Highlights
----------
Q2 2009
-------
- Second quarter ("Q2") 2009 Revenues of $84.3 million, Q2 Gross Profit
of $21.3 million, Q2 Net Income of $0.7 million
- Q2 Cash Available for Distribution of $5.8 million or $0.249 per unit
and Cash Distributions of $6.8 million or $0.290 per unit
(see Table 4 and "Non-GAAP Measures" below)
- Q2 Payout Ratio of 116.5% (See Table 4 below)
- Q2 Adjusted EBITDA of $7.4 million (See Table 3 and "Non-GAAP
Measures" below)
YTD 2009
--------
- Year to Date ("YTD") 2009 Revenues of $174.7 million, YTD Gross
Profit of $44.5 million, YTD Net Income of $3.6 million
- YTD Cash Available for Distribution of $12.0 million or $0.513 per
unit and Cash Distributions of $13.6 million or $0.580 per unit (see
Table 4 and "Non-GAAP Measures" below)
- YTD Payout Ratio of 113.1% (See Table 4 below)
- YTD Adjusted EBITDA of $16.5 million (See Table 3 and "Non-GAAP
Measures" below)
BRAMPTON, ON, Aug. 7 /CNW/ - The DATA Group Income Fund (TSX: DGI.UN) ("the Fund") today announced financial and operating results for the second quarter ended June 30, 2009, which include the results of operations for The Data Group Limited Partnership (the "Data Group").
OUTLOOK
Many of the Data Group's customers have been impacted by the current economic environment and, as a result, have reduced spending. Those factors have negatively affected the Fund's revenues through the first six months of 2009. This decline in revenues has resulted in lower cash available for distribution and a payout ratio in excess of 100% for the first and second quarters of 2009. In response, the Data Group has initiated workforce reductions, changes to its pension plan and its employee group benefit plans and other measures to reduce costs. These measures are expected to lower the Data Group's operating expenses by approximately $15.0 million annually. In addition, over the past nine months, the Data Group has secured new business which is expected to generate approximately $15.0 million in revenues over the next 12 months. Based upon the Data Group's currently projected cash flow from operations, including expected revenues from new business wins, lower anticipated operating expenses as a result of recent cost reductions, and its current liquidity and existing cash resources, the Fund intends to maintain its monthly distributions on the units at current levels for the foreseeable future. The Fund's Board of Trustees will continue to closely monitor the Fund's monthly distribution level in light of the Fund's cash available for distribution and cash resources.
Table 1 The following table sets out selected historical financial
information for the periods noted.
Consolidated Financial Information
-------------------------------------------------------------------------
For the periods ended
June 30, 2009 and 2008
(in thousands of
dollars, except per
unit amounts,
unaudited)
Apr. 1 to Apr. 1 to Jan. 1 to Jan. 1 to
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------
Revenues 84,269 93,733 174,686 194,759
Cost of revenues 62,938 67,785 130,213 140,424
-------------------------------------------------------------------------
Gross profit 21,331 25,948 44,473 54,335
Selling, general and
administrative
expenses 15,693 17,330 31,621 35,584
Gain on cancellation
of convertible
debentures - - (2) -
Cease use charge 866 - 866 -
Amortization of
intangible assets 2,649 2,744 5,298 5,488
-------------------------------------------------------------------------
Income before interest
and income taxes 2,123 5,874 6,690 13,263
-------------------------------------------------------------------------
Interest expense
on long-term debt 1,253 1,471 2,689 3,069
-------------------------------------------------------------------------
Income before
income taxes 870 4,403 4,001 10,194
Future income
tax expense 121 400 455 600
-------------------------------------------------------------------------
Net income for
the period 749 4,003 3,546 9,594
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Basic and diluted
income per unit 0.03 0.17 0.15 0.41
Number of units
outstanding 23,490,592 23,490,592 23,490,592 23,490,592
-------------------------------------------------------------------------
-------------------------------------------------------------------------
As at As at
June 30, June 30,
Consolidated Balance 2009 2008
Sheet Information $ $
-----------------------------------------------
Current assets 103,446 116,392
Current liabilities 39,436 49,285
Total assets 330,536 371,130
Total long-term
liabilities 129,132 127,400
Unitholders' equity 161,968 194,445
-----------------------------------------------
-----------------------------------------------
Table 2 The following table sets out selected historical financial
information by business segment for the periods noted.
