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Press release from CNW Group

Data Group Inc. Announces Third Quarter Results for 2012 and 2013 Dividend Policy

Friday, November 09, 2012

Data Group Inc. Announces Third Quarter Results for 2012 and 2013 Dividend Policy07:45 EST Friday, November 09, 2012HighlightsQ3 2012Third quarter 2012 ("Q3") Revenues of $80.1 million, Q3 Gross Profit of $19.7 million, and Q3 Net Income of $0.3 millionQ3 Dividends declared of $3.8 million or $0.163 per shareQ3 Adjusted EBITDA of $5.8 million (See Table 2 and "Non-GAAP Measures" below)YTD 2012Year to Date 2012 ("YTD") Revenues of $249.4 million, YTD Gross Profit of $64.0 million, and YTD Net Income of $4.5 millionYTD Dividends declared of $11.5 million or $0.488 per shareYTD Adjusted EBITDA of $19.6 million (See Table 2 and "Non-GAAP Measures" below)BRAMPTON, ON, Nov. 9, 2012 /CNW/ -DATA Group Inc. (TSX: DGI) ("DATA Group") announced its financial and operating results for the third quarter ended September 30, 2012, which includes the operating results of its subsidiaries DATA Group Ltd., The Fulfillment Solutions Advantage Inc. ("FSA") and FSA Datalytics Canada Inc. ("Datalytics")."We are encouraged by the progress of our growth strategy in the third quarter and the first nine months of 2012.  As we execute on our strategic plan, we believe it is prudent to achieve an improved balance between our dividend policy, debt reduction and our growth initiatives.  We believe this is essential in order to achieve sustainable growth, enterprise value appreciation and a consistent dividend payout to our shareholders over the longer term.", said Michael Suksi, President and Chief Executive Officer.After careful consideration, the Board of Directors has decided to reduce DATA Group's annual dividend from $0.6504 per share to $0.30 per share effective January 1, 2013, and intends to begin paying dividends on a quarterly basis commencing in 2013.  DATA Group intends to continue to pay a dividend of $0.0542 per share for the months of November and December 2012.  DATA Group believes the reduction in dividends is prudent to support the company's strategic plan, to reduce debt to achieve a healthier and more sustainable balance sheet, to be positioned to make strategic acquisitions, and to maintain a dividend payout to DATA Group's shareholders over the longer term.OUTLOOKDATA Group continues to expand its capabilities with new electronic communications oriented solutions, in order to position the company for sustainable, long term growth.  The company's growth strategy is to meet its client's evolving requirements by bundling its new e-communication services with its traditional print services into a single, holistic communications management solution.  Clients will enter into multi-year outsourcing contracts with DATA Group for this bundled solution.  This set of services will be branded as Managed Business Communications services. This also includes selectively expanding into the United States with its existing clients who have U.S. operations, as well as continuously reducing its costs.  DATA Group believes this strategy provides it with substantial opportunities to offset revenue declines in traditional print services due to technological change and, in fact, grow through expanded market share in its traditional business and from new revenue streams.  DATA Group remains focused on the successful, ongoing execution of this plan in a prudent, well managed fashion, balancing its investment in the growth plan with its financial strategy.During the third quarter of 2012, revenue continued to grow and DATA Group won a number of new customer agreements in which its bundled Managed Business Communications played a key role.  DATA Group recently signed a letter of intent for one of the largest single source, multi-year, customer agreements in its history.  This is an expansion of a current agreement with a significant client, and includes document management services of administrative documents as well as marketing print and communications services in Canada and the U.S.  The new agreement will take effect in the fourth quarter 2012 and has required DATA Group to make modest investments in people and technology during the third quarter of 2012.  DATA Group expects this agreement to generate positive revenue and Adjusted EBITDA results in the future.  Another significant new agreement for marketing print will begin in the first quarter of 2013.  In addition, in the third quarter of 2012, DATA Group generated $6.6 million in new business revenue.  In the first nine months of 2012, DATA Group generated $17.8 million in new business revenue, which is ahead of last year's pace.DATA Group continued to invest in new, technology-oriented products and services in the third quarter with two new capabilities.  Marketing Campaign Management, a software-based service DATA Group is launching in the fourth quarter, enhances the effectiveness of marketing departments by creating collaborative, automated workflows between the clients' marketing staff, their agencies and fulfilment by DATA Group.  