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) June 18, 2007

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 June 18, 2007, ScanSource, Inc. issued a press release announcing complete financial results for its first three quarters of fiscal year 2007 and its amended 2006 10-K. 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 June 18, 2007. 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: June 18, 2007	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:	Richard P. Cleys
	VP and CFO
	ScanSource, Inc.
	864 286-4358

SCANSOURCE CURRENT WITH SEC FILINGS

Company Reports Financial Results

For Three Quarters ended March 2007

And Amended 2006

GREENVILLE, SC — June 18, 2007—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 complete financial results for its first three quarters of fiscal year 2007.

The Company reported GAAP net income of $12.5 million, $8.8 million and $10.1 million for the September, December and March fiscal 2007 quarters, respectively. Net income for the September, 2006 quarter increased 38% versus restated results for the September, 2005 quarter, while net income for the December, 2006 quarter declined 2% and net income for the March, 2007 quarter increased 12% versus the corresponding restated prior periods. When adjusted to exclude third party legal and accounting costs of the Special Committee’s review of the Company’s stock option grant practices, net income for the December 2006 quarter increased 32% and net income for the March 2007 quarter increased 32% versus the restated prior year quarters.

ScanSource Reports Financial Results

“We are pleased with our financial results for the three quarters ended March 31, 2007,” said Mike Baur, President and CEO of ScanSource. “Our divisions have kept excellent focus on operating performance while we have completed our SEC filings.”

Concurrently with this release, the Company is filing with the SEC an amended annual report on Form 10-K/A for the fiscal year ended June 30, 2006 and quarterly reports on Form 10-Q for the quarters ended September 30, 2006, December 31, 2006, and March 31, 2007. The Company has restated its financial results for prior periods as a result of a review of the Company’s stock option grant practices by a Special Committee, consisting solely of independent directors. As part of the restatement process, the Company reflected other audit adjustments in its restated results. The restatement changed previously reported fully diluted earnings per share by $.00, $.00 and a decrease of $.03 for the years ended 2006, 2005 and 2004 respectively, with a cumulative after tax reduction to net income over the period 1995 to 2006 of $5.3 million. See the filings noted above for more information concerning the Company’s restated results for fiscal 2006, as well as its results for the first three quarters of fiscal 2007.

Selected financial results for each of the first three quarters of fiscal year 2007 are presented below:

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ScanSource Reports Financial Results

(in millions)	Current Year Quarter Ended		Prior Year Quarter Ended (restated)		Increase		%
1st Quarter Fiscal 2007		Sept 30, 2006		Sept 30, 2005
Net Sales	$	496.2	$	390.4	$	106	27	%
Operating Income		21.5		14.9		6.6	45	%
Net Income		12.5		9.0		3.5	38	%
Diluted Earnings per Share		0.48		0.35		0.13	37	%
2nd Quarter Fiscal 2007		Dec 31, 2006		Dec 31, 2005
Net Sales	$	473.7	$	408.5	$	65	16	%
Operating Income		15.9		15.0		0.9	6	%
Net Income		8.8		8.9		-0.1	-2	%
Diluted Earnings per Share		0.34		0.34		0	0	%
3rd Quarter Fiscal 2007		March 31, 2007		March 31, 2006
Net Sales	$	492.7	$	405.6	$	87	21	%
Operating Income		17.2		14.4		2.8	19	%
Net Income		10.1		9.0		1.1	12	%
Diluted Earnings per Share		0.38		0.35		0.03	9	%

Included in operating income for the December and March quarters is third party legal and accounting costs related to the Special Committee’s review of $4.9 million and $3.0 million respectively.

On October 26, 2006, the Company announced unaudited results for the first quarter of fiscal year 2007 that ended on September 30, 2006. However, the Company did not report results on Form 10Q. The announced results were impacted by the restatement. The impact on previously announced pre tax income was an increase of $1.4 million with a net income increase of $0.8 million resulting in a $.04 increase to fully diluted earnings per share.

Company Conference Call Information

ScanSource will conduct a conference call to discuss its amended financial results for fiscal year 2006 and financial results for the first, second, and third quarters of fiscal 2007, today at 11:00 AM eastern time live on the internet at www.scansource.com.

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ScanSource Reports Financial Results

Forecast for Next Quarter

As previously announced, the Company’s revenue forecast for the fourth quarter of fiscal 2007 could range from $512 million to $532 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 will have an impact on reported financial results for the fourth 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 amended annual report on Form 10K/A 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).

