HIGHLIGHTS
SECOND QUARTER 2016
- Net Income of $1.0 million,
including restructuring expenses of $0.4
million, compared to Net Loss of $29.7 million, including a goodwill impairment
charge of $26.0 million and
restructuring expenses of $4.2
million in the prior comparative period
- Adjusted Net Income of $1.3
million, an increase of $1.8
million compared to the prior comparative period (See Table
3 and "Non-GAAP Measures" below)
- Adjusted EBITDA of $4.5 million,
an increase of 74.4% year over year (See Table 2 and "Non-GAAP
Measures" below)
- Revenues of $69.7 million, a
decrease of 5.1% year over year
FIRST HALF OF 2016
- Net Income of $2.9 million,
including restructuring expenses of $0.7
million, compared to Net Loss of $30.8 million, including a goodwill impairment
charge of $26.0 million and
restructuring expenses of $6.3
million in the prior comparative period
- Adjusted Net Income of $3.4
million, an increase of $3.6
million compared to the prior comparative period (See Table
3 and "Non-GAAP Measures" below)
- Adjusted EBITDA of $10.2 million,
an increase of 67.0% year over year (See Table 2 and "Non-GAAP
Measures" below)
- Revenues of $144.3 million, a
decrease of 3.4% year over year
BRAMPTON, ON, Aug. 10, 2016 /CNW/ - DATA Communications
Management Corp. (TSX: DCM) ("DATA" or the "Company") announced its
consolidated financial results for the second quarter and the six
months ended June 30, 2016.
"In the second quarter of 2016, our financial results showed
continued improvements in margins and profitability over the
comparable period last year. Gross margin percentage,
Adjusted EBITDA margin percentage and net margin percentage all
improved, leading to healthy increases in Adjusted EBITDA and net
income despite softer revenue. It's one year ago today that
we announced a series of significant restructuring initiatives to
improve DATA's financial performance and we have now experienced
four successive quarters of year over year improvements in margins
and profitability", said Michael G.
Sifton, President and Chief Executive Officer of DATA.
Although significant operating improvements have been
implemented, DATA continues to optimize its operations. As
such, DATA recently announced it is consolidating its Alberta operations into its flagship
Calgary, Alberta operations
facility. As a result, it will close its Edmonton, Alberta operations facility at the
end of 2016 and redistribute production from Edmonton to Calgary and other operations facilities across
Canada. DATA presently expects to incur a total of
approximately $3.5 million in
restructuring expenses in the second half of 2016 related to these
consolidation plans, consisting primarily of severance costs
associated with headcount reductions and, to a lesser extent,
relocation of equipment.
DATA continues to contend with industry over-capacity in some
print segments and the current uncertainty about a potential Canada
Post labour disruption. Some of DATA's sales initiatives to
address its industry challenges include: recruitment of both senior
sales leadership and young talent; better integration of its
outside sales teams and its inside "customer experience" teams; and
building marketplace awareness and credibility through directed
marketing strategies which leverage its new brand, name and
website.
DATA's senior leadership team has been focused on stabilizing
the business for the past year and is now renewing its emphasis on
developing and implementing growth strategies for both the short
and longer term. DATA has recently completed a number of
corporate initiatives which it believes will help position DATA
better to execute on these strategies as they are developed.
These include:
- Closing a private placement that raised a total of $2.8 million in gross proceeds in two tranches,
further strengthening its balance sheet;
- Entering into a settlement, nomination and standstill agreement
with KST Industries Inc.;
- Adding three new directors to its Board of Directors, with
strong governance and relevant industry expertise;
- Formally changing its legal name to "DATA Communications
Management Corp."; and
- Consolidating its outstanding common shares on a 1-for-100
basis, along with a corresponding change in trading symbol.
At August 10, 2016, June 30, 2016 and
December 31, 2015, DATA had 11,975,053, 1,166,608,744 and
998,752,732 common shares outstanding, respectively. On
May 27, 2016, DATA announced that it
intended to complete a non-brokered private placement of up to
198,751,793 common shares at a price of $0.014 per common share for gross proceeds to
DATA of approximately $2.8 million in
two tranches. On May 31, 2016,
the first portion of private placement was completed and DATA
issued 167,856,012 common shares. On July 4, 2016, following receipt of disinterested
shareholder approval at DATA's annual and special meeting of
shareholders held on June 30, 2016,
the second portion of the private placement was completed and DATA
issued 30,895,781 common shares. On July 4, 2016, DATA consolidated its issued and
outstanding common shares on the basis of one post-consolidation
common share for each 100 pre-consolidation common shares (the
"Share Consolidation"). After giving effect to the Share
Consolidation, the 1,197,504,525 common shares then outstanding
were consolidated into 11,975,053 common shares. No
fractional common shares were issued, and any fractional share
entitlements resulting from the Share Consolidation were rounded up
to the nearest whole number of common shares. The exercise
price and number of common shares issuable, and other entitlements,
under awards granted pursuant to DATA's long-term incentive plan
have been proportionately adjusted to reflect the Share
Consolidation. Additionally, the conversion price of DATA's
outstanding 6.00% Convertible Unsecured Subordinated Debentures
(the "6.00% Convertible Debentures") was proportionately adjusted
to reflect the Share Consolidation.
RESULTS OF OPERATIONS
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.
