HIGHLIGHTS
Q1 2015
- First quarter 2015 ("Q1") Revenues of $76.0 million, Q1 Gross Profit of $17.3 million and Q1 Net Loss of $1.1 million
- Q1 Adjusted EBITDA of $3.5 million (See Table 2 and "Non-GAAP Measures" below)
BRAMPTON, ON, May 7, 2015 /CNW/ - DATA Group Ltd. (TSX: DGI) ("DATA Group") announced its consolidated financial and operating results for the three months ended March 31, 2015.
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 March 31, 2015 and 2014 |
Jan. 1 to |
Jan. 1 to |
|||
(in thousands of Canadian dollars, except per share amounts, unaudited) |
$ |
$ |
|||
Revenues |
76,002 |
77,903 |
|||
Cost of revenues |
58,717 |
59,100 |
|||
Gross profit |
17,285 |
18,803 |
|||
Selling, general and administrative expenses |
14,935 |
14,680 |
|||
Restructuring expenses |
2,054 |
865 |
|||
Amortization of intangible assets |
479 |
479 |
|||
(Loss) income before finance costs and income taxes |
(183) |
2,779 |
|||
Finance costs |
|||||
Interest expense |
1,284 |
1,549 |
|||
Interest income |
(4) |
(5) |
|||
Amortization of transaction costs |
36 |
139 |
|||
1,316 |
1,683 |
||||
(Loss) income before income taxes |
(1,499) |
1,096 |
|||
Income tax expense (recovery) |
|||||
Current |
7 |
— |
|||
Deferred |
(375) |
300 |
|||
(368) |
300 |
||||
Net (loss) income for the period |
(1,131) |
796 |
|||
Net (loss) income attributable to common shareholders |
(1,131) |
796 |
|||
Basic and diluted (loss) earnings per share |
(0.05) |
0.03 |
|||
Number of common shares outstanding |
23,490,592 |
23,490,592 |
|||
As at March 31, 2015 and December 31, 2014 |
As at |
As at |
|||
(in thousands of Canadian dollars, unaudited) |
$ |
$ |
|||
Current assets |
80,904 |
83,619 |
|||
Current liabilities |
47,613 |
46,176 |
|||
Total assets |
163,764 |
164,977 |
|||
Total non-current liabilities |
98,660 |
100,388 |
|||
Shareholders' equity |
17,491 |
18,413 |
Table 2 The following table provides a reconciliation of net income (loss) to Adjusted EBITDA for the periods noted. See "Non-GAAP Measures".
Adjusted EBITDA Reconciliation
For the periods ended March 31, 2015 and 2014 |
Jan. 1 to |
Jan. 1 to |
||||
(in thousands of Canadian dollars, unaudited) |
$ |
$ |
||||
Net (loss) income for the period |
(1,131) |
796 |
||||
Interest expense |
1,284 |
1,549 |
||||
Interest income |
(4) |
(5) |
||||
Amortization of transaction costs |
36 |
139 |
||||
Current income tax expense |
7 |
— |
||||
Deferred income tax (recovery) expense |
(375) |
300 |
||||
Depreciation of property, plant and equipment |
1,150 |
1,308 |
||||
Amortization of intangible assets |
479 |
479 |
||||
EBITDA |
1,446 |
4,566 |
||||
Restructuring expenses |
2,054 |
865 |
||||
Adjusted EBITDA |
3,500 |
5,431 |
Revenues
For the quarter ended March 31, 2015, DATA Group recorded revenues of $76.0 million, a decrease of $1.9 million or 2.4% compared with the same period in 2014. The decrease, before intersegment revenues, was the result of a $2.2 million decrease in the DATA segment and was partially offset by a $0.3 million increase in the Multiple Pakfold segment. The decrease in revenues in the DATA segment was primarily due to a reduction in orders from existing customers for print-related products and services, aggressive pricing by DATA Group's competitors supplying similar products and services, reduced demand for printed products due to technological change and a change in product mix. The increase in revenues in the Multiple Pakfold segment was primarily due to new business which arose as a result of the bankruptcy of a competitor.
