DATA Communications Management Corp. (TSX: DCM) (“DCM” or the “Company”), a leading provider of marketing and business communication solutions to companies across North America, announces its consolidated financial results for the three and nine months ended September 30, 2019.
“While our third quarter results were poor, we have made steady progress in capturing the backlog of business which occurred when we launched ERP. Our September revenue numbers were in line with historical norms and we experienced a strong October. We believe our fourth quarter revenue will compare favorably to our 2018 fourth quarter record revenue,” said Gregory J. Cochrane, CEO. “Our lenders have been totally supportive and have provided us extra borrowing capacity to help us through the most challenging part of our ERP implementation, which is now behind us. In addition, our suppliers and customers have been patient and supportive. Our objective for 2020 is to return to the path as we set out at the beginning of this year and to become a leading marketing and business services leader to our clients throughout North America.”
PROGRESS ON ERP TRANSITION
As a result of the significant disruption in DCM’s business caused by the implementation of a new ERP system since June 3, 2019, the Company’s liquidity has been constrained by delays in production, shipments and billings to its customers. Significant progress has been made throughout the third quarter to remediate many system issues pivotal to the proper functionality of the system, however clean up and remediation efforts are ongoing. Production and shipping volumes have begun to return to normal levels commensurate with activity prior to the implementation of the new ERP system, however DCM continues to experience challenges with issuing accurate billings to its customers which in turn has increased its accounts receivable by nearly double its normal levels (for the DCM core business that transitioned to the new ERP system). DCM has leveraged its Bank Credit Facility (as defined below) during the third quarter, in addition to obtaining additional financing from Crown (as defined below), to enable it to continue to meet its commitments to its valued suppliers until billings and collections issues are resolved with its customers. Management continues to work with its lenders, while exploring other financing alternatives to provide additional liquidity to the business while it continues to address its ERP issues, stabilize and position itself for growth going forward (see “Liquidity”).
INCREASED PROCEEDS UNDER THE CROWN CREDIT FACILITY
On August 16, 2019, DCM entered into a third amendment to its non-revolving term loan facility with Crown Capital Partner Funding, LP (the “Crown Facility”), a fund managed by Crown Capital LP Partner Funding Inc. (“Crown”), whereby Crown advanced a second non-revolving term loan in the principal amount of $7 million, for total advances in the principal amount of $19 million on this facility. The terms are consistent with the provisions of the original Crown Facility agreement that DCM established on May 8, 2018. In addition, a total of 550,000 warrants have been issued to Crown in connection with this amendment. Each warrant entitles the holder to acquire one DCM common share at an exercise price of $1.08 for a period of 3.7 years, commencing on August 16, 2019.
INCREASE TO AVAILABLE CREDIT UNDER THE BANK CREDIT FACILITY
On July 31, 2019, DCM entered into a third amendment to increase the revolving commitment under its a revolving credit facility (the “Bank Credit Facility”) with a Canadian chartered bank (the “Bank”) from $35 million to $42 million for the period July 31 to December 31, 2019.
At the Company’s request, the Bank is also reviewing the potential to provide additional funding by way of an increase to the credit available under its Bank Credit Facility from $42 million to up to $50 million (“Proposed Bank Credit Facility”) to provide additional financial liquidity should the remediation of the short-term liquidity constraints arising from the ERP implementation take longer than anticipated.
In the interim, on November 14, 2019, a fourth amendment was made to the Bank Credit Facility to provide a short-term increase of available credit from $42.0 million to $45.0 million until December 31, 2019, or the date an agreement is reached under the Proposed Bank Credit Facility, should that come sooner.
RIGHTS OFFERING
Subject to receipt of all necessary regulatory approvals, including the approval of the Toronto Stock Exchange, we intend to pursue a rights offering under which eligible shareholders will receive rights to subscribe for common shares of the company. It is expected that our directors and senior officers will participate in the rights offering. Further details of the proposed rights offering will be set out in a rights offering circular filed with securities regulatory authorities. The net proceeds from the proposed offering, if completed, would be used to enhance the company’s liquidity in the near term.
While it is the Company’s intention to execute on its refinancing plan, obtain additional debt and equity financing and mitigate the working capital constraints caused by the implementation of the new ERP system before the end of the year, there can be no assurance that DCM will be successful in these efforts. Failure to obtain adequate financing and/or on satisfactory terms could have a material adverse effect on the Company’s results of operations and financial condition.
SHAREHOLDER CONFERENCE CALL
DCM will host a conference call to discuss its third quarter results on Monday November 18, 2019 at 11:00 a.m. Eastern time. Participants may listen to the call by dialing Toll-Free: (844) 868-9648 or: (647) 689-5136, followed by entering Conference ID#: 6096173. The operator will ask for participants’ registration information. A replay of the call will be available from 2:00 p.m. Eastern time November 18, 2019 until midnight Eastern time November 25, 2019 by calling: Toll-free: (800) 585-8367 or: (416) 621-4642, followed by Conference ID#: 6096173.
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 September 30, 2019 and 2018 |
January 1 to September 30, 2019 |
|
January 1 to September 30, 2018 |
||||||||||||
|
(in thousands of Canadian dollars, except share and per share amounts, unaudited) |
|||||||||||||||
|
|
Proforma without IFRS 16 adjustment |
|
IFRS 16 adjustments |
|
As reported |
|
As reported |
||||||||
|
Revenues |
$ |
211,387 |
|
|
$ |
— |
|
|
$ |
211,387 |
|
|
$ |
241,617 |
|
|
Cost of revenues |
160,965 |
|
|
(1,314 |
) |
|
159,651 |
|
|
183,292 |
|
||||
|
Gross profit |
50,422 |
|
|
1,314 |
|
|
51,736 |
|
|
58,325 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Selling, general and administrative expenses |
50,684 |
|
|
(188 |
) |
|
50,496 |
|
|
50,969 |
|
||||
|
Restructuring expenses |
7,595 |
|
|
— |
|
|
7,595 |
|
|
809 |
|
||||
|
Acquisition costs |
— |
|
|
— |
|
|
— |
|
|
319 |
|
||||
|
|
58,279 |
|
|
(188 |
) |
|
58,091 |
|
|
52,097 |
|
||||
|
(Loss) income before finance costs and income taxes |
(7,857 |
) |
|
1,502 |
|
|
(6,355 |
) |
|
6,228 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Finance costs |
|
|
|
|
|
|
|
||||||||
|
Interest expense, net |
3,748 |
|
|
2,719 |
|
|
6,467 |
|
|
3,664 |
|
||||
|
Amortization of transaction costs |
400 |
|
|
— |
|
|
400 |
|
|
469 |
|
||||
|
|
4,148 |
|
|
2,719 |
|
|
6,867 |
|
|
4,133 |
|
||||
|
(Loss) income before income taxes |
(12,005 |
) |
|
(1,217 |
) |
|
(13,222 |
) |
|
2,095 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Income tax (recovery) expense |
|
|
|
|
|
|
|
||||||||
|
Current |
(79 |
) |
|
— |
|
|
(79 |
) |
|
985 |
|
||||
|
Deferred |
(3,149 |
) |
|
— |
|
|
(3,149 |
) |
|
(297 |
) |
||||
|
|
(3,228 |
) |
|
— |
|
|
(3,228 |
) |
|
688 |
|
||||
|
Net (loss) income for the period |
$ |
(8,777 |
) |
|
$ |
(1,217 |
) |
|
$ |
(9,994 |
) |
|
$ |
1,407 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Basic (loss) earnings per share |
$ |
(0.41 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.46 |
) |
|
$ |
0.07 |
|
|
Diluted (loss) earnings per share |
$ |
(0.41 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.46 |
) |
|
$ |
0.07 |
|
|
Weighted average number of common shares outstanding, basic |
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
20,821,844 |
|
|
Weighted average number of common shares outstanding, diluted |
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
20,931,490 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
The adoption of IFRS 16 resulted in a lower net income by $1.2 million for the nine months ended September 30, 2019 versus on a pre IFRS 16 basis. Lease payments were previously expensed directly through the statement of operations as cost of sales or SG&A expenses for a total of $8.1 million. Under IFRS 16, (i) the $8.1 million lease payments are recognized as a reduction of lease liabilities which are presented as finance lease payments on the condensed interim consolidated statement of cash flow, (ii) a depreciation expense of the ROU Asset is recognized in cost of sales and SG&A for an aggregate amount of $6.6 million , and (iii) finance charges on the lease liability were recognized as interest expense of $2.7 million.
