Datamark Systems Group Inc.
TSX : DMK

Datamark Systems Group Inc.

November 10, 2005 18:52 ET

Datamark Systems Group Inc. Announces Results for the Third Quarter and Nine Months Ended September 30, 2005

MONTREAL, QUEBEC--(CCNMatthews - Nov. 10, 2005) - Datamark Systems Group Inc. (TSX:DMK) Although market conditions remained challenging in the third quarter, the Company continued to generate positive cash flow and strengthen its balance sheet. For the first nine months of 2005, the Company reduced its long-term debt and capital lease obligation by $1,648,000, and repaid in full its bank indebtedness of $812,000. Total net debt (including long-term debt, capital lease obligation, current portions of both and bank indebtedness, minus cash on hand) stood at $2,460,000 at the end of the third quarter compared to $6,857,000 at the end of 2004. The Company expects to further strengthen its financial position in the fourth quarter.

Several new long-term contracts were signed during the third quarter, including multi-year document management agreements with Canada Post and Alcoholics Anonymous World. The Company was also successful in winning new business for carbonized airline tickets by signing contracts with two new customers, Vietnam Airlines and Virgin Airlines.

Consolidated sales for the third quarter ended September 30, 2005 were $27,075,000 compared to $28,812,000 for the same period last year. Commercial printing sales were stable at last year's strong level while sales of traditional business forms and labels declined as a result of challenging market conditions and continued pricing pressure. Consolidated sales for the nine months ended September 30, 2005 were $83,208,000 compared to $85,756,000 for the nine months ended September 30, 2004, reflecting mainly lower sales of business forms, including carbonized airline tickets.

Cost of sales for the third quarter of 2005 totalled $19,471,000 or 71.9% of sales compared to $19,562,000 or 67.9% of sales in the third quarter of last year. The increase in cost of sales as a percentage of sales reflects mainly the recognition of investment tax credits (ITC) totaling $474,000 in the third quarter of 2005 compared to $1.1 million in the same period last year. ITC is related to prior years' research and development expenses. The Company continues to pursue research and development activity that it believes will qualify for ITC. Cost of sales for the nine months ended September 30, 2005 decreased to $59,304,000 or 71.3% of sales, compared to $60,604,000 or 70.7% of sales, for the same period last year.

Gross margin decreased to 28.1% of sales from 32.1% in the third quarter of 2004, mainly as a result of the lower ITC recorded in the third quarter of 2005 compared to the same period of last year. Gross margin was also affected by competitive market conditions and lower sales over a fixed component of overhead. Gross margin for the nine-month period was 28.7% compared to 29.3% for the nine-month period last year.

Selling and administrative expenses for the third quarter were $6,074,000 or 22.4% of sales compared to $6,565,000 or 22.8% of sales for the same period last year. Selling and administrative expenses during the third quarter of 2005 were also impacted by $247,000 of expenses incurred to date as a result of the Company's continued exploration into a possible reorganization into an income trust and other options that will maximize shareholder value. Year-to-date selling and administrative expenses totalled $18,476,000, or 22.2% of sales, compared to $18,848,000 or 22.0% of sales, for the same period last year.

Interest expense was $60,000 for the third quarter and $265,000 for the first nine months of 2005 compared to $158,000 and $415,000, respectively, for the same periods of the previous year. This decrease is directly related to the reduction in total indebtedness.

Net earnings for the third quarter were $515,000 ($0.04 basic earnings per share) compared to $1,151,000 ($0.09 basic earnings per share) for the same period in 2004. Net earnings for the nine months ended September 30, 2005 were $2,034,000 ($0.17 basic earnings per share) compared to $2,427,000 ($0.20 basic earnings per share) for the first nine months of the previous year.

The number of common shares issued and outstanding as at November 10, 2005 was 12,189,611 compared to 12,158,111 as at November 10, 2004.

Datamark previously announced that it is exploring a reorganization of Datamark into an income trust. Given the uncertainty as a result of the recent announcement of the Government of Canada, the Board of Directors of Datamark Systems Group Inc. has deferred its decision with respect to the possible conversion to an income trust.

Datamark Systems Group Inc. is dedicated to providing efficient and innovative document Management solutions. The company's operating divisions and subsidiaries, Datamark Systems, Proforms and Les Impressions Intra-Media Inc. provide a full range of products and services including forms, labels, airline products and short and long run commercial printing. Document management services encompass warehousing and distribution as well as customized inventory and cost reporting. Datamark Systems Group Inc.'s plants and distribution centers are in Quebec, Ontario, Manitoba and Alberta. Datamark Systems Group Inc. is listed on the Toronto stock Exchange under the symbol DMK.

Contact Information

  • Datamark Systems Group Inc.
    Jeffrey Zunenshine
    President
    (450) 663-7878, Ext.410