UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 29, 2015
ScanSource, Inc.
(Exact name of registrant as specified in its charter)
Commission File Number: 000-26926
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SC | | 00-26926 | | 57-0965380 |
(State or other jurisdiction of incorporation) | | (Commission File Number) | | (IRS Employer Identification No.) |
6 Logue Court, Greenville, SC 29615
(Address of principal executive offices, including zip code)
864-288-2432
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition
On October 29, 2015 ScanSource, Inc. issued a press release announcing its financial results for its first quarter for the period ended September 30, 2015. A copy of the press release and accompanying presentation slides are attached as Exhibit 99.1 and 99.2 hereto and incorporated herein by reference and also made available through the Company’s website at www.scansource.com.
The information in this Item 2.02 Current Report on Form 8-K, including the exhibits, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
99.1 – Press release issued by ScanSource, Inc. on October 29, 2015. The information contained in the attached exhibit is unaudited and should be read in conjunction with the Registrant’s annual and quarterly reports filed with the Securities and Exchange Commission.
99.2 – Presentation slides for the financial results conference call issued on October 29, 2015. The information contained in the attached exhibit is unaudited and should be read in conjunction with the Registrant’s annual and quarterly reports filed with the Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | | | ScanSource, Inc. |
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Date: October 29, 2015 | | | | By: | | /s/ Charles A. Mathis |
| | | | Name: | | Charles A. Mathis |
| | | | Its: | | Executive Vice President and Chief Financial Officer |
FOR IMMEDIATE RELEASE
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Contact: | | |
Charles A. Mathis | | Mary M. Gentry |
Executive Vice President and Chief Financial Officer | - or - | Vice President, Treasurer and Investor Relations |
ScanSource, Inc. | | ScanSource, Inc. |
(864) 286-4975 | | (864) 286-4892 |
SCANSOURCE REPORTS RECORD NET SALES FOR FIRST QUARTER
Profitability for the Quarter Exceeds Expectations
GREENVILLE, SC -- October 29, 2015 -- ScanSource, Inc. (NASDAQ:SCSC), a leading global provider of technology products and solutions, today announced financial results for fiscal year 2016 first quarter ended September 30, 2015.
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| Quarter ended September 30, | |
| 2015 | | 2014 | | Change | |
| (in millions, except per share data) | |
Net sales | $ | 870.8 |
| | $ | 791.7 |
| | 10 | % | |
Operating income | 24.4 |
| | 29.0 |
| | (16 | )% | |
Non-GAAP operating income(1) | 28.4 |
| | 31.8 |
| | (11 | )% | |
GAAP net income | 16.0 |
| | 19.2 |
| | (17 | )% | |
Non-GAAP net income(1) | 18.9 |
| | 21.6 |
| | (12 | )% | |
GAAP diluted EPS | $ | 0.57 |
| | $ | 0.67 |
| | (15 | )% | |
Non-GAAP diluted EPS(1) | $ | 0.68 |
| | $ | 0.75 |
| | (9 | )% | |
(1) A reconciliation of non-GAAP financial information to GAAP financial information is presented in the following Supplementary Information (Unaudited) table.
Net sales for the quarter ended September 30, 2015 totaled $870.8 million, a 10% increase over net sales of $791.7 million for the quarter ended September 30, 2014. Net sales increased 15% year-over-year in constant currency. The increase in net sales includes a full quarter of results from the acquisitions of Imago and Network1 and approximately a month of results from the acquisition of KBZ.
"We completed our first fiscal quarter with profitability ahead of our expectations in a quarter where we executed well on our strategic initiatives,” said Mike Baur, CEO, ScanSource, Inc. “We implemented our SAP ERP in North America with minimal disruption to our customers and vendors due to the tireless dedication of our employees. Our three acquisitions during the past year, Imago, Network1, and KBZ, contributed positively to our growth and strong operating performance.”
Operating income for the quarter ended September 30, 2015 totaled $24.4 million, compared with $29.0 million in the prior year quarter. Non-GAAP operating income for the quarter ended September 30, 2015 of $28.4 million decreased from $31.8 million in the prior year quarter.
