Welcome to the ScanSource quarterly and year-end earnings announcement conference call. All lines have been placed in a listen-only mode until the question-and-answer session. Today's call is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to turn the call over to Mary Gentry, Treasurer and Director of Investor Relations. Ma'am, you may begin.

Thank you, and welcome to ScanSource's earnings conference call for the quarter and year ended June 30, 2014. With me today are Mike Baur, our CEO, and Charlie Mathis, our CFO. We will review operating results for the quarter and year and then take your questions. A slide presentation that accompanies our comments and webcast is posted in the Investor Relations section of our website. Certain statements made on this call will be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to, those factors identified in the release and in ScanSource's SEC filings. Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. ScanSource undertakes no duty to update any forward-looking statements to actual results or changes in expectations. We will be discussing both GAAP and non-GAAP results during our call and have provided reconciliations between these amounts in our press release, which can be found on our website and also filed with our Form 8-K. Mike Baur will now begin our discussion with an overview of the results.

Thanks, Mary, and thank you for joining us today. Let's start with the highlights for the fourth quarter on slide three. We reported fourth quarter 2014 net sales of $758 million and adjusted EPS of $0.60, both above our expected range. We had diluted EPS of $0.94 including $15.5 million legal recovery related to our previously disclosed ERP litigation. Charlie will go into more detail on the numbers on them. Our worldwide barcode and security segment had record net sales for the quarter and for the year. Fourth quarter sales increased 10% year-over-year with record sales for our North American POS and barcode and security business units, driven by big deals. In addition, we had another solid quarter for sales growth for Brazil and Europe. For worldwide communications and services net sales rebounded from the March quarter, with 18% sequential quarter growth including growth for each business unit. ScanSource Communications in North America had a record sales quarter and as expected, our worldwide communications and services sales were unchanged from the prior year quarter. We ended fiscal year 2014 with 6% net sales growth for the fourth quarter returning to growth after three quarters of no growth. For the full year, net sales increased 1% to $2.9 billion, while adjusted operating income increased 4% with higher gross and operating profit margins. This reflects better operating results for our international business than a year ago, including improved performance for Europe and Brazil. Now turning to slide four and five. Last week, we announced an agreement to acquire Network1, Brazil's leading value-added communications distributor. We have been looking for the right opportunity to expand our successful growth business in Brazil with the addition of communications products in that geography. Network1 does that. We are excited about this opportunity that Network1's CEO Rafael…

Thanks, Mike. The financial information I will be discussing can be found on slides nine through 17 of our presentation. I will discuss our fourth quarter and full year 2014 results and then give a consolidated first quarter 2015 forecast. Let me begin with revenue. Fourth quarter consolidated net sales of $758 million increased 6.4% from $713 million for the prior year quarter. Worldwide barcode and security sales increased 10% year-over-year, a record sales quarter as previously mentioned, while worldwide communications and services sales were relatively flat. For the full year, consolidated net sales increased 1.3% to $2.9 billion with a 2.5% increase fro worldwide barcode and security. Our Brazil business unit grew the fastest with approximately 9% or 22% in local currency for the full year. Sales for worldwide communications and services declined 0.8% year although ScanSource communications in North America which includes our Polycom business had record sales. Turning to profitability. Our consolidated gross profit margin for the fourth quarter 2014 was 9.8%, down from 10.6% in the prior-year quarter, primarily due to product mix, higher big deals and favorable adjustments for European operations in the prior year. If you recall, this time last year, I had stated that gross margins were higher than expected and one of the reasons was due to the favorable resolution in Europe of several inventory aging issues and certain adjustments related to timing of vendor programs. For the full year, consolidated gross margins were 10.3% for 2014, compared to 10.2% for 2013. Our worldwide barcode and security gross margin decreased to 8.5% from 9.7% for the year ago quarter, largely due to increased big deals, favorable adjustments in the prior year for Europe that I just mentioned that did not recur and a less favorable sales mix in our security business unit.…

