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Tuesday, May 31, 2005


Black Box Corporation Reports Fourth Quarter
And Total Year Fiscal 2005 Results



Black Box Corporation (NASDAQ:BBOX) today reported for the fourth quarter ended March 31, 2005, break-even diluted earnings per share compared to 61¢ last year. Net income for the fourth quarter was break-even compared to $11.5 million or 8.9% of revenues last year. Excluding restructuring and other charges and reconciling items in the fourth quarter of Fiscal 2005 described below, diluted earnings per share were 39¢ for the quarter and net income was $6.8 million or 4.3% of revenues.

During the fourth quarter of Fiscal 2005, the Company recorded a pre-tax charge for restructuring and other charges of $5.1 million. This charge was comprised of $3.0 million for staffing level adjustments and real estate consolidations in Europe and North America, and $2.1 million for the final settlement of a previously disclosed litigation matter. In addition, the Company incurred charges during the fourth quarter of Fiscal 2005 of $5.3 million pre-tax, comprised of acquisition-related expenses from the purchase of Norstan, Inc. (“Norstan”) on January 25, 2005 of $2.7 million and $2.6 million of costs associated with the compliance requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Management believes that presenting diluted earnings per share and net income excluding restructuring and other charges and reconciling items is useful to investors because it provides a more meaningful comparison of the ongoing operations of the Company.

In accordance with SEC Regulation G, the attached financial charts include a reconciliation of the non-GAAP financial measures in this release to the most directly comparable GAAP measures.

Total revenues for the fourth quarter were $157 million, an increase of 21% from $130 million last year. On a sequential comparison basis, third quarter revenues were $127 million.

Fourth quarter cash provided by operating activities was $18 million, compared to $27 million last year. On a sequential comparison basis, third quarter cash provided by operating activities was $14 million. Black Box utilized its fourth quarter cash provided by operating activities of $18 million to make a dividend payment of $1 million and $17 million for share repurchases.

For total fiscal year 2005, diluted earnings per share were $1.68 compared to $2.52 last year, down 33%. Corresponding net income for the year was $29.9 million or 5.6% of revenues, compared to $47.2 million or 9.1% of revenues last year. Excluding restructuring and other charges and reconciling items for total fiscal year 2005, diluted earnings per share were $2.13 and net income was $37.9 million or 7.1% of revenues.

In addition to the restructuring and other charges and reconciling items discussed above that were incurred during the fourth quarter of Fiscal 2005, the Company also incurred $1.8 million of costs associated with the compliance requirements of Section 404 in previous Fiscal 2005 quarters. Total cost for the full fiscal year associated with the compliance requirements of Section 404 was $4.4 million.

Total year revenues were $535 million, up 3% from $520 million last year.

Cash provided by operating activities for the year was $52 million or 175% of net income, compared to $75 million or 159% of net income last year. Black Box utilized the total year cash provided by operating activities of $52 million to make dividend payments of $4 million and repurchase $48 million of its Common Stock.

The Company’s 6-month order backlog was $97 million at March 31, 2005 compared to $54 million at the end of the third quarter. The increase in backlog is related to the purchase of Norstan.

The Company has set its worldwide cost structure on the basis of approximately $700 million in annual revenues, or approximately $175 million per quarter. At this revenue level, the Company is targeting gross profits at 40% to 41%, SG&A expenses excluding depreciation and Norstan acquisition-related expenses, described below, at 26.5% to 27.5% and EBITDA of approximately $95 to $100 million or 13.5% to 14.5% of revenues. Depreciation is estimated at approximately $11 million.

Assuming an overall interest rate of 5%, interest expense is targeted to be approximately $7.5 to $8.5 million or approximately 1.1% of revenues. The effective tax rate is targeted to be approximately 35.0% of pre-tax income. Net income excluding Norstan acquisition-related expenses and restructuring costs, described below, is targeted to be approximately $52 to $54 million. Assuming weighted average common and common equivalent shares outstanding of 18 million, EPS excluding Norstan acquisition-related expenses and restructuring costs is targeted to approximate $2.90 to $3.00 per share.

Norstan acquisition-related expenses will approximate $6.2 million pre-tax in FY06 and $1.4 million in FY07. The corresponding EPS impact is expected to be 23¢ per share in FY06 and 5¢ per share in FY07.

The Company expects to record in the first quarter of Fiscal 2006, a $4 to $5 million pre-tax restructuring charge, or 14¢ to 18¢ per share, to complete its staffing level adjustments in Europe and North America and real estate consolidations. In combination with the $3 million restructuring recorded in the fourth quarter of Fiscal 2005, the Company will reduce its operating costs by $11 to $12 million annually.

