Scansource, Inc 8-K, filed Feb 2, 2021

Scansource, Inc. (SCSC)

8-K 2021-02-02 For: 2021-02-02

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Added on April 08, 2026

About this 8-K

Scansource, Inc filed this 8-K on February 2, 2021.

Items reported

Item 2.02: Financial results
Item 9.01: Financial statements and exhibits

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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:
Stephen T. 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)
	December 31, 2020		June 30, 2020*
Assets
Current assets:
Cash and cash equivalents	$	67,187	$	29,485
Accounts receivable, less allowance of $21,805 at December 31, 2020 and $21,906 at December 31, 2019	534,583		443,185
Inventories	421,003		454,885
Prepaid expenses and other current assets	96,358		94,681
Current assets held for sale	—		181,231
Total current assets	1,119,131		1,203,467
Property and equipment, net	48,183		55,641
Goodwill	217,956		214,288
Identifiable intangible assets, net	114,208		121,547
Deferred income taxes	25,619		24,630
Other non-current assets	72,022		72,521

Total assets	$	1,597,119	$	1,692,094
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	589,292	$	454,240
Accrued expenses and other current liabilities	91,592		76,686
Current portion of contingent consideration	—		46,334
Income taxes payable	859		5,886

Current portion of long-term debt	7,843		7,839
Current liabilities held for sale	—		128,022
Total current liabilities	689,586		719,007
Deferred income taxes	4,273		3,884
Long-term debt, net of current portion	139,081		143,175
Borrowings under revolving credit facility	5,000		67,714

Other long-term liabilities	77,040		80,068

Total liabilities	914,980		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, 25,451,640 and 25,361,298 shares issued and outstanding at December 31, 2020 and June 30, 2020, respectively	65,924		63,765
Retained earnings	721,263		747,276
Accumulated other comprehensive loss	(105,048)		(132,795)
Total shareholders’ equity	682,139		678,246
Total liabilities and shareholders’ equity	$	1,597,119	$	1,692,094


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

	Quarter ended December 31,				Six months ended December 31,
	2020		2019		2020		2019
Net sales	$	810,897	$	823,999	$	1,568,238	$	1,666,700
Cost of goods sold	724,854		725,680		1,401,415		1,469,856
Gross profit	86,043		98,319		166,823		196,844
Selling, general and administrative expenses	60,470		67,840		122,580		136,371
Depreciation expense	3,097		3,161		6,494		6,462
Intangible amortization expense	4,862		5,310		9,716		9,848
Restructuring and other charges	484		266		8,753		435
Change in fair value of contingent consideration	—		3,176		516		5,649
Operating income	17,130		18,566		18,764		38,079
Interest expense	1,796		3,312		3,709		6,629
Interest income	(531)		(740)		(1,011)		(1,548)
Other expense (income), net	121		(39)		484		336
Income before income taxes	15,744		16,033		15,582		32,662
Provision for income taxes	4,683		4,407		4,636		8,745
Net income from continuing operations	11,061		11,626		10,946		23,917
Net loss from discontinued operations	(25,255)		(260)		(36,959)		(1,021)
Net (loss) income	$	(14,194)	$	11,366	$	(26,013)	$	22,896
Per share data:

Net income from continuing operations per common share, basic	$	0.44	$	0.46	$	0.43	$	0.94
Net loss from discontinued operations per common share, basic	(1.00)		(0.01)		(1.46)		(0.04)
Net (loss) income per common share, basic	$	(0.56)	$	0.45	$	(1.03)	$	0.90
Weighted-average shares outstanding, basic	25,395		25,274		25,378		25,407

Net income from continuing operations per common share, diluted	$	0.43	$	0.46	$	0.43	$	0.94
Net loss from discontinued operations per common share, diluted	(0.99)		(0.01)		(1.45)		(0.04)
Net (loss) income per common share, diluted	$	(0.56)	$	0.45	$	(1.02)	$	0.90
Weighted-average shares outstanding, diluted	25,475		25,358		25,458		25,488


