HIGHLIGHTS
SECOND QUARTER 2017
- Revenues of $73.1 million
compared with $69.7 million in the
prior year, an increase of 4.8% year over year
- Net Loss of $0.6 million,
including restructuring expenses of $1.7
million, compared to Net Income of $0.9 million, including restructuring expenses of
$0.4 million in the prior comparative
period
- Adjusted EBITDA of $4.3 million,
compared to $4.5 million in the prior
year (See Table 2 and "Non-IFRS Measures" below)
- Raised $8.4 million of equity to
repay the 6.00% convertible debentures for $11.2 million plus interest of $0.3 million
YEAR TO DATE
- Revenues of $143.2 million
compared with $144.3 million in the
prior year, a decrease of 0.8% year over year
- Net Loss of $2.7 million,
including restructuring expenses of $3.6
million and acquisition costs of $1.0
million compared to Net Income of $2.9 million, including restructuring expenses of
$0.7 million in the prior comparative
period
- Adjusted EBITDA of $7.2 million,
compared to $10.2 million in the
prior year (See Table 2 and "Non-IFRS Measures" below)
BRAMPTON, ON, Aug. 8, 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
three and six months ended June 30,
2017.
"We are pleased with the progress we have made in key business
areas and with the corresponding improved financial results," said
Michael G. Sifton, Chief Executive
Officer of DATA. "We continue to focus on sales stabilization
strategies, further enhancement of operational efficiencies and the
strengthening of our balance sheet. Under Greg Cochrane's
focused sales and business development leadership, I am confident
that we will make significant strides in improving DATA's position
in both the marketing communications and print business
segments. We continue to build a robust pipeline of
opportunities that capitalize on our core competency of managing
complex business communications for our customers.
Furthermore, I am very pleased that DATA repaid our 6.00%
convertible debentures in full upon maturity. I am cautiously
optimistic about the balance of 2017 and our sales pipeline of new
initiatives converting through 2018."
Settlement of 6.00% convertible debentures
As
intended, upon maturity on June 30,
2017, DATA settled the outstanding 6.00% Convertible
Unsecured Subordinated Debentures ("6.00% Convertible Debentures")
with an aggregate payment of $11.2
million plus accrued interest of $0.3
million which was financed with the net proceeds received
from the Rights Offering, Private Placement and Bridging Credit
Facility (all of which are described in further detail
below). This represents a significant achievement for the
Company, as it looks to deleverage its balance sheet further.
Rights offering
On June
23, 2017, DATA completed a rights offering ("Rights
Offering") and issued 3,312,368 Common Shares at a price of
$1.40 per share for gross proceeds of
$4.6 million. Among this,
1,090,727 Common Shares were issued to directors, officers and
related parties of DATA for total gross proceeds of $1.5 million. The gross proceeds were used
to finance, in part, the settlement of the 6.00% Convertible
Debentures which matured on June 30,
2017.
Private placement
On June 28, 2017, DATA completed a non-brokered
private placement offering ("Private Placement"). Pursuant to
the Private Placement, DATA issued 2,690,604 units ("Units"), with
each Unit consisting of one Common Share and one-half of a Common
Share purchase warrant (each whole Common Share purchase warrant, a
"Warrant") at a price per Unit of $1.40 for gross proceeds of $3.8 million. Among this, 550,650 Units
were issued to directors and officers of DATA for total proceeds of
$0.8 million. The gross
proceeds of $3.8 million were used to
finance, in part, the settlement of the 6.00% Convertible
Debentures which matured on June 30,
2017.
On July 13, 2017, DATA completed a
second closing of the Private Placement to a director of DATA for
71,500 Units, raising additional gross proceeds of $0.1 million.
New credit facility and covenant amendment
On
June 28, 2017, DATA established a
non-revolving credit facility (the "Bridging Credit Facility") with
Bridging Finance Inc. ("Bridging") for $3.5
million (the "Bridging Credit Agreement"). Advances
under the Bridging Credit Facility are repayable on demand and bear
interest at a rate equal to the prime rate of interest charged by
DATA's bank lender from time to time plus 10.3% per annum,
calculated and payable monthly. The Bridging Credit Facility
has a term of one year and can be repaid at any time without any
prepayment fee upon sixty days prior written notice to Bridging,
subject to the prior written consent of DATA's other senior
lenders. The gross proceeds of $3.5
million were used to finance, in part, the settlement of the
6.00% Convertible Debentures which matured on June 30, 2017.
In addition to the establishment of the Bridging Credit
Facility, the term on a sub facility of DATA's senior revolving
credit facility with a Canadian chartered bank (the "Bank Term
Facility") was concurrently amended whereby the outstanding balance
as of June 30, 2017 for $4.2
million will be repaid by May 31, 2018, with equal
monthly instalments of $0.4
million. Given the Bridging Credit Facility and Bank
Term Facility are repayable within one year, these were classified
as current liabilities in DATA's consolidated statement of
financial position as at June 30, 2017. Consequently,
the required working capital current ratio of 1.25 to 1, pursuant
to the terms of DATA's senior term loan facilities with Integrated
Asset Management Corp. ("IAM"), was not met as at June 30, 2017. On August 4, 2017, the terms of the IAM senior
term loan facilities were amended whereby the working capital
current ratio was changed to 1.1 to 1 effective June 30, 2017, thereby resulting in DATA's
lenders confirming there is no event of default. Given that
the amendment was entered into subsequent to June 30, 2017, the long-term portion of DATA's
senior credit facilities totalling $41.3
million were reclassified to current liabilities in DATA's
consolidated statement of financial position as at June 30, 2017. DATA expects to be compliant
with its covenants going forward and, accordingly, it expects that
the long-term portion of DATA's senior credit facilities will be
reclassified to long-term in future periods.
Further enhancements to sales
In the second
quarter of 2017, Gregory J.
