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CORRECTION FROM SOURCE/Velan Inc. Reports its Year-End and Fourth Quarter 2012/13 Financial Results

May 28 2013 12:00AM

Marketwire

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MONTREAL, QUEBEC -- (Marketwired) -- 05/28/13 -- 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 $437.1Gross profit 30.4 23.0 113.9 87.3Gross profit % 21.4% 19.5% 22.8% 20.0%Adjusted net earnings(1) 5.9 3.6 15.4 5.7Adjusted net earnings(1)per share - Basic & Diluted 0.27 0.16 0.70 0.26Net earnings (loss) (2) (3.6) 5.9 6.2 7.9Net 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 shareamounts)---------------------------------------------------------------------------- Three-month periods ended Fiscal years ended February 28, February 29, February 28, February 29, 2013 2012 2013 2012 $ $ $ $Sales 142,070 117,784 500,574 437,135Cost of sales 111,640 94,779 386,675 349,873 -------------------------------------------------------------Gross profit 30,430 23,005 113,899 87,262Administration costs 22,445 21,406 90,985 83,620Goodwill 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 7,448Finance income 131 88 631 318Finance 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 6,097Provision 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 7,892Non-controlling interest 36 (1,466) 565 (2,143) ------------------------------------------------------------- (3,519) 4,398 6,734 5,749 ------------------------------------------------------------- -------------------------------------------------------------Net income (loss) per Subordinate and MultipleVoting ShareBasic (0.16) 0.27 0.28 0.36Diluted (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 5,749Other 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 1,400Non-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 $ $AssetsCurrent assetsCash and cash equivalents 77,172 65,414Short-term investments 398 4,954Accounts receivable 134,374 111,856Income taxes recoverable 7,672 9,682Inventories 246,983 258,684Deposits and prepaid expenses 6,048 6,209Derivative assets 340 1,737 ------------------------------- 472,987 458,536Non-current assetsProperty, plant and equipment 90,630 72,961Intangible assets and goodwill 43,194 58,845Deferred income taxes 11,226 10,152Other assets 1,737 1,476 ------------------------------- 146,787 143,434 -------------------------------Total assets 619,774 601,970 ------------------------------- -------------------------------LiabilitiesCurrent liabilitiesBank indebtedness 48,580 32,438Short-term bank loans 2,284 858Accounts payable and accrued liabilities 78,431 82,088Income tax payable 2,831 2,484Dividend payable 1,701 1,791Customer deposits 76,682 86,544Provisions 6,345 5,149Accrual for performance guarantees 28,525 21,679Derivative liabilities 1,380 534Current portion of long-term debt 10,463 1,696Current portion of other liabilities 1,951 5,753 ------------------------------- 259,173 241,014Non-current liabilitiesLong-term debt 16,387 7,891Deferred income taxes 8,035 8,270Other liabilities 8,006 9,218 ------------------------------- 32,428 25,379 -------------------------------Total liabilities 291,601 266,393 -------------------------------EquityEquity attributable to Subordinate and Multiple Voting shareholdersShare capital 76,314 78,764Contributed surplus 1,746 1,871Retained earnings 250,129 250,951Accumulated other comprehensive income (loss) (8,676) (4,217) ------------------------------- 319,513 327,369Non-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 2,275 250,254 333,698Net income (loss) for the year - - - 7,892 7,892Other comprehensive loss - - (6,492) - (6,492) ------------------------------------------------------------- 79,271 1,898 (4,217) 258,146 335,098Effect of share-based compensation - 71 - - 71Dividends 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) 250,951 327,369Net income for the year - - - 6,169 6,169Other comprehensive loss - - (4,459) - (4,459) ------------------------------------------------------------- 78,764 1,871 (8,676) 257,120 329,079Effect of share-based compensation - 58 - - 58Dividends 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 4,025 337,723Net income (loss) for the year (2,143) 5,749Other comprehensive loss (969) (7,461) -------------------------------- 913 336,011Effect of share-based compensation - 71Dividends 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 8,208 335,577Net income for the year 565 6,734Other comprehensive loss (72) (4,531) -------------------------------- 8,701 337,780Effect of share-based compensation - 58Dividends 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 2012Cash flows from $ $ $ $Operating activitiesNet income (loss) for the period (3,519) 4,398 6,734 5,749Adjustments 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 16,125Changes 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 activitiesShort -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 100Net 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 activitiesDividends 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 5,221Repayment 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)





Contacts:
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





Source: Marketwire


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