MONTREAL, QUEBEC--(Marketwired - May 28, 2013) -
This document corrects and replaces the release sent earlier today at 2:34 PM EDT.
Velan Inc. (TSX:VLN) (the "Company"), a world-leading manufacturer of industrial valves, announced today its financial results for its fiscal year and fourth quarter ended February 28, 2013.
Highlights
- Record sales of US$500.6 million for the year
- Adjusted net earnings(1) of US$15.4 million for the year
- Order backlog of US$531 million at year-end
- Order bookings of US$370.1 million for the year
| Three-month periods ended | Fiscal years ended | |||||||
| (millions of U.S. dollars, excluding per share amounts) | February 28, | February 29, | February 28, | February 29, | ||||
| 2013 | 2012 | 2013 | 2012 | |||||
| Sales | $142.1 | $117.8 | $500.6 | $437.1 | ||||
| Gross profit | 30.4 | 23.0 | 113.9 | 87.3 | ||||
| Gross profit % | 21.4 | % | 19.5 | % | 22.8 | % | 20.0 | % |
| Adjusted net earnings(1) | 5.9 | 3.6 | 15.4 | 5.7 | ||||
| Adjusted net earnings(1)per share - Basic & Diluted | 0.27 | 0.16 | 0.70 | 0.26 | ||||
| Net earnings (loss) (2) | (3.6 | ) | 5.9 | 6.2 | 7.9 | |||
| Net earnings (loss)(2)per share - Basic & Diluted | (0.16 | ) | 0.27 | 0.28 | 0.36 | |||
Year-ended fiscal 2013 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the prior fiscal year):
- Net earnings(2) amounted to $6.2 million or $0.28 per share compared to $7.9 million or $0.36 per share last year. The net earnings(2) for the year were significantly impacted by an $11.7 million non-cash goodwill impairment charge related to the Company's 70%-owned Italian subsidiary, Velan ABV S.p.A. ("ABV"). Excluding this charge and other related fair value adjustments, the Company's adjusted net earnings(1) amounted to $15.4 million or $0.70 per share compared to $5.7 million or $0.26 per share last year. Further adjusting for the results of ABV and foreign currency fluctuations, the Company's adjusted net operating results(1) would have been $19.2 million or $0.87 per share this year compared to $12.5 million or $0.56 per share last year.
| (1) | Non-IFRS measure - see explanation below. |
| (2) | Net earnings or loss refers to net income or loss attributable to Subordinate and Multiple Voting Shares. |
- Net new orders received ("bookings") amounted to $370.1 million, a decrease of $158.9 million or 30% compared to last year. Excluding the results of ABV, bookings decreased by $138.9 million or 28.7%. Further adjusting for currency impacts, the decrease would have been $144.2 million or 27.3%.
- Sales amounted to a record total of $500.6 million, an increase of $63.5 million or 14.5%. Excluding the results of ABV and currency impacts, sales would have increased by $52.4 million or 12.6%.
- Gross profit percentage increased by 2.8 percentage points from 20% to 22.8%. Excluding the results of ABV and the effects of purchase price accounting, gross profit percentage increased by 2.4 percentage points from 22.2% to 24.6%. Further adjusting for currency impacts, the gross profit percentage would have been 24.8% for the current year.
- The Company generated net cash(1) from operations of $14.4 million. This source of net cash(1)is primarily attributable to an increase in operational profitability combined with improved non-cash working capital management.
- While there were no significant fluctuations in the average rate of the U.S. dollar against the Canadian dollar over the course of the current year, the Company's results were impacted by the fluctuations of the euro. Based on average exchange rates, the euro weakened 6.9% against the U.S. dollar when compared to the same period last year. This weakening resulted in the Company's net profits from its European subsidiaries being reported as lower U.S. dollar amounts in the current year.