TABLE 2 The following table sets out selected historical consolidated financial information for the periods noted.
|
For the periods ended September 30, 2019 and 2018 |
July 1 to September 30, 2019 |
|
July 1 to September 30, 2018 |
||||||||||||
|
(in thousands of Canadian dollars, except share and per share amounts, unaudited) |
|||||||||||||||
|
|
Proforma without IFRS 16 adjustment |
|
IFRS 16 adjustments |
|
As reported |
|
As reported |
||||||||
|
Revenues |
$ |
63,215 |
|
|
$ |
— |
|
|
$ |
63,215 |
|
|
$ |
74,925 |
|
|
Cost of revenues |
48,346 |
|
|
(384 |
) |
|
47,962 |
|
|
56,664 |
|
||||
|
Gross profit |
14,869 |
|
|
384 |
|
|
15,253 |
|
|
18,261 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Selling, general and administrative expenses |
17,863 |
|
|
(55 |
) |
|
17,808 |
|
|
15,547 |
|
||||
|
Restructuring expenses |
2,724 |
|
|
— |
|
|
2,724 |
|
|
9 |
|
||||
|
Acquisition costs |
— |
|
|
— |
|
|
— |
|
|
6 |
|
||||
|
|
20,587 |
|
|
(55 |
) |
|
20,532 |
|
|
15,562 |
|
||||
|
(Loss) income before finance costs and income taxes |
(5,718 |
) |
|
439 |
|
|
(5,279 |
) |
|
2,699 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Finance costs |
|
|
|
|
|
|
|
||||||||
|
Interest expense, net |
1,344 |
|
|
916 |
|
|
2,260 |
|
|
1,256 |
|
||||
|
Amortization of transaction costs |
177 |
|
|
— |
|
|
177 |
|
|
168 |
|
||||
|
|
1,521 |
|
|
916 |
|
|
2,437 |
|
|
1,424 |
|
||||
|
(Loss) Income before income taxes |
(7,239 |
) |
|
(477 |
) |
|
(7,716 |
) |
|
1,275 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Income tax (recovery) expense |
|
|
|
|
|
|
|
||||||||
|
Current |
395 |
|
|
— |
|
|
395 |
|
|
430 |
|
||||
|
Deferred |
(2,194 |
) |
|
— |
|
|
(2,194 |
) |
|
7 |
|
||||
|
|
(1,799 |
) |
|
— |
|
|
(1,799 |
) |
|
437 |
|
||||
|
Net (loss) income for the period |
$ |
(5,440 |
) |
|
$ |
(477 |
) |
|
$ |
(5,917 |
) |
|
$ |
838 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Basic (loss) earnings per share |
$ |
(0.25 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.27 |
) |
|
0.04 |
|
|
|
Diluted (loss) earnings per share |
$ |
(0.25 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.27 |
) |
|
0.04 |
|
|
|
Weighted average number of common shares outstanding, basic |
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
Weighted average number of common shares outstanding, diluted |
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,759,414 |
|
The adoption of IFRS 16 resulted in a lower net income by $0.5 million for the three months ended September 30, 2019 versus on a pre IFRS 16 basis. Lease payments were previously expensed directly through the statement of operations as cost of sales or SG&A expenses for a total of $2.8 million. Under IFRS 16, (i) the $2.8 million lease payments are recognized as a reduction of lease liabilities which are presented as finance lease payments on the condensed interim consolidated statement of cash flow, (ii) a depreciation expense of the ROU Asset is recognized in cost of sales and SG&A for an aggregate amount of $2.3 million for a net operating loss effect of $0.4 million, and (iii) finance charges on the lease liability were recognized as interest expense of $0.9 million.
TABLE 3 The following table sets out selected historical consolidated financial information for the periods noted.
|
As at September 30, 2019 and December 31, 2018 |
As at Sept. 30, 2019 |
|
As at December 31, 2018 |
||||||||||||
|
(in thousands of Canadian dollars, unaudited) |
|||||||||||||||
|
|
Proforma without IFRS 16 adjustment |
|
IFRS 16 adjustments |
|
As reported |
|
As reported |
||||||||
|
Current assets |
$ |
101,029 |
|
|
$ |
(241 |
) |
|
$ |
100,788 |
|
|
$ |
85,455 |
|
|
Current liabilities |
66,825 |
|
|
7,933 |
|
|
74,758 |
|
|
64,716 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Total assets |
157,769 |
|
|
58,963 |
|
|
216,732 |
|
|
142,231 |
|
||||
|
Total non-current liabilities |
91,793 |
|
|
52,247 |
|
|
144,040 |
|
|
70,003 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Shareholders’ equity |
$ |
(849 |
) |
|
$ |
(1,217 |
) |
|
$ |
(2,066 |
) |
|
$ |
7,512 |
|
Table 3 highlights the changes to the condensed interim consolidated statement of financial position as at September 30, 2019 as a result of the adoption of IFRS 16 as at January 1, 2019. The significant changes relate to the following:
- DCM recognized a ROU Asset and a lease liability at the lease commencement date for substantially all of its leases which increased total assets and total liabilities (current and long-term portion);
- The ROU Asset was adjusted for any lease payments made at or before the lease commencement date, less any lease incentives and onerous lease liabilities, which were previously classified within current assets and total liabilities (current and long-term portion), respectively; and
- With respect to subleases where DCM is the lessor, DCM has reclassified the finance lease receivable from total liabilities to total assets, with the short-term portion allocated to current assets.
TABLE 4 The following table sets out selected historical consolidated financial information for the periods noted. See “Non-IFRS Measures” section above for more details.
|
For the periods ended September 30, 2019 and 2018 |
January 1 to September 30, 2019 |
|
January 1 to September 30, 2018 |
||||||||||||
|
(in thousands of Canadian dollars, except percentage amounts, unaudited) |
|||||||||||||||
|
|
Proforma without IFRS 16 adjustment |
|
IFRS 16 adjustments |
|
As reported |
|
As reported |
||||||||
|
Revenues |
$ |
211,387 |
|
|
$ |
— |
|
|
$ |
211,387 |
|
|
$ |
241,617 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Gross profit |
$ |
50,422 |
|
|
$ |
1,314 |
|
|
$ |
51,736 |
|
|
$ |
58,325 |
|
|
Gross profit, as a percentage of revenues |
23.9 |
% |
|
|
|
24.5 |
% |
|
24.1 |
% |
|||||
|
|
|
|
|
|
|
|
|
||||||||
|
Selling, general and administrative expenses |
$ |
50,684 |
|
|
$ |
(188 |
) |
|
$ |
50,496 |
|
|
$ |
50,969 |
|
|
As a percentage of revenues |
24.0 |
% |
|
|
|
23.9 |
% |
|
21.1 |
% |
|||||
|
|
|
|
|
|
|
|
|
||||||||
|
Adjusted EBITDA (see Table 6) |
$ |
6,397 |
|
|
$ |
8,065 |
|
|
$ |
14,462 |
|
|
$ |
15,680 |
|
|
As a percentage of revenues |
3.0 |
% |
|
|
|
6.8 |
% |
|
6.5 |
% |
|||||
|
|
|
|
|
|
|
|
|
||||||||
|
Net (loss) income for the period |
$ |
(8,777 |
) |
|
$ |
(1,217 |
) |
|
$ |
(9,994 |
) |
|
$ |
1,407 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Adjusted net (loss) income (see Table 8) |
$ |
(2,515 |
) |
|
$ |
(1,217 |
) |
|
$ |
(3,732 |
) |
|
$ |
3,304 |
|
|
As a percentage of revenues |
-1.2 |
% |
|
|
|
-1.8 |
% |
|
1.4 |
% |
|||||
TABLE 5 The following table sets out selected historical consolidated financial information for the periods noted. See “Non-IFRS Measures” section above for more details.
|
For the periods ended September 30, 2019 and 2018 |
July 1 to September 30, 2019 |
|
July 1 to September 30, 2018 |
||||||||||||
|
(in thousands of Canadian dollars, except percentage amounts, unaudited) |
|||||||||||||||
|
|
Proforma without IFRS 16 adjustment |
|
IFRS 16 adjustments |
|
As reported |
|
As reported |
||||||||
|
Revenues |
$ |
63,215 |
|
|
$ |
— |
|
|
$ |
63,215 |
|
|
$ |
74,925 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Gross profit |
$ |
14,869 |
|
|
$ |
384 |
|
|
$ |
15,253 |
|
|
$ |
18,261 |
|
|
Gross profit, as a percentage of revenues |
23.5 |
% |
|
|
|
24.1 |
% |
|
24.4 |
% |
|||||
|
|
|
|
|
|
|
|
|
||||||||
|
Selling, general and administrative expenses |
$ |
17,863 |
|
|
$ |
(55 |
) |
|
$ |
17,808 |
|
|
$ |
15,547 |
|
|
As a percentage of revenues |
28.3 |
% |
|
|
|
28.2 |
% |
|
20.8 |
% |
|||||
|
|
|
|
|
|
|
|
|
||||||||
|
Adjusted EBITDA (see Table 7) |
$ |
(601 |
) |
|
$ |
2,768 |
|
|
$ |
2,167 |
|
|
$ |
5,242 |
|
|
As a percentage of revenues |
-1.0 |
% |
|
|
|
3.4 |
% |
|
7.0 |
% |
|||||
|
|
|
|
|
|
|
|
|
||||||||
|
Net (loss) income for the period |
$ |
(5,440 |
) |
|
$ |
(477 |
) |
|
$ |
(5,917 |
) |
|
$ |
838 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Adjusted net (loss) income (see Table 9) |
$ |
(3,423 |
) |
|
$ |
(477 |
) |
|
$ |
(3,900 |
) |
|
$ |
964 |
|
|
As a percentage of revenues |
-5.4 |
% |
|
|
|
-6.2 |
% |
|
1.3 |
% |
|||||
TABLE 6 The following table provides reconciliations of net (loss) income to EBITDA and of net loss to Adjusted EBITDA for the periods noted. See “Non-IFRS Measures” section above for more details.