Table 1
|
The following table sets
out selected historical consolidated financial information for the
periods noted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended June 30, 2016 and
2015
|
Apr. 1
to
June
30,
2016
|
|
Apr. 1
to
June
30,
2015
|
|
Jan. 1
to
June
30,
2016
|
|
Jan. 1
to
June
30,
2015
|
|
(in thousands of Canadian dollars, except per
share amounts,
unaudited)
|
$
|
|
$
|
|
$
|
|
$
|
|
Revenues
|
69,716
|
|
73,447
|
|
144,330
|
|
149,449
|
|
Cost of
revenues
|
52,567
|
|
57,821
|
|
108,808
|
|
116,538
|
|
Gross
profit
|
17,149
|
|
15,626
|
|
35,522
|
|
32,911
|
|
|
|
|
|
|
Selling, general and administrative
expenses
|
13,748
|
|
14,249
|
|
27,581
|
|
29,184
|
|
Restructuring
expenses
|
368
|
|
4,205
|
|
692
|
|
6,259
|
|
Impairment of
goodwill
|
—
|
|
26,000
|
|
—
|
|
26,000
|
|
Amortization of intangible
assets
|
510
|
|
479
|
|
1,015
|
|
958
|
|
|
|
|
|
|
Income (loss) before finance costs and income
taxes
|
2,523
|
|
(29,307)
|
|
6,234
|
|
(29,490)
|
|
|
|
|
|
|
Finance
costs
|
|
|
|
|
|
Interest
expense
|
869
|
|
1,464
|
|
1,737
|
|
2,748
|
|
|
Interest
income
|
(1)
|
|
(3)
|
|
(4)
|
|
(7)
|
|
|
Amortization of transaction
costs
|
109
|
|
134
|
|
356
|
|
170
|
|
|
977
|
|
1,595
|
|
2,089
|
|
2,911
|
|
Income (loss) before income
taxes
|
1,546
|
|
(30,902)
|
|
4,145
|
|
(32,401)
|
|
|
|
|
|
|
Income tax expense
(recovery)
|
|
|
|
|
|
Current
|
1,156
|
|
76
|
|
1,332
|
|
83
|
|
|
Deferred
|
(601)
|
|
(1,295)
|
|
(60)
|
|
(1,670)
|
|
|
555
|
|
(1,219)
|
|
1,272
|
|
(1,587)
|
|
Net income (loss) for the
period
|
991
|
|
(29,683)
|
|
2,873
|
|
(30,814)
|
|
|
|
|
|
|
Net income (loss) attributable to common
shareholders
|
991
|
|
(29,683)
|
|
2,873
|
|
(30,814)
|
|
Basic earnings (loss) per
share
|
0.00
|
|
(1.26)
|
|
0.00
|
|
(1.31)
|
|
Diluted earnings (loss) per
share
|
0.00
|
|
(1.26)
|
|
0.00
|
|
(1.31)
|
|
Weighted average number of common shares outstanding
- basic
|
1,055,934,450
|
|
23,490,592
|
|
1,027,343,591
|
|
23,490,592
|
|
Weighted average number of common shares outstanding
-
diluted
|
1,058,695,311
|
|
23,490,592
|
|
1,028,724,021
|
|
23,490,592
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2016 and December 31,
2015
|
As
at
June 30,
2016
|
|
As
at
Dec.
31,
2015
|
|
(in thousands of Canadian dollars,
unaudited)
|
$
|
|
$
|
|
Current
assets
|
73,488
|
|
80,125
|
|
Current
liabilities
|
60,701
|
|
90,298
|
|
|
|
|
Total
assets
|
125,025
|
|
134,067
|
|
Total non-current
liabilities
|
41,278
|
|
24,750
|
|
|
|
|
Shareholders'
equity
|
23,046
|
|
19,019
|
|
|
|
|
|
|
Table
2
|
The following table
provides reconciliations of net income (loss) to EBITDA and of net
income (loss) to Adjusted EBITDA for the periods noted. See
"Non-GAAP
Measures".
|
|
|
EBITDA and Adjusted EBITDA Reconciliation
|
|
|
|
|
|
|
|
|
For the periods ended June 30, 2016 and
2015
|
Apr. 1
to
June
30,
2016
|
|
Apr. 1
to
June
30,
2015
|
|
Jan. 1
to
June
30,
2016
|
|
Jan. 1
to
June
30,
2015
|
|
(in thousands of Canadian dollars,
unaudited)
|
$
|
|
$
|
|
$
|
|
$
|
|
Net income (loss) for the
period
|
991
|
|
(29,683)
|
|
2,873
|
|
(30,814)
|
|
|
|
|
|
|
Interest
expense
|
869
|
|
1,464
|
|
1,737
|
|
2,748
|
|
Interest
income
|
(1)
|
|
(3)
|
|
(4)
|
|
(7)
|
|
Amortization of transaction
costs
|
109
|
|
134
|
|
356
|
|
170
|
|
Current income tax
expense
|
1,156
|
|
76
|
|
1,332
|
|
83
|
|
Deferred income tax
recovery
|
(601)
|
|
(1,295)
|
|
(60)
|
|
(1,670)
|
|
Depreciation of property, plant and
equipment
|
1,134
|
|
1,224
|
|
2,249
|
|
2,374
|
|
Amortization of intangible
assets
|
510
|
|
479
|
|
1,015
|
|
958
|
|
EBITDA
|
4,167
|
|
(27,604)
|
|
9,498
|
|
(26,158)
|
|
|
|
|
|
|
Restructuring
expenses
|
368
|
|
4,205
|
|
692
|
|
6,259
|
|
Impairment of
goodwill
|
—
|
|
26,000
|
|
—
|
|
26,000
|
|
Adjusted
EBITDA
|
4,535
|
|
2,601
|
|
10,190
|
|
6,101
|
|
|
|
|
|
|
|
|
|
|
Table
3
|
The following table
provides reconciliations of net income (loss) to Adjusted net
income (loss) and a presentation of Adjusted net income (loss) per
share and Pro forma Adjusted net income (loss) per share for the
periods noted. See "Non-GAAP
Measures".
