MONTREAL, QUEBEC–(Marketwired – July 12, 2016) – Velan Inc. (TSX:VLN) (the “Company”), a world-leading manufacturer of industrial valves, announced today its financial results for its first quarter ended May 31, 2016.
Highlights
- Sales of US$77.4 million for the quarter
- Net earnings1of US$0.5 million for the quarter
- Order backlog of US$368.0 million at the end of the quarter
- Net order bookings of US$110.0 million for the quarter
- Net cash2of US$93.0 million at the end of the quarter
| Three-month periods ended | ||||
| May 31, | May 31, | |||
| (millions of U.S. dollars, excluding per share amounts) | 2016 | 2015 | ||
| Sales | $77.4 | $103.2 | ||
| Gross Profit | 18.7 | 23.5 | ||
| Gross profit % | 24.1 | % | 22.8 | % |
| Net income attributable to Multiple and Subordinate Voting Shares | 0.5 | 3.1 | ||
| Net income per share – basic and diluted | 0.02 | 0.14 | ||
First Quarter Fiscal 2017 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the first quarter of fiscal 2016):
- Net earnings1 amounted to $0.5 million or $0.02 per share compared to $3.1 million or $0.14 per share last year. The $2.6 million decrease in net earnings1 is primarily attributable to a lower sales volume which was partially offset by a higher gross profit percentage and decreased administration costs.
- Net new orders received (“bookings”) amounted to $110.0 million, an increase of $28.2 million or 34.5% compared to last year. Excluding the effect of an order cancellation of $23.6 million in the prior year quarter, bookings would have increased by $4.6 million or 4.4%. This increase is due primarily to large project orders booked by the Company’s Italian subsidiary.
- Sales amounted to $77.4 million, a decrease of $25.8 million or 25.0% from the prior year. Sales were negatively impacted by the decreased bookings received over the last fiscal year as well as delays in shipments of certain large project orders caused by various customer-related, supply chain and internal operational issues.
- As a result of bookings outpacing sales in the quarter, the Company ended the period with a backlog of $368.0 million, an increase of $36.8 million or 11.1% since the beginning of the current fiscal year. In addition to higher bookings, the backlog was positively impacted by the strengthening of the euro against the U.S. dollar over the course of the quarter.
- Gross profit percentage increased by 130 basis points from 22.8% to 24.1%. 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 $18.8 million, a decrease of $0.4 million or 2.1%. The decrease was achieved despite a $0.4 million increase in costs recognized in connection with the Company’s ongoing asbestos litigation. The fluctuation in asbestos costs for the quarter 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 quarter with net cash2 of $93.0 million, an increase of $11.0 million or 13.4% since the beginning of the current fiscal year. This increase is primarily attributable to positive non-cash working capital movements, particularly a decrease in accounts receivable.
- Foreign currency impacts:
- Based on average exchange rates, the Euro strengthened 3.1% against the U.S. dollar when compared to the same period last year. This strengthening resulted in the Company’s net profits and bookings 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 4.8% 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 net impact of the above currency swings was generally favourable on the Company’s net earnings1.
“While we were not pleased with the $28 million sales decrease from last year, a result primarily of our low bookings last year as well as certain customer-related project delays, we were heartened by the positive increases in bookings, backlog, margin and net cash2,” said John Ball, CFO of Velan Inc. “Our expenses and net earnings1 were also positively impacted by the restructuring activities carried out last year, and we continue to actively search for ways to improve our profitability during this period of uncertain sales outlook.”
Yves Leduc, President of Velan Inc., said, “The industry is experiencing a notable slowdown that is greatly affecting our sales, but we have been able to limit its impact by reducing expenses and improving our margins. Indeed, we are pursuing the path of a new five-year strategic plan, named Velocity 2020, the first phase of which is to drive efficiency gains and reduce lead times through operational excellence; in parallel, we are planting the seeds to spark growth in several global markets where we are very well positioned. We have dedicated employees, the Company is resilient, and the whole organization is being mobilized towards our new vision.”
Tom Velan, CEO of Velan Inc. said, “This is a very tough market environment for us but we are taking the necessary measures to right size the Company and improve our operations to be ready to benefit when the market recovers.”
Dividend
The Board declared an eligible quarterly dividend of CDN$0.10 per share, payable on September 30, 2016, to all shareholders of record as at September 15, 2016.
Conference call
Financial analysts, shareholders, and other interested individuals are invited to attend the first quarter conference call to be held on Tuesday, July 12, 2016, at 4:30 p.m. (EDT). The toll free call-in number is 1-888-273-1350, access code 21814078. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800- 558-5253, access code 21814078.