On a GAAP basis, net income for the quarter ended September 30, 2015 totaled $16.0 million, or $0.57 per diluted share, compared with net income of $19.2 million, or $0.67 per diluted share, for the prior year quarter. Non-GAAP net income for the quarter ended September 30, 2015 totaled $18.9 million, or $0.68 per diluted share, compared with $21.6 million, or $0.75 per diluted share in the prior year quarter. Average diluted shares for first quarter 2016 totaled 27.9 million, down 3% from 28.8 million shares for the prior year quarter.
Completion of the Acquisition of KBZ
On September 4, 2015, ScanSource completed its acquisition of KBZ, an award-winning Cisco Authorized Distributor specializing in video conferencing, services, and cloud. Founded in 1987 and based in Doylestown, Pennsylvania, KBZ operates in the United States and has approximately 75 employees. ScanSource's first quarter results included KBZ from the September 4, 2015 acquisition date.
Share Repurchase Update
Under the Company's $120 million share repurchase authorization through September 30, 2015, the Company has repurchased approximately 1.6 million shares for approximately $61 million, having executed over 50% of the total authorization. During the quarter ended September 30, 2015, the Company repurchased approximately 1.15 million shares for approximately $42 million.
Forecast for Next Quarter
The Company announced its current expectations for the second quarter of fiscal year 2016. ScanSource expects net sales for the quarter ending December 31, 2015 to range from $900 million to $980 million and non-GAAP diluted earnings per share to range from $0.72 to $0.80 per share. Non-GAAP diluted earnings per share exclude amortization of intangibles, 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, October 29, 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, utilization and further implementation of the Company's new ERP system; risks in connection with our growth which includes strategic acquisitions; expanded international operations that expose the Company to greater risks than its operations in domestic markets; 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 ability to forecast volatility in earnings resulting from the quarterly revaluation of the Company's earnout obligations; 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, 2015, 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. Non-GAAP results exclude amortization of intangible assets related to acquisitions and change in fair value of contingent consideration.
Net sales on a constant currency basis: 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 other non-GAAP adjustments. 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 (Unaudited) tables.
About ScanSource, Inc.
ScanSource, Inc. (NASDAQ: SCSC) is a leading global provider of technology products and solutions, focusing on point-of-sale (POS), barcode, physical security, video, voice, and data networking. ScanSource's teams provide value-added solutions 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 is headquartered in Greenville, South Carolina and was named one of the 2015 Best Places to Work in South Carolina. ScanSource ranks #775 on the Fortune 1000. For more information, visit www.scansource.com.
ScanSource Reports First Quarter Results
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ScanSource, Inc. and Subsidiaries |
Condensed Consolidated Balance Sheets (Unaudited) |
(in thousands) |
| | September 30, 2015 | | June 30, 2015* |
Assets | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 41,239 |
| | $ | 121,646 |
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Accounts receivable, less allowance of $31,149 at September 30, 2015 | | 588,008 |
| | 522,532 |
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and $32,589 at June 30, 2015 | | | | |
Inventories | | 588,195 |
| | 553,063 |
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Prepaid expenses and other current assets | | 69,602 |
| | 46,917 |
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Deferred income taxes | | 19,787 |
| | 20,556 |
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Total current assets | | 1,306,831 |
| | 1,264,714 |
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Property and equipment, net | | 45,461 |
| | 46,574 |
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Goodwill | | 83,251 |
| | 66,509 |
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Net identifiable intangible assets | | 57,459 |
| | 46,272 |
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Other non-current assets | | 50,265 |
| | 52,872 |
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Total assets | | $ | 1,543,267 |
| | $ | 1,476,941 |
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Liabilities and Shareholders' Equity | | | | |
Current liabilities: | | | | |
Current debt | | $ | 1,700 |
| | $ | 2,860 |
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Accounts payable | | 516,146 |
| | 501,329 |
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Accrued expenses and other current liabilities | | 87,747 |
| | 81,000 |
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Current portion of contingent consideration | | 15,456 |
| | 9,391 |
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Income taxes payable | | 11,190 |
| | 4,180 |
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Total current liabilities | | 632,239 |
| | 598,760 |
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Deferred income taxes | | 3,559 |
| | 3,773 |
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Long-term debt | | 5,769 |
