UK markets closed
  • FTSE 100

    5,577.27
    -4.48 (-0.08%)
     
  • FTSE 250

    17,214.38
    +36.70 (+0.21%)
     
  • AIM

    948.60
    -0.70 (-0.07%)
     
  • GBP/EUR

    1.1115
    +0.0051 (+0.46%)
     
  • GBP/USD

    1.2951
    +0.0028 (+0.22%)
     
  • BTC-GBP

    10,649.66
    +134.82 (+1.28%)
     
  • CMC Crypto 200

    265.42
    +1.78 (+0.68%)
     
  • S&P 500

    3,269.96
    -40.15 (-1.21%)
     
  • DOW

    26,501.60
    -157.51 (-0.59%)
     
  • CRUDE OIL

    35.72
    -0.45 (-1.24%)
     
  • GOLD FUTURES

    1,878.80
    +10.80 (+0.58%)
     
  • NIKKEI 225

    22,977.13
    -354.81 (-1.52%)
     
  • HANG SENG

    24,107.42
    -479.18 (-1.95%)
     
  • DAX

    11,556.48
    -41.59 (-0.36%)
     
  • CAC 40

    4,594.24
    +24.57 (+0.54%)
     

ScanSource Reports Fourth Quarter and Fiscal Year 2020 Results

·18-min read

ScanSource, Inc. (NASDAQ: SCSC), a leading provider of technology products and solutions, today announced financial results for the fourth quarter and fiscal year ended June 30, 2020. All results in this release reflect continuing operations only unless otherwise noted.

Fourth Quarter Summary:

  • Net sales: $636.5 million, down 22% year-over-year

  • Gross profit: $74.1 million, down 23% year-over-year

  • GAAP operating loss of $(113.4) million; non-GAAP operating income of $8.2 million

  • Net loss from continuing operations of $(108.9) million, which includes non-cash goodwill and asset impairment charges of $120.5 million

  • GAAP and non-GAAP diluted EPS of $(4.29) and $0.19 per share, respectively

  • Classified divestitures of products distribution business outside of the United States, Canada and Brazil ("Divestitures") as assets held for sale at June 30, 2020 and reported as discontinued operations in the financial results

  • Generated strong operating cash flow of $74.0 million during the quarter

"While the COVID-19 pandemic had a significant impact on our quarterly financial results, I am proud of how our teams have executed and the value we deliver to our suppliers and customers," said Mike Baur, Chairman and CEO, ScanSource, Inc. "We've taken the necessary actions to strengthen our balance sheet, improve our cost structure, and continue to drive investments in our higher-margin, VAR cloud platform and agency business."

Quarterly Results

Net sales totaled $636.5 million for the fourth quarter of fiscal year 2020, down 22% year-over-year, or down 19% for organic growth. The reduction in net sales is primarily due to the impact of the COVID-19 pandemic, which resulted in lower demand from customers. For the Intelisys master agency business, net sales increased 15% year-over-year for the fourth quarter of fiscal year 2020.

For the fourth quarter of fiscal year 2020, operating income decreased to $(113.4) million, and non-GAAP operating income decreased to $8.2 million. As of the annual goodwill impairment test date of April 30th, the Company’s revenue projections were lowered, primarily as a result of the COVID-19 pandemic. As a result, the Company recognized pre-tax, non-cash goodwill and asset impairment charges of $120.5 million. This accounting adjustment does not involve any cash outflow.

On a GAAP basis, net income for the fourth quarter of fiscal year 2020 totaled $(108.9) million, or $(4.29) per diluted share, compared to net income of $16.0 million, or $0.62 per diluted share, for the prior-year quarter. Non-GAAP net income totaled $4.9 million, or $0.19 per diluted share, compared to $19.3 million, or $0.75 per diluted share, for the prior-year quarter.

At June 30, 2020, ScanSource had cash and cash equivalents of $29.5 million and total debt of $218.7 million for continuing operations. Borrowings for discontinued operations totaled $28.2 million. In the fourth quarter of fiscal year 2020, the Company generated $74.0 million of operating cash flow.

