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ScanSource, Inc. (NASDAQ:SCSC), the leading international value-added
distributor of specialty technology products, today announced complete
financial results for its second quarter ended December 31, 2012.
Quarter ended December 31, 2012:
Net sales
$747.7 million
GAAP net income
$16.4 million
Adjusted net income(1)
$17.8 million
GAAP diluted EPS
$0.59 per share
Adjusted diluted EPS(1)
$0.64 per share
(1) A reconciliation of non-GAAP financial information
to GAAP financial information is presented
in the following Supplementary Information table.
“Our sales teams delivered results within our planned range, including
record quarterly sales for POS & Barcode and Security products
worldwide,” said Mike Baur, CEO, ScanSource, Inc. “In addition, our
North America Communications team achieved record sales results for the
quarter.”
For the quarter ended December 31, 2012, net sales decreased 4.5% to
$747.7 million, compared with $782.7 million for the quarter ended
December 31, 2011. Excluding the translation impact of foreign
currencies, net sales decreased 3.1% year-over-year. Operating income
decreased to $24.4 million from $32.1 million in the comparable prior
year quarter. The effective tax rate decreased to 34.0% in the current
quarter from 34.7% in the prior year quarter. Net income for the quarter
ended December 31, 2012 was $16.4 million, or $0.59 per diluted share,
compared with net income of $21.4 million, or $0.77 per diluted share,
for the prior year quarter.
Selling, general and administrative expenses for the quarter ended
December 31, 2012 included $2.1 million pre-tax ($1.4 million after-tax)
in one-time costs associated with the Company's attaining compliance
with local Belgian tax matters. These costs include the replacement of
certain personnel in the Company's Belgian office and related severance
costs, as well as tax accruals and professional fees. Excluding the
one-time costs associated with personnel replacement in the Company's
local Belgian office, including related tax compliance and professional
fees, adjusted net income for the quarter ended December 31, 2012
totaled $17.8 million, or $0.64 per diluted share.
Forecast for Next Quarter
The Company announced its current expectations for the third quarter of
fiscal 2013. ScanSource expects that net sales for the quarter ending
March 31, 2013 could range from $675 million to $695 million, and
diluted earnings per share could be in the range of $0.48 to $0.50 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 one-time costs
associated with tax compliance and personnel replacement in the
Company's local Belgian office; 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
and associated litigation; our ability to forecast volatility in
earnings resulting from the quarterly revaluation of the Company's
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. To evaluate current period
performance on a clearer and more consistent basis with prior periods,
the Company discloses adjusted net income and adjusted diluted earnings
per share, which exclude one-time costs associated with tax compliance
and personnel replacement in the Company's local Belgian office.
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. 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 prior 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 the following Supplemental
Information table.
About ScanSource, Inc.
ScanSource, Inc. (NASDAQ: SCSC) is the leading international distributor
of specialty technology products, operating from dedicated business
units in North America, Latin America and Europe. ScanSource POS &
Barcode delivers AIDC (automatic identification and data capture) and
POS (point-of-sale) solutions; Catalyst Telecom and ScanSource
Communications provide voice, video, data and converged communications
equipment; ScanSource Security offers physical security solutions; and
ScanSource Services Group delivers value-added support programs and
services. 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)
December 31, 2012
June 30, 2012*
Assets
Current assets:
Cash and cash equivalents
$
31,455
$
29,173
Accounts receivable, less allowance of
464,286
470,808
$29,840 at December 31, 2012
$27,349 at June 30, 2012
Inventories
474,713
475,479
Prepaid expenses and other current assets
42,540
41,846
Deferred income taxes
15,278
14,624
Total current assets
1,028,272
1,031,930
Property and equipment, net
48,685
48,785
Goodwill
54,080
53,885
Other non-current assets, including identifiable intangible assets
72,486
67,206
Total assets
$
1,203,523
$
1,201,806
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings
$
544
$
4,268
Accounts payable
353,108
419,683
Accrued expenses and other current liabilities
69,700
67,776
Current portion of contingent consideration
4,952
4,976
Income taxes payable
2,267
1,698
Total current liabilities
430,571
498,401
Deferred income taxes
2,787
—
Long-term debt
5,429
5,429
Borrowings under revolving credit facility
21,808
—
Long-term portion of contingent consideration
8,138
11,677
Other long-term liabilities
37,830
33,988
Total liabilities
506,563
549,495
Shareholders' equity:
Common stock
144,894
139,557
Retained earnings
568,443
534,445
Accumulated other comprehensive income (loss)
(16,377
)
(21,691
)
Total shareholders' equity
696,960
652,311
Total liabilities and shareholders' equity
$
1,203,523
$
1,201,806
*
Derived from audited financial statements.
