MONTREAL, QUEBEC--(Marketwire - May 17, 2011) - Velan Inc. (TSX:VLN), a world-leading manufacturer of industrial valves, announced today its financial results for the full year and fourth quarter ended February 28, 2011.
| THREE MONTHS ENDED | FULL YEAR ENDED | ||||
| FEBRUARY 28 | FEBRUARY 28 | ||||
| 2011 | 2010 | 2011 | 2010 | ||
| Sales | 107.1 | 116.8 | 388.5 | 465.9 | |
| Net Earnings (Loss) | (0.2 | ) | 6.1 | 5.8 | 35.5 |
| Earnings (Loss) per Share | (0.01 | ) | 0.28 | 0.26 | 1.60 |
Highlights
Full Year Fiscal 2011 (all comparisons versus full year fiscal 2010 unless otherwise noted):
1. Net earnings of $5.8 million, or $0.26 per share, compares to $35.5 million, or $1.60 per share.
2. Bookings of $418.4 million, down 3.3%, but would have been up 5.2% if not for negative currency effects.
3. Sales of $388.5 million, down 16.6%, or 8.4% excluding negative currency effects.
4. Gross margin decreased by 6.0% from 32.0% to 26.0%; the decrease would have been 2.0% excluding negative currency effects.
5. Net cash1 generated from operations of $26.0 million, compares to $67.6 million.
6. Backlog of $532.6 million, up 5.9%, or 13.3% excluding negative currency effects.
7. Shareholders' equity of $340.6 million, or $15.35 per share, down 1.6%.
8. Net cash1 of $110.5 million, or $4.98 per share, up 6.5%.
- 9. Based on average exchange rates, the Canadian dollar strengthened against the Company's main selling currencies, the U.S. dollar and the euro, by 8.9% and 16.0%, respectively. This significant strengthening had a negative impact on the Company's results.
Fourth Quarter Fiscal 2011 (all comparisons versus fourth quarter fiscal 2010 unless otherwise noted):
Net loss of $0.2 million, or $0.01 per share, compares to net earnings of $6.1 million, or $0.28 per share.
Bookings of $83.3 million, down 35.6%, or 28.4% excluding negative currency effects.
Sales of $107.1 million, down 8.3%, or 1.2% excluding negative currency effects.
Gross margin decreased by 1.5% from 28.2% to 26.7%, but would have increased by 0.4% if not for negative currency effects.
Net cash1 generated from operations of $15.3 million, up 19.5%.
- Based on average exchange rates, the Canadian dollar strengthened against the Company's main selling currencies, the U.S. dollar and the euro, by 5.5% and 11.5%, respectively. This significant strengthening had a negative impact on the Company's results.
"As we anticipated one year ago, this has been a downturn year with lower sales and earnings as the effects of the global financial crisis impacted us as a late-cycle company. We started this year with lower deliverable backlog due to low order bookings last year, other than nuclear. Our margins were squeezed by a combination of lower volume, higher input costs, and a strong Canadian dollar," said Tom Velan, President and CEO of Velan Inc.
"We remain focused on our operational excellence program to implement cost reductions. Faced with significant material cost increases, we have been raising our selling prices. We expect these measures will help protect our margins in the near term and help improve margins when our sales volume increases."
Nuclear continued to be an important factor in the Company's sales, bookings, and backlog. The serious nuclear accident at Fukishima, Japan, caused by the earthquake and tsunami has had a serious impact on the nuclear industry around the world. Despite the tragic events in Japan, the Company believes that the new generation- three reactors have vastly improved safety characteristics and that nuclear will play an important role in meeting future energy requirements. The Company expects that its current order backlog will continue to be manufactured as scheduled, but there will be a hiatus or slowdown in commitments for new orders.
Tom Velan said, "There have now been more positive trends in the global economy and in our main markets over the last few months, with the exception of nuclear. We are starting this year with a higher backlog than last year. Although there are signs of improvement in our markets, we expect that it will take time for the capital-intensive project market to fully recover and we continue to experience fierce competition as competitors fight to maintain market share and sales volume. We continue to take measures to broaden our scope of product offerings and strengthen our international presence."
Following the year end, the Company acquired 70% of ABV Energy S.p.A., now Velan ABV S.p.A. ("ABV"), an Italian valve manufacturer with two plants in Lucca, Italy. ABV manufactures engineered valves, actuators, and control systems supplied to energy markets. The former shareholders will retain a 30% interest. ABV reported sales of approximately $49.7 million (€36.4 million) for its last fiscal year.
The Company believes ABV will be accretive to earnings, excluding the effects of purchase price accounting. The Company is still in the process of determining the purchase price equation and as such is not in a position to estimate the impact that purchase price accounting will have on its fiscal 2012 results.
