MONTREAL, QUEBEC--(Marketwire - Oct. 12, 2012) - Velan Inc. (TSX:VLN) (the "Company"), a world-leading manufacturer of industrial valves, announced today its financial results for its second quarter ended August 31, 2012.
| Three-month periods ended | Six-month periods ended | ||||||||
| August 31 | August 31 | ||||||||
| (millions of U.S. dollars, excluding per share amounts) | 2012 | 2011 | 2012 | 2011 | |||||
| Sales | $108.4 | $95.4 | $224.3 | $200.4 | |||||
| Gross profit | 26.0 | 15.7 | 50.1 | 37.0 | |||||
| Gross margin % | 24.0 | % | 16.5 | % | 22.3 | % | 18.4 | % | |
| Net income (loss) attributable to Subordinate and Multiple Voting Shares | 3.3 |
(2.1 |
) |
4.0 |
(2.0 |
) |
|||
| Net income (loss) per share | - Basic | 0.15 | (0.10 | ) | 0.18 | (0.09 | ) | ||
| - Diluted | 0.15 | (0.10 | ) | 0.18 | (0.09 | ) | |||
Highlights
Second Quarter Fiscal 2013 (unless otherwise noted, all comparisons are to the second quarter of fiscal 2012):
- Net earnings1 amounted to $3.3 million or $0.15 per share compared to a net loss1 of $2.1 million or $0.10 per share last year. Excluding currency impacts, the Company would have reported net earnings1 of $3.5 million or $0.16 per share this year compared to a net loss1 of $2.0 million or $0.09 per share last year. Further excluding the results of Velan ABV S.p.A. ("ABV"), an Italian valve manufacturer acquired in
the prior fiscal year, and the effects of purchase price accounting, the Company would have reported net earnings1 of $4.5 million or $0.21 per share this year compared to a net loss1 of $0.5 million or $0.02 per share last year.
- Net new orders received ("bookings") amounted to $92.4 million, a decrease of $79.7 million or 46.3% compared to last year. Excluding currency impacts, the decrease would have been $80.8 million or 46.9%. The Company ended the quarter with a backlog of $625.9 million, a decrease of $35.9 million since the beginning of the current fiscal year. Excluding currency impacts, the backlog would have decreased by $13.9 million over the same period to $647.9 million.
- Sales amounted to $108.4 million, an increase of $13.0 million or 13.6%. Excluding currency impacts, sales would have increased by $18.1 million or 19.0%.
- Gross margin increased by 7.5 percentage points from 16.5% to 24.0%. Excluding currency impacts, the gross margin percentage would have increased by 7.6 percentage points in the quarter. Further excluding the results of ABV and the effects of purchase price accounting, gross margin would have increased by 8.3 percentage points in the quarter. The increase in the gross margin percentage excluding ABV, the effects of purchase price accounting and currency impacts is primarily attributable to the increase in sales volume which allowed the Company to more efficiently cover its production overhead costs, lower raw material costs and product mix.
- Based on average exchange rates, the euro weakened 13.5% 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 3.9% 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 outweighed by the negative impact of a weaker euro.
First Half Year Fiscal 2013 (unless otherwise noted, all comparisons are to the first half year of fiscal 2012):
- Net earnings1 amounted to $4.0 million or $0.18 per share compared to a net loss1 of $2.0 million or
$0.09 per share last year. Excluding the results of ABV, the effects of purchase price accounting and currency impacts, the Company would have reported net earnings1 of $6.4 million or $0.29 per share this year compared to $1.0 million or $0.04 per share last year. - Bookings amounted to $190.1 million, a decrease of $118.8 million or 38.5% compared to last year. Excluding currency impacts, the decrease would have been $91.9 million or 29.8%.
- Sales amounted to $224.3 million, an increase of $23.9 million or 11.9%. Excluding ABV and currency impacts, sales would have increased by $20.2 million or 10.5%.