| | 5,966 |
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Borrowings under revolving credit facility | | 87,000 |
| | — |
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Long-term portion of contingent consideration | | 13,601 |
| | 24,569 |
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Other long-term liabilities | | 36,406 |
| | 34,888 |
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Total liabilities | | 778,574 |
| | 667,956 |
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Shareholders' equity: | | | | |
Common stock | | 116,849 |
| | 157,172 |
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Retained earnings | | 732,311 |
| | 716,315 |
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Accumulated other comprehensive income (loss) | | (84,467 | ) | | (64,502 | ) |
Total shareholders' equity | | 764,693 |
| | 808,985 |
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Total liabilities and shareholders' equity | | $ | 1,543,267 |
| | $ | 1,476,941 |
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* | Derived from audited financial statements. |
ScanSource Reports First Quarter Results
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ScanSource, Inc. and Subsidiaries |
Condensed Consolidated Income Statements (Unaudited) |
(in thousands, except per share data) |
| | | | |
| | Quarter ended September 30, |
| | 2015 | | 2014 |
Net sales | | $ | 870,829 |
| | $ | 791,720 |
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Cost of goods sold | | 783,277 |
| | 714,075 |
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Gross profit | | 87,552 |
| | 77,645 |
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Selling, general and administrative expenses | | 61,547 |
| | 48,155 |
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Change in fair value of contingent consideration | | 1,564 |
| | 513 |
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Operating income | | 24,441 |
| | 28,977 |
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Interest expense | | 281 |
| | 190 |
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Interest income | | (942 | ) | | (835 | ) |
Other, net | | 680 |
| | 386 |
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Income before income taxes | | 24,422 |
| | 29,236 |
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Provision for income taxes | | 8,426 |
| | 10,028 |
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Net income | | $ | 15,996 |
| | $ | 19,208 |
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Per share data: | | | | |
Net income per common share, basic | | $ | 0.58 |
| | $ | 0.67 |
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Weighted-average shares outstanding, basic | | 27,702 |
| | 28,544 |
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| | | | |
Net income per common share, diluted | | $ | 0.57 |
| | $ | 0.67 |
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Weighted-average shares outstanding, diluted | | 27,929 |
| | 28,794 |
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ScanSource Reports First Quarter Results
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ScanSource, Inc. and Subsidiaries |
Supplementary Information (Unaudited) |
(in thousands) |
| | | | | |
Net Sales by Segment: | | | | | |
| Quarter ended September 30, | | | | Non-GAAP % Change |
| 2015 | | 2014 | | % Change | | Constant Currency(a) |
Worldwide Barcode & Security | $ | 515,669 |
| | $ | 500,960 |
| | 2.9 | % | | 9.8 | % |
Worldwide Communications & Services | 355,160 |
| | 290,760 |
| | 22.1 | % | | 23.1 | % |
Consolidated | $ | 870,829 |
| | $ | 791,720 |
| | 10.0 | % | | 14.7 | % |
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Net Sales by Geography: | | | | | |
| Quarter ended September 30, | | | | Non-GAAP % Change |
| 2015 | | 2014 | | % Change | | Constant Currency(b) |
North American (U.S. and Canada) | $ | 641,931 |
| | $ | 595,791 |
| | 7.7 | % | | 7.7 | % |
International | 228,898 |
| | 195,929 |
| | 16.8 | % | | 35.8 | % |
Consolidated | $ | 870,829 |
| | $ | 791,720 |
| | 10.0 | % | | 14.7 | % |
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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, 2015 into U.S. dollars using the weighted average foreign exchange rates for the quarter ended September 30, 2014. Worldwide Barcode & Security net sales excluding the translation impact of foreign currencies for the quarter ended September 30, 2015, as adjusted, totaled $549.9 million. Worldwide Communications & Services net sales excluding the translation impact of foreign currencies for the quarter ended September 30, 2015, as adjusted, totaled $358 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, 2015 into U.S. dollars using the weighted average foreign exchange rates for the quarter ended September 30, 2014. International net sales excluding the translation impact of foreign currencies for the quarter ended September 30, 2015 totaled $266 million. |
ScanSource Reports First Quarter Results
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ScanSource, Inc. and Subsidiaries |
Supplementary Information (Unaudited) |
(in thousands) |
| | | | | | | |
Non-GAAP Financial Information: | | |
| Quarter ended September 30, 2015 |
| Operating income | | Pre-tax income | | Net income | | Diluted EPS |
GAAP measure | $ | 24,441 |
| | $ | 24,422 |
| | $ | 15,996 |
| | $ | 0.57 |
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Adjustments: | | | | | | | |
Amortization of intangible assets | 2,185 |
| | 2,185 |
| | 1,597 |
| | 0.06 |
