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) April 27, 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 April 27, 2006, ScanSource, Inc. issued a press release announcing its financial results for the third quarter ended March 31, 2006. 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 April 27, 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: April 28, 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
	Executive VP of Investor Relations
	ScanSource, Inc.
	864 286-4305

SCANSOURCE REPORTS RESULTS

*Sales increase 14% to $405.6 million

GREENVILLE, SC—April 27, 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 March 31, 2006.

QE 3/31/06 capsule:

Net sales	$	405.6 million
Net income	$	9.4 million
Non-GAAP net income	$	10.3 million
Diluted EPS	$	0.72 per share
Non-GAAP diluted EPS	$	0.78 per share

For the quarter ended March 31, 2006, net sales increased 14% to $405.6 million compared to $355.1 million for the quarter ended March 31, 2005.

“We believe our goals were aggressive when factoring the unique challenges facing our business units this quarter”, said Mike Baur, President and CEO of ScanSource. “We saw no improved market conditions in point of sale, and we continued to experience supply issues in some areas, yet we achieved our sales goals due to excellent execution by our employees and vendors.”

1

ScanSource Reports Third Quarter Results

Net income, based upon Generally Accepted Accounting Principles (GAAP), increased 13% to $9.4 million for the quarter ended March 31, 2006 versus $8.3 million for the quarter ended March 31, 2005. Diluted earnings per share increased 13% to $0.72 per share compared to $0.64 in the prior year quarter. For the nine months ended March 31, 2006, GAAP net income and diluted earnings per share were $28.0 million and $2.13, respectively.

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 March 31, 2006 quarter, net income would have been $862,000 higher or $10.3 million compared to $8.3 million for the March 2005 quarter, an increase of 24%. Diluted earnings per share would have been $0.78 compared to $0.64 for the March 2005 quarter, an increase of 22%. For the nine months ended March 31, 2006, net income would have been $2.4 million higher or $30.4 million compared to $26.3 million for the nine months ended March 2005, an increase of 15%. Diluted earnings per share would have been $2.31 compared to $2.01 for the nine months ended March 2005. Comparable results herein for the quarter and nine months ended March 31, 2005 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 Third Quarter Results

Non-GAAP Financial Information

The Company has issued stock options in the current and prior periods with similar terms. For internal management analysis, the Company compares current operating expenses to periods prior to the adoption of Statement 123(R) on a “with” and “without” basis to determine the trend of operating expenses.

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 March 31,				Nine months ended March 31,
	2006		2005		2006		2005
Net income	$	9,441	$	8,340	$	28,025	$	26,338
Share-based payment expense under Statement 123(R)		862		—		2,357		—
Non-GAAP net income	$	10,303	$	8,340	$	30,382	$	26,338
Net income per common share, assuming dilution	$	0.72	$	0.64	$	2.13	$	2.01
Non-GAAP net income per common share, assuming dilution	$	0.78	$	0.64	$	2.31	$	2.01

3

ScanSource Reports Third Quarter Results

Forecast for Next Quarter

The Company announced its revenue forecast for the fourth quarter of fiscal 2006. ScanSource expects net revenues for the June 2006 quarter could range from $420 million to $440 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. 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.

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 Third Quarter Results

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	March 31, 2006 (unaudited)		June 30, 2005 *
Assets
Current Assets
Cash and cash equivalents	$	16,877	$	8,609
Trade & notes receivable, net		256,582		215,190
Other receivables		5,961		5,479
Inventories		219,981		178,917
Prepaid expenses and other assets		2,974		3,546
Deferred income taxes		10,283		10,227
Total current assets		512,658		421,968
Property and equipment, net		23,158		23,299
Goodwill		14,083		12,915
Other assets, including identifiable intangible assets		4,467		8,888
Total assets	$	554,366	$	467,070
Liabilities and Shareholders’ Equity
Current Liabilities
Current portion of long-term debt	$	248	$	564
Short-term borrowings				4,478
Trade accounts payable		239,423		173,255
Accrued expenses and other liabilities		22,684		22,133
Total current liabilities		262,355		200,430
Deferred income taxes				1,008
Long-term debt		4,435		6,045
Borrowings under revolving credit facility		24,073		31,269
Other long-term liabilities		2,550		1,341
Total liabilities		293,413		240,093
Minority interest		810		1,092
Shareholders’ Equity
Common stock		71,698		65,381
Retained earnings		185,045		157,020
Accumulated other comprehensive income		3,400		3,484
Total shareholders’ equity		260,143		225,885
Total liabilities and shareholders’ equity	$	554,366	$	467,070