Consolidated Financial Information
-------------------------------------------------------------------------
For the periods
ended June 30,
2009 and 2008
(in thousands
of dollars, Apr. 1 to Apr. 1 to Jan. 1 to Jan. 1 to
except percentage June 30, June 30, June 30, June 30,
amounts, unaudited) 2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------
Revenues
DATA East and West 77,289 85,160 159,670 176,739
Sundog 4,699 5,650 10,030 12,128
Multiple Pakfold 3,211 3,962 6,921 8,007
Intersegment (930) (1,039) (1,935) (2,115)
-------------------------------------------------------------------------
84,269 93,733 174,686 194,759
-------------------------------------------------------------------------
Gross profit
DATA East and West 19,905 23,939 41,133 49,987
Sundog 1,187 1,653 2,665 3,585
Multiple Pakfold 239 356 675 763
-------------------------------------------------------------------------
21,331 25,948 44,473 54,335
-------------------------------------------------------------------------
Gross profit, as a
percentage of revenues
DATA East and West 25.8% 28.1% 25.8% 28.3%
Sundog 25.3% 29.3% 26.6% 29.6%
Multiple Pakfold 7.4% 9.0% 9.8% 9.5%
-------------------------------------------------------------------------
25.3% 27.7% 25.5% 27.9%
-------------------------------------------------------------------------
Selling, general
and administrative
expenses 15,693 17,330 31,621 35,584
-------------------------------------------------------------------------
As a percentage
of revenues 18.6% 18.5% 18.1% 18.3%
-------------------------------------------------------------------------
Adjusted EBITDA
(see Table 3) 7,430 10,668 16,526 22,872
-------------------------------------------------------------------------
Adjusted EBITDA margin,
as a percentage
of revenues 8.8% 11.4% 9.5% 11.7%
-------------------------------------------------------------------------
Net income 749 4,003 3,546 9,594
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Table 3 The following table provides a reconciliation of net income to
Adjusted EBITDA for the periods noted. See "Non-GAAP Measures".
Adjusted EBITDA Reconciliation
-------------------------------------------------------------------------
For the periods
ended June 30,
2009 and 2008
(in thousands
of dollars, Apr. 1 to Apr. 1 to Jan. 1 to Jan. 1 to
unaudited) June 30, June 30, June 30, June 30,
2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------
Net income for
the period 749 4,003 3,546 9,594
-------------------------------------------------------------------------
Net interest expense
on long-term debt 1,253 1,471 2,689 3,069
Depreciation of
property, plant
and equipment 1,792 2,050 3,674 4,121
Amortization of
intangible assets 2,649 2,744 5,298 5,488
Gain on cancellation
of convertible
debentures - - (2) -
Cease use charge 866 - 866 -
Future income tax expense 121 400 455 600
-------------------------------------------------------------------------
Adjusted EBITDA 7,430 10,668 16,526 22,872
-------------------------------------------------------------------------
-------------------------------------------------------------------------
RESULTS OF OPERATIONS
THE DATA GROUP INCOME FUND
Overview
The Data Group is a leading provider of total document management solutions, including printed products, and operates as three segments. DATA East and West (which provided approximately 90% of total revenues for the second quarter of 2009) sells a broad range of printed products and document management services directly to end users. Sundog (which provided approximately 6% of total revenues for the second quarter of 2009) is a commercial printer specializing in the production of high-quality annual reports, marketing materials and event tickets. Multiple Pakfold (which provided approximately 4% of total revenues for the second quarter of 2009) sells forms and labels to independent brokers and resellers.
Revenues
The most significant challenge that the Data Group faced in the first six months of 2009 was the current domestic and global economic environment, which has weakened significantly since 2008 and negatively impacted the Fund's revenues over that period. For the quarter ended June 30, 2009, the Fund recorded revenues of $84.3 million, a decrease of $9.5 million or 10.1% compared with the same period in 2008. The decrease, before intersegment revenues, was the result of a $7.9 million decrease in the Data East and West segment, a $1.0 million decrease in the Sundog segment and a $0.8 million decrease in the Multiple Pakfold segment. For the six months ended June 30, 2009, the Fund recorded revenues of $174.7 million, a decrease of $20.1 million or 10.3% compared with the same period in 2008. The decrease, before intersegment revenues, was the result of a $17.1 million decrease in the DATA East and West segment, a $2.1 million decrease in the Sundog segment and a $1.1 million decrease in the Multiple Pakfold segment. A more detailed discussion of the results of operations of each of the Fund's reporting segments is set out below.
Cost of Revenues and Gross Profit
For the quarter ended June 30, 2009, cost of revenues decreased to $62.9 million from $67.8 million for the same period in 2008. Gross profit for the quarter ended June 30, 2009 was $21.3 million, which represented a decrease of $4.6 million or 17.8% from $25.9 million for the same period in 2008. The decrease in gross profit for the quarter ended June 30, 2009 was attributable to gross profit decreases of $4.0 million in the DATA East and West segment, $0.5 million in the Sundog segment and $0.2 million in the Multiple Pakfold segment. Gross profit as a percentage of revenues decreased to 25.3% for the quarter ended June 30, 2009 compared to 27.7% for the same period in 2008. For the six months ended June 30, 2009, cost of revenues decreased to $130.2 million from $140.4 million for the same period in 2008. Gross profit for the six months ended June 30, 2009 was $44.5 million, which represented a decrease of $9.9 million or 18.2% from $54.3 million in the same period of 2008. The decrease in gross profit for the six months ended June 30, 2009 was attributable to gross profit decreases of $8.9 million in the DATA East and West segment, $0.9 million in the Sundog segment and $0.1 million in the Multiple Pakfold segment. Gross profit as a percentage of revenue decreased to 25.5% for the six months ended June 30, 2009 compared to 27.9% for the same period in 2008.