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Change in fair value of contingent consideration | 1,564 |
| | 1,564 |
| | 1,080 |
| | 0.04 |
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Acquisition costs (a) | 220 |
| | 220 |
| | 220 |
| | 0.01 |
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Non-GAAP measure | $ | 28,410 |
| | $ | 28,391 |
| | $ | 18,893 |
| | $ | 0.68 |
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| Quarter ended September 30, 2014 |
| Operating income | | Pre-tax income | | Net income | | Diluted EPS |
GAAP measure | $ | 28,977 |
| | $ | 29,236 |
| | $ | 19,208 |
| | $ | 0.67 |
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Adjustments: | | | | | | | |
Amortization of intangible assets | 992 |
| | 992 |
| | 660 |
| | 0.02 |
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Change in fair value of contingent consideration | 513 |
| | 513 |
| | 341 |
| | 0.01 |
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Acquisition costs (a) | 1,350 |
| | 1,350 |
| | 1,350 |
| | 0.05 |
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Non-GAAP measure | $ | 31,832 |
| | $ | 32,091 |
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| $ | 21,559 |
| | $ | 0.75 |
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(a) Acquisition costs are non-deductible for tax purposes. | | | | | | | |
ScanSource Reports First Quarter Results
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ScanSource, Inc. and Subsidiaries |
Supplementary Information (Unaudited) |
(in thousands) |
| | | | | |
Non-GAAP Financial Information: |
| | Quarter ended September 30, | |
| | 2015 | | 2014 | |
Return on invested capital (ROIC), annualized (a) | | 14.6 | % | | 16.2 | % | |
| | | |
| |
Reconciliation of Net Income to Adjusted EBITDA | | | | | |
Net income - GAAP | | $ | 15,996 |
| | $ | 19,208 |
| |
Plus: Income taxes | | 8,426 |
| | 10,028 |
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Plus: Interest expense | | 281 |
| | 190 |
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Plus: Depreciation and amortization | | 3,938 |
| | 1,897 |
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EBITDA | | 28,641 |
| | 31,323 |
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Adjustments: | | | | | |
Change in fair value of contingent consideration | | 1,564 |
| | 513 |
| |
Acquisition costs | | 220 |
| | 1,350 |
| |
Adjusted EBITDA (numerator for ROIC) (non-GAAP) | | $ | 30,425 |
| | $ | 33,186 |
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Invested Capital Calculation | | | | | |
Equity - beginning of quarter/year | | $ | 808,985 |
| | $ | 802,643 |
| |
Equity - end of quarter/year | | 764,693 |
| | 810,265 |
| |
Adjustments: | | | | | |
Change in fair value of contingent consideration, net of tax | | 1,080 |
| | 341 |
| |
Acquisition costs, net of tax | | 220 |
| | 1,350 |
| |
Average equity | | 787,489 |
| | 807,300 |
| |
Average funded debt (b) | | 39,124 |
| | 6,205 |
| |
Invested capital (denominator for ROIC) (non-GAAP) | | $ | 826,613 |
| | $ | 813,505 |
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Notes: | | | | | |
(a) Calculated as net income plus interest expense, income taxes, depreciation and amortization (EBITDA), plus change in fair value of contingent consideration and other adjustments, 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) Average funded debt is calculated as the average daily amounts outstanding on short-term and long-term interest-bearing debt. |
Q1 FY16 FINANCIAL RESULTS CONFERENCE CALL October 29, 2015 at 5:00 pm ET Exhibit 99.2
SAFE HARBOR This presentation may contain certain comments, which are “forward-looking” statements that involve plans, strategies, economic performance and trends, projections, expectations, costs or beliefs about future events and other statements that are not descriptions of historical facts, may be forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking information is inherently subject to risks and uncertainties; these statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Any number of 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 “Risk Factors” included in the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2015, filed with the Securities and Exchange Commission (“SEC”). Although ScanSource believes the expectations in its forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement. ScanSource disclaims any intentions or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by law. 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 measures, including non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP diluted earnings per share, return on invested capital (“ROIC”) and the percentage change in net sales excluding the impact of foreign currency exchange rates. A reconciliation of the Company's non-GAAP financial information to GAAP financial information is provided in the Appendix and in the Company’s Form 8-K, filed with the SEC, with the quarterly earnings press release for the period indicated. 2
HIGHLIGHTS – Q1 FY16 3 Record net sales of $871 million, up 10% Y/Y, and non-GAAP diluted EPS of $0.68*; within or above expected ranges Gross profit margin of 10.1%; non-GAAP operating margin of 3.3%* Acquisition of KBZ completed September 4, 2015 Three acquisitions during the past year – Imago, Network1 and KBZ – contributed positively to our growth and strong operating performance Implementation of SAP ERP system in North America in early July 2015 Returned cash to shareholders through share repurchases First quarter 2016 return on invested capital of 14.6%* * See Appendix for calculation of non-GAAP measures and reconciliations to GAAP measures.