Full Year Results

For fiscal year 2020, net sales decreased 6% to $3.0 billion, or a 5% year-over-year decrease on an organic basis. Fiscal year 2020 GAAP operating income decreased to $(65.0) million, largely from the non-cash goodwill and asset impairment charges, and non-GAAP operating income decreased to $78.9 million.

On a GAAP basis, net income for fiscal year 2020 totaled $(79.2) million, or $(3.12) per diluted share, compared to net income of $64.9 million, or $2.52 per diluted share for the prior year. Non-GAAP net income totaled $52.0 million, or $2.05 per diluted share, compared to $87.7 million, or $3.41 per diluted share for the prior year.

Discontinued Operations

On August 20, 2019, ScanSource announced plans to divest its products distribution businesses outside of the United States, Canada and Brazil. ScanSource continues to operate in its digital distribution business in these geographies. These plans are part of a strategic portfolio repositioning to align investments with higher-growth, higher-margin businesses. On July 23, 2020, ScanSource signed an agreement to sell its products distribution business located in Mexico, Colombia, Chile, Peru and its Miami-based export operations to Intcomex. The Company is actively working on sales opportunities for its divestitures in Europe and the UK.

At June 30, 2020, the Divestitures were classified as assets held for sale and recorded as discontinued operations. Net loss from discontinued operations for the fourth quarter of fiscal year 2020 includes a $88.9 million non-cash loss on held for sale classification to establish a valuation allowance and $13.7 million for non-cash impairment charges.

COVID-19 Update

Our top priority during the COVID-19 pandemic is protecting the health and safety of our employees. We implemented travel restrictions and transitioned our employees, where possible, to a remote working environment. Nearly all office-based employees around the world are working remotely. We have taken a number of measures to ensure our teams have the flexibility and resources they need to stay safe and healthy. We are experiencing higher costs from these safety measures to protect our employees. We are continuing to provide the high level of customer service our partners expect from us.

Initiated Expense Reduction Plan

In July 2020, ScanSource initiated a $30 million annualized expense reduction plan to address the business impacts of the COVID-19 pandemic and prepare for the next phase of growth.

Webcast Details and CFO Commentary

At approximately 4:15 p.m. ET today, a CFO commentary, as a supplement to this press release and the Company's conference call, will be available on ScanSource's website, www.scansource.com (Investor Relations section). ScanSource will present additional information about its financial results in a conference call today, August 31, 2020, at 5:00 p.m. ET. A webcast of the call 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 "forward-looking" statements, including the Company's Divestitures and the impact of the COVID-19 pandemic, which involve risks and uncertainties. Any number of factors could cause actual results to differ materially from anticipated results, including, but not limited to, the impact of the COVID-19 pandemic on our operations and financial condition, the Company's ability to complete the Divestitures on acceptable terms or to otherwise dispose of the operations, changes in interest and exchange rates and regulatory regimes impacting the Company's international operations, the impact of tax reform laws, the failure of acquisitions to meet the Company's expectations, the failure to manage and implement the Company's organic growth strategy, credit risks involving the Company's larger customers and suppliers, termination of the Company's relationship with key suppliers or a significant modification of the terms under which it operates with a key supplier, the decline in demand for the products and services that the Company provides, reduced prices for the products and services that the Company provides due both to competitor and customer action, changes in the Company's operating strategy, and other factors set forth in the "Risk Factors" contained in the Company's annual report on Form 10-K for the year ended June 30, 2020, 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 understand and evaluate performance, including comparisons from period to period. Non-GAAP results exclude amortization of intangible assets related to acquisitions, change in fair value of contingent consideration, acquisition costs, restructuring costs and other non-GAAP adjustments.

Net sales on a constant currency basis, excluding Divestitures and acquisitions: The Company discloses the percentage change in net sales excluding the translation impact from changes in foreign currency exchange rates between reporting periods and excluding the net sales from Divestitures, as well as acquisitions prior to the first full year from the acquisition date. This measure enhances the comparability between periods to help analyze underlying trends on an organic basis.

