Tuesday, March 11, 2003
Black Box Corporation Announces Expected Results for Fourth Quarter Fiscal 2003
Black Box Corporation (NASDAQ:BBOX) today announced that it expects EPS for its fiscal fourth quarter ending March 31, 2003 to be between 53 cents and 54 cents, prior to one-time charges. Corresponding net income as a percent of revenue is expected to be between 8.0% and 8.2%. Revenue is expected to be approximately $131 to $133 million. Cash provided by operating activities is expected to be between $15 and $20 million.
Included in the above numbers is a 6-cent negative operating impact from certain offices, which are in the process of being consolidated with other nearby offices. As a result of these consolidations, this negative impact should go to zero for 1Q04.
The Company is expected to record a $9 to $10 million one-time pre-tax charge, or 29 cents to 32 cents per share, for the following two items: a restructuring charge of approximately $6 to $7 million primarily related to adjusting staffing levels for its European Operations and real estate consolidations, which will reduce operating costs by $7 to $8 million annually; a $3 to $3.5 million charge for selected receivables in the New York City marketplace for work performed that is now deemed to be non-collectable.
Commenting on the expected results, Fred C. Young, Chief Executive Officer, said, “Over capacity in just about all vertical markets, leading to more job cuts, continues to have an impact on our business. Throw in the constant distraction from threats of terrorism/war, and you get a real down draft on technology spending in the short term. And unfortunately, our crystal ball does not show these factors subsiding in the foreseeable future.”
“The beginning of January was soft as we expected, but the back-end of January and February remained soft, and March is acting the same. This softness is global in nature and across all service types. To properly stay ahead of what we see as a potentially deteriorating market, we are adjusting our near-term cost structure based on revenue at $125 million per quarter. At this level of revenue, we should be able to achieve net income as a percent of revenue of approximately 9% to 10% and cash provided by operating activities of approximately 90% to 100% of net income. From here we will monitor the business climate accordingly. We need to exercise prudent judgment to successfully navigate our business through these very uncertain economic times. The risk/reward ratio to run the cost structure much more aggressively is just not favorable. When the world gets better at large, we have the ability to capitalize on incremental opportunities in very short order.”
Relative to the Company’s strategy, Mr. Young went on to say, “We will remain focused on our core long-term growth strategy. This strategy is centered on aggressively executing our unique One-Source for Worldwide Infrastructure Services model. Focused on capturing significant market share, our service model particularly helps multi-site and global clients better manage their internal technology infrastructure. Traditionally, the majority of the world has been served through a fragmented group of VARs who are small and geographically limited or large project management companies who are not experts in this field and typically subcontract to this same fragmented group of VARs.”
“Our global operating base, staffed with our own expert-level technical support and project management staffs, provides the market with a new and innovative alternative. Black Box’s operations today span 117 offices servicing 132 countries throughout the world. We feel very strongly that we have built a service offering that is strategically relevant and has no peer.”
“Evolving technologies should provide additional growth engines for us as wireless, VOIP (Voice Over Internet Protocol) and fiber to the desktop become more prominent in the next generation of infrastructure systems.”
“And from an overall marketing perspective, with approximately 3% market share, Black Box today is the largest service company in this space. We believe, through proper execution, there is an enormous opportunity to capture significant market share in this very fragmented $20 billion market. We have demonstrable success with some of the world’s largest companies who are now enjoying the benefits of better-managed and more cost-effective infrastructure systems. Unfortunately, the overall economic malaise has masked these specific successes. Fortunately, we are just in the early phases of exploiting the service capabilities of Black Box with the balance of the Global Fortune 1000 and selected vertical markets. We have built the best infrastructure services model in the industry. Once the economy settles down, the long-term growth potential of Black Box is very real.”
This release contains forward-looking statements, which are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected, including levels of business activity and global economic conditions. The statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and speak only as of the date of this press 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 clients through 117 offices in 132 countries throughout the world.
Black Box Corporation