HIGHLIGHTS – Q1 FY16 4 Non-GAAP* Q1 FY16 Q1 FY15 Y/Y Change: Net sales $870.8 $791.7 +10%;+15% constant currency Gross profit 87.6 77.6 +13% Gross profit margin % 10.1% 9.8% +25 bps SG&A expenses 56.8 45.8 +24% SAP-related ERP costs 2.4 -- Non-GAAP operating income 28.4 31.8 -11% Non-GAAP operating income % 3.3% 4.0% -76 bps Non-GAAP net income $18.9 $21.6 -12% Non-GAAP diluted EPS $0.68 $0.75 -9% In millions, except EPS * See Appendix for calculation of non-GAAP measures and reconciliations to GAAP measures.
Q1 FY16 Q4 FY15 Q1 FY15 Net sales $515.7 $489.6 $501.0 Gross profit $44.7 $44.4 $43.0 Gross margin 8.7% 9.1% 8.6% Operating income $13.1 $12.2 $12.5 Operating income % 2.5% 2.5% 2.5% Non-GAAP operating income $13.8 $13.4 $13.6 Non-GAAP operating income % 2.7% 2.7% 2.7% WW BARCODE & SECURITY 5 $ in millions Non-GAAP operating income excludes amortization of intangibles and change in fair value of contingent consideration. See Appendix for calculation of non-GAAP measures and reconciliations to GAAP measures. Q1 FY15 Q1 FY16 $501 $516 Acqs. Net Sales, $ in millions Up 3% Constant Currency, Up 10%
Q1 FY16 Q4 FY15 Q1 FY15 Net sales $355.2 $367.1 $290.8 Gross profit $42.9 $46.9 $34.6 Gross margin 12.1% 12.8% 11.9% Operating income $11.6 $12.9 $17.8 Operating income % 3.3% 3.5% 6.1% Non-GAAP operating income $14.6 $15.2 $18.2 Non-GAAP operating income % 4.1% 4.1% 6.3% WW COMMUNICATIONS & SERVICES 6 Q1 FY15 Q1 FY16 Net Sales, $ in millions Up 22% Constant Currency, Up 23% $ in millions Non-GAAP operating income excludes amortization of intangibles and change in fair value of contingent consideration. See Appendix for calculation of non-GAAP measures and reconciliations to GAAP measures. $355 Acqs. $291
Q1 FY16 Q4 FY15 Q1 FY15 Accounts receivable (Q/E) $588.0 $522.5 $500.0 Days sales outstanding in receivables 56* 55 55** Inventory (Q/E) $588.2 $553.1 $495.1 Inventory turns 5.3* 5.9 5.7** Accounts payable (Q/E) $516.1 $501.3 $423.5 Paid for inventory days 13.0* 6.1 9.7** WORKING CAPITAL MEASURES $ in millions 7 * Excludes the impact of KBZ, which was completed September 4, 2015 ** Excludes the impact of Imago, which was completed September 19, 2014
Q1 FY16 Q4 FY15 Q1 FY15 Return on invested capital (“ROIC”)* 14.6% 15.2% 16.2% Operating cash flow, trailing 12-months $17.1 $75.5 $2.7 Cash and cash equivalents (Q/E) $41.2 $121.6 $139.9 Debt (Q/E) $94.5 $8.8 $5.4 Net debt to EBITDA, trailing 12-months 0.46x -- -- Shares repurchased – # of shares (QTR) 1,149,103 409,860 -- Shares repurchased – dollars (QTR) $41.9 $16.1 Cum. repurchases under plan – # shares (as of Q/E) 1,628,928 479,825 Cum. repurchases under plan – # shares (as of Q/E) $60.7 $18.8 Remaining authorization under plan (as of Q/E) $59.3 $101.2 -- CASH FLOW AND BALANCE SHEET HIGHLIGHTS $ in millions 8 * Excludes non-GAAP adjustments and change in fair value of contingent consideration. See Appendix for calculation of ROIC, a non-GAAP measure.
