HIGHLIGHTS
FIRST QUARTER 2017
- Completed acquisitions of Eclipse Colour & Imaging Corp.
("Eclipse") and Thistle Printing Limited ("Thistle"), financial
results benefited from five weeks of successful integration
- Increased availability and amendment of certain terms on senior
credit facilities
- Further cost reductions through streamlining of
order-to-production process
- Revenues of $70.1 million
compared with $74.6 million in the
prior year, a decrease of 6.0% year over year
- Net Loss of $2.1 million,
including restructuring expenses of $1.9
million and $1 million of
acquisition costs, compared to Net Income of $1.8 million, including restructuring expenses of
$0.3 million in the prior comparative
period
- Adjusted EBITDA of $2.9 million,
compared to $5.7 million in the prior
year (See Table 2 and "Non-IFRS Measures" below)
RECENT EVENTS
- Gregory J. Cochrane, President,
assumes responsibilities of former Senior Vice President,
Sales
BRAMPTON, ON, May 12, 2017
/CNW/ - DATA Communications Management Corp. (TSX: DCM)
("DATA" or the "Company"), a leading provider of business
communication solutions to companies across North America, announced its consolidated
financial results for the three months ended March 31,
2017.
"We are pleased to share that the integration of Eclipse and
Thistle is progressing well. We are seeing early signs of
cost and margin synergies, and are actively pursuing cross-selling
opportunities," said Michael G.
Sifton, Chief Executive Officer of DATA. "We also
continue to evaluate our business for further operating
efficiencies, enhanced profitability, business growth and strategic
acquisitions. We expect that all these initiatives will
support our long-term vision of creating a more streamlined company
with strong core capabilities, continuing our evolution to a
communications management and marketing services provider."
Strategic acquisitions
On February 22,
2017 (the "Closing Date"), DATA completed the acquisition of
substantially all of the assets of Eclipse and all of the shares of
Thistle and accordingly our financial results for the first quarter
of 2017 only reflected their financial results for approximately
five weeks.
The acquisition of Eclipse has added significantly expanded wide
format, large format, and grand format printing capabilities to
DATA's portfolio of products and services, with Eclipse having a
product mix focused on in-store print, outdoor, transit, display,
packaging, kitting and fulfilment capabilities. The net
purchase price was approximately $9.5
million which was satisfied with the payment of $3.5 million in cash on closing, $1.4 million through the issuance of common
shares of DATA, $4.0 million through
the issuance of a secured, non-interest bearing vendor take-back
promissory note, and approximately $0.6
million in post-closing adjustments, which are payable in
cash and subject to final approval. On the Closing Date, DATA
also advanced $3.2 million to settle
Eclipse's bank indebtedness, equipment leases and amounts payable
to the former owners pre-acquisition, in addition to paying
$0.3 million for related transaction
costs. The revenue and net income contributed by Eclipse for
the quarter ended March 31, 2017 were
$2.7 million and $0.4 million, respectively.
The acquisition of Thistle has provided DATA with a full service
commercial print facility in Eastern
Canada and has enabled DATA to expand its margins by
insourcing commercial printing capabilities which it had
historically outsourced to local tier two suppliers. The net
purchase price was approximately $5.3
million which was satisfied with a payment of $1.1 million in cash on closing, $1.4 million through the issuance of common
shares of DATA, and $2.8 million in
the form of a secured, non-interest bearing vendor take-back
promissory note, after giving effect to $0.4
million in post-closing adjustments which is subject to
final approval. On the Closing Date, DATA also advanced
$1.9 million to settle Thistle's bank
indebtedness and amounts payable to the former owners of
Thistle. The revenue and net loss contributed by Thistle for
the quarter ended March 31, 2017 were
$1.4 million and $0.1 million, respectively.
The financial results of Eclipse and Thistle were consistent
with expectations. Integration of these businesses is
progressing well and DATA is seeing early signs of cost and margin
synergies, in addition to actively pursuing cross-selling
opportunities across their respective offerings.