- Gross margin increased by 3.9 percentage points from 18.4% to 22.3%. Excluding ABV, the effects of purchase price accounting and currency impacts, gross margin would have increased by 4.8 percentage points.
- The Company used net cash2 from operations of $23.9 million in the period. This use of net cash2 was
primarily attributable to increases in accounts receivable and inventories coupled with decreases in accounts payable. The Company ended the period with net cash2 of $5.6 million. - The Company generated net cash2 from financing activities of $12.4 million in the period. This source of net cash2 was principally from a $20.7 million increase in long-term debt. The Company is using the proceeds of this debt 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 11.0% 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 period. The Canadian dollar weakened 3.5% 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 period. The net impact of these two currency swings was generally unfavourable on the Company's results for this period since the positive impact of a weaker Canadian dollar was 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 are pleased that we are gradually working through our high backlog although perhaps not as quickly as we would like", said John Ball, CFO of Velan Inc. "This is restoring our profitability as our shipments increase, although not without certain working capital challenges, and we continue to invest in our productive capacity both in Canada and abroad. The fluctuation of the euro this year, the current vagaries of the nuclear industry, and the uncertainty in certain world financial markets also contribute to these challenges, however they are outweighed by the longer term opportunities in our end user markets."
Tom Velan, President and CEO of Velan Inc. said, "In view of our large order backlog, our main focus is on increasing our output and improving our execution of our complex project orders. We are investing both in Asia and North America to increase our global manufacturing capacity and to strengthen our presence in international markets. In the shorter term, we are focused on improved execution of our large project order backlog to satisfy the needs of our customers."
Dividend
The Board declared an eligible quarterly dividend of Canadian dollar $0.08 per share, payable on December 31, 2012, to all shareholders of record as at December 14, 2012.
Conference call
Financial analysts, shareholders, and other interested individuals are invited to attend the second quarter conference call to be held on October 12, 2012, at 4:30 PM (EDT). The toll free call-in number is 1-888-224-7971, access code 21607087. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558-5253, access code 21607087.
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 2,000 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.
Non-GAAP measures
In this press release, the Company presented measures of performance and financial condition that 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 | Six-month periods ended | |||||||
| August 31 | August 31 | |||||||
| 2012 | 2011 | 2012 | 2011 | |||||
| $ | $ | $ | $ | |||||
| Sales | 108,449 | 95,389 | 224,301 | 200,412 | ||||
| Cost of sales | 82,433 | 79,681 | 174,173 | 163,442 | ||||
| Gross profit | 26,016 | 15,708 | 50,128 | 36,970 | ||||
| Administration costs | 21,023 | 19,931 | 44,948 | 40,580 | ||||
| Other expense (income) | 98 | (340 | ) | (830 | ) | (216 | ) | |