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ScanSource Reports Financial Results

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 #956 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 Financial Results

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	March 31, 2007 (unaudited)		December 31, 2006 (unaudited)		September 30, 2006 (unaudited)		June 30, 2006 * (restated)
Assets
Current Assets
Cash and cash equivalents	$	3,036	$	2,730	$	3,130	$	3,831
Trade & notes receivable, net		333,823		317,672		346,951		300,240
Other receivables		8,020		8,846		6,738		4,558
Inventories		291,332		274,723		246,905		244,005
Prepaid expenses and other assets		3,012		2,455		2,202		2,293
Deferred income taxes		16,604		17,243		17,119		15,709
Total current assets		655,827		623,669		623,045		570,636
Property and equipment, net		25,767		26,347		26,174		27,098
Goodwill		37,865		37,835		37,565		14,404
Other assets, including identifiable intangible assets		17,724		18,027		18,002		5,359
Total assets	$	737,183	$	705,878	$	704,786	$	617,497
Liabilities and Shareholders’ Equity
Current Liabilities
Current portion of long-term debt	$	230	$	214	$	223	$	229
Short-term borrowings		3,019		3,077		3,736		—
Trade accounts payable		250,054		286,306		271,580		271,519
Accrued expenses and other liabilities		37,183		36,150		33,532		36,717
Total current liabilities		290,486		325,747		309,071		308,465
Long-term debt		17,239		17,307		17,352		4,398
Borrowings under revolving credit facility		112,403		57,970		85,696		27,558
Other long-term liabilities		4,427		3,889		3,207		2,757
Total liabilities		424,555		404,913		415,326		343,178
Minority interest		512		501		488		910
Shareholders’ Equity
Common stock		82,794		81,466		79,912		76,915
Retained earnings		223,200		213,129		204,338		191,876
Accumulated other comprehensive income		6,122		5,869		4,722		4,618
Total shareholders’ equity		312,116		300,464		288,972		273,409
Total liabilities and shareholders’ equity	$	737,183	$	705,878	$	704,786	$	617,497

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

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ScanSource Reports Financial Results

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)

(In thousands, except per share data)

	Quarter ended March 31,						Quarter ended December 31,						Quarter ended September 30,
	2007			2006			2006			2005			2006			2005
				(restated)						(restated)						(restated)
Net sales	$	492,678		$	405,592		$	473,734		$	408,468		$	496,230		$	390,396
Cost of goods sold		441,641			364,332			420,957			366,633			444,392			350,067
Gross profit		51,037			41,260			52,777			41,835			51,838			40,329
Selling, general and adminstrative expenses		33,795			26,820			36,899			26,786			30,320			25,446
Operating income		17,242			14,440			15,878			15,049			21,518			14,883
Other expense (income):
Interest expense		1,939			633			1,754			455			1,770			511
Interest income		(246	)		(243	)		(174	)		(155	)		(108	)		(149	)
Other (income) expense		141			(121	)		(126	)		(68	)		(436	)		28
Other expense (income), net		1,834			269			1,454			232			1,226			390
Income before income taxes and minority interest		15,408			14,171			14,424			14,817			20,292			14,493
Provision for income taxes		5,326			5,150			5,620			5,824			7,798			5,421
Income before minority interest		10,082			9,021			8,804			8,993			12,494			9,072
Minority interest in income of consolidated subsidiaries, net of income taxes		11			15			13			51			33			59
Net income	$	10,071		$	9,006		$	8,791		$	8,942		$	12,461		$	9,013
Per share data:
Net income per common share, basic	$	0.39		$	0.35		$	0.34		$	0.35		$	0.48		$	0.36
Weighted-average shares outstanding, basic		25,770			25,555			25,749			25,402			25,729			25,333
Net income per common share, assuming dilution	$	0.38		$	0.35		$	0.34		$	0.34		$	0.48		$	0.35
Weighted-average shares outstanding, assuming dilution		26,194			26,101			26,236			25,994			26,213			25,883

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ScanSource Reports Financial Results

SCANSOURCE, INC. AND SUBSIDIARIES

RECONCILIATION OF NON GAAP INCOME (UNAUDITED)

(In thousands, except per share data)

