EX-99.1 2 a2014-q1exhibit991.htm EXHIBIT 99.1
Exhibit 99.1
FOR IMMEDIATE RELEASE

Contact: |  |
Charles A. Mathis |  | Mary M. Gentry
Senior Vice President and Chief Financial Officer | - or - | Treasurer and Director, Investor Relations
ScanSource, Inc. |  | ScanSource, Inc.
(864) 286-4975 |  | (864) 286-4892

SCANSOURCE REPORTS FIRST QUARTER RESULTS
Solid Sales Growth in North America Communications and Security Business Units
GREENVILLE, SC -- October 24, 2013 -- ScanSource, Inc. (NASDAQ:SCSC), the leading international value-added distributor of specialty technology products, today announced complete financial results for its first quarter ended September 30, 2013.

Quarter ended September 30, 2013:
Net sales | $731.9 million
Net income | $19.4 million
Diluted EPS | $0.69 per share

“Our quarterly sales results were led by solid year-over-year growth for our North America Communications and Security business units,” said Mike Baur, CEO, ScanSource, Inc. “Our teams executed well in a slower growth environment, especially internationally where Europe and Brazil achieved better operating results than a year ago.”
For the quarter ended September 30, 2013, net sales totaled $731.9 million. This represents a 2.7% increase from the prior quarter’s sales of $712.7 million and a slight decrease from net sales of $733.6 million for the quarter ended September 30, 2012. Operating income increased 7.7% to $28.2 million from $26.2 million in the comparable prior year quarter. Net income for the quarter ended September 30, 2013 was $19.4 million, or $0.69 per diluted share, compared with net income of $17.6 million, or $0.63 per diluted share, for the prior year quarter.
Forecast for Next Quarter and Sales Release Update
The Company announced its current expectations for the second quarter of fiscal 2014. ScanSource expects that net sales for the quarter ending December 31, 2013 could range from $740 million to $760 million, and diluted earnings per share could be in the range of $0.62 to $0.64 per share. Starting with the quarter ending December 31, 2013, the Company will no longer provide a sales release in the first week following the quarter end.
Webcast Details
ScanSource will present additional information about its financial results and outlook in a conference call with presentation slides today, October 24, 2013, at 5:00 p.m. (ET). A webcast of the call and accompanying presentations 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.

ScanSource Reports First Quarter Results
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 operations in emerging markets, such as Brazil, that expose the Company to greater political and economic volatility than its operations in established markets; additional costs and delays in connection with the Company's new ERP system and associated litigation; the ability to forecast volatility in earnings resulting from the quarterly revaluation of the Company's earnout obligation to the sellers of CDC; and macroeconomic circumstances that could impact the business, such as currency fluctuations, 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, 2013 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, including net sales excluding the translation impact of foreign currencies and return on invested capital ("ROIC"). Non-GAAP financial measures are used to better understand and evaluate performance, including comparisons from period to period, as described below.
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.
Return on invested capital ("ROIC"): Management uses ROIC as a performance measurement to assess efficiency at 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, excludes the results of capitalization decisions, is easily computed and understood, and is considered to have a strong correlation with shareholder value creation. ROIC also provides management a measure of the Company's profitability on a basis more comparable to historical or future periods. 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 Supplemental 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 #711 on the Fortune 1000. For more information, visit www.scansource.com.

ScanSource Reports First Quarter Results

ScanSource, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
|  | September 30, 2013 |  | June 30, 2013*
Assets |  |  |  |
Current assets: |  |  |  |
Cash and cash equivalents |  | $ | 193,769 |  |  | $ | 148,164 |
Accounts receivable, less allowance of |  | 443,256 |  |  | 435,028 |
$27,966 at September 30, 2013 |  |  |  |
$25,479 at June 30, 2013 |  |  |  |
Inventories |  | 433,109 |  |  | 402,307 |
Prepaid expenses and other current assets |  | 43,023 |  |  | 40,105 |
Deferred income taxes |  | 15,522 |  |  | 16,456 |
Total current assets |  | 1,128,679 |  |  | 1,042,060 |
Property and equipment, net |  | 19,545 |  |  | 20,203 |
Goodwill |  | 32,044 |  |  | 31,795 |
Other non-current assets, including identifiable intangible assets |  | 71,589 |  |  | 70,125 |
Total assets |  | $ | 1,251,857 |  |  | $ | 1,164,183 |
Liabilities and Shareholders' Equity |  |  |  |
Current liabilities: |  |  |  |
Current portion of contingent consideration |  | $ | 5,453 |  |  | $ | 3,732 |
Accounts payable |  | 417,103 |  |  | 362,271 |
Accrued expenses and other current liabilities |  | 57,967 |  |  | 59,983 |
Income taxes payable |  | 10,730 |  |  | 1,696 |
Total current liabilities |  | 491,253 |  |  | 427,682 |
Deferred income taxes |  | 698 |  |  | 205 |
Long-term debt |  | 5,429 |  |  | 5,429 |
Long-term portion of contingent consideration |  | 4,053 |  |  | 8,813 |
Other long-term liabilities |  | 26,676 |  |  | 26,098 |
Total liabilities |  | 528,109 |  |  | 468,227 |
Shareholders' equity: |  |  |  |
Common stock |  | 153,905 |  |  | 149,821 |
Retained earnings |  | 588,544 |  |  | 569,107 |
Accumulated other comprehensive income (loss) |  | (18,701 | ) |  | (22,972 | )
Total shareholders' equity |  | 723,748 |  |  | 695,956 |
Total liabilities and shareholders' equity |  | $ | 1,251,857 |  |  | $ | 1,164,183 |

* | Derived from audited financial statements.

