MONTREAL, QUEBEC--(Marketwired - Jan. 13, 2015) - 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, 2014.
Highlights
- Sales of US$127.3 million for the quarter
- Net earnings1 of US$4.8 million for the quarter
- Order backlog of US$474.6 million at the end of the quarter
- Order bookings of US$111.3 million for the quarter
- Net cash2 of US$66.7 million at the end of the quarter
- Quarterly dividend of CA$0.10 per share declared, payable March 31, 2015
| Three-month periods ended | Nine-month periods ended | ||||||||||||
| November 30 | November 30 | ||||||||||||
| (millions of U.S. dollars, excluding per share amounts) | 2014 | 2013 | 2014 | 2013 | |||||||||
| Sales | $ | 127.3 | $ | 115.6 | $ | 341.2 | $ | 368.5 | |||||
| Gross profit | 33.5 | 33.7 | 89.2 | 94.5 | |||||||||
| Gross profit % | 26.3 | % | 29.2 | % | 26.1 | % | 25.6 | % | |||||
| Net income (loss) attributable to Subordinate and | |||||||||||||
| Multiple Voting Shares | 4.8 | 8.3 | 13.9 | 19.0 | |||||||||
| Net income (loss) per share | |||||||||||||
| - Basic | 0.22 | 0.38 | 0.63 | 0.87 | |||||||||
| - Diluted | 0.22 | 0.38 | 0.63 | 0.87 | |||||||||
Third Quarter Fiscal 2015 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the third quarter of fiscal 2014):
- Net earnings1 amounted to $4.8 million or $0.22 per share compared to $8.3 million or $0.38 per share last year. The $3.5 million decrease in net earnings1 is primarily attributable to a lower gross profit percentage and increased administration costs, in particular an increase in costs recognized in connection with the Company's ongoing asbestos litigation and higher sales commissions resulting from the increased sales output in the quarter.
- Sales amounted to $127.3 million, an increase of $11.7 million or 10.1% from the prior year. The increase is due to improved execution of shipments of certain large export project orders in the current quarter.
- Net new orders received ("bookings") amounted to $111.3 million, an increase of $22.9 million or 25.9% compared to last year.
- Gross profit decreased by 2.9 percentage points from 29.2% to 26.3%. This decrease is mainly attributable to a product mix with a greater proportion of project orders which generally entail higher variable production costs.
- Foreign currency impacts:
- Based on average exchange rates, the Euro weakened 3.9% against the U.S. dollar when compared to the same quarter 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.
- Based on average exchange rates, the Canadian dollar weakened 7.2% against the U.S. dollar when compared to the same quarter 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 impact of these currency swings was generally neutral to the Company's results for the quarter.
- Based on average exchange rates, the Euro weakened 3.9% against the U.S. dollar when compared to the same quarter 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.
First Nine Months Fiscal 2015 (unless otherwise noted, all comparisons are to the first nine months of fiscal 2014):
- Net earnings1 amounted to $13.9 million or $0.63 per share compared to $19.0 million or $0.87 per share last year. The $5.1 million decrease in net earnings1 is primarily attributable to lower sales volume and higher administration costs, in particular an increase in costs recognized in connection with the Company's ongoing asbestos litigation as well as increased research and development costs in one of the Company's French subsidiaries related to new product qualifications.
- Sales amounted to $341.2 million, a decrease of $27.3 million or 7.4%. Despite the improved execution in the quarter, the Company's shipments of certain large export project orders were lower for the first nine months of the current year compared to the prior period.
- Bookings amounted to $343.5 million, an increase of $55.7 million or 19.4% compared to last year, continuing the positive trend which started during the latter half of the prior year.
- Gross profit remained relatively stable, increasing by 0.5 percentage points from 25.6% to 26.1%. While the Company had a greater proportion of higher margin product sales, particularly spare parts and valves without third party actuators, in the first two quarters of the year, this trend was reversed in the current quarter of the year as the Company shipped a greater proportion of project orders, which generally entail lower gross margins.
