Softchoice Announces First Quarter Earnings

• Net sales up 2.4 percent
• Gross Profit grows 5.8 percent
• EBITDA increases 18.9 percent
• Softchoice announced that Birch Hill Equity Partners has extended an offer to acquire all outstanding shares of the Company for $20 per common share

TORONTO, May 14, 2013 /CNW/ - Softchoice Corporation (TSX: SO), a leading North American Solutions and Services provider, today reported earnings for the first quarter of 2013.

For the three month-period ended March 31st 2013, Softchoice reported net earnings of US$4.5 million compared to net earnings of US$5.1 million for the same period the year prior. The decrease in net income is primarily a result of a foreign exchange loss in the quarter of US$1.4 million as compared to a US$1.0 million foreign exchange gain in the same period of the prior year. Eliminating the after tax impact of foreign exchange gains and losses, adjusted net earnings amounted to US$5.6 million, or US$0.28 per fully diluted share compared to US$4.4 million, or US$0.22 per fully diluted share recorded for the same period the year prior, representing an increase of 26 percent.

First quarter net sales increased 2.4 percent to US$265.2 million compared to US$259.1 million reported for the same period in 2012. The increase in net sales was largely driven by sales of Microsoft licensing to the Canadian Government as a result of the normalization of federal government procurement processes from the prior year.  Sales of Client Computing solutions in the period increased 5.9 percent while sales of Enterprise Software, Servers, Storage and Networking solutions declined slightly over the first quarter of 2012. Softchoice's Services business continued to make steady gains, increasing 14 percent compared to the same period the year prior.

"Despite an unsettled environment for IT spending, we are pleased with our progress with Microsoft and in the execution of our Services strategy," said David MacDonald, President and CEO of Softchoice. "We continue to see positive client reception to our Keystone Managed Services offering and Softchoice Cloud as we help organizations leverage this unique platform to acquire and manage new software-as-a-service offerings like Microsoft Office 365."

Expense management combined with gross profit growth of 5.8 percent drove a corresponding increase in EBITDA of 18.9 percent to US$11.2 million compared to US$9.4 million for the first quarter of 2012.

"The growth in EBITDA reflects the operating leverage of our model," added Mr. MacDonald. "As we expand our coverage of the Small Medium Business marketplace and our sales organization embraces our new services offerings, we remain optimistic in our goal of growing faster than the overall North American IT industry for the balance of the year."

Management intends to accelerate investments in the Company's Territory Sales Division and Services business with the belief that this is in the best interest of the Company's long-term growth strategy. These additional investments, however, will likely have a negative impact on earnings over the short term.  Management also recognizes that the expected transformation could take longer or be less successful than anticipated.

On April 22, Softchoice announced that Birch Hill Equity Partners has extended an offer to acquire all outstanding shares of the Company for $20 per common share. The transaction is subject to approval by at least two-thirds of the Company's shareholders, approval from the Ontario Superior Court of Justice and certain regulatory approvals.  A special meeting of shareholders will take place in Toronto on June 10, 2013 to vote on the transaction.  It is expected that these approvals will be obtained by mid-June of 2013.  As a result, Softchoice's Board of Directors has agreed it will not pay any dividends prior to the date of the completion of the transaction. Accordingly, there will be no quarterly dividend payment that would otherwise have been payable in June.

At the end of the quarter, cash on hand was US$63.2 million, up 50.2 percent from $42.1 million in the prior year. Cash flow used in operations was $2.6 million as compared to cash generated from operations of $10.5 million in the same quarter of the prior year, largely as a result of an outflow of non-cash working capital.

Highlights

• Total Revenue, including Imputed Revenue, increased 8.1 percent compared to the same period the year prior. The increase was largely driven by sales of Microsoft Select and Enterprise Agreements to the Canadian federal government as a result of the normalization in federal government procurement process from the prior year.
• For the eighth consecutive year, Softchoice was named one of Canada's Best Workplaces by the Globe and Mail newspaper.
• Softchoice was ranked among Canada's 10 largest Information and Communications Technology companies (ICT) and was named the country's second largest Professional Services organizations, according to the Branham Group's definitive annual listing of leading Canadian ICT organizations.

Softchoice's first quarter financial statements and management discussion and analysis are available on www.softchoice.com/ir and on www.sedar.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 1,200 employees, 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.

Interim Consolidated Financial Statements
(Expressed in U.S. dollars)

SOFTCHOICE CORPORATION

Three-month periods ended
March 31, 2013 and 2012
(Unaudited)

SOFTCHOICE CORPORATION
Interim Consolidated Statements of Financial Position
(In thousands of U.S. dollars)
(Unaudited)

