Softchoice Q2 Net Income Increases 53 Percent



    
    -   Q2 EPS up 53 percent
    -   Gross profit grows 29 percent
    -   Hardware revenues increase 15 percent
    -   Employee productivity expands 29 percent
    

    TORONTO, Aug. 13 /CNW/ - Softchoice Corp. (TSX: SO), a leading North
American provider of technology products and services, today announced revenue
and record net income results for the second quarter of 2007.
    For the three-month period ended June 30, 2007, the Company reported
record net income of US$10.1 million or US$0.58 per share basic (US$0.58 per
share fully diluted) on revenue of US$182.5 million versus net income of
US$6.6 million or US$0.38 per share basic (US$0.38 per share fully diluted) on
revenue of US$186.9 million recorded during the same period in 2006. Revenue
declined by 2 percent, while net income increased by 53 percent, reflecting
the impact from the sale of Microsoft Enterprise Agreement (EA) 6.0 licensing
in the quarter and continued margin improvements across all product lines.
    On a trailing twelve-month basis, year-over-year net income has grown by
47 percent while revenue increased by 3 percent.
    "We are delighted to report another strong set of financial results,
including record net income growth for the quarter," said David MacDonald,
President and CEO of Softchoice. "The increases we've seen in gross profit,
the growing contribution of hardware sales, our gains in market share,
particularly in the U.S., and continued improvements in sales productivity are
a further validation of our focus on deepening customer relationships and
helping organizations improve the manageability of their IT investments. The
efforts of our people are making a significant difference to our customers and
to the continued strength of our bottom-line results."

    Year-to-Date Results
    --------------------
    For the six-month period ended June 30, 2007, the Company reported net
income of US$13.7 million or US$0.79 per share basic (US$0.79 per share fully
diluted) on revenue of US$351.5 million versus net income of US$8.4 million or
US$0.49 per share basic (US$0.48 per share fully diluted) on revenue of
US$347.6 million for the same period in 2006. Revenue increased by 1 percent,
while net income and earnings per share grew by 64 percent and by 61 percent,
respectively, over the same period the year prior.
    During the first half of 2007, hardware sales increased by 14 percent
(15 percent in the three-month period). The number of hardware orders
processed during this period increased by 10 percent, while the average gross
profit per order increased by 16 percent. The increase in gross profit is a
reflection of product mix as well as the Company's focus on providing
sophisticated hardware solutions to its corporate customers.
    "Ramping up our hardware business and supporting these offerings with an
increasingly robust set of life-cycle services remain a key priority," added
Mr. MacDonald. "We expect that with incremental investments in sales personnel
and our focus on acquiring new customers, we will extend the reach of our
offerings in the market for the balance of the year while enhancing the
customer experience for those already doing business with Softchoice."
    The second quarter has emerged as the Company's strongest quarter since
it is also Microsoft's fiscal year-end. The growth of EA licensing fees, both
as a total number and as a percentage of gross profit, has contributed to the
generation of the significant growth in profits during the period. For the
balance of the year, fewer EAs are available for renewal and, therefore, the
growth in agency fees and agency fees as a percentage of gross profit are
expected to be more moderate in comparison to the levels realized so far this
year.
    The directors of Softchoice have declared a dividend in the amount of
$0.10 per common share payable on September 29, 2007, to shareholders of
record at the close of business on September 14, 2007.

    Quarterly Highlights

    
    -   Softchoice continues to increase its share of the U.S. Microsoft
        software licensing market, outpacing the average growth rate of the
        channel community and leading the industry in EA licensing sales.
    -   On a consolidated basis, Gross Profit per Sales Employee increased
        41 percent in the first half of 2007 compared to the same period the
        prior year. The increase reflects the impact of initiatives to
        increase productivity levels across the organization.
    -   Revenues from the sale of Softchoice's TechCheck(TM) assessment
        services increased 167 percent in the quarter, pointing to strong
        demand for this service among customers. To date Softchoice has
        helped more than 500 organizations reduce the cost, risk and
        complexity of managing IT resources.
    -   Softchoice successfully achieved Diamond Partner status with HP
        Canada. This achievement is noteworthy given the fact that the
        Company attained this top-tier designation faster than any other
        organization of its kind.
    -   Softchoice was authorized as a Corporate Tier Reseller by VMware, the
        world's leading source for virtualization software. The authorization
        gives Softchoice access to the entire VMware product category line,
        as well as to world-class consulting services to help customers
        accelerate virtualization implementations within their organizations.
    -   For the sixth consecutive year, Softchoice was presented with the
        Microsoft Operational Excellence Award for its record of maintaining
        100 percent accuracy in the processing of software licensing
        contracts.
    

