Business & Finance
Business and Finance
Business and Finance 
Wed, November 11, 2009
Tue, November 10, 2009
TORONTO, ONTARIO--(Marketwire - Nov. 10, 2009) - Softchoice Corporation (TSX:SO), a leading North American provider of IT solutions and services, today reported financial results for the third quarter of 2009.
For the three-month period ended September 30, 2009, Softchoice reported net earnings of US$4.9 million or US$0.28 per share (basic and fully diluted), compared to a net loss of $1.7 million recorded over the same period of the prior year. Net earnings in the quarter were positively affected by an unrealized foreign exchange gain as the Canadian dollar appreciated by 12 percent compared to the first quarter of this year. Adjusted earnings per share would have been US$0.03 per share (basic) compared to a loss of $0.05 per share (basic) for the same period last year. For the first nine months of 2009, net earnings were US$15.2 million (US$0.87 per share basic and fully diluted) compared to US$7.5 million (US$0.43 per share basic and fully diluted) recorded for the first nine months of 2008.
Softchoice reported revenues of US$218.7 million during the third quarter of 2009, representing a decline of 21 percent compared to the same period last year. Eliminating the foreign exchange impact, revenues declined by 19 percent compared to the same period last year, while gross profit declined by 12 percent. Management believes that the declines in the Company's revenue and gross profit resulting from the economic downturn began to stabilize in the third quarter. The actions taken last fall to resize the Company's cost base and the subsequent investment of cash to retire debt have served to position Softchoice for an expected recovery in the North American information technology industry.
"Despite very difficult industry dynamics we have increased operating earnings by 96 percent on a year over year basis and our early and aggressive cost-actions have paid dividends in productivity and bottom line results," said David MacDonald, President and CEO of Softchoice. "Moreover, we have retained our strong branch network and sales force and are well positioned to capitalize on future growth opportunities."
On a year-over-year basis, Softchoice's balance sheet has continued to strengthen. The Company has used proceeds from its strong cash flows to reduce its outstanding debt from $105.4 million at the beginning of the first quarter of the prior year to $14.5 at the end of the third quarter of the current year.
"The speed and durability of the economic recovery remains uncertain; however, buoyed by major product releases, including Microsoft Windows 7 and Cisco's Unified Computing System, we share the views of analysts like Gartner that the technology sector will lead other industries out of the recession," added Mr. MacDonald. "As a result, we've been very careful in adjusting our cost base to ensure that Softchoice does not sacrifice our ability to work with customers face to face in more than 40 local markets. This means that as IT spending regains strength in the U.S., we will be well positioned in the early stages to create additional leverage for our bottom line."
Third-Quarter Highlights
- On October 29, Softchoice received top honors for Green IT Solution of the Year and Best Channel Marketing Initiative at the 2009 Computer Dealer News Channel Elite Awards.
- During the quarter, Softchoice successfully secured Cisco's Advanced Data Center Networking Infrastructure Specialization in Canada, allowing the Company to meet a wide range of customer needs around the design and implementation of high-performance data center solutions.
- Softchoice was named to the 2008 Channel Reseller News Fast Growth 100 list, the definitive listing of North America's fastest-growing IT solutions and services providers.
- At the end of the quarter, Softchoice released a new IT assessment specifically designed to help organizations plan for the deployment of the new Windows 7 operating system from Microsoft.
Third-Quarter Earnings Call Details
Softchoice Corporation will be hosting its 2009 third-quarter earnings call on Tuesday, November 10, at 5:00 p.m. Eastern Time.
The call will be hosted by David MacDonald, Softchoice's President and CEO, and Chief Financial Officer David Long. The conference call will begin with a brief presentation followed by a question-and-answer session.
Participant Information
Local Toronto Access: (416) 981-9000
Toll-free: (800) 745-9830
Conference Reference ID: 21441054
Webcast URL:
[ http://events.snwebcastcenter.com/softchoice/20091110/ ]
To ensure participation, please dial in at least 10 minutes prior to the start of the conference at 5:00 p.m. Eastern Time.
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 11, 2009.
About Softchoice
As one of North America's leading providers of technology solutions and services, Softchoice helps businesses and organizations of all sizes to select, acquire and manage their software and hardware technology resources. Softchoice offers a full range of capabilities, including face-to-face consultations and IT asset management services designed to help customers save time, money and risk in IT procurement. Softchoice currently has 883 employees operating from more than 40 branch offices located in major cities across the U.S. 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.
