MONTREAL, QUEBEC--(Marketwired - May 20, 2014) - Velan Inc. (TSX:VLN) (the "Company"), a world-leading manufacturer of industrial valves, announced today its financial results for its fiscal year and fourth quarter ended February 28, 2014.
Highlights
- Sales of US$489.3 million for the year
- Net earnings1 of US$29.4 million for the year
- Order backlog of US$471.7 million at the end of the year
- Order bookings of US$430.2 million for the year
- Net cash2 of US$67.7 million at the end of the year
- Increase annual dividend payout by 25% to CDN$0.40 per share, effective in June 2014
| Three-month periods ended | Fiscal years ended | |||||||||||
| (millions of U.S. dollars, excluding per share amounts) | February 28, | February 28, | February 28, | February 28, | ||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||
| Sales | $ | 120.7 | $ | 142.1 | $ | 489.3 | $ | 500.6 | ||||
| Gross profit | 36.6 | 30.4 | 131.1 | 113.9 | ||||||||
| Gross profit % | 30.3 | % | 21.4 | % | 26.8 | % | 22.8 | % | ||||
| Net earnings (loss)1 | 10.4 | (3.6 | ) | 29.4 | 6.2 | |||||||
| Net earnings (loss)1 per share - Basic & Diluted | 0.47 | (0.16 | ) | 1.34 | 0.28 | |||||||
| Adjusted net operating results2 | 10.4 | 6.1 | 29.4 | 15.8 | ||||||||
| Adjusted net operating results2 per share - Basic & Diluted | 0.47 | 0.28 | 1.34 | 0.72 | ||||||||
Year-ended fiscal 2014 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the prior fiscal year):
- Net earnings1 amounted to $29.4 million or $1.34 per share compared to $6.2 million or $0.28 per share last year. The $23.2 million increase in net earnings1 is primarily attributable to improved gross profit margins and lower administration costs. Furthermore, net earnings1 for the prior year were significantly impacted by an $11.7 million non-cash goodwill impairment charge related to the Company's then 70%-owned Italian subsidiary, Velan ABV S.p.A. ("ABV"). Excluding this charge, as well as other non-recurring items related to the ABV acquisition, the Company's adjusted net operating results2 would have been $29.4 million or $1.34 per share this year compared to $15.8 million or $0.72 per share last year.
- Sales amounted to $489.3 million, a decrease of $11.3 million or 2.3% from the record total achieved in the prior year. This decrease is primarily attributable to a decrease in nuclear sales following the Fukushima crisis which was partially offset by an increase in sales in Canada to the Alberta oil and gas industry.
- Net new orders received ("bookings") amounted to $430.2 million, an increase of $60.1 million or 16.2% compared to last year. This increase is primarily attributable to significant new orders booked with large Indian customers. Since sales outpaced bookings, the Company ended the current year with a backlog of $471.7 million, a decrease of $59.3 million or 11.2% from the end of the prior year.
- Gross profit percentage increased by 4.0 percentage points from 22.8% to 26.8%. This increase is mainly attributable to improved efficiencies as a result of a higher margin product mix, particularly spare part sales.
- The Company generated net cash2 from operations of $75.5 million. This source of net cash2 is primarily attributable to improved net earnings1 and a decrease in inventory. The Company ended the year with net cash2 of $67.7 million, an increase of $47.9 million or 241.9% since the beginning of the current fiscal year.
- The Company will modify its dividend policy by raising its annual dividend payout from CDN$0.32 per share to CDN$0.40 per share. This change will apply beginning with the next quarterly dividend payment payable on June 30, 2014, to all shareholders of record as at June 16, 2014.
- Foreign currency impacts:
- Based on average exchange rates, the Euro strengthened 3.4% 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 fiscal year.
- 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 fiscal year.
- The impact of these currency swings was favourable to the Company's results for the current fiscal year.
- Based on average exchange rates, the Euro strengthened 3.4% 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 fiscal year.
Fourth Quarter Fiscal 2014 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the fourth quarter of fiscal 2013):
- Net earnings1 amounted to $10.4 million or $0.47 per share compared to a net loss1 of $3.6 million or $0.16 per share last year. Excluding the goodwill impairment charge, as well as other non-recurring items related to the ABV acquisition, the Company's adjusted net operating results2 would have been $10.4 million or $0.47 per share this year compared to $6.1 million or $0.28 per share last year. The $4.3 million increase in adjusted net operating results2 is primarily attributable to improved gross profit margins.
- Sales amounted to $120.7 million, a decrease of $21.4 million or 15.1% compared to last year.
- Bookings amounted to $142.4 million, an increase of $45.7 million or 47.3% compared to last year.