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

	Six months ended December 31,
		2020		2019
Cash flows from operating activities:
Net (loss) income		$	(26,013)	$	22,896
Net loss from discontinued operations		(36,959)		(1,021)
Net income from continuing operations		10,946		23,917
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
Depreciation and amortization		17,059		17,599
Amortization of debt issue costs		209		209
Provision for doubtful accounts		(180)		1,101
Share-based compensation		3,174		2,817

Deferred income taxes		(694)		(344)

Change in fair value of contingent consideration		516		5,649
Contingent consideration payments excess		(5,457)		(3,050)
Finance lease interest		70		39
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(86,683)		8,101
Inventories		35,124		(69,384)
Prepaid expenses and other assets		2,256		(1,748)
Other non-current assets		1,328		(8,972)
Accounts payable		132,074		97,962
Accrued expenses and other liabilities		11,150		12,094
Income taxes payable		(5,218)		(3,256)
Net cash provided by operating activities of continuing operations		115,674		82,734
Cash flows from investing activities of continuing operations:
Capital expenditures		(1,454)		(2,732)
Cash paid for business acquisitions, net of cash acquired		—		(48,930)
Proceeds from the sale of net assets of discontinued operations		34,356		—

Net cash provided by (used in) investing activities of continuing operations		32,902		(51,662)
Cash flows from financing activities of continuing operations:

Borrowings on revolving credit, net of expenses		959,848		1,022,403
Repayments on revolving credit, net of expenses		(1,022,561)		(1,066,890)
Borrowings on long-term debt, net		(4,089)		(2,210)
Repayments of finance lease obligations		(652)		(1,115)

Contingent consideration payments		(41,393)		(35,481)
Exercise of stock options		—		720
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		(109,883)		(90,004)


☐			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 December 31,
	2020			2019
Return on invested capital ratio (ROIC), annualized (a)	12.4		%	9.9		%

Reconciliation of net income to EBITDA:
Net income from continuing operations (GAAP)	$	11,061		$	11,626
Plus: Interest expense	1,796			3,312
Plus: Income taxes	4,683			4,407
Plus: Depreciation and amortization	8,349			9,081
EBITDA (non-GAAP)	25,889			28,426
Plus: Change in fair value of contingent consideration	—			3,176
Plus: Acquisition and divestiture costs(b)	1,359			1,151
Plus: Restructuring costs	484			266


Adjusted EBITDA (numerator for ROIC) (non-GAAP)	$	27,732		$	33,019

Invested Capital Calculations:
Equity – beginning of the period	$	671,227		$	905,751
Equity – end of the period	682,139			927,580
Plus: Change in fair value of contingent consideration, net of tax	—			2,401
Plus: Acquisition and divestiture costs(b)	1,359			1,151
Plus: Restructuring, net of tax	366			196


Plus: Discontinued operations net loss	25,255			260
Average equity	690,173			918,670
Average funded debt(c)	198,620			411,614
Invested capital (denominator for ROIC) (non-GAAP)	$	888,793		$	1,330,284

(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 December 31,
	2020		2019		% Change
Worldwide Barcode, Networking & Security:	(in thousands)


Net sales, reported	$	551,394	$	575,001	(4.1)	%
Foreign exchange impact (a)	7,903		—

Non-GAAP net sales, constant currency	$	559,297	$	575,001	(2.7)	%

Worldwide Communications & Services:


Net sales, reported	$	259,503	$	248,998	4.2	%
Foreign exchange impact (a)	19,882		—

Non-GAAP net sales, constant currency	$	279,385	$	248,998	12.2	%

Consolidated:


Net sales, reported	$	810,897	$	823,999	(1.6)	%
Foreign exchange impact (a)	27,785		—

Non-GAAP net sales, constant currency	$	838,682	$	823,999	1.8	%

(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 December 31, 2020 into U.S. dollars using the average foreign exchange rates for the quarter ended December 31, 2019.


ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)

Net Sales by Geography:
	Quarter ended December 31,
	2020		2019		% Change
United States and Canada:	(in thousands)
Net sales, as reported	$	720,004	$	734,832	(2.0)	%



International:


Net sales, reported	$	90,893	$	89,167	1.9	%
Foreign exchange impact(a)	27,785		—

Non-GAAP net sales, constant currency	$	118,678	$	89,167	33.1	%

Consolidated:


Net sales, reported	$	810,897	$	823,999	(1.6)	%
Foreign exchange impact(a)	27,785		—

Non-GAAP net sales, constant currency	$	838,682	$	823,999	1.8	%

(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 December 31, 2020 into U.S. dollars using the average foreign exchange rates for the quarter ended December 31, 2019.


