<PAGE> 1
1999 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, 1998
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)
724-746-5500
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 July 31, 1998 was 16,962,739 shares.
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BLACK BOX CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands, except share amounts)
<TABLE>
<CAPTION>
(Unaudited)
June 30, March 31,
ASSETS 1998 1998
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,762 $ 10,560
Accounts receivable, net of allowance for doubtful
accounts of $2,442 and $2,655, respectively 42,828 47,197
Inventories, net 32,535 31,922
Other current assets 7,948 10,148
--------- ---------
Total current assets 94,073 99,827
Property, plant and equipment, net of accumulated depreciation
of $15,278 and $14,231 respectively 13,515 12,782
Intangibles, net of accumulated amortization of $25,901 and
$24,956, respectively 71,219 72,164
Other assets 451 418
--------- ---------
Total assets $ 179,258 $ 185,191
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current debt $ 9,550 $ 8,437
Accounts payable 9,338 14,098
Other accrued expenses 8,755 12,522
Accrued income taxes 4,823 3,266
--------- ---------
Total current liabilities 32,466 38,323
Long-term debt 73 8,043
Other liabilities, primarily deferred taxes 10,807 11,060
Stockholders' equity:
Preferred stock authorized 5,000,000; par value $1.00;
none issued and outstanding
Common stock authorized 40,000,000; par value $.001; issued
and outstanding 16,960,880 and 16,765,110, respectively 17 17
Additional paid-in capital 34,187 33,805
Retained earnings 106,548 97,998
Cumulative foreign currency translation adjustments (4,143) (3,619)
Dividend declared to former ATIMCO and ANSI
shareholders prior to mergers (697) (436)
--------- ---------
Total stockholders' equity 135,912 127,765
--------- ---------
Total liabilities and stockholders' equity $ 179,258 $ 185,191
========= =========
</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,
1998 1997
-------- -------
<S> <C> <C>
Revenues $ 70,453 $65,032
Cost of sales 35,196 31,690
-------- -------
Gross profit 35,257 33,342
Selling, general and administrative expenses 20,823 19,656
Intangibles amortization 948 954
-------- -------
Operating income 13,486 12,732
Interest expense, net 210 807
Other (income)/expense, net (77) 96
-------- -------
Income before income taxes 13,353 11,829
Provision for income taxes 5,396 4,867
-------- -------
Net income $ 7,957 $ 6,962
======== =======
Basic earnings per common share $ 0.47 $ 0.42
======== =======
Diluted earnings per common share $ 0.45 $ 0.40
======== =======
Weighted average common shares 16,956 16,623
======== =======
Weighted average common and
common equivalent shares 17,877 17,433
======== =======
</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 Dividend Total
---------- ------- -------- -------- ---------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1997 16,518,682 $ 17 $29,897 $ 66,504 $(2,154) -- $ 94,264
Net income for the year
ended March 31, 1998 -- -- -- 30,915 -- -- 30,915
Contribution from merger 62 579 642
Issuance of common stock 68,115 -- -- -- -- -- --
Exercise of options 178,313 -- 2,038 -- -- -- 2,038
Tax benefit from exercised options -- -- 1,808 -- -- -- 1,808
Foreign currency translation
adjustments -- -- -- -- (1,465) -- (1,465)
Dividend declared to former
ATIMCO shareholders prior
to merger -- -- -- -- -- (436) (436)
---------- ------ ------- -------- ------- ------- ---------
Balance at March 31, 1998 16,765,110 17 33,805 97,998 (3,619) (436) 127,765
Net income for the three month
period ended June 30, 1998 -- -- -- 7,957 -- -- 7,957
Contribution from merger -- -- 301 593 -- -- 894
Issuance of common stock 186,549 -- -- -- -- --
Exercise of options 9,221 -- 53 -- -- -- 53
Tax benefit from exercised options -- -- 28 -- -- -- 28
Foreign currency translation
adjustments -- -- -- -- (524) -- (524)
Dividend declared to former
ANSI shareholders prior
to merger -- -- -- -- -- (261) (261)
---------- ------ ------- -------- ------- ------- ---------
Balance at June 30, 1998 16,960,880 $ 17 $34,187 $106,548 $(4,143) $ (697) $ 135,912
========== ====== ======= ======== ======= ======= =========
</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,
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,957 $ 6,962