Tom Velan said, "We are pleased to have executed on one of our major strategic goals, with the largest acquisition in our history. ABV's product line is entirely complementary to our valve range, broadening the scope of our offerings to energy markets and providing us with a great opportunity to grow sales and earnings over the coming years."
After the year end, the Company also purchased land in Coimbatore in southern India to build a new plant that will serve both to improve its cost competitiveness and its access to the rapidly growing Indian market. This plant will take time to build and put into operation.
"We are pleased to have maintained a solid balance sheet," said John Ball, CFO of Velan Inc., "and to have generated net cash1 from operations during this challenging year. Our focus on working capital management allowed us to fund the ABV acquisition from our own cash resources and still have sufficient liquidity to satisfy our working capital requirements and execute on our business strategy.
"This is the last year we will be reporting our results in Canadian dollars. As a result of the adoption of the International Financial Reporting Standards ("IFRS"), we are switching to the U.S. dollar as our functional and reporting currency. We expect this change to lessen, but not eliminate, the foreign exchange-related volatility on our earnings."
Tom Velan concluded, "We are a late-cycle company, so while many businesses had lower sales right after the financial crisis, we had very good results for six quarters but experienced a downturn in this fiscal year. We expect to have better results in fiscal 2012 as we are starting this year with a higher backlog and there have been more positive trends in the global economy and in our main markets over the last few months, with the exception of nuclear. We have and continue to take measures to broaden our product offering, improve our cost competitiveness, and strengthen our presence in international markets in order to improve our performance and increase the value of our company."
Dividend
The Board declared an eligible quarterly dividend of $0.08 per share, payable on June 30, 2011, to all shareholders of record as at June 15, 2011.
Conference Call
Financial analysts, shareholders, and other interested individuals are invited to attend the fourth-quarter conference call to be held on May 17, 2011, at 3:30 PM (EST). The toll free call-in number is 1-800-734-4208, access code 21523248. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558-5253, access code 21523248.
About Velan
Velan Inc. (www.velan.com) is a world-leading manufacturer of industrial valves with sales of Cnd. $388 million in its last reported fiscal year. The company employs over 1,800 people and has manufacturing plants in nine 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.
1 Non-GAAP measure – see explanation below
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.
| Consolidated Statements of Earnings | ||||||||||||||
| and Retained Earnings | ||||||||||||||
| Unaudited | Unaudited | |||||||||||||
| Three months ended | Twelve months ended | |||||||||||||
| February 28 | February 28 | |||||||||||||
| (in thousands of dollars, | ||||||||||||||
| excluding per share amounts) | 2011 | 2010 | 2011 | 2010 | ||||||||||
| Sales | $ | 107,117 | $ | 116,795 | $ | 388,466 | $ | 465,945 | ||||||
| Cost of sales | 78,552 | 83,816 | 287,413 | 316,933 | ||||||||||
| Gross profit | 28,565 | 32,979 | 101,053 | 149,012 | ||||||||||
| Expenses (other income) | ||||||||||||||
| Engineering, selling, general and | ||||||||||||||
| administrative and research | 22,010 | 20,814 | 74,012 | 74,635 | ||||||||||
| Interest | ||||||||||||||
| Long-term debt | (51 | ) | 12 | 187 | 265 | |||||||||
| Other | 156 | 75 | 402 | 231 | ||||||||||
| Amortization of property, plant and equipment | 2,625 | 2,377 | 10,071 | 9,550 | ||||||||||
| Other income | (403 | ) | (82 | ) | (857 | ) | (970 | ) | ||||||
| Non-controlling interest | 59 | 512 | 570 | 1,403 | ||||||||||
