Softchoice Reports Q4 Earnings

    -   Q4 revenue grows 26 percent;
    -   Q4 Gross profit grows 18 percent
    -   Q4 EBITDA grows by 5 percent
    -   Net loss of $21.9 million reported after a goodwill impairment charge
        of $43.6 million ($26.6 million after taxes)
    -   Integration of three acquired companies now complete
    -   Long term credit facilities renewed and expanded

    TORONTO, Feb. 11 /CNW/ - Softchoice Corporation (TSX: SO), a leading
North American provider of technology solutions and services, today reported
financial results for the fourth quarter and twelve-months ended December 31,
    For the three month period ending December 31, 2008, the Company reported
revenue of US$335.0 million, a 26 percent increase over the same period last
year. Gross profit increased by 18 percent to US$43.7 million and EBITDA(1)
increased by 5 percent to US$10.5 million compared to the same period last
year. EBITDA(1) includes $2.8 million in resizing and bank refinancing costs.
    The Company wrote-off $43.6 million in goodwill. This is a non-cash
charge that does not affect our debt covenant compliance, cash flows or the
ongoing results of operations. This write-off is required as a result of the
broad decline in market price of the Company's shares experienced in the
fourth quarter and does not reflect our expected return on the investment in
these acquisitions.
    As a result of this charge, the Company recorded a net loss of $21.9
million in the quarter. Earnings per share decreased to a loss of US($1.25)
basic (US($1.25) fully diluted) compared to earnings per share of US$0.30
basic (US$0.30 fully diluted) reported in the fourth quarter of 2007.
    Excluding the write-down for goodwill, earnings in the quarter were $4.8
million, a decline of 9 percent compared to fourth quarter earnings in 2007 of
$5.2 million.
    "Delivering a 5 percent increase in EBITDA(1) in the fourth quarter of
2008 tells two important stories," noted David MacDonald, Softchoice President
and CEO. "First, it underscores the Company's increased scale and post
integration growth potential. Second, it shows the resilience of our business
model in the face of the current economic slowdown."
    For the year ended December 31, 2008, Softchoice reported revenue of
US$1.2 billion, a 60 percent increase over the same period last year. Gross
profit increased by 37 percent to US$171.8 million and EBITDA(1) decreased by
13 percent to US$36.1 million compared to the prior period. Net income for the
period declined to a loss of US$14.4 million from earnings of US$22.0 million
reported in 2007. Earnings per share amounted to a loss of US($0.82) basic
(US($0.82) fully diluted) compared to US$1.27 basic (US$1.25 fully diluted)
reported in 2007. If the goodwill impairment charge is excluded, net earnings
for the year would have been $12.3 million, compared to $22.0 million earned
in 2007.
    "At the beginning of 2008, our objective was to move quickly and
effectively to integrate three acquisitions into the Softchoice operating
platform and culture," added. Mr. MacDonald. "I am very pleased with the
success we achieved over these last twelve months - from retaining customers
and key employees, to taking costs out of the system. As a result, Softchoice
has built the most efficient and diversified platform in the industry with the
scalability to respond to both the challenges of slower economic growth that
is expected in 2009 as well as the next IT growth cycle."
    Results for the comparable three-month and twelve month periods last year
include the operations of Nexinnovations for a partial period subsequent to
the closing of its acquisition on October 12, 2007 as well as the operations
of Software Plus for a partial period subsequent to the closing of its
acquisition on December 11, 2007. Results for the comparable 2007 periods
exclude the operations of Optimus Solutions which the Company acquired on
January 2, 2008.

    Financial and Operational Highlights

    -   On February 2nd, 2009, Softchoice announced that it had entered into
        long-term credit agreements including a revolving facility through a
        syndicate led by Bank of America, N.A. and a term loan from HSBC
        Capital (Canada) Inc. to provide the Company with access to up to
        C$140 million in debt financing, replacing its existing Asset-Backed
        Loan (ABL) and short term debt.

    -   Annual hardware revenues increased by 121 percent year over year,
        accounting for 41 percent of revenue compared to 30 percent of
        revenue for the same 12-month period in 2007.

    -   Revenue from Optimus Solutions was US$57.6 million in the fourth
        quarter, generating revenue growth from that unit of 5 percent
        compared to the fourth quarter of 2007.

    -   Softchoice achieved Cisco Gold Status in the U.S., enabling the
        Company to support the sale and implementation of Cisco's most
        advanced unified communications, wireless and data center solutions.

    -   Softchoice was named one of Canada's Top 5 Green IT Solutions
        Providers by Computer Dealer News magazine, an honor recognizing the
        Company's commitment to helping organizations reduce the
        environmental impact of their IT operations, improve productivity and
        drive long-term cost-savings.

