SCSC ScanSource Inc

ScanSource, Inc. (NASDAQ:SCSC), a leading international distributor of AIDC (automatic identification and data capture), point of sale, communications and electronic security products for the reseller market, today announced financial results for its quarter ended September 30, 2005. -0- *T QE 9/30/05 capsule: Net sales $ 390.4 million Net income $ 9.3 million Non-GAAP net income $ 10.0 million Diluted EPS $ 0.72 per share Non-GAAP diluted EPS $ 0.77 per share *T For the quarter ended September 30, 2005, net sales increased 8% to a record $390.4 million compared to $362.7 million for the quarter ended September 30, 2004. "We were very pleased with our overall results, highlighted by exceptional performance in our Catalyst business unit," said Mike Baur, President and CEO of ScanSource. "Our international segment also exceeded our expectations during a seasonally slower quarter." Net income, based upon Generally Accepted Accounting Principles (GAAP), increased 5% to $9.3 million for the quarter ended September 30, 2005 versus $8.9 million for the quarter ended September 30, 2004. Diluted earnings per share increased 6% to $0.72 per share, compared to $0.68 in the prior year quarter. Beginning the September 2005 quarter, the Company was required to adopt FASB Statement 123(R), Share-Based Payments, which mandates expensing share-based compensation cost. If the Company had not adopted Statement 123(R) for the September 30, 2005 quarter, net income would have been $687,000 higher or $10.0 million compared to $8.9 million for the September 2004 quarter, an increase of 12%. Diluted earnings per share would have been $.77 compared to $.68 for the September 2004 quarter, an increase of 13%. Comparable results herein for the quarter ended September 30, 2004 do not reflect the effects of adopting Statement 123(R), which was not yet in effect. Please refer to the Company's statements regarding non-GAAP financial information and the related reconciliation of GAAP results to non-GAAP results located in this release and also located in the Investor Relations section of the Company's website at www.scansource.com. Non-GAAP Financial Information The reconciliation below shows the effects on the quarterly results if the Company had not adopted Statement 123(R). This non-GAAP data is included with the intention of providing investors a more complete understanding of our operational results and trends as compared with prior period results, but should only be used in conjunction with results reported in accordance with GAAP. -0- *T Reconciliation of Non-GAAP Financial Information (In thousands, except per share data) Quarter ended September 30, 2005 2004 --------- -------- Net income $ 9,334 $ 8,914 Share-based payment expense under Statement 123(R) 687 --- --------- -------- Non-GAAP net income $ 10,021 $ 8,914 ========= ======== Net income per common share, assuming dilution $ 0.72 $ 0.68 ========= ======== Non-GAAP net income per common share, assuming dilution $ 0.77 $ 0.68 ========= ======== *T Forecast for Next Quarter The Company announced its financial forecast for the second quarter of fiscal 2006. ScanSource expects net revenues for the December 2005 quarter could range from $385 million to $405 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 and Exchange Commission. About ScanSource ScanSource, Inc. is a 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; communications products from Intel and NEC through its Paracon sales unit; and electronic security products through its ScanSource Security Distribution unit. The Company serves the North America marketplace and has an international segment, which sells AIDC and POS products in Latin America and Europe. Founded in 1992, the Company markets products from more than 100 technology manufacturers to over 16,000 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. -0- *T SCANSOURCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) September 30, June 30, 2005 2005 (a) (unaudited) --------------- ----------- Assets Current Assets ------------------------------------------ Cash and cash equivalents $ 16,781 $ 8,609 Trade & notes receivable, net 227,439 215,190 Other receivables 6,116 5,479 Inventories 184,795 178,917 Prepaid expenses and other assets 2,762 3,546 Deferred income taxes 10,038 10,227 ------------ ---------- Total current assets 447,931 421,968 Property and equipment, net 23,099 23,299 Goodwill 13,773 12,915 Other assets, including identifiable intangible assets 3,624 8,888 ------------ ---------- Total assets $ 488,427 $ 467,070 ============ ========== Liabilities and Shareholders' Equity Current Liabilities ------------------------------------------ Current portion of long-term debt $ 510 $ 564 Short-term borrowings - 4,478 Trade accounts payable 190,406 173,255 Accrued expenses and other liabilities 19,828 22,133 ------------ ---------- Total current liabilities 210,744 200,430 Deferred income taxes 1,173 1,008 Long-term debt 5,986 6,045 Borrowings under revolving credit facility 31,693 31,269 Other long-term liabilities 1,794 1,341 ------------ ---------- Total liabilities 251,390 240,093 ------------ ---------- Minority interest 744 1,092 Shareholders' Equity ------------------------------------------ Common stock 66,654 65,381 Retained earnings 166,354 157,020 Accumulated other comprehensive income 3,285 3,484 ------------ ---------- Total shareholders' equity 236,293 225,885 ------------ ---------- Total liabilities and shareholders' equity $ 488,427 $ 467,070 ============ ========== (a) Derived from audited financial statements at June 30, 2005. SCANSOURCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED) (In thousands, except per share data) Quarter ended September 30, 2005 2004 -------- -------- Net sales $390,396 $362,709 Cost of goods sold 350,067 325,727 -------- -------- Gross profit 40,329 36,982 -------- -------- Selling, general and administrative expenses 25,009 22,312 ---------- -------- Operating income 15,320 14,670 Other expense (income): Interest expense 511 413 Interest income (149) (216) Other (income) expense (48) 47 -------- -------- Other expense (income), net 314 244 -------- -------- Income before income taxes and minority interest 15,006 14,426 Provision for income taxes 5,613 5,482 -------- -------- Income before minority interest 9,393 8,944 Minority interest in income of consolidated subsidiaries, net of income taxes 59 30 -------- -------- Net income $ 9,334 $ 8,914 ======== ======== Per share data: Net income per common share, basic $ 0.74 $ 0.71 ======== ======== Weighted-average shares outstanding, basic 12,666 12,580 ======== ======== Net income per common share, assuming dilution $ 0.72 $ 0.68 ======== ======== Weighted-average shares outstanding, assuming dilution 13,006 13,053 ======== ======== SCANSOURCE, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED) Quarter Ended September 30, 2005 (In thousands, except per share data) GAAP FASB 123(R) QE Share-Based Non -GAAP Sep 30 Payment QE Sep 30 2005 Expense 2005 -------- ----------- ---------- Net sales $390,396 $390,396 Cost of goods sold 350,067 350,067 -------- -------- Gross profit 40,329 40,329 -------- -------- Selling, general and administrative 25,009 (892) 24,117 -------- --------- -------- Operating income 15,320 892 16,212 -------- --------- -------- Other expense (income): Interest expense 511 511 Interest income (149) (149) Other (income) expense (48) (48) -------- -------- Other expense, net 314 - 314 -------- --------- -------- Income before taxes & minority interest 15,006 892 15,898 Provision for income taxes 5,613 205 5,818 -------- --------- -------- Income before minority interest 9,393 687 10,080 Minority interest in income of consolidated subsidiaries, net of income taxes 59 - 59 -------- --------- -------- Net income $ 9,334 $ 687 $ 10,021 ======== ========= ======== Per share data: Net income per common share, basic $ 0.74 $ 0.79 ======== ======== Net income per common share, assuming dilution $ 0.72 $ 0.77 ======== ======== *T