Selling, General and Administrative Expenses and Restructuring Costs
Selling, general and administrative ("SG&A") expenses, including administrative expenses of the Fund, for the quarter ended June 30, 2009 decreased $1.6 million to $15.7 million compared to $17.3 million in the same period of 2008. SG&A expenses for the three months ended June 30, 2009 decreased as the result of the Data Group's on-going productivity improvements initiatives. As a percentage of revenues, these costs were 18.6% of revenues for the quarter ended June 30, 2009 compared to 18.5% of revenues for the same period in 2008. For the quarters ended June 30, 2009 and 2008, the Data Group incurred $0.3 million of severance costs, respectively. These costs were included in SG&A and were related to the Data Group's on-going productivity improvement initiatives. SG&A expenses for the six months ended June 30, 2009 decreased by $4.0 million to $31.6 million compared to $35.6 million in the same period of 2008. SG&A expenses for the six months ended June 30, 2009 decreased as a result of the Data Group's on-going productivity improvements initiatives. As a percentage of revenues, these costs were 18.1% of revenues for the six months ended June 30, 2009 compared to 18.3% of revenues for the same period in 2008. For the six month periods ended June 30, 2009 and 2008, the Data Group incurred $0.3 million and $0.5 million of severance costs, respectively. These costs were included in SG&A and were related to the Data Group's on-going productivity improvement initiatives.
Asset Sale and Other
During the quarter ended June 30, 2009, the Data Group completed a sublet agreement in respect of its Dorval, Quebec facility for the remainder of the lease term and incurred a cease use charge of $0.9 million, which represented the liability for remaining lease costs under the lease agreement net of sublease income. During the six months ended June 30, 2009, the Data Group completed the sale of its Hemmingford, Quebec property for gross proceeds of $0.7 million and recorded a pre-tax gain on disposal of $0.1 million.
Adjusted EBITDA
For the quarter ended June 30, 2009, Adjusted EBITDA was $7.4 million, or 8.8% of revenues. Adjusted EBITDA for the quarter ended June 30, 2009 decreased $3.2 million or 30.4% from the same period in the prior year and the Adjusted EBITDA margin for the quarter, as a percentage of revenues, decreased from 11.4% of revenues in 2008 to 8.8% of revenues in 2009. For the six months ended June 30, 2009, Adjusted EBITDA was $16.5 million or 9.5% of revenues. Adjusted EBITDA for the six months ended June 30, 2009 decreased $6.3 million or 27.7% from the same period in the prior year and the Adjusted EBITDA margin for the six month period, as a percentage of revenues, decreased from 11.7% of revenues in 2008 to 9.5% of revenues in 2009.
Interest Expense
Net interest expense on long-term debt relating to the Data Group's credit facilities and the Fund's $34.8 million aggregate principal amount of outstanding convertible debentures was $1.3 million for the quarter ended June 30, 2009 compared to $1.5 million for the same period in 2008. Net interest expense on long-term debt was $2.7 million for the six months ended June 30, 2009 compared to $3.1 million for the same period in 2008.
For the quarter ended June 30, 2009, interest income of $0.2 million was earned compared to $0.1 million earned for the same period in 2008. This interest income was substantially related to the cash and cash equivalents and other receivables held by the Data Group. Interest income of $0.2 million was earned during the six month periods ended June 30, 2009 and 2008, respectively. This interest income was substantially related to the cash and cash equivalents and other receivables held by the Data Group.
Income Taxes
The Fund reported income before income taxes of $0.9 million and a future income tax expense of $0.2 million for the quarter ended June 30, 2009. The future income tax expense was due to a change in estimates of future reversals of temporary differences. The Fund reported income before income taxes of $4.4 million and a future income tax expense of $0.4 million for the quarter ended June 30, 2008. The future income tax expense was due to a change in estimates of future reversals of temporary differences.
The Fund reported income before income taxes of $4.0 million and a future income tax expense of $0.4 million for the six months ended June 30, 2009. The future income tax expense was due to a change in estimates of future reversals of temporary differences and changes to substantively enacted income tax rates. The Fund reported income before income taxes of $10.2 million and a future income tax expense of $0.6 million for the six months ended June 30, 2008. The future income tax expense was due to a change in estimates of future reversals of temporary differences.
Net Income
Net income for the quarter ended June 30, 2009 was $0.7 million compared to a net income of $4.0 million for the quarter ended June 30, 2008. Net income for the six months ended June 30, 2009 was $3.6 million compared to a net income of $9.6 million for the six months ended June 30, 2008. The decrease in comparable profitability for the three and six months ended June 30, 2009 was substantially due to lower gross profit as a result of lower revenues due to generally poor economic conditions, a cease use charge and offset by realized cost savings from on-going productivity improvement initiatives.
