MONTREAL, QUEBEC--(Marketwire - Aug. 2, 2011) - Velan Inc. (TSE:VLN), a world-leading manufacturer of industrial valves, announced today its financial results for its first quarter ended May 31, 2011.
| Three months ended May 31 |
||||
| (millions of U.S. dollars, excluding per share amounts) | 2011 | 2010 | ||
| Sales | $105.0 | $89.7 | ||
| Gross Profit | 21.3 | 24.3 | ||
| Gross margin | 20.3 | % | 27.1 | % |
| Net income attributable to Multiple and Subordinate Voting Shares | 0.1 | 4.7 | ||
| Net income per share – basic and fully diluted | 0.01 | 0.21 | ||
Highlights
First Quarter 2012 (all comparisons versus first quarter fiscal 2011, unless otherwise noted):
-
Acquisition of 70% of ABV Energy S.p.A., now Velan ABV ("ABV"), an Italian manufacturer of engineered valves, actuators and control systems supplied to energy markets.
-
Net income attributable to Multiple and Subordinate Voting Shares amounted to $0.1 million. Excluding ABV, the effects of purchase price accounting and unfavourable currency impacts, net income would have been $1.7 million in the quarter. The unfavourable currency impacts in the current quarter are mainly the result of translating the Company`s Canadian dollar expenses into U.S. dollars. Net income was $4.7 million last year; excluding currency benefits, primarily attributable to gains on foreign currency derivatives, net income last year would have been $2.0 million.
-
Net new orders received ("bookings) increased by $68.7 million or 101.0% to $136.8 million. Excluding the impact of ABV and currency; the increase would have been $21.2 million or 22.2%. The Company booked a significant amount of project orders during the quarter which it believes may be indicative of a strengthening in its key end user markets. The Company ended the quarter with a record backlog of $600.0 million, $575.0 million excluding ABV.
-
Sales increased by $15.4 million or 17.1%. Excluding ABV, sales increased $11.3 million or 12.6%.
-
Gross margin decreased by 6.8%. Excluding ABV and currency impacts, gross margin would have decreased by 0.2%.
-
The Company used net cash1 from operations of $1.5 million. This use of net cash1 was primarily attributable to increased inventory purchases, required to service the Company's growing backlog.
-
Net cash1 at quarter end amounted to $63.8 million; a decrease of $49.8 million during the quarter primarily attributable to the $37.2 million of net cash1 paid to acquire ABV.
-
Based on average exchange rates, the U.S. dollar weakened 5.4% against the Canadian dollar when compared to the same period last year. This weakening resulted in the Company`s Canadian dollar expenses being reported as higher U.S. dollar amounts in the current year.
International Financial Reporting Standards "IFRS"
The Company's quarterly results are prepared in accordance with Canadian Generally Accepted Accounting Principles ("GAAP") which now reflects the adoption of IFRS. Adopting IFRS resulted in the Company changing its functional currency from Canadian dollars to U.S. dollars. Additionally, the Company elected to change its reporting currency to the U.S. dollar. This change has been consistently applied to all financial information presented in this press release, unless otherwise stated.
"This was a challenging quarter. Despite increase in sales, bookings and backlog, our net earnings were down compared to last year," said Tom Velan, President and CEO of Velan Inc. "Faced with significant material cost increases, we have been raising our selling prices. For some of our product lines we still face lower margins due to a combination of material cost increases and the increase in all our Canadian costs in relation to our US dollar selling prices. The weakness of the US dollar is an important concern for us as it results in higher material costs and lower margins in all our plants that produce in a country with strengthening currency but sell mainly in US dollars. We need to raise our margin by increasing volume as well as continuing to make selective price increases to cover cost increases."
"The increases in bookings, backlog and sales are good indications of an improving global market for our products. We are starting our second quarter with the highest backlog in our history and the challenge we faced last year due to not enough orders has changed to the challenge of producing our orders as quickly and profitably as possible."
"The acquisition of ABV is a great opportunity to help grow our sales and earnings over the coming years. In the shorter term, purchase price accounting, whereby part of goodwill is attributed to the assets (including inventory), will reduce the contribution to our results. We are happy to see bookings of $8.1 million during the first month of our acquisition and we continue to be optimistic about the sales growth potential for Velan ABV."
