ScanSource, Inc. (NASDAQ:SCSC), the leading international
value-added distributor of specialty technology products, today
announced complete financial results for its second quarter ended
December 31, 2012.
Quarter ended December 31, 2012: Net sales
$747.7 million GAAP net income $16.4 million
Adjusted net income(1) $17.8 million GAAP
diluted EPS $0.59 per share Adjusted diluted
EPS(1) $0.64 per share
(1) A reconciliation of non-GAAP financial
information to GAAP financial information is presented
in the following Supplementary Information
table.
“Our sales teams delivered results within our planned range,
including record quarterly sales for POS & Barcode and Security
products worldwide,” said Mike Baur, CEO, ScanSource, Inc. “In
addition, our North America Communications team achieved record
sales results for the quarter.”
For the quarter ended December 31, 2012, net sales decreased
4.5% to $747.7 million, compared with $782.7 million for the
quarter ended December 31, 2011. Excluding the translation impact
of foreign currencies, net sales decreased 3.1% year-over-year.
Operating income decreased to $24.4 million from $32.1 million in
the comparable prior year quarter. The effective tax rate decreased
to 34.0% in the current quarter from 34.7% in the prior year
quarter. Net income for the quarter ended December 31, 2012 was
$16.4 million, or $0.59 per diluted share, compared with net income
of $21.4 million, or $0.77 per diluted share, for the prior year
quarter.
Selling, general and administrative expenses for the quarter
ended December 31, 2012 included $2.1 million pre-tax ($1.4 million
after-tax) in one-time costs associated with the Company's
attaining compliance with local Belgian tax matters. These costs
include the replacement of certain personnel in the Company's
Belgian office and related severance costs, as well as tax accruals
and professional fees. Excluding the one-time costs associated with
personnel replacement in the Company's local Belgian office,
including related tax compliance and professional fees, adjusted
net income for the quarter ended December 31, 2012 totaled $17.8
million, or $0.64 per diluted share.
Forecast for Next Quarter
The Company announced its current expectations for the third
quarter of fiscal 2013. ScanSource expects that net sales for the
quarter ending March 31, 2013 could range from $675 million to
$695 million, and diluted earnings per share could be in the range
of $0.48 to $0.50 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 60 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 one-time costs associated with tax compliance and
personnel replacement in the Company's local Belgian office;
expanded operations in emerging markets, such as Brazil, that
expose us to greater political and economic volatility than our
operations in established markets; additional costs and delays in
connection with the implementation of our new ERP system and
associated litigation; our ability to forecast volatility in
earnings resulting from the quarterly revaluation of the Company's
earnout obligation to the sellers of CDC; 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, 2012 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 non-GAAP measures.
To evaluate current period performance on a clearer and more
consistent basis with prior periods, the Company discloses adjusted
net income and adjusted diluted earnings per share, which exclude
one-time costs associated with tax compliance and personnel
replacement in the Company's local Belgian office. Management uses
return on invested capital (“ROIC”), a non-GAAP measure, as a
performance measurement because management believes that this
metric best balances the Company's operating results with its asset
and liability management. The Company's Board of Directors uses
ROIC in evaluating management performance and setting management
compensation. The Company also discloses the percentage change in
net sales excluding the impact of foreign currency exchange rates
to better assess the changes from prior periods.
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 the following
Supplemental Information table.
About ScanSource, Inc.
ScanSource, Inc. (NASDAQ: SCSC) is the leading international
distributor of specialty technology products, operating from
dedicated business units in North America, Latin America and
Europe. ScanSource POS & Barcode delivers AIDC (automatic
identification and data capture) and POS (point-of-sale) solutions;
Catalyst Telecom and ScanSource Communications provide voice,
video, data and converged communications equipment; ScanSource
Security offers physical security solutions; and ScanSource
Services Group delivers value-added support programs and services.
Founded in 1992, the company ranks #760 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)
December 31, 2012 June 30, 2012* Assets
Current assets: Cash and cash equivalents $ 31,455 $ 29,173
Accounts receivable, less allowance of 464,286 470,808 $29,840 at
December 31, 2012 $27,349 at June 30, 2012 Inventories 474,713
475,479 Prepaid expenses and other current assets 42,540 41,846
Deferred income taxes 15,278 14,624 Total current
assets 1,028,272 1,031,930 Property and equipment, net 48,685
48,785 Goodwill 54,080 53,885 Other non-current assets, including
identifiable intangible assets 72,486 67,206 Total
assets $ 1,203,523 $ 1,201,806
Liabilities and
Shareholders' Equity Current liabilities: Short-term borrowings
$ 544 $ 4,268 Accounts payable 353,108 419,683 Accrued expenses and
other current liabilities 69,700 67,776 Current portion of
contingent consideration 4,952 4,976 Income taxes payable 2,267
1,698 Total current liabilities 430,571 498,401
Deferred income taxes 2,787 — Long-term debt 5,429 5,429 Borrowings
under revolving credit facility 21,808 — Long-term portion of
contingent consideration 8,138 11,677 Other long-term liabilities
37,830 33,988 Total liabilities 506,563 549,495
Shareholders' equity: Common stock 144,894 139,557 Retained
earnings 568,443 534,445 Accumulated other comprehensive income
(loss) (16,377 ) (21,691 ) Total shareholders' equity 696,960
652,311 Total liabilities and shareholders' equity $
1,203,523 $ 1,201,806 * Derived from audited
financial statements.
