Achieves Record Quarterly Sales
ScanSource, Inc. (NASDAQ:SCSC), the leading international
value-added distributor of specialty technology products, today
announced financial results for fiscal year 2015 first quarter
ended September 30, 2014.
Quarter ended September 30, 2014
2013 Change (in millions, except per
share data) Net sales $ 791.7 $
731.9 8.2 %
Operating income 29.0 28.2 2.7 %
Non-GAAP operating income(1)
31.8 29.9 6.5 %
GAAP
net income 19.2 19.4 (1.2 )%
Non-GAAP net
income(1)
21.6 20.5 5.0 %
GAAP diluted EPS
$ 0.67 $ 0.69 (2.9 )%
Non-GAAP diluted EPS(1)
$ 0.75 $ 0.73 2.7 %
(1) Non-GAAP financial measures exclude amortization of
intangible assets, changes in fair value of contingent
consideration, and acquisition costs. A reconciliation of non-GAAP
financial measures to GAAP financial measures is presented in the
following Supplementary Information table.
Net sales for the quarter ended September 30, 2014 totaled
$791.7 million, an 8.2% increase over net sales of $731.9 million
for the quarter ended September 30, 2013.
"We achieved record quarterly sales and had double-digit growth
in our Worldwide Barcode and Security segment for the second
quarter in a row," said Mike Baur, CEO, ScanSource, Inc.
"International sales growth was especially strong, increasing 13%
over the prior year. We are pleased to complete our strategic
acquisition of Imago Group and add Europe’s leading value-added
distributor of video and voice solutions to ScanSource."
Operating income for quarter ended September 30, 2014
totaled $29.0 million, compared with $28.2 million in the prior
year quarter. Excluding adjustments, non-GAAP operating income for
the quarter ended September 30, 2014 increased 6.5% over the
prior year quarter to $31.8 million from $29.9 million.
On a GAAP basis, net income for the quarter ended
September 30, 2014 totaled $19.2 million, or $0.67 per diluted
share, compared with net income of $19.4 million, or $0.69 per
diluted share, for the prior year quarter. Excluding adjustments,
non-GAAP net income for the quarter ended September 30, 2014
increased to $21.6 million, or $0.75 per diluted share from $20.5
million, or $0.73 per diluted share.
Completion of the Acquisition of Imago
On September 19, 2014, ScanSource completed its acquisition of
Imago, Europe's leading value-added distributor of video and voice
communications equipment and services. ScanSource has acquired
Imago’s operations in the United Kingdom, France, and Germany, and
approximately 120 employees joined ScanSource. Under the agreement,
Imago shareholders received an initial purchase price of
approximately $37.4 million and are expected to receive additional
earnout payments over the next two years. Ian Vickerage, Imago
Founder and Managing Director, is continuing to lead Imago
ScanSource as its managing director.
Forecast for Next Quarter
The Company announced its current expectations for the second
quarter of fiscal year 2015. ScanSource expects net sales for the
quarter ending December 31, 2014 to range from $780 million to $800
million and non-GAAP diluted earnings per share to range from $0.64
to $0.66 per share. Non-GAAP diluted earnings per share exclude
acquisition costs, amortization of intangibles, and changes in fair
value of contingent consideration.
Webcast Details
ScanSource will present additional information about its
financial results and outlook in a conference call with
presentation slides today, October 30, 2014, at 5:00 p.m. (ET). A
webcast of the call and accompanying presentation slides will be
available for all interested parties and can be accessed at
www.scansource.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, expanded
international operations that expose the Company to greater risks
than its operations in domestic markets; risks in connection with
our growth which includes strategic acquisitions; costs and delays
in connection with the Company's new ERP system; the ability to
forecast volatility in earnings resulting from the quarterly
revaluation of the Company's earnout obligation to the sellers of
CDC and Imago; risks associated with consolidation of the Company's
vendors; risks in connection with compliance with laws and
regulations governing the Company's international business;
macroeconomic circumstances that could impact the business, such as
currency fluctuations, credit market conditions, and an economic
downturn; the timing and amount of any share repurchases; the
exercise of discretion by the Company to make any repurchase or
continue the share repurchase authorization; and changes to the
source of funds for any repurchases. 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, 2014, 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 certain non-GAAP
financial measures, which are summarized below. Non-GAAP financial
measures are used to better understand and evaluate performance,
including comparisons from period to period. The Company completed
an acquisition on September 19, 2014 and has a planned acquisition
that it expects to close on or before December 31, 2014. Both of
these acquisitions are structured with earnout payments. Given the
size of the acquisitions and potential variability of fair value
adjustments on operating results, non-GAAP results exclude
amortization of intangible assets related to acquisitions and
change in fair value of contingent consideration.
Net sales excluding the translation impact of foreign
currencies: The Company discusses the percentage change in net
sales excluding the translation impact from changes in foreign
currency exchange rates between reporting periods. This measure
enhances comparability between periods to help analyze underlying
trends.