"We are pleased to have maintained a solid balance sheet," said John Ball, CFO of Velan Inc., "and end the quarter with net cash1 of $63.8 million after having acquired ABV. We used cash in operating activities this quarter as we needed to increase our inventory in relation to our growing backlog."
Tom Velan concluded, "We are encouraged by the positive trend in bookings and backlog. We are continuing to take measures to broaden our product offering, to improve our cost competitiveness, and to strengthen our presence in international markets in order to improve our long-term performance and increase the value of our company. In the shorter-term, we are focused on improved execution of our large project order backlog to increase sales and improve earnings."
| 1 Non-GAAP measure – see explanation below |
Dividend
The Board declared an eligible quarterly dividend of Canadian dollar $0.08 per share, payable on September 30, 2011, to all shareholders of record as at September 15, 2011.
Annual General Meeting
Velan Inc. will be holding its Annual General Meeting at 11:00 a.m. on Wednesday, August 3, 2011, at the Delta Centre-Ville, 777 University Street, St. Jacques room, Montreal, Quebec.
Conference Call
Financial analysts, shareholders, and other interested individuals are invited to attend the first quarter conference call to be held on August 2, 2011, at 4:30 PM (EST). The toll free call-in number is 1-800-268-2160, access code 21532681. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558- 5253, access code 21532681.
About Velan
Velan Inc. (www.velan.com) is a world-leading manufacturer of industrial valves with sales of $381 million in its last reported fiscal year. The company employs over 1,800 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-GAAP measures
In this press release, the Company presented measures of performance and financial condition which are not defined under Canadian GAAP ("non-GAAP 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.
Net cash is defined as cash and cash equivalents plus short-term investments less bank indebtedness and short- term bank loans.
| VELAN INC. SELECTED FINANCIAL INFORMATION |
|||||
| Reconciliation of Net Income from Canadian GAAP to IFRS: | |||||
| February 28 | May 31 | ||||
| (In thousands of indicated currency) | 2011 | 2010 | |||
| $ | $ | ||||
| Net Income – GAAP in Canadian dollars | 5,810 | 1,074 | |||
| Net Income – GAAP in U.S. dollars | 5,665 | 1,057 | |||
| IFRS Adjustments to net income in U.S. dollars: | |||||
| Change of functional currency to U.S. dollar | 14,819 | 4,022 | |||
| Reclassification of Non-controlling Interest | 775 | 322 | |||
| Income taxes – tax effect of above differences | 740 | (381 | ) | ||
| Net Income – IFRS in U.S. dollars | 21,999 | 5,020 | |||
| Reconciliation of Comprehensive Income from Canadian GAAP to IFRS: | |||||
| February 28 | May 31 | ||||
| (In thousands of indicated currency) | 2011 | 2010 | |||
| $ | $ | ||||
| Comprehensive Income – GAAP in Canadian dollars | 1,976 | (5,950 | ) | ||
| Comprehensive Income – GAAP in U.S. dollars | 1,907 | (5,811 | ) | ||
| IFRS Adjustments to comprehensive income in U.S. dollars: | |||||
| Change of functional currency to U.S. dollar | 21,091 | 3,374 | |||
| Realized translation adjustment on reduction of net investment in self-sustaining operations | |||||
| (239 | ) | - | |||
| Income taxes – tax effect of above differences | 740 | (381 | ) | ||
| Comprehensive Income – IFRS in U.S. dollars | 23,499 | (2,818 | ) | ||
| Reconciliation of Equity from Canadian GAAP to IFRS:: | |||||||