Increase in senior credit facilities and amendment to
existing terms
On January 31,
2017, DATA amended its senior credit facilities. DATA
amended its senior revolving credit facility which included an
increase in the total available commitment under that facility from
$25.0 million to up to $35.0 million and the extension of the term of
this facility by one year to March 31, 2020 from
March 11, 2019. DATA also completed an amendment to its
term facility which provides DATA with a total borrowing base of up
to $72.0 million from $50.0 million. The increased availability
under its senior credit facilities was partially used to finance
the up-front cash components of the Eclipse and Thistle
acquisitions and related transaction expenses, settle certain debt
assumed from these acquisitions, and will also provide DATA with
additional flexibility to continue to pursue its strategic growth
objectives.
Modification of certain covenants on senior term
facility
On March 9, 2017,
DATA received approval, effective the quarter ending March 31, 2017, to modify the calculation of the
Debt Service Coverage ratio to include EBITDA for the six most
recently completed fiscal quarters (previously four most recently
completed quarters).
Furthermore, on May 11, 2017, DATA
received approval, effective the quarter ending June 30, 2017, to modify the calculation of the
Senior Funded Debt to EBITDA ratio to include EBITDA for the six
most recently completed fiscal quarters multiplied by 2/3
(previously the four most recently completed quarters).
Further improvements in operations
On
January 31, 2017, DATA announced a
process realignment of its operations, which DATA anticipates will
result in estimated cost savings of $2.4
million on an annualized basis. A total of
approximately $1.8 million in
severance expenses were incurred during the first quarter of
2017. This restructuring primarily involved a reduction of
DATA's indirect labour force across its operations, which is
designed to streamline DATA's order-to-production process.
This process redesign and automation has improved manufacturing
processes from DATA's on-line web-to-print ordering system,
directly to digital production.
Refinement in leadership of sales
DATA made
further changes to its leadership team in the second quarter of
2017. Gregory J. Cochrane,
President, has assumed full responsibility for sales, in the place
of Steve Wittal, former Senior Vice
President, Sales, and will provide further direction to drive
growth in the business. Mr. Cochrane is focused on helping DATA
grow through a three-pronged strategy: 1) expanding the products
and services it provides to existing customers; 2) adding new
profitable customers; and 3) continued business acquisitions to
broaden DATA's product offering.
Update on maturity of convertible
debentures
The 6.00% convertible unsecured subordinated
debentures ("6.00% Convertible Debentures") are nearing maturity at
the end of the second quarter of 2017. DATA intends to repay
the 6.00% Convertible Debentures in full at maturity and is
evaluating a number of alternatives that will allow it to not only
repay the debentures, but also strengthen its balance sheet for the
future.
DATA is considering various forms of capital, including one or
more of the following: drawing upon its senior revolving credit
facility, which was recently increased to a maximum amount of up to
$35.0 million of total availability
in conjunction with the acquisitions of Eclipse and Thistle;
refinancing the convertible debentures through another issue of
debentures; other forms of subordinated capital; and an equity
offering. DATA's objective is to deal with the pending
maturity, as well as position it for growth and additional
acquisitions.
RESULTS OF OPERATIONS
All financial information in this press release is presented in
Canadian dollars and in accordance with International Financial
Reporting Standards ("IFRS"), as issued by the International
Accounting Standards Board ("IASB").
Table
1
|
The following table
sets out selected historical consolidated financial information for
the periods noted.
