DATA Communications Management Corp. Announces Fourth Quarter and Year End Financial Results for 2016

Further improvements in operations and technology
Operationally, DATA made significant improvements in its production capabilities and facilities including the closure of its large Edmonton, Alberta manufacturing facility during the fourth quarter of 2016 ahead of schedule and below budget.  DATA has significantly downsized to a 10,000 square foot sales, customer experience and high-volume digital print production facility in order to strategically serve the local market.  Total cost savings from the large Edmonton, Alberta closure and a number of strategic headcount reductions across several functions of the business are expected to be $5.2 million on an annualized basis.  Total restructuring costs related to its operational improvements in 2016, primarily pertaining to headcount reductions, were $4.2 million.  In total, DATA has reduced its total production facilities by over 600,000 square feet reduced its total workforce by more than 400 employees in the last three years.

On January 31, 2017, DATA announced a process realignment of its operations, which DATA anticipates will result in estimated cost savings of $2.4 million on an annualized basis.  In connection with these improvements, DATA will incur a total of approximately $1.8 million in severance expenses in 2017.  This restructuring primarily involves a reduction of DATA's indirect labour force across its operations, which is designed to streamline DATA's order-to-production process.  This process redesign and automation is expected to improve manufacturing processes from DATA's on-line web-to-print ordering system, directly to digital production.

With respect to the Company's IT infrastructure, the technology team was busy in 2016 enhancing DATA's network capabilities, streamlining its employee and systems work flow, and advancing its Enterprise Resource Planning ("ERP") project.

Leadership strength and sales
On the sales front, DATA continued to build its sales leadership, go-to-market strategies, and vertical market focus.  In November  2016, DATA announced the appointment of Gregory J. Cochrane President of DATA.  In his new role, Mr. Cochrane is focused on sales and business development and will help lead the organization through its next stages of growth.  He has tremendous experience in the marketing communications and services industries, with extensive industry knowledge and C-suite client relationships.  Mr. Sifton remains as CEO of DATA with a focus on financial and strategic initiatives.

Strategic acquisitions
On February 22, 2017, DATA completed the acquisition of substantially all of the assets of Eclipse and all of the shares of Thistle.

Eclipse is a leading Canadian large-format and point-of-purchase printing and packaging company located in Burlington, Ontario.  The acquisition of Eclipse adds significantly expanded wide format, large format, and grand format printing capabilities to DATA's portfolio of products and services, with Eclipse having a product mix focused on in-store print, outdoor, transit, display, packaging, kitting and fulfilment capabilities.  The net purchase price was approximately $9.4 million which was satisfied with the payment of $3.5 million in cash on closing, $1.3 million through the issuance of common shares of DATA, and $4.6 million through the issuance of a secured, non-interest bearing vendor take-back promissory note.

Thistle is a full service commercial printing company located in Toronto, Ontario.  The acquisition of Thistle provides DATA with a full service commercial print facility in Eastern Canada and enables DATA to expand its margins by insourcing commercial printing capabilities which it has historically outsourced to local tier two suppliers.  The net purchase price was approximately $6.1 million which was satisfied with a payment of $1.1 million in cash on closing, $1.5 million through the issuance of common shares of DATA, and $3.5 million in the form of a secured, non-interest bearing vendor take-back promissory note.

"We believe that these two transactions will position DATA to grow revenue within our Retail and Financial Services client bases.  Both businesses will provide enhanced product offerings to our sales team, enabling us to target further opportunities with our clients," said Mr. Sifton. "We believe there are significant other strategic acquisitions available to us at attractive prices that could help us further diversify our business from the declines we have been experiencing."

Increase in senior credit facilities and amendment to existing terms
On January 31, 2017, DATA amended its senior credit facilities.  DATA entered into an amended senior revolving credit facility with a Canadian chartered bank, including an increase in the total available commitment under that facility from $25.0 million to up to $35.0 million and the extension of the term of this facility by one year to March 31, 2020 from March 11, 2019.  DATA also completed an amendment to our term facility which provides DATA with a total borrowing base of up to $72.0 million from $50.0 million.  The increased availability under its senior credit facilities was partially used to finance the up-front cash components of the Eclipse and Thistle acquisitions and related transaction expenses and will also provide DATA with additional flexibility to continue to pursue its strategic growth objectives.

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").

For the periods ended December 31, 2016 and 2015		Oct. 1 to Dec. 31, 2016	Oct. 1 to Dec. 31, 2015	Jan. 1 to Dec. 31, 2016	Jan. 1 to Dec. 31, 2015
(in thousands of Canadian dollars, except per share amounts, unaudited)		$	$	$	$
Revenues		68,191	81,010	278,363	304,575
Cost of revenues		54,950	61,237	215,295	233,505
Gross profit		13,241	19,773	63,068	71,070
Selling, general and administrative expenses		13,394	13,082	55,934	56,663
Restructuring expenses		1,721	1,545	4,200	13,560
Impairment of goodwill		31,066	—	31,066	26,000
Gain on redemption of convertible debentures		—	(12,766)	—	(12,766)
Acquisition costs		68	—	68	—
(Loss) income before finance costs and income taxes		(33,008)	17,912	(28,200)	(12,387)
Finance costs (income)
	Interest expense	839	1,370	3,414	5,599
	Interest income	—	(1)	(8)	(11)
	Amortization of transaction costs	111	163	578	468
		950	1,532	3,984	6,056
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