase of $3.0 million or 4.4% since the beginning of the current fiscal year.
-
Foreign currency impacts:
-
Based on average exchange rates, the Euro strengthened 6.2% against the U.S. dollar when compared to the same period last year. This strengthening resulted in the Company's net profits from its European subsidiaries being reported as higher U.S. dollar amounts in the current quarter.
-
Based on average exchange rates, the Canadian dollar weakened 7.1% against the U.S. dollar when compared to the same period last year. This weakening resulted in the Company's Canadian dollar expenses being reported as lower U.S. dollar amounts in the current quarter.
-
The impact of these currency swings was favourable to the Company's results for the quarter.
"While Velan occasionally has quarters where not all contract sales take place as planned, and our first quarter was one of those quarters, we were pleased with the improved margins and expense control during the quarter," said John Ball, CFO of Velan Inc. "The backlog has slowly been increasing, and the balance sheet continued to strengthen, with our cash position improving from last year end."
Tom Velan, President and CEO of Velan Inc. said, "After finishing our Fiscal 2014 with such a strong quarter, we would have liked to see the sales momentum continue into our first quarter of Fiscal 2015. Although some projects didn't make it out the door in our first quarter, we continued to benefit from a favorable product mix and improved margins."
Dividend
The Board declared an eligible quarterly dividend of CDN$0.10 per share, payable on September 30, 2014, to all shareholders of record as at September 15, 2014.
Conference call
Financial analysts, shareholders, and other interested individuals are invited to attend the first quarter conference call to be held on July 10, 2014, at 5:00 PM (EST). The toll free call-in number is 1-877-256-6025, access code 21721720. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558- 5253, access code 21721720.
About Velan
Velan Inc. (www.velan.com) is a world-leading manufacturer of industrial valves with sales of $489 million in its last reported fiscal year. The Company employs over 2,000 people and has manufacturing plants in 10 countries. Velan Inc. is a public company with its shares listed on the Toronto Stock Exchange under the symbol VLN.
Safe harbour statement
Except for historical information provided herein, this press release may contain information and statements of a forward-looking nature concerning the future performance of the Company. These statements are based on suppositions and uncertainties as well as on management's best possible evaluation of future events. Such factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for the Company's products and services, the impact of price pressures exerted by competitors, and general market trends or economic changes. As a result, readers are advised that actual results may differ from expected results.
Non-IFRS measures
In this press release, the Company presented measures of performance and financial condition that are not defined under International Financial Reporting Standards ("non-IFRS measures") and are therefore unlikely to be comparable to similar measures presented by other companies. These measures are used by management in assessing the operating results and financial condition of the Company. In addition, they provide readers of the Company's consolidated financial statements with enhanced understanding of its results and financial condition, and increase transparency and clarity into the operating results of its core business.
The term "net cash" is defined as cash and cash equivalents plus short-term investments less bank indebtedness, short-term bank loans, and current portion of long-term bank borrowings. Refer to the "Reconciliations of Non- IFRS Measures" section in the Company's MD&A for a detailed calculation of this measure.
1 Net earnings or loss refer to net income or loss attributable to Subordinate and Multiple Voting Shares.
2 Non-IFRS measures - see explanation above.
| Velan Inc. |
| Condensed Interim Consolidated Statements of Financial Position |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| | | | | |
| | | | | |
| As At | May 31, | | February 28, | |
| | 2014 | | 2014 | |
| | $ | | $ | |
| Assets | | | | |
| | | | | |
| Current assets | | | | |
| Cash and cash equivalents | 102,516 | | 106,716 | |
