The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from CNW Group

Data Group Inc. announces first quarter results for 2013

Wednesday, May 08, 2013

Data Group Inc. announces first quarter results for 2013

07:45 EDT Wednesday, May 08, 2013

HIGHLIGHTS

Q1 2013

  • Revenues of $82.9 million, Gross Profit of $21.7 million and Net Income of $0.8 million
  • Q1 Dividends declared of $1.8 million or $0.075 per share
  • Q1 Adjusted EBITDA of $7.4 million (See Table 2 and "Non-GAAP Measures" below)

BRAMPTON, ON, May 8, 2013 /CNW/ - DATA Group Inc. (TSX: DGI) ("DATA Group") announced its financial and operating results for the first quarter ("Q1") ended March 31, 2013, which include the operating results of its subsidiaries DATA Group Ltd., DATA Group (US) Corp., The Fulfillment Solutions Advantage Inc. ("FSA") and FSA Datalytics Canada Inc. ("Datalytics").

"DATA Group made modest progress on our growth strategy in the first quarter of 2013.  Although revenues did not meet our expectations, we made progress implementing new customer agreements that we won in late 2012 and new capabilities, while also reducing our costs.  The new customer agreements are impacting our results at a slower rate than expected due to the pace of implementation.  We continued to focus on marketing our Managed Business Communications Services, or MBCS, and to implement our new e-communications solutions. Our accelerated cost savings program, which we launched in the fourth quarter of 2012, began to be implemented, resulting in a number of operational and administrative cost reductions.  As a result of these initiatives, we recorded $0.8 million in restructuring charges in the first quarter of 2013 and expect to continue to incur restructuring charges through the balance of 2013" said Michael Suksi, President and Chief Executive Officer.  "Adjusted EBITDA decreased from the prior year due to the continued investment in our growth strategy and a decline in revenues, and was partially offset by cost savings realized.  We declared total dividends to shareholders during the first quarter of 2013 of $1.8 million or $0.075 per share, which represents an annualized rate of $0.30 per share, and reduced our debt by $2.0 million, which is consistent with our previously announced plans."

Based on our current business outlook, we expect to continue with our current dividend per share rate, while also continuing to reduce our debt and invest in new revenue generating activities.  We believe this strategy will position DATA Group for sustainable profit growth, enterprise value appreciation and a consistent dividend payout to our shareholders over the longer term.

Table 1  The following table sets out selected historical financial information for the periods noted.

Consolidated Statements of Income Information      
For the periods ended March 31, 2013 and 2012
(in thousands of Canadian dollars, except per share amounts, unaudited)
Jan. 1 to
Mar. 31,
2013
$
  Jan. 1 to
Mar. 31,
2012 (1)
$
Revenues 82,863   86,648
Cost of revenues 61,125   63,421
Gross profit 21,738   23,227
       
Selling, general and administrative expenses 15,686   16,924
Restructuring expenses 767   -
Corporate conversion costs -   84
Amortization of intangible assets 2,310   2,311
       
Income before finance costs and income taxes 2,975   3,908
       
Finance costs      
  Interest expense 1,638   1,677
  Interest income (2)   (9)
  Amortization of transaction costs 143   152
  1,779   1,820
       
Income before income taxes 1,196   2,088
       
Income tax expense (recovery)      
  Current 1,272   1,248
  Deferred (925)   (2,718)
  347   (1,470)
       
Net income for the period 849   3,558
       
Net income attributable to common shareholders 853   3,566
Basic and diluted earnings per share 0.04   0.15
Number of common shares outstanding 23,490,592   23,490,592
       
Consolidated Statements of Financial Position Information
As at March 31, 2013 and December 31, 2012
(in thousands of Canadian dollars, unaudited)
As at
Mar. 31,
2013
$
  As at
Dec. 31,
2012
$
Current assets 85,176   84,069
Current liabilities 42,394   40,316
       
Total assets 223,021   224,629
Total non-current liabilities 118,442   122,199
       
Shareholders' equity 62,053   61,978
Non-controlling interest 132   136
Total equity 62,185   62,114

(1)      Prior-period amounts have been revised to reflect the retrospective application of
amendments to IAS 19 Employee Benefits.
      

