MONTREAL, QUEBEC--(Marketwired - Oct. 9, 2014) -
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, 2014.
Highlights
- Sales of US$110.9 million for the quarter
- Net earnings1 of US$5.1 million for the quarter
- Order backlog of US$490.7 million at the end of the quarter
- Order bookings of US$117.9 million for the quarter
- Net cash2 of US$68.8 million at the end of the quarter
- Quarterly dividend of CA$0.10 per share declared, payable December 31, 2014
| Three-month periods ended | Six-month periods ended | |||||||||||||
| August 31 | August 31 | |||||||||||||
| (millions of U.S. dollars, excluding per share amounts) | 2014 | 2013 | 2014 | 2013 | ||||||||||
| Sales | $ | 110.9 | $ | 120.7 | $ | 214.0 | $ | 252.9 | ||||||
| Gross profit | 29.2 | 30.1 | 55.7 | 60.8 | ||||||||||
| Gross margin % | 26.3 | % | 24.9 | % | 26.0 | % | 24.0 | % | ||||||
| Net income (loss) attributable to Subordinate and Multiple Voting Shares | 5.1 | 4.9 | 9.1 | 10.7 | ||||||||||
| Net income (loss) per share | - Basic | 0.23 | 0.23 | 0.41 | 0.49 | |||||||||
| - Diluted | 0.23 | 0.23 | 0.41 | 0.49 | ||||||||||
Second Quarter Fiscal 2015 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the second quarter of fiscal 2014):
- Net earnings1 amounted to $5.1 million or $0.23 per share compared to $4.9 million or $0.23 per share last year. The $0.2 million increase in net earnings1 is primarily attributable to an improved gross margin percentage and lower net borrowing costs.
- Sales amounted to $110.9 million, a decrease of $9.8 million or 8.1% for the quarter, while net new orders received ("bookings") amounted to $117.9 million, an increase of $25.2 million or 27.2% compared to last year. As a result, the Company ended the quarter with a backlog of $490.7 million, an increase of $19.0 million or 4.0% since the beginning of the current fiscal year.
- Gross margin increased by 1.4 percentage points from 24.9% to 26.3%. This increase is mainly attributable to a product mix with a greater proportion of higher margin product sales, particularly spare parts and valves without third party actuators.
- The Company generated net cash2 from operations of $5.3 million in the quarter. The Company ended the quarter with net cash2 of $68.8 million, an increase of $1.1 million or 1.6% since the beginning of the current fiscal year.
First Half Year Fiscal 2015 (unless otherwise noted, all comparisons are to the first half year of fiscal 2014):
- Net earnings1 amounted to $9.1 million or $0.41 per share compared to $10.7 million or $0.49 per share last year. The $1.6 million decrease in net earnings1 is primarily attributable to lower sales volume which was partially offset by improved gross margins.
- Sales amounted to $214.0 million, a decrease of $38.9 million or 15.4%. The decrease in sales is primarily attributable to decreased shipments of certain large export project orders.
- Bookings amounted to $232.2 million, an increase of $32.8 million or 16.4% compared to last year, continuing the positive trend which started during the latter half of the prior year.
- Gross margin increased by 2.0 percentage points from 24.0% to 26.0%. This increase is mainly attributable to a product mix with a greater proportion of higher margin product sales, particularly spare parts and valves without third party actuators.
- The Company generated net cash2 from operations of $16.7 million in the period. This source of net cash2 was primarily attributable to positive cash net earnings1.
- Foreign currency impacts:
- Based on average exchange rates, the Euro strengthened 4.1% against the U.S. dollar when compared to the same period last year. This strengthening resulted in the Company's net profits from its European subsidiaries being reported as higher U.S. dollar amounts in the current period.
- Based on average exchange rates, the Canadian dollar weakened 5.7% 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 impact of these currency swings was favourable to the Company's results for the period.
- Based on average exchange rates, the Euro strengthened 4.1% against the U.S. dollar when compared to the same period last year. This strengthening resulted in the Company's net profits from its European subsidiaries being reported as higher U.S. dollar amounts in the current period.
