BBOX Black Box Corp.

Please replace the release dated May 26, 2005 with the following corrected version due to revisions. The corrected release reads: 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 cents 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 cents 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 cents per share in FY06 and 5 cents 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 cents to 18 cents 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. 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 website at www.blackbox.com. Black Box and the Double Diamond logo are registered trademarks of BB Technologies, Inc. -0- *T 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 ----------------------------------------- *T RECONCILIATIONS: In addition to reported results under U.S. GAAP for the fiscal periods, the following financial highlights tables 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: -0- *T 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 ---------------------------------------------------------------------- *T A reconciliation of diluted earnings per common share (EPS) to diluted EPS excluding restructuring and other charges and reconciling items is presented below: -0- *T 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 ---------------------------------------------------------------------- *T A reconciliation of net income to net income excluding restructuring and other charges and reconciling items is presented below: -0- *T 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% ---------------------------------------------------------------------- *T A reconciliation of operating income to EBITDA is presented below: -0- *T 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% ---------------------------------------------------------------------- *T 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. -0- *T 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% ---------------------------------------------------------------------- *T Information on revenues and gross profit for data services, voice services and hotline services is presented below: -0- *T 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% ---------------------------------------------------------------------- *T Information on revenues on a same-office basis is presented below: -0- *T 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)% ---------------------------------------------------------------------- *T Information on various balance sheet ratios, backlog and headcount is presented below. Dollar amounts are in millions. -0- *T 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 ---------------------------------------------------------------------- *T