Cash provided by operating activities after these items is targeted to be in a range of $68 to $73 million. New capital expenditures are targeted to approximate $6 million.

All of the above targets are before any new mergers and acquisition activity that has not been announced.

Commenting on past year and future, Fred C. Young, Chief Executive Officer, said, “Fourth quarter revenues grew 21% to $157 million and total year revenues grew 3% to $535 million. For FY06 we expect revenues to grow 31% to $700 million. We are also targeting to aggressively increase market share via our M&A program with a 12-month goal of $150 to $200 million in additional annualized revenues. Funding for this expansion will come from operating cash flow, existing lines of credit and stock issuances. Looking beyond FY06, we have established a goal of one billion dollars in revenues by the end of FY07.

“We have spent considerable time and money restructuring our worldwide cost structure to achieve targeted future profits and cash flows. This requires a restructuring charge in 4Q05 and 1Q06, and although costly, we believe these actions are operationally necessary and financially beneficial going forward.

“In support of attaining our financial targets we will aggressively market our Data, Voice and Hotline Technical Services, or what we call DVH Services. Our Technical Services Model is unique in the industry and we believe provides the best value proposition to our clients. For Fiscal 2006 we expect our revenue mix by technical service to be 28% Data Services, 43% Voice Services and 29% Hotline Services. Geographically we expect our revenue mix to be 75% North America and 25% International. Over time we will look to increase our international presence.

“We continue to have high expectations from our recent Norstan acquisition. The integration program is proceeding per our plan which included re-branding Norstan to Black Box throughout North America.

“In closing, we have high expectations for the future of Black Box. Achieving these expectations will require us to successfully complete the Norstan integration, aggressively sell our DVH services and consummate high quality M&A opportunities.”

During FY05, the Company repurchased approximately 1.4 million shares for an aggregate purchase price of $57 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, 2005, the Company has repurchased in aggregate approximately 6.9 million shares for $297 million. Repurchases of stock during FY06 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 will conduct a conference call beginning at 5:00 p.m. Eastern Daylight Time today, May 26, 2005. Fred Young, Chief Executive Officer, will host the call. To participate in the call, please dial 612-332-0802 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 two weeks after the teleconference by dialing 320-365-3844 and using access code 781061.

The Company expects to file its Annual Report on Form 10-K with the Securities and Exchange Commission on Tuesday, June 14, 2005. The Annual Report and Proxy Statement are expected to be mailed at the end of June 2005 to stockholders of record as of June 10, 2005. The Company’s Annual Stockholders Meeting will be held in Pittsburgh, PA on Tuesday, August 9, 2005.

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. You can identify these forward-looking statements by the fact they use words such as "should," "anticipate," "estimate," "approximate," "expect," "target," "may," "will," "project," "intend," "plan," "believe" and other words of similar meaning and expression in connection with any discussion of future operating or financial performance. One can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. Although it is not possible to predict or identify all factors, they may include levels of business activity and operating expenses, expenses relating to corporate compliance requirements, cash flows, global economic conditions and successful integration of the Norstan business, the timing and costs of restructuring programs, successful marketing of DVH services and successful implementation of our M&A program including identifying appropriate targets, consummating transactions and successfully integrating the businesses. Additional risk factors are included in the Company’s Annual Report on Form 10-K. We can give no assurance that any goal, plan or target set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements, which speak only as of the date made. We undertake no obligation to release publicly any revisions to forward-looking statements as a result of future events or developments.

About Black Box

Black Box is the world’s largest technical services company dedicated to designing, building and maintaining today’s complicated data and voice infrastructure systems. Black Box services 152,000 clients in 141 countries with 122 offices throughout the world. To learn more, visit the Black Box Web site at www.blackbox.com.

Black Box and the Double Diamond logo are registered trademarks of BB Technologies, Inc.