    Quarterly financial statements, annual audited statements and the MD&A
are available on SEDAR or by visiting www.softchoice.com.

    Second-Quarter Results Conference Call

    Softchoice will hold a conference call to discuss its second-quarter
results today at 11 a.m. ET.
    Dave MacDonald, Softchoice's President and CEO, and Anne Brace,
Softchoice's Chief Financial Officer, will host the call. The conference call
will begin with a brief presentation followed by a question-and-answer
session.

    To participate in the conference:

    Local/International: 416-915-9608
    North American Toll-Free: 1-866-214-7077

    To listen to the call and view the Web presentation:
    http://events.onlinebroadcasting.com/softchoice/081307/index.php

    To ensure participation, please dial in at least 10 minutes prior to the
start of the conference at 11 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 14, 2007.

    About Softchoice Corporation

    As one of North America's leading providers of technology products 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. In 2006, Softchoice was named Software
Value Added Reseller (VAR) of the Year by VAR Business magazine. Softchoice
currently has 658 employees operating from more than 30 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, among other
things, plans and timing for the introduction and enhancement of our services,
and other expectations, intentions and plans contained in this press release
that are not historical fact. When used in this press release, the words
"anticipate," "expect" 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
                         Consolidated Balance Sheets
                         ---------------------------
                        (in thousands of U.S. dollars)

                                                     June 30,    December 31,
                                                       2007          2006
                                                   (unaudited)     (audited)

    ASSETS
    Current assets
      Cash                                         $    17,117   $     7,328
      Accounts receivable                              134,044       151,738
        net of allowance for doubtful accounts
         of $2,238 (December 31, 2006 - $1,804)
      Inventories                                          344           240
      Prepaids and other assets                          3,036         2,125
      Future income taxes                                1,506           997
                                                  ---------------------------
                                                       156,047       162,428


    Property and equipment                               7,274         6,280
    Goodwill (note 4)                                   12,993        12,465
    Intangible assets (note 4)                           4,239         4,603
    Future income taxes                                  1,548         1,478
                                                  ---------------------------

                                                   $   182,101   $   187,254
                                                  ---------------------------
                                                  ---------------------------

    LIABILITIES
    Current liabilities
      Bank indebtedness (note 5)                   $     9,624   $    10,285
      Accounts payable and accrued liabilities          99,628       119,687
      Income taxes payable                               4,473         1,155
                                                  ---------------------------
                                                       113,725       131,127

    Shareholders' equity
      Capital stock (note 6)                             8,514         8,222
      Contributed surplus (note 7)                         768           482
      Retained earnings(*)                              56,761        46,136
      Accumulated other comprehensive
       income(*) (note 2)                                2,333         1,287
                                                  ---------------------------
                                                        68,376        56,127
                                                  ---------------------------

                                                   $   182,101   $   187,254
                                                  ---------------------------
                                                  ---------------------------
    Contingencies (note 8)

    Quarterly financial statements, annual audited statements and the MD&A
    are available on SEDAR or by visiting www.softchoice.com.

    (*) Accumulated comprehensive income is comprised of retained earnings
        and accumulated other comprehensive income



                           Softchoice Corporation
          Consolidated Statements of Earnings and Retained Earnings
          ---------------------------------------------------------
         (in thousands of U.S. dollars except per share information)
                                 (Unaudited)

                         3 month       3 month       6 month       6 month
                      period ended  period ended  period ended  period ended
                         June 30,      June 30,      June 30,      June 30,
                           2007          2006          2007          2006
    Revenue
      Software         $   114,548   $   132,104   $   226,086   $   243,883
      Hardware              48,513        42,343        96,613        84,835
      Agency Fees           19,482        12,456        28,796        18,872
                      --------------------------- ---------------------------
                           182,543       186,903       351,495       347,590

    Cost of sales          144,175       157,170       288,371       296,929
                      --------------------------- ---------------------------