|
|
|
Adjusted Net Income (Loss) Reconciliation
|
|
|
|
|
|
For the periods ended June 30, 2016 and
2015
|
Apr. 1
to
June
30,
2016
|
|
Apr. 1
to
June
30,
2015
|
|
Jan. 1
to
June
30,
2016
|
|
Jan. 1
to
June
30,
2015
|
|
(in thousands of Canadian dollars, except share
and per share amounts,
unaudited)
|
$
|
|
$
|
|
$
|
|
$
|
|
Net income (loss) for the
period
|
991
|
|
(29,683)
|
|
2,873
|
|
(30,814)
|
|
|
|
|
|
|
Restructuring
expenses
|
368
|
|
4,205
|
|
692
|
|
6,259
|
|
Impairment of
goodwill
|
—
|
|
26,000
|
|
—
|
|
26,000
|
|
Tax effect of the above
adjustments
|
(96)
|
|
(1,089)
|
|
(181)
|
|
(1,621)
|
|
Adjusted net (loss)
income
|
1,263
|
|
(567)
|
|
3,384
|
|
(176)
|
|
|
|
|
|
|
Adjusted net income (loss) per share,
basic
|
0.0012
|
|
(0.0241)
|
|
0.0033
|
|
(0.0075)
|
|
Adjusted net income (loss) per share,
diluted
|
0.0012
|
|
(0.0241)
|
|
0.0033
|
|
(0.0075)
|
|
Pro forma Adjusted net income (loss) per share, basic
(1)
|
0.0012
|
|
(0.0006)
|
|
0.0033
|
|
(0.0002)
|
|
Pro forma Adjusted net income (loss) per share,
diluted
(1)
|
0.0012
|
|
(0.0006)
|
|
0.0033
|
|
(0.0002)
|
|
Weighted average number of common shares outstanding
- basic
|
1,055,934,450
|
|
23,490,592
|
|
1,027,343,591
|
|
23,490,592
|
|
Weighted average number of common shares outstanding
-
diluted
|
1,058,695,311
|
|
23,490,592
|
|
1,028,724,021
|
|
23,490,592
|
|
Number of common shares
outstanding
|
1,166,608,744
|
|
23,490,592
|
|
1,166,608,744
|
|
23,490,592
|
|
|
|
|
|
|
|
|
|
|
Note:
|
|
(1)
|
On December 23, 2015,
DATA issued 975,262,140 common shares in connection with the
redemption of approximately 75% of the aggregate principal amount
of its outstanding 6.00% Convertible Debentures. Pro forma
Adjusted net income (loss) per share, a non-GAAP measure, assumes
Adjusted net income (loss) per share for the three and six
month periods ended June 30, 2015 were calculated on the
basis of the total number of common shares outstanding of
998,752,732 at December 31, 2015, rather than the weighted average
number of common shares outstanding at the respective period ends,
given the significant dilution that occurred with eight days left
in the 2015 fiscal year due to the issuance of 975,262,140 common
shares of DATA as described
above.
|
|
|
Revenues
For the quarter ended June 30, 2016, DATA recorded revenues of
$69.7 million, a decrease of
$3.7 million or 5.1% compared with
the same period in 2015. The decrease in revenues was due to
declines in and the timing of orders from existing customers for
print-related products and services, which was partially offset by
growth in revenues from new customer orders. For the six
months ended June 30, 2016, DATA
recorded revenues of $144.3 million,
a decrease of $5.1 million or
3.4% compared with the same period in 2015. The decrease in
revenues for the six months ended June 30,
2016 was primarily due to a greater decline in orders from
existing customers for print-related products and services than
offsetting growth in revenues from new customers.
Cost of Revenues and Gross Profit
For the
quarter ended June 30, 2016, cost of
revenues decreased to $52.6 million
from $57.8 million for the same
period in 2015. Gross profit for the quarter ended
June 30, 2016 was $17.1 million, which represented an increase
of $1.5 million or 9.7% from
$15.6 million for the same
period in 2015. Gross profit as a percentage of revenues
increased to 24.6% for the quarter ended June 30, 2016 compared to 21.3% for the same
period in 2015. For the six months ended June 30, 2016, cost of revenues decreased to
$108.8 million from $116.5 million for the same period in 2015.
Gross profit for the six months ended June
30, 2016 was $35.5 million, which represented an increase
of $2.6 million or 7.9% from
$32.9 million for the same
period in 2015. Gross profit as a percentage of revenues
increased to 24.6% for the six months ended June 30, 2016 compared to 22.0% for the same
period in 2015. The increase in gross profit as a percentage
of revenues for the three and six month periods ended June 30,
2016 was largely due to the cost reductions realized from prior
cost savings initiatives implemented in 2015. Those cost
savings initiatives included headcount reductions, which helped
reduce direct and indirect labour costs, respectively.
Selling, General and Administrative
Expenses
Selling, general and administrative
("SG&A") expenses, excluding amortization of intangible assets,
for the quarter ended June 30, 2016
decreased $0.5 million or 3.5%
to $13.7 million compared to
$14.2 million in the same period
in 2015. As a percentage of revenues, these costs were 19.7%
of revenues for the quarter ended June 30,
2016 compared to 19.4% of revenues for the same period in
2015. SG&A expenses, excluding amortization of intangible
assets, for the six months ended June 30,
2016 decreased $1.6 million or 5.5% to $27.6 million compared to $29.2 million for the same period of
2015. As a percentage of revenues, these costs were 19.1% and
19.5% of revenues for the six month periods ended June 30,
2016 and 2015, respectively. The decrease in
SG&A expenses for the three and six month periods ended
June 30, 2016 was primarily attributable to cost savings
initiatives implemented in 2015, including headcount reductions
across sales, general and administration functions,
respectively. The decrease in SG&A expenses for the three
and six month periods ended June 30, 2016 was partially offset
by higher SG&A expenses related to share-based compensation
expense and additional corporate costs related to changes in DATA's
Board of Directors, the change in the company's legal name and the
share consolidation during the quarter ended June 30, 2016.