| February 28 | May 31, | March 1, | |||||
| (In thousands of indicated currency) | 2011 | 2010 | 2010 | ||||
| $ | $ | $ | |||||
| Equity – GAAP in Canadian dollars | 340,627 | 338,463 | 346,184 | ||||
| Equity – GAAP in U.S. dollars | 350,265 | 324,374 | 328,682 | ||||
| IFRS Adjustments to Equity in U.S. dollars: | |||||||
| Change of functional currency to U.S. dollar | (19,794 | ) | (13,292 | ) | (13,469 | ) | |
| Reclassification of non-controlling interest | 4,025 | 5,162 | 4,954 | ||||
| Income taxes – tax effect of above differences | 3,227 | 2,021 | 2,439 | ||||
| Equity – IFRS in U.S. dollars | 337,723 | 318,265 | 322,606 | ||||
| Velan Inc. Interim Consolidated Statements of Income (Unaudited) (in thousands of U.S. dollars, excluding number of shares and per share amounts) |
|||||
| For the three months ended May 31 | 2011 | 2010 | |||
| $ | $ | ||||
| (adjusted) | |||||
| Sales | 105,023 | 89,670 | |||
| Cost of sales | 83,761 | 65,377 | |||
| Gross profit | 21,262 | 24,293 | |||
| Administration cost | 20,649 | 17,677 | |||
| Other expense (income) | 124 | 109 | |||
| Operating profit | 489 | 6,507 | |||
| Finance income | 119 | 19 | |||
| Finance costs | 317 | 187 | |||
| Finance income (costs) – net | (198 | ) | (168 | ) | |
| Income before income tax | 291 | 6,339 | |||
| Income tax expense (recovery) | (50 | ) | 1,319 | ||
| Net income for the period | 341 | 5,020 | |||
| Net income attributable to: | |||||
| Subordinate Voting Shares and Multiple Voting Shares | 147 | 4,698 | |||
| Non-controlling interest | 194 | 322 | |||
| 341 | 5,020 | ||||
| Net income per Subordinate and Multiple Voting Share | |||||
| Basic | 0.01 | 0.21 | |||
| Diluted | 0.01 | 0.21 | |||
| Dividends declared per Subordinate and Multiple Voting Share | |||||
| 0.08 (CDN$0.08 | ) | 0.08 (CDN$0.08 | ) | ||
| Total weighted average Subordinate and Multiple Voting Shares | |||||
| Basic | 22,194,014 | 22,230,086 | |||
| Diluted | 22,245,063 | 22,283,738 | |||
| Velan Inc. Interim Consolidated Statements of Comprehensive Income (Unaudited) (in thousands of U.S. dollars) |
||||
| For the three months ended May 31 | 2011 | 2010 | ||
| $ | $ | |||
| (adjusted) | ||||
| Comprehensive income | ||||
| Net income for the period | 341 | 5,020 | ||
| Other comprehensive income (loss), net of tax | ||||
| Foreign currency translation adjustment on foreign operations whose functional currency is other than the U.S. dollar | ||||
| 2,814 | (7,630 | ) | ||
| Comprehensive income | 3,155 | (2,610 | ) | |
| Comprehensive income attributable to: | ||||
| Subordinate Voting Shares and Multiple Voting Shares | 3,285 | (2,818 | ) | |
| Non-controlling interest | (130 | ) | 208 | |
| 3,155 | (2,610 | ) | ||
| Velan Inc. Interim Consolidated Statements of Financial Position (Unaudited) (in thousands of U.S. dollars) |
|||||
| As At | May 31, | February 28, | March 1, | ||
| 2011 | 2011 | 2010 | |||
| $ | $ | $ | |||
| (adjusted) | (adjusted) | ||||
| Assets | |||||
| Current assets | |||||
| Cash and cash equivalents | 73,790 | 119,996 | 101,691 | ||
| Short-term investments | 124 | 87 | 295 | ||
| Accounts receivable | 104,749 | 94,495 | 86,756 | ||
| Income taxes recoverable | 7,403 | 5,007 | 3,301 | ||
| Inventories | 235,529 | 205,334 | 190,031 | ||
| Deposits and prepaid expenses | 3,544 | 3,875 | 5,672 | ||
| Derivative assets | 1,799 | 3,329 | 4,042 | ||
| 426,938 | 432,123 | 391,788 | |||
| Non-current assets | |||||
| Property, plant and equipment | 73,667 | 65,559 | 64,697 | ||