Fourth Quarter Fiscal 2013 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the fourth quarter of fiscal 2012):
- Net loss(2) amounted to $3.6 million or $0.16 per share compared to net earnings(2) of $5.9 million or $0.27 per share last year. Adjusted net earnings(1) amounted to $5.9 million or $0.27 per share compared to $3.6 illion or $0.16 per share last year. Further adjusting for foreign currency fluctuations, the Company's adjusted net operating results(1) for the quarter would have been $6.3 million or $0.28 per share this year compared to $2.5 million or $0.11 per share last year.
- Net new orders received ("bookings") amounted to $96.7 million, a decrease of $29.2 million or 23.2% compared to last year. Excluding currency impacts, the decrease would have been 24.7%. The Company ended the quarter with a backlog of $531 million, a decrease of $130.8 million from the end of the prior year. Excluding currency impacts, the backlog would have decreased by $124 million over the same period to $537.8 million.
- Sales amounted to $142.1 million, an increase of $24.3 million or 20.6%. Excluding currency impacts, sales would have increased by $22 million or 18.7%.
- Gross profit percentage increased by 1.9 percentage points from 19.5% to 21.4%. Excluding currency impacts, the gross profit percentage would have increased by 2.4 percentage points in the quarter. This favourable variance was principally due to higher sales volume to cover production overhead expenses, especially in the Company's North American operations, coupled with improved production efficiencies in its Italian operations.
- The Company generated net cash(1) from operations of $23.1 million in the quarter, an increase of $7.5 million from the prior year. This increase was principally related to non-cash working capital movements, specifically a decrease in inventory.
"We were generally pleased about the progress for the year, notwithstanding the challenges to our earnings posed by the integration of the Italian company acquired in 2011 and the continued depreciation of the Euro against the U.S. dollar," said John Ball, CFO of Velan Inc. "Our investments in our manufacturing capacity both in Canada and Asia have been extensive and should start to pay dividends. Our balance sheet remains healthy and well financed and our backlog is now at a manageable level."
Tom Velan, President and CEO of Velan Inc. said, "We are pleased to have reached the $500 million sales milestone and we are starting this year with a good order backlog of $531 million. Our challenge will be to continue the high level of production of our complex project order backlog while using our shorter lead-times to increase our order bookings from last year's level."
"We have expanded our local manufacturing presence in Korea, China and India with an objective to lower production costs and increase our local sales in Asia. During the last year, we invested $28.5 million in our global manufacturing infrastructure. In our North American operations, we invested in large test fixtures, robotic welding, and computer numeric control ("CNC") machines. We also modified some of our production cells for improved production flow in accordance with Lean principles. We completed construction of a new greenfield plant in southern India and started to manufacture small forged valves; the plant will expand into other products in the future and will supply valves to the Indian and global markets. In China, we invested in test fixtures, CNC machines, and robotic welding to produce pressure seal valves for the Chinese power market. In Korea, we are establishing a new production line for larger valves to better service Korean engineering, procurement, and construction customers."
"We are continuing to take measures to improve our operational excellence and cost competitiveness, while strengthening our presence in international markets in order to improve our performance. Now, we are working to continue to build on the positive momentum to further improve our performance and operating results."
Dividend
The Board declared an eligible quarterly dividend of Canadian dollar $0.08 per share, payable on June 28, 2013, to all shareholders of record as at June 14, 2013.
Conference call
Financial analysts, shareholders, and other interested individuals are invited to attend the fourth quarter conference call to be held on May 28, 2013, at 4:30 PM (EST). The toll free call-in number is 1-888-224-7971, access code 21658132. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558-5253, access code 21658132.
About Velan
Velan Inc. (www.velan.com) is a world-leading manufacturer of industrial valves with sales of over $500 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 "adjusted net earnings" is defined as net income or loss attributable to Subordinate and Multiple Voting Shares excluding a goodwill impairment loss of $11.7 million for the current quarter and fiscal year, and positive fair value adjustments to the ABV purchase price proceeds payable. For both the current year and prior year quarters, as well as for the prior fiscal year, the amount of such fair value adjustment was $2.2 million. For the current fiscal year, the amount was $2.4 million.