Cochrane, President assumed additional sales and business
development responsibilities with the objective of improving DATA's
position in the marketing communications and print business
segments. Under his leadership, DATA has made structural and
leadership changes to the sale team to make it more responsive to
the changing market, take a more consultative approach to our
client interactions and better capitalize on our unique suite of
integrated technology solutions. We also began to implement
several strategic initiatives to improve customer profitability,
build wallet share in our existing customer base and position DATA
as a provider of a unique suite of superior solutions.
In addition, DATA recently announced the hiring of Mike Coté as
Senior Vice President, Corporate Development and Strategy,
effective September 5, 2017. In
this new role, Mr. Coté will lead strategic business development
efforts, and will focus on helping DATA achieve its organic growth
objectives. Mr. Coté brings extensive business-to-business
selling experience and is expected to help strengthen DATA's
customer relationships and competitive positioning.
Restructuring
DATA continues to evaluate its
business for opportunities to enhance productivity and reduce its
cost of operations. During the three months ended
June 30, 2017, additional
restructuring charges of $1.5 million
were incurred primarily related to headcount reductions in the
Sales and Customer Service functions as a result of initiatives
described in the "Further Enhancements to Sales" section
above. In addition, a $0.3
million expense was recorded during the second quarter of
2017 as a result of an onerous lease on the Regina, Saskatchewan facility which DATA
exited and consolidated with its Calgary,
Alberta facility, in addition to expenditures for building
maintenance costs. Annualized savings from these initiatives
are expected to be $1.4 million per
year.
Post-integration of Eclipse and Thistle
acquisitions
As previously reported, DATA completed the
acquisition of Eclipse Colour and Imaging Corp. ("Eclipse") and
Thistle Printing Limited ("Thistle") in the first quarter of
2017. During the second quarter of 2017, the sales force was
cross-trained on the respective capabilities and service offerings
of DATA, Eclipse and Thistle. This has translated into
stronger than expected post-acquisition financial results as the
Company has benefited from cross-selling opportunities, in addition
to cost savings and improved margins from synergies gained.
Eclipse generated revenue and net income for the three months ended
June 30, 2017 of $6.7 million and $0.8
million (six months ended June 30, 2017 of $9.4 million and $1.2
million), respectively, and Thistle generated revenue and
net income for the three months ended June
30, 2017 of $4.2 million and $0.4 million (six months ended June 30, 2017
of $6.0 million and $0.4 million), respectively. With the
inclusion of Eclipse's and Thistle's financial results for a full
quarter, in addition to synergies gained from these acquisitions,
overall gross margin for the Company improved from 23.3% for the
three months ended March 31, 2017 to
24.6% for the three months ended June 30,
2017 and is consistent with the same comparative period last
year.
The valuation reports for the Eclipse and Thistle acquisitions
are still in progress, and therefore, the purchase price allocation
remains preliminary. As such, there may be adjustments to the
purchase accounting and those adjustments could be material.
The post-closing adjustment for the Eclipse acquisition was
completed during the second quarter of 2017 and did not change the
purchase price significantly from the estimated amount previously
used for the purchase accounting. The finalization of the
post-closing adjustment for the Thistle acquisition is expected to
be completed in the third quarter of 2017.
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 June 30, 2017 and 2016
|
Apr. 1 to
June 30,
2017
|
Apr. 1 to
June 30, 2016
|
Jan. 1 to
June 30,
2017
|
Jan. 1
to June 30,
2016
|
(in thousands of
Canadian dollars, except share and per share amounts,
unaudited)
|
$
|
$
|
$
|
$
|
Revenues
|
73,066
|
69,716
|
143,192
|
144,330
|
Cost of
revenues
|
55,062
|
52,567
|
108,828
|
108,808
|
Gross
profit
|
18,004
|
17,149
|
34,364
|
35,522
|
|
|
|
|
|
Selling, general and
administrative expenses
|
15,715
|
14,258
|
30,739
|
28,596
|
Restructuring
expenses
|
1,735
|
368
|
3,621
|
692
|
Acquisition
costs
|
13
|
—
|
969
|
—
|
|
|
|
|
|
Income (loss) before
finance costs and income taxes
|
541
|
2,523
|
(965)
|
6,234
|
|
|
|
|
|
Finance costs
(income)
|
|
|
|
|
|
Interest
expense
|
1,181
|
869
|
2,131
|
1,737
|
|
Interest
income
|
—
|
(1)
|
—
|
(4)
|
Amortization of
transaction costs
|
121
|
109
|
236
|
356
|
|
1,302
|
977
|
2,367
|
2,089
|
|
|
|
|
|
(Loss) income before
income taxes
|
(761)
|
1,546
|
(3,332)
|
4,145
|
|
|
|
|
|
Income tax (recovery)
expense
|
|
|
|
|
|
Current
|
288
|
1,156
|
339
|
1,332
|
|
Deferred
|
(468)
|
(601)
|
(993)
|
(60)
|
|
(180)
|
555
|
(654)
|
1,272
|
|
|
|
|
|
Net (loss) income for
the period
|
(581)
|
991
|
(2,678)
|
2,873
|
|
|
|
|
|
Basic (loss) earnings
per share
|
(0.04)
|
0.09
|
(0.20)
|
0.28
|
Diluted (loss)
earnings per share
|
(0.04)
|
0.09
|
(0.20)
|
0.28
|
Weighted average
number of common shares outstanding, basic
|
13,637,875
|
10,559,348
|
13,079,515
|
10,273,438
|
Weighted average
number of common shares outstanding, diluted
|
13,637,875
|
10,586,957
|
13,079,515
|
10,287,242
|
As at June 30,
2017 and December 31, 2016
|
As at
June 30,
2017
|
As at
Dec. 31,
2016
|
(in thousands of
Canadian dollars, unaudited)
|
$
|
$
|
Current
assets
|
77,564
|
68,620
