MONTREAL, QUEBEC--(Marketwired - May 18, 2017) - 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, 2017.
Highlights
- Sales of US$102.8 million for the quarter
- Adjusted net earnings1 of US$3.7 million for the quarter
- Order backlog of US$438.2 million at the end of the quarter
- Net new orders received ("Bookings") of US$125.9 million for the quarter
- Net cash1 of US$72.5 million at the end of the quarter
- Returned US$2.2 million to shareholders in the quarter and US$7.5 million in the fiscal year by way of dividends and share repurchases
| (millions of U.S. dollars, | Three-month | |||||||||||
| excluding | periods ended | Fiscal years ended | ||||||||||
| per share amounts) | February 28, | February 29, | February 28, | February 29, | ||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||
| Sales | $ | 102.8 | $ | 108.2 | $ | 331.8 | $ | 426.9 | ||||
| Gross profit | 28.9 | 28.1 | 88.5 | 104.3 | ||||||||
| Gross profit % | 28.1 | % | 26.0 | % | 26.7 | % | 24.4 | % | ||||
| Adjusted net earnings1 | 3.7 | 4.2 | 7.7 | 17.3 | ||||||||
| Adjusted net earnings1per share - basic and diluted | 0.17 | 0.20 | 0.36 | 0.79 | ||||||||
| Net earnings (loss)2 | 3.7 | (7.8 | ) | 7.7 | 3.6 | |||||||
| Net earnings (loss)2per share - basic and diluted | 0.17 | (0.35 | ) | 0.36 | 0.17 | |||||||
Fourth Quarter Fiscal 2017 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the fourth quarter of fiscal 2016):
- Net earnings2 amounted to $3.7 million or $0.17 per share compared to a net loss2 of $7.8 million or $0.35 per share last year. Adjusted net earnings1, which excludes from net earnings2 a goodwill impairment charge as well as the after-tax impact of the restructuring costs incurred in the prior year quarter, amounted to $3.7 million or $0.17 per share compared to $4.2 million or $0.20 per share last year. The $0.5 million decrease in adjusted net earnings1 is primarily attributable to a lower sales volume which was partially offset by gross margin improvements and decreased administration costs.
- Bookings amounted to $125.9 million, an increase of $39.2 million or 45.2% compared to the prior year. This increase in bookings is principally attributable to new project orders won by the Company's French operations to supply valves towards the construction of a nuclear power plant in the U.K., which were partially offset by decreased bookings in the Company's North American operations where the current highly competitive environment in its various markets continues to put downward pressure on pricing and lead times.
- Sales amounted to $102.8 million, a decrease of $5.4 million or 5.0% from the prior year. While sales were lower in the current quarter when compared to the comparative period in the prior year, they were stronger when compared to the previous three quarters of the current fiscal year. Sales for the quarter were improved in the Company's French operations, while its North American and Italian operations realized lower sales due to the effects of the lower bookings and backlog from the prior year.
- Gross profit percentage increased by 210 basis points from 26.0% to 28.1%. Despite the lower sales volume, both the gross profit and the gross profit percentage increased due to a product mix with a greater proportion of higher margin product sales such as spare parts, material cost savings, as well as labour and overhead savings stemming from the restructuring initiatives implemented in the prior fiscal year
Year Ended Fiscal 2017 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the prior fiscal year):
- Net earnings2 amounted to $7.7 million or $0.36 per share compared to $3.6 million or $0.17 per share last year. Adjusted net earnings1, which excludes from net earnings2 a goodwill impairment charge as well as the after-tax impact of restructuring costs incurred in the prior year, amounted to $7.7 million or $0.36 per share compared to $17.3 million or $0.79 per share last year. The $9.6 million decrease in adjusted net earnings1 is primarily attributable to a lower sales volume which was partially offset by gross margin improvements and decreased administration costs.
- Bookings amounted to $448.2 million, an increase of $118.7 million or 36.0% compared to last year. Excluding the effect of an order cancellation of $23.6 million in the prior year, bookings would have increased by $95.1 million or 26.9%. This increase is due primarily to new large project orders booked by the Company's French, German and Italian operations, which was partially offset by a decrease in orders booked in the Company's North American operations.
- Sales amounted to $331.8 million, a decrease of $95.1 million or 22.3%. Despite an improved performance in the last quarter of the year, sales were negatively impacted, particularly in the Company's Italian and North American operations, by the decreased bookings received over the last fiscal year. Delays in shipments of certain large project orders caused by various customer-related, supply chain and internal operational issues, particularly in our North American operations, also had a negative impact on sales for the year.
