Key Initiatives Accomplished to Grow the
Business
ScanSource, Inc. (NASDAQ:SCSC), the leading international
value-added distributor of specialty technology products, today
announced financial results for fiscal year 2015 third quarter
ended March 31, 2015.
Net sales for the quarter ended March 31, 2015 totaled
$763.2 million, a 12% increase over net sales of $683.0 million for
the quarter ended March 31, 2014. Excluding the translation
impact of foreign currencies, net sales increased 16%
year-over-year. The increase in net sales included a full quarter
of net sales from the acquisitions of Imago and Network1, each
completed during the current fiscal year.
"We had a busy quarter and completed several key strategic
initiatives," said Mike Baur, CEO, ScanSource, Inc. "Our successful
acquisitions of Network1 and Imago contributed to the strong sales
growth in our Worldwide Communications and Services segment. As
planned, we implemented our new global ERP system in Europe with
minimal disruption to our business."
Operating income for quarter ended March 31, 2015 totaled
$21.5 million, compared with $25.7 million in the prior year
quarter. Excluding adjustments, non-GAAP operating income for the
quarter ended March 31, 2015 decreased 12% over the prior year
quarter to $24.2 million from $27.6 million. Selling, general and
administrative expenses for the quarter ended March 31, 2015
included $2.6 million pre-tax ($1.6 million after-tax, or $0.06 per
diluted share) non-recurring SAP-related expenses associated with
the implementation of the Company's Enterprise Resource Planning
(ERP) system.
“We are deploying capital in accordance with our plan of
strategic acquisitions, share repurchases, and investment in our
global ERP system,” said Charlie Mathis, CFO, ScanSource, Inc.
On a GAAP basis, net income for the quarter ended March 31,
2015 totaled $12.9 million, or $0.45 per diluted share, compared
with net income of $16.9 million, or $0.59 per diluted share, for
the prior year quarter. Excluding adjustments, non-GAAP net income
for the quarter ended March 31, 2015 decreased to $14.9
million, or $0.52 per diluted share, from $18.2 million, or $0.63
per diluted share.
Forecast for Next Quarter
The Company announced its current expectations for the fourth
quarter of fiscal year 2015. ScanSource expects net sales for the
quarter ending June 30, 2015 to range from $800 million to $850
million and non-GAAP diluted earnings per share to range from $0.56
to $0.62 per share. Non-GAAP diluted earnings per share exclude
amortization of intangibles and change in fair value of contingent
consideration, and acquisition costs.
Webcast Details
ScanSource will present additional information about its
financial results and outlook in a conference call with
presentation slides today, April 30, 2015 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 obligations; 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
acquisitions on September 19, 2014 and January 13, 2015, which were
both 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, change in the fair value of
contingent consideration, and 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. 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)
March 31, 2015 June 30, 2014* Assets
Current assets: Cash and cash equivalents $ 93,578 $ 194,851
Accounts receivable, less allowance of $30,859 at March 31, 2015
487,148 464,405
and $26,257 at June 30, 2014
Inventories 485,603 504,758 Prepaid expenses and other current
assets 47,145 33,558 Deferred income taxes 20,879 18,109
Total current assets 1,134,353 1,215,681 Property and
equipment, net 47,401 31,823 Goodwill 64,848 32,342 Other
non-current assets, including net identifiable intangible assets
100,317 55,278 Total assets $ 1,346,919 $
1,335,124
Liabilities and Shareholders' Equity
Current liabilities: Current debt $ 5,171 $ — Accounts payable
392,396 421,721 Accrued expenses and other current liabilities
71,132 63,574 Current portion of contingent consideration 9,955
5,851 Income taxes payable 2,328 8,685 Total current
liabilities 480,982 499,831 Deferred income taxes 3,636 185
Long-term debt 6,696 5,429 Long-term portion of contingent
consideration 21,403 5,256 Other long-term liabilities 35,151
21,780 Total liabilities 547,868 532,481
Shareholders' equity: Common stock 171,084 168,447 Retained
earnings 699,868 650,896 Accumulated other comprehensive income
(loss) (71,901 ) (16,700 ) Total shareholders' equity 799,051
802,643 Total liabilities and shareholders' equity $
1,346,919 $ 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
March 31,
Nine months ended
March 31,
2015 2014 2015 2014 Net sales $ 763,203
$ 682,998 $ 2,361,941 $ 2,155,520 Cost of goods sold 683,187
609,647 2,126,168 1,928,414 Gross profit
80,016 73,351 235,773 227,106 Selling, general and administrative
expenses 58,235 46,705 158,047 143,541 Change in fair value of
contingent consideration 285 981 1,262 2,218
Operating income 21,496 25,665 76,464 81,347 Interest
expense 891 217 1,288 698 Interest income (731 ) (545 ) (2,057 )
(1,644 ) Other, net 1,515 13 2,238 65
Income before income taxes 19,821 25,980 74,995 82,228 Provision
for income taxes 6,878 9,031 26,023 27,544
Net income $ 12,943 $ 16,949 $ 48,972 $