| Foreign exchange loss on translation of | ||||||||||||||
| integrated subsidiaries | 2,174 | 115 | 3,548 | 7,594 | ||||||||||
| 26,570 | 23,823 | 87,933 | 92,708 | |||||||||||
| Earnings before income taxes | 1,995 | 9,156 | 13,120 | 56,304 | ||||||||||
| Provision for (recovery of) income taxes - Current | 2,593 | 5,139 | 7,701 | 22,822 | ||||||||||
| Provision for (recovery of) income taxes - Future | (391 | ) | (2,041 | ) | (391 | ) | (2,041 | ) | ||||||
| Net earnings (loss) | $ | (207 | ) | $ | 6,058 | $ | 5,810 | $ | 35,523 | |||||
| Retained earnings - beginning | $ | 246,340 | $ | 241,375 | $ | 245,654 | $ | 217,251 | ||||||
| Net earnings (loss) | (207 | ) | 6,058 | 5,810 | 35,523 | |||||||||
| Dividends | ||||||||||||||
| Multiple Voting Shares | 1,245 | 1,245 | 4,980 | 4,981 | ||||||||||
| Subordinate Voting Shares | 531 | 534 | 2,127 | 2,139 | ||||||||||
| Retained earnings - ending | $ | 244,357 | $ | 245,654 | $ | 244,357 | $ | 245,654 | ||||||
| Earnings (loss) per share | ||||||||||||||
| Basic | $ | (0.01 | ) | $ | 0.28 | $ | 0.26 | $ | 1.60 | |||||
| Diluted | $ | (0.01 | ) | $ | 0.27 | $ | 0.26 | $ | 1.59 | |||||
| Consolidated Balance Sheets | |||||||
| Unaudited | Unaudited | ||||||
| February 28 | February 28 | ||||||
| (in thousands of dollars) | 2011 | 2010 | |||||
| ASSETS | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 116,703 | $ | 106,940 | |||
| Short-term investments | 85 | 310 | |||||
| Accounts receivable | 95,187 | 95,546 | |||||
| Income taxes recoverable | 5,432 | 3,497 | |||||
| Inventories | 207,478 | 206,472 | |||||
| Deposits and prepaid expenses | 3,766 | 5,959 | |||||
| Future income taxes | 4,914 | 4,735 | |||||
| 433,565 | 423,459 | ||||||
| Future income taxes | 1,900 | 1,880 | |||||
| Property, plant and equipment | 71,932 | 73,418 | |||||
| Goodwill | 12,502 | 12,502 | |||||
| Other assets | 1,331 | 1,438 | |||||
| $ | 521,230 | $ | 512,697 | ||||
| LIABILITIES | |||||||
| Current liabilities | |||||||
| Bank indebtedness | $ | 5,483 | $ | 2,630 | |||
| Short-term bank loans | 800 | 833 | |||||
| Accounts payable and accrued liabilities | 63,727 | 68,248 | |||||
| Income taxes payable | 1,543 | 3,473 | |||||
| Dividend payable | 1,778 | 1,778 | |||||
| Customer deposits | 71,009 | 58,146 | |||||
| Provision for performance guarantees | 17,148 | 11,470 | |||||
| Future income taxes | 743 | 907 | |||||
| Current portion of long-term debt | 587 | 46 | |||||
| 162,818 | 147,531 | ||||||
| Future income taxes | 4,000 | 3,834 | |||||
| Long-term debt | 4,286 | 3,956 | |||||
| Non-controlling interest | 3,024 | 4,149 | |||||
| Other long-term liabilities | 6,475 | 7,043 | |||||
| 180,603 | 166,513 | ||||||
| SHAREHOLDERS' EQUITY | |||||||
| Capital stock | 107,553 | 108,073 | |||||
| Contributed surplus | 2,110 | 2,016 | |||||
| Retained earnings | 244,357 | 245,654 | |||||
| Accumulated other comprehensive loss | (13,393 | ) | (9,559 | ) | |||
| 340,627 | 346,184 | ||||||
| $ | 521,230 | $ | 512,697 | ||||
| Consolidated Statements of Cash Flows | ||||||||||||||
| Unaudited | Unaudited | |||||||||||||
| Three months ended | Twelve months ended | |||||||||||||
| February 28 | February 28 | |||||||||||||
| (in thousands of dollars) | 2011 | 2010 | 2011 | 2010 | ||||||||||
| Cash provided from: | ||||||||||||||
| Operating activities | ||||||||||||||
| Net earnings (loss) | $ | (207 | ) | $ | 6,058 | 5,810 | $ | 35,523 | ||||||
| Items not affecting cash - | ||||||||||||||
| Amortization of property plant & equipment | 2,625 | 2,377 | 10,071 | 9,550 | ||||||||||
| Stock options expense | 10 | 27 | 64 | 197 | ||||||||||
| Future income taxes | (391 | ) | (2,041 | ) | (391 | ) | (2,041 | ) | ||||||
| Gain on disposal of property, plant and equipment | (412 | ) | (64 | ) | (467 | ) | (64 | ) | ||||||
| Realized translation adjustment on reduction of net investment in a | ||||||||||||||
| self-sustaining operation | - | - | 488 | - | ||||||||||
| Non-controlling interest | 59 | 512 | 570 | 1,403 | ||||||||||