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$426.9 million in its last reported fiscal year. The Company 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
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 “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 Interim Report for the quarter ended May 31, 2016 for a detailed calculation of this measure.
| 1 | Net earnings refers to net income 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 | May 31, | February 29, | ||
| 2016 | 2016 | |||
| $ | $ | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 101,556 | 89,368 | ||
| Short-term investments | 2,068 | 3,225 | ||
| Accounts receivable | 103,714 | 119,569 | ||
| Income taxes recoverable | 7,682 | 5,674 | ||
| Inventories | 168,678 | 162,523 | ||
| Deposits and prepaid expenses | 5,743 | 3,586 | ||
| Derivative assets | 1,604 | 1,598 | ||
| 391,045 | 385,543 | |||
| Non-current assets | ||||
| Property, plant and equipment | 94,551 | 95,257 | ||
| Intangible assets and goodwill | 20,423 | 20,352 | ||
| Deferred income taxes | 14,322 | 13,537 | ||
| Other assets | 779 | 938 | ||
| 130,075 | 130,084 | |||
| Total assets | 521,120 | 515,627 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Bank indebtedness | 6,546 | 5,028 | ||
| Short-term bank loans | 1,192 | 1,319 | ||
| Accounts payable and accrued liabilities | 61,717 | 62,943 | ||
| Income taxes payable | 4,380 | 5,746 | ||
| Dividend payable | 1,658 | 1,606 | ||
| Customer deposits | 36,532 | 28,123 | ||
| Provisions | 9,363 | 9,333 | ||
| Accrual for performance guarantees | 30,300 | 30,563 | ||
| Derivative liabilities | 227 | 2,945 | ||
| Current portion of long-term debt | 6,728 | 7,978 | ||
| 158,643 | 155,584 | |||
| Non-current liabilities | ||||
| Long-term debt | 14,404 | 14,471 | ||
| Deferred income taxes | 3,374 | 3,408 | ||
| Other liabilities | 9,528 | 9,045 | ||
| 27,306 | 26,924 | |||
| Total liabilities | 185,949 | 182,508 | ||
| Equity | ||||
| Equity attributable to the Subordinate and Multiple Voting shareholders | ||||
| Share capital | 74,345 | 74,345 | ||
| Contributed surplus | 5,960 | 5,941 | ||
| Retained earnings | 279,250 | 280,380 | ||
| Accumulated other comprehensive income (loss) | (30,165 | ) | (33,089 | ) |
| 329,390 | 327,577 | |||
| Non-controlling interest | 5,781 | 5,542 | ||
| Total equity | 335,171 | 333,119 | ||
| Total liabilities and equity | 521,120 | 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 | ||||
| May 31 | ||||
| 2016 | 2015 | |||
| $ | $ | |||
| Sales | 77,409 | 103,179 | ||
| Cost of sales | 58,744 | 79,662 | ||
| Gross profit | 18,665 | 23,517 | ||
| Administration costs | 18,766 | 19,181 | ||
| Other expense (income) | (107 | ) | 15 | |
| Operating profit (loss) | 6 | 4,321 | ||
| Finance income | 265 | 256 | ||
| Finance costs | 125 | 302 | ||
| Finance income (costs) – net | 140 | (46 | ) | |
| Income (Loss) before income taxes | 146 | 4,275 | ||
| Income taxes | (428 | ) | 844 | |
| Net income (loss) for the period | 574 | 3,431 | ||
| Net income (loss) attributable to: | ||||
| Subordinate Voting Shares and Multiple Voting Shares | 528 | 3,107 | ||
| Non-controlling interest | 46 | 324 | ||
| 574 | 3,431 | |||
| Net income (loss) per Subordinate and Multiple Voting Share | ||||
| Basic | 0.02 | 0.14 | ||
| Diluted | 0.02 | 0.14 | ||
| Dividends declared per Subordinate and Multiple Voting Share | 0.08 | 0.08 | ||
| (CA$0.10 | ) | (CA$0.10 | ) | |
| Total weighted average number of Subordinate and Multiple Votng Shares | ||||
| Basic | 21,737,135 | 21,936,769 | ||
| Diluted | 21,743,540 | 21,936,769 | ||
| Velan Inc. |
| Condensed Interim Consolidated Statements of Comprehensive Income (Loss) |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| Three-month periods ended | |||
| May 31 | |||
| 2016 | 2015 | ||
| $ | $ | ||
| Comprehensive income (loss) | |||
| Net income (loss) for the period | 574 | 3,431 | |
| Other comprehensive income (loss) | |||
| Foreign currency translation adjustment on foreign operations whose functional currency is other than the reporting currency (U.S. dollar) | 3,117 | (3,042 | ) |
