MONTREAL, QUEBEC--(Marketwired - Jan. 9, 2014) - Velan Inc. (TSX:VLN) (the "Company"), a world-leading manufacturer of industrial valves, announced today its financial results for its third quarter ended November 30, 2013.
Highlights
- Sales of US$115.6 million for the quarter
- Net earnings(1) of US$8.3 million for the quarter
- Order backlog of US$450.2 million at the end of the quarter
- Order bookings of US$88.4 million for the quarter
- Net cash(2) of US$59.2 million at the end of the quarter
| Three-month periods ended | Nine-month periods ended | |||||||
| November 30 | November 30 | |||||||
| (millions of U.S. dollars, excluding per share amounts) | 2013 | 2012 | 2013 | 2012 | ||||
| Sales | $115.6 | $134.2 | $368.5 | $358.5 | ||||
| Gross profit | 33.7 | 33.3 | 94.5 | 83.5 | ||||
| Gross margin % | 29.2 | % | 24.8 | % | 25.6 | % | 23.3 | % |
| Net income (loss) attributable to Subordinate and Multiple Voting Shares | 8.3 | 5.7 | 19.0 | 9.7 | ||||
| Net income (loss) per share - Basic | 0.38 | 0.26 | 0.87 | 0.44 | ||||
| - Diluted | 0.38 | 0.26 | 0.87 | 0.44 | ||||
Third Quarter Fiscal 2014 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the third quarter of fiscal 2013):
- Net earnings(1) amounted to $8.3 million or $0.38 per share compared to $5.7 million or $0.26 per share last year. The $2.6 million increase in net earnings(1) is primarily attributable to improved gross profit margins, lower administration costs and favourable foreign currency impacts.
- Sales amounted to $115.6 million, a decrease of $18.6 million or 13.9% when compared to the record sales output recognized for a November quarter end in the prior year.
- Net new orders received ("bookings") amounted to $88.4 million, an increase of $5.1 million or 6.1% compared to last year.
- Gross margin improved by 4.4 percentage points from 24.8% to 29.2%. This increase is mainly attributable to a higher proportion of spare part sales in certain subsidiaries which generally entail lower variable production costs.
- Administration costs amounted to $21.9 million, decreasing $1.7 million or 7.2% from the prior year.
- Foreign currency impacts:
- Based on average exchange rates, the euro strengthened 6.4% 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 4.6% 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 Korean won strengthened 4.9% against the U.S. dollar when comparing the spot rate at the beginning of the period to the period end rate. This strengthening resulted in the Company recording foreign exchange gains in the current quarter upon conversion of the balance sheet of its Korean subsidiary whose functional currency is the U.S. dollar.
- The impact of these three currency swings was favourable to the Company's results for the quarter.
- Based on average exchange rates, the euro strengthened 6.4% 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.
First Nine Months of Fiscal 2014 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the first nine months of fiscal 2013):
- Net earnings(1) amounted to $19.0 million or $0.87 per share compared to $9.7 million or $0.44 per share last year. The $9.3 million increase in net earnings(1) is primarily attributable to higher sales volume, improved gross profit margins and lower administration costs.
- Sales amounted to $368.5 million, an increase of $10.0 million or 2.8%. The increase in sales is primarily attributable to increased shipments of certain large export project orders and higher spare parts sales.
- Bookings amounted to $287.8 million, an increase of $14.4 million or 5.3% compared to last year.
- The Company ended the period with a backlog of $450.2 million, a decrease of $80.8 million or 15.2% since the beginning of the current fiscal year. This decrease is mainly attributable to the higher sales output outpacing the bookings in the period.
- Gross margin improved by 2.3 percentage points from 23.3% to 25.6%. This increase is mainly attributable to higher sales volume and improved efficiencies as a result of a higher margin product mix, particularly spare part sales.
- Administration costs amounted to $65.0 million, a decrease of $3.5 million or 5.1%.
- The Company generated net cash(2) from operations of $62.1 million in the period. This source of net cash(2) was primarily attributable to improved net earnings(1) and a decrease in both inventory and accounts receivable. The Company ended the period with net cash(2) of $59.2 million, an increase of $39.4 million or 199% since the beginning of the current fiscal year.
- Foreign currency impacts:
- Based on average exchange rates, the euro strengthened 3.5% 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 3.3% 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 Indian rupee weakened 12.9% against the U.S. dollar when comparing the spot rate at the beginning of the period to the period end rate. This weakening resulted in the Company recording significant unrealized foreign exchange losses in the current period upon conversion of the U.S. dollar denominated loans payable by its Indian subsidiary to various related parties.