| Operating profit (loss) | 4,895 | (3,883 | ) | 6,010 | (3,394 | ) | ||
| Finance income | 160 | 42 | 358 | 161 | ||||
| Finance costs | 698 | 506 | 1,347 | 823 | ||||
| Finance income (costs) - net | (538 | ) | (464 | ) | (989 | ) | (662 | ) |
| Income (Loss) before income tax | 4,357 | (4,347 | ) | 5,021 | (4,056 | ) | ||
| Provision for (Recovery of) income tax | 941 | (1,525 | ) | 896 | (1,575 | ) | ||
| Net income (loss) for the period | 3,416 | (2,822 | ) | 4,125 | (2,481 | ) | ||
| Net income (loss) attributable to: | ||||||||
| Subordinate Voting Shares and Multiple Voting Shares | 3,318 | (2,111 | ) | 4,012 | (1,964 | ) | ||
| Non-controlling interest | 98 | (711 | ) | 113 | (517 | ) | ||
| 3,416 | (2,822 | ) | 4,125 | (2,481 | ) | |||
| Net income (loss) per Subordinate and Multiple Voting Share | ||||||||
| Basic | 0.15 | (0.10 | ) | 0.18 | (0.09 | ) | ||
| Diluted | 0.15 | (0.10 | ) | 0.18 | (0.09 | ) | ||
| Dividends declared per Subordinate and Multiple Voting Share | 0.08 | 0.09 | 0.16 | 0.17 | ||||
| (CDN$0.08 | ) | (CDN$0.08 | ) | (CDN$0.16 | ) | (CDN$0.16 | ) | |
| Total weighted average number of Subordinate and | ||||||||
| Multiple Voting Shares | ||||||||
| Basic | 22,033,577 | 22,183,375 | 22,033,577 | 22,183,375 | ||||
| Diluted | 22,038,797 | 22,225,091 | 22,043,135 | 22,230,509 | ||||
| Velan Inc. | |||||||
| Interim Consolidated Statements of Comprehensive Income (Loss) | |||||||
| (Unaudited) | |||||||
| (in thousands of U.S. dollars) | |||||||
| Three-month periods ended | Six-month periods ended | ||||||
| August 31 | August 31 | ||||||
| 2012 | 2011 | 2012 | 2011 | ||||
| $ | $ | $ | $ | ||||
| Comprehensive income (loss) | |||||||
| Net income (loss) for the period | 3,416 | (2,822 | ) | 4,125 | (2,481 | ) | |
| Other comprehensive income (loss) | |||||||
| Foreign currency translation adjustment on foreign operations whose functional currency is other than the U.S. dollar | |||||||
| 1,455 | 1,031 | (9,004 | ) | 3,845 | |||
| Comprehensive income (loss) | 4,871 | (1,791 | ) | (4,879 | ) | 1,364 | |
| Comprehensive income (loss) attributable to: | |||||||
| Subordinate Voting Shares and Multiple Voting Shares | 4,611 | (1,258 | ) | (4,501 | ) | 2,027 | |
| Non-controlling interest | 260 | (533 | ) | (378 | ) | (663 | ) |
| 4,871 | (1,791 | ) | (4,879 | ) | 1,364 | ||
| Velan Inc. | ||||
| Interim Consolidated Statements of Financial Position | ||||
| (Unaudited) | ||||
| (in thousands of U.S. dollars) | ||||
| As At | August 31, | February 29, | ||
| 2012 | 2012 | |||
| $ | $ | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 52,155 | 65,414 | ||
| Short-term investments | 2,657 | 4,954 | ||
| Accounts receivable | 124,934 | 111,856 | ||
| Income taxes recoverable | 9,537 | 9,682 | ||
| Inventories | 269,115 | 258,684 | ||
| Deposits and prepaid expenses | 8,118 | 6,209 | ||
| Derivative assets | 2,297 | 1,737 | ||
| 468,813 | 458,536 | |||
| Non-current assets | ||||
| Property, plant and equipment | 77,506 | 72,961 | ||
| Intangible assets and goodwill | 53,560 | 58,845 | ||
| Deferred income taxes | 11,094 | 10,152 | ||
| Other assets | 1,612 | 1,476 | ||
| 143,772 | 143,434 | |||
| Total assets | 612,585 | 601,970 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Bank indebtedness | 40,697 | 32,438 | ||
| Short-term loans | 1,961 | 858 | ||
| Accounts payable and accrued liabilities | 74,175 | 82,088 | ||
| Income tax payable | 1,895 | 2,484 | ||
