ScanSource reports of 2% net sales increase during 3Q FY2017 compared to the prior year quarter

Greenville, SC, 2017-May-10 — /EPR Retail News/ — ScanSource, Inc. (NASDAQ: SCSC), a leading global provider of technology products and solutions, today ( May 09, 2017) announced financial results for the third quarter of its fiscal year 2017, which ended March 31, 2017.

“We are pleased to report both net sales and EPS within our forecast range, and our Worldwide Barcode, Networking and Security segment delivered 4% sales growth,” said Mike Baur, CEO, ScanSource, Inc.  “We executed well on our key opportunities for growth, including the Intelisys telecommunications and cloud services business.”

For the third quarter of fiscal year 2017, net sales increased 2% to $813.5 million from $798.4 million in the prior year quarter, primarily from growth for the Worldwide Barcode, Networking & Security segment. Operating income decreased to $20.0 million from the prior year quarter, due to higher amortization of intangible assets and the change in fair value of contingent consideration from the Intelisys acquisition. Non-GAAP operating income increased 3% to $26.2 million, primarily from the addition of the Intelisys acquisition.

On a GAAP basis, net income for the quarter totaled $12.4 million, or $0.49 per diluted share, compared with net income of $14.0 million, or $0.54 per diluted share, for the prior year quarter. Non-GAAP net income for the third quarter of fiscal year 2017 totaled $16.4 million, or $0.65 per diluted share.

Forecast for Next Quarter

For the fourth quarter of fiscal year 2017, ScanSource expects net sales to range from $860 million to $920 million, diluted earnings per share to range from $0.44 to $0.51 per share, and non-GAAP diluted earnings per share to range from $0.64 to $0.71 per share. Non-GAAP diluted earnings per share exclude amortization of intangible assets and change in fair value of contingent consideration.

Webcast Details

ScanSource will present additional information about its financial results and outlook in a conference call with presentation slides today, May 9, 2017 at 5:00 p.m. (ET).  A webcast of the call and accompanying presentation slides will be available for all interested parties and can be accessed at www.scansource.com (Investor Relations section).  The webcast will be available for replay for 60 days.

Safe Harbor Statement

This press release, including the forecast for next quarter, contains “forward-looking” statements that involve risks and uncertainties.  Any number of factors could cause actual results to differ materially from anticipated or forecasted results, including, but not limited to, changes in interest and exchange rates and regulatory regimes impacting our overseas operations, the failure of acquisitions to meet our expectations, the failure to manage and implement our organic growth strategy, credit risks involving our larger customers and vendors, termination of our relationship with key vendors or a significant modification of the terms under which we operate with a key vendor, the decline in demand for the products and services that we provide, reduced prices for the products and services that we provide due both to competitor and customer actions, and other factors set forth in the “Risk Factors” contained in our annual report on Form 10-K for the year ended June 30, 2016, and subsequent reports on Form 10-Q, filed with the Securities and Exchange Commission.  Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

Non-GAAP Financial Information

In addition to disclosing results that are determined in accordance with United States Generally Accepted Accounting Principles (“GAAP”), the Company also discloses certain non-GAAP financial measures, which are summarized below.  Non-GAAP financial measures are used to understand and evaluate performance, including comparisons from period to period. Non-GAAP results exclude amortization of intangible assets related to acquisitions, change in fair value of contingent consideration, acquisition costs and other non-GAAP adjustments.

Net sales on a constant currency basis, excluding acquisitions:  The Company discloses the percentage change in net sales excluding the translation impact from changes in foreign currency exchange rates between reporting periods and excluding the net sales from acquisitions prior to the first full year from the acquisition date.  This measure enhances the comparability between periods to help analyze underlying trends on an organic basis.

Non-GAAP operating income, non-GAAP net income and non-GAAP EPS: To evaluate current period performance on a more consistent basis with prior periods, the Company discloses non-GAAP operating income, non-GAAP net income and non-GAAP diluted earnings per share. Non-GAAP results exclude amortization of intangible assets related to acquisitions, change in the fair value of contingent consideration, acquisition costs and other non-GAAP adjustments. Non-GAAP operating income, non-GAAP net income, and non-GAAP EPS measures are useful in assessing and understanding the Company’s operating performance, especially when comparing results with previous periods or forecasting performance for future periods.

