Contact: | ||||||||
Gerald Lyons | Mary M. Gentry | |||||||
Senior Executive Vice President, Chief Financial Officer | - or - | Vice President, Treasurer and Investor Relations | ||||||
ScanSource, Inc. | ScanSource, Inc. | |||||||
(864) 286-4854 | (864) 286-4892 |
ScanSource, Inc. and Subsidiaries | |||||||||||
Condensed Consolidated Balance Sheets (Unaudited) | |||||||||||
(in thousands) | |||||||||||
September 30, 2020 | June 30, 2020* | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 49,889 | $ | 29,485 | |||||||
Accounts receivable, less allowance of $21,981 at September 30, 2020 and $21,906 at September 30, 2019 | 509,779 | 443,185 | |||||||||
Inventories | 423,088 | 454,885 | |||||||||
Prepaid expenses and other current assets | 92,216 | 94,681 | |||||||||
Current assets held for sale | 176,903 | 181,231 | |||||||||
Total current assets | 1,251,875 | 1,203,467 | |||||||||
Property and equipment, net | 52,264 | 55,641 | |||||||||
Goodwill | 215,170 | 214,288 | |||||||||
Identifiable intangible assets, net | 117,492 | 121,547 | |||||||||
Deferred income taxes | 24,366 | 24,630 | |||||||||
Other non-current assets | 72,177 | 72,521 | |||||||||
Total assets | $ | 1,733,344 | $ | 1,692,094 | |||||||
Liabilities and Shareholders’ Equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 544,856 | $ | 454,240 | |||||||
Accrued expenses and other current liabilities | 84,537 | 76,686 | |||||||||
Current portion of contingent consideration | 46,850 | 46,334 | |||||||||
Income taxes payable | 1,820 | 5,886 | |||||||||
Current portion of long-term debt | 7,843 | 7,839 | |||||||||
Current liabilities held for sale | 152,259 | 128,022 | |||||||||
Total current liabilities | 838,165 | 719,007 | |||||||||
Deferred income taxes | 4,029 | 3,884 | |||||||||
Long-term debt, net of current portion | 140,956 | 143,175 | |||||||||
Borrowings under revolving credit facility | — | 67,714 | |||||||||
Other long-term liabilities | 78,967 | 80,068 | |||||||||
Total liabilities | 1,062,117 | 1,013,848 | |||||||||
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 25,361,298 shares issued and outstanding at September 30, 2020 and June 30, 2020, respectively | 64,945 | 63,765 | |||||||||
Retained earnings | 735,457 | 747,276 | |||||||||
Accumulated other comprehensive loss | (129,175) | (132,795) | |||||||||
Total shareholders’ equity | 671,227 | 678,246 | |||||||||
Total liabilities and shareholders’ equity | $ | 1,733,344 | $ | 1,692,094 |
ScanSource, Inc. and Subsidiaries | |||||||||||
Condensed Consolidated Income Statements (Unaudited) | |||||||||||
(in thousands, except per share data) | |||||||||||
Quarter ended September 30, | |||||||||||
2020 | 2019 | ||||||||||
Net sales | $ | 757,342 | $ | 842,701 | |||||||
Cost of goods sold | 676,563 | 744,176 | |||||||||
Gross profit | 80,779 | 98,525 | |||||||||
Selling, general and administrative expenses | 62,112 | 68,532 | |||||||||
Depreciation expense | 3,396 | 3,301 | |||||||||
Intangible amortization expense | 4,853 | 4,538 | |||||||||
Restructuring and other charges | 8,268 | 169 | |||||||||
Change in fair value of contingent consideration | 516 | 2,472 | |||||||||
Operating income | 1,634 | 19,513 | |||||||||
Interest expense | 1,913 | 3,317 | |||||||||
Interest income | (481) | (807) | |||||||||
Other expense (income), net | 364 | 374 | |||||||||
(Loss) income before income taxes | (162) | 16,629 | |||||||||
Provision for income taxes | (47) | 4,338 | |||||||||