The term "adjusted net operating results" for the annual results is defined as net income or loss attributable to Subordinate and Multiple Voting Shares excluding the net loss of ABV, the goodwill impairment loss, the purchase price accounting and interest accretion adjustments, the positive fair value adjustments to the ABV purchase price proceeds payable, and the impact of currency changes. Refer to the "Reconciliations and Non-IFRS Measures" section in the Company's Management Discussion and Analysis ("MD&A") for a detailed calculation of this measure.
The term "adjusted net operating results" for the quarterly results is defined as net income or loss attributable to Subordinate and Multiple Voting Shares excluding the goodwill impairment loss, the positive fair value adjustments to the ABV purchase price proceeds payable, and the impact of currency changes. Refer to the "Reconciliations and Non-IFRS Measures" section in the Company's MD&A for a detailed calculation of this measure.
Note that, for the calculation of the adjusted net operating results for the quarter, the net loss of ABV, as well as the purchase price accounting and interest accretion adjustments were not included as adjustments because both comparable periods included such items for the entire applicable period. The Company included these adjustments in the calculation of adjusted net operating results for the full fiscal year since the acquisition of ABV occurred part way through the 2012 fiscal year. As such, both periods would not be comparable since fiscal year 2012 includes 10 months of activity for ABV while fiscal year 2013 includes 12 months of activity.
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 and Non- IFRS Measures" section in the Company's MD&A for a detailed calculation of this measure.
| 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 | Fiscal years ended | ||||||||
| February 28, | February 29, | February 28, | February 29, | ||||||
| 2013 | 2012 | 2013 | 2012 | ||||||
| $ | $ | $ | $ | ||||||
| Sales | 142,070 | 117,784 | 500,574 | 437,135 | |||||
| Cost of sales | 111,640 | 94,779 | 386,675 | 349,873 | |||||
| Gross profit | 30,430 | 23,005 | 113,899 | 87,262 | |||||
| Administration costs | 22,445 | 21,406 | 90,985 | 83,620 | |||||
| Goodwill impairment loss | 11,700 | - | 11,700 | - | |||||
| Other expense (income) | (2,646 | ) | (3,489 | ) | (3,364 | ) | (3,806 | ) | |
| Operating profit (loss) | (1,069 | ) | 5,088 | 14,578 | 7,448 | ||||
| Finance income | 131 | 88 | 631 | 318 | |||||
| Finance costs | 614 | 633 | 3,191 | 1,669 | |||||
| Finance income (costs) - net | (483 | ) | (545 | ) | (2,560 | ) | (1,351 | ) | |
| Income (Loss) before income tax | (1,552 | ) | 4,543 | 12,018 | 6,097 | ||||
| Provision for (Recovery of) income tax | 1,967 | 145 | 5,284 | 348 | |||||
| Net income (loss) for the period | (3,519 | ) | 4,398 | 6,734 | 5,749 | ||||
| Net income (loss) attributable to: | |||||||||
| Subordinate Voting Shares and Multiple Voting Shares | (3,555 | ) | 5,864 | 6,169 | 7,892 | ||||
| Non-controlling interest | 36 | (1,466 | ) | 565 | (2,143 | ) | |||
| (3,519 | ) | 4,398 | 6,734 | 5,749 | |||||
| Net income (loss) per Subordinate and Multiple | |||||||||
| Voting Share | |||||||||