Return on invested capital (“ROIC”): Management uses ROIC as a performance measurement to assess efficiency in allocating capital under the Company’s control to generate returns. Management believes this metric balances the Company’s operating results with asset and liability management, is not impacted by capitalization decisions and correlates with shareholder value creation. In addition, it is easily computed, communicated and understood. ROIC also provides management a measure of the Company’s profitability on a basis more comparable to historical or future periods.

ROIC assists management in comparing the Company’s performance over various reporting periods on a consistent basis because it removes from operating results the impact of items that do not reflect core operating performance. Adjusted earnings before interest expense, income taxes, depreciation and amortization (“Adjusted EBITDA”) excludes the change in fair value of contingent consideration, in addition to other non-GAAP adjustments. Management believes the calculation of ROIC provides useful information to investors and is an additional relevant comparison of the Company’s performance during the year. In addition, the Company’s Board of Directors uses ROIC in evaluating business and management performance. Certain management incentive compensation targets are set and measured relative to ROIC.

These non-GAAP financial measures have limitations as analytical tools, and the non-GAAP financial measures that the Company reports may not be comparable to similarly titled amounts reported by other companies. Analysis of results and outlook on a non-GAAP basis should be considered in addition to, and not in substitution for or as superior to, measurements of financial performance prepared in accordance with GAAP. A reconciliation of the Company’s non-GAAP financial information to GAAP is set forth in the Supplementary Information (Unaudited) below.

About ScanSource, Inc.

ScanSource, Inc. (NASDAQ: SCSC) is a leading global provider of technology products and solutions, focusing on point-of-sale (POS), barcode, physical security, video, voice, data networking and technology services. ScanSource’s teams provide value-added solutions and operate from two segments, Worldwide Barcode, Networking & Security and Worldwide Communications & Services. ScanSource is committed to helping its resellers and sales partners choose, configure and deliver the industry’s best solutions across almost every vertical market in North America, Latin America and Europe. In August 2016, ScanSource entered the recurring revenue telecom and cloud services market through its acquisition of Intelisys, the industry’s leading technology services distributor. Founded in 1992, the Company is headquartered in Greenville, South Carolina and was named one of the 2016 Best Places to Work in South Carolina. ScanSource ranks #685 on the Fortune 1000. For more information, visit www.scansource.com.

Contact:

Mary Gentry
Vice President, Treasurer and Investor Relations
Phone: 864.286.4892

Source: ScanSource, Inc.

Coach, Inc. 3Q- FY2017: Our solid performance was very much in line with our expectations and our strategic initiatives

Coach, Inc. 3Q- FY2017: Our solid performance was very much in line with our expectations and our strategic initiatives

 

  • Coach Brand North America Comparable Store Sales Increased 3% in the Third Quarter
  • Third Quarter GAAP EPS was $0.43 Versus $0.40 a Year Ago, Up 7%; Non-GAAP EPS was $0.46 Versus $0.44 a Year Ago, Up 4%
  • Maintains Fiscal 2017 Guidance

NEW YORK, 2017-May-03 — /EPR Retail News/ — Coach, Inc. (NYSE:COH) (SEHK:6388), a leading New York design house of modern luxury accessories and lifestyle brands, today (May 2, 2017) reported third quarter results for the period ended April 1, 2017.

Victor Luis, Chief Executive Officer of Coach, Inc., said, “Our solid performance this quarter was very much in line with our expectations and our strategic initiatives. In a volatile and complex global environment, we delivered continued positive comparable store sales for the Coach brand in North America and gross margin expansion in each segment, while tightly controlling costs. We continued to drive growth in our directly-operated Europe and Mainland China businesses, which represent the most significant geographic opportunities for our brands. And, despite our deliberate pullback in the North America wholesale channel and the impact of calendar shifts, we delivered earnings growth. Importantly, we announced a new leadership structure and strengthened our Coach brand team, a critical step in Coach, Inc.’s evolution as a customer-focused, multi-brand organization.”