"Although our sales this quarter were lower than the comparable quarter last year, due in part to certain contracts that couldn't ship during the quarter, we were pleased that the margin continued to be stronger than last year," said John Ball, CFO of Velan Inc. "The stronger margins, coupled with flat administration costs, resulted in a slightly better net income for the quarter. Furthermore, given our strong balance sheet, we intend, subject to Toronto Stock Exchange approval, to renew our normal course issuer bid when it expires on October 21, 2014. Although this year we had hoped to buy more than the 17,600 shares that we managed to acquire on the open market, we realize our shares are thinly traded and not always available in the quantities we would like. Under the bid, we may purchase up to 100,000 Subordinate Voting Shares (the "Shares"), representing approximately 1.57% of the issued Shares of such class as at October 9, 2014. All Shares purchased will be cancelled. As at October 9, 2014, we had 6,374,601 Shares outstanding. During the past 12 months, 17,600 Shares were purchased at a weighted average price of $16.99. We have concluded that purchases of up to 100,000 of the issued and outstanding Shares may be an appropriate and desirable use of available funds and, therefore, would be in the best interest of the Corporation. As a result of such purchases, the number of issued Shares will be decreased and, consequently, the proportionate share interest of all remaining shareholders will be increased on a pro rata basis."
Tom Velan, President and CEO of Velan Inc. said, "We just completed an international sales conference with our distributors and agents as well as our sales people from around the world. I am encouraged by the great opportunities for our products in the global energy market."
Dividend
The Board declared an eligible quarterly dividend of CDN$0.10 per share, payable on December 31, 2014, to all shareholders of record as at December 15, 2014.
Conference call
Financial analysts, shareholders, and other interested individuals are invited to attend the second quarter conference call to be held on October 9, 2014, at 4:30 PM (EDT). The toll free call-in number is 1-877-256-6025, access code 21735725. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558-5253, access code 21735725.
About Velan
Velan Inc. (www.velan.com) is a world-leading manufacturer of industrial valves with sales of $489 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 | August 31, | February 28, | ||
| 2014 | 2014 | |||
| $ | $ | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 98,190 | 106,716 | ||
| Short-term investments | 808 | 239 | ||
| Accounts receivable | 114,823 | 128,978 | ||
| Income taxes recoverable | 8,436 | 5,465 | ||
| Inventories | 219,084 | 224,149 | ||
| Deposits and prepaid expenses | 6,545 | 5,046 | ||
| Derivative assets | 307 | 498 | ||
| 448,193 | 471,091 | |||
| Non-current assets | ||||
| Property, plant and equipment | 94,743 | 96,605 | ||
| Intangible assets and goodwill | 40,431 | 43,359 | ||
| Deferred income taxes | 11,064 | 11,406 | ||
| Other assets | 1,528 | 1,693 | ||
| 147,766 | 153,063 | |||
| Total assets | 595,959 | 624,154 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Bank indebtedness | 22,811 | 31,876 | ||
| Short-term bank loans | 1,487 | 916 | ||
| Accounts payable and accrued liabilities | 65,776 | 76,590 | ||
| Income tax payable | 6,162 | 4,158 | ||
| Dividend payable | 2,018 | 1,586 | ||
| Customer deposits | 61,150 | 66,842 | ||
| Provisions | 7,483 | 8,060 | ||
| Accrual for performance guarantees | 33,482 | 33,842 | ||
| Derivative liabilities | 358 | 1,501 | ||
| Current portion of long-term debt | 9,582 | 10,402 | ||
| 210,309 | 235,773 | |||
| Non-current liabilities | ||||
| Long-term debt | 8,823 | 11,685 | ||
| Deferred income taxes | 8,734 | 9,270 | ||
| Other liabilities | 8,552 | 8,307 | ||
| 26,109 | 29,262 | |||