Thank you, Charlie. Let me start with our worldwide barcode and security, summarized on slide 18, which represents 65% of overall sales for the quarter. Worldwide barcode and security sales of $491 million increased 10% year-over-year and 8% sequentially. Moving on last quarter's growth, we had a record sales quarter for this segment with year-over-year increase for all geographies, except our Miami export business. It was a strong big deal quarter and our business with each of our top 10 vendors grew year-over-year. Our POS and barcode unit in North America had a record sales quarter, driven by big deals in POS and strong run rate business in our AIDC mobility barcode business. Sales across all product categories mobile computing, POS, scanning and barcode printing increased both year-over-year and quarter-over-quarter. We believe that the Windows XP end-of-life upgrade cycle contributed to our POS growth as many retailers had to upgrade over POS systems. Our barcode business picked up also this quarter as we retained some market share from competition. The POS payment terminal hardware business grew double digits as we gained share. We have recently partnered with Ingenico and FreedomPay to sell configured hardware and key injection services for the first PCI certified encryption and EMV payment solution in North America, all part of getting ready for the upcoming shift to EMV enable payment platforms. Our business continues to improve for our POS and barcode team in Europe with good year-over-year sales growth for the second quarter in a row. This includes upper single-digit growth for each of our top three countries the United Kingdom, Germany and France. We had big growth with scanners and mobile computing. During the quarter, we added a new vendor as we launched Motion Computing's Rugged Tablet Solutions for retail, healthcare and other vertical markets…

(Operator Instructions). Our first question comes from Chris McGinnis of Sidoti & Company. Your line is open. Chris McGinnis - Sidoti & Company: Hi. Good afternoon. Thanks for taking my questions, and congratulations on a good quarter and some good news.

Thanks, Chris. Chris McGinnis - Sidoti & Company: Just a quick question on the network one. Can you maybe just talk a little bit of how you are positioning and maybe the experience of already being in there in the acquisition from CDC, how that benefits you going forward for the Network1 acquisition?

Sure, Chris. This is Mike. So the basic premise here, this brings us new products that we are not selling currently in Brazil. So we have acquired the leading company that's working with the key vendors, many of them we are already working with in other geographies like Avaya and Polycom. So we are excited that we are able to partner with these guys. They have already proven their success for several years in Brazil and when we were looking at doing it ourselves, which we talked about over the last couple of years, talked about how do we take our CDC Brasil team and add the communication products and vendors to them, we looked at that and instead decided to go and acquire the expertise, because we didn't think we can get there fast enough on our own, and frankly our team in Brazil to-date, the CDC team has done a fantastic job growing the business in the barcode and POS and we didn't want to miss the opportunity to going into that business and we felt like Network1 had the right team. Rafael and his team are excited about this opportunity. Their vendors are also excited about the partnership, because ScanSource can bring the financial resources that these guys will need to continue growing at the pace they have. Chris McGinnis - Sidoti & Company: Great, and just a follow-up on that. Can you just maybe talk about the competitive landscape in the region? You are picking up the largest. Can you maybe just talk a little bit about the dynamics where Network1 fits into the competitive landscape there?

Sure. In Brazil, there are some smaller players, and then there are some of the traditional broadline distributors that we see in other markets. So we got both types of competitors there. But as we have learned in the market, starting in North America and then as we grew into Europe, we believe that the real specialty value-added model still is preferred by the vendors and the resellers. And it's true in Brazil, just like it was in U.S. and Europe, is that a very focused team that's not trying to chase broadline revenue is better. It's a way for us to focus, deliver value-added services and frankly the margin opportunity, the gross margin opportunity and the operating margin opportunity here is very strong for us. So these guys have carved out the leading position even competing with some of the same big distributors that we have in our other markets. Chris McGinnis - Sidoti & Company: Great, and then just two quick questions. One, you just talked about gaining share in the POS market. Can you just maybe talk about what's driving that? Is it change in the way you are going to business? Is it the increase in sales force? Or can you just talk a little bit about how you are gaining that share back?