|
Current
liabilities
|
106,778
|
58,473
|
|
|
|
Total
assets
|
122,065
|
90,910
|
Total non-current
liabilities
|
18,544
|
42,372
|
|
|
|
Shareholders'
deficit
|
(3,257)
|
(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 June 30, 2017 and 2016
|
Apr. 1 to
June 30,
2017
|
Apr. 1 to
June 30,
2016
|
Jan. 1 to
June 30,
2017
|
Jan. 1 to
June 30,
2016
|
(in thousands of
Canadian dollars, unaudited)
|
$
|
$
|
$
|
$
|
Net (loss) income for
the period
|
(581)
|
991
|
(2,678)
|
2,873
|
|
|
|
|
|
Interest
expense
|
1,181
|
869
|
2,131
|
1,737
|
Interest
income
|
—
|
(1)
|
—
|
(4)
|
Amortization of
transaction costs
|
121
|
109
|
236
|
356
|
Current income tax
expense
|
288
|
1,156
|
339
|
1,332
|
Deferred income tax
recovery
|
(468)
|
(601)
|
(993)
|
(60)
|
Depreciation of
property, plant and equipment
|
1,058
|
1,134
|
1,943
|
2,249
|
Amortization of
intangible assets
|
906
|
510
|
1,599
|
1,015
|
EBITDA
|
2,505
|
4,167
|
2,577
|
9,498
|
|
|
|
|
|
Restructuring
expenses
|
1,735
|
368
|
3,621
|
692
|
Acquisition
costs
|
13
|
—
|
969
|
—
|
Adjusted
EBITDA
|
4,253
|
4,535
|
7,167
|
10,190
|
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 June 30, 2017 and 2016
|
Apr. 1 to
June 30,
2017
|
Apr. 1 to
June 30,
2016
|
Jan. 1 to
June 30,
2017
|
Jan. 1 to
June 30,
2016
|
(in thousands of
Canadian dollars, except share and per share amounts,
unaudited)
|
$
|
$
|
$
|
$
|
Net (loss) income for
the period
|
(581)
|
991
|
(2,678)
|
2,873
|
|
|
|
|
|
Restructuring
expenses
|
1,735
|
368
|
3,621
|
692
|
Acquisition
costs
|
13
|
—
|
969
|
—
|
Tax effect of the
above adjustments
|
(453)
|
(96)
|
(945)
|
(181)
|
Adjusted net
income
|
714
|
1,263
|
967
|
3,384
|
|
|
|
|
|
Adjusted net income
per share, basic and diluted
|
0.05
|
0.12
|
0.07
|
0.34
|
Weighted average
number of common shares outstanding, basic
|
13,637,875
|
10,559,348
|
13,079,515
|
10,273,438
|
Weighted average
number of common shares outstanding, diluted
|
13,637,875
|
10,586,957
|
13,079,515
|
10,287,242
|
Number of common
shares outstanding, basic
|
19,263,235
|
11,666,095
|
19,263,235
|
11,666,095
|
Number of common
shares outstanding, diluted
|
19,263,235
|
11,980,143
|
19,263,235
|
11,980,143
|
Revenues
For the quarter ended June 30, 2017, DATA recorded revenues of
$73.1 million, an increase of
$3.4 million or 4.8% compared with
the same period in 2016. The increase in revenues for the
quarter ended June 30, 2017 was due
to the inclusion of a full quarter of financial results for Eclipse
and Thistle, in addition to greater than expected growth realized
from these acquisitions. This was partially offset by lower
revenues in DATA's core business due to (i) lower volumes and
pricing from certain customers that reduced their overall spend,
particularly in the financial services sector, and (ii)
non-recurring work related to labels and forms from a major
retailer and certain government agencies, respectively.
For the six months ended June 30,
2017, DATA recorded revenues of $143.2 million, a decrease of $1.1 million or 0.8% compared with the same
period in 2016. The decrease in revenues for the six months
ended June 30, 2017 was primarily due
to lower volumes and pricing pressures from certain customers that
reduced their overall spend, particularly in the financial services
sector, and was also due to non-recurring work related to the forms
and labels business, from which DATA benefited last year.
Those factors led to revenue declines during the six month period
which more than offset the growth in revenues from new customers
and additional revenues from the acquisitions of Eclipse and
Thistle, resulting in the overall reduction in revenues compared to
the first six months of 2016.
Cost of Revenues and Gross Profit
For the
quarter ended June 30, 2017, cost of
revenues increased to $55.1 million
from $52.6 million for the same
period in 2016 proportionate to the increase in year of year
revenue for the same period. Gross profit for the quarter
ended June 30, 2017 was $18.0 million, which represented an increase
of $0.9 million or 5.0% from
$17.1 million for the same
period in 2016. Gross profit as a percentage of revenues for
the quarter ended June 30, 2017
remained largely unchanged from the prior year at 24.6%. For
the six months ended June 30, 2017,
cost of revenues remained largely unchanged from the prior year at
$108.8 million. Gross profit
for the six months ended June 30,
2017 was $34.4 million,
which represented a decrease of $1.2 million or 3.3% from $35.5 million for the same period in
2016. Gross profit as a percentage of revenues decreased
marginally to 24.0% for the six months ended June 30, 2017 compared to 24.6% for the same
period in 2016. The decrease in gross profit as a percentage
of revenues for the six months ended June
30, 2017 was due to the decrease in revenues in the first
six months 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 higher gross margins attributed to
Eclipse and Thistle, cost reductions realized from prior cost
savings initiatives implemented in 2016 and additional process
improvement savings implemented in January
2017.
Selling, General and Administrative
Expenses
Selling, general and administrative
("SG&A") expenses for the quarter ended June 30, 2017 increased $1.5 million or 10.2% to $15.7 million compared to $14.3 million in the same period in
2016. As a percentage of revenues, these costs were 21.5% of
revenues for the quarter ended June 30,
2017 compared to 20.5% of revenues for the same period in
2016. The increase in SG&A expenses for the quarter ended
June 30, 2017 was primarily
attributable to the acquisitions of Eclipse and Thistle and an
increase in the amortization of intangible assets.