| Total liabilities | 236,418 | 265,035 | ||
| Equity | ||||
| Equity attributable to the Subordinate and Multiple Voting shareholders | ||||
| Share capital | 76,497 | 76,688 | ||
| Contributed surplus | 6,054 | 6,099 | ||
| Retained earnings | 277,884 | 272,867 | ||
| Accumulated other comprehensive income (loss) | (8,597 | ) | (3,589 | ) |
| 351,838 | 352,065 | |||
| Non-controlling interest | 7,703 | 7,054 | ||
| Total equity | 359,541 | 359,119 | ||
| Total liabilities and equity | 595,959 | 624,154 | ||
| 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 | Six-month periods ended | |||||||||||
| August 31 | August 31 | |||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||
| $ | $ | $ | $ | |||||||||
| Sales | 110,888 | 120,762 | 213,953 | 252,930 | ||||||||
| Cost of sales | 81,635 | 90,685 | 158,215 | 192,174 | ||||||||
| Gross profit | 29,253 | 30,077 | 55,738 | 60,756 | ||||||||
| Administration costs | 21,480 | 21,349 | 42,777 | 43,097 | ||||||||
| Other expense (income) | (86 | ) | 976 | (216 | ) | 1,014 | ||||||
| Operating profit (loss) | 7,859 | 7,752 | 13,177 | 16,645 | ||||||||
| Finance income | 251 | 179 | 516 | 359 | ||||||||
| Finance costs | 253 | 610 | 632 | 1,156 | ||||||||
| Finance income (costs) - net | (2 | ) | (431 | ) | (116 | ) | (797 | ) | ||||
| Income (Loss) before income tax | 7,857 | 7,321 | 13,061 | 15,848 | ||||||||
| Provision for (Recovery of) income tax | 2,438 | 2,093 | 3,580 | 4,338 | ||||||||
| Net income (loss) for the period | 5,419 | 5,228 | 9,481 | 11,510 | ||||||||
| Net income (loss) attributable to: | ||||||||||||
| Subordinate Voting Shares and Multiple Voting Shares | 5,098 | 4,889 | 9,103 | 10,689 | ||||||||
| Non-controlling interest | 321 | 339 | 378 | 821 | ||||||||
| 5,419 | 5,228 | 9,481 | 11,510 | |||||||||
| Net income (loss) per Subordinate and Multiple Voting Share | ||||||||||||
| Basic | 0.23 | 0.23 | 0.41 | 0.49 | ||||||||
| Diluted | 0.23 | 0.23 | 0.41 | 0.49 | ||||||||
| Dividends declared per Subordinate and Multiple | 0.09 | 0.08 | 0.18 | 0.16 | ||||||||
| Voting Share | (CA$0.10 | ) | (CA$0.08 | ) | (CA$0.20 | ) | (CA$0.16 | ) | ||||
| Total weighted average number of Subordinate andMultiple Voting Shares | ||||||||||||
| Basic | 21,948,133 | 21,923,768 | 21,948,133 | 21,923,768 | ||||||||
| Diluted | 21,958,384 | 21,935,818 | 21,956,900 | 21,935,754 | ||||||||
| Velan Inc. | |||||||
| Condensed 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 | ||||||
| 2014 | 2013 | 2014 | 2013 | ||||
| $ | $ | $ | $ | ||||
| Comprehensive income (loss) | |||||||
| Net income (loss) for the period | 5,419 | 5,228 | 9,481 | 11,510 | |||
| Other comprehensive income (loss) | |||||||
| Foreign currency translation adjustment on foreign operations whose functional currency is other than the reporting currency (U.S. dollar) | (3,771 | ) | 1,884 | (4,737 | ) | 662 | |
| Comprehensive income (loss) | 1,648 | 7,112 | 4,744 | 12,172 | |||
| Comprehensive income (loss) attributable to: | |||||||
| Subordinate Voting Shares and Multiple Voting Shares | 1,290 | 6,701 | 4,095 | 11,447 | |||
| Non-controlling interest | 358 | 411 | 649 | 725 | |||
| 1,648 | 7,112 | 4,744 | 12,172 | ||||
| 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, 2014 | 21,958,768 | 76,688 | 6,099 | (3,589 | ) | 272,867 | 352,065 | 7,054 | 359,119 | ||||||||
| Net income (loss) for the period | - | - | - | - | 9,103 | 9,103 | 378 | 9,481 | |||||||||
| Other comprehensive income (loss) | - | - | - | (5,008 | ) | - | (5,008 | ) | 271 | (4,737 | ) | ||||||
| 21,958,768 | 76,688 | 6,099 | (8,597 | ) | 281,970 | 356,160 | 7,703 | 363,863 | |||||||||
| Effect of share-based compensation | - | - | 6 | - | - | 6 | - | 6 | |||||||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (2,852 | ) | (2,852 | ) | - | (2,852 | ) | ||||||
| Subordinate Voting Shares | - | - | - | - | (1,200 | ) | (1,200 | ) | - | (1,200 | ) | ||||||
| Share repurchase | (17,600 | ) | (191 | ) | (51 | ) | - | (34 | ) | (276 | ) | - | (276 | ) | |||