Adjustments to reconcile net income to cash provided
by operating activities:
Intangibles amortization 945 936
Depreciation 679 603
Changes in working capital items:
Account receivable, net 5,579 (125)
Inventories, net (415) (6,033)
Other current assets 2,184 (2,082)
Accounts payable and accrued liabilities (8,177) (3,136)
-------- --------
Cash (used in)/provided by operating activities 8,752 (2,875)
-------- --------
Cash flows from investing activities:
ATIMCO and ANSI mergers 204 160
Capital expenditures (868) (572)
-------- --------
Cash (used) in investing activities (664) (412)
-------- --------
Cash flows from financing activities:
Repayment of borrowings (8,103) (32,004)
Proceeds from borrowings 921 34,228
Proceeds from exercise of options 81 834
Dividend to former ATIMCO and ANSI shareholders (261) (71)
-------- --------
Cash (used in)/provided by financing activities (7,362) 2,987
-------- --------
Foreign currency translation adjustment (524) 107
-------- --------
(Decrease)/increase in cash and cash equivalents 202 (193)
Cash and cash equivalents at beginning of period 10,560 1,353
-------- --------
Cash and cash equivalents at end of period $ 10,762 $ 1,160
======== ========
</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, 1998.
Note 2 - Fiscal Years and Interim Periods
--------------------------------
Prior to March 31, 1998, the Company followed a 52 or 53 week fiscal
calendar which divided the year into 13 week fiscal quarters and adjusted the
fourth quarter for those years with 53 weeks. Beginning with the fourth quarter
of fiscal 1998, the fiscal quarter ending dates were changed to the calendar
quarter ending dates. As a result, the ending dates for the periods ended June
30, 1998, March 31, 1998, and June 30,1997 were actually June 30, 1998, March
31, 1998, and June 29, 1997, respectively. For simplicity, the calendar period
end is used for all period end references.
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:
June 30, March 31,
1998 1998
---- ----
Raw materials $ 1,963 $ 1,654
Work-in-process 61 41
Finished goods 32,673 33,081
Inventory reserve (2,162) (2,854)
-------- --------
Inventory, net $ 32,535 $ 31,922
======== ========
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, 1998, the open foreign exchange contracts were exclusively
in Yen. These open contracts were valued at approximately $2,500, with contract
rates ranging from 138.42 to 139.42 Yen to U.S. dollars, and will expire over
the next two months. The effect of these contracts on net income for the three
month period ended June 30, 1998 was not material.
Note 5 - Comprehensive Income
--------------------
In the first quarter of Fiscal 1999, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," which established standards for reporting and displaying comprehensive
income and its components in financial statements. Comprehensive income is
defined as net income and all nonowner changes in shareholders' equity.
Accumulated other comprehensive income consists entirely of foreign currency
translation adjustments. Total comprehensive income for the quarters ending June
30, 1998 and 1997 was $7,433 million and $7,069 million, respectively.
Note 6 - Earnings Per Share
------------------
Basic earnings per common share were computed based on the weighted
average number of common shares issued and outstanding during the relevant
periods. Diluted earnings per common share were computed under the treasury
stock method based on the weighted average number of common shares issued and
outstanding, plus additional shares assumed to be outstanding to reflect the
dilutive effect of common stock equivalents, less the number of shares assumed
to be repurchased with the tax savings resulting from compensation expense of
exercisable options. The following table details this calculation:
7
<PAGE> 8
BLACK BOX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except per-share amounts)
Three month period
ended June 30,
1998 1997
---- ----
Net income for earnings per share computation $ 7,957 $ 6,962
Basic earnings per common share:
Weighted average common shares 16,956 16,623
-------- --------
Basic earnings per common share $ 0.47 $ 0.42
======== ========
Diluted earnings per common share:
Weighted average common shares 16,956 16,623
Shares issuable from assumed conversion
of common stock equivalents 1,101 955
Shares buyable with tax savings from
compensