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 complete financial results for its second quarter ended December 31, 2007. QE 12/31/ 07 capsule: Net sales $553.3 million Net income $15.5 million Diluted EPS $0.59 per share �Our growth was led by record results in our North American and International POS/Bar Code units,� said Mike Baur, CEO of ScanSource. �Excellent execution by our sales and support teams worldwide allowed us to gain market share and achieve our financial goals. We are also very pleased with the record quarterly sales growth of our newly formed ScanSource Communications business unit.� For the quarter ended December 31, 2007, net sales increased 17% to $553.3 million compared to $473.7 million for the quarter ended December 31, 2006. Quarterly operating income increased 60% to $25.4 million from $15.9 million for the comparable quarter in 2006. Our effective tax rate for the quarter was 37.7% compared to 39.0% for the prior year. Net income increased 76% to $15.5 million for the quarter ended December 31, 2007 versus $8.8 million for the quarter ended December 31, 2006. Diluted earnings per share increased 74% to $0.59 per share compared to $0.34 in the prior year quarter. The comparable quarter and year-to-date periods are impacted by the ongoing expenditures related to our Special Committee�s review of the Company�s stock option grant practices and related matters. When adjusted to exclude legal and accounting costs of third party providers relating to this review for both periods, net income was $15.7 million for the quarter ended December 31, 2007 versus $11.8 million for the quarter ended December 31, 2006, an increase of 33%. Diluted earnings, as adjusted, per share also increased 33% to $0.60 per share compared to $0.45 in the prior year quarter. Supplemental schedules have been included to show this reconciliation for the quarter and year-to-date periods ended December 31, 2007 and 2006, respectively. Forecast for Next Quarter The Company announced its revenue forecast for the third quarter of fiscal 2008. ScanSource expects net revenues for the March 2008 quarter could range from $550 million to $570 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 creased 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 actual results to differ from anticipated results, see the Company�s annual report on Form 10-K for the year ended June 30, 2007 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 four sales units: ScanSource [automatic identification and data capture (AIDC) and point-of-sale (POS) products]; Catalyst Telecom (Avaya communications products); ScanSource Communications (video conferencing, telephone and communications products); and ScanSource Security Distribution (electronic security products). The Company services 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 #956 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 (In thousands) � Dec. 31, 2007 June 30, (unaudited) 2007 (a) Assets Current Assets Cash and cash equivalents $ 3,650 $ 1,864 Trade & notes receivable, net 349,281 349,961 Other receivables 10,526 6,755 Inventories 336,107 272,012 Prepaid expenses and other assets 9,983 10,444 Deferred income taxes � 13,700 � 12,102 Total current assets 723,247 653,138 � Property and equipment, net 22,832 26,781 Goodwill 29,310 29,361 Other assets, including identifiable intangible assets � 30,370 � 29,168 Total assets $ 805,759 $ 738,448 � Liabilities and Shareholders' Equity � Current Liabilities Current portion of long-term debt $ - $ 200 Short-term borrowings 1,973 3,490 Trade accounts payable 345,241 256,883 Accrued expenses and other liabilities � 42,062 � 39,610 Total current liabilities 389,276 300,183 � Deferred income taxes - - Long-term debt 3,888 17,216 Borrowings under revolving credit facility 45,277 90,314 Other long-term liabilities � 7,182 � 5,475 Total liabilities � 445,623 � 413,188 � Minority interest - 516 � Shareholders' Equity Common stock 87,796 83,653 Retained earnings 264,639 234,502 Accumulated other comprehensive income � 7,701 � 6,589 Total shareholders' equity � 360,136 � 324,744 Total liabilities and shareholders' equity $ 805,759 $ 738,448 � (a) Derived from audited financial statements at June 30, 2007. SCANSOURCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED) (In thousands, except per share data) � � � � � Quarter ended Six months ended Dec. 31, Dec. 31, 2007 2006 2007 2006 � Net sales $ 553,344 $ 473,734 $ 1,107,035 $ 969,963 Cost of goods sold � 494,167 � � 420,957 � � 989,734 � � 865,348 � Gross profit � 59,177 � � 52,777 � � 117,301 � � 104,615 � � Selling, general and adminstrative expenses � 33,743 � � 36,899 � � 66,514 � � 67,219 � Operating income 25,434 15,878 50,787 37,396 � Other expense (income): Interest expense 1,274 1,754 3,399 3,525 Interest income (404 ) (174 ) (707 ) (282 ) Other (income) expense � (251 ) � (126 ) � (403 ) � (562 ) Other expense (income), net � 619 � � 1,454 � � 2,289 � � 2,681 � Income before income taxes and minority interest 24,815 14,424 48,498 34,715 � Provision for income taxes � 9,365 � � 5,620 � � 18,361 � � 13,417 � Income before minority