8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported) January 26, 2006

ScanSource, Inc.

(Exact Name of Registrant as Specified in Its Charter)

South Carolina	000-26926	57-0965380
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

6 Logue Court, Greenville, South Carolina 29615

(Address, Including Zip Code, of Principal Executive Offices)

(864) 288-2432

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ 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))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

On January 26, 2006, ScanSource, Inc. issued a press release announcing its financial results for the second quarter ended December 31, 2005. A copy of the press release is attached as Exhibit 99.1 hereto and incorporated herein by reference and also made available through the Company’s website at www.scansource.com. The information in this Current Report on Form 8-K, including the exhibit, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.

Item 9.01. Financial Statements and Exhibits

(c) Exhibits

99.1 – Press release issued by ScanSource, Inc. on January 26, 2006. The information contained in the attached exhibit is unaudited and should be read in conjunction with the Registrant’s annual and quarterly reports filed with the Securities and Exchange Commission.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ScanSource, Inc.
Date: January 26, 2006	By:	/S/ Richard P. Cleys
	Name:	Richard P. Cleys
	Its:	Vice President and Chief Financial Officer

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Contact:	Jeffery A. Bryson
	VP of Investor Relations
	ScanSource, Inc.
	864 286-4305

SCANSOURCE REPORTS RECORD RESULTS

*Sales increase 10% to $408.5 million

GREENVILLE, SC—January 26, 2006—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 December 31, 2005.

QE 12/31/05 capsule:

Net sales	$	408.5 million
Net income	$	9.3 million
Non-GAAP net income	$	10.1 million
Diluted EPS	$	0.71 per share
Non-GAAP diluted EPS	$	0.77 per share

For the quarter ended December 31, 2005, net sales increased 10% to a record $408.5 million compared to $370.1 million for the quarter ended December 31, 2004.

“We had excellent year over year growth in our communications business units and in our bar code business. Our AIDC/ POS sales team had to overcome continued market weakness in POS systems sales,” said Mike Baur, President and CEO of ScanSource. “Overall AIDC/ POS product sales were led by record sales in our international unit which serves Latin America and Europe.”

1

ScanSource Reports Second Quarter Results

Net income, based upon Generally Accepted Accounting Principles (GAAP), increased 2% to $9.3 million for the quarter ended December 31, 2005 versus $9.1 million for the quarter ended December 31, 2004. Diluted earnings per share increased 3% to $0.71 per share compared to $0.69 in the prior year quarter.

Beginning the September 2005 quarter, the Company was required to adopt FASB Statement 123(R), Share-Based Payments, which mandates expensing share-based compensation cost. If the Company had not adopted Statement 123(R) for the December 31, 2005 quarter, net income would have been $808,000 higher or $10.1 million compared to $9.1 million for the December 2004 quarter, an increase of 11%. Diluted earnings per share would have been $0.77 compared to $0.69 for the December 2004 quarter, an increase of 12%. For the six months ended December 31, 2005, net income would have been $1.5 million higher or $20.1 million compared to $18.0 million for the six months ended December 2004, an increase of 12%. Diluted earnings per share would have been $1.54 compared to $1.37 for the six months ended December 2004. Comparable results herein for the quarter and six months ended December 31, 2004 do not reflect the effects of adopting Statement 123(R), which was not yet in effect. Please refer to the Company’s statements regarding non-GAAP financial information and the related reconciliation of GAAP results to non-GAAP results located in this release and also located in the Investor Relations section of the Company’s website at www.scansource.com.

2

ScanSource Reports Second Quarter Results

Non-GAAP Financial Information

The reconciliation below shows the effects on the quarterly results if the Company had not adopted Statement 123(R). This non-GAAP data is included with the intention of providing investors a more complete understanding of our operational results and trends as compared with prior period results, but should only be used in conjunction with results reported in accordance with GAAP.

Reconciliation of Non-GAAP Financial Information

(In thousands, except per share data)

	Quarter ended December 31,				Six months ended December 31,
	2005		2004		2005		2004
Net income	$	9,250	$	9,084	$	18,584	$	17,998
Share-based payment expense under Statement 123(R)		808		—		1,495		—
Non-GAAP net income	$	10,058	$	9,084	$	20,079	$	17,998
Net income per common share, assuming dilution	$	0.71	$	0.69	$	1.42	$	1.37
Non-GAAP net income per common share, assuming dilution	$	0.77	$	0.69	$	1.54	$	1.37

Forecast for Next Quarter

The Company announced its revenue forecast for the third quarter of fiscal 2006. ScanSource expects net revenues for the March 2006 quarter could range from $395 million to $415 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

3

Securities Litigation Reform Act of 1995. Any number of important factors could cause actual results to differ materially from anticipated results. For more information concerning factors that could cause such a difference, see the Company’s annual report on Form 10K filed with the Securities and Exchange Commission.

ScanSource Reports Second Quarter Results

About ScanSource

ScanSource, Inc. is a leading international distributor of specialty technology products, including automatic identification and data capture (AIDC) and point-of-sale (POS) products through its ScanSource sales unit; Avaya voice, data and converged communications products through its Catalyst Telecom sales unit; communications products from Intel through its Paracon sales unit; and electronic security products through its ScanSource Security Distribution unit.

