This document corrects and replaces the release sent earlier today at 2:34 PM EDT.
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, 2013.
Highlights
-- Record sales of US$500.6 million for the year
-- Adjusted net earnings(1) of US$15.4 million for the year
-- Order backlog of US$531 million at year-end
-- Order bookings of US$370.1 million for the year
Three-month periods ended Fiscal years ended
----------------------------------------------------
(millions of U.S.
dollars, excluding per
share amounts) February 28, February 29, February 28, February 29,
2013 2012 2013 2012
----------------------------------------------------
Sales $142.1 $117.8 $500.6 $437.1
Gross profit 30.4 23.0 113.9 87.3
Gross profit % 21.4% 19.5% 22.8% 20.0%
Adjusted net earnings(1) 5.9 3.6 15.4 5.7
Adjusted net
earnings(1)per share -
Basic & Diluted 0.27 0.16 0.70 0.26
Net earnings (loss) (2) (3.6) 5.9 6.2 7.9
Net earnings
(loss)(2)per share -
Basic & Diluted (0.16) 0.27 0.28 0.36
Year-ended fiscal 2013 (unless otherwise noted, all amounts are in U.S. dollars
and all comparisons are to the prior fiscal year):
-- Net earnings(2)amounted to $6.2 million or $0.28 per share compared to
$7.9 million or $0.36 per share last year. The net earnings(2)for the
year were significantly impacted by an $11.7 million non-cash goodwill
impairment charge related to the Company's 70%-owned Italian subsidiary,
Velan ABV S.p.A. ("ABV"). Excluding this charge and other related fair
value adjustments, the Company's adjusted net earnings(1)amounted to
$15.4 million or $0.70 per share compared to $5.7 million or $0.26 per
share last year. Further adjusting for the results of ABV and foreign
currency fluctuations, the Company's adjusted net operating
results(1)would have been $19.2 million or $0.87 per share this year
compared to $12.5 million or $0.56 per share last year.
(1) Non-IFRS measure - see explanation below.
(2) Net earnings or loss refers to net income or loss attributable to
Subordinate and Multiple Voting Shares.
-- Net new orders received ("bookings") amounted to $370.1 million, a
decrease of $158.9 million or 30% compared to last year. Excluding the
results of ABV, bookings decreased by $138.9 million or 28.7%. Further
adjusting for currency impacts, the decrease would have been $144.2
million or 27.3%.
-- Sales amounted to a record total of $500.6 million, an increase of $63.5
million or 14.5%. Excluding the results of ABV and currency impacts,
sales would have increased by $52.4 million or 12.6%.
-- Gross profit percentage increased by 2.8 percentage points from 20% to
22.8%. Excluding the results of ABV and the effects of purchase price
accounting, gross profit percentage increased by 2.4 percentage points
from 22.2% to 24.6%. Further adjusting for currency impacts, the gross
profit percentage would have been 24.8% for the current year.
-- The Company generated net cash(1) from operations of $14.4 million. This
source of net cash(1)is primarily attributable to an increase in
operational profitability combined with improved non-cash working
capital management.
-- While there were no significant fluctuations in the average rate of the
U.S. dollar against the Canadian dollar over the course of the current
year, the Company's results were impacted by the fluctuations of the
euro. Based on average exchange rates, the euro weakened 6.9% 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
year.
Fourth Quarter Fiscal 2013 (unless otherwise noted, all amounts are in U.S.
dollars and all comparisons are to the fourth quarter of fiscal 2012):
-- Net loss(2)amounted to $3.6 million or $0.16 per share compared to net
earnings(2)of $5.9 million or $0.27 per share last year. Adjusted net
earnings(1)amounted to $5.9 million or $0.27 per share compared to $3.6
illion or $0.16 per share last year. Further adjusting for foreign
currency fluctuations, the Company's adjusted net operating
results(1)for the quarter would have been $6.3 million or $0.28 per
share this year compared to $2.5 million or $0.11 per share last year.
-- Net new orders received ("bookings") amounted to $96.7 million, a
decrease of $29.2 million or 23.2% compared to last year. Excluding
currency impacts, the decrease would have been 24.7%. The Company ended
the quarter with a backlog of $531 million, a decrease of $130.8 million
from the end of the prior year. Excluding currency impacts, the backlog
would have decreased by $124 million over the same period to $537.8
million.
