Here read this for 2013 I think you can see it and earnings should come in big to me anyways
Data Group loses $45.84-million in 2013
2014-03-06 07:56 ET - News Release
Mr. Michael Suksi reports
DATA GROUP LTD. ANNOUNCES FOURTH QUARTER AND YEAR END RESULTS FOR 2013
The Data Group Inc. has released its consolidated financial and operating results for the fourth quarter and the year ended Dec. 31, 2013.
Highlights
Fourth-quarter 2013:
- Fourth-quarter 2013 revenues of $82.1-million, fourth-quarter gross profit of $20.9-million and fourth-quarter net loss of $22.9-million (includes a fourth-quarter restructuring charge of $400,000 and a fourth-quarter non-cash impairment of goodwill charge of $25.0-million);
- Fourth-quarter adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $8.1-million.
Fiscal 2013:
- 2013 revenues of $317.0-million, year-to-date gross profit of $80.1-million and year-to-date net loss of $45.8-million (includes a year-to-date restructuring charge of $7.0-million and a year-to-date non-cash impairment of goodwill charge of $44.0-million);
- Year-to-date adjusted EBITDA of $25.6-million.
Data Group continues to make progress on its transformation plan. The company remain focused on creating long-term enterprise value appreciation for its shareholders. In 2013 Data Group reduced its costs by $13.0-million on an annualized basis, generated $11.3-million in revenues from the selected growth areas management has targeted and reduced debt by $4.5-million. The company's net loss in the fourth quarter and in 2013 was primarily due to non-cash goodwill impairment charges and the restructuring expenses associated with the cost reduction initiatives.
Why is a transformation plan required?
Portions of Data Group's core print business, which continues to generate a significant portion of the company's revenues, face increased competitive pressures and unprecedented change with the shift toward digital communications technologies. These factors adversely impacted Data Group's financial results for 2013. In response to these market driven forces, the company is transforming its business to reposition it for sustained profit growth by:
- Continuing to significantly reduce the company's costs;
- Reducing the company's indebtedness;
- Stabilizing the company's revenues.
Cost reduction
In 2013, Data Group began a comprehensive, three-year cost reduction program. During the year, the company closed three production sites, downsized two others, simplified its organizational structure, centralized a number of functions, reduced its work force by 145 staff (8 per cent) and renegotiated a number of raw material input costs, resulting in $13.0-million in annualized savings. Data Group is committed to this program and is continuing its efforts, including engaging a major consulting firm to assist in identifying and acting on additional cost savings opportunities for 2014 and beyond.
Debt reduction
Data Group reduced its debt by $4.5-million in 2013. Data Group intends to accelerate its rate of debt reduction in 2014 and has reduced debt by $2.0-million year-to-date.
Revenue stabilization
Data Group's strategy in 2014 is to stabilize its revenue. The company will achieve this by investing selectively in new talent, focusing on winning market share in its traditional print business and prudently investing in growth capabilities. For example, since the third quarter of 2013 Data Group has made a number of changes in its sales management and executive teams, and the company has invested in its direct mail and in-store retail signage capabilities. The company's digital services, such as e-marketing and document scanning, will be closely bundled with its print offerings to increase the value Data Group provides to its customers and increase the contribution these services are making to the company's overall revenue and profitability. See the company's website for case studies of how its services are helping clients.
Results of operations
All financial information in this press release is presented in Canadian dollars and in accordance with generally accepted accounting principles measured under international financial reporting standards, as issued by the International Accounting Standards Board for publicly accountable entities, unless otherwise noted. Financial figures presented prior to Jan. 1, 2012, are those of the Data Group Income Fund, the predecessor to Data Group. In order to simplify the company's corporate structure and generate operating efficiencies, the company completed an internal reorganization on Jan. 1, 2014. Pursuant to the reorganization, Data Group Inc. amalgamated with its Canadian subsidiaries to form a new corporation called "Data Group Ltd." The reorganization did not have any significant effect on Data Group's business and operations, which are now carried on through Data Group Ltd. and its U.S. subsidiary.
