MONTREAL, QUEBEC--(Marketwire - July 5, 2012) - Velan Inc. (TSX:VLN) (the "Company"), a world-leading manufacturer of industrial valves, announced today its financial results for its first quarter ended May 31, 2012.
| Three months ended | ||||
| (millions of U.S. dollars, excluding per share amounts) |
May 31, 2012 |
|
May 31, 2011 |
|
| Sales | $115.9 | $105.0 | ||
| Gross Profit | 24.1 | 21.3 | ||
| Gross margin % | 20.8 | % | 20.3 | % |
| Net income (loss) attributable to Multiple and Subordinate Voting Shares | 0.7 | 0.1 | ||
| Net income (loss) per share - Basic | 0.03 | 0.01 | ||
| Diluted | 0.03 | 0.01 | ||
| Highlights | ||||
| First Quarter Fiscal 2013 (unless otherwise noted, all comparisons are to the first quarter of fiscal 2012:) | ||||
- Net earnings1 amounted to $0.7 million or $0.03 per share compared to $0.1 million or $0.01 per share last year. Excluding the results of Velan ABV S.p.A. ("ABV"), an Italian valve manufacturer acquired in the
prior fiscal year, the effects of purchase price accounting and currency impacts, the Company would have reported net earnings1 of $1.9 million or $0.09 per share this year compared to $0.6 million or $0.03 per share last year.
- Net new orders received ("bookings") amounted to $97.7 million, a decrease of $39.1 million or 28.6% compared to last year. Excluding currency impacts, the decrease would have been $11.1 million or 8.1%. The Company ended the quarter with a backlog of $642.3 million, a decrease of $19.5 million since the beginning of the current fiscal year. Excluding currency impacts, the backlog would have increased by $7.1 million over the same period to $668.9 million.
- Sales amounted to $115.9 million, an increase of $10.9 million or 10.4%. Excluding ABV and currency impacts, sales would have increased by $5.6 million or 5.5%.
- Gross margin increased by 0.5 percentage points from 20.3% to 20.8%. Excluding ABV, the effects of purchase price accounting and currency impacts, gross margin would have increased by 1.7 percentage points from 21.7% to 23.4%.
- The Company used net cash2 from operations of $19.2 million in the quarter. This use of net cash2 was primarily attributable to increased accounts receivable which resulted from the increase in sales. The Company ended the quarter with net cash2 of $25.3 million.
- The Company generated net cash2 from financing activities of $18.7 million in the quarter. This source of net cash2 was principally from a $20 million increase in long-term debt. The Company is using the proceeds of this debt in order to fund its growing working capital needs, particularly with respect to inventory purchases to service its large backlog, to continue to improve its production capacity with investments in machinery and equipment, and to fund various activities in its overseas operations, particularly in Asia.
- Based on average exchange rates, the euro weakened 8.5% 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 quarter. The Canadian dollar weakened 3.1% 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 net impact of these two currency swings was generally unfavourable on the Company's quarterly results since the positive impact of a weaker Canadian dollar was far outweighed by the negative impact of a weaker euro.
| 1 | Net earnings or loss refers to net income or loss attributable to Subordinate and Multiple Voting Shares. |
| 2 | Non-GAAP measures - see explanation below. |
"We continue to experience severe turbulence in the currency markets, particularly with respect to the euro", said John Ball, CFO of Velan Inc. "Although the recent plunge in the value of the euro will help the long term international competitiveness of our European subsidiaries, it has also negatively impacted our financial results of those operations as reported in U.S. dollars. We continue to monitor the use of our working capital, particularly with respect to the increase in our backlog and our investment in productive capacity".
Tom Velan, President and CEO of Velan Inc. said, "Based on our large order backlog, we continue to be focused on increasing our output and we are investing in Asia and North America to increase our global manufacturing capacity. In this quarter, we had lower volume than planned because of delays encountered in manufacturing some of our large international projects. This was mainly due to a combination of supply chain issues, customer- related issues, and internal operational issues. We are devoting a lot of effort to solving these issues so we can increase sales revenues and improve on-time delivery."
