Softchoice Announces Second Quarter Earnings, Reinstates Quarterly Dividend

• Softchoice reinstates quarterly dividend, commencing at CAD $0.07 per common share.
• Services revenues grow 112 percent year-over-year.
• Gross margins improve 40 basis points compared to the second quarter of 2011.

TORONTO, Aug. 8, 2012 /CNW/ - Softchoice Corporation (TSX: SO), a North American provider of technology solutions and services, today reported earnings for the second quarter of 2012.

For the three-month period ended June 30^th 2012, Softchoice reported net earnings of US$8.6 million compared to net earnings of US$10.9 million for the same period the prior year. Eliminating the impact of foreign exchange gains and losses, adjusted earnings amounted to US$9.5 million, or US$0.48 per share (basic and fully diluted), compared to adjusted net earnings of US$10.6 million, or US$0.54 per share (basic and fully diluted) recorded for the second quarter of 2011. The decline in net earnings is largely attributable to investments in services headcount, expanded sales coverage of the small-and-medium-size business segment and improvements to core systems infrastructure.

Softchoice's second quarter revenues increased to US$254.2 million compared to US$252.9 million reported for the same period in 2011, while gross profit increased 2 percent to US$56.7 million. Net revenues generated from the Company's Canadian operations, increased 21 percent year-over-year, reflecting the positive impact of the acquisition of UNIS LUMIN.

"Given the strength of our balance sheet and the superior cash generating capabilities of our business model, we are very pleased to reinstate a quarterly dividend," said David MacDonald, President and CEO of Softchoice. "This announcement reflects our commitment to shareholder value and our ability to continue investing in the future growth and success of Softchoice."

At the end of the quarter, Softchoice had cash on hand of US$46.8 million, with cash flow generated from operations of approximately US$7 million during the quarter, and total debt of nil.

"Despite the anticipated effect of Microsoft fees changes in the quarter, we continue to make steady progress in the execution of our growth strategy," said Mr. MacDonald. "Sales of enterprise software, server, storage and networking solutions increased as a proportion of our overall revenue mix while growth in our services business helped strengthen our gross margin performance in the period."

Revenues from the Company's Services business increased 112 percent compared to the same quarter the year prior, while sales of enterprise software, servers, storage and networking solutions grew by 17 percent.

"While the most significant impact of the Microsoft fee changes for fiscal year 2012 are largely behind us, we continue to take a prudent outlook going forward," added Mr. MacDonald. "This includes focusing on productivity and limiting our expense growth over the coming quarters to allow top line growth to drive improved earnings performance."

Operating Highlights

• Softchoice formally launches Softchoice Cloud - a secure online platform that simplifies the purchase, deployment, management and support of Software-as-a-Service (SaaS) applications.
• During the quarter, Softchoice launched Keystone Essentials, a Managed Services offering designed to improve network performance and reliability while allowing organizations to devote more time to driving their IT strategy.
• Out of a global field of 3,000 Microsoft partners, Softchoice was named the 2012 Microsoft Outstanding Sales Operations Partner of the Year at the annual World Wide Partner Conference in Toronto.
• Softchoice successfully met the criteria to become a Master Unified Communications Specialist, placing the Company among the top one percent of North American Cisco partners to achieve this designation.

Softchoice Second Quarter Earnings Call Details

Softchoice will host its second-quarter earnings call on August 9^th at 8:00 a.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 Dial in Numbers:

416 800 1066 - North American
Toll 866 212 4491 - North American Toll Free

Webcast URL:

http://www.snwebcastcenter.com/custom_events/softchoice-20120809/site/

To ensure participation, please dial in at least 10 minutes prior to the start of the conference at 8:00 a.m. 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 August 10^th, 2012.

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, 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 and six-month periods ended
June 30, 2012 and 2011
(Unaudited)

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

					June 30			December 31,
					2012			2011
Assets
Current assets:
	Cash			$	46,764		$	32,993
	Trade and other receivables				260,773			306,434
	Inventory				2,566			8,407
	Work-in-progress				535			465
	Deferred costs				651			2,591
	Prepaid expenses and other assets				7,420			6,158
Total current assets					318,709			357,048
Non-current assets:
	Long-term accounts receivable				194			643
	Long-term prepaid expenses				1,847			1,821
	Property and equipment				6,287			6,309
	Goodwill				16,417			16,441
	Intangible assets				43,710			46,203
	Deferred tax assets				19,312			19,224
Total non-current assets					87,767			90,641
Total assets				$	406,476		$	447,689
Liabilities and Shareholders' Equity
Current liabilities:
	Trade and other payables			$	236,937		$	290,267
	Deferred lease inducements				227			243
	Deferred revenue				9,426			10,627
	Income taxes payable				1,965			2,279
	Total current liabilities				248,555			303,416
Non-current liabilities:
	Deferred lease inducements				542			648
	Deferred revenue				2,863			3,307
	Total non-current liabilities				3,405			3,955
Total liabilities					251,960			307,371
Shareholders' equity:
	Capital stock				26,275			26,548
	Contributed surplus				4,168			3,274
	Retained earnings				125,455			111,689
	Accumulated other comprehensive loss				(1,382)			(1,193)
	Total shareholders' equity				154,516			140,318
Total liabilities and shareholders' equity				$	406,476		$	447,689

 

