MONTREAL, QUEBEC--(Marketwired - July 9, 2015) - 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, 2015.
Highlights
- Sales of US$103.2 million for the quarter
- Net earnings1 of US$3.1 million for the quarter
- Order backlog of US$410.4 million at the end of the quarter
- Net order bookings of US$81.8 million for the quarter
- Net cash2of US$61.3 million at the end of the quarter
| Three-month periods ended | |||||||
| (millions of U.S. dollars, excluding per share amounts) |
May 31, 2015 |
|
May 31, 2014 |
|
|||
| Sales | $ | 103.2 | $ | 103.1 | |||
| Gross Profit | 23.5 | 26.5 | |||||
| Gross profit % | 22.8 | % | 25.7 | % | |||
| Net income (loss) attributable to Multiple and Subordinate Voting Shares | 3.1 | 4.0 | |||||
| Net income (loss) per share - | Basic | 0.14 | 0.18 | ||||
| Diluted | 0.14 | 0.18 | |||||
First Quarter Fiscal 2016 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the first quarter of fiscal 2015):
- Net earnings1amounted to $3.1 million or $0.14 per share compared to $4.0 million or $0.18 per share last year. The $0.9 million decrease in net earnings1is primarily attributable to a lower gross profit percentage partially offset by decreased administration costs.
- The Company concluded labour negotiations with its Canadian unions in June 2015. The negative impact on net earnings1of these negotiations and lockout in its first quarter was under $1 million. The Company intends to recover this shortfall by the end of the current fiscal year.
- Despite the production slowdown caused by the lockout, consolidated sales remained relatively stable in the quarter, amounting to $103.2 million, an increase of $0.1 million or 0.1%
- Net new orders received ("bookings") amounted to $81.8 million, a decrease of $35.8 million or 30.4% compared to last year. Excluding the effect of an order cancellation of $23.6 million in the quarter, bookings would have decreased by $12.2 million or 10.4%, which is primarily due to the negative Euro currency impact on the bookings in the Company's European operations. As a result of these factors, the Company ended the quarter with a backlog of $410.4 million, a decrease of $27.4 million or 6.3% since the beginning of the current fiscal year.
- Gross margin decreased by 2.9 percentage points from 25.7% to 22.8%. This decrease is mainly attributable to a product mix with a greater proportion of lower margin product sales, particularly large project orders.
- Administration costs amounted to $19.2 million, a decrease of $2.1 million or 9.9%. The decrease is primarily attributable to a decrease in variable compensation-related costs and costs recognized in connection with the Company's ongoing asbestos litigation. The fluctuation in asbestos costs for the quarter is due more to the timing of settlement payments in these two periods rather than to changes in long-term trends.
- The Company ended the quarter with net cash2of $61.3 million, a decrease of $14.3 million or 18.9% since the beginning of the current fiscal year. This decrease is primarily attributable to negative non-cash working capital movements, particularly an increase in accounts receivable and a decrease in customer deposits.
- Foreign currency impacts:
- Based on average exchange rates, the Euro weakened 20.8% against the U.S. dollar when compared to the same period last year. This weakening resulted in the Company's net profits and bookings from its European subsidiaries being reported as lower U.S. dollar amounts in the current quarter.
- Based on average exchange rates, the Canadian dollar weakened 11.2% 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 unfavourable impact of the Euro decrease was generally offset by the favourable impact of the Canadian dollar decrease on the Company's net earnings1.
- Based on average exchange rates, the Euro weakened 20.8% against the U.S. dollar when compared to the same period last year. This weakening resulted in the Company's net profits and bookings from its European subsidiaries being reported as lower U.S. dollar amounts in the current quarter.
"The first quarter presented a number of challenges, from contractual issues and a lockout in our Canadian plants to continued uncertainty over the Euro and the upstream oil and gas market," said John Ball, CFO of Velan Inc. "However with our strong balance sheet, international capabilities and strategic initiatives, we continue to see opportunities for future growth."
Yves Leduc, President of Velan Inc., said, "We are now deploying an operational excellence plan that aims to improve delivery, both in terms of timeliness and shortened lead times. We are also managing a portfolio of improvement initiatives to increase our cost competitiveness. These will help bolster our already strong position in each of our global markets."
Tom Velan, CEO of Velan Inc. said, "The valve market is very competitive and challenging due to the impact of the low price of oil that has resulted in delays or cancellations of many mega-projects around the world. Even though our bookings in the oil sector have been negatively impacted, we are diversified by market and geography so we still see a lot of opportunities in the global energy sector. For example, in our first quarter, we booked $18.4 million of nuclear valve orders in China for new nuclear plants using Chinese technology. We are intensifying our efforts to increase our order bookings."
