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ScanSource Reports Second Quarter Results



  ScanSource Reports Second Quarter Results

  Solid Sales Results for North America Security, Communications, and POS &
                            Barcode Business Units

Business Wire

GREENVILLE, S.C. -- January 24, 2013

ScanSource, Inc. (NASDAQ:SCSC), the leading international value-added
distributor of specialty technology products, today announced complete
financial results for its second quarter ended December 31, 2012.

Quarter ended December 31, 2012:
                                                
Net sales                                      $747.7 million
GAAP net income                                $16.4 million
Adjusted net income^(1)                        $17.8 million
GAAP diluted EPS                               $0.59 per share
Adjusted diluted EPS^(1)                       $0.64 per share
^(1) A reconciliation of non-GAAP financial information to GAAP financial
information is presented

in the following Supplementary Information table.

“Our sales teams delivered results within our planned range, including record
quarterly sales for POS & Barcode and Security products worldwide,” said Mike
Baur, CEO, ScanSource, Inc. “In addition, our North America Communications
team achieved record sales results for the quarter.”

For the quarter ended December 31, 2012, net sales decreased 4.5% to $747.7
million, compared with $782.7 million for the quarter ended December 31, 2011.
Excluding the translation impact of foreign currencies, net sales decreased
3.1% year-over-year. Operating income decreased to $24.4 million from $32.1
million in the comparable prior year quarter. The effective tax rate decreased
to 34.0% in the current quarter from 34.7% in the prior year quarter. Net
income for the quarter ended December 31, 2012 was $16.4 million, or $0.59 per
diluted share, compared with net income of $21.4 million, or $0.77 per diluted
share, for the prior year quarter.

Selling, general and administrative expenses for the quarter ended December
31, 2012 included $2.1 million pre-tax ($1.4 million after-tax) in one-time
costs associated with the Company's attaining compliance with local Belgian
tax matters. These costs include the replacement of certain personnel in the
Company's Belgian office and related severance costs, as well as tax accruals
and professional fees. Excluding the one-time costs associated with personnel
replacement in the Company's local Belgian office, including related tax
compliance and professional fees, adjusted net income for the quarter ended
December 31, 2012 totaled $17.8 million, or $0.64 per diluted share.

Forecast for Next Quarter

The Company announced its current expectations for the third quarter of fiscal
2013. ScanSource expects that net sales for the quarter ending March 31, 2013
could range from $675 million to $695 million, and diluted earnings per share
could be in the range of $0.48 to $0.50 per share.

Webcast Details

ScanSource will present additional information about its financial results and
outlook on a conference call today at 5:00 p.m. (ET). A webcast of the call
will be available for all interested parties and can be accessed at
www.scansourceinc.com (Investor Relations section). The webcast will be
available for replay for 60 days.

Safe Harbor Statement

This press release contains comments that are “forward-looking” statements
that involve risks and uncertainties; these statements are subject to the safe
harbor created by the Private Securities Litigation Reform Act of 1995. Any
number of important factors could cause actual results to differ materially
from anticipated or forecasted results, including, but not limited to, factors
affecting one-time costs associated with tax compliance and personnel
replacement in the Company's local Belgian office; expanded operations in
emerging markets, such as Brazil, that expose us to greater political and
economic volatility than our operations in established markets; additional
costs and delays in connection with the implementation of our new ERP system
and associated litigation; our ability to forecast volatility in earnings
resulting from the quarterly revaluation of the Company's earnout obligation
to the sellers of CDC; macroeconomic circumstances that could impact our
business, such as currency fluctuations; continued adverse capital and credit
market conditions; and an economic downturn. For more information concerning
factors that could cause actual results to differ from anticipated results,
see the Company's annual report on Form 10-K for the year ended June 30, 2012
filed with the Securities and Exchange Commission. Except as may be required
by law, the Company expressly disclaims any obligation to update these
forward-looking statements to reflect events or circumstances after the date
of this press release or to reflect the occurrence of unanticipated events.