Net (loss) income from continuing operations | (115) | 12,291 | |||||||||
Net loss from discontinued operations | (11,704) | (761) | |||||||||
Net (loss) income | $ | (11,819) | $ | 11,530 | |||||||
Per share data: | |||||||||||
Net (loss) income from continuing operations per common share, basic | $ | (0.01) | $ | 0.48 | |||||||
Net loss from discontinued operations per common share, basic | (0.46) | (0.03) | |||||||||
Net (loss) income per common share, basic | $ | (0.47) | $ | 0.45 | |||||||
Weighted-average shares outstanding, basic | 25,361 | 25,539 | |||||||||
Net (loss) income from continuing operations per common share, diluted | $ | (0.01) | $ | 0.48 | |||||||
Net loss from discontinued operations per common share, diluted | (0.46) | (0.03) | |||||||||
Net (loss) income per common share, diluted | $ | (0.47) | $ | 0.45 | |||||||
Weighted-average shares outstanding, diluted | 25,361 | 25,617 |
ScanSource, Inc. and Subsidiaries | |||||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||||||||
(in thousands) | |||||||||||
Quarter ended September 30, | |||||||||||
2020 | 2019 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net (loss) income | $ | (11,819) | $ | 11,530 | |||||||
Net loss from discontinued operations | (11,704) | (761) | |||||||||
Net (loss) income from continuing operations | (115) | 12,291 | |||||||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities of continuing operations: | |||||||||||
Depreciation and amortization | 8,710 | 8,518 | |||||||||
Amortization of debt issue costs | 104 | 104 | |||||||||
Provision for doubtful accounts | (8) | 1,225 | |||||||||
Share-based compensation | 1,168 | 1,241 | |||||||||
Deferred income taxes | 139 | 56 | |||||||||
Change in fair value of contingent consideration | 516 | 2,472 | |||||||||
Finance lease interest | 37 | 22 | |||||||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||||||
Accounts receivable | (68,726) | (48,844) | |||||||||
Inventories | 31,155 | (49,276) | |||||||||
Prepaid expenses and other assets | 2,369 | 306 | |||||||||
Other non-current assets | (274) | (7,516) | |||||||||
Accounts payable | 92,419 | 94,587 | |||||||||
Accrued expenses and other liabilities | 7,827 | 10,063 | |||||||||
Income taxes payable | (4,096) | 2,381 | |||||||||
Net cash provided by operating activities of continuing operations | 71,225 | 27,630 | |||||||||
Cash flows from investing activities of continuing operations: | |||||||||||
Capital expenditures | (748) | (939) | |||||||||
Cash paid for business acquisitions, net of cash acquired | — | (49,080) | |||||||||
Net cash used in investing activities of continuing operations | (748) | (50,019) | |||||||||
Cash flows from financing activities of continuing operations: | |||||||||||
Borrowings on revolving credit, net of expenses | 477,381 | 476,171 | |||||||||
Repayments on revolving credit, net of expenses | (545,095) | (515,772) | |||||||||
Borrowings on long-term debt, net | (2,214) | (1,272) | |||||||||
Repayments of finance lease obligations | (327) | (391) | |||||||||
Taxes paid on settlement of equity awards | — | (12) | |||||||||
Repurchase of common stock | — | (6,077) | |||||||||
Net cash used in financing activities of continuing operations | (70,255) | (47,353) | |||||||||
ScanSource, Inc. and Subsidiaries | |||||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited), continued | |||||||||||
(in thousands) | |||||||||||
Cash flows from discontinued operations: | |||||||||||
