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 December 31, 2005. -0- *T QE 12/31/05 capsule: Net sales $408.5 million Net income $ 9.3 million Non-GAAP net income $ 10.1 million Diluted EPS $ 0.71 per share Non-GAAP diluted EPS $ 0.77 per share *T For the quarter ended December 31, 2005, net sales increased 10% to a record $408.5 million compared to $370.1 million for the quarter ended December 31, 2004. "We had excellent year over year growth in our communications business units and in our bar code business. Our AIDC/ POS sales team had to overcome continued market weakness in POS systems sales," said Mike Baur, President and CEO of ScanSource. "Overall AIDC/ POS product sales were led by record sales in our international unit which serves Latin America and Europe." Net income, based upon Generally Accepted Accounting Principles (GAAP), increased 2% to $9.3 million for the quarter ended December 31, 2005 versus $9.1 million for the quarter ended December 31, 2004. Diluted earnings per share increased 3% to $0.71 per share compared to $0.69 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 December 31, 2005 quarter, net income would have been $808,000 higher or $10.1 million compared to $9.1 million for the December 2004 quarter, an increase of 11%. Diluted earnings per share would have been $0.77 compared to $0.69 for the December 2004 quarter, an increase of 12%. For the six months ended December 31, 2005, net income would have been $1.5 million higher or $20.1 million compared to $18.0 million for the six months ended December 2004, an increase of 12%. Diluted earnings per share would have been $1.54 compared to $1.37 for the six months ended December 2004. Comparable results herein for the quarter and six months ended December 31, 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. Reconciliation of Non-GAAP Financial Information (In thousands, except per share data) -0- *T Quarter ended Six months ended December 31, December 31, 2005 2004 2005 2004 ------- ------- ------- ------- Net income $ 9,250 $ 9,084 $18,584 $17,998 Share-based payment expense under Statement 123(R) 808 --- 1,495 --- ------- ------- ------- ------- Non-GAAP net income $10,058 $ 9,084 $20,079 $17,998 ======= ======= ======= ======= Net income per common share, assuming dilution $ 0.71 $ 0.69 $ 1.42 $ 1.37 ======= ======= ======= ======= Non-GAAP net income per common share, assuming dilution $ 0.77 $ 0.69 $ 1.54 $ 1.37 ======= ======= ======= ======= *T Forecast for Next Quarter The Company announced its revenue forecast for the third quarter of fiscal 2006. ScanSource expects net revenues for the March 2006 quarter could range from $395 million to $415 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 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) December 31, 2005 June 30, (unaudited) 2005 (a) ----------------- --------- Assets Current Assets ------------------------------------------ Cash and cash equivalents $ 10,927 $ 8,609 Trade & notes receivable, net 249,828 215,190 Other receivables 5,068 5,479 Inventories 191,603 178,917 Prepaid expenses and other assets 5,293 3,546 Deferred income taxes 9,673 10,227 -------- -------- Total current assets 472,392 421,968 Property and equipment, net 22,994 23,299 Goodwill 13,882 12,915 Other assets, including identifiable intangible assets 4,164 8,888 -------- -------- Total assets $513,432 $467,070 ======== ======== Liabilities and Shareholders' Equity Current Liabilities ------------------------------------------ Current portion of long-term debt $ 415 $ 564 Short-term borrowings - 4,478 Trade accounts payable 207,939 173,255 Accrued expenses and other liabilities 19,781 22,133 -------- -------- Total current liabilities 228,135 200,430 Deferred income taxes 999 1,008 Long-term debt 4,485 6,045 Borrowings under revolving credit facility 28,753 31,269 Other long-term liabilities 2,196 1,341 -------- -------- Total liabilities 264,568 240,093 -------- -------- Minority interest 795 1,092 Shareholders' Equity ------------------------------------------ Common stock 69,488 65,381 Retained earnings 175,604 157,020 Accumulated other comprehensive income 2,977 3,484 -------- -------- Total shareholders' equity 