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 earnings(1) 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 cash(2) 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, February February February February
excluding per share amounts) 28, 28, 28, 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
results(2) 10.4 6.1 29.4 15.8
Adjusted net operating
results(2) 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 earnings(1) 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 earnings(1) is primarily attributable to improved gross profit
margins and lower administration costs. Furthermore, net earnings(1) 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 results(2) 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 cash(2) from operations of $75.5 million. This
source of net cash(2) is primarily attributable to improved net
earnings(1) and a decrease in inventory. The Company ended the year with
net cash(2) 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.
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 earnings(1) amounted to $10.4 million or $0.47 per share compared to
a net loss(1) 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
results(2) 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 results(2) 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 cash(2) from operations of $13.4 million in
the quarter. This source of net cash(2) was primarily attributable to
improved net earnings(1).
-- 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.
"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
-------------------------------------------------
Accumulated
Number other
of Share Contributed comprehensive
shares capital surplus income (loss)
-------------------------------------------------
Balance - February 29, 2012 22,148,968 78,764 1,871 (4,217)
Net income (loss) for the
period - - - -
Other comprehensive income
(loss) - - - (4,459)
-------------------------------------------------
22,148,968 78,764 1,871 (8,676)
Effect of share-based
compensation - - 58 -
Dividends
Multiple Voting Shares - - - -
Subordinate Voting Shares - - - -
Non-controlling interest - - - -
Share repurchase (225,200) (2,450) (183) -
-------------------------------------------------
Balance - February 28, 2013 21,923,768 76,314 1,746 (8,676)
Net income (loss) for the
period - - - -
Other comprehensive income
(loss) - - - 6,224
-------------------------------------------------
21,923,768 76,314 1,746 (2,452)
Effect of share-based
compensation - - 23 -
Shares issued under Share
Option Plan 35,000 374 - -
Dividends
Multiple Voting Shares - - - -
Subordinate Voting Shares - - - -
Non-controlling interest - - - -
Acquisition of non-
controlling interest - - 4,330 (1,137)
-------------------------------------------------
Balance - February 28, 2014 21,958,768 76,688 6,099 (3,589)
-------------------------------------------------
-------------------------------------------------
Equity attributable to
the Subordinate and
Multiple Voting
shareholders
------------------------
Non-
Retained controlling Total
earnings Total interest equity
-------------------------------------------------
Balance - February 29, 2012 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) (72) (4,531)
-------------------------------------------------
257,120 329,079 8,701 337,780
Effect of share-based
compensation - 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 - (2,633) - (2,633)
-------------------------------------------------
Balance - February 28, 2013 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 87 6,311
-------------------------------------------------
279,529 355,137 10,350 365,487
Effect of share-based
compensation - 23 - 23
Shares issued under Share
Option Plan - 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 - 3,193 (3,193) -
-------------------------------------------------
Balance - February 28, 2014 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)
FOR FURTHER INFORMATION PLEASE CONTACT:
VELAN Inc.
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
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