Velan Inc. Reports Its 1st Quarter 1999/2000 Financial Results
19 October 1999
Velan Inc. Reports Its 1st Quarter 1999/2000 Financial Results
MONTREAL--Oct. 19, 1999--(TSE:VLN.) (ME:VLN.) We are pleased to announce our financial results for the 1st quarter of our fiscal year.Revenues for the 1st quarter amounted to $71.8 million, representing an 8.5 % increase over the $66.1 million in the same quarter last year. Net earnings declined to $6.5 million or $0.29 per share, compared with $11.3 million or $0.50 per share attained in the 1998 1st quarter.
The gross profit margin of 29 % decreased from a record 39 % in the 1998 1st quarter, while earnings declined from the record 17 % of revenues to 9 %. The reduction in margin is principally attributable to reduced selling prices due to competitive pressure, higher raw material costs and the strengthening of the Canadian dollar. Our net profit margin is still greater than the average reported by the Valve Manufacturers of America.
These results include the operations of Bouvier Darling, and the remaining 50 % of Alstom-Velan which have been acquired during the quarter. These acquisitions accounted for $8.8 million of the sales volume and $0.7 million of net profit prior to amortization of goodwill directly attributable to these acquisitions of $0.4 million.
Incoming worldwide business remained steady generating $71 million of order bookings resulting in a backlog of $184 million as compared to $185 million at the beginning of this quarter.
As the year 2000 approaches, the Company states that:
a) all internal "mission critical" systems have been evaluated,
tested for compliance and replaced where necessary;
b) key suppliers, customers, lenders and borrowers have responded to
our requests confirming their own Y2K readiness; and,
c) our contingency plans have been drafted and are in process of
being formally documented.
We have also increased our interest in the jointly-held company, Alstom-Velan, of Lyon France, from 50 % to 100 %. This unique company is a manufacturer of high performance valves for the energy sector and cryogenics, with substantial backlog for power stations in China and long-range maintenance contracts with EDF for France's 68 nuclear power stations. This acquisition represents an additional $20 million of volume annually and will be paid for entirely out of existing cash available in France.
The Company, having completed the payment of its 1996 repurchase of its shares held by Deutsche Babcock, is pleased to announce the introduction of a dividend policy and normal course issuer bid. The dividend has been initially established at $0.25 per share this year, with $0.125 dividend payments to be made on December 15 and June 15. The Company will also be initiating a normal course issuer bid, the regulatory approvals having been received, enabling it to repurchase, in the open market, up to a maximum of 348,874 subordinate voting shares. The repurchase program will commence on October 22, 1999 and terminate October 21, 2000 with any shares purchased being cancelled by the Company.
Velan Inc. is a world leader in the design, manufacture and marketing of the most comprehensive industrial valve line, seeking to enhance its worldwide market position while maintaining profitability at above-industry level.
Velan Inc.
Consolidated Statements of Earnings
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(in thousands of dollars)
(Unaudited) (Unaudited)
3 months ended 3 months ended
August 31,99 August 31,98
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Sales $71,750 $66,124
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Gross profit 20,736 25,821
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Expenses
Engineering, research, selling,
general and administrative 10,776 9,806
Interest
Long-term debt 190 241
Other 52 119
Amortization 2,597 2,246
Other income (1,262) (462)
Foreign exchange gain on
translation of
integrated subsidiaries (1,122) (1,932)
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11,231 10,018
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Earnings before income taxes 9,505 15,803
Provision for income taxes 3,019 4,536
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Net earnings for the period $6,486 $11,267
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Earnings per share $0.29 $0.50
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Velan Inc.
Consolidated Balance Sheets
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(in thousands of dollars) (Unaudited) (Audited)
August 31, 99 May 31 1999
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Assets
Current $260,762 $242,797
Capital 59,342 49,411
Other 19,082 1,384
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$339,186 $293,592
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Liabilities
Current $117,475 $77,056
Long-term debt 5,149 5,337
Other 4,183 3,609
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126,807 86,002
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Shareholders' Equity
Capital stock 114,953 114,953
Retained earnings 97,049 90,563
Other 377 2,074
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212,379 207,590
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$339,186 $293,592
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Consolidated Statements of Retained Earnings
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(Unaudited) (Audited)
3 months 12 months
Ended August 31, 99 Ended May 31, 99
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Balance -
Beginning of period $90,563 $51,354
Net earnings for the period 6,486 39,209
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Balance - End of the period $97,049 $90,563
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Velan Inc.
Consolidated Statements of Cash Flows
(Unaudited) (Unaudited)
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(in thousands of dollars)
3 months 3 months
Ended August 31, 99 Ended August 31, 98
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Cash provided from
(required for)
Operations
Net earnings for
the period $6,486 $11,267
Items not affecting cash:
Amortization 2,597 2,246
Deferred income taxes 418 129
Increase in other long-term
liabilities 17 137
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9,518 13,779
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Net change in non-cash
working capital items
Decrease in accounts receivable 6,492 7,708
Increase in income taxes
Recoverable (1,568) -
Decrease in deposits and
prepaid expenses 473 599
Increase in inventory (5,425) (12,721)
Decrease in accounts payable
and accrued liabilities (8,591) (3,604)
Decrease (Increase) in income
and withholding taxes payable (4,817) 4,756
Decrease (Increase) in provision
for performance guarantees (1,029) 288
Decrease (Increase) in
customers' deposits (2,731) 598
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(17,196) (2,376)
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(7,678) 11,403
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Investments
Net assets of business
Acquisitions (36,255)
Less: cash acquired 19,272 (16,983) -
Additions to capital assets (5,784) (2,995)
Increase in other assets (407) (967)
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(23,174) (3,962)
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Financing
Increase in long-term debt 65 806
Repayment of long-term debt (1,136) (525)
Balance of Sale on Acquisition 29,448
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28,377 281
Net change in cash arising from
foreign exchange translation
adjustment 436 1,218
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Net increase (decrease) in cash (2,039) 8,940
Cash - Beginning period 59,800 24,615
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Cash - End of period $57,761 $33,555
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