DATA Communications Management Corp. (“DCM” or the “Company”)(TSX:DCM), a leading provider of marketing and business communications solutions to companies across North America, today provided updates on its business related to COVID-19, recent amendments to its credit agreements, and the timing of its regulatory filings.
“I am pleased to report all of our major locations remain operational,” said Gregory Cochrane, Chief Executive Officer. “We have taken the necessary steps to ensure our plants and facilities meet and exceed government standards for employee protection against COVID-19. Our first quarter revenues were on target to our plan through mid-March, when we started to feel the impact of COVID-19. Since that time, we have experienced some weakness in our revenue levels, particularly in our retail-focused lines of business. Nonetheless, our sales and production teams are actively engaged in meeting the needs of our clients, including providing COVID-19 related products and services. We are producing a wide range of innovative products including window signs, labels and distance protection floor decals, as well as sourcing products such as sanitizer and protective gloves.”
“We have taken a number of initiatives to manage our operations through this difficult period, including temporary layoffs, shift reductions, roll-back of management and account executive salaries, reductions in non-essential spending and deferral of expenses and payments where practical,” Mr. Cochrane continued.
Recent Credit Agreement Updates
DCM continues to monitor the impact of COVID-19 on its business and continues to have proactive discussions with its senior credit providers in regards to additional financial liquidity and other accommodations that may be required. DCM recently negotiated further amendments to its credit agreements and obtained certain waivers from its senior lenders.
DCM’s bank revolving credit facility has been amended to permit DCM to increase the margin calculation on its borrowing base to 75% from 30% on finished goods products it has produced for customers and holds for future delivery based on specific contracts and billing procedures, for the three months ended June 30, 2020. The effect of this amendment has been to increase DCM’s eligible borrowing base under that credit facility by approximately $3 million. Pursuant to recent credit agreement waivers, DCM’s financial covenants under its credit agreements have been suspended until July 1, 2020, other than its minimum cash flow requirement covenant, which the Company has continued to meet.
Update on Regulatory Filings and Related Management Cease Trade Order
The Company also announced it expects to complete the filing of its audited annual financial statements for the year ended December 31, 2019, annual management’s discussion and analysis (“MD&A“) for the corresponding period, related management certifications of annual filings and annual information form for the year ended December 31, 2019 (collectively, the “Filings“) on or before June 8, 2020.
As a result of the delay in making the Filings, the Ontario Securities Commission has, at the request of the Company, issued a Management Cease Trade Order (the “MCTO“) effective May 14, 2020. The MCTO will not generally affect the ability of persons who are not directors, officers or insiders of the Company to trade in securities of the Company. However, the Company’s Chief Executive Officer and Chief Financial Officer are not permitted to trade the Company’s shares until the Company completes the Filings, and, pursuant to its insider trading policy, directors, officers and other insiders will remain in a trading blackout until after the Filings are current.
As previously announced, the principal reason for the delay of completing the Filings relates to a confluence of events, including continuing remediation efforts with respect to our previously reported ERP system implementation, which resulted in the issuance of inaccurate invoices and delays in collection of accounts receivable, together with the COVID-19 outbreak which has resulted in the Company and many of its customers and suppliers, including DCM’s external auditor, activating business continuity procedures, including work from home policies.
The Company intends to satisfy the provisions of the “alternative information guidelines” set out in National Policy 12-203 – Management Cease Trade Orders, including the requirement to file bi-weekly status reports in the form of news releases containing prescribed updating information, until the Filings are made.
Blanket Relief for Continuous Disclosure Filing Requirements Due to COVID-19
As a result of the COVID-19 pandemic developments, effective May 1, 2020, the Canadian Securities Administrators granted blanket relief (the “Blanket Relief“) for all reporting issuers, that, among other things, provides a filing extension to December 31, 2020 for market participants’ executive compensation disclosure.
DCM’s annual general and special meeting is scheduled for June 26, 2020 and the Company intends to circulate its management information circular (“MIC”), which will include the Company’s executive compensation disclosure, in the last week of May 2020. The Company intends to rely on the Blanket Relief in order to extend the dates by which the Company must, under applicable securities laws, deliver to its shareholders its executive compensation disclosure and an annual request form and satisfy its send-on-request obligations to shareholders who have requested paper copies of the Company’s financial statements and MD&A.
The Company expects to file its first quarter financial results and related filings for the period ended March 31, 2020 before June 30, 2020, within the 45-day extension provided by the Blanket Relief.
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.
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 that future 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: risks relating to the impact of the COVID-19 outbreak, a continuing situation the impact of which could be material on DCM’s business, financial condition and results of operations; DCM’s belief that the release of DCM’s financial results for the year ended December 31, 2019 and the other Filings will be delayed; DCM’s new enterprise resource planning 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; there are material uncertainties associated with the resolution of the liquidity challenges currently facing the Company, as described in the Company’s condensed interim financial statements for the three months ended September 30, 2019, that may cast significant doubt as to the ability of the Company to meet its obligations as they come due; there is no assurance that management’s initiatives for dealing with these events and conditions will be successful and there are risks in the expected timing of resolution thereof and the possible effects of these issues if they are not resolved; the Company’s ability to continue as a going concern is dependent upon its ability to return to profitability, generate positive cash flows from operations, and obtain additional financing as discussed in those interim financial statements; 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 liquidity and business plans from internal and external sources; 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 acquisitions it has made and risks associated with the integration and growth of such businesses; increases in the costs of paper and other raw materials used by DCM; and DCM’s ability to maintain relationships with its customers and its suppliers. 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 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.