This allows for faster and more effective marketing campaign planning, creative design, execution and reporting on results. In the fourth quarter, DATA Group is also launching Document Process Management services.  Rather than just managing the supply of "blank" (or uncompleted) documents which the DATA Group currently does, Document Process Management will enable DATA Group to provide services associated with completed documents, such as workflow consulting and process automation, scanning and archiving of documents and related data extraction.The final element of DATA Group's strategy is incremental cost savings.  In the third quarter of 2012, DATA Group achieved approximately $1.2 million in cost saving efficiencies.  In the first nine months of 2012, DATA Group generated approximately $3.3 million in cost savings.  During the first three quarters of 2012, DATA Group also initiated new projects that it believes will continue to generate cost savings in the future.DATA Group is moving to capitalize on market share and technology driven revenue growth opportunities in order to offset declines due to a reduction in traditional print demand.  The changes in DATA Group's dividend policy and debt reduction strategy will support this transition.Table 1 The following table sets out selected historical financial information for the periods noted.Consolidated Financial Information            For the periods ended September 30, 2012 and 2011(in thousands of Canadian dollars, except per share/unit amounts, unaudited)  July 1 toSept. 30,2012$  July 1 toSept. 30,2011$  Jan. 1 toSept. 30,2012$  Jan. 1 toSept. 30,2011$Revenues  80,144  77,965  249,400  242,245Cost of revenues  60,430  58,669  185,400  181,348Gross profit  19,714  19,296  64,000  60,897             Selling, general and administrative expenses  15,331  13,741  48,697  43,306Corporate conversion costs  -  23  84  437Amortization of identifiable intangible assets  2,310  2,566  6,932  7,697Income before finance costs and income taxes  2,073  2,966  8,287  9,457             Finance costs             Interest expense  1,468  1,432  4,418  4,176 Interest income  (1)  (21)  (15)  (66) Change in fair value of conversion options  -  (185)  -  (1,180) Amortization of transaction costs  154  131  460  393   1,621  1,357  4,863  3,323Income before income taxes  452  1,609  3,424  6,134             Income tax expense (recovery)             Current  716  344  2,768  1,371 Deferred  (531)  270  (3,831)  608   185  614  (1,063)  1,979             Net income for the period  267  995  4,487  4,155             Net income attributable to shareholders/unitholders  298  995  4,546  4,155Basic and diluted income per share/unit  0.01  0.04  0.19  0.18Number of common shares/units outstanding  23,490,592  23,490,592  23,490,592  23,490,592             Consolidated Statements of Financial Position Information(in thousands of Canadian dollars, unaudited)  As atSept. 30,2012$  As atSept. 30,2011$      Current assets  85,286  93,659      Current liabilities  42,618  39,906                   Total assets  273,653  280,919      Total non-current liabilities  124,282  122,223                   Shareholders' equity  106,620  -      Non-controlling interest  133  -      Total equity  106,753  -                   Unitholders' equity  -  118,790                   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 September 30, 2012 and 2011(in thousands of Canadian dollars, unaudited)  July 1 toSept. 30,2012$  July 1 toSept. 30,2011$  Jan. 1 toSept. 30,2012$ Jan. 1 toSept. 30,2011$Net income for the period  267  995  4,487 4,155Interest expense  1,468  1,432  4,418 4,176Interest income  (1)  (21)  (15) (66)Change in fair value of conversion options  -  (185)  - (1,180)Amortization of transaction costs  154  131  460 393Depreciation of property, plant and equipment  1,450  1,348  4,320 4,182Amortization of identifiable intangible assets  2,310  2,566  6,932 7,697Corporate conversion costs  -  23  84 437Current income tax expense  716  344  2,768 1,371Deferred income tax (recovery) expense  (531)  270  (3,831) 608Adjusted EBITDA  5,833  6,903  19,623 21,773            RESULTS OF OPERATIONSRevenuesFor the quarter ended September 30, 2012, DATA Group recorded revenues of $80.1 million, an increase of $2.2 million or 2.8% compared with the same period in 2011.  The increase, before intersegment revenues, was the result of a $2.8 million increase in the DATA East and West segment and was offset by a $0.3 million decrease in the Multiple Pakfold segment.  For the nine months ended September 30, 2012, DATA Group recorded revenues of $249.4 million, an increase of $7.2 million or 3.0% compared with the same period in 2011.  The increase, before intersegment revenues, was the result of a $8.6 million increase in the DATA East and West segment and was offset by a $0.2 million decrease in the Multiple Pakfold segment.Cost of Revenues and Gross ProfitFor the quarter ended September 30, 2012, cost of revenues increased to $60.4 million from $58.7 million for the same period in 2011.  