SG&A expenses for the six months ended June 30, 2017 increased $2.1 million or 7.5% to $30.7 million compared to $28.6 million for the same period of
2016. As a percentage of revenues, these costs were 21.5% and
19.8% of revenues for the six month periods ended June 30,
2017 and 2016, respectively. The increase in SG&A
expenses for the six months ended June 30,
2017 was primarily attributable to the acquisitions of
Eclipse and Thistle, an increase in the amortization of intangible
assets, and increased investment in technology including expenses
related to DATA's ERP project.
Restructuring Expenses
For the quarter ended
June 30, 2017, DATA incurred
restructuring expenses of $1.7
million compared to $0.4
million in the same period in 2016, of which $1.5 million primarily related to headcount
reductions across the sales and customer service functions of the
business and a lease exit charge of $0.3
million associated with the closure of its manufacturing and
warehouse facility in Regina,
Saskatchewan. For the quarter ended June 30, 2016, DATA incurred restructuring
expenses of $0.4 million primarily
related to headcount reductions.
For the six months ended June 30,
2017, DATA incurred total restructuring expenses of
$3.6 million compared to $0.7 million in the same period in 2016.
$3.7 million of restructuring costs
in the first half or 2017 were related to headcount reductions in
DATA's indirect labour force across its operations, designed to
streamline DATA's order-to-production process and across the Sales
and Customer Service functions of the business. 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
and DATA also incurred a lease exit charge associated with the
closure of its manufacturing and warehouse facility in Regina, Saskatchewan of $0.3 million. For the six months ended
June 30, 2016, DATA incurred
restructuring expenses related to headcount reductions of
$0.7 million.
Adjusted EBITDA
For the quarter ended
June 30, 2017, Adjusted EBITDA was
$4.3 million, or 5.8% of revenues,
after adjusting EBITDA for the $1.7
million in restructuring charges. Adjusted EBITDA for
the three months ended June 30, 2017
decreased $0.3 million or 6.2% from
the same period in the prior year which was 6.5% of revenues in
2016. The decrease in Adjusted EBITDA for the three months
ended June 30, 2017 was due to higher
SG&A expenses and was partially offset by higher gross profit
as a result of higher revenues.
For the six months ended June 30,
2017, Adjusted EBITDA was $7.2
million, or 5.0% of revenues, after adjusting EBITDA for the
$3.6 million in restructuring charges
and adding back $1.0 million related
to business acquisition costs. Adjusted EBITDA for the six
months ended June 30, 2017 decreased
$3.0 million or 29.7% from the same
period in the prior year which was 7.1% of revenues in 2016.
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 $1.2
million for the three months ended June 30, 2017 compared to $0.9 million for the same period in 2016, and was
$2.1 million for the six months ended
June 30, 2017 compared to
$1.7 million for the same period in
2016. Interest expense for the six months ended June 30, 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 of the purchase prices,
settle certain debt assumed and pay for related acquisition costs
associated with the Eclipse and Thistle acquisitions in
February 2017.
Income Taxes
DATA reported a loss before income
taxes of $0.8 million and a net
income tax recovery of $0.2 million
for the quarter ended June 30, 2017
compared to income before income taxes of $1.5 million and a net income tax expense of
$0.6 million for the quarter ended
June 30, 2016. DATA reported a
loss before income taxes of $3.3
million and a net income tax recovery of $0.7 million for the six months ended
June 30, 2017 compared to income
before income taxes of $4.1 million
and a net income tax expense of $1.3
million for the six months ended June
30, 2016. The current income tax expense was due to
the taxes payable on DATA's estimated taxable income for the three
and six month periods ended June 30, 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 and six month periods ended June 30, 2017 and 2016,
respectively.
Net (Loss) Income
Net loss for the quarter
ended June 30, 2017 was $0.6 million compared to net income of
$0.9 million for the same period in
2016. The decrease in comparable profitability for the
quarter ended June 30, 2017 was
substantially due to higher SG&A expenses and restructuring
expenses and partially offset by higher gross profit as a result of
higher revenues during the three months ended June 30, 2017.
Net loss for the six months ended June
30, 2017 was $2.7 million
compared to a net income $2.9 million
for the same period in 2016. The decrease in comparable
profitability for the six months ended June
30, 2017 was primarily due to lower revenue, higher SG&A
expenses, a larger restructuring charge and business acquisition
costs during the six months ended June 30,
2017.
Adjusted Net (Loss) Income
Adjusted net income
for the quarter ended June 30, 2017
was $0.7 million compared to Adjusted
net income of $1.3 million for the
same period in 2016. Adjusted net income for the six months
ended June 30, 2017 was $1.0 million compared to Adjusted net income of
$3.4 million for the same period in
2016. The decrease in comparable profitability for the three
and six month periods ended June 30, 2017 was attributable
primarily due to lower revenues, higher SG&A expenses and
higher interest expense in 2017.
CASH FLOW FROM OPERATIONS
During the three months ended June 30,
2017, cash flows generated by operating activities were
$3.9 million compared to cash flows
generated by operating activities of $7.9
million during the same period in 2016. $3.3 million of current year cash flows resulted
from operations, after adjusting for non-cash items, compared with
$4.7 million in 2016. Current
period cash flows from operations were positively impacted by
the acquisitions of Eclipse and Thistle however, this was
offset by a $1.5
million increase in SG&A expenses over the prior year
comparative period, in addition to lower revenue from
DATA's core business. Changes in working capital during the
three months ended June 30, 2017
generated $2.7 million in cash
compared with $5.5
million primarily due to an increase in inventory on hand and
a decrease in deferred revenue which was partially offset by
an increase in accounts payables due to the timing of payments to
suppliers for purchases and a decrease in accounts
receivable. In addition, $1.7
million of cash was used to make payments primarily related
to severances and lease termination costs, compared with
$1.6 million of payments in
2016. Contributions made to the Company's pension plans were
$0.5 million, which was unchanged
from the prior year.