"Our change to reporting in U.S. dollars under International Financial Reporting Standards reduced the currency impact of fluctuations in the value of the Canadian dollar on our results since less than 10% of our sales were denominated in Canadian dollars. Now, we have a growing impact of the euro in our results due to the acquisition of ABV and the growth of our subsidiaries in France. At the end of May, 48.5% of our backlog and 34.0% of our sales in the quarter were made in euro. The continuing weakness of the euro and uncertainty resulting from problems in Europe will continue to impact our results."
"As expected, our results were negatively impacted by the results of ABV, particularly by the purchase price accounting and interest accretion adjustments. Although ABV is continuing to post improved sales and results following the acquisition transition period, we expect the negative impact on results to continue in the near term until some lower margin orders are shipped and replaced by more profitable orders."
"We are continuing to take measures to improve our operational excellence and 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."
Dividend
The Board declared an eligible quarterly dividend of Canadian dollar $0.08 per share, payable on September 28, 2012, to all shareholders of record as at September 14, 2012.
Conference Call
Financial analysts, shareholders, and other interested individuals are invited to attend the first quarter conference call to be held on July 5, 2012, at 4:30 PM (EDT). The toll free call-in number is 1-800-268-5851, access code 21598363. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558- 5253, access code 21598363.
About Velan
Velan Inc. (www.velan.com) is a world-leading manufacturer of industrial valves with sales of $437 million in its last reported fiscal year. The company employs over 1,950 people and has manufacturing plants in 9 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, short-term loans and current portion of long-term debt.
| Velan Inc. |
| 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, |
||||
| 2012 | 2011 | |||
| $ | $ | |||
| Sales | 115,852 | 105,023 | ||
| Cost of sales | 91,740 | 83,761 | ||
| Gross profit | 24,112 | 21,262 | ||
| Administration costs | 23,925 | 20,649 | ||
| Other expense (income) | (928 | ) | 124 | |
| Operating profit (loss) | 1,115 | 489 | ||
| Finance income | 198 | 119 | ||
| Finance costs | 649 | 317 | ||
| Finance income (costs) - net | (451 | ) | (198 | ) |
| Income (Loss) before income tax | 664 | 291 | ||
| Provision for (Recovery of) income tax | (45 | ) | (50 | ) |
| Net income (loss) for the period | 709 | 341 | ||
| Net income (loss) attributable to: | ||||
| Subordinate Voting Shares and Multiple Voting Shares | 694 | 147 | ||
| Non-controlling interest | 15 | 194 | ||
| 709 | 341 | |||
| Net income (loss) per Subordinate and Multiple Voting Share | ||||
| Basic | 0.03 | 0.01 | ||
| Diluted | 0.03 | 0.01 | ||
| Dividends declared per Subordinate and Multiple Voting Share | 0.08 (CDN$0.08 | ) | 0.08 (CDN$0.08 | ) |
| Total weighted average number of Subordinate and Multiple Voting Shares | ||||
| Basic | 22,139,813 | 22,194,014 | ||
| Diluted | 22,149,091 | 22,245,063 | ||
| Velan Inc. |
| Interim Consolidated Statements of Comprehensive Income (Loss) |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| Three-month periods ended May 31, |
||||
| 2012 | 2011 | |||
| $ | $ | |||
| Comprehensive income (loss) | ||||
| Net income (loss) for the period | 709 | 341 | ||
| Other comprehensive income (loss) | ||||