Overview of Third Quarter 2017 Consolidated, Coach, Inc. Results:

  • Net sales totaled $995 million for the third fiscal quarter, a decrease of 4% on a reported basis and 3% on a constant currency basis. As planned, the Company’s strategic decision to elevate the Coach brand’s positioning in the North American wholesale channel through a reduction in promotional events and door closures negatively impacted sales growth by approximately 150 basis points in the quarter.
  • Gross profit totaled $706 million, a decrease of 1% on a reported and non-GAAP basis. Gross margin for the quarter expanded 190 basis points from prior year to 70.9% on both a reported and non-GAAP basis.
  • SG&A expenses totaled $555 million on a reported basis, a decrease of 4%, and represented 55.7% of sales compared to 56.0% in the year-ago quarter. On a non-GAAP basis, SG&A expenses were $544 million, a decrease of 3%, or 54.6% of sales as compared to 54.3% in the year ago period, reflecting in part the Company’s continued investment in Stuart Weitzman.
  • Operating income for the quarter on a reported basis totaled $151 million, an increase of 13%, while operating margin was 15.2% versus 13.0%. On a non-GAAP basis, operating income was $162 million, an increase of 7%, while operating margin was 16.3% versus 14.7%.
  • Net interest expense was $4 million in the quarter as compared to $7 million in the year ago period.
  • Net income for the quarter on a reported basis totaled $122 million, with earnings per diluted share of $0.43. This compared to reported net income in the third quarter of FY16 of $112 million with earnings per diluted share of $0.40. On a non-GAAP basis, net income for the quarter totaled $130 million compared to $124 million a year ago, an increase of 5%, with earnings per diluted share of $0.46, up 4% versus prior year.

Coach Brand Third Quarter of 2017 Results:

  • Net sales for the Coach brand totaled $915 million for the third fiscal quarter, a decrease of approximately 4% on a reported and constant currency basis, consistent with expectations. As planned, the strategic actions in the North America wholesale channel negatively impacted sales growth by about 150 basis points.

Third fiscal quarter sales results in each of Coach’s primary segments were as follows:

  • Total North American Coach brand sales decreased 5% on a reported and constant currency basis to $474 million versus $499 million last year. Both North American aggregate and bricks and mortar comparable store sales rose approximately 3% despite the negative impact of the shift in timing of Easter. Total North American direct sales declined 2% for the quarter, reflecting the change in the fiscal calendar on non-comparable sales. As planned, sales at North American department stores declined approximately 40% on both a POS and net sales basis.
  • International Coach brand sales totaled $430 million compared to $448 million a year ago, a decrease of approximately 4% on a reported basis, including approximately 70 basis points of pressure related to foreign currency translation. Greater China sales declined 2% versus prior year in dollars and increased 2% on a constant currency basis, driven by strong growth and positive comparable store sales in Mainland China, offset by continued softness in Hong Kong and Macau. In Japan, sales rose 2% in dollars and decreased 1% in constant currency. Sales for the remaining directly-operated businesses in Asia decreased low-double digits on a reported and constant currency basis, due primarily to weakness in Korea where macroeconomic and geopolitical headwinds have pressured spending from domestic consumers and tourists. Sales in the directly operated channels in Europe remained strong, growing at a double-digit rate in constant currency, while total sales decreased modestly in dollars and rose slightly in constant currency, reflecting the impact of the planned shift in wholesale shipment timing. As expected, international wholesale declined on a net sales basis due to shipment timing with the fourth quarter, while POS sales also declined.
  • Gross profit for the Coach brand totaled $656 million, a decrease of 2% on a reported and non-GAAP basis. Gross margin for the quarter increased 180 basis points over prior year, including approximately 20 basis points of benefit from currency, to 71.7% on both a reported and non-GAAP basis.
  • SG&A expenses totaled $509 million for the Coach brand on a reported basis, down 5% versus prior year, and represented 55.6% of sales compared to 56.3% of sales in the prior year’s third quarter. On a non-GAAP basis, SG&A expenses were $500 million, a decrease of 4%, and represented 54.6% of sales versus 54.8% in the year ago period.
  • Operating income for the Coach brand on a reported basis was $147 million, an increase of 14%, while operating margin was 16.1% compared to operating margin of 13.6% a year ago. On a non-GAAP basis, operating income was $156 million, an increase of 8%, while operating margin was 17.1% compared to operating margin of 15.1% on a non-GAAP basis a year ago.

