HIGHLIGHTS
Q1 2013
- Revenues of $82.9 million, Gross Profit of $21.7 million and Net Income of $0.8 million
- Q1 Dividends declared of $1.8 million or $0.075 per share
- Q1 Adjusted EBITDA of $7.4 million (See Table 2 and "Non-GAAP Measures" below)
BRAMPTON, ON, May 8, 2013 /CNW/ - DATA Group Inc. (TSX: DGI) ("DATA Group") announced its financial and operating results for the first quarter ("Q1") ended March 31, 2013, which include the operating results of its subsidiaries DATA Group Ltd., DATA Group (US) Corp., The Fulfillment Solutions Advantage Inc. ("FSA") and FSA Datalytics Canada Inc. ("Datalytics").
"DATA Group made modest progress on our growth strategy in the first quarter of 2013. Although revenues did not meet our expectations, we made progress implementing new customer agreements that we won in late 2012 and new capabilities, while also reducing our costs. The new customer agreements are impacting our results at a slower rate than expected due to the pace of implementation. We continued to focus on marketing our Managed Business Communications Services, or MBCS, and to implement our new e-communications solutions. Our accelerated cost savings program, which we launched in the fourth quarter of 2012, began to be implemented, resulting in a number of operational and administrative cost reductions. As a result of these initiatives, we recorded $0.8 million in restructuring charges in the first quarter of 2013 and expect to continue to incur restructuring charges through the balance of 2013" said Michael Suksi, President and Chief Executive Officer. "Adjusted EBITDA decreased from the prior year due to the continued investment in our growth strategy and a decline in revenues, and was partially offset by cost savings realized. We declared total dividends to shareholders during the first quarter of 2013 of $1.8 million or $0.075 per share, which represents an annualized rate of $0.30 per share, and reduced our debt by $2.0 million, which is consistent with our previously announced plans."
Based on our current business outlook, we expect to continue with our current dividend per share rate, while also continuing to reduce our debt and invest in new revenue generating activities. We believe this strategy will position DATA Group for sustainable profit growth, enterprise value appreciation and a consistent dividend payout to our shareholders over the longer term.
Table 1 The following table sets out selected historical financial information for the periods noted.
| Consolidated Statements of Income Information | ||||
|
For the periods ended March 31, 2013 and 2012 (in thousands of Canadian dollars, except per share amounts, unaudited) |
Jan. 1 to Mar. 31, 2013 $ |
Jan. 1 to Mar. 31, 2012 (1) $ |
||
| Revenues | 82,863 | 86,648 | ||
| Cost of revenues | 61,125 | 63,421 | ||
| Gross profit | 21,738 | 23,227 | ||
| Selling, general and administrative expenses | 15,686 | 16,924 | ||
| Restructuring expenses | 767 | - | ||
| Corporate conversion costs | - | 84 | ||
| Amortization of intangible assets | 2,310 | 2,311 | ||
| Income before finance costs and income taxes | 2,975 | 3,908 | ||
| Finance costs | ||||
| Interest expense | 1,638 | 1,677 | ||
| Interest income | (2) | (9) | ||
| Amortization of transaction costs | 143 | 152 | ||
| 1,779 | 1,820 | |||
| Income before income taxes | 1,196 | 2,088 | ||
| Income tax expense (recovery) | ||||
| Current | 1,272 | 1,248 | ||
| Deferred | (925) | (2,718) | ||
| 347 | (1,470) | |||
| Net income for the period | 849 | 3,558 | ||
| Net income attributable to common shareholders | 853 | 3,566 | ||
| Basic and diluted earnings per share | 0.04 | 0.15 | ||
| Number of common shares outstanding | 23,490,592 | 23,490,592 | ||
|
Consolidated Statements of Financial Position Information As at March 31, 2013 and December 31, 2012 (in thousands of Canadian dollars, unaudited) |
As at Mar. 31, 2013 $ |
As at Dec. 31, 2012 $ |
||
| Current assets | 85,176 | 84,069 | ||
| Current liabilities | 42,394 | 40,316 | ||
| Total assets | 223,021 | 224,629 | ||
| Total non-current liabilities | 118,442 | 122,199 | ||
| Shareholders' equity | 62,053 | 61,978 | ||
| Non-controlling interest | 132 | 136 | ||
| Total equity | 62,185 | 62,114 | ||
| (1) |
Prior-period amounts have been revised to reflect the retrospective
application of amendments to IAS 19 Employee Benefits. |
Table 2 The following table provides a reconciliation of net income (loss) to Adjusted EBITDA for the periods noted. See "Non-GAAP Measures".