Gross profit for the quarter ended September 30, 2012 was $19.7 million, which represented an increase of $0.4 million or 2.2% from $19.3 million for the same period in 2011.  The increase in gross profit for the quarter ended September 30, 2012 was attributable to a gross profit increase of $0.5 million in the DATA East and West segment and was offset by a gross profit decrease of $0.1 million in the Multiple Pakfold segment.  Gross profit as a percentage of revenues decreased to 24.6% for the quarter ended September 30, 2012 compared to 24.7% for the same period in 2011.  For the nine months ended September 30, 2012, cost of revenues increased to $185.4 million from $181.3 million for the same period in 2011.  Gross profit for the nine months ended September 30, 2012 was $64.0 million, which represented an increase of $3.1 million or 5.1% from $60.9 million for the same period in 2011.  The increase in gross profit for the nine months ended September 30, 2012 was attributable to a gross profit increase of $3.2 million in the DATA East and West segment and offset by a gross profit decrease of $0.1 million in the Multiple Pakfold segment.  Gross profit as a percentage of revenues increased to 25.7% for the nine months ended September 30, 2012 compared to 25.1% for the same period in 2011.Selling, General and Administrative ExpensesSelling, general and administrative ("SG&A") expenses, including administrative expenses of DATA Group Inc. but excluding amortization of identifiable intangible assets, for the quarter ended September 30, 2012 increased $1.6 million to $15.3 million compared to $13.7 million in the same period in 2011.  As a percentage of revenues, these costs were 19.1% of revenues for the quarter ended September 30, 2012 compared to 17.6% of revenues for the same period in 2011.  For each of the quarters ended September 30, 2012 and 2011, DATA Group incurred $0.3 million and $0.2 million of severance expenses, respectively.  SG&A expenses for the nine months ended September 30, 2012 increased $5.4 million to $48.7 million compared to $43.3 million for the same period of 2011.  The increases in SG&A expenses for the three and nine month periods were attributable to the inclusion of FSA and Datalytics in DATA Group's results of operations and investments to launch new products and services initiatives. As a percentage of revenues, these costs were 19.5% of revenues for the nine months ended September 30, 2012 compared to 17.9% of revenues for the same period in 2011.  For the nine months ended September 30, 2012 and 2011, DATA Group incurred $0.7 million and $0.6 million of severance expenses, respectively.  Severance costs for the three and nine months ended September 30, 2012 and 2011 were included in SG&A and were related to DATA Group's on-going productivity improvements and cost reduction initiatives.Corporate Conversion CostsDuring the nine month periods ended September 30, 2012 and 2011, DATA Group incurred total professional fees of $0.1 million and $0.4 million, respectively, related to the conversion of the Fund to a corporation on January 1, 2012.Adjusted EBITDAFor the quarter ended September 30, 2012, Adjusted EBITDA was $5.8 million, or 7.3% of revenues.  Adjusted EBITDA for the quarter ended September 30, 2012 decreased $1.1 million or 15.5% from the same period in the prior year primarily due to the cost of DATA Group's investment it its growth strategy in 2012.  These costs included selling, general and administration expense related to investments to launch new products and services.  The Adjusted EBITDA margin for the quarter, as a percentage of revenues, decreased from 8.9% of revenues in 2011 to 7.3% of revenues in 2012.  Adjusted EBITDA for the nine months ended September 30, 2012 was $19.6 million, or 7.9% of revenues. Adjusted EBITDA for the nine months ended September 30, 2012 decreased $2.1 million or 9.9% from the same period in the prior year and the Adjusted EBITDA margin for the nine month period, as a percentage of revenues, decreased from 9.0% of revenues in 2011 to 7.9% of revenues in 2012.Interest Expense and Finance CostsInterest expense on long-term debt outstanding under DATA Group's credit facilities and DATA Group's outstanding $45.0 million aggregate principal amount of 6.00% Convertible Unsecured Subordinated Debentures (the "6.00% Convertible Debentures") was $1.5 million for the three months ended September 30, 2012 compared to $1.4 million for the same period in 2011, and was $4.4 million for the nine months ended September 30, 2012 compared to $4.2 million for the same period in 2011.  The increase in interest expense during the three and nine months ended September 30, 2012 was the result of higher outstanding balances under DATA Group's credit facilities and higher rates of interest charged on those balances.Finance costs for the three and nine months ended September 30, 2011 included recoveries of $0.2 million and $1.2 million, respectively, related to the change in the fair value of the Fund's conversion options.  