Press Release Details

Black Box Corporation Reports Second Quarter Fiscal 2019 Results

Nov 16, 2018, 16:06 PM
Black Box Corporation today reported results for the second quarter of Fiscal 2019.
Author : Black Box Corporation
Source name : Black Box Investor Website
Source URL : http://investor.blackbox.com/press-releases
Contact name : David J. Russo
Contact phone : (724) 873-6788
Contact email : investors@blackbox.com
Contact title : Executive Vice President, Chief Financial Officer and Treasurer

PITTSBURGH, PENNSYLVANIA, November 16, 2018 - Black Box Corporation (NASDAQ:BBOX), a leading digital solutions provider dedicated to helping customers design, build, manage and secure their IT infrastructure, today reported results for the second quarter of Fiscal 2019 and six-month period ended September 29, 2018. Discussion of results reflect the continuing operations of the Company unless otherwise noted.

Second Quarter Results

  • Revenues declined by $5.8 million or 3.5% to $158.7 million compared to the same period last year, while the revenue decline from the prior quarter was $3.8 million or 2.4%. The decline when compared to the same period last year was primarily due to the Products business, mainly in North America Products. The decline when compared to the prior quarter was primarily due to North America Services.
  • Gross profit margin was 27.3%, down 270 basis points from 30.0% for the same period last year.This decrease was primarily due to revenue growth in lower margin International Services combined with lower revenues in the other segments. The gross profit margin in the prior quarter was 28.5%.
  • Selling, general and administrative expenses were $50.1 million, down 9.0% from $55.1 million for the same period last year and down 3.1% from $51.7 million in the prior quarter. The $5.0 million decrease from the same period last year was primarily due to reductions of $3.5 million in compensation and benefit costs, $2.7 million in ERP implementation costs, $0.6 million in foreign exchange costs and $0.5 million in stock compensation expense, partially offset by an increase of $2.8 million in financial advisory costs.
  • Interest expense was $4.2 million, compared to $1.8 million for the same period last year. The $2.4 million increase was due to higher rates, higher amortization amounts of deferred financing fees and the write-off of certain deferred financing fees in the quarter.
  • Loss before income taxes was $13.9 million, compared to a loss before income taxes of $10.5 million for the same period last year and compared to a loss before income taxes of $9.5 million in the prior quarter.
  • Benefit from income taxes was $7.7 million, compared to a provision for income taxes of $1.9 million for the same period last year and compared to a benefit from income taxes of $0.7 million in the prior quarter. The variance from the statutory rate in the current quarter was principally due to the intraperiod tax allocation of valuation allowances between continuing and discontinued operations.
  • Loss from continuing operations was $6.2 million, compared to loss from continuing operations of $12.4 million for the same period last year and compared to loss from continuing operations of $8.9 million in the prior quarter.
  • Diluted loss per share from continuing operations was $0.41, compared to a diluted loss per share from continuing operations of $0.82 for the same period last year and compared to a diluted loss per share from continuing operations of $0.59 in the prior quarter.
  • Cash flow used for continuing operating activities was $6.1 million, compared to cash flow provided by continuing operating activities of $0.8 million for the same period last year and compared to cash flow used for continuing operating activities of $4.2 million in the prior quarter. The variance compared to the prior quarter was principally due to lower gross profit, higher interest expense and an increase in primary working capital.

2QYTD19 Results

  • Revenues were $321.2 million, down 1.2% from $325.2 million for the same period last year. The decline was primarily due to the Products business, mainly in North America Products.
  • Gross profit margin was 27.9%, down 110 basis points from 29.0% for the same period last year. The decline was primarily due to North America Services.
  • Selling, general and administrative expenses were $101.9 million, down 9.9% from $113.0 million for the same period last year. The $11.1 million decrease from the comparable prior year period was primarily due to reductions of $5.6 million in compensation and benefit costs, $4.6 million in ERP implementation costs, $4.1 million in restructuring costs, $1.7 million in stock compensation expense and $1.1 million in foreign exchange expense, partially offset by an increase of $5.8 million in financial advisory costs.
  • Interest expense was $6.7 million, compared to $3.0 million for the same period last year. The $3.7 million increase was due to higher rates, higher amortization amounts of deferred financing fees and the write-off of certain deferred financing fees in the quarter.
  • Loss before income taxes was $23.5 million, compared to a loss before income taxes of $26.6 million for the same period last year.
  • Benefit from income taxes was $8.4 million, compared to a benefit from income taxes of $3.3 million for the same period last year.
  • Loss from continuing operations was $15.1 million, compared to loss from continuing operations of $23.4 million.
  • Diluted loss per share from continuing operations was $0.99, compared to a diluted loss per share from continuing operations of $1.55 for the same period last year.
  • Cash flow used for continuing operating activities was $10.3 million, compared to cash flow used for continuing operating activities of $15.9 million for the same period last year.

Agreement and Plan of Merger

On November 11, 2018, Black Box entered into an Agreement and Plan of Merger (the "Merger Agreement") with AGC Networks Pte Ltd., a company organized under the laws of Singapore, a wholly-owned subsidiary of global solutions integrator AGC Networks Ltd (BSE/NSE: AGCNET).  AGC Singapore has agreed to acquire all the outstanding shares of Black Box for $1.08 per share in cash, subject to customary closing conditions and regulatory approvals.

Please see the Company’s Current Report on Form 8-K, file number 0-18706, filed with the SEC on November 13, 2018 for further details regarding the transaction.