| Basic | (0.16 | ) | 0.27 | 0.28 | 0.36 | ||||
| Diluted | (0.16 | ) | 0.27 | 0.28 | 0.36 | ||||
| Dividends declared per Subordinate and Multiple | 0.08 | 0.08 | 0.32 | 0.32 | |||||
| Voting Share | (CDN$0.08 | ) | (CDN$0.08 | ) | (CDN$0.32 | ) | (CDN$0.32 | ) | |
| Velan Inc. |
| Condensed Interim Consolidated Statements of Comprehensive Income (Loss) |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| Three-month periods ended | Fiscal years ended | |||||||
| February 28, | February 29, | February 28, | February 29, | |||||
| 2013 | 2012 | 2013 | 2012 | |||||
| $ | $ | $ | $ | |||||
| Comprehensive income (loss) | ||||||||
| Net income (loss) for the period | (3,519 | ) | 4,398 | 6,734 | 5,749 | |||
| Other comprehensive income (loss) | ||||||||
| Foreign currency translation adjustment on foreign operations whose functional currency is other than the U.S. dollar | 152 | (251 | ) | (4,531 | ) | (7,461 | ) | |
| Comprehensive income (loss) | (3,367 | ) | 4,147 | 2,203 | (1,712 | ) | ||
| Comprehensive income (loss) attributable to: | ||||||||
| Subordinate Voting Shares and Multiple Voting Shares | (3,451 | ) | 5,490 | 1,710 | 1,400 | |||
| Non-controlling interest | 84 | (1,343 | ) | 493 | (3,112 | ) | ||
| (3,367 | ) | 4,147 | 2,203 | (1,712 | ) | |||
| Velan Inc. |
| Condensed Interim Consolidated Statements of Financial Position |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| As at | As at | |||
| February 28, | February 29, | |||
| 2013 | 2012 | |||
| $ | $ | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 77,172 | 65,414 | ||
| Short-term investments | 398 | 4,954 | ||
| Accounts receivable | 134,374 | 111,856 | ||
| Income taxes recoverable | 7,672 | 9,682 | ||
| Inventories | 246,983 | 258,684 | ||
| Deposits and prepaid expenses | 6,048 | 6,209 | ||
| Derivative assets | 340 | 1,737 | ||
| 472,987 | 458,536 | |||
| Non-current assets | ||||
| Property, plant and equipment | 90,630 | 72,961 | ||
| Intangible assets and goodwill | 43,194 | 58,845 | ||
| Deferred income taxes | 11,226 | 10,152 | ||
| Other assets | 1,737 | 1,476 | ||
| 146,787 | 143,434 | |||
| Total assets | 619,774 | 601,970 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Bank indebtedness | 48,580 | 32,438 | ||
| Short-term bank loans | 2,284 | 858 | ||
| Accounts payable and accrued liabilities | 78,431 | 82,088 | ||
| Income tax payable | 2,831 | 2,484 | ||
| Dividend payable | 1,701 | 1,791 | ||
| Customer deposits | 76,682 | 86,544 | ||
| Provisions | 6,345 | 5,149 | ||
| Accrual for performance guarantees | 28,525 | 21,679 | ||
| Derivative liabilities | 1,380 | 534 | ||
| Current portion of long-term debt | 10,463 | 1,696 | ||
| Current portion of other liabilities | 1,951 | 5,753 | ||
| 259,173 | 241,014 | |||
| Non-current liabilities | ||||
| Long-term debt | 16,387 | 7,891 | ||
| Deferred income taxes | 8,035 | 8,270 | ||
| Other liabilities | 8,006 | 9,218 | ||
| 32,428 | 25,379 | |||
| Total liabilities | 291,601 | 266,393 | ||
| Equity | ||||
| Equity attributable to Subordinate and Multiple Voting shareholders | ||||
| Share capital | 76,314 | 78,764 | ||
| Contributed surplus | 1,746 | 1,871 | ||
| Retained earnings | 250,129 | 250,951 | ||
| Accumulated other comprehensive income (loss) | (8,676 | ) | (4,217 | ) |