- Gross profit percentage improved by 8.9 percentage points from 21.4% to 30.3%. This increase is primarily attributable to a higher margin product mix, particularly as a result of a higher proportion of spare parts sales which generally generate higher gross profit as a percentage of sales when compared to manufactured valves.
- The Company generated net cash2 from operations of $13.4 million in the quarter. This source of net cash2 was primarily attributable to improved net earnings1.
- Foreign currency impacts:
- Based on average exchange rates, the Euro strengthened 3.0% 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 quarter.
- Based on average exchange rates, the Canadian dollar weakened 8.3% 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 quarter.
- The impact of these currency swings was favourable to the Company's results for the current quarter.
- Based on average exchange rates, the Euro strengthened 3.0% 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 quarter.
"Our fourth quarter provided a strong finish to fiscal 2014, with both good margins and flat administration costs contributing to the bottom line," said John Ball, CFO of Velan Inc. "While we are still feeling the after effects of Fukushima in our nuclear business, particularly in China, the tightening up of our quoted lead times is starting to help increase order intake and net bookings. We were also pleased with our advances into the Indian market, where we remain optimistic about longer term opportunities."
Tom Velan, President and CEO of Velan Inc. said, "I am glad to report our big improvement in earnings and cash flow. We have decided to increase our annual dividend to CDN$0.40 per share."
Dividend
The Board declared an eligible quarterly dividend of CDN$0.10 per share, payable on June 30, 2014, to all shareholders of record as at June 16, 2014.
Conference call
Financial analysts, shareholders, and other interested individuals are invited to attend the fourth quarter conference call to be held on May 20, 2014, at 4:30 PM (EDT). The toll free call-in number is 1-877-256-6025, access code 21717227. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558-5253, access code 21717227.
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 "adjusted net operating results" is defined as net income or loss attributable to Subordinate and Multiple Voting Shares excluding the goodwill impairment loss, the interest accretion adjustments, the positive fair value adjustments to the ABV purchase price proceeds payable, and the unrealized foreign exchange gain on the ABV purchase price proceeds payable. Refer to the "Reconciliations and Non-IFRS Measures" section in the Company's Management Discussion and Analysis ("MD&A") for a detailed calculation of this measure.
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 | February 28, | February 28, | ||
| 2014 | 2013 | |||
| $ | $ | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 106,716 | 77,172 | ||
| Short-term investments | 239 | 398 | ||
| Accounts receivable | 128,978 | 134,374 | ||
| Income taxes recoverable | 5,465 | 7,672 | ||
| Inventories | 224,149 | 246,983 | ||
| Deposits and prepaid expenses | 5,046 | 6,048 | ||
| Derivative assets | 498 | 340 | ||
| 471,091 | 472,987 | |||
| Non-current assets | ||||
| Property, plant and equipment | 96,605 | 90,630 | ||
| Intangible assets and goodwill | 43,359 | 43,194 | ||
| Deferred income taxes | 11,406 | 11,226 | ||
| Other assets | 1,693 | 1,737 | ||
| 153,063 | 146,787 | |||
| Total assets | 624,154 | 619,774 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Bank indebtedness | 31,876 | 48,580 | ||
| Short-term bank loans | 916 | 2,284 | ||
| Accounts payable and accrued liabilities | 76,590 | 78,431 | ||
| Income tax payable | 4,158 | 2,831 | ||
| Dividend payable | 1,586 | 1,701 | ||
| Customer deposits | 66,842 | 76,682 | ||
| Provisions | 8,060 | 6,345 | ||
| Accrual for performance guarantees | 33,842 | 28,525 | ||
| Derivative liabilities | 1,501 | 1,380 | ||
| Current portion of long-term debt | 10,402 | 10,463 | ||
| Current portion of other liabilities | - | 1,951 | ||
| 235,773 | 259,173 | |||
