Form 8-K SCANSOURCE INC For: Jan 29
Tweet
Share
E-mailUNITED 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):�January 29, 2015
�ScanSource, Inc.
(Exact name of registrant as specified in its charter)
�
Commission File Number:�000-26926
�
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
(Registrants 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:
� | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
� | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
� | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
� | 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 January 29, 2015 ScanSource, Inc. issued a press release announcing its financial results for its second quarter fiscal year 2015 for the period ended December 31, 2014. 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 Companys 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 January 29, 2015. The information contained in the attached exhibit is unaudited and should be read in conjunction with the Registrants annual and quarterly reports filed with the Securities and Exchange Commission.
99.2 Presentation slides for the financial results conference call issued on January 29, 2015.� The information contained in the attached exhibit is unaudited and should be read in conjunction with the Registrants 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.
�
� | � | � | � | ScanSource, Inc. | ||
� | � | � | � | |||
Date: January 29, 2015 | � | � | � | By: | � | /s/ Charles A. Mathis |
� | � | � | � | Name: | � | Charles A. Mathis |
� | � | � | � | Its: | � | Executive Vice President and Chief Financial Officer |
Exhibit 99.1
FOR IMMEDIATE RELEASE
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 ACHIEVES RECORD SALES QUARTER
Two Worldwide Segments Drive 9% Sales Growth for Second Quarter
GREENVILLE, SC -- January 29, 2015 -- ScanSource, Inc. (NASDAQ: SCSC), the leading international value-added distributor of specialty technology products, today announced financial results for fiscal year 2015 second quarter ended December 31, 2014.
Quarter ended December 31, | ||||||||||
2014 | 2013 | Change | ||||||||
(in millions, except per share data) | ||||||||||
Net sales | $ | 807.0 | $ | 740.6 | 9.0 | �% | ||||
Operating income | 26.0 | 27.5 | (5.4 | )% | ||||||
Non-GAAP operating income(1) | 29.4 | 28.9 | 1.7 | �% | ||||||
GAAP net income | 16.8 | 18.3 | 8.1 | �% | ||||||
Non-GAAP net income(1) | 19.7 | 19.2 | 2.2 | �% | ||||||
GAAP diluted EPS | $ | 0.58 | $ | 0.64 | (9.4 | )% | ||||
Non-GAAP diluted EPS(1) | $ | 0.68 | $ | 0.67 | 1.5 | �% | ||||
����
(1) Non-GAAP financial measures exclude amortization of intangible assets, change 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 December�31, 2014 totaled $807.0 million, a 9.0% increase over net sales of $740.6 million for the quarter ended December�31, 2013. Excluding the translation impact of foreign currencies, net sales increased 11.1% year-over-year. The increase in net sales included the acquisition of Imago, Europe's leading value-added distributor of video and voice solutions, during September 2014.
"Our two worldwide segments achieved very good sales results with 9% year-over-year net sales growth," said Mike Baur, CEO, ScanSource, Inc. "We are pleased to report that the acquisition of Imago has gone very well and contributed to the quarters excellent results."
Operating income for quarter ended December�31, 2014 totaled $26.0 million, compared with $27.5 million in the prior year quarter. Excluding adjustments, non-GAAP operating income for the quarter ended December�31, 2014 increased 1.7% over the prior year quarter to $29.4 million from $28.9 million.
On a GAAP basis, net income for the quarter ended December�31, 2014 totaled $16.8 million, or $0.58 per diluted share, compared with net income of $18.3 million, or $0.64 per diluted share, for the prior year quarter. Excluding adjustments, non-GAAP net income for the quarter ended December�31, 2014 increased to $19.7 million, or $0.68 per diluted share, from $19.2 million, or $0.67 per diluted share.
Exhibit 99.1
Completion of the Acquisition of Network1
On January 13, 2015, ScanSource completed its acquisition of Network1, Brazils leading value-added distributor of communications equipment and services. As part of the transaction, ScanSource acquired all of Network1s operations throughout Latin America, including Brazil, Mexico, Colombia, Chile and Peru.The all-cash transaction includes a cash payment and a fixed amount of assumed net debt for an initial purchase price of approximately $60 million, plus earn-out payments based on EBITDA over the next four years. Rafael Paloni, Network1s Founder and Chief Executive Officer, will lead ScanSources Communications business in Latin America.