EBITDA and Adjusted EBITDA reconciliation
|
For the periods ended September 30, 2019 and 2018 |
January 1 to September 30, 2019 |
|
January 1 to September 30, 2018 |
||||||||||||
|
(in thousands of Canadian dollars, unaudited) |
|||||||||||||||
|
|
Proforma without IFRS 16 adjustment |
|
IFRS 16 adjustments |
|
As reported |
|
As reported |
||||||||
|
Net (loss) income for the period (1) |
$ |
(8,777 |
) |
|
$ |
(1,217 |
) |
|
$ |
(9,994 |
) |
|
$ |
1,407 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Interest expense, net (1) |
3,748 |
|
|
2,719 |
|
|
6,467 |
|
|
3,664 |
|
||||
|
Amortization of transaction costs |
400 |
|
|
— |
|
|
400 |
|
|
469 |
|
||||
|
Current income tax (recovery) expense |
(79 |
) |
|
— |
|
|
(79 |
) |
|
985 |
|
||||
|
Deferred income tax recovery |
(3,149 |
) |
|
— |
|
|
(3,149 |
) |
|
(297 |
) |
||||
|
Depreciation of property, plant and equipment |
3,109 |
|
|
— |
|
|
3,109 |
|
|
3,486 |
|
||||
|
Amortization of intangible assets |
2,672 |
|
|
— |
|
|
2,672 |
|
|
3,514 |
|
||||
|
Depreciation of the ROU Asset (1) |
— |
|
|
6,563 |
|
|
6,563 |
|
|
— |
|
||||
|
EBITDA |
$ |
(2,076 |
) |
|
$ |
8,065 |
|
|
$ |
5,989 |
|
|
$ |
13,228 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Restructuring expenses |
7,595 |
|
|
— |
|
|
7,595 |
|
|
809 |
|
||||
|
One-time business reorganization costs (2) |
878 |
|
|
— |
|
|
878 |
|
|
1,324 |
|
||||
|
Acquisition costs |
— |
|
|
— |
|
|
— |
|
|
319 |
|
||||
|
Adjusted EBITDA |
$ |
6,397 |
|
|
$ |
8,065 |
|
|
$ |
14,462 |
|
|
$ |
15,680 |
|
- 2019 results include the impact of the adoption of new accounting standard IFRS 16. Refer to note 3 of the condensed interim consolidated financial statements for the three and nine months ended September 30, 2019 and related management’s discussion & analysis for further details of the impact of the adoption of new accounting standards.
- One-time business reorganization costs include non-recurring headcount reduction expenses for employees that did not qualify as restructuring costs. This also includes one-time expenses for the joint venture with Aphria Inc. (the “JV”) that was dissolved on July 12, 2019.
TABLE 7 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” section above for more details.
EBITDA and Adjusted EBITDA reconciliation
|
For the periods ended September 30, 2019 and 2018 |
July 1 to September 30, 2019 |
|
July 1 to September 30, 2018 |
||||||||||||||||||||
|
(in thousands of Canadian dollars, unaudited) |
|||||||||||||||||||||||
|
|
Proforma without IFRS 16 adjustment |
|
IFRS 16 adjustments |
|
As reported |
|
As reported |
||||||||||||||||
|
Net (loss) income for the period (1) |
$ |
(5,440 |
) |
|
$ |
(477 |
) |
|
$ |
(5,917 |
) |
|
$ |
838 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Interest expense, net (1) |
1,344 |
|
|
916 |
|
|
2,260 |
|
|
1,256 |
|
||||||||||||
|
Amortization of transaction costs |
177 |
|
|
— |
|
|
177 |
|
|
168 |
|
||||||||||||
|
Current income tax recovery |
395 |
|
|
— |
|
|
395 |
|
|
430 |
|
||||||||||||
|
Deferred income tax recovery |
(2,194 |
) |
|
— |
|
|
(2,194 |
) |
|
7 |
|
||||||||||||
|
Depreciation of property, plant and equipment |
959 |
|
|
— |
|
|
959 |
|
|
1,162 |
|
||||||||||||
|
Amortization of intangible assets |
1,428 |
|
|
— |
|
|
1,428 |
|
|
1,213 |
|
||||||||||||
|
Depreciation of the ROU Asset (1) |
— |
|
|
2,329 |
|
|
2,329 |
|
|
— |
|
||||||||||||
|
EBITDA |
$ |
(3,331 |
) |
|
$ |
2,768 |
|
|
$ |
(563 |
) |
|
$ |
5,074 |
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Restructuring expenses |
2,724 |
|
— |
|
2,724 |
|
9 |
||||||||||||||||
|
One-time business reorganization costs (2) |
6 |
|
— |
|
6 |
|
153 |
||||||||||||||||
|
Acquisition costs |
— |
|
— |
|
— |
|
6 |
||||||||||||||||
|
Adjusted EBITDA |
$ |
(601 |
) |
|
$ |
2,768 |
|
|
$ |
2,167 |
|
|
$ |
5,242 |
|
||||||||
- 2019 results include the impact of the adoption of new accounting standard IFRS 16. Refer to note 3 of the condensed interim consolidated financial statements for the three and nine months ended September 30, 2019 and related management’s discussion & analysis for further details of the impact of the adoption of new accounting standards.
- One-time business reorganization costs include non-recurring headcount reduction expenses for employees that did not qualify as restructuring costs.
TABLE 8 The following table provides reconciliations of net (loss) income to Adjusted net (loss) income and a presentation of Adjusted net income per share for the periods noted. See “Non-IFRS Measures” section above for more details.
Adjusted net (loss) income reconciliation
|
For the periods ended September 30, 2019 and 2018 |
January 1 to September 30, 2019 |
|
January 1 to September 30, 2018 |
||||||||||||
|
(in thousands of Canadian dollars, except share and per share amounts, unaudited) |
|||||||||||||||
|
|
Proforma without IFRS 16 adjustment |
|
IFRS 16 adjustments |
|
As reported |
|
As reported |
||||||||
|
Net (loss) income for the period (1) |
$ |
(8,777 |
) |
|
$ |
(1,217 |
) |
|
$ |
(9,994 |
) |
|
$ |
1,407 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Restructuring expenses |
7,595 |
|
|
— |
|
|
7,595 |
|
|
809 |
|
||||
|
One-time business reorganization costs (2) |
878 |
|
|
— |
|
|
878 |
|
|
1,324 |
|
||||
|
Acquisition costs |
— |
|
|
— |
|
|
— |
|
|
319 |
|
||||
|
Tax effect of the above adjustments |
(2,211 |
) |
|
— |
|
|
(2,211 |
) |
|
(555 |
) |
||||
|
Adjusted net (loss) income |
$ |
(2,515 |
) |
|
$ |
(1,217 |
) |
|
$ |
(3,732 |
) |
|
$ |
3,304 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Adjusted net (loss) income per share, basic and diluted |
$ |
(0.12 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.17 |
) |
|
$ |
0.16 |
|
|
Weighted average number of common shares outstanding, basic |
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
20,821,844 |
|
|
|
Weighted average number of common shares outstanding, diluted |
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
20,931,490 |
|
|
|
Number of common shares outstanding, basic |
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
Number of common shares outstanding, diluted |
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
20,821,844 |
|
|
- 2019 results include the impact of the adoption of new accounting standard IFRS 16. Refer to note 3 of the condensed interim consolidated financial statements for the three and nine months ended September 30, 2019 and related management’s discussion & analysis for further details of the impact of the adoption of new accounting standards.
- One-time business reorganization costs include non-recurring headcount reduction expenses for employees that did not qualify as restructuring costs. This also includes one-time expenses for the JV that was dissolved on July 12, 2019.
TABLE 9 The following table provides reconciliations of net (loss) income to Adjusted net (loss) income and a presentation of Adjusted net income per share for the periods noted. See “Non-IFRS Measures” section above for more details.