| Foreign currency translation adjustment on foreign operations whose functional currency is other than the U.S. dollar | (10,459 | ) | 2,814 | |
| Comprehensive income (loss) | (9,750 | ) | 3,155 | |
| Comprehensive income (loss) attributable to: | ||||
| Subordinate Voting Shares and Multiple Voting Shares | (9,112 | ) | 3,285 | |
| Non-controlling interest | (638 | ) | (130 | ) |
| (9,750 | ) | 3,155 | ||
| Velan Inc. |
| Interim Consolidated Statements of Financial Position |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| As At | May 31, | February 29, | ||
| 2012 | 2012 | |||
| $ | $ | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 65,985 | 65,414 | ||
| Short-term investments | 4,218 | 4,954 | ||
| Accounts receivable | 129,601 | 111,856 | ||
| Income taxes recoverable | 10,527 | 9,682 | ||
| Inventories | 262,010 | 258,684 | ||
| Deposits and prepaid expenses | 6,913 | 6,209 | ||
| Derivative assets | 2,455 | 1,737 | ||
| 481,709 | 458,536 | |||
| Non-current assets | ||||
| Property, plant and equipment | 72,886 | 72,961 | ||
| Intangible assets and goodwill | 53,597 | 58,845 | ||
| Deferred income taxes | 10,238 | 10,152 | ||
| Other assets | 1,597 | 1,476 | ||
| 138,318 | 143,434 | |||
| Total assets | 620,027 | 601,970 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Bank indebtedness | 37,591 | 32,438 | ||
| Short-term loans | 2,055 | 858 | ||
| Accounts payable and accrued liabilities | 81,088 | 82,088 | ||
| Income tax payable | 2,331 | 2,484 | ||
| Dividend payable | 1,715 | 1,791 | ||
| Customer deposits | 91,963 | 86,544 | ||
| Provisions | 4,771 | 5,149 | ||
| Accrual for performance guarantees | 21,952 | 21,679 | ||
| Derivative liabilities | 2,295 | 534 | ||
| Current portion of long-term debt | 5,245 | 1,696 | ||
| Current portion of other liabilities | 5,239 | 5,753 | ||
| 256,245 | 241,014 | |||
| Non-current liabilities | ||||
| Long-term debt | 23,424 | 7,891 | ||
| Deferred income taxes | 7,552 | 8,270 | ||
| Other liabilities | 8,792 | 9,218 | ||
| 39,768 | 25,379 | |||
| Total liabilities | 296,013 | 266,393 | ||
| Equity | ||||
| Equity attributable to the Subordinate and Multiple Voting shareholders | ||||
| Share capital | 78,651 | 78,764 | ||
| Contributed surplus | 1,872 | 1,871 | ||
| Retained earnings | 249,944 | 250,951 | ||
| Accumulated other comprehensive income (loss) | (14,023 | ) | (4,217 | ) |
| 316,444 | 327,369 | |||
| Non-controlling interest | 7,570 | 8,208 | ||
| Total equity | 324,014 | 335,577 | ||
| Total liabilities and equity | 620,027 | 601,970 |
| Velan Inc. |
| Interim Consolidated Statements of Changes in Equity |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| Equity attributable to the Subordinate and Multiple Voting shareholders | ||||||||||||||||
| |
Number of shares |
Share capital |
Contributed surplus |
Accumu- lated other compre- hensive income (loss) |
Retained earnings |
Total |
Non- controlling interest |
Total equity |
||||||||
| Balance - March 1, 2012 | 22,148,968 | 78,764 | 1,871 | (4,217 | ) | 250,951 | 327,369 | 8,208 | 335,577 | |||||||
| Net income (loss) for the period | - | - | - | - | 694 | 694 | 15 | 709 | ||||||||
| Other comprehensive income (loss) | - | - | - | (9,806 | ) | - | (9,806 | ) | (653 | ) | (10,459 | ) | ||||
| 22,148,968 | 78,764 | 1,871 | (14,023 | ) | 251,645 | 318,257 | 7,570 | 325,827 | ||||||||
| Effect of share-based compensation | - | - | 14 | - | - | 14 | - | 14 | ||||||||
| Dividends | ||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (1,246 | ) | (1,246 | ) | - | (1,246 | ) | |||||
| Subordinate Voting Shares | - | - | - | - | (455 | ) | (455 | ) | - | (455 | ) | |||||