| Adjusted EBITDA Reconciliation | ||||||
|
For the periods ended March 31, 2013 and 2012 (in thousands of Canadian dollars, unaudited) |
Jan. 1 to Mar. 31, 2013 $ |
Jan. 1 to Mar. 31, 2012 (1) $ |
||||
| Net income for the period | 849 | 3,558 | ||||
| Interest expense | 1,638 | 1,677 | ||||
| Interest income | (2) | (9) | ||||
| Amortization of transaction costs | 143 | 152 | ||||
| Depreciation of property, plant and equipment | 1,328 | 1,423 | ||||
| Amortization of intangible assets | 2,310 | 2,311 | ||||
| Restructuring expenses | 767 | - | ||||
| Corporate conversion costs | - | 84 | ||||
| Current income tax expense | 1,272 | 1,248 | ||||
| Deferred income tax recovery | (925) | (2,718) | ||||
| Adjusted EBITDA | 7,380 | 7,726 |
| (1) |
Prior-period amounts have been revised to reflect the retrospective application of amendments to IAS 19 Employee Benefits. |
RESULTS OF OPERATIONS
Revenues
For the quarter ended March 31, 2013, DATA Group recorded revenues of
$82.9 million, a decrease of $3.8 million or 4.4% compared with the
same period in 2012. The decrease, before intersegment revenues, was
the result of a $3.4 million decrease in the DATA East and West segment
and a $0.4 million decrease in the Multiple Pakfold segment.
Cost of Revenues and Gross Profit
For the quarter ended March 31, 2013, cost of revenues decreased to
$61.1 million from $63.4 million for the same period in 2012. Gross
profit for the quarter ended March 31, 2013 was $21.7 million, which
represented a decrease of $1.5 million or 6.4% from $23.2 million for
the same period in 2012. The decrease in gross profit for the quarter
ended March 31, 2013 was attributable to a gross profit decrease of
$1.4 million in the DATA East and West segment and a gross profit
decrease of $0.1 million in the Multiple Pakfold segment. Gross profit
as a percentage of revenues decreased to 26.2% for the quarter ended
March 31, 2013 compared to 26.8% for the same period in 2012.
Selling, General and Administrative Expenses and Restructuring Expenses
Selling, general and administrative ("SG&A") expenses, excluding
amortization of intangible assets, for the quarter ended March 31, 2013
decreased $1.2 million to $15.7 million compared to $16.9 million in
the same period in 2012. As a percentage of revenues, these costs were
18.9% of revenues for the quarter ended March 31, 2013 compared to
19.5% of revenues for the same period in 2012. For the quarter ended
March 31, 2012, DATA Group incurred $0.1 million of severance
expenses. The decrease in SG&A expenses for the three months ended
March 31, 2013 was attributable to realizing the benefit of cost saving
initiatives implemented in 2012. Severance costs for the three months
ended March 31, 2012 were included in SG&A and were related to DATA
Group's on-going productivity improvements and cost reduction
initiatives. For the three months ended March 31, 2013, DATA Group
incurred restructuring expenses related to headcount reductions of
$0.8 million as part of its 2013 restructuring initiatives.
Corporate Conversion Costs
During the three months ended March 31, 2012, DATA Group incurred total
professional fees of $0.1 million related to the conversion to a
corporation on January 1, 2012.
Adjusted EBITDA
For the quarter ended March 31, 2013, Adjusted EBITDA was $7.4 million,
or 8.9% of revenues. Adjusted EBITDA for the quarter ended March 31,
2013 decreased $0.3 million or 4.5% from the same period in the prior
year due to the continued investment in DATA Group's growth strategy
and a decline in revenues, and was partially offset by cost savings
realized. These costs included SG&A expense related to investments to
launch new products and services. The Adjusted EBITDA margin for the
quarter, as a percentage of revenues, remained unchanged at 8.9% of
revenues in 2013 and the same period in 2012.
