EX-99.1 2 l21558aexv99w1.htm EX-99.1 EX-99.1
 

(BLACK BOX LOGO)
Michael McAndrew, Chief Financial Officer
Black Box Corporation
(724) 873-6788
(724) 873-6799 (fax)
Email: investors@blackbox.com
FOR IMMEDIATE RELEASE
BLACK BOX CORPORATION REPORTS FIRST QUARTER FISCAL 2007 RESULTS
- Reports record quarterly revenues of $230 million -
PITTSBURGH, PENNSYLVANIA, August 1, 2006 — Black Box Corporation (NASDAQ:BBOX) today reported for the Fiscal 2007 first quarter ended July 1, 2006 diluted earnings per share of 43¢ on net income of $7.8 million or 3.4% of revenues compared to diluted earnings per share of 43¢ on net income of $7.4 million or 4.1% of revenues for the first quarter a year ago. On a sequential quarter comparison basis, fourth quarter 2006 diluted earnings per share were 26¢ with corresponding net income of $4.7 million or 2.7% of revenues. Excluding the reconciling items and restructuring charges described below, first quarter 2007 diluted earnings per share were 58¢ on net income of $10.5 million or 4.6% of revenues compared to diluted earnings per share of 75¢ on net income of $12.7 million or 7.1% of revenues for the first quarter 2006. Management believes that presenting diluted earnings per share and net income excluding restructuring charges and reconciling items is useful to investors because it provides a more meaningful comparison of the ongoing operations of the Company.
As of April 1, 2006 the Company implemented Financial Accounting Standards Board Statement No. 123R which requires share based compensation to be charged to expense. During the first quarter of Fiscal 2007, the Company’s reconciling items include pre-tax charges of $1.6 million for share based compensation, $1.4 million in acquisition related expenses and charges of $1.1 million in severance expenses. During the first quarter of Fiscal 2006 and as previously disclosed, the Company recorded a pre-tax restructuring charge of $5.3 million and incurred pre-tax non-cash charges of $2.8 million related to acquisitions.
Total revenues for the first quarter were $230 million, an increase of 29% from $179 million for the same period last year. On a sequential comparison basis, fourth quarter 2006 revenues were $175 million.
First quarter cash provided by operating activities was approximately $13 million or 161% of net income, compared to $11 million or 146% for the same period last year. First quarter free cash flow (defined below) was $14 million compared to $11 million last year. On a sequential comparison basis, fourth quarter 2006 cash provided by operating activities was $13 million or 276% of net income and free cash flow was $19 million. Black Box utilized its first quarter free cash flow of $14 million to fund debt reduction of $13 million and a dividend payment 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.
The Company’s 6-month order backlog was $168 million at July 1, 2006 compared to $97 million at the same period last year. On a sequential comparison basis, fourth quarter 2006 6-month order backlog was $96 million.
During the first quarter 2007, Black Box completed two acquisitions. On April 30, 2006, Black Box acquired the USA Commercial and Government and Canadian operations of NextiraOne, LLC (“NextiraOne”) from Platinum Equity, LLC. The acquired operations service commercial and various government agency clients and represent approximately $270 million to $280 million of projected annualized voice services revenues.
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Page 2
On May 1, 2006, Black Box acquired Nu-Vision Technologies, Inc. and Nu-Vision Technologies, LLC (collectively referred to as “NUVT”), which provide planning, installation, monitoring and maintenance services for voice and data network systems. NUVT has an active customer base, which includes commercial, education and various government agency accounts and is expected to provide annual revenues of approximately $55 million.
Commenting on the first quarter results, Fred C. Young, Chief Executive Officer, said, “We are very pleased to have achieved our objective of record revenues for 1Q07. From here, our next objective is to increase profits and cash flows in line with what we have previously outlined. This should result in a marked improvement in these 2 key operating metrics for our 2Q07. And again, we should be able to achieve another level of record revenues.”
Fred C. Young went on to say, “Now at the one billion level of annual revenues, we will aggressively position our DVHTM (Data Services, Voice Services and Hotline Technical Services) and associated cost structures accordingly.”
The Company will conduct a conference call beginning at 5:00 p.m. Eastern Daylight Time today, August 1, 2006. Fred C. Young, Chief Executive Officer, will host the call. To participate in the call, please dial 612-332-1025 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 835638.
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 risk factors, they may include levels of business activity and operating expenses, expenses relating to corporate compliance requirements, cash flows, global economic conditions, successful integration of acquisitions, including the Norstan, Inc. (“Norstan”), NextiraOne and NUVT businesses, the timing and costs of restructuring programs, successful marketing of DVH (Data, Voice, Hotline) 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.
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 175,000 clients in 141 countries with 168 offices throughout the world. To learn more, visit the Black Box website at www.blackbox.com.
Black Box and the Double Diamond logo are registered trademarks and DVH is a trademark of BB Technologies, Inc.
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Page 3
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
                 
