Softchoice Corporation
TSX : SO

Softchoice Corporation

August 09, 2011 18:14 ET

Softchoice Announces Strong Earnings Growth for the Second Quarter of 2011

- Adjusted EPS grows by 28.6 percent

- Gross profit grows 18.3 percent

- Gross margins improve 184 basis points

- EBITDA as a percentage of revenue improves to 7.8 percent

TORONTO, ONTARIO--(Marketwire - Aug. 9, 2011) - Softchoice Corporation (TSX:SO), a leading North American provider of technology solutions and services, today reported its financial results for the second quarter of 2011.

For the three-month period ended June 30, 2011, Softchoice reported net income of US$10.9 million compared to net income of US$6.2 million for the same period the year prior. Adjusting for the impact of foreign exchange gains and losses, net earnings in the quarter amounted to US$10.6 million, or US$0.54 per share (basic and fully diluted), compared to net earnings of US$8.3 million, or US$0.42 per share (basic and fully diluted) for the second quarter of 2010. Adjusted net earnings per share grew 28.6 percent year-over-year.

The Company reported revenue of US$252.9 million compared to US$233.3 million for the second quarter of 2010, representing an increase of 8.4 percent. Microsoft sales were up 9.8 percent in the quarter, while sales of hardware infrastructure solutions grew by 18 percent.

"Consistent with our long-term strategy to increase the value of our solutions portfolio, the addition of pre-sales and professional services resources coupled with solid demand across the major segments of our business have translated into strong earnings growth and steady improvements in our margin performance," said David MacDonald, President and CEO of Softchoice. "As we look to the balance of year, we are well positioned to benefit from the ongoing technology refresh cycle and from new incentives Microsoft has created for partners who provide value-added support around the deployment of leading Microsoft solutions."

Gross profit was US$55.5 million in the quarter, representing an increase of 18.3 percent compared to gross profit of US$46.9 million reported for the second quarter of 2010. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 23.6 percent to US$19.8 million delivering a 96 basis point year-over-year increase in EBITDA margin to 7.8 percent.

"The strong growth in EBITDA in the quarter reflects the success of our strategy to shift a greater proportion of our gross profit mix to higher margin engagements such as server and storage virtualization and private cloud solutions," added Mr. MacDonald. "While still in the early stages, we are very pleased with these results and with the impact our pre-sales and services investments have had on driving substantial improvements in the productivity of our sales organization."

At the close of the second quarter, the Company had US$42.5 million in cash on hand.

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

Additional Quarterly Highlights

  • Softchoice appoints Paul Khawaja, the former President of Xwave, as the Senior Vice President of the Company's Professional Services organization.
  • For the second consecutive year, Softchoice received the award for Operational Excellence at the 2011 Microsoft Worldwide Partner Conference.

Second Quarter Earnings Call Participant Details

Softchoice will host its second quarter earnings call on August 10, 2011 at 8 a.m. EDT.

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.

Softchoice will release its second quarter earnings results the evening of August 9, 2011.

Second Quarter Earnings Details

Participant Dial in Number: 1 866 212 4491

Webcast URL:

http://www.snwebcastcenter.com/custom_events/softchoice-20110810/site/

To ensure participation, please dial in at least 10 minutes prior to the start of the conference call at 8:00 a.m. EDT.

For those unable to attend the call, a link will be made available on www.softchoice.com/about/ir to an archived web and audio version on August 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 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 almost 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.

TORONTO, ONTARIO--(Marketwire - Aug. 9, 2011) -

Interim Consolidated Financial Statements

(Expressed in U.S. dollars)

SOFTCHOICE CORPORATION

Three-month and six-month periods ended

June 30, 2011 and 2010

(Unaudited)