SOFTCHOICE CORPORATION
Interim Condensed Consolidated Statements of Comprehensive Income
(In thousands of U.S. dollars, except per share information)
(Unaudited)

			Three-month periods ended June 30,					Six month periods ended June 30,
			2012			2011			2012			2011
Net sales		$	254,168		$	252,946		$	513,283		$	502,664
Cost of sales			197,495			197,434			407,742			403,238
Gross profit			56,673			55,512			105,541			99,426
Operating expenses
	Selling and marketing		29,766			26,367			59,674			52,999
	Administrative		12,480			11,579			24,866			21,912
			42,246			37,946			84,540			74,911
Income from operating activities			14,427			17,566			21,001			24,515
Finance costs			1,350			1,033			539			2,080
Finance income			(5)			(373)			(14)			(1,639)
Other income			(266)			-			(222)			(78)
			1,079			660			303			363
Earnings before income taxes			13,348			16,906			20,698			24,152
Income tax expense			4,724			5,958			6,932			8,044
Net earnings			8,624			10,948			13,766			16,108
Other comprehensive loss:
	Foreign currency translation
	adjustment		(117)			(57)			(189)			(411)
Total comprehensive income		$	8,507		$	10,891		$	13,577		$	15,697
Net earnings per common share:
	Basic (note 7)	$	0.43		$	0.55		$	0.69		$	0.81
	Diluted (note 7)	$	0.43		$	0.55		$	0.69		$	0.81

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

									Cumulative				Total
Six-month period ended			Number		Capital		Contributed		translation		Retained		shareholders'
June 30, 2011			of shares		stock		surplus		account		earnings		equity
Balance, January 1, 2011			19,780,039	$	26,016	$	2,054	$	(1,142)	$	89,569	$	116,497
Total comprehensive income (loss):
	Net earnings		-		-		-		-		16,108		16,108
	Other comprehensive loss:
		Foreign currency translation
		adjustment	-		-		-		(411)		-		(411)
Total comprehensive income (loss)			-		-		-		(411)		16,108		15,697
Transactions with shareholders
recorded directly in equity:
	Contributions by and
	distributions to owners:
		Share options exercised	1,250		26		(6)		-		-		20
		Share-based payment
		transactions	-		-		1,038		-		-		1,038
		Transfer from contributed
		surplus	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		Capital		Contributed		translation		Retained		shareholders'
June 30, 2012			of shares		stock		surplus		account		earnings		equity
Balance, January 1, 2012			19,837,211	$	26,548	$	3,274	$	(1,193)	$	111,689	$	140,318
Total comprehensive income (loss):
	Net earnings		-		-		-		-		13,766		13,766
	Other comprehensive loss:
		Foreign currency translation
		adjustment	-		-		-		(189)		-		(189)
Total comprehensive income (loss)			-		-		-		(189)		13,766		13,577
Transactions with shareholders
recorded directly in equity:
	Contributions by and
	distributions to owners:
		Share options exercised	22,589		292		(108)		-		-		184
		Share repurchase	(46,300)		(565)		-		-		-		(565)
		Share-based payment
		transactions	-		-		1,002		-		-		1,002
			(23,711)		(273)		894		-		-		621
Balance, June 30, 2012			19,813,500	$	26,275	$	4,168	$	(1,382)	$	125,455	$	154,516

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

				Three-month periods ended					Six month periods ended
				June 30,					June 30,
				2012			2011			2012			2011
Cash provided by (used in):
Operating activities:
	Net earnings		$	8,624		$	10,948		$	13,766		$	16,108
	Adjustments for:
		Depreciation of property
		and equipment		808			1,047			1,556			1,729
		Share-based payment
		transactions		478			676			1,002			1,038
		Income tax expense		4,724			5,958			6,932			8,044
		Amortization of intangible
		assets		2,111			1,180			4,236			2,777
		Unrealized foreign
		currency loss (gain)		1,214			(262)			210			(1,307)
		Amortization of contract
		related assets		-			370			-			727
		Interest expense on
		financial liabilities		18			486			50			1,008
	Change in non-cash operating
	working capital (note 9)			(7,460)			(17,141)			(2,822)			(11,126)
				10,517			3,262			24,930			18,998
	Interest paid			(19)			(479)			(50)			(1,001)
	Income taxes paid			(3,511)			(3,988)			(7,346)			(6,972)
	Cash provided (used) by
	operating activities			6,987			(1,205)			17,534			11,025
Financing activities:
	Repayment of loans and borrowings			-			(1,142)			-			(2,418)
	Repurchase of common shares (note 5)			(519)			-			(565)			-
	Proceeds from issuance of
	common shares			184			10			184			10
	Cash used in financing activities			(335)			(1,132)			(381)			(2,408)
Investing activities:
	Purchase of property and equipment			(541)			(839)			(1,550)			(1,417)
	Purchase of intangible assets			(1,162)			(541)			(1,776)			(1,015)
	Cash used in investing activities			(1,703)			(1,380)			(3,326)			(2,432)
Increase (decrease) in cash				4,949			(3,717)			13,827			6,185
Cash, beginning of period				42,089			46,096			32,993			35,752
Effect of exchange rate changes on cash				(274)			131			(56)			573
Cash, end of period			$	46,764		$	42,510		$	46,764		$	42,510

 

SOURCE: Softchoice Corporation

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