- The net impact of these three currency swings was generally favourable to the Company's results since the positive impacts of both a stronger euro and a weaker Canadian dollar outweighed the negative impact of a weaker Indian rupee.
- Based on average exchange rates, the euro strengthened 3.5% 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.
"We are pleased with the solid results for both the quarter and year to date," said John Ball, CFO of Velan Inc. "Both earnings and gross profit have improved over the previous year. The third quarter was also quite positive for both our cash position and working capital."
Tom Velan, President and CEO of Velan Inc. said, "We are pleased to report strong earnings in the quarter. Although our bookings in the quarter continued to be lower than we would like, there has been a gradual strengthening over recent months and in December 2013 we had consolidated bookings of more than $50 million. We have many outstanding opportunities in the marketplace and we are working on turning these opportunities into orders."
Dividend
The Board declared an eligible quarterly dividend of Canadian dollar $0.08 per share, payable on March 31, 2014, to all shareholders of record as at March 17, 2014.
Conference call
Financial analysts, shareholders, and other interested individuals are invited to attend the third quarter conference call to be held on January 9, 2014, at 4:30 PM (EDT). The toll free call-in number is 1-877-256-6025, access code 21703038. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558- 5253, access code 21703038.
About Velan
Velan Inc. (www.velan.com) is a world-leading manufacturer of industrial valves with sales of over $500 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 | November 30, | February 28, | ||
| 2013 | 2013 | |||
| $ | $ | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 103,467 | 77,172 | ||
| Short-term investments | 2,176 | 398 | ||
| Accounts receivable | 127,025 | 134,374 | ||
| Income taxes recoverable | 8,878 | 7,672 | ||
| Inventories | 224,791 | 246,983 | ||
| Deposits and prepaid expenses | 6,055 | 6,048 | ||
| Derivative assets | 567 | 340 | ||
| 472,959 | 472,987 | |||
| Non-current assets | ||||
| Property, plant and equipment | 95,984 | 90,630 | ||
| Intangible assets and goodwill | 43,263 | 43,194 | ||
| Deferred income taxes | 11,506 | 11,226 | ||
| Other assets | 1,746 | 1,737 | ||
| 152,499 | 146,787 | |||
| Total assets | 625,458 | 619,774 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Bank indebtedness | 38,570 | 48,580 | ||
| Short-term bank loans | 1,255 | 2,284 | ||
| Accounts payable and accrued liabilities | 72,376 | 78,431 | ||
| Income tax payable | 7,089 | 2,831 | ||
| Dividend payable | 1,652 | 1,701 | ||
| Customer deposits | 73,856 | 76,682 | ||
| Provisions | 7,618 | 6,345 | ||
| Accrual for performance guarantees | 33,742 | 28,525 | ||
| Derivative liabilities | 696 | 1,380 | ||
| Current portion of long-term debt | 10,395 | 10,463 | ||
| Current portion of other liabilities | - | 1,951 | ||
| 247,249 | 259,173 | |||
| Non-current liabilities | ||||
| Long-term debt | 13,118 | 16,387 | ||
| Deferred income taxes | 7,842 | 8,035 | ||
| Other liabilities | 8,464 | 8,006 | ||
| 29,424 | 32,428 | |||
| Total liabilities | 276,673 | 291,601 | ||
| Equity | ||||
| Equity attributable to the Subordinate and Multiple Voting shareholders | ||||
| Share capital | 76,688 | 76,314 | ||
| Contributed surplus | 6,095 | 1,746 | ||
| Retained earnings | 264,064 | 250,129 | ||
| Accumulated other comprehensive income (loss) | (4,893 | ) | (8,676 | ) |
| 341,954 | 319,513 | |||
| Non-controlling interest | 6,831 | 8,660 | ||
| Total equity | 348,785 | 328,173 | ||
| Total liabilities and equity | 625,458 | 619,774 | ||
| 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 | Nine-month periods ended | |||||||