Income Statement Non-GAAP Metrics: To evaluate current period performance on a more consistent basis with prior periods, the Company discloses non-GAAP net sales, non-GAAP gross profit, non-GAAP operating income, non-GAAP other expense, net, non-GAAP pre-tax income, non-GAAP net income and non-GAAP diluted earnings per share (non-GAAP diluted "EPS"). Non-GAAP results exclude amortization of intangible assets related to acquisitions, changes in fair value of contingent consideration, acquisition and divestiture costs, impairment charges and other non-GAAP adjustments. Non-GAAP metrics are useful in 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 correlates 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. ROIC is calculated as adjusted EBITDA over invested capital. Adjusted earnings before interest expense, income taxes, depreciation and amortization ("Adjusted EBITDA") excludes the change in fair value of contingent consideration, in addition to other non-GAAP adjustments. Invested capital is defined as average equity plus average daily funded interest-bearing debt for the period. 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.

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 Supplementary Information (Unaudited) below.

About ScanSource, Inc.

ScanSource, Inc. (NASDAQ: SCSC) is at the center of the technology solution delivery channel, connecting businesses and providing solutions for their complex needs. ScanSource sells through multiple, specialized routes-to-market with digital, physical and services offerings from the world’s leading suppliers of point-of-sale (POS), payments, barcode, physical security, unified communications and collaboration, telecom and cloud services. ScanSource enables its sales partners to create, deliver and manage solutions for end-customers across almost every vertical market. Founded in 1992 and headquartered in Greenville, South Carolina, ScanSource was named one of the Best Places to Work in South Carolina and on FORTUNE magazine’s 2020 List of World’s Most Admired Companies. ScanSource ranks #654 on the Fortune 1000. For more information, visit www.scansource.com.

ScanSource, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands)

June 30, 2020

June 30, 2019

Assets

Current assets:

Cash and cash equivalents

$

29,485

$

19,305

Accounts receivable, less allowance of $21,906 at June 30, 2020 and $27,521 at June 30, 2019

443,185

523,424

Inventories

454,885

554,080

Prepaid expenses and other current assets

94,681

83,753

Current assets held for sale

181,231

296,753

Total current assets

1,203,467

1,477,315

Property and equipment, net

55,641

60,570

Goodwill

214,288

310,715

Identifiable intangible assets, net

121,547

121,214

Deferred income taxes

24,630

15,447

Other non-current assets

72,521

52,921

Non-current assets held for sale

29,079

Total assets

$

1,692,094

$

2,067,261

Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

$

454,240

$

488,291

Accrued expenses and other current liabilities

76,686

64,629

Current portion of contingent consideration

46,334

38,393

Income taxes payable

5,886

3,956

Short-term borrowings

Current portion of long-term debt

7,839

4,085

Current liabilities held for sale

128,022

101,532

Total current liabilities

719,007

700,886

Deferred income taxes

3,884

Long-term debt, net of current portion

143,175

151,014

Borrowings under revolving credit facility

67,714

172,390

Long-term portion of contingent consideration

39,532

Other long-term liabilities

80,068

57,153

Long-term liabilities held for sale

32,157

Total liabilities

1,013,848

1,153,132

Commitments and contingencies

Shareholders’ equity:

Preferred stock, no par value; 3,000,000 shares authorized, none issued

Common stock, no par value; 45,000,000 shares authorized, 25,361,298 and 25,408,397 shares issued and outstanding at June 30, 2020 and June 30, 2019, respectively

63,765

64,287

Retained earnings

747,276

939,930

Accumulated other comprehensive loss

(132,795

)

(90,088

)

Total shareholders’ equity

678,246

914,129

Total liabilities and shareholders’ equity

$

1,692,094

$

2,067,261

ScanSource, Inc. and Subsidiaries

Condensed Consolidated Income Statements (Unaudited)

(in thousands, except per share data)

Quarter ended June 30,

Fiscal year ended June 30,

2020

2019

2020

2019

Net sales

$

636,450

$

811,432

$

3,047,734

$

3,249,799

Cost of goods sold

562,303

714,789

2,692,165

2,856,996

Gross profit

74,147

96,643

355,569

392,803

Selling, general and administrative expenses

58,192

62,923

260,139

252,948

Depreciation expense

3,304

2,952

13,033

12,028

Intangible amortization expense

4,946

4,542

19,953

17,893

Impairment charges

120,470

120,470

Change in fair value of contingent consideration

674

3,666

6,941

15,200

Operating (loss) income

(113,439

)

