SCSC 8-K

Scansource, Inc. (SCSC)

8-K 2021-05-10 For: 2021-05-10

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Added on April 08, 2026

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Exhibit Number			Description

99.1			Press release
99.2			CFO commentary
104			Cover Page Interactive Data File (embedded within the Inline XBRL document)


Contact:
Steve Jones		Mary M. Gentry
Senior Executive Vice President, Chief Financial Officer	- or -	Vice President, Treasurer and Investor Relations
ScanSource, Inc.		ScanSource, Inc.
(864) 286-4302		(864) 286-4892


ScanSource, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
	March 31, 2021		June 30, 2020*
Assets
Current assets:
Cash and cash equivalents	$	49,321	$	29,485
Accounts receivable, less allowance of $21,180 at March 31, 2021 and $21,906 at March 31, 2020	509,404		443,185
Inventories	459,652		454,885
Prepaid expenses and other current assets	99,424		94,681
Current assets held for sale	—		181,231
Total current assets	1,117,801		1,203,467
Property and equipment, net	45,316		55,641
Goodwill	217,093		214,288
Identifiable intangible assets, net	109,172		121,547
Deferred income taxes	24,405		24,630
Other non-current assets	68,835		72,521

Total assets	$	1,582,622	$	1,692,094
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	521,552	$	454,240
Accrued expenses and other current liabilities	87,969		76,686
Current portion of contingent consideration	—		46,334
Income taxes payable	5,333		5,886

Current portion of long-term debt	7,843		7,839
Current liabilities held for sale	—		128,022
Total current liabilities	622,697		719,007
Deferred income taxes	4,309		3,884
Long-term debt, net of current portion	137,206		143,175
Borrowings under revolving credit facility	53,802		67,714

Other long-term liabilities	74,033		80,068

Total liabilities	892,047		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, 25,466,365 and 25,361,298 shares issued and outstanding at March 31, 2021 and June 30, 2020, respectively	68,895		63,765
Retained earnings	734,361		747,276
Accumulated other comprehensive loss	(112,681)		(132,795)
Total shareholders’ equity	690,575		678,246
Total liabilities and shareholders’ equity	$	1,582,622	$	1,692,094


ScanSource, Inc. and Subsidiaries
Condensed Consolidated Income Statements (Unaudited)
(in thousands, except per share data)

	Quarter ended March 31,				Nine months ended March 31,
	2021		2020		2021		2020
Net sales	$	729,873	$	744,584	$	2,298,111	$	2,411,285
Cost of goods sold	641,757		660,006		2,043,172		2,129,862
Gross profit	88,116		84,578		254,939		281,423
Selling, general and administrative expenses	60,099		64,971		182,681		201,344
Depreciation expense	3,141		3,268		9,634		9,729
Intangible amortization expense	4,880		5,159		14,595		15,007
Restructuring and other charges	560		169		9,312		604
Change in fair value of contingent consideration	—		618		516		6,266
Operating income	19,436		10,393		38,201		48,473
Interest expense	1,576		3,098		5,285		9,727
Interest income	(745)		(1,080)		(1,756)		(2,627)
Other expense (income), net	(302)		(137)		183		198
Income before income taxes	18,907		8,512		34,489		41,175
Provision for income taxes	5,121		2,797		9,757		11,542
Net income from continuing operations	13,786		5,715		24,732		29,633
Net loss from discontinued operations	(688)		(4,002)		(37,647)		(5,025)
Net (loss) income	$	13,098	$	1,713	$	(12,915)	$	24,608
Per share data:

Net income from continuing operations per common share, basic	$	0.54	$	0.23	$	0.97	$	1.17
Net loss from discontinued operations per common share, basic	(0.03)		(0.16)		(1.48)		(0.20)
Net (loss) income per common share, basic	$	0.51	$	0.07	$	(0.51)	$	0.97
Weighted-average shares outstanding, basic	25,455		25,346		25,404		25,386

Net income from continuing operations per common share, diluted	$	0.54	$	0.23	$	0.97	$	1.16
Net loss from discontinued operations per common share, diluted	(0.03)		(0.16)		(1.48)		(0.20)
Net (loss) income per common share, diluted	$	0.51	$	0.07	$	(0.51)	$	0.97
Weighted-average shares outstanding, diluted	25,572		25,363		25,484		25,444


ScanSource, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)

	Nine months ended March 31,
		2021		2020
Cash flows from operating activities:
Net (loss) income		$	(12,915)	$	24,608
Net loss from discontinued operations		(37,647)		(5,025)
Net income from continuing operations		24,732		29,633
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
Depreciation and amortization		25,417		26,585
Amortization of debt issue costs		313		313
Provision for doubtful accounts		226		1,399
Share-based compensation		5,711		4,053

Deferred income taxes		(26)		(1,479)

