Le Lézard
Classified in: Business
Subject: EARNINGS

Velan Inc. Reports Its Third Quarter 2018/19 Financial Results


MONTREAL, Jan. 10, 2019 (GLOBE NEWSWIRE) -- Velan Inc. (TSX: VLN) (the "Company"), a world-leading manufacturer of industrial valves, announced today its financial results for its third quarter ended November 30, 2018.

Highlights

(millions of U.S. dollars, excluding per share amounts)Three-month periods ended
November 30
 Nine-month periods ended
November 30
20182017 20182017
Sales$92.3$87.7 $261.5$235.4
Gross Profit322.623.2 59.752.8
Gross profit3 %24.5%26.5% 22.8%22.4%
EBITDA23.43.4 3.3(3.3)
EBITDA2 per share ? basic and diluted0.160.16 0.15(0.15)
Net earnings (loss)1(0.2)0.3 (6.4)(9.6)
Net earnings (loss)1 per share ? basic and diluted(0.01)0.02 (0.30)(0.44)

Third Quarter Fiscal 2019 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the third quarter of fiscal 2018):

First Nine Months Fiscal 2019 (unless otherwise noted, all amounts are in U.S. dollars and all comparisons are to the first nine months of fiscal 2018):

"Although our third quarter was essentially break-even, we noted that the trend of higher order bookings and sales continued. Our SG&A costs decreased for the quarter both in absolute terms and as a percentage of sales, in spite of some heavy freight charges for a large export order as well as continued investment in our transformation initiative," said John Ball, CFO of Velan Inc.  "Our balance sheet remains solid, and we reduced our investment in receivables and inventory even with an increase in sales and backlog. The backlog increase was achieved despite being negatively impacted by the weakening of the euro spot rate against the U.S. dollar since the beginning of the year. Our quarter end net book value per share was US$14.25 per share, which includes cash of US$2.31 per share."      

Yves Leduc, President and CEO of Velan Inc., said, "Once again, we noted improvements on several fronts this quarter. Our sales and bookings were significantly higher than last year, and our backlog has also improved since the beginning of the fiscal year. We recently reorganized into strategic business units to better serve our customers. We are also undertaking several transformative initiatives to return to profitability, including the very important decision to consolidate the Company's valve manufacturing facilities in Quebec (Canada) from three plants into two as disclosed in a separate press release issued today"

Dividend

The Board declared an eligible quarterly dividend of CDN$0.03 per share, payable on March 29, 2019, to all shareholders of record as at March 15, 2019.

Conference call

Financial analysts, shareholders, and other interested individuals are invited to attend the third quarter conference call to be held on Friday, January 12, 2019, at 10:00 a.m. (EDT). The toll free call-in number is 1?800?785?6380, access code 21913385. A recording of this conference call will be available for seven days at 1?416?626?4100 or 1?800?558?5253, access code 21913385.

About Velan

Founded in Montreal in 1950, Velan Inc. (www.velan.com) is one of the world's leading manufacturers of industrial valves, with sales of US$338 million in its last reported fiscal year. The Company employs over 1,800 people and has manufacturing plants in 9 countries. Velan Inc. is a public company with its shares listed on the Toronto Stock Exchange under the symbol VLN.

Safe harbour statement

This news release may include forward-looking statements, which generally contain words like "should", "believe", "anticipate", "plan", "may", "will", "expect", "intend", "continue" or "estimate" or the negatives of these terms or variations of them or similar expressions, all of which are subject to risks and uncertainties, which are disclosed in the Company's filings with the appropriate securities commissions. While these statements are based on management's assumptions regarding historical trends, current conditions and expected future developments, as well as other factors that it believes are reasonable and appropriate in the circumstances, no forward-looking statement can be guaranteed and actual future results may differ materially from those expressed herein. The Company disclaims any intention or obligation to update or revise any forward-looking statements contained herein whether as a result of new information, future events or otherwise, except as required by the applicable securities laws. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

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 "EBITDA" is defined as net income or loss attributable to Subordinate and Multiple Voting Shares plus depreciation of property, plant & equipment, plus amortization of intangible assets, plus net finance costs plus income tax provision. Refer to the "Reconciliations of Non-IFRS Measures" section in the Company's Management Discussion and Analysis included in its Interim Report for the quarter ended November 30, 2018 for a detailed calculation of this measure. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

________________________________
1 Net earnings or loss refers to net income or loss attributable to Subordinate and Multiple Voting Shares.
2 Non-IFRS measures ? see explanation above.
3 In accordance with the current fiscal year's presentation, the comparative figures were adjusted to reflect a more accurate allocation of cost of sales and administration costs.