| November 30 | November 30 | |||||||
| 2013 | 2012 | 2013 | 2012 | |||||
| $ | $ | $ | $ | |||||
| Sales | 115,611 | 134,203 | 368,541 | 358,504 | ||||
| Cost of sales | 81,863 | 100,862 | 274,037 | 275,035 | ||||
| Gross profit | 33,748 | 33,341 | 94,504 | 83,469 | ||||
| Administration costs | 21,901 | 23,592 | 64,998 | 68,540 | ||||
| Other expense (income) | 33 | 112 | 1,047 | (718 | ) | |||
| Operating profit (loss) | 11,814 | 9,637 | 28,459 | 15,647 | ||||
| Finance income | 244 | 142 | 603 | 500 | ||||
| Finance costs | 531 | 1,230 | 1,687 | 2,577 | ||||
| Finance income (costs) - net | (287 | ) | (1,088 | ) | (1,084 | ) | (2,077 | ) |
| Income (Loss) before income tax | 11,527 | 8,549 | 27,375 | 13,570 | ||||
| Provision for (Recovery of) income tax | 2,688 | 2,421 | 7,026 | 3,317 | ||||
| Net income (loss) for the period | 8,839 | 6,128 | 20,349 | 10,253 | ||||
| Net income (loss) attributable to: | ||||||||
| Subordinate Voting Shares and Multiple Voting Shares | 8,319 | 5,712 | 19,008 | 9,724 | ||||
| Non-controlling interest | 520 | 416 | 1,341 | 529 | ||||
| 8,839 | 6,128 | 20,349 | 10,253 | |||||
| Net income (loss) per Subordinate and Multiple Voting Share | ||||||||
| Basic | 0.38 | 0.26 | 0.87 | 0.44 | ||||
| Diluted | 0.38 | 0.26 | 0.87 | 0.44 | ||||
| Dividends declared per Subordinate and Multiple Voting | 0.07 | 0.08 | 0.23 | 0.24 | ||||
| Share | (CDN$0.08 | ) | (CDN$0.08 | ) | (CDN$0.24 | ) | (CDN$0.24 | ) |
| Total weighted average number of Subordinate and Multiple Voting Shares | ||||||||
| Basic | 21,941,076 | 22,022,256 | 21,929,494 | 22,022,256 | ||||
| Diluted | 21,941,076 | 22,027,043 | 21,929,494 | 22,030,500 | ||||
| Velan Inc. |
| Condensed Interim Consolidated Statements of Comprehensive Income (Loss) |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| Three-month periods ended | Nine-month periods ended | ||||
| November 30 | November 30 | ||||
| 2013 | 2012 | 2013 | 2012 | ||
| $ | $ | $ | $ | ||
| Comprehensive income (loss) | |||||
| Net income (loss) for the period | 8,839 | 6,128 | 20,349 | 10,253 | |
| Other comprehensive income (loss) | |||||
| Foreign currency translation adjustment on foreign operations whose functional currency is other than the U.S. dollar | 4,384 | 4,321 | 5,046 | (4,683 | ) |
| Comprehensive income (loss) | 13,223 | 10,449 | 25,395 | 5,570 | |
| Comprehensive income (loss) attributable to: | |||||
| Subordinate Voting Shares and Multiple Voting Shares | 12,481 | 9,662 | 23,928 | 5,161 | |
| Non-controlling interest | 742 | 787 | 1,467 | 409 | |
| 13,223 | 10,449 | 25,395 | 5,570 | ||
| 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 compre- hensive income (loss) |
Retained earnings |
Total |
Non-controlling interest |
Total equity |
||||||||||
| Balance - March 1, 2013 | 21,923,768 | 76,314 | 1,746 | (8,676 | ) | 250,129 | 319,513 | 8,660 | 328,173 | ||||||||
| Net income (loss) for the period | - | - | - | - | 19,008 | 19,008 | 1,341 | 20,349 | |||||||||
| Other comprehensive income (loss) | - | - | - | 4,920 | - | 4,920 | 126 | 5,046 | |||||||||
| 21,923,768 | 76,314 | 1,746 | (3,756 | ) | 269,137 | 343,441 | 10,127 | 353,568 | |||||||||
| Effect of share-based compensation | - | - | 19 | - | - | 19 | - | 19 | |||||||||
| Shares issued under Share Option Plan | 35,000 | 374 | - | - | - | 374 | - | 374 | |||||||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (3,617 | ) | (3,617 | ) | - | (3,617 | ) | ||||||
| Subordinate Voting Shares | - | - | - | - | (1,456 | ) | (1,456 | ) | - | (1,456 | ) | ||||||
| Non-controlling interest | - | - | - | - | - | - | (103 | ) | (103 | ) | |||||||
| Acquisition of non-controlling interest | - | - | 4,330 | (1,137 | ) | - | 3,193 | (3,193 | ) | - | |||||||
| Balance - November 30, 2013 | 21,958,768 | 76,688 | 6,095 | (4,893 | ) | 264,064 | 341,954 | 6,831 | 348,785 | ||||||||