Adjusted net (loss) income reconciliation
|
For the periods ended September 30, 2019 and 2018 |
July 1 to September 30, 2019 |
|
July 1 to September 30, 2018 |
||||||||||||
|
(in thousands of Canadian dollars, except share and per share amounts, unaudited) |
|||||||||||||||
|
|
Proforma without IFRS 16 adjustment |
|
IFRS 16 adjustments |
|
As reported |
|
As reported |
||||||||
|
Net (loss) income for the period (1) |
$ |
(5,440 |
) |
|
$ |
(477 |
) |
|
$ |
(5,917 |
) |
|
$ |
838 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Restructuring expenses |
2,724 |
|
|
— |
|
|
2,724 |
|
|
9 |
|
||||
|
One-time business reorganization costs (2) |
6 |
|
|
— |
|
|
6 |
|
|
153 |
|
||||
|
Acquisition costs |
— |
|
|
— |
|
|
— |
|
|
6 |
|
||||
|
Tax effect of the above adjustments |
(713 |
) |
|
— |
|
|
(713 |
) |
|
(42 |
) |
||||
|
Adjusted net (loss) income |
$ |
(3,423 |
) |
|
$ |
(477 |
) |
|
$ |
(3,900 |
) |
|
$ |
964 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Adjusted net (loss) income per share, basic and diluted |
$ |
(0.16 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.18 |
) |
|
$ |
0.04 |
|
|
Weighted average number of common shares outstanding, basic |
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
Weighted average number of common shares outstanding, diluted |
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,759,414 |
|
|
Number of common shares outstanding, basic |
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
Number of common shares outstanding, diluted |
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,523,515 |
|
|
|
21,759,414 |
|
- 2019 results include the impact of the adoption of new accounting standard IFRS 16. Refer to note 3 of the condensed interim consolidated financial statements for the three and nine months ended September 30, 2019 and related management’s discussion & analysis for further details of the impact of the adoption of new accounting standards.
- One-time business reorganization costs include non-recurring headcount reduction expenses for employees that did not qualify as restructuring costs.
REVENUES
For the three months ended September 30, 2019, DCM recorded revenues of $63.2 million, a decrease of $11.7 million or 15.6% compared with the same period in 2018. DCM continued to experience a disruption in its business during the third quarter as a result of the transition to the new ERP system on June 3, 2019. This impacted production, shipments and billing activity to its customers resulting in a significant backlog of sales orders and delays in meeting customer demand. As the third quarter progressed, DCM made significant improvements with remediating its ERP issues however further development and clean-up efforts are ongoing. Customer demand continues to be strong and DCM is beginning to work through its order backlog as revenues for September were more reflective of normalized levels. Commencement of the fourth quarter continues to show positive momentum in volumes commensurate with its strong fourth quarter in the prior year. Similarly, DCM’s sales pipeline has never been stronger and continues to generate a healthy influx of new wins and additional wallet share from existing customers. As a result of the disruption caused by the new ERP transition, revenues for the three months ended September 30, 2019 decreased by approximately $7.5 million year over year. The sales order backlog continues to be higher than expected norms which DCM expects to recover in the fourth quarter as production resumes back to normal capacity.
Other significant factors contributing to the decrease in revenues for the three months ended September 30, 2019 versus the same period last year include: (i) $1.5 million reduction in spend by certain retailers and government agencies to better manage their inventory levels and/or move to other solutions not offered by DCM; (ii) $1.6 million due to the deferral of certain work including direct marketing campaigns, and (iii) $3.2 million reduction in sales due to lowered customer demand and volume decline. The reduction in revenue was partially offset due to (i) the onboarding of its new offering to a large provincial healthcare services customer which began to ramp up in the second and third quarter for $1.8 million and is expected to contribute to continued sales growth over the multi-year term of the agreement; (ii) new sales from customers in the Cannabis sector of $1.6 million, and (iii) $0.4 million from various other new customer wins or incremental wallet share from its existing customer base.
For the nine months ended September 30, 2019, DCM recorded revenues of $211.4 million, a decrease of $30.2 million or 12.5% compared with the same period in 2018. In the first quarter of 2019, DCM experienced a planned reduction in the scope of work versus the prior year by approximately $4.9 million for a specific customer, which was a one-time non-recurring win in 2018. The remaining decrease in revenue year over year is attributable to (i) a disruption of production and shipments to customers caused by DCM’s transition to a new ERP system resulting in a reduction of revenue by $7.5 million year over year (for the reasons noted above for the three months ended September 30, 2019); (ii) $15.1 million reduction in sales due to lowered customer demand and volume decline; (iv) a reduction in spend by certain retailers to better manage their inventory levels and/or move to other solutions not offered by DCM of $6.1 million; (v) the loss of a lower margin, limited product line customer resulting in a $3.2 million decrease; (vi) $2.5 million due to the deferral of certain work including direct marketing campaigns, and (vii) $1.4 million for other non-recurring work. The reduction in revenue was partially offset due to (i) onboarding of its new offering to a large provincial healthcare services customer which began to ramp up in the second and third quarter for $2.8 million; (ii) new sales from customers in the Cannabis sector of $5.6 million; (iii) $0.9 million in new wins and existing customer growth, and (iv) a full nine months of revenue from Perennial this year given it was acquired in May 2018 resulting in an additional $1.0 million.
As noted above, recent large client wins are representative of the broad service and product offering with large enterprise customers which DCM continues to target. A number of enhanced relationships are particularly attributed to the strategic ideation and marketing expertise contributed by Perennial.
COST OF REVENUES AND GROSS PROFIT
For the three months ended September 30, 2019, cost of revenues decreased to $48.0 million from $56.7 million for the same period in 2018, resulting in a $8.7 million or 15.4% decrease over the same period last year. Excluding the effects of adopting IFRS 16, cost of revenues decreased by $8.3 million or 14.7% relative to the same period last year.
Gross profit for the three months ended September 30, 2019 was $15.3 million, which represented a decrease of $3.0 million or 16.5% from $18.3 million for the same period in 2018. Excluding the effects of adopting IFRS 16, gross profit decreased by $3.4 million or 18.6% relative to the same period last year. Gross profit as a percentage of revenues decreased to 24.1% for the three months ended September 30, 2019 compared to 24.4% for the same period in 2018, however, excluding the effects of adopting IFRS 16, gross profit as a percentage of revenues was 23.2% for the three months ended September 30, 2019. The decrease in gross profit as a percentage of revenues for the three months ended September 30, 2019 was primarily due to (i) production inefficiencies caused by disruptions arising from the implementation of the ERP system; (ii) softness in sales thereby resulting in weaker absorption of fixed overhead costs, and, (iii) impact of paper and other raw material price increases leading to somewhat compressed margins on contracts with certain customers. Gross profit as a percentage of revenues was, however, positively impacted due to continued discipline to improve pricing with customers, loss of low margin customers, and cost reductions realized from ongoing cost savings initiatives implemented in 2019 and the last quarter of 2018.
For the nine months ended September 30, 2019, cost of revenues decreased to $159.7 million from $183.3 million for the same period in 2018, resulting in a $23.6 million or 12.9% decrease over the same period last year. Excluding the effects of adopting IFRS 16, cost of revenues decreased by $22.3 million or 12.2% relative to the same period last year.
Gross profit for the nine months ended September 30, 2019 was $51.7 million, which represented a decrease of $6.6 million or 11.3% from $58.3 million for the same period in 2018. Gross profit as a percentage of revenues increased to 24.5% for the nine months ended September 30, 2019, compared to 24.1% for the same period in 2018. Excluding the effects of adopting IFRS 16, gross profit for the nine months ended September 30, 2019 was $50.4 million or 23.8% as a percentage of revenues. The decrease in gross profit as a percentage of revenues for the nine months ended September 30, 2019 was primarily attributable to the same reasons noted for the three months ended September 30, 2019.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative (“SG&A”) expenses for the three months ended September 30, 2019 increased $2.3 million or 14.5% to $17.8 million, or 28.2% of total revenues, compared to $15.5 million, or 20.8% of total revenues, in the same period in 2018. The increase in SG&A expenses for the three months ended September 30, 2019 is due to an increase in general and administration expenses of $2.8 million, whereas selling, commissions and expenses decreased by $0.5 million. The decrease in selling, commissions and expenses was primarily attributable to (i) lower sales commission costs commensurate with the decrease in revenues, and (ii) benefits from the cost saving initiatives implemented in 2019 and the last quarter of 2018. The increase in general and administration expenses was primarily attributable to (i) an increase in amortization costs related to the ERP intangible asset which commenced in June 2019; (ii) increase in salaries and wages for employees that have resumed normal responsibilities following the launch of the ERP system and no longer have their salaries and wages capitalized; (iii) overtime and temporary labour required to action remediation efforts related to the new ERP system, in addition to catching up on production of the sales order backlog; (iv) professional fees surrounding the ERP system, and (v) costs incurred for the strategic ideation and marketing expertise contributed by Perennial for in-house support to the DCM Sales team.