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

5

ScanSource Reports Third Quarter Results

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)

(In thousands, except per share data)

	Quarter ended March 31,						Nine months ended March 31,
	2006			2005			2006			2005
Net sales	$	405,592		$	355,060		$	1,204,456		$	1,087,899
Cost of goods sold		364,332			319,585			1,081,032			977,581
Gross profit		41,260			35,475			123,424			110,318
Selling, general and administrative expenses		26,134			22,093			77,415			67,515
Operating income		15,126			13,382			46,009			42,803
Other expense (income):
Interest expense		633			549			1,599			1,444
Interest income		(243	)		(140	)		(547	)		(690	)
Other (income) expense		(118	)		(199	)		(228	)		(452	)
Other expense (income), net		272			210			824			302
Income before income taxes and minority interest		14,854			13,172			45,185			42,501
Provision for income taxes		5,398			4,771			17,035			15,972
Income before minority interest		9,456			8,401			28,150			26,529
Minority interest in income of consolidated subsidiaries, net of income taxes		15			61			125			191
Net income	$	9,441		$	8,340		$	28,025		$	26,338
Per share data:
Net income per common share, basic	$	0.74		$	0.66		$	2.20		$	2.09
Weighted-average shares outstanding, basic		12,777			12,644			12,714			12,614
Net income per common share, assuming dilution	$	0.72		$	0.64		$	2.13		$	2.01
Weighted-average shares outstanding, assuming dilution		13,164			13,111			13,142			13,108

6

ScanSource Reports Third Quarter Results

SCANSOURCE, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

Quarter Ended March 31, 2006

(In thousands, except per share data)

	GAAP QE Mar 31 2006			FASB 123(R) Share-Based Payment Expense			Non -GAAP QE Mar 31 2006
Net sales	$	405,592					$	405,592
Cost of goods sold		364,332						364,332
Gross profit		41,260						41,260
Selling, general and administrative		26,134			(973	)		25,161
Operating income		15,126			973			16,099
Other expense (income):
Interest expense		633						633
Interest income		(243	)					(243	)
Other (income) expense		(118	)					(118	)
Other expense, net		272			—			272
Income before taxes & minority interest		14,854			973			15,827
Provision for income taxes		5,398			111			5,509
Income before minority interest		9,456			862			10,318
Minority interest in income of consolidated subsidiaries, net of income taxes		15			—			15
Net income	$	9,441		$	862		$	10,303
Per share data:
Net income per common share, basic	$	0.74					$	0.81
Net income per common share, assuming dilution	$	0.72					$	0.78

7

ScanSource Reports Third Quarter Results

SCANSOURCE, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (UNAUDITED)

Nine Months Ended March 31, 2006

(In thousands, except per share data)

	GAAP Nine months Mar 31 2006			FASB 123(R) Share-Based Payment Expense			Non -GAAP Nine months Mar 31 2006
Net sales	$	1,204,456					$	1,204,456
Cost of goods sold		1,081,032						1,081,032
Gross profit		123,424						123,424
Selling, general and administrative		77,415			(2,800	)		74,615
Operating income		46,009			2,800			48,809
Other expense (income):
Interest expense		1,599						1,599
Interest income		(547	)					(547	)
Other (income) expense		(228	)					(228	)
Other expense, net		824			—			824
Income before taxes & minority interest		45,185			2,800			47,985
Provision for income taxes		17,035			443			17,478
Income before minority interest		28,150			2,357			30,507
Minority interest in income of consolidated subsidiaries, net of income taxes		125			—			125
Net income	$	28,025		$	2,357		$	30,382
Per share data:
Net income per common share, basic	$	2.20					$	2.39
Net income per common share, assuming dilution	$	2.13					$	2.31

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