| 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 | - | - | - | - | 9,724 | 9,724 | 529 | 10,253 | |||||||||
| Other comprehensive income (loss) | - | - | - | (4,563 | ) | - | (4,563 | ) | (120 | ) | (4,683 | ) | |||||
| 22,148,968 | 78,764 | 1,871 | (8,780 | ) | 260,675 | 332,530 | 8,617 | 341,147 | |||||||||
| Effect of share-based compensation | - | - | 43 | - | - | 43 | - | 43 | |||||||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (3,739 | ) | (3,739 | ) | - | (3,739 | ) | ||||||
| Subordinate Voting Shares | - | - | - | - | (1,537 | ) | (1,537 | ) | - | (1,537 | ) | ||||||
| Non-controlling interest | - | - | - | - | - | - | (41 | ) | (41 | ) | |||||||
| Share repurchase | (206,500 | ) | (2,247 | ) | (169 | ) | - | - | (2,416 | ) | - | (2,416 | ) | ||||
| Balance - November 30, 2012 | 21,942,468 | 76,517 | 1,745 | (8,780 | ) | 255,399 | 324,881 | 8,576 | 333,457 | ||||||||
| Velan Inc. |
| Condensed Interim Consolidated Statements of Cash Flow |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| Three-month periods ended | Nine-month periods ended | ||||||||
| November 30 | November 30 | ||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||
| $ | $ | $ | $ | ||||||
| Cash flows from | |||||||||
| Operating activities | |||||||||
| Net income for the period | 8,839 | 6,128 | 20,349 | 10,253 | |||||
| Adjustments to reconcile net income to cash provided by operating activities | 2,580 | 5,755 | 10,831 | 8,733 | |||||
| Changes in non-cash working capital items | 27,210 | 3,378 | 30,894 | (27,624 | ) | ||||
| Cash provided (used) by operating activities | 38,629 | 15,261 | 62,074 | (8,638 | ) | ||||
| Investing activities | |||||||||
| Short-term investments | 455 | 378 | (1,778 | ) | 2,675 | ||||
| Additions to property, plant and equipment | (6,493 | ) | (11,559 | ) | (14,691 | ) | (22,641 | ) | |
| Additions to intangible assets | (60 | ) | (139 | ) | (265 | ) | (405 | ) | |
| Proceeds on disposal of property, plant and equipment, and | - | (75 | ) | 87 | 384 | ||||
| Net change in other assets | (81 | ) | (123 | ) | (9 | ) | (267 | ) | |
| Cash provided (used) by investing activities | (6,179 | ) | (11,518 | ) | (16,656 | ) | (20,254 | ) | |
| Financing activities | |||||||||
| Dividends paid to Subordinate and Multiple Voting shareholders | (1,700 | ) | (1,801 | ) | (5,122 | ) | (5,301 | ) | |
| Dividends paid to non-controlling interest | (103 | ) | (41 | ) | (103 | ) | (41 | ) | |
| Shares issued under Share Option Plan | 374 | - | 374 | - | |||||
| Repurchase of shares | - | (346 | ) | - | (2,416 | ) | |||
| Payment of proceeds payable | - | - | (1,960 | ) | (2,905 | ) | |||
| Short-term bank loans | (28 | ) | 151 | (1,029 | ) | 1,254 | |||
| Increase in long-term debt | - | - | 2,654 | 20,715 | |||||
| Repayment of long-term debt | (1,740 | ) | (1,749 | ) | (6,583 | ) | (2,706 | ) | |
| Cash provided (used) by financing activities | (3,197 | ) | (3,786 | ) | (11,769 | ) | 8,600 | ||
| Effect of exchange rate differences on cash | 1,691 | 509 | 2,656 | (760 | ) | ||||
| Net change in cash during the period | 30,944 | 466 | 36,305 | (21,052 | ) | ||||
| Net cash - Beginning of the period | 33,953 | 11,458 | 28,592 | 32,976 | |||||
| Net cash - End of the period | 64,897 | 11,924 | 64,897 | 11,924 | |||||
| Net cash is composed of: | |||||||||
| Cash and cash equivalents | 103,467 | 57,840 | 103,467 | 57,840 | |||||
| Bank indebtedness | (38,570 | ) | (45,916 | ) | (38,570 | ) | (45,916 | ) | |
| 64,897 | 11,924 | 64,897 | 11,924 | ||||||
| Supplementary information | |||||||||
| Interest received (paid) | (147 | ) | (489 | ) | (733 | ) | (1,349 | ) | |
| Income taxes reimbursed (paid) | (1,676 | ) | 693 | (2,473 | ) | (2,282 | ) | ||
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