Velan Inc.
Condensed Interim Consolidated Statements of Financial Position 
(Unaudited)
(in thousands of U.S. dollars)
     
As AtNovember 30, February 28, 
 2018 2018 
 $ $ 
Assets    
     
Current assets    
Cash and cash equivalents  68,450   85,391 
Short-term investments  147   647 
Accounts receivable   125,611   137,382 
Income taxes recoverable   15,876   8,012 
Inventories  170,262   170,790 
Deposits and prepaid expenses  3,284   4,222 
Derivative assets  110   604 
   383,740   407,048 
     
Non-current assets    
Property, plant and equipment  86,062   89,864 
Intangible assets and goodwill  17,602   20,210 
Deferred income taxes  18,708   22,034 
Other assets   398   1,037 
     
   122,770   133,145 
     
Total assets  506,510   540,193 
     
     
Liabilities    
     
Current liabilities    
Bank indebtedness  18,494   20,848 
Short-term bank loans   2,485   1,074 
Accounts payable and accrued liabilities  69,871   63,441 
Income taxes payable  475   2,186 
Dividend payable  497   1,678 
Customer deposits  38,208   48,963 
Provisions   8,768   10,798 
Accrual for performance guarantees  23,124   32,655 
Derivative liabilities  869   1,615 
Current portion of long-term debt  7,696   8,151 
   170,487   191,409 
     
Non-current liabilities    
Long-term debt  14,858   13,978 
Income taxes payable  2,033   2,078 
Deferred income taxes  2,433   2,889 
Other liabilities  8,535   8,222 
     
   27,859   27,167 
     
Total liabilities  198,346   218,576 
     
Equity     
     
Equity attributable to the Subordinate and Multiple Voting shareholders    
Share capital  73,090   73,090 
Contributed surplus   6,070   6,057 
Retained earnings  253,575   256,668 
Accumulated other comprehensive loss  (28,971)  (19,790)
   303,764   316,025 
     
Non-controlling interest  4,400   5,592 
     
Total equity  308,164   321,617 
     
Total liabilities and equity  506,510   540,193 
     


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
November 30
  Nine-month periods ended
November 30
 
 2018 2017  2018 2017 
 $ $  $ $ 
          
          
Sales92,271 87,738  261,520 235,356 
          
Cost of sales69,622 64,530  201,791 182,508 
          
Gross profit22,649 23,208  59,729 52,848 
          
Administration costs22,467 23,121  66,151 64,347 
Other expense (income)(63)28  (87)1,547 
          
Operating profit (loss)245 59  (6,335)(13,046)
          
Finance income131 193  493 561 
Finance costs221 328  1,165 694 
          
Finance costs ? net(90)(135) (672)(133)
          
Income (Loss) before income taxes155 (76) (7,007)(13,179)
          
Provision for (Recovery of) income taxes497 (248) (436)(3,324)
          
Net income (loss) for the period(342)172  (6,571)(9,855)
          
Net income (loss) attributable to:         
Subordinate Voting Shares and Multiple Voting Shares  (236)  305    (6,401)  (9,590)
Non-controlling interest(106)(133) (170)(265)
 (342)172  (6,571)(9,855)
          
Net income (loss) per Subordinate and Multiple Voting Share        
Basic(0.01)0.02  (0.30)(0.44)
Diluted(0.01)0.02  (0.30)(0.44)
          
          
Dividends declared per Subordinate and Multiple0.02 0.08  0.07 0.23 
Voting Share(CA$0.03) (CA$0.10)  (CA$0.09) (CA$0.30) 
          
          
Total weighted average number of Subordinate and         
Multiple Voting Shares          
Basic21,621,935 21,626,678  21,621,935 21,640,632 
Diluted21,621,935 21,632,731  21,621,935 21,640,632 


Velan Inc.
Condensed Interim Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(in thousands of U.S. dollars)
         
 Three-month periods ended
November 30
 Nine-month periods ended
November 30
 
 2018 2017 2018 2017 
 $ $ $ $ 
         
         
Comprehensive income (loss)        
         
Net income (loss) for the period(342)172 (6,571)(9,855)
         
Other comprehensive income (loss)        
Foreign currency translation adjustment on foreign operations        
whose functional currency is other than the reporting        
currency (U.S. dollar)(2,454)678 (9,276)12,489 
         
Comprehensive income (loss)(2,796)850 (15,847)2,634 
         
Comprehensive income (loss) attributable to:        
Subordinate Voting Shares and Multiple Voting Shares(2,682)825 (15,582)2,721 
Non-controlling interest(114)25 (265)(87)
         
 (2,796)850 (15,847)2,634 
         
         
Other comprehensive income (loss) is composed solely of items that may be reclassified subsequently to the     
consolidated statement of loss.        
         