The conversion options were the conversion feature in each of the Fund's outstanding convertible debentures, which is measured at fair value at each reporting date.  The Fund's obligations under those convertible debentures were assumed by the Corporation in connection with the Arrangement.  As a result of the Fund's conversion to a corporation on January 1, 2012, those conversion option liabilities were classified as equity on the financial statements of the Corporation due to the change in the nature of the underlying security to shares from units and are not re-measured at fair value at each reporting date.Income TaxesDATA Group reported income before income taxes of $0.5 million, a current income tax expense of $0.7 million and a deferred income tax recovery of $0.5 million for the three months ended September 30, 2012 compared to income before income taxes of $1.6 million, current income tax expense of $0.3 million and a deferred income tax expense of $0.3 million for the three months ended September 30, 2011.  DATA Group reported income before income taxes of $3.4 million, a current income tax expense of $2.8 million and a deferred income tax recovery of $3.8 million for the nine months ended September 30, 2012 compared to income before income taxes of $6.1 million, a current income tax expense of $1.4 million and a deferred income tax expense of $0.6 million for the nine months ended September 30, 2011.  The current tax expense for the three and nine months ended September 30, 2012 were higher than the same periods in 2011 due to the Fund's conversion to a corporation, which resulted in higher taxable income.  The deferred income tax recovery was due to the conversion, a change in estimates of future reversals of temporary differences and new temporary differences that arose during the three and nine months ended September 30, 2012.  As a result of the conversion, DATA Group re-measured its deferred tax assets and liabilities at the corporate tax rates applicable to corporations, which are lower than the top marginal tax rate for individuals used by the Fund.  In addition, the Fund's conversion option liabilities were reclassified as equity on January 1, 2012 and the associated deferred tax liability was reversed.  As a result of these changes, DATA Group recorded a deferred income tax recovery $2.0 million during the first quarter of 2012.Net IncomeNet income for the quarter ended September 30, 2012 was $0.3 million compared to a net income of $1.0 million for the quarter ended September 30, 2011.  The decrease in comparable profitability for the quarter ended September 30, 2012 was due to higher SG&A expenses, higher interest expense due to the acquisition of FSA and Datalytics, a change in the accounting for the conversion options due to the conversion to a corporation, and current income tax expense, respectively.  The decrease in comparable profitability was partially offset by the deferred income tax recovery due to the change in estimate of future reversals of temporary differences and new temporary differences that arose during the period, higher gross profit in the third quarter of 2012 as a result of cost savings realized from DATA Group's ongoing productivity improvement and cost reduction initiatives, and the acquisition of FSA and Datalytics, respectively.Net income for the nine months ended September 30, 2012 was $4.5 million compared to a net income of $4.2 million for the nine months ended September 30, 2011.  The increase in comparable profitability for the nine months ended September 30, 2012 was substantially due to higher gross profit, the acquisition of FSA and Datalytics, and the deferred income tax recovery due to the change in estimate of future reversals of temporary differences, new temporary differences that arose during the period and the conversion of the Fund to a corporation.  The increase in comparable profitability during the first nine months of 2012 was partially offset by higher SG&A expenses, a large recovery related to the change in the fair value of the conversion options in the Fund's outstanding convertible debentures in 2011, and a higher current income tax expense as discussed above.INVESTING ACTIVITIESCapital expenditures for the quarter ended September 30, 2012 of $0.7 million related primarily to maintenance capital expenditures.  For the nine months ended September 30, 2012, DATA Group incurred capital expenditures of $1.6 million related primarily to maintenance capital expenditures and $0.4 million related to the investment in identifiable intangible assets consisting of software licences.  These capital expenditures were financed by cash flow from operations and existing cash resources.FINANCING ACTIVITIESAt September 30, 2012, DATA Group had a bank overdraft of $2.0 million, which consisted of financing provided by its suppliers in the form of outstanding cheques of $4.1 million offset by cash and cash equivalents of $2.1 million.  During the nine months ended September 30, 2012, DATA Group repaid $2.5 million of its Revolving Bank Facility outstanding.  For the three and nine months ended September 30, 2012, DATA Group paid aggregate cash dividends of $3.8 million and $10.2 million, respectively, to its shareholders.  For the nine months ended September 30, 2012, DATA Group paid aggregate cash distributions of $1.3 million to holders of the common shares of DATA Group (formerly unitholders of the Fund).About DATA Group Inc.DATA Group Inc. is a leading provider of document management and marketing solutions.  We provide integrated web and print based communications, information management and associated professional services.  We differentiate ourselves and provide value to our customers by focusing on innovative, high value solutions and on exceptional performance at delivering on our promises and commitments.  We have over 1,950 employees working from 34 locations across Canada to accomplish this.Additional information relating to DATA Group Inc. is available on www.datagroup.ca, and in the disclosure documents filed by DATA Group Inc. on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.All financial information in this press release is presented in Canadian dollars and in accordance with generally accepted accounting principles ("GAAP") measured under International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB") for publicly accountable entities, unless otherwise noted.  Financial figures presented prior to January 1, 2012 are those of The DATA Group Income Fund, the predecessor to DATA Group Inc.FORWARD-LOOKING STATEMENTSCertain statements in this press release constitute "forward-looking" statements that involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, objectives or achievements of DATA Group, or industry results, to be materially different from any future results, performance, objectives or achievements expressed or implied by such forward-looking statements.  When used in this press release, words such as "may", "would", "could", "will", "expect", "anticipate", "estimate", "believe", "intend", "plan", and other similar expressions are intended to identify forward-looking statements.  These statements reflect DATA Group's current views regarding future events and operating performance, are based on information currently available to DATA Group, and speak only as of the date of this press release.  These forward-looking statements involve a number of risks, uncertainties and assumptions and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such performance or results will be achieved.  Many factors could cause the actual results, performance, objectives or achievements of DATA Group to be materially different from any future results, performance, objectives or achievements that may be expressed or implied by such forward-looking statements.  The principal factors, assumptions and risks that DATA Group made or took into account in the preparation of these forward-looking statements include the risk that DATA Group may not be successful in growing its business or in managing its organic growth; DATA Group's ability to develop and successfully market new products and services; competition from competitors supplying similar products and services; DATA Group's ability to grow its sales or even maintain historical levels of its sales of printed business documents; the impact of economic conditions on DATA Group's businesses; risks associated with acquisitions by DATA Group; increases in the costs of paper and other raw materials used by DATA Group and DATA Group's ability to maintain relationships with its customers. Additional factors are discussed elsewhere in this press release and under the heading "Risks and Uncertainties" in DATA Group's management's discussion and analysis and in DATA Group's other publicly available disclosure documents, as filed by DATA Group on SEDAR (www.sedar.com).  Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results may vary materially from those described in this press release as intended, planned, anticipated, believed, estimated or expected.  Unless required by applicable securities law, DATA Group does not intend and does not assume any obligation to update these forward-looking statements.NON-GAAP MEASURESThis press release includes certain non-GAAP measures as supplementary information. When used in this press release, EBITDA means earnings before interest and finance costs, taxes, depreciation and amortization.  Adjusted EBITDA for the three months ended September 30, 2012 means EBITDA adjusted with no adjustments.  Adjusted EBITDA for the three months ended September 30, 2011 means EBITDA adjusted for corporate conversion costs.  Adjusted EBITDA for the nine months ended September 30, 2012 and 2011, respectively, means EBITDA adjusted for corporate conversion costs.  DATA Group believes that, in addition to net income (loss), EBITDA and Adjusted EBITDA are useful supplemental measures in evaluating the performance of DATA Group and its predecessors.  EBITDA and Adjusted EBITDA are not earnings measures recognized by IFRS and do not have any standardized meanings prescribed by IFRS.  