 

                           BLACK BOX CORPORATION
                   CONSOLIDATED STATEMENTS OF INCOME

                               Three months ended      Year ended
                               ------------------- -------------------
In thousands, except per       March 31, March 31, March 31, March 31,
share                            2005      2004      2005      2004
                               ---------------------------------------


Revenues                       $157,230  $129,730  $535,076  $520,412
Cost of sales                    97,514    75,442   320,147   304,161
                               --------- --------- --------  ---------

Gross profit                     59,716    54,288   214,929   216,251
Selling, general &

 administrative expense          52,119    36,331   160,002   140,805
Restructuring and other
 charges                          5,059        --     5,059        --
Intangibles amortization          1,145        48     1,332       246
                               --------- --------- --------  ---------

Operating income                  1,393    17,909    48,536    75,200
Interest expense, net             1,319       450     2,755     1,808
Other expenses, net                  22        56       115       147
                               --------- --------- --------  ---------

Income before income
 taxes                               52    17,403    45,666    73,245
Provision for income
 taxes                               18     5,900    15,754    26,002
                               --------- --------- --------  ---------

Net income                     $     34  $ 11,503  $ 29,912  $ 47,243
                               ========= ========= ========  =========


Basic earnings per
 common share                  $   0.00  $   0.63  $   1.72  $   2.60
                               ========= ========= ========  =========

Diluted earnings per
 common share                  $   0.00  $   0.61  $   1.68  $   2.52
                               ========= ========= ========  =========

Weighted average common
 shares                          17,148    18,296    17,411    18,173
                               ========= ========= ========  =========

Weighted average common
 & common equivalent
 shares outstanding              17,524    18,830    17,845    18,766
                               ========= ========= ========  =========


                        BLACK BOX CORPORATION
                     CONSOLIDATED BALANCE SHEETS

                                                  March 31,  March 31,
In thousands                                        2005       2004
----------------------------------------------------------------------
Assets
Cash and cash equivalents                        $  11,592  $   9,306
Accounts receivable, net                           116,865     97,203
Lease receivables                                    1,697         --
Inventories, net                                    57,176     40,162
Costs and estimated earnings in excess
  of billings on uncompleted contracts              25,695     13,763
Deferred tax asset                                   9,236      4,131
Net current assets of discontinued operations          424         --
Other current assets                                14,849     10,623
                                                 ---------- ----------
     Total current assets                          237,534    175,188
                                                 ---------- ----------
Property, plant and equipment, net                  38,268     29,269
Goodwill, net                                      444,567    380,769
Intangibles, net                                    44,157     29,546
Lease receivables, net of current portion              473         --
Deferred tax asset                                   3,793         --
Discontinued operations, net of current portion        373         --
Other assets                                         3,725      2,530
                                                 ---------- ----------
     Total assets                                $ 772,890  $ 617,302
                                                 ---------- ----------
Liabilities
Current maturities of long-term debt             $     692  $   1,061
Current maturities of discounted lease rentals         890         --
Accounts payable                                    36,032     30,709
Billings in excess of costs and estimated
earnings on uncompleted contracts                    8,947      5,665
Deferred revenue                                    21,456         --
Accrued liabilities:
  Compensation and benefits                         13,073      7,849
  Restructuring                                      6,709        593
  Other liabilities                                 33,905     16,185
  Income taxes                                       3,295      3,695
                                                 ---------- ----------
     Total current liabilities                     124,999     65,757
                                                 ---------- ----------
Long-term debt                                     147,196     35,177
Discounted lease rentals                                30         --
Deferred taxes                                          --     11,050
Other liabilities                                       75        414
Restructuring reserve                                9,889         --
Stockholders' Equity
Common stock                                            24         23
Additional paid-in capital                         336,290    324,219
Retained earnings                                  428,632    402,675
Treasury stock, at cost                           (296,797)  (239,885)
Accumulated other comprehensive gain                22,552     17,872
                                                 ---------- ----------
     Total stockholders' equity                    490,701    504,904
                                                 ---------- ----------
Total liabilities and stockholders'equity        $ 772,890  $ 617,302
                                                 ---------- ----------