SG&A expenses for the nine months ended September 30, 2019 decreased $0.5 million or 0.9% to $50.5 million, or 23.9% of total revenues, compared to $51.0 million, or 21.1% of total revenues, for the same period of 2018. After deducting one-time business reorganization costs, SG&A expenses were $49.6 million, or 23.5% of total revenues compared to $49.6 million or 20.5% of revenues in the prior period. The slight decrease in SG&A expenses for the nine months ended September 30, 2019 is due to an increase in general and administration expenses of $1.9 million, whereas selling, commissions and expenses decreased by $2.4 million. The net decrease was primarily attributable to the same reasons noted for the three months ended September 30, 2019.
RESTRUCTURING EXPENSES
Cost reductions and enhancement of operating efficiencies have been an area of focus for DCM over the past four years in order to improve margins and better align costs with the declining revenues experienced by the Company in its traditional business, a trend being faced by the traditional printing industry for several years now.
For the three months ended September 30, 2019, DCM incurred restructuring expenses of $2.7 million compared to a nominal amount in the same period in 2018. The restructuring expenses of $2.7 million during for the three months ended September 30, 2019 related to headcount reductions predominately for direct and indirect labour across DCM’s various manufacturing facilities, in addition to certain SG&A functions.
For the nine months ended September 30, 2019, DCM incurred restructuring expenses of $7.6 million compared to $0.8 million in the same period in 2018. In 2019, the restructuring costs related to headcount reductions from (i) the closure of its Brossard, Quebec facility which was announced in March 2019, (ii) the sale of its loose-leaf binders and index tab business in May 2019, (iii) process improvements in manufacturing to improve efficiencies and gross margins, and (iv) process improvements in its SG&A functions to reduce costs and enhance productivity.
DCM will continue to evaluate its operating costs for further efficiencies as part of its commitment to improving its gross margins and lowering its selling, general and administration expenses.
ADJUSTED EBITDA
For the three months ended September 30, 2019, Adjusted EBITDA was $2.2 million, or 3.4% of revenues, after adjusting EBITDA for the $2.7 million in restructuring charges. Excluding the effects of adopting IFRS 16, Adjusted EBITDA was $0.6 million or 1.0% of revenues the three months ended September 30, 2019 compared with an Adjusted EBITDA of $5.2 million or 7.0% of revenues of revenues for the same period last year.
For the nine months ended September 30, 2019, Adjusted EBITDA was $14.5 million or 6.8% of revenues, after adjusting EBITDA for the $7.6 million in restructuring charges and $0.9 million of one-time business reorganization costs. Excluding the effects of adopting IFRS 16, Adjusted EBITDA for the nine months ended September 30, 2019 was $6.4 million, or 3.0% of revenues compared with an Adjusted EBITDA of $15.7 million or 6.5% of revenues.
The decrease in Adjusted EBITDA, excluding the effect of IFRS 16, for the three and nine months ended September 30, 2019 over the prior year comparative periods was primarily attributable to the launch of the ERP system resulting in (i) the deferral of revenues and compressing margins, as discussed above; (ii) an increase in SG&A as the cost for salaries and wages for those employees working on the ERP system implementation can no longer be capitalized post go-live; (iii) an increase in overtime costs and temporary labour to help resolve ERP issues post go-live and catch up on production from the sales order backlog caused by delays in the ERP transition, and additional professional fees incurred as a direct result of the new ERP system. Furthermore, there were additional reductions in revenues and margins in the normal course of operations. However, the decline was partially offset due to cost reductions realized from ongoing cost savings initiatives implemented in 2019 and the last quarter of 2018.
INTEREST EXPENSE
Interest expense, including interest on debt outstanding under DCM’s credit facilities, interest accretion expense related to certain debt obligations recorded at fair value, and interest expense on lease liabilities under IFRS 16 was $2.3 million for the three months ended September 30, 2019 compared to $1.3 million for the same period in 2018, and was $6.5 million for the nine months ended September 30, 2019 compared to $3.7 million for the same period in 2018. Excluding the effects of adopting IFRS 16, interest expense the three months ended September 30, 2019 was $1.3 million and for the nine months ended September 30, 2019 was $3.8 million. Interest expense for the three and nine months ended September 30, 2019 was relatively consistent with the same period in the prior year excluding IFRS 16. The slight change was primarily due to the Crown facility, secured in 2018 to fund the acquisition of Perennial and to repay the outstanding balance on its subordinated debt facility with Bridging Finance Inc. (“Bridging Credit Facility”), which was partially reflected in the nine months period ended September 30, 2019 as the facility was obtained in May 2018. In addition, part way through the quarter, total debt increased as at September 30, 2019 due to an additional $7 million loan obtained from Crown, and an increase in the Bank Credit Facility resulting in additional interest expense. The increase was offset by a reduction in the unwinding of discount which was included in interest expense of the Eclipse and Thistle VTBs that were repaid during the first quarter of 2019, and reduction of FPD Credit Facilities through principal payments resulting in lower interest expense.
INCOME TAXES
DCM reported a loss before income taxes of $7.7 million and a net income tax recovery of $1.8 million for the three months ended September 30, 2019 compared to income before income taxes of $1.3 million and a net income tax expense of $0.4 million for the three months ended September 30, 2018. DCM reported a loss before income taxes of $13.2 million and a net income tax recovery of $3.2 million for the nine months ended September 30, 2019 compared to income before income taxes of $2.1 million and a net income tax expense of $0.7 million for the nine months ended September 30, 2018. The change from a net income tax expense to a recovery position was due to the reduction of DCM’s estimated taxable income to a loss for the three and nine months ended September 30, 2019. The deferred income tax recovery for the nine months ended September 30, 2019 was adjusted for any changes in estimates of future reversals of temporary differences.
NET LOSS
Net loss the three months ended September 30, 2019 was $5.9 million compared to net income of $0.8 million for the same period in 2018. Excluding the effects of adopting IFRS 16, net loss for the three months ended September 30, 2019 was $5.4 million.
Net loss for the nine months ended September 30, 2019 was $10.0 million compared to a net income of $1.4 million for the same period in 2018. Excluding the effects of adopting IFRS 16, net loss for the nine months ended September 30, 2019 was $8.8 million.
The decrease in comparable profitability for the three and nine months ended September 30, 2019 was primarily due to (i) the launch in the ERP system resulting in both the reduction in revenues and margins, and increase in SG&A as discussed above, (ii) the decrease in revenues in the normal course of operations, and (iii) an increase in restructuring expenses. This was partially offset by improved pricing discipline and cost savings from restructuring efforts carried out in 2019 and the last quarter of 2018 in cost of sales and selling, commissions and expenses.
ADJUSTED NET LOSS
Adjusted net loss the three months ended September 30, 2019 was $3.9 million compared to Adjusted net income of $1.0 million for the same period in 2018. Excluding the effects of adopting IFRS 16, Adjusted net loss the three months ended September 30, 2019 was $3.4 million.
Adjusted net loss for the nine months ended September 30, 2019 was $3.7 million compared to Adjusted net income of $3.3 million for the same period in 2018. Excluding the effects of adopting IFRS 16, Adjusted net loss for the nine months ended September 30, 2019 was $2.5 million.
The decrease in comparable profitability for the three and nine months ended September 30, 2019 was primarily due to (i) the launch of the ERP system resulting in both the reduction in revenues and margins, and increase in SG&A as discussed above, and (ii) the decrease in revenues in the normal course of operations. This was partially offset by improved pricing discipline and cost savings from restructuring efforts carried out in 2019 and the last quarter of 2018 in cost of sales and selling, commissions and expenses.
CASH FLOW FROM OPERATIONS
During the nine months ended September 30, 2019, cash flows used for operating activities were $4.9 million compared to cash flows generated by operating activities of $14.5 million during the same period in 2018. Current period cash flow from operations, before adjusting for changes in working capital, generated a total of $4.1 million compared with $5.8 million for the same period last year. As a result of the adoption of IFRS 16, $8.1 million in lease payments are now presented as cash used for financing activities in the condensed interim consolidated statement of cash flow whereby in the prior year comparative period, this was classified as a reduction of operating activities. Excluding the effects of IFRS 16, cash flow used for operating activities, before adjusting for changes in working capital, was $4.0 million, a decrease of $9.2 million over the same period last year. Current period cash flows from operations were negatively impacted primarily due to an increase in the net loss which stems from the decrease in revenues and increase in general and administration expese, particularly in the second and third quarter this year as a direct result of the new ERP system, alongside other reductions in revenue due to softness in customer spend. This was offset by further improvements in DCM’s pricing discipline and cost reductions realized from ongoing cost savings initiatives implemented in 2019 and the last quarter of 2018. Other payments for severances and lease termination related to DCM’s restructuring initiatives, contributions to defined benefit pension plans and income taxes were relatively consistent with the comparative period.
