ScanSource Reports Record Quarterly Sales

ScanSource, Inc. (NASDAQ:SCSC), the leading international distributor of AIDC (automatic identification and data capture), point of sale, communications, and physical security products for the reseller market, today announced complete financial results for its second quarter ended December 31, 2011.
Quarter ended December 31, 2011:
 
Net sales $782.7 million
Net income $21.4 million
Diluted EPS $0.77 per share

“Our excellent quarterly results were led by record sales in each of our POS/Barcoding business units in all geographies,” said Mike Baur, CEO, ScanSource, Inc. “In addition, we achieved record sales results in our ScanSource Communications business unit in North America.”

For the quarter ended December 31, 2011, net sales increased 14.5% to $782.7 million compared to $683.6 million in the prior year quarter. Operating income decreased by 4.3% to $32.1 million from $33.5 million in the same period last year. Net income decreased 1.2% to $21.4 million for the quarter ended December 31, 2011 versus $21.6 million in the prior year. The effective tax rate for the quarter decreased to 34.7% in the current quarter from 35.7% in the prior year quarter. Diluted earnings per share decreased 3.8% to $0.77 in the current quarter compared to $0.80 in the prior year quarter.

As previously disclosed, the prior year quarter ending December 31, 2010 included the favorable impact of proceeds from a legal settlement against a former service provider representing reimbursement of expenses. The $3.1 million recovery ($2.0 million after tax or $0.07 per diluted share) was recorded as a reduction of selling, general and administrative expenses in the December 2010 quarter. The December 2011 quarter EPS of $0.77 includes a $0.02 benefit for the change in fair value of contingent consideration.

Outlook for Next Quarter

The Company announced its current expectations for the third quarter of fiscal 2012. ScanSource expects that net revenues for the quarter ending March 31, 2012 could range from $700 million to $720 million, and diluted earnings per share could be in the range of $0.52 to $0.55 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 30 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 our expanded operations in emerging markets, such as Brazil, that expose us to greater political and economic volatility than our operations in established markets; the results of purchase accounting; 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, 2011 and Form 10-Q for the quarter ended September 30, 2011 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 return on invested capital (“ROIC”), a non-GAAP measure. Management uses ROIC as a performance measurement because it believes that this metric best balances the Company’s operating results with its asset and liability management. It excludes the results of capitalization decisions, is easily computed and understood, and drives changes in shareholder value. In addition, the Company’s Board of Directors uses this non-GAAP measure in evaluating management performance and setting management compensation. 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 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 and converged communications equipment; and ScanSource Security in North America offers physical security solutions. Founded in 1992, the company ranks #839 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, June 30,
  2011   2011*
Assets
Current assets:
Cash and cash equivalents $ 42,593 $ 28,747
Accounts receivable, less allowance of 491,587 462,102
$26,625 at December 31, 2011
$26,562 at June 30, 2011
Inventories 516,659 467,350
Prepaid expenses and other assets 41,658 35,421
Deferred income taxes   15,207     15,894
Total current assets 1,107,704 1,009,514
 
Property and equipment, net 41,853 36,819
Goodwill 54,612 59,090
Other assets, including identifiable intangible assets   66,785     76,765
Total assets $ 1,270,954   $ 1,182,188
 
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $ 670 $ 3,164
Current portion of contingent consideration 6,703 2,398
Accounts payable 433,388 406,453
Accrued expenses and other liabilities 65,356 60,157
Income taxes payable   1,827     5,175
Total current liabilities 507,944 477,347
 
Long-term debt 5,429 30,429
Borrowings under revolving credit facility 94,978 26,513
Long-term portion of contingent consideration 13,299 21,396
Other long-term liabilities   33,201     39,109
Total liabilities   654,851     594,794
 
Shareholders' equity:
Common stock 130,722 123,608
Retained earnings 499,903 460,157
Accumulated other comprehensive loss   (14,522 )   3,629
Total shareholders' equity   616,103     587,394
Total liabilities and shareholders' equity $ 1,270,954   $ 1,182,188
 
* June 30, 2011 results are derived from audited consolidated financial statements.
       
ScanSource, Inc. and Subsidiaries
Condensed Consolidated Income Statements (Unaudited)
(in thousands, except per share information)
 
Quarter ended Six months ended
December 31, December 31,
  2011     2010     2011     2010  
 
Net sales $ 782,684 $ 683,644 $ 1,552,943 $ 1,318,175
Cost of goods sold   702,845     613,018     1,394,013     1,184,068  
Gross profit   79,839     70,626     158,930     134,107  
 
Operating expenses:
Selling, general and administrative expenses 48,474 37,088 95,043 75,721
Change in fair value of contingent consideration   (722 )   -     172     -  
Operating income 32,087 33,538 63,715 58,386
 
Other expense (income):
Interest expense 749 388 1,236 754
Interest income (1,002 ) (306 ) (1,452 ) (605 )
Other, net   (374 )   (182 )   3,157     191  
Income before income taxes 32,714 33,638 60,774 58,046
Provision for income taxes   11,347     12,017     21,028     20,718  
Net income $ 21,367   $ 21,621   $ 39,746   $ 37,328  
 
Per share data:
Net income per common share, basic $ 0.78   $ 0.81   $ 1.46   $ 1.40  
Weighted-average shares outstanding, basic   27,244     26,786     27,191     26,749  
 
Net income per common share, diluted $ 0.77   $ 0.80   $ 1.44   $ 1.38  
Weighted-average shares outstanding, diluted   27,674     27,160     27,604     27,068  
     
ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)
(in thousands)
 
Net Sales by Geographic Segment: Quarter ended
December 31,
2011 2010 % Change
 
North American (a) $ 562,923 $ 522,875 7.7%
International 219,761 160,769 36.7%
Consolidated $ 782,684 683,644 14.5%
 
Six months ended
December 31,
2011 2010 % Change
 
North American (a) $ 1,136,395 $ 1,017,200 11.7%
International 416,548 300,975 38.4%
Consolidated $ 1,552,943 $ 1,318,175 17.8%
 
Non-GAAP Financial Information: Quarter ended
December 31,
2011 2010
Return on invested capital (ROIC), annualized (b) 19.8% 25.0%
 
Reconciliation of EBITDA to Net Income
Net income - GAAP $ 21,367 $ 21,621
Plus: Income taxes 11,347 12,017
Plus: Interest expense 749 388
Plus: Depreciation and amortization 2,258 1,446
EBITDA (numerator for ROIC) $ 35,721 $ 35,472
 
Invested Capital Calculation
Equity - beginning of the quarter $ 597,658 $ 513,646
Equity - end of quarter 616,103 535,649
Average equity 606,881 524,648
Average funded debt (c) 109,303 38,213
Invested capital (denominator for ROIC) $ 716,184 $ 562,861
 
Notes:
(a) Includes the United States and Canada
(b) Calculated as net income plus income taxes, interest expense, depreciation and amortization (EBITDA), annualized
and divided by invested capital
(c) Daily average interest-bearing debt

Copyright Business Wire 2010

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