ScanSource Reports Sales Up 38 Percent In First-Quarter 2003

The value-added distributor of AIDC, point-of-sale and telephony products, based here, pulled out ahead of Wall Street predictions to finish its quarter ended Sept. 30 with net income of $6 million, or 95 cents per share, on sales of $261 million.

Wall Street analysts projected first-quarter earnings of 87 cents per share, according to First Call/Thomson Financial. The first-quarter fiscal year 2003 results compare with net income of $4.5 million, or 73 cents per share, on sales of $189 million for the same quarter last year.

"We had an outstanding quarter in the North American unit, especially AIDC, where all product categories performed well," ScanSource CFO Jeffery Bryson told analysts during an earnings Webcast late Thursday.

ScanSource shares closed Thursday at $54.49 on low-volume trading, just prior to the release of first quarter results.

Bryson told analysts that $244 million in quarterly sales came from North American distribution, $13.3 million from international distribution (including Latin America and Europe) and $3.3 million from ChannelMax, a business segment that provides e-logistics services.

The company also offers voice, data and telephony products, as well as converged communications solutions via a separate unit, called Catalyst Telecom. Bryson reported 46 percent year-over-year growth in the bar code and POS areas and 30 percent for telephony. For the first quarter, Bryson reported a 52/48 mix of bar code and POS vs. telephony sales.

Gross margins were 11.6 percent for the quarter, compared with 11.1 percent for last year. Bryson said gross margins were higher because of some "opportunistic purchases from the June quarter that we earned as they sold through September."

Mike Baur, CEO of ScanSource, said POS sales have remained flat amid manufacturers moves to shift business models as the market matures.

Baur also said that while ScanSource is making good progress in Europe, sales have been restricted mostly to the United Kingdom marketplace and slower than desirable. He said he expects that to improve once the message is better communicated and more vendors and resellers jump on board.

"We've had a challenge trying to explain our business model to a lot of the manufacturers' field-sales teams," said Baur. "We're coming into a market where we are trying to create a Pan European strategy where no one has done that before in this industry."

Looking ahead to its second quarter, ScanSource expects similar sales, in the range of $235 million to $255 million, with earnings of 85 cents to 95 cents per share.