Q2 FY16 OUTLOOK* 9 * Outlook as of October 29, 2015. Non-GAAP diluted EPS excludes amortization of intangible assets, change in fair value of contingent consideration, and acquisition costs. Reflects the following FX rates: $1.12 to EUR 1.00 for the Euro, $0.256 to R$1.00 for the Brazilian real (R$3.91 to $1), and $1.53 to GBP 1.00 for the British pound. For the quarter ending December 31, 2015, excluding amortization of intangible assets, change in fair value of contingent consideration, and acquisition costs: Net Sales Non-GAAP Diluted Earnings Per Share Range from $900 million to $980 million Range from $0.72 to $0.80 per share
APPENDIX: NON-GAAP FINANCIAL INFORMATION 10 Income Statement Highlights ($ in thousands) Q1 FY16 Q4 FY15 Q1 FY15 GAAP Non- GAAP GAAP Non- GAAP GAAP Non- GAAP Net sales $870,829 $870,829 $856,685 $856,685 $791,720 $791,720 Gross profit 87,552 87,552 91,318 91,318 77,645 77,645 Gross profit margin % (of net sales) 10.1% 10.1% 10.7% 10.7% 9.8% 9.8% SG&A expenses 56,750 56,750 60,403 60,403 45,813 45,813 SAP-related ERP costs 2,392 2,392 2,303 2,303 - - Amortization of intangible assets 2,185 - 2,091 - 992 - Change, FV contingent consideration 1,564 - 1,406 - 513 - Acquisition costs 220 - 138 - 1,350 - Operating income 24,441 28,410 24,977 28,612 28,977 31,832 Operating income % (of net sales) 2.8% 3.3% 2.9% 3.3% 3.7% 4.0% Net income $ 15,996 $ 18,893 $ 16,447 $ 18,990 $ 19,208 $ 21,559 Diluted EPS $ 0.57 $ 0.68 $ 0.57 $ 0.66 $ 0.67 $ 0.75
APPENDIX: NON-GAAP FINANCIAL INFORMATION 11 Operating Income, Net Income & EPS ($ in thousands) Quarter Ended September 30, 2015 Operating Income Pre-tax income Net income Diluted EPS GAAP measure $ 24,441 $ 24,422 $ 15,996 $ 0.57 Adjustment: Amortization of intangible assets 2,185 2,185 1,597 0.06 Change in fair value of contingent consideration 1,564 1,564 1,080 0.04 Acquisition costs (a) 220 220 220 0.01 Non-GAAP measure $ 28,410 $ 28,391 $ 18,893 $ 0.68 Quarter Ended September 30, 2014 Operating Income Pre-tax income Net income Diluted EPS GAAP measure $ 28,977 $ 29,236 $ 19,208 $ 0.67 Adjustment: Amortization of intangible assets 992 992 660 0.02 Change in fair value of contingent consideration 513 513 341 0.01 Acquisition costs (a) 1,350 1,350 1,350 0.05 Non-GAAP measure $ 31,832 $ 32,091 $ 21,559 $ 0.75 (a) Acquisition costs are nondeductible for tax purposes.
