MONTREAL, QUEBEC--(Marketwired - May 19, 2015) - 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, 2015.
Highlights
- Sales of US$455.7 million for the year
- Net earnings1 of US$18.6 million for the year
- Order backlog of US$437.8 million at the end of the year
- Order bookings of US$471.4 million for the year
- Net cash2of US$75.6 million at the end of the year
- Quarterly dividend of CA$0.10 per share declared, payable June 30, 2015
| Three-month periods ended | Fiscal years ended | ||||||||||||
| February 28 | February 28 | ||||||||||||
| (millions of U.S. dollars, excluding per share amounts) | 2015 | 2014 | 2015 | 2014 | |||||||||
| Sales | $ | 114.5 | $ | 120.7 | $ | 455.7 | $ | 489.3 | |||||
| Gross profit | 29.1 | 36.6 | 118.3 | 131.1 | |||||||||
| Gross profit % | 25.4 | % | 30.3 | % | 26.0 | % | 26.8 | % | |||||
| Net income attributable to Subordinate and | |||||||||||||
| Multiple Voting Shares | 4.7 | 10.4 | 18.6 | 29.4 | |||||||||
| Net earnings1 per share - Basic | 0.22 | 0.47 | 0.85 | 1.34 | |||||||||
| - Diluted | 0.22 | 0.47 | 0.85 | 1.34 | |||||||||
Year Ended Fiscal 2015 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the prior fiscal year):
- Net earnings1 amounted to $18.6 million or $0.85 per share compared to $29.4 million or $1.34 per share last year. The $10.8 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 $455.7 million, a decrease of $33.6 million or 6.9% from the prior year. The Company's shipments of certain large project orders were lower for the current year compared to the prior year, despite the improved execution in the second half of the year.
- Net new orders received ("bookings"), which were calculated based on actual orders received converted at average exchange rates, amounted to $471.4 million, an increase of $54.8 million or 13.2% compared to last year. This increase is primarily attributable to increased bookings in the Company's French and German subsidiaries.
- Although bookings outpaced sales in the year, the Company ended the current fiscal year with a backlog of $437.8 million, a decrease of $33.9 million or 7.2% from the end of the prior year. This decrease is mainly attributable to the weakening of the Euro against the U.S. dollar over the course of the year, which had a $50.7 million negative impact on the Company's backlog in the year.
- Gross profit percentage remained relatively stable, marginally decreasing by 0.8 percentage points from 26.8% to 26.0%. While the Company had a greater proportion of higher margin product sales, particularly spare parts and valves without third party actuators, in the first half of the year, this trend was reversed in the second half 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 $49.9 million. This source of net cash2 is primarily attributable to positive cash net earnings1 and favourable working capital movements.
- The Company ended the year with net cash2 of $75.6 million, an increase of $7.9 million or 11.7% since the beginning of the current fiscal year. The Company's cash balance was negatively impacted by the
18.6% drop in the Euro spot rate against the U.S. dollar since the beginning of the current fiscal year, which resulted in a $14.4 million reduction in the Company's net cash2.
- Foreign currency impacts:
- Based on average exchange rates, the Euro weakened 2.9% against the U.S. dollar when compared to the same period 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 fiscal year.
- 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 fiscal year.
- The unfavourable impact of the Euro decrease was generally offset by the favourable impact of the Canadian dollar decrease.
Fourth Quarter Fiscal 2015 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the fourth quarter of fiscal 2014):
- Net earnings1 amounted to $4.7 million or $0.22 per share compared to $10.4 million or $0.47 per share last year. The $5.7 million decrease in net earnings1 is primarily attributable to a lower gross profit percentage partially offset by decreased administration costs, in particular lower freight costs, the securing of a research and development grant attributable to the Company's Italian operations in the quarter and a decrease in costs associated with the Company's ongoing asbestos litigation.
- Sales amounted to $114.5 million, a decrease of $6.2 million or 5.1%. Despite the strong push in the quarter to execute shipments of certain large project orders, the Company was not able to match the level of execution achieved in the same quarter of the prior year, particularly in its North American operations.
- Bookings, which were calculated based on actual orders received converted at average exchange rates, amounted to $101.1 million, a decrease of $38.5 million or 27.6%. The decrease in net bookings is primarily attributable to the fact that the prior year quarter had over $40 million worth of orders that were booked with two large Indian energy customers, which did not repeat in the current quarter.
- Gross profit percentage decreased by 4.9 percentage points from 30.3% to 25.4%. This decrease was primarily attributable to a product mix with a greater proportion of sales of lower margin products, such as complex and custom manufactured project valves, as opposed to higher margin products, such as spare parts.
- Foreign currency impacts:
- Based on average exchange rates, the Euro weakened 13.8% against the U.S. dollar when compared to the same period 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 9.5% 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 unfavourable impact of the Euro decrease was generally offset by the favourable impact of the Canadian dollar decrease.
"While Fiscal 2015 was a profitable year overall for Velan, with $18.6 million of net earnings1 which generated approximately $50 million of cash, the year presented its challenges, ranging from the soaring value of the U.S. dollar, the uncertainty caused by the plunging price of oil, and the contract issues related to certain large project orders," said John Ball, CFO of Velan Inc. "Fortunately the diversity of our geographic operations, product lines and customer base allowed us to weather these issues, and to maintain gross margins and increase net bookings."
Yves Leduc, President of Velan Inc., said, "We are driving an operational excellence plan in our North American operations, focused on improving our global supply chain performance, project execution and lead times, and cost competitiveness. These initiatives will strengthen our position in each of our markets worldwide."
Tom Velan, CEO of Velan Inc. said, "As we proved last year, the Company is resilient, able to withstand unexpected swings in demand, owing in large part to the knowhow of our people, our superior product portfolio and track record in quality, as well as to being diversified both geographically and by end user markets. We have a solid order backlog of $437.8 million, as we go after sales opportunities in a very competitive and challenging global market."
Dividend
The Board declared an eligible quarterly dividend of CDN$0.10 per share, payable on June 30, 2015, to all shareholders of record as at June 15, 2015.
Conference call
Financial analysts, shareholders, and other interested individuals are invited to attend the fourth quarter conference call to be held on Tuesday, May 19, 2015, at 4:30 p.m. (EDT). The toll free call-in number is 1-888- 273-1350, access code 21768781. A recording of this conference call will be available for seven days at 1-416- 626-4100 or 1-800-558-5253, access code 21768781.
About Velan
Velan Inc. (www.velan.com) is a world-leading manufacturer of industrial valves with sales of $455.7 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 Management Discussion and Analysis included in its Annual Report for the fiscal year ended February 28, 2015 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 | February 28, | February 28, | ||
| 2015 | 2014 | |||
| $ | $ | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 99,578 | 106,716 | ||
| Short-term investments | 847 | 239 | ||
| Accounts receivable | 105,335 | 128,978 | ||
| Income taxes recoverable | 5,472 | 5,465 | ||
| Inventories | 203,557 | 224,149 | ||
| Deposits and prepaid expenses | 5,326 | 5,046 | ||
| Derivative assets | 144 | 498 | ||
| 420,259 | 471,091 | |||
| Non-current assets | ||||
| Property, plant and equipment | 91,285 | 96,605 | ||
| Intangible assets and goodwill | 33,576 | 43,359 | ||
| Deferred income taxes | 12,392 | 11,406 | ||
| Other assets | 1,116 | 1,693 | ||
| 138,369 | 153,063 | |||
| Total assets | 558,628 | 624,154 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Bank indebtedness | 15,616 | 31,876 | ||
| Short-term bank loans | 2,134 | 916 | ||
| Accounts payable and accrued liabilities | 70,997 | 76,590 | ||