22,560

(64,967

)

94,734

Interest expense

2,497

3,851

12,224

13,162

Interest income

(3,199

)

(446

)

(5,826

)

(1,818

)

Other expense (income), net

213

22

411

(247

)

(Loss) Income before income taxes

(112,950

)

19,133

(71,776

)

83,637

Provision for income taxes

(4,091

)

3,137

7,451

18,778

Net (loss) income from continuing operations

(108,859

)

15,996

(79,227

)

64,859

Net loss from discontinued operations

(108,403

)

(4,418

)

(113,427

)

(7,262

)

Net (loss) income

$

(217,262

)

$

11,578

$

(192,654

)

$

57,597

Per share data:

Net (loss) income from continuing operations per common share, basic

$

(4.29

)

$

0.62

$

(3.12

)

$

2.53

Net loss from discontinued operations per common share, basic

(4.28

)

(0.17

)

(4.47

)

(0.28

)

Net (loss) income per common share, basic

$

(8.57

)

$

0.45

$

(7.59

)

$

2.25

Weighted-average shares outstanding, basic

25,353

25,627

25,378

25,642

Net (loss) income from continuing operations per common share, diluted

$

(4.29

)

$

0.62

$

(3.12

)

$

2.52

Net loss from discontinued operations per common share, diluted

(4.28

)

(0.17

)

(4.47

)

(0.28

)

Net (loss) income per common share, diluted

$

(8.57

)

$

0.45

$

(7.59

)

$

2.24

Weighted-average shares outstanding, diluted

25,353

25,691

25,378

25,734

ScanSource, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Quarter ended June 30,

Fiscal year ended June 30,

2020

2019

2020

2019

Cash flows from operating activities:

Net (loss) income

$

(217,262

)

$

11,578

$

(192,654

)

$

57,597

Net loss from discontinued operations

(108,403

)

(4,418

)

(113,427

)

(7,262

)

Net (loss) income from continuing operations

(108,859

)

15,996

(79,227

)

64,859

Adjustments to reconcile net income to net cash (used in) provided by operating activities of continuing operations:

Depreciation and amortization

8,743

8,321

35,328

33,652

Provision for doubtful accounts

222

(1,197

)

1,621

1,712

Share-based compensation

1,425

1,210

5,478

6,045

Impairment charges

120,470

120,470

Deferred income taxes

(10,714

)

(3,698

)

(12,193

)

(2,757

)

Change in fair value of contingent consideration

674

3,666

6,941

15,200

Contingent consideration payments excess

(3,050

)

(10,190

)

Other

125

98

502

350

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

57,562

(38,060

)

57,477

(5,490

)

Inventories

93,623

61,948

86,177

(85,862

)

Prepaid expenses and other assets

(2,903

)

(14,657

)

(13,880

)

(10,091

)

Other non-current assets

(12,534

)

(2,545

)

(13,563

)

(2,438

)

Accounts payable

(76,224

)

(5,622

)

(20,846

)

16,134

Accrued expenses and other liabilities

(1,992

)

6,118

11,239

2,377

Income taxes payable

4,334

2,873

(441

)

(7,469

)

Net cash provided by operating activities of continuing operations

73,952

34,451

182,033

16,032

Cash flows from investing activities of continuing operations:

Capital expenditures

188

4,093

(6,387

)

(5,797

)

Cash paid for business acquisitions, net of cash acquired

(48,921

)

(32,161

)

Net cash used in investing activities of continuing operations

188

4,093

(55,308

)

(37,958

)

Cash flows from financing activities of continuing operations:

Borrowings on revolving credit, net of expenses

477,446

458,522

2,085,918

2,061,090

Repayments on revolving credit, net of expenses

(539,732

)

(611,877

)

(2,190,595

)

(2,132,702

)

Borrowings on long-term debt, net

(938

)

150,000

(4,085

)

149,670

Repayments of finance lease obligations

(1,105

)

(166

)

(1,765

)

(662

)

Debt issuance costs

(1,096

)

(1,096

)

Contingent consideration payments

(35,482

)

