MONTREAL, QUEBEC--(Marketwired - July 10, 2014) - 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, 2014.

Highlights

• Sales of US$103.1 million for the quarter
• Net earnings¹ of US$4.0 million for the quarter
• Order backlog of US$483.1 million at the end of the quarter
• Order bookings of US$114.3 million for the quarter
• Net cash² of US$70.7 million at the end of the quarter

		Three-month periods ended
(millions of U.S. dollars, excluding per share amounts)		May 31, 2014			May 31, 2013
Sales		$	103.1		$	132.2
Gross Profit			26.5			30.7
Gross margin %			25.7	%		23.2	%
Net income (loss) attributable to Multiple and Subordinate Voting Shares			4.0			5.8
Net income (loss) per share -	Basic		0.18			0.26
	Diluted		0.18			0.26

First Quarter Fiscal 2015 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the first quarter of fiscal 2014):

• Net earnings¹ amounted to $4.0 million or $0.18 per share compared to $5.8 million or $0.26 per share last year. The $1.8 million decrease in net earnings¹ is primarily attributable to lower sales volume which was partially offset by improved gross margins and lower administration costs.
  
  
• Sales amounted to $103.1 million, a decrease of $29.1 million or 22.0%. The decrease in sales is primarily attributable to decreased shipments of certain large export project orders.
  
  
• Net new orders received ("bookings") amounted to $114.3 million, an increase of $7.6 million or 7.1% compared to last year, continuing the positive trend which started during the latter half of the prior year.
  
  
• The Company ended the quarter with a backlog of $483.1 million, an increase of $11.4 million or 2.4% since the beginning of the current fiscal year. This increase is mainly attributable to the higher bookings outpacing the lower sales output in the quarter.
  
  
• Gross margin increased by 2.5 percentage points from 23.2% to 25.7%. This increase is mainly attributable to a product mix with a greater proportion of higher margin product sales, particularly spare parts and valves without third party actuators.
  
  
• Administration costs amounted to $21.3 million, a decrease of $0.4 million or 1.8%. The decrease is primarily attributable to a decrease in sales commissions and freight to customers on project orders which was partially offset by an increase in costs recognized in connection with the Company's ongoing asbestos litigation. The increase in asbestos costs is due more to the fact that the prior year settlement payments in the quarter were unusually low compared to other periods over recent years.
  
  
• The Company generated net cash² from operations of $11.4 million in the quarter. This source of net cash² was primarily attributable to positive cash net earnings¹ and non-cash working capital movements. The Company ended the quarter with net cash² of $70.7 million, an increase of $3.0 million or 4.4% since the beginning of the current fiscal year.
  
  
• Foreign currency impacts:
  
  
  • Based on average exchange rates, the Euro strengthened 6.2% 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 7.1% 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 quarter.
    
    
  • The impact of these currency swings was favourable to the Company's results for the quarter.
    
    

"While Velan occasionally has quarters where not all contract sales take place as planned, and our first quarter was one of those quarters, we were pleased with the improved margins and expense control during the quarter," said John Ball, CFO of Velan Inc. "The backlog has slowly been increasing, and the balance sheet continued to strengthen, with our cash position improving from last year end."

Tom Velan, President and CEO of Velan Inc. said, "After finishing our Fiscal 2014 with such a strong quarter, we would have liked to see the sales momentum continue into our first quarter of Fiscal 2015. Although some projects didn't make it out the door in our first quarter, we continued to benefit from a favorable product mix and improved margins."

Dividend

The Board declared an eligible quarterly dividend of CDN$0.10 per share, payable on September 30, 2014, to all shareholders of record as at September 15, 2014.

Conference call

Financial analysts, shareholders, and other interested individuals are invited to attend the first quarter conference call to be held on July 10, 2014, at 5:00 PM (EST). The toll free call-in number is 1-877-256-6025, access code 21721720. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558- 5253, access code 21721720.