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, 2013 and 2012
(in thousands of Canadian dollars, unaudited)
    Jan. 1 to
Mar. 31,
2013
$
    Jan. 1 to
Mar. 31,
2012 (1)
$
Net income for the period     849     3,558
Interest expense     1,638     1,677
Interest income     (2)     (9)
Amortization of transaction costs     143     152
Depreciation of property, plant and equipment     1,328     1,423
Amortization of intangible assets     2,310     2,311
Restructuring expenses     767     -
Corporate conversion costs     -     84
Current income tax expense     1,272     1,248
Deferred income tax recovery     (925)     (2,718)
Adjusted EBITDA     7,380     7,726

(1)      Prior-period amounts have been revised to reflect the retrospective
application of amendments to IAS 19 Employee Benefits.
   

RESULTS OF OPERATIONS

Revenues
For the quarter ended March 31, 2013, DATA Group recorded revenues of $82.9 million, a decrease of $3.8 million or 4.4% compared with the same period in 2012.  The decrease, before intersegment revenues, was the result of a $3.4 million decrease in the DATA East and West segment and a $0.4 million decrease in the Multiple Pakfold segment.

Cost of Revenues and Gross Profit
For the quarter ended March 31, 2013, cost of revenues decreased to $61.1 million from $63.4 million for the same period in 2012.  Gross profit for the quarter ended March 31, 2013 was $21.7 million, which represented a decrease of $1.5 million or 6.4% from $23.2 million for the same period in 2012.  The decrease in gross profit for the quarter ended March 31, 2013 was attributable to a gross profit decrease of $1.4 million in the DATA East and West segment and a gross profit decrease of $0.1 million in the Multiple Pakfold segment.  Gross profit as a percentage of revenues decreased to 26.2% for the quarter ended March 31, 2013 compared to 26.8% for the same period in 2012.

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, 2013 decreased $1.2 million to $15.7 million compared to $16.9 million in the same period in 2012.  As a percentage of revenues, these costs were 18.9% of revenues for the quarter ended March 31, 2013 compared to 19.5% of revenues for the same period in 2012.  For the quarter ended March 31, 2012, DATA Group incurred $0.1 million of severance expenses.  The decrease in SG&A expenses for the three months ended March 31, 2013 was attributable to realizing the benefit of cost saving initiatives implemented in 2012. Severance costs for the three months ended March 31, 2012 were included in SG&A and were related to DATA Group's on-going productivity improvements and cost reduction initiatives.  For the three months ended March 31, 2013, DATA Group incurred restructuring expenses related to headcount reductions of $0.8 million as part of its 2013 restructuring initiatives.

Corporate Conversion Costs
During the three months ended March 31, 2012, DATA Group incurred total professional fees of $0.1 million related to the conversion to a corporation on January 1, 2012.

Adjusted EBITDA
For the quarter ended March 31, 2013, Adjusted EBITDA was $7.4 million, or 8.9% of revenues.  Adjusted EBITDA for the quarter ended March 31, 2013 decreased $0.3 million or 4.5% from the same period in the prior year due to the continued investment in DATA Group's growth strategy and a decline in revenues, and was partially offset by cost savings realized.  These costs included SG&A expense related to investments to launch new products and services.  The Adjusted EBITDA margin for the quarter, as a percentage of revenues, remained unchanged at 8.9% of revenues in 2013 and the same period in 2012.

Interest Expense and Finance Costs
Interest expense on long-term debt outstanding under DATA Group's credit facilities, DATA Group's outstanding $45.0 million aggregate principal amount of 6.00% Convertible Unsecured Subordinated Debentures (the "6.00% Convertible Debentures") and interest expense on DATA Group's employee benefit plans was $1.6 million for the three months ended March 31, 2013 compared to $1.7 million for the same period in 2012.  The decrease in interest expense during the three months ended March 31, 2013 was the result of lower outstanding balances under DATA Group's credit facilities.

Income Taxes
DATA Group reported income before income taxes of $1.2 million, a current income tax expense of $1.3 million and a deferred income tax recovery of $0.9 million for the three months ended March 31, 2013 compared to income before income taxes of $2.1 million, current income tax expense of $1.2 million and a deferred income tax recovery of $2.7 million for the three months ended March 31, 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 DATA Group Income Fund (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 Income
Net income for the quarter ended March 31, 2013 was $0.8 million compared to a net income of $3.6 million for the quarter ended March 31, 2012.  The decrease in comparable profitability for the quarter ended March 31, 2013 was due to lower gross profit as a result of lower revenues, restructuring expenses and a smaller deferred income tax recovery.  The decrease in comparable profitability was partially offset by lower SG&A expense.

INVESTING ACTIVITIES
Capital expenditures for the three months ended March 31, 2013 of $0.5 million related primarily to maintenance capital expenditures.  These capital expenditures were financed by cash flow from operations.

FINANCING ACTIVITIES
During the three months ended March 31, 2013, DATA Group repaid $2.0 million of its Revolving Bank Facility outstanding.  For the three months ended March 31, 2013, DATA Group paid aggregate cash dividends of $1.3 million on its common shares.

About DATA Group Inc.
DATA Group Inc. 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 1,800 employees working from 35 locations across Canada and the United States 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 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 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 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 months ended March 31, 2013 means EBITDA adjusted for restructuring expenses.  Adjusted EBITDA for the three months ended March 31, 2012 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 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, 2013
$
  December 31, 2012
$
Assets        
Current assets        
  Trade receivables   39,187   41,580
  Inventories   41,218   38,085
  Prepaid expenses and other current assets   4,771   4,404
    85,176   84,069
         
Non-current assets        
  Deferred income tax assets   2,076   1,534
  Property, plant and equipment   19,473   20,420
  Intangible assets   15,230   17,540
  Goodwill   101,066   101,066
    223,021   224,629
Liabilities        
Current liabilities        
  Bank overdraft   583   1,161
  Trade payables   31,486   28,289
  Provisions   807   308
  Income taxes payable   158   1,699
  Deferred revenue   7,598   7,586
  Dividends payable   1,762   1,273
    42,394   40,316
         
Non-current liabilities        
  Provisions   814   867
  Revolving bank facility   55,620   57,553
  Convertible debentures   42,459   42,311
  Deferred income tax liabilities   732   766
  Other non-current liabilities   1,057   1,137
  Pension obligations   14,984   16,839
  Other post-employment benefit plans   2,776   2,726
    160,836   162,515
Equity        
Shareholders' equity        
  Shares   215,336   215,336
  Conversion options   516   516
  Accumulated other comprehensive income   2   1
  Deficit   (153,801)   (153,875)
    62,053   61,978
Non-controlling interest   132   136
    62,185   62,114
    223,021   224,629
           

         
CONSOLIDATED STATEMENTS OF INCOME        
(in thousands of Canadian dollars, except per share amounts, unaudited)   For the three
months ended
March 31, 2013
  For the three
months ended
March 31, 2012 (1)
    $   $
Revenues   82,863   86,648
         
Cost of revenues   61,125   63,421
         
Gross profit   21,738   23,227
         
Expenses        
       Selling, commissions and expenses   9,368   9,786
       General and administration expenses excluding amortization
   of intangible assets
  6,318   7,138
       Restructuring expenses   767   -
       Corporate conversion costs   -   84
       Amortization of intangible assets   2,310   2,311
    18,763   19,319
         
Income before finance costs and income taxes   2,975   3,908
         
Finance costs        
       Interest expense   1,638   1,677
       Interest income   (2)   (9)
       Amortization of transaction costs   143   152
    1,779   1,820
         
Income before income taxes   1,196   2,088
         
Income tax expense (recovery)        
       Current   1,272   1,248
       Deferred   (925)   (2,718)
    347   (1,470)
         
Net income for the period   849   3,558
         
         
Net income (loss) attributable to:        
       Common shareholders   853   3,566
      Non-controlling interest   (4)   (8)
    849   3,558
         
Basic earnings per share   0.04   0.15
         
Diluted earnings per share   0.04   0.15

(1)      Prior-period amounts have been revised to reflect the retrospective application of amendments to IAS 19
Employee Benefits.
   

         
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME        
(in thousands of Canadian dollars, unaudited)   For the three
months ended
March 31, 2013
  For the three
months ended
March 31, 2012 (1)
    $   $
         
Net income for the period   849   3,558
         
         
Other comprehensive income (loss):        
         
Items that may be reclassified subsequently to net income        
       Foreign currency translation   1   -
    1   -
         
Items that will not be reclassified to net income        
       Deferred income tax recovery on conversion to a corporation   -   406
       Actuarial gains (losses) on post-employment benefit obligations   1,332   (596)
       Taxes related to post-employment adjustment above   (349)   152
    983   (38)
         
Other comprehensive income (loss) for the period, net of tax   984   (38)
         
Comprehensive income for the period   1,833   3,520
         
Comprehensive income (loss) attributable to:        
       Common shareholders   1,837   3,528
       Non-controlling interest   (4)   (8)
         
    1,833   3,520

(1)      Prior-period amounts have been revised to reflect the retrospective application of amendments to IAS 19
Employee Benefits.
   

