Black Box Corporation (NASDAQ:BBOX) today reported results for
the fourth quarter of Fiscal 2009 ended March 31, 2009.
For the fourth quarter of Fiscal 2009, diluted earnings per
share were 48� on net income of $8.4 million or 3.5% of revenues
compared to diluted earnings per share of 48� on net income of $8.4
million or 3.4% of revenues for the same quarter last year. On a
sequential quarter comparison basis, third quarter of Fiscal 2009
diluted earnings per share were 56� on net income of $9.8 million
or 3.8% of revenues. Excluding reconciling items, operating
earnings per share (which is a non-GAAP term and is defined below)
for the fourth quarter of Fiscal 2009 were 96� on operating net
income (which is a non-GAAP term and is defined below) of $16.8
million or 6.9% of revenues compared to operating earnings per
share of 74� on operating net income of $13.1 million or 5.3% of
revenues for the same quarter last year. Management believes that
presenting operating earnings per share and operating net income is
useful to investors because it provides a more meaningful
comparison of the ongoing operations of the Company.
For the fourth quarter of Fiscal 2009, the Company�s pre-tax
reconciling items were $12.4 million with an after-tax impact on
net income and EPS of $8.4 million and 48�, respectively. During
the fourth quarter of Fiscal 2008, as previously disclosed, the
Company�s pre-tax reconciling items were $7.8 million with an
after-tax impact on net income and EPS of $4.7 million and 26�,
respectively. See below for further discussion regarding
Management�s use of non-GAAP accounting measurements and a detailed
presentation of the Company�s pre-tax reconciling items for the
periods presented above. Included in our fourth quarter and Fiscal
2009 results is the impact of a decrease in our annual effective
tax rate from our previous estimate of 36.5% to the actual
effective tax rate of 34.5%, resulting in an effective tax rate of
23.8% for the fourth quarter of Fiscal 2009. This tax rate
reduction is primarily the result of a favorable resolution of a
previously-reserved Internal Revenue Service audit item. The
effective tax rate reduction increased fourth quarter and Fiscal
2009 operating earnings per share by 11�.
Fourth quarter of Fiscal 2009 total revenues were $241 million,
a decrease of $4 million or 2% from $245 million for the same
quarter last year. On a sequential quarter comparison basis, third
quarter of Fiscal 2009 total revenues were $262 million.
Fourth quarter of Fiscal 2009 cash provided by operating
activities was $20 million or 237% of net income, compared to $44
million or 529% of net income for the same quarter last year.
Fourth quarter of Fiscal 2009 free cash flow (which is a non-GAAP
term and is defined below) was $19 million compared to $43 million
for the same quarter last year. On a sequential quarter comparison
basis, third quarter of Fiscal 2009 cash provided by operating
activities was $13 million or 136% of net income and free cash flow
was $11 million. Black Box utilized its fourth quarter of Fiscal
2009 free cash flow primarily to fund acquisition activity of $18
million and to pay dividends 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 stock 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.
Fiscal 2009 diluted earnings per share were $2.59 on net income
of $45.3 million or 4.5% of revenues compared to diluted earnings
per share of $2.22 on net income of $39.2 million or 3.9% of
revenues for the same period last year. Excluding reconciling
items, operating earnings per share for Fiscal 2009 were $3.51 on
operating net income of $61.4 million or 6.1% of revenues compared
to operating earnings per share of $3.20 on operating net income of
$56.5 million or 5.6% of revenues for the same period last
year.
For Fiscal 2009, the Company�s pre-tax reconciling items were
$24.6 million with an after-tax impact on net income and EPS of
$16.1 million and 92�, respectively. For Fiscal 2008, as previously
disclosed, the Company�s pre-tax reconciling items were $27.9
million with an after-tax impact on net income and EPS of $17.2
million and 98�, respectively.
Fiscal 2009 total revenues were $1.0 billion, a decrease of $17
million or 2% from $1.02 billion for the same period last year.
Fiscal 2009 cash provided by operating activities was $72
million or 158% of net income compared to $81 million or 207% of
net income for the same period last year. Free cash flow was $68
million compared to $81 million for the same period last year.
Black Box utilized its Fiscal 2009 free cash flow primarily to fund
current and prior period acquisition activity of $64 million and to
pay dividends of $4 million.
The Company�s six-month order backlog was $194 million at March
31, 2009 compared to $159 million for the same quarter last year.
On a sequential quarter end comparison basis, the Company�s
six-month order backlog was $195 million at December 27, 2008.
For the first quarter of Fiscal 2010, the Company is targeting
reported revenues of approximately $220 million to $225 million and
corresponding operating earnings per share in the range of 63� to
68�. Included in these projections is an effective tax rate of
37.5%.