| Non-current liabilities | ||||
| Long-term debt | 11,685 | 16,387 | ||
| Deferred income taxes | 9,270 | 8,035 | ||
| Other liabilities | 8,307 | 8,006 | ||
| 29,262 | 32,428 | |||
| Total liabilities | 265,035 | 291,601 | ||
| Equity | ||||
| Equity attributable to the Subordinate and Multiple Voting shareholders | ||||
| Share capital | 76,688 | 76,314 | ||
| Contributed surplus | 6,099 | 1,746 | ||
| Retained earnings | 272,867 | 250,129 | ||
| Accumulated other comprehensive income (loss) | (3,589 | ) | (8,676 | ) |
| 352,065 | 319,513 | |||
| Non-controlling interest | 7,054 | 8,660 | ||
| Total equity | 359,119 | 328,173 | ||
| Total liabilities and equity | 624,154 | 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 | Fiscal years | |||||||
| ended February 28 | ended February 28 | |||||||
| 2014 | 2013 | 2014 | 2013 | |||||
| $ | $ | $ | $ | |||||
| Sales | 120,716 | 142,070 | 489,257 | 500,574 | ||||
| Cost of sales | 84,074 | 111,640 | 358,111 | 386,675 | ||||
| Gross profit | 36,642 | 30,430 | 131,146 | 113,899 | ||||
| Administration costs | 22,145 | 22,445 | 87,143 | 90,985 | ||||
| Goodwill impairment loss | - | 11,700 | - | 11,700 | ||||
| Other expense (income) | (1,316 | ) | (2,646 | ) | (269 | ) | (3,364 | ) |
| Operating profit (loss) | 15,813 | (1,069 | ) | 44,272 | 14,578 | |||
| Finance income | 256 | 131 | 859 | 631 | ||||
| Finance costs | 682 | 614 | 2,369 | 3,191 | ||||
| Finance income (costs) - net | (426 | ) | (483 | ) | (1,510 | ) | (2,560 | ) |
| Income (Loss) before income tax | 15,387 | (1,552 | ) | 42,762 | 12,018 | |||
| Provision for (Recovery of) income tax | 4,733 | 1,967 | 11,759 | 5,284 | ||||
| Net income (loss) for the period | 10,654 | (3,519 | ) | 31,003 | 6,734 | |||
| Net income (loss) attributable to: | ||||||||
| Subordinate Voting Shares and Multiple Voting Shares | 10,392 | (3,555 | ) | 29,400 | 6,169 | |||
| Non-controlling interest | 262 | 36 | 1,603 | 565 | ||||
| 10,654 | (3,519 | ) | 31,003 | 6,734 | ||||
| Net income (loss) per Subordinate and Multiple Voting Share | ||||||||
| Basic | 0.47 | (0.16 | ) | 1.34 | 0.28 | |||
| Diluted | 0.47 | (0.16 | ) | 1.34 | 0.28 | |||
| Dividends declared per Subordinate and Multiple Voting Share | 0.08 | 0.08 | 0.31 | 0.32 | ||||
| (CDN$0.08 | ) | (CDN$0.08 | ) | (CDN$0.32 | ) | (CDN$0.32 | ) | |
| Total weighted average number of Subordinate and Multiple Voting Shares | ||||||||
| Basic | 21,958,768 | 22,019,568 | 21,936,714 | 22,019,568 | ||||
| Diluted | 21,962,693 | 22,030,325 | 21,936,714 | 22,031,563 | ||||
| Velan Inc. |
| Condensed Interim Consolidated Statements of Comprehensive Income (Loss) |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| Three-month periods | Fiscal years | |||||
| ended February 28 | ended February 28 | |||||
| 2014 | 2013 | 2014 | 2013 | |||
| $ | $ | $ | $ | |||
| Comprehensive income (loss) | ||||||
| Net income (loss) for the period | 10,654 | (3,519 | ) | 31,003 | 6,734 | |
| Other comprehensive income (loss) | ||||||
| Foreign currency translation adjustment on foreign operations whose functional currency is other than the reporting currency (U.S. dollar) | 1,265 | 152 | 6,311 | (4,531 | ) | |
| Comprehensive income (loss) | 11,919 | (3,367 | ) | 37,314 | 2,203 | |
| Comprehensive income (loss) attributable to: | ||||||
| Subordinate Voting Shares and Multiple Voting Shares | 11,696 | (3,451 | ) | 35,624 | 1,710 | |
| Non-controlling interest | 223 | 84 | 1,690 | 493 | ||
| 11,919 | (3,367 | ) | 37,314 | 2,203 | ||
| 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 29, 2012 | 22,148,968 | 78,764 | 1,871 | (4,217 | ) | 250,951 | 327,369 | 8,208 | 335,577 | ||||||||
| Net income (loss) for the period | - | - | - | - | 6,169 | 6,169 | 565 | 6,734 | |||||||||
| Other comprehensive income (loss) | - | - | - | (4,459 | ) | - | (4,459 | ) | (72 | ) | (4,531 | ) | |||||
| 22,148,968 | 78,764 | 1,871 | (8,676 | ) | 257,120 | 329,079 | 8,701 | 337,780 | |||||||||
| Effect of share-based compensation | - | - | 58 | - | - | 58 | - | 58 | |||||||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (4,988 | ) | (4,988 | ) | - | (4,988 | ) | ||||||