Forecast for Next Quarter
The Company announced its current expectations for the third quarter of fiscal year 2015. ScanSource expects net sales for the quarter ending March 31, 2015 to range from $800 million to $820 million and non-GAAP diluted earnings per share to range from $0.54 to $0.57 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, January 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, 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.
ScanSource Achieves Record Sales Quarter
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 Achieves Record Sales Quarter
ScanSource, Inc. and Subsidiaries | ||||||||
Condensed Consolidated Balance Sheets (Unaudited) | ||||||||
(in thousands) | ||||||||
December�31, 2014 | June 30, 2014* | |||||||
Assets | ||||||||
Current�assets: | ||||||||
Cash�and�cash�equivalents | $ | 121,513 | $ | 194,851 | ||||
Accounts receivable, less allowance of $22,125 at December 31, 2014 | 490,713 | 464,405 | ||||||
and $26,257 at June�30, 2014 | ||||||||
Inventories | 518,419 | 504,758 | ||||||
Prepaid�expenses�and�other�current assets | 39,872 | 33,558 | ||||||
Deferred�income�taxes | 18,246 | 18,109 | ||||||
Total�current�assets | 1,188,763 | 1,215,681 | ||||||
Property�and�equipment,�net | 43,232 | 31,823 | ||||||
Goodwill | 48,966 | 32,342 | ||||||
Other�non-current assets,�including�net identifiable�intangible�assets | 69,531 | 55,278 | ||||||
Total�assets | $ | 1,350,492 | $ | 1,335,124 | ||||
Liabilities�and�Shareholders'�Equity | ||||||||
Current�liabilities: | ||||||||
Accounts payable | $ | 419,614 | $ | 421,721 | ||||
Accrued�expenses�and�other�current liabilities | 66,477 | 63,574 | ||||||
Current portion of contingent consideration | 7,582 | 5,851 | ||||||
Income�taxes�payable | 1,935 | 8,685 | ||||||
Total�current�liabilities | 495,608 | 499,831 | ||||||
Deferred income taxes | 3,931 | 185 | ||||||
Long-term�debt | 5,429 | 5,429 | ||||||
Long-term portion of contingent consideration | 2,423 | 5,256 | ||||||
Other�long-term�liabilities | 24,353 | 21,780 | ||||||
Total�liabilities | 531,744 | 532,481 | ||||||
Shareholders' equity: | ||||||||
Common stock | 171,825 | 168,447 | ||||||
Retained�earnings | 686,925 | 650,896 | ||||||
Accumulated�other�comprehensive�income (loss) | (40,002 | ) | (16,700 | ) | ||||
Total�shareholders'�equity | 818,748 | 802,643 | ||||||
Total�liabilities�and�shareholders'�equity | $ | 1,350,492 | $ | 1,335,124 | ||||
* | Derived from audited financial statements. |
ScanSource Achieves Record Sales Quarter
ScanSource, Inc. and Subsidiaries | ||||||||||||||||
Condensed Consolidated Income Statements (Unaudited) | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
� | Quarter ended December 31, | Six months ended December 31, | ||||||||||||||
� | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Net�sales | $ | 807,019 | $ | 740,618 | $ | 1,598,738 | $ | 1,472,522 | ||||||||
Cost�of�goods�sold | 728,908 | 663,362 | 1,442,981 | 1,318,767 | ||||||||||||
Gross�profit | 78,111 | 77,256 | 155,757 | 153,755 | ||||||||||||
Selling,�general�and�administrative�expenses | 51,658 | 49,296 | 99,813 | 96,836 | ||||||||||||
Change in fair value of contingent consideration | 463 | 499 | 976 | 1,237 | ||||||||||||
Operating�income | 25,990 | 27,461 | 54,968 | 55,682 | ||||||||||||
Interest�expense | 207 | 235 | 397 | 482 | ||||||||||||
Interest�income | (492 | ) | (525 | ) | (1,327 | ) | (1,099 | ) | ||||||||
Other,�net | 337 | (58 | ) | 724 | 51 | |||||||||||
Income before�income�taxes | 25,938 | 27,809 | 55,174 | 56,248 | ||||||||||||
Provision�for�income�taxes | 9,117 | 9,511 | 19,145 | 18,513 | ||||||||||||