Yes, I think part of it was, we felt like we weren't aggressive enough in some of our markets. So we were letting some business go away from us. And we decided that it was a better business decision for ScanSource if we took back some of that market share. And so some of that you saw in our margins. That our margins are somewhat lower for the fourth quarter and that was because of big deals, which also came back and some of those big deals were because we were more aggressive in going after the business. So that was a North America story primarily, though some that also happened in Europe. But I would say North America where we have been the longest in our business, we decided to be more aggressive in the marketplace against competition. Chris McGinnis - Sidoti & Company: All right, and then lastly you mentioned the benefit from Microsoft redo. How long do you expect that to linger in the market in terms of a positive benefit?

Kind of hard to say. I think the whole IT industry saw some benefit and retailers are no exception. The XP became a standard operating system maybe 10 or 12 years ago. And so our larger POS systems business, I think our Toshiba business, our NCR business, those are the kind of products that really saw the success where it's more of the medium for larger retailers that had traditionally used those products. These are the systems that were replaced and some of big deals we referenced earlier, they came out of our POS business in North America. So hard to say. Right now, our forecast for the next quarter suggests still a good North American business in that area. But we will just have to see how that plays out. Chris McGinnis - Sidoti & Company: Great, and then one last quick one, just on the share repurchase program. Charlie, did you repurchase any shares in the quarter or after the quarter or any?

No. No we have not. Chris McGinnis - Sidoti & Company: All right. Thank you very much.

Thanks.

The next question comes from Ryan Rackley of Raymond James. Your line is open.

Thanks, guys. Can you talk about your gross margin profile for 2015 as far as what you see with big deals and product mix going into the year?

Yes, Chris. This is Charlie. On the gross margins, we expect the gross margins to be up from this prior quarter. We have been talking about 10% gross margins for some time. That's where we would be comfortable with going into the quarter.

Okay. Actually this is Ryan.

I am sorry.

No problem. I appreciate the EBIT margin on the two acquisitions. Can you give any guidance on how the acquisitions are going to impact you guys at the gross margin line?

The only comment I will make, Ryan, is that these are our communication type businesses. So they will be -- typically our communication business, as you recall, is higher gross margins because there's more value added services. Generally speaking, those markets require more SG&A from us as well. So generally the communications businesses as both of these are will have higher gross margins, yes.

Okay, great, and then finally, can you talk about just potential scenario as to what could happen if Symbol gets to with acquiring Zebra, what effect that could have on your business?

Yes. So the Zebra acquisition, the old Symbol business from Motorola is something that we certainly spend a lot of time talking to them about. We don't anticipate a change. I would say they are making sure, they being the Zebra guys and the Motorola guys, are both company's management team are making sure there is really no change. And so what we have been told and what we believe is that they want the business right now in post close to be the same as it is. We are and will still be their largest distributor worldwide. And so we believe they are excited about their opportunity together but that they need to have the execution in the channel not miss a beat. And I think that's what our teams are focused on and their teams in the field are as well. So we think it's business as usual and we haven't seen any reason to doubt that.

Okay, great. Thanks, guys.

Your next question comes from Keith Housum of Northcoast Research. Your line is open.

Good afternoon, guys. Thanks for taking my call. Charlie, just a first question for you. Inventory and accounts receivable is up quite a bit this year over last year. Your inventory being up $100 million. And I guess in the script, you guys were preparing for growth but 25% increase year-over-year, it seems like it's quite a bit in there. Can you just provide a little commentary on your thoughts on the inventory position now?

Well, I would say that last year inventory levels were very low reflecting maybe nothing until from going into the year. So I think we are comfortable with the inventory levels currently based on the amount of demand that we see and growth opportunities. It's within our range of inventory turns. So I think we are pretty comfortable with the levels there. And maybe last year was just lower than we would have expected, and would be unusual for the company.

Okay. However the accounts receivables, they are at 15.9 almost a full point over last year in terms of sales per year. Are you guys satisfied with those levels?

It looks like probably the sales in the quarter being higher than last year. Our was pretty much 55 days. It has been. So I think that's pretty normal as far as the accounts receivable level.

Okay. With the two acquisitions that you guys have pending, is there going to be a need to beef up their balance sheet and beef up their working capital? Or you guys are satisfied with their levels as you anticipate them to be?