| Subordinate Voting Shares | - | - | - | - | (2,003 | ) | (2,003 | ) | - | (2,003 | ) | ||||||
| Non-controlling interest | - | - | - | - | - | - | (41 | ) | (41 | ) | |||||||
| Share repurchase | (225,200 | ) | (2,450 | ) | (183 | ) | - | - | (2,633 | ) | - | (2,633 | ) | ||||
| 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 | - | - | - | - | 29,400 | 29,400 | 1,603 | 31,003 | |||||||||
| Other comprehensive income (loss) | - | - | - | 6,224 | - | 6,224 | 87 | 6,311 | |||||||||
| 21,923,768 | 76,314 | 1,746 | (2,452 | ) | 279,529 | 355,137 | 10,350 | 365,487 | |||||||||
| Effect of share-based compensation | - | - | 23 | - | - | 23 | - | 23 | |||||||||
| Shares issued under Share Option Plan | 35,000 | 374 | - | - | - | 374 | - | 374 | |||||||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (4,760 | ) | (4,760 | ) | - | (4,760 | ) | ||||||
| Subordinate Voting Shares | - | - | - | - | (1,902 | ) | (1,902 | ) | - | (1,902 | ) | ||||||
| Non-controlling interest | - | - | - | - | - | - | (103 | ) | (103 | ) | |||||||
| Acquisition of non-controlling interest | - | - | 4,330 | (1,137 | ) | - | 3,193 | (3,193 | ) | - | |||||||
| Balance - February 28, 2014 | 21,958,768 | 76,688 | 6,099 | (3,589 | ) | 272,867 | 352,065 | 7,054 | 359,119 | ||||||||
| Velan Inc. |
| Condensed Interim Consolidated Statements of Cash Flow |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| Three-month periods | Fiscal years | ||||||||
| ended February 28 | ended February 28 | ||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||
| $ | $ | $ | $ | ||||||
| Cash flows from | |||||||||
| Operating activities | |||||||||
| Net income for the period | 10,654 | (3,519 | ) | 31,003 | 6,734 | ||||
| Adjustments to reconcile net income to cash provided by operating activities | 5,059 | 14,656 | 15,890 | 23,389 | |||||
| Changes in non-cash working capital items | (2,328 | ) | 11,913 | 28,566 | (15,711 | ) | |||
| Cash provided (used) by operating activities | 13,385 | 23,050 | 75,459 | 14,412 | |||||
| Investing activities | |||||||||
| Short-term investments | 1,937 | 1,881 | 159 | 4,556 | |||||
| Additions to property, plant and equipment | (3,262 | ) | (5,811 | ) | (17,953 | ) | (28,452 | ) | |
| Additions to intangible assets | (132 | ) | (279 | ) | (397 | ) | (684 | ) | |
| Proceeds on disposal of property, plant and equipment, and intangible assets | 309 | 521 | 396 | 905 | |||||
| Net change in other assets | 53 | (3 | ) | 44 | (270 | ) | |||
| Cash provided (used) by investing activities | (1,095 | ) | (3,691 | ) | (17,751 | ) | (23,945 | ) | |
| Financing activities | |||||||||
| Dividends paid to Subordinate and Multiple Voting shareholders | (1,655 | ) | (1,780 | ) | (6,777 | ) | (7,081 | ) | |
| Dividends paid to non-controlling interest | - | - | (103 | ) | (41 | ) | |||
| Shares issued under Share Option Plan | - | - | 374 | - | |||||
| Repurchase of shares | - | (217 | ) | - | (2,633 | ) | |||
| Payment of proceeds payable | - | (560 | ) | (1,960 | ) | (3,465 | ) | ||
| Short-term bank loans | (339 | ) | 172 | (1,368 | ) | 1,426 | |||
| Increase in long-term debt | - | 342 | 2,654 | 21,057 | |||||
| Repayment of long-term debt | (1,847 | ) | (1,772 | ) | (8,430 | ) | (4,478 | ) | |
| Cash provided (used) by financing activities | (3,841 | ) | (3,815 | ) | (15,610 | ) | 4,785 | ||
| Effect of exchange rate differences on cash | 1,494 | 1,124 | 4,150 | 364 | |||||
| Net change in cash during the period | 9,943 | 16,668 | 46,248 | (4,384 | ) | ||||
| Net cash - Beginning of the period | 64,897 | 11,924 | 28,592 | 32,976 | |||||
| Net cash - End of the period | 74,840 | 28,592 | 74,840 | 28,592 | |||||
| Net cash is composed of: | |||||||||
| Cash and cash equivalents | 106,716 | 77,172 | 106,716 | 77,172 | |||||
| Bank indebtedness | (31,876 | ) | (48,580 | ) | (31,876 | ) | (48,580 | ) | |
| 74,840 | 28,592 | 74,840 | 28,592 | ||||||
| Supplementary information | |||||||||
| Interest received (paid) | (329 | ) | (546 | ) | (1,062 | ) | (1,895 | ) | |
| Income taxes reimbursed (paid) | 776 | 240 | (1,697 | ) | (2,042 | ) | |||
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