Velan Inc.
Condensed Interim Consolidated Statements of Changes in Equity
(Unaudited)
(in thousands of U.S. dollars, excluding number of shares)
                
                
                
 Equity attributable to the Subordinate and Multiple Voting shareholders    
 Number of shares Share capital Contributed surplusAccumulated other comprehensive income (loss) Retained earnings Total Non-controlling interest Total equity 
                
Balance - February 28, 201821,621,935 73,090 6,057(19,790)256,668 316,025 5,592 321,617 
Adjustment related to the transition to IFRS 15- - -- 4,741 4,741 - 4,741 
Adjusted  balance - March 1, 201821,621,935 73,090 6,057(19,790)261,409 320,766 5,592 326,358 
                
Net loss for the period- - -- (6,401)(6,401)(170)(6,571)
Other comprehensive loss- - -(9,181)- (9,181)(95)(9,276)
                
 21,621,935 73,090 6,057(28,971)255,008 305,184 5,327 310,511 
                
Effect of share-based compensation- - 13- - 13 - 13 
Dividends               
Multiple Voting Shares- - -- (1,044)(1,044)- (1,044)
Subordinate Voting Shares- - -- (389)(389)- (389)
Non-controlling interest- - -- - - (927)(927)
                
Balance - November 30, 201821,621,935 73,090 6,070(28,971)253,575 303,764 4,400 308,164 
                
                
Balance - February 28, 201721,667,235 73,584 6,017(35,550)281,343 325,394 6,517 331,911 
                
Net loss for the period- - -- (9,590)(9,590)(265)(9,855)
Other comprehensive income- - -12,311 - 12,311 178 12,489 
                
 21,667,235 73,584 6,017(23,239)271,753 328,115 6,430 334,545 
                
Effect of share-based compensation- - 30- - 30 - 30 
Share repurchase(45,300)(494)-- (136)(630)- (630)
Dividends               
Multiple Voting Shares- - -- (3,603)(3,603)- (3,603)
Subordinate Voting Shares- - -- (1,433)(1,433)- (1,433)
Non-controlling interest- - -- - - (41)(41)
                
Balance - November 30, 201721,621,935 73,090 6,047(23,239)266,581 322,479 6,389 328,868 


Velan Inc.         
Condensed Interim Consolidated Statements of Cash Flow         
(Unaudited)         
(in thousands of U.S. dollars)         
          
 Three-month periods ended
November 30
  Nine-month periods ended
November 30
 
 2018 2017  2018 2017 
 $ $  $ $ 
          
          
Cash flows from         
          
Operating activities         
Net income (loss) for the period(342)172  (6,571)(9,855)
Adjustments to reconcile net income to cash provided by operating activities2,676 2,420  9,679 10,885 
Changes in non-cash working capital items(4,519)5,727  (8,499)5,990 
Cash provided (used) by operating activities(2,185)8,319  (5,391)7,020 
          
Investing activities         
Short-term investments11 (24) 500 (487)
Additions to property, plant and equipment(1,111)(1,457) (6,401)(4,372)
Additions to intangible assets(13)-  (112)(405)
Proceeds on disposal of property, plant and equipment, and intangible assets intangible assets19 14  144 75 
Net change in other assets18 (8) 596 44 
Cash used by investing activities(1,076)(1,475) (5,273)(5,145)
          
Financing activities         
Dividends paid to Subordinate and Multiple Voting shareholders(484)(1,720) (2,614)(4,989)
Dividends paid to non-controlling interest- (41) (927)(41)
Repurchase of shares- (94) - (630)
Short-term bank loans426 (791) 1,411 (564)
Increase in long-term debt3,509 -  4,116 - 
Repayment of long-term debt(857)(793) (2,787)(2,352)
Cash provided (used) by financing activities2,594 (3,439) (801)(8,576)
          
Effect of exchange rate differences on cash (711)568  (3,122)6,495 
          
Net change in cash during the period(1,378)3,973  (14,587)(206)
          
Net cash ? Beginning of the period51,334 72,048  64,543 76,227 
          
Net cash ? End of the period49,956 76,021  49,956 76,021 
          
Net cash is composed of:         
Cash and cash equivalents68,450 88,241  68,450 88,241 
Bank indebtedness(18,494)(12,220) (18,494)(12,220)
          
 49,956 76,021  49,956 76,021 
          
Supplementary information         
Interest received (paid)52 (32) (116)89 
Income taxes reimbursed (paid)(4,422)(1,363) (8,776)(4,122)
          

For further information please contact:
Yves Leduc, President & Chief Executive Officer
or
John D. Ball, Chief Financial Officer
Tel: (514) 748-7743
Fax: (514) 748-8635
Web:  www.velan.com


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