MONTREAL, QUEBEC — (Marketwire) — 10/12/11 — Velan Inc. (TSX: VLN), a world-leading manufacturer of industrial valves, announced today its financial results for its second quarter ended August 31, 2011.
Highlights
Second Quarter Fiscal 2012 (unless otherwise noted, all comparisons are to the second quarter of fiscal 2011):
(1) Net earnings or loss refers to net income or loss attributable to Subordinate and Multiple Voting Shares.
Half year fiscal 2012 (unless otherwise noted, all comparisons are to the second quarter of fiscal 2011):
„Despite improving second quarter sales revenues, bookings and backlog, we had a net loss(2)of US$2.1 million,“ said Tom Velan, President and CEO of Velan Inc. „however, adjusting for ABV, the effects of purchase price accounting for the acquisition and currency impacts, we would have reported a net loss(2)of US$0.5 million compared to an adjusted loss of $2.6 million last year.“
„Faced with significant material cost increases, we have been raising our selling prices. For some of our product lines we still face lower margins due to higher material costs. We aim to improve the margin by increasing volume as well as continuing to make selective price increases to cover cost increases.“
„Administration costs increased significantly this quarter as our legal and other costs associated with our on-going asbestos legal proceedings increased from $2.2 million to $2.7 million. Similar to some other U.S. valve manufacturers, two of our U.S. subsidiaries have been named as defendants in a number of pending lawsuits brought on behalf of individuals seeking to recover damages for their alleged asbestos exposure. These lawsuits are related to products manufactured and sold many years ago. We strongly believe that our products, which were supplied with encapsulated asbestos packing and gaskets in accordance with valve industry practice and customer mandated specifications, did not contribute to any asbestos-related sicknesses. We will continue to vigorously defend against these claims but, given the ongoing course of asbestos litigation in the U.S. and the unpredictability of jury trials, it is not possible to make an estimate of our legal and other costs related to these claims.“
(1)Non-GAAP measures – see explanation below.
(2) Net earnings or loss refers to net income or loss attributable to Subordinate and Multiple Voting Shares.
„ABV had a soft quarter due to the impact of resources devoted to opening a new plant and the acquisition and subsequent integration work. We expect improving results going forward and continue to view this acquisition as a great opportunity to help grow our sales and earnings over the coming years.“
„We had strong order bookings of $172.1 million, an increase of 76% compared to last year. Adjusting for ABV and currency impacts, the increase would be 48.7%. We have had a large increase in project order bookings and we continue to see strength in our key markets both in quotation activity and bookings.“
„Excluding ABV, our backlog increased by $90.1 million or 16.4% since the beginning of the fiscal year,“ said John Ball, CFO of Velan Inc. „We needed to increase our inventory purchases in order to service our backlog which is now the highest in the history of Velan at $676.9 million. The increased purchases resulted in net cash(1) of $12.8 million being used this quarter in operating activities. Despite the increased purchases, we ended the quarter with net cash(1) of $49.6 million.“
„While our key end-user markets are showing signs of strengthening, we continue to monitor the risk of another sharp downturn in the economy. Persistent stagnation in Europe, renewed weakness in the U.S. and concerns about the stability of the Euro caused by the economic problems in Greece and elsewhere are some of the factors we are closely monitoring. With a record order backlog of $676.9 million, virtually no debt, $190.2 million in unused credit lines and net cash(1) of $49.6 million, we feel we have maintained a balance sheet solid enough to weather another economic downturn should one occur.“
Tom Velan concluded, „We are encouraged by the positive trend in bookings, backlog and sales. We are continuing to take measures to broaden our product offering, to improve our cost competitiveness, and to strengthen our presence in international markets in order to improve our long-term performance and increase the value of our company. In the shorter term, we are focused on improved execution of our large project order backlog to increase sales and improve earnings.“
Dividend
The Board declared an eligible quarterly dividend of Canadian dollar $0.08 per share, payable on December 30, 2011, to all shareholders of record as at December 15, 2011.
Conference Call
Financial analysts, shareholders, and other interested individuals are invited to attend the second quarter conference call to be held on October 12, 2011, at 4:30 PM (EST). The toll free call-in number is 1-800-268-2160, access code 21541915. A recording of this conference call will be available for seven days at 1-416-626-4100 or 1-800-558-5253, access code 21541915
About Velan
Velan Inc. () is a world-leading manufacturer of industrial valves with sales of $381 million in its last reported fiscal year. The company employs over 1,800 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-GAAP measures
In this press release, the Company presented measures of performance and financial condition which are not defined under Canadian GAAP („non-GAAP 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.
Net cash is defined as cash and cash equivalents plus short-term investments less bank indebtedness and short- term bank loans.
Reconciliation of Comprehensive Income (Loss) from Canadian GAAP to IFRS:
Contacts: VELAN Inc. Tom Velan President (514) 748-7743 (514) 748-8635 (FAX)
VELAN Inc. John D. Ball Chief Financial Officer (514) 748-7743 (514) 748-8635 (FAX)