Dividend
The Board declared an eligible quarterly dividend of CDN$0.10 per share, payable on September 30, 2015, to all shareholders of record as at September 15, 2015.
Conference call
Financial analysts, shareholders, and other interested individuals are invited to attend the first quarter conference call to be held on Thursday, July 9, 2015, at 5:00 PM (EDT). The toll free call-in number is 1-888-273-1350, access code 21771513. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558-5253, access code 21771513.
About Velan
Velan Inc. (www.velan.com) is a world-leading manufacturer of industrial valves with sales of $455.7 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, | ||
| 2015 | 2015 | |||
| $ | $ | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 92,468 | 99,578 | ||
| Short-term investments | 1,621 | 847 | ||
| Accounts receivable | 110,151 | 105,335 | ||
| Income taxes recoverable | 7,626 | 5,472 | ||
| Inventories | 203,506 | 203,557 | ||
| Deposits and prepaid expenses | 5,942 | 5,326 | ||
| Derivative assets | 268 | 144 | ||
| 421,582 | 420,259 | |||
| Non-current assets | ||||
| Property, plant and equipment | 89,053 | 91,285 | ||
| Intangible assets and goodwill | 32,399 | 33,576 | ||
| Deferred income taxes | 12,422 | 12,392 | ||
| Other assets | 778 | 1,116 | ||
| 134,652 | 138,369 | |||
| Total assets | 556,234 | 558,628 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Bank indebtedness | 24,243 | 15,616 | ||
| Short-term bank loans | 1,569 | 2,134 | ||
| Accounts payable and accrued liabilities | 70,447 | 70,997 | ||
| Income taxes payable | 4,497 | 3,961 | ||
| Dividend payable | 1,765 | 1,755 | ||
| Customer deposits | 39,537 | 44,111 | ||
| Provisions | 7,706 | 7,874 | ||
| Accrual for performance guarantees | 29,517 | 30,012 | ||
| Derivative liabilities | 3,305 | 5,362 | ||
| Current portion of long-term debt | 10,563 | 10,644 | ||
| 193,149 | 192,466 | |||
| Non-current liabilities | ||||
| Long-term debt | 2,785 | 4,183 | ||
| Deferred income taxes | 8,144 | 8,349 | ||
| Other liabilities | 8,456 | 8,537 | ||
| 19,385 | 21,069 | |||
| Total liabilities | 212,534 | 213,535 | ||
| Equity | ||||
| Equity attributable to the Subordinate and Multiple Voting shareholders | ||||
| Share capital | 76,665 | 76,475 | ||
| Contributed surplus | 5,863 | 6,064 | ||
| Retained earnings | 285,060 | 283,724 | ||
| Accumulated other comprehensive income (loss) | (30,647 | ) | (27,652 | ) |
| 336,941 | 338,611 | |||
| Non-controlling interest | 6,759 | 6,482 | ||
| Total equity | 343,700 | 345,093 | ||
| Total liabilities and equity | 556,234 | 558,628 | ||
| 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 | ||||
| 2015 | 2014 | |||
| $ | $ | |||
| Sales | 103,179 | 103,065 | ||
| Cost of sales | 79,662 | 76,580 | ||
| Gross profit | 23,517 | 26,485 | ||
| Administration costs | 19,181 | 21,297 | ||
| Other expense (income) | 15 | (130 | ) | |
| Operating profit (loss) | 4,321 | 5,318 | ||
| Finance income | 256 | 265 | ||
| Finance costs | 302 | 379 | ||
| Finance income (costs) - net | (46 | ) | (114 | ) |
| Income (Loss) before income taxes | 4,275 | 5,204 | ||
| Income taxes | 844 | 1,142 | ||
| Net income (loss) for the period | 3,431 | 4,062 | ||
| Net income (loss) attributable to: | ||||
| Subordinate Voting Shares and Multiple Voting Shares | 3,107 | 4,005 | ||
| Non-controlling interest | 324 | 57 | ||
| 3,431 | 4,062 | |||
| Net income (loss) per Subordinate and Multiple Voting Share | ||||
| Basic | 0.14 | 0.18 | ||
| Diluted | 0.14 | 0.18 | ||
| Dividends declared per Subordinate and Multiple Voting Share | 0.08 | 0.09 | ||
| (CA$0.10 | ) | (CA$0.10 | ) | |
| Total weighted average number of Subordinate and Multiple Votng Shares | ||||
| Basic | 21,936,769 | 21,958,012 | ||
| Diluted | 21,936,769 | 21,965,057 | ||
| Velan Inc. | ||||