|
|
|
|
For the periods
ended March 31, 2017 and 2016
|
Jan. 1 to
Mar. 31, 2017
|
Jan. 1 to
Mar. 31, 2016
|
(in thousands of
Canadian dollars, except per share amounts,
unaudited)
|
$
|
$
|
Revenues
|
70,126
|
74,614
|
Cost of
revenues
|
53,766
|
56,241
|
Gross
profit
|
16,360
|
18,373
|
|
|
|
Selling, general and
administrative expenses
|
15,024
|
14,338
|
Restructuring
expenses
|
1,886
|
324
|
Acquisition
costs
|
956
|
—
|
(Loss) income before
finance costs and income taxes
|
(1,506)
|
3,711
|
|
|
|
Finance costs
(income)
|
|
|
|
Interest
expense
|
950
|
868
|
|
Interest
income
|
—
|
(3)
|
|
Amortization of
transaction costs
|
115
|
247
|
|
1,065
|
1,112
|
(Loss) income before
income taxes
|
(2,571)
|
2,599
|
|
|
|
Income tax (recovery)
expense
|
|
|
|
Current
|
51
|
176
|
|
Deferred
|
(525)
|
541
|
|
(474)
|
717
|
Net (loss) income for
the period
|
(2,097)
|
1,882
|
|
|
|
Basic (loss) earnings
per share
|
(0.17)
|
0.24
|
Diluted (loss)
earnings per share
|
(0.17)
|
0.24
|
Weighted average
number of common shares outstanding, basic
|
12,514,952
|
9,987,528
|
Weighted average
number of common shares outstanding, diluted
|
12,514,952
|
9,987,528
|
|
|
|
|
|
|
As at March 31,
2017 and December 31, 2016
|
As at Mar. 31,
2017
|
As at Dec. 31,
2016
|
(in thousands of
Canadian dollars, unaudited)
|
$
|
$
|
Current
assets
|
80,618
|
68,620
|
Current
liabilities
|
70,553
|
58,473
|
|
|
|
Total
assets
|
124,885
|
90,910
|
Total non-current
liabilities
|
64,478
|
42,372
|
|
|
|
Shareholders' equity
(deficit)
|
(10,146)
|
(9,935)
|
Table
2
|
The following table
provides reconciliations of net (loss) income to EBITDA and of net
(loss) income to Adjusted EBITDA for the periods noted. See
"Non-IFRS Measures".
|
|
|
EBITDA and
Adjusted EBITDA Reconciliation
|
|
For the periods
ended March 31, 2017 and 2016
|
Jan. 1 to
Mar. 31, 2017
|
Jan. 1 to
Mar. 31, 2016
|
(in thousands of
Canadian dollars, unaudited)
|
$
|
$
|
Net (loss) income for
the period
|
(2,097)
|
1,882
|
|
|
|
Interest
expense
|
950
|
868
|
Interest
income
|
—
|
(3)
|
Amortization of
transaction costs
|
115
|
247
|
Current income tax
expense
|
51
|
176
|
Deferred income tax
(recovery) expense
|
(525)
|
541
|
Depreciation of
property, plant and equipment
|
885
|
1,115
|
Amortization of
intangible assets
|
693
|
505
|
EBITDA
|
72
|
5,331
|
|
|
|
Restructuring
expenses
|
1,886
|
324
|
Acquisition
costs
|
956
|
—
|
Adjusted
EBITDA
|
2,914
|
5,655
|
Table
3
|
The following table
provides reconciliations of net income (loss) to Adjusted net
income and a presentation of Adjusted net income per share for the
periods noted. See "Non-IFRS Measures".
|
|
|
|
Adjusted Net
Income Reconciliation
|
|
|
For the periods
ended March 31, 2017 and 2016
|
Jan. 1 to
Mar. 31, 2017
|
Jan. 1 to
Mar. 31, 2016
|
(in thousands of
Canadian dollars, except share and per share amounts,
unaudited)
|
$
|
$
|
Net (loss) income for
the period
|
(2,097)
|
1,882
|
|
|
|
Restructuring
expenses
|
1,886
|
324
|
Acquisition
costs
|
956
|
—
|
Tax effect of the
above adjustments
|
(492)
|
(85)
|
Adjusted net
income
|
253
|
2,121
|
|
|
|
Adjusted net income
per share, basic and diluted
|
0.02
|
0.21
|
Weighted average
number of common shares outstanding, basic
|
12,514,952
|
9,987,528
|
Weighted average
number of common shares outstanding, diluted
|
12,514,952
|
9,987,528
|
Number of common
shares outstanding, basic
|
13,253,761
|
9,987,528
|
Number of common
shares outstanding, diluted
|
13,614,158
|
9,987,528
|
Revenues
For the three months ended
March 31, 2017, DATA recorded
revenues of $70.1 million, a decrease
of $4.5 million or 6.0% compared
with the same period in 2016. The decrease in revenues for
the three months ended March 31, 2017
was primarily due to lower volumes and pricing pressures from
certain customers that reduced their overall spend, particularly in
the financial services vertical, and was also due to non-recurring
work related to the forms and labels business, from which DATA
benefited last year, and due to the timing of orders from certain
customers. Those factors led to revenue declines during the
quarter which more than offset the growth in revenues from new
customers and additional revenues from the acquisitions of Eclipse
and Thistle during the quarter, resulting in the overall reduction
in revenues compared to the first quarter of 2016.
