Wednesday, May 19, 2004
Black Box Corporation Reports Fourth Quarter and Total Year Fiscal 2004 Results
Black Box Corporation (NASDAQ:BBOX) today reported for the fourth quarter ended March 31, 2004, diluted earnings per share of 61¢ compared to 21¢ last year. Net income for the fourth quarter was $11.5 million or 8.9% of revenues, compared to $4.2 million or 3.1% of revenues last year. On a sequential comparison basis, third quarter diluted earnings per share were 66¢ with corresponding net income of $12.2 million or 9.2% of revenues. Included in the FY04 fourth quarter earnings per share is a 4¢ negative impact from an award in an arbitration matter that has been resolved.
Total revenues for the fourth quarter were $130 million, down 4% from $135 million last year. On a sequential comparison basis, third quarter revenues were $133 million.
Fourth quarter cash provided by operating activities was $27 million or 231% of net income, compared to $27 million or 638% of net income last year. Fourth quarter free cash flow was $42 million compared to $25 million last year. On a sequential comparison basis, third quarter cash provided by operating activities was $16 million and free cash flow was $19 million. The fourth quarter’s free cash flow of $42 million was used towards: Black Box stock repurchases of $29 million; debt reduction of $11 million; dividend payments of $1 million; and merger obligations of $1 million. Management believes that free cash flow, defined by the Company as cash provided by operating activities less net capital expenditures, plus proceeds from option exercises, plus or minus foreign currency translation adjustments, is an important measurement of liquidity as it represents the total cash available to the Company.
In accordance with SEC Regulation G, the attached financial chart includes a reconciliation of non-GAAP financial measures in this release to the most directly comparable GAAP measures.
For total fiscal year 2004, diluted earnings per share were $2.52 compared to $2.39 last year, up 5%. Corresponding net income for the year was $47.2 million or 9.1% of revenues, compared to $48.7 million or 8.0% of revenues last year.
Total year revenues were $520 million, down 14% from $605 million last year.
Cash provided by operating activities for the year was $75 million or 159% of net income, compared to $93 million or 190% of net income last year. Free cash flow was $97 million, comparable to last year’s $97 million. The total year free cash flow of $97 million and $5 million of cash on hand was used towards: payments for Black Box stock repurchases of $81 million; debt reduction of $14 million; dividend payments of $4 million; and merger obligations of $3 million.
The Company’s 6-month order backlog was $56 million at March 31, 2004 compared to $54 million at the end of the third quarter.
Commenting on the total year results, Fred C. Young, Chief Executive Officer, said, “Revenues for FY04 proved to be relatively stable throughout the year, although down 14% from FY03. Corresponding net income was down 3%, as we offset this revenue decline with good cost control and without the need for restructuring charges. As a percent of revenues, net income increased from 8.0% to 9.1%. On the strength of our operating profits and stock repurchase program, diluted earnings per share increased 5% from $2.39 to $2.52. Cash flow remained very strong in absolute amounts and relative to net income.”
The Company has entered into a Stipulation and Agreement of Settlement in the case captioned In Re Black Box Corporation Securities Litigation (Civil Action No. 03-CV-412). This preliminary settlement provides for the payment of $2 million into a settlement fund, an amount within the limits of the Company’s directors’ and officers’ liability policy, most of which will be covered under such policy. This payment is in exchange for a full and complete release of any and all claims against defendants. The settlement is subject to (1) plaintiffs’ counsel determining, through limited confirmatory discovery, that the settlement is fair, reasonable and adequate, (2) the notice and hearing procedures that pertain to federal court class actions and (3) final approval of the court.
The Company also announced today that its Board of Directors has declared a quarterly cash dividend of 5¢ per share of common stock. The dividend was declared on all outstanding shares of Black Box’s common stock and will be payable on July 15, 2004 to stockholders of record at the close of business on June 30, 2004. Black Box will pay the dividend through its transfer agent, American Stock Transfer & Trust Company. Beginning with its August 2004 dividend declaration, the Company expects to increase its current annual dividend payment rate of 20¢ by 20% to 24¢ per share.
During FY04, the Company repurchased approximately 1.7 million shares for an aggregate purchase price of $76 million. Funding for the stock repurchases came primarily from cash flow from operations. Since inception of the repurchase program in April 1999 through March 31, 2004, the Company has repurchased in aggregate approximately 5.5 million shares for $240 million. Throughout FY05, the Company expects to repurchase approximately 1 million additional shares. Repurchases of stock during FY05 will occur from time to time depending upon factors such as the Company’s cash flows and general market conditions. While the Company expects to continue to repurchase shares for the foreseeable future, there can be no assurance as to the timing or amount of such repurchases.