Yes. They have structures on them, both of them. So the idea is that they would be run independently. They manage the balance sheet very well, both companies, focused on working capital. So we are going in with the idea that they have adequate level of working capital on the balance sheet and hopefully growth going forward that we can help get them there with any type of funding needs they have.

And I think the one other thing would be, in Brazil we have a lower cost of borrowing than those guys. So they will benefit from some of that, I think.

Great. So in Brazil, you guys still need to borrow?

Well, sometimes we do. If we need to, just maybe the cost of capital is less, depending on what treasury decides they want to do. We don't need to borrow anywhere, as you see that the cash balances were up. But we expect these to generate cash and an excellent return on their IRR going forward. So we are all excited also about these and look to getting them close within the next six months.

Great. Now Mike you said you guys had strong finish to the quarter. Did that strong sales carry off to the beginning part of this quarter?

Well, I would say this. This is the quarter or the year where we are giving a forecast that we are already well into the quarter and so sitting here, 21st day of August, we feel very good about our forecast. And we have the ability to because July has already happened and we know where those sales are and we know that August is trending. So I would say, this forecast that we are giving at the midpoint, we think is very consistent with a typical September growth over June. And so I don't see anything that would cause me to concern. We feel very good about the forecast.

Okay, got it, and then if I can come back to the share repurchase. Charlie, I think I heard you say that there might be a preference there just to offset the dilution that you guys are seeing as opposed to being actively involved in buying back shares. Is that a correct understanding?

Yes. That would be a correct understanding.

Okay.

And even in that situation, it would depend on the market conditions that we are in. But that is principally the reason.

So in terms of the capital allocation strategy, it sounds like acquisitions are still the preferred method of using the capital?

Absolutely, and that's how the company has done it throughout its 20-year history and that's the way we look to do it going forward.

Great. Now with these two pending acquisitions, does this take you guys to the sidelines for a while? Or are you guys still going to be involved if the acquisitions opportunity appear?

No, we will continue to look for acquisitions, even after announcing these. So we are continuing to look for additional acquisitions that would make sense strategically and financially as we believe these are.

Okay, and then a final question for me on Imago, the latest acquisition you guys announced today. It appears Polycom is probably the lead vendor there that I am personally familiar with. Does this give you guys a relationships that perhaps have been lacking with those guys and others in that local market?

I am sorry. I didn't follow that part, Keith, about the relationship. Say it again.

In terms of, it looks like Polycom is probably the lead vendor for Imago and if my memory serves me correct, that's probably one of the relationships you guys have had a tough time with in Europe. Does this really solidify your opportunity with Polycom there and give you the relationship with Polycom you have perhaps been missing?

Yes, I understand better now. Thanks. Yes. We did not do well while trying to come up with a Polycom strategy couple years ago. When we really go back and look at the acquisitions we made in Europe, if you think back about whether it's the acquisition we made in England which was into telecom, that was really an Avaya SMB voice centric acquisition. When we go back to the Algol in Germany, their expertise was really data. They were strong with data and some voice and we really didn't in either one of those a strong video platform. And we have learned, even back to 2006, when we bought T2, our successful acquisition in North America, where we had a Polycom relationship, we still weren't the lead distributor for video. We learned, as we had to really get some specific expertise or help in that market to complement our voice knowledge and that's probably what we thought we could get away with a couple years ago in Europe. And the reality is, the video expertise is still very, very important to have. Day one, customers want to know that you have the people on staff that know the products, the vendors really want to trust you, but they don't want to see someone totally a startup and they believe that the video expertise is different and unique from data expertise and voice. And now, we have finally got all three areas of focus for our communication business covered by bringing Imago in. And we think this will compliment what we have already in our German, formerly Algol, business and our MTV business, formerly in the U.K. So this is the missing piece that we really lack to make our European communications business come together. So I Polycom knew that. They really had talked to us even a couple years ago about, what you guys need, Mike, is you really need a strong platform. And I met Ian probably six years ago. And so they been a company we have a lot of respect for and that we really saw that their business was so much like ours that it just made a lot of sense if we could workout the deal correctly. So we are thrilled to have Imago as part of our planned acquisition there.