Sale of Federal Business

On August 27, 2018, the Company sold its federal government IT services business (the "Federal Business"). The results of the Federal Business have been presented as discontinued operations and the related assets and liabilities have been reclassified as held for sale for all periods presented.

CEO Comment

"This quarter presented unique challenges as we dealt with a difficult business environment as well as potentially disruptive deal-related activities," stated Joel Trammell, President and CEO. "I am pleased with the team’s efforts in maintaining a "business as usual" mindset while meeting the challenges of these circumstances. Our results reflect this strong team effort."

Earnings Conference Call

The Company will conduct a conference call beginning at 2:00 p.m. Eastern Time today, November 16, 2018. Joel Trammell, President and Chief Executive Officer, will host the call. To listen only to the live webcast, access the event at http://investor.blackbox.com/events.cfm. To participate in the teleconference, dial 877-303-3145 (USA) or 253-237-1194 (International) approximately 15 minutes prior to the starting time and ask to be connected to conference 2283476. A replay of the audio webcast will be available at http://investor.blackbox.com/events.cfm for a limited period of time.

About Black Box

Black Box is a leading digital solutions provider dedicated to helping customers design, build, manage and secure their IT infrastructure. Black Box delivers high-value products and services through its global presence and 2,849 team members. To learn more, visit the Black Box Web site at http://www.blackbox.com.

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

For more details, view the official investor press release.

Additional Information and Where to Find It

The tender offer described herein has not yet commenced. This document is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell any common stock of the Company or any other securities. On the commencement date of the tender offer, a tender offer statement on Schedule TO, including an offer to purchase, a letter of transmittal and related documents, will be filed with the United States Securities and Exchange Commission (the “SEC”) by AGC, and a solicitation/recommendation statement on Schedule 14D-9 will be filed with the SEC by the Company. The offer to purchase common stock of the Company will only be made pursuant to the offer to purchase, the letter of transmittal and related documents filed as a part of the Schedule TO. THE TENDER OFFER MATERIALS (INCLUDING AN OFFER TO PURCHASE, A RELATED LETTER OF TRANSMITTAL AND CERTAIN OTHER TENDER OFFER DOCUMENTS) AND THE SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 WILL CONTAIN IMPORTANT INFORMATION. STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THESE DOCUMENTS CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION THAT SUCH STOCKHOLDERS SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING TENDERING THEIR SHARES. Investors and security holders may obtain a free copy of these statements (when available) and other documents filed with the SEC at the website maintained by the SEC at www.sec.gov or by directing such requests to the information agent for the tender offer that will be named in the tender offer statement on Schedule TO.

Cautionary Forward-Looking Statements

All of the statements in this document, other than historical facts, are forward-looking statements, including, without limitation, the statements made concerning the pending acquisition of Black Box by the Parent Entities, and are based on a number of assumptions that could ultimately prove inaccurate. Forward-looking statements made herein with respect to the tender offer, the merger and related transactions, including, for example, the timing of the completion of the merger and the potential benefits of the merger, reflect the current analysis of existing information and are subject to various risks and uncertainties. As a result, caution must be exercised in relying on forward-looking statements. Due to known and unknown risks, Black Box’s actual results may differ materially from its expectations or projections. The following factors, among others, could cause actual plans and results to differ materially from those described in forward-looking statements: (i) uncertainties as to the timing of the tender offer and the merger; (ii) uncertainties as to how many Black Box stockholders will tender their shares of Black Box common stock in the tender offer; (iii) the possibility that competing acquisition proposals will be made; (iv) the possibility that Black Box will terminate the merger agreement to enter into an alternative business combination, refinancing, or other recapitalization transaction; (v) the possibility that various closing conditions for the transactions contemplated by the merger agreement may not be satisfied or waived; (vi) the risk that the merger agreement may be terminated in circumstances requiring Black Box to pay a termination fee; (vii) risks related to the filing or filings to be made with CFIUS, and unanticipated developments in related law; (viii) the possibility that the transactions contemplated by the merger agreement may not be timely completed, if at all; (ix) the risk that, prior to the completion of the transactions contemplated by the merger agreement, if at all, Black Box’s business and its relationships with employees, collaborators, vendors and other business partners could experience significant disruption, whether due to uncertainty related to the tender offer, the merger and related transactions or otherwise, continued degradation in Black Box’s financial performance, or other factors; (x) the risk that AGC’s equity financing, debt financing or both are unavailable to complete the tender offer or the merger; (xi) the risk that stockholder litigation in connection with the tender offer or the merger may result in significant costs of defense, indemnification and liability; (xii) the risk that Black Box does not generate sufficient cash flow from operations to meet its obligations during the period prior to the completion of the transactions contemplated by the merger agreement; (xiii) the risks and uncertainties pertaining to Black Box’s business; and (xiv) other factors included elsewhere in Black Box’s public periodic filings with the SEC, as well as the tender offer materials filed and to be filed by AGC and/or its affiliates in connection with the tender offer. Other factors that could cause actual results to differ materially include those set forth in Black Box’s SEC reports, including, without limitation, the risks described in Black Box’s Annual Report on Form 10-K for its fiscal year ended March 31, 2018, Black Box’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 and the Current Report on Form 8-K, filed July 2, 2018, each of which are on file with the SEC. Black Box’s SEC filings are available publicly on the SEC’s website at www.sec.gov, on Black Box’s website at https://www.blackbox.com/ under the Investor Relations section or upon request via phone at 724-873-6788. Black Box disclaims any obligation or undertaking to update or revise the forward-looking statements contained herein, whether as a result of new information, future events or otherwise, except as required by law.

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