Non-GAAP Financial Information

In addition to disclosing results that are determined in accordance with
United States Generally Accepted Accounting Principles (“GAAP”), the Company
also discloses non-GAAP measures. To evaluate current period performance on a
clearer and more consistent basis with prior periods, the Company discloses
adjusted net income and adjusted diluted earnings per share, which exclude
one-time costs associated with tax compliance and personnel replacement in the
Company's local Belgian office. Management uses return on invested capital
(“ROIC”), a non-GAAP measure, as a performance measurement because management
believes that this metric best balances the Company's operating results with
its asset and liability management. The Company's Board of Directors uses ROIC
in evaluating management performance and setting management compensation. The
Company also discloses the percentage change in net sales excluding the impact
of foreign currency exchange rates to better assess the changes from prior
periods.

Analysis of results and outlook on a non-GAAP basis should be used as a
complement to, and in conjunction with, data presented in accordance with
GAAP. A reconciliation of the Company's non-GAAP financial information to GAAP
is set forth in the following Supplemental Information table.

About ScanSource, Inc.

ScanSource, Inc. (NASDAQ: SCSC) is the leading international distributor of
specialty technology products, operating from dedicated business units in
North America, Latin America and Europe. ScanSource POS & Barcode delivers
AIDC (automatic identification and data capture) and POS (point-of-sale)
solutions; Catalyst Telecom and ScanSource Communications provide voice,
video, data and converged communications equipment; ScanSource Security offers
physical security solutions; and ScanSource Services Group delivers
value-added support programs and services. Founded in 1992, the company ranks
#760 on the Fortune 1000. For more information, call the toll-free sales
telephone number at 800.944.2432 or visit www.scansourceinc.com.

ScanSource, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
                                                               
                                            December 31, 2012   June 30, 2012*
Assets
Current assets:
Cash and cash equivalents                   $   31,455          $  29,173
Accounts receivable, less allowance of      464,286             470,808
$29,840 at December 31, 2012
$27,349 at June 30, 2012
Inventories                                 474,713             475,479
Prepaid expenses and other current assets   42,540              41,846
Deferred income taxes                       15,278              14,624        
Total current assets                        1,028,272           1,031,930
Property and equipment, net                 48,685              48,785
Goodwill                                    54,080              53,885
Other non-current assets, including         72,486              67,206        
identifiable intangible assets
Total assets                                $   1,203,523       $  1,201,806  
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings                       $   544             $  4,268
Accounts payable                            353,108             419,683
Accrued expenses and other current          69,700              67,776
liabilities
Current portion of contingent               4,952               4,976
consideration
Income taxes payable                        2,267               1,698         
Total current liabilities                   430,571             498,401
Deferred income taxes                       2,787               —
Long-term debt                              5,429               5,429
Borrowings under revolving credit           21,808              —
facility
Long-term portion of contingent             8,138               11,677
consideration
Other long-term liabilities                 37,830              33,988        
Total liabilities                           506,563             549,495
Shareholders' equity:
Common stock                                144,894             139,557
Retained earnings                           568,443             534,445
Accumulated other comprehensive income      (16,377        )    (21,691      )
(loss)
Total shareholders' equity                  696,960             652,311       
Total liabilities and shareholders'         $   1,203,523       $  1,201,806  
equity

* Derived from audited financial statements.

ScanSource, Inc. and Subsidiaries
Condensed Consolidated Income Statements (Unaudited)
(in thousands, except per share data)
                                                                