	Quarter ended March 31, 2007									Quarter ended December 31, 2006
	GAAP			Special Committee Costs			Non-GAAP			GAAP			Special Committee Costs			Non-GAAP
Net sales	$	492,678		$	—		$	492,678		$	473,734		$	—		$	473,734
Cost of goods sold		441,641			—			441,641			420,957			—			420,957
Gross profit		51,037			—			51,037			52,777			—			52,777
Selling, general and administrative expenses		33,795			(3,000	)		30,795			36,899			(4,900	)		31,999
Operating income		17,242			3,000			20,242			15,878			4,900			20,778
Other expense (income):
Interest expense		1,939			—			1,939			1,754			—			1,754
Interest income		(246	)		—			(246	)		(174	)		—			(174	)
Other (income) expense		141			—			141			(126	)		—			(126	)
Other expense (income), net		1,834			—			1,834			1,454			—			1,454
Income before income taxes and minority interest		15,408			3,000			18,408			14,424			4,900			19,324
Provision for income taxes		5,326			1,140			6,466			5,620			1,862			7,482
Income before minority interest		10,082			1,860			11,942			8,804			3,038			11,842
Minority interest in income of consolidated subsidiaries, net of income taxes		11			—			11			13			—			13
Net income	$	10,071		$	1,860		$	11,931		$	8,791		$	3,038		$	11,829
Increase(decrease) over prior year restated results		12	%					32	%		-2	%					32	%
Per share data:
Net income per common share, basic	$	0.39		$	0.07		$	0.46		$	0.34		$	0.12		$	0.46
Weighted-average shares outstanding, basic		25,770						25,770			25,749						25,749
Net income per common share, assuming dilution	$	0.38		$	0.07		$	0.46		$	0.34		$	0.12		$	0.45
Weighted-average shares outstanding, assuming dilution		26,194						26,194			26,236						26,236

The above schedule shows the impact on earnings had the Company not incurred the additional external costs related to the Special Committee. These amounts consist primarily of legal and accounting costs of third party providers. For internal operating measurements, the Company has excluded these costs.

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ScanSource Reports Financial Results

SCANSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

	Nine months ended March 31, 2007			Six months ended December 31, 2006			Three months ended September 30, 2006
Cash flows from operating activities:
Net income	$	31,323		$	21,252		$	12,461
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		3,808			2,677			1,394
Amortization of intangible assets		1,345			896			448
Allowance for accounts and notes receivable		7,017			4,969			2,591
Share-based compensation and restricted stock		2,884			2,086			1,116
Impairment of capitalized software		148			148			148
Deferred income tax (benefit) expense		(1,346	)		(2,374	)		(2,375	)
Excess tax benefits from share-based payment arrangements		(2,105	)		(2,105	)		(1,611	)
Minority interest in income of subsidiaries		57			46			33
Changes in operating assets and liabilities, net of acquisitions:
Trade and notes receivable		(27,853	)		(10,349	)		(39,219	)
Other receivables		(2,795	)		(3,236	)		(1,371	)
Inventories		(40,835	)		(24,773	)		1,638
Prepaid expenses and other assets		(699	)		(144	)		99
Other noncurrent assets		(1,092	)		(583	)		(68	)
Trade accounts payable		(22,611	)		14,014			280
Accrued expenses and other liabilities		3,950			2,447			(2,763	)
Income taxes payable		(411	)		(346	)		1,355
Net cash (used in) provided by operating activities		(49,215	)		4,625			(25,844	)
Cash flows used in investing activities:
Capital expenditures		(2,501	)		(1,959	)		(548	)
Cash paid for business acquisitions, net of cash acquired		(50,585	)		(50,585	)		(50,569	)
Net cash used in investing activities		(53,086	)		(52,544	)		(51,117	)
Cash flows from financing activities:
Increases (decreases) in short-term borrowings, net		2,877			2,980			3,747
Advances (payments) on revolving credit, net		82,616			28,386			57,671
Exercise of stock options		970			390			269
Excess tax benefits from share-based payment arrangements		2,105			2,105			1,611
Advances (repayments) of long-term debt borrowings		12,841			12,894			12,947
Net cash provided by (used in) financing activities		101,409			46,755			76,245
Effect of exchange rate changes on cash and cash equivalents		97			63			15
(Decrease) Increase in cash and cash equivalents		(795	)		(1,101	)		(701	)
Cash and cash equivalents at beginning of period		3,831			3,831			3,831
Cash and cash equivalents at end of period	$	3,036		$	2,730		$	3,130

See notes to condensed consolidated financial statements (unaudited).

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