Softchoice Corporation
TSX : SO

Softchoice Corporation

May 10, 2011 07:35 ET

Softchoice Announces Strong Earnings Growth for the First Quarter of 2011

- Reported revenues increase 24 percent

- Gross profit grows 21 percent

- Income from operating activities increases 33 percent

TORONTO, ONTARIO--(Marketwire - May 10, 2011) - Softchoice Corporation (TSX:SO), a leading North American provider of technology solutions and services, today reported its financial results for the first quarter of 2011.

For the three-month period ended March 31, 2011, Softchoice reported net income of US$5.2 million, or US$0.26 per share (basic and fully diluted). Adjusting for the impact of foreign exchange gains and losses, earnings in the quarter amounted to US$4.2 million, or US$0.21 per share (basic and fully diluted), compared to earnings of US$2.7 million, or US$0.14 per share (basic and fully diluted) for the first quarter of 2010, representing a year-over-year increase of 50 percent.

The Company reported revenue of $250 million compared to $202 million in the first quarter of 2010, an increase of 24 percent. Sales of software and hardware infrastructure solutions grew by 45 percent and 31 percent, respectively. Microsoft sales were up 5 percent this quarter.

"We are pleased to deliver a strong first quarter with revenue growth across software, notebooks and PCs, storage, networking and services increasing by double digits," said David MacDonald, President and CEO of Softchoice. "Providing value added support across a broad range of technologies is generating solid momentum for Softchoice as the technology refresh cycle continues and customers seek to improve productivity through investments in server and storage virtualization, mobility solutions and private cloud infrastructure."

Gross profit was US$43.9 million in the quarter, representing an increase of 21 percent compared to gross profit of US$36.4 million reported for the first quarter of 2010. Total operating expenses grew by 18 percent over the same period of the year prior while EBITDA increased by 28 percent.

"The growth in EBITDA in the quarter reflects the productivity of our people and the leverage our operating model is delivering to our business," added David MacDonald, President and CEO of Softchoice. "As our investments in pre-sales and services continue to gain traction, we are well positioned to drive shareholder value by continuing to shift our gross profit mix toward higher margin transactions."

The Company adopted International Financial Reporting Standards ("IFRS") effective January 1, 2011. The accompanying consolidated interim financial statements represent the Company's first set of financial statements prepared in accordance with IFRS.

The Company's interim consolidated financial statements and MD&A are available at http://www.softchoice.com/about/ir/.

Additional Quarterly Highlights

  • Softchoice welcomed 40 additional territory sales representatives to its 4 regional sales centers. The expansion is aimed at increasing Softchoice's growth and support of the mid-size business segment.

  • For the sixth straight year, Softchoice was named one of Canada's Best Workplaces by the Globe and Mail.

  • Softchoice was honored as the Growth Partner of the Year in Canada by Cisco at Cisco's Partner Summit.

  • For the first time, Softchoice's Atlanta office was named a Top Workplace by the Atlanta Journal-Constitution.

2010 AGM & First Quarter Earnings Call Details

Softchoice will host its Annual General Meeting of Shareholders today at 10:00 a.m. at the Westin Harbour Castle Hotel in Pier 7 and 8. The hotel is located at 1 Harbour Square in downtown Toronto. Presenters will include Bill Linton, Chairman of the Softchoice Board, and President and CEO, David MacDonald.

First Quarter Earnings Call Participant Details

The Quarterly Earnings Conference Call will take place today at 5:00 pm. The conference call will begin with a brief presentation followed by a question and answer period.

Participant Dial in Numbers: 1.866.236.8857

Webcast URL:

http://www.snwebcastcenter.com/custom_events/softchoice-20110510/site/

To ensure participation, please dial in at least 10 minutes prior to the start of the conference at 5:00 pm EDT.

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 May 11, 2011.

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 providing access to one of the most comprehensive and cost-effective technology distribution networks in North America. With over 950 employees located in more than 40 branch offices, Softchoice manages the technology needs of more than 15,000 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.

Interim Consolidated Financial Statements

(Expressed in U.S. dollars)

SOFTCHOICE CORPORATION

Three-month periods ended March 31, 2011 and 2010

(Unaudited)

SOFTCHOICE CORPORATION

Interim Consolidated Statements of Financial Position

(In thousands of U.S. dollars)

(Unaudited)