All of the above exclude acquisition-related expense, employee
severance costs, historical stock option granting practices
investigation and related matters costs and the impact of changes
in the fair market value of the Company�s interest-rate swap, and
all of the above are before any new mergers and acquisition
activity that has not been announced. The Company has traditionally
excluded stock-based compensation expense from its projections but
will include such expenses prospectively.
Commenting on Fiscal 2009 results and the first quarter of
Fiscal 2010 outlook, Terry Blakemore, President and Chief Executive
Officer said, "I am pleased with Black Box's achievements for both
the fourth quarter and Fiscal 2009. Our experienced management team
has been proactive in implementing financial and operational
programs in this challenging economic environment. We worked with
our customers to introduce our DVH� solution suite into new markets
and drive revenue with our innovative product offerings and
world-class technical service. In addition to our top-line goals,
we have and will continue to maintain our disciplined approach
towards cost and expense management. While implementing headcount
reductions, we have used the opportunity to create efficiencies in
our organization including the consolidation of back office
functions as well as real estate cost savings.
�Our focus on balance sheet management and strong positive cash
flow continues to provide the resources to implement our
previously-stated strategy of expanding through selective strategic
acquisitions. I am confident that Black Box is well positioned to
leverage its financial and operating strengths and will emerge from
the current economic environment as a stronger force in the
industry.�
The Company will conduct a conference call beginning at 5:00
p.m. Eastern Daylight Time today, May 21, 2009. Terry Blakemore,
President and 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 978968. A live audio webcast of
the conference call will be available. To access the webcast,
please visit the Investor Relations section of the Black Box
website at www.blackbox.com. Please login approximately 10 minutes
prior to the start of the conference call.
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 192 offices
throughout the world. To learn more, visit the Black Box Web site
at http://www.blackbox.com.
Black Box�, the Double Diamond logo and DVH� are registered
trademarks of BB Technologies, Inc.
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 and speak only as of the
date of this release. 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 the timing and final outcome of the
ongoing review of the Company�s stock option practices, including
the related Securities and Exchange Commission (�SEC�)
investigation, shareholder derivative lawsuit and tax matters, and
the impact of any actions that may be required or taken as a result
of such review, SEC investigation, shareholder derivative lawsuit
or tax matters, levels of business activity and operating expenses,
expenses relating to corporate compliance requirements, cash flows,
global economic and business conditions, successful integration of
acquisitions, the timing and costs of restructuring programs,
successful marketing of DVH (Data, Voice, Hotline) services,
successful implementation of our M&A program, including
identifying appropriate targets, consummating transactions and
successfully integrating the businesses, successful implementation
of our government contracting programs, competition, changes in
foreign, political and economic conditions, fluctuating foreign
currencies compared to the U.S. dollar, rapid changes in
technologies, client preferences, the Company�s arrangements with
suppliers of voice equipment and technology and various other
matters, many of which are beyond the Company's control. Additional
risk factors are included in the Company�s Annual Report on Form
10-K for the fiscal year ended March 31, 2008. 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
CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF
INCOME
� �
Three-months ended
March 31,
Fiscal Year ended
March 31,
In thousands, except per share amounts � �
2009 � �
2008 � �
2009 � �
2008 � �
Revenues
Hotline products $ 45,785 $ 60,287 $ 209,793 $ 235,314 On-Site
services � 195,547 � 185,210 � � 789,755
�
781,428 � Total 241,332 245,497 999,548 1,016,742 �
Cost of
sales Hotline products 24,282 30,301 108,561 122,011 On-Site
services � 131,987 � 126,216 � � 533,807 � 528,111 � Total 156,269
156,517 642,368 650,122 �
Gross profit 85,063
88,980 357,180 366,620 � Selling, general
& administrative expenses 68,105 67,260 266,387 275,309
Intangibles amortization � 3,803 � 1,635 � � 10,790 � 6,679 � �
Operating income 13,155 20,085 80,003
84,632 � Interest expense (income), net 2,174 6,095 10,279
21,298 Other expenses (income), net � 18 � (41 ) � 561 � (197 ) �
Income before provision for income taxes 10,963 14,031 69,163
63,531 � Provision for income taxes � 2,613 � 5,637 � � 23,854 �
24,298 � �
Net income $
