Softchoice Corporation
TSX : SO

Softchoice Corporation

February 29, 2012 17:03 ET

Softchoice Announces Annual and Fourth Quarter Earnings

- Annual gross profit up 15 percent

- Annual net earnings increases 10 percent to $22 million

- Annual adjusted earnings increases 34 percent

- Fourth quarter gross profit grows 8 percent

- Company posts record sales for the fourth quarter

TORONTO, ONTARIO--(Marketwire - Feb. 29, 2012) - Softchoice Corporation (TSX:SO), a North American provider of technology solutions and services, today reported earnings for the fourth quarter and fiscal year 2011.

For the three-month period ended December 31st, 2011, Softchoice reported revenues of US$269.4 million compared to US$253.6 million for the fourth quarter of 2010, representing an increase of 6.2 percent. Net earnings for the period amounted to US$6.5 million compared to net earnings of $7.4 million for the same period the year prior. Eliminating the impact of foreign exchange gains and losses and one-time costs associated with the acquisition of UNIS LUMIN Inc., adjusted earningsi for the quarter amounted to US$6.3 million, or US$0.32 per share (basic and fully diluted) compared to US$6.0 million, or US$0.31 per share (basic and fully diluted) recorded for the same period the year prior. Softchoice's fourth quarter results include one month's contribution from the operations of UNIS LUMIN Inc.

As previously announced, during the year-end reporting process management identified certain errors in the amounts recorded for rebate and marketing development funds in 2011. An adjustment was made to cost of sales in the current period to correct for the errors, reducing net earnings by US$1.1 million. Management has considered the adequacy of internal controls in this area, and has introduced remedial measures that are more fully described in Softchoice's MD&A which was filed today.

"Overall, we are pleased to report a strong finish in the quarter, rounding off a year of tremendous growth in revenue, gross profit and earnings," said David Long, CFO for Softchoice.

On a full year basis, Softchoice reported net earnings of US$22.1 million or US$1.11 (fully diluted) per share. On an adjusted basisi, earnings were US$23.9 million or US$1.20 per share (basic and fully diluted), up 34 percent from the US$17.8 million or US$0.90 per share reported for 2010.

"Overall we have made great progress executing our strategy, and are entering 2012 with a strong balance sheet, significantly greater coverage of the small and mid-size business segment and the most complete portfolio of solutions and services in North America," added Mr. MacDonald. "In the year ahead we will remain focused on high growth technologies like data center virtualization and cloud computing while continuing to increase our value by offering deep expertise in pre-sales, services and consulting to help more organizations leverage technology to achieve better outcomes for their business."

Softchoice's professional services business realized strong gains in the quarter with revenues increasing 30 percent year-over-year while sales of Microsoft licensing increased 28.3 percent compared to the same period the year prior.

During the fourth quarter, Softchoice strengthened its balance sheet by repaying its term debt and re-negotiating its asset-backed loan agreement. After the acquisition of UNIS LUMIN Inc., which was paid for in cash, as of December 31, 2011, the Company had $33.0 million of cash on hand, and total debt of nil.

Highlights

  • On December 1, 2011, Softchoice announced the completion of the acquisition of substantially all of the assets of UNIS LUMIN Inc, one of Canada's most highly regarded Cisco networking and managed services companies.
  • On January 13, 2012 Softchoice reported that several institutions acquired 5,093,700 Softchoice common shares from the Company's largest shareholder, the Ontario Teachers' Pension Plan Board.
  • Softchoice was named to CRN magazines Tech Elite 250, a definitive North American listing of solution providers with deep technical expertise and premier certifications in the data center market.
  • Softchoice was named Software Asset Management, Volume Licensing and Sales Management Partner of the Year at Microsoft Canada's annual Impact Awards in Toronto on November 30, 2011.

Fourth Quarter Earnings Call Details

Softchoice will host its fourth-quarter earnings call on February 29, 2012 at 6:00 p.m. ET. The call will be moderated by David MacDonald, Softchoice's President and CEO and Chief Financial Officer, David Long. The conference call will begin with a brief web presentation followed by a question-and-answer session.