- As a result of bookings outpacing sales in the year, the Company ended the year with a backlog of $438.2 million, an increase of $107.0 million or 32.3% since the beginning of the current fiscal year. This increase in backlog occurred despite the negative impact related to the weakening of the euro spot rate against the U.S. dollar over the course of the year.
- Gross profit percentage increased by 230 basis points from 24.4% to 26.7%. Despite the lower sales volume, the increase in the gross profit percentage was mainly attributable to a product mix with a greater proportion of higher margin product sales, material cost savings, as well as labour and overhead savings stemming from the restructuring initiatives implemented in the prior fiscal year.
- Administration costs amounted to $75.9 million, a decrease of $2.1 million or 2.7%. This decrease was achieved despite a $1.2 million increase in costs recognized in connection with the Company's ongoing asbestos litigation. The fluctuation in asbestos costs for the year is due more to the timing of settlement payments in these two periods rather than to changes in long-term trends.
- The Company ended the year with net cash1 of $72.5 million, a decrease of $9.5 million or 11.6% since the beginning of the year. This decrease is primarily attributable to negative working capital movements and distributions to shareholders via dividends and share repurchases.
- Foreign currency fluctuations did not have a significant impact on the Company's net earnings2 in the current fiscal year. Based on average exchange rates, the euro remained relatively constant against the U.S. dollar, while the Canadian dollar weakened by only 0.3% against the U.S. dollar when compared to the same period last year.
"This was a year of challenges, particularly on the sales front. Our various efficiency initiatives that we commenced last year helped protect our margin and bottom line this year. In addition, we have conserved cash and maintained a strong balance sheet," said John Ball, CFO of Velan Inc. "While we are encouraged by the steady increase in our backlog, we note that it is concentrated in some of our overseas markets. Our focus for the coming year will be to maintain and broaden our order buildup as well as to ensure timely delivery of project orders."
Yves Leduc, President and CEO of Velan Inc., said, "Although the year's results were disappointing, we are encouraged by signs that the outlook may be improving as both bookings and backlog increased in the second half of the fiscal year. With these recent orders, we should see performance improve in the latter part of the next fiscal year. While market conditions slowly improve, we continue to implement several improvement initiatives under our strategic plan Velocity 2020 in order to position the Company, not just to ride the wave of a recovering market, but to outperform it. The goal is to transform our Company into an organization that is more agile and customer-centric, by delivering greater value to our customers through front-loaded application engineering and design solutions, fast lead times and disciplined market development."
Dividend
The Board declared an eligible quarterly dividend of CDN$0.10 per share, payable on June 30, 2017, to all shareholders of record as at June 15, 2017.
Conference call
Financial analysts, shareholders, and other interested individuals are invited to attend the fourth quarter conference call to be held on Thursday, May 18, 2017, at 4:30 p.m. (EDT). The toll free call-in number is 1-800-672-3665, access code 21852130. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558-5253, access code 21852130.
About Velan
Founded in Montreal in 1950, Velan Inc. (www.velan.com) is one of the world's leading manufacturers of industrial valves, with sales of US$331.8 million in its last reported fiscal year. The Company employs over 1,800 people and has manufacturing plants in 9 countries. Velan Inc. is a public company with its shares listed on the Toronto Stock Exchange under the symbol VLN.
Safe harbour statement
This news release may include forward-looking statements, which generally contain words like "should", "believe", "anticipate", "plan", "may", "will", "expect", "intend", "continue" or "estimate" or the negatives of these terms or variations of them or similar expressions, all of which are subject to risks and uncertainties, which are disclosed in
the Company's filings with the appropriate securities commissions. While these statements are based on management's assumptions regarding historical trends, current conditions and expected future developments, as well as other factors that it believes are reasonable and appropriate in the circumstances, no forward-looking statement can be guaranteed and actual future results may differ materially from those expressed herein. The Company disclaims any intention or obligation to update or revise any forward-looking statements contained herein whether as a result of new information, future events or otherwise, except as required by the applicable securities laws. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.
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 earnings" is defined as net income or loss attributable to Subordinate and Multiple Voting Shares plus goodwill impairment loss, plus restructuring costs less the income tax effect of the restructuring costs. Refer to the "Reconciliations of Non-IFRS Measures" section in the Company's Management Discussion and Analysis included in its Annual Report for the fiscal year ended February 28, 2017 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 Management Discussion and Analysis included in its Annual Report for the fiscal year ended February 28, 2017 for a detailed calculation of this measure.
| 1 | Non-IFRS measures - see explanation above. |
| 2 | Net earnings or loss refer to net income or loss attributable to Subordinate and Multiple Voting Shares. |
| Velan Inc. | ||||
| Condensed Interim Consolidated Statements of Financial Position | ||||
| (Unaudited) | ||||
| (in thousands of U.S. dollars) | ||||
| As At | February 28, | February 29, | ||
| 2017 | 2016 | |||
| $ | $ | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 84,019 | 89,368 | ||
| Short-term investments | 974 | 3,225 | ||
| Accounts receivable | 125,512 | 119,569 | ||
| Income taxes recoverable | 7,145 | 5,674 | ||
| Inventories | 173,089 | 162,523 | ||
| Deposits and prepaid expenses | 3,391 | 3,586 | ||
| Derivative assets | 1,202 | 1,598 | ||
| 395,332 | 385,543 | |||
| Non-current assets | ||||
| Property, plant and equipment | 91,535 | 95,257 | ||
| Intangible assets and goodwill | 19,023 | 20,352 | ||
| Deferred income taxes | 12,951 | 13,537 | ||
| Other assets | 456 | 938 | ||
| 123,965 | 130,084 | |||
| Total assets | 519,297 | 515,627 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Bank indebtedness | 7,792 | 5,028 | ||
| Short-term bank loans | 1,650 | 1,319 | ||
| Accounts payable and accrued liabilities | 60,641 | 62,943 | ||
| Income taxes payable | 946 | 5,746 | ||
| Dividend payable | 1,631 | 1,606 | ||
| Customer deposits | 43,953 | 28,123 | ||
| Provisions | 10,600 | 9,333 | ||
| Accrual for performance guarantees | 26,943 | 30,563 | ||
| Derivative liabilities | 799 | 2,945 | ||
| Current portion of long-term debt | 7,115 | 7,978 | ||
| 162,070 | 155,584 | |||
| Non-current liabilities | ||||
| Long-term debt | 15,318 | 14,471 | ||
| Deferred income taxes | 2,784 | 3,408 | ||
| Other liabilities | 7,214 | 9,045 | ||
| 25,316 | 26,924 | |||
| Total liabilities | 187,386 | 182,508 | ||
| Equity | ||||
| Equity attributable to the Subordinate and Multiple Voting shareholders | ||||
| Share capital | 73,584 | 74,345 | ||
| Contributed surplus | 6,017 | 5,941 | ||
| Retained earnings | 281,343 | 280,380 | ||
| Accumulated other comprehensive income (loss) | (35,550 | ) | (33,089 | ) |
| 325,394 | 327,577 | |||
| Non-controlling interest | 6,517 | 5,542 | ||
| Total equity | 331,911 | 333,119 | ||
| Total liabilities and equity | 519,297 | 515,627 | ||
| 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 | Fiscal years ended | |||||||
| February 28, | February 29, | February 28, | February 29, | |||||
| 2017 | 2016 | 2017 | 2016 | |||||
| $ | $ | $ | $ | |||||
| Sales | 102,835 | 108,156 | 331,777 | 426,895 | ||||
| Cost of sales | 73,944 | 80,085 | 243,249 | 322,612 | ||||
| Gross profit | 28,891 | 28,071 | 88,528 | 104,283 | ||||
| Administration costs | 18,950 | 20,325 | 75,868 | 77,974 | ||||
| Goodwill impairment loss | - | 11,510 | - | 11,510 | ||||
| Restructuring costs | - | 609 | - | 2,759 | ||||
| Other expense (income) | 579 | (519 | ) | (408 | ) | (348 | ) | |
| Operating profit (loss) | 9,362 | (3,854 | ) | 13,068 | 12,388 | |||
| Finance income | 328 | 583 | 992 | 1,296 | ||||