8,350 $
8,394 � $
45,309 $
39,233 � � Earnings per common share Basic $
0.48 $ 0.48 � $ 2.59 $ 2.23 � Diluted $ 0.48 $ 0.48 � $ 2.59 $ 2.22
� � Weighted average common shares outstanding Basic � 17,533 �
17,614 � � 17,527 � 17,605 � Diluted � 17,533 � 17,616 � � 17,527 �
17,653 � � Dividends per share � $ 0.06 � $ 0.06 � � $ 0.24 � $
0.24 � �
BLACK BOX
CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS
� �
In thousands, except par value � �
March 31, 2009
� �
March 31, 2008 �
Assets Cash and cash equivalents
$ 23,720 $ 26,652 Accounts receivable, net 163,975 162,289
Inventories, net 55,898 67,537 Costs/estimated earnings in excess
of billings on uncompleted contracts 66,066 58,611 Prepaid and
other current assets � 30,809 � � 31,529 �
Total current
assets 340,468 346,618 � Property, plant and
equipment, net 28,419 32,822 Goodwill 621,948 586,856 Intangibles
Customer relationships, net 105,111 67,331 Other intangibles, net
37,684 32,524 Other assets � 2,858 � � 7,700 �
Total assets
$
1,136,488 � $
1,073,851 � �
Liabilities
Accounts payable $ 79,021 $ 71,670 Accrued compensation and
benefits 30,446 22,654 Deferred revenue 35,520 37,467 Billings in
excess of costs/estimated earnings on uncompleted contracts 18,217
19,946 Income taxes 5,164 13,810 Other liabilities � 41,891 � �
47,040 �
Total current liabilities 210,259
212,587 � Long-term debt 249,260 195,904 Other liabilities �
29,670 � � 25,086 �
Total liabilities 489,189
433,577 �
Stockholders' equity Common stock 25 25
Additional paid-in capital 445,774 443,380 Retained earnings
521,023 479,921 Accumulated other comprehensive income 3,572 40,043
Treasury stock � (323,095 ) � (323,095 )
Total stockholders'
equity �
647,299
� �
640,274 � �
Total liabilities and stockholders'
equity $
1,136,488 � $
1,073,851 � �
BLACK BOX
CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
� �
Three-months ended
March 31,
Fiscal Year ended
March 31,
In thousands � �
2009 �
2008 � �
2009 �
2008 �
Operating Activities Net income $ 8,350 $
8,394 $ 45,309 $ 39,233 Adjustments to reconcile net income to net
cash provided by (used for) operating activities Intangibles
amortization and depreciation 6,289 4,273 20,722 17,737 Loss (gain)
on sale of property 19 21 (65 ) 462 Deferred taxes 4,602 791 4,512
4,901 Tax impact from stock options 58 2,472 1,193 6,792 Stock
compensation expense 805 498 3,042 3,217 Change in fair value of
interest-rate swap (533 ) 2,555 (974 ) 4,576 Changes in operating
assets and liabilities (net of acquisitions) Accounts receivable,
net 11,795 18,345 26,279 4,852 Inventories, net 6,270 7,124 11,455
7,829 All other current assets excluding deferred tax asset (307 )
2,569 (11,933 ) 12,328 Liabilities exclusive of long-term debt �
(17,545 ) � (2,657 ) � (27,974 ) � (20,806 )
Net cash provided
by (used for) operating activities $
19,803 $
44,385 $
71,566 $
81,121 �
Investing
Activities Capital expenditures $ (325 ) $ (829 ) $ (2,178 ) $
(3,241 ) Capital disposals 120 19 288 105 Acquisition of businesses
(payments)/recoveries (20,650 ) (3,056 ) (117,184 ) (13,713 ) Prior
merger-related (payments)/recoveries � (159 ) � (1,236 ) � (421 ) �
(3,432 )
Net cash provided by (used for) investing
activities $
(21,014 ) $
(5,102 ) $
(119,495 ) $
(20,281 ) �
Financing
Activities Proceeds from borrowings $ 70,905 $ 43,475 $ 308,567
$ 196,750 Repayment of borrowings (67,091 ) (67,652 ) (257,470 )
(240,030 ) Proceeds from the exercise of stock options -- 706 545
5,878 Deferred financing costs -- (471 ) (125 ) (471 ) Payment of
dividends (1,052 ) (1,060 ) (4,206 ) (4,225 ) Purchase of treasury
stock � -- � � (6,059 ) � -- � � (6,062 )
Net cash provided by
(used for) financing activities $
2,762 $
31,061
$
47,311 $
(48,160 ) �
Foreign currency
exchange impact on cash $
(388 ) $
(1,679
) $
(2,314 ) $
(3,185 ) �
Increase / (decrease) in cash and cash equivalents $
1,163 $
6,543 $
(2,932 ) $
9,495
Cash and cash equivalents at beginning of period $ 22,557 � $
20,109 � $ 26,652 � $ 17,157 � Cash and cash equivalents at end of
period $ 23,720 � $ 26,652 � $ 23,720 � $ 26,652 �
Non-GAAP Financial
Measures
As a supplement to United States Generally Accepted Accounting
Principles (�GAAP�), the Company provides non-GAAP financial
measures such as free cash flow, cash provided by operating
activities excluding restructuring payments (see below for
reference), operating net income, operating earnings per share,
Earnings Before Interest, Taxes, Depreciation and Amortization
(�EBITDA�), Adjusted EBITDA, adjusted operating income and
same-office revenue comparisons to illustrate the Company's
operational performance. These non-GAAP financial measures exclude
the impact of certain items and, therefore, have not been
calculated in accordance with GAAP. Pursuant to the requirements of
Regulation G, the Company has provided Management explanations
regarding their use and the usefulness of non-GAAP financial
measures, definitions of the non-GAAP financial measures and
reconciliations to the most directly comparable GAAP financial
measures, which are provided below.