    -   Softchoice was named the Large Account Reseller (LAR) of the year for
        Volume Licensing Sales, and received top honors for IT Asset
        Management Solution of the Year and for Innovation in Enterprise
        Marketing at the Microsoft Canada Annual Impact Awards.

    1. EBITDA is a non-GAAP term. See "Use of Non-GAAP Measures" outlined in
the MD&A. The term "EBITDA" is a financial measure used in this news release
that is not a standard measure under Canadian GAAP. Therefore, Softchoice's
non-GAAP measures, as presented in this news release, may not be comparable to
similar measures presented by other issuers. EBITDA refers to operating income
of the Company determined in accordance with generally accepted accounting
principles, before depreciation amortization and similar non-cash adjustments.
Management believes that EBITDA is a useful supplemental measure of
performance, and it is the primary basis on which management assesses
financial performance and cash available for debt service, working capital,
capital expenditures, income taxes and dividends. For the fourth quarter the
Company reported EBITDA of $10.5 million which consists of the operating loss
of $36.0 million, amortization costs of $2.9 million and the goodwill
impairment charge of $43.6 million.

    Fourth Quarter Earnings Conference Call Details

    Softchoice will be hosting a conference call to discuss its 2008 fourth
quarter results at 11 a.m. ET on February 11th, 2009.
    David 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

    To participate in the conference:

        Conference ID: 7548147
        Local / International: 416-849-6186
        North American Toll-Free: 866-443-4184

    To view the Web presentation:

    To ensure participation, please dial in five to 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 February 12th,

    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 897 employees
operating from 45 branch offices located in major cities across the U.S. and
    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

    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
                         Consolidated Balance Sheets

    AS AT DECEMBER 31                                  2008          2007
                                                  ------------- -------------
    Current assets
    Cash                                           $    14,098   $    11,063
    Accounts receivable (note 4)                       242,411       214,103
    Inventories                                          1,722           172
    Prepaids and other assets (note 5)                   8,056         5,608
    Future income taxes (note 6)                         2,095         1,250
    Income taxes recoverable                               254             -
                                                  ------------- -------------
                                                       268,636       232,196

    Property and equipment (note 7)                      8,832         8,406
    Goodwill (note 8)                                   10,172        44,720
    Intangible assets (note 8)                          48,343        31,996
    Deferred costs                                       2,377         1,283
    Future income taxes (note 6)                        17,401         1,225
                                                  ------------- -------------

                                                   $   355,761   $   319,826
                                                  ------------- -------------
                                                  ------------- -------------

    Current liabilities
    Bank indebtedness (note 9)                     $    40,376   $    29,077
    Accounts payable and accrued liabilities           227,884       190,536
    Current portion of deferred revenue                  5,033         2,637
    Income taxes payable                                     -            61
                                                  ------------- -------------
                                                       273,293       222,311

    Long-term liabilities
    Deferred lease inducements                             483           591
    Deferred revenue                                       830           327
    Long-term debt (note 9)                             13,717        21,897
                                                  ------------- -------------
                                                        15,030        22,815

    Total liabilities                                  288,323       245,126

    Shareholders' Equity
    Capital stock (note 10)                              9,827         9,220
    Contributed surplus (note 11)                        2,495         1,343

    Retained earnings                                   42,000        61,587
    Accumulated other comprehensive income              13,116         2,550
                                                  ------------- -------------
                                                        55,116        64,137

    Total shareholders' equity                          67,438        74,700
                                                  ------------- -------------
                                                   $   355,761   $   319,826
                                                  ------------- -------------
                                                  ------------- -------------

    Commitments and contingencies (note 12)
    Related party transactions (note 17)
    See accompanying notes to consolidated financial statements.

                           Softchoice Corporation
          Consolidated Statements of Earnings and Retained Earnings

    FOR THE YEARS ENDED DECEMBER 31                    2008          2007
                                                  ------------- -------------

    Software                                       $   675,570   $   494,315
    Hardware                                           511,532       231,482
    Agency Fees                                         57,193        51,285
                                                  ------------- -------------
                                                     1,244,295       777,082
                                                  ------------- -------------

    Cost of sales                                    1,072,492       651,965
                                                  ------------- -------------
    Gross profit                                       171,803       125,117
                                                  ------------- -------------