Interest Expense and Finance Costs
Interest expense on long-term debt outstanding under DATA Group's credit
facilities, DATA Group's outstanding $45.0 million aggregate principal
amount of 6.00% Convertible Unsecured Subordinated Debentures (the
"6.00% Convertible Debentures") and interest expense on DATA Group's
employee benefit plans was $1.6 million for the three months ended
March 31, 2013 compared to $1.7 million for the same period in 2012.
The decrease in interest expense during the three months ended
March 31, 2013 was the result of lower outstanding balances under DATA
Group's credit facilities.
Income Taxes
DATA Group reported income before income taxes of $1.2 million, a
current income tax expense of $1.3 million and a deferred income tax
recovery of $0.9 million for the three months ended March 31, 2013
compared to income before income taxes of $2.1 million, current income
tax expense of $1.2 million and a deferred income tax recovery of
$2.7 million for the three months ended March 31, 2012. As a result of
the conversion, DATA Group re-measured its deferred tax assets and
liabilities at the corporate tax rates applicable to corporations,
which are lower than the top marginal tax rate for individuals used by
The DATA Group Income Fund (the "Fund"). In addition, the Fund's
conversion option liabilities were reclassified as equity on January 1,
2012 and the associated deferred tax liability was reversed. As a
result of these changes, DATA Group recorded a deferred income tax
recovery $2.0 million during the first quarter of 2012.
Net Income
Net income for the quarter ended March 31, 2013 was $0.8 million
compared to a net income of $3.6 million for the quarter ended March
31, 2012. The decrease in comparable profitability for the quarter
ended March 31, 2013 was due to lower gross profit as a result of lower
revenues, restructuring expenses and a smaller deferred income tax
recovery. The decrease in comparable profitability was partially
offset by lower SG&A expense.
INVESTING ACTIVITIES
Capital expenditures for the three months ended March 31, 2013 of $0.5
million related primarily to maintenance capital expenditures. These
capital expenditures were financed by cash flow from operations.
FINANCING ACTIVITIES
During the three months ended March 31, 2013, DATA Group repaid $2.0
million of its Revolving Bank Facility outstanding. For the three
months ended March 31, 2013, DATA Group paid aggregate cash dividends
of $1.3 million on its common shares.
About DATA Group Inc.
DATA Group Inc. is a managed business communications services company
specializing in customized document management and marketing
solutions. DATA Group develops, manufactures, markets and supports
integrated web and print-based communications, information management
and direct marketing products and services that help its customers
reduce costs, increase revenues, maintain brand consistency and
simplify their business processes. DATA Group's expertise and
resources enable it to address any document requirement of its
customers, from a simple mail-out to an enterprise-wide document
management or direct marketing initiative. We have approximately 1,800
employees working from 35 locations across Canada and the United States
to accomplish this.
Additional information relating to DATA Group Inc. is available on www.datagroup.ca, and in the disclosure documents filed by DATA Group Inc. on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.
All financial information in this press release is presented in Canadian dollars and in accordance with generally accepted accounting principles ("GAAP") measured under International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB") for publicly accountable entities, unless otherwise noted. Financial figures presented prior to January 1, 2012 are those of The DATA Group Income Fund, the predecessor to DATA Group Inc.