                         BLACK BOX CORPORATION
                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                              Three Months Ended       Year Ended
                             -------------------- --------------------
                             March 31,  March 31, March 31,  March 31,
  In thousands                  2005      2004       2005      2004
  --------------------------------------------------------------------
Operating Activities
Net income                   $      34  $ 11,503  $  29,912  $ 47,243
Adjustments to reconcile net
 income to cash
  Provided by operating
   activities:
  Intangibles amortization       1,145        48      1,332       246
  Depreciation                   2,253     1,695      6,623     6,519
  Gain on disposal of assets        --        --         --      (301)
  Stock compensation expense        --        --        680        --
Changes in operating assets
 and liabilities:
  Account receivable, net        7,725     3,699      8,878     7,486
  Inventories, net               2,336     2,077        (76)    1,144
  Other current assets          14,143     6,036     16,608    19,854
  Proceeds from lease
   contracts                       504        --        504        --
  Accounts payable and
   accrued liabilities         (10,342)    1,554    (12,255)   (7,006)
                             -----------------------------------------
Net cash provided by
 operating activities        $  17,798  $ 26,612  $  52,206  $ 75,185
                             -----------------------------------------
Investing Activities
  Capital expenditures, net       (470) $    (95) $  (2,319) $    322
  Acquisition of businesses,
   net of cash acquired       (102,553)       --   (102,553)       --
  Prior merger-related
   payments                        605    (1,772)       107    (3,010)
                             -----------------------------------------
Net cash used in investing
 activities                  $(102,418) $ (1,867) $(104,765) $ (2,688)
                             -----------------------------------------
Financing Activities
  Proceeds/(repayments) on
   borrowings, net           $ 106,414  $(11,327) $ 110,450  $(14,688)
  Repayments on discounted
   lease rentals                  (458)       --       (458)       --
  Proceeds from exercise of
   options                         609    16,145      7,919    22,159
  Payment of dividends          (1,038)     (889)    (3,847)   (3,663)
  Deferred financing costs      (1,117)        -     (1,352)        -
  Purchase of treasury stock   (19,327)  (28,702)   (56,912)  (81,057)
                             -----------------------------------------
Net cash provided/(used) in
 financing activities        $  85,083  $(24,773) $  55,800  $(77,249)
Foreign currency exchange
 impact on cash              $     182  $   (590) $    (955) $     15
                             -----------------------------------------
Increase/(decrease) in cash &
 cash equivalents            $     645  $   (618) $   2,286  $ (4,737)
Cash & cash equivalents at
 beginning of period            10,947     9,924      9,306    14,043
                             -----------------------------------------
Cash & cash equivalents at
 end of period               $  11,592  $  9,306  $  11,592  $  9,306
                             -----------------------------------------

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, EBITDA, diluted EPS and net income excluding restructuring and other charges and reconciling items (which are non-GAAP measures), 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:

                                     4Q05     4Q04     FY05     FY04
----------------------------------------------------------------------
Cash provided by operating
 activities                        $17,798  $26,612  $52,206  $75,185
Plus or (minus):
   Net capital
    expenditures/disposals            (470)     (95)  (2,319)     322
   Proceeds from stock option
    exercises                          609   16,145    7,919   22,159
   Foreign currency exchange
    impact on cash                     182     (590)    (955)      15
----------------------------------------------------------------------
Free cash flow                     $18,119  $42,072  $56,851  $97,681
----------------------------------------------------------------------

A reconciliation of diluted earnings per common share (EPS) to diluted EPS excluding restructuring and other charges and reconciling items is presented below:

                                                          4Q05  FY05
----------------------------------------------------------------------
Diluted EPS                                              $0.00  $1.68
EPS impact of restructuring and other charges             0.19   0.19
EPS impact of reconciling items                           0.20   0.26
----------------------------------------------------------------------
Diluted EPS excluding special items                      $0.39  $2.13
----------------------------------------------------------------------

A reconciliation of net income to net income excluding restructuring and other charges and reconciling items is presented below:

                                                       4Q05     FY05
----------------------------------------------------------------------
Net income                                               $34  $29,912
% of revenues                                            0.0%     5.6%
Restructuring and other charges, after tax impact      3,314    3,314
Reconciling items, after tax impact                    3,471    4,650
----------------------------------------------------------------------
Net income excluding special items                    $6,819  $37,876
% of revenues                                            4.3%     7.1%
----------------------------------------------------------------------

A reconciliation of operating income to EBITDA is presented below:

                                              4Q05     FY05     FY06
----------------------------------------------------------------------
Operating income                             $1,393  $48,536  $84,000
% of revenues                                   1.0%     9.1%    12.0%
Depreciation                                  2,253    6,623   11,000
Amortization                                  1,145    1,332      400
----------------------------------------------------------------------
EBITDA                                       $4,791  $56,491  $95,400
% of revenues                                   3.0%    10.6%    13.6%
----------------------------------------------------------------------

SUPPLEMENTAL INFORMATION:

Additionally, the following supplemental information is being provided for comparisons of fourth quarter ended March 31, 2005 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 2005 restructuring and other charges, as well as the reconciling items of $10.4 million. Management believes this enables a clearer understanding of the ongoing operations of the Company.