Net�income | $ | 16,821 | $ | 18,298 | $ | 36,029 | $ | 37,735 | ||||||||
Per�share�data: | ||||||||||||||||
Net�income�per�common�share,�basic | $ | 0.59 | $ | 0.65 | $ | 1.26 | $ | 1.34 | ||||||||
Weighted-average�shares�outstanding,�basic | 28,579 | 28,293 | 28,562 | 28,164 | ||||||||||||
Net�income�per�common�share,�diluted | $ | 0.58 | $ | 0.64 | $ | 1.25 | $ | 1.33 | ||||||||
Weighted-average�shares�outstanding,�diluted | 28,831 | 28,597 | 28,813 | 28,434 | ||||||||||||
ScanSource Achieves Record Sales Quarter
ScanSource, Inc. and Subsidiaries | |||||||||||||
Supplementary Information (Unaudited) | |||||||||||||
(in thousands) | |||||||||||||
Net Sales by Segment: | |||||||||||||
Quarter ended December 31, | Non-GAAP % Change | ||||||||||||
2014 | 2013 | % Change | Excluding FX(a) | ||||||||||
Worldwide Barcode & Security | $ | 499,772 | $ | 476,206 | 4.9 | % | 8.1 | % | |||||
Worldwide Communications & Services | 307,247 | 264,412 | 16.2 | % | 16.7 | % | |||||||
Consolidated | $ | 807,019 | $ | 740,618 | 9.0 | % | 11.1 | % | |||||
Six months ended December 31, | Non-GAAP % Change | ||||||||||||
2014 | 2013 | % Change | Excluding FX(a) | ||||||||||
Worldwide Barcode & Security | $ | 1,000,732 | $ | 926,850 | 8.0 | % | 9.5 | % | |||||
Worldwide Communications & Services | 598,006 | 545,672 | 9.6 | % | 9.9 | % | |||||||
Consolidated | $ | 1,598,738 | $ | 1,472,522 | 8.6 | % | 9.7 | % | |||||
Net Sales by Geography: | |||||||||||||
Quarter ended December 31, | Non-GAAP % Change | ||||||||||||
2014 | 2013 | % Change | Excluding FX(b) | ||||||||||
North American (U.S. and Canada) | $ | 587,068 | $ | 545,089 | 7.7 | % | 7.7 | % | |||||
International | 219,951 | 195,529 | 12.5 | % | 20.7 | % | |||||||
Consolidated | $ | 807,019 | $ | 740,618 | 9.0 | % | 11.1 | % | |||||
Six months ended December 31, | Non-GAAP % Change | ||||||||||||
2014 | 2013 | % Change | Excluding FX(b) | ||||||||||
North American (U.S. and Canada) | $ | 1,182,858 | $ | 1,103,429 | 7.2 | % | 7.2 | % | |||||
International | 415,880 | 369,093 | 12.7 | % | 17.0 | % | |||||||
��������Consolidated | $ | 1,598,738 | $ | 1,472,522 | 8.6 | % | 9.7 | % | |||||
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, 2014 into U.S. dollars using the weighted average foreign exchange rates for the quarter and six months ended December 31, 2013, respectively. Worldwide Barcode & Security net sales excluding the translation impact of foreign currencies for the quarter and six months ended December 31, 2014, as adjusted, totaled $514.5 million and $1.0 billion, respectively. Worldwide Communications & Services net sales excluding the translation impact of foreign currencies for the quarter and six months ended December 31, 2014, as adjusted, totaled $308.5 million and $599.4 million, respectively. | |||||||||||||
(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 and six months ended December 31, 2014 into U.S. dollars using the weighted average foreign exchange rates for the quarter and six months ended December 31, 2013, respectively. International net sales excluding the translation impact of foreign currencies for the quarter and six months ended December 31, 2014 totaled $236.0 million and $431.9 million, respectively. | |||||||||||||
ScanSource Achieves Record Sales Quarter
ScanSource, Inc. and Subsidiaries | ||||||||||||||||
Supplementary Information (Unaudited) | ||||||||||||||||
(in thousands) | ||||||||||||||||
Non-GAAP Financial Information: | ||||||||||||||||
Quarter ended December 31, 2014 | ||||||||||||||||
Operating income | Pre-tax income | Net income | Diluted EPS | |||||||||||||
