<PAGE> 1
1998 First Quarter
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
COMMISSION FILE NO. 0-18706
BLACK BOX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-3086563
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1000 Park Drive
Lawrence, Pennsylvania 15055
(Address of principal executive offices)
412-746-5500
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
The number of shares outstanding of the Registrant's common stock, $.001 par
value, as of August 1, 1997 was 16,593,641 shares.
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BLACK BOX CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
(Unaudited)
June 30, March 31,
1997 1997
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,009 $ 1,353
Accounts receivable, net of allowance for doubtful
accounts of $2,365 and $2,499, respectively 43,857 43,900
Inventories, net 36,434 30,435
Other current assets 10,354 8,227
--------- ---------
Total current assets 91,654 83,915
Property, plant and equipment, net of accumulated depreciation
of $12,383 and $9,939, respectively 12,892 12,923
Intangibles, net of accumulated amortization of $22,101 and
$18,339, respectively 75,019 75,955
Other assets 465 486
--------- ---------
Total assets $ 180,030 $ 173,279
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current debt $ 10,360 $ 8,128
Accounts payable 20,637 19,924
Other accrued expenses 7,887 11,815
Accrued income taxes 5,941 5,816
--------- ---------
Total current liabilities 44,825 45,683
Long-term debt 21,167 21,175
Other liabilities, primarily deferred taxes 12,106 12,157
Stockholders' equity:
Preferred stock authorized 5,000,000; par value $1.00;
none issued and outstanding
Common stock authorized 20,000,000; par value $.001; issued
and outstanding 16,590,309 and 16,518,682, respectively 17 17
Additional paid-in capital 30,731 29,897
Retained earnings 73,231 66,504
Cumulative foreign currency translation adjustments (2,047) (2,154)
--------- ---------
Total stockholders' equity 101,932 94,264
--------- ---------
Total liabilities and stockholders' equity $ 180,030 $ 173,279
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE> 3
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three month period ended
June 30,
1997 1996
---------- ----------
<S> <C> <C>
Revenues $ 64,198 $ 53,788
Cost of sales 31,200 24,810
---------- ----------
Gross profit 32,998 28,978
Selling, general and administrative expenses 19,546 17,621
Intangibles amortization 954 963
---------- ----------
Operating income 12,498 10,394
Interest expense, net 808 1,126
Other (income)/expense, net 96 (26)
---------- ----------
Income before income taxes 11,594 9,294
Provision for income taxes 4,867 4,089
---------- ----------
Net income $ 6,727 $ 5,205
========== ==========
Earnings per share $ 0.39 $ 0.31
========== ==========
Weighted average common and
common equivalent shares $ 17,463 $ 17,016
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 4
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Additional
---------------------- Paid-in Retained Translation
Shares Amount Capital Earnings Adjustment Total
----------- ---------- ---------- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1996 16,302,254 $ 16 $ 25,904 $ 42,209 $ (988) $ 67,141
Net income for the year
ended March 31, 1997 - - - 24,295 - 24,295
Exercise of options 216,428 1 2,473 - - 2,474
Tax benefit from exercised options - - 1,520 - - 1,520
Foreign currency translation
adjustments - - - - (1,166) (1,166)
----------- ---- -------- -------- -------- ---------
Balance at March 31, 1997 16,518,682 17 29,897 66,504 (2,154) 94,264
Net income for the three month
period ended June 30, 1997 - - - 6,727 - 6,727
Exercise of options 71,627 - 542 - - 542
Tax benefit from exercised options - - 292 - - 292
Foreign currency translation
adjustments - - - - 107 107
---------- ---- -------- -------- -------- ---------
Balance at June 30, 1997 16,590,309 $ 17 $ 30,731 $ 73,231 $ (2,047) $ 101,932
========== ==== ======== ======== ======== =========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 5
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three month period ended
June 30,
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,727 $ 5,205
Adjustments to reconcile net income to cash provided
by operating activities:
Intangibles amortization 936 946
Depreciation 603 557
Other (38) (21)
Changes in working capital items:
Account receivable, net 43 296
Inventories, net (6,023) (1,722)
Other current assets (2,086) 1,032
Accounts payable and accrued liabilities (3,175) (2,627)
--------- ---------
Cash (used in) provided by operating activities (2,937) 3,666
--------- ---------
Cash flows from investing activities:
Capital expenditures (572) (541)
--------- ---------
Cash used in investing activities (572) (541)
--------- ---------
Cash flows from financing activities:
Repayment of borrowings (32,004) (21,400)
Proceeds from borrowings 34,228 18,348
Proceeds from exercise of options 834 478
--------- ---------
Cash provided by (used in) financing activities 3,058 (2,574)
--------- ---------
Foreign currency translation adjustment 107 (304)
--------- ---------
(Decrease)/increase in cash and cash equivalents (344) 247
Cash and cash equivalents at beginning of period 1,353 1,924
--------- ---------
Cash and cash equivalents at end of period $ 1,009 $ 2,171
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE> 6
BLACK BOX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except per-share amounts)
NOTE 1 - BASIS OF PRESENTATION
The Financial Statements presented herein and these notes are
unaudited. Certain information and footnote disclosures normally included in
the financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). Although the
Company believes that all adjustments necessary for a fair presentation have
been made, interim periods are not necessarily indicative of the results of
operations for a full year. As such, these financial statements should be read
in conjunction with the financial statements and notes thereto included in the
Company's most recent Form 10-K which was filed with the SEC for the fiscal
year ended March 31, 1997.