APPENDIX: NON-GAAP FINANCIAL INFORMATION 12 ($ in thousands) Quarter Ended September 30, 2015 WW Barcode & Security WW Comms. & Services Corporate Consolidated Net sales $ 515,669 $ 355,160 $ - $ 870,829 GAAP operating income $ 13,082 $ 11,579 $ (220) $ 24,441 Adjustments: Amortization of intangible assets 610 1,575 - 2,185 Change in fair value of contingent consideration 126 1,438 - 1,564 Acquisition costs - - 220 220 Non-GAAP operating income $ 13,818 $ 14,592 $ - $ 28,410 GAAP operating income % (of net sales) 2.5% 3.3% n/m 2.8% Non-GAAP operating income % (of net sales) 2.7% 4.1% n/m 3.3% Quarter Ended September 30, 2014 WW Barcode & Security WW Comms. & Services Corporate Consolidated Net sales $ 500,960 $ 290,760 $ - $ 791,720 GAAP operating income $ 12,541 $ 17,786 $ (1,350) $ 28,977 Adjustments: Amortization of intangible assets 580 412 - 992 Change in fair value of contingent consideration 498 15 - 513 Acquisition costs - - 1,350 1,350 Non-GAAP operating income $ 13,619 $ 18,213 $ - $ 31,832 GAAP operating income % (of net sales) 2.5% 6.1% n/m 3.7% Non-GAAP operating income % (of net sales) 2.7% 6.3% n/m 4.0% n/m = not meaningful Highlights by Segment
APPENDIX: NON-GAAP FINANCIAL INFORMATION 13 ($ in thousands) Q1 FY16 Q4 FY15 Q1 FY15 Return on invested capital (ROIC), annualized (a) 14.6% 15.2% 16.2% Reconciliation of Net Income to EBITDA Net income - GAAP $ 15,996 $ 16,447 $ 19,208 Plus: Income taxes 8,426 8,464 10,028 Plus: Interest expense 281 509 190 Plus: Depreciation and amortization 3,938 3,947 1,897 EBITDA 28,641 29,367 31,323 Change in fair value of contingent consideration 1,564 1,406 513 Acquisition costs 220 138 1,350 Adjusted EBITDA (numerator for ROIC)(non-GAAP) $ 30,425 $ 30,911 $ 33,186 Invested Capital Calculation Equity - beginning of the quarter $ 808,985 $ 799,051 $ 802,643 Equity - end of quarter 764,693 808,985 810,265 Add: Change in fair value of contingent consideration, net of tax 1,080 955 341 Add: Acquisition costs, net of tax 220 138 1,350 Average equity 787,489 804,565 807,300 Average funded debt (b) 39,124 10,377 6,205 Invested capital (denominator for ROIC)(non-GAAP) $ 826,613 $ 814,942 $ 813,505 Notes: (a) Calculated as net income plus interest expense, income taxes, depreciation and amortization (EBITDA), annualized divided by invested capital for the period. Adjusted EBITDA reflects other adjustments for non-GAAP measures. (b) Average daily amounts outstanding on short-term and long-term interest-bearing debt. Return on Invested Capital
APPENDIX: NON-GAAP FINANCIAL INFORMATION 14 Net Sales, Constant Currency and Excluding Acquisitions ($ in thousands) Q1 FY16 Q1 FY15 Y/Y % Change Worldwide Barcode & Security: Net sales, as reported $ 515,669 $ 500,960 2.9% Foreign exchange impact (a) 34,260 - Net sales, constant currency $ 549,929 $ 500,960 9.8% Worldwide Communications & Services: Net sales, as reported $ 355,160 $ 290,760 22.1% Foreign exchange impact (a) 2,857 - Net sales, constant currency $ 358,017 $ 290,760 23.1% Consolidated: Net sales, as reported $ 870,829 $ 791,720 10.0% Foreign exchange impact 37,117 - Net sales, constant currency 907,946 791,720 14.7% Less: Acquisitions (104,505) (4,686) Net sales, constant currency excluding acquisitions $ 803,441 $ 787,034 2.1% (a) Year-over-year sales growth excluding the translation impact of changes in foreign currency rates. Calculated by translating the net sales for the quarter ended September 30, 2015 into U.S. dollars using the weighted average foreign exchange rates for the quarter ended September 30, 2014.
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