FOR IMMEDIATE RELEASE
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| | |
| Contact: | | |
| Richard P. Cleys | | Mary M. Gentry |
| Chief Financial Officer | - or - | Treasurer and Director, Investor Relations |
| ScanSource, Inc. | | ScanSource, Inc. |
| (864) 286-4358 | | (864) 286-4892 |
SCANSOURCE REPORTS FIRST QUARTER RESULTS
Solid Sales Growth in North America Communications and Security Business Units
GREENVILLE, SC -- October 25, 2012 -- 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, 2012.
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| Quarter ended September 30, 2012: |
| Net sales | $733.6 million |
| Net income | $17.6 million |
| Diluted EPS | $0.63 per share |
“Challenging market conditions contributed to a sales decline versus last year,” said Mike Baur, CEO, ScanSource, Inc. “However, we were pleased with the record quarterly sales performance of our North America Security business unit. In addition, our North America Communications as well as our Miami and Mexico-based operations achieved solid year-over-year sales growth.”
For the quarter ended September 30, 2012, net sales decreased 4.8% to $733.6 million, compared with $770.3 million for the quarter ended September 30, 2011. Excluding the translation impact of foreign currencies, net sales decreased 1.6% year-over-year. Operating income decreased 17.1% to $26.2 million from $31.6 million in the comparable prior year quarter. The effective tax rate decreased to 34.0% in the current quarter from 34.5% in the prior year quarter. Net income for the quarter ended September 30, 2012 was $17.6 million, or $0.63 per diluted share, compared with net income of $18.4 million, or $0.67 per diluted share, for the prior year quarter.
Forecast for Next Quarter
The Company announced its current expectations for the second quarter of fiscal 2013. ScanSource expects that net sales for the quarter ending December 31, 2012 could range from $745 million to $765 million, and diluted earnings per share could be in the range of $0.61 to $0.63 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.
ScanSource Reports First Quarter Results
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; additional costs and delays in connection with the implementation of our new ERP system; our ability to forecast volatility in earnings resulting from the quarterly revaluation of our 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. 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. In addition, 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 period 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 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 Reports First Quarter Results
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| | | | | | | | |
| 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 |
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| Accounts receivable, less allowance of | | 468,718 |
| | 470,808 |
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| $28,744 at September 30, 2012 | | | | |
| $27,349 at June 30, 2012 | | | | |
| Inventories | | 471,014 |
| | 475,479 |
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| Prepaid expenses and other current assets | | 38,730 |
| | 41,846 |
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| Deferred income taxes | | 15,138 |
| | 14,624 |
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| Total current assets | | 1,032,331 |
| | 1,031,930 |
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| Property and equipment, net | | 48,328 |
| | 48,785 |
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| Goodwill | | 54,187 |
| | 53,885 |
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| Other non-current assets, including identifiable intangible assets | | 73,244 |
| | 67,206 |
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| Total assets | | $ | 1,208,090 |
| | $ | 1,201,806 |
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| Liabilities and Shareholders' Equity | | | | |
| Current liabilities: | | | | |
| Short-term borrowings | | $ | — |
| | $ | 4,268 |
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| Current portion of contingent consideration | | 9,816 |
| | 4,976 |
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| Accounts payable | | 384,111 |
| | 419,683 |
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| Accrued expenses and other current liabilities | | 62,210 |
| | 67,776 |
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| Income taxes payable | | 10,058 |
| | 1,698 |
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| Total current liabilities | | 466,195 |
| | 498,401 |
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| Deferred income taxes | | 3,318 |
| | — |
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| Long-term debt | | 5,429 |
| | 5,429 |
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| Borrowings under revolving credit facility | | 12,215 |
| | — |
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| Long-term portion of contingent consideration | | 7,526 |
| | 11,677 |
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| Other long-term liabilities | | 37,271 |
| | 33,988 |
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| Total liabilities | | 531,954 |
| | 549,495 |
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| Shareholders' equity: | | | | |
| Common stock | | 142,604 |
| | 139,557 |
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| Retained earnings | | 552,086 |
| | 534,445 |
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| Accumulated other comprehensive income (loss) | | (18,554 | ) | | (21,691 | ) |
| Total shareholders' equity | | 676,136 |
| | 652,311 |
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| Total liabilities and shareholders' equity | | $ | 1,208,090 |
| | $ | 1,201,806 |
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| * | Derived from audited financial statements. |
ScanSource Reports First Quarter Results
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| | | | | | | |
| ScanSource, Inc. and Subsidiaries |
| Condensed Consolidated Income Statements (Unaudited) |
| (in thousands) |
| | | | |
| | Quarter ended September 30, |
| | 2012 | | 2011 |
| Net sales | $ | 733,605 |
| | $ | 770,259 |
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| Cost of goods sold | 659,565 |
| | 691,169 |
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| Gross profit | 74,040 |
| | 79,090 |
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| Operating expenses: | | | |
| Selling, general and administrative expenses | 47,061 |
| | 46,569 |
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| Change in fair value of contingent consideration | 764 |
| | 894 |
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| Operating income | 26,215 |
| | 31,627 |
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| Other expense (income): | | | |
| Interest expense | 124 |
| | 486 |
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| Interest income | (633 | ) | | (450 | ) |
| Other, net | (15 | ) | | 3,530 |
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| Income before income taxes | 26,739 |
| | 28,061 |
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| Provision for income taxes | 9,097 |
| | 9,681 |
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| Net income | $ | 17,642 |
| | $ | 18,380 |
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| Per share data: | | | |
| Weighted-average shares outstanding, basic | 27,618 |
| | 27,138 |
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| Net income per common share, basic | $ | 0.64 |
| | $ | 0.68 |
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| | | | |
| Weighted-average shares outstanding, diluted | 27,901 |
| | 27,551 |
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| Net income per common share, diluted | $ | 0.63 |
| | $ | 0.67 |
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ScanSource Reports First Quarter Results
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| | | | | | | | | | | | | |
| 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 | )% |
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| Non-GAAP Financial Information: | Quarter ended September 30, | | | | |
| | 2012 | | 2011 | | | | |
Return on invested capital (ROIC), annualized (b) | 17.0 | % | | 18.2 | % | | | | |
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| Reconciliation of EBITDA to Net Income | | | | | | | |
| Net income - GAAP | $ | 17,642 |
| | $ | 18,380 |
| | | | |
| Plus: Income taxes | 9,097 |
| | 9,681 |
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| Plus: Interest expense | 124 |
| | 486 |
| | | | |
| Plus: Depreciation and amortization | 2,314 |
| | 2,582 |
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| EBITDA (numerator for ROIC) | $ | 29,177 |
| | $ | 31,129 |
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| Invested Capital Calculation | | | | | | | |
| Equity - beginning of quarter | $ | 652,311 |
| | $ | 587,394 |
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| Equity - end of quarter | 676,136 |
| | 597,658 |
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| Average equity | 664,224 |
| | 592,526 |
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Average funded debt (c) | 16,563 |
| | 86,780 |
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| Invested capital (denominator for ROIC) | $ | 680,787 |
| | $ | 679,306 |
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| 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. |