Cost of Revenues and Gross Profit
For the quarter ended March 31, 2015, cost of revenues decreased to $58.7 million from $59.1 million for the same period in 2014. Gross profit for the quarter ended March 31, 2015 was $17.3 million, which represented a decrease of $1.5 million or 8.1% from $18.8 million for the same period in 2014. The decrease in gross profit for the quarter ended March 31, 2015 was attributable to a gross profit decrease of $1.6 million in the DATA segment and was partially offset by a $0.1 million increase in the Multiple Pakfold segment. Gross profit as a percentage of revenues decreased to 22.7% for the quarter ended March 31, 2015 compared to 24.1% for the same period in 2014. The decrease in gross profit was attributable to lower revenues and the impact of competitive pricing and changes in product mix in the DATA segment. The decrease in gross profit was partially offset by higher revenues in the Multiple Pakfold segment and by cost savings in each segment. These cost savings included headcount reductions, the closure of certain manufacturing locations, and the renegotiation of agreements for a number of raw material input costs.
Selling, General and Administrative Expenses and Restructuring Expenses
Selling, general and administrative ("SG&A") expenses, excluding amortization of intangible assets, for the quarter ended March 31, 2015 increased $0.3 million or 1.7% to $14.9 million compared to $14.7 million in the same period in 2014. As a percentage of revenues, these costs were 19.7% of revenues for the quarter ended March 31, 2015 compared to 18.8% of revenues for the same period in 2014. The increase in SG&A expenses for the quarter ended March 31, 2015 was primarily attributable to the write off of leasehold improvements at closed facilities. For the quarter ended March 31, 2015, DATA Group incurred restructuring expenses related to headcount reductions, the closure of certain manufacturing locations and a lease exit charge of $2.1 million as part of its 2015 restructuring initiatives. For the quarter ended March 31, 2014, DATA Group incurred restructuring expenses related to headcount reductions of $0.9 million as part of its 2014 restructuring initiatives.
Adjusted EBITDA
For the quarter ended March 31, 2015, Adjusted EBITDA was $3.5 million, or 4.6% of revenues. Adjusted EBITDA for the quarter ended March 31, 2015 decreased $1.9 million or 35.6% from the same period in the prior year and the Adjusted EBITDA margin for the quarter, as a percentage of revenues, decreased from 7.0% of revenues in 2014 to 4.6% of revenues in 2015. The decrease in Adjusted EBITDA for the quarter ended March 31, 2015 was attributable to the continued investment in new products and services, a decline in revenues due to pricing concessions and changes in product mix, and was partially offset by cost savings realized as a result of prior restructuring initiatives.
Interest Expense
Interest expense on long-term debt outstanding under DATA Group's credit facilities, its outstanding 6.00% Convertible Unsecured Subordinated Debentures (the "6.00% Convertible Debentures"), certain unfavourable lease obligations related to closed facilities and DATA Group's employee benefit plans was $1.3 million for the quarter ended March 31, 2015 compared to $1.5 million for the same period in 2014. Interest expense for the quarter ended March 31, 2015 was lower than the same period in the prior year primarily as a result of a reduction in long-term debt outstanding under DATA Group's credit facilities.
Income Taxes
DATA Group reported a loss before income taxes of $1.5 million and a deferred income tax recovery of $0.4 million for the quarter ended March 31, 2015 compared to income before income taxes of $1.1 million and a deferred income tax expense of $0.3 million for the quarter ended March 31, 2014. The deferred income tax expense and deferred income tax recovery were due to changes in estimates of future reversals of temporary differences and new temporary differences that arose during the three month periods ended March 31, 2015 and 2014.
Net (Loss) Income
Net loss for the quarter ended March 31, 2015 was $1.1 million compared to a net income of $0.8 million for the quarter ended March 31, 2014. The decrease in comparable profitability for the quarter ended March 31, 2015 was substantially due to lower gross profit as a result of lower revenues, higher restructuring expenses and an increase in SG&A expenses during the quarter ended March 31, 2015. The decrease in comparable profitability was partially offset by lower interest expense and a deferred income tax recovery during the quarter ended March 31, 2015.