Change in fair value of contingent consideration		516		6,266
Contingent consideration payments excess		(5,457)		(3,050)
Finance lease interest		96		64
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(68,654)		(85)
Inventories		(5,907)		(7,446)
Prepaid expenses and other assets		(1,641)		(10,977)
Other non-current assets		2,846		(1,029)
Accounts payable		69,609		55,378
Accrued expenses and other liabilities		8,434		13,233
Income taxes payable		(793)		(4,775)
Net cash provided by operating activities of continuing operations		55,422		108,083
Cash flows from investing activities of continuing operations:
Capital expenditures		(2,283)		(6,575)
Cash paid for business acquisitions, net of cash acquired		—		(48,915)
Proceeds from the sale of net assets of discontinued operations		34,356		—

Net cash provided by (used in) investing activities of continuing operations		32,073		(55,490)
Cash flows from financing activities of continuing operations:

Borrowings on revolving credit, net of expenses		1,486,464		1,608,472
Repayments on revolving credit, net of expenses		(1,500,375)		(1,650,862)
Borrowings on long-term debt, net		(5,964)		(3,147)
Repayments of finance lease obligations		(974)		(660)

Contingent consideration payments		(41,393)		(35,481)
Exercise of stock options		439		754
Taxes paid on settlement of equity awards		(1,036)		(1,354)
Repurchase of common stock		—		(6,077)

Net cash used in financing activities of continuing operations		(62,839)		(88,355)


☐			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))


ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)
(in thousands, except percentages)

Non-GAAP Financial Information:
	Quarter ended March 31,
	2021			2020
Return on invested capital ratio (ROIC), annualized (a)	13.6		%	6.0		%

Reconciliation of net income to EBITDA:
Net income from continuing operations (GAAP)	$	13,786		$	5,715
Plus: Interest expense	1,576			3,098
Plus: Income taxes	5,121			2,797
Plus: Depreciation and amortization	8,358			8,987
EBITDA (non-GAAP)	28,841			20,597
Plus: Change in fair value of contingent consideration	—			618
Plus: Acquisition and divestiture costs(b)	272			780
Plus: Restructuring costs	349			169

Plus: Tax recovery	—			(2,320)
Adjusted EBITDA (numerator for ROIC) (non-GAAP)	$	29,462		$	19,844

Invested Capital Calculations:
Equity – beginning of the quarter (c)	$	682,139		$	927,580
Equity – end of the quarter (c)	690,575			897,678
Plus: Change in fair value of contingent consideration, net of tax	—			467
Plus: Acquisition and divestiture costs(b)	272			780
Plus: Restructuring, net of tax	264			125

Plus: Tax recovery, net of tax	—			(1,754)
Plus: Net loss from discontinued operations	688			4,002
Average equity	686,969			914,439
Average funded debt (d)	191,996			405,533
Invested capital (denominator for ROIC) (non-GAAP)	$	878,965		$	1,319,972

(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 90 days in the current quarter and 91 days in the prior-year quarter.
(b) Acquisition and divestiture costs are generally nondeductible for tax purposes.
(c) In the quarter ending June 30, 2020, the Company recorded impairment charges of $120.5 million. Impairment charges, net of tax reduced equity by $114.4 million.
(d) 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 March 31,
	2021		2020		% Change
Worldwide Barcode, Networking & Security:	(in thousands)


Net sales, reported	$	502,227	$	489,218	2.7	%
Foreign exchange impact (a)	4,132		—

Non-GAAP net sales, constant currency	$	506,359	$	489,218	3.5	%

Worldwide Communications & Services:


Net sales, reported	$	227,646	$	255,366	(10.9)	%
Foreign exchange impact (a)	10,476		—

Non-GAAP net sales, constant currency	$	238,122	$	255,366	(6.8)	%

Consolidated:


Net sales, reported	$	729,873	$	744,584	(2.0)	%
Foreign exchange impact (a)	14,608		—

Non-GAAP net sales, constant currency	$	744,481	$	744,584	—	%

(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 March 31, 2021 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2020.


ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)

Net Sales by Geography:
	Quarter ended March 31,
	2021		2020		% Change
United States and Canada:	(in thousands)
Net sales, as reported	$	665,720	$	670,175	(0.7)	%



International:


Net sales, reported	$	64,153	$	74,409	(13.8)	%
Foreign exchange impact(a)	14,608		—

Non-GAAP net sales, constant currency	$	78,761	$	74,409	5.8	%

Consolidated:


Net sales, reported	$	729,873	$	744,584	(2.0)	%
Foreign exchange impact(a)	14,608		—

Non-GAAP net sales, constant currency	$	744,481	$	744,584	—	%

(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 March 31, 2021 into U.S. dollars using the average foreign exchange rates for the quarter ended March 31, 2020.