Softchoice Corporation
Interim Consolidated Balance Sheets
(in thousands of U.S. dollars)
September 30, December 31,
2009 2008
(unaudited)
ASSETS
Current assets
Cash $ 11,625 $ 14,098
Accounts receivable,
net of allowance for doubtful
accounts of $3,477
(December 31, 2008 - $2,759) 150,908 241,581
Inventory 2,674 1,722
Prepaid expenses and other assets 2,139 8,056
Future income taxes 2,029 2,095
Income taxes recoverable - 254
-------------------------------
169,375 267,806
Property and equipment (note 2) 6,825 7,252
Goodwill (note 3) 10,917 10,172
Intangible assets (notes 2 and 3) 46,381 49,923
Long-term accounts receivable 181 830
Deferred costs 1,396 2,377
Future income taxes 17,159 17,401
-------------------------------
$ 252,234 $ 355,761
-------------------------------
-------------------------------
LIABILITIES
Current liabilities
Bank indebtedness (note 4) $ 2,694 $ 40,376
Accounts payable and accrued liabilities 155,945 227,884
Current portion of deferred revenue 3,827 5,033
Income taxes payable 2,930 -
-------------------------------
165,396 273,293
-------------------------------
Long-term liabilities
Deferred lease inducements 508 483
Deferred revenue 181 830
Long-term debt (note 4) 11,761 13,717
-------------------------------
12,450 15,030
-------------------------------
Total liabilities 177,846 288,323
-------------------------------
-------------------------------
Shareholders' equity
Capital stock (note 5) 9,827 9,827
Contributed surplus (note 6) 996 2,495
Retained earnings 57,165 42,000
Accumulated other comprehensive income(i) 6,400 13,116
-------------------------------
63,565 55,116
-------------------------------
Total shareholders' equity 74,388 67,438
-------------------------------
$ 252,234 $ 355,761
-------------------------------
-------------------------------
Contingencies (note 7)
See accompanying notes to interim consolidated financial statements.
(i) Accumulated other comprehensive income is comprises of foreign currency
translation adjustments.
Softchoice Corporation
Interim Consolidated Statements of Earnings and Retained Earnings
(in thousands of U.S. dollars except per share information)
(Unaudited)
3 month period 3 month period 9 month period 9 month period
ended ended ended ended
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
Revenue
Software $ 119,455 $ 139,085 $ 425,247 $ 484,048
Hardware 93,431 128,137 260,191 381,511
Agency fees 5,842 9,134 30,921 43,747
--------------------------------------------------------------
218,728 276,356 716,359 909,306
--------------------------------------------------------------
Cost of sales 187,915 240,892 613,580 781,133
--------------------------------------------------------------
Gross profit 30,813 35,464 102,779 128,173
--------------------------------------------------------------
Expenses
Salaries and
benefits 19,229 22,520 56,905 73,119
Selling,
general
and administrative 6,716 9,183 23,105 28,255
Amortization of
property and
equipment 762 720 2,185 2,013
Amortization
of intangible
assets
(note 3) 1,973 1,955 5,930 5,881
--------------------------------------------------------------
28,680 34,378 88,125 109,268
--------------------------------------------------------------
Operating
income 2,133 1,086 14,654 18,905
Foreign currency
exchange (gain)
loss (6,230) 1,108 (10,778) 1,270
Interest expense 1,490 1,703 4,644 5,035
Other 15 495 (493) (13)
--------------------------------------------------------------
Earnings (loss)
before income
taxes 6,858 (2,220) 21,281 12,613
--------------------------------------------------------------
Provision for
(recovery of)
income taxes
Current 2,019 (884) 5,672 4,591
Future (73) 329 444 559
--------------------------------------------------------------
1,946 (555) 6,116 5,150
--------------------------------------------------------------
Net earnings
(loss) for
the period 4,912 (1,665) 15,165 7,463
Retained
earnings
- Beginning
of period 52,253 67,208 42,000 61,587
Dividends
(note 8) - (1,692) - (5,199)
--------------------------------------------------------------
Retained
earnings
- End of
period $ 57,165 $ 63,851 $ 57,165 $ 63,851
--------------------------------------------------------------
--------------------------------------------------------------
Net earnings
(loss) per
common share
(note 9)
Basic $ 0.28 $ (0.09) $ 0.87 $ 0.43
Diluted $ 0.28 $ (0.09) $ 0.87 $ 0.43
Basic weighted
average number
of common shares
outstanding 17,496,807 17,527,465 17,496,807 17,463,868
Diluted weighted
average number
of common shares
outstanding 17,553,515 17,596,235 17,512,165 17,546,990
See accompanying notes to interim consolidated financial statements.