Cost of Revenues and Gross Profit
For the three
months ended March 31, 2017, cost of
revenues decreased to $53.8 million
from $56.2 million for the same
period in 2016. Gross profit for the three months ended
March 31, 2017 was $16.4 million, which represented a decrease
of $2.0 million or 11.0% from
$18.4 million for the same
period in 2016. Gross profit as a percentage of revenues
decreased to 23.3% for the three months ended March 31, 2017 compared to 24.6% for the same
period in 2016.
The decrease in gross profit as a percentage of revenues for the
three months ended March 31, 2017 was
due to the decrease in revenues in the first quarter of 2017,
changes in product mix, and compressed margins on recently
negotiated large contracts with certain existing customers.
The decrease in gross profit as a percentage of revenues was
partially offset by cost reductions realized from prior cost
savings initiatives implemented in 2016 and additional process
improvement savings in January
2017.
Selling, General and Administrative
Expenses
Selling, general and administrative
("SG&A") expenses for the three months ended March 31, 2017 increased $0.7 million or 4.8% to $15.0 million compared to $14.3 million for the same period of
2016. As a percentage of revenues, these costs were 21.4% and
19.2% of revenues for the three month periods ended March 31,
2017 and 2016, respectively. The increase in SG&A
expenses for the three months ended March
31, 2017 was primarily attributable to increased investment
in technology including expenses related to DATA's ERP project.
Restructuring Expenses
For the three months
ended March 31, 2017, DATA incurred
total restructuring expenses of $1.9
million compared to $0.3
million in the same period in 2016. $2.2 million of restructuring costs were incurred
related to headcount reductions in DATA's indirect labour force
across its operations, which are designed to streamline DATA's
order-to-production process. These restructuring costs were
offset by a recovery of $0.3 million
related to a sub-lease of a closed facility in Richmond Hill, Ontario. For the three
months ended March 31, 2016, DATA
incurred restructuring expenses related to headcount reductions of
$0.3 million. For the three
months ended March 31, 2016, DATA
incurred restructuring expenses related to headcount reductions of
$0.3 million.
Adjusted EBITDA
For the three months ended
March 31, 2017, Adjusted EBITDA was
$2.9 million, or 4.2% of revenues,
after adjusting EBITDA for the $1.9
million in restructuring charges and adding back
$1.0 million related to business
acquisition costs. Adjusted EBITDA for the three months ended
March 31, 2017 decreased $2.7 million or 48.5% from the same period in the
prior year and Adjusted EBITDA margin for the period, as a
percentage of revenues, decreased from 7.6% of revenues in 2016 to
4.2% of revenues in 2017. The decrease in Adjusted EBITDA for
2017 was attributable to lower levels of revenue and gross profit
and higher SG&A expenses compared to the prior comparable
period.
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 $1.0
million for the three months ended March 31, 2017 compared to $0.9 million for the same period in 2016.
Interest expense for the three months ended March 31, 2017 was higher than the same periods
in the prior year primarily due to the increase in the debt
outstanding under DATA's credit facilities in order to fund a
portion of the upfront cash components, settle certain debt assumed
and pay for related transaction costs associated with the Eclipse
and Thistle acquisitions in February
2017.