DATA EAST AND WEST
Revenues at the Data Group's DATA East and West segment for the quarter ended June 30, 2009 decreased $7.9 million or 9.2% to $77.3 million from $85.2 million for the same period in the prior year. Revenues for the six months ended June 30, 2009 decreased $17.1 million or 9.7% to $159.7 million from $176.7 million for the same period in the prior year.
Revenues for the three and six months ended June 30, 2009 decreased due to lower spending from customers in the financial, government and direct mail industries as a result of generally poor economic conditions in the fourth quarter of 2008 and the first six months of 2009. During the second quarter, this segment experienced declines in Western Canada similar to those encountered by the segment in Eastern Canada at the end of 2008 and during the first six months of 2009.
For the quarter ended June 30, 2009, gross profit decreased $4.0 million to $19.9 million from $23.9 million for the same period in 2008. Gross profit as a percentage of revenues for the quarter ended June 30, 2009 decreased to 25.8% from 28.1% for the same period in 2008. The decrease in gross profit as a percentage of revenues during the quarter ended June 30, 2009 was due to lower revenues as discussed above. This segment continues to be focused upon improving productivity and efficiencies in the operation of its equipment.
For the six months ending June 30, 2009, gross profit decreased $8.9 million to $41.1 million from $50.0 million in the same period of 2008. Gross profit as a percentage of revenues for the six months ended June 30, 2009 decreased to 25.8% from 28.3% for the same period in 2008. The decrease in the gross profit as a percentage of revenues during the six months ended June 30, 2009, was due to lower revenues as discussed above. This segment continues to be focused upon improving productivity and efficiencies in the operation of its equipment.
SUNDOG
Revenues at the Data Group's Sundog segment for the quarter ended June 30, 2009 decreased $1.0 million or 16.8% to $4.7 million from $5.7 million for the same period in the prior year. Revenues for the six months ended June 30, 2009 decreased $2.1 million or 17.3% to $10.0 million from $12.1 million for the same period in the prior year. The decrease in revenues for the three and six months ended June 30, 2009 was due to poor economic conditions in Alberta, which continue to negatively affect demand for commercial printing in that market, primarily marketing materials.
For the quarter ended June 30, 2009, gross profit decreased $0.5 million to $1.2 million from $1.7 million for the same period in 2008. Gross profit as a percentage of revenues for the quarter ended June 30, 2009 decreased to 25.3% from 29.3% for the same period in 2008. For the six months ended June 30, 2009, gross profit decreased $0.9 million to $2.7 million from $3.6 million for the same period in 2008. Gross profit as a percentage of revenues for the six months ended June 30, 2009 decreased to 26.6% from 29.6% for the same period in 2008. The decrease in gross profit as a percentage of revenues for the three and six months ended June 30, 2009 was principally due to the revenue shortfall as noted above.
MULTIPLE PAKFOLD
Revenues at the Data Group's Multiple Pakfold segment for the quarter ended June 30, 2009 decreased $0.8 million or 19.0% to $3.2 million from $4.0 million for the same period in the prior year. Revenues for the six months ended June 30, 2009 decreased $1.1 million or 13.6% to $6.9 million from $8.0 million for the same period in the prior year.
The decline in revenues for the three and six months ended June 30, 2009 was attributable to the poor economic conditions, which have resulted in a decline in quoting activity, smaller order quantities and extended reorder cycles.
For the quarter ended June 30, 2009, gross profit decreased $0.2 million to $0.2 million from $0.4 million for the same period in 2008. Gross profit as a percentage of revenues for the quarter ended June 30, 2009 was 7.4% compared to 9.0% for the same period in 2008. The decrease in gross profit as a percentage of revenues was due to poor economic conditions causing downward pricing pressures on this segment's products. For the six months ended June 30, 2009, gross profit decreased $0.1 million to $0.7 million from $0.8 million for the same period of 2008. Gross profit as percentage of revenues for the six months ended June 30, 2009 was 9.8% compared to 9.5% for the same period in 2008. The improvement in the gross profit as a percentage of revenues for the first six months of 2009 was due to the initiatives undertaken in 2008 to improve operating efficiencies.
Table 4 The following table provides a reconciliation of cash provided by
operating activities to cash available for distribution for the
periods noted. See "Non-GAAP Measures".