| Income taxes payable | 3,961 | 4,158 | ||
| Dividend payable | 1,755 | 1,586 | ||
| Customer deposits | 44,111 | 66,842 | ||
| Provisions | 7,874 | 8,060 | ||
| Accrual for performance guarantees | 30,012 | 33,842 | ||
| Derivative liabilities | 5,362 | 1,501 | ||
| Current portion of long-term debt | 10,644 | 10,402 | ||
| 192,466 | 235,773 | |||
| Non-current liabilities | ||||
| Long-term debt | 4,183 | 11,685 | ||
| Deferred income taxes | 8,349 | 9,270 | ||
| Other liabilities | 8,537 | 8,307 | ||
| 21,069 | 29,262 | |||
| Total liabilities | 213,535 | 265,035 | ||
| Equity | ||||
| Equity attributable to the Subordinate and Multiple Voting shareholders | ||||
| Share capital | 76,475 | 76,688 | ||
| Contributed surplus | 6,064 | 6,099 | ||
| Retained earnings | 283,724 | 272,867 | ||
| Accumulated other comprehensive income (loss) | (27,652 | ) | (3,589 | ) |
| 338,611 | 352,065 | |||
| Non-controlling interest | 6,482 | 7,054 | ||
| Total equity | 345,093 | 359,119 | ||
| Total liabilities and equity | 558,628 | 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 | Fiscal years ended | ||||||||
| February 28 | February 28 | ||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||
| $ | $ | $ | $ | ||||||
| Sales | 114,507 | 120,716 | 455,750 | 489,257 | |||||
| Cost of sales | 85,445 | 84,074 | 337,467 | 358,111 | |||||
| Gross profit | 29,062 | 36,642 | 118,283 | 131,146 | |||||
| Administration costs | 20,370 | 22,145 | 88,391 | 87,143 | |||||
| Other expense (income) | 373 | (1,316 | ) | 337 | (269 | ) | |||
| Operating profit (loss) | 8,319 | 15,813 | 29,555 | 44,272 | |||||
| Finance income | 287 | 256 | 1,067 | 859 | |||||
| Finance costs | 387 | 682 | 1,657 | 2,369 | |||||
| Finance income (costs) - net | (100 | ) | (426 | ) | (590 | ) | (1,510 | ) | |
| Income (Loss) before income taxes | 8,219 | 15,387 | 28,965 | 42,762 | |||||
| Provision for (Recovery of) income taxes | 3,672 | 4,733 | 9,773 | 11,759 | |||||
| Net income (loss) for the period | 4,547 | 10,654 | 19,192 | 31,003 | |||||
| Net income (loss) attributable to: | |||||||||
| Subordinate Voting Shares and Multiple Voting Shares | 4,718 | 10,392 | 18,580 | 29,400 | |||||
| Non-controlling interest | (171 | ) | 262 | 612 | 1,603 | ||||
| 4,547 | 10,654 | 19,192 | 31,003 | ||||||
| Net income (loss) per Subordinate and Multiple Voting Share | |||||||||
| Basic | 0.22 | 0.47 | 0.85 | 1.34 | |||||
| Diluted | 0.22 | 0.47 | 0.85 | 1.34 | |||||
| Dividends declared per Subordinate and Multiple | 0.09 | 0.08 | 0.36 | 0.31 | |||||
| Voting Share | (CA$0.10 | ) | (CA$0.08 | ) | (CA$0.40 | ) | (CA$0.32 | ) | |
| Total weighted average number of Subordinate and Multiple Voting Shares | |||||||||
| Basic | 21,947,725 | 21,958,768 | 21,947,725 | 21,936,714 | |||||
| Diluted | 21,962,474 | 21,962,693 | 21,962,617 | 21,936,714 | |||||
| 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 28 | |||||
| 2015 | 2014 | 2015 | 2014 | |||
| $ | $ | $ | $ | |||
| Comprehensive income (loss) | ||||||
| Net income (loss) for the period | 4,547 | 10,654 | 19,192 | 31,003 | ||
| Other comprehensive income (loss) | ||||||
| Foreign currency translation adjustment on foreign operations whose functional currency is other than the reportingcurrency (U.S. dollar) | (11,875 |
) | 1,265 |
(24,850 |
) | 6,311 |
| Foreign currency translation adjustment realized on the liquidation of a subsidiary whose functional currency isother than the reporting currency (U.S. dollar) | 636 |
- |
636 |
- |
||
| Comprehensive income (loss) | (6,692 | ) | 11,919 | (5,022 | ) | 37,314 |
| Comprehensive income (loss) attributable to: | ||||||
| Subordinate Voting Shares and Multiple Voting Shares | (6,628 | ) | 11,696 | (5,483 | ) | 35,624 |
| Non-controlling interest | (64 | ) | 223 | 461 | 1,690 | |
| (6,692 | ) | 11,919 | (5,022 | ) | 37,314 | |