ScanSource, Inc. and Subsidiaries
Condensed Consolidated Income Statements (Unaudited) (in
thousands, except per share data)
Quarter ended
December 31,
Six months ended
December 31,
2012 2011 2012 2011 Net sales $ 747,716
$ 782,684 $ 1,481,320 $ 1,552,943 Cost of goods sold 673,365
702,845 1,332,930 1,394,013 Gross profit
74,351 79,839 148,390 158,930 Operating expenses: Selling, general
and administrative expenses 49,393 48,474 96,454 95,043 Change in
fair value of contingent consideration 533 (722 ) 1,296
172 Operating income 24,425 32,087 50,640 63,715
Other expense (income): Interest expense 130 749 254 1,236 Interest
income (532 ) (1,002 ) (1,166 ) (1,452 ) Other, net 53 (374
) 39 3,157 Income before income taxes 24,774 32,714
51,513 60,774 Provision for income taxes 8,417 11,347
17,514 21,028 Net income $ 16,357 $ 21,367
$ 33,999 $ 39,746 Per share data:
Weighted-average shares outstanding, basic 27,713 27,244
27,665 27,191 Net income per common share,
basic $ 0.59 $ 0.78 $ 1.23 $ 1.46
Weighted-average shares outstanding, diluted 27,958
27,674 27,928 27,604 Net income per common
share, diluted $ 0.59 $ 0.77 $ 1.22 $ 1.44
ScanSource, Inc. and Subsidiaries Supplementary
Information (Unaudited) (in thousands)
Net Sales by Geographic Segment: Non-GAAP Quarter
ended December 31, % Change 2012
2011 % Change Excluding FX(a) North
American (U.S. and Canada) $ 547,987 $ 562,923 (2.7 )% (2.7 )%
International 199,729 219,761 (9.1 )% (4.4 )%
Consolidated $ 747,716 $ 782,684 (4.5 )% (3.1 )%
Non-GAAP Six months ended December 31, %
Change 2012 2011 % Change Excluding
FX(a) North American (U.S. and Canada) $ 1,093,799 $
1,136,395 (3.7 )% (3.7 )% International 387,521 416,548
(7.0 )% 1.2 % Consolidated $ 1,481,320 $ 1,552,943
(4.6 )% (2.4 )% Notes: (a) Year-over-year net sales
growth rate excluding the translation impact of changes in foreign
currency exchange rates. Calculated by translating the net sales
for the quarter and six months ended December 31, 2012 into U.S.
dollars using the weighted average foreign exchange rates for the
quarter and six months ended December 31, 2011, respectively.
International net sales excluding the translation impact of foreign
currencies for the quarter and six months ended December 31, 2012,
as adjusted, totaled $210.2 million and $421.6 million.
ScanSource, Inc. and Subsidiaries Supplementary
Information (Unaudited) (in thousands, except per share
data) Non-GAAP Financial Information: Quarter
ended December 31, 2012 Pre-Tax After-Tax
Diluted EPS Net income (GAAP) $ 24,774 $ 16,357 $ 0.59
Adjustments: Costs associated with Belgian tax compliance and
personnel replacement costs, including related professional fees
2,121 1,400 0.05 Adjusted net income
(Non-GAAP) $ 26,895 $ 17,757 $ 0.64
Quarter ended December 31, 2012 2011 Return on
invested capital (ROIC), annualized (a) 15.2 % 19.3 %
Reconciliation of
EBITDA to Net Income
Net income (GAAP) $ 16,357 $ 21,367 Plus: Income taxes 8,417 11,347
Plus: Interest expense 130 749 Plus: Depreciation and amortization
2,275 2,258 EBITDA (numerator for ROIC) $ 27,179
$ 35,721
Invested Capital
Calculation
Equity - beginning of quarter $ 676,136 $ 597,658 Equity - end of
quarter 696,960 616,103 Average equity 686,548
606,881 Average funded debt (b) 23,850 128,805
Invested capital (denominator for ROIC) $ 710,398 $ 735,686
Notes: (a) Calculated as net income plus interest
expense, income taxes, depreciation and amortization (EBITDA),
annualized and divided by invested capital for the period. (b)
Average funded debt is calculated as the daily average amounts
outstanding on our short-term and long-term interest-bearing debt.
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