Revenues
For the quarter ended Dec. 31, 2013, Data Group recorded revenues of $82.1-million, a decrease of $4.8-million or 5.5 per cent compared with the same period in 2012. The decrease, before intersegment revenues, was the result of a $4.6-million decrease in the Data East and West segment and a $200,000 decrease in the Multiple Pakfold segment, respectively. For the year ended Dec. 31, 2013, Data Group recorded revenues of $317.0-million, a decrease of $19.4-million or 5.8 per cent compared with the same period in 2012. The decrease, before intersegment revenues, was the result of an $18.7-million decrease in the Data East and West segment and a $700,000 decrease in the Multiple Pakfold segment, respectively. The decrease in revenues in the Data East and West segment was primarily due to competitive activity which resulted in the loss of orders from existing customers and the continued decline in demand for traditional printed products, including business forms, due to the increased use of digitally based replacement products. Data Group generated approximately $11.3-million in revenues from selected growth areas the corporation has targeted and the segment continued to experience revenue gains from new business in its traditional print business. Revenues were also adversely affected by aggressive pricing by Data Group's competitors supplying similar products and services. The decrease in revenues in the Multiple Pakfold segment was attributable to aggressive pricing by competitors, continued declines in sales of traditional business forms and orders in 2012 which did not repeat in 2013.
Cost of revenues and gross profit
For the quarter ended Dec. 31, 2013, cost of revenues decreased to $61.3-million from $63.7-million for the same period in 2012. Gross profit for the quarter ended Dec. 31, 2013, was $20.9-million, which represented a decrease of $2.3-million or 9.8 per cent from $23.2-million for the same period in 2012. The decrease in gross profit for the quarter ended Dec. 31, 2013, was attributable to gross profit decreases of $2.2-million in the Data East and West segment and of $100,000 in the Multiple Pakfold segment, respectively. Gross profit as a percentage of revenues decreased to 25.4 per cent for the quarter ended Dec. 31, 2013, compared with 26.7 per cent for the same period in 2012. For the year ended Dec. 31, 2013, cost of revenues decreased to $236.9-million from $249.1-million for the same period in 2012. Gross profit for the year ended Dec. 31, 2013, was $80.1-million, which represented a decrease of $7.1-million or 8.1 per cent from $87.2-million for the same period in 2012. The decrease in gross profit for the year ended Dec. 31, 2013, was attributable to a gross profit decrease of $6.9-million in the Data East and West segment and a gross profit decrease of $200,000 in the Multiple Pakfold segment. Gross profit as a percentage of revenues decreased to 25.3 per cent for the year ended Dec. 31, 2013, compared with 25.9 per cent for the same period in 2012. The decrease in gross profit was attributable to lower revenues and was partially offset by cost savings in each segment. These cost savings included head count reductions, the closure and downsizing of certain manufacturing locations and warehouses, and the renegotiation of agreements for a number of raw material input costs.
Selling, general and administrative expenses, and restructuring expenses
Selling, general and administrative expenses, excluding amortization of intangible assets, for the quarter ended Dec. 31, 2013, decreased $1.3-million or 8.4 per cent to $14.2-million compared with $15.5-million in the same period in 2012. As a percentage of revenues, these costs were 17.3 per cent of revenues for the quarter ended Dec. 31, 2013, compared with 17.8 per cent of revenues for the same period in 2012. For the year ended Dec. 31, 2012, Data Group incurred $700,000 of severance expenses. Severance costs for the year ended Dec. 31, 2012, were included in SG&A and were related to Data Group's productivity improvements and cost reduction initiatives. SG&A expenses, excluding amortization of intangible assets, for the year ended Dec. 31, 2013, decreased $4.1-million or 6.5 per cent to $59.8-million compared with $63.9-million for the same period of 2012. As a percentage of revenues, these costs were 18.9 per cent and 19.0 per cent of revenues for the years ended Dec. 31, 2013, and 2012, respectively. The decrease in SG&A expenses for the quarter ended and year ended Dec. 31, 2013, was attributable to the benefits realized from cost saving initiatives implemented in 2012 and 2013 which included simplifying its organization structure and centralizing a number of functions. For the quarter ended and year ended Dec. 31, 2013, Data Group incurred restructuring expenses related to head count reductions, the closure and downsizing of certain manufacturing locations and warehouses, and lease exit charges of $400,000 and $7.0-million, respectively, as part of its 2013 restructuring initiatives. The restructuring initiatives included a number of changes in Data Group's sales management and executive teams, closing facilities in Brockville, Ont., and Anjou, Que., downsizing two other production facilities and transferring the operations of the Fulfilment Solutions Advantage Inc. from Markham, Ont., to Data Group's existing facility in Mississauga, Ont.