Changes in working capital during the nine months ended September 30, 2019 used $9.0 million in cash compared with $8.7 million of cash generated in the prior year. In the prior year comparable period DCM’s focus was to better align payments to its vendors with cash receipts from its customers given many of its customers opt to store their product in DCM’s warehouses and pay upon taking shipment of product which extends the time to collection. In the current year, DCM continues to manage cash flow consistent with the comparative period. There was a significant increase in trade receivables by $15.4 million given the challenges encountered with issuing accurate and timely billings as a result of the ERP transition in June 2019. In the third quarter of 2019, billing volumes progressively increased throughout the quarter as the Company began catching up on its backlog of orders. However, DCM continued to experience issues with issuing accurate billings to its customers thereby resulting in a deterioration of collections and an increase in trade receivables. This resulted in liquidity constraints whereby the Company was required to obtain additional financing and manage payments to suppliers to maintain cash for working capital requirements resulting in an increase in trade and accrued liabilities by $6.9 million.
INVESTING ACTIVITIES
For the nine months ended September 30, 2019, $3.8 million in cash flows were used for investing activities compared with $13.3 million during the same period in 2018. This represents a reduction of $9.5 million over the same period last year, of which $7.5 million was used in the comparable period for the acquisition of Perennial. In the current period, $0.8 million of cash was primarily used to invest in IT equipment related to the implementation of the new ERP system and costs related to leasehold improvements to set up new production equipment, including the Gallus/Heidelberg hybrid digital label press at its Brampton, Ontario facility and the Heidelberg six-colour press at its Toronto, Ontario facility, compared with $2.3 million of capital expenditures incurred in 2018 related to investments in IT equipment and costs related to leasehold improvements, which were incurred as part of DCM’s consolidation of certain facilities. Furthermore, $3.9 million of cash was used to further invest in the development of DCM’s new ERP system compared with $3.7 million for the same period last year. DCM continues to capitalize costs for the ERP system in the third quarter of 2019 related to further development of the system. $0.7 million in cash proceeds were received upon the sale of its loose-leaf and index tab business in May 2019.
FINANCING ACTIVITIES
For the nine months ended September 30, 2019, cash flow generated by financing activities was $11.2 million compared with $0.6 million during the same period in 2018. As noted under “Cash Flow From Operations”, as a result of the adoption of IFRS 16, $8.1 million in lease payments are now presented as cash used for financing activities whereas this is presented as a reduction of cash from operations in the prior year comparative period, thereby contributing to the overall variance in cash used for financing activities. Excluding the effects of IFRS 16, cash flow generated for financing activities was $19.3 million, increasing the variance to $20 million from the comparative period. A total of $3.3 million in outstanding principal amounts under its various credit facilities were repaid during the current period compared with $9.1 million during the same period last year. DCM amended its FPD Credit Facilities on July 25, 2019 to defer principal amounts for the months of August to December 2019 which explains the reduction of the repayments on the credit facilities from the comparative period. In addition, $3.9 million was repaid during the period related to the vendor take-back promissory notes issued in connection with the acquisitions of Eclipse, Thistle and BOLDER Graphics compared with $4.0 million in the prior year comparative period. The Eclipse and Thistle VTBs were fully repaid in the first quarter of 2019, and $1.0 million was paid for the Perennial VTB. Lastly, proceeds of $26.1 million was received in the current period, of which $7 million represents additional proceeds received from the Crown Facility and the remaining $19.1 million represents the draw on DCM’s revolving credit facility with the Bank compared with $12.9 million during the same period last year to fund its working capital requirements, and manage cash flow to compensate for the slow down in the collection process as a result of the ERP disruptions.
OUTLOOK
DCM experienced a weak third quarter of 2019, primarily due to the disruption caused by its transition to the new ERP system. Inaccuracies in billings caused working capital to increase significantly, as we experienced delays in converting accounts receivable to cash, thereby requiring additional draws on our Bank Credit Facility and causing us to delay payments to vendors as we managed our available credit line. Disruption caused by the new ERP transition resulted in decreased revenues by approximately $7.5 million year over year. The sales order backlog continues to be higher than expected norms which DCM expects to recover in the fourth quarter as production resumes back to normal capacity. Financial liquidity however is expected to remain tight through the fourth quarter, subject to obtaining additional credit on its existing facilities and completion of additional financing.
As DCM continued to work through the transition of the new system with the commitment and diligence of our senior management and employees, we achieved significant progress on resolving the implementation issues, with production, billings and shipments returning to more normalized levels in the months of September and October. Substantially all customer transactions are now flowing through the new system, however further work is required to continue refinements.
DCM continued its commitment to improving gross margin and reducing SG&A with additional staff reductions, resulting in annualized savings of $3.5 million during the quarter. Although DCM did not realize the full quarter effects of these cost savings due to additional costs incurred as a direct result of the ERP issues for overtime and temporary labour, margins and SG&A are expected to improve as the business demonstrates further signs of stabilizing.
Fourth quarter revenue is expected to compare favorably to our 2018 fourth quarter revenue, given the positive developments in September and October. DCM continues to attract new customers and obtain greater wallet share from its existing customers. DCM continues to attract new business wins and is committed to continuing its strategy of becoming a leading marketing solutions and business services provider.
The Company’s key priority for the remainder of 2019 is to complete the remediation of the ERP system and work with vendors as collections improve from accounts receivable. DCM’s objective for 2020 is to return to the path set out at the beginning of this year and return our focus to our five key business principles.
About DATA Communications Management Corp.
DCM is a communication solutions partner that adds value for major companies across North America by creating more meaningful connections with their customers. DCM pairs customer insights and thought leadership with cutting-edge products, modular enabling technology and services to power its clients’ go-to market strategies. DCM helps its clients manage how their brands come to life, determine which channels are right for them, manage multimedia campaigns, deploy location-specific and 1:1 marketing, execute custom loyalty programs, and fulfill their commercial printing needs all in one place.
DCM’s extensive experience has positioned it as an expert at providing communication solutions across many verticals, including the financial, retail, healthcare, consumer health, energy, and not-for-profit sectors. As a result of its locations throughout Canada and in the United States (Chicago, Illinois and New York, New York), it is able to meet its clients’ varying needs with scale, speed, and efficiency – no matter how large or complex the ask. DCM is able to deliver advanced data security, regulatory compliance, and bilingual communications, both in print and/or digital formats.
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.