| Condensed Interim Consolidated Statements of Comprehensive Income (Loss) | ||||
| (Unaudited) | ||||
| (in thousands of U.S. dollars) | ||||
| Three-month periods ended | ||||
| May 31 | ||||
| 2015 | 2014 | |||
| $ | $ | |||
| Comprehensive income (loss) | ||||
| Net income (loss) for the period | 3,431 | 4,062 | ||
| Other comprehensive income (loss) | ||||
| Foreign currency translation adjustment on foreign operations whose functional currency is other than the reporting currency (U.S. dollar) | (3,042 |
) |
(966 |
) |
| Comprehensive income (loss) | 389 | 3,096 | ||
| Comprehensive income (loss) attributable to: | ||||
| Subordinate Voting Shares and Multiple Voting Shares | 112 | 2,805 | ||
| Non-controlling interest | 277 | 291 | ||
| 389 | 3,096 | |||
| 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, 2015 | 21,939,168 | 76,475 | 6,064 | (27,652 | ) | 283,724 | 338,611 | 6,482 | 345,093 | ||||||||
| Net income (loss) for the period | - | - | - | - | 3,107 | 3,107 | 324 | 3,431 | |||||||||
| Other comprehensive income (loss) | - | - | - | (2,995 | ) | - | (2,995 | ) | (47 | ) | (3,042 | ) | |||||
| 21,939,168 | 76,475 | 6,064 | (30,647 | ) | 286,831 | 338,723 | 6,759 | 345,482 | |||||||||
| Effect of share-based compensation | - | - | 26 | - | - | 26 | - | 26 | |||||||||
| Shares issued under Share Option Plan | 14,267 | 227 | (227 | ) | - | - | - | - | - | ||||||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (1,235 | ) | (1,235 | ) | - | (1,235 | ) | ||||||
| Subordinate Voting Shares | - | - | - | - | (518 | ) | (518 | ) | - | (518 | ) | ||||||
| Share repurchase | (3,400 | ) | (37 | ) | - | - | (18 | ) | (55 | ) | - | (55 | ) | ||||
| Balance - May 31, 2015 | 21,950,035 | 76,665 | 5,863 | (30,647 | ) | 285,060 | 336,941 | 6,759 | 343,700 | ||||||||
| 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 | ||||||||
| Velan Inc. | |||||
| Condensed Interim Consolidated Statements of Cash Flow | |||||
| (Unaudited) | |||||
| (in thousands of U.S. dollars) | |||||
| Three-month periods ended | |||||
| May 31 | |||||
| 2015 | 2014 | ||||
| $ | $ | ||||
| Cash flows from | |||||
| Operating activities | |||||
| Net income for the period | 3,431 | 4,062 | |||
| Adjustments to reconcile net income to cash provided by operating activities | 1,076 | 2,401 | |||
| Changes in non-cash working capital items | (12,843 | ) | 4,935 | ||
| Cash provided (used) by operating activities | (8,336 | ) | 11,398 | ||
| Investing activities | |||||
| Short-term investments | (774 | ) | (92 | ) | |
| Additions to property, plant and equipment | (1,577 | ) | (4,059 | ) | |
| Additions to intangible assets | (105 | ) | (230 | ) | |
| Proceeds on disposal of property, plant and equipment, and intangible assets | 17 | 51 | |||
| Net change in other assets | 337 | 230 | |||
| Cash provided (used) by investing activities | (2,102 | ) | (4,100 | ) | |
| Financing activities | |||||
| Dividends paid to Subordinate and Multiple Voting shareholders | (1,743 | ) | (1,578 | ) | |
| Repurchase of shares | (55 | ) | (16 | ) | |
| Short-term bank loans | (565 | ) | (379 | ) | |
| Repayment of long-term debt | (1,424 | ) | (1,679 | ) | |
| Cash provided (used) by financing activities | (3,787 | ) | (3,652 | ) | |
| Effect of exchange rate differences on cash | (1,512 | ) | (1,448 | ) | |
| Net change in cash during the period | (15,737 | ) | 2,198 | ||
| Net cash - Beginning of the period | 83,962 | 74,840 | |||
| Net cash - End of the period | 68,225 | 77,038 | |||
| Net cash is composed of: | |||||
| Cash and cash equivalents | 92,468 | 102,516 | |||
| Bank indebtedness | (24,243 | ) | (25,478 | ) | |
| 68,225 | 77,038 | ||||
| Supplementary information | |||||
| Interest received (paid) | 5 | (93 | ) | ||
| Income taxes reimbursed (paid) | (1,868 | ) | (1,488 | ) | |
Contact Information:
Tom Velan
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