Net cash flows provided by operating activities of discontinued operations | 31,853 | 19,370 | |||||||||
Net cash flows used in investing activities of discontinued operations | (36) | (1) | |||||||||
Net cash flows (used in) provided by financing activities of discontinued operations | (9,488) | 52,861 | |||||||||
Net cash flows provided by discontinued operations | 22,329 | 72,230 | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (1,439) | (429) | |||||||||
Increase in cash and cash equivalents | 21,112 | 2,059 | |||||||||
Consolidated cash and cash equivalents at beginning of period | 34,455 | 23,818 | |||||||||
Consolidated cash and cash equivalents at end of period | 55,567 | 25,877 | |||||||||
Cash and cash equivalents of discontinued operations | 5,678 | 1,526 | |||||||||
Cash and cash equivalents of continuing operations | $ | 49,889 | $ | 24,351 |
ScanSource, Inc. and Subsidiaries | |||||||||||
Supplementary Information (Unaudited) | |||||||||||
(in thousands, except percentages) | |||||||||||
Non-GAAP Financial Information: | |||||||||||
Quarter ended September 30, | |||||||||||
2020 | 2019 | ||||||||||
Return on invested capital ratio (ROIC), annualized (a) | 8.4 | % | 9.6 | % | |||||||
Reconciliation of net income to EBITDA: | |||||||||||
Net (loss) income from continuing operations (GAAP) | $ | (115) | $ | 12,291 | |||||||
Plus: Interest expense | 1,913 | 3,317 | |||||||||
Plus: Income taxes | (47) | 4,338 | |||||||||
Plus: Depreciation and amortization | 8,710 | 8,518 | |||||||||
EBITDA (non-GAAP) | 10,461 | 28,464 | |||||||||
Plus: Change in fair value of contingent consideration | 516 | 2,472 | |||||||||
Plus: Acquisition and divestiture costs(b) | 498 | 757 | |||||||||
Plus: Restructuring costs | 8,268 | 169 | |||||||||
Adjusted EBITDA (numerator for ROIC) (non-GAAP) | $ | 19,743 | $ | 31,862 | |||||||
Invested Capital Calculations: | |||||||||||
Equity – beginning of the period | $ | 678,246 | $ | 914,129 | |||||||
Equity – end of the period | 671,227 | 905,751 | |||||||||
Plus: Change in fair value of contingent consideration, net of tax | 390 | 1,869 | |||||||||
Plus: Acquisition and divestiture costs(b) | 498 | 757 | |||||||||
Plus: Restructuring, net of tax | 6,250 | 128 | |||||||||
Plus: Discontinued operations net loss | 11,704 | 761 | |||||||||
Average equity | 684,158 | 911,698 | |||||||||
Average funded debt(c) | 243,268 | 407,306 | |||||||||
Invested capital (denominator for ROIC) (non-GAAP) | $ | 927,426 | $ | 1,319,004 | |||||||
(a) The annualized EBITDA amount is divided by days in the quarter times 365 days per year, or 366 days for leap year. There were 92 days in the current and prior-year quarter. | |||||||||||
(b) Acquisition and divestiture costs are generally nondeductible for tax purposes. | |||||||||||
(c) 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 September 30, | |||||||||||||||||
2020 | 2019 | % Change | |||||||||||||||
Worldwide Barcode, Networking & Security: | (in thousands) | ||||||||||||||||
Non-GAAP net sales, including Divestitures | $ | 638,385 | $ | 697,791 | (8.5) | % | |||||||||||
Divestitures | (114,808) | (116,604) | |||||||||||||||
Net sales, reported | 523,577 | 581,187 | (9.9) | % | |||||||||||||
Foreign exchange impact (a) | 7,724 | — | |||||||||||||||
Non-GAAP net sales, constant currency excluding Divestitures | $ | 531,301 | $ | 581,187 | (8.6) | % | |||||||||||
Worldwide Communications & Services: | |||||||||||||||||
Non-GAAP net sales, including Divestitures | $ | 264,005 | $ | 300,627 | (12.2) | % | |||||||||||