(35,606

)

Exercise of stock options

754

1,509

Taxes paid on settlement of equity awards

(1,353

)

(1,406

)

Repurchase of common stock

(9,176

)

(6,078

)

(9,483

)

Net cash (used in) provided by financing activities of continuing operations

(64,329

)

(13,793

)

(152,686

)

31,314

ScanSource, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited), continued

(in thousands)

Cash flows from discontinued operations:

Net cash flows provided by (used in) operating activities of discontinued operations

2,235

(37,031

)

44,238

(43,159

)

Net cash flows (used in) provided by investing activities of discontinued operations

(35

)

(330

)

(77

)

(1,416

)

Net cash flows (used in) provided by financing activities of discontinued operations

(10,663

)

15,748

(3,921

)

32,917

Net cash flows provided by (used in) discontinued operations

(8,463

)

(21,613

)

40,240

(11,658

)

Effect of exchange rate changes on cash and cash equivalents

(1,489

)

280

(3,642

)

558

Increase (decrease) in cash and cash equivalents

(141

)

3,418

10,637

(1,712

)

Consolidated cash and cash equivalents at beginning of period

34,596

20,400

23,818

25,530

Consolidated cash and cash equivalents at end of period

34,455

23,818

34,455

23,818

Cash and cash equivalents of discontinued operations

4,970

4,513

4,970

4,513

Cash and cash equivalents of continuing operations

$

29,485

$

19,305

$

29,485

$

19,305

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

(in thousands, except percentages)

Non-GAAP Financial Information:

Quarter ended June 30,

Fiscal year ended June 30,

2020

2019

2020

2019

Return on invested capital ratio (ROIC), annualized (a)

4.0

%

11.2

%

7.5

%

12.1

%

Reconciliation of net income to EBITDA:

Net (loss) income from continuing operations (GAAP)

$

(108,859

)

$

15,996

$

(79,227

)

$

64,859

Plus: Interest expense

2,497

3,851

12,224

13,162

Plus: Income taxes

(4,091

)

3,137

7,451

18,778

Plus: Depreciation and amortization

8,743

8,321

35,328

33,652

EBITDA (non-GAAP)

(101,710

)

31,305

(24,224

)

130,451

Plus: Change in fair value of contingent consideration

674

3,666

6,941

15,200

Plus: Acquisition and divestiture costs

1,311

230

4,000

1,218

Plus: Restructuring costs

604

Plus: Impairment charges

120,470

120,470

Plus: Tax reform and settlement, includes interest income

(8,424

)

(10,744

)

Adjusted EBITDA (numerator for ROIC) (non-GAAP)

$

12,321

$

35,201

$

97,047

$

146,869

Invested Capital Calculation

Equity – beginning of the period

$

897,678

$

911,063

$

914,129

$

866,376

Equity – end of the period

678,246

914,129

678,246

914,129

Plus: Change in fair value of contingent consideration, net of tax

510

2,780

5,247

11,294

Plus: Acquisition and divestiture costs

1,311

230

4,000

1,218

Plus: Restructuring, net of tax

449

Plus: Impairment charges, net

114,398

114,398

Plus: Tax recovery, net

(6,247

)

(3,110

)

(8,001

)

(3,110

)

Plus: Impact of discontinued operations, net of tax

98,794

(16,557

)

98,794

(16,557

)

Average equity

892,345

904,268

903,631

886,675

Average funded debt(b)

337,973

355,932

390,709

329,473

Invested capital (denominator for ROIC) (non-GAAP)

$

1,230,318

$

1,260,200

$

1,294,340

$

1,216,148

(a) Calculated as earnings before 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, which includes both continuing and discontinued operations, is calculated as the average daily amounts outstanding on short-term and long-term interest-bearing debt.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

Net Sales by Segment:

Quarter ended June 30,

2020

2019

% Change

Worldwide Barcode, Networking & Security:

(in thousands)

Non-GAAP net sales, including Divestitures

$

543,996

$

636,172

(14.5

)%

Planned Divestitures

(96,184

)

(107,079

)

Net sales, reported

447,812

529,093

(15.4

)%

Foreign exchange impact (a)