	Quarter ended December 31, 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	$	810,897	$	—	$	—	$	—	$	—	$	810,897
Gross profit	86,043		—		—		—		—		86,043
Operating income	17,130		4,862		—		1,360		484		23,836
Other expense, net	1,386		—		—		—		—		1,386
Pre-tax income	15,744		4,862		—		1,360		484		22,450
Net income from continuing operations	11,061		3,682		—		1,360		366		16,469
Diluted EPS from continuing operations	$	0.43	$	0.15	$	—	$	0.06	$	0.01	$	0.65

	Quarter ended December 31, 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	$	823,999	$	—	$	—	$	—	$	—	$	823,999
Gross profit	98,319		—		—		—		—		98,319
Operating income	18,566		5,310		3,176		1,151		266		28,469
Other expense, net	2,533		—		—		—		—		2,533
Pre-tax income	16,033		5,310		3,176		1,151		266		25,936
Net income from continuing operations	11,626		4,032		2,401		1,151		196		19,406
Diluted EPS from continuing operations	$	0.46	$	0.16	$	0.09	$	0.05	$	0.01	$	0.77



	Six months ended December 31, 2020
	Reported GAAP Measure		Intangible amortization expense		Change in fair value of contingent consideration		Acquisition and divestiture costs		Restructuring costs		Non-GAAP measure

Net sales	$	1,568,238	$	—	$	—	$	—	$	—	$	1,568,238
Gross profit	166,823		—		—		—		—		166,823
Operating income	18,764		9,716		516		1,857		8,753		39,606
Other expense, net	3,182		—		—		—		—		3,182
Pre-tax income	15,582		9,716		516		1,857		8,753		36,424
Net income from continuing operations	10,946		7,357		390		1,857		6,617		27,167
Diluted EPS from continuing operations	$	0.43	$	0.29	$	0.02	$	0.07	$	0.26	$	1.07



	Six months ended December 31, 2019
	Reported GAAP Measure		Intangible amortization expense		Change in fair value of contingent consideration		Acquisition and divestiture costs		Restructuring costs		Non-GAAP measure

Net sales	$	1,666,700	$	—	$	—	$	—	$	—	$	1,666,700
Gross profit	196,844		—		—		—		—		196,844
Operating income	38,079		9,848		5,649		1,909		435		55,920
Other expense, net	5,417		—		—		—		—		5,417
Pre-tax income	32,662		9,848		5,649		1,909		435		50,503
Net income from continuing operations	23,917		7,438		4,270		1,909		324		37,858
Diluted EPS from continuing operations	$	0.94	$	0.29	$	0.17	$	0.07	$	0.01	$	1.48


ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)

Discontinued Operations - Financial Results:

	Quarter ended December 31,				Six months ended December 31,
	2020		2019		2020		2019
	(in thousands)
Net sales	$	68,323	$	155,912	$	213,373	$	311,628
Cost of goods sold	63,977		140,347		198,512		282,489
Gross profit	4,346		15,565		14,861		29,139
Selling, general and administrative expenses	6,378		15,016		17,291		28,825
Depreciation expense	—		298		—		546
Intangible amortization expense	—		321		—		746

Operating loss	(2,032)		(70)		(2,430)		(978)
Interest expense, net	269		430		394		913
Loss on disposal group	23,122		—		33,808		—
Other expense, net	(181)		(188)		310		(531)
Loss from discontinued operations before taxes	(25,242)		(312)		(36,942)		(1,360)
Income tax expense	13		(52)		17		(339)
Net loss from discontinued operations	$	(25,255)	$	(260)	$	(36,959)	$	(1,021)


ScanSource, Inc. and Subsidiaries
Supplementary Information (Unaudited)

Discontinued Operations - Assets and Liabilities:

	December 31, 2020		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 December 31, 2020 and June 30, 2020. The discontinued operations were disposed of during the quarter ended December 31, 2020.


Emerging growth company			☐