Management uses non-GAAP financial measures (a) to evaluate the
Company's historical and prospective financial performance as well
as its performance relative to its competitors, (b) to set internal
sales targets and associated operating budgets, (c) to allocate
resources, (d) to measure operational profitability and (e) as an
important factor in determining variable compensation for
Management and its team members. Moreover, the Company has
historically reported these non-GAAP financial measures as a means
of providing consistent and comparable information with past
reports of financial results.
While Management believes these non-GAAP financial measures
provide useful supplemental information to investors, there are
limitations associated with the use of non-GAAP financial measures.
The limitations include (i) the non-GAAP financial measures are not
prepared in accordance with GAAP, are not reported by all of the
Company's competitors and may not be directly comparable to
similarly-titled measures of the Company's competitors due to
potential differences in the exact method of calculation, (ii) the
non-GAAP financial measures exclude costs for employee severance
and facility consolidations (�employee severance and facility
consolidations costs�) incurred during the periods reported in an
attempt to right-size the organization and more appropriately align
the expense structure with anticipated revenues and changing market
demand for its solutions and services that will impact future
operating results, (iii) the non-GAAP financial measures exclude
certain costs, incurred during the periods reported as a result of
past acquisitions, including restructuring, severance and other
integration costs (collectively referred to as �acquisition
integration costs�) that will impact future operating results, (iv)
the non-GAAP financial measures exclude certain non-cash
amortization of intangible assets on acquisitions, however, they do
not specifically exclude the added benefits of these costs, such as
revenue and contributing operating margin, (v) the non-GAAP
financial measures exclude non-cash stock-based compensation
charges, which are similar to cash compensation paid to employees
and are an integral part of achieving our operating results, (vi)
the non-GAAP financial measures exclude non-cash asset write-up
depreciation expense on acquisitions related to acquisitions made
during recent years which is derived from the book value to fair
market value write-up on acquired assets, (vii) the non-GAAP
financial measures exclude historical stock option granting
practices investigation costs, including costs associated with the
related SEC investigation, shareholder derivative lawsuit and tax
matters, (viii) the non-GAAP financial measures exclude the
non-cash change in fair value of the interest-rate swap which will
continue to impact the Company�s earnings until the interest-rate
swap is settled, (ix) the non-GAAP financial measures exclude
expenses incurred as a result of measures taken by the Company to
address the application of Section 409A of the Internal Revenue
Code of 1986, as amended (hereinafter referred to as �409A
expenses�) and (x) there is no assurance the excluded items in the
non-GAAP financial measures will not occur in the future. The
Company compensates for these limitations by using these non-GAAP
financial measures as supplements to GAAP financial measures and by
reviewing the reconciliations of the non-GAAP financial measures to
their most comparable GAAP financial measures.
Non-GAAP financial measures are not in accordance with, or an
alternative for, GAAP. The Company's non-GAAP financial measures
are not meant to be considered in isolation or as a substitute for
comparable GAAP financial measurements, and should be read only in
conjunction with the Company's consolidated financial statements
prepared in accordance with GAAP.
Free cash flow
Free cash flow is defined by the Company as cash provided by
operating activities less net capital expenditures, plus proceeds
from stock option exercises, plus or minus foreign currency
translation adjustments. Management�s reasons for exclusion of each
item are explained in further detail below.
Net capital
expenditures
The Company believes net capital expenditures must be taken into
account along with cash provided by operating activities to more
properly reflect the actual cash available to the Company. Net
capital expenditures are typically material and directly impact the
availability of the Company�s operating cash. Net capital
expenditures are comprised of capital expenditures and capital
disposals.
Proceeds from stock option
exercises
The Company believes that proceeds from stock option exercises
should be added to cash provided by operating activities to more
accurately reflect the actual cash available to the Company. The
Company has demonstrated a recurring inflow of cash related to its
stock-based compensation plans and, since this cash is immediately
available to the Company, it directly impacts the availability of
the Company�s operating cash. The amount of proceeds from stock
option exercises is dependent upon a number of variables, including
the number and exercise price of outstanding options and the
trading price of the Company's common stock. In addition, the
timing of stock option exercises is under the control of the
individual option holder and is not in the control of the Company.
As a result, there can be no assurance as to the timing or amount
of any proceeds from stock option exercises.