Cash Available for Distribution Reconciliation
-------------------------------------------------------------------------
For the periods
ended June 30,
2009 and 2008
(in thousands
of dollars,
except percentages Apr. 1 to Apr. 1 to Jan. 1 to Jan. 1 to
and per unit June 30, June 30, June 30, June 30,
amounts, unaudited) 2009 2008 2009 2008
$ $ $ $
-------------------------------------------------------------------------
Cash provided by
operating activities 3,952 11,294 13,874 22,991
Capital adjustments
Maintenance capital
expenditures(1) (167) (721) (1,306) (1,467)
Purchase of
convertible
debentures - - (6) -
Other adjustments
including
discretionary items:
Changes in non-cash
working capital(2) 1,937 (2,499) (755) (3,312)
Other(3) 117 107 224 213
-------------------------------------------------------------------------
Cash available
for distribution 5,839 8,181 12,031 18,425
-------------------------------------------------------------------------
Distributions to
unitholders(4) 6,805 6,805 13,610 13,610
-------------------------------------------------------------------------
Excess (shortfall)
of cash available
for distribution
over actual
distributions (966) 1,376 (1,579) 4,815
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Per unit(5)
-------------------------------------------------------------------------
Cash available
for distribution
per unit(5) 0.249 0.349 0.513 0.785
-------------------------------------------------------------------------
Distributions to
unitholders
per unit(5) 0.290 0.290 0.580 0.580
-------------------------------------------------------------------------
Excess (shortfall)
of cash available
for distribution
per unit over actual
distributions
per unit (0.041) 0.059 (0.067) 0.205
-------------------------------------------------------------------------
Payout ratio(6) 116.5% 83.2% 113.1% 73.9%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Notes:
(1) Maintenance capital expenditures are additions, replacements or
improvements to property, plant and equipment to maintain the Data
Group's business operations. These expenditures involve the
replacement of printing and digital equipment, computers and
software, and leasehold improvements.
(2) Cash provided by operating activities has been adjusted for changes
in non-cash working capital and other items so as to remove the
impact of timing differences in cash receipts and cash disbursements,
which generally reverse themselves but can vary significantly across
quarters.
(3) Includes other amounts that do not reflect the ongoing operations of
the Data Group's business.
(4) Distributions are in respect of the distributions declared.
(5) Per unit calculations are based upon the number of units outstanding
at the end of each month consistent with the number of units upon
which distributions are declared or paid and not the weighted average
number of units outstanding. As at June 30, 2009 and 2008, 23,490,592
units were outstanding.
(6) The payout ratio represents the distributions paid or declared to
unitholders as a percentage of the cash available for distribution,
in each case for the relevant period.
CASH AVAILABLE FOR DISTRIBUTION
See Table 4 above for a reconciliation of cash provided by operating activities to cash available for distribution for the three and six month periods ended June 30, 2009 and 2008, respectively and the amounts discussed below. For the quarter ended June 30, 2009, the Fund generated $5.8 million or $0.249 per unit of cash available for distribution compared to $8.2 million or $0.349 per unit for the same period in 2008. Cash available for distribution for the quarter ended June 30, 2009 was calculated by deducting from cash provided by operating activities of $4.0 million, maintenance capital expenditures of $0.2 million and adding back changes in non-cash working capital of $1.9 million and other non-cash items of $0.1 million. Cash available for distribution for the quarter ended June 30, 2008 was calculated by deducting from cash provided by operating activities of $11.3 million, maintenance capital expenditures of $0.7 million and changes in non-cash working capital of $2.5 million, and adding back other non-cash items of $0.1 million.
For the six months ended June 30, 2009, the Fund generated $12.0 million or $0.513 per unit of cash available for distribution compared to $18.4 million or $0.785 per unit for the same period in 2008. Cash available for distribution for the six months ended June 30, 2009 was calculated by deducting from cash provided by operating activities of $13.9 million, maintenance capital expenditures of $1.3 million and changes in non-cash working capital of $0.8 million, and adding back other non-cash items of $0.2 million. Cash available for distribution for the six months ended June 30, 2008 was calculated by deducting from cash provided by operating activities of $23.0 million, maintenance capital expenditures of $1.5 million and changes in non-cash working capital of $3.3 million, and adding back other non-cash items of $0.2 million.
For the quarter ended June 30, 2009, the Fund declared distributions of $6.8 million or $0.290 per unit. Actual distributions exceeded cash available for distribution by $1.0 million or $0.041 per unit for the quarter ended June 30, 2009. During the quarter ended June 30, 2009, the Data Group made cash payments of $0.7 million for the restructuring costs accrued as part of the purchase price accounting for the acquisition of Relizon Canada Inc. ("Relizon Canada") and for the related integration costs, consisting primarily of severance payments and moving costs and accrued restructuring provisions related to severance costs incurred as part of the Data Group's on-going productivity improvement initiatives charged to restructuring expense in 2008. These cash payments were funded by cash generated from operations. The restructuring and integration costs paid during the quarter have been deducted in determining cash available for distribution.
For the quarter ended June 30, 2008, the Fund declared distributions of $6.8 million or $0.290 per unit. Cash available for distribution exceeded actual distributions by $1.4 million or $0.059 per unit for the quarter ended June 30, 2008. During the quarter ended June 30, 2008, the Data Group made cash payments of $0.6 million for the restructuring costs accrued as part of the purchase price accounting for the Relizon Canada acquisition and for the related integration costs, consisting primarily of severance payments and moving costs. These cash payments were funded by cash generated from operations and the net proceeds from asset dispositions. The restructuring and integration costs paid during the quarter have been deducted in determining cash available for distribution.