248,069 225,885 -------- -------- Total liabilities and shareholders' equity $513,432 $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 Six months ended December 31, December 31, 2005 2004 2005 2004 -------- -------- -------- -------- Net sales $408,468 $370,130 $798,864 $732,839 Cost of goods sold 366,633 332,269 716,700 657,996 -------- -------- -------- -------- Gross profit 41,835 37,861 82,164 74,843 -------- -------- -------- -------- Selling, general and administrative expenses 26,272 23,110 51,281 45,422 ---------- -------- ---------- -------- Operating income 15,563 14,751 30,883 29,421 Other expense (income): Interest expense 455 482 966 895 Interest income (155) (334) (304) (550) Other (income) expense (62) (300) (110) (253) -------- -------- -------- -------- Other expense (income), net 238 (152) 552 92 -------- -------- -------- -------- Income before income taxes and minority interest 15,325 14,903 30,331 29,329 Provision for income taxes 6,024 5,719 11,637 11,201 -------- -------- -------- -------- Income before minority interest 9,301 9,184 18,694 18,128 Minority interest in income of consolidated subsidiaries, net of income taxes 51 100 110 130 -------- -------- -------- -------- Net income $ 9,250 $ 9,084 $ 18,584 $ 17,998 ======== ======== ======== ======== Per share data: Net income per common share, basic $ 0.73 $ 0.72 $ 1.47 $ 1.43 ======== ======== ======== ======== Weighted-average shares outstanding, basic 12,701 12,620 12,684 12,600 ======== ======== ======== ======== Net income per common share, assuming dilution $ 0.71 $ 0.69 $ 1.42 $ 1.37 ======== ======== ======== ======== Weighted-average shares outstanding, assuming dilution 13,067 13,131 13,042 13,108 ======== ======== ======== ======== SCANSOURCE, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED) Quarter Ended December 31, 2005 (In thousands, except per share data) FASB 123(R) GAAP Share- Non QE Based -GAAP Dec 31 Payment QE Dec 31 2005 Expense 2005 ----------------- -------- Net sales $ 408,468 $408,468 Cost of goods sold 366,633 366,633 --------- -------- Gross profit 41,835 41,835 --------- -------- Selling, general and administrative 26,272 (935) 25,337 --------- ------ -------- Operating income 15,563 935 16,498 --------- ------ -------- Other expense (income): Interest expense 455 455 Interest income (155) (155) Other (income) expense (62) (62) --------- -------- Other expense, net 238 - 238 --------- ------ -------- Income before taxes & minority interest 15,325 935 16,260 Provision for income taxes 6,024 127 6,151 --------- ------ -------- Income before minority interest 9,301 808 10,109 Minority interest in income of consolidated subsidiaries, net of income taxes 51 - 51 --------- ------ -------- Net income $ 9,250 $ 808 $ 10,058 ========= ====== ======== Per share data: Net income per common share, basic $ 0.73 $ 0.79 ========= ======== Net income per common share, assuming dilution $ 0.71 $ 0.77 ========= ======== SCANSOURCE, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED) Six Months Ended December 31, 2005 (In thousands, except per share data) FASB Non GAAP 123(R) -GAAP Six Share- Six months Based months Dec 31 Payment Dec 31 2005 Expense 2005 ---------------- -------- Net sales $798,864 $798,864 Cost of goods sold 716,700 716,700 -------- -------- Gross profit 82,164 82,164 -------- -------- Selling, general and administrative 51,281 (1,827) 49,454 -------- ------- -------- Operating income 30,883 1,827 32,710 -------- ------- -------- Other expense (income): Interest expense 966 966 Interest income (304) (304) Other (income) expense (110) (110) -------- -------- Other expense, net 552 - 552 -------- ------- -------- Income before taxes & minority interest 30,331 1,827 32,158 Provision for income taxes 11,637 332 11,969 -------- ------- -------- Income before minority interest 18,694 1,495 20,189 Minority interest in income of consolidated subsidiaries, net of income taxes 110 - 110 -------- ------- -------- Net income $ 18,584 $ 1,495 $ 20,079 ======== ======= ======== Per share data: Net income per common share, basic $ 1.47 $ 1.58 ======== ======== Net income per common share, assuming dilution $ 1.42 $ 1.54 ======== ======== *T