	Quarter ended March 31, 2021
	GAAP Measure		Intangible amortization expense		Change in fair value of contingent consideration		Acquisition and divestiture costs		Restructuring costs		Tax recovery, net		Non-GAAP measure
	(in thousands, except per share data)
Net sales	$	729,873	$	—	$	—	$	—	$	—	$	—	$	729,873
Gross profit	88,116		—		—		—		—		—		88,116
Operating income	19,436		4,880		—		272		560		—		25,148
Other expense, net	529		—		—		—		—		—		529
Pre-tax income	18,907		4,880		—		272		560		—		24,619
Net income from continuing operations	13,786		3,697		—		272		423		—		18,178
Diluted EPS from continuing operations	$	0.54	$	0.14	$	—	$	0.01	$	0.02	$	—	$	0.71

	Quarter ended March 31, 2020
	GAAP Measure		Intangible amortization expense		Change in fair value of contingent consideration		Acquisition and divestiture costs		Restructuring costs		Tax recovery, net		Non-GAAP measure
	(in thousands, except per share data)
Net sales	$	744,584	$	—	$	—	$	—	$	—	$	—	$	744,584
Gross profit	84,578		—		—		—		—		—		84,578
Operating income	10,393		5,159		618		780		169		(2,320)		14,799
Other expense, net	1,881		—		—		—		—		—		1,881
Pre-tax income	8,512		5,159		618		780		169		(2,320)		12,918
Net income from continuing operations	5,715		3,909		467		780		125		(1,754)		9,242
Diluted EPS from continuing operations	$	0.23	$	0.15	$	0.02	$	0.03	$	—	$	(0.07)	$	0.36



	Nine months ended March 31, 2021
	Reported GAAP Measure		Intangible amortization expense		Change in fair value of contingent consideration		Acquisition and divestiture costs		Restructuring costs		Tax recovery, net		Non-GAAP measure
	(in thousands, except per share data)
Net sales	$	2,298,111	$	—	$	—	$	—	$	—	$	—	$	2,298,111
Gross profit	254,939		—		—		—		—		—		254,939
Operating income	38,201		14,595		516		2,130		9,312		—		64,754
Other expense, net	3,712		—		—		—		—		—		3,712
Pre-tax income	34,489		14,595		516		2,130		9,312		—		61,042
Net income from continuing operations	24,732		11,055		390		2,130		7,040		—		45,347
Diluted EPS from continuing operations	$	0.97	$	0.43	$	0.02	$	0.08	$	0.28	$	—	$	1.78



	Nine months ended March 31, 2020
	Reported GAAP Measure		Intangible amortization expense		Change in fair value of contingent consideration		Acquisition and divestiture costs		Restructuring costs		Tax recovery, net		Non-GAAP measure
	(in thousands, except per share data)
Net sales	$	2,411,285	$	—	$	—	$	—	$	—	$	—	$	2,411,285
Gross profit	281,423		—		—		—		—		—		281,423
Operating income	48,473		15,007		6,266		2,689		604		(2,320)		70,719
Other expense, net	7,298		—		—		—		—		—		7,298
Pre-tax income	41,175		15,007		6,266		2,689		604		(2,320)		63,421
Net income from continuing operations	29,633		11,347		4,737		2,689		449		(1,754)		47,101
Diluted EPS from continuing operations	$	1.16	$	0.45	$	0.19	$	0.11	$	0.02	$	(0.07)	$	1.85


ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)

Discontinued Operations - Financial Results:

	Quarter ended March 31,				Nine months ended March 31,
	2021		2020		2021		2020
	(in thousands)
Net sales	$	—	$	127,899	$	213,373	$	439,527
Cost of goods sold	—		117,669		198,512		400,158
Gross profit	—		10,230		14,861		39,369
Selling, general and administrative expenses	—		13,782		17,291		42,607
Depreciation expense	—		225		—		771
Intangible amortization expense	—		327		—		1,073

Operating loss	—		(4,104)		(2,430)		(5,082)
Interest expense, net	—		323		394		1,236
Loss on disposal group	688		—		34,496		—
Other expense, net	—		433		310		(96)
Loss from discontinued operations before taxes	(688)		(4,860)		(37,630)		(6,222)
Income tax expense	—		(858)		17		(1,197)
Net loss from discontinued operations	$	(688)	$	(4,002)	$	(37,647)	$	(5,025)


ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)

Discontinued Operations - Assets and Liabilities:

	March 31, 2021		June 30, 2020
	(in thousands)
Assets
Current assets:
Cash and cash equivalents	$	—	$	4,970
Accounts receivable, net	—		117,200
Inventories, net	—		106,779
Prepaid expenses and other current assets	—		23,808

Total current assets	—		252,757
Property and equipment, net	—		1,833


Deferred income taxes	—		9,349
Other non-current assets	—		6,215
Total assets, before valuation allowance	—		270,154
Less: valuation allowance	—		(88,923)
Total assets, net of valuation allowance (a)	$	—	$	181,231
Liabilities
Current liabilities:
Accounts payable	$	—	$	56,098
Accrued expenses and other current liabilities	—		14,815
Other taxes payable	—		20,378
Short-term borrowings	—		3,524
Income tax payable	—		1,085
Total current liabilities	—		95,900
Borrowings under revolving credit facility	—		24,704
Other long-term liabilities	—		7,418
Total liabilities(1)	$	—	$	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 March 31, 2021 and June 30, 2020. The discontinued operations were disposed of during the quarter ended December 31, 2020.


Emerging growth company			☐