Therefore, EBITDA and Adjusted EBITDA are unlikely to be comparable to similar measures presented by other issuers.Investors are cautioned that EBITDA and Adjusted EBITDA should not 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)  September 30, 2012$   December 31, 2011$ Assets         Current assets          Cash and cash equivalents  -    4,046  Trade receivables  40,068    43,647  Inventories  40,554    40,786  Prepaid expenses and other current assets  4,664    4,691    85,286    93,170           Non-current assets          Deferred income tax assets  1,903    887  Property, plant and equipment  21,414    24,149  Identifiable intangible assets  19,850    26,367  Goodwill  145,200    145,200    273,653    289,773 Liabilities         Current liabilities          Bank overdraft  2,045    -  Trade payables  30,296    32,466  Provisions  248    163  Income taxes payable  784    1,933  Deferred revenue  7,972    9,039  Dividends/distributions payable  1,273    1,273    42,618    44,874           Non-current liabilities          Revolving bank facility  57,711    60,123  Convertible debentures  42,161    42,229  Deferred income tax liabilities  734    5,686  Other non-current liabilities  2,272    2,617  Pension obligations  18,680    14,043  Other post-employment benefit plans  2,724    2,525    166,900    172,097 Equity         Shareholders' equity          Shares  215,336    -  Units  -    215,336  Conversion options  516    -  Deficit  (109,232)    (97,973)    106,620    117,363 Non-controlling interest  133    313    106,753    117,676    273,653    289,773                   CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE LOSS         (in thousands of Canadian dollars, except per share/unit amounts, unaudited)  For the three monthsended September 30,2012 $  For the three monthsended September 30,2011 $Revenues  80,144   77,965          Cost of revenues  60,430   58,669          Gross profit  19,714   19,296          Expenses         Selling, commissions and expenses  8,826   8,163  General and administration expenses excluding amortization of identifiable intangible assets  6,505   5,578  Corporate conversion costs  -   23  Amortization of identifiable intangible assets  2,310   2,566    17,641   16,330          Income before finance costs and income taxes  2,073   2,966          Finance costs         Interest expense  1,468   1,432  Interest income  (1)   (21)  Change in fair value of conversion options  -   (185)  Amortization of transaction costs  154   131    1,621   1,357          Income before income taxes  452   1,609          Income tax expense (recovery)         Current  716   344  Deferred  (531)   270    185   614          Net income for the period  267   995          Other comprehensive (loss) income         Actuarial losses on post-employment benefit obligations  (3,568)   (2,007)  Taxes post-employment adjustment above  935   -    (2,633)   (2,007)          Comprehensive loss for the period  (2,366)   (1,012)          ATTRIBUTABLE TO        SHAREHOLDERS' or UNITHOLDERS'          Net income  298   995   Other comprehensive loss  (2,633)   (2,007)  Comprehensive loss for the period  (2,335)   (1,012)          NON-CONTROLLING INTEREST          Net loss  (31)   -   Other comprehensive income (loss)  -   -  Comprehensive loss for the period  (31)   -          Basic income per share/unit  0.01   0.04 Diluted income per share/unit  0.01   0.04                   CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME         (in thousands of Canadian dollars, except per share/unit amounts, unaudited)  For the nine monthsended September 30, 2012 $  For the nine monthsended September 30, 2011 $Revenues  249,400   242,245          Cost of revenues  185,400   181,348          Gross profit  64,000   60,897          Expenses         Selling, commissions and expenses  27,985   25,679  General and administration expenses excluding amortizationof identifiable intangible assets  20,712   17,627  Corporate conversion costs  84   437  Amortization of identifiable intangible assets  6,932   7,697    55,713   51,440          Income before finance costs and income taxes  8,287   9,457          Finance costs         Interest expense  4,418   4,176  Interest income  (15)   (66)  Change in fair value of conversion options  -   (1,180)  Amortization of transaction costs  460   393    4,863   3,323          Income before income taxes  3,424   6,134          Income tax expense (recovery)         Current  2,768   1,371  Deferred  (3,831)   608    (1,063)   1,979          Net income for the period  4,487   4,155          Other comprehensive (loss) income         Deferred income tax recovery on conversion to a corporation  406   -  Actuarial losses on post-employment benefit obligations  (6,604)   (2,007)  Taxes post-employment adjustment above  1,731   -    (4,467)   (2,007)          Comprehensive income for the period  20   2,148          ATTRIBUTABLE TO        SHAREHOLDERS' or UNITHOLDERS'          Net income  4,546   4,155   Other comprehensive