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 fourth quarter and fiscal year ended June 30, 2006. -0- *T QE 6/30/06 capsule: Net sales $461.1 million Net income $ 12.1 million Non-GAAP net income $ 12.4 million Diluted EPS $ 0.46 per share Non-GAAP diluted EPS $ 0.47 per share *T "We were very pleased with sales results for this quarter in which we had our highest growth rate in over a year as all business units were strong, including the North America bar code and point of sale unit," said Mike Baur, President and CEO of ScanSource. "The return of some larger deals in the North America point of sale marketplace led to record results for that business unit." Net income, based upon Generally Accepted Accounting Principles (GAAP), increased 29% to $12.1 million for the quarter ended June 30, 2006 versus $9.4 million for the quarter ended June 30, 2005. Diluted earnings per share increased 28% to $0.46 per share compared to $0.36 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 June 30, 2006 quarter, net income would have been $285,000 higher or $12.4 million compared to $9.4 million for the June 2005 quarter, an increase of 32%. Diluted earnings per share would have been $0.47 compared to $0.36 for the June 2005 quarter, an increase of 31%. For the fiscal year ended June 30, 2006, GAAP net income and diluted earnings per share were $40.1 million and $1.53, respectively. For the fiscal year ended June 30, 2006, net income would have been $2.6 million higher or $42.8 million compared to $35.7 million for the fiscal year ended June 2005, an increase of 20%. Diluted earnings per share would have been $1.64 compared to $1.37 for the fiscal year ended June 2005. Comparable results herein for the quarter and fiscal year ended June 30, 2005 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 Company has issued stock options in the current and prior periods with similar terms. For internal management analysis, the Company compares current operating expenses to periods prior to the adoption of Statement 123(R) on a "with" and "without" basis to determine the trend of operating expenses. 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 Fiscal Year Ended Ended June 30, June 30, 2006 2005 2006 2005 -------- ------- -------- -------- Net income $12,084 $9,394 $40,109 $35,732 Share-based payment expense under Statement 123(R) 285 --- 2,642 --- -------- ------- -------- -------- Non-GAAP net income $12,369 $9,394 $42,751 $35,732 ======== ======= ======== ======== Net income per common share, assuming dilution $0.46 $0.36 $1.53 $1.37 ======== ======= ======== ======== Non-GAAP net income per common share, assuming dilution $0.47 $0.36 $1.64 $1.37 ======== ======= ======== ======== *T Forecast for Next Quarter The Company announced its revenue forecast for the first quarter of fiscal 2007. ScanSource expects net revenues for the September 2006 quarter could range from $465 million to $485 million, including revenues resulting from the July acquisition of T2 Supply. 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. The Company markets specialty technologies through five sales units: ScanSource (automatic identification and data capture (AIDC) and point-of-sale (POS) products); Catalyst Telecom (Avaya communications products); Paracon (communications products); T2 supply (video conferencing and telephone products); and ScanSource Security Distribution (electronic security products). 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 ranks #982 on the Fortune 1000. 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) June 30, June 30, 2006 2005/a (unaudited) ------------ --------- Assets Current Assets --------------------------------------- Cash and cash equivalents $3,831 $8,609 Trade & notes receivable, net 297,740 215,190 Other receivables 4,558 5,479 Inventories 244,005 178,917 Prepaid expenses and other assets 2,293 3,546 Deferred income taxes 14,659 10,227 ------------ --------- Total current assets 567,086 421,968 Property and equipment, net 27,098 23,299 Goodwill 14,404 12,915 Other assets, including identifiable intangible assets 4,631 8,888 ------------ --------- Total assets $613,219 $467,070 ============ ========= Liabilities and Shareholders' Equity Current Liabilities ----------------------------------------------- Current portion of long-term debt $229 $564 Short-term borrowings - 4,478 Trade accounts payable 271,519 173,255 Accrued expenses and other liabilities 31,242 22,133 ------------ --------- Total current liabilities 302,990 200,430 Deferred income taxes - 1,008 Long-term debt 4,398 6,045 Borrowings under revolving credit facility 27,558 31,269 Other long-term liabilities 2,757 1,341 ------------ --------- Total liabilities 337,703 240,093 ------------ --------- Minority interest 910 1,092 Shareholders' Equity ----------------------------------------------- Common stock 72,860 65,381 Retained earnings 197,129 157,020 Accumulated other comprehensive income 4,617 3,484 ------------ --------- Total shareholders' equity 274,606 225,885 ------------ --------- Total liabilities and shareholders' equity $613,219 $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 Fiscal year Ended Ended June 30, June 30, 2006 2005 2006 2005 ----------- --------- ----------- ----------- Net sales $461,144 $381,195 $1,665,600 $1,469,094 Cost of goods sold 416,216 341,787 1,497,248 1,319,368 ----------- --------- ----------- ----------- Gross profit 44,928 39,408 168,352 149,726 ----------- --------- ----------- ----------- Selling, general and administrative expenses 27,344 23,462 104,759 90,977 ---------------------- ------------------------ Operating income 17,584 15,946 63,593 58,749 Other expense (income): Interest expense 588 683 2,187 2,127 Interest income (20) (173) (567) (863) Other (income) expense 117 (14) (111) (466) ----------- --------- ----------- ----------- Other expense (income), net 685 496 1,509 798 ----------- --------- ----------- ----------- Income before income taxes and minority interest 16,899 15,450 62,084 57,951 Provision for income taxes 4,715 5,956 21,750 21,928 ----------- --------- ----------- ----------- Income before minority interest 12,184 9,494 40,334 36,023 Minority interest in income of consolidated subsidiaries, net of income taxes 100 100 225 291 ----------- --------- ----------- ----------- Net income $12,084 $9,394 $40,109 $35,732 =========== ========= =========== =========== Per share data: Net income per common share, basic $0.47 $0.37 $1.57 $1.41 =========== ========= =========== =========== Weighted-average shares outstanding, basic 25,680 25,329 25,491 25,254 =========== ========= =========== =========== Net income per common share, assuming dilution $0.46 $0.36 $1.53 $1.37 =========== ========= =========== =========== Weighted-average shares outstanding, assuming dilution 26,262 25,887 26,139 26,019 SCANSOURCE, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED) Quarter Ended June 30, 2006 (In thousands, except per share data) GAAP FASB 123(R) QE Share-Based Non-GAAP June 30, Payment QE June 30, 2006 Expense 2006 ------------- -------- --------- Net sales $461,144 $461,144 Cost of goods sold 416,216 416,216 ------------- --------- Gross profit 44,928 44,928 ------------- --------- Selling, general and administrative expenses 27,344 (364) 26,980 ------------- -------- --------- Operating income 17,584 364 17,948 ------------- -------- --------- Other expense (income): Interest expense 588 588 Interest income (20) (20) Other (income) expense 117 117 ------------- --------- Other expense, net 685 - 685 ------------- -------- --------- Income before taxes & minority interest 16,899 364 17,263 Provision for income taxes 4,715 79 4,794 ------------- -------- --------- Income before minority interest 12,184 285 12,469 Minority interest in income of consolidated subsidiaries, net of income taxes 100 - 100 ------------- -------- --------- Net income $12,084 $285 $12,369 ============= ======== ========= Per share data: Net income per common share, basic $0.47 $0.48 ============= ========= Net income per common share, assuming dilution $0.46 $0.47 ============= ========= SCANSOURCE, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED) Fiscal Year Ended June 30, 2006 (In thousands, except per share data) FASB 123(R) GAAP Share- Non-GAAP Fiscal year Based Fiscal year June 30, Payment June 30, 2006 Expense 2006 ---------- -------- ---------- Net sales $1,665,600 $1,665,600 Cost of goods sold 1,497,248 1,497,248 ---------- ---------- Gross profit 168,352 168,352 ---------- ---------- Selling, general and administrative expenses 104,759 (3,164) 101,595 ------------ ------- ---------- Operating income 63,593 3,164 66,757 ---------- ------- ---------- Other expense (income): Interest expense 2,187 2,187 Interest income (567) (567) Other (income) expense (111) (111) ---------- ---------- Other expense, net 1,509 - 1,509 ---------- ------- ---------- Income before taxes & minority interest 62,084 3,164 65,248 Provision for income taxes 21,750 522 22,272 ---------- ------- ---------- Income before minority interest 40,334 2,642 42,976 Minority interest in income of consolidated subsidiaries, net of income taxes 225 - 225 ---------- ------- ---------- Net income $ 40,109 $ 2,642 $ 42,751 ========== ======= ========== Per share data: Net income per common share, basic $ 1.57 $ 1.68 ========== ========== Net income per common share, assuming dilution $ 1.53 $ 1.64 ========== ========== *T