    Three months ended  
    July 1,     July 2,  
In thousands, except per share   2006     2005  
Revenue:
               
Hotline products
  $ 52,225     $ 53,452  
On-Site services
    178,170       125,830  
 
           
Total
    230,395       179,282  
 
               
Cost of sales:
               
Hotline products
    25,461       25,874  
On-Site services
    119,090       82,468  
 
           
Total
    144,551       108,342  
 
           
Gross profit
    85,844       70,940  
 
               
Selling, general & administrative expense
    68,573       50,920  
 
               
Restructuring and other charges
          5,290  
 
               
Intangibles amortization
    1,506       1,558  
 
           
 
               
Operating income
    15,765       13,172  
 
               
Interest expense, net
    3,640       1,959  
 
               
Other expenses, net
    115       (75 )
 
           
 
               
Income before provision for income taxes
    12,010       11,288  
 
               
Provision for income taxes
    4,203       3,894  
 
           
 
               
Net income
  $ 7,807     $ 7,394  
 
           
 
               
Basic earnings per common share
  $ 0.44     $ 0.44  
 
           
 
               
Diluted earnings per common share
  $ 0.43     $ 0.43  
 
           
 
               
Weighted average common shares
    17,626       16,845  
 
           
 
               
Weighted average common & common equivalent shares outstanding
    18,262       17,042  
 
           
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Page 4
BLACK BOX CORPORATION
CONSOLIDATED BALANCE SHEETS
                 
    July 1,     March 31,  
In thousands   2006     2006  
Assets
               
Cash and cash equivalents
  $ 14,360     $ 11,207  
Accounts receivable, net
    172,315       116,713  
Lease receivables
    1,071       512  
Inventories, net
    68,243       53,926  
Costs and estimated earnings in excess of billings on uncompleted contracts
    55,400       23,803  
Deferred tax asset
    8,873       8,973  
Net current assets of discontinued operations
    404       467  
Other current assets
    27,187       15,523  
 
           
Total current assets
    347,853       231,124  
 
           
Property, plant and equipment, net
    39,029       35,124  
Goodwill, net
    593,188       468,724  
Customer relationships, net
    54,036       24,657  
Intangibles, net
    35,471       30,783  
Lease receivables, net of current portion
    987        
Deferred tax asset
    3,189       4,231  
Other assets
    3,982       5,091  
 
           
Total assets
  $ 1,077,735     $ 799,734  
 
           
Liabilities
               
Current maturities of long-term debt
  $ 704     $ 1,049  
Current maturities of discounted lease rentals
    9       30  
Accounts payable
    73,753       44,943  
Billings in excess of costs and estimated earnings on uncompleted contracts
    15,483       8,648  
Deferred revenue
    53,365       22,211  
Accrued liabilities:
               
Compensation and benefits
    25,644       13,954  
Restructuring reserve
    16,090       3,292  
Other liabilities
    52,245       27,817  
Deferred tax liability
    6,300       5,924  
 
