ScanSource (SCSC) 8-K Financial statements and exhibits

FOR IMMEDIATE RELEASE

Contact: Jeffery A. Bryson VP of Investor Relations ScanSource, Inc. 864 286-4305

ScanSource Fiscal Year Sales Up 18%

*Quarterly sales increase 8% to $253.0 million

GREENVILLE, SC—August 14, 2003—ScanSource, Inc. (Nasdaq: SCSC), a leading value-added distributor of AIDC (automatic identification and data capture), point of sale and telephony products for the reseller market, today announced financial results for its fourth quarter and fiscal year ended June 30, 2003.

For the quarter ended June 30, 2003, net sales increased 8% to $253.0 million compared to $233.7 million for the quarter ended June 30, 2002, and operating income increased 29% to $11.0 million, from $8.5 million for the comparable quarter in 2002. For the quarter ended June 30, 2003 net income was 17% higher at $6.2 million compared to $5.3 million for the same period last year, and diluted earnings per share increased 17% to $.49 per share compared to $0.42 per share for the 2002 quarter. Per share results are based upon 12,496,000 and 12,604,000 diluted weighted average shares outstanding for the fiscal 2003 and 2002 quarters, respectively, reflecting a 2-for-1 split of the Company’s common stock, effected in the form of a 100% stock dividend paid on January 28, 2003.

For the fiscal year ended June 30, 2003, net sales increased 18% to $991.2 million compared to $841.9 million for the fiscal year ended June 30, 2002.

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ScanSource Fiscal Year Sales Up 18%

“We were pleased this quarter to see a return of sales growth in telephony products in both our Catalyst Telecom and Paracon units.” said Mike Baur, President and CEO of ScanSource. “We had healthy sales growth in AIDC and point of sale products internationally and in North America. We also completed some cost-saving initiatives in Europe which allowed that unit to cover its direct expenses for the first time.”

ChannelMax Restructuring

The Company has decided to restructure its ChannelMax unit. Logistics and IS services will continue to be provided, but management of ChannelMax will be divided among other ScanSource business units, rather than operating as a separate legal entity. In connection with this restructuring the Company will incur one-time costs of $.09-$.11 cents per share, which will be charged to earnings for the quarter ending September 30, 2003.

September 2003 Forecast

The Company also announced its financial forecast for the first fiscal quarter of 2004 which ends September 30, 2003. ScanSource expects net revenues for the September quarter could range from $240 million to $260 million.

Safe Harbor Statement

This news 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 results. For more information concerning factors that could cause such a difference, see the company’s annual report on Form 10K filed with the Securities Exchange Commission.

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ScanSource Fiscal Year Sales Up 18%

* * * *

ScanSource, Inc. is the leading international distributor of specialty technology products, including automatic identification and data capture (AIDC) and point-of-sale (POS) products through its ScanSource sales unit; Avaya voice, data and converged communications products through its Catalyst Telecom sales unit; and converged communications products from Intel through its Paracon sales unit. The Company provides both value-added distribution sales to technology resellers and e-logistics services. ScanSource has two distribution segments: one serving North America from the Memphis distribution center, and an international segment currently serving Latin America and Europe. ChannelMax, a subsidiary of ScanSource, Inc., is a provider of logistics and
e-fulfillment services.

The Company markets products from more than 60 technology manufacturers to over 13,000 value-added technology resellers and is committed to empowering them with tools and services designed to help them grow. For more information, call the toll-free sales telephone number at 800.944.2432 or visit www.scansource.com.

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ScanSource Fiscal Year Sales Up 18%

SCANSOURCE, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands)

	June 30, 2002		June 30, 2003
Assets
Current Assets
Cash	$	1,296	$	2,565
Trade and notes receivable		119,158		129,105
Other receivables		7,860		4,420
Inventories		182,636		152,261
Prepaid taxes		—		870
Prepaid expenses and other assets		1,258		869
Deferred income taxes		10,225		9,498
Total current assets		322,433		299,588
Property and equipment, net		25,995		27,270
Intangibles, net		9,575		9,945
Other assets		1,029		7,544
Total assets	$	359,032	$	344,347
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	175,406	$	151,389
Current portion of long-term debt		769		914
Accrued expenses and other		10,755		12,308
Total current liabilities		186,930		164,611
Deferred tax liability		517		1,673
Borrowings under revolving credit facility		43,780		18,118
Long term debt		8,319		7,385
Total liabilities		239,546		191,787
Minority interest		1,437		1,673
Shareholders’ Equity
Common stock		48,223		56,706
Retained earnings		68,732		91,306
Accumulated other comprehensive income		1,094		2,875
Total shareholders’ equity		118,049		150,887
Total liabilities and shareholders’ equity	$	359,032	$	344,347

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ScanSource Fiscal Year Sales Up 18%

SCANSOURCE, INC.

CONSOLIDATED INCOME STATEMENTS (UNAUDITED)

(In thousands, except share and per share data)

	Quarter ended June 30,						Year ended June 30,
	2002			2003			2002			2003
Net sales	$	233,704		$	253,022		$	841,887		$	991,194
Cost of goods sold		208,105			223,667			750,310			879,311
Gross profit		25,599			29,355			91,577			111,883
Operating expenses:
Selling, general and admin. expenses		17,086			18,209			58,927			71,168
Impairment of capitalized software		—			191			840			191
		17,086			18,400			59,767			71,359
Operating income		8,513			10,955			31,810			40,524
Other expense (income):
Interest expense		688			361			2,831			2,063
Interest income		(352	)		(281	)		(1,274	)		(1,194	)
Other (income) expense		(260	)		574			(128	)		1,031
Other expense, net		76			654			1,429			1,900
Income before income taxes and extraordinary gain		8,437			10,301			30,381			38,624
Provision for income taxes		3,108			4,090			11,268			16,050
Income before extraordinary gain		5,329			6,211			19,113			22,574
Extraordinary gain on excess of fair value of net assets acquired over cost, net of income taxes of $508		—			—			829			—
Net income	$	5,329		$	6,211		$	19,942		$	22,574

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ScanSource Fiscal Year Sales Up 18%

SCANSOURCE, INC.

CONSOLIDATED INCOME STATEMENTS (UNAUDITED)

(continued)

	Quarter ended June 30,				Year ended June 30,
	2002		2003		2002		2003
Per share data:
Basic earnings per share:
Income before extraordinary gain	$	0.46	$	0.51	$	1.66	$	1.88
Extraordinary gain on excess of fair value of net assets acquired over cost, net of income taxes of $508		—		—		0.07		—
Net income (a)	$	0.46	$	0.51	$	1.73	$	1.88
Weighted-average shares outstanding (a)		11,642		12,273		11,524		12,013
Diluted earnings per share:
Income before extraordinary gain	$	0.42	$	0.49	$	1.54	$	1.81
Extraordinary gain on excess of fair value of net assets acquired over cost, net of income taxes of $508		—		—		0.06		—
Net income (a)	$	0.42	$	0.49	$	1.60	$	1.81
Weighted-average shares outstanding (a)		12,604		12,496		12,432		12,349

(a) All per share amounts have been adjusted to reflect a 2-for-1 split of the Company’s common stock, effected in the form of a 100% common stock dividend paid on January 28, 2003.

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