    Salaries and benefits                               93,648        56,661
    Selling, general and administrative                 36,987        28,116
    Amortization of property and equipment               3,849         3,173
    Amortization of intangible assets (note 8)           6,964         1,948
    Goodwill impairment (note 8)                        43,624             -
    Resizing and refinancing charges (note 13)           2,771             -
    Unrealized foreign exchange loss (gain)
     (note 14)                                           2,333        (1,175)
                                                  ------------- -------------
                                                       190,176        88,723

    Operating (loss) income                            (18,373)       36,394

    Interest expense                                     6,286         1,388
    Other expense (income) - net                           171        (1,944)
                                                  ------------- -------------

    (Loss) earnings before income taxes                (24,830)       36,950
                                                  ------------- -------------

    Provision for (recovery of) income taxes (note 6)
    Current                                              6,758        14,770
    Future                                             (17,200)          183
                                                  ------------- -------------
                                                       (10,442)       14,953
                                                  ------------- -------------

    Net (loss) earnings for the year                   (14,388)       21,997
    Retained earnings - Beginning of year               61,587        46,136

    Dividends (note 15)                                 (5,199)       (6,546)
                                                  ------------- -------------
    Retained earnings - End of year                $    42,000   $    61,587
                                                  ------------- -------------
                                                  ------------- -------------

    Net (loss) earnings per common share (note 10)
    basic                                          $     (0.82)  $      1.27
    diluted                                        $     (0.82)  $      1.25

    Basic weighted average number of shares
     outstanding                                    17,472,170    17,311,251
    Diluted weighted average number of shares
     outstanding                                    17,554,049    17,602,205

    See accompanying notes to consolidated financial statements.

                           Softchoice Corporation
                    Consolidated Statements of Cash Flows

    FOR THE YEARS ENDED DECEMBER 31                    2008          2007
                                                  ------------- -------------

    Cash provided by (used in)
    Operating activities
    Net (loss) earnings for the year               $   (14,388)  $    21,997
    Items not affecting cash
      Amortization of property and equipment             3,849         3,173
      Stock-based compensation (note 11)                 1,194         1,166
      Future income taxes                              (17,200)          183
      Amortization of intangible assets                  6,964         1,948
      Goodwill impairment                               43,624             -
      Unrealized foreign currency loss                   4,703         1,069
      (Gain) loss on capital assets                        (21)           11
                                                  ------------- -------------
                                                        28,725        29,547

    Net change in non-cash working capital
     items relating to operations (note 18)              2,155         5,517
                                                  ------------- -------------

                                                        30,880        35,064
                                                  ------------- -------------
    Financing activities
      Increase in bank indebtedness                     21,479        15,392
      Increase in long-term debt                             -        21,854
      Repayment of long-term debt                       (3,747)            -
      Payment of cash dividend                          (5,199)       (6,546)
      Proceeds from issuance of common shares
       (note 10)                                           565           692
                                                  ------------- -------------
                                                        13,098        31,392
                                                  ------------- -------------

    Investing activities
      Purchase of property and equipment                (5,929)       (3,854)
      Proceeds on disposal of property and equipment        88            29
      Acquisitions, net of cash acquired (note 3)      (34,412)      (59,498)
                                                  ------------- -------------

                                                       (40,253)      (63,323)
                                                  ------------- -------------

    Effect of exchange rate changes on cash               (690)          602
                                                  ------------- -------------

    Increase in cash                                     3,035         3,735
    Cash - Beginning of year                            11,063         7,328
                                                  ------------- -------------

    Cash - End of year                             $    14,098   $    11,063
                                                  ------------- -------------
                                                  ------------- -------------

    See accompanying notes to consolidated financial statements.
    Supplemental disclosures of cash flow information (note 18)

                           Softchoice Corporation
             Consolidated Statements of Comprehensive Income and
                   Accumulated Other Comprehensive Income

    AS AT DECEMBER 31                                  2008          2007
                                                  ------------- -------------

    Comprehensive Income
    Net earnings for the year                      $   (14,388)  $    21,997
    Foreign currency translation adjustment             10,566         1,263
                                                  ------------- -------------

    Comprehensive Income                           $    (3,822)  $    23,260
                                                  ------------- -------------
                                                  ------------- -------------

    Accumulated Other Comprehensive Income

    Balance - beginning of year                    $     2,550   $     1,287
    Foreign currency translation adjustment             10,566         1,263
                                                  ------------- -------------

    Balance - end of year                          $    13,116   $     2,550
                                                  ------------- -------------
                                                  ------------- -------------

For further information:

For further information: Anne Brace, Chief Financial Officer, Softchoice
Corporation, (416) 588-9986,; Eric Gardiner,
Communications Manager, Softchoice Corporation, (416) 588-9002 x2358,

Organization Profile

Softchoice Corporation

More on this organization

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890