NOTE 2 - FISCAL YEARS AND INTERIM PERIODS
The Company has a 52 or 53 week fiscal year that ends on the Sunday
nearest March 31. Each fiscal quarter consists of 13 weeks. The last quarter is
adjusted for those years which have 53 weeks. The ending dates for the periods
ended June 30, 1997, March 31, 1997 and June 30, 1996 were actually June 29,
1997, March 30, 1997 and June 30, 1996, respectively.
NOTE 3 - INVENTORIES
Inventories are stated at the lower of cost or market (first-in,
first-out method) or market. The net inventory balances are as follows:
<TABLE>
<CAPTION>
June 30, March 31,
1997 1997
-------- --------
<S> <C> <C>
Raw materials $ 2,237 $ 2,152
Work-in-process 76 28
Finished goods 36,034 29,865
Inventory reserve (1,913) (1,610)
-------- --------
Inventory, net $ 36,434 $ 30,435
======== ========
</TABLE>
6
<PAGE> 7
BLACK BOX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except per-share amounts)
NOTE 4 - FINANCIAL DERIVATIVES
The Company has entered and will continue in the future, on a
selective basis, to enter into forward exchange contracts to reduce the foreign
currency exposure related to certain intercompany transactions. On a monthly
basis, the open contracts are revalued to the current exchange rates and the
resulting gains and losses are recorded in other income. These gains and losses
offset the revaluation of the related foreign currency denominated receivables.
At June 30,1997, the open foreign exchange contracts were exclusively
in Yen. These open contracts were valued at approximately $8.2 million, with
contract rates ranging from 112.25 to 116.25 Yen to U.S. dollars, and will
expire over the next nine months. The effect of these contracts on net income
for the three month period ended June 30, 1997 was not material.
NOTE 5 - ADOPTION OF NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings
per Share", which establishes new standards for computing and presenting
earnings per share ("EPS"). As required by the SFAS, the Company will adopt the
new standard in the quarter ended December 31, 1997, and restate all prior
periods. The Company has reviewed SFAS No. 128 and determined that had the SFAS
been adopted for the First Quarter 1998, basic and diluted EPS would have been
$0.41 and $0.39, respectively.
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income", which establishes standards for reporting and display of comprehensive
income and its components in financial statements. As required by the SFAS, the
Company expects to adopt the new standard in the first quarter of Fiscal 1999.
The Company has reviewed SFAS No. 130 and determined that the only component of
comprehensive income which applies to the Company will be foreign currency
translation adjustments currently recorded directly to Stockholder's Equity in
accordance with SFAS No. 52.
7
<PAGE> 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (dollars in thousands)
GENERAL
FORWARD-LOOKING STATEMENTS
When included in this Quarterly Report on Form 10-Q or in documents
incorporated herein by reference, the words "expects," "intends,"
"anticipates," "believes," "estimates," and analogous expressions are intended
to identify forward-looking statements. Such statements are inherently subject
to a variety of risks and uncertainties that could cause actual results to
differ materially from those projected. Such risks and uncertainties include,
among others, general economic and business conditions, competition, changes in
foreign, political and economic conditions, fluctuating foreign currencies
compared to the U.S. dollar, rapid changes in technologies, customer
preferences and various other matters, many of which are beyond the Company's
control. These forward-looking statements 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 Quarterly Report on Form 10-Q. The Company
expressly disclaims any obligation or undertaking to release publicly any
updates or any changes in the Company's expectations with regard thereto or any
change in events, conditions, or circumstances on which any statement is based.
RESULTS OF OPERATIONS
The table below should be read in conjunction with the following
discussion (percentages are based on total revenues).