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 markets products from more than 100 technology manufacturers to over 16,000 value-added technology resellers and is committed to empowering them with tools and services designed to help them grow. For more information, call the toll-free sales telephone number at 800.944.2432 or visit www.scansource.com.

4

ScanSource Reports Second Quarter Results

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	December 31, 2005 (unaudited)		June 30, 2005 *
Assets
Current Assets
Cash and cash equivalents	$	10,927	$	8,609
Trade & notes receivable, net		249,828		215,190
Other receivables		5,068		5,479
Inventories		191,603		178,917
Prepaid expenses and other assets		5,293		3,546
Deferred income taxes		9,673		10,227
Total current assets		472,392		421,968
Property and equipment, net		22,994		23,299
Goodwill		13,882		12,915
Other assets, including identifiable intangible assets		4,164		8,888
Total assets	$	513,432	$	467,070
Liabilities and Shareholders’ Equity
Current Liabilities
Current portion of long-term debt	$	415	$	564
Short-term borrowings		—		4,478
Trade accounts payable		207,939		173,255
Accrued expenses and other liabilities		19,781		22,133
Total current liabilities		228,135		200,430
Deferred income taxes		999		1,008
Long-term debt		4,485		6,045
Borrowings under revolving credit facility		28,753		31,269
Other long-term liabilities		2,196		1,341
Total liabilities		264,568		240,093
Minority interest		795		1,092
Shareholders’ Equity
Common stock		69,488		65,381
Retained earnings		175,604		157,020
Accumulated other comprehensive income		2,977		3,484
Total shareholders’ equity		248,069		225,885
Total liabilities and shareholders’ equity	$	513,432	$	467,070

* Derived from audited financial statements at June 30, 2005.

5

ScanSource Reports Second Quarter Results

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)

(In thousands, except per share data)

	Quarter ended December 31,						Six months ended December 31,
	2005			2004			2005			2004
Net sales	$	408,468		$	370,130		$	798,864		$	732,839
Cost of goods sold		366,633			332,269			716,700			657,996
Gross profit		41,835			37,861			82,164			74,843
Selling, general and administrative expenses		26,272			23,110			51,281			45,422
Operating income		15,563			14,751			30,883			29,421
Other expense (income):
Interest expense		455			482			966			895
Interest income		(155	)		(334	)		(304	)		(550	)
Other (income) expense		(62	)		(300	)		(110	)		(253	)
Other expense (income), net		238			(152	)		552			92
Income before income taxes and minority interest		15,325			14,903			30,331			29,329
Provision for income taxes		6,024			5,719			11,637			11,201
Income before minority interest		9,301			9,184			18,694			18,128
Minority interest in income of consolidated subsidiaries, net of income taxes		51			100			110			130
Net income	$	9,250		$	9,084		$	18,584		$	17,998
Per share data:
Net income per common share, basic	$	0.73		$	0.72		$	1.47		$	1.43
Weighted-average shares outstanding, basic		12,701			12,620			12,684			12,600
Net income per common share, assuming dilution	$	0.71		$	0.69		$	1.42		$	1.37
Weighted-average shares outstanding, assuming dilution		13,067			13,131			13,042			13,108

6

ScanSource Reports Second Quarter Results

SCANSOURCE, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

Quarter Ended December 31, 2005

(In thousands, except per share data)

	GAAP QE Dec 31 2005			FASB 123(R) Share-Based Payment Expense			Non -GAAP QE Dec 31 2005
Net sales	$	408,468					$	408,468
Cost of goods sold		366,633						366,633
Gross profit		41,835						41,835
Selling, general and administrative		26,272			(935	)		25,337
Operating income		15,563			935			16,498
Other expense (income):
Interest expense		455						455
Interest income		(155	)					(155	)
Other (income) expense		(62	)					(62	)
Other expense, net		238			—			238
Income before taxes & minority interest		15,325			935			16,260
Provision for income taxes		6,024			127			6,151
Income before minority interest		9,301			808			10,109
Minority interest in income of consolidated subsidiaries, net of income taxes		51			—			51
Net income	$	9,250		$	808		$	10,058
Per share data:
Net income per common share, basic	$	0.73					$	0.79
Net income per common share, assuming dilution	$	0.71					$	0.77

7

ScanSource Reports Second Quarter Results

SCANSOURCE, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

Six Months Ended December 31, 2005

(In thousands, except per share data)

	GAAP Six months Dec 31 2005			FASB 123(R) Share-Based Payment Expense			Non -GAAP Six months Dec 31 2005
Net sales	$	798,864					$	798,864
Cost of goods sold		716,700						716,700
Gross profit		82,164						82,164
Selling, general and administrative		51,281			(1,827	)		49,454
Operating income		30,883			1,827			32,710
Other expense (income):
Interest expense		966						966
Interest income		(304	)					(304	)
Other (income) expense		(110	)					(110	)
Other expense, net		552			—			552
Income before taxes & minority interest		30,331			1,827			32,158
Provision for income taxes		11,637			332			11,969
Income before minority interest		18,694			1,495			20,189
Minority interest in income of consolidated subsidiaries, net of income taxes		110			—			110
Net income	$	18,584		$	1,495		$	20,079
Per share data:
Net income per common share, basic	$	1.47					$	1.58
Net income per common share, assuming dilution	$	1.42					$	1.54

8