Softchoice Corporation
Interim Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)
(Unaudited)
3 month period 3 month period 9 month period 9 month period
ended ended ended ended
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
Cash provided
by (used in)
Operating activities
Net earnings
(loss) for the
period $ 4,912 $ (1,665) $ 15,165 $ 7,463
Items not affecting
cash
Amortization of
property and
equipment 762 720 2,185 2,013
Stock-based
(recovery)
compensation
(note 6) 54 54 (1,499) 1,100
Future income
taxes (73) 329 444 559
Amortization of
intangible assets
(note 3) 1,973 1,955 5,930 5,881
Unrealized foreign
currency (gain)
loss (5,240) (381) (7,761) 286
(Gain) loss on
disposal of
property and
equipment - - (2) 5
--------------------------------------------------------------
2,388 1,012 14,462 17,307
Net change in
non-cash
working capital
items relating
to operations
(note 13) 22 31,653 27,347 3,665
--------------------------------------------------------------
2,410 32,665 41,809 20,972
--------------------------------------------------------------
Financing
activities
Repayment of
bank
indebtedness
due to
refinancing
(note 4) (5,516) - (40,317) -
Increase in
bank
indebtedness
due to
refinancing
(note 4) - - 1,627 -
Repayment of
long-term debt
due to
refinancing
(note 4) (2,455) - (13,688) -
Increase in
long-term debt
due to
refinancing
(note 4) - - 9,368 -
(Decrease)
increase in
bank
indebtedness - (33,891) - 26,107
Increase
(decrease) in
long-term debt - 779 - (2,120)
Payment of cash
dividend - (1,692) - (5,199)
Proceeds from
issuance of
common shares
(note 5) - 2 - 565
--------------------------------------------------------------
(7,971) (34,802) (43,010) 19,353
--------------------------------------------------------------
Investing
activities
Purchase of
property and
equipment (254) (1,753) (1,128) (3,575)
Purchase of
intangible
assets (558) (366) (932) (965)
Proceeds on
disposal of
property and
equipment 32 51 61 46
Acquisition,
net of cash
acquired - 1,145 - (39,254)
--------------------------------------------------------------
(780) (923) (1,999) (43,748)
--------------------------------------------------------------
Effect of
exchange
rate changes
on cash 687 (35) 727 (170)
--------------------------------------------------------------
Decrease in
cash during
the period (5,654) (3,095) (2,473) (3,593)
Cash
- Beginning
of period 17,279 10,565 14,098 11,063
--------------------------------------------------------------
Cash
- End
of period $ 11,625 $ 7,470 $ 11,625 $ 7,470
--------------------------------------------------------------
--------------------------------------------------------------
Interest paid $ 1,029 $ 703 $ 3,001 $ 3,063
Income taxes
paid $ (6) $ 358 $ 2,525 $ 4,256
Softchoice Corporation
Interim Consolidated Statements of Comprehensive Income and
Accumulated Other Comprehensive Income
(in thousands of U.S. dollars)
(Unaudited)
3 month period 3 month period 9 month period 9 month period
ended ended ended ended
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
--------------------------------------------------------------
Comprehensive
Income
Net earnings
(loss) for
the period $ 4,912 $ (1,665) $ 15,165 $ 7,463
Foreign
currency
translation
adjustment (3,921) 2,299 (6,716) 3,362
--------------------------------------------------------------
Comprehensive
income $ 991 $ 634 $ 8,449 $ 10,825
--------------------------------------------------------------
--------------------------------------------------------------
Accumulated
other
comprehensive
income
Balance
- Beginning
of period $ 13,116 $ 2,550
Foreign currency
translation
adjustment (6,716) 3,362
-----------------------------
Balance
- End of period $ 6,400 $ 5,912
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