Restructuring Expenses
For the three and six
month periods ended June 30, 2016, DATA incurred restructuring
expenses primarily related to headcount reductions of $0.4 million and $0.7
million, respectively. For the three months ended
June 30, 2015, DATA incurred
restructuring expenses of $4.2
million due to changes in senior management, headcount
reductions across DATA's operations and the closure of certain
manufacturing locations. For the six months ended
June 30, 2015, DATA incurred
restructuring expenses of $6.3
million comprised of (i) $5.6
million of restructuring expenses due to changes in senior
management, headcount reductions across DATA's operations and the
closure of certain manufacturing locations, and a (ii) charge to
onerous contracts of $0.7 million for
a lease exit charge for a closed facility in Calgary, Alberta.
Adjusted EBITDA
For the quarter ended
June 30, 2016, Adjusted EBITDA was
$4.5 million, or 6.5% of
revenues. Adjusted EBITDA for the quarter ended June 30, 2016 increased $1.9 million or 74.4% from the same period in the
prior year and Adjusted EBITDA margin for the quarter, as a
percentage of revenues, increased from 3.5% of revenues in 2015 to
6.5% of revenues in 2016. For the six months ended
June 30, 2016, Adjusted EBITDA was
$10.2 million, or 7.1% of
revenues. Adjusted EBITDA for the six months ended
June 30, 2016 increased $4.1 million or 67.0% from the same period in the
prior year and Adjusted EBITDA margin for the period, as a
percentage of revenues, increased from 4.1% of revenues in 2015 to
7.1% of revenues in 2016. The increase in Adjusted EBITDA for
the three and six month periods ended June 30, 2016 was
attributable to improved gross margins as a result of prior cost
savings initiatives which lowered direct and indirect labour costs,
improved utilization rates at DATA's key plants and lowered
SG&A expense, despite lower levels of revenues compared to the
prior comparable periods.
Interest Expense
Interest expense, including
interest on debt outstanding under DATA's credit facilities, on its
outstanding 6.00% Convertible Debentures, on certain unfavourable
lease obligations related to closed facilities and on DATA's
employee benefit plans, was $0.9
million for the quarter ended June
30, 2016 compared to $1.5
million for the same period in 2015, and was $1.7 million for the six months ended
June 30, 2016 compared to
$2.7 million for the same period in
2015. Interest expense for the three and six month periods
ended June 30, 2016 was lower than the same periods in the
prior year primarily as a result of reductions in the aggregate
principal amount of outstanding 6.00% Convertible Debentures and
debt outstanding under DATA's credit facilities, respectively.
Income Taxes
DATA reported income before income
taxes of $1.5 million, a current
income tax expense of $1.2 million
and a deferred income tax recovery of $0.6
million for the quarter ended June
30, 2016 compared to a loss before income taxes of
$30.9 million, a current income tax
expense of $0.1 million and a
deferred income tax recovery of $1.3
million for the quarter ended June
30, 2015. DATA reported income before income taxes of
$4.1 million, a current income tax
expense of $1.3 million and a
deferred income tax recovery of $0.1
million for the six months ended June
30, 2016 compared to a loss before income taxes of
$32.4 million, a current income tax
expense of $0.1 million and a
deferred income tax recovery of $1.7
million for the six months ended June
30, 2015. The current income tax expense was due to
the taxes payable on DATA's estimated taxable income for the three
and six month periods ended June 30, 2016, respectively.
The current tax expense for the three and six month periods ended
June 30, 2016 includes a recovery of taxes paid in a prior
period offset by a reclassification from deferred taxes. The
deferred income tax recoveries were due to changes in estimates of
future reversals of temporary differences and new temporary
differences that arose during the three and six month periods ended
June 30, 2016 and 2015, respectively.
Net Income (Loss)
Net income for the three and
six months ended June 30, 2016 was
$1.0 million and $2.9 million, respectively, compared to net loss
of $29.7 million and $30.8 million, respectively, for the same periods
in 2015. The increase in comparable profitability for the
three and six month periods ended June 30, 2016 was
substantially due to higher gross profit as a result of lower
direct and indirect costs, cost savings realized as a result of the
restructuring initiatives in 2015 that led to a decline in SG&A
expenses and lower interest expense during the three and six month
periods ended June 30, 2016, respectively. In addition,
the increase in comparable profitability was due to lower
restructuring expenses during the three and six month periods ended
June 30, 2016 and a goodwill impairment charge during the
three and six month periods ended June 30, 2015,
respectively. The increase in comparable profitability was
partially offset by larger current income tax expenses and smaller
deferred income tax recoveries, respectively, during the three and
six month periods ended June 30, 2016.
Adjusted Net Income (Loss)
Adjusted net income
for the three and six months ended June 30,
2016 was $1.3 million and
$3.4 million, respectively, compared
to Adjusted net loss of $0.6 million
and $0.2 million, respectively, for
the same periods in 2015. The increase in comparable
profitability for the three and six month periods ended
June 30, 2016 was attributable to higher gross profit as a
result of lower direct and indirect labour costs and SG&A
expenses attributable to cost savings realized as a result of the
restructuring initiatives in 2015 and lower interest expense in
2016, respectively.
INVESTING ACTIVITIES
Capital expenditures for the three and six months ended
June 30, 2016 were $0.2 million and $0.8
million, respectively. These capital expenditures,
which were financed by cash flow from operations, were related
primarily to maintenance capital expenditures.
FINANCING ACTIVITIES
On May 31, 2016, a portion of a
non-brokered private placement was completed and DATA issued a
total of 167,856,012 common shares at a price of $0.014 per common share. During the three
months ended June 30, 2016, DATA
received gross proceeds of $2.4
million, less issue expenses of $0.1
million for net proceeds of $2.3
million.
