SwampFox

ScanSource Reports Record Sales in First Quarter

(a) Sales increase 27% to $ 496 million

GREENVILLE, S.C.--(BUSINESS WIRE)--ScanSource, Inc. (NASDAQ:SCSC), a leading international distributor of AIDC (automatic identification and data capture), point of sale, communications and electronic security products for the reseller market, today announced financial results for its quarter ended September 30, 2006.
QE 9/30/06 capsule:

Net sales $496.2 million
Net income $ 11.7 million
Diluted EPS $ 0.44 per share

“Our record sales results were led by our communications units, especially Catalyst and the addition of T2 as a sales unit at the beginning of July,” said Mike Baur, President and CEO of ScanSource. “Our AIDC and POS business was led by stronger than expected growth in Europe and Mexico, along with record sales in North America.”

For the quarter ended September 30, 2006, net sales increased 27% to $496.2 million compared to $390.4 million for the quarter ended September 30, 2005. Quarterly operating income increased 33% to $20.3 million from $15.3 million for the comparable quarter in 2005. Net income increased 25% to $11.7 million for the quarter ended September 30, 2006 versus $9.3 million for the quarter ended September 30, 2005. Diluted earnings per share increased 22% to $0.44 per share compared to $0.36 in the prior year quarter.

As previously announced, the Company’s Board of Directors has appointed a Special Committee, consisting entirely of independent directors, to conduct a review of the Company’s stock option grant practices and related accounting issues from the time of its initial public offering in 1994 to the present. The Special Committee is assisted in its review by independent legal counsel and advisors. The review of the Special Committee is in process, and, accordingly, no findings have been made regarding the Company’s stock option grant practices and related accounting issues or the materiality of any issues that may arise in that regard. The Company does not anticipate having additional comment on this topic until the review by the Special Committee is complete. The financial results included in this release do not reflect adjustments, if any, that may be required as a result of the Special Committee’s review, including the impact of any unrecorded non-cash equity-based compensation charges, either on the current period or that may require adjustments to previously reported results.

Forecast for Next Quarter

The Company announced its revenue forecast for the second quarter of fiscal 2007. ScanSource expects net revenues for the December 2006 quarter could range from $477 million to $497 million.

Safe Harbor Statement

This news release contains comments that are “forward looking” statements that involve risks and uncertainties; these statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Any number of important factors could cause actual results to differ materially from anticipated results. Results of the review of the Special Committee may have an impact on reported financial results for this quarter, as well as previously reported results. For more information concerning factors that could cause actual results to differ from anticipated results, see the Company’s annual report on Form 10K filed with the Securities and Exchange Commission.

About ScanSource

ScanSource, Inc. is a leading international distributor of specialty technology products. The Company markets specialty technologies through five sales units: ScanSource [automatic identification and data capture (AIDC) and point-of-sale (POS) products]; Catalyst Telecom (Avaya communications products); Paracon (communications products); T2 Supply (video conferencing and telephone products); and ScanSource Security Distribution (electronic security products).

The Company serves the North America marketplace and has an international segment which sells AIDC and POS products in Latin America and Europe. Founded in 1992, the Company ranks #982 on the Fortune 1000. For more information, call the toll-free sales telephone number at 800.944.2432 or visit www.scansource.com.