Foreign currency translation
adjustment
Due to the size of the Company�s international operations, and
the ability of the Company to utilize cash generated from foreign
operations locally without the need to convert such currencies to
U.S. dollars on a regular basis, the Company believes that it is
appropriate to adjust its operating cash flows to take into account
the positive and/or negative impact of such charges as such
adjustment provides an appropriate measure of the availability of
the Company�s operating cash on a world-wide basis. A limitation of
adjusting cash flows to account for the foreign currency impact is
that it may not provide an accurate measure of cash available in
U.S. dollars.
A reconciliation of cash provided by operating activities to
free cash flow is presented below:
� � �
4Q09 � �
3Q09 � �
4Q08 � �
FY09 �
�
FY08 Cash provided by operating activities � $ 19,803 � $
13,378 � $ 44,385 � $ 71,566 � $ 81,121 Capital expenditures (325 )
(329 ) (829 ) (2,178 ) (3,241 ) Capital disposals 120 64 19 288 105
Foreign currency exchange impact on cash � (388 ) � � (1,999 ) � �
(1,679 ) � (2,314 ) � � (3,185 ) Free cash flow before stock option
exercises $ 19,210 $ 11,114 $ 41,896 $ 67,362 $ 74,800 Proceeds
from stock option exercises � -- � � � -- � � � 706 � � 545 � � �
5,878 � Free cash flow � $ 19,210 � � $ 11,114 � � $ 42,602 � � $
67,907 � � $ 80,678 �
Cash provided by operating activities excluding restructuring
payments
Cash provided by operating activities excluding restructuring
payments is defined by the Company as cash provided by operating
activities plus restructuring payments. Restructuring payments are
the cash payments made during the period for employee severance
costs and/or acquisition integration costs. The Company believes
that restructuring payments should be added to cash provided by
operating activities to more accurately reflect the cash flow from
operations.
A reconciliation of cash provided by operating activities to
cash provided by operating activities excluding restructuring
payments is presented below:
� � �
4Q09 � �
3Q09 � �
4Q08 � �
FY09 �
�
FY08 Cash provided by operating activities � $ 19,803 � $
13,378 � $ 44,385 � $ 71,566 � $ 81,121 Restructuring payments �
4,339 � � 2,314 � � 2,758 � 11,941 � � 13,273 Cash provided by
operating activities excluding restructuring payments � $ 24,142 �
$ 15,692 � $ 47,143 � $ 83,507 � $ 94,394
Operating net income and operating earnings per share
(�EPS�)
Management believes that operating net income, defined by the
Company as net income plus reconciling items, and operating EPS,
defined as operating net income divided by weighted average common
shares outstanding (diluted), provide investors additional
important information to enable them to assess, in a way Management
assesses, the Company�s current and future operations. Reconciling
items include employee severance and facility consolidation costs,
acquisition integration costs, amortization of intangible assets on
acquisitions, stock-based compensation expense, asset write-up
depreciation expense on acquisitions, historical stock option
granting practices investigation and related matters costs, the
change in fair value of the interest-rate swap and 409A expenses.
Management�s reason for exclusion of each item is explained in
further detail below.
Employee severance and facility
consolidation costs
The Company believes that incurring costs in the current
period(s) in an attempt to right-size the organization and more
appropriately align the expense structure with anticipated revenues
and changing market demand for its solutions and services will
result in a long-term positive impact on financial performance in
the future. Employee severance and facility consolidation costs are
presented in accordance with GAAP in the Company�s Condensed
Consolidated Statements of Income. However, due to the material
amount of additional costs incurred during a single or possibly
successive periods, Management believes that exclusion of these
costs and their related tax impact provides a more accurate
reflection of the Company�s ongoing financial performance.
Acquisition integration
costs
The Company believes that incurring costs in the current
period(s) as part of a restructuring plan or as a result of
economies of scale from acquisitions will result in a long-term
positive impact on financial performance in the future. Acquisition
integration costs are presented in accordance with GAAP in the
Company�s Condensed Consolidated Statements of Income. However, due
to the material amount of additional costs incurred during a single
or possibly successive periods, Management believes that exclusion
of these costs and their related tax impact provides a more
accurate reflection of the Company�s ongoing financial
performance.
Amortization of intangible assets
on acquisitions
The Company incurs non-cash amortization expense from intangible
assets related to various acquisitions it has made in recent years.
Management excludes these expenses and their related tax impact for
the purpose of calculating non-GAAP financial measures when it
evaluates the continuing operational performance of the Company
because these costs are fixed at the time of an acquisition, are
then amortized over a period of several years after the acquisition
and generally cannot be changed or influenced by Management after
the acquisition.