Participant Information

Local Dial in number: 416 800 1066

Toll Free Dial in number: 1 866 212 4491

Webcast URL: http://www.snwebcastcenter.com/custom_events/softchoice-20120214/site/

To ensure participation, please dial in at least 10 minutes prior to the start of the conference at 6:00pm ET. For those unable to attend the call, a link will be made available on the Softchoice website to an archived web and audio version on March 1, 2012.

Investor Day

Softchoice Corporation will be holding a site visit and presentation for analysts and institutional investors on Thursday March 8, 2012. Please take a moment to register for the event by sending your name, company and phone number to ana.stephenson@softchoice.com

About Softchoice

As a leading North American provider of technology solutions and services, Softchoice combines the efficiency and reliability of a national IT supplier with the personal touch and technical expertise of a local solutions provider. Softchoice's holistic approach to technology includes solution design, implementation and asset management services, as well as access to one of the most comprehensive and cost-effective technology distribution networks in North America. With over 1,100 employees located in more than 40 branch offices, Softchoice manages the technology needs of thousands of corporate and public sector organizations across the United States and Canada.

Softchoice stock is listed on the Toronto Stock Exchange (TSX) under the trading symbol "SO." The common shares of Softchoice are not registered under the U.S. Securities Act of 1933 and are not publicly traded in the United States.

Forward-Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties. These forward-looking statements relate to expectations, intentions and plans contained in this press release that are not historical fact. When used in this press release, the words "anticipate", "expect", "will" and similar expressions generally identify forward-looking statements. These statements reflect our current expectations and are subject to a number of risks and uncertainties including, but not limited to, change in technology and general market conditions, many of which are set out or incorporated by reference in the Company's latest Annual Information Form. Due to the many risks and uncertainties, Softchoice cannot assure that the forward-looking statements contained in this press release will be realized.

(i) The Company refers to adjusted earnings which is a non-IFRS measure. Adjusted earnings does not have a standardized meaning and therefore is unlikely to be comparable to similar measures used by other Companies. The Company uses adjusted net earnings to highlight the underlying business performance by adjusting for foreign exchange gains and losses on the cash, intercompany debt and external debt of the Company denominated in a currency other than the Company's functional currency. Adjusted earnings for the year also eliminates the after-tax impact of transactions costs associated with the UNIS LUMIN Inc. acquisition, as these would have previously been capitalized under Canadian GAAP. The following table reconciles net earnings to adjusted net earnings for the three months and twelve months ended December 31, 2011 and 2010:

(in thousands of USD, except per share amounts) Three months ended December 31, Year ended December 31,
2011 2010 % Change 2011 2010 % Change
Net earnings $ 6,484 $ 7,384 -12.2% $ 22,120 $ 20,065 10.2%
Adjustments, net of income tax (145 ) (1,338 ) -89.2% 1,733 (2,229 ) -177.7%
Adjusted net earnings $ 6,339 $ 6,046 4.9% $ 23,853 $ 17,836 33.7%
Adjusted net earnings per share $ 0.32 $ 0.31 3.2% $ 1.20 $ 0.90 33.3%
SOFTCHOICE CORPORATION
Consolidated Statements of Financial Position
(In thousands of U.S. dollars)
December 31, 2011, December 31, 2010 and January 1, 2010
(Unaudited)
December 31, December 31, January 1,
2011 2010 2010
Assets
Current assets:
Cash $ 32,993 $ 35,752 $ 18,601
Trade and other receivables 306,434 224,168 183,674
Inventory 8,407 881 766
Work-in-progress 465 - -
Deferred costs 2,591 7,082 385
Prepaid expenses and other assets 6,158 2,881 2,036
Total current assets 357,048 270,764 205,462
Non-current assets:
Restricted cash - 500 500
Long-term accounts receivable 643 2,771 -
Long-term prepaid expenses 1,821 - -
Property and equipment 6,309 5,748 6,894
Goodwill 16,441 11,383 11,063
Intangible assets 46,203 41,155 47,403
Deferred tax assets 19,224 19,023 18,500
Total non-current assets 90,641 80,580 84,360
Total assets $ 447,689 $ 351,344 $ 289,822
Liabilities and Shareholders' Equity
Current liabilities:
Trade and other payables $ 290,267 $ 217,986 $ 172,039
Loans and borrowings - 3,961 3,968
Deferred lease inducements 243 193 85
Deferred revenue 10,627 1,899 1,465
Income taxes payable 2,279 2,320 3,288
Total current liabilities 303,416 226,359 180,845
Non-current liabilities:
Deferred lease inducements 648 217 395
Deferred revenue 3,307 - -
Loans and borrowings - 8,271 12,253
Total non-current liabilities 3,955 8,488 12,648
Total liabilities 307,371 234,847 193,493
Shareholders' equity:
Capital stock 26,548 26,016 25,842
Contributed surplus 3,274 2,054 983
Retained earnings 111,689 89,569 69,504
Accumulated other comprehensive loss (1,193 ) (1,142 ) -
Total shareholders' equity 140,318 116,497 96,329
Total liabilities and shareholders' equity $ 447,689 $ 351,344 $ 289,822
SOFTCHOICE CORPORATION
Consolidated Statements of Comprehensive Income
(In thousands of U.S. dollars, except per share information)
Years ended December 31, 2011 and 2010
(Unaudited)
2011 2010
Net sales $ 999,400 $ 884,014
Cost of sales 810,518 719,503
Gross profit 188,882 164,511
Expenses:
Selling and marketing 102,434 91,825
Administrative 45,680 41,002
Other income (119 ) (763 )
Other expenses 673 184
148,668 132,248
Results from operating activities 40,214 32,263
Finance costs 6,169 4,652
Finance income (82 ) (3,012 )
Net finance costs 6,087 1,640
Earnings before income taxes 34,127 30,623
Income tax expense 12,007 10,558
Net earnings 22,120 20,065
Other comprehensive loss:
Foreign currency translation adjustment (51 ) (1,142 )
Total comprehensive income $ 22,069 $ 18,923
Net earnings per common share:
Basic $ 1.12 $ 1.01
Diluted 1.11 1.01
SOFTCHOICE CORPORATION
Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
Years ended December 31, 2011 and 2010
(Unaudited)
2011 2010
Cash provided by (used in):
Operating activities:
Net earnings $ 22,120 $ 20,065
Adjustments for:
Depreciation of property and equipment 3,018 2,797
Share-based payment transactions 1,722 1,139
Income tax expense 12,007 10,558
Amortization of intangible assets 5,989 6,639
Unrealized foreign currency gain (loss) 648 (2,092)
Amortization of deferred financing costs 1,844 1,374
Interest expense on financial liabilities 1,840 2,624
Loss on disposal of intangible assets and
property and equipment 16 43
49,204 43,147
Change in non-cash operating working capital 4,477 (5,091)
53,681 38,056
Interest paid (1,832) (2,573)
Income taxes paid (13,259) (12,035)
Cash provided by operating activities 38,590 23,448
Financing activities:
Repayment of loans and borrowings (12,784) (4,805)
Proceeds from issuance of common shares 67 106
Repurchase of own shares (37) -
Cash used in financing activities (12,754) (4,699)
Investing activities:
Purchase of property and equipment (2,280) (1,426)
Purchase of intangible assets (2,620) (1,060)
Restricted cash 500 -
Acquisition of UNIS LUMIN Inc. (23,941) -
Cash used in investing activities (28,341) (2,486)
Increase (decrease) in cash (2,505) 16,263
Cash, beginning of year 35,752 18,601
Effect of exchange rate changes on cash (254) 888
Cash, end of year $ 32,993 $ 35,752

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