           
Total current liabilities
    243,593       127,868  
 
           
Long-term debt
    243,886       122,673  
Other liabilities
    16,863       887  
Restructuring reserve
    14,646       7,406  
Stockholders’ Equity
               
Common stock
    25       25  
Additional paid-in capital
    367,618       362,810  
Retained earnings
    468,599       461,853  
Treasury stock, at cost
    (296,824 )     (296,824 )
Accumulated other comprehensive income
    19,329       13,036  
 
           
Total stockholders’ equity
    558,747       540,900  
 
           
Total liabilities and stockholders’ equity
  $ 1,077,735     $ 799,734  
 
           
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Page 5
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
                 
    Three Months Ended  
    July 1,     July 2,  
In thousands   2006     2005  
Operating Activities
               
Net income
  $ 7,807     $ 7,394  
Adjustments to reconcile net income to cash provided by operating activities:
               
Intangibles amortization
    1,506       1,558  
Depreciation
    2,300       2,233  
Deferred tax provision/(benefit)
    1,248       (2,493 )
Stock compensation expense
    1,620        
Tax provision/(benefit) from exercised stock options
    342       (31 )
Changes in operating assets and liabilities:
               
Accounts receivable, net
    11,218       4,785  
Inventories, net
    (1,066 )     5,032  
Other current assets
    (3,111 )     (7,371 )
Proceeds from lease contracts
    312       735  
Accounts payable and accrued liabilities
    (9,569 )     (1,039 )
 
           
Net cash provided by operating activities
  $ 12,607     $ 10,803  
 
           
 
               
Investing Activities
               
Capital expenditures, net
  $ (1,690 )   $ 321  
Acquisition of businesses, net of cash acquired
    (129,161 )     (13,492 )
Prior merger-related (payments)/recoveries
    (1,350 )     44  
 
           
Net cash used in investing activities
  $ (132,201 )   $ (13,127 )
 
           
 
               
Financing Activities
               
Proceeds on borrowings, net
  $ 120,950     $ 3,072  
Repayments on discounted lease rentals
    (21 )     (423 )
Proceeds from exercise of options
    3,530       136  
Payment of dividends
    (1,055 )     (1,011 )
 
           
Net cash provided by financing activities
  $ 123,404     $ 1,774  
Foreign currency exchange impact on cash
    (657 )     (34 )
 
           
Increase/(decrease) in cash and cash equivalents
  $ 3,153     $ (584 )
Cash and cash equivalents at beginning of period
    11,207       11,592  
 
           
Cash and cash equivalents at end of period
  $ 14,360     $ 11,008  
 
           
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Non-GAAP Measurements
The financial information presented in this release contains certain non-GAAP financial measures. Management uses the non-GAAP measures to improve the comparisons between fiscal periods. Management believes the use of the non-GAAP measures improves the investor’s ability to make comparisons between fiscal periods and provides useful information to investors regarding the Company’s financial condition and its results of operations. In accordance with SEC Regulation G, the following financial highlights tables reconcile (1) free cash flow; (2) net income excluding restructuring charges and reconciling items; and (3) diluted EPS excluding restructuring charges and reconciling items; to the most directly comparable U.S. GAAP measures. The additional non-GAAP financial information presented should be considered in conjunction with, and not as a substitute for, or superior to, the financial information presented in accordance with GAAP. All dollar amounts are in thousands.
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. A reconciliation of cash provided by operating activities to free cash flow is presented below:
                         
    1Q07     4Q06     1Q06  
Cash provided by operating activities
  $ 12,607     $ 12,885     $ 10,803  
Capital expenditures
    (1,720 )     (964 )     (492 )
Capital disposals
    30       213       813  
Proceeds from stock option exercises
    3,530       6,976       136  
Foreign currency exchange impact on cash
    (657 )     (76 )     (34 )
 