INVESTING ACTIVITIES
Capital expenditures for the three months ended March 31, 2015 of $2.6 million related primarily to maintenance capital expenditures and the consolidation of manufacturing facilities. These capital expenditures were financed by cash flow from operations.
FINANCING ACTIVITIES
During the three months ended March 31, 2015, DATA Group repaid $1.0 million of the principal amount outstanding under its credit facilities.
About DATA Group Ltd.
DATA Group Ltd. is a managed business communications services company specializing in customized document management and marketing solutions. DATA Group develops, manufactures, markets and supports integrated web and print-based communications, information management and direct marketing products and services that help its customers reduce costs, increase revenues, maintain brand consistency and simplify their business processes. DATA Group's expertise and resources enable it to address any document requirement of its customers, from a simple mail-out to an enterprise-wide document management or direct marketing initiative. We have approximately 1,585 employees working from 34 locations across Canada and the United States to accomplish this.
Additional information relating to DATA Group Ltd. is available on www.datagroup.ca, and in the disclosure documents filed by DATA Group Ltd. 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 Group, or industry results, to be materially different from any future results, performance, objectives or achievements expressed or implied by such forward-looking statements. When used in this press release, words such as "may", "would", "could", "will", "expect", "anticipate", "estimate", "believe", "intend", "plan", and other similar expressions are intended to identify forward-looking statements. These statements reflect DATA Group's current views regarding future events and operating performance, are based on information currently available to DATA Group, and speak only as of the date of this press release. These forward-looking statements involve a number of risks, uncertainties and assumptions and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such performance or results will be achieved. Many factors could cause the actual results, performance, objectives or achievements of DATA Group to be materially different from any future results, performance, objectives or achievements that may be expressed or implied by such forward-looking statements. The principal factors, assumptions and risks that DATA Group made or took into account in the preparation of these forward-looking statements include the risk that DATA Group may not be successful reducing the size of its legacy print business, reducing costs, reducing or refinancing its long-term debt and growing its digital communications business; the risk that DATA Group may not be successful in managing its organic growth; DATA Group's ability to invest in, develop and successfully market new products and services; competition from competitors supplying similar products and services; DATA Group's ability to grow its sales or even maintain historical levels of its sales of printed business documents; the impact of economic conditions on DATA Group's businesses; risks associated with acquisitions by DATA Group; increases in the costs of paper and other raw materials used by DATA Group; and DATA Group's ability to maintain relationships with its customers. Additional factors are discussed elsewhere in this press release and under the heading "Risks and Uncertainties" in DATA Group's management's discussion and analysis and in DATA Group's other publicly available disclosure documents, as filed by DATA Group on SEDAR (www.sedar.com). Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, estimated or expected. Unless required by applicable securities law, DATA Group does not intend and does not assume any obligation to update these forward-looking statements.
NON-GAAP MEASURES
This press release includes certain non-GAAP measures as supplementary information. When used in this press release, EBITDA means earnings before interest and finance costs, taxes, depreciation and amortization. Adjusted EBITDA for the three month periods ended March 31, 2015 and 2014 means EBITDA adjusted for restructuring expenses. DATA Group believes that, in addition to net income (loss), EBITDA and Adjusted EBITDA are useful supplemental measures in evaluating the performance of DATA Group and its predecessors. EBITDA and Adjusted EBITDA are not earnings measures recognized by IFRS and do not have any standardized meanings prescribed by IFRS. Therefore, EBITDA and Adjusted EBITDA are unlikely to be comparable to similar measures presented by other issuers.