| Other assets | 1,367 | 1,391 | 1,388 | ||
| Intangible assets | 63,399 | 10,720 | 10,616 | ||
| Deferred income taxes | 6,222 | 6,244 | 5,545 | ||
| 144,655 | 83,914 | 82,246 | |||
| Total assets | 571,593 | 516,037 | 474,034 | ||
| Liabilities | |||||
| Current liabilities | |||||
| Bank indebtedness | 7,987 | 5,634 | 2,500 | ||
| Short-term bank loans | 2,153 | 822 | 791 | ||
| Accounts payable and accrued liabilities | 82,978 | 65,329 | 63,897 | ||
| Income tax payable | 1,861 | 1,832 | 4,505 | ||
| Dividend payable | 1,833 | 1,830 | 1,689 | ||
| Customer deposits | 73,492 | 73,054 | 55,403 | ||
| Provisions | 4,328 | 4,288 | 2,973 | ||
| Accrual for performance guarantees | 17,066 | 13,354 | 7,955 | ||
| Derivative liabilities | 994 | 447 | 1,077 | ||
| Current portion of long-term debt | 2,993 | 603 | 44 | ||
| 195,685 | 167,193 | 140,834 | |||
| Non-current liabilities | |||||
| Long-term debt | 4,657 | 4,408 | 3,768 | ||
| Other long-term liabilities | 16,189 | 6,656 | 6,702 | ||
| Deferred income taxes | 7,665 | 57 | 124 | ||
| 28,511 | 11,121 | 10,594 | |||
| Total liabilities | 224,196 | 178,314 | 151,428 | ||
| Equity | |||||
| Equity attributable to the owners of the parent | |||||
| Share capital | 79,251 | 79,271 | 79,651 | ||
| Contributed surplus | 1,898 | 1,898 | 1,936 | ||
| Retained earnings | 248,568 | 250,254 | 236,065 | ||
| Accumulated other comprehensive loss | 5,413 | 2,275 | - | ||
| 335,130 | 333,698 | 317,652 | |||
| Non-controlling interest | 12,267 | 4,025 | 4,954 | ||
| Total shareholders' equity | 347,397 | 337,723 | 322,606 | ||
| Total liabilities and shareholders' equity | 571,800 | 516,037 | 474,034 | ||
| Velan Inc. Interim Consolidated Statements of Changes in Equity (Unaudited) (in thousands of U.S. dollars) |
||||||
| Equity attributable to the owners of the parent | |||||||||||||||||
Number of shares |
Share capital |
Contri- buted surplus |
Accumu- lated other compre- hensive income |
Retained earnings |
Total |
Non- control- ling interest |
Total equity |
||||||||||
| Balance - | |||||||||||||||||
| Beginning of period (adjusted) | 22,195,568 | 79,271 | 1,898 | 2,275 | 250,254 | 333,698 | 4,025 | 337,723 | |||||||||
| Net income for the period | - | - | - | - | 147 | 147 | 194 | 341 | |||||||||
| Other comprehensive income (loss) |
- |
|
- |
|
- |
|
3,138 |
|
- |
|
3,138 |
|
(324 |
) |
2,814 |
|
|
| 22,195,568 | 79,271 | 1,898 | 5,413 | 250,401 | 336,983 | 3,895 | 340,878 | ||||||||||
| Effect of share-based compensation |
- | - | 9 | - | - | 9 | - | 9 | |||||||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (1,286 | ) | (1,286 | ) | - | (1,286 | ) | ||||||
| Subordinate Voting Shares | - | - | - | - | (547 | ) | (547 | ) | - | (547 | ) | ||||||
| Share repurchase | (1,900 | ) | (20 | ) | (9 | ) | - | - | (29 | ) | - | (29 | ) | ||||
| Non-controlling interest arising on acquisition | - | - | - | - | - | - | 8,372 | 8,372 | |||||||||
| As at May 31, 2011 | 22,193,668 | 79,251 | 1,898 | 5,413 | 248,568 | 335,130 | 12,267 | 347,397 | |||||||||
| Equity attributable to the owners of the parent | |||||||||||||||||
Number of shares |
Share capital |
Contri- buted surplus |
Accumu- lated other comprehensive income |
Retained earnings |
Total |
Non- control- ling interest |
Total equity |
||||||||||
| Balance - | |||||||||||||||||
| Beginning of period (adjusted) | 22,230,468 | 79,651 | 1,936 | - | 236,065 | 317,652 | 4,954 | 322,606 | |||||||||
| Net income for the period | - | - | - | - | 4,698 | 4,698 | 322 | 5,020 | |||||||||