                       4Q05      3Q05      4Q04      FY05      FY04
----------------------------------------------------------------------
Revenues:
  North America      $112,047   $78,642   $81,744  $355,013  $341,299
  Europe               35,501    38,947    38,214   142,838   142,158
  All Other             9,682     9,307     9,772    37,225    36,955
                     -------------------------------------------------
  Total              $157,230  $126,896  $129,730  $535,076  $520,412

Operating Income:
  North America         $(295)   $8,345    $9,686   $26,798   $44,281
 % of North America
  revenues              (0.3)%     10.6%     11.8%      7.5%     13.0%
  Europe                 $274    $4,016    $5,534   $13,639   $21,812
  % of Europe
   revenues               0.8%     10.3%     14.5%      9.5%     15.3%
  All Other            $1,414    $1,836    $2,689    $8,099    $9,107
  % of All Other
   revenues              14.6%     19.7%     27.5%     21.8%     24.6%
                     -------------------------------------------------
  Total                $1,393   $14,197   $17,909   $48,536   $75,200
  % of total revenues     1.0%     11.2%     13.8%      9.1%     14.5%

Restructuring and
 Other Charges and
 Reconciling Items:
  North America        $9,356     1,300        --   $11,156        --
  Europe                1,003        --        --     1,003        --
  All Other                --        --        --        --        --
                     -------------------------------------------------
  Total               $10,359     1,300        --   $12,159        --

Operating Income
 Excluding
Restructuring and
 Other Charges and
 Reconciling Items:
  North America        $9,061    $9,645    $9,686   $37,954   $44,281
 % of North America
  revenues                8.1%     12.3%     11.8%     10.7%     13.0%
  Europe               $1,277    $4,016    $5,534   $14,642   $21,812
  % of Europe
   revenues               3.6%     10.3%     14.5%     10.3%     15.3%
  All Other            $1,414    $1,836    $2,689    $8,099    $9,107
  % of All Other
   revenues              14.6%     19.7%     27.5%     21.8%     24.6%
                     -------------------------------------------------
  Total               $11,752   $15,497    17,909   $60,695   $75,200
  % of total revenues     7.5%     12.2%     13.8%     11.3%     14.5%
----------------------------------------------------------------------

Information on revenues and gross profit for voice services, data services and hotline services is presented below:

                       4Q05      3Q05      4Q04      FY05      FY04
----------------------------------------------------------------------
Revenues:
  Data Services       $48,799   $53,410   $52,851  $200,935  $214,299
  Voice Services       52,921    16,219    15,515   106,540    68,241
  Hotline Services     55,510    57,267    61,364   227,601   237,872
                     -------------------------------------------------
  Total              $157,230  $126,896  $129,730  $535,076  $520,412

Gross Profit:
  Data Services       $13,343   $16,149   $15,925   $59,354   $67,329
 % of Data Services
  revenues               27.3%     30.2%     30.1%     29.5%     31.4%
 Voice Services       $17,648    $5,469    $5,652   $36,255   $23,999
  % of Voice Services
   revenues              33.3%     33.7%     36.4%     34.0%     35.2%
  Hotline Services    $28,725   $29,400   $32,711  $119,320  $124,923
  % of Hotline
   Services revenues     51.7%     51.3%     53.3%     52.4%     52.5%
                     -------------------------------------------------
  Total               $59,716   $51,018   $54,288  $214,929  $216,251
  % of total revenues    38.0%     40.2%     41.8%     40.2%     41.6%
----------------------------------------------------------------------

Information on revenues on a same-office basis is presented below:

                                              4Q05     4Q04     Change
----------------------------------------------------------------------
Revenues as reported                       $157,230  $129,730      21%
Less revenues from offices added since
 Fiscal 2004                                (35,208)       --
                                           ---------------------------
Revenues on same-office basis              $122,022  $129,730     (6)%
----------------------------------------------------------------------

Information on various balance sheet ratios, backlog and headcount is presented below. Dollar amounts are in millions.

                                 4Q05           3Q05          4Q04
----------------------------------------------------------------------
Accounts Receivable:
   Gross Accounts
    Receivable $                    $124.2         $108.8      $107.6
   Reserve $ / %                  $7.3/5.9%     $10.2/9.4%  $10.4/9.7%
                           -------------------------------------------
   Net Accounts Receivable
    $                               $116.9          $98.6       $97.2

   Net Days Sales                   57 days        64 days     63 days
    Outstanding

Inventory:
   Gross Inventory $                 $69.7          $48.2       $45.0
   Reserve $ / %                $12.5/18.0%     $5.0/10.4%  $4.8/10.8%
                           -------------------------------------------
   Net Inventory $                   $57.2          $43.2       $40.2

   Net Inventory Turns                 6.4x           7.9x        7.6x

Six-Month Order Backlog                $97            $54         $56

Team Members                         3,371          2,538       2,779
----------------------------------------------------------------------



Investor Contact:
Black Box Corporation
Mike McAndrew
724-873-6788
Fax: 724-873-6799
E-mail:investors@blackbox.com

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