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ScanSource Reports First Quarter Results

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 a following table.

About ScanSource, Inc.

ScanSource, Inc. (NASDAQ:SCSC) is the leading international distributor of specialty technology products, consisting of seven sales units in North America, Latin America and Europe. ScanSource POS and Barcoding in North America, Latin America and Europe delivers AIDC and POS solutions; Catalyst Telecom in the U.S. and ScanSource Communications in North America and Europe, provide voice, video, data and converged communications equipment; and ScanSource Security in North America offers physical security solutions. 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)
    September 30, 2012   June 30, 2012*
Assets
Current assets:
Cash and cash equivalents $ 38,731 $ 29,173
Accounts receivable, less allowance of 468,718 470,808
$28,744 at September 30, 2012
$27,349 at June 30, 2012
Inventories 471,014 475,479
Prepaid expenses and other current assets 38,730 41,846
Deferred income taxes 15,138   14,624  
Total current assets 1,032,331 1,031,930
Property and equipment, net 48,328 48,785
Goodwill 54,187 53,885
Other non-current assets, including identifiable intangible assets 73,244   67,206  
Total assets $ 1,208,090   $ 1,201,806  
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $ $

4,268

 
Current portion of contingent consideration 9,816 4,976
Accounts payable 384,111 419,683
Accrued expenses and other current liabilities 62,210 67,776
Income taxes payable 10,058   1,698  
Total current liabilities 466,195 498,401
Deferred income taxes 3,318
Long-term debt 5,429 5,429
Borrowings under revolving credit facility 12,215
Long-term portion of contingent consideration 7,526 11,677
Other long-term liabilities 37,271   33,988  
Total liabilities 531,954 549,495
Shareholders' equity:
Common stock 142,604 139,557
Retained earnings 552,086 534,445
Accumulated other comprehensive income (loss) (18,554 ) (21,691 )
Total shareholders' equity 676,136   652,311  
Total liabilities and shareholders' equity $ 1,208,090   $ 1,201,806  

*Derived from audited financial statements.
 
 
ScanSource, Inc. and Subsidiaries
Condensed Consolidated Income Statements (Unaudited)
(in thousands)
     
Quarter ended

September 30,
 
2012 2011
Net sales $ 733,605 $ 770,259
Cost of goods sold 659,565   691,169  
Gross profit 74,040 79,090
Operating expenses:
Selling, general and administrative expenses 47,061 46,569
Change in fair value of contingent consideration 764   894  
Operating income 26,215 31,627
Other expense (income):
Interest expense 124 486
Interest income (633 ) (450 )
Other, net (15 ) 3,530  
Income before income taxes 26,739 28,061
Provision for income taxes 9,097   9,681  
Net income $ 17,642   $ 18,380  
Per share data:
Weighted-average shares outstanding, basic 27,618   27,138  
Net income per common share, basic $ 0.64   $ 0.68  
 
Weighted-average shares outstanding, diluted 27,901   27,551  
Net income per common share, diluted $ 0.63   $ 0.67  
 
 
ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)
(in thousands)
            Non-GAAP
Net Sales by Geographic Segment: Quarter ended September 30, % Change
2012   2011 % Change   Excluding FX (a)
North American (U.S. and Canada) $ 545,813 $ 573,472 (4.8 )% (4.8 )%
International 187,792   196,787   (4.6 )%   7.8

 %
Consolidated $ 733,605   $ 770,259   (4.8 )% (1.6 )%
 
Non-GAAP Financial Information: Quarter ended September 30,
2012 2011
Return on invested capital (ROIC), annualized (b) 17.0 % 18.2 %
 

Reconciliation of EBITDA to Net Income
Net income - GAAP $ 17,642 $ 18,380
Plus: Income taxes 9,097 9,681
Plus: Interest expense 124 486
Plus: Depreciation and amortization 2,314   2,582  
EBITDA (numerator for ROIC) $ 29,177   $ 31,129  
 

Invested Capital Calculation
Equity - beginning of quarter $ 652,311 $ 587,394
Equity - end of quarter 676,136   597,658  
Average equity 664,224 592,526
Average funded debt (c) 16,563   86,780  
Invested capital (denominator for ROIC) $ 680,787   $ 679,306  
 
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, 2012 into U.S. dollars using the weighted average foreign exchange rates for the quarter ended September 30, 2011. International net sales excluding the translation impact of foreign currencies for the quarter ended September 30, 2012, as adjusted, totaled $212.2 million.
(b) Calculated as net income plus interest expense, income taxes, depreciation and amortization (EBITDA), annualized and divided by invested capital for the period.
(c) Average funded debt is calculated as the daily average amounts outstanding on our short-term and long-term interest-bearing debt.

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