| 319,513 | 327,369 | |||
| Non-controlling interest | 8,660 | 8,208 | ||
| Total equity | 328,173 | 335,577 | ||
| Total liabilities and equity | 619,774 | 601,970 | ||
| Velan Inc. |
| Condensed Interim Consolidated Statements of Changes in Equity |
| (Unaudited) |
| (in thousands of U.S. dollars, excluding number of shares) |
| Equity attributable to Subordinate and Multiple Voting shareholders | |||||||||||||||
| Share capital | Contributed surplus | Accumulated other comprehensive income (loss) | Retained earnings | Total | Non-controlling interest | Total equity | |||||||||
| Balance - March 1, 2011 | 79,271 | 1,898 | 2,275 | 250,254 | 333,698 | 4,025 | 337,723 | ||||||||
| Net income (loss) for the year | - | - | - | 7,892 | 7,892 | (2,143 | ) | 5,749 | |||||||
| Other comprehensive loss | - | - | (6,492 | ) | - | (6,492 | ) | (969 | ) | (7,461 | ) | ||||
| 79,271 | 1,898 | (4,217 | ) | 258,146 | 335,098 | 913 | 336,011 | ||||||||
| Effect of share-based compensation | - | 71 | - | - | 71 | - | 71 | ||||||||
| Dividends | |||||||||||||||
| Multiple Voting Shares | - | - | - | (5,022 | ) | (5,022 | ) | - | (5,022 | ) | |||||
| Subordinate Voting Shares | - | - | - | (2,173 | ) | (2,173 | ) | - | (2,173 | ) | |||||
| Non-controlling interest | - | - | - | - | - | (948 | ) | (948 | ) | ||||||
| Share repurchase | (507 | ) | (98 | ) | - | - | (605 | ) | - | (605 | ) | ||||
| Non-controlling interest arising on acquisition | - | - | - | - | - | 8,243 | 8,243 | ||||||||
| Balance - February 29, 2012 | 78,764 | 1,871 | (4,217 | ) | 250,951 | 327,369 | 8,208 | 335,577 | |||||||
| Balance - March 1, 2012 | 78,764 | 1,871 | (4,217 | ) | 250,951 | 327,369 | 8,208 | 335,577 | |||||||
| Net income for the year | - | - | - | 6,169 | 6,169 | 565 | 6,734 | ||||||||
| Other comprehensive loss | - | - | (4,459 | ) | - | (4,459 | ) | (72 | ) | (4,531 | ) | ||||
| 78,764 | 1,871 | (8,676 | ) | 257,120 | 329,079 | 8,701 | 337,780 | ||||||||
| Effect of share-based compensation | - | 58 | - | - | 58 | - | 58 | ||||||||
| Dividends | |||||||||||||||
| Multiple Voting Shares | - | - | - | (4,988 | ) | (4,988 | ) | - | (4,988 | ) | |||||
| Subordinate Voting Shares | - | - | - | (2,003 | ) | (2,003 | ) | - | (2,003 | ) | |||||
| Non-controlling interest | - | - | - | - | - | (41 | ) | (41 | ) | ||||||
| Share repurchase | (2,450 | ) | (183 | ) | - | - | (2,633 | ) | - | (2,633 | ) | ||||
| Balance - February 28, 2013 | 76,314 | 1,746 | (8,676 | ) | 250,129 | 319,513 | 8,660 | 328,173 | |||||||
| Velan Inc. |
| Condensed Interim Consolidated Statements of Cash Flows |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| Three-month periods ended | Fiscal years ended | ||||||||
| February 28 | February 29 | February 28 | February 29 | ||||||
| 2013 | 2012 | 2013 | 2012 | ||||||
| Cash flows from | $ | $ | $ | $ | |||||
| Operating activities | |||||||||
| Net income (loss) for the period | (3,519 | ) | 4,398 | 6,734 | 5,749 | ||||
| Adjustments to reconcile net income (loss) to cash provided operating activities | |||||||||
| Depreciation of property, plant and equipment | 2,631 | 2,451 | 9,572 | 8,847 | |||||
| Amortization of intangible assets | 658 | 494 | 2,915 | 4,330 | |||||