SOFTCHOICE CORPORATION
Interim Consolidated Statements of Financial Position
(In thousands of U.S. dollars)
(Unaudited)
June 30, December 31,
2011 2010
Assets
Cash $ 42,510 $ 35,752
Trade and other receivables (note 10) 226,632 224,168
Inventory 1,417 881
Deferred costs 7,888 7,082
Prepaid expenses and other assets 3,388 2,881
Total current assets 281,835 270,764
Restricted cash (note 9) 500 500
Long-term accounts receivable 1,118 2,771
Property and equipment 6,332 5,748
Goodwill 11,586 11,383
Intangible assets 39,052 41,155
Deferred tax assets (note 17) 19,458 19,023
Total non-current assets 78,046 80,580
Total assets $ 359,881 $ 351,344
Liabilities and Shareholders' Equity
Trade and other payables $ 207,824 $ 217,888
Provisions 712 98
Loans and borrowings (note 11) 3,957 3,961
Deferred lease inducements 286 193
Deferred revenue 2,989 1,899
Income taxes payable 3,860 2,320
Total current liabilities 219,628 226,359
Deferred lease inducements 717 217
Loans and borrowings (note 11) 6,284 8,271
Total non-current liabilities 7,001 8,488
Total liabilities 226,629 234,847
Capital stock (note 12) 26,503 26,016
Contributed surplus 2,625 2,054
Retained earnings 105,677 89,569
Accumulated other comprehensive loss (1,553) (1,142)
Total shareholders' equity 133,252 116,497
Total liabilities and shareholders' equity $ 359,881 $ 351,344
Related party transactions (note 14)
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
SOFTCHOICE CORPORATION
Interim Consolidated Statements of Comprehensive Income
(In thousands of U.S. dollars, except per share information)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
2011 2010 2011 2010
Net sales $ 252,946 $ 233,326 $ 502,664 $ 434,886
Cost of sales 197,434 186,393 403,238 351,505
Gross profit 55,512 46,933 99,426 83,381
Expenses:
Selling and marketing (note 4) 26,367 22,427 52,999 45,376
Administrative (note 4) 11,579 10,738 21,912 19,619
Other income (note 5) (7) (78) (707)
Other expenses (note 6) 42
37,946 33,158 74,833 64,330
Results from operating activities 17,566 13,775 24,593 19,051
Finance costs (note 7) 1,033 3,574 2,080 2,800
Finance income (note 8) (373) (126) (1,639) (132)
Net finance cost 660 3,448 441 2,668
Earnings before income taxes 16,906 10,327 24,152 16,383
Income tax expense (note 17) 5,958 4,128 8,044 5,796
Net earnings for the period 10,948 6,199 16,108 10,587
Other comprehensive income:
Foreign currency translation adjustments (57) 916 (411) 95
Total comprehensive income $ 10,891 $ 7,115 $ 15,697 $ 10,682
Net earnings per common share:
Basic (note 13) $ 0.55 $ 0.31 $ 0.81 $ 0.54
Diluted (note 13) 0.55 0.31 0.81 0.53
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
SOFTCHOICE CORPORATION
Interim Consolidated Statements of Changes in Equity
(In thousands of U.S. dollars)
(Unaudited)
Cumulative Total
Six-month
period ended
Number Share Cont-
ributed
trans-
lation
Retained share-
holders'
June 30, 2011 of shares capital surplus account earnings equity
Balance, January 1, 2011 19,780,039 $ 26,016 $ 2,054 $ (1,142) $ 89,569 $ 116,497
Total comprehensive
income
for the period:
Profit or loss 16,108 16,108
Other comprehensive
income:
Foreign currency
translation adjustment (411) (411)
Total comprehensive
income
for the period (411) 16,108 15,697
Trans-
actions with shareholders
recorded directly
in equity:
Contri-
butions by and
distri-
butions to owners:
Share options exercised 1,250 26 (6) 20
Share-based payment
transactions 1,038 1,038
Transfer from
contri-
buted surplus
(note 12) 52,573 461 (461)
53,823 487 571 1,058
Balance,
June 30, 2011
19,833,862 $ 26,503 $ 2,625 $ (1,553) $ 105,677 $ 133,252
Cumulative Total
Six-month
period ended
Number Share Cont-
ributed
trans-
lation
Retained share-
holders'
June 30, 2010 of shares capital surplus account earnings equity
Balance, January 1, 2010 19,759,189 $ 25,842 $ 983 $ $ 69,504 $ 96,329
Total comprehensive
income
for the period:
Profit or loss 10,587 10,587
Other comprehensive
income:
Foreign currency
translation adjustment 95 95
Total comprehensive
income
for the period 95 10,587 10,682
Trans-
actions with
shareholders
recorded directly
in equity:
Contri-
butions by and
distri-
butions to owners:
Share options
exercised
19,600 97 97
Share-based
payment
trans-
actions
467 467
Transfer from
contr-
ibuted surplus
(note 12) 62 (62)
19,600 159 405 564
Balance,
June 30, 2010
19,778,789 $ 26,001 $ 1,388 $ 95 $ 80,091 $ 107,575

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

SOFTCHOICE CORPORATION
Interim Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
2011 2010 2011 2010
Cash provided by (used in):
Operating activities:
Earnings for the period $ 10,948 $ 6,199 $ 16,108 $ 10,587
Adjustments for:
Depreciation of property and equipment 1,047 664 1,729 1,441
Share-based compensation 676 322 1,038 467
Income taxes expense 5,958 4,128 8,044 5,796
Amortization of intangible assets 1,180 1,585 2,777 3,420
Unrealized foreign currency gain (262) 1,682 (1,307) 172
Amortization of contract related assets 370 329 727 660
Interest expense on financial liabilities 486 662 1,008 1,362
Loss on disposal of property
and equipment 42
9,455 9,372 14,016 13,360
Change in non-cash operating
working capital (note 16) (17,141) 2,253 (11,126) 12,995
Interest paid (479) (617) (1,001) (1,317)
2,783 17,207 17,997 35,625
Income tax paid (3,988) (2,544) (6,972) (5,980)
(1,205) 14,663 11,025 29,645
Financing activities:
Repayment of loans and borrowings (1,142) (369) (2,418) (1,876)
Proceeds from issuance of common
shares 10 10 97
(1,132) (369) (2,408) (1,779)
Investing activities:
Purchase of property and equipment (839) (254) (1,417) (513)
Purchase of intangible assets (541) (277) (1,015) (425)
(1,380) (531) (2,432) (938)
Net increase (decrease) in cash during the period (3,717) 13,763 6,185 26,928
Cash, beginning of period 46,096 32,245 35,752 18,601
Effect of exchange rate changes on cash 131 (526) 573 (47)
Cash, end of period $ 42,510 $ 45,482 $ 42,510 $ 45,482

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