ScanSource Reports First Quarter Results

  ScanSource Reports First Quarter Results

Solid Sales Growth in North America Communications and Security Business Units

Business Wire

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

ScanSource, Inc. (NASDAQ:SCSC), the leading international value-added
distributor of specialty technology products, today announced complete
financial results for its first quarter ended September 30, 2013.

Quarter ended September 30, 2013:
Net sales       $731.9 million
Net income          $19.4 million
Diluted EPS         $0.69 per share

“Our quarterly sales results were led by solid year-over-year growth for our
North America Communications and Security business units,” said Mike Baur,
CEO, ScanSource, Inc. “Our teams executed well in a slower growth environment,
especially internationally where Europe and Brazil achieved better operating
results than a year ago.”

For the quarter ended September 30, 2013, net sales totaled $731.9 million.
This represents a 2.7% increase from the prior quarter’s sales of $712.7
million and a slight decrease from net sales of $733.6 million for the quarter
ended September 30, 2012. Operating income increased 7.7% to $28.2 million
from $26.2 million in the comparable prior year quarter. Net income for the
quarter ended September 30, 2013 was $19.4 million, or $0.69 per diluted
share, compared with net income of $17.6 million, or $0.63 per diluted share,
for the prior year quarter.

Forecast for Next Quarter and Sales Release Update

The Company announced its current expectations for the second quarter of
fiscal 2014. ScanSource expects that net sales for the quarter ending
December31, 2013 could range from $740 million to $760 million, and diluted
earnings per share could be in the range of $0.62 to $0.64 per share. Starting
with the quarter ending December 31, 2013, the Company will no longer provide
a sales release in the first week following the quarter end.

Webcast Details

ScanSource will present additional information about its financial results and
outlook in a conference call with presentation slides today, October 24, 2013,
at 5:00 p.m. (ET). A webcast of the call and accompanying presentations slides
will be available for all interested parties and can be accessed at
www.scansource.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,
expanded operations in emerging markets, such as Brazil, that expose the
Company to greater political and economic volatility than its operations in
established markets; additional costs and delays in connection with the
Company's new ERPsystem and associated litigation; the ability to forecast
volatility in earnings resulting from the quarterly revaluation of the
Company's earnout obligation to the sellers of CDC; and macroeconomic
circumstances that could impact the business, such as currency fluctuations,
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, 2013 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 certain non-GAAP financial measures, including net sales
excluding the translation impact of foreign currencies and return on invested
capital ("ROIC"). Non-GAAP financial measures are used to better understand
and evaluate performance, including comparisons from period to period, as
described below.

Net sales excluding the translation impact of foreign currencies: The Company
discusses the percentage change in net sales excluding the translation impact
from changes in foreign currency exchange rates between reporting periods.
This measure enhances comparability between periods to help analyze underlying
trends.

Return on invested capital ("ROIC"): Management uses ROIC as a performance
measurement to assess efficiency at allocating capital under the Company's
control to generate returns. Management believes this metric balances the
Company's operating results with asset and liability management, excludes the
results of capitalization decisions, is easily computed and understood, and is
considered to have a strong correlation with shareholder value creation. ROIC
also provides management a measure of the Company's profitability on a basis
more comparable to historical or future periods. In addition, the Company's
Board of Directors uses ROIC in evaluating business and management
performance. Certain management incentive compensation targets are set and
measured relative to ROIC.

These non-GAAP financial measures have limitations as analytical tools, and
the non-GAAP financial measures that the Company reports may not be comparable
to similarly titled amounts reported by other companies. Analysis of results
and outlook on a non-GAAP basis should be considered in addition to, and not
in substitution for or as superior to, measurements of financial performance
prepared in accordance with GAAP. A reconciliation of the Company's non-GAAP
financial information to GAAP is set forth in the following Supplemental
Information tables.

About ScanSource, Inc.

ScanSource, Inc. (NASDAQ: SCSC) is the leading international distributor of
specialty technology products, focusing on point-of-sale (POS) and barcode,
communications and physical security solutions. ScanSource's teams provide
value-added services and operate from two technology segments, Worldwide
Barcode & Security and Worldwide Communications & Services. ScanSource is
committed to helping its reseller customers choose, configure, and deliver the
industry's best products across almost every vertical market in North America,
Latin America and Europe. Founded in 1992, the Company ranks #711 on the
Fortune 1000. For more information, visit www.scansource.com.