- The Company generated net cash2 from operations of $24.7 million in the period. Despite this increase, the Company ended the period with net cash2 of $66.7 million, a decrease of $1.0 million or 1.5% since the beginning of the current fiscal year. The Company's cash balance was negatively impacted by the 9.6% drop in the Euro spot rate against the U.S. dollar since the beginning of the year.
- Foreign currency impacts:
- Based on average exchange rates, the Euro strengthened 0.7% 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 6.1% 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 0.7% 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.
"Our sales and net new orders for the quarter were an improvement over the prior year, although our gross profit remained flat as the increase in sales came from lower margin project sales," said John Ball, CFO of Velan Inc. "We are watching developments in both the currency markets, with a rapidly appreciating US dollar, and the crude oil markets with interest. While we are not sure that these trends will be sustained over the longer term, we believe that they offer not only challenges but opportunities to a company such as Velan, and our strong balance sheet is well positioned to weather these uncertain markets."
Tom Velan, President and CEO of Velan Inc. said, "These are rapidly changing times with a dramatic reduction in oil prices and significant currency exchange swings. We are fortunate to be diversified both geographically and by our end-user markets as we go after opportunities in a very competitive environment."
Dividend
The Board declared an eligible quarterly dividend of CDN$0.10 per share, payable on March 31, 2015, to all shareholders of record as at March 16, 2015.
Conference call
Financial analysts, shareholders, and other interested individuals are invited to attend the third quarter conference call to be held on January 13, 2015, at 4:30 PM (EDT). The toll free call-in number is 1-888-273-1350, access code 21758605. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800- 558-5253, access code 21758605.
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 | November 30, | February 28, | ||
| 2014 | 2014 | |||
| $ | $ | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 89,430 | 106,716 | ||
| Short-term investments | 318 | 239 | ||
| Accounts receivable | 123,352 | 128,978 | ||
| Income taxes recoverable | 10,519 | 5,465 | ||
| Inventories | 208,331 | 224,149 | ||
| Deposits and prepaid expenses | 5,480 | 5,046 | ||
| Derivative assets | 94 | 498 | ||
| 437,524 | 471,091 | |||
| Non-current assets | ||||
| Property, plant and equipment | 94,056 | 96,605 | ||
| Intangible assets and goodwill | 37,823 | 43,359 | ||
| Deferred income taxes | 10,331 | 11,406 | ||
| Other assets | 1,224 | 1,693 | ||
| 143,434 | 153,063 | |||
| Total assets | 580,958 | 624,154 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Bank indebtedness | 15,360 | 31,876 | ||
| Short-term bank loans | 1,783 | 916 | ||
| Accounts payable and accrued liabilities | 76,708 | 76,590 | ||
| Income taxes payable | 7,055 | 4,158 | ||
| Dividend payable | 1,918 | 1,586 | ||
| Customer deposits | 46,620 | 66,842 | ||
| Provisions | 9,326 | 8,060 | ||
| Accrual for performance guarantees | 31,977 | 33,842 | ||
| Derivative liabilities | 2,461 | 1,501 | ||
| Current portion of long-term debt | 9,708 | 10,402 | ||
| 202,916 | 235,773 | |||
| Non-current liabilities | ||||
| Long-term debt | 7,123 | 11,685 | ||
| Deferred income taxes | 8,327 | 9,270 | ||