For the six months ended June 30, 2009, the Fund declared distributions of $13.6 million or $0.580 per unit. Actual distributions exceeded cash available for distribution by $1.6 million or $0.067 per unit for the six months ended June 30, 2009. During the six months ended June 30, 2009, the Data Group made cash payments of $1.9 million for the restructuring costs accrued as part of the purchase price accounting for the Relizon Canada acquisition and for the related integration costs, consisting primarily of severance payments and moving costs and accrued restructuring provisions related to severance costs incurred as part of the Data Group's on-going productivity improvement initiatives charged to restructuring expense in 2008. These cash payments were funded by cash generated from operations and the net proceeds from asset dispositions. The restructuring and integration costs paid during the period have been deducted in determining cash available for distribution.
For the six months ended June 30, 2008, the Fund declared distributions of $13.6 million or $0.580 per unit. Cash available for distribution exceeded actual distributions by $4.8 million or $0.205 per unit for the six months ended June 30, 2008. During the six months ended June 30, 2008, the Data Group made cash payments of $1.7 million for the restructuring costs accrued as part of the purchase price accounting for the Relizon Canada acquisition and for the related integration costs, consisting primarily of severance payments and moving costs. These cash payments were funded by cash generated from operations and the net proceeds from asset dispositions. The restructuring and integration costs paid during the quarter have been deducted in determining cash available for distribution.
Investing Activities
Capital expenditures for the quarter ended June 30, 2009 of $0.2 million related primarily to maintenance capital expenditures and were financed by cash flow from operations. Capital expenditures for the six months ended June 30, 2009 of $1.3 million related primarily to maintenance capital expenditures and were financed by cash flow from operations and net proceeds from asset dispositions. During the quarter ended June 30, 2009, the Data Group sold and leased back printing equipment having a value of $0.6 million. During the six months ended June 30, 2009, the Data Group sold its former Hemmingford, Quebec facility for gross proceeds of $0.7 million.
Financing Activities
For the quarter ended June 30, 2009, the Fund paid or declared aggregate cash distributions of $6.8 million to its unitholders. For the six months ended June 30, 2009, the Fund paid cash distributions of $13.6 million to its unitholders.
About The DATA Group Income Fund --------------------------------
The Fund owns directly and indirectly all of the outstanding partnership units of The Data Group Limited Partnership (the "Data Group") and all of the outstanding shares of the Data Group's general partner, Data Business Forms Limited. The DATA Group is a leading provider of document management solutions including printed products. Founded in 1959, the Data Group operates numerous facilities in 11 regions across Canada and has a leading market share in the total document management services segment.
Additional information relating to The DATA Group Income Fund is available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com and www.datagroupincomefund.com.
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 the Fund and/or the 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 the Fund's current views regarding future events and operating performance, are based on information currently available to the Fund, 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 or achievements of the Fund and the Data Group to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. The principal assumptions and risks that the Fund made or took into account in the preparation of these forward-looking statements include the impact of the weakened domestic and global economic conditions on the Data Group's businesses; the Data Group's efforts to reduce its operating costs may not become effective as quickly as the Data Group expects, thereby impacting the Data Group's profitability and cash available for distribution; should the Data Group's revenues decline further than expected, the cost reduction measures taken by the Data Group in response to the current economic environment may not be sufficient and further reductions may be necessary; the Data Group's ability to maintain and grow historical levels of its sales of product and services including printed business documents; increases in the costs of paper and other raw materials used by the Data Group; the Data Group's ability to maintain relationships with its customers; the accuracy of estimated synergies in respect of expected cash flows, cost savings and profitability from the combination of the former Data Business Forms Limited and Relizon Canada Inc. businesses; the risk that any savings, growth prospects or other synergies from the combination of those businesses will not be fully realized or will take longer to realize than expected; competition from competitors supplying similar products and services; and the application of recent changes to the income tax treatment of certain income trusts, such as the Fund, which will subject the Fund to tax commencing in 2011 (assuming the Fund complies with the "normal growth guidelines" contained in such changes), and the effect of those proposed changes on the trading price of the Fund's units. Additional factors are discussed elsewhere in this press release and under the heading "Risks and Uncertainties" in the Fund's management's discussion and analysis and in the Fund's other publicly available disclosure documents, as filed by the Fund 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, the Fund 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, taxes, depreciation and amortization, and Adjusted EBITDA for the three and six months ended June 30, 2009 means EBITDA adjusted for gains on cancellation of convertible debentures and cease use charges. The Fund believes that, in addition to net income (loss), EBITDA and Adjusted EBITDA are useful supplemental measures in evaluating the performance of the Data Group and/or the Fund. Cash available for distribution means cash provided by (used in) operating activities increased by, or reduced for, maintenance capital expenditures, purchases of convertible debentures, changes in non-cash working capital and other non-cash items. Specifically, the Fund views cash available for distribution as a measure generally used by Canadian income funds, investors and management as an indicator of financial performance. EBITDA, Adjusted EBITDA and cash available for distribution are not earnings or cash flow measures recognized by Canadian generally accepted accounting principles ("GAAP") and do not have any standardized meanings prescribed by GAAP. Therefore, EBITDA, Adjusted EBITDA and cash available for distribution are unlikely to be comparable to similar measures presented by other issuers.