Income Taxes
DATA reported a loss before income
taxes of $2.6 million, a current
income tax expense of $0.1 million
and a deferred income tax recovery of $0.5
million for the three months ended March 31, 2017 compared to income before income
taxes of $2.6 million, a current
income tax expense of $0.2 million
and a deferred income tax expense of $0.5
million for the three months ended March 31, 2016. The current income tax expense
was due to the taxes payable on DATA's estimated taxable income for
the three month periods ended March 31, 2017 and 2016,
respectively. The deferred income tax recoveries primarily
related to changes in estimates of future reversals of temporary
differences and new temporary differences that arose during the
three month periods ended March 31, 2017 and 2016,
respectively.
Net (Loss) Income
Net loss for the three months
ended March 31, 2017 was $2.1 million compared to a net income
$1.9 million for the same period in
2016. The decrease in comparable profitability for the three
months ended March 31, 2017 was
primarily due to lower revenue, higher SG&A expenses, a larger
restructuring charge and business acquisition costs during the
three months ended March 31,
2017.
Adjusted Net (Loss) Income
Adjusted net income
for the three months ended March 31,
2017 was $0.3 million compared
to Adjusted net income of $2.1
million for the same period in 2016. The decrease in
comparable profitability for the three months ended March 31,
2017 was attributable to lower revenues and higher SG&A
expenses in 2017.
CASH FLOW FROM OPERATIONS
During the three months ended March 31,
2017, cash flows used by operating activities were
$1.6 million compared to cash flows
generated by operating activities of $2.3
million during the same period in 2016. $1.5 million of current year cash flows resulted
from operations, after adjusting for non-cash items, compared with
$5.6 million in 2016. The
$4.2 million decrease over the prior
year related primarily to lower revenue earned in the current
year. Changes in working capital in 2017 used $0.9 million compared with $0.4 million in the prior year primarily due to
an increase in inventory on hand and a decrease in accounts
payables due to the timing of payments to suppliers for purchases
and was partially offset by an increase in deferred revenue.
In addition, $1.7 million of cash was
used to make payments primarily related to severances and lease
termination costs, compared with $2.4
million of restructuring related payments in 2016.
Contributions made to the Company's pension plans were $0.5 million, which was unchanged from the prior
year.
INVESTING ACTIVITIES
During the three months ended March 31,
2017, $5.0 million in cash
flows were used for investing activities compared with $0.6 million during the same period in
2016. In 2017, $4.6 million of
cash was used to acquire the businesses of Eclipse and Thistle.
FINANCING ACTIVITIES
During the three months ended March 31,
2017, cash flow generated by financing activities was
$6.9 million compared to cash flow
used by financing activities of $1.7
million during the same period in 2016. DATA used cash
from advances under its credit facilities totaling $13.6 million to repay $3.6 million in outstanding principal amounts
under its credit facilities and to settle certain debt assumed upon
the acquisition of Eclipse and Thistle on February 22, 2017. In addition, DATA repaid
a total of $2.4 million to settle the
outstanding balance on certain equipment leases that were assumed
upon the acquisition of Eclipse. DATA also repaid a total of
$0.3 million related to
pre-acquisition amounts payable to the former owners of
Eclipse. DATA also incurred $0.3
million of transaction costs related to the amendments to
its senior credit facilities made on January
31, 2017.
OUTLOOK
Despite the softness in financial results for the first quarter
of 2017, DATA continues to take steps to execute on its strategic
growth initiatives, both organically and through strategic
acquisitions. During the first quarter of 2017, DATA
continued to refine operational efficiencies by streamlining the
order-to-production process through headcount reductions and
improved design in processes, developing more enhanced reporting
tools to better rationalize product and customer profitability, and
remodelling DATA's sales process and go-to-market strategy, which
includes developing knowledge expertise by vertical market.