| Balance - August 31, 2014 | 21,941,168 | 76,497 | 6,054 | (8,597 | ) | 277,884 | 351,838 | 7,703 | 359,541 | ||||||||
| Balance - February 28, 2013 | 21,923,768 | 76,314 | 1,746 | (8,676 | ) | 250,129 | 319,513 | 8,660 | 328,173 | ||||||||
| Net income (loss) for the period | - | - | - | - | 10,689 | 10,689 | 821 | 11,510 | |||||||||
| Other comprehensive income (loss) | - | - | - | 758 | - | 758 | (96 | ) | 662 | ||||||||
| 21,923,768 | 76,314 | 1,746 | (7,918 | ) | 260,818 | 330,960 | 9,385 | 340,345 | |||||||||
| Effect of share-based compensation | - | - | 16 | - | - | 16 | - | 16 | |||||||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (2,420 | ) | (2,420 | ) | - | (2,420 | ) | ||||||
| Subordinate Voting Shares | - | - | - | - | (967 | ) | (967 | ) | - | (967 | ) | ||||||
| Acquisition of non-controlling interest | - | - | 4,330 | (1,137 | ) | - | 3,193 | (3,193 | ) | - | |||||||
| Balance - August 31, 2013 | 21,923,768 | 76,314 | 6,092 | (9,055 | ) | 257,431 | 330,782 | 6,192 | 336,974 | ||||||||
| Velan Inc. | ||||||||||
| Condensed Interim Consolidated Statements of Cash Flow | ||||||||||
| (Unaudited) | ||||||||||
| (in thousands of U.S. dollars) | ||||||||||
| Three-month periods ended | Six-month periods ended | |||||||||
| August 31 | August 31 | |||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||
| $ | $ | $ | $ | |||||||
| Cash flows from | ||||||||||
| Operating activities | ||||||||||
| Net income for the period | 5,419 | 5,228 | 9,481 | 11,510 | ||||||
| Adjustments to reconcile net income to cash provided by operating activities | 4,985 | 4,931 | 7,386 | 8,251 | ||||||
| Changes in non-cash working capital items | (5,151 | ) | (11,421 | ) | (216 | ) | 3,684 | |||
| Cash provided (used) by operating activities | 5,253 | (1,262 | ) | 16,651 | 23,445 | |||||
| Investing activities | ||||||||||
| Short-term investments | (477 | ) | (1,080 | ) | (569 | ) | (2,233 | ) | ||
| Additions to property, plant and equipment | (1,661 | ) | (3,975 | ) | (5,720 | ) | (8,198 | ) | ||
| Additions to intangible assets | (63 | ) | (152 | ) | (293 | ) | (205 | ) | ||
| Proceeds on disposal of property, plant and equipment, and intangible assets | 77 | - | 128 | 87 | ||||||
| Net change in other assets | (63 | ) | 87 | 167 | 72 | |||||
| Cash provided (used) by investing activities | (2,187 | ) | (5,120 | ) | (6,287 | ) | (10,477 | ) | ||
| Financing activities | ||||||||||
| Dividends paid to Subordinate and Multiple Voting shareholders | (2,042 | ) | (1,721 | ) | (3,620 | ) | (3,422 | ) | ||
| Repurchase of shares | (260 | ) | - | (276 | ) | - | ||||
| Payment of proceeds payable | - | - | - | (1,960 | ) | |||||
| Short-term bank loans | 950 | 177 | 571 | (1,001 | ) | |||||
| Increase in long-term debt | - | 1,263 | - | 2,654 | ||||||
| Repayment of long-term debt | (1,720 | ) | (3,124 | ) | (3,399 | ) | (4,843 | ) | ||
| Cash provided (used) by financing activities | (3,072 | ) | (3,405 | ) | (6,724 | ) | (8,572 | ) | ||
| Effect of exchange rate differences on cash | (1,653 | ) | 1,097 | (3,101 | ) | 965 | ||||
| Net change in cash during the period | (1,659 | ) | (8,690 | ) | 539 | 5,361 | ||||
| Net cash - Beginning of the period | 77,038 | 42,643 | 74,840 | 28,592 | ||||||
| Net cash - End of the period | 75,379 | 33,953 | 75,379 | 33,953 | ||||||
| Net cash is composed of: | ||||||||||
| Cash and cash equivalents | 98,190 | 74,892 | 98,190 | 74,892 | ||||||
| Bank indebtedness | (22,811 | ) | (40,939 | ) | (22,811 | ) | (40,939 | ) | ||
| 75,379 | 33,953 | 75,379 | 33,953 | |||||||
| Supplementary information | ||||||||||
| Interest received (paid) | 27 | (227 | ) | (66 | ) | (586 | ) | |||
| Income taxes reimbursed (paid) | (1,198 | ) | (1,301 | ) | (2,686 | ) | (797 | ) | ||
Contact Information:
Tom Velan
President
(514) 748-7743
(514) 748-8635 (FAX)
VELAN Inc.
John D. Ball
Chief Financial Officer
(514) 748-7743
(514) 748-8635 (FAX)
Web: www.velan.com