interest 15,450 8,804 30,137 21,298 � Minority interest in income of consolidated subsidiaries, net of income taxes � - � � 13 � � - � � 46 � � Net income $ 15,450 � $ 8,791 � $ 30,137 � $ 21,252 � � Per share data: Net income per common share, basic $ 0.60 � $ 0.34 � $ 1.16 � $ 0.83 � � Weighted-average shares outstanding, basic � 25,899 � � 25,749 � � 25,883 � � 25,739 � � Net income per common share, assuming dilution $ 0.59 � $ 0.34 � $ 1.15 � $ 0.81 � � Weighted-average shares outstanding, assuming dilution � 26,330 � � 26,236 � � 26,275 � � 26,225 � SCANSOURCE, INC. AND SUBSIDIARIES RECONCILIATION OF NON GAAP INCOME (UNAUDITED) (In thousands, except per share data) � � � � � � � Quarter ended Dec. 31, 2007 � Quarter ended Dec. 31, 2006 Special Special GAAP Committee Non-GAAP GAAP Committee Non-GAAP � � Costs � � � � Costs � � � Net sales $ 553,344 $ - $ 553,344 $ 473,734 $ - $ 473,734 Cost of goods sold � 494,167 � � - � � 494,167 � � 420,957 � � - � � 420,957 � Gross profit � 59,177 � � - � � 59,177 � � 52,777 � � - � � 52,777 � � Selling, general and administrative expenses � 33,743 � � (468 ) � 33,275 � � 36,899 � � (4,900 ) � 31,999 � Operating income 25,434 468 25,902 15,878 4,900 20,778 � Other expense (income): Interest expense 1,274 - 1,274 1,754 - 1,754 Interest income (404 ) - (404 ) (174 ) - (174 ) Other (income) expense � (251 ) � - � � (251 ) � (126 ) � - � � (126 ) Other expense (income), net � 619 � � - � � 619 � � 1,454 � � - � � 1,454 � Income before income taxes and minority interest 24,815 468 25,283 14,424 4,900 19,324 � Provision for income taxes � 9,365 � � 176 � � 9,541 � � 5,620 � � 1,862 � � 7,482 � � Income before minority interest 15,450 292 15,742 8,804 3,038 11,842 � Minority interest in income of consolidated subsidiaries, net of income taxes � - � � - � � - � � 13 � � - � � 13 � � Net income $ 15,450 � $ 292 � $ 15,742 � $ 8,791 � $ 3,038 � $ 11,829 � � Per share data: � Net income per common share, basic $ 0.60 � $ 0.01 � $ 0.61 � $ 0.34 � $ 0.12 � $ 0.46 � Weighted-average shares outstanding, basic � 25,899 � � 25,899 � � 25,749 � � 25,749 � � Net income per common share, assuming dilution $ 0.59 � $ 0.01 � $ 0.60 � $ 0.34 � $ 0.12 � $ 0.45 � Weighted-average shares outstanding, assuming dilution � 26,330 � � 26,330 � � 26,236 � � 26,236 � � To provide the reader more comparable information regarding the Company's quarterly operating results, the above schedule shows the impact on earnings had the Company not incurred the additional external costs related to the Special Committee and realated matters, in the quarterly periods indicated. These amounts consist primarily of legal and accounting costs of third party providers. For internal operating measurements, these costs are charged to the Company's corporate overhead and are not allocated to product lines. SCANSOURCE, INC. AND SUBSIDIARIES RECONCILIATION OF NON GAAP INCOME (UNAUDITED) (In thousands, except per share data) � � � � � � � Six months ended Dec. 31, 2007 Six months ended Dec. 31, 2006 Special Special GAAP Committee Non-GAAP GAAP Committee Non-GAAP � � Costs � � � � Costs � � � Net sales $ 1,107,035 $ - $ 1,107,035 $ 969,963 $ - $ 969,963 Cost of goods sold � 989,734 � � - � � 989,734 � � 865,348 � � - � � 865,348 � Gross profit � 117,301 � � - � � 117,301 � � 104,615 � � - � � 104,615 � � Selling, general and administrative expenses � 66,514 � � (1,011 ) � 65,503 � � 67,219 � � (4,900 ) � 62,319 � Operating income 50,787 1,011 51,798 37,396 4,900 42,296 � Other expense (income): Interest expense 3,399 - 3,399 3,525 - 3,525 Interest income (707 ) - (707 ) (282 ) - (282 ) Other (income) expense � (403 ) � - � � (403 ) � (562 ) � - � � (562 ) Other expense (income), net � 2,289 � � - � � 2,289 � � 2,681 � � - � � 2,681 � Income before income taxes and minority interest 48,498 1,011 49,509 34,715 4,900 39,615 � Provision for income taxes � 18,361 � � 381 � � 18,742 � � 13,417 � � 1,862 � � 15,279 � � Income before minority interest 30,137 630 30,767 21,298 3,038 24,336 � Minority interest in income of consolidated subsidiaries, net of income taxes � - � � - � � - � � 46 � � - � � 46 � � Net income $ 30,137 � $ 630 � $ 30,767 � $ 21,252 � $ 3,038 � $ 24,290 � � Per share data: � Net income per common share, basic $ 1.16 � $ 0.02 � $ 1.18 � $ 0.83 � $ 0.12 � $ 0.95 � Weighted-average shares outstanding, basic � 25,883 � � 25,883 � � 25,739 � � 25,739 � � Net income per common share, assuming dilution $ 1.15 � $ 0.02 � $ 1.17 � $ 0.81 � $ 0.12 � $ 0.93 � Weighted-average shares outstanding, assuming dilution � 26,275 � � 26,275 � � 26,225 � � 26,225 � � To provide the reader more comparable information regarding the Company's year-to-date operating results, the above schedule shows the impact on earnings had the Company not incurred the additional external costs related to the Special Committee and related matters, in the year-to-date periods indicated. These amounts consist primarily of legal and accounting costs of third party providers. For internal operating measurements, these costs are charged to the Company's corporate overhead and are not allocated to product lines.