Non-GAAP operating income, non-GAAP net income and non-GAAP EPS:
To evaluate current period performance on a clearer and more
consistent basis with prior periods, the Company discloses non-GAAP
operating income, non-GAAP net income and non-GAAP diluted earnings
per share. Non-GAAP results exclude amortization of intangible
assets related to acquisitions and change in the fair value of
contingent consideration. Results for the quarter ended
September 30, 2014 also exclude acquisition costs. Non-GAAP
operating income, non-GAAP net income, and non-GAAP EPS measures
are useful in better assessing and understanding the Company's
operating performance, especially when comparing results with
previous periods or forecasting performance for future periods.
Return on invested capital ("ROIC"): Management uses ROIC as a
performance measurement to assess efficiency in allocating capital
under the Company's control to generate returns. Management
believes this metric balances the Company's operating results with
asset and liability management, is not impacted by capitalization
decisions and is considered to have a strong correlation with
shareholder value creation. In addition, it is easily computed,
communicated and understood. ROIC also provides management a
measure of the Company's profitability on a basis more comparable
to historical or future periods.
ROIC assists management in comparing the Company's performance
over various reporting periods on a consistent basis because it
removes from operating results the impact of items that do not
reflect core operating performance. Starting this quarter, adjusted
earnings before interest expense, income taxes, depreciation and
amortization ("EBITDA") excludes the change in fair value of
contingent consideration, in addition to other non-GAAP
adjustments. Management believes the calculation of ROIC provides
useful information to investors and is an additional relevant
comparison of the Company's performance during the year. In
addition, the Company's Board of Directors uses ROIC in evaluating
business and management performance. Certain management incentive
compensation targets are set and measured relative to ROIC.
These non-GAAP financial measures have limitations as analytical
tools, and the non-GAAP financial measures that the Company reports
may not be comparable to similarly titled amounts reported by other
companies. Analysis of results and outlook on a non-GAAP basis
should be considered in addition to, and not in substitution for or
as superior to, measurements of financial performance prepared in
accordance with GAAP. A reconciliation of the Company's non-GAAP
financial information to GAAP is set forth in the following
Supplementary Information tables.
About ScanSource, Inc.
ScanSource, Inc. (NASDAQ: SCSC) is the leading international
distributor of specialty technology products, focusing on
point-of-sale (POS) and barcode, communications and physical
security solutions. ScanSource's teams provide value-added services
and operate from two technology segments, Worldwide Barcode &
Security and Worldwide Communications & Services. ScanSource is
committed to helping its reseller customers choose, configure and
deliver the industry's best products across almost every vertical
market in North America, Latin America and Europe. Founded in 1992,
the Company ranks #751 on the Fortune 1000. For more information,
visit www.scansource.com.
ScanSource, Inc. and Subsidiaries Condensed Consolidated
Balance Sheets (Unaudited) (in thousands)
September 30, 2014 June 30, 2014*
Assets Current assets: Cash and cash equivalents $ 139,863 $
194,851 Accounts receivable, less allowance of $24,110 at September
30, 2014 500,002 464,405 and $26,257 at June 30, 2014 Inventories
495,090 504,758 Prepaid expenses and other current assets 44,497
33,558 Deferred income taxes 18,302 18,109 Total
current assets 1,197,754 1,215,681 Property and equipment, net
38,423 31,823 Goodwill 50,945 32,342 Other non-current assets,
including net identifiable intangible assets 73,869 55,278
Total assets $ 1,360,991 $ 1,335,124
Liabilities and Shareholders' Equity Current liabilities:
Accounts payable $ 423,545 $ 421,721 Accrued expenses and other
current liabilities 67,915 63,574 Current portion of contingent
consideration 7,806 5,851 Income taxes payable 15,164 8,685
Total current liabilities 514,430 499,831 Deferred income
taxes 4,356 185 Long-term debt 5,429 5,429 Long-term portion of
contingent consideration 2,356 5,256 Other long-term liabilities
24,155 21,780 Total liabilities 550,726 532,481
Shareholders' equity: Common stock 170,104 168,447 Retained
earnings 670,104 650,896 Accumulated other comprehensive income
(loss) (29,943 ) (16,700 ) Total shareholders' equity 810,265
802,643 Total liabilities and shareholders' equity $
1,360,991 $ 1,335,124
* Derived from audited financial
statements.