| 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 | - | - | - | - | 18,580 | 18,580 | 612 | 19,192 | |||||||||
| Other comprehensive income (loss) | - | - | - | (24,063 | ) | - | (24,063 | ) | (151 | ) | (24,214 | ) | |||||
| 21,958,768 | 76,688 | 6,099 | (27,652 | ) | 291,447 | 346,582 | 7,515 | 354,097 | |||||||||
| Effect of share-based compensation | - | - | 15 | - | - | 15 | - | 15 | |||||||||
| Dividends | |||||||||||||||||
| Multiple Voting Shares | - | - | - | - | (5,447 | ) | (5,447 | ) | - | (5,447 | ) | ||||||
| Subordinate Voting Shares | - | - | - | - | (2,233 | ) | (2,233 | ) | - | (2,233 | ) | ||||||
| Non-controlling interest | - | - | - | - | - | - | (1,033 | ) | (1,033 | ) | |||||||
| Share repurchase | (19,600 | ) | (213 | ) | (50 | ) | - | (43 | ) | (306 | ) | - | (306 | ) | |||
| Balance - February 28, 2015 | 21,939,168 | 76,475 | 6,064 | (27,652 | ) | 283,724 | 338,611 | 6,482 | 345,093 | ||||||||
| 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 ended | Fiscal years ended | ||||||||
| February 28 | February 28 | ||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||
| $ | $ | $ | $ | ||||||
| Cash flows from | |||||||||
| Operating activities | |||||||||
| Net income for the period | 4,547 | 10,654 | 19,192 | 31,003 | |||||
| Adjustments to reconcile net income to cash provided by operating activities | 5,934 |
5,059 |
19,445 |
15,890 |
|||||
| Changes in non-cash working capital items | 14,726 | (2,328 | ) | 11,279 | 28,566 | ||||
| Cash provided (used) by operating activities | 25,207 | 13,385 | 49,916 | 75,459 | |||||
| Investing activities | |||||||||
| Short-term investments | (529 | ) | 1,937 | (608 | ) | 159 | |||
| Additions to property, plant and equipment | (2,559 | ) | (3,262 | ) | (12,822 | ) | (17,953 | ) | |
| Additions to intangible assets | - | (132 | ) | (400 | ) | (397 | ) | ||
| Proceeds on disposal of property, plant and equipment, and intangible assets | - |
309 |
160 |
396 |
|||||
| Net change in other assets | 121 | 53 | 576 | 44 | |||||
| Cash provided (used) by investing activities | (2,967 | ) | (1,095 | ) | (13,094 | ) | (17,751 | ) | |
| Financing activities | |||||||||
| Dividends paid to Subordinate and Multiple Voting shareholders | (1,913 | ) | (1,655 | ) | (7,511 | ) | (6,777 | ) | |
| Dividends paid to non-controlling interest | (947 | ) | - | (1,033 | ) | (103 | ) | ||
| Shares issued under Share Option Plan | - | - | - | 374 | |||||
| Repurchase of shares | (14 | ) | - | (306 | ) | - | |||
| Payment of proceeds payable | - | - | - | (1,960 | ) | ||||
| Short-term bank loans | 351 | (339 | ) | 1,218 | (1,368 | ) | |||
| Increase in long-term debt | - | - | - | 2,654 | |||||
| Repayment of long-term debt | (1,459 | ) | (1,847 | ) | (6,326 | ) | (8,430 | ) | |
| Cash provided (used) by financing activities | (3,982 | ) | (3,841 | ) | (13,958 | ) | (15,610 | ) | |
| Effect of exchange rate differences on cash | (8,366 | ) | 1,494 | (13,742 | ) | 4,150 | |||
| Net change in cash during the period | 9,892 | 9,943 | 9,122 | 46,248 | |||||
| Net cash - Beginning of the period | 74,070 | 64,897 | 74,840 | 28,592 | |||||
| Net cash - End of the period | 83,962 | 74,840 | 83,962 | 74,840 | |||||
| Net cash is composed of: | |||||||||
| Cash and cash equivalents | 99,578 | 106,716 | 99,578 | 106,716 | |||||
| Bank indebtedness | (15,616 | ) | (31,876 | ) | (15,616 | ) | (31,876 | ) | |
| 83,962 | 74,840 | 83,962 | 74,840 | ||||||
| Supplementary information | |||||||||
| Interest received (paid) | (16 | ) | (329 | ) | (117 | ) | (1,062 | ) | |
| Income taxes reimbursed (paid) | (3,954 | ) | (1,473 | ) | (9,357 | ) | (3,946 | ) | |
Contact Information:
Tom Velan
Chief Executive Officer
(514) 748-7743
(514) 748-8635 (FAX)
www.velan.com
VELAN Inc.
John D. Ball
Chief Financial Officer
(514) 748-7743
(514) 748-8635 (FAX)