                 
Free cash flow
  $ 13,790     $ 19,304     $ 11,226  
 
                 
Management believes that presenting net income and diluted earnings per share excluding restructuring charges and reconciling items is useful to investors because it provides a more meaningful comparison of the ongoing operations of the Company. Included in reconciling items are pre-tax charges for share based compensation, acquisition related costs and severance expenses in 1Q07, acquisition-related expenses from the purchase of Norstan and the Italian Operations Adjustment previously disclosed in 4Q06 and acquisition-related expenses from the purchase of Norstan and restructuring charges in 1Q06. A reconciliation of net income to net income excluding restructuring charges and reconciling items is presented below:
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Page 7
                         
    1Q07     4Q06     1Q06  
Net income
  $ 7,807     $ 4,656     $ 7,394  
% of revenues
    3.4 %     2.7 %     4.1 %
Restructuring charges, after tax impact
                3,465  
Reconciling items, after tax impact
    2,709       4,931       1,854  
 
                 
Net income excluding restructuring charges and reconciling items
  $ 10,516     $ 9,587     $ 12,713  
% of revenues
    4.6 %     5.5 %     7.1 %
 
                 
A reconciliation of diluted earnings per common share (EPS) to diluted EPS excluding restructuring charges and reconciling items is presented below:
                         
    1Q07     4Q06     1Q06  
Diluted EPS
  $ 0.43     $ 0.26     $ 0.43  
EPS impact of restructuring charges
                0.20  
EPS impact of reconciling items
    0.15       0.27       0.11  
 
                 
Diluted EPS excluding restructuring charges and reconciling items
  $ 0.58     $ 0.53     $ 0.75  
 
                 
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SUPPLEMENTAL INFORMATION:
Additionally, the following supplemental information is being provided for comparisons of the first quarter ended July 1, 2006 reported results to the prior quarter ended March 31, 2006 and the prior year’s first quarter ended July 2, 2005. 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 restructuring charges and reconciling items. Included in reconciling items are charges for share based compensation, acquisition related costs and severance expenses in 1Q07, acquisition-related expenses from the purchase of Norstan and the Italian Operations Adjustment previously disclosed in 4Q06 and acquisition-related expenses from the purchase of Norstan and restructuring charges in 1Q06. Management believes this enables a clearer understanding of the ongoing operations of the Company and allows the reader to more accurately compare other fiscal periods where the events did not occur.
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Page 9
Information on revenues and operating income for geographical segments is presented below:
                         
    1Q07     4Q06     1Q06  
Revenues:
                       
North America
  $ 192,572     $ 137,912     $ 136,861  
Europe
    29,345       27,152       33,750  
All Other
    8,478       9,804       8,671  
 
                 
Total
  $ 230,395     $ 174,868     $ 179,282  
Operating income:
                       
North America
  $ 11,026     $ 9,414     $ 11,859  
% of North America revenues
    5.7 %     6.8 %     8.7 %
Europe
    3,143       (1,643 )     (367 )
% of Europe revenues
    10.7 %     (6.1 )%     (1.1 )%
All Other
    1,596       1,733       1,680  
% of All Other revenues
    18.8 %     17.7 %     19.4 %
 
                 
Total
  $ 15,765     $ 9,504     $ 13,172  
% of Total revenues
    6.8 %     5.4 %     7.3 %
Restructuring charges and reconciling items:
                       
North America
  $ 4,168     $ 464     $ 4,379  
Europe
          7,065       3,742  
All Other
                 
 
                 
Total
  $ 4,168     $ 7,529     $ 8,121  
Operating income excluding restructuring charges and reconciling items:
                       
North America
  $ 15,194     $ 9,878     $ 16,238  
% of North America revenues
    7.9 %     7.2 %     11.9 %
Europe
    3,143       5,422       3,375  
% of Europe revenues
    10.7 %     20.0 %     10.0 %
All Other
    1,596       1,733       1,680  
% of All Other revenues
    18.8 %     17.7 %     19.4 %
 