Investors are cautioned that EBITDA and Adjusted EBITDA should not be construed as an alternative to net income (loss) determined in accordance with GAAP as indicators of the Data Group's or the Fund's performance, nor is cash available for distribution an alternative to cash flows from operating, investing and financing activities determined in accordance with GAAP as measures of liquidity and cash flows. For a reconciliation of net income to Adjusted EBITDA, see Table 3 above. For a reconciliation of cash provided by operating activities to cash available for distribution, see Table 4 above.
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------
(in thousands of dollars, unaudited) June 30, December 31,
2009 2008
$ $
-------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents 11,680 11,492
Accounts receivable 36,666 47,106
Inventories 48,029 47,583
Prepaid expenses and other current assets 7,071 7,684
------------------------
103,446 113,865
Property, plant and equipment 36,392 39,909
Goodwill 141,206 141,206
Intangible assets 49,492 54,790
------------------------
330,536 349,770
------------------------
------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 27,321 32,224
Accrued restructuring and integration provisions 1,771 3,627
Income taxes payable 1,385 4,022
Deferred revenue 6,690 7,861
Distributions payable 2,269 2,269
------------------------
39,436 50,003
Revolving bank facility 70,000 70,000
Convertible debentures 34,403 34,327
Future income taxes 8,901 8,446
Deferred gain 1,627 1,724
Unfavourable lease obligation 1,084 1,142
Deferred lease inducement 919 980
Cease use accrual 858 -
Pension obligations 9,154 9,680
Post-employment and post-retirement benefits 2,186 2,150
------------------------
168,568 178,452
------------------------
Unitholders' Equity
Units 215,336 215,336
Conversion options 897 898
Accumulated other comprehensive loss (344) (1,059)
Deficit (53,921) (43,857)
------------------------
161,968 171,318
------------------------
330,536 349,770
------------------------
------------------------
CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
-------------------------------------------------------------------------
(in thousands of dollars, except For the For the
per unit amounts, unaudited) three three
months months
ended ended
June 30, June 30,
2009 2008
` $ $
-------------------------------------------------------------------------
Revenues 84,269 93,733
Cost of revenues (including depreciation
of $1,726 and $1,932, respectively) 62,938 67,785
------------------------
Gross profit 21,331 25,948
------------------------
Expenses
Selling, commissions and expenses 8,408 9,477
General and administration expenses (including
depreciation of $66 and $118, respectively) 7,285 7,853
Cease use charge 866 -
Amortization of intangible assets 2,649 2,744
------------------------
19,208 20,074
------------------------
Income before interest and income taxes 2,123 5,874
------------------------
Interest expense on long-term debt (net of
interest income of $207 and $102, respectively) 1,253 1,471
------------------------
Income before income taxes 870 4,403
------------------------
Future income tax expense 121 400
------------------------
Net income for the period 749 4,003
------------------------
------------------------
Gain on cash flow hedges (434) (328)
------------------------
Comprehensive income for the period 1,183 4,331
------------------------
------------------------
Basic income per unit 0.03 0.17
------------------------
Diluted income per unit 0.03 0.17
------------------------
Units outstanding 23,490,592 23,490,592
------------------------
------------------------
CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
-------------------------------------------------------------------------
(in thousands of dollars, except For the For the
per unit amounts, unaudited) six months six months
ended ended
June 30, June 30,
2009 2008
$ $
-------------------------------------------------------------------------
Revenues 174,686 194,759
Cost of revenues (including depreciation
of $3,532 and $3,871, respectively) 130,213 140,424
------------------------
Gross profit 44,473 54,335
------------------------
Expenses
Selling, commissions and expenses 17,209 19,664
General and administration expenses (including
depreciation of $142 and $250, respectively) 14,412 15,920
Cease use charge 866 -
Gain on cancellation of convertible debentures (2) -
Amortization of intangible assets 5,298 5,488
------------------------
37,783 41,072
------------------------
Income before interest and income taxes 6,690 13,263
------------------------
Interest expense on long-term debt (net of
interest income of $247 and $210, respectively) 2,689 3,069
------------------------
Income before income taxes 4,001 10,194
------------------------
Future income tax expense 455 600
------------------------
Net income for the period 3,546 9,594
------------------------
------------------------
(Gain) loss on cash flow hedges (715) 375
------------------------
Comprehensive income for the period 4,261 9,219
------------------------
------------------------
Basic income per unit 0.15 0.41
------------------------
Diluted income per unit 0.15 0.41
------------------------
Units outstanding 23,490,592 23,490,592
------------------------
------------------------
CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY
-------------------------------------------------------------------------