| Short-term investments | 331 | | 239 | |
| Accounts receivable | 112,470 | | 128,978 | |
| Income taxes recoverable | 7,917 | | 5,465 | |
| Inventories | 226,914 | | 224,149 | |
| Deposits and prepaid expenses | 5,948 | | 5,046 | |
| Derivative assets | 526 | | 498 | |
| | 456,622 | | 471,091 | |
| Non-current assets | | | | |
| Property, plant and equipment | 97,616 | | 96,605 | |
| Intangible assets and goodwill | 42,289 | | 43,359 | |
| Deferred income taxes | 11,725 | | 11,406 | |
| Other assets | 1,468 | | 1,693 | |
| | |
| | 153,098 | | 153,063 | |
| Total assets | 609,720 | | 624,154 | |
| | |
| Liabilities | | | | |
| | |
| Current liabilities | | | | |
| Bank indebtedness | 25,478 | | 31,876 | |
| Short-term bank loans | 537 | | 916 | |
| Accounts payable and accrued liabilities | 72,649 | | 76,590 | |
| Income tax payable | 5,263 | | 4,158 | |
| Dividend payable | 2,025 | | 1,586 | |
| Customer deposits | 63,975 | | 66,842 | |
| Provisions | 7,739 | | 8,060 | |
| Accrual for performance guarantees | 33,655 | | 33,842 | |
| Derivative liabilities | 335 | | 1,501 | |
| Current portion of long-term debt | 10,059 | | 10,402 | |
| | 221,715 | | 235,773 | |
| Non-current liabilities | | | | |
| Long-term debt | 10,314 | | 11,685 | |
| Deferred income taxes | 9,042 | | 9,270 | |
| Other liabilities | 8,464 | | 8,307 | |
| | |
| | 27,820 | | 29,262 | |
| Total liabilities | 249,535 | | 265,035 | |
| | |
| Equity | | | | |
| | |
| Equity attributable to the Subordinate and Multiple Voting shareholders | | | | |
| Share capital | 76,678 | | 76,688 | |
| Contributed surplus | 6,096 | | 6,099 | |
| Retained earnings | 274,855 | | 272,867 | |
| Accumulated other comprehensive income (loss) | (4,789 | ) | (3,589 | ) |
| | 352,840 | | 352,065 | |
| | |
| Non-controlling interest | 7,345 | | 7,054 | |
| Total equity | 360,185 | | 359,119 | |
| | |
| Total liabilities and equity | 609,720 | | 624,154 | |
| | | | | |
| | | | | |
| | | | | |
| Velan Inc. |
| Condensed Interim Consolidated Statements of Income (Loss) |
| (Unaudited) |
| (in thousands of U.S. dollars, excluding number of shares and per share amounts) |
| |
| |
| | Three-month periods ended | |
| | May 31 | |
| | 2014 | | 2013 | |
| | $ | | $ | |
| | |
| Sales | 103,065 | | 132,168 | |
| | | | | |
| Cost of sales | 76,580 | | 101,489 | |
| | |
| Gross profit | 26,485 | | 30,679 | |
| | |
| Administration costs | 21,297 | | 21,748 | |
| Other expense (income) | (130 | ) | 38 | |
| | |
| Operating profit (loss) | 5,318 | | 8,893 | |
| | |
| Finance income | 265 | | 180 | |
| Finance costs | 379 | | 546 | |
| Finance income (costs) - net | (114 | ) | (366 | ) |
| Income (Loss) before income tax | 5,204 | | 8,527 | |
| | | | | |
| Income taxes | 1,142 | | 2,245 | |
| | |
| Net income (loss) for the period | 4,062 | | 6,282 | |
| | |
| Net income (loss) attributable to: | | | | |
| Subordinate Voting Shares and Multiple Voting Shares | 4,005 | | 5,800 | |
| Non-controlling interest | 57 | | 482 | |
| | 4,062 | | 6,282 | |
| Net income (loss) per Subordinate and Multiple Voting Share | | | | |
| Basic | 0.18 | | 0.26 | |
| Diluted | 0.18 | | 0.26 | |
| | |
| Dividends declared per Subordinate and Multiple Voting Share | 0.09 | | 0.08 | |
| | (CA$0.10 | ) | (CA$0.08 | ) |
| | |
| Total weighted average number of Subordinate and Multiple Voting Shares | | | | |
| Basic | 21,958,012 | | 21,923,768 | |
| Diluted | 21,965,057 | | 21,934,333 | |
| | | | | |
| | | | | |
| | | | | |
| Velan Inc. |
| Condensed Interim Consolidated Statements of Comprehensive Income (Loss) |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| |
| |
| | Three-month periods ended | |
| | May 31 | |
| | 2014 | | 2013 | |
| | $ | | $ | |
| | |
| Comprehensive income (loss) | | | | |
| | |
| Net income (loss) for the period | 4,062 | | 6,282 | |
| | |
| Other comprehensive income (loss) | | | | |
| Foreign currency translation adjustment on foreign operations whose functional currency isother than the reporting currency (U.S. dollar) |
(966
|
)
|
(1,222
|
)
|
| | |
| Comprehensive income (loss) | 3,096 | | 5,060 | |
| | |
| Comprehensive income (loss) attributable to: | | | | |
| Subordinate Voting Shares and Multiple Voting Shares | 2,805 | | 4,746 | |
| Non-controlling interest | 291 | | 314 | |
| | |
| | 3,096 | | 5,060 | |
| | | | | |
| | | | | |
| Velan Inc. |
| Condensed Interim Consolidated Statements of Changes in Equity |