— 30 —
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 DCM, 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 DCM’s current views regarding future events and operating performance, are based on information currently available to DCM, 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 DCM 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 DCM made or took into account in the preparation of these forward-looking statements include: DCM’s new enterprise resource planning (“ERP”) system has failed to perform as planned and interrupted operational transactions during and following the implementation, which has, and may continue to, materially and adversely affect DCM’s financial liquidity and operations and results of operations; the limited growth in the traditional printing industry and the potential for further declines in sales of DCM’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 DCM will adversely affect DCM’s financial results; the risk that DCM 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 and marketing communications businesses; the risk that DCM may not be successful in managing its organic growth; DCM’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 DCM and are well-established suppliers; DCM’s ability to grow its sales or even maintain historical levels of its sales of printed business documents; the impact of economic conditions on DCM’s businesses; risks associated with acquisitions and/or investments in joint ventures by DCM; the failure to realize the expected benefits from the acquisitions of Thistle Printing, Eclipse Colour & Imaging, BOLDER Graphics and Perennial Group of Companies and risks associated with the integration and growth of such businesses; increases in the costs of paper and other raw materials used by DCM; DCM’s ability to maintain relationships with its customers; risks relating to future legislative and regulatory developments and other business risks involving the wellness, medical and adult-use marijuana markets in Canada and internationally generally; risks relating to DCM’s ability to access sufficient capital, including, without limitation, under its existing revolving credit facility, on favourable terms to fund its business plans from internal and external sources; and the risk that DCM will not be successful in implementing amendments to the terms of its existing credit facilities including, without limitations, the financial covenants of DCM under these facilities. Additional factors are discussed elsewhere in this press release and under the headings “Liquidity and capital resources” and “Risks and Uncertainties” in DCM’s management’s discussion and analysis and in DCM’s other publicly available disclosure documents, as filed by DCM 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, DCM 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. Adjusted EBITDA means EBITDA adjusted for restructuring expenses, one-time business reorganization costs, goodwill impairment charges, and acquisition costs. Adjusted net income (loss) means net income (loss) adjusted for restructuring expenses, one-time business reorganization costs, goodwill impairment charges, 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 (loss) for the period by the weighted average number of common shares of DCM (basic and diluted) outstanding during the period. In addition to net income (loss), DCM 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 DCM’s operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS financial measures. DCM also believes that securities analysts, investors, rating agencies and other interested parties frequently use non-IFRS measures in the evaluation of issuers. DCM’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 DCM’s performance. For a reconciliation of net income (loss) to EBITDA and a reconciliation of net income (loss) to Adjusted EBITDA, see Table 6 and Table 7. For a reconciliation of net income (loss) to Adjusted net income (loss) and a presentation of Adjusted net income (loss) per share, see Table 8 and Table 9 above.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
(in thousands of Canadian dollars, unaudited) |
September 30, 2019 |
|
December 31, 2018 |
||||
|
|
|
|
|
||||
|
Assets |
|
|
|
||||
|
Current assets |
|
|
|
||||
|
Trade receivables |
88,450 |
|
|
73,124 |
|
||
|
Inventories |
10,477 |
|
|
8,812 |
|
||
|
Prepaid expenses and other current assets |
1,861 |
|
|
3,519 |
|
||
|
|
100,788 |
|
|
85,455 |
|
||
|
Non-current assets |
|
|
|
||||
|
Other non-current assets |
895 |
|
|
827 |
|
||
|
Deferred income tax assets |
5,357 |
|
|
3,428 |
|
||
|
Restricted cash |
515 |
|
|
515 |
|
||
|
Property, plant and equipment |
13,886 |
|
|
16,804 |
|
||
|
Right-of-use assets |
58,976 |
|
|
— |
|
||
|
Intangible assets |
19,342 |
|
|
18,164 |
|
||
|
Goodwill |
16,973 |
|
|
17,038 |
|
||
|
|
|
|
|
||||
|
|
216,732 |
|
|
142,231 |
|
||
|
|
|
|
|
||||
|
Liabilities |
|
|
|
||||
|
Current liabilities |
|
|
|
||||
|
Bank overdraft |
1,475 |
|
|
3,999 |
|
||
|
Trade payables and accrued liabilities |
50,233 |
|
|
43,497 |
|
||
|
Current portion of credit facilities |
4,591 |
|
|
5,670 |
|
||
|
Current portion of promissory notes |
2,104 |
|
|
4,013 |
|
||
|
Current portion of lease liabilities |
8,172 |
|
|
— |
|
||
|
Provisions |
5,295 |
|
|
2,908 |
|
||
|
Income taxes payable |
1,573 |
|
|
3,152 |
|
||
|
Deferred revenue |
1,315 |
|
|
1,477 |
|
||
|
|
74,758 |
|
|
64,716 |
|
||
|
Non-current liabilities |
|
|
|
||||
|
Provisions |
771 |
|
|
540 |
|
||
|
Credit facilities |
75,661 |
|
|
51,751 |
|
||
|
Promissory notes |
457 |
|
|
1,363 |
|
||
|
Lease liabilities |
55,515 |
|
|
— |
|
||
|
Deferred income tax liabilities |
457 |
|
|
1,753 |
|
||
|
Other non-current liabilities |
33 |
|
|
3,272 |
|
||
|
Pension obligations |
7,962 |
|
|
8,346 |
|
||
|
Other post-employment benefit plans |
3,184 |
|
|
2,978 |
|
||
|
|
218,798 |
|
|
134,719 |
|
||
|
|
|
|
|
||||
|
Equity |
|
|
|
||||
|
Shareholders’ equity |
|
|
|
||||
|
Shares |
251,217 |
|
|
251,217 |
|
||
|
Warrants |
716 |
|
|
806 |
|
||
|
Contributed surplus |
2,277 |
|
|
1,841 |
|
||
|
Translation reserve |
258 |
|
|
242 |
|
||
|
Deficit |
(256,534 |
) |
|
(246,594 |
) |
||
|
|
(2,066 |
) |
|
7,512 |
|
||
|
|
|
|
|
||||
|
|
216,732 |
|
|
142,231 |
|
||
|
|
|||||||
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in thousands of Canadian dollars, except per share amounts, unaudited) |
For the three months ended September 30, 2019 |
|
For the three months ended September 30, 2018 |
||||
|
|
$ |
|
$ |
||||
|
|
|
|
|
||||
|
Revenues |
63,215 |
|
|
74,925 |
|
||
|
|
|
|
|
||||
|
Cost of revenues |
47,962 |
|
|
56,664 |
|
||
|
Gross profit |
15,253 |
|
|
18,261 |
|
||
|
|
|
|
|
||||
|
Expenses |
|
|
|
||||
|
Selling, commissions and expenses |
8,545 |
|
|
8,235 |
|
||
|
General and administration expenses |
9,263 |
|
|
7,312 |
|
||
|
Restructuring expenses |
2,724 |
|
|
9 |
|
||
|
Acquisition costs |
— |
|
|
6 |
|
||
|
|
20,532 |
|
|
15,562 |
|
||
|
|
|
|
|
||||
|
(Loss) income before finance costs and income taxes |
(5,279 |
) |
|
2,699 |
|
||
|
|
|
|
|
||||
|
Finance costs |
|
|
|
||||
|
Interest expense, net |
2,260 |
|
|
1,256 |
|
||
|
Amortization of transaction costs |
177 |
|
|
168 |
|
||
|
|
2,437 |
|
|
1,424 |
|
||
|
|
|
|
|
||||
|
(Loss) Income before income taxes |
(7,716 |
) |
|
1,275 |
|
||
|
|
|
|
|
||||
|
Income tax (recovery) expense |
|
|
|
||||
|
Current |
395 |
|
|
430 |
|
||
|
Deferred |
(2,194 |
) |
|
7 |
|
||
|
|
(1,799 |
) |
|
437 |
|
||
|
|
|
|
|
||||
|
Net (loss) income for the period |
(5,917 |
) |
|
838 |
|
||
|
|
|
|
|
||||
|
Basic (loss) earnings per share |
(0.27 |
) |
|
0.04 |
|
||
|
|
|
|
|
||||
|
Diluted (loss) earnings per share |
(0.27 |
) |
|
0.04 |
|
||
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in thousands of Canadian dollars, except per share amounts, unaudited) |
For the nine months ended September 30, 2019 |
|
For the nine months ended September 30, 2018 |
||||
|
|
$ |
|
$ |
||||
|
|
|
|
|
||||
|
Revenues |
211,387 |
|
|
241,617 |
|
||
|
|
|
|
|
||||
|
Cost of revenues |
159,651 |
|
|
183,292 |
|
||
|
|
|
|
|
||||
|
Gross profit |
51,736 |
|
|
58,325 |
|
||
|
|
|
|
|
||||
|
Expenses |
|
|
|
||||
|
Selling, commissions and expenses |
25,527 |
|
|
27,896 |
|
||
|
General and administration expenses |
24,969 |
|
|
23,073 |
|
||
|
Restructuring expenses |
7,595 |
