RE:RE:RE:Stephen Takacsy - BNN - HOLD From PWC: Provisions are recognized when the Company has
a present legal or constructive obligation as a result
of a past event, it is probable that an outflow
of resources will be required to settle the obligation,
and the amount can be reliably estimated.
Management used an actuary (management’s
expert) to reliably measure the asbestos provision
which is based on the closed with indemnity (CWI)
claim decay method. Management used judgment
in measuring the asbestos provision, including
significant assumptions such as the expected
number of future claims, the projected average
CWI severity, the decay rate, the inflation rate and
the discount rate.
Auditors, as usual, make no specific comment on provisions, not negative or positive, but below are the numbers otherwise hidden in administrative costs. While the the year's changes of added, paid, reversed, etc. amounts are shown under Provisions in the footnotes the fact is, there are at least 3 other categories of providions, asbestos being just one of them, so a $figure for
total provisions provides no data for the asbestos numbers.You're right, there is no quarterly report in the financials (in fact a Note # against Admn costs in the P&L was incorrect in the qtly I saw, it was regarding inventories.) Still, the MD&A does explain changes in Admin costs relating to provisions but not detailed There is no real detail that I can uncover in any news releases from Velan thru any period of what is happeneing.
Major thing related to my question is that I have no idea how long these provisions will continue to be increased based on "
Provisions are recognized when the Company has a present legal or constructive obligation...". Looking at the sites listing Asbestos cases i seems Velan have won some but I cannot pinpoint which prior subsidiaries had the first rulings against them.
These were write-offs (MM's) 2024 $14,255; 2023 $69,676 ; 2022 $19,924 There were no provisions in 2021 but there is reference to ongoing litogations costs (about $11MM that year) and it seems Velan changed approach to proviions in 2022 when they decided to come up with potential liability
for all claims rather than the settlement amounts as they occurred
So it would seem the ongoing attention to provisions is meant to detail all claim liabilites.. The provision, $78.2MM at 02r/24 is higher than 2023 on net basis, mainly becasue of $10MM added plus an 'accretion' of over $4MM The question remains can $78MM be judged the top number, or close to it. Hopefully provisions will start coming down now to prove that out.
A final note, Too bad Flowserve did not take over as Flowserve has its own asbestos related claims which seem to run deeper than Velan's, and better they were all Flowserve's problem.