ScanSource, Inc. and Subsidiaries Condensed Consolidated
Income Statements (Unaudited) (in thousands, except per
share data) Quarter ended
September 30,
2014 2013 Net sales $ 791,720 $ 731,904 Cost of goods
sold 714,075 655,405 Gross profit 77,645 76,499
Selling, general and administrative expenses 48,155 47,540 Change
in fair value of contingent consideration 513 738
Operating income 28,977 28,221 Interest expense 190 247 Interest
income (835 ) (574 ) Other, net 386 109 Income before
income taxes 29,236 28,439 Provision for income taxes 10,028
9,002 Net income $ 19,208 $ 19,437 Per share
data: Net income per common share, basic $ 0.67 $ 0.69
Weighted-average shares outstanding, basic 28,544
28,034 Net income per common share, diluted $ 0.67
$ 0.69 Weighted-average shares outstanding, diluted
28,794 28,257
ScanSource, Inc. and
Subsidiaries Supplementary Information (Unaudited)
(in thousands) Net Sales by Segment:
Quarter ended
September 30,
Non-GAAP %
Change
2014 2013 % Change Excluding
FX(a) Worldwide Barcode & Security $ 500,960 $
450,644 11.2 % 11.1 % Worldwide Communications & Services
290,760 281,260 3.4 % 3.4 % Consolidated $ 791,720 $ 731,904 8.2 %
8.2 %
Net Sales by Geography: Quarter
ended
September 30,
Non-GAAP %
Change
2014 2013 % Change Excluding
FX(b) North American (U.S. and Canada) $ 595,791 $
558,340 6.7 % 6.7 % International 195,929 173,564 12.9 % 12.9 %
Consolidated $ 791,720 $ 731,904 8.2 % 8.2 % 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 ended September 30, 2014 into U.S. dollars using the
weighted average foreign exchange rates for the quarter ended
September 30, 2013, respectively. Worldwide Barcode & Security
net sales excluding the translation impact of foreign currencies
for the quarter ended September 30, 2014, as adjusted, totaled
$500.8 million. Worldwide Communications & Services net sales
excluding the translation impact of foreign currencies for the
quarter ended September 30, 2014, as adjusted, totaled $290.9
million.
(b) 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 ended September 30, 2014
into U.S. dollars using the weighted average foreign exchange rates
for the quarter ended September 30, 2013, respectively.
International net sales excluding the translation impact of foreign
currencies for the quarter ended September 30, 2014 remained
unchanged at $195.9 million.
Non-GAAP
Financial Information: Quarter ended September 30, 2014
Operating
income
Pre-tax
income
Net
income
Diluted
EPS
GAAP measure $ 28,977 $ 29,236 $ 19,208 $ 0.67 Adjustments:
Amortization of intangible assets 992 992 660 0.02 Change in fair
value of contingent consideration 513 513 341 0.01 Acquisition
costs 1,350 1,350 1,350 0.05 Non-GAAP measure
$ 31,832 $ 32,091 $ 21,559 $ 0.75
Quarter ended September 30, 2013
Operating
income
(loss)
Pre-tax
income
(loss)
Net
income
(loss)
Diluted
EPS
GAAP measure $ 28,221 $ 28,439 $ 19,437 $ 0.69 Adjustments:
Amortization of intangible assets 924 924 605 0.02 Change in fair
value of contingent consideration 738 738 487
0.02 Non-GAAP measure $ 29,883 $ 30,101 $ 20,529
$ 0.73
ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited) (in thousands)
Non-GAAP Financial Information: Quarter
ended
September 30,
2014 2013 Return on invested capital (ROIC),
annualized (a) 16.2 % 17.4 %
Reconciliation of
Net Income to Adjusted EBITDA
Net income - GAAP $ 19,208 $ 19,437 Plus: Income taxes 10,028 9,002
Plus: Interest expense 190 247 Plus: Depreciation and amortization
1,897 1,869 EBITDA 31,323 30,555 Plus: Change in fair
value of contingent consideration 513 738 Plus: Acquisition costs
1,350 — Adjusted EBITDA (numerator for ROIC)
(non-GAAP) (b) $ 33,186 $ 31,293
Invested Capital
Calculation
Equity - beginning of quarter/year $ 802,643 $ 695,956 Equity - end
of quarter/year 810,265 723,748 Add: Change in fair value of
contingent consideration, net of tax 341 487 Acquisition costs, net
of tax(c) 1,350 — Average equity 807,300 710,096
Average funded debt (d) 6,205 5,429 Invested capital
(denominator for ROIC) (non-GAAP) $ 813,505 $ 715,525
Notes: (a) Calculated as net income plus
interest expense, income taxes, depreciation and amortization
(EBITDA), plus change in fair value of contingent consideration and
acquisition costs, annualized and divided by invested capital for
the period. Invested capital is defined as average equity plus
average daily funded interest-bearing debt for the period. (b)
Adjusted EBITDA removes the impact of change in fair value of
contingent consideration for the quarters ended September 30, 2014
and 2013 and acquisition costs for the quarter ended September 30,
2014. Adjusted EBITDA and the resulting change in ROIC is shown
retrospectively. (c) Acquisition costs are nondeductible for tax
purposes. (d) Average funded debt is calculated as the average
daily amounts outstanding on short-term and long-term
interest-bearing debt.
ScanSource, Inc.Charles A. MathisExecutive Vice President and
Chief Financial Officer864-286-4975orMary M. GentryVice President,
Treasurer and Investor Relations864-286-4892
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