54,684 Per share data: Net income per common share, basic $
0.45 $ 0.59 $ 1.71 $ 1.93
Weighted-average shares outstanding, basic 28,646 28,502
28,590 28,275 Net income per common
share, diluted $ 0.45 $ 0.59 $ 1.70 $ 1.92
Weighted-average shares outstanding, diluted 28,855
28,730 28,825 28,548
ScanSource, Inc. and
Subsidiaries Supplementary Information (Unaudited)
(in thousands)
Net Sales by Segment: Quarter
ended
March 31,
Non-GAAP% Change
2015 2014 % Change Excluding
FX(a) Worldwide Barcode & Security $ 422,061 $
455,822
(7.4)%
(2.0)% Worldwide Communications & Services 341,142
227,176
50.2 %
51.5 %
Consolidated $ 763,203 $ 682,998
11.7 %
15.8 %
Nine months ended
March 31,
Non-GAAP% Change
2015 2014 % Change Excluding
FX(a) Worldwide Barcode & Security $ 1,422,793 $
1,382,672
2.9 %
5.8 %
Worldwide Communications & Services 939,148 772,848
21.5 %
22.1 %
Consolidated $ 2,361,941 $ 2,155,520
9.6 %
11.6 %
Net Sales by Geography:
Quarter ended
March 31,
Non-GAAP% Change
2015 2014 % Change Excluding
FX(b) North American (U.S. and Canada) $ 534,742 $
498,773
7.2 %
7.2 %
International 228,461 184,225
24.0 %
39.1 %
Consolidated $ 763,203 $ 682,998
11.7 %
15.8 %
Nine months ended
March 31,
Non-GAAP% Change
2015 2014 % Change Excluding
FX(b) North American (U.S. and Canada) $ 1,717,600 $
1,602,202
7.2 %
7.2 %
International 644,341 553,318
16.5 %
24.4 %
Consolidated $ 2,361,941 $ 2,155,520
9.6 %
11.6 %
Notes:
(a) Year-over-year net sales growth rate
excluding the translation impact of changes in foreign currency
exchangerates. Calculated by translating the net sales for the
quarter and nine months ended March 31, 2015 intoU.S. dollars using
the weighted average foreign exchange rates for the quarter and
nine months ended March31, 2014, respectively. Worldwide Barcode
& Security net sales excluding the translation impact of
foreigncurrencies for the quarter and nine months ended March 31,
2015, as adjusted, totaled $446.9 million and$1.5 billion,
respectively. Worldwide Communications & Services net sales
excluding the translationimpact of foreign currencies for the
quarter and nine months ended March 31, 2015, as adjusted, totaled
$344.2million and $943.6 million, respectively.
(b) Year-over-year net sales growth rate
excluding the translation impact of changes in foreign currency
exchangerates. Calculated by translating the net sales for the
quarter and nine months ended March 31, 2015 into U.S.dollars using
the weighted average foreign exchange rates for the quarter and
nine months ended March 31, 2014,respectively. International net
sales excluding the translation impact of foreign currencies for
the quarterand nine months ended March 31, 2015 totaled
$256.3million and $688.3 million, respectively.
ScanSource, Inc. and Subsidiaries Supplementary
Information (Unaudited) (in thousands)
Non-GAAP Financial Information: Quarter
ended March 31, 2015
Operatingincome
Pre-taxincome
Netincome
DilutedEPS
GAAP measure $ 21,496 $ 19,821 $ 12,943 $ 0.45 Adjustments:
Amortization of intangible assets 2,114 2,114 1,464 0.05 Change in
fair value of contingent consideration 285 285 200 0.01 Acquisition
costs 292 292 292 0.01 Non-GAAP measure $
24,187 $ 22,512 $ 14,899 $ 0.52
Quarter ended March 31, 2014
Operatingincome
Pre-taxincome
Netincome
DilutedEPS
GAAP measure $ 25,665 $ 25,980 $ 16,949 $ 0.59 Adjustments:
Amortization of intangible assets 909 909 595 0.02 Change in fair
value of contingent consideration 981 981 647
0.02 Non-GAAP measure $ 27,555 $ 27,870 $ 18,191
$ 0.63
ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited) (in thousands)
Non-GAAP Financial Information: Quarter ended
March 31,
2015 2014 Return on invested capital (ROIC),
annualized (a) 12.1 % 15.3 %
Reconciliation of
Net Income to Adjusted EBITDA
Net income - GAAP $ 12,943 $ 16,949 Plus: Income taxes 6,878 9,031
Plus: Interest expense 891 217 Plus: Depreciation and amortization
3,710 1,743 EBITDA 24,422 27,940 Plus: Change in fair
value of contingent consideration 285 981 Plus: Acquisition costs
292 — Adjusted EBITDA (numerator for ROIC) (non-GAAP)
(b) $ 24,999 $ 28,921
Invested Capital
Calculation
Equity - beginning of quarter/year $ 818,748 $ 751,446 Equity - end
of quarter/year 799,051 772,786 Add: Change in fair value of
contingent consideration, net of tax 200 647 Acquisition costs, net
of tax(c) 292 — Average equity 809,146 762,440
Average funded debt(d) 32,046 5,429 Invested capital
(denominator for ROIC) (non-GAAP) $ 841,192 $ 767,869
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 byinvested capital for the period.
Invested capital is defined as average equity plus average daily
fundedinterest-bearing debt for the period.
(b) Adjusted EBITDA removes the impact of
change in fair value of contingent consideration for the
quartersended March 31, 2015 and 2014 and acquisition costs for the
quarter ended March 31, 2015. Adjusted EBITDAand 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-terminterest-bearing debt.
ScanSource, Inc.Charles A. Mathis, 864-286-4975Executive Vice
President and Chief Financial OfficerorMary M. Gentry,
864-286-4892Vice President, Treasurer and Investor Relations
ScanSource (NASDAQ:SCSC)
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