| (Unaudited) |
| (in thousands of U.S. dollars, excluding number of shares) |
| |
| |
| | Equity attributable to the Subordinate and Multiple Voting shareholders | | | | | |
| | Number of
shares | | Share
capital | | Contributed
surplus | | Accumulated
other
comprehensive
income (loss) | |
Retained
earnings
| |
Total
| |
Non-controlling
interest
| |
Total
equity
| |
| | |
| Balance - February 28, 2014 | 21,958,768 | | 76,688 | | 6,099 | | (3,589 | ) | 272,867 | | 352,065 | | 7,054 | | 359,119 | |
| | |
| Net income (loss) for the period | - | | - | | - | | - | | 4,005 | | 4,005 | | 57 | | 4,062 | |
| Other comprehensive income (loss) | - | | - | | - | | (1,200 | ) | - | | (1,200 | ) | 234 | | (966 | ) |
| | |
| | 21,958,768 | | 76,688 | | 6,099 | | (4,789 | ) | 276,872 | | 354,870 | | 7,345 | | 362,215 | |
| | |
| Effect of share-based compensation | - | | - | | 3 | | - | | - | | 3 | | - | | 3 | |
| Dividends | | | | | | | | | | | | | | | | |
| | Multiple Voting Shares | - | | - | | - | | - | | (1,415 | ) | (1,415 | ) | - | | (1,415 | ) |
| | Subordinate Voting Shares | - | | - | | - | | - | | (602 | ) | (602 | ) | - | | (602 | ) |
| Share repurchase | (1,000 | ) | (10 | ) | (6 | ) | - | | - | | (16 | ) | - | | (16 | ) |
| | |
| Balance - May 31, 2014 | 21,957,768 | | 76,678 | | 6,096 | | (4,789 | ) | 274,855 | | 352,840 | | 7,345 | | 360,185 | |
| | |
| | |
| Balance - February 28, 2013 | 21,923,768 | | 76,314 | | 1,746 | | (8,676 | ) | 250,129 | | 319,513 | | 8,660 | | 328,173 | |
| | |
| Net income (loss) for the period | - | | - | | - | | - | | 5,800 | | 5,800 | | 482 | | 6,282 | |
| Other comprehensive income (loss) | - | | - | | - | | (1,054 | ) | - | | (1,054 | ) | (168 | ) | (1,222 | ) |
| | |
| | 21,923,768 | | 76,314 | | 1,746 | | (9,730 | ) | 255,929 | | 324,259 | | 8,974 | | 333,233 | |
| | |
| Effect of share-based compensation | - | | - | | 8 | | - | | - | | 8 | | - | | 8 | |
| Dividends | | | | | | | | | | | | | | | | |
| | Multiple Voting Shares | - | | - | | - | | - | | (1,220 | ) | (1,220 | ) | - | | (1,220 | ) |
| | Subordinate Voting Shares | - | | - | | - | | - | | (472 | ) | (472 | ) | - | | (472 | ) |
| | |
| Balance - May 31, 2013 | 21,923,768 | | 76,314 | | 1,754 | | (9,730 | ) | 254,237 | | 322,575 | | 8,974 | | 331,549 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Velan Inc. |
| Condensed Interim Consolidated Statements of Cash Flow |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| |
| |
| | Three-month periods ended | |
| | May 31 | | | |
| | 2014 | | 2013 | |
| | $ | | $ | |
| | |
| Cash flows from | | | | |
| | | | | |
| Operating activities | | | | |
| Net income for the period | 4,062 | | 6,282 | |
| Adjustments to reconcile net income to cash provided by operating activities | 2,401 | | 3,320 | |
| Changes in non-cash working capital items | 4,935 | | 15,105 | |
| Cash provided (used) by operating activities | 11,398 | | 24,707 | |
| | |
| Investing activities | | | | |
| Short-term investments | (92 | ) | (1,153 | ) |
| Additions to property, plant and equipment | (4,059 | ) | (4,223 | ) |
| Additions to intangible assets | (230 | ) | (53 | ) |
| Proceeds on disposal of property, plant and equipment, and intangible assets | 51 | | 87 | |
| Net change in other assets | 230 | | (15 | ) |
| Cash provided (used) by investing activities | (4,100 | ) | (5,357 | ) |
| | |
| Financing activities | | | | |
| Dividends paid to Subordinate and Multiple Voting shareholders | (1,578 | ) | (1,701 | ) |
| Repurchase of shares | (16 | ) | - | |
| Payment of proceeds payable | - | | (1,960 | ) |
| Short-term bank loans | (379 | ) | (1,178 | ) |
| Increase in long-term debt | - | | 1,391 | |
| Repayment of long-term debt | (1,679 | ) | (1,719 | ) |
| Cash provided (used) by financing activities | (3,652 | ) | (5,167 | ) |
| | |
| Effect of exchange rate differences on cash | (1,448 | ) | (132 | ) |
| | |
| Net change in cash during the period | 2,198 | | 14,051 | |
| | |
| Net cash - Beginning of the period | 74,840 | | 28,592 | |
| | |
| Net cash - End of the period | 77,038 | | 42,643 | |
| | |
| Net cash is composed of: | | | | |
| | Cash and cash equivalents | 102,516 | | 84,359 | |
| | Bank indebtedness | (25,478 | ) | (41,716 | ) |
| | |
| | 77,038 | | 42,643 | |
| Supplementary information | | | | |
| Interest received (paid) | (93 | ) | (359 | ) |
| Income taxes reimbursed (paid) | (1,488 | ) | 504 | |
