Velan Inc. Reports its Year-End and Fourth Quarter 2013/14 Financial Results

Velan Inc. Reports its Year-End and Fourth Quarter 2013/14 Financial Results 
NEWS RELEASE TRANSMITTED BY Marketwired 
FOR: VELAN Inc. 
TSX SYMBOL:  VLN 
MAY 20, 2014 
Velan Inc. Reports its Year-End and Fourth Quarter 2013/14 Financial Results 
MONTREAL, QUEBEC--(Marketwired - May 20, 2014) - 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 
/T/ 
--  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  
/T/ 
Year-ended fiscal 2014 (unless otherwise noted, all amounts are in U.S. dollars
and all comparisons are to the prior fiscal year): 
/T/ 
--  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. 
/T/ 
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): 
/T/ 
--  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.  
/T/ 
"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. 
/T/ 
(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.                               
/T/ 
/T/ 
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) 
/T/ 
-30-
FOR FURTHER INFORMATION PLEASE CONTACT: 
VELAN Inc.
Tom Velan
President and Chief Executive Officer
(514) 748-7743
(514) 748-8635
or
VELAN Inc.
John D. Ball
Chief Financial Officer
(514) 748-7743
(514) 748-8635
www.velan.com 
INDUSTRY:  Manufacturing and Production - Machinery and Tools 
SUBJECT:  ERN 
-0-
-0- May/20/2014 17:58 GMT
 
 
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