<TABLE>
<CAPTION>
Three month period ended June 30,
1997 1996
-------- --------
<S> <C> <C>
Revenues $ 64,198 $ 53,788
-------- --------
Revenues:
US/Canada 54.3% 54.9%
International 45.7 45.1
-------- ---------
Total 100.0 100.0
Cost of sales 48.6 46.1
-------- ---------
Gross profit 51.4 53.9
Selling, general and
administrative expenses 30.4 32.8
-------- ---------
Operating income
before amortization 21.0 21.1
Intangibles amortization 1.5 1.8
-------- ---------
Operating income 19.5% 19.3%
-------- ---------
</TABLE>
8
<PAGE> 9
Revenues for the three months ended June 30, 1997 ("First Quarter
1998") were $64,198, an increase of $10,410, or 19.4%, over the three months
ended June 30, 1996 ("First Quarter 1997") revenues of $53,788. Revenues from
International operations were $29,321, an increase of $5,046, or 20.8%, over
First Quarter 1997 of $24,275. If exchange rates had remained constant from
First Quarter 1997 to First Quarter 1998, revenues from International
operations would have increased $6,520, or 26.9%. Reported revenue dollar and
percentage growth of the Company's largest subsidiaries for the First Quarter
1998 were as follows: Japan increased $1,095 or 20%, United Kingdom increased
$1,388 or 32%, France decreased $549 or 12% and Brazil increased $1,251 or 80%.
The remaining international business units grew by $1,860 or 23% in the
aggregate for the First Quarter 1998. Revenues in France for the First Quarter
1998 were flat on a local currency basis, but in U.S. dollars, were down 12%
due to a stronger U.S. dollar compared to the same period last year.
Revenues for the First Quarter 1998 from US/Canada were $34,877, an
increase of $5,364, or 18.2%, over First Quarter 1997 revenues of $29,513.
US/Canada revenue growth was driven by an increase in the number of medium and
large orders shipped in the quarter and the continued success of new product
sales. In the First Quarter 1998, medium and large orders represented
approximately 40% of the US/Canada revenue compared to approximately 35% of the
First Quarter 1997 US/Canada revenues.
Gross profit in First Quarter 1998 increased to $32,998, or 51.4% of
revenues, from $28,978, or 53.9% of revenues, in First Quarter 1997. The
decrease in the gross profit margin of 2.5% is primarily due to the increase in
medium and large orders, which generally receive a larger discount and earn a
lower gross profit margin compared to small orders.
Selling, general and administrative ("SG&A") expenses in First Quarter
1998 were $19,546, or 30.4% of revenues, an increase of $1,925 over SG&A
expenses of $17,621, or 32.8% of revenues, in First Quarter 1997. SG&A
decreased as a percentage of revenues as the Company was able to leverage its
existing support structure. The dollar increase relates to additional marketing
and personnel costs primarily at the international locations.
Operating income before amortization in First Quarter 1998 increased
to $13,452, or 21.0% of revenues, from $11,357, or 21.1% of revenues, in First
Quarter 1997, as a result of higher revenues. Operating income in First Quarter
1998 increased to $12,498, or 19.5% of revenues, from $10,394 or 19.3% of
revenues, in First Quarter 1997.
Net interest expense in First Quarter 1998 declined to $808 from
$1,126 in First Quarter 1997 as a result of lower average borrowings and lower
average interest rates.
The estimated annual effective income tax rate of 42.0% for Fiscal
1998 is higher than the U.S. statutory rate of 35.0% primarily due to state
income taxes and the unfavorable impact of non-deductible intangibles
amortization.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
In the First Quarter 1998, the Company increased its total borrowings
$2,224 to fund working capital requirements. This increase was primarily due to
increased inventory levels as the Company purchased new product for its "New
Product Supplement" catalog, mailed at the end of June. In addition, inventory
levels were increased to support the overall business growth and to strengthen
the Company's same-day order fulfillment rates. As of June 30, 1997, the
Company had $1,009 in cash and cash equivalents, working capital of $46,829 and
long-term debt of $21,167.
The Company's long-term debt at June 30, 1997 was comprised of $13,100
under the Mellon Credit Agreement, dated as of May 6, 1994, among the Company
and Mellon Bank, as amended (the "Mellon Credit Agreement"), $16,000 aggregate
principal amount of 8.81% Senior Notes, and $2,427 of various other loans. The
weighted average interest rate on all indebtedness of the Company as of June
30, 1997 was approximately 7.9% compared to 8.2% as of June 30, 1996. In
addition, at June 30, 1997, the Company had $26,540 of additional funds
available under the Mellon Credit Agreement.
