ScanSource Reports Fourth Quarter And Full Year Results

ScanSource, Inc. (NASDAQ:SCSC), the leading international value-added distributor of specialty technology products, today announced complete financial results for its fourth quarter and fiscal year ended June 30, 2012.
Quarter ended June 30, 2012:                           Fiscal Year ended June 30, 2012:
Net sales $ 754.5 million Net sales $ 3,015.3 million
Net income $ 19.8 million Net income $ 74.3 million
Diluted EPS $ 0.71 per share Diluted EPS $ 2.68 per share

"We achieved record quarterly sales for our North America Communications and Security business units," said Mike Baur, CEO, ScanSource, Inc. "These results contributed to stronger performance in North America, where each of our business units had positive sequential quarter growth. Our international segment was weaker, particularly in our European businesses. Certain international markets, such as our Brazil business unit, had strong year-over-year sales growth as measured in the local currency.”

For the quarter ended June 30, 2012, net sales increased 2.7% to $754.5 million, compared with $734.9 million for the quarter ended June 30, 2011. Operating income decreased 3.2% to $28.3 million from $29.2 million in the comparable prior year quarter. The effective tax rate decreased to 30.9% in the current quarter from 31.7% in the prior year quarter. Net income for the quarter ended June 30, 2012 was $19.8 million, or $0.71 per diluted share, compared with net income of $19.7 million, or $0.71 per diluted share, for the prior year quarter. The June 2012 quarter EPS of $0.71 includes a $0.03 benefit for the change in the fair value of contingent consideration for the Brazilian acquisition earn-out.

For fiscal year ended June 30, 2012, net sales increased $349 million, or 13.1%, to $3.0 billion from $2.7 billion for the prior year ended June 30, 2011. Fiscal year operating income increased 0.4% to $113.5 million from $113.1 million for the prior year. The effective tax rate for the year was 33.2%, compared with 34.3% for the prior fiscal year. Net income for fiscal year 2012 was $74.3 million, or $2.68 per diluted share, compared with net income of $73.5 million, or $2.70 per diluted share, for the prior fiscal year. The change in fair value of contingent consideration had no impact on the fiscal year 2012 EPS of $2.68.

Forecast for Next Quarter

The Company announced its current expectations for the first quarter of fiscal 2013. ScanSource expects that net sales for the quarter ending September 30, 2012 could range from $740 million to $760 million, and diluted earnings per share could be in the range of $0.58 to $0.60 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 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 quarters ended September 30, 2011, December 31, 2011, and March 31, 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 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 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.
Scan Source, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
   
June 30, 2012 June 30, 2011*
Assets
Current assets:
Cash and cash equivalents $ 29,173 $ 28,747
Accounts receivable, less allowance of 470,808 462,102
$27,349 at June 30, 2012
$26,562 at June 30, 2011
Inventories 475,479 467,350
Prepaid expenses and other assets 41,846 35,421
Deferred income taxes 14,624   15,894
Total current assets 1,031,930 1,009,514
Property and equipment, net 48,785 36,819
Goodwill 53,885 59,090
Other assets, including identifiable intangible assets 67,206   76,765
Total assets $ 1,201,806   $ 1,182,188
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $ 4,268 $ 3,164
Current portion of contingent consideration 4,976 2,398
Accounts payable 419,683 406,453
Accrued expenses and other liabilities 67,776 60,157
Income taxes payable 1,698   5,175
Total current liabilities 498,401 477,347
Long-term debt 5,429 30,429
Borrowings under revolving credit facility 26,513
Long-term portion of contingent consideration 11,677 21,396
Other long-term liabilities 33,988   39,109
Total liabilities 549,495   594,794
Shareholders' equity:
Common stock 139,557 123,608
Retained earnings 534,445 460,157
Accumulated other comprehensive income (loss) (21,691 ) 3,629
Total shareholders' equity 652,311   587,394
Total liabilities and shareholders' equity $ 1,201,806   $ 1,182,188
* Derived from audited financial statements at June 30, 2011.
Scan Source, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
       
Quarter ended

June 30,
Year ended

June 30,
2012 2011* 2012 2011*
Net sales $ 754,470 $ 734,891 $ 3,015,296 $ 2,666,531
Cost of goods sold 680,643   660,520   2,713,272   2,392,224  
Gross profit 73,827   74,371   302,024   274,307  
Operating expenses:
Selling, general and administrative expenses 46,634 45,256 188,388 161,326
Change in fair value of contingent consideration (1,123 ) (128 ) 120   (128 )
Operating income 28,316 29,243 113,516 113,109
Other expense (income):
Interest expense 150 541 1,639 1,723
Interest income (653 ) (294 ) (2,886 ) (1,212 )
Other, net 188   220   3,552   712  
Income before income taxes 28,631 28,776 111,211 111,886
Provision for income taxes 8,846   9,115   36,923   38,363  
Net income $ 19,785   $ 19,661   $ 74,288   $ 73,523  
Per share data:
Net income per common share, basic $ 0.72   $ 0.73   $ 2.72   $ 2.74  
Weighted-average shares outstanding, basic 27,579   27,056   27,362   26,872  
Net income per common share, diluted $ 0.71   $ 0.71   $ 2.68   $ 2.70  
Weighted-average shares outstanding, diluted 27,886   27,515   27,751   27,246  
* Derived from audited financial statements at June 30, 2011
ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)
(in thousands)
             
Net Sales by Geographic Segment: Quarter ended June 30,
2012   2011 % Change
North American (U.S. and Canada) $ 570,219 $ 543,422 4.9 %
International 184,251   191,469   (3.8 )%
Consolidated $ 754,470   $ 734,891   2.7 %
 
Year ended June 30,
2012 2011 % Change
North American (U.S. and Canada) $ 2,236,459 $ 2,022,668 10.6 %
International 778,837   643,863   21.0 %
Consolidated $ 3,015,296   $ 2,666,531   13.1 %
 
Non-GAAP Financial Information: Quarter ended June 30,
2012 2011
Return on invested capital (ROIC), annualized (a) 18.2 % 19.9 %
 

Reconciliation of EBITDA to Net Income
Net income - GAAP $ 19,785 $ 19,661
Plus: Income taxes 8,846 9,115
Plus: Interest expense 150 541
Plus: Depreciation and amortization 2,328   2,312  
EBITDA (numerator for ROIC) $ 31,109   $ 31,629  
 

Invested Capital Calculation
Equity - beginning of quarter $ 642,450 $ 562,071
Equity - end of quarter 652,311   587,394  
Average equity 647,381 574,733
Average funded debt (b) 41,324   61,310  
Invested capital (denominator for ROIC) $ 688,705   $ 636,043  
 
Year ended June 30,
2012 2011

Return on invested capital (ROIC) (a)
17.2 % 20.6 %
 

Reconciliation of EBITDA to Net Income
Net income - GAAP $ 74,288 $ 73,523
Plus: Income taxes 36,923 38,363
Plus: Interest expense 1,639 1,723
Plus: Depreciation and amortization 9,922   6,662  
EBITDA (numerator for ROIC) $ 122,772   $ 120,271  
 

Invested Capital Calculation
Equity - beginning of year $ 587,394 $ 486,851
Equity - end of year 652,311   587,394  
Average equity 619,853 537,123
Average funded debt (b) 92,125   46,186  
Invested capital (denominator for ROIC) $ 711,978   $ 583,309  
Notes:
(a) Calculated as net income plus income taxes, interest expense, depreciation and amortization (EBITDA), annualized and divided by invested capital for the period

(b) Daily average interest-bearing debt

Copyright Business Wire 2010

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