    Gross profit            38,368        29,733        63,124        50,661

    Expenses
      Salaries and
       benefits             14,221        12,177        25,518        23,539
      Selling, general
       and administrative    6,214         6,004        12,413        11,506
      Amortization of
       property and
       equipment               797           535         1,477         1,093
      Amortization of
       intangible assets       378           392           754           773
                      --------------------------- ---------------------------
                            21,610        19,108        40,162        36,911
                      --------------------------- ---------------------------

    Operating income        16,758        10,625        22,962        13,750

      Interest expense         238            81           671           170
      Other                   (220)         (204)         (474)         (156)
                      --------------------------- ---------------------------

    Earnings before
     income taxes           16,740        10,748        22,765        13,736
                      --------------------------- ---------------------------

    Provision for
     income taxes
      Current                6,990         4,123         9,510         5,394
      Future                  (338)           27          (491)          (64)
                      --------------------------- ---------------------------
                             6,652         4,150         9,019         5,330

    Net earnings for
     the period             10,088         6,598        13,746         8,406

    Retained earnings
     - Beginning of
      period                48,302        36,586        46,136        36,250
      Dividends (note 9)    (1,629)       (1,543)       (3,121)       (3,015)
                      --------------------------- ---------------------------
    Retained earnings
     - End of period   $    56,761   $    41,641   $    56,761   $    41,641
                      --------------------------- ---------------------------
                      --------------------------- ---------------------------

    Net earnings per
     common share
     (note 10)
      Basic            $      0.58   $      0.38   $      0.79   $      0.49
      Diluted          $      0.58   $      0.38   $      0.79   $      0.48

      Basic weighted
       average number
       of shares
       outstanding      17,309,950    17,204,376     17,291,882   17,186,921
      Diluted weighted
       average number
       of shares
       outstanding      17,485,961    17,382,637     17,458,288   17,365,032

    Quarterly financial statements, annual audited statements and the MD&A
    are available on SEDAR or by visiting www.softchoice.com.



                           Softchoice Corporation
                    Consolidated Statements of Cash Flows
                    -------------------------------------
                       (in thousands of U.S. dollars)
                                 (Unaudited)

                         3 month       3 month       6 month       6 month
                      period ended  period ended  period ended  period ended
                         June 30,      June 30,      June 30,      June 30,
                           2007          2006          2007          2006

    Cash provided by
     (used in)

    Operating activities
    Net earnings for
     the period        $    10,088   $     6,598   $    13,746   $     8,406
    Items not
     affecting cash
      Amortization of
       property and
       equipment               797           535         1,477         1,093
      Stock-based
       compensation            332             -           332            (6)
      Future income taxes     (338)           44          (491)          (64)
      Amortization of
       intangible
       assets (note 4)         378           392           754           773
      Unrealized foreign
       currency loss (gain)    (16)          298            71           212
      Loss on capital
       assets                   24             -            24             -
      Realized foreign
       exchange loss             -            68             -            68
                      ------------- ------------- ------------- -------------
                            11,265         7,935        15,913        10,482

    Net change in
     non-cash working
     capital items
     relating to
     operations (note 13)   16,319       (12,417)          234        (4,681)
                      ------------- ------------- ------------- -------------

                            27,584        (4,482)       16,147         5,801
                      ------------- ------------- ------------- -------------

    Financing activities
      Repayment of bank
       indebtedness        (11,320)       (1,558)       (1,681)       (7,560)
      Payment of cash
       dividend             (1,629)       (1,543)       (3,121)       (3,015)
      Proceeds from
       issuance of common
       shares (note 6)         148            74           246           195
                      ------------- ------------- ------------- -------------
                           (12,801)       (3,027)       (4,556)      (10,380)
                      ------------- ------------- ------------- -------------

    Investing activities
      Purchase of
       property and
       equipment              (959)       (1,384)       (1,984)       (1,952)
      Notes receivable           -           109             -         1,912
                      ------------- ------------- ------------- -------------
                              (959)       (1,275)       (1,984)          (40)
                      ------------- ------------- ------------- -------------

    Effect of exchange
     rate changes on
     cash                      137           278           182           269
                      ------------- ------------- ------------- -------------

    Increase (decrease)
     in cash                13,961        (8,506)        9,789        (4,350)

    Cash - Beginning
     of period               3,156        10,953         7,328         6,797
                      ------------- ------------- ------------- -------------

    Cash - End of
     period            $    17,117   $     2,447   $    17,117   $     2,447
                      ------------- ------------- ------------- -------------
                      ------------- ------------- ------------- -------------