Impairment of goodwill
During the fourth quarter of 2013, Data Group performed its annual review for impairment of goodwill by comparing the fair value of each cash-generating unit to the CGU's carrying value. Data Group determined the fair value of each CGU by discounting expected future cash flows in accordance with recognized valuation methods. The process of determining those fair values required Data Group to make a number of estimates and assumptions such as projected future revenues, costs of revenues, operating margins, market conditions well into the future, and discount rates. As a result of that review and market indicators, including the trading price of Data Group's common shares, Data Group concluded that the fair value of its Data East and West CGU was less than its carrying value. Accordingly, Data Group recognized an impairment of goodwill charge of $25.0-million related to the Data East and West CGU during the fourth quarter of 2013. During the third quarter of 2013, market indicators, including the trading price of Data Group's common shares and changes in revenue trends and forecasted profits, indicated that Data Group's assets may be impaired. As a result of this new information, Data Group performed an impairment analysis by comparing the fair value of each cash CGU to the CGU's carrying value. As a result of that review and market indicators, including the trading price of Data Group's common shares, Data Group concluded that the fair value of its Data East and West CGU was less than its carrying value. Accordingly, Data Group recognized an impairment of goodwill charge of $19.0-million related to the Data East and West CGU during the third quarter of 2013. During the fourth quarter of 2012, Data Group performed its annual review for impairment of goodwill and concluded that the fair value of its Data East and West CGU was less than its carrying value. Accordingly, Data Group recognized an impairment of goodwill charge of $44.0-million related to the Data East and West CGU in 2012.
Gain on settlement of pension plan and corporate conversion costs
During the year ended Dec. 31, 2012, Data Group incurred total professional fees of $100,000 related to the conversion of the fund to a corporation on Jan. 1, 2012, and recorded a gain of $200,000 on the settlement of a pension plan related to the overcontribution to the benefit settlement upon finalizing the windup of a pension plan.
Adjusted EBITDA
For the quarter ended Dec. 31, 2013, adjusted EBITDA was $8.1-million, or 9.8 per cent of revenues. Adjusted EBITDA for the quarter ended Dec. 31, 2013, decreased $1.0-million or 11.3 per cent from the same period in the prior year and the adjusted EBITDA margin for the quarter, as a percentage of revenues, decreased from 10.5 per cent of revenues in 2012 to 9.8 per cent of revenues in 2013. Adjusted EBITDA for the year ended Dec. 31, 2013, was $25.6-million, or 8.1 per cent of revenues. Adjusted EBITDA for the year ended Dec. 31, 2013, decreased $3.4-million or 11.6 per cent from the same period in the prior year and the adjusted EBITDA margin for the year, as a percentage of revenues, decreased from 8.6 per cent of revenues in 2012 to 8.1 per cent of revenues in 2013. The decrease in adjusted EBITDA for the quarter ended and the year ended Dec. 31, 2013, was attributable to the continued investment in Data Group's growth strategy and a decline in revenues, and was partially offset by cost savings realized as a result of its restructuring initiatives.
Interest expense
Interest expense on long-term debt outstanding under Data Group's credit facilities, Data Group's outstanding $45.0-million principal amount of 6.00-per-cent convertible unsecured subordinated debentures, certain unfavourable lease obligations related to closed facilities and Data Group's employee benefit plans was $1.7-million for the three months ended Dec. 31, 2013, compared with $1.6-million for the same period in 2012, and was $6.7-million for each of the years ended Dec. 31, 2013, and 2012.
Income taxes
Data Group reported a loss before income taxes of $22.1-million, a current income tax expense of $1.1-million and a deferred income tax recovery of $300,000 for the three months ended Dec. 31, 2013, compared with a loss before income taxes of $40.2-million, a current income tax expense of $1.5-million and a deferred income tax expense of $100,000 for the three months ended Dec. 31, 2012. Data Group reported a loss before income taxes of $46.4-million, a current income tax expense of $2.9-million and a deferred income tax recovery of $3.4-million for the year ended Dec. 31, 2013, compared with a loss before income taxes of $37.1-million, a current income tax expense of $4.2-million and a deferred income tax recovery of $3.8-million for the year ended Dec. 31, 2012. The current tax expense was primarily related to the income tax payable on Data Group's estimated taxable income for the years ended Dec. 31, 2013, and 2012, respectively. The deferred income tax recovery was due to a change in estimates of future reversals of temporary differences and new temporary differences that arose during the years ended Dec. 31, 2013, and 2012. As a result of the conversion, Data Group remeasured 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 Jan. 1, 2012, and the associated deferred tax liability was reversed. As a result of these changes, Data Group recorded a deferred income tax recovery $1.4-million during the first quarter of 2012.
