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Press release from Marketwire

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

Tuesday, August 09, 2011

Softchoice Announces Strong Earnings Growth for the Second Quarter of 201118:14 EDT Tuesday, August 09, 2011TORONTO, 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 4491Webcast 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 CORPORATIONThree-month and six-month periods ended June 30, 2011 and 2010(Unaudited) SOFTCHOICE CORPORATIONInterim Consolidated Statements of Financial Position (In thousands of U.S. dollars)(Unaudited)June 30,December 31,20112010AssetsCash$42,510$35,752Trade and other receivables (note 10)226,632224,168Inventory1,417881Deferred costs7,8887,082Prepaid expenses and other assets3,3882,881Total current assets281,835270,764Restricted cash (note 9)500500Long-term accounts receivable1,1182,771Property and equipment6,3325,748Goodwill11,58611,383Intangible assets39,05241,155Deferred tax assets (note 17)19,45819,023Total non-current assets78,04680,580Total assets$359,881$351,344Liabilities and Shareholders' EquityTrade and other payables$207,824$217,888Provisions71298Loans and borrowings (note 11)3,9573,961Deferred lease inducements286193Deferred revenue2,9891,899Income taxes payable3,8602,320Total current liabilities219,628226,359Deferred lease inducements717217Loans and borrowings (note 11)6,2848,271Total non-current liabilities7,0018,488Total liabilities226,629234,847Capital stock (note 12)26,50326,016Contributed surplus2,6252,054Retained earnings105,67789,569Accumulated other comprehensive loss(1,553)(1,142)Total shareholders' equity133,252116,497Total liabilities and shareholders' equity$359,881$351,344Related party transactions (note 14)The accompanying notes are an integral part of these unaudited interim consolidated financial statements.SOFTCHOICE CORPORATIONInterim Consolidated Statements of Comprehensive Income (In thousands of U.S. dollars, except per share information)(Unaudited)Three months endedSix months endedJune 30,June 30,2011201020112010Net sales$252,946$233,326$502,664$434,886Cost of sales197,434186,393403,238351,505Gross profit55,51246,93399,42683,381Expenses:Selling and marketing (note 4)26,36722,42752,99945,376Administrative (note 4)11,57910,73821,91219,619Other income (note 5)–(7)(78)(707)Other expenses (note 6)–––4237,94633,15874,83364,330Results from operating activities17,56613,77524,59319,051Finance costs (note 7)1,0333,5742,0802,800Finance income (note 8)(373)(126)(1,639)(132)Net finance cost6603,4484412,668Earnings before income taxes16,90610,32724,15216,383Income tax expense (note 17)5,9584,1288,0445,796Net earnings for the period10,9486,19916,10810,587Other comprehensive income:Foreign currency translation adjustments(57)916(411)95Total comprehensive income$10,891$7,115$15,697$10,682Net earnings per common share:Basic (note 13)$0.55$0.31$0.81$0.54Diluted (note 13)0.550.310.810.53The accompanying notes are an integral part of these unaudited interim consolidated financial statements. SOFTCHOICE CORPORATIONInterim Consolidated Statements of Changes in Equity (In thousands of U.S. dollars)(Unaudited)CumulativeTotalSix-month period endedNumberShareCont- ributedtrans- lationRetainedshare- holders'June 30, 2011of sharescapitalsurplusaccountearningsequityBalance, January 1, 201119,780,039$26,016$2,054$(1,142)$89,569$116,497Total comprehensive incomefor the period:Profit or loss––––16,10816,108Other comprehensive income:Foreign currencytranslation adjustment–––(411)–(411)Total comprehensive incomefor the period–––(411)16,10815,697Trans- actions with shareholdersrecorded directly in equity:Contri- butions by anddistri- butions to owners:Share options exercised1,25026(6)––20Share-based paymenttransactions––1,038––1,038Transfer fromcontri- buted surplus(note 12)52,573461(461)–––53,823487571––1,058Balance, June 30, 201119,833,862$26,503$2,625$(1,553)$105,677$133,252CumulativeTotalSix-month period endedNumberShareCont- ributedtrans- lationRetainedshare- holders'June 30, 2010of sharescapitalsurplusaccountearningsequityBalance, January 1, 201019,759,189$25,842$983$–$69,504$96,329Total comprehensive incomefor the period:Profit or loss––––10,58710,587Other comprehensive income:Foreign currencytranslation adjustment–––95–95Total comprehensive incomefor the period–––9510,58710,682Trans- actions with shareholdersrecorded directly in equity:Contri- butions by anddistri- butions to owners:Share options exercised19,60097–––97Share-based paymenttrans- actions––467––467Transfer fromcontr- ibuted surplus(note 12)–62(62)–––19,600159405––564Balance, June 30, 201019,778,789$26,001$1,388$95$80,091$107,575The accompanying notes are an integral part of these unaudited interim consolidated financial statements.SOFTCHOICE CORPORATIONInterim Consolidated Statements of Cash Flows (In thousands of U.S. dollars)(Unaudited)Three months endedSix months endedJune 30,June 30,2011201020112010Cash provided by (used in):Operating activities:Earnings for the period$10,948$6,199$16,108$10,587Adjustments for:Depreciation of property and equipment1,0476641,7291,441Share-based compensation6763221,038467Income taxes expense5,9584,1288,0445,796Amortization of intangible assets1,1801,5852,7773,420Unrealized foreign currency gain(262)1,682(1,307)172Amortization of contract related assets370329727660Interest expense on financial liabilities4866621,0081,362Loss on disposal of propertyand equipment–––429,4559,37214,01613,360Change in non-cash operatingworking capital (note 16)(17,141)2,253(11,126)12,995Interest paid(479)(617)(1,001)(1,317)2,78317,20717,99735,625Income tax paid(3,988)(2,544)(6,972)(5,980)(1,205)14,66311,02529,645Financing activities:Repayment of loans and borrowings(1,142)(369)(2,418)(1,876)Proceeds from issuance of commonshares10–1097(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)13,7636,18526,928Cash, beginning of period46,09632,24535,75218,601Effect of exchange rate changes on cash131(526)573(47)Cash, end of period$42,510$45,482$42,510$45,482FOR FURTHER INFORMATION PLEASE CONTACT: Eric GardinerMedia ContactManager of Communications416.588.9002 Ext. 2358eric.gardiner@softchoice.comwww.softchoice.com