Divestitures | (30,240) | (39,113) | |||||||||||||||
Net sales, reported | 233,765 | 261,514 | (10.6) | % | |||||||||||||
Foreign exchange impact (a) | 17,440 | — | |||||||||||||||
Non-GAAP net sales, constant currency excluding Divestitures | $ | 251,205 | $ | 261,514 | (3.9) | % | |||||||||||
Consolidated: | |||||||||||||||||
Non-GAAP net sales, including Divestitures | $ | 902,390 | $ | 998,418 | (9.6) | % | |||||||||||
Divestitures | (145,048) | (155,717) | |||||||||||||||
Net sales, reported | 757,342 | 842,701 | (10.1) | % | |||||||||||||
Foreign exchange impact (a) | 25,164 | — | |||||||||||||||
Non-GAAP net sales, constant currency excluding Divestitures | $ | 782,506 | $ | 842,701 | (7.1) | % | |||||||||||
(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, 2020 into U.S. dollars using the average foreign exchange rates for the quarter ended September 30, 2019. |
ScanSource, Inc. and Subsidiaries | |||||||||||||||||
Supplementary Information (Unaudited) | |||||||||||||||||
Net Sales by Geography: | |||||||||||||||||
Quarter ended September 30, | |||||||||||||||||
2020 | 2019 | % Change | |||||||||||||||
United States and Canada: | (in thousands) | ||||||||||||||||
Net sales, as reported | $ | 683,603 | $ | 768,508 | (11.0) | % | |||||||||||
International: | |||||||||||||||||
Non-GAAP net sales, including Divestitures | $ | 218,787 | $ | 229,910 | (4.8) | % | |||||||||||
Divestitures | (145,048) | (155,717) | |||||||||||||||
Net sales, reported | 73,739 | 74,193 | (0.6) | % | |||||||||||||
Foreign exchange impact(a) | 25,164 | — | |||||||||||||||
Non-GAAP net sales, constant currency excluding Divestitures | $ | 98,903 | $ | 74,193 | 33.3 | % | |||||||||||
Consolidated: | |||||||||||||||||
Non-GAAP net sales, including Divestitures | $ | 902,390 | $ | 998,418 | (9.6) | % | |||||||||||
Divestitures | (145,048) | (155,717) | |||||||||||||||
Net sales, reported | 757,342 | 842,701 | (10.1) | % | |||||||||||||
Foreign exchange impact(a) | 25,164 | — | |||||||||||||||
Non-GAAP net sales, constant currency excluding Divestitures | $ | 782,506 | $ | 842,701 | (7.1) | % | |||||||||||
(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, 2020 into U.S. dollars using the average foreign exchange rates for the quarter ended September 30, 2019. |
Quarter ended September 30, 2020 | |||||||||||||||||||||||||||||||||||
GAAP Measure | Intangible amortization expense | Change in fair value of contingent consideration | Acquisition and divestiture costs | Restructuring costs | Non-GAAP measure | ||||||||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||||||||||
Net sales | $ | 757,342 | $ | — | $ | — | $ | — | $ | — | $ | 757,342 | |||||||||||||||||||||||
Gross profit | 80,779 | — | — | — | — | 80,779 | |||||||||||||||||||||||||||||
Operating income | 1,634 | 4,853 | 516 | 498 | 8,268 | 15,769 | |||||||||||||||||||||||||||||
Other expense, net | 1,796 | — | — | — | — | 1,796 | |||||||||||||||||||||||||||||
Pre-tax (loss) income | (162) | 4,853 | 516 | 498 | 8,268 | 13,973 | |||||||||||||||||||||||||||||
Net (loss) income from continuing operations | (115) | 3,675 | 390 | 498 | 6,250 | 10,698 | |||||||||||||||||||||||||||||
Diluted EPS from continuing operations | $ | (0.01) | $ | 0.14 | $ | 0.02 | $ | 0.02 | $ | 0.25 | $ | 0.42 | |||||||||||||||||||||||
Quarter ended September 30, 2019 | |||||||||||||||||||||||||||||||||||