Stock-based compensation
expense
The Company records non-cash stock-based compensation expense
equal to the fair value of share-based payment awards to its
directors, executives and employees. Non-cash stock-based
compensation is an integral part of ongoing operations since it is
considered similar to other types of compensation to employees.
However, Management believes that varying levels of stock-based
compensation expense could result in misleading period-over-period
comparisons and is providing an adjusted disclosure which excludes
stock-based compensation and its related tax impact.
Asset write-up depreciation
expense on acquisitions
The Company incurs non-cash asset write-up depreciation expense
on acquisitions related to acquisitions made during recent years.
Specifically, this non-cash expenditure is derived from the book
value to fair market value write-up on acquired assets. Asset
write-ups are depreciated over their remaining useful life which
generally falls between one to five years. Management excludes
these expenses and their related tax impact for the purpose of
calculating non-GAAP financial measures when it evaluates the
continuing operational performance of the Company because these
costs are fixed from acquisition to the end of the asset�s useful
life, and generally cannot be changed or influenced by Management
after the acquisition.
Historical stock option granting
practices investigation and related matters costs
The Company incurs costs in connection with its investigation of
historical stock option granting practices, including the related
SEC investigation, shareholder derivative lawsuit and tax matters.
Management excludes these expenses and their related tax impact for
the purpose of calculating non-GAAP financial measures when it
evaluates the continuing operational performance of the Company
because these costs are generally non-recurring and cannot be
changed or influenced by Management.
Change in fair value of the
interest-rate swap
To mitigate the risk of interest-rate fluctuations associated
with the Company�s variable rate debt, the Company entered into a
five-year interest-rate swap (�interest-rate swap�) that does not
qualify as a cash flow hedge. Thus, the Company records the change
in fair value of the interest-rate swap as an asset/liability
within the Company�s Condensed Consolidated Balance Sheets with the
offset to Interest expense (income) within the Company�s Condensed
Consolidated Statements of Income. Management excludes this
non-cash expense and the related tax impact for the purpose of
calculating non-GAAP financial measures when it evaluates the
continuing operational performance of the Company because these
costs generally cannot be changed or influenced by Management.
409A expenses
The Company incurred significant costs as a result of measures
taken to address the application of Section 409A of the Internal
Revenue Code of 1986, as amended, related to its stock options.
Management excludes these expenses and their related tax impact for
the purpose of calculating non-GAAP financial measures when it
evaluates the continuing operational performance of the Company
because these costs are generally non-recurring and cannot be
changed or influenced by Management.
The following table represents the Company�s pre-tax reconciling
items:
� � �
4Q09 � �
3Q09 � �
4Q08 � �
FY09 �
�
FY08
Non-cash charges � � � � � Amortization of intangible assets
on acquisitions $ 3,785 $ 3,231 $ 1,599 $ 10,671 $ 6,501
Stock-based compensation expense 805 855 498 3,042 3,217 Asset
write-up depreciation expense on acquisitions 507 485 614 1,888
2,178 Change in fair value of interest-rate swap � (533 ) � � 2,436
� � 2,555 � (974 ) � � 4,576
Total Non-cash charges $ 4,564
$ 7,007 $ 5,266 $ 14,627 $ 16,472 �
Cash charges Employee
severance and facility consolidations costs $ 6,946 $ 1,697 $ -- $
8,643 $ -- Acquisition integration costs -- -- 2,255 -- 8,671
Historical stock option granting practices investigation and
related matters costs 939 88 69 1,359 1,221 409A expenses � -- � �
� -- � � 183 � -- � � � 1,524
Total Cash charges $ 7,885 � �
$ 1,785 � $ 2,507 $ 10,002 � � $ 11,416 �
Total pre-tax
reconciling items � $ 12,449 � � $ 8,792 � $ 7,773 � $ 24,629 �
� $ 27,888
A reconciliation of net income to operating net income is
presented below:
� � �
4Q09 � �
3Q09 � �
4Q08 � �
FY09 �
�
FY08
Net income � $ 8,350 � $ 9,827 � $ 8,394 � $ 45,309 � $ 39,233 % of
Revenue 3.5 % 3.8 % 3.4 % 4.5 % 3.9 % Reconciling items, after tax
� 8,400 � � � 5,583 � � � 4,662 � � 16,135 � � � 17,222 � Operating
net income $ 16,750 $ 15,410 $ 13,056 $ 61,444 $ 56,455 % of
Revenue � � 6.9 % � � 5.9 % � � 5.3 % � � 6.1 % � � 5.6 %
A reconciliation of diluted EPS to operating EPS is presented
below:
� � �
4Q09 � �
3Q09 � �
4Q08 � �
FY09 �
�
FY08
Diluted EPS � $ 0.48 � $ 0.56 � $ 0.48 � $ 2.59 � $ 2.22 EPS impact
of reconciling items � 0.48 � � 0.32 � � 0.26 � 0.92
�
� 0.98 Operating EPS � $ 0.96 � $ 0.88 � $ 0.74 � $ 3.51 � $ 3.20
EBITDA and Adjusted EBITDA
Management believes that EBITDA, defined as income before
provision for income taxes plus interest, depreciation and
amortization, is a widely accepted measure of profitability that
may be used to measure the Company�s ability to service its debt.