GAAP measure | $ | 25,990 | $ | 25,938 | $ | 16,821 | $ | 0.58 | ||||||||
Adjustments: | ||||||||||||||||
Amortization of intangible assets | 1,443 | 1,443 | 1,025 | 0.04 | ||||||||||||
Change in fair value of contingent consideration | 463 | 463 | 346 | 0.01 | ||||||||||||
Acquisition costs | 1,474 | 1,474 | 1,474 | 0.05 | ||||||||||||
Non-GAAP measure | $ | 29,370 | $ | 29,318 | $ | 19,666 | $ | 0.68 | ||||||||
Quarter ended December 31, 2013 | ||||||||||||||||
Operating income | Pre-tax income | Net income | Diluted EPS | |||||||||||||
GAAP measure | $ | 27,461 | $ | 27,809 | $ | 18,298 | $ | 0.64 | ||||||||
Adjustments: | ||||||||||||||||
Amortization of intangible assets | 930 | 930 | 609 | 0.02 | ||||||||||||
Change in fair value of contingent consideration | 499 | 499 | 330 | 0.01 | ||||||||||||
Non-GAAP measure | $ | 28,890 | $ | 29,238 | $ | 19,237 | $ | 0.67 | ||||||||
ScanSource Achieves Record Sales Quarter
ScanSource, Inc. and Subsidiaries | |||||||||
Supplementary Information (Unaudited) | |||||||||
(in thousands) | |||||||||
Non-GAAP Financial Information: | |||||||||
Quarter ended December 31, | |||||||||
2014 | 2013 | ||||||||
Return on invested capital (ROIC), annualized (a) | 14.8 | % | 16.2 | % | |||||
Reconciliation of Net Income to Adjusted EBITDA | |||||||||
Net income - GAAP | $ | 16,821 | $ | 18,298 | |||||
Plus: Income taxes | 9,117 | 9,511 | |||||||
Plus: Interest expense | 207 | 235 | |||||||
Plus: Depreciation and amortization | 2,443 | 1,778 | |||||||
EBITDA | 28,588 | 29,822 | |||||||
Plus: Change in fair value of contingent consideration | 463 | 499 | |||||||
Plus: Acquisition costs | 1,474 | ||||||||
Adjusted EBITDA (numerator for ROIC) (non-GAAP)�(b) | $ | 30,525 | $ | 30,321 | |||||
Invested Capital Calculation | |||||||||
Equity - beginning of quarter/year | $ | 810,265 | $ | 723,748 | |||||
Equity - end of quarter/year | 818,748 | 751,446 | |||||||
Add: | |||||||||
Change in fair value of contingent consideration, net of tax | 346 | 330 | |||||||
Acquisition costs, net of tax(c) | 1,474 | ||||||||
Average equity | 815,417 | 737,762 | |||||||
Average funded debt (d) | 5,429 | 5,429 | |||||||
Invested capital (denominator for ROIC) (non-GAAP) | $ | 820,846 | $ | 743,191 | |||||
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 December 31, 2014 and 2013 and acquisition costs for the quarter ended December 31, 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. | |||||||||
Q2 FY 2015 FINANCIAL RESULTS CONFERENCE CALL January 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, 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 Companys annual report on Form 10-K for the fiscal year ended June 30, 2014, as well as the quarterly report on Form 10-Q for the quarter ended September 30, 2014, 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 Companys Form 8-K, filed with the SEC, with the quarterly earnings press release for the period indicated. 2
�
HIGHLIGHTS Q2 FY15 3 � Record net sales for second quarter 2015 of $807 million, up 9% Y/Y, and non-GAAP diluted EPS of $0.68; above our expected range � Worldwide Barcode & Security sales increased 5% Y/Y, or 8% excluding foreign exchange � Worldwide Communications & Services sales increased 16% Y/Y, or 17% excluding foreign exchange � Includes successful acquisition of Imago for full quarter � Second quarter 2015 return on invested capital of 14.8% excluding acquisition costs and change in fair value of contingent consideration � On January 13, 2015, completed acquisition of Network 1, Brazils leading communications value-added distributor * See Appendix for calculation of non-GAAP measures and reconciliations to GAAP measures.
�
Q2 FY15 Q2 FY14 GAAP Non- GAAP* GAAP Non- GAAP* Y/Y Change (non-GAAP): Net sales $807.0 $807.0 $740.6 $740.6 � 9.0% increase Gross profit 78.1 78.1 77.3 77.3 � 1.1% increase Gross profit margin % (of net sales) 9.7% 9.7% 10.4% 10.4% � 75 bp margin decrease SG&A expenses 48.7 48.7 48.4 48.4 � 0.8% higher SG&A Amortization of intangible assets 1.4 -- 0.9 -- Change, FV contingent consideration 0.5 -- 0.5 -- Acquisition costs 1.5 -- -- -- Operating income 26.0 29.4 27.5 28.9 � 1.7% increase Operating income % (of net sales) 3.2% 3.6% 3.7% 3.9% � 26 bp margin decrease Net income $16.8 $19.7 $18.3 $19.2 � 2.2% increase Diluted EPS $0.58 $0.68 $0.64 $0.67 � 1.5% increase HIGHLIGHTS Q2 FY15 4 * See Appendix for calculation of non-GAAP measures and reconciliations to GAAP measures. In millions, except EPS
�
Q2 FY15 Q2 FY14 Net sales $499.8 $476.2 Gross profit $41.9 $42.7 Gross margin 8.4% 9.0% Operating income $13.6 $13.0 Operating income % 2.7% 2.7% Non-GAAP operating income $14.3 $14.0 Non-GAAP operating income % 2.9% 2.9% WW BARCODE & SECURITY 5 $476 $500 Q2 FY14 Q2 FY15 Net Sales, $ in millions Up 4.9% Excluding FX, Up 8.1% $ 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.
�
Q2 FY15 Q2 FY14 Net sales $307.2 $264.4 Gross profit $36.2 $34.5 Gross margin 11.8% 13.1% Operating income $13.9 $14.5 Operating income % 4.5% 5.5% Non-GAAP operating income $15.1 $14.9 Non-GAAP operating income % 4.9% 5.6% WW COMMUNICATIONS & SERVICES 6 $264 $307 Q2 FY14 Q2 FY15 Net Sales, $ in millions Up 16.2% Excluding FX, Up 16.7% $ 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.
�
Q2 FY15 Q1 FY15 Q2 FY14 Return on invested capital ( ROIC )* 14.8% 16.2% 16.2% Cash and cash equivalents (Q/E) $121.5 $139.9 $157.1 Operating cash flow, trailing 12-months $36.7 $2.7 $140.8 Days sales outstanding in receivables 55 55** 53 Inventory (Q/E) $518.4 $495.1 $467.2 Inventory turns 5.8 5.7** 5.9 Paid for inventory days 12.2 9.7** 11.3 Q2 FY15 KEY MEASURES 7 $ in millions * Excludes non-GAAP adjustments and change in fair value of contingent consideration. See Appendix for calculation of ROIC, a non-GAAP measure. ** Excludes the impact of Imago, which was completed September 19, 2014.
�
Q3 FY15 OUTLOOK* 8 * Outlook as of January 29, 2015. Non-GAAP diluted EPS excludes amortization of intangible assets, change in fair value of contingent consideration, and acquisition costs. For the quarter ending March 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 $800 million to $820 million � Range midpoint: $810 million � Range from $0.54 to $0.57 per share � Range midpoint: $0.555
�
WW BARCODE & SECURITY HIGHLIGHTS 9 $476 $500 Q2 FY14 Q2 FY15 Net Sales, $ in millions Up 4.9% Excluding FX, Up 8.1% � 62% of overall sales � Record sales results for POS & Barcode teams in North America and Europe � Strong big deal quarter � Positive results from almost every major product category � Key investments in growth areas: Physical Security, 3D Printing, Payment Processing, Mobile Computing * See Appendix for reconciliation of net sales excluding impact of foreign exchange to a GAAP measure.
�
WW COMMUNICATIONS & SERVICES HIGHLIGHTS 10 $264 $307 Q2 FY14 Q2 FY15 Net Sales, $ in millions Up 16.2% Excluding FX, Up 16.7% * See Appendix for reconciliation of net sales excluding impact of foreign exchange to a GAAP measure. � 38% of overall sales � First full quarter with Imago; very good results � With Imago, now offer a stronger portfolio of video, voice and data products in Europe � Key investments in growth areas: International, Pro AV, and Collaboration
�
APPENDIX: NON-GAAP FINANCIAL INFORMATION 11 ($ in thousands) Quarter Ended December 31, 2014 Operating Income Pre-tax income Net income Diluted EPS GAAP measure $ 25,990 $ 25,938 $ 16,821 $ 0.58 Adjustment: Amortization of intangible assets 1,443 1,443 1,025 0.04 Change in fair value of contingent consideration 463 463 346 0.01 Acquisition costs (a) 1,474 1,474 1,474 0.05 Non-GAAP measure $ 29,370 $ 29,318 $ 19,666 $ 0.68 Quarter Ended December 31, 2013 Operating Income Pre-tax income Net income Diluted EPS GAAP measure $ 27,461 $ 27,809 $ 18,298 $ 0.64 Adjustment: Amortization of intangible assets 930 930 609 0.02 Change in fair value of contingent consideration 499 499 330 0.01 Non-GAAP measure $ 28,890 $ 29,238 $ 19,237 $ 0.67 (a) Acquisition costs are nondeductible for tax purposes.