| Comprehensive income (loss) | 3,691 | 389 | |
| Comprehensive income (loss) attributable to: | |||
| Subordinate Voting Shares and Multiple Voting Shares | 3,452 | 112 | |
| Non-controlling interest | 239 | 277 | |
| 3,691 | 389 | ||
| 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 |
Contributed surplus |
Accumulated other comprehensive income (loss) |
Retained earnings |
Total |
Non-controlling interest |
Total |
||||||||||
| 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 | – | – | – | – | 528 | 528 | 46 | 574 | |||||||||
| Other comprehensive income (loss) | – | – | – | 2,924 | – | 2,924 | 193 | 3,117 | |||||||||
| 21,737,135 | 74,345 | 5,941 | (30,165 | ) | 280,908 | 331,029 | 5,781 | 336,810 | |||||||||
| Effect of share-based compensation | – | – | 19 | – | – | 19 | – | 19 | |||||||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | – | – | – | – | (1,174 | ) | (1,174 | ) | – | (1,174 | ) | ||||||
| Subordinate Voting Shares | – | – | – | – | (484 | ) | (484 | ) | – | (484 | ) | ||||||
| Balance – May 31, 2016 | 21,737,135 | 74,345 | 5,960 | (30,165 | ) | 279,250 | 329,390 | 5,781 | 335,171 | ||||||||
| 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 | – | – | – | – | 3,107 | 3,107 | 324 | 3,431 | |||||||||
| Other comprehensive income (loss) | – | – | – | (2,995 | ) | – | (2,995 | ) | (47 | ) | (3,042 | ) | |||||
| 21,939,168 | 76,475 | 6,064 | (30,647 | ) | 286,831 | 338,723 | 6,759 | 345,482 | |||||||||
| Effect of share-based compensation | – | – | 26 | – | – | 26 | – | 26 | |||||||||
| Shares issued under Share Option Plan | 14,267 | 227 | (227 | ) | – | – | – | – | – | ||||||||
| Share repurchase | (3,400 | ) | (37 | ) | – | – | (18 | ) | (55 | ) | – | (55 | ) | ||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | – | – | – | – | (1,235 | ) | (1,235 | ) | – | (1,235 | ) | ||||||
| Subordinate Voting Shares | – | – | – | – | (518 | ) | (518 | ) | – | (518 | ) | ||||||
| Balance – May 31, 2015 | 21,950,035 | 76,665 | 5,863 | (30,647 | ) | 285,060 | 336,941 | 6,759 | 343,700 | ||||||||
| Velan Inc. |
| Condensed Interim Consolidated Statements of Cash Flow |
| (Unaudited) |
| (in thousands of U.S. dollars) |
| Three-month periods ended | |||||
| May 31 | |||||
| 2016 | 2015 | ||||
| $ | $ | ||||
| Cash flows from | |||||
| Operating activities | |||||
| Net income for the period | 574 | 3,431 | |||
| Adjustments to reconcile net income to cash provided by operating activities | 507 | 1,076 | |||
| Changes in non-cash working capital items | 11,805 | (12,843 | ) | ||
| Cash provided (used) by operating activities | 12,886 | (8,336 | ) | ||
| Investing activities | |||||
| Short-term investments | 1,157 | (774 | ) | ||
| Additions to property, plant and equipment | (1,336 | ) | (1,577 | ) | |
| Additions to intangible assets | (50 | ) | (105 | ) | |
| Proceeds on disposal of property, plant and equipment, and intangible assets | 133 | 17 | |||
| Net change in other assets | 162 | 337 | |||
| Cash provided (used) by investing activities | 66 | (2,102 | ) | ||
| Financing activities | |||||
| Dividends paid to Subordinate and Multiple Voting shareholders | (1,606 | ) | (1,743 | ) | |
| Repurchase of shares | – | (55 | ) | ||
| Short-term bank loans | (127 | ) | (565 | ) | |
| Repayment of long-term debt | (1,961 | ) | (1,424 | ) | |
| Cash provided (used) by financing activities | (3,694 | ) | (3,787 | ) | |
| Effect of exchange rate differences on cash | 1,412 | (1,512 | ) | ||
| Net change in cash during the period | 10,670 | (15,737 | ) | ||
| Net cash – Beginning of the period | 84,340 | 83,962 | |||
| Net cash – End of the period | 95,010 | 68,225 | |||
| Net cash is composed of: | |||||
| Cash and cash equivalents | 101,556 | 92,468 | |||
| Bank indebtedness | (6,546 | ) | (24,243 | ) | |
| 95,010 | 68,225 | ||||
| Supplementary information | |||||
| Interest received (paid) | 112 | 5 | |||
| Income taxes reimbursed (paid) | (1,920 | ) | (1,868 | ) | |
Tom Velan, Chief Executive Officer, or
Yves Leduc, President
(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
