BBOX Black Box Corp.

Black Box Corporation (NASDAQ:BBOX) today reported for the Fiscal 2007 first quarter ended July 1, 2006, diluted earnings per share of 43(cents) on net income of $7.8 million or 3.4% of revenues compared to diluted earnings per share of 43(cents) 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(cents) 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(cents) on net income of $10.5 million or 4.6% of revenues compared to diluted earnings per share of 75(cents) 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. 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 DVH(TM) (Data Services, Voice Services and Hotline Technical Services) service offerings 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. -0- *T 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 ======== ======== 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 ---------- --------- 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 --------- -------- 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: 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 ---------------------------------------------------------------------- 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. 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% ---------------------------------------------------------------------- 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% 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 7.2x 7.3x 7.2x Six-month order backlog $168 $ 96 $ 97 Team members 4,752 3,295 3,346 ---------------------------------------------------------------------- *T