Softchoice Announces Second Quarter Earnings, Reinstates Quarterly Dividend

News provided by

Aug 08, 2012, 19:36 ET

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