Net loss
Net loss for the quarter ended Dec. 31, 2013, was $22.9-million compared with a net loss of $41.7-million for the quarter ended Dec. 31, 2012. The decrease in comparable profitability for the quarter ended Dec. 31, 2013, was substantially due to lower gross profit as a result of lower revenues, restructuring expenses of $400,000 and a gain on the settlement of a pension plan that did not reoccur in 2013. The decrease in profitability was partially offset by cost savings in cost of revenues and SG&A expenses, a smaller goodwill impairment charge in 2013, a smaller current tax expense and a deferred income tax recovery as discussed above. Net loss for the year ended Dec. 31, 2013, was $45.8-million compared with a net loss of $37.5-million for the year ended Dec. 31, 2012. The decrease in comparable profitability for the year ended Dec. 31, 2013, was substantially due to lower gross profits as a result of lower revenues, restructuring expenses of $7.0-million incurred in connection with cost reduction initiatives and a gain on the settlement of a pension plan that did not reoccur in 2013. The decrease in comparable profitability was partially offset by cost savings in cost of revenues and SG&A expenses and a smaller current tax expense as discussed above.
Investing activities
Capital expenditures for the three months ended Dec. 31, 2013, of $300,000 related primarily to maintenance capital expenditures and the consolidation of manufacturing facilities. For the year ended Dec. 31, 2013, Data Group incurred capital expenditures of $2.3-million related primarily to maintenance capital expenditures and the consolidation of manufacturing facilities. These capital expenditures were financed by cash flow from operations.
Financing activities
During the quarter and the year ended Dec. 31, 2013, Data Group repaid $2.0-million and $4.5-million of the principal amount outstanding under its revolving bank facility, respectively. For the quarter and the year ended Dec. 31, 2013, Data Group paid cash dividends $1.8-million and $6.6-million on its common shares, respectively.
CONSOLIDATED STATEMENTS OF (LOSS) (in thousands of dollars, except per share amounts) For the three months ended Dec. 31, Dec. 31, 2013 2012 Revenues $ 82,147 $ 86,915 Cost of revenues 61,257 63,743 ---------- ---------- Gross profit 20,890 23,172 Expenses Selling, commissions and expenses 8,904 9,332 General and administration expenses excluding amortization of intangible assets 5,271 6,149 Restructuring expenses 396 - Impairment of goodwill 25,000 44,000 Gain on settlement of pension plan - (243) Amortization of intangible assets 1,617 2,310 ---------- ---------- 41,188 61,548 ---------- ---------- (Loss) before finance costs and income taxes (20,298) (38,376) Finance costs Interest expense 1,691 1,649 Interest income (2) - Amortization of transaction costs 134 157 ---------- ---------- 1,823 1,806 ---------- ---------- (Loss) before income taxes (22,121) (40,182) Income tax expense (recovery) Current 1,055 1,452 Deferred (312) 82 ---------- ---------- 743 1,534 ---------- ---------- Net (loss) for the period $ (22,864) $ (41,716) ========== ========== Net (loss) attributable to Common shareholders (22,868) (41,710) Non-controlling interest 4 (6) ---------- ---------- (22,864) (41,716) Basic (loss) per share $ (0.97) $ (1.78) Diluted (loss) per share (0.97) (1.78)
CONSOLIDATED STATEMENTS OF (LOSS) (in thousands of dollars, except per share amounts) Year ended Dec. 31, Dec. 31, 2013 2012 Revenues $ 316,961 $ 336,315 Cost of revenues 236,879 249,143 ---------- ---------- Gross profit 80,082 87,172 Expenses Selling, commissions and expenses 36,137 37,317 General and administration expenses excluding amortization of intangible assets 23,689 26,646 Restructuring expenses 7,034 - Impairment of goodwill 44,000 44,000 Corporate conversion costs - 84 Gain on settlement of pension plan - (243) Amortization of intangible assets 8,370 9,242 ---------- ---------- 119,230 117,046 ---------- ---------- (Loss) before finance costs and income taxes (39,148) (29,874) Finance costs Interest expense 6,657 6,659 Interest income (15) (15) Amortization of transaction costs 568 617 ---------- ---------- 7,210 7,261 ---------- ---------- (Loss) before income taxes (46,358) (37,135) Income tax expense (recovery) Current 2,916 4,220 Deferred (3,432) (3,848) ---------- ---------- (516) 372 ---------- ---------- Net (loss) for the year $ (45,842) $ (37,507) ========== ========== Net (loss) attributable to Common shareholders (45,831) (37,451) Non-controlling interest (11) (56) ---------- ---------- (45,842) (37,507) Basic (loss) per share $ (1.95) $ (1.59) Diluted (loss) per share (1.95) (1.59)
We seek Safe Harbor.
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