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)         October 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 October 26, 2006, ScanSource, Inc. issued a press release announcing its financial results for the first quarter ended September 30, 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.

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 the attached press 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 result.

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 October 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: October 26, 2006	By:	/s/ Richard P. Cleys
	Name: Title:	Richard P. Cleys 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 RECORD

SALES IN FIRST QUARTER

*Sales increase 27% to $ 496 million

GREENVILLE, SC—October 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 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.”

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ScanSource Reports Record Sales in First Quarter

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.

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ScanSource Reports Record Sales in First Quarter

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.

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ScanSource Reports Record Sales in First Quarter

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	September 30,		June 30,
	2006		2006 *
	(unaudited)
Assets
Current Assets
Cash and cash equivalents	$	3,130	$	3,831
Trade & notes receivable, net		344,451		297,740
Other receivables		7,560		4,558
Inventories		246,905		244,005
Prepaid expenses and other assets		2,201		2,293
Deferred income taxes		16,863		14,659
Total current assets		621,110		567,086
Property and equipment, net		26,174		27,098
Goodwill		44,620		14,404
Other assets, including identifiable intangible assets		10,565		4,631
Total assets	$	702,469	$	613,219
Liabilities and Shareholders’ Equity
Current Liabilities
Current portion of long-term debt	$	223	$	229
Short-term borrowings		3,736		—
Trade accounts payable		271,580		271,519
Accrued expenses and other liabilities		29,999		31,242
Total current liabilities		305,538		302,990
Long-term debt		17,352		4,398
Borrowings under revolving credit facility		85,696		27,558
Other long-term liabilities		3,207		2,757
Total liabilities		411,793		337,703
Minority interest		488		910
Shareholders’ Equity
Common stock		76,678		72,860
Retained earnings		208,788		197,129
Accumulated other comprehensive income		4,722		4,617
Total shareholders’ equity		290,188		274,606
Total liabilities and shareholders’ equity	$	702,469	$	613,219

* Derived from audited financial statements at June 30, 2006.

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ScanSource Reports Record Sales in First Quarter

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)

(In thousands, except per share data)

	Quarter ended September 30,
	2006			2005
Net sales	$	496,230		$	390,396
Cost of goods sold		444,392			350,067
Gross profit		51,838			40,329
Selling, general and administrative expenses		31,490			25,009
Operating income		20,348			15,320
Other expense (income):
Interest expense		1,770			511
Interest income		(108	)		(149	)
Other (income) expense		(170	)		(48	)
Other expense (income), net		1,492			314
Income before income taxes and minority interest		18,856			15,006
Provision for income taxes		7,165			5,613
Income before minority interest		11,691			9,393
Minority interest in income of consolidated subsidiaries, net of income taxes		33			59
Net income	$	11,658		$	9,334
Per share data:
Net income per common share, basic	$	0.45		$	0.37
Weighted-average shares outstanding, basic		25,729			25,333
Net income per common share, assuming dilution	$	0.44		$	0.36
Weighted-average shares outstanding, assuming dilution		26,310			26,012

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