During the six months ended June 30,
2017, cash flows generated by operating activities were
$2.3 million compared to cash flows
generated by operating activities of $10.1
million during the same period in 2016. $4.7 million of current year cash flows resulted
from operations, after adjusting for non-cash items, compared with
$10.4 million in 2016. Current
period cash flows from operations were positively impacted by the
acquisitions of Eclipse and Thistle however, this was offset by a
$2.1 million increase in SG&A
expense over the prior year comparative period, in addition to
lower revenues from DATA's core business. Changes in working
capital during the six months ended June 30,
2017 generated $1.8 million
compared with $5.0 million in the
prior year primarily due to an increase in inventory on hand which
was partially offset by an increase in accounts payables due to the
timing of payments to suppliers for purchases and a decrease in
accounts receivable. In addition, $3.3
million of cash was used to make payments primarily related
to severances and lease termination costs, compared with
$4.1 million of payments in
2016. Contributions made to the Company's pension plans were
$0.9 million, which was unchanged
from the prior year.
INVESTING ACTIVITIES
During the three months ended June 30,
2017, $1.7 million in cash
flows were used for investing activities compared with $0.3 million during the same period in
2016. In 2017, $0.8 million of
cash was used to invest in label equipment with digital
capabilities, digital press equipment and the relocation of certain
sales offices. In 2017, $0.8
million of cash was used primarily related to investments in
DATA's ERP project.
During the six months ended June 30,
2017, $6.6 million in cash
flows were used for investing activities compared with $0.9 million during the same period in
2016. In 2017, $0.9 million of
cash was used to invest in label equipment with digital
capabilities, digital press equipment and the relocation of certain
sales offices. In 2017, $1.1
million of cash was used related primarily related to
investments in DATA's ERP project. In 2017, $4.6 million of cash was used to acquire the
businesses of Eclipse and Thistle.
FINANCING ACTIVITIES
During the three months ended June 30,
2017, cash flow used for financing activities was
$5.0 million compared to cash flow
used for financing activities of $7.4
million during the same period in 2016. DATA used net
cash received from the issuance of common shares and warrants of
$8.1 million and cash from advances
under its credit facilities totaling $3.5
million and to repay $4.0
million in outstanding principal amounts under its credit
facilities and to repay the 6.00% Convertible Debentures
outstanding principal amount totaling $11.2
million. DATA also repaid a total of $0.9 million related to the post-closing
adjustments and promissory note related to the acquisitions of
Eclipse and Thistle. DATA also incurred $0.3 million of transaction costs related to the
amendments to its senior credit facilities during the three months
ended June 30, 2017.
During the six months ended June 30,
2017, cash flow generated by financing activities was
$1.9 million compared to cash flow
used for financing activities of $9.1
million during the same period in 2016. DATA used net
cash received from the issuance of common shares and warrants of
$8.1 million and cash from advances
under its credit facilities totaling $17.1
million to repay a total of $2.4
million to settle the outstanding balance on certain
equipment leases that were assumed upon the acquisition of Eclipse,
$7.6 million in outstanding principal
amounts under its credit facilities, to settle certain debt assumed
upon the acquisition of Eclipse and Thistle on February 22, 2017, and to repay the 6.00%
Convertible Debentures outstanding principal amount totalling
$11.2 million. DATA also repaid
a total of $1.1 million related to
the post-closing adjustment for Eclipse and the promissory note
related to the acquisition of Thistle. Lastly, DATA also
incurred $0.6 million of transaction
costs related to the amendments to its senior credit facilities
during the six months ended June 30,
2017.
OUTLOOK
Financial results for the second quarter of 2017 show modest
improvement over the first quarter of the year after the inclusion
of full quarter results for Thistle and Eclipse for the three
months ended June 30, 2017.
While DATA's core business experienced some softness in sales
during the second quarter of 2017, consistent with the secular
declines experienced by the industry, the contribution of full
quarter revenue and greater than expected growth from Eclipse and
Thistle, offset this shortfall. As noted previously,
cross-selling opportunities and cost savings from synergies gained
from the Eclipse and Thistle acquisitions are materializing as
planned. Gross margin was 24.6% for the second quarter of
2017 in comparison to 23.3% in the first quarter of the year.
DATA expects the positive contributions from Eclipse and Thistle to
continue going forward.
DATA has taken active steps to refine its positioning in the
marketing communications and print business segment. Several
strategic initiatives have been implemented to improve customer
profitability, build wallet share in its existing customer base and
position DATA as a provider of a unique suite of superior
solutions. Early results are promising, and the Company has
been developing a healthy pipeline of new business wins within its
existing customer base together with new customer acquisitions
which are expected to translate into improved sales and higher
margins progressively over the balance of 2017 and into 2018.
With the integration of Eclipse and Thistle substantially
completed, DATA is actively pursuing other target acquisitions it
sees in its markets which leverage its key competencies and/or
bring new capabilities. It is expected that the Company will
continue to be active on this front to deliver further growth and
widen its footprint in the business and marketing solutions
space.
DATA also continues to identify opportunities to further
deleverage its balance sheet. The 6.00% Convertible
Debentures that were settled on June 30,
2017, with an aggregate principal amount of $11.2 million plus interest of $0.3 million, was a significant step in this
direction. The Company is exploring various financing options
that will facilitate new acquisitions, further pay down outstanding
debt and provide additional funds for future working capital
needs. In addition, DATA continues to seek out further
operational efficiencies within its business to bolster
profitability and generate higher cash flows.
DATA is encouraged by its sales funnel and the opportunities
ahead of it. Despite having a robust new business pipeline,
the sales and onboarding process is slow and is taking longer than
the Company had anticipated. At the same time, DATA's core
enterprise and financial institutions business has experienced
larger declines than previously anticipated. Nonetheless,
DATA is cautiously optimistic about the balance of 2017 and its
sales pipeline of new initiatives converting through 2018. As
a result, DATA is revising its financial guidance for fiscal 2017
to a range of between $18.0 million and
$20.0 million of full year non-IFRS adjusted EBITDA.