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	May 31,		February 28,
	2014		2014
	$		$
Assets
Current assets
Cash and cash equivalents	102,516		106,716
Short-term investments	331		239
Accounts receivable	112,470		128,978
Income taxes recoverable	7,917		5,465
Inventories	226,914		224,149
Deposits and prepaid expenses	5,948		5,046
Derivative assets	526		498
	456,622		471,091
Non-current assets
Property, plant and equipment	97,616		96,605
Intangible assets and goodwill	42,289		43,359
Deferred income taxes	11,725		11,406
Other assets	1,468		1,693
	153,098		153,063
Total assets	609,720		624,154
Liabilities
Current liabilities
Bank indebtedness	25,478		31,876
Short-term bank loans	537		916
Accounts payable and accrued liabilities	72,649		76,590
Income tax payable	5,263		4,158
Dividend payable	2,025		1,586
Customer deposits	63,975		66,842
Provisions	7,739		8,060
Accrual for performance guarantees	33,655		33,842
Derivative liabilities	335		1,501
Current portion of long-term debt	10,059		10,402
	221,715		235,773
Non-current liabilities
Long-term debt	10,314		11,685
Deferred income taxes	9,042		9,270
Other liabilities	8,464		8,307
	27,820		29,262
Total liabilities	249,535		265,035
Equity
Equity attributable to the Subordinate and Multiple Voting shareholders
Share capital	76,678		76,688
Contributed surplus	6,096		6,099
Retained earnings	274,855		272,867
Accumulated other comprehensive income (loss)	(4,789	)	(3,589	)
	352,840		352,065
Non-controlling interest	7,345		7,054
Total equity	360,185		359,119
Total liabilities and equity	609,720		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
	May 31
	2014		2013
	$		$
Sales	103,065		132,168
Cost of sales	76,580		101,489
Gross profit	26,485		30,679
Administration costs	21,297		21,748
Other expense (income)	(130	)	38
Operating profit (loss)	5,318		8,893
Finance income	265		180
Finance costs	379		546
Finance income (costs) - net	(114	)	(366	)
Income (Loss) before income tax	5,204		8,527
Income taxes	1,142		2,245
Net income (loss) for the period	4,062		6,282
Net income (loss) attributable to:
Subordinate Voting Shares and Multiple Voting Shares	4,005		5,800
Non-controlling interest	57		482
	4,062		6,282
Net income (loss) per Subordinate and Multiple Voting Share
Basic	0.18		0.26
Diluted	0.18		0.26
Dividends declared per Subordinate and Multiple Voting Share	0.09		0.08
	(CA$0.10	)	(CA$0.08	)
Total weighted average number of Subordinate and Multiple Voting Shares
Basic	21,958,012		21,923,768
Diluted	21,965,057		21,934,333

Velan Inc.
Condensed Interim Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(in thousands of U.S. dollars)
	Three-month periods ended
	May 31
	2014		2013
	$		$
Comprehensive income (loss)
Net income (loss) for the period	4,062		6,282
Other comprehensive income (loss)
Foreign currency translation adjustment on foreign operations whose functional currency isother than the reporting currency (U.S. dollar)	(966	)	(1,222	)
Comprehensive income (loss)	3,096		5,060
Comprehensive income (loss) attributable to:
Subordinate Voting Shares and Multiple Voting Shares	2,805		4,746
Non-controlling interest	291		314
	3,096		5,060

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		-		-		-		-		4,005		4,005		57		4,062
Other comprehensive income (loss)		-		-		-		(1,200	)	-		(1,200	)	234		(966	)
		21,958,768		76,688		6,099		(4,789	)	276,872		354,870		7,345		362,215
Effect of share-based compensation		-		-		3		-		-		3		-		3
Dividends
	Multiple Voting Shares	-		-		-		-		(1,415	)	(1,415	)	-		(1,415	)
	Subordinate Voting Shares	-		-		-		-		(602	)	(602	)	-		(602	)
Share repurchase		(1,000	)	(10	)	(6	)	-		-		(16	)	-		(16	)
Balance - May 31, 2014		21,957,768		76,678		6,096		(4,789	)	274,855		352,840		7,345		360,185
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		-		-		-		-		5,800		5,800		482		6,282
Other comprehensive income (loss)		-		-		-		(1,054	)	-		(1,054	)	(168	)	(1,222	)
		21,923,768		76,314		1,746		(9,730	)	255,929		324,259		8,974		333,233
Effect of share-based compensation		-		-		8		-		-		8		-		8
Dividends
	Multiple Voting Shares	-		-		-		-		(1,220	)	(1,220	)	-		(1,220	)
	Subordinate Voting Shares	-		-		-		-		(472	)	(472	)	-		(472	)
Balance - May 31, 2013		21,923,768		76,314		1,754		(9,730	)	254,237		322,575		8,974		331,549

Velan Inc.
Condensed Interim Consolidated Statements of Cash Flow
(Unaudited)
(in thousands of U.S. dollars)
		Three-month periods ended
		May 31
		2014		2013
		$		$
Cash flows from
Operating activities
Net income for the period		4,062		6,282
Adjustments to reconcile net income to cash provided by operating activities		2,401		3,320
Changes in non-cash working capital items		4,935		15,105
Cash provided (used) by operating activities		11,398		24,707
Investing activities
Short-term investments		(92	)	(1,153	)
Additions to property, plant and equipment		(4,059	)	(4,223	)
Additions to intangible assets		(230	)	(53	)
Proceeds on disposal of property, plant and equipment, and intangible assets		51		87
Net change in other assets		230		(15	)
Cash provided (used) by investing activities		(4,100	)	(5,357	)
Financing activities
Dividends paid to Subordinate and Multiple Voting shareholders		(1,578	)	(1,701	)
Repurchase of shares		(16	)	-
Payment of proceeds payable		-		(1,960	)
Short-term bank loans		(379	)	(1,178	)
Increase in long-term debt		-		1,391
Repayment of long-term debt		(1,679	)	(1,719	)
Cash provided (used) by financing activities		(3,652	)	(5,167	)
Effect of exchange rate differences on cash		(1,448	)	(132	)
Net change in cash during the period		2,198		14,051
Net cash - Beginning of the period		74,840		28,592
Net cash - End of the period		77,038		42,643
Net cash is composed of:
	Cash and cash equivalents	102,516		84,359
	Bank indebtedness	(25,478	)	(41,716	)
		77,038		42,643

Supplementary information
Interest received (paid)	(93	)	(359	)
Income taxes reimbursed (paid)	(1,488	)	504