SoftBrands Announces Fourth Quarter and Fiscal 2006 Results

  • Infor
  • 01.01.07
SoftBrands, Inc., a global supplier of enterprise application software, announced its financial results for the fourth quarter and fiscal year ended September 30, 2006.

Revenues for the fourth quarter fiscal 2006 were $19.0 million, compared with revenues of $17.1 million in the fourth quarter fiscal 2005. Maintenance revenue accounted for 65 percent of total revenues in the current quarter, an increase from 61 percent of revenues in the fourth quarter fiscal 2005.

The company reported an operating loss of $12.3 million in the fourth quarter fiscal 2006, which included purchased in-process research and development expense of $11.4 million related to the HIS acquisition, restructuring charges of $0.2 million, noncash amortization of intangibles expense of $0.8 million and non-cash stock compensation expense of $0.3 million. This compares to operating income of $0.1 million in the fourth quarter fiscal 2005, which included non-cash amortization of intangibles expense of $1.0 million. The company reported a net loss available to common shareholders of $17.0 million, or a loss of $0.42 cents per diluted share, for the fourth quarter fiscal 2006, compared with a loss of $3.3 million, or a loss of $0.08 per diluted share, for the fourth quarter fiscal 2005.

Randy Tofteland, SoftBrands’ president and chief executive officer, said “Our fourth quarter was a transition quarter, during which we restructured the operations of our hospitality business to position it for improved profitability, at the same time we announced and began integrating our highly strategic acquisition of HIS. We are very excited by the progress made to date and the long-term growth opportunity that we are well positioned to capitalize on in the hospitality sector.”

Tofteland continued, “In addition to the significant activity in our hospitality business, we continued our transition to more of an indirect sales model in our manufacturing business. This is a long-term process, but we continue to make progress in building a foundation to support future growth, which we believe will come as a result of our domain expertise, broad and deep manufacturing solution and overall commitment to our
partnership with SAP.”

“As we look to fiscal 2007, we are optimistic about the company’s outlook. We believe SoftBrands is well positioned to restore top line growth and profitability and generate solid cash from operations,” Tofteland concluded.

Other highlights of the fourth quarter and other recent developments include:
  • Signing of a global, multiyear agreement with a multinational food company to supply the Fourth Shift Edition for SAP Business One solution to plants within its many operating divisions.
  • Closed the largest Medallion deal in the company’s history, passing the 1,000th installation of Medallion.
  • Successfully launched Karyon Software as a service offering in November.
  • Launched Fourth Shift Edition for SAP Business One in China and signed the first customer.
  • Partnered with Wincor Nixdorf to bring Medallion to Polish hospitality market.
  • Partnered with CP CIM-POOL, a Swiss software developer, to further reach into the discrete manufacturing mid-market.

In the company's manufacturing business, fourth quarter fiscal 2006 revenues were $12.4 million, compared with $13.1 million in the fiscal 2005 period. Fourth quarter fiscal 2006 operating income in manufacturing was $0.6 million, a decline from $1.2 million in the prior year's fourth quarter due to increased investment in sales and marketing resources for Fourth Shift Edition for SAP Business One and the continued transition toward a primarily indirect sales model.

In the company's hospitality business, fourth quarter fiscal 2006 revenues were $6.6 million, a significant increase from $4.0 million in the prior year’s quarter due to the acquisition of HIS. In the fourth quarter fiscal 2006, SoftBrands' hospitality business generated an operating loss, excluding the purchased in-process research and development expense of $11.4 million, of $1.5 million compared to an operating loss of $1.1 million from the fourth quarter fiscal 2005.

From a geographic perspective, 60 percent of our revenues were generated in the Americas in the quarter; 28 percent in the EMEA region; and 12 percent in the Asia Pacific region. This compares to a respective mix of 54 percent, 32 percent and 14 percent in the prior year’s quarter.

Full Year Results
Revenues for the full fiscal year 2006 were $69.3 million, compared with $70.8 million in fiscal 2005.

The operating loss for the fiscal year 2006 was $16.4 million, which included purchased in-process research and development of $11.4 million related to the HIS acquisition, $0.2 million in restructuring costs, $3.6 million in non-cash amortization of intangibles expense and $1.9 million in non-cash stock compensation expense. In fiscal 2005, the company generated operating income of $1.3 million, which included the benefit of approximately $0.3 million related to the reversal of restructuring related costs and $4.3 million in non-cash amortization of intangibles expense.

SoftBrands reported a net loss available to common shareholders of $21.1 million, or a loss of $0.52 cents per diluted share for full year ended September 30, 2006, compared with net income of $7.2 million, or $0.18 cents per diluted share, for the full year ended September 30, 2005. Net income in the 2006 fiscal year includes $0.4 million income from discontinued operations and in the 2005 fiscal year period includes income from discontinued operations of $10.3 million from a distribution from the AremisSoft Corporation Liquidating Trust, net of tax.

Cash and Liquidity
As of September 30, 2006, SoftBrands had $14.5 million in total cash and cash equivalents, an increase of $1.8 million from $12.7 million at June 30, 2006.

Forward-Looking Statements
All statements other than historical facts included in this release regarding future operations are subject to the risks inherent in predictions and "forward looking statements." These statements are based on the beliefs and assumptions of management of SoftBrands and on information currently available. Nevertheless, these forward-looking statements should not be construed as guarantees of future performance. They involve risks, uncertainties, and assumptions identified in filings by SoftBrands with the SEC, including:
  • Changes in the economy, natural disasters, disease or other events that affect the manufacturing and hospitality segments or the geographies SoftBrands serves.
  • Increasing dependence upon their relationship with SAP.
  • Their ability to effectively integrate the HIS business.
  • SoftBrands' ability to timely complete and introduce, and the market acceptance of their new products.
  • Their ability to properly document their sales consistent with the manner in which they recognize revenue.
  • Their ability to manage international operations.
  • SoftBrands' ability to maintain and expand their base of clients on software maintenance programs.
  • The effects of and their ability to rapidly adapt to changes in standards for operating systems, databases and other technologies.
  • Their ability to successfully upgrade their financial systems.



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