-- Sales amounted to $142.1 million, an increase of $24.3 million or 20.6%.
Excluding currency impacts, sales would have increased by $22 million or
18.7%.
-- Gross profit percentage increased by 1.9 percentage points from 19.5% to
21.4%. Excluding currency impacts, the gross profit percentage would
have increased by 2.4 percentage points in the quarter. This favourable
variance was principally due to higher sales volume to cover production
overhead expenses, especially in the Company's North American
operations, coupled with improved production efficiencies in its Italian
operations.
-- The Company generated net cash(1)from operations of $23.1 million in the
quarter, an increase of $7.5 million from the prior year. This increase
was principally related to non-cash working capital movements,
specifically a decrease in inventory.
"We were generally pleased about the progress for the year, notwithstanding the
challenges to our earnings posed by the integration of the Italian company
acquired in 2011 and the continued depreciation of the Euro against the U.S.
dollar," said John Ball, CFO of Velan Inc. "Our investments in our manufacturing
capacity both in Canada and Asia have been extensive and should start to pay
dividends. Our balance sheet remains healthy and well financed and our backlog
is now at a manageable level."
Tom Velan, President and CEO of Velan Inc. said, "We are pleased to have reached
the $500 million sales milestone and we are starting this year with a good order
backlog of $531 million. Our challenge will be to continue the high level of
production of our complex project order backlog while using our shorter
lead-times to increase our order bookings from last year's level."
"We have expanded our local manufacturing presence in Korea, China and India
with an objective to lower production costs and increase our local sales in
Asia. During the last year, we invested $28.5 million in our global
manufacturing infrastructure. In our North American operations, we invested in
large test fixtures, robotic welding, and computer numeric control ("CNC")
machines. We also modified some of our production cells for improved production
flow in accordance with Lean principles. We completed construction of a new
greenfield plant in southern India and started to manufacture small forged
valves; the plant will expand into other products in the future and will supply
valves to the Indian and global markets. In China, we invested in test fixtures,
CNC machines, and robotic welding to produce pressure seal valves for the
Chinese power market. In Korea, we are establishing a new production line for
larger valves to better service Korean engineering, procurement, and
construction customers."
"We are continuing to take measures to improve our operational excellence and
cost competitiveness, while strengthening our presence in international markets
in order to improve our performance. Now, we are working to continue to build on
the positive momentum to further improve our performance and operating results."
Dividend
The Board declared an eligible quarterly dividend of Canadian dollar $0.08 per
share, payable on June 28, 2013, to all shareholders of record as at June 14,
2013.
Conference call
Financial analysts, shareholders, and other interested individuals are invited
to attend the fourth quarter conference call to be held on May 28, 2013, at 4:30
PM (EST). The toll free call-in number is 1-888-224-7971, access code 21658132.
A recording of this conference call will be available for seven days at
1-416-626-4100 or 1-800-558-5253, access code 21658132.
About Velan
Velan Inc. (www.velan.com) is a world-leading manufacturer of industrial valves
with sales of over $500 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 earnings" is defined as net income or loss attributable
to Subordinate and Multiple Voting Shares excluding a goodwill impairment loss
of $11.7 million for the current quarter and fiscal year, and positive fair
value adjustments to the ABV purchase price proceeds payable. For both the
current year and prior year quarters, as well as for the prior fiscal year, the
amount of such fair value adjustment was $2.2 million. For the current fiscal
year, the amount was $2.4 million.
The term "adjusted net operating results" for the annual results is defined as
net income or loss attributable to Subordinate and Multiple Voting Shares
excluding the net loss of ABV, the goodwill impairment loss, the purchase price
accounting and interest accretion adjustments, the positive fair value
adjustments to the ABV purchase price proceeds payable, and the impact of
currency changes. 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 "adjusted net operating results" for the quarterly results is defined
as net income or loss attributable to Subordinate and Multiple Voting Shares
excluding the goodwill impairment loss, the positive fair value adjustments to
the ABV purchase price proceeds payable, and the impact of currency changes.