In addition, DATA successfully completed two acquisitions during
the quarter and has been actively working to integrate these
businesses with DATA's, collaborate on cross-selling opportunities
and execute on cost savings synergies identified. In
connection with these acquisitions, DATA also amended its senior
credit facilities to increase availability and provide greater
flexibility under certain financial covenants.
Looking forward, DATA made further changes to its leadership
team in the second quarter of 2017. Gregory J. Cochrane, President, has assumed
responsibility for sales and will provide further direction to
drive growth in the business. As part of this initiative,
DATA is actively pursuing other potential acquisitions it sees in
its markets which leverage its key competencies of managing
complexity and providing superior execution for its clients'
business and marketing communications needs. DATA is
currently exploring various financing options that will facilitate
new acquisitions and fund future working capital needs.
In-house, DATA continues to evaluate various parts of the business
to seek out other opportunities for improvement, strengthen
profitability and generate higher cash flows.
About DATA Communications Management Corp.
DATA is a leading provider of business communication solutions,
bringing value and collaboration to marketing and operation teams
in companies across North America. 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 asset tracking, 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, retail,
healthcare, lottery and gaming, 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, realizing the benefits expected from restructuring and
business reorganization initiatives, reducing costs, reducing and
repaying its long-term debt, repaying or refinancing its
outstanding 6.00% convertible unsecured subordinated debentures due
June 30, 2017, 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; the
failure to realize the expected benefits from acquisitions and
risks associated with the integration of acquired businesses;
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-IFRS MEASURES
This press release includes certain non-IFRS 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 means EBITDA adjusted for
restructuring expenses, one-time business reorganization costs,
goodwill impairment charges, gain on redemption of convertible
debentures, and acquisition costs. Adjusted net income (loss)
means net income (loss) adjusted for restructuring expenses,
one-time business reorganization costs, goodwill impairment
charges, gain on redemption of convertible debentures, acquisition
costs and the tax effects of those items. Adjusted net income
(loss) per share (basic and diluted) 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. In addition to net income (loss), DATA uses non-IFRS
measures including Adjusted net income (loss), Adjusted net income
(loss) per share, EBITDA and Adjusted EBITDA to provide investors
with supplemental measures of DATA's operating performance and thus
highlight trends in its core business that may not otherwise be
apparent when relying solely on IFRS financial measures. DATA also
believes that securities analysts, investors, rating agencies and
other interested parties frequently use non-IFRS measures in the
evaluation of issuers. DATA's management also uses non-IFRS
measures in order to facilitate operating performance comparisons
from period to period, prepare annual operating budgets and assess
its ability to meet future debt service, capital expenditure and