As part of establishing the above guidance, the Company made the
following assumptions:
- Economic conditions in North
America will not deteriorate
- Print revenues in DATA's core business will continue to decline
consistent with trends experienced by the industry
- The Company will be able to translate its pipeline of sales
into new customer acquisitions and higher wallet share from its
existing customer base
- The structural and leadership changes to the sales team, and
the several strategic initiatives implemented to date to further
enhance sales, will result in improved customer profitability and
higher revenues
- The acquisitions of Eclipse and Thistle will generate
additional revenue from cross-selling opportunities gained and will
also improve profitability through synergies in cost savings
- Further operational efficiencies and cost savings will result
from additional cost management and/or restructuring
initiatives
DATA cautions that the assumptions used to prepare the guidance
provided above, although currently reasonable, may prove to be
incorrect or inaccurate. Accordingly, actual results may
differ materially from expectations as set forth above. The
guidance provided above should be read in conjunction with, as is
qualified by, the section Forward-looking Statements contained
in this press release.
It is expected that the financial performance of the Company
will improve in the second half of the year as DATA begins to
realize the benefit of the various growth initiatives currently
underway.
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 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, 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)
|
June 30, 2017
$
|
|
December 31,
2016
$
|
|
|
|
|
Assets
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
—
|
|
1,544
|
|
Trade
receivables
|
34,909
|
|
29,157
|
|
Inventories
|
37,928
|
|
33,252
|
|
Prepaid expenses and
other current assets
|
4,727
|
|
4,667
|
|
77,564
|
|
68,620
|
Non-current
assets
|
|
|
|
|
Deferred income tax
assets
|
5,323
|
|
3,839
|
|
Restricted
cash
|
425
|
|
425
|
|
Property, plant and
equipment
|
18,427
|
|
12,483
|
|
Pension
assets
|
—
|
|
1,589
|
|
Intangible
assets
|
13,005
|
|
3,954
|
|
Goodwill
|
7,321
|
|
—
|
|
|
|
|
|
122,065
|
|
90,910
|
|
|
|
|
Liabilities
|
|
|
|
Current
liabilities
|
|
|
|
|
Bank
overdraft
|
989
|
|
—
|
|
Trade payables and
accrued liabilities
|
35,049
|
|
27,304
|
|
Current portion of
credit facilities
|
51,913
|
|
5,886
|
|
Convertible
debentures
|
—
|
|
11,082
|
|
Current portion of
promissory notes
|
3,515
|
|
—
|
|
Provisions
|
3,527
|
|
3,305
|
|
Income taxes
payable
|
2,927
|
|
2,231
|
|
Deferred
revenue
|
8,858
|
|
8,665
|
|
106,778
|
|
58,473
|
Non-current
liabilities
|
|
|
|
|
Provisions
|
944
|
|
675
|
|
Credit
facilities
|
—
|
|
29,156
|
|
Promissory
notes
|
2,946
|
|
—
|
|
Deferred income tax
liabilities
|
1,409
|
|
—
|
|
Other non-current
liabilities
|
2,413
|
|
1,691
|
|
Pension
obligations
|
8,212
|
|
8,340
|
|
Other post-employment
benefit plans
|
2,620
|
|
2,510
|
|
125,322
|
|
100,845
|
|
|
|
|
Equity
|
|
|
|
Shareholders'
deficit
|
|
|
|
|
Shares
|
248,094
|
|
237,432
|
|
Warrants
|
280
|
|
—
|
|
Conversion
options
|
—
|
|
128
|
|
Contributed
surplus
|
1,336
|
|
1,164
|
|
Accumulated other
comprehensive income
|
184
|
|
258
|
|
Deficit
|
(253,151)
|
|
(248,917)
|
|
(3,257)
|
|
(9,935)
|
|
|
|
|
|
122,065
|
|
90,910
|
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of
Canadian dollars, except per share amounts,
unaudited)
|
For the three
months ended June
30, 2017
|
|
For the three
months ended June
30, 2016
|
|
$
|
|
$
|
|
|
|
|
Revenues
|
73,066
|
|
69,716
|
|
|
|
|
Cost of
revenues
|
55,062
|
|
52,567
|
|
|
|
|
Gross
profit
|
18,004
|
|
17,149
|
|
|
|
|
Expenses
|
|
|
|
|
Selling, commissions
and expenses
|
8,690
|
|
7,664
|
|
General and
administration expenses
|
7,025
|
|
6,594
|
|
Restructuring
expenses
|
1,735
|
|
368
|
|
Acquisition
costs
|
13
|
|
—
|
|
17,463
|
|
14,626
|
|
|
|
|
Income before
finance costs and income taxes
|
541
|
|
2,523
|
|
|
|
|
Finance costs
(income)
|
|
|
|
|
Interest
expense
|
1,181
|
|
869
|
|
Interest
income
|
—
|
|
(1)
|
|
Amortization of
transaction
costs
|
121
|
|
109
|
|
1,302
|
|
977
|
|
|
|
|
(Loss) income
before income taxes
|
(761)
|
|
1,546
|
|
|
|
|
Income tax
(recovery) expense
|
|
|
|
|
Current
|
288
|
|
1,156
|
|
Deferred
|
(468)
|
|
(601)
|
|
(180)
|
|
555
|
|
|
|
|
Net (loss) income
for the period
|
(581)
|
|
991
|
|
|
|
|
Basic (loss)