The Company also announced that current director Thomas G. Greig will serve as non-executive Chairman of the Board. Mr. Fred Young, along with his CEO position, formerly served as Chairman. Mr. Greig has been serving on the Black Box Board since August 1999 and remains an independent director. The Company believes this is a stronger commitment to contemporary governance guidelines than simply naming a lead director. With a current Institutional Shareholder Services (ISS) industry ranking Corporate Governance Quotient score of 86 (meaning that, according to ISS, Black Box currently outperforms 86% of the companies in the technology hardware and equipment group relative to corporate governance), the Company remains committed to its overall corporate governance program and its associated leadership position.
In summary, Mr. Young stated, “As we look forward, we will remain focused on continued overall financial stability. In addition, we remain committed to achieving long-term ‘green growth’, i.e., revenue growth that has high client value-add and the right profit and cash flow characteristics. We will look to strategically add revenue streams that might not immediately meet our traditional metrics, but only where we believe this revenue will eventually meet such criteria. From a marketing and operational perspective, we will stay true to the consistent execution of our world-class technical support services—the combination of data, voice and hot-line services.”
The Company will conduct a conference call beginning at 5:00 p.m. Eastern Daylight Time today, May 19, 2004. Fred Young, Chief Executive Officer, will host the call. To participate in the call, please dial 612-326-1003 approximately 15 minutes prior to the starting time and ask to be connected to the Black Box Earnings Call. A replay of the conference call will be available for one week after the teleconference by dialing 320-365-3844 and using access code 728699.
The Company expects to file its Annual Report on Form 10-K with the Securities and Exchange Commission on Monday, June 14, 2004. Its Annual Report and Proxy Statement is expected to be mailed at the end of June 2004 to stockholders of record as of June 11, 2004. The Company’s Annual Stockholders Meeting will be held in Pittsburgh, PA on Tuesday, August 10, 2004, commencing at 12:30 p.m. EDT.
Any forward-looking statements contained in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. These include levels of business activity, cash flows and global economic conditions. Additional risk factors are included in the Company’s Annual Report on Form 10-K. Any information, which is not historical in nature, constitutes such forward-looking statements and speaks only as of the date of this release.
Black Box is the world's largest technical services company dedicated to designing, building and maintaining today's complicated network infrastructure systems. Black Box services 150,000 clients in 132 countries with 117 offices throughout the world.
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Quarter Ended Year Ended
March 31, March 31,
------------------- -------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Revenues $129,730 $134,812 $520,412 $605,017
Cost of sales 75,442 81,876 304,161 366,170
--------- --------- --------- ---------
Gross profit 54,288 52,936 216,251 238,847
Selling, general &
administrative exp 36,331 39,020 140,805 152,808
Restructuring expense - 6,536 - 6,536
Intangibles amortization 48 72 246 377
--------- --------- --------- ---------
Operating income 17,909 7,308 75,200 79,126
Interest expense, net 450 617 1,808 2,826
Other expenses, net of
income 56 115 147 229
--------- --------- --------- ---------
Income before income taxes 17,403 6,576 73,245 76,071
Provision for income taxes 5,900 2,368 26,002 27,386
--------- --------- --------- ---------
Net income $11,503 $4,208 $47,243 $48,685
========= ========= ========= =========
Basic earnings per common share $0.63 $0.22 $2.60 $2.46
========= ========= ========= =========
Diluted earnings per common
share $0.61 $0.21 $2.52 $2.39
========= ========= ========= =========
Weighted average common shares 18,296 19,309 18,173 19,781
========= ========= ========= =========
Weighted average common &
common equivalent shares
outstanding 18,830 19,831 18,766 20,342
========= ========= ========= =========
BLACK BOX CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, March 31,
ASSETS 2004 2003
--------- ---------
Current assets:
Cash and cash equivalents $9,306 $14,043
Trade accounts receivable, net 97,203 100,263
Inventories, net 40,162 40,047
Costs and estimated earnings in excess