working capital requirements. Adjusted net income (loss),
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, 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, 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, see Table 3 above.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
|
|
(in thousands of
Canadian dollars, unaudited)
|
March 31, 2017
$
|
December 31,
2016
$
|
|
|
|
Assets
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
1,838
|
1,544
|
|
Trade
receivables
|
35,861
|
29,157
|
|
Inventories
|
37,498
|
33,252
|
|
Prepaid expenses and
other current assets
|
5,421
|
4,667
|
|
80,618
|
68,620
|
Non-current
assets
|
|
|
|
Deferred income tax
assets
|
4,725
|
3,839
|
|
Restricted
cash
|
425
|
425
|
|
Property, plant and
equipment
|
18,722
|
12,483
|
|
Pension
assets
|
—
|
1,589
|
|
Intangible
assets
|
13,065
|
3,954
|
|
Goodwill
|
7,330
|
—
|
|
124,885
|
90,910
|
|
|
|
Liabilities
|
|
|
Current
liabilities
|
|
|
|
Trade
payables and accrued liabilities
|
31,273
|
27,304
|
|
Current portion of
credit facilities
|
6,630
|
5,886
|
|
Convertible
debentures
|
11,129
|
11,082
|
|
Current portion of
promissory notes
|
3,989
|
—
|
|
Provisions
|
3,690
|
3,305
|
|
Income taxes
payable
|
2,929
|
2,231
|
|
Deferred
revenue
|
10,913
|
8,665
|
|
70,553
|
58,473
|
Non-current
liabilities
|
|
|
|
Provisions
|
699
|
675
|
|
Credit
facilities
|
45,976
|
29,156
|
|
Promissory
notes
|
3,251
|
—
|
|
Deferred income tax
liabilities
|
1,476
|
—
|
|
Other non-current
liabilities
|
2,739
|
1,691
|
|
Pension
obligations
|
7,772
|
8,340
|
|
Other post-employment
benefit plans
|
2,565
|
2,510
|
|
135,031
|
100,845
|
|
|
|
Equity
|
|
|
Shareholders' equity
(deficit)
|
|
|
|
Shares
|
240,279
|
237,432
|
|
Conversion
options
|
128
|
128
|
|
Contributed
surplus
|
1,216
|
1,164
|
|
Accumulated other
comprehensive income
|
240
|
258
|
|
Deficit
|
(252,009)
|
(248,917)
|
|
(10,146)
|
(9,935)
|
|
124,885
|
90,910
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
(in thousands of
Canadian dollars, except per share amounts,
unaudited)
|
For the three
months
ended March 31, 2017
|
For the three
months
ended March 31, 2016
|
|
$
|
$
|
|
|
|
Revenues
|
70,126
|
74,614
|
|
|
|
Cost of
revenues
|
53,766
|
56,241
|
|
|
|
Gross
profit
|
16,360
|
18,373
|
|
|
|
Expenses
|
|
|
|
Selling, commissions
and expenses
|
8,518
|
8,515
|
|
General and
administration
expenses
|
6,506
|
5,823
|
|
Restructuring
expenses
|
1,886
|
324
|
|
Acquisition costs
(note 4)
|
956
|
—
|
|
17,866
|
14,662
|
|
|
|
(Loss) income
before finance costs and income taxes
|
(1,506)
|
3,711
|
|
|
|
Finance costs
(income)
|
|
|
|
Interest
expense
|
950
|
868
|
|
Interest
income
|
—
|
(3)
|
|
Amortization of
transaction costs
|
115
|
247
|
|
1,065
|
1,112
|
|
|
|
(Loss) income
before income taxes
|
(2,571)
|
2,599
|
|
|
|
Income tax
(recovery) expense
|
|
|
|
Current
|
51
|
176
|
|
Deferred
|
(525)
|
541
|
|
(474)
|
717
|
|
|
|
Net (loss) income
for the period
|
(2,097)
|
1,882
|
|
|
|
Basic (loss)
earnings per share
|
(0.17)
|
0.19
|
|
|
|
Diluted (loss)
earnings per share
|
(0.17)
|
0.19
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
INCOME
|
|
|
(in thousands of
Canadian dollars, unaudited)
|
For the three
months
ended March 31, 2017
|
For the three
months
ended March 31, 2016
|
|
$
|
$
|
|
|
|
Net (loss) income
for the period
|
(2,097)
|
1,882
|
|
|
|
|
|
|
Other
comprehensive (loss) income:
|
|
|
|
|
|
Items that may be
reclassified subsequently to net (loss) income
|
|
|
|
Foreign currency
translation
|
(18)
|
(109)
|
|
(18)
|
(109)
|
|
|
|
Items that will