During the three months ended June 30,
2016, DATA repaid $9.6 million
of principal amounts outstanding under its new credit
facilities. During the six months ended June 30, 2016, DATA received $43.9 million in cash from advances under its new
credit facilities and repaid $43.3
million and $10.2 million of
the principal amounts outstanding under its old and new credit
facilities, respectively. During the six months ended
June 30, 2016, DATA incurred
$1.3 million of transaction costs
related to the establishment of its new credit facilities.
About DATA Communications Management Corp.
At DATA, we are experts at planning and driving business
communications. We help marketers and agencies unify and
execute communications campaigns across multiple channels, and we
help operations teams streamline and automate document and
communications management processes. Our core capabilities
include direct marketing, commercial print services, labels and
automated identification solutions, event tickets and gift cards,
logistics and fulfilment, content and workflow management, data
management and analytics, and regulatory communications. We
serve clients in key vertical markets such as financial services,
healthcare, lottery and gaming, retail, not-for-profit, and
energy. We are strategically located across Canada to support clients on a national basis,
and serve the U.S. market through our facilities in Chicago, Illinois.
Additional information relating to DATA Communications
Management Corp. is available on www.datacm.com, and in the
disclosure documents filed by DATA Communications Management Corp.
on the System for Electronic Document Analysis and Retrieval
(SEDAR) at www.sedar.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 DATA, 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's current views
regarding future events and operating performance, are based on
information currently available to DATA, 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 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 made or took into account
in the preparation of these forward-looking statements include: the
limited growth in the traditional printing industry and the
potential for further declines in sales of DATA's printed business
documents relative to historical sales levels for those products;
the risk that changes in the mix of products and services sold by
DATA which are related to reduced demand for its printed products
will adversely affect DATA's financial results; the risk that DATA
may not be successful in reducing the size of its legacy print
business, reducing costs, reducing its long-term debt, repaying or
refinancing its outstanding 6.00% convertible unsecured
subordinated debentures, and growing its digital communications
business; the risk that DATA may not be successful in managing its
organic growth; DATA's ability to invest in, develop and
successfully market new digital and other products and services;
competition from competitors supplying similar products and
services, some of whom have greater economic resources than DATA
and are well-established suppliers; DATA'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's
businesses; risks associated with acquisitions by DATA; increases
in the costs of paper and other raw materials used by DATA; and
DATA's ability to maintain relationships with its customers.
Additional factors are discussed elsewhere in this press release
and under the headings "Risk Factors" and "Risks and Uncertainties"
in DATA's management's discussion and analysis and in DATA's other
publicly available disclosure documents, as filed by DATA 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 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. Except as otherwise noted, when used in
this press release, EBITDA means earnings before interest and
finance costs, taxes, depreciation and amortization and Adjusted
net income (loss) means net income (loss) adjusted for the impact
of certain non-cash items and certain items of note on an after-tax
basis. Adjusted EBITDA for the three and six month periods
ended June 30, 2016 means EBITDA adjusted for restructuring
expenses. Adjusted EBITDA for the three and six month periods
ended June 30, 2015 means EBITDA adjusted June 30, 2015
for restructuring expenses and goodwill impairment charges.
Adjusted net income (loss) for the three and six month periods
ended June 30, 2016 means net income (loss) adjusted for
restructuring expenses and the tax effects of those items.
Adjusted net income (loss) for the three and six month periods
ended June 30, 2015 means net income (loss) adjusted for
restructuring expenses, goodwill impairment charges and the tax
effects of those items. Adjusted net income (loss) per share,
basic is calculated by dividing Adjusted net income for the period
by the weighted average number of common shares (basic and diluted)
outstanding during the period. Pro forma Adjusted net income
(loss) per share for the three and six month periods ended
June 30, 2015 assumes Adjusted net income (loss) per share was
calculated on the basis of the total number of common shares
outstanding at December 31, 2015,
rather than the weighted average number of common shares
outstanding at the period end, given the significant dilution that
occurred on December 23, 2015 due to
the issuance of of 975,262,140 common shares of DATA in connection
with the redemption of a portion of DATA's then outstanding 6.00%
Convertible Debentures. DATA believes that, in addition to
net income (loss), Adjusted net income (loss), Adjusted net income
(loss) per share, Pro forma Adjusted net income (loss) per share,
EBITDA and Adjusted EBITDA are useful supplemental measures in
evaluating the performance of DATA. Adjusted net income
(loss), Adjusted net income (loss) per share, Pro forma Adjusted
net income (loss) per share, EBITDA and Adjusted EBITDA are not
earnings measures recognized by IFRS and do not have any
standardized meanings prescribed by IFRS. Therefore, Adjusted
net income (loss), Adjusted net income (loss) per share, Pro forma
Adjusted net income (loss) per share, EBITDA and Adjusted EBITDA
are unlikely to be comparable to similar measures presented by
other issuers.
Investors are cautioned that Adjusted net income (loss),
Adjusted net income (loss) per share, Pro forma Adjusted net income
(loss) per share, EBITDA and Adjusted EBITDA should not be
construed as alternatives to net income (loss) determined in
accordance with IFRS as an indicator of DATA's performance.
For a reconciliation of net income (loss) to EBITDA and a
reconciliation of net income (loss) to Adjusted EBITDA, see Table 2
above. For a reconciliation of net income (loss) to Adjusted
net income (loss) and a presentation of Adjusted net income (loss)
per share and Pro forma Adjusted net income (loss) per share, see
Table 3 above.
CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION
|
|
|
|
(in thousands of Canadian dollars,
unaudited)
|
June 30, 2016
$
|
|
|
December 31, 2015
$
|
|
|
|
|
|
Assets
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
1,003
|
|
|
871
|
|
|
Trade
receivables
|
30,472
|
|
|
38,051
|
|
|
Inventories
|
37,745
|
|
|
37,053
|
|
|
Prepaid expenses and other current
assets
|
4,268
|
|
|
4,150
|
|
|
73,488
|
|
|
80,125
|
|
Non-current
assets
|
|
|
|
|
Deferred income tax
assets
|
2,635
|
|
|
2,070
|
|
|
Restricted
cash
|
425
|
|
|
—
|
|
|
Property, plant and
equipment
|
12,661
|
|
|
14,422
|
|
|
Pension
asset
|
—
|
|
|
770
|
|
|
Intangible
assets
|
4,750
|
|
|
5,614
|
|
|
Goodwill
|
31,066
|
|
|
31,066
|
|
|
|
|
|
|
125,025
|
|
|
134,067
|
|
|
|
|
|
Liabilities
|
|
|
|
Current
liabilities
|
|
|
|
|
Current portion of Credit
facilities
|
5,770
|
|
|
43,095
|
|
|
Current portion of Convertible
debentures
|
10,998
|
|
|
—
|
|
|
Trade
payables
|
28,042
|
|
|
29,766
|
|
|
Provisions
|
3,086
|
|
|
5,723
|
|
|
Income taxes
payable
|
1,965
|
|
|
903
|
|
|
Deferred
revenue
|
10,840
|
|
|
10,811
|
|
|
60,701
|
|
|
90,298
|
|
Non-current
liabilities
|
|
|
|
|
Provisions
|
751
|
|
|
1,483
|
|
|
Credit
facilities
|
26,782
|
|
|
—
|
|
|
Convertible
debentures
|
—
|
|
|
10,912
|
|
|
Deferred income tax
liabilities
|
19
|
|
|
76
|
|
|
Other non-current
liabilities
|
1,931
|
|
|
1,362
|
|
|
Pension
obligations
|
9,106
|
|
|
8,354
|
|
|
Other post-employment benefit
plans
|
2,689
|
|
|
2,563
|
|
|
101,979
|
|
|
115,048
|
|
|
|
|
|
Equity
|
|
|
|
Shareholders'
equity
|
|
|
|
|
Shares
|
237,062
|
|
|
234,782
|
|
|
Conversion
options
|
128
|
|
|
128
|
|
|
Contributed
surplus
|
961
|
|
|
385
|
|
|
Accumulated other comprehensive
income
|
189
|
|
|
306
|
|
|
Deficit
|
(215,294)
|
|
|
(216,582)
|
|
|
23,046
|
|
|
19,019
|
|
|
|
|
|
|
125,025
|
|
|
134,067
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF INCOME
(LOSS)
|
|
|
|
|
(in thousands of Canadian dollars, except per
share amounts,
unaudited)
|
For the
three
months
ended
June 30,
2016
|
|
|
For the
three
months
ended
June 30,
2015
|
|
|
$
|
|
|
$
|
|
|
|
|
|
Revenues
|
69,716
|
|
|
73,447
|
|
|
|
|
|
Cost of
revenues
|
52,567
|
|
|
57,821
|
|
|
|
|
|
Gross
profit
|
17,149
|
|
|
15,626
|
|
|
|
|
|
Expenses
|
|
|
|
|
Selling, commissions and
expenses
|
7,664
|
|
|
8,686
|
|
|
General and administration expenses excluding
amortization of
intangible
assets
|
6,084
|
|
|
5,563
|
|
|
Restructuring
expenses
|
368
|
|
|
4,205
|
|
|
Impairment of
goodwill
|
—
|
|
|
26,000
|
|
|
Amortization of intangible
assets
|
510
|
|
|
479
|
|
|
14,626
|
|
|
44,933
|
|
|
|
|
|
Income (loss) before finance costs and income
taxes
|
2,523
|
|
|
(29,307)
|
|
|
|
|
|
Finance
costs
|
|
|
|
|
Interest
expense
|
869
|
|
|
1,464
|
|
|
Interest
income
|
(1)
|
|
|
(3)
|
|
|
Amortization of transaction
costs
|
109
|
|
|
134
|
|
|
977
|
|
|
1,595
|
|
|
|
|
|
Income (loss) before income
taxes
|
1,546
|
|
|
(30,902)
|
|
|
|
|
|
Income tax expense
(recovery)
|
|
|
|
|
Current
|
1,156
|
|
|
76
|
|
|
Deferred
|
(601)
|
|
|
(1,295)
|
|
|
555
|
|
|
(1,219)
|
|
|
|
|
|
Net income (loss) for the
period
|
991
|
|
|
(29,683)
|
|
|
|
|
|
Basic earnings (loss) per
share
|
0.00
|
|
|
(1.26)
|
|
|
|
|
|
Diluted earnings (loss) per
share
|
0.00
|
|
|
(1.26)
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF INCOME
(LOSS)
|
|
|
|
|
(in thousands of Canadian dollars, except per
share amounts,
unaudited)
|
For the
six
months
ended
June 30,
2016
|
|
|
For the
six
months
ended
June 30,
2015
|
|
|
$
|
|
|
$
|
|
|
|
|
|
Revenues
|
144,330
|
|
|
149,449
|
|
|
|
|
|
Cost of
revenues
|
108,808
|
|
|
116,538
|
|
|
|
|
|
Gross
profit
|
35,522
|
|
|
32,911
|
|
|
|
|
|
Expenses
|
|
|
|
|
Selling, commissions and
expenses
|
16,179
|
|
|
17,798
|
|
|
General and administration expenses excluding
amortization of
intangible
assets
|
11,402
|
|
|
11,386
|
|
|
Restructuring
expenses
|
692
|
|
|
6,259
|
|
|
Impairment of
goodwill
|
—
|
|
|
26,000
|
|
|
Amortization of intangible
assets
|
1,015
|
|
|
958
|
|
|
29,288
|
|
|
62,401
|
|
|
|
|
|
Income (loss) before finance costs and income
taxes
|
6,234
|
|
|
(29,490)
|
|
|
|
|