Refer to the "Reconciliations and Non-IFRS Measures" section in the Company's
MD&A for a detailed calculation of this measure.
Note that, for the calculation of the adjusted net operating results for the
quarter, the net loss of ABV, as well as the purchase price accounting and
interest accretion adjustments were not included as adjustments because both
comparable periods included such items for the entire applicable period. The
Company included these adjustments in the calculation of adjusted net operating
results for the full fiscal year since the acquisition of ABV occurred part way
through the 2012 fiscal year. As such, both periods would not be comparable
since fiscal year 2012 includes 10 months of activity for ABV while fiscal year
2013 includes 12 months of activity.
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 and Non- IFRS
Measures" section in the Company's MD&A for a detailed calculation of this
measure.
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,
2013 2012 2013 2012
$ $ $ $
Sales 142,070 117,784 500,574 437,135
Cost of sales 111,640 94,779 386,675 349,873
-------------------------------------------------------------
Gross profit 30,430 23,005 113,899 87,262
Administration
costs 22,445 21,406 90,985 83,620
Goodwill
impairment
loss 11,700 - 11,700 -
Other expense
(income) (2,646) (3,489) (3,364) (3,806)
-------------------------------------------------------------
Operating
profit (loss) (1,069) 5,088 14,578 7,448
Finance income 131 88 631 318
Finance costs 614 633 3,191 1,669
-------------------------------------------------------------
Finance income
(costs) - net (483) (545) (2,560) (1,351)
-------------------------------------------------------------
Income (Loss)
before income
tax (1,552) 4,543 12,018 6,097
Provision for
(Recovery of)
income tax 1,967 145 5,284 348
-------------------------------------------------------------
Net income
(loss) for the
period (3,519) 4,398 6,734 5,749
-------------------------------------------------------------
-------------------------------------------------------------
Net income
(loss)
attributable
to:
Subordinate
Voting Shares
and Multiple
Voting Shares (3,555) 5,864 6,169 7,892
Non-controlling
interest 36 (1,466) 565 (2,143)
-------------------------------------------------------------
(3,519) 4,398 6,734 5,749
-------------------------------------------------------------
-------------------------------------------------------------
Net income
(loss) per
Subordinate
and Multiple
Voting Share
Basic (0.16) 0.27 0.28 0.36
Diluted (0.16) 0.27 0.28 0.36
-------------------------------------------------------------
-------------------------------------------------------------
Dividends
declared per
Subordinate
and Multiple 0.08 0.08 0.32 0.32
Voting Share (CDN$0.08) (CDN$0.08) (CDN$0.32) (CDN$0.32)
-------------------------------------------------------------
-------------------------------------------------------------
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,
2013 2012 2013 2012
$ $ $ $
Comprehensive income
(loss)
Net income (loss) for
the period (3,519) 4,398 6,734 5,749
Other comprehensive
income (loss)
Foreign currency
translation adjustment
on foreign operations
whose functional
currency is other than
the U.S. dollar 152 (251) (4,531) (7,461)
----------------------------------------------------
Comprehensive income
(loss) (3,367) 4,147 2,203 (1,712)
----------------------------------------------------
----------------------------------------------------
Comprehensive income
(loss) attributable to:
Subordinate Voting
Shares and Multiple
Voting Shares (3,451) 5,490 1,710 1,400
Non-controlling interest 84 (1,343) 493 (3,112)
----------------------------------------------------
(3,367) 4,147 2,203 (1,712)
----------------------------------------------------
----------------------------------------------------
Velan Inc.
