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Press release from Marketwire

Softchoice Announces Strong Profitability Growth for the Third Quarter of 2011

- Revenue grows 16.3 percent - EBITDA grows 75.7 percent in the quarter - Softchoice announces acquisition of UNIS LUMIN - The Company renegotiates its ABL credit facility for a new five-year term and secures the option for early repayment of its term loan

Tuesday, November 08, 2011

Softchoice Announces Strong Profitability Growth for the Third Quarter of 201117:32 EST Tuesday, November 08, 2011TORONTO, ONTARIO--(Marketwire - Nov. 8, 2011) -Softchoice Corporation (TSX:SO), a leading North American provider of technology solutions and services, today reported its financial results for the third quarter of 2011.For the three-month period ended September 30, 2011, the Company reported revenue of US$227.4 million compared to US$195.5 million for the third quarter of 2010, representing an increase of 16.3 percent. Due to fluctuations in foreign exchange between periods, Softchoice reported a net loss of US$0.47 million compared to net earnings of US$2.1 million for the same quarter the year prior. Adjusting for the impact of foreign exchange gains and losses, net earnings in the quarter amounted to US$2.7 million, or US$0.14 per share (basic and fully diluted), compared to adjusted net earnings of US$0.8 million, or US$0.04 per share (basic and fully diluted) for the third quarter of 2010. Adjusted net earnings per share grew 250.0 percent year-over-year. Microsoft sales demonstrated strong growth, increasing by 46.9 percent in the quarter, while sales of hardware infrastructure solutions and other software grew by 6.7 percent and 4.3 percent, respectively. Softchoice's U.S. operations reported solid growth with revenues increasing 28.1 percent compared to the same period the year prior. "Our performance reflects the traction our expanded telesales organization is now starting to generate for our business," said David MacDonald, President and CEO of Softchoice. "Our increased coverage of the small and medium business segment is fuelling strong gains in our Microsoft market share. This is consistent with our strategy of leveraging our strength in Microsoft as an entry point for the introduction of other value-added solutions and services over time." Gross profit was US$40.7 million in the quarter, representing an increase of 13.7 percent compared to gross profit of US$35.8 million reported for the third quarter of 2010. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 75.7 percent to US$8.0 million delivering a 120 basis point year-over-year increase in EBITDA margin to 3.5 percent."With the acquisition of UNIS LUMIN, one of the country's most-respected networking and managed services companies, we have bolstered our position as Canada's preeminent provider of IT solutions and services," added Mr. MacDonald. "We are delighted to welcome our new team and to take another step in shifting our business toward higher margin projects such as networking and converged infrastructure that emphasize deep expertise in pre-sales, professional services and technical consulting." Softchoice is also pleased to announce that it has renegotiated its existing asset-backed loan agreement for a five-year term reflective of current market rates and covenants. The Company has also secured an option with HSBC Capital to repay its five-year term loan by November 30th, 2011. Management notes that the early retirement of this loan will have a positive effect on the Company's financial performance in 2012. As at September 30, 2011, Softchoice had a net cash position of $34.7 million. Softchoice's interim consolidated financial statements and MD&A are available at and Additional Quarterly Highlights Softchoice announced the acquisition of UNIS LUMIN which greatly expands Softchoice's professional services capabilities while providing the technology foundation to support the Company's future cloud offerings. Softchoice's U.S. operations recorded strong growth with sales of Microsoft software, non-Microsoft software and hardware solutions increasing by 67.7 percent, 22.1 percent, and 6.3 percent, respectively. Softchoice strengthened its Board with the election of Mary Ritchie and Carol S. Perry to its Board of Directors. Softchoice was presented with the 2011 VMware Integration Award by Trend Micro in acknowledgement of the Company's growth and expertise in providing security solutions for virtualized environments. Third Quarter Earnings Call Participant DetailsSoftchoice will host its third-quarter earnings call on November 9, 2011 at 8:00 am 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. Third Quarter Earnings Call Details Local Dial in number: 416 800 1066Toll Free Dial in number: 1 866 212 4491Webcast URL: ensure participation, please dial in at least 10 minutes prior to the start of the conference at 8:00 am EDT.