|
Finance
costs
|
|
|
|
|
Interest
expense
|
1,737
|
|
|
2,748
|
|
|
Interest
income
|
(4)
|
|
|
(7)
|
|
|
Amortization of transaction
costs
|
356
|
|
|
170
|
|
|
2,089
|
|
|
2,911
|
|
|
|
|
|
Income (loss) before income
taxes
|
4,145
|
|
|
(32,401)
|
|
|
|
|
|
Income tax expense
(recovery)
|
|
|
|
|
Current
|
1,332
|
|
|
83
|
|
|
Deferred
|
(60)
|
|
|
(1,670)
|
|
|
1,272
|
|
|
(1,587)
|
|
|
|
|
|
Net income (loss) for the
period
|
2,873
|
|
|
(30,814)
|
|
|
|
|
|
Basic earnings (loss) per
share
|
0.00
|
|
|
(1.31)
|
|
|
|
|
|
Diluted earnings (loss) per
share
|
0.00
|
|
|
(1.31)
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)
|
|
|
|
(in thousands of Canadian dollars,
unaudited)
|
For the
three
months
ended
June 30,
2016
|
|
|
For the
three
months
ended
June 30,
2015
|
|
|
$
|
|
|
$
|
|
|
|
|
|
Net income (loss) for the
period
|
991
|
|
|
(29,683)
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
(loss):
|
|
|
|
|
|
|
|
Items that may be reclassified subsequently to net
income
(loss)
|
|
|
|
|
Foreign currency
translation
|
(8)
|
|
|
(13)
|
|
|
(8)
|
|
|
(13)
|
|
|
|
|
|
Items that will not be reclassified to net income
(loss)
|
|
|
|
|
Re-measurements of post-employment benefit
obligations
|
(1,096)
|
|
|
986
|
|
|
Taxes related to post-employment adjustment
above
|
286
|
|
|
(258)
|
|
|
(810)
|
|
|
728
|
|
|
|
|
|
Other comprehensive (loss) income for the period,
net of
tax
|
(818)
|
|
|
715
|
|
|
|
|
|
Comprehensive income (loss) for the
period
|
173
|
|
|
(28,968)
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME
(LOSS)
|
|
|
|
(in thousands of Canadian dollars,
unaudited)
|
For the
six
months
ended
June 30,
2016
|
|
|
For the
six
months
ended
June 30,
2015
|
|
|
$
|
|
|
$
|
|
|
|
|
|
Net income (loss) for the
period
|
2,873
|
|
|
(30,814)
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
(loss):
|
|
|
|
|
|
|
|
Items that may be reclassified subsequently to net
income
(loss)
|
|
|
|
|
Foreign currency
translation
|
(117)
|
|
|
73
|
|
|
(117)
|
|
|
73
|
|
|
|
|
|
Items that will not be reclassified to net income
(loss)
|
|
|
|
|
Re-measurements of
post-employment benefit
obligations
|
(2,145)
|
|
|
1,151
|
|
|
Taxes related to
post-employment adjustment
above
|
560
|
|
|
(300)
|
|
|
(1,585)
|
|
|
851
|
|
|
|
|
|
Other comprehensive (loss) income for the period,
net of
tax
|
(1,702)
|
|
|
924
|
|
|
|
|
|
Comprehensive income (loss) for the
period
|
1,171
|
|
|
(29,890)
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY
(DEFICIT)
|
(in thousands of Canadian dollars,
unaudited)
|
Shares
|
Conversion
options
|
Contributed
surplus
|
Accumulated
other
comprehensive
income
|
Deficit
|
Total
equity
(deficit)
|
|
$
|
$
|
|
$
|
$
|
$
|
|
|
|
|
|
Balance as at December 31,
2014
|
215,336
|
513
|
—
|
92
|
(197,528)
|
18,413
|
|
|
|
|
|
|
|
Net loss for the
period
|
—
|
—
|
—
|
—
|
(30,814)
|
(30,814)
|
Other comprehensive income for the
period
|
—
|
—
|
—
|
73
|
851
|
924
|
Total comprehensive income (loss) for the
period
|
—
|
—
|
—
|
73
|
(29,963)
|
(29,890)
|
|
|
|
|
|
|
|
Balance as at June 30,
2015
|
215,336
|
513
|
—
|
165
|
(227,491)
|
(11,477)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at December 31,
2015
|
234,782
|
128
|
385
|
306
|
(216,582)
|
19,019
|
|
|
|
|
|
|
|
Net income for the
period
|
—
|
—
|
—
|
—
|
2,873
|
2,873
|
Other comprehensive loss for the
period
|
—
|
—
|
—
|
(117)
|
(1,585)
|
(1,702)
|
Total comprehensive (loss) income for the
period
|
—
|
—
|
—
|
(117)
|
1,288
|
1,171
|
|
|
|
|
|
|
|
Issuance of common
shares
|
2,280
|
—
|
—
|
—
|
—
|
2,280
|
Share-based compensation
expense
|
—
|
—
|
576
|
—
|
—
|
576
|
|
|
|
|
|
|
|
Balance as at June 30,
2016
|
237,062
|
128
|
961
|
189
|
(215,294)
|
23,046
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS
OF CASH FLOWS
|
|
|
|
(in thousands of Canadian dollars,
unaudited)
|
For the
three
months
ended
June 30,
2016
|
|
|
For the
three
months
ended
June 30,
2015
|
|
|
$
|
|
|
$
|
|
|
|
|
|
Cash provided by (used
in)
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
Net income (loss) for the
period
|
991
|
|
|
(29,683)
|
|
Adjustments to net income
(loss)
|
|
|
|
|
Depreciation of property, plant and
