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Press release from CNW Group

Softchoice Announces First Quarter Earnings

Tuesday, May 14, 2013

Softchoice Announces First Quarter Earnings

19:52 EDT Tuesday, May 14, 2013
  • 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

For further information:

Media Contact

Eric Gardiner 
Manager of Communications 
416.588.9002 Ext. 2358 
eric.gardiner@softchoice.com

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