not be reclassified to net (loss) income
|
|
|
|
Re-measurements of
post-employment benefit obligations
|
(1,345)
|
(1,049)
|
|
Taxes related to
post-employment adjustment above
|
350
|
274
|
|
(995)
|
(775)
|
|
|
|
Other
comprehensive loss for the period, net of tax
|
(1,013)
|
(884)
|
|
|
|
Comprehensive
(loss) income for the period
|
(3,110)
|
998
|
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, 2015
|
234,782
|
128
|
385
|
306
|
(216,582)
|
19,019
|
|
|
|
|
|
|
|
Net income for the
period
|
—
|
—
|
—
|
—
|
1,882
|
1,882
|
Other comprehensive
(loss) income for the period
|
—
|
—
|
—
|
(109)
|
(775)
|
(884)
|
Total comprehensive
(loss) income for the period
|
—
|
—
|
—
|
(109)
|
1,107
|
998
|
|
|
|
|
|
|
|
Balance as at
March 31, 2016
|
234,782
|
128
|
—
|
197
|
(215,475)
|
19,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at
December 31, 2016
|
237,432
|
128
|
1,164
|
258
|
(248,917)
|
(9,935)
|
|
|
|
|
|
|
|
Net loss for the
period
|
—
|
—
|
—
|
—
|
(2,097)
|
(2,097)
|
Other comprehensive
loss for the period
|
—
|
—
|
—
|
(18)
|
(995)
|
(1,013)
|
Total comprehensive
loss for the period
|
—
|
—
|
—
|
(18)
|
(3,092)
|
(3,110)
|
|
|
|
|
|
|
|
Issuance of common
shares
|
2,847
|
—
|
—
|
—
|
—
|
2,847
|
Share-based
compensation expense
|
—
|
—
|
52
|
—
|
—
|
52
|
|
|
|
|
|
|
|
Balance as at
March 31, 2017
|
240,279
|
128
|
1,216
|
240
|
(252,009)
|
(10,146)
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
(in thousands of
Canadian dollars, unaudited)
|
For the three
months
ended March 31, 2017
|
For the three
months
ended March 31, 2016
|
|
$
|
$
|
|
|
|
Cash provided by
(used in)
|
|
|
|
|
|
Operating
activities
|
|
|
Net (loss) income for
the period
|
(2,097)
|
1,882
|
Adjustments to net
(loss) income
|
|
|
|
Depreciation of
property, plant and equipment
|
885
|
1,115
|
|
Amortization of
intangible assets
|
693
|
505
|
|
Share-based
compensation expense
|
52
|
—
|
|
Pension
expense
|
135
|
148
|
|
(Gain) loss on
disposal of property, plant and equipment
|
(20)
|
182
|
|
Provisions
|
1,886
|
324
|
|
Amortization of
transaction costs
|
115
|
247
|
|
Accretion of
convertible debentures and non-current liabilities
|
98
|
22
|
|
Other non-current
liabilities
|
130
|
404
|
|
Other post-employment
benefit plans, net
|
55
|
64
|
|
Tax credits
recognized
|
—
|
—
|
|
Income tax (recovery)
expense
|
(474)
|
717
|
|
1,458
|
5,610
|
Changes in working
capital
|
(885)
|
(442)
|
Contributions made to
pension plans
|
(459)
|
(459)
|
Provisions
paid
|
(1,687)
|
(2,439)
|
Income taxes
paid
|
—
|
(5)
|
|
(1,573)
|
2,265
|
|
|
|
Investing
activities
|
|
|
Purchase of property,
plant and equipment
|
(137)
|
(652)
|
Purchase of
intangible assets
|
(233)
|
(24)
|
Proceeds on disposal
of property, plant and equipment
|
20
|
118
|
Cash consideration
for acquisition of businesses
|
(4,638)
|
—
|
|
(4,988)
|
(558)
|
|
|
|
Financing
activities
|
|
|
Share issuance
costs
|
(11)
|
—
|
Proceeds from credit
facilities
|
13,589
|
43,931
|
Repayment of credit
facilities
|
(3,598)
|
(43,824)
|
Proceeds from loans
payable
|
—
|
(24)
|
Repayment of loans
and other liabilities
|
(289)
|
(450)
|
Repayment of
promissory notes
|
(129)
|
—
|
Finance and
transaction costs
|
(317)
|
(1,326)
|
Finance lease
payments
|
(2,382)
|
(11)
|
|
6,863
|
(1,704)
|
|
|
|
Increase in cash
and cash equivalents during the period
|
302
|
3
|
Cash and cash
equivalents – beginning of period
|
1,544
|
871
|
Effects of foreign
exchange on cash balances
|
(8)
|
(59)
|
Cash and cash
equivalents – end of period
|
1,838
|
815
|
SOURCE DATA Communications Management Corp.