Stuart Weitzman Third Quarter of 2017 Results:

  • Net sales for the Stuart Weitzman brand totaled $80 million for the third fiscal quarter compared to $79 million reported in the same period of the prior year, an increase of 1%, impacted by wholesale shipment timing.
  • Gross profit for the Stuart Weitzman brand totaled $50 million, an increase of 8% versus prior year, on a reported and non-GAAP basis. Gross margin for the quarter was 62.1%, an increase of approximately 390 basis points over prior year, on a reported and non-GAAP basis, reflective, in part, of channel mix, the benefit of currency, and lower promotional levels.
  • SG&A expenses for the Stuart Weitzman brand were $46 million on a reported basis, compared to $41 million in the prior year, and represented 57.3% of sales compared to 52.3% of sales in the prior year’s third quarter. On a non-GAAP basis, SG&A expenses were $44 million compared to $39 million in the prior year due to an increase in store occupancy costs as well as the Company’s strategic investments in team and infrastructure. As a percentage of sales, SG&A was 55.2% compared to 48.9% of sales a year ago.
  • Operating income for the Stuart Weitzman brand was $4 million or 4.7% of sales as reported compared to $5 million or 5.9% of sales in the prior year’s third quarter. On a non-GAAP basis, operating income was $6 million or 6.9% of sales versus $7 million or 9.3% of sales in the prior year.

Mr. Luis continued, “At Stuart Weitzman, we’re executing on our plan, driving global awareness and brand relevance, and gaining traction with the millennial consumer. The response to spring newness has been particularly strong, and we continue to expect sales to increase at a double-digit pace for both the fourth quarter and the year. We’re also making key brand investments in management and creative talent, as well as infrastructure to support long-term, multi-category growth. To this end, we’re especially excited about the arrival of Giovanni Morelli, who joins the brand this week as Creative Director.”

During the third quarter of FY17, the Company recorded the following under its previously announced plans:

  • Operational Efficiency Plan: charges of approximately $6 million, primarily related to organizational efficiency and technology infrastructure costs.
  • Acquisition-Related Costs: charges of approximately $5 million associated with the acquisition of Stuart Weitzman (which primarily includes charges attributable to contingent payments and integration-related activities).

These actions taken together increased the Company’s consolidated reported SG&A expenses by about $11 million, negatively impacting reported net income by $8 million after tax or about $0.03 per diluted share in the third quarter.

“While the retail environment remains uncertain, our strategic vision for our brands and our company remains clear. The traction we’ve achieved to date on our transformation plan and the success of our integration of Stuart Weitzman give us continued confidence in our direction. Moreover, with our new leadership structure, Coach, Inc. is well positioned to continue its journey as a global house of brands and to focus on opportunities to drive long-term and sustainable growth,” Mr. Luis concluded.

Fiscal Year 2017 Outlook:

The following fiscal 2017 guidance is provided on a non-GAAP, 52-week basis versus 52-week basis.

The Company is maintaining its operational outlook for fiscal 2017 as outlined in January.

The Company continues to expect revenues for fiscal 2017 to increase low-single digits, including the impact of currency.

In addition, the Company is maintaining its operating margin forecast for Coach, Inc. of between 18.5-19.0% for fiscal 2017. This guidance incorporates the negative impact of both Stuart Weitzman and the strategic decision to elevate the Coach brand’s positioning in the North American wholesale channel, including a reduction in promotional events and the closure of about 25% of doors.

Interest expense is now expected to be in the area of $20 million for the year while the full year fiscal 2017 tax rate is still projected at about 26%.