| Dividend payable | 1,783 | 1,791 | ||
| Customer deposits | 90,224 | 86,544 | ||
| Provisions | 4,798 | 5,149 | ||
| Accrual for performance guarantees | 23,492 | 21,679 | ||
| Derivative liabilities | 654 | 534 | ||
| Current portion of long-term debt | 6,615 | 1,696 | ||
| Current portion of other liabilities | 2,384 | 5,753 | ||
| 248,678 | 241,014 | |||
| Non-current liabilities | ||||
| Long-term debt | 22,434 | 7,891 | ||
| Deferred income taxes | 7,463 | 8,270 | ||
| Other liabilities | 8,845 | 9,218 | ||
| 38,742 | 25,379 | |||
| Total liabilities | 287,420 | 266,393 | ||
| Equity | ||||
| Equity attributable to the Subordinate and Multiple Voting shareholders | ||||
| Share capital | 76,836 | 78,764 | ||
| Contributed surplus | 1,758 | 1,871 | ||
| Retained earnings | 251,471 | 250,951 | ||
| Accumulated other comprehensive income (loss) | (12,730 | ) | (4,217 | ) |
| 317,335 | 327,369 | |||
| Non-controlling interest | 7,830 | 8,208 | ||
| Total equity | 325,165 | 335,577 | ||
| Total liabilities and equity | 612,585 | 601,970 | ||
| Velan Inc. |
| 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 | |||||||||||||||||
| Accumulated | |||||||||||||||||
| Contri- | other | ||||||||||||||||
| Number of | Share | buted | comprehensive | Retained | Non-controlling | ||||||||||||
| shares | capital | surplus | income (loss) | earnings | Total | 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 | - | - | - | - | 4,012 | 4,012 | 113 | 4,125 | |||||||||
| Other comprehensive income (loss) | - | - | - | (8,513 | ) | - | (8,513 | ) | (491 | ) | (9,004 | ) | |||||
| 22,148,968 | 78,764 | 1,871 | (12,730 | ) | 254,963 | 322,868 | 7,830 | 330,698 | |||||||||
| Effect of share-based compensation | - | - | 29 | - | - | 29 | - | 29 | |||||||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (2,478 | ) | (2,478 | ) | - | (2,478 | ) | ||||||
| Subordinate Voting Shares | - | - | - | - | (1,014 | ) | (1,014 | ) | - | (1,014 | ) | ||||||
| Non-controlling interest | - | - | - | - | - | - | - | - | |||||||||
| Share repurchase | (177,200 | ) | (1,928 | ) | (142 | ) | - | - | (2,070 | ) | - | (2,070 | ) | ||||
| Balance - August 31, 2012 | 21,971,768 | 76,836 | 1,758 | (12,730 | ) | 251,471 | 317,335 | 7,830 | 325,165 | ||||||||
| 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 | - | - | - | - | (1,964 | ) | (1,964 | ) | (517 | ) | (2,481 | ) | |||||
| Other comprehensive income (loss) | - | - | - | 3,991 | - | 3,991 | (146 | ) | 3,845 | ||||||||
| 22,195,568 | 79,271 | 1,898 | 6,266 | 248,290 | 335,725 | 3,362 | 339,087 | ||||||||||
| Effect of share-based compensation | - | - | 17 | - | - | 17 | - | 17 | |||||||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (2,568 | ) | (2,568 | ) | - | (2,568 | ) | ||||||
| Subordinate Voting Shares | - | - | - | - | (1,093 | ) | (1,093 | ) | - | (1,093 | ) | ||||||
| Non-controlling interest | - | - | - | - | - | - | (84 | ) | (84 | ) | |||||||
| Share repurchase | (19,200 | ) | (201 | ) | (78 | ) | - | - | (279 | ) | - | (279 | ) | ||||
| Non-controlling interest arising on acquisition | - | - | - | - | - | - | 8,372 | 8,372 | |||||||||
| Balance - August 31, 2011 | 22,176,368 | 79,070 | 1,837 | 6,266 | 244,629 | 331,802 | 11,650 | 343,452 | |||||||||
| Velan Inc. | |||||||||
| Interim Consolidated Statements of Cash Flows | |||||||||
| (Unaudited) | |||||||||
| (in thousands of U.S. dollars) | |||||||||
| Three-month periods | Six-month periods | ||||||||