| Other liabilities | 8,105 | 8,307 | ||
| 23,555 | 29,262 | |||
| Total liabilities | 226,471 | 265,035 | ||
| Equity | ||||
| Equity attributable to the Subordinate and Multiple Voting shareholders | ||||
| Share capital | 76,486 | 76,688 | ||
| Contributed surplus | 6,054 | 6,099 | ||
| Retained earnings | 280,760 | 272,867 | ||
| Accumulated other comprehensive income (loss) | (16,306 | ) | (3,589 | ) |
| 346,994 | 352,065 | |||
| Non-controlling interest | 7,493 | 7,054 | ||
| Total equity | 354,487 | 359,119 | ||
| Total liabilities and equity | 580,958 | 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 | Nine-month periods ended | ||||||||
| November 30 | November 30 | ||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||
| $ | $ | $ | $ | ||||||
| Sales | 127,290 | 115,611 | 341,243 | 368,541 | |||||
| Cost of sales | 93,807 | 81,863 | 252,022 | 274,037 | |||||
| Gross profit | 33,483 | 33,748 | 89,221 | 94,504 | |||||
| Administration costs | 25,244 | 21,901 | 68,021 | 64,998 | |||||
| Other expense (income) | 180 | 33 | (36 | ) | 1,047 | ||||
| Operating profit (loss) | 8,059 | 11,814 | 21,236 | 28,459 | |||||
| Finance income | 264 | 244 | 780 | 603 | |||||
| Finance costs | 638 | 531 | 1,270 | 1,687 | |||||
| Finance income (costs) - net | (374 | ) | (287 | ) | (490 | ) | (1,084 | ) | |
| Income (Loss) before income taxes | 7,685 | 11,527 | 20,746 | 27,375 | |||||
| Provision for (Recovery of) income taxes | 2,521 | 2,688 | 6,101 | 7,026 | |||||
| Net income (loss) for the period | 5,164 | 8,839 | 14,645 | 20,349 | |||||
| Net income (loss) attributable to: | |||||||||
| Subordinate Voting Shares and Multiple Voting Shares | 4,759 | 8,319 | 13,862 | 19,008 | |||||
| Non-controlling interest | 405 | 520 | 783 | 1,341 | |||||
| 5,164 | 8,839 | 14,645 | 20,349 | ||||||
| Net income (loss) per Subordinate and Multiple Voting Share | |||||||||
| Basic | 0.22 | 0.38 | 0.63 | 0.87 | |||||
| Diluted | 0.22 | 0.38 | 0.63 | 0.87 | |||||
| Dividends declared per Subordinate and Multiple | 0.09 | 0.07 | 0.27 | 0.23 | |||||
| Voting Share | (CA$0.10 | ) | (CA$0.08 | ) | (CA$0.30 | ) | (CA$0.24 | ) | |
| Total weighted average number of Subordinate and | |||||||||
| Multiple Voting Shares | |||||||||
| Basic | 21,947,758 | 21,941,076 | 21,947,758 | 21,929,494 | |||||
| Diluted | 21,961,072 | 21,941,076 | 21,959,439 | 21,929,494 | |||||
| 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 | ||||||
| 2014 | 2013 | 2014 | 2013 | ||||
| $ | $ | $ | $ | ||||
| Comprehensive income (loss) | |||||||
| Net income (loss) for the period | 5,164 | 8,839 | 14,645 | 20,349 | |||
| Other comprehensive income (loss) | |||||||
| Foreign currency translation adjustment on foreign operations whose functional currency is other than the reporting currency (U.S. dollar) | (8,238 | ) | 4,384 | (12,975 | ) | 5,046 | |
| Comprehensive income (loss) | (3,074 | ) | 13,223 | 1,670 | 25,395 | ||
| Comprehensive income (loss) attributable to: | |||||||
| Subordinate Voting Shares and Multiple Voting Shares | (2,950 | ) | 12,481 | 1,145 | 23,928 | ||
| Non-controlling interest | (124 | ) | 742 | 525 | 1,467 | ||
| (3,074 | ) | 13,223 | 1,670 | 25,395 | |||
| 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 | - | - | - | - | 13,862 | 13,862 | 783 | 14,645 | |||||||||
| Other comprehensive income (loss) | - | - | - | (12,717 | ) | - | (12,717 | ) | (258 | ) | (12,975 | ) | |||||
| 21,958,768 | 76,688 | 6,099 | (16,306 | ) | 286,729 | 353,210 | 7,579 | 360,789 | |||||||||