Adjusted EBITDA, defined as EBITDA plus stock-based compensation
expense, may also be used to measure the Company�s ability to
service its debt.
A reconciliation of net income to EBITDA is presented below:
� � �
4Q09 � �
3Q09 � �
4Q08 � �
FY09 �
�
FY08
Income before provision for income taxes � $ 10,963 � $ 15,474 � $
14,031 � $ 69,163 � $ 63,531 Interest 2,174 5,722 6,095 10,279
21,298 Depreciation/Amortization � 6,289 � � 5,834 � � 4,273 �
20,722 � � 17,737 EBITDA $ 19,426 $ 27,030 $ 24,399 $ 100,164 $
102,566 Stock-based compensation expense � 805 � � 855 � � 498 �
3,042 � � 3,217 Adjusted EBITDA � $ 20,231 � $ 27,885 � $ 24,897 �
$ 103,206 � $ 105,783
Supplemental
Information
The following supplemental information, including geographical
segment results, service type results, same-office revenue
comparisons and significant balance sheet ratios and other
information is being provided for comparisons of reported results
for the fourth quarter of Fiscal 2009 and 2008, third quarter of
Fiscal 2009 and/or Fiscal 2009 and 2008. All dollar amounts are in
thousands unless noted otherwise.
Geographical Segment Results
Management is presented with and reviews revenues, operating
income and adjusted operating income by geographical segment.
Adjusted operating income is defined by the Company as operating
income plus reconciling items. Reconciling items include employee
severance and facility consolidation costs, acquisition integration
costs, amortization of intangible assets on acquisitions,
stock-based compensation expense, asset write-up depreciation
expense on acquisitions, historical stock option granting practices
investigation and related matters costs and 409A expenses. See
above for additional details provided by Management regarding
non-GAAP financial measures. Revenues, operating income and
adjusted operating income for North America, Europe and All Other
are presented below:
� � �
4Q09 � �
3Q09 � �
4Q08 � �
FY09 �
�
FY08
Revenues � � � � � North America $ 207,248 $ 223,820 $
199,763 $ 838,871 $ 837,402 Europe 25,727 28,591 35,119 121,839
138,927 All Other � 8,357 � � � 9,442 � � � 10,615 � � 38,838 � � �
40,413 � Total $ 241,332 $ 261,853 $ 245,497 $ 999,548 $ 1,016,742
�
Operating income North America $ 9,737 $ 17,267 $ 12,998 $
61,651 $ 57,964 % of North America revenues 4.7 % 7.7 % 6.5 % 7.3 %
6.9 % Europe $ 2,397 $ 2,882 $ 5,072 $ 12,548 $ 19,278 % of Europe
revenues 9.3 % 10.1 % 14.4 % 10.3 % 13.9 % All Other $ 1,021 $
1,423 $ 2,015 $ 5,804 $ 7,390 % of All Other revenues � 12.2 % � �
15.1 % � � 19.0 % � 14.9 % � � 18.3 % Total $ 13,155 $ 21,572 $
20,085 $ 80,003 $ 84,632 % of Total revenues 5.5 % 8.2 % 8.2 % 8.0
% 8.3 % �
Reconciling items (pretax) North America $ 11,657
$ 5,878 $ 5,218 $ 23,800 $ 23,312 Europe 1,112 465 -- 1,577 -- All
Other � 213 � � � 13 � � � -- � � 226 � � � -- � Total $ 12,982 $
6,356 $ 5,218 $ 25,603 $ 23,312 �
Adjusted Operating income
�
North America $ 21,394 $ 23,145 $ 18,216 $ 85,451 $ 81,276 % of
North America revenues 10.3 % 10.3 % 9.1 % 10.2 % 9.7 % Europe $
3,509 $ 3,347 $ 5,072 $ 14,125 $ 19,278 % of Europe revenues 13.6 %
11.7 % 14.4 % 11.6 % 13.9 % All Other $ 1,234 $ 1,436 $ 2,015 $
6,030 $ 7,390 % of All Other revenues � 14.8 % � � 15.2 % � � 19.0
% � 15.5 % � � 18.3 % Total $ 26,137 $ 27,928 $ 25,303 $ 105,606 $
107,944 % of Total revenues � � 10.8 % � � 10.7 % � � 10.3 % � �
10.6 % � � 10.6 %
Service Type Results
Management is presented with and reviews revenues and gross
profit for Data Services, Voice Services and Hotline Services which
are presented below:
� � �
4Q09 � �
3Q09 � �
4Q08 � �
FY09 �
�
FY08
Revenues � � � � � Data Services $ 49,600 $ 52,238 $ 47,615
$ 191,436 $ 194,454 Voice Services 145,947 158,065 137,595 598,319