       
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY      
(in thousands of Canadian dollars, unaudited) Attributable to Shareholders'    
        Accumulated        
        other   Total Non-  
      Conversion comprehensive   Shareholders' controlling Total
  Shares Units options income Deficit Equity interest Equity
  $ $ $ $ $ $ $ $
                 
Balance as at December 31, 2011 - 215,336 - - (97,973) 117,363 313 117,676
Effect 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 (1) - - - - 3,566 3,566 (8) 3,558
Other comprehensive loss for the period (1) - - - - (38) (38) - (38)
Total comprehensive income (loss) for the period - - - - 3,528 3,528 (8) 3,520
                 
Dividends declared - - - - (3,820) (3,820) - (3,820)
        -        
Balance as at March 31, 2012 215,336 - 516 - (98,265) 117,587 305 117,892
                 
                 
Balance as at December 31, 2012 215,336 - 516 1 (153,875) 61,978 136 62,114
                 
Net income (loss) for the period - - - - 853 853 (4) 849
Other comprehensive income for the period - - - 1 983 984 - 984
Total comprehensive (loss) income for the period - - - 1 1,836 1,837 (4) 1,833
                 
Dividends declared - - - - (1,762) (1,762) - (1,762)
                 
Balance as at March 31, 2013 215,336 - 516 2 (153,801) 62,053 132 62,185

(1)      Prior-period amounts have been revised to reflect the retrospective application of amendments to IAS 19 Employee Benefits.
   

         
CONSOLIDATED STATEMENTS OF CASH FLOWS        
(in thousands of Canadian dollars, unaudited)   For the three
months ended
March 31, 2013
  For the three
months ended
March 31, 2012 (1)
    $   $
Cash provided by (used in)        
Operating activities        
Net income for the period   849   3,558
Adjustments to net income        
   Depreciation of property, plant and equipment   1,328   1,423
       Amortization of intangible assets   2,310   2,311
       Pension expense   236   234
       Loss on disposal of property, plant and equipment   57   1
       Change in provisions   446   (64)
       Amortization of transaction costs   143   152
       Accretion of convertible debentures   73   74
       Other non-current liabilities   (80)   (47)
       Other post-employment benefit plans, net   50   67
       Income tax expense (recovery)   347   (1,470)
    5,759   6,239
Changes in working capital   2,100   (1,719)
Contributions made to pension plans   (759)   (775)
Income taxes paid   (2,813)   (1,904)
    4,287   1,841
Investing activities        
Purchase of property, plant and equipment   (464)   (292)
Purchase of intangible assets   -   (415)
Proceeds on disposal of property, plant and equipment   26   -
    (438)   (707)
Financing activities        
Repayment of revolving bank facility   (2,000)   (1,000)
Finance costs   (1)   (138)
Dividends or distributions paid   (1,273)   (3,819)
    (3,274)   (4,957)
         
Increase (decrease) in (bank overdraft) cash and cash equivalents during the period   575   (3,823)
Effects of foreign exchange on cash balances   3   -
(Bank overdraft) cash and cash equivalents - beginning of period   (1,161)   4,046
(Bank overdraft) cash and cash equivalents - end of period   (583)   223
         

(1)      Prior-period amounts have been revised to reflect the retrospective application of amendments to IAS 19 Employee Benefits.

 

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

Products
  • Globe Unlimited

    Digital all access pass across devices. subscribe

  • The Globe and Mail Newspaper

    Newspaper delivered to your doorstep. subscribe

  • Globe2Go

    The digital replica of our newspaper. subscribe

  • Globe eBooks

    A collection of articles by the Globe. subscribe

See all Globe Products

Advertise with us

GlobeLink.ca

Your number one partner for reaching Canada's Influential Achievers. learn more

The Globe at your Workplace
Our Company
Customer Service
Globe Recognition
Mobile Apps
NEWS APP
INVESTING APP
Other Sections