| Effect of share-based compensation | - | - | 6 | - | - | 6 | - | 6 | |||||||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (4,208 | ) | (4,208 | ) | - | (4,208 | ) | ||||||
| Subordinate Voting Shares | - | - | - | - | (1,722 | ) | (1,722 | ) | - | (1,722 | ) | ||||||
| Non-controlling interest | - | - | - | - | - | - | (86 | ) | (86 | ) | |||||||
| Share repurchase | (18,600 | ) | (202 | ) | (51 | ) | - | (39 | ) | (292 | ) | - | (292 | ) | |||
| Balance - November 30, 2014 | 21,940,168 | 76,486 | 6,054 | (16,306 | ) | 280,760 | 346,994 | 7,493 | 354,487 | ||||||||
| 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 | - | - | - | - | 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 | ||||||||
| 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 | |||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||
| $ | $ | $ | $ | |||||||
| Cash flows from | ||||||||||
| Operating activities | ||||||||||
| Net income for the period | 5,164 | 8,839 | 14,645 | 20,349 | ||||||
| Adjustments to reconcile net income to cash provided by operating activities | 6,125 | 2,580 | 13,511 | 10,831 | ||||||
| Changes in non-cash working capital items | (3,231 | ) | 27,210 | (3,447 | ) | 30,894 | ||||
| Cash provided (used) by operating activities | 8,058 | 38,629 | 24,709 | 62,074 | ||||||
| Investing activities | ||||||||||
| Short-term investments | 490 | 455 | (79 | ) | (1,778 | ) | ||||
| Additions to property, plant and equipment | (4,543 | ) | (6,493 | ) | (10,263 | ) | (14,691 | ) | ||
| Additions to intangible assets | (107 | ) | (60 | ) | (400 | ) | (265 | ) | ||
| Proceeds on disposal of property, plant and equipment, and intangible assets | 32 | - | 160 | 87 | ||||||
| Net change in other assets | 288 | (81 | ) | 455 | (9 | ) | ||||
| Cash provided (used) by investing activities | (3,840 | ) | (6,179 | ) | (10,127 | ) | (16,656 | ) | ||
| Financing activities | ||||||||||
| Dividends paid to Subordinate and Multiple Voting shareholders | (1,978 | ) | (1,700 | ) | (5,598 | ) | (5,122 | ) | ||
| Dividends paid to non-controlling interest | (86 | ) | (103 | ) | (86 | ) | (103 | ) | ||
| Shares issued under Share Option Plan | - | 374 | - | 374 | ||||||
| Repurchase of shares | (16 | ) | - | (292 | ) | - | ||||
| Payment of proceeds payable | - | - | - | (1,960 | ) | |||||
| Short-term bank loans | 296 | (28 | ) | 867 | (1,029 | ) | ||||
| Increase in long-term debt | - | - | - | 2,654 | ||||||
| Repayment of long-term debt | (1,468 | ) | (1,740 | ) | (4,867 | ) | (6,583 | ) | ||
| Cash provided (used) by financing activities | (3,252 | ) | (3,197 | ) | (9,976 | ) | (11,769 | ) | ||
| Effect of exchange rate differences on cash | (2,275 | ) | 1,691 | (5,376 | ) | 2,656 | ||||
| Net change in cash during the period | (1,309 | ) | 30,944 | (770 | ) | 36,305 | ||||
| Net cash - Beginning of the period | 75,379 | 33,953 | 74,840 | 28,592 | ||||||
| Net cash - End of the period | 74,070 | 64,897 | 74,070 | 64,897 | ||||||
| Net cash is composed of: | ||||||||||
| Cash and cash equivalents | 89,430 | 103,467 | 89,430 | 103,467 | ||||||
| Bank indebtedness | (15,360 | ) | (38,570 | ) | (15,360 | ) | (38,570 | ) | ||
| 74,070 | 64,897 | 74,070 | 64,897 | |||||||
| Supplementary information | ||||||||||
| Interest received (paid) | (35 | ) | (147 | ) | (101 | ) | (733 | ) | ||
| Income taxes reimbursed (paid) | (2,717 | ) | (1,676 | ) | (5,403 | ) | (2,473 | ) | ||
Contact Information:
Tom Velan
President and 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