4,911

Non-GAAP net sales, constant currency excluding Divestitures

$

452,723

$

529,093

(14.4

)%

Worldwide Communications & Services:

Non-GAAP net sales, including Divestitures

$

214,422

$

324,661

(34.0

)%

Planned Divestitures

(25,784

)

(42,322

)

Net sales, reported

188,638

282,339

(33.2

)%

Foreign exchange impact (a)

14,674

Less: Acquisitions

(1,567

)

Non-GAAP net sales, constant currency excluding Divestitures and acquisitions

$

201,745

$

282,339

(28.5

)%

Consolidated:

Non-GAAP net sales, including Divestitures

$

758,418

$

960,833

(21.1

)%

Planned Divestitures

(121,968

)

(149,401

)

Net sales, reported

636,450

811,432

(21.6

)%

Foreign exchange impact (a)

19,585

Less: Acquisitions

(1,567

)

Non-GAAP net sales, constant currency excluding Divestitures and acquisitions

$

654,468

$

811,432

(19.3

)%

(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 June 30, 2020 into U.S. dollars using the average foreign exchange rates for the quarter ended June 30, 2019.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

Net Sales by Segment:

Fiscal year ended June 30,

2020

2019

% Change

Worldwide Barcode, Networking & Security:

(in thousands)

Non-GAAP net sales, including Divestitures

$

2,511,666

$

2,589,837

(3.0

)%

Planned Divestitures

(418,449

)

(447,941

)

Net sales, reported

2,093,217

2,141,896

(2.3

)%

Foreign exchange impact (a)

10,395

Non-GAAP net sales, constant currency excluding Divestitures

$

2,103,612

$

2,141,896

(1.8

)%

Worldwide Communications & Services:

Non-GAAP net sales, including Divestitures

$

1,097,564

$

1,283,274

(14.5

)%

Planned Divestitures

(143,047

)

(175,371

)

Net sales, reported

954,517

1,107,903

(13.8

)%

Foreign exchange impact (a)

29,829

Less: Acquisitions

(9,122

)

(1,026

)

Non-GAAP net sales, constant currency excluding Divestitures and acquisitions

$

975,224

$

1,106,877

(11.9

)%

Consolidated:

Non-GAAP net sales, including Divestitures

$

3,609,230

$

3,873,111

(6.8

)%

Planned Divestitures

(561,496

)

(623,312

)

Net sales, reported

3,047,734

3,249,799

(6.2

)%

Foreign exchange impact (a)

40,224

Less: Acquisitions

(9,122

)

(1,026

)

Non-GAAP net sales, constant currency excluding Divestitures and acquisitions

$

3,078,836

$

3,248,773

(5.2

)%

(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 fiscal year ended June 30, 2020 into U.S. dollars using the average foreign exchange rates for the fiscal year ended June 30, 2019.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

Net Sales by Geography:

Quarter ended June 30,

2020

2019

% Change

United States and Canada:

(in thousands)

Net sales, as reported

$

581,619

$

728,212

(20.1

)%

Less: Acquisitions

(131

)

Non-GAAP net sales, excluding acquisitions

$

581,488

$

728,212

(20.1

)%

International:

Non-GAAP net sales, including Divestitures

$

176,799

$

232,621

(24.0

)%

Divestitures

(121,968

)

(149,401

)

Net sales, reported

54,831

83,220

(34.1

)%

Foreign exchange impact(a)

19,585

Less: Acquisitions

(1,436

)

Non-GAAP net sales, constant currency excluding Divestitures and acquisitions

$

72,980

$

83,220

(12.3

)%

Consolidated:

Non-GAAP net sales, including Divestitures

$

758,418

$

960,833

(21.1

)%

Divestitures

(121,968

)

(149,401

)

Net sales, reported

636,450

811,432

(21.6

)%

Foreign exchange impact(a)

19,585

Less: Acquisitions

(1,567

)

Non-GAAP net sales, constant currency excluding Divestitures and acquisitions

$

654,468

$

811,432

(19.3

)%

(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 June 30, 2020 into U.S. dollars using the average foreign exchange rates for the quarter ended June 30, 2019.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

Net Sales by Geography:

Fiscal year ended June 30,

2020

2019

% Change

United States and Canada:

(in thousands)

Net sales, as reported

$

2,755,134

$

2,917,780

(5.6

)%

Less: Acquisitions

(3,542

)

(1,062

)

Net sales, excluding acquisitions

$

2,751,592

$

2,916,718

(5.7

)%

International:

Non-GAAP net sales, including Divestitures

$

854,096

$

955,331

(10.6

)%

Divestitures

(561,496

)

(623,312

)

Net sales, reported

292,600

332,019

(11.9

)%

Foreign exchange impact(a)

40,224

Less: Acquisitions

(5,580

)

36

Non-GAAP net sales, constant currency excluding Divestitures and acquisitions

$

327,244

$

332,055

(1.4

)%

Consolidated:

Non-GAAP net sales, including Divestitures

$

3,609,230

$

3,873,111

(6.8

)%

Divestitures

(561,496

)

(623,312

)

Net sales, reported

3,047,734

3,249,799

(6.2

)%

Foreign exchange impact(a)

40,224

Less: Acquisitions

(9,122

)

(1,026

)

Non-GAAP net sales, constant currency excluding Divestitures and acquisitions

$

3,078,836

$

3,248,773

(5.2

)%

(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 fiscal year ended June 30, 2020 into U.S. dollars using the average foreign exchange rates for the fiscal year ended June 30, 2019.

Quarter ended June 30, 2020

Reported
GAAP Measure

Intangible
amortization
expense

Change in fair
value of
contingent
consideration

Acquisition,
divestiture and
restructuring
costs(a)

Tax recovery,
net

Impairment
charges

Non-GAAP
measure

Net sales

$

636,450

$

$

$

$

$

$

636,450

Gross profit

74,147

74,147

Operating (loss) income

(113,439)

4,946

674

1,311

(5,743)

120,470

8,219

Other expense, net

(489)

2,681

2,192

Pre-tax income

(112,950)

4,946

674

1,311

(8,424)

120,470

6,027

Net (loss) income from continuing operations

(108,859)

3,744

510

1,311

(6,247)

114,398

4,857

Diluted EPS from continuing operations

$

(4.29)

$

0.15

$

0.02

$

0.05

$

(0.25)

$

4.51

$

0.19

(a) Acquisition and divestiture costs totaled $1.3 million for the quarter ended June 30, 2020 and are generally nondeductible for tax purposes.

Quarter ended June 30, 2019

Reported
GAAP Measure

Intangible
amortization
expense

Change in fair
value of
contingent
consideration

Acquisition,
divestiture and
restructuring
costs(a)

Tax recovery,
net

Impairment
charges

Non-GAAP
measure

Net sales

$

811,432

$

$

$

$

$

$

811,432

Gross profit

96,643

96,643

Operating income

22,560

4,542

3,666

230

30,998

Other expense, net

3,427

3,427

Pre-tax income

19,133

4,542

3,666

230

27,571

Net income from continuing operations

15,996

3,418

2,780

230

(3,110)

19,314

Diluted EPS from continuing operations

$

0.62

$

0.13

$

0.11

$

0.01

$

(0.12)

$

$

0.75

(a) Acquisition and divestiture costs totaled $0.2 million for the quarter ended June 30, 2019 and are generally nondeductible for tax purposes.

Year ended June 30, 2020

Reported
GAAP Measure

Intangible
amortization
expense

Change in fair
value of
contingent
consideration

Acquisition,
divestiture and
restructuring
costs(a)

Tax recovery,
net

Impairment
charges

Non-GAAP
measure

Net sales

$

3,047,734

$

$

$

$

$

$

3,047,734

Gross profit

355,569

355,569

Operating (loss) income

(64,967)

19,953

6,941

4,604

(8,063)

120,470

78,938

Other expense, net

6,809

2,681

9,490

Pre-tax income

(71,776)

19,953

6,941

4,604

(10,744)

120,470

69,448

Net (loss) income from continuing operations

(79,227)

15,091

5,247

4,449

(8,001)

114,398

51,957

Diluted EPS from continuing operations

$

(3.12)

$

0.59

$

0.21

$

0.18

$

(0.32)