equipment
|
1,134
|
|
|
1,224
|
|
|
Amortization of intangible
assets
|
510
|
|
|
479
|
|
|
Share-based compensation
expense
|
576
|
|
|
—
|
|
|
Pension
expense
|
147
|
|
|
152
|
|
|
Loss (gain) on disposal of property, plant and
equipment
|
7
|
|
|
(128)
|
|
|
Impairment of
goodwill
|
—
|
|
|
26,000
|
|
|
Provisions
|
368
|
|
|
4,205
|
|
|
Amortization of transaction
costs
|
109
|
|
|
134
|
|
|
Accretion of convertible
debentures
|
21
|
|
|
79
|
|
|
Other non-current
liabilities
|
267
|
|
|
21
|
|
|
Other post-employment benefit plans,
net
|
62
|
|
|
69
|
|
|
Income tax expense
(recovery)
|
555
|
|
|
(1,219)
|
|
|
4,747
|
|
|
1,333
|
|
Changes in working
capital
|
5,478
|
|
|
4,913
|
|
Contributions made to pension
plans
|
(459)
|
|
|
(480)
|
|
Provisions
paid
|
(1,622)
|
|
|
(2,874)
|
|
Income taxes
paid
|
(263)
|
|
|
(67)
|
|
|
7,881
|
|
|
2,825
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
Purchase of property, plant and
equipment
|
(171)
|
|
|
(903)
|
|
Purchase of intangible
assets
|
(127)
|
|
|
—
|
|
Proceeds on disposal of property, plant and
equipment
|
6
|
|
|
604
|
|
|
(292)
|
|
|
(299)
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Proceeds from issuance of common shares,
net
|
2,280
|
|
|
—
|
|
Repayment of credit
facilities
|
(9,622)
|
|
|
(1,000)
|
|
Repayment of loan
payable
|
(56)
|
|
|
—
|
|
Decrease in restricted
cash
|
25
|
|
|
—
|
|
Finance and transaction
costs
|
(15)
|
|
|
7
|
|
Finance lease
payments
|
(7)
|
|
|
(9)
|
|
|
(7,395)
|
|
|
(1,002)
|
|
|
|
|
|
Increase in cash and cash equivalents during the
period
|
194
|
|
|
1,524
|
|
Cash and cash equivalents – beginning of
period
|
815
|
|
|
1,993
|
|
Effects of foreign exchange on cash
balances
|
(6)
|
|
|
(3)
|
|
Cash and cash equivalents – end of
period
|
1,003
|
|
|
3,514
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS
OF CASH FLOWS
|
|
|
|
|
(in thousands of Canadian dollars,
unaudited)
|
For the
six
months
ended
June 30,
2016
|
|
For the
six
months
ended
June 30,
2015
|
|
|
$
|
|
$
|
|
|
|
|
|
Cash provided by (used
in)
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
Net income (loss) for the
period
|
2,873
|
|
|
(30,814)
|
|
Adjustments to net income
(loss)
|
|
|
|
|
Depreciation of property, plant and
equipment
|
2,249
|
|
|
2,374
|
|
|
Amortization of intangible
assets
|
1,015
|
|
|
958
|
|
|
Share-based compensation
expense
|
576
|
|
|
—
|
|
|
Pension
expense
|
295
|
|
|
304
|
|
|
Loss on disposal of property, plant and
equipment
|
189
|
|
|
39
|
|
|
Impairment of
goodwill
|
—
|
|
|
26,000
|
|
|
Provisions
|
692
|
|
|
6,259
|
|
|
Amortization of transaction
costs
|
356
|
|
|
170
|
|
|
Accretion of convertible
debentures
|
43
|
|
|
61
|
|
|
Other non-current
liabilities
|
671
|
|
|
70
|
|
|
Other post-employment benefit plans,
net
|
126
|
|
|
136
|
|
|
Income tax expense
(recovery)
|
1,272
|
|
|
(1,587)
|
|
|
10,357
|
|
|
3,970
|
|
Changes in working
capital
|
5,036
|
|
|
8,576
|
|
Contributions made to pension
plans
|
(918)
|
|
|
(939)
|
|
Provisions
paid
|
(4,061)
|
|
|
(3,944)
|
|
Income taxes
paid
|
(268)
|
|
|
(138)
|
|
|
10,146
|
|
|
7,525
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
Purchase of property, plant and
equipment
|
(823)
|
|
|
(3,493)
|
|
Purchase of intangible
assets
|
(151)
|
|
|
—
|
|
Proceeds on disposal of property, plant and
equipment
|
124
|
|
|
632
|
|
|
(850)
|
|
|
(2,861)
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Proceeds from issuance of common shares,
net
|
2,280
|
|
|
—
|
|
Proceeds from credit
facilities
|
43,931
|
|
|
—
|
|
Repayment of credit
facilities
|
(53,446)
|
|
|
(2,000)
|
|
Repayment of loan
payable
|
(80)
|
|
|
—
|
|
Increase in restricted
cash
|
(425)
|
|
|
—
|
|
Finance and transaction
costs
|
(1,341)
|
|
|
7
|
|
Finance lease
payments
|
(18)
|
|
|
(18)
|
|
|
(9,099)
|
|
|
(2,011)
|
|
|
|
|
|
Increase in cash and cash equivalents during the
period
|
197
|
|
|
2,653
|
|
Cash and cash equivalents – beginning of
period
|
871
|
|
|
812
|
|
Effects of foreign exchange on cash
balances
|
(65)
|
|
|
49
|
|
Cash and cash equivalents – end of
period
|
1,003
|
|
|
3,514
|
|
|
|
|
|
|
|
SOURCE DATA Communications Management Corp.