GAAP Measure | Intangible amortization expense | Change in fair value of contingent consideration | Acquisition and divestiture costs | Restructuring costs | Non-GAAP measure | ||||||||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||||||||||
Net sales | $ | 842,701 | $ | — | $ | — | $ | — | $ | — | $ | 842,701 | |||||||||||||||||||||||
Gross profit | 98,525 | — | — | — | — | 98,525 | |||||||||||||||||||||||||||||
Operating income | 19,513 | 4,538 | 2,472 | 757 | 169 | 27,449 | |||||||||||||||||||||||||||||
Other expense, net | 2,884 | — | — | — | — | 2,884 | |||||||||||||||||||||||||||||
Pre-tax income | 16,629 | 4,538 | 2,472 | 757 | 169 | 24,565 | |||||||||||||||||||||||||||||
Net income from continuing operations | 12,291 | 3,406 | 1,869 | 757 | 128 | 18,451 | |||||||||||||||||||||||||||||
Diluted EPS from continuing operations | $ | 0.48 | $ | 0.13 | $ | 0.07 | $ | 0.03 | $ | 0.01 | $ | 0.72 | |||||||||||||||||||||||
ScanSource, Inc. and Subsidiaries | |||||||||||
Supplementary Information (Unaudited) | |||||||||||
Discontinued Operations - Financial Results: | |||||||||||
Quarter ended September 30, | |||||||||||
2020 | 2019 | ||||||||||
(in thousands) | |||||||||||
Net sales | $ | 145,049 | $ | 155,716 | |||||||
Cost of goods sold | 134,534 | 142,142 | |||||||||
Gross profit | 10,515 | 13,574 | |||||||||
Selling, general and administrative expenses | 10,913 | 13,810 | |||||||||
Depreciation expense | 201 | 248 | |||||||||
Intangible amortization expense | — | 424 | |||||||||
Operating loss | (599) | (908) | |||||||||
Interest expense, net | 125 | 483 | |||||||||
Loss on held for sale classification | 10,686 | — | |||||||||
Other expense, net | 291 | (343) | |||||||||
Loss from discontinued operations before taxes | (11,701) | (1,048) | |||||||||
Income tax expense | 3 | (287) | |||||||||
Net loss from discontinued operations | $ | (11,704) | $ | (761) |
ScanSource, Inc. and Subsidiaries | |||||||||||
Supplementary Information (Unaudited) | |||||||||||
Discontinued Operations - Assets and Liabilities: | |||||||||||
September 30, 2020 | June 30, 2020 | ||||||||||
(in thousands) | |||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 5,678 | $ | 4,970 | |||||||
Accounts receivable, net | 130,553 | 117,200 | |||||||||
Inventories, net | 95,560 | 106,779 | |||||||||
Prepaid expenses and other current assets | 27,465 | 23,808 | |||||||||
Total current assets | 259,256 | 252,757 | |||||||||
Property and equipment, net | 1,724 | 1,833 | |||||||||
Deferred income taxes | 9,633 | 9,349 | |||||||||
Other non-current assets | 5,899 | 6,215 | |||||||||
Total assets, before valuation allowance | 276,512 | 270,154 | |||||||||
Less: valuation allowance | (99,609) | (88,923) | |||||||||
Total assets, net of valuation allowance (a) | $ | 176,903 | $ | 181,231 | |||||||
Liabilities | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 84,657 | $ | 56,098 | |||||||
Accrued expenses and other current liabilities | 15,834 | 14,815 | |||||||||
Other taxes payable | 23,136 | 20,378 | |||||||||
Short-term borrowings | — | 3,524 | |||||||||
Income tax payable | 1,338 | 1,085 | |||||||||
Total current liabilities | 124,965 | 95,900 | |||||||||
Borrowings under revolving credit facility | 19,932 | 24,704 | |||||||||
Other long-term liabilities | 7,362 | 7,418 | |||||||||
Total liabilities(1) | $ | 152,259 | $ | 128,022 | |||||||
(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 September 30, 2020 and June 30, 2020, as the discontinued operations are expected to be disposed by June 30, 2021. |