(in thousands of dollars, Accumulated
unaudited) other
comprehensive Total
Conversion income Unitholders'
Units options (loss) Deficit Equity
$ $ $ $ $
-------------------------------------------------------------------------
Balance as at
December 31, 2007 215,336 898 (66) (23,507) 192,661
Accounting policy
change - - - 6,175 6,175
----------------------------------------------------
Balance as at
January 1, 2008 215,336 898 (66) (17,332) 198,836
Distributions
declared - - - (13,610) (13,610)
Loss on cash
flow hedges - - (375) - (375)
Net income for
the period - - - 9,594 9,594
----------------------------------------------------
Balance as at
June 30, 2008 215,336 898 (441) (21,348) 194,445
----------------------------------------------------
----------------------------------------------------
Balance as at
December 31, 2008 215,336 898 (1,059) (43,857) 171,318
Distributions
declared - - - (13,610) (13,610)
Cancellation of
convertible
debentures - (1) - - (1)
Gain on cash
flow hedges - - 715 - 715
Net income for
the period - - - 3,546 3,546
----------------------------------------------------
Balance as at
June 30, 2009 215,336 897 (344) (53,921) 161,968
----------------------------------------------------
----------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------
(in thousands of dollars, unaudited) For the For the
three three
months months
ended ended
June 30, June 30,
2009 2008
$ $
-------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
-------------------------------------------------------------------------
Net income for the period 749 4,003
Items not involving cash
Depreciation of property, plant and equipment 1,792 2,050
Amortization of intangible assets 2,649 2,744
Pension expense 230 484
Contributions made to pension plans (484) (678)
Loss (gain) on disposal of property,
plant and equipment 18 (151)
Cease use charge 866 -
Accretion of convertible debentures 42 42
Amortization of deferred gain (49) (49)
Unfavourable lease obligation (29) (27)
Amortization of lease inducement (31) (31)
Accretion of cease use accrual (8) -
Post-employment and post-retirement benefits 23 8
Future income tax expense 121 400
------------------------
5,889 8,795
Changes in non-cash items relating to
operating activities (1,937) 2,499
------------------------
3,952 11,294
------------------------
Investing activities
-------------------------------------------------------------------------
Purchase of property, plant and equipment (167) (721)
Proceeds on disposal of property,
plant and equipment 588 1,633
------------------------
421 912
------------------------
Financing activities
-------------------------------------------------------------------------
Distributions to unitholders (6,805) (6,805)
------------------------
(6,805) (6,805)
------------------------
(Decrease) increase in cash and cash
equivalents during the period (2,432) 5,401
-------------------------------------------------------------------------
Cash and cash equivalents - beginning of period 14,112 9,463
-------------------------------------------------------------------------
Cash and cash equivalents - end of period 11,680 14,864
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental cash flow information
Interest paid 1,865 2,033
Income taxes paid 3,470 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------
(in thousands of dollars, unaudited) For the For the
six months six months
ended ended
June 30, June 30,
2009 2008
$ $
-------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
-------------------------------------------------------------------------
Net income for the period 3,546 9,594
Items not involving cash
Depreciation of property, plant and equipment 3,674 4,121
Amortization of intangible assets 5,298 5,488
Pension expense 460 987
Contributions made to pension plans (986) (981)
Gain on disposal of property, plant and equipment (87) (15)
Gain on cancellation of convertible debentures (2) -
Cease use charge 866 -
Accretion of convertible debentures 83 84
Amortization of deferred gain (97) (97)
Unfavourable lease obligation (58) (54)
Amortization of lease inducement (61) (62)
Accretion of cease use accrual (8) -
Post-employment and post-retirement benefits 36 14
Future income tax expense 455 600
------------------------
13,119 19,679
Changes in non-cash items relating to
operating activities 755 3,312
------------------------
13,874 22,991
------------------------
Investing activities
-------------------------------------------------------------------------
Purchase of property, plant and equipment (1,306) (1,467)
Proceeds on disposal of property,
plant and equipment 1,236 1,635
------------------------
(70) 168
------------------------
Financing activities
-------------------------------------------------------------------------
Repurchase of convertible debentures (6) -
Distributions to unitholders (13,610) (13,610)
------------------------
(13,616) (13,610)
------------------------
Increase in cash and cash equivalents during
the period 188 9,549
-------------------------------------------------------------------------
Cash and cash equivalents - beginning of period 11,492 5,315
-------------------------------------------------------------------------
Cash and cash equivalents - end of period 11,680 14,864
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental cash flow information
Interest paid 2,541 2,851
Income taxes paid 3,470 -