| Finance costs | 623 | 357 | 1,066 | 1,097 | ||||
| Finance income (costs) - net | (295 | ) | 226 | (74 | ) | 199 | ||
| Income (Loss) before income taxes | 9,067 | (3,628 | ) | 12,994 | 12,587 | |||
| Provision for (Recovery of) income taxes | 4,981 | 4,282 | 4,680 | 8,302 | ||||
| Net income (loss) for the period | 4,086 | (7,910 | ) | 8,314 | 4,285 | |||
| Net income (loss) attributable to: | ||||||||
| Subordinate Voting Shares and Multiple Voting Shares | 3,707 | (7,823 | ) | 7,737 | 3,641 | |||
| Non-controlling interest | 379 | (87 | ) | 577 | 644 | |||
| 4,086 | (7,910 | ) | 8,314 | 4,285 | ||||
| Net income (loss) per Subordinate and Multiple Voting Share | ||||||||
| Basic | 0.17 | (0.35 | ) | 0.36 | 0.17 | |||
| Diluted | 0.17 | (0.35 | ) | 0.36 | 0.17 | |||
| Dividends declared per Subordinate and Multiple | 0.08 | 0.08 | 0.31 | 0.31 | ||||
| Voting Share | (CA$0.10 | ) | (CA$0.10 | ) | (CA$0.40 | ) | (CA$0.40 | ) |
| Total weighted average number of Subordinate and Multiple Voting Shares | ||||||||
| Basic | 21,698,670 | 21,758,224 | 21,722,089 | 21,861,230 | ||||
| Diluted | 21,703,812 | 21,759,862 | 21,727,697 | 21,868,242 | ||||
| Velan Inc. | ||||||||
| Condensed Interim Consolidated Statements of Comprehensive Income (Loss) | ||||||||
| (Unaudited) | ||||||||
| (in thousands of U.S. dollars) | ||||||||
| Three-month periods ended | Fiscal years ended | |||||||
| February 28, | February 29, | February 28, | February 29, | |||||
| 2017 | 2016 | 2017 | 2016 | |||||
| $ | $ | $ | $ | |||||
| Comprehensive income (loss) | ||||||||
| Net income (loss) for the period | 4,086 | (7,910 | ) | 8,314 | 4,285 | |||
| Other comprehensive income (loss) | ||||||||
| Foreign currency translation adjustment on foreign operations whose functional currency is other than the reporting currency (U.S. dollar) | 208 |
1,606 |
(2,014 |
) |
(5,992 |
) |
||
| Comprehensive income (loss) | 4,294 | (6,304 | ) | 6,300 | (1,707 | ) | ||
| Comprehensive income (loss) attributable to: | ||||||||
| Subordinate Voting Shares and Multiple Voting Shares | 3,723 | (5,901 | ) | 5,276 | (1,796 | ) | ||
| Non-controlling interest | 571 | (403 | ) | 1,024 | 89 | |||
| 4,294 | (6,304 | ) | 6,300 | (1,707 | ) | |||
| 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, 2016 | 21,737,135 | 74,345 | 5,941 | (33,089 | ) | 280,380 | 327,577 | 5,542 | 333,119 | ||||||||
| Net income (loss) for the period | - | - | - | - | 7,737 | 7,737 | 577 | 8,314 | |||||||||
| Other comprehensive income (loss) | - | - | - | (2,461 | ) | - | (2,461 | ) | 447 | (2,014 | ) | ||||||
| 21,737,135 | 74,345 | 5,941 | (35,550 | ) | 288,117 | 332,853 | 6,566 | 339,419 | |||||||||
| Effect of share-based compensation | - | - | 76 | - | - | 76 | - | 76 | |||||||||
| Share repurchase | (69,900 | ) | (761 | ) | - | - | (165 | ) | (926 | ) | - | (926 | ) | ||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (4,745 | ) | (4,745 | ) | - | (4,745 | ) | ||||||
| Subordinate Voting Shares | - | - | - | - | (1,864 | ) | (1,864 | ) | - | (1,864 | ) | ||||||
| Non-controlling interest | - | - | - | - | - | - | (49 | ) | (49 | ) | |||||||
| Balance - February 28, 2017 | 21,667,235 | 73,584 | 6,017 | (35,550 | ) | 281,343 | 325,394 | 6,517 | 331,911 | ||||||||
| Balance - February 28, 2015 | 21,939,168 | 76,475 | 6,064 | (27,652 | ) | 283,724 | 338,611 | 6,482 | 345,093 | ||||||||
| Net income (loss) for the period | - | - | - | - | 3,641 | 3,641 | 644 | 4,285 | |||||||||
| Other comprehensive income (loss) | - | - | - | (5,437 | ) | - | (5,437 | ) | (555 | ) | (5,992 | ) | |||||
| 21,939,168 | 76,475 | 6,064 | (33,089 | ) | 287,365 | 336,815 | 6,571 | 343,386 | |||||||||