FORWARD-LOOKING STATEMENTS
Certain statements in this press release constitute "forward-looking"
statements that involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance,
objectives or achievements of DATA Group, or industry results, to be
materially different from any future results, performance, objectives
or achievements expressed or implied by such forward-looking
statements. When used in this press release, words such as "may",
"would", "could", "will", "expect", "anticipate", "estimate",
"believe", "intend", "plan", and other similar expressions are intended
to identify forward-looking statements. These statements reflect DATA
Group's current views regarding future events and operating
performance, are based on information currently available to DATA
Group, and speak only as of the date of this press release. These
forward-looking statements involve a number of risks, uncertainties and
assumptions and should not be read as guarantees of future performance
or results, and will not necessarily be accurate indications of whether
or not such performance or results will be achieved. Many factors
could cause the actual results, performance, objectives or achievements
of DATA Group to be materially different from any future results,
performance, objectives or achievements that may be expressed or
implied by such forward-looking statements. The principal factors,
assumptions and risks that DATA Group made or took into account in the
preparation of these forward-looking statements include the risk that
DATA Group may not be successful in growing its business or in managing
its organic growth; DATA Group's ability to develop and successfully
market new products and services; competition from competitors
supplying similar products and services; DATA Group's ability to grow
its sales or even maintain historical levels of its sales of printed
business documents; the impact of economic conditions on DATA Group's
businesses; risks associated with acquisitions by DATA Group; increases
in the costs of paper and other raw materials used by DATA Group; and
DATA Group's ability to maintain relationships with its customers.
Additional factors are discussed elsewhere in this press release and
under the heading "Risks and Uncertainties" in DATA Group's
management's discussion and analysis and in DATA Group's other publicly
available disclosure documents, as filed by DATA Group on SEDAR (www.sedar.com). Should one or more of these risks or uncertainties materialize, or
should assumptions underlying the forward-looking statements prove
incorrect, actual results may vary materially from those described in
this press release as intended, planned, anticipated, believed,
estimated or expected. Unless required by applicable securities law,
DATA Group does not intend and does not assume any obligation to update
these forward-looking statements.
NON-GAAP MEASURES
This press release includes certain non-GAAP measures as supplementary
information. When used in this press release, EBITDA means earnings
before interest and finance costs, taxes, depreciation and
amortization. Adjusted EBITDA for the three months ended March 31,
2013 means EBITDA adjusted for restructuring expenses. Adjusted EBITDA
for the three months ended March 31, 2012 means EBITDA adjusted for
corporate conversion costs. DATA Group believes that, in addition to
net income (loss), EBITDA and Adjusted EBITDA are useful supplemental
measures in evaluating the performance of DATA Group and its
predecessors. EBITDA and Adjusted EBITDA are not earnings measures
recognized by IFRS and do not have any standardized meanings prescribed
by IFRS. Therefore, EBITDA and Adjusted EBITDA are unlikely to be
comparable to similar measures presented by other issuers.
Investors are cautioned that neither EBITDA nor Adjusted EBITDA should be construed as an alternative to net income (loss) determined in accordance with IFRS as an indicator of DATA Group's performance. For a reconciliation of net income (loss) to Adjusted EBITDA, see Table 2 above.
| CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | |||||
| (in thousands of Canadian dollars, unaudited) |