Condensed Interim Consolidated Statements of Financial Position
(Unaudited)
(in thousands of U.S. dollars)
----------------------------------------------------------------------------
As at As at
February 28, February 29,
2013 2012
$ $
Assets
Current assets
Cash and cash equivalents 77,172 65,414
Short-term investments 398 4,954
Accounts receivable 134,374 111,856
Income taxes recoverable 7,672 9,682
Inventories 246,983 258,684
Deposits and prepaid expenses 6,048 6,209
Derivative assets 340 1,737
-------------------------------
472,987 458,536
Non-current assets
Property, plant and equipment 90,630 72,961
Intangible assets and goodwill 43,194 58,845
Deferred income taxes 11,226 10,152
Other assets 1,737 1,476
-------------------------------
146,787 143,434
-------------------------------
Total assets 619,774 601,970
-------------------------------
-------------------------------
Liabilities
Current liabilities
Bank indebtedness 48,580 32,438
Short-term bank loans 2,284 858
Accounts payable and accrued liabilities 78,431 82,088
Income tax payable 2,831 2,484
Dividend payable 1,701 1,791
Customer deposits 76,682 86,544
Provisions 6,345 5,149
Accrual for performance guarantees 28,525 21,679
Derivative liabilities 1,380 534
Current portion of long-term debt 10,463 1,696
Current portion of other liabilities 1,951 5,753
-------------------------------
259,173 241,014
Non-current liabilities
Long-term debt 16,387 7,891
Deferred income taxes 8,035 8,270
Other liabilities 8,006 9,218
-------------------------------
32,428 25,379
-------------------------------
Total liabilities 291,601 266,393
-------------------------------
Equity
Equity attributable to Subordinate and
Multiple Voting shareholders
Share capital 76,314 78,764
Contributed surplus 1,746 1,871
Retained earnings 250,129 250,951
Accumulated other comprehensive income (loss) (8,676) (4,217)
-------------------------------
319,513 327,369
Non-controlling interest 8,660 8,208
-------------------------------
Total equity 328,173 335,577
-------------------------------
Total liabilities and equity 619,774 601,970
-------------------------------
-------------------------------
Velan Inc.
Condensed Interim Consolidated Statements of Changes in Equity
(Unaudited)
(in thousands of U.S. dollars, excluding number of shares)
----------------------------------------------------------------------------
Equity attributable to Subordinate and Multiple Voting
shareholders
-------------------------------------------------------------
Accumulated
other
Share Contributed comprehensive Retained
capital surplus income (loss) earnings Total
-------------------------------------------------------------
Balance - March
1, 2011 79,271 1,898 2,275 250,254 333,698
Net income
(loss) for the
year - - - 7,892 7,892
Other
comprehensive
loss - - (6,492) - (6,492)
-------------------------------------------------------------
79,271 1,898 (4,217) 258,146 335,098
Effect of
share-based
compensation - 71 - - 71
Dividends
Multiple
Voting
Shares - - - (5,022) (5,022)
Subordinate
Voting
Shares - - - (2,173) (2,173)
Non-
controlling
interest - - - - -
Share
repurchase (507) (98) - - (605)
Non-controlling
interest
arising on
acquisition - - - - -
-------------------------------------------------------------
Balance -
February 29,
2012 78,764 1,871 (4,217) 250,951 327,369
-------------------------------------------------------------
-------------------------------------------------------------
Balance - March
1, 2012 78,764 1,871 (4,217) 250,951 327,369
Net income for
the year - - - 6,169 6,169
Other
comprehensive
loss - - (4,459) - (4,459)
-------------------------------------------------------------
78,764 1,871 (8,676) 257,120 329,079
Effect of
share-based
compensation - 58 - - 58
Dividends
Multiple
Voting
Shares - - - (4,988) (4,988)
Subordinate
Voting
Shares - - - (2,003) (2,003)
Non-
controlling
interest - - - - -
Share
repurchase (2,450) (183) - - (2,633)
-------------------------------------------------------------
Balance -
February 28,
2013 76,314 1,746 (8,676) 250,129 319,513
-------------------------------------------------------------
-------------------------------------------------------------
Non-controlling
interest Total equity
--------------------------------
Balance - March
1, 2011 4,025 337,723
Net income
(loss) for the
year (2,143) 5,749
Other
comprehensive
loss (969) (7,461)
--------------------------------
913 336,011
Effect of
share-based
compensation - 71
Dividends
Multiple
Voting
Shares - (5,022)
Subordinate
Voting
Shares - (2,173)
Non-
controlling
interest (948) (948)
Share
repurchase - (605)
Non-controlling
interest
arising on
acquisition 8,243 8,243
--------------------------------
Balance -
February 29,
2012 8,208 335,577
--------------------------------
--------------------------------
Balance - March
1, 2012 8,208 335,577
Net income for
the year 565 6,734
Other
comprehensive
loss (72) (4,531)
--------------------------------
8,701 337,780
Effect of
share-based
compensation - 58
Dividends
Multiple
Voting
Shares - (4,988)
Subordinate
Voting
Shares - (2,003)
Non-
controlling
interest (41) (41)
Share
repurchase - (2,633)
--------------------------------
Balance -
February 28,
2013 8,660 328,173
--------------------------------
--------------------------------
Velan Inc.