| Other comprehensive income (loss) | - | - | - | (7,516 | ) | - | (7,516 | ) | (114 | ) | (7,630 | ) | |||||
| 22,230,468 | 79,651 | 1,936 | (7,516 | ) | 240,763 | 314,834 | 5,162 | 319,996 | |||||||||
| Effect of share-based compensation | - | - | 15 | - | - | 15 | - | 15 | |||||||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (1,217 | ) | (1,217 | ) | - | (1,217 | ) | ||||||
| Subordinate Voting Shares | - | - | - | - | (522 | ) | (522 | ) | - | (522 | ) | ||||||
| Share repurchase | (500 | ) | (5 | ) | (2 | ) | - | - | (7 | ) | - | (7 | ) | ||||
| As at May 31, 2010 (adjusted) | 22,229,968 | 79,646 | 1,949 | (15,032 | ) | 239,024 | 305,587 | 5,048 | 310,635 | ||||||||
| Velan Inc. Interim Consolidated Statements of Cash Flows (Unaudited) (in thousands of U.S. dollars) |
|||||
| For the three months ended May 31 | 2011 | 2010 | |||
| $ | $ | ||||
| (adjusted) | |||||
| Cash flows from | |||||
| Operating activities | 341 | 5,020 | |||
| Net income for the period | |||||
| Adjustments to reconcile net profit to cash provided operating activities | |||||
| Amortization of property, plant and equipment | 2,251 | 2,334 | |||
| Amortization of intangible assets | 460 | - | |||
| Deferred income taxes | (60 | ) | 773 | ||
| Share-based compensation expense | 9 | 15 | |||
| Loss (Gain) on disposal of property, plant and equipment | 19 | (4 | ) | ||
| Amortization of present value discount on other long-term liabilities | 106 | - | |||
| Net change in other long-term liabilities | 115 | (546 | ) | ||
| 3,241 | 7,592 | ||||
| Changes in non-cash working capital items | |||||
| Accounts receivable | 299 | 14,881 | |||
| Inventories | (12,549 | ) | 2,091 | ||
| Income taxes recoverable | (2,141 | ) | 287 | ||
| Deposits and prepaid expenses | 879 | 283 | |||
| Accounts payable and accrued liabilities | 6,929 | (3,696 | ) | ||
| Income taxes payable | (452 | ) | (1,269 | ) | |
| Customer deposits | (1,530 | ) | (3,967 | ) | |
| Provisions and accrual for performance guarantees | 3,797 | (905 | ) | ||
| (4,768 | ) | 7,705 | |||
| Cash provided (used) by operating activities | (1,527 | ) | 15,297 | ||
| Investing activities | |||||
| Short-term investments | (37 | ) | (15 | ) | |
| Additions to property, plant and equipment | (4,480 | ) | (1,947 | ) | |
| Proceeds on disposal of property, plant and equipment | 8 | 142 | |||
| Net change in other assets | 27 | (42 | ) | ||
| Business acquisition – net of cash acquired | (37,281 | ) | - | ||
| Cash provided (used) by investing activities | (41,763 | ) | (1,862 | ) | |
| Financing activities | |||||
| Dividends | (1,830 | ) | (1,724 | ) | |
| Repurchase of shares | (29 | ) | (7 | ) | |
| Short-term bank loans | (3,536 | ) | (3 | ) | |
| Repayment of long-term debt | (52 | ) | (19 | ) | |
| Cash provided (used) by investing activities | (5,447 | ) | (1,753 | ) | |
| Effect of exchange rate differences on cash | 178 | (3,044 | ) | ||
| Net change in cash during the period | (48,559 | ) | 8,638 | ||
| Net cash – Beginning of period | 114,362 | 99,191 | |||
| Net cash – End of period | 65,803 | 107,829 | |||
| Net cash is composed of: | |||||
| Cash and cash equivalents | 73,790 | 109,659 | |||
| Bank indebtedness | (7,987 | ) | (1,830 | ) | |
| 65,803 | 107,829 | ||||
| Supplementary information | |||||
| Interest received (paid) | (51 | ) | (59 | ) | |
| Income taxes received (paid) | (2,451 | ) | (959 | ) | |
Contact Information:
Tom Velan
President and Chief Executive Officer
514-748-7743
(514) 748-8635 (FAX)
VELAN Inc.
M. John D. Ball
Chief Financial Officer
514-748-7743
(514) 748-8635 (FAX)
www.velan.com