March 31, 2013 $ |
December 31, 2012 $ |
|||
| Assets | |||||
| Current assets | |||||
| Trade receivables | 39,187 | 41,580 | |||
| Inventories | 41,218 | 38,085 | |||
| Prepaid expenses and other current assets | 4,771 | 4,404 | |||
| 85,176 | 84,069 | ||||
| Non-current assets | |||||
| Deferred income tax assets | 2,076 | 1,534 | |||
| Property, plant and equipment | 19,473 | 20,420 | |||
| Intangible assets | 15,230 | 17,540 | |||
| Goodwill | 101,066 | 101,066 | |||
| 223,021 | 224,629 | ||||
| Liabilities | |||||
| Current liabilities | |||||
| Bank overdraft | 583 | 1,161 | |||
| Trade payables | 31,486 | 28,289 | |||
| Provisions | 807 | 308 | |||
| Income taxes payable | 158 | 1,699 | |||
| Deferred revenue | 7,598 | 7,586 | |||
| Dividends payable | 1,762 | 1,273 | |||
| 42,394 | 40,316 | ||||
| Non-current liabilities | |||||
| Provisions | 814 | 867 | |||
| Revolving bank facility | 55,620 | 57,553 | |||
| Convertible debentures | 42,459 | 42,311 | |||
| Deferred income tax liabilities | 732 | 766 | |||
| Other non-current liabilities | 1,057 | 1,137 | |||
| Pension obligations | 14,984 | 16,839 | |||
| Other post-employment benefit plans | 2,776 | 2,726 | |||
| 160,836 | 162,515 | ||||
| Equity | |||||
| Shareholders' equity | |||||
| Shares | 215,336 | 215,336 | |||
| Conversion options | 516 | 516 | |||
| Accumulated other comprehensive income | 2 | 1 | |||
| Deficit | (153,801) | (153,875) | |||
| 62,053 | 61,978 | ||||
| Non-controlling interest | 132 | 136 | |||
| 62,185 | 62,114 | ||||
| 223,021 | 224,629 | ||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||
| (in thousands of Canadian dollars, except per share amounts, unaudited) |
For the three months ended March 31, 2013 |
For the three months ended March 31, 2012 (1) |
|||
| $ | $ | ||||
| Revenues | 82,863 | 86,648 | |||
| Cost of revenues | 61,125 | 63,421 | |||
| Gross profit | 21,738 | 23,227 | |||
| Expenses | |||||
| Selling, commissions and expenses | 9,368 | 9,786 | |||
|
General and administration expenses excluding amortization of intangible assets |
6,318 | 7,138 | |||
| Restructuring expenses | 767 | - | |||
| Corporate conversion costs | - | 84 | |||
| Amortization of intangible assets | 2,310 | 2,311 | |||
| 18,763 | 19,319 | ||||
| Income before finance costs and income taxes | 2,975 | 3,908 | |||
| Finance costs | |||||
| Interest expense | 1,638 | 1,677 | |||
| Interest income | (2) | (9) | |||
| Amortization of transaction costs | 143 | 152 | |||
| 1,779 | 1,820 | ||||
| Income before income taxes | 1,196 | 2,088 | |||
| Income tax expense (recovery) | |||||
| Current | 1,272 | 1,248 | |||
| Deferred | (925) | (2,718) | |||
| 347 | (1,470) | ||||
| Net income for the period | 849 | 3,558 | |||
| Net income (loss) attributable to: | |||||
| Common shareholders | 853 | 3,566 | |||
| Non-controlling interest | (4) | (8) | |||
| 849 | 3,558 | ||||
| Basic earnings per share | 0.04 | 0.15 | |||
| Diluted earnings per share | 0.04 | 0.15 | |||
| (1) |
Prior-period amounts have been revised to reflect the retrospective
application of amendments to IAS 19 Employee Benefits. |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||
| (in thousands of Canadian dollars, unaudited) |
For the three months ended March 31, 2013 |
For the three months ended March 31, 2012 (1) |
|||
| $ | $ | ||||
| Net income for the period | 849 | 3,558 | |||
| Other comprehensive income (loss): | |||||
| Items that may be reclassified subsequently to net income | |||||
| Foreign currency translation | 1 | - | |||
| 1 | - | ||||
| Items that will not be reclassified to net income | |||||
| Deferred income tax recovery on conversion to a corporation | - | 406 | |||
| Actuarial gains (losses) on post-employment benefit obligations | 1,332 | (596) | |||
| Taxes related to post-employment adjustment above | (349) | 152 | |||
| 983 | (38) | ||||
| Other comprehensive income (loss) for the period, net of tax | 984 | (38) | |||
| Comprehensive income for the period | 1,833 | 3,520 | |||
| Comprehensive income (loss) attributable to: | |||||
| Common shareholders | 1,837 | 3,528 | |||
| Non-controlling interest | (4) | (8) | |||