    Interest paid      $       166   $        72   $       348   $       207
    Taxes paid         $     4,234   $     4,292   $     6,231   $     5,627

    Quarterly financial statements, annual audited statements and the MD&A
    are available on SEDAR or by visiting www.softchoice.com



                           Softchoice Corporation
               Consolidated Statement of Shareholder's Equity
               ----------------------------------------------
           (in thousands U.S. dollars except per share information)
                                 (Unaudited)

                  -----------------------------------------------------------
                                       QUARTERLY SUMMARY

                                                       Accumulated
                                                             Other
                     Total                                  Compre-
                     Share-             Contri-            hensive    Compre-
                   holders'  Capital     buted  Retained    Income/  hensive
                    Equity     Stock   Surplus  Earnings     (loss)   Income
                  -------------------------------------------------
    Balance at
     December 31,
     2005           45,563     7,615       612    36,250     1,086

    Exercise of
     stock options     121       121
    Cash dividends  (1,471)                       (1,471)
    Stock based
     compensation
     expense            (6)                 (6)
    Transfer from
     contributed
     surplus             -        28       (28)
    Net earnings     1,807                         1,807               1,807
    Foreign
     currency
     translation
     adjustment        185                                     185       185
                                                                    ---------
    Comprehensive
     income                                                            1,992
                                                                    ---------
                                                                    ---------
                  -----------------------------------------------------------
    Balance at
     March 31,
     2006           46,199     7,764       578    36,586     1,271

    Exercise of
     stock options      74        74
    Cash dividends  (1,543)                       (1,543)
    Transfer from
     contributed
     surplus             -        18       (18)
    Net earnings     6,598                         6,598               6,598
    Foreign
     currency
     translation
     adjustment        526                                     526       526
                                                                    ---------
    Comprehensive
     income                                                            7,124
                                                                    ---------
                                                                    ---------
                  -----------------------------------------------------------
    Balance at
     June 30,
     2006           51,854     7,856       560    41,641     1,797

    Exercise of
     stock options     259       259
    Cash dividends  (1,547)                       (1,547)
    Transfer from
     contributed
     surplus             -        75       (75)
    Net earnings     1,234                         1,234               1,234
    Foreign
     currency
     translation
     adjustment         (2)                                     (2)       (2)
                                                                    ---------
    Comprehensive
     income                                                            1,232
                                                                    ---------
                                                                    ---------
                  -----------------------------------------------------------
    Balance at
     September 30,
     2006           51,798     8,190       485    41,328     1,795

    Exercise of
     stock options      29        29
    Cash dividends  (1,483)                       (1,483)
    Transfer from
     contributed
     surplus             -         3        (3)
    Net earnings     6,291                         6,291               6,291
    Foreign
     currency
     translation
     adjustment       (508)                                   (508)     (508)
                                                                    ---------
    Comprehensive
     income                                                            5,783
                                                                    ---------
                                                                    ---------
                  -----------------------------------------------------------
    Balance at
     December 31,
     2006           56,127     8,222       482    46,136     1,287

    Exercise of
     stock options      98        98
    Cash dividends  (1,492)                       (1,492)
    Transfer from
     contributed
     surplus             -         7        (7)
    Net earnings     3,658                         3,658               3,658
    Foreign
     currency
     translation
     adjustment        123                                     123       123
                                                                    ---------
    Comprehensive
     income                                                            3,781
                                                                    ---------
                                                                    ---------
                  -----------------------------------------------------------
    Balance at
     March 31,
     2007           58,514     8,327       475    48,302     1,410

    Exercise of
     stock options     148       148
    Cash dividends  (1,629)                       (1,629)
    Stock based
     compensation
     expense           332                 332
    Transfer from
     contributed
     surplus             -        39       (39)
    Net earnings    10,088                        10,088              10,088
    Foreign
     currency
     translation
     adjustment        923                                     923       923
                                                                    ---------
    Comprehensive
     income                                                           11,011
                                                                    ---------
                                                                    ---------
                  -----------------------------------------------------------
    Balance at
     June 30,
     2007           68,376     8,514       768    56,761     2,333
                  -----------------------------------------------------------
    




For further information:

For further information: Anne Brace, Chief Financial Officer, Softchoice
Corporation, (416) 588-9986, investor_relations@softchoice.com; Eric Gardiner,
Softchoice Corporation, (416) 588-9002 x2358, Contact Softchoice Corporate
Communications

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