Got you, and one follow up if I may. Both Network1 and Imago appear to be growing by double digit sales growth. Is that market growth or are they taking share? How are they accomplishing that?

Well, in one aspect, both of them have not grown out their opportunity in their geographies. So for example, staying with Imago, they are not in every country today with Polycom. So they are, I think the number of distributors for Polycom worldwide its 120 and so it's our belief that many of those smaller distributors probably can't expand beyond their local markets. In some areas that will always be the case. But there is an opportunity to consolidate some revenue in Europe and so we believe that Imago can continue to grow by moving in other countries. And in Brazil, what they have been able to do is take some of their vendors and they have added more without competing with their existing line cards. So they have got more vendors in Brazil than Imago has in Europe and that ScanSource has even in the U.S. So I think, in Network1's case, they are building out there vendor portfolio across Brazil.

Great, Mike. I appreciate it. Thank you.

Your next question comes from Chris Quilty of Raymond James. Your line is open.

Thanks, Mike. If I recall, in the last conference call you had talked about a potential acquisition that might add a fourth leg in terms of the product assortment. And at least in these two acquisitions, that doesn't seem to be there. So is it fair to assume you have still got some stuff in the pipeline?

Yes. I mean I would love to figure out, let me just go back, so in security, we got the technology unit that was our third leg that we have not made an acquisition in. We have looked in that market for targets and we still would be interested if we can find the right fit. In 3-D printing, similarly there is probably not an obvious target. But we believe that there might be an opportunity to still go after some aspect of the 3-D business and take that business to another, maybe take it to a different level. And maybe that we don't buy traditional technology distributor but maybe a complementary partner. If you can remember back in the early days of ScanSource barcode in the nineties, we started business down in Atlanta and we acquired a company called OUI and they gave us services expertise, which helped us accelerate the Avaya business. And I can see us trying to find maybe a services company even in one of those markets. So those are the kind of ideas we have got where they don't have to be traditional two-step distributors that we are trying to acquire.

Got you, and with both of these acquisitions, were they negotiated deals or auctions?

Well, I am not sure I want to say. We have got a history of acquisitions and we have a strategy and we cannot publish that too much.

Okay, and can you talk about any type of synergies in terms of warehouse consolidation that you might be able to achieve?

Well, for us, that would be the last thing we need to do to make these deals work for us. The synergies that we might get them out or not is most important to us. Our belief is we got, both of these companies are high growth companies at strong margins. And so our objective will be to kind of get out of their way first and let them continue to grow their markets. And of course, if it makes sense where we can get some synergies in the back-office, we will look at it, but that is not the most important thing we got on our plate and we have structured the earnouts traditionally. We did the same with CDC where we looked at management team, decide when that's better for them is to have access to some of our shared services. So we are going to certainly do the right thing from financial controls and all that, but I don't think that warehouse, any warehouse sharing would be necessary to make these success.

Okay, and Charlie, can you talk about where you are comfortable in terms of debt to EBITDA or other leverage ratios you focused on?

Yes.

Assuming you have more acquisitions that you could potentially layer on?

Yes. Let me just get back to one of your questions here that you were asking. I just want to make clear, Chris, that this was not an auction process. And I just want to make sure you understand that this was not an auction process. It was a strategic fit that both buyers and sellers agreed upon, and it made sense. So that's how the thing is coming down.

Mike, Charlie jut gave up the goods there.

Well, I probably would need to make that clear for the other side to make sure that we clarify that because it was not that process. As far as the debt to EBITDA and as far as our capital structure goes, we are looking to move to a more optimal capital structure to have $200 million cash on our balance sheet. We don't believe that's nearly the right capital structure. So we are looking to improve that. And by doing so through acquisitions to growing organically and also to do share repurchase.

Got you. Thank you very much, gentlemen.

Thanks, Chris.

I am showing no further questions at this time. (Operator Instructions). We are still showing no further questions at this time.

Okay, thank you very much for joining us. We expect to hold our next conference call to discuss September 30 quarterly earnings results on October 30, 2014. Thank you.