| ended August 31, | ended August 31, | ||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||
| Cash flows from | $ | $ | $ | $ | |||||
| Operating activities | |||||||||
| Net income (loss) for the period | 3,416 | (2,822 | ) | 4,125 | (2,481 | ) | |||
| Adjustments to reconcile net profit to cash provided operating activities | |||||||||
| Depreciation of property, plant and equipment | 2,314 | 2,204 | 4,528 | 4,224 | |||||
| Amortization of intangible assets | 621 | 1,667 | 1,650 | 2,358 | |||||
| Deferred income taxes | (810 | ) | (882 | ) | (1,773 | ) | (942 | ) | |
| Share-based compensation expense | 15 | 8 | 29 | 17 | |||||
| Loss (Gain) on disposal of property, plant and equipment | 103 | 31 | (121 | ) | 50 | ||||
| Interest accretion on proceeds payable | 163 | 305 | 349 | 411 | |||||
| Income from fair value adjustment of proceeds payable | - | - | (196 | ) | - | ||||
| Unrealized foreign exchange gain on proceeds payable | (13 | ) | - | (574 | ) | - | |||
| Net change in other liabilities | (24 | ) | 514 | (434 | ) | 628 | |||
| 5,785 | 1,025 | 7,583 | 4,265 | ||||||
| Changes in non-cash working capital items | (10,481 | ) | (13,829 | ) | (31,482 | ) | (18,596 | ) | |
| Cash provided (used) by operating activities | (4,696 | ) | (12,804 | ) | (23,899 | ) | (14,331 | ) | |
| Investing activities | |||||||||
| Short -term investments | 1,561 | (614 | ) | 2,297 | (651 | ) | |||
| Additions to property, plant and equipment | (6,830 | ) | (2,932 | ) | (11,082 | ) | (7,377 | ) | |
| Proceeds on disposal of property, plant and equipment | 67 | 19 | 459 | 27 | |||||
| Additions to intangible assets | (208 | ) | (610 | ) | (266 | ) | (645 | ) | |
| Net change in other assets | (10 | ) | (9 | ) | (144 | ) | 17 | ||
| Business acquisition - net of cash acquired | - | - | - | (37,281 | ) | ||||
| Cash provided (used) by investing activities | (5,420 | ) | (4,146 | ) | (8,736 | ) | (45,910 | ) | |
| Financing activities | |||||||||
| Dividends paid to Subordinate and Multiple Voting shareholders | (1,723 | ) | (1,850 | ) | (3,500 | ) | (3,680 | ) | |
| Dividends paid to non-controlling interest | - | (84 | ) | - | (84 | ) | |||
| Repurchase of shares | (1,944 | ) | (250 | ) | (2,070 | ) | (279 | ) | |
| Payment of proceeds payable | (2,905 | ) | - | (2,905 | ) | - | |||
| Short -term loans | (94 | ) | (1,306 | ) | 1,103 | (4,842 | ) | ||
| Increase in long-term debt | 623 | 4,224 | 20,715 | 4,224 | |||||
| Repayment of long-term debt | (292 | ) | (5 | ) | (957 | ) | (57 | ) | |
| Cash provided (used) by financing activities | (6,335 | ) | 729 | 12,386 | (4,718 | ) | |||
| Effect of exchange rate differences on cash | (485 | ) | 133 | (1,269 | ) | 312 | |||
| Net change in cash during the period | (16,936 | ) | (16,088 | ) | (21,518 | ) | (64,647 | ) | |
| Net cash - Beginning of the period | 28,394 | 65,803 | 32,976 | 114,362 | |||||
| Net cash - End of the period | 11,458 | 49,715 | 11,458 | 49,715 | |||||
| Net cash is composed of: | |||||||||
| Cash and cash equivalents | 52,155 | 58,210 | 52,155 | 58,210 | |||||
| Bank indebtedness | (40,697 | ) | (8,495 | ) | (40,697 | ) | (8,495 | ) | |
| 11,458 | 49,715 | 11,458 | 49,715 | ||||||
| Supplementary information | |||||||||
| Interest received (paid) | (511 | ) | (54 | ) | (860 | ) | (105 | ) | |
| Income taxes received (paid) | (1,636 | ) | (1,568 | ) | (2,975 | ) | (4,019 | ) | |
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