of billings on uncompleted contracts 13,763 18,261
Other current assets 13,741 16,052
--------- ---------
Total current assets 174,175 188,666
--------- ---------
Property, plant and equipment, net 29,269 34,737
Intangibles, net 410,315 399,299
Other assets 2,530 4,027
--------- ---------
Total assets $616,289 $626,729
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current debt $1,061 $926
Accounts payable 30,709 30,508
Billings in excess of costs and estimated
earnings on uncompleted contracts 5,665 3,295
Accrued expenses 23,614 32,405
Accrued taxes 3,695 2,940
--------- ---------
Total current liabilities 64,744 70,074
--------- ---------
Long-term debt 35,177 49,453
Other liabilities 11,464 12,780
Stockholders' equity:
Common stock 23 23
Additional paid-in capital 324,219 295,271
Retained earnings 402,675 359,037
Treasury stock, at cost (239,885) (163,547)
Accumulated other comprehensive gain 17,872 3,638
--------- ---------
Total stockholders' equity 504,904 494,422
--------- ---------
Total liabilities and stockholders' equity $616,289 $626,729
========= =========
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Quarter Ended Year Ended
March 31, March 31,
------------------- -------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Cash flows from operating
activities:
Net income $11,503 $4,208 $47,243 $48,685
Adjustments to reconcile net
income to cash provided
by operating activities:
Intangibles amortization 48 72 246 377
Depreciation 1,695 1,892 6,519 7,639
Gain on sale of property - - (531) -
Changes in working capital
items:
Account receivable, net 3,699 12,957 7,486 23,111
Inventories, net 2,077 5,723 1,144 7,994
Other current assets 6,036 11,189 19,854 20,087
Accounts payable and
accrued liabilities 1,554 (9,295) (7,006) (15,316)
--------- --------- --------- ---------
Cash provided by operating
activities $26,612 $26,746 $74,955 $92,577
--------- --------- --------- ---------
Cash flows from investing
activities:
Capital expenditures, net
of disposals (95) $402 $178 $(304)
Merger transactions and
prior merger-related
payments, net of cash
acquired (1,772) (261) (3,010) (7,822)
--------- --------- --------- ---------
Cash (used in)/provided by
investing activities $(1,867) $141 $(2,832) $(8,126)
--------- --------- --------- ---------
Cash flows from financing
activities:
Revolving credit
repayments, net $(11,327) $(2,939) $(14,314) $(28,715)
Proceeds from exercise of
options 16,145 520 22,159 4,886
Payment of dividends (889) (975) (3,663) (975)
Purchase of treasury stock (28,702) (20,620) (81,057) (58,473)
--------- --------- --------- ---------
Cash used in financing
activities $(24,773) $(24,014) $(76,875) $(83,277)
--------- --------- --------- ---------
Foreign currency exchange
impact on cash $(590) $(2,277) $15 $(554)
--------- --------- --------- ---------
(Decrease)/increase in cash &
cash equivalents $(618) $596 $(4,737) $620
Cash & cash equivalents at
beginning of period 9,924 13,447 14,043 13,423
--------- --------- --------- ---------
Cash & cash equivalents at end
of period $9,306 $14,043 $9,306 $14,043
========= ========= ========= =========
RECONCILIATIONS:
In addition to reported results under U.S. GAAP for the fiscal
periods, the following financial highlights table also includes, where
appropriate, a reconciliation of free cash flow (which is a non-GAAP
measure), to the most directly comparable GAAP measure. All dollar
amounts are in thousands.
A reconciliation of cash provided by operating activities to free
cash flow is presented below:
4Q04 4Q03 FY04 FY03
----------------------------------------------------------------------
Cash provided by operating
activities $26,612 $26,746 $74,955 $92,577
Plus or (minus):
Net capital expenditures/disposals (95) 402 178 (304)
Proceeds from stock option
exercises 16,145 520 22,159 4,886
Foreign currency exchange impact
on cash (590) (2,277) 15 (554)
----------------------------------------------------------------------
Free cash flow $42,072 $25,391 $97,307 $96,605
----------------------------------------------------------------------
SUPPLEMENTAL INFORMATION:
Additionally, the following supplemental information is being
provided for comparisons of fourth quarter ended March 31, 2004
reported results to this year's third quarter and prior year's fourth
quarter. All dollar amounts are in thousands unless noted otherwise.
Information on revenues and operating income by geography is
presented below. Management believes it is important to separately
present the Fiscal 2003 restructuring charge of $6,536. Management
believes this enables a clearer understanding of the ongoing
operations of the Company.