March 31,December 31,January 1,
201120102010
Assets
Cash$46,096$35,752$18,601
Trade and other receivables (note 10)238,077224,168183,674
Inventory965881766
Deferred costs8,7597,082385
Prepaid expenses and other assets3,5182,8812,036
Total current assets297,415270,764205,462
Restricted cash (note 9)500500500
Long-term accounts receivable2,4102,771-
Property and equipment5,7465,7486,894
Goodwill11,53411,38311,063
Intangible assets40,00541,15547,403
Deferred tax assets18,93219,02318,500
Total non-current assets79,12780,58084,360
Total assets$376,542$351,344$289,822
Liabilities and Shareholders' Equity
Trade and other payables$239,055$217,888$171,966
Provisions6969873
Loans and borrowings (note 11)3,9583,9613,968
Deferred lease inducements10519385
Deferred revenue2,1281,8991,465
Income taxes payable1,3472,3203,288
Total current liabilities247,289226,359180,845
Deferred lease inducements320217395
Loans and borrowings (note 11)7,2758,27112,253
Total non-current liabilities7,5958,48812,648
Total liabilities254,884234,847193,493
Capital stock (note 12)26,47726,01625,842
Contributed surplus1,9492,054983
Retained earnings94,72989,56969,504
Accumulated other comprehensive loss(1,497)(1,142)
Total shareholders' equity121,658116,49796,329
Total liabilities and shareholders' equity$376,542$351,344$289,822
Related party transactions (note 14)

SOFTCHOICE CORPORATION

Interim Consolidated Statements of Comprehensive Income

(In thousands of U.S. dollars, except per share information)

(Unaudited)

Three-month periods ended
March 31,
20112010
Net sales$249,718$201,561
Cost of sales205,804165,113
Gross profit43,91436,448
Expenses:
Selling and marketing (note 4)26,63222,949
Administrative (note 4)10,3338,881
Other income (note 5)(78)(700)
Other expenses (note 6)-42
36,88731,172
Results from operating activities7,0275,276
Finance costs (note 7)1,0471,221
Finance income (note 8)(1,266)(2,001)
Net finance costs(219)(780)
Earnings before income taxes7,2466,056
Income tax expense2,0861,668
Net earnings for the period5,1604,388
Other comprehensive income:
Foreign currency translation adjustment(355)(822)
Total comprehensive income$4,805$3,566
Net earnings per common share:
Basic (note 13)$0.26$0.22
Diluted (note 13)$0.26$0.22

SOFTCHOICE CORPORATION

Interim Consolidated Statements of Changes in Equity (In thousands of U.S. dollars)

(Unaudited)

Three-month period ended
March 31, 2011
Number
of shares

Share
capital
Contributed
surplus

Cumulative
translation
account

Retained
earnings

Total
shareholders'
equity
Balance, January 1, 201119,780,039$26,016$2,054$(1,142)$89,569$116,497
Total comprehensive income
for the period:
Profit or loss5,1605,160
Other comprehensive
income:
Foreign currency
translation
adjustment(355)(355)
Total comprehensive income
for the period(355)5,1604,805
Transactions with shareholders
recorded directly in equity:
Contributions by and
distributions to owners:
Share-based payment
transactions356356
Transfer from
contributed
surplus (note 12)52,573461(461)
461(105)356
Balance, March 31, 201119,832,612$26,477$1,949$(1,497)$94,729$121,658

Three-month period ended March 31, 2010Number
of shares

Share
capital

Contributed
surplus

Cumulative
translation
account

Retained
earnings

Total
shareholders'
equity
Balance, January 1, 201019,759,189$25,842$983$$69,504$96,329
Total comprehensive income
for the period:
Profit or loss4,3884,388
Other comprehensive
income:
Foreign currency
translation
adjustment(822)(822)
Total comprehensive income
for the period(822)4,3883,566
Transactions with shareholders
recorded directly in equity:
Contributions by and
distributions to owners:
Share options exercised
(note 12)19,6009797
Share-based payment
transactions146146
Transfer from
contributed
surplus (note 12)62(62)
15984243
Balance, March 31, 201019,778,789$26,001$1,067$(822)$73,892$100,138

SOFTCHOICE CORPORATION

Interim Consolidated Statements of Cash Flows

(In thousands of U.S. dollars)

(Unaudited)

Three-month periods ended
March 31,
20112010
Cash provided by (used in):
Operating activities:
Earnings for the period$5,160$4,388
Adjustments for:
Depreciation of property and equipment682777
Share-based transactions356146
Income tax expense2,0861,668
Amortization of intangible assets1,5971,834
Unrealized foreign currency gain(950)(1,509)
Amortization of contract related assets269330
Loss on disposal of property and equipment-42
9,2007,676
Change in non-cash operating working capital (note 16)6,53611,442
15,73619,118
Interest paid(522)(700)
15,21418,418
Income tax paid(2,984)(3,436)
12,23014,982
Financing activities:
Repayment of loans and borrowings(1,276)(1,507)
Proceeds from issuance of common shares-97
(1,276)(1,410)
Investing activities:
Purchase of property and equipment(578)(259)
Purchase of intangible assets(474)(148)
(1,052)(407)
Net increase in cash during the period9,90213,165
Cash, beginning of period35,75218,601
Effect of exchange rate changes on cash442479
Cash, end of period$46,096$32,245

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