$

4.51

$

2.05

(a) Acquisition and divestiture costs totaled $4.0 million for the fiscal year ended June 30, 2020 and are generally nondeductible for tax purposes. Restructuring costs totaled $0.6 million for the fiscal year ended June 30, 2020

Year ended June 30, 2019

Reported
GAAP Measure

Intangible
amortization
expense

Change in fair
value of
contingent
consideration

Acquisition,
divestiture and
restructuring
costs(a)

Tax recovery,
net

Impairment
charges

Non-GAAP
measure

Net sales

$

3,249,799

$

$

$

$

$

$

3,249,799

Gross profit

392,803

392,803

Operating income

94,734

17,893

15,200

1,218

129,045

Other expense, net

11,097

11,097

Pre-tax income

83,637

17,893

15,200

1,218

117,948

Net income from continuing operations

64,859

13,484

11,294

1,218

(3,110)

87,745

Diluted EPS from continuing operations

$

2.52

$

0.52

$

0.44

$

0.05

$

(0.12)

$

$

3.41

(a) Acquisition and divestiture costs totaled $1.2 million for the fiscal year ended June 30, 2019 and are generally nondeductible for tax purposes.

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

Discontinued Operations - Financial Results:

Quarter ended June 30,

Fiscal year ended June 30,

2020

2019

2020

2019

(in thousands)

Net sales

$

121,969

$

149,401

$

561,496

$

623,312

Cost of goods sold

112,846

136,180

513,003

563,543

Gross profit

9,123

13,221

48,493

59,769

Selling, general and administrative expenses

11,337

15,028

53,946

61,574

Depreciation expense

205

249

975

1,127

Intangible amortization expense

330

483

1,403

1,839

Impairment charges

13,747

13,747

Operating loss

(16,496)

(2,539)

(21,578)

(4,771)

Interest expense, net

163

114

1,399

195

Loss on held for sale classification

88,923

88,923

Other expense, net

1,221

241

1,124

763

Loss from discontinued operations before taxes

(106,803)

(2,894)

(113,024)

(5,729)

Income tax expense

1,600

1,524

403

1,533

Net loss from discontinued operations

$

(108,403)

$

(4,418)

$

(113,427)

$

(7,262)

ScanSource, Inc. and Subsidiaries

Supplementary Information (Unaudited)

Discontinued Operations - Assets and Liabilities:

June 30, 2020

June 30, 2019

(in thousands)

Assets

Current assets:

Cash and cash equivalents

$

4,970

$

4,513

Accounts receivable, net

117,200

131,560

Inventories, net

106,779

143,263

Prepaid expenses and other current assets

23,808

17,417

Total current assets

252,757

296,753

Property and equipment, net

1,833

2,793

Goodwill

8,823

Identifiable intangible assets, net

6,726

Deferred income taxes

9,349

9,277

Other non-current assets

6,215

1,460

Total assets, before valuation allowance

270,154

325,832

Less: valuation allowance

(88,923

)

Total assets, net of valuation allowance (a)

$

181,231

$

325,832

Liabilities

Current liabilities:

Accounts payable

$

56,098

$

69,810

Accrued expenses and other current liabilities

14,815

14,763

Other taxes payable

20,378

12,018

Short-term borrowings

3,524

4,590

Income tax payable

1,085

351

Total current liabilities

95,900

101,532

Borrowings under revolving credit facility

24,704

28,427

Other long-term liabilities

7,418

3,730

Total liabilities(1)

$

128,022

$

133,689

(a) Total assets and liabilities of discontinued operations are classified in current assets and liabilities, respectively, in the Company's consolidated balance sheet as of June 30, 2020, as the discontinued operations are expected to be disposed within twelve months of that date. The assets and liabilities of discontinued operations are classified in their respective current and long-term classifications, respectively, in the Company's consolidated balance sheet as of June 30, 2019 in accordance with the nature and underlying classification of such assets and liabilities.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200831005715/en/

Contacts

Gerald Lyons
Executive Vice President, Chief Financial Officer
ScanSource, Inc.
(864) 286-4854

- or -

Mary M. Gentry
Vice President, Treasurer and Investor Relations
ScanSource, Inc.
(864) 286-4892