4Q04 3Q04 4Q03 FY04 FY03
----------------------------------------------------------------------
Revenues:
North America $81,744 $84,665 $87,132 $341,299 $412,247
Europe 38,214 38,309 37,630 142,158 153,477
All Other 9,772 10,093 10,050 36,955 39,293
---------------------------------------------
Total $129,730 $133,067 $134,812 $520,412 $605,017
Operating Income:
North America $9,686 $10,900 $5,056 $44,281 $53,079
% of North America
revenues 11.8% 12.9% 5.8% 13.0% 12.9%
Europe $5,534 $6,325 $116 $21,812 $17,729
% of Europe revenues 14.5% 16.5% 0.3% 15.3% 11.6%
All Other $2,689 $2,399 $2,136 $9,107 $8,318
% of All Other revenues 27.5% 23.8% 21.3% 24.6% 21.2%
---------------------------------------------
Total $17,909 $19,624 $7,308 $75,200 $79,126
% of total revenues 13.8% 14.7% 5.4% 14.5% 13.1%
Restructuring Charge:
North America -- -- $1,806 -- $1,806
Europe -- -- 4,592 -- 4,592
All Other -- -- 138 -- 138
---------------------------------------------
Total -- -- $6,536 -- $6,536
Operating Income
excluding
restructuring charge:
North America $9,686 $10,900 $6,862 $44,281 $54,885
% of North America
revenues 11.8% 12.9% 7.9% 13.0% 13.3%
Europe $5,534 $6,325 $4,708 $21,812 $22,321
% of Europe revenues 14.5% 16.5% 12.5% 15.3% 14.5%
All Other $2,689 $2,399 $2,274 $9,107 $8,456
% of All Other revenues 27.5% 23.8% 22.6% 24.6% 21.5%
---------------------------------------------
Total $17,909 $19,624 13,844 $75,200 $85,662
% of total revenues 13.8% 14.7% 10.3% 14.5% 14.2%
----------------------------------------------------------------------
Information on revenues and gross profit for hotline services,
data services and voice services is presented below:
4Q04 3Q04 4Q03 FY04 FY03
----------------------------------------------------------------------
Revenues:
Hotline Services $61,364 $61,538 $61,330 $237,872 $252,105
Data Services 52,851 54,305 56,695 214,299 275,842
Voice Services 15,515 17,224 16,787 68,241 77,070
---------------------------------------------
Total $129,730 $133,067 $134,812 $520,412 $605,017
Gross Profit:
Hotline Services $32,711 $32,241 $31,729 $124,923 $128,635
% of Hotline Services
revenues 53.3% 52.4% 51.7% 52.5% 51.0%
Data Services $15,925 $16,267 $15,005 $67,329 $85,122
% of Data Services
revenues 30.1% 30.0% 26.5% 31.4% 30.9%
Voice Services $5,652 $6,133 $6,202 $23,999 $25,090
% of Voice Services
revenues 36.4% 35.6% 36.9% 35.2% 32.6%
---------------------------------------------
Total $54,288 $54,641 $52,936 $216,251 $238,847
% of total revenues 41.8% 41.1% 39.3% 41.6% 39.5%
----------------------------------------------------------------------
Information on revenues on a same-office basis is presented below:
4Q04 4Q03 Change
----------------------------------------------------------------------
Revenues as reported $129,730 $134,812 (4)%
Less revenues from offices added
since Fiscal 2003 (300) (225)
-------------------------
Revenues on same-office basis $129,430 $134,587 (4)%
----------------------------------------------------------------------
Information on various balance sheet ratios, backlog and headcount
is presented below. Dollar amounts are in millions.
4Q04 3Q04 4Q03
----------------------------------------------------------------------
Accounts Receivable:
Gross Accounts
Receivable $ $107.6 $112.3 $112.0
Reserve $ / % $10.4/9.7% $11.7/10.4% $11.7/10.5%
----- ----- -----
Net Accounts
Receivable $ $97.2 $100.6 $100.3
Net Days Sales 63 days 64 days 63 days
Outstanding
Inventory:
Gross Inventory $ $45.0 $46.6 $44.0
Reserve $ / % $4.8/10.8% $4.4/9.4% $4.0/9.0%
----- ----- -----
Net Inventory $ $40.2 $42.2 $40.0
Net Inventory Turns 7.6x 8.0x 8.0x
Six-Month Order
Backlog $56 $54 $51
Team Members 2,779 2,928 3,123
----------------------------------------------------------------------
Investor Contact:
Black Box Corporation
Mike McAndrew
724-873-6788
Fax: 724-873-6799
E-mail:
investors@blackbox.com