| Deferred income taxes | 348 | (2,417 | ) | (1,325 | ) | (2,929 | ) | ||
| Share-based compensation expense | 15 | 21 | 58 | 71 | |||||
| Loss (Gain) on disposal of property, plant and equipment | 10 | (25 | ) | (134 | ) | (14 | ) | ||
| Goodwill impairment loss | 11,700 | - | 11,700 | - | |||||
| Interest accretion on proceeds payable | 158 | 244 | 663 | 946 | |||||
| Income from fair value adjustment of proceeds payable | (2,248 | ) | (2,230 | ) | (2,444 | ) | (2,230 | ) | |
| Unrealized foreign exchange gain on proceeds payable | 18 | (978 | ) | (407 | ) | (978 | ) | ||
| Net change in derivative assets and liabilities | 683 | (1,966 | ) | 2,169 | 1,649 | ||||
| Net change in other liabilities | 683 | 790 | 622 | 684 | |||||
| 11,137 | 782 | 30,123 | 16,125 | ||||||
| Changes in non-cash working capital items | 11,913 | 14,818 | (15,711 | ) | (28,893 | ) | |||
| Cash provided (used) by operating activities | 23,050 | 15,600 | 14,412 | (12,768 | ) | ||||
| Investing activities | |||||||||
| Short -term investments | 1,881 | (3,440 | ) | 4,556 | (4,867 | ) | |||
| Additions to property, plant and equipment | (5,811 | ) | (3,770 | ) | (28,452 | ) | (12,710 | ) | |
| Additions to intangible assets | (279 | ) | (1,102 | ) | (684 | ) | (1,840 | ) | |
| Proceeds on disposal of property, plant and equipment, and intangible assets | 521 | 39 | 905 | 100 | |||||
| Net change in other assets | (3 | ) | (235 | ) | (270 | ) | (87 | ) | |
| Business acquisition - net of cash acquired | - | - | - | (37,281 | ) | ||||
| Cash provided (used) by investing activities | (3,691 | ) | (8,508 | ) | (23,945 | ) | (56,685 | ) | |
| Financing activities | |||||||||
| Dividends paid to Subordinate and Multiple Voting shareholders | (1,780 | ) | (1,781 | ) | (7,081 | ) | (7,234 | ) | |
| Dividends paid to non-controlling interest | - | (864 | ) | (41 | ) | (948 | ) | ||
| Repurchase of shares | (217 | ) | (217 | ) | (2,633 | ) | (605 | ) | |
| Payment of proceeds payable | (560 | ) | - | (3,465 | ) | - | |||
| Short -term bank loans | 172 | 11 | 1,426 | (4,831 | ) | ||||
| Increase in long-term debt | 342 | 609 | 21,057 | 5,221 | |||||
| Repayment of long-term debt | (1,772 | ) | (366 | ) | (4,478 | ) | (3,002 | ) | |
| Cash provided (used) by financing activities | (3,815 | ) | (2,608 | ) | 4,785 | (11,399 | ) | ||
| Effect of exchange rate differences on cash | 1,124 | 503 | 364 | (534 | ) | ||||
| Net change in cash during the period | 16,668 | 4,987 | (4,384 | ) | (81,386 | ) | |||
| Net cash - Beginning of the period | 11,924 | 27,989 | 32,976 | 114,362 | |||||
| Net cash - End of the period | 28,592 | 32,976 | 28,592 | 32,976 | |||||
| Net cash is composed of: | |||||||||
| Cash and cash equivalents | 77,172 | 65,414 | 77,172 | 65,414 | |||||
| Bank indebtedness | (48,580 | ) | (32,438 | ) | (48,580 | ) | (32,438 | ) | |
| Supplementary information | 28,592 | 32,976 | 28,592 | 32,976 | |||||
| Interest received (paid) | (546 | ) | 197 | (1,895 | ) | (555 | ) | ||
| Income taxes received (paid) | 240 | (888 | ) | (2,042 | ) | (6,742 | ) | ||
Contact Information:
President and Chief Executive Officer
(514) 748-7743
(514) 748-8635 (FAX)
John D. Ball
Chief Financial Officer
(514) 748-7743
(514) 748-8635 (FAX)
www.velan.com