586,974 Hotline Services � 45,785 � � � 51,550 � � � 60,287 � �
209,793 � � � 235,314 � Total $ 241,332 $ 261,853 $ 245,497 $
999,548 $ 1,016,742 �
Gross profit Data Services $ 13,994 $
15,247 $ 13,285 $ 55,407 $ 57,747 % of Data Services revenues 28.2
% 29.2 % 27.9 % 28.9 % 29.7 % Voice Services $ 49,566 $ 51,501 $
45,709 $ 200,541 $ 195,570 % of Voice Services revenues 34.0 % 32.6
% 33.2 % 33.5 % 33.3 % Hotline Services $ 21,503 $ 24,170 $ 29,986
$ 101,232 $ 113,303 % of Hotline Services revenues � 47.0 % � �
46.9 % � � 49.7 % � 48.3 % � � 48.1 % Total $ 85,063 $ 90,918 $
88,980 $ 357,180 $ 366,620 % of Total revenues � � 35.2 % � � 34.7
% � � 36.2 % � � 35.7 % � � 36.1 %
Same-office revenue comparisons
Management is presented with and reviews revenues on a
same-office basis which excludes the effects of revenues from
acquisitions. While the information provided below is presented on
a consolidated basis, the revenue from offices added below relates
to the North American Data Services and North American Voice
Services. Reported same-office comparisons for the Company�s North
America, Data Services and Voice Services segments can be
determined by excluding the revenues from offices added since
4/1/07 or 9/28/08 as shown below.
Information on quarterly revenues on a same-office basis
compared to the same period last year is presented below:
� �
4Q09 �
4Q08 �
% Change Reported revenues �
$ 241,332 � $ 245,497 � (2 %) Less revenue from Data Services
offices added since 4/1/07 (1Q08) (14,977 ) -- Less revenue from
Voice Services offices added since 4/1/07 (1Q08) � (17,123 ) � (176
) Reported revenues on same-office basis 209,232 245,321 (15 %)
Foreign currency impact � 7,342 � � -- � Revenues on same-office
basis (excluding foreign currency impact) � $ 216,574 � � $ 245,321
� � (12 %)
Information on year-to-date revenues on a same-office basis
compared to the same period last year is presented below:
� �
FY09 �
FY08 �
% Change Reported revenues �
$ 999,548 � $ 1,016,742 � (2 %) Less revenue from Data Services
offices added since 4/1/07 (1Q08) (27,603 ) -- Less revenue from
Voice Services offices added since 4/1/07 (1Q08) � (66,103 ) �
(7,176 ) Reported revenues on same-office basis 905,842 1,009,566
(10 %) Foreign currency impact � 6,526 � � -- � Revenues on
same-office basis (excluding foreign currency impact) � $ 912,368 �
� $ 1,009,566 � � (10 %)
Information on revenues on a same-office basis compared to the
sequential quarter is presented below:
� �
4Q09 �
3Q09 �
% Change Reported revenues �
$ 241,332 � $ 261,853 � (8 %) Less revenue from Data Services
offices added since 9/28/08 (3Q09) (14,977 ) (12,626 ) Less revenue
from Voice Services offices added since 9/28/08 (3Q09) � -- � � --
� Reported revenues on same-office basis 226,355 249,227 (9 %)
Foreign currency impact � 1,244 � � -- � Revenues on same-office
basis (excluding foreign currency impact) � $ 227,599 � � $ 249,227
� � (9 %)
Significant Balance Sheet ratios and Other
Information
Information on certain balance sheet ratios, backlog and
headcount is presented below. Dollar amounts are in millions.
� �
4Q09 �
3Q09 �
4Q08 Accounts
receivable � � � � � � Gross accounts receivable $ 173.9 $
172.4 $ 174.9 Reserve $ / % $ 9.9 5.7 % $ 11.0 6.4 % $ 12.6 7.2 %
Net accounts receivable $ 164.0 $ 161.4 $ 162.3 � Net days sales
outstanding 53 days 54 days 55 days �
Inventory Gross
inventory $ 76.2 $ 82.5 $ 87.9 Reserve $ / % $ 20.3 26.6 % $ 20.7
25.1 % $ 20.4 23.2 % Net inventory $ 55.9 $ 61.8 $ 67.5 � Net
inventory turns 8.5x 8.6x 7.1x �
Six-month order backlog $
194 $ 195 $ 159 �
Team members � � 4,542 � � � � 4,745 � � �
� 4,313 � �
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