�
APPENDIX: NON-GAAP FINANCIAL INFORMATION 12 ($ in thousands) Quarter Ended December 31, 2014 WW Barcode & Security WW Comms. & Services Corporate Consolidated Net sales $ 499,772 $ 307,247 $ - $ 807,019 GAAP operating income $ 13,576 $ 13,888 $ (1,474) $ 25,990 Adjustments: Amortization of intangible assets 519 924 - 1,443 Change in fair value of contingent consideration 160 303 - 463 Acquisition costs - - 1,474 1,474 Non-GAAP operating income $ 14,255 $ 15,115 $ - $ 29,370 GAAP operating income % (of net sales) 2.7% 4.5% n/m 3.2% Non-GAAP operating income % (of net sales) 2.9% 4.9% n/m 3.6% Quarter Ended December 31, 2013 WW Barcode & Security WW Comms. & Services Corporate Consolidated Net sales $ 476,206 $ 264,412 $ - $ 740,618 GAAP operating income $ 12,955 $ 14,506 $ - $ 27,461 Adjustments: Amortization of intangible assets 580 350 - 930 Change in fair value of contingent consideration 499 - - 499 Non-GAAP operating income $ 14,034 $ 14,856 $ - $ 28,890 GAAP operating income % (of net sales) 2.7% 5.5% n/m 3.7% Non-GAAP operating income % (of net sales) 2.9% 5.6% n/m 3.9% n/m = not meaningful
�
APPENDIX: NON-GAAP FINANCIAL INFORMATION 13 ($ in thousands) Q2 FY15 Q1 FY15 Q2 FY14 Return on invested capital (ROIC), annualized (a) 14.8% 16.2% 16.2% Reconciliation of Net Income to EBITDA Net income - GAAP $ 16,821 $ 19,208 $ 18,298 Plus: Income taxes 9,117 10,028 9,511 Plus: Interest expense 207 190 235 Plus: Depreciation and amortization 2,443 1,897 1,778 EBITDA 28,588 31,323 29,822 Change in fair value of contingent consideration 463 513 499 Acquisition costs 1,474 1,350 - Adjusted EBITDA (numerator for ROIC)(non-GAAP) $ 30,525 $ 33,186 $ 30,321 Invested Capital Calculation Equity - beginning of the quarter $ 810,265 $ 802,643 $ 723,748 Equity - end of quarter 818,748 810,265 751,446 Add: Change in fair value of contingent consideration, net of tax 346 341 330 Add: Acquisition costs, net of tax 1,474 1,350 - Average equity 815,417 807,300 737,762 Average funded debt (b) 5,429 6,205 5,429 Invested capital (denominator for ROIC)(non-GAAP) $ 820,846 $ 813,505 $ 743,191 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.
�
APPENDIX: NON-GAAP FINANCIAL INFORMATION 14 ($ in millions) Worldwide Barcode & Security Net sales, excluding impact of foreign exchange (FX) - Y/Y Change: Q2 2015 net sales $ 499.8 Foreign exchange impact 14.7 Q2 2015 net sales, excluding FX impact $ 514.5 Q2 2014 sales $ 476.2 % Change 8.1% Worldwide Communications & Services Net sales, excluding impact of foreign exchange (FX) - Y/Y Change: Q2 2015 net sales $ 307.2 Foreign exchange impact 1.3 Q2 2015 net sales, excluding FX impact $ 308.5 Q2 2014 sales $ 264.4 % Change 16.7%
�
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- ScanSource to Announce Third Quarter Fiscal Year 2024 Results May 7, 2024
- BlackGirlsHack presents SquadCon ‘24: Play to Win; GHV in 2022, and now we are back again!
- Southern Michigan Bancorp, Inc. Announces First Quarter 2024 Earnings
Create E-mail Alert Related Categories
SEC FilingsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