                     Quarter ended               Six months ended

                     December 31,                December 31,
                     2012          2011          2012            2011
Net sales            $ 747,716     $ 782,684     $ 1,481,320     $ 1,552,943
Cost of goods sold   673,365       702,845       1,332,930       1,394,013    
Gross profit         74,351        79,839        148,390         158,930
Operating
expenses:
Selling, general
and administrative   49,393        48,474        96,454          95,043
expenses
Change in fair
value of             533           (722      )   1,296           172          
contingent
consideration
Operating income     24,425        32,087        50,640          63,715
Other expense
(income):
Interest expense     130           749           254             1,236
Interest income      (532      )   (1,002    )   (1,166      )   (1,452      )
Other, net           53            (374      )   39              3,157        
Income before        24,774        32,714        51,513          60,774
income taxes
Provision for        8,417         11,347        17,514          21,028       
income taxes
Net income           $ 16,357      $ 21,367      $ 33,999        $ 39,746     
Per share data:
Weighted-average
shares               27,713        27,244        27,665          27,191       
outstanding, basic
Net income per
common share,        $ 0.59        $ 0.78        $ 1.23          $ 1.46       
basic
                                                                  
Weighted-average
shares               27,958        27,674        27,928          27,604       
outstanding,
diluted
Net income per
common share,        $ 0.59        $ 0.77        $ 1.22          $ 1.44       
diluted

ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)
(in thousands)
                                                                   
Net Sales by
Geographic
Segment:
                                                                     Non-GAAP
                Quarter ended December 31,                           % Change
                2012                2011                % Change     Excluding
                                                                     FX^(a)
North American
(U.S. and       $  547,987          $  562,923          (2.7  )%     (2.7   )%
Canada)
International   199,729             219,761             (9.1  )%     (4.4   )%
Consolidated    $  747,716          $  782,684          (4.5  )%     (3.1   )%
                                                                      
                                                                     Non-GAAP
                Six months ended December 31,                        % Change
                2012                2011                % Change     Excluding
                                                                     FX^(a)
North American
(U.S. and       $  1,093,799        $  1,136,395        (3.7  )%     (3.7   )%
Canada)
International   387,521             416,548             (7.0  )%     1.2    %
Consolidated    $  1,481,320        $  1,552,943        (4.6  )%     (2.4   )%
                                                                      
Notes:
(a) Year-over-year net sales growth rate excluding the translation impact
of changes in foreign currency exchange rates. Calculated by translating
the net sales for the quarter and six months ended December 31, 2012 into
U.S. dollars using the weighted average foreign exchange rates for the
quarter and six months ended December 31, 2011, respectively. International
net sales excluding the translation impact of foreign currencies for the
quarter and six months ended December 31, 2012, as adjusted, totaled $210.2
million and $421.6 million.

ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)
(in thousands, except per share data)
                                             
Non-GAAP Financial
Information:
                              Quarter ended December 31, 2012
                              Pre-Tax          After-Tax         Diluted EPS
Net income (GAAP)             $  24,774        $  16,357         $  0.59
Adjustments:
Costs associated with Belgian
tax compliance and personnel  2,121            1,400             0.05         
replacement costs, including
related professional fees
Adjusted net income           $  26,895        $  17,757         $  0.64      
(Non-GAAP)
                                                                  
                                               Quarter ended December 31,
                                               2012              2011
Return on invested capital                     15.2        %     19.3        %
(ROIC), annualized ^(a)
                                                                  
Reconciliation of EBITDA to
Net Income
Net income (GAAP)                              $  16,357         $  21,367
Plus: Income taxes                             8,417             11,347
Plus: Interest expense                         130               749
Plus: Depreciation and                         2,275             2,258        
amortization
EBITDA (numerator for ROIC)                    $  27,179         $  35,721    
                                                                  
Invested Capital Calculation
Equity - beginning of quarter                  $  676,136        $  597,658
Equity - end of quarter                        696,960           616,103      
Average equity                                 686,548           606,881
Average funded debt ^(b)                       23,850            128,805      
Invested capital (denominator                  $  710,398        $  735,686   
for ROIC)
                                                                  
Notes:
(a) Calculated as net income plus interest expense, income taxes, depreciation
and amortization (EBITDA), annualized and divided by invested capital for the
period.
(b) Average funded debt is calculated as the daily average amounts outstanding
on our short-term and long-term interest-bearing debt.

Contact:

ScanSource, Inc.
Charles A. Mathis, Chief Financial Officer
864-286-4975
or
Mary M. Gentry
Treasurer and Director, Investor Relations
864-286-4892
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