                 
Total
  $ 19,933     $ 17,033     $ 21,293  
% of Total revenues
    8.7 %     9.7 %     11.9 %
 
                 
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Page 10
Information on revenues and gross profit for data services, voice services and hotline services is presented below:
                         
    1Q07     4Q06     1Q06  
Revenues:
                       
Data Services
  $ 44,531     $ 44,017     $ 52,901  
Voice Services
    133,639       77,184       72,929  
Hotline Services
    52,225       53,667       53,452  
 
                 
Total
  $ 230,395     $ 174,868     $ 179,282  
 
                       
Gross profit:
                       
Data Services
  $ 13,317     $ 11,268     $ 15,524  
% of Data Services revenues
    29.9 %     25.6 %     29.3 %
Voice Services
    45,763       28,400       27,838  
% of Voice Services revenues
    34.2 %     36.8 %     38.2 %
Hotline Services
    26,764       24,458       27,578  
% of Hotline Services revenues
    51.2 %     45.6 %     51.6 %
 
                 
Total
  $ 85,844     $ 64,126     $ 70,940  
% of Total revenues
    37.3 %     36.7 %     39.6 %
 
                       
Reconciling items:
                       
Data Services
  $     $ 2,071     $  
Voice Services
                 
Hotline Services
          1,517        
 
                 
Total
  $     $ 3,588     $  
 
                       
Gross profit excluding reconciling items:
                       
Data Services
  $ 13,317     $ 13,339     $ 15,524  
% of Data Services revenues
    29.9 %     30.3 %     29.3 %
Voice Services
    45,763       28,400       27,838  
% of Voice Services revenues
    34.2 %     36.8 %     38.2 %
Hotline Services
    26,764       25,975       27,578  
% of Hotline Services revenues
    51.2 %     48.4 %     51.6 %
 
                 
Total
  $ 85,844     $ 67,714     $ 70,940  
% of Total revenues
    37.3 %     38.7 %     39.6 %
 
                 
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Page 11
Information on revenues on a same-office basis compared to prior year is presented below:
                         
    1Q07     1Q06     Change  
Revenues as reported
  $ 230,395     $ 179,282       29 %
Less revenues from offices added since 1Q06
    (76,099 )     (7,437 )        
 
                   
Revenues on same-office basis
  $ 154,296     $ 171,845       (10 )%
 
                   
Information on revenues on a same-office basis compared to prior quarter is presented below:
                         
    1Q07     4Q06     Change  
Revenues as reported
  $ 230,395     $ 174,868       32 %
Less revenues from offices added since 4Q06
    (60,158 )            
 
                   
Revenues on same-office basis
  $ 170,237     $ 174,868       (3 )%
 
                   
Information on various balance sheet ratios, backlog and headcount is presented below. Dollar amounts are in millions.
                         
    1Q07     4Q06     1Q06  
Accounts receivable:
                       
Gross accounts receivable $
  $ 188.2     $ 126.2     $ 122.7  
 
                       
Reserve $ / %
  $ 15.9 /8.5%   $ 9.5 /7.5%   $ 7.6 /6.2%
Net accounts receivable $
  $ 172.3     $ 116.7     $ 115.1  
 
                       
Net days sales outstanding
  57 days   54 days   55 days
 
                       
Inventory:
                       
Gross inventory $
  $ 93.9     $ 68.2     $ 64.8  
Reserve $ / %
  $ 25.7 /27.4%   $ 14.3 /21.0%   $ 12.3 /19.0%
Net inventory $
  $ 68.2     $ 53.9     $ 52.5  
Net inventory turns
    7.2 x     7.3 x     7.2 x
 
                       
Six-month order backlog
  $ 168     $ 96     $ 97  
 
                       
Team members
    4,752       3,295       3,346  
 
                 
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