			March 31,		December 31,
			2013		2012
Assets
Current assets:
		Cash	$	63,217	$	67,875
		Trade and other receivables		268,639		280,241
		Inventories		4,097		3,836
		Deferred costs		9,735		2,644
		Prepaid expenses and other assets		9,681		7,635
		Total current assets		355,369		362,231
Non-current assets:
		Long-term accounts receivable		190		207
		Long-term prepaid expenses		2,042		1,690
		Property and equipment		4,755		5,478
		Goodwill		16,456		16,696
		Intangible assets		38,340		40,571
		Deferred tax assets		18,498		18,708
		Total non-current assets		80,281		83,350
Total assets			$	435,650	$	445,581
Liabilities and Shareholders' Equity
Current liabilities:
		Trade and other payables	$	250,506	$	263,813
		Deferred lease inducements		213		276
		Deferred revenue		11,965		11,321
		Income taxes payable		923		779
		Total current liabilities		263,607		276,189
Non-current liabilities:
		Deferred lease inducements		485		498
		Deferred revenue		3,590		3,991
		Total non-current liabilities		4,075		4,489
Total liabilities				267,682		280,678
Shareholders' equity:
		Capital stock		26,721		26,728
		Contributed surplus		3,405		2,907
		Retained earnings		139,341		136,567
		Accumulated other comprehensive loss		(1,499)		(1,299)
		Total shareholders' equity		167,968		164,903
Total liabilities and shareholders' equity			$	435,650	$	445,581

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,
				2013		2012
Net sales			$	265,237	$	259,116
Cost of sales				213,550		210,247
Gross profit				51,687		48,869
Expenses:
		Selling and marketing		30,488		29,907
		Administrative		12,905		12,386
				43,393		42,293
Income from operations				8,294		6,576
Finance costs				1,509		142
Finance income				(24)		(961)
Other income				(11)		(22)
Other expense				52		66
				1,526		(775)
Income before income taxes				6,768		7,351
Income tax expense				2,273		2,208
Net income				4,495		5,143
Other comprehensive loss:
		Foreign currency translation adjustment^(a)		(200)		(72)
Total comprehensive income			$	4,295	$	5,071
Net earnings per common share:
		Basic	$	0.23	$	0.26
		Diluted		0.22		0.26

^(a) Amounts may be reclassified to net income in subsequent periods.

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

									Accumulated
									other				Total
Three-month period ended			Number		Capital		Contributed		comprehensive		Retained		shareholders'
March 31, 2013			of shares		stock		surplus		loss		earnings		equity
Balance, January 1, 2013			19,657,762	$	26,728	$	2,907	$	(1,299)	$	136,567	$	164,903
Total comprehensive income (loss):
	Net income		-		-		-		-		4,495		4,495
	Other comprehensive loss:
		Foreign currency translation adjustment	-		-		-		(200)		-		(200)
	Total comprehensive income (loss)		-		-		-		(200)		4,495		4,295
Transactions with shareholders recorded directly in equity:
	Share-based compensation		-		-		538				-		538
	Repurchase of common shares		(4,000)		(7)		(40)		-		-		(47)
	Dividends declared		-		-		-		-		(1,721)		(1,721)
			(4,000)		(7)		498		-		(1,721)		(1,230)
Balance, March 31, 2013			19,653,762	$	26,721	$	3,405	$	(1,499)	$	139,341	$	167,968
									Accumulated
									other				Total
Three-month period ended			Number		Capital		Contributed		comprehensive		Retained		shareholders'
March 31, 2012			of shares		stock		surplus		loss		earnings		equity
Balance, January 1, 2012			19,837,211	$	26,548	$	3,274	$	(1,193)	$	111,689	$	140,318
Total comprehensive income (loss):
	Net income		-		-		-		-		5,143		5,143
	Other comprehensive loss:
		Foreign currency translation adjustment	-		-		-		(72)		-		(72)
	Total comprehensive income (loss)		-		-		-		(72)		5,143		5,071
Transactions with shareholders recorded directly in equity:
	Share-based compensation		-		-		524		-		-		524
	Repurchase of common shares		(3,700)		(5)		(41)		-		-		(46)
			(3,700)		(5)		483		-		-		478
Balance, March 31, 2012			19,833,511	$	26,543	$	3,757	$	(1,265)	$	116,832	$	145,867

SOFTCHOICE CORPORATION
Interim Consolidated Statements of Cash Flows
(In thousands of U.S. dollars)
(Unaudited)

			Three-month periods ended
			March 31,
				2013		2012
Cash (used in) provided by:
Operating activities:
	Net income		$	4,495	$	5,143
	Adjustments for:
		Amortization of intangible assets		2,221		2,125
		Depreciation of property and equipment		721		748
		Share-based compensation		538		524
		Income tax expense		2,273		2,208
		Unrealized foreign currency loss (gain)		978		(1,004)
		Loss on disposal of intangible assets and property and equipment		-		-
		Interest expense on financial liabilities		-		32
				11,226		9,776
	Change in non-cash operating working capital			(12,007)		4,636
				(781)		14,412
	Interest paid			-		(32)
	Income taxes paid			(1,784)		(3,835)
	Cash (used in) provided by operating activities			(2,565)		10,545
Financing activities:
	Dividends paid to shareholders			(1,721)		-
	Repurchase of common shares			(47)		(46)
	Cash used in financing activities			(1,768)		(46)
Investing activities:
	Purchase of property and equipment			(93)		(1,009)
	Purchase of intangible assets			(381)		(614)
	Cash used in investing activities			(474)		(1,623)
(Decrease) increase in cash				(4,807)		8,876
Cash, beginning of year				67,875		32,993
Effect of exchange rate fluctuations on cash held				149		220
Cash, end of period			$	63,217	$	42,089

 

 

 

 

SOURCE: Softchoice Corporation

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