Investors are cautioned that neither EBITDA nor Adjusted EBITDA should be construed as an alternative to net income (loss) determined in accordance with IFRS as an indicator of DATA Group's performance. For a reconciliation of net income (loss) to Adjusted EBITDA, see Table 2 above.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands of Canadian dollars, unaudited) |
March 31, 2015 |
December 31, 2014 |
||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
1,993 |
812 |
||||||
Trade receivables |
32,922 |
37,175 |
||||||
Inventories |
41,452 |
40,045 |
||||||
Prepaid expenses and other current assets |
4,537 |
5,587 |
||||||
80,904 |
83,619 |
|||||||
Non-current assets |
||||||||
Deferred income tax assets |
1,840 |
1,508 |
||||||
Property, plant and equipment |
16,798 |
15,523 |
||||||
Pension asset |
374 |
— |
||||||
Intangible assets |
6,782 |
7,261 |
||||||
Goodwill |
57,066 |
57,066 |
||||||
163,764 |
164,977 |
|||||||
Liabilities |
||||||||
Current liabilities |
||||||||
Current portion of Credit facilities |
4,000 |
3,500 |
||||||
Trade payables |
27,687 |
29,061 |
||||||
Provisions |
3,282 |
2,042 |
||||||
Income taxes payable |
90 |
154 |
||||||
Deferred revenue |
12,554 |
11,419 |
||||||
47,613 |
46,176 |
|||||||
Non-current liabilities |
||||||||
Provisions |
1,105 |
1,361 |
||||||
Credit facilities |
41,937 |
43,382 |
||||||
Convertible debentures |
43,185 |
43,222 |
||||||
Deferred income tax liabilities |
53 |
50 |
||||||
Other non-current liabilities |
586 |
548 |
||||||
Pension obligations |
8,851 |
8,949 |
||||||
Other post-employment benefit plans |
2,943 |
2,876 |
||||||
146,273 |
146,564 |
|||||||
Equity |
||||||||
Shareholders' equity |
||||||||
Shares |
215,336 |
215,336 |
||||||
Conversion options |
513 |
513 |
||||||
Accumulated other comprehensive income |
178 |
92 |
||||||
Deficit |
(198,536) |
(197,528) |
||||||
17,491 |
18,413 |
|||||||
163,764 |
164,977 |
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(in thousands of Canadian dollars, except per share amounts, unaudited) |
For the three months |
For the three months |
|||||
$ |
$ |
||||||
Revenues |
76,002 |
77,903 |
|||||
Cost of revenues |
58,717 |
59,100 |
|||||
Gross profit |
17,285 |
18,803 |
|||||
Expenses |
|||||||
Selling, commissions and expenses |
9,112 |
8,922 |
|||||
General and administration expenses excluding amortization of intangible assets |
5,823 |
5,758 |
|||||
Restructuring expenses |
2,054 |
865 |
|||||
Amortization of intangible assets |
479 |
479 |
|||||
17,468 |
16,024 |
||||||
(Loss) income before finance costs and income taxes |
(183) |
2,779 |
|||||
Finance costs |
|||||||
Interest expense |
1,284 |
1,549 |
|||||
Interest income |
(4) |
(5) |
|||||
Amortization of transaction costs |
36 |
139 |
|||||
1,316 |
1,683 |
||||||
(Loss) income before income taxes |
(1,499) |
1,096 |
|||||
Income tax expense (recovery) |
|||||||
Current |
7 |
— |
|||||
Deferred |
(375) |
300 |
|||||
(368) |
300 |
||||||
Net (loss) income for the period |
(1,131) |
796 |
|||||
Basic (loss) earnings per share |
(0.05) |
0.03 |
|||||
Diluted (loss) earnings per share |
(0.05) |
0.03 |
|||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands of Canadian dollars, unaudited) |
For the three months |
For the three months |
|||||
$ |
$ |
||||||
Net (loss) income for the period |
(1,131) |
796 |
|||||
Other comprehensive income (loss): |
|||||||
Items that may be reclassified subsequently to net (loss) income |
|||||||