ScanSource Reports First Quarter Results

ScanSource, Inc. and Subsidiaries
Condensed Consolidated Income Statements (Unaudited)
(in thousands)
| Quarter ended September 30,
| 2013 |  | 2012
Net sales | $ | 731,904 |  |  | $ | 733,605 |
Cost of goods sold | 655,405 |  |  | 659,565 |
Gross profit | 76,499 |  |  | 74,040 |
Operating expenses: |  |  |
Selling, general and administrative expenses | 47,540 |  |  | 47,061 |
Change in fair value of contingent consideration | 738 |  |  | 764 |
Operating income | 28,221 |  |  | 26,215 |
Other expense (income): |  |  |
Interest expense | 247 |  |  | 124 |
Interest income | (574 | ) |  | (633 | )
Other, net | 109 |  |  | (15 | )
Income before income taxes | 28,439 |  |  | 26,739 |
Provision for income taxes | 9,002 |  |  | 9,097 |
Net income | $ | 19,437 |  |  | $ | 17,642 |
Per share data: |  |  |
Weighted-average shares outstanding, basic | 28,034 |  |  | 27,618 |
Net income per common share, basic | $ | 0.69 |  |  | $ | 0.64 |
Weighted-average shares outstanding, diluted | 28,257 |  |  | 27,901 |
Net income per common share, diluted | $ | 0.69 |  |  | $ | 0.63 |

ScanSource Reports First Quarter Results

ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)
(in thousands)
Net Sales by Segment: |  |  |  |  | Non-GAAP
| Quarter ended September 30, |  |  |  | % Change
| 2013 |  | 2012 |  | % Change |  | Excluding FX(a)
Worldwide Barcode & Security | $ | 450,644 |  |  | $ | 456,187 |  |  | (1.2 | )% |  | (1.2 | )%
Worldwide Communications & Services | 281,260 |  |  | 277,418 |  |  | 1.4 | % |  | 1.0 | %
Consolidated | $ | 731,904 |  |  | $ | 733,605 |  |  | (0.2 | )% |  | (0.4 | )%
Net Sales by Geographic Segment: |  |  |  |  | Non-GAAP
| Quarter ended September 30, |  |  |  | % Change
| 2013 |  | 2012 |  | % Change |  | Excluding FX(b)
North American (U.S. and Canada) | $ | 558,340 |  |  | $ | 545,813 |  |  | 2.3 | % |  | 2.3 | %
International | 173,564 |  |  | 187,792 |  |  | (7.6 | )% |  | (8.1 | )%
Consolidated | $ | 731,904 |  |  | $ | 733,605 |  |  | (0.2 | )% |  | (0.4 | )%
Non-GAAP Financial Information: | Quarter ended September 30, |  |  |  |
| 2013 |  | 2012 |  |  |  |
Return on invested capital (ROIC), annualized (c) | 16.9 | % |  | 17.0 | % |  |  |  |
Reconciliation of Net Income to EBITDA |  |  |  |  |  |  |
Net income - GAAP | $ | 19,437 |  |  | $ | 17,642 |  |  |  |  |
Plus: Income taxes | 9,002 |  |  | 9,097 |  |  |  |  |
Plus: Interest expense | 247 |  |  | 124 |  |  |  |  |
Plus: Depreciation and amortization | 1,869 |  |  | 2,314 |  |  |  |  |
EBITDA (numerator for ROIC) (non-GAAP) | $ | 30,555 |  |  | $ | 29,177 |  |  |  |  |
(a) Depreciation & amortization for the quarter ended September 30, 2012 includes debt issue costs of $0.1 million. |  |  |  |
Invested Capital Calculation |  |  |  |  |  |  |
Equity - beginning of quarter | $ | 695,956 |  |  | $ | 652,311 |  |  |  |  |
Equity - end of quarter | 723,748 |  |  | 676,136 |  |  |  |  |
Average equity | 709,852 |  |  | 664,224 |  |  |  |  |
Average funded debt (d) | 5,429 |  |  | 16,563 |  |  |  |  |
Invested capital (denominator for ROIC) (non-GAAP) | $ | 715,281 |  |  | $ | 680,787 |  |  |  |  |
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, 2013 into U.S. dollars using the weighted average foreign exchange rates for the quarter ended September 30, 2012. Worldwide Barcode & Security net sales excluding the translation impact of foreign currencies for the quarter September 30, 2013, as adjusted, totaled $450.8 million. Worldwide Communications & Services net sales excluding the translation impact of foreign currencies for the quarter ended September 30, 2013, as adjusted, totaled $280.2 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, 2013 into U.S. dollars using the weighted average foreign exchange rates for the quarter ended September 30, 2012. International net sales excluding the translation impact of foreign currencies for the quarter ended September 30, 2013, as adjusted, totaled $172.6 million.
(c) Calculated as net income plus interest expense, income taxes, depreciation and amortization (EBITDA), annualized and divided by invested capital for the period.
(d) Average funded debt is calculated as the daily average amounts outstanding on our short-term and long-term interest-bearing debt.