loss  (4,467)   (2,007)  Comprehensive income for the period  79   2,148          NON-CONTROLLING INTERESTS          Net loss  (59)   -   Other comprehensive income (loss)  -   -  Comprehensive loss for the period  (59)   -          Basic income per share/unit  0.19   0.18 Diluted income per share/unit  0.19   0.18                               CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY                 Attributable to Shareholders'      (in thousands of Canadian dollars, unaudited) Shares Units Conversion options Deficit Total Shareholders' Equity Non-controlling interest Total Equity  $ $ $ $ $ $ $               Balance as at December 31, 2010 - 215,336 - (87,234) 128,102 - 128,102               Net income for the period - - - 4,155 4,155 - 4,155Other comprehensive loss for the period - - - (2,007) (2,007) - (2,007)Total comprehensive income for the period - - - 2,148 2,148 - 2,148               Distributions declared - - - (11,460) (11,460) - (11,460)               Balance as at September 30, 2011 - 215,336 - (96,546) 118,790 - 118,790                              Balance as at December 31, 2011 - 215,336 - (97,973) 117,363 313 117,676Effect of conversion to a corporation 215,336 (215,336) 516 - 516 - 516  215,336 - 516 (97,973) 117,879 313 118,192               Net income (loss) for the period - - - 4,546 4,546 (59) 4,487Other comprehensive loss for the period - - - (4,467) (4,467) - (4,467)Total comprehensive income (loss) for the period - - - 79 79 (59) 20               Acquisition of non-controlling interest - - - 121 121 (121) -Dividends declared - - - (11,459) (11,459) - (11,459)               Balance as at September 30, 2012 215,336 - 516 (109,232) 106,620 133 106,753                  CONSOLIDATED STATEMENTS OF CASH FLOWS         (in thousands of Canadian dollars, unaudited)  For the three monthsended September 30,2012$  For the three monthsended September 30,2011$ Cash provided by (used in)        Operating activities        Net income for the period  267   995 Adjustments to net income         Depreciation of property, plant and equipment  1,450   1,348  Amortization of identifiable intangible assets  2,310   2,566  Pension expense  108   124  Loss on disposal of property, plant and equipment  16   -  Change in provisions  56   (29)  Change in fair value of conversion options  -   (185)  Amortization of transaction costs  154   131  Accretion of convertible debentures  75   75  Other non-current liabilities  (124)   (67)  Other post-employment benefit plans  67   31  Income tax expense  185   614    4,564   5,603 Changes in working capital  (322)   880 Contributions made to pension plans  (746)   (702) Income taxes paid  (663)   -    2,833   5,781 Investing activities        Purchase of property, plant and equipment  (653)   (453) Proceeds on disposal of property, plant and equipment  5   -    (648)   (453) Financing activities        Bank overdraft  1,635   - Dividends or distributions paid  (3,820)   (3,820)    (2,185)   (3,820)          Increase in cash and cash equivalents during the period  -   1,508 Cash and cash equivalents - beginning of period  -   5,269 Cash and cash equivalents - end of period  -   6,777                   CONSOLIDATED STATEMENTS OF CASH FLOWS         (in thousands of Canadian dollars, unaudited)  For the nine monthsended September 30,2012$  For the nine monthsended September 30,2011$ Cash provided by (used in)        Operating activities        Net income for the period  4,487   4,155 Adjustments to net income         Depreciation of property, plant and equipment  4,320   4,182  Amortization of identifiable intangible assets  6,932   7,697  Pension expense  324   371  Loss on disposal of property, plant and equipment  15   35  Change in provisions  85   (156)  Change in fair value of conversion options  -   (1,180)  Amortization of transaction costs  460   393  Accretion of convertible debentures  224   223  Other non-current liabilities  (345)   (198)  Other post-employment benefit plans  199   111  Income tax (recovery) expense  (1,063)   1,979    15,638   17,612 Changes in working capital  601   (3,882) Contributions made to pension plans  (2,291)   (2,154) Income taxes paid  (3,917)   -    10,031   11,576 Investing activities        Purchase of property, plant and equipment  (1,612)   (1,326) Purchase of identifiable intangible assets  (415)   - Proceeds on disposal of property, plant and equipment  12   -    (2,015)   (1,326) Financing activities        Bank overdraft  2,045   - Financing costs  (148)   (9) Repayment of revolving bank facility  (2,500)   - Dividends or distributions paid  (11,459)   (11,459)    (12,062)   (11,468)          Decrease in cash and cash equivalents during the period  (4,046)   (1,218) Cash and cash equivalents - beginning of period  4,046   7,995 Cash and cash equivalents - end of period  -   6,777   SOURCE: DATA Group Inc.For further information: Mr. Michael Suksi President and Chief Executive Officer DATA Group Inc. Tel: (905) 791-3151 Mr. Paul O'Shea Chief Financial Officer DATA Group Inc. Tel: (905) 791-3151