Taken together, the Company continues to project double-digit growth in both net income and earnings per diluted share for the year.

Fiscal Year 2017 Outlook – Non-GAAP Disclosure:

The Company is not able to provide a full reconciliation of the non-GAAP financial measures to GAAP because certain material items that impact these measures, such as the timing and exact amount of charges related to our Operational Efficiency Plan and acquisition related charges, have not yet occurred or are out of the Company’s control. Accordingly, a reconciliation of our non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort. The Company has identified the estimated impact of the items excluded from its fiscal 2017 guidance.

This fiscal 2017 non-GAAP guidance excludes (1) expected pre-tax charges of around $20 million to $35 million attributable to the Company’s Operational Efficiency Plan (which will primarily include the costs of replacing and updating the Company’s core technology platforms, organizational efficiency costs, as well as network optimization costs) and (2) expected pre-tax Stuart Weitzman acquisition-related charges of around $20 million (which primarily include the impact of contingent purchase price payments, subject to achieving a certain revenue target, and office lease termination charges).

Conference Call Details:

Coach will host a conference call to review these results at 8:30 a.m. (ET) today, May 2, 2017. Interested parties may listen to the webcast by accessing www.coach.com/investors on the Internet or dialing into 1-877-510-8087 or 1-862-298-9015 and providing the Conference ID 44859438. A telephone replay will be available starting at 12:00 p.m. (ET) today, for a period of five business days. To access the telephone replay, call 1-800-585-8367 or 1-404-537-3406 and enter the Conference ID above. A webcast replay of the earnings conference call will also be available for five business days on the Coach website.

The Company expects to report fourth quarter financial results on Tuesday, August 8, 2017. To receive notification of future announcements, please register at www.coach.com/investors (“Subscribe to E-Mail Alerts”).

Coach, Inc. is a leading New York design house of modern luxury accessories and lifestyle brands. The Coach brand was established in New York City in 1941, and has a rich heritage of pairing exceptional leathers and materials with innovative design. Coach is sold worldwide through Coach stores, select department stores and specialty stores, and through Coach’s website at www.coach.com. In 2015, Coach acquired Stuart Weitzman, a global leader in designer footwear, sold in more than 70 countries and through its website at www.stuartweitzman.com. Coach, Inc.’s common stock is traded on the New York Stock Exchange under the symbol COH and Coach’s Hong Kong Depositary Receipts are traded on The Stock Exchange of Hong Kong Limited under the symbol 6388.

Neither the Hong Kong Depositary Receipts nor the Hong Kong Depositary Shares evidenced thereby have been or will be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States or to, or for the account of, a U.S. Person (within the meaning of Regulation S under the Securities Act), absent registration or an applicable exemption from the registration requirements. Hedging transactions involving these securities may not be conducted unless in compliance with the Securities Act.

This information to be made available in this press release may contain forward-looking statements based on management’s current expectations. Forward-looking statements include, but are not limited to, the statements under “Fiscal Year 2017 Outlook,” as well as statements that can be identified by the use of forward-looking terminology such as “may,” “will,” “can,” “should,” “expect,” “intend,” “estimate,” “continue,” “project,” “guidance,” “forecast,” “anticipated,” “moving,” “leveraging,” “targeting,” “maintaining,” “assume,” “plan,” “pursue,” “look forward to,” “on track to return,” “to achieve” or comparable terms. Future results may differ materially from management’s current expectations, based upon a number of important factors, including risks and uncertainties such as expected economic trends, the ability to anticipate consumer preferences, the ability to control costs and successfully execute our transformation and operational efficiency initiatives and growth strategies and our ability to achieve intended benefits, cost savings and synergies from acquisitions, etc. Please refer to Coach Inc.’s latest Annual Report on Form 10-K and its other filings with the Securities and Exchange Commission for a complete list of risks and important factors.

Analysts & Media:
Andrea Shaw Resnick
212-629-2618
Global Head of Investor Relations and Corporate Communications

Christina Colone
212-946-7252
Senior Director
Investor Relations

Source: Coach, Inc.

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