Condensed Interim Consolidated Statements of Cash Flows
(Unaudited)
(in thousands of U.S. dollars)
----------------------------------------------------------------------------
Three-month periods
ended Fiscal years ended
February 28 February 29 February 28 February 29
2013 2012 2013 2012
Cash flows from $ $ $ $
Operating activities
Net income (loss) for the
period (3,519) 4,398 6,734 5,749
Adjustments to reconcile
net income (loss) to cash
provided operating
activities
Depreciation of property,
plant and equipment 2,631 2,451 9,572 8,847
Amortization of
intangible assets 658 494 2,915 4,330
Deferred income taxes 348 (2,417) (1,325) (2,929)
Share-based compensation
expense 15 21 58 71
Loss (Gain) on disposal
of property, plant and
equipment 10 (25) (134) (14)
Goodwill impairment loss 11,700 - 11,700 -
Interest accretion on
proceeds payable 158 244 663 946
Income from fair value
adjustment of proceeds
payable (2,248) (2,230) (2,444) (2,230)
Unrealized foreign
exchange gain on
proceeds payable 18 (978) (407) (978)
Net change in derivative
assets and liabilities 683 (1,966) 2,169 1,649
Net change in other
liabilities 683 790 622 684
-------------------------------------------------
11,137 782 30,123 16,125
Changes in non-cash working
capital items 11,913 14,818 (15,711) (28,893)
-------------------------------------------------
Cash provided (used) by
operating activities 23,050 15,600 14,412 (12,768)
-------------------------------------------------
Investing activities
Short -term investments 1,881 (3,440) 4,556 (4,867)
Additions to property,
plant and equipment (5,811) (3,770) (28,452) (12,710)
Additions to intangible
assets (279) (1,102) (684) (1,840)
Proceeds on disposal of
property, plant and
equipment, and intangible
assets 521 39 905 100
Net change in other assets (3) (235) (270) (87)
Business acquisition - net
of cash acquired - - - (37,281)
-------------------------------------------------
Cash provided (used) by
investing activities (3,691) (8,508) (23,945) (56,685)
-------------------------------------------------
Financing activities
Dividends paid to
Subordinate and Multiple
Voting shareholders (1,780) (1,781) (7,081) (7,234)
Dividends paid to non-
controlling interest - (864) (41) (948)
Repurchase of shares (217) (217) (2,633) (605)
Payment of proceeds payable (560) - (3,465) -
Short -term bank loans 172 11 1,426 (4,831)
Increase in long-term debt 342 609 21,057 5,221
Repayment of long-term debt (1,772) (366) (4,478) (3,002)
-------------------------------------------------
Cash provided (used) by
financing activities (3,815) (2,608) 4,785 (11,399)
-------------------------------------------------
Effect of exchange rate
differences on cash 1,124 503 364 (534)
-------------------------------------------------
Net change in cash during
the period 16,668 4,987 (4,384) (81,386)
Net cash - Beginning of the
period 11,924 27,989 32,976 114,362
-------------------------------------------------
Net cash - End of the
period 28,592 32,976 28,592 32,976
-------------------------------------------------
Net cash is composed of:
Cash and cash equivalents 77,172 65,414 77,172 65,414
Bank indebtedness (48,580) (32,438) (48,580) (32,438)
-------------------------------------------------
Supplementary information 28,592 32,976 28,592 32,976
-------------------------------------------------
Interest received (paid) (546) 197 (1,895) (555)
Income taxes received
(paid) 240 (888) (2,042) (6,742)
FOR FURTHER INFORMATION PLEASE CONTACT:
Tom Velan
President and Chief Executive Officer
(514) 748-7743
(514) 748-8635 (FAX)
John D. Ball
Chief Financial Officer
(514) 748-7743
(514) 748-8635 (FAX)
www.velan.com
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