Foreign currency translation |
86 |
20 |
|||||
86 |
20 |
||||||
Items that will not be reclassified to net (loss) income |
|||||||
Re-measurements of post-employment benefit obligations |
165 |
(2,423) |
|||||
Taxes related to post-employment adjustment above |
(42) |
636 |
|||||
123 |
(1,787) |
||||||
Other comprehensive income (loss) for the period, net of tax |
209 |
(1,767) |
|||||
Comprehensive loss for the period |
(922) |
(971) |
|||||
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands of Canadian dollars, unaudited) |
Shares |
Conversion |
Accumulated |
Deficit |
Total Equity |
||||||||||
$ |
$ |
$ |
$ |
$ |
|||||||||||
Balance as at December 31, 2013 |
215,336 |
516 |
30 |
(197,807) |
18,075 |
||||||||||
Net loss for the period |
— |
— |
— |
796 |
796 |
||||||||||
Other comprehensive income (loss) for the period |
— |
— |
20 |
(1,787) |
(1,767) |
||||||||||
Total comprehensive (loss) income for the period |
— |
— |
20 |
(991) |
(971) |
||||||||||
Balance as at March 31, 2014 |
215,336 |
516 |
50 |
(198,798) |
17,104 |
||||||||||
Balance as at December 31, 2014 |
215,336 |
513 |
92 |
(197,528) |
18,413 |
||||||||||
Net loss for the period |
— |
— |
— |
(1,131) |
(1,131) |
||||||||||
Other comprehensive income for the period |
— |
— |
86 |
123 |
209 |
||||||||||
Total comprehensive (loss) income for the period |
— |
— |
86 |
(1,008) |
(922) |
||||||||||
Balance as at March 31, 2015 |
215,336 |
513 |
178 |
(198,536) |
17,491 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of Canadian dollars, unaudited) |
For the three months |
For the three months |
|||||
$ |
$ |
||||||
Cash provided by (used in) |
|||||||
Operating activities |
|||||||
Net (loss) income for the period |
(1,131) |
796 |
|||||
Adjustments to net (loss) income |
|||||||
Depreciation of property, plant and equipment |
1,150 |
1,308 |
|||||
Amortization of intangible assets |
479 |
479 |
|||||
Pension expense |
152 |
121 |
|||||
Loss (gain) on disposal of property, plant and equipment |
167 |
(13) |
|||||
Provisions |
2,054 |
865 |
|||||
Amortization of transaction costs |
36 |
139 |
|||||
Accretion of convertible debentures |
(18) |
73 |
|||||
Other non-current liabilities |
49 |
(82) |
|||||
Other post-employment benefit plans, net |
67 |
57 |
|||||
Income tax (recovery) expense |
(368) |
300 |
|||||
2,637 |
4,043 |
||||||
Changes in working capital |
3,663 |
(1,255) |
|||||
Contributions made to pension plans |
(459) |
(869) |
|||||
Provisions paid |
(1,070) |
(1,072) |
|||||
Income taxes paid |
(71) |
(12) |
|||||
4,700 |
835 |
||||||
Investing activities |
|||||||
Purchase of property, plant and equipment |
(2,590) |
(603) |
|||||
Proceeds on disposal of property, plant and equipment |
28 |
19 |
|||||
(2,562) |
(584) |
||||||
Financing activities |
|||||||
Repayment of credit facilities |
(1,000) |
(2,000) |
|||||
Finance costs |
— |
(38) |
|||||
Finance lease payments |
(9) |
(6) |
|||||
(1,009) |
(2,044) |
||||||
Increase (decrease) in cash and cash equivalents |
1,129 |
(1,793) |
|||||
Cash and cash equivalents – beginning of period |
812 |
478 |
|||||
Effects of foreign exchange on cash balances |
52 |
7 |
|||||
Cash and cash equivalents (bank overdraft) – end of period |
1,993 |
(1,308) |
|||||
SOURCE DATA Group Ltd.
Mr. Michael G. Sifton, President and Chief Executive Officer, DATA Group Ltd., Tel: (905) 791-3151; Mr. Paul O'Shea, Chief Financial Officer, DATA Group Ltd., Tel: (905) 791-3151
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