ScanSource, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
                                      September 30, 2013  June 30, 2013*
Assets
Current assets:
Cash and cash equivalents                  $   193,769          $  148,164
Accounts receivable, less                  443,256              435,028
allowance of
$27,966 at September 30, 2013
$25,479 at June 30, 2013
Inventories                                433,109              402,307
Prepaid expenses and other                 43,023               40,105
current assets
Deferred income taxes                      15,522              16,456       
Total current assets                       1,128,679            1,042,060
Property and equipment, net                19,545               20,203
Goodwill                                   32,044               31,795
Other non-current assets,
including identifiable                     71,589              70,125       
intangible assets
Total assets                               $   1,251,857       $  1,164,183 
Liabilities and Shareholders'
Equity
Current liabilities:
Current portion of contingent              $   5,453            $  3,732
consideration
Accounts payable                           417,103              362,271
Accrued expenses and other                 57,967               59,983
current liabilities
Income taxes payable                       10,730              1,696        
Total current liabilities                  491,253              427,682
Deferred income taxes                      698                  205
Long-term debt                             5,429                5,429
Long-term portion of contingent            4,053                8,813
consideration
Other long-term liabilities                26,676              26,098       
Total liabilities                          528,109              468,227
Shareholders' equity:
Common stock                               153,905              149,821
Retained earnings                          588,544              569,107
Accumulated other comprehensive            (18,701         )    (22,972      )
income (loss)
Total shareholders' equity                 723,748             695,956      
Total liabilities and                      $   1,251,857       $  1,164,183 
shareholders' equity
                                                                             
* Derived from audited financial
statements.
                                                                             

ScanSource, Inc. and Subsidiaries
Condensed Consolidated Income Statements (Unaudited)
(in thousands)
                                                           
                                                 Quarter ended

                                                 September 30,
                                                 2013            2012
Net sales                                        $  731,904     $  733,605
Cost of goods sold                               655,405        659,565     
Gross profit                                     76,499          74,040
Operating expenses:
Selling, general and administrative              47,540          47,061
expenses
Change in fair value of contingent               738            764         
consideration
Operating income                                 28,221          26,215
Other expense (income):
Interest expense                                 247             124
Interest income                                  (574        )   (633        )
Other, net                                       109            (15         )
Income before income taxes                       28,439          26,739
Provision for income taxes                       9,002          9,097       
Net income                                       $  19,437     $  17,642  
Per share data:
Weighted-average shares outstanding,             28,034         27,618      
basic
Net income per common share, basic               $  0.69       $  0.64    
                                                                 
Weighted-average shares outstanding,             28,257         27,901      
diluted
Net income per common share, diluted             $  0.69       $  0.63    
                                                                             

ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)
(in thousands)
                                                                  
Net Sales by Segment:                                                Non-GAAP
                      Quarter ended September 30,                    % Change
                      2013              2012             % Change   Excluding
                                                                     FX^(a)
Worldwide Barcode &   $   450,644        $  456,187       (1.2  )%   (1.2  )%
Security
Worldwide
Communications &      281,260           277,418         1.4   %    1.0   %
Services
Consolidated          $   731,904       $  733,605      (0.2  )%   (0.4  )%
                                                                     
                                                                     
Net Sales by                                                         Non-GAAP
Geographic Segment:
                      Quarter ended September 30,                    % Change
                      2013               2012             % Change   Excluding
                                                                     FX^(b)
North American (U.S.  $   558,340        $  545,813       2.3   %    2.3   %
and Canada)
International         173,564           187,792         (7.6  )%   (8.1  )%
Consolidated          $   731,904       $  733,605      (0.2  )%   (0.4  )%
                                                                     
Non-GAAP Financial    Quarter ended September 30,
Information:
                      2013               2012
Return on invested
capital (ROIC),       16.9         %     17.0        %
annualized ^(c)
                                                                     
Reconciliation of Net
Income to EBITDA
Net income - GAAP     $   19,437         $  17,642
Plus: Income taxes    9,002              9,097
Plus: Interest        247                124
expense
Plus: Depreciation    1,869             2,314       
and amortization
EBITDA (numerator for $   30,555        $  29,177   
ROIC) (non-GAAP)
(a) Depreciation & amortization for the quarter ended
September 30, 2012 includes debt issue costs of $0.1
million.
                                                                     
Invested Capital
Calculation
Equity - beginning of $   695,956        $  652,311
quarter
Equity - end of       723,748           676,136     
quarter
Average equity        709,852            664,224
Average funded debt   5,429             16,563      
^(d)
Invested capital
(denominator for      $   715,281       $  680,787  
ROIC) (non-GAAP)

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 ended September 30, 2013 into U.S. dollars using the
weighted average foreign exchange rates for the quarter ended September 30,
2012. Worldwide Barcode & Security net sales excluding the translation impact
of foreign currencies for the quarter September 30, 2013, as adjusted, totaled
$450.8 million. Worldwide Communications & Services net sales excluding the
translation impact of foreign currencies for the quarter ended September 30,
2013, as adjusted, totaled $280.2 million.

(b)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 ended September 30, 2013 into U.S. dollars using the
weighted average foreign exchange rates for the quarter ended September 30,
2012. International net sales excluding the translation impact of foreign
currencies for the quarter ended September 30, 2013, as adjusted, totaled
$172.6 million.

(c) Calculated as net income plus interest expense, income taxes, depreciation
and amortization (EBITDA), annualized and divided by invested capital for the
period.

(d) 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, 864-286-4975
Senior Vice President and Chief Financial Officer
or
Mary M. Gentry, 864-286-4892
Treasurer and Director, Investor Relations
 
Press spacebar to pause and continue. Press esc to stop.