| Effect of share-based compensation | - | - | 104 | - | - | 104 | - | 104 | |||||||||
| Shares issued under Share Option Plan | 14,267 | 227 | (227 | ) | - | - | - | - | - | ||||||||
| Share repurchase | (216,300 | ) | (2,357 | ) | - | - | (381 | ) | (2,738 | ) | - | (2,738 | ) | ||||
| Acquisition of non-controlling interest | - | - | - | - | - | - | (890 | ) | (890 | ) | |||||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (4,801 | ) | (4,801 | ) | - | (4,801 | ) | ||||||
| Subordinate Voting Shares | - | - | - | - | (1,803 | ) | (1,803 | ) | - | (1,803 | ) | ||||||
| Non-controlling interest | - | - | - | - | - | - | (139 | ) | (139 | ) | |||||||
| Balance - February 29, 2016 | 21,737,135 | 74,345 | 5,941 | (33,089 | ) | 280,380 | 327,577 | 5,542 | 333,119 | ||||||||
| Velan Inc. | |||||||||
| Condensed Interim Consolidated Statements of Cash Flow | |||||||||
| (Unaudited) | |||||||||
| (in thousands of U.S. dollars) | |||||||||
| Three-month periods ended | Fiscal years ended | ||||||||
| February 28, | February 29, | February 28, | February 29, | ||||||
| 2017 | 2016 | 2017 | 2016 | ||||||
| $ | $ | $ | $ | ||||||
| Cash flows from | |||||||||
| Operating activities | |||||||||
| Net income for the period | 4,086 | (7,910 | ) | 8,314 | 4,285 | ||||
| Adjustments to reconcile net income to cash provided by operating activities | 3,265 |
8,738 |
10,267 |
17,080 |
|||||
| Changes in non-cash working capital items | (7,059 | ) | 15,448 | (11,434 | ) | 7,519 | |||
| Cash provided (used) by operating activities | 292 | 16,276 | 7,147 | 28,884 | |||||
| Investing activities | |||||||||
| Short-term investments | (825 | ) | (592 | ) | 2,251 | (2,378 | ) | ||
| Additions to property, plant and equipment | (1,730 | ) | (12,077 | ) | (7,721 | ) | (19,791 | ) | |
| Additions to intangible assets | (831 | ) | (1,149 | ) | (910 | ) | (1,329 | ) | |
| Proceeds on disposal of property, plant and equipment, and intangible assets | 220 |
122 |
399 |
272 |
|||||
| Acquisition of non-controlling interest | - | - | - | (890 | ) | ||||
| Net change in other assets | 134 | 1,625 | 482 | 177 | |||||
| Cash provided (used) by investing activities | (3,032 | ) | (12,071 | ) | (5,499 | ) | (23,939 | ) | |
| Financing activities | |||||||||
| Dividends paid to Subordinate and Multiple Voting shareholders | (1,632 | ) | (1,583 | ) | (6,584 | ) | (6,753 | ) | |
| Dividends paid to non-controlling interest | - | - | (49 | ) | (139 | ) | |||
| Repurchase of shares | (572 | ) | (367 | ) | (926 | ) | (2,738 | ) | |
| Short-term bank loans | 337 | 115 | 331 | (815 | ) | ||||
| Increase in long-term debt | 5,079 | 10,365 | 5,079 | 17,499 | |||||
| Repayment of long-term debt | (581 | ) | (3,206 | ) | (5,904 | ) | (9,122 | ) | |
| Cash provided (used) by financing activities | 2,631 | 5,324 | (8,053 | ) | (2,068 | ) | |||
| Effect of exchange rate differences on cash | (7 | ) | 1,127 | (1,708 | ) | (2,499 | ) | ||
| Net change in cash during the period | (116 | ) | 10,656 | (8,113 | ) | 378 | |||
| Net cash - Beginning of the period | 76,343 | 73,684 | 84,340 | 83,962 | |||||
| Net cash - End of the period | 76,227 | 84,340 | 76,227 | 84,340 | |||||
| Net cash is composed of: | |||||||||
| Cash and cash equivalents | 84,019 | 89,368 | 84,019 | 89,368 | |||||
| Bank indebtedness | (7,792 | ) | (5,028 | ) | (7,792 | ) | (5,028 | ) | |
| 76,227 | 84,340 | 76,227 | 84,340 | ||||||
| Supplementary information | |||||||||
| Interest received (paid) | 353 | 432 | 641 | 532 | |||||
| Income taxes reimbursed (paid) | (2,447 | ) | (4,695 | ) | (7,722 | ) | (10,742 | ) | |
Contact Information:
Yves Leduc
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