| Net change in other long-term liabilities | 108 | (74 | ) | (591 | ) | 167 | ||||||||
| 1,792 | 6,795 | 15,554 | 44,735 | |||||||||||
| Changes in non-cash working capital items | ||||||||||||||
| Accounts receivable | (4,148 | ) | (1,377 | ) | 344 | 26,756 | ||||||||
| Income taxes recoverable | (1,601 | ) | 434 | (2,015 | ) | 988 | ||||||||
| Inventories | 5,007 | 18,424 | (1,048 | ) | 6,075 | |||||||||
| Deposits and prepaid expenses | 2,048 | (997 | ) | 2,102 | 2,623 | |||||||||
| Accounts payable and accrued liabilities | 3,537 | (3,541 | ) | (4,708 | ) | (23,644 | ) | |||||||
| Income taxes payable | (562 | ) | (11,949 | ) | (2,010 | ) | (137 | ) | ||||||
| Customer deposits | 7,072 | 788 | 12,331 | 6,296 | ||||||||||
| Provision for performance guarantees | 2,148 | 4,202 | 5,443 | 3,883 | ||||||||||
| 13,501 | 5,984 | 10,439 | 22,840 | |||||||||||
| 15,293 | 12,779 | 25,993 | 67,575 | |||||||||||
| Investing activities | ||||||||||||||
| Short-term investments | 335 | 80 | 225 | (144 | ) | |||||||||
| Additions to property, plant and equipment | (4,026 | ) | (4,162 | ) | (9,817 | ) | (14,038 | ) | ||||||
| Proceeds on disposal of property, plant and equipment | 483 | 90 | 649 | 90 | ||||||||||
| Net change in other assets | 156 | 268 | 103 | 366 | ||||||||||
| (3,052 | ) | (3,724 | ) | (8,840 | ) | (13,726 | ) | |||||||
| Financing activities | ||||||||||||||
| Repurchase of shares | (26 | ) | - | (490 | ) | (1,056 | ) | |||||||
| Dividends | (1,776 | ) | (1,770 | ) | (7,107 | ) | (7,128 | ) | ||||||
| Dividends to non-controlling interest | - | (2 | ) | (1,870 | ) | (87 | ) | |||||||
| Short-term bank loans | (32 | ) | (3 | ) | (33 | ) | (170 | ) | ||||||
| Increase in long-term debt | 1,021 | - | 1,021 | - | ||||||||||
| Repayment of long-term debt | - | (4 | ) | (89 | ) | (1,061 | ) | |||||||
| (813 | ) | (1,779 | ) | (8,568 | ) | (9,502 | ) | |||||||
| Effect of exchange rate differences on cash and cash | ||||||||||||||
| equivalents | (487 | ) | (3,899 | ) | (1,675 | ) | (4,359 | ) | ||||||
| Net change in cash and cash equivalents | 10,941 | 3,377 | 6,910 | 39,988 | ||||||||||
| Net cash - beginning | 100,279 | 100,933 | 104,310 | 64,322 | ||||||||||
| Net cash - ending | $ | 111,220 | $ | 104,310 | $ 111,220 | $ | 104,310 | |||||||
| Net cash includes cash and cash equivalents less bank indebtedness | ||||||||||||||
| Interest paid amounted to : | 136 | 32 | 225 | 178 | ||||||||||
| Income tax paid amounted to: | 6,725 | 13,731 | 11,583 | 20,515 | ||||||||||
| Consolidated Statements of Comprehensive Income and Accumulated Other Comprehensive Loss | ||||||||||||
| Unaudited | Unaudited | |||||||||||
| Three months ended | Twelve months ended | |||||||||||
| February 28 | February 28 | |||||||||||
| (in thousands of dollars) | 2011 | 2010 | 2011 | 2010 | ||||||||
| Net earnings (loss) | $ | (207 | ) | $ | 6,058 | 5,810 | $ | 35,523 | ||||
| Other comprehensive income (loss), net of tax | ||||||||||||
| Foreign currency translation adjustment on self-sustaining operations | 187 | (7,053 | ) | (4,078 | ) | (8,475 | ) | |||||
| Realized translation adjustment on the reduction of the net investment in self- | ||||||||||||
| sustaining foreign operations | - | - | 244 | - | ||||||||
| Comprehensive income (loss) | (20 | ) | (995 | ) | 1,976 | 27,048 | ||||||
| Accumulated other comprehensive loss, net tax | ||||||||||||
| Accumulated other comprehensive income (loss), beginning of period | (13,580 | ) | (2,506 | ) | (9,559 | ) | (1,084 | ) | ||||
| Other comprehensive income (loss) for the period | 187 | (7,053 | ) | (4,078 | ) | (8,475 | ) | |||||
| Realized translation adjustment on the reduction of the net investment in self-sustaining | ||||||||||||
| foreign operations | - | - | 244 | - | ||||||||
| Accumulated other comprehensive loss, end of period | (13,393 | ) | (9,559 | ) | (13,393 | ) | (9,559 | ) | ||||
Contact Information:
President and Chief Executive Officer
M. John D. Ball
Chief Financial Officer
(514) 748-7743
(514) 748-8635 (FAX)
www.velan.com