ScanSource, Inc. and Subsidiaries
Condensed Consolidated Income Statements (Unaudited)
(in thousands, except per share data)
Quarter ended
December 31,
Six months ended
December 31,
2012
2011
2012
2011
Net sales
$
747,716
$
782,684
$
1,481,320
$
1,552,943
Cost of goods sold
673,365
702,845
1,332,930
1,394,013
Gross profit
74,351
79,839
148,390
158,930
Operating expenses:
Selling, general and administrative expenses
49,393
48,474
96,454
95,043
Change in fair value of contingent consideration
533
(722
)
1,296
172
Operating income
24,425
32,087
50,640
63,715
Other expense (income):
Interest expense
130
749
254
1,236
Interest income
(532
)
(1,002
)
(1,166
)
(1,452
)
Other, net
53
(374
)
39
3,157
Income before income taxes
24,774
32,714
51,513
60,774
Provision for income taxes
8,417
11,347
17,514
21,028
Net income
$
16,357
$
21,367
$
33,999
$
39,746
Per share data:
Weighted-average shares outstanding, basic
27,713
27,244
27,665
27,191
Net income per common share, basic
$
0.59
$
0.78
$
1.23
$
1.46
Weighted-average shares outstanding, diluted
27,958
27,674
27,928
27,604
Net income per common share, diluted
$
0.59
$
0.77
$
1.22
$
1.44
ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)
(in thousands)
Net Sales by Geographic Segment:
Non-GAAP
Quarter ended December 31,
% Change
2012
2011
% Change
Excluding FX(a)
North American (U.S. and Canada)
$
547,987
$
562,923
(2.7
)%
(2.7
)%
International
199,729
219,761
(9.1
)%
(4.4
)%
Consolidated
$
747,716
$
782,684
(4.5
)%
(3.1
)%
Non-GAAP
Six months ended December 31,
% Change
2012
2011
% Change
Excluding FX(a)
North American (U.S. and Canada)
$
1,093,799
$
1,136,395
(3.7
)%
(3.7
)%
International
387,521
416,548
(7.0
)%
1.2
%
Consolidated
$
1,481,320
$
1,552,943
(4.6
)%
(2.4
)%
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 and six months ended
December 31, 2012 into U.S. dollars using the weighted average
foreign exchange rates for the quarter and six months ended December
31, 2011, respectively. International net sales excluding the
translation impact of foreign currencies for the quarter and six
months ended December 31, 2012, as adjusted, totaled $210.2 million
and $421.6 million.
ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)
(in thousands, except per share data)
Non-GAAP Financial Information:
Quarter ended December 31, 2012
Pre-Tax
After-Tax
Diluted EPS
Net income (GAAP)
$
24,774
$
16,357
$
0.59
Adjustments:
Costs associated with Belgian tax compliance and personnel
replacement costs, including related professional fees
2,121
1,400
0.05
Adjusted net income (Non-GAAP)
$
26,895
$
17,757
$
0.64
Quarter ended December 31,
2012
2011
Return on invested capital (ROIC), annualized (a)
15.2
%
19.3
%
Reconciliation of EBITDA to Net Income
Net income (GAAP)
$
16,357
$
21,367
Plus: Income taxes
8,417
11,347
Plus: Interest expense
130
749
Plus: Depreciation and amortization
2,275
2,258
EBITDA (numerator for ROIC)
$
27,179
$
35,721
Invested Capital Calculation
Equity - beginning of quarter
$
676,136
$
597,658
Equity - end of quarter
696,960
616,103
Average equity
686,548
606,881
Average funded debt (b)
23,850
128,805
Invested capital (denominator for ROIC)
$
710,398
$
735,686
Notes:
(a) Calculated as net income plus interest expense, income taxes,
depreciation and amortization (EBITDA), annualized and divided by
invested capital for the period.
(b) 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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