earnings per share
|
(0.04)
|
|
0.09
|
|
|
|
|
Diluted (loss)
earnings per share
|
(0.04)
|
|
0.09
|
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of
Canadian dollars, except per share amounts,
unaudited)
|
For the six
months ended June
30, 2017
|
|
For the six
months ended June
30, 2016
|
|
$
|
|
$
|
|
|
|
|
Revenues
|
143,192
|
|
144,330
|
|
|
|
|
Cost of
revenues
|
108,828
|
|
108,808
|
|
|
|
|
Gross
profit
|
34,364
|
|
35,522
|
|
|
|
|
Expenses
|
|
|
|
|
Selling, commissions
and expenses
|
17,208
|
|
16,179
|
|
General and
administration expenses
|
13,531
|
|
12,417
|
|
Restructuring
expenses
|
3,621
|
|
692
|
|
Acquisition
costs
|
969
|
|
—
|
|
35,329
|
|
29,288
|
|
|
|
|
(Loss) income
before finance costs and income taxes
|
(965)
|
|
6,234
|
|
|
|
|
Finance costs
(income)
|
|
|
|
|
Interest
expense
|
2,131
|
|
1,737
|
|
Interest
income
|
—
|
|
(4)
|
|
Amortization of
transaction costs
|
236
|
|
356
|
|
2,367
|
|
2,089
|
|
|
|
|
(Loss) income
before income taxes
|
(3,332)
|
|
4,145
|
|
|
|
|
Income tax
(recovery) expense
|
|
|
|
|
Current
|
339
|
|
1,332
|
|
Deferred
|
(993)
|
|
(60)
|
|
(654)
|
|
1,272
|
|
|
|
|
Net (loss) income
for the period
|
(2,678)
|
|
2,873
|
|
|
|
|
Basic (loss)
earnings per share
|
(0.20)
|
|
0.28
|
|
|
|
|
Diluted (loss)
earnings per share
|
(0.20)
|
|
0.28
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
INCOME
(in thousands of
Canadian dollars, unaudited)
|
For the three
months ended June
30, 2017
|
|
For the three
months ended June
30, 2016
|
|
$
|
|
$
|
|
|
|
|
Net (loss) income
for the period
|
(581)
|
|
991
|
|
|
|
|
|
|
|
|
Other
comprehensive loss:
|
|
|
|
|
|
|
|
Items that may be
reclassified subsequently to net (loss) income
|
|
|
|
|
Foreign currency
translation
|
(56)
|
|
(8)
|
|
(56)
|
|
(8)
|
|
|
|
|
Items that will
not be reclassified to net (loss) income
|
|
|
|
|
Re-measurements of
post-employment benefit obligations
|
(758)
|
|
(1,096)
|
|
Taxes related to
post-employment adjustment
above
|
197
|
|
286
|
|
(561)
|
|
(810)
|
|
|
|
|
Other
comprehensive loss for the period, net of tax
|
(617)
|
|
(818)
|
|
|
|
|
Comprehensive
(loss) income for the period
|
(1,198)
|
|
173
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
INCOME
(in thousands of
Canadian dollars, unaudited)
|
For the six
months ended June
30, 2017
|
|
For the six
months ended June
30, 2016
|
|
$
|
|
$
|
|
|
|
|
Net (loss) income
for the period
|
(2,678)
|
|
2,873
|
|
|
|
|
|
|
|
|
Other
comprehensive loss:
|
|
|
|
|
|
|
|
Items that may be
reclassified subsequently to net (loss) income
|
|
|
|
|
Foreign currency
translation
|
(74)
|
|
(117)
|
|
(74)
|
|
(117)
|
|
|
|
|
Items that will
not be reclassified to net (loss) income
|
|
|
|
|
Re-measurements of
post-employment benefit obligations
|
(2,103)
|
|
(2,145)
|
|
Taxes related to
post-employment adjustment
above
|
547
|
|
560
|
|
(1,556)
|
|
(1,585)
|
|
|
|
|
Other
comprehensive loss for the period, net of tax
|
(1,630)
|
|
(1,702)
|
|
|
|
|
Comprehensive
(loss) income for the period
|
(4,308)
|
|
1,171
|
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(DEFICIT)
|
Attributable to
Shareholders
|
(in thousands of
Canadian dollars,
unaudited)
|
Shares
|
Warrants
|
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
|
—
|
—
|
—
|
—
|
—
|
2,873
|
2,873
|
Other comprehensive
(loss) income for the period
|
—
|
—
|
—
|
—
|
(117)
|
(1,585)
|
(1,702)
|
Total comprehensive
(loss) income for the period
|
—
|
—
|
—
|
—
|
(117)
|
1,288
|
1,171
|
|
|
|
|
|
|
|
|
Issuance of common
shares
|
2,280
|
—
|
—
|
—
|
—
|
—
|
2,280
|
Share-based
compensation expense
|
—
|
—
|
—
|
576
|
—
|
—
|
576
|
|
|
|
|
|
|
|
Balance as at June
30, 2016
|
234,782
|
—
|
128
|
385
|
189
|
(215,294)
|
20,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at
December 31, 2016
|
237,432
|
—
|
128
|
1,164
|
258
|
(248,917)
|
(9,935)
|
|
|
|
|
|
|
|
|
Net loss for the
period
|
—
|
—
|
—
|
—
|
—
|
(2,678)
|
(2,678)
|
Other comprehensive
loss for the period
|
—
|
—
|
—
|
—
|
(74)
|
(1,556)
|
(1,630)
|
Total comprehensive
loss for the period
|
—
|
—
|
—
|
—
|
(74)
|
(4,234)
|
(4,308)
|
|
|
|
|
|
|
|
Cancellation of
convertible debentures
|
—
|
—
|
(128)
|
128
|
—
|
—
|
—
|
Issuance of common
shares and warrants, net
|
10,662
|
280
|
—
|
(15)
|
—
|
—
|
10,927
|
Share-based
compensation expense
|
—
|
—
|
—
|
59
|
—
|
—
|
59
|
|
|
|
|
|
|
|
|
Balance as at June
30, 2017
|
248,094
|
280
|
—
|
1,336
|
184
|
(253,151)
|
(3,257)
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of