|
|
809 |
|
||
|
Acquisition costs |
— |
|
|
319 |
|
||
|
|
58,091 |
|
|
52,097 |
|
||
|
|
|
|
|
||||
|
(Loss) income before finance costs and income taxes |
(6,355 |
) |
|
6,228 |
|
||
|
|
|
|
|
||||
|
Finance costs (income) |
|
|
|
||||
|
Interest expense |
6,467 |
|
|
3,664 |
|
||
|
Amortization of transaction costs |
400 |
|
|
469 |
|
||
|
|
6,867 |
|
|
4,133 |
|
||
|
|
|
|
|
||||
|
(Loss) income before income taxes |
(13,222 |
) |
|
2,095 |
|
||
|
|
|
|
|
||||
|
Income tax expense (recovery) |
|
|
|
||||
|
Current |
(79 |
) |
|
985 |
|
||
|
Deferred |
(3,149 |
) |
|
(297 |
) |
||
|
|
(3,228 |
) |
|
688 |
|
||
|
|
|
|
|
||||
|
Net (loss) income for the period |
(9,994 |
) |
|
1,407 |
|
||
|
|
|
|
|
||||
|
Basic (loss) earnings per share |
(0.46 |
) |
|
0.07 |
|
||
|
|
|
|
|
||||
|
Diluted (loss) earnings per share |
(0.46 |
) |
|
0.07 |
|
||
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
|
(in thousands of Canadian dollars, unaudited) |
For the three months ended September 30, 2019 |
|
For the three months ended September 30, 2018 |
||||
|
|
$ |
|
$ |
||||
|
|
|
|
|
||||
|
Net (loss) income for the period |
(5,917 |
) |
|
838 |
|
||
|
|
|
|
|
||||
|
|
|
|
|
||||
|
Other comprehensive (loss) income: |
|
|
|
||||
|
|
|
|
|
||||
|
Items that may be reclassified subsequently to net (loss) income |
|
|
|
||||
|
Foreign currency translation |
4 |
|
|
(11 |
) |
||
|
|
4 |
|
|
(11 |
) |
||
|
|
|
|
|
||||
|
Items that will not be reclassified to net (loss) income |
|
|
|
||||
|
Re-measurements of pension and other post-employment benefit obligations |
791 |
|
|
243 |
|
||
|
Taxes related to pension and other post-employment benefit adjustment above |
(201 |
) |
|
(63 |
) |
||
|
|
590 |
|
|
180 |
|
||
|
|
|
|
|
||||
|
Other comprehensive income for the period, net of tax |
594 |
|
|
169 |
|
||
|
|
|
|
|
||||
|
Comprehensive (loss) income for the period |
(5,323 |
) |
|
1,007 |
|
||
|
|
|
|
|
||||
|
|
|
|
|
||||
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
|
(in thousands of Canadian dollars, unaudited) |
For the nine months ended September 30, 2019 |
|
For the nine months ended September 30, 2018 |
||||
|
|
$ |
|
$ |
||||
|
|
|
|
|
||||
|
Net (loss) income for the period |
(9,994 |
) |
|
1,407 |
|
||
|
|
|
|
|
||||
|
|
|
|
|
||||
|
Other comprehensive income (loss): |
|
|
|
||||
|
|
|
|
|
||||
|
Items that may be reclassified subsequently to net (loss) income |
|
|
|
||||
|
Foreign currency translation |
16 |
|
|
26 |
|
||
|
|
16 |
|
|
26 |
|
||
|
|
|
|
|
||||
|
Items that will not be reclassified to net (loss) income |
|
|
|
||||
|
Re-measurements of pension and other post-employment benefit obligations |
67 |
|
|
1,457 |
|
||
|
Taxes related to pension and other post-employment benefit adjustment above |
(13 |
) |
|
(379 |
) |
||
|
|
54 |
|
|
1,078 |
|
||
|
|
|
|
|
||||
|
Other comprehensive income for the period, net of tax |
70 |
|
|
1,104 |
|
||
|
|
|
|
|
||||
|
Comprehensive (loss) income for the period |
(9,924 |
) |
|
2,511 |
|
||
|
|
|
|
|
||||
|
|
|
|
|
||||
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
|
(in thousands of Canadian dollars, unaudited) |
Shares |
Warrants |
Conversion options |
Contributed surplus |
Translation reserve |
Deficit |
Total equity |
||||||||||||||
|
|
$ |
$ |
$ |
|
$ |
$ |
$ |
||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Balance as at December 31, 2017 |
248,996 |
|
287 |
|
— |
|
1,368 |
|
183 |
|
(256,233 |
) |
(5,399 |
) |
|||||||
|
Impact of change in accounting policy |
— |
|
— |
|
— |
|
— |
|
— |
|
8,365 |
|
8,365 |
|
|||||||
|
|
248,996 |
|
287 |
|
— |
|
1,368 |
|
183 |
|
(247,868 |
) |
2,966 |
|
|||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Net income for the period |
— |
|
— |
|
— |
|
— |
|
— |
|
1,407 |
|
1,407 |
|
|||||||
|
Other comprehensive income for the period |
— |
|
— |
|
— |
|
— |
|
26 |
|
1,078 |
|
1,104 |
|
|||||||
|
Total comprehensive income for the period |
— |
|
— |
|
— |
|
— |
|
26 |
|
2,485 |
|
2,511 |
|
|||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Issuance of common shares |
2,221 |
|
519 |
|
— |
|
— |
|
— |
|
— |
|
2,740 |
|
|||||||
|
Share-based compensation expense |
— |
|
— |
|
— |
|
383 |
|
— |
|
— |
|
383 |
|
|||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Balance as at September 30, 2018 |
251,217 |
|
806 |
|
— |
|
1,751 |
|
209 |
|
(245,383 |
) |
8,600 |
|
|||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Balance as at December 31, 2018 |
251,217 |
|
806 |
|
— |
|
1,841 |
|
242 |
|
(246,594 |
) |
7,512 |
|
|||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Net loss for the period |
— |
|
— |
|
— |
|
— |
|
— |
|
(9,994 |
) |
(9,994 |
) |
|||||||
|
Other comprehensive income for the period |
— |
|
— |
|
— |
|
— |
|
16 |
|
54 |
|
70 |
|
|||||||
|
Total comprehensive income (loss) for the period |
— |
|
— |
|
— |
|
— |
|
16 |
|
(9,940 |
) |
(9,924 |
) |
|||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Expiration of warrants |
— |
|
(269 |
) |
— |
|
269 |
|
— |
|
— |
|
— |
|
|||||||
|
Share-based compensation expense |
— |
|
— |
|
— |
|
167 |
|
— |
|
— |
|
167 |
|
|||||||
|
Issuance of common shares and warrants, net |
— |
|
179 |
|
— |
|
— |
|
— |
|
— |
|
179 |
|
|||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Balance as at September 30, 2019 |
251,217 |
|
716 |
|
— |
|
2,444 |
|
258 |
|
(256,534 |
) |
(1,899 |
) |
|||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(in thousands of Canadian dollars, unaudited) |
For the nine months ended September 30, 2019 |
|
For the nine months ended September 30, 2018 |
||||
|
|
$ |
|
$ |
||||
|
|
|
|
|
||||
|
Cash provided by (used in) |
|
|
|
||||
|
|
|
|
|
||||
|
Operating activities |
|
|
|
||||
|
Net (loss) income for the period |
(9,994 |
) |
|
1,407 |
|
||
|
Adjustments to net (loss) income |
|
|
|
||||
|
Depreciation of property, plant and equipment |
3,109 |
|
|
3,486 |
|
||
|
Amortization of intangible assets |
2,672 |
|
|
3,514 |
|
||
|
Depreciation of right-of-use-assets |
6,563 |
|
|
— |
|
||
|
Interest expense on lease liability |
2,707 |
|
|
— |
|
||
|
Share-based compensation expense |
167 |
|
|
383 |
|
||
|
Pension expense |
446 |
|
|
403 |
|
||
|
Loss (gain) on disposal of property, plant and equipment |
84 |
|
|
(144 |
) |
||
|
Write-off of intangible assets |
— |
|
|
242 |
|
||
|
Provisions |
7,595 |
|
|
943 |
|
||
|
Amortization of transaction costs |
400 |
|
|
469 |
|
||
|
Accretion of non-current liabilities and related interest expense |
238 |
|
|
471 |
|
||
|
Other non-current liabilities |
— |
|
|
403 |
|
||
|
Other post-employment benefit plans, net |
206 |
|
|
202 |
|
||
|
Tax credits recognized |
(89 |
) |
|
— |
|
||
|
Income tax (recovery) expense |
(3,228 |
) |
|
688 |
|
||
|
|
10,876 |
|
|
12,467 |
|
||
|
Changes in working capital |
(8,957 |
) |
|
8,723 |
|
||
|
Contributions made to pension plans |
(763 |
) |
|
(818 |
) |
||
|
Provisions paid |
(4,661 |
) |
|
(4,803 |
) |
||
|
Income taxes paid |
(1,391 |
) |
|
(1,056 |
) |
||
|
|
(4,896 |
) |
|
14,513 |
|
||
|
|
|
|
|
||||
|
Investing activities |
|
|
|
||||
|
Purchase of property, plant and equipment |
(820 |
) |
|
(2,319 |
) |
||
|
Addition to intangible assets |
(3,899 |
) |
|
(3,664 |
) |
||
|
Proceeds on disposal of property, plant and equipment |
254 |
|
|
172 |
|
||
|
Proceeds on sale of business |
675 |
|
|
— |
|
||
|
Net cash consideration for acquisition of businesses |
— |
|
|
(7,505 |
) |
||
|
|
(3,790 |
) |
|
(13,316 |
) |
||
|
|
|
|
|
||||
|
Financing activities |
|
|
|
||||
|
Issuance of common shares and warrants, net |
— |
|
|
685 |
|
||
|
Proceeds from credit facilities |
26,097 |
|
|
12,951 |
|
||
|
Repayment of credit facilities |
(3,262 |
) |
|
(9,093 |
) |
||
|
Repayment of other liabilities |
(300 |
) |
|
(301 |
) |
||
|
Proceeds from promissory notes and warrants (note 10) |
1,000 |
|
|
— |
|
||
|
Repayment of promissory notes |
(3,905 |
) |
|
(3,978 |
) |
||
|
Transaction costs |
(327 |
) |
|
(890 |
) |
||
|
Lease payments |
(8,075 |
) |
|
(20 |
) |
||
|
|
11,228 |
|
|
(646 |
) |
||
|
|
|
|
|
||||
|
Decrease in bank overdraft during the period |
2,542 |
|
|
551 |
|
||
|
Bank overdraft – beginning of period |
(3,999 |
) |
|
(2,868 |
) |
||
|
Effects of foreign exchange on cash balances |
(18 |
) |
|
34 |
|
||
|
Bank overdraft – end of period |
(1,475 |
) |
|
(2,283 |
) |
||
|
|
|||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20191114005959/en/