SCSC ScanSource Inc

ScanSource, Inc. (NASDAQ: SCSC), the leading international distributor of AIDC (automatic identification and data capture), point of sale, communications, and physical security products for the reseller market, today announced complete financial results for its third quarter ended March 31, 2012.

Quarter ended March 31, 2012:   Net sales $707.9 million Net income $14.8 million Diluted EPS $0.53 per share

“Results for the quarter were in line with our expectations, with strong performance in our North America Barcode and Security units offsetting weak results in our International businesses,” said Mike Baur, CEO, ScanSource, Inc. “Each of our North American business units had double-digit sales growth, while our International segment, excluding the addition of our acquisition in Brazil, had a single-digit decline over prior year’s sales.”

For the quarter ended March 31, 2012, net sales increased 15.4% to $707.9 million compared to $613.5 million in the prior year quarter. Operating income decreased by 15.7% to $21.5 million from $25.5 million in the same period last year. Net income decreased 10.8% to $14.8 million for the quarter ended March 31, 2012 versus $16.5 million in the prior year. The effective tax rate for the quarter decreased to 32.3% in the current quarter from 34.0% in the prior year quarter. Diluted earnings per share decreased 11.7% to $0.53 in the current quarter compared to $0.60 in the prior year quarter.

Outlook for Next Quarter

The Company announced its current expectations for the fourth quarter of fiscal 2012. ScanSource expects that net revenues for the quarter ending June 30, 2012 could range from $780 million to $800 million, and diluted earnings per share could be in the range of $0.60 to $0.64 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 30 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 our expanded operations in emerging markets, such as Brazil, that expose us to greater political and economic volatility than our operations in established markets; the results of purchase accounting; 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, 2011 and Form 10-Q for the quarters ended September 30, 2011 and December 31, 2011 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 return on invested capital (“ROIC”), a non-GAAP measure. Management uses ROIC as a performance measurement because it believes that this metric best balances the Company’s operating results with its asset and liability management. It excludes the results of capitalization decisions, is easily computed and understood, and drives changes in shareholder value. In addition, the Company’s Board of Directors uses this non-GAAP measure in evaluating management performance and setting management compensation. 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 a following table.

About ScanSource, Inc.

ScanSource, Inc. (NASDAQ:SCSC) is the leading international distributor of specialty technology products, consisting of seven sales units in North America, Latin America and Europe. ScanSource POS and Barcoding in North America, Latin America and Europe delivers AIDC and POS solutions; Catalyst Telecom in the U.S. and ScanSource Communications in North America and Europe provide voice, video and converged communications equipment; and ScanSource Security in North America offers physical security solutions. Founded in 1992, the company ranks #839 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)   March 31, June 30, 2012 2011* Assets Current assets: Cash and cash equivalents $ 34,295 $ 28,747 Accounts receivable, less allowance of 445,206 462,102 $26,791 at March 31, 2012 $26,562 at June 30, 2011 Inventories 501,980 467,350 Prepaid expenses and other assets 35,460 35,421 Deferred income taxes   16,731     15,894 Total current assets 1,033,672 1,009,514   Property and equipment, net 46,332 36,819 Goodwill 56,363 59,090 Other assets, including identifiable intangible assets   71,174     76,765 Total assets $ 1,207,541   $ 1,182,188   Liabilities and Shareholders' Equity Current liabilities: Short-term borrowings $ - $ 3,164 Current portion of contingent consideration 5,061 2,398 Accounts payable 397,163 406,453 Accrued expenses and other liabilities 62,321 60,157 Income taxes payable   1,341     5,175 Total current liabilities 465,886 477,347   Long-term debt 5,429 30,429 Borrowings under revolving credit facility 41,491 26,513 Long-term portion of contingent consideration 14,678 21,396 Other long-term liabilities   37,607     39,109 Total liabilities   565,091     594,794   Shareholders' equity: Common stock 137,348 123,608 Retained earnings 514,659 460,157 Accumulated other comprehensive (income) loss   (9,557 )   3,629 Total shareholders' equity   642,450     587,394 Total liabilities and shareholders' equity $ 1,207,541   $ 1,182,188   * June 30, 2011 results are derived from audited consolidated financial statements.   ScanSource, Inc. and Subsidiaries Condensed Consolidated Income Statements (Unaudited) (in thousands, except per share information)         Quarter ended Nine months ended March 31, March 31, 2012 2011 2012 2011   Net sales $ 707,883 $ 613,466 $ 2,260,827 $ 1,931,641 Cost of goods sold   638,615     547,637     2,032,630     1,731,704   Gross profit   69,268     65,829     228,197     199,937     Operating expenses: Selling, general and administrative expenses 46,711 40,349 141,753 116,071 Change in fair value of contingent consideration   1,072     -     1,244     -   Operating income 21,485 25,480 85,200 83,866   Other expense (income): Interest expense 254 429 1,490 1,182 Interest income (780 ) (313 ) (2,233 ) (918 ) Other, net   206     300     3,363     492   Income before income taxes 21,805 25,064 82,580 83,110 Provision for income taxes   7,049     8,530     28,077     29,248   Net income $ 14,756   $ 16,534   $ 54,503   $ 53,862     Per share data: Net income per common share, basic $ 0.54   $ 0.61   $ 2.00   $ 2.01   Weighted-average shares outstanding, basic   27,489     26,938     27,290     26,811     Net income per common share, diluted $ 0.53   $ 0.60   $ 1.97   $ 1.98   Weighted-average shares outstanding, diluted   27,926     27,413     27,709     27,182     ScanSource, Inc. and Subsidiaries Supplementary Information (Unaudited) (in thousands)                 Net Sales by Geographic Segment: Quarter ended March 31, 2012 2011 % Change   North American (a) $ 529,845 $ 462,047 14.7 % International   178,038     151,419   17.6 % Consolidated $ 707,883     613,466   15.4 %   Nine months ended March 31, 2012 2011 % Change   North American (a) $ 1,666,240 $ 1,479,247 12.6 % International   594,587     452,394   31.4 % Consolidated $ 2,260,827   $ 1,931,641   17.0 %   Non-GAAP Financial Information: Quarter ended March 31, 2012 2011 Return on invested capital (ROIC), annualized (b)   13.5 %   18.2 %  

Reconciliation of EBITDA to Net Income

Net income - GAAP $ 14,756 $ 16,534 Plus: Income taxes 7,049 8,530 Plus: Interest expense 254 429 Plus: Depreciation and amortization   2,754     1,395   EBITDA (numerator for ROIC) $ 24,813   $ 26,888    

Invested Capital Calculation

Equity - beginning of the quarter $ 616,103 $ 535,649 Equity - end of quarter   642,450     562,072   Average equity 629,277 548,861 Average funded debt (c)   111,247     51,129   Invested capital (denominator for ROIC) $ 740,524   $ 599,990     Notes: (a) Includes the United States and Canada (b) Calculated as net income plus income taxes, interest expense, depreciation and amortization (EBITDA), annualized and divided by invested capital (c) Daily average interest-bearing debt