Canadian dollars,
unaudited)
|
For the three
months ended June
30, 2017
|
|
For the three
months ended June
30, 2016
|
|
$
|
|
$
|
|
|
|
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
Net (loss) income for
the period
|
(581)
|
|
991
|
Adjustments to net
(loss) income
|
|
|
|
|
Depreciation of
property, plant and equipment
|
1,058
|
|
1,134
|
|
Amortization of
intangible assets
|
906
|
|
510
|
|
Share-based
compensation expense
|
7
|
|
576
|
|
Pension
expense
|
135
|
|
147
|
|
Loss on disposal of
property, plant and equipment
|
42
|
|
7
|
|
Provisions
|
1,735
|
|
368
|
|
Amortization of
transaction costs
|
121
|
|
109
|
|
Accretion of
convertible debentures and non-current liabilities
|
219
|
|
21
|
|
Other non-current
liabilities
|
(248)
|
|
267
|
|
Other post-employment
benefit plans, net
|
55
|
|
62
|
|
Income tax (recovery)
expense
|
(180)
|
|
555
|
|
3,269
|
|
4,747
|
Changes in working
capital
|
2,721
|
|
5,478
|
Contributions made to
pension plans
|
(453)
|
|
(459)
|
Provisions
paid
|
(1,653)
|
|
(1,622)
|
Income taxes
paid
|
(5)
|
|
(263)
|
|
3,879
|
|
7,881
|
|
|
|
|
Investing
activities
|
|
|
|
Purchase of property,
plant and equipment
|
(811)
|
|
(171)
|
Purchase of
intangible assets
|
(846)
|
|
(127)
|
Proceeds on disposal
of property, plant and equipment
|
2
|
|
6
|
|
(1,655)
|
|
(292)
|
|
|
|
|
Financing
activities
|
|
|
|
Decrease in
restricted cash
|
—
|
|
25
|
Issuance of common
shares and warrants, net
|
8,080
|
|
2,280
|
Proceeds from credit
facilities
|
3,500
|
|
—
|
Repayment of credit
facilities
|
(4,003)
|
|
(9,622)
|
Repayment of
convertible debentures
|
(11,175)
|
|
—
|
Repayment of loans
and other liabilities
|
(166)
|
|
(56)
|
Repayment of
promissory notes
|
(935)
|
|
—
|
Finance and
transaction costs
|
(288)
|
|
(15)
|
Finance lease
payments
|
(18)
|
|
(7)
|
|
(5,005)
|
|
(7,395)
|
|
|
|
|
(Decrease)
increase in cash and cash equivalents during the
period
|
(2,781)
|
|
194
|
Cash and cash
equivalents – beginning of period
|
1,838
|
|
815
|
Effects of foreign
exchange on cash balances
|
(46)
|
|
(6)
|
(Bank overdraft)
cash and cash equivalents – end of period
|
(989)
|
|
1,003
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
(in thousands of
Canadian dollars, unaudited)
|
For the six
months ended June
30, 2017
|
|
For the six
months ended June
30, 2016
|
|
$
|
|
$
|
|
|
|
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
Net (loss) income for
the period
|
(2,678)
|
|
2,873
|
Adjustments to net
(loss) income
|
|
|
|
|
Depreciation of
property, plant and equipment
|
1,943
|
|
2,249
|
|
Amortization of
intangible assets
|
1,599
|
|
1,015
|
|
Share-based
compensation expense
|
59
|
|
576
|
|
Pension
expense
|
270
|
|
295
|
|
Loss on disposal of
property, plant and equipment
|
22
|
|
189
|
|
Provisions
|
3,621
|
|
692
|
|
Amortization of
transaction costs
|
236
|
|
356
|
|
Accretion of
convertible debentures and non-current liabilities
|
317
|
|
43
|
|
Other non-current
liabilities
|
(118)
|
|
671
|
|
Other post-employment
benefit plans, net
|
110
|
|
126
|
|
Income tax (recovery)
expense
|
(654)
|
|
1,272
|
|
4,727
|
|
10,357
|
Changes in working
capital
|
1,836
|
|
5,036
|
Contributions made to
pension plans
|
(912)
|
|
(918)
|
Provisions
paid
|
(3,340)
|
|
(4,061)
|
Income taxes
paid
|
(5)
|
|
(268)
|
|
2,306
|
|
10,146
|
|
|
|
|
Investing
activities
|
|
|
|
Purchase of property,
plant and equipment
|
(948)
|
|
(823)
|
Purchase of
intangible assets
|
(1,079)
|
|
(151)
|
Proceeds on disposal
of property, plant and equipment
|
22
|
|
124
|
Cash consideration
for acquisition of businesses
|
(4,638)
|
|
—
|
|
(6,643)
|
|
(850)
|
|
|
|
|
Financing
activities
|
|
|
|
Increase in
restricted cash
|
—
|
|
(425)
|
Issuance of common
shares and warrants, net
|
8,069
|
|
2,280
|
Proceeds from credit
facilities
|
17,089
|
|
43,931
|
Repayment of credit
facilities
|
(7,601)
|
|
(53,446)
|
Repayment of
convertible debentures
|
(11,175)
|
|
—
|
Repayment of loans
and other liabilities
|
(455)
|
|
(80)
|
Repayment of
promissory notes
|
(1,064)
|
|
—
|
Finance and
transaction costs
|
(605)
|
|
(1,341)
|
Finance lease
payments
|
(2,400)
|
|
(18)
|
|
1,858
|
|
(9,099)
|
|
|
|
|
(Decrease)
increase in cash and cash equivalents during the
period
|
(2,479)
|
|
197
|
Cash and cash
equivalents – beginning of period
|
1,544
|
|
871
|
Effects of foreign
exchange on cash balances
|
(54)
|
|
(65)
|
(Bank overdraft)
cash and cash equivalents – end of period
|
(989)
|
|
1,003
|
SOURCE DATA Communications Management Corp.