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 November 10, 2011.About SoftchoiceAs 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 StatementsThis 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 CORPORATIONThree-month and nine-month periods ended September 30, 2011 and 2010(Unaudited)SOFTCHOICE CORPORATIONInterim Consolidated Statements of Financial Position (In thousands of U.S. dollars)(Unaudited)September 30,December 31,20112010AssetsCash$44,012$35,752Trade and other receivables (note 8)207,855224,168Inventory1,237881Deferred costs1,7137,082Prepaid expenses and other assets3,2032,881Total current assets258,020270,764Restricted cash (note 7)-500Long-term accounts receivable (note 8)7782,771Property and equipment5,6475,748Goodwill11,10911,383Intangible assets37,01041,155Deferred tax assets (note 15)19,20619,023Total non-current assets73,75080,580Total assets$331,770$351,344Liabilities and Shareholders' Equity Trade and other payables$183,312$217,888Provisions67998Loans and borrowings (note 9)3,9673,961Deferred lease inducements292193Deferred revenue2,1681,899Income taxes payable1,8702,320Total current liabilities192,288226,359Deferred lease inducements636217Loans and borrowings (note 9)5,3098,271Total non-current liabilities5,9458,488Total liabilities198,233234,847Capital stock (note 10)26,58526,016Contributed surplus2,8132,054Retained earnings105,20589,569Accumulated other comprehensive loss(1,066)(1,142)Total shareholders' equity133,537116,497Total liabilities and shareholders' equity $ 331,770 $ 351,344Related party transactions (note 12) Subsequent events (note 17)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 endedNine months endedSeptember 30,September 30,2011201020112010Net sales$227,364$195,484$730,028$630,371Cost of sales186,649159,656589,887511,162Gross profit40,71535,828140,141119,209Expenses:Selling and marketing (note 4)23,66623,55176,66568,927Administrative (note 4)11,25910,03833,17129,657Other income-(15)-(722)Other expenses254-1764235,17933,574110,01297,904Results from operating activities5,5362,25430,12921,305Finance costs (note 5)5,1211,1975,6073,541Finance income (note 6)(2)(1,555)(47)(1,231)Net finance costs (income)5,119(358)5,5602,310Earnings before income taxes4172,61224,56918,995Income tax expense (note 15)8895188,9336,314Net earnings (loss) for the period(472)2,09415,63612,681Other comprehensive income (loss):Foreign currency translation adjustments487(604)76(509)Total comprehensive income$15$1,490$15,712$12,172Net earnings (loss) per common share:Basic (note 11)$(0.02)$0.11$0.79$0.64Diluted (note 11)(0.02)0.110.790.64The 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)Nine-month period ended September 30, 2011Number of shares Share capitalContributed surplusCumulative translation accountRetained earningsTotal shareholders' equity Balance, January 1, 201119,780,039$26,016$2,054$(1,142)$89,569$116,497Total comprehensive income for the period:Profit or loss––––15,63615,636Other comprehensive income:Foreign currency translation adjustment – – – 76 – 76Total comprehensive income for the period – – 76 15,636 15,712Transactions with shareholders recorded directly in equity:Contributions by and distributions to owners:Share options exercised8,599108(41)––67Share-based payment transactions – – 1,261 – – 1,261Deferred share units exercised 52,573 461 (461) – – –61,172569759––1,328Balance, September 30, 201119,841,211$26,585$2,813$(1,066)$105,205$133,537 Nine-month period ended September 30, 2010 Number of shares Share capital Contributed surplusCumulative translation account Retained earningsTotal shareholders' equityBalance, January 1, 201019,759,189$25,842$983$–$69,504$96,329Total comprehensive income for the period:Profit or loss––––12,68112,681Other comprehensiveincome:Foreign currency translation adjustment – – – (509) – (509)Total comprehensive income for the period – – (509) 12,681 12,172Transactions with shareholders recorded directly in equity:Contributions by and distributions to owners:Share options exercised20,850174(68)––106Share-based payment transactions––796––796Deferred share units exercised – – – – – –20,850174728––902Balance, September 30, 201019,780,039$26,016$1,711$(509)$82,185$109,403The accompanying notes are an integral part of these unaudited interim consolidated financial statements.To view a link of the Interim Consolidated Statements of Changes in Equity, please visit the following link: CORPORATIONInterim Consolidated Statements of Cash Flows (In thousands of U.S. dollars)(Unaudited)Three months endedNine months endedSeptember 30,September 30,2011201020112010Cash provided by (used in):Operating activities:Net earnings (loss) for the period$(472)$2,094$15,636$12,681Adjustments for:Depreciation of property and equipment 663 663 2,392 2,104Share-based transactions2243291,261796Income taxes expense8895188,9336,314Amortization of intangible assets1,5281,6414,3055,061Unrealized foreign currency loss (gain)3,460(1,064)2,154(892)Amortization of deferred financing cost3693491,0961,009Interest expense on financial liabilities4346951,4422,057Loss on disposal of property and equipment - - - 427,0955,22537,21929,172Change in non-cash operating working capital (note 14) (555) (16,758) (11,681) (3,763)6,540(11,533)25,53825,409Interest paid(442)(669)(1,443)(1,986)Income taxes paid(2,538)(4,539)(9,510)(10,519)3,560(16,741)14,58512,904Financing activities:Repayment of loans and borrowings(278)(1,453)(2,696)(3,329)Proceeds from issuance of common shares 57 9 67 106(221)(1,444)(2,629)(3,223)Investing activities:Purchase of property and equipment(299)(379)(1,716)(892)Purchase of intangible assets(651)(349)(1,666)(774)Restricted cash500-500-(450)(728)(2,882)(1,666)Net increase (decrease) in cash during the period2,889(18,913)9,0748,015Cash, beginning of period42,51045,48235,75218,601Effect of exchange rate changes on cash(1,387)245(814)198Cash, end of period$44,012$26,814$44,012$26,814The accompanying notes are an integral part of these unaudited interim consolidated financial statements.FOR FURTHER INFORMATION PLEASE CONTACT: Softchoice CorporationMedia Contact:Eric GardinerManager of Communications416.588.9002 Ext.