| 1,833 | 3,520 | ||||
| (1) |
Prior-period amounts have been revised to reflect the retrospective
application of amendments to IAS 19 Employee Benefits. |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | ||||||||
| (in thousands of Canadian dollars, unaudited) | Attributable to Shareholders' | |||||||
| Accumulated | ||||||||
| other | Total | Non- | ||||||
| Conversion | comprehensive | Shareholders' | controlling | Total | ||||
| Shares | Units | options | income | Deficit | Equity | interest | Equity | |
| $ | $ | $ | $ | $ | $ | $ | $ | |
| Balance as at December 31, 2011 | - | 215,336 | - | - | (97,973) | 117,363 | 313 | 117,676 |
| Effect of conversion to a corporation | 215,336 | (215,336) | 516 | - | - | 516 | - | 516 |
| 215,336 | - | 516 | - | (97,973) | 117,879 | 313 | 118,192 | |
| Net income (loss) for the period (1) | - | - | - | - | 3,566 | 3,566 | (8) | 3,558 |
| Other comprehensive loss for the period (1) | - | - | - | - | (38) | (38) | - | (38) |
| Total comprehensive income (loss) for the period | - | - | - | - | 3,528 | 3,528 | (8) | 3,520 |
| Dividends declared | - | - | - | - | (3,820) | (3,820) | - | (3,820) |
| - | ||||||||
| Balance as at March 31, 2012 | 215,336 | - | 516 | - | (98,265) | 117,587 | 305 | 117,892 |
| Balance as at December 31, 2012 | 215,336 | - | 516 | 1 | (153,875) | 61,978 | 136 | 62,114 |
| Net income (loss) for the period | - | - | - | - | 853 | 853 | (4) | 849 |
| Other comprehensive income for the period | - | - | - | 1 | 983 | 984 | - | 984 |
| Total comprehensive (loss) income for the period | - | - | - | 1 | 1,836 | 1,837 | (4) | 1,833 |
| Dividends declared | - | - | - | - | (1,762) | (1,762) | - | (1,762) |
| Balance as at March 31, 2013 | 215,336 | - | 516 | 2 | (153,801) | 62,053 | 132 | 62,185 |
| (1) | Prior-period amounts have been revised to reflect the retrospective application of amendments to IAS 19 Employee Benefits. |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
| (in thousands of Canadian dollars, unaudited) |
For the three months ended March 31, 2013 |
For the three months ended March 31, 2012 (1) |
|||
| $ | $ | ||||
| Cash provided by (used in) | |||||
| Operating activities | |||||
| Net income for the period | 849 | 3,558 | |||
| Adjustments to net income | |||||
| Depreciation of property, plant and equipment | 1,328 | 1,423 | |||
| Amortization of intangible assets | 2,310 | 2,311 | |||
| Pension expense | 236 | 234 | |||
| Loss on disposal of property, plant and equipment | 57 | 1 | |||
| Change in provisions | 446 | (64) | |||
| Amortization of transaction costs | 143 | 152 | |||
| Accretion of convertible debentures | 73 | 74 | |||
| Other non-current liabilities | (80) | (47) | |||
| Other post-employment benefit plans, net | 50 | 67 | |||
| Income tax expense (recovery) | 347 | (1,470) | |||
| 5,759 | 6,239 | ||||
| Changes in working capital | 2,100 | (1,719) | |||
| Contributions made to pension plans | (759) | (775) | |||
| Income taxes paid | (2,813) | (1,904) | |||
| 4,287 | 1,841 | ||||
| Investing activities | |||||
| Purchase of property, plant and equipment | (464) | (292) | |||
| Purchase of intangible assets | - | (415) | |||
| Proceeds on disposal of property, plant and equipment | 26 | - | |||
| (438) | (707) | ||||
| Financing activities | |||||
| Repayment of revolving bank facility | (2,000) | (1,000) | |||
| Finance costs | (1) | (138) | |||
| Dividends or distributions paid | (1,273) | (3,819) | |||
| (3,274) | (4,957) | ||||
| Increase (decrease) in (bank overdraft) cash and cash equivalents during the period | 575 | (3,823) | |||
| Effects of foreign exchange on cash balances | 3 | - | |||
| (Bank overdraft) cash and cash equivalents - beginning of period | (1,161) | 4,046 | |||
| (Bank overdraft) cash and cash equivalents - end of period | (583) | 223 | |||
| (1) | Prior-period amounts have been revised to reflect the retrospective application of amendments to IAS 19 Employee Benefits. |
SOURCE: DATA Group Inc.
Mr. Michael Suksi
President and Chief Executive Officer
DATA Group Inc.
Tel: (905) 791-3151
Mr. Paul O'Shea
Chief Financial Officer
DATA Group Inc.
Tel: (905) 791-3151