| Non-controlling interest | - | - | - | - | - | - | - | - | ||||||||
| Share repurchase | (10,400 | ) | (113 | ) | (13 | ) | - | - | (126 | ) | - | (126 | ) | |||
| Balance - May 31, 2012 | 22,138,568 | 78,651 | 1,872 | (14,023 | ) | 249,944 | 316,444 | 7,570 | 324,014 | |||||||
| Balance - March 1, 2011 | 22,195,568 | 79,271 | 1,898 | 2,275 | 250,254 | 333,698 | 4,025 | 337,723 | ||||||||
| Net income (loss) 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 | ) | |||||
| Non-controlling interest | - | - | - | - | - | - | - | - | ||||||||
| Share repurchase | (1,900 | ) | (20 | ) | (9 | ) | - | - | (29 | ) | - | (29 | ) | |||
| Non-controlling interest arising on acquisition | - | - | - | - | - | - | 8,372 | 8,372 | ||||||||
| Balance - May 31, 2011 | 22,193,668 | 79,251 | 1,898 | 5,413 | 248,568 | 335,130 | 12,267 | 347,397 | ||||||||
| Velan Inc. |
| Interim Consolidated Statements of Cash Flows |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| For the three-month periods ended May 31, |
|||||
| 2012 | 2011 | ||||
| Cash flows from | $ | $ | |||
| Operating activities | |||||
| Net income (loss) for the period | 709 | 341 | |||
| Adjustments to reconcile net profit to cash provided operating activities | |||||
| Depreciation of property, plant and equipment | 2,214 | 2,020 | |||
| Amortization of intangible assets | 1,029 | 691 | |||
| Deferred income taxes | (963 | ) | (60 | ) | |
| Share-based compensation expense | 14 | 9 | |||
| Loss (Gain) on disposal of property, plant and equipment | (224 | ) | 19 | ||
| Interest accretion on proceeds payable | 186 | 106 | |||
| Income from fair value adjustment of proceeds payable | (196 | ) | - | ||
| Unrealized foreign exchange gain on proceeds payable | (561 | ) | - | ||
| Net change in other liabilities | (410 | ) | 114 | ||
| 1,798 | 3,240 | ||||
| Changes in non-cash working capital items | (21,001 | ) | (4,767 | ) | |
| Cash provided (used) by operating activities | (19,203 | ) | (1,527 | ) | |
| Investing activities | |||||
| Short-term investments | 736 | (37 | ) | ||
| Additions to property, plant and equipment | (4,252 | ) | (4,445 | ) | |
| Proceeds on disposal of property, plant and equipment | 392 | 8 | |||
| Additions to intangible assets | (58 | ) | (35 | ) | |
| Net change in other assets | (134 | ) | 26 | ||
| Business acquisition - net of cash acquired | - | (37,281 | ) | ||
| Cash provided (used) by investing activities | (3,316 | ) | (41,764 | ) | |
| Financing activities | |||||
| Dividends paid to Subordinate and Multiple Voting shareholders | (1,777 | ) | (1,830 | ) | |
| Repurchase of shares | (126 | ) | (29 | ) | |
| Short-term loans | 1,197 | (3,536 | ) | ||
| Increase in long-term debt | 20,092 | - | |||
| Repayment of long-term debt | (665 | ) | (52 | ) | |
| Cash provided (used) by financing activities | 18,721 | (5,447 | ) | ||
| Effect of exchange rate differences on cash | (784 | ) | 179 | ||
| Net change in cash during the period | (4,582 | ) | (48,559 | ) | |
| Net cash - Beginning of the period | 32,976 | 114,362 | |||
| Net cash - End of the period | 28,394 | 65,803 | |||
| Net cash is composed of: | |||||
| Cash and cash equivalents | 65,985 | 73,790 | |||
| Bank indebtedness | (37,591 | ) | (7,987 | ) | |
| Supplementary information | 28,394 | 65,803 | |||
| Interest received (paid) | (349 | ) | (51 | ) | |
| Income taxes received (paid) | (1,339 | ) | (2,451 | ) | |
Contact Information:
Tom Velan
President and Chief Executive Officer
(514) 748-7743
(514) 748-8635 (FAX)
VELAN Inc.
John D. Ball
Chief Financial Officer
(514) 748-7743
(514) 748-8635 (FAX)
www.velan.com