The Company has entered and will continue in the future, on a
selective basis, to enter into forward exchange contracts to reduce the foreign
currency exposure related to certain intercompany transactions. On a monthly
basis, the open contracts are revalued to the current exchange rates and the
resulting gains and losses are recorded in other income. These gains and losses
offset the revaluation of the related foreign currency denominated receivables.
At June 30,1997, the open foreign exchange contracts were exclusively
in Yen. These open contracts were valued at approximately $8.2 million, with
contract rates ranging from 112.25 to 116.25 Yen to U.S. dollars, and will
expire over the next nine months. The effect of these contracts on net income
for the three month period ended June 30, 1997 was not material.
The Company believes that its cash flow from operations and existing
credit facilities will be sufficient to satisfy its liquidity needs for the
foreseeable future.
ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128
"Earnings per Share", which establishes new standards for computing and
presenting earnings per share ("EPS"). As required by the SFAS, the Company
will adopt the new standard in the quarter ended December 31, 1997, and restate
all prior periods. The Company has reviewed SFAS No. 128 and determined that
had the SFAS been adopted for the First Quarter 1998, basic and diluted EPS
would have been $0.41 and $0.39, respectively.
10
<PAGE> 11
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income", which establishes standards for reporting and display of comprehensive
income and its components in financial statements. As required by the SFAS, the
Company expects to adopt the new standard in the first quarter of fiscal 1999.
The Company has reviewed SFAS No. 130 and determined that the only component of
comprehensive income which applies to the Company will be foreign currency
translation adjustments currently recorded directly to Stockholder's Equity in
accordance with SFAS No. 52.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
21.0 Subsidiaries of the Company
27.0 Financial Data Schedules
(b) Reports on Form 8-K.
None.
11
<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLACK BOX CORPORATION
By: /s/ ANNA M. BAIRD
----------------------------
Anna M. Baird, Vice President
and Chief Financial Officer
August 8, 1997
12
<PAGE> 13
EXHIBIT INDEX
Exhibit
- -------
No.
- ---
21.0 Subsidiaries of the Company
27.0 Financial Data Schedule
<PAGE> 1
Exhibit 21.0
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
NAME LOCATION STATE OF INCORPORATION
- ---- -------- ----------------------
<S> <C> <C>
Black Box Corporation Lawrence, Pennsylvania, USA Delaware
BBOX Holding Company Wilmington, Delaware, USA Delaware
Black Box of Pennsylvania Lawrence, Pennsylvania, USA Delaware
BB Technologies, Inc. Wilmington, Delaware, USA Delaware
Black Box Foreign Sales Corporation St. Thomas, U.S.V.I.
Black Box Communication SANV Zaventum, Belgium
Black Box do Brazil Industria e
Comercio Ltda. Sao Paulo, Brazil
Black Box Canada Corporation Ontario, Canada
Black Box Catalogue, Ltd. Reading, England
Black Box France, S.A. Rungis, France
Black Box Deutschland GmbH Munich, Germany
Black Box Italia, SpA Vimodrone, Italy
Black Box Japan Kabushiki Kaisha Tokyo, Japan
Black Box de Mexico, S.A. de C.V. Mexico City, Mexico
Black Box Datacom, B.V. Utrecht, Netherlands
Datacom Black Box Services AG Altendorf, Switzerland
Datacom Black Box Holding, AG Zug, Switzerland
Black Box Australia Pty, Ltd. (1) Croydon VIC, Australia
Black Box Catalog New Zealand
Limited (1) Wellington, New Zealand
</TABLE>
(1) Acquired in March 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,009
<SECURITIES> 0
<RECEIVABLES> 46,222
<ALLOWANCES> 2,365
<INVENTORY> 36,434
<CURRENT-ASSETS> 91,654
<PP&E> 25,275
<DEPRECIATION> 12,383
<TOTAL-ASSETS> 180,030
<CURRENT-LIABILITIES> 44,825
<BONDS> 0
0
0
<COMMON> 17
<OTHER-SE> 101,915
<TOTAL-LIABILITY-AND-EQUITY> 180,030
<SALES> 64,198
<TOTAL-REVENUES> 64,198
<CGS> 31,200
<TOTAL-COSTS> 31,200
<OTHER-EXPENSES> 20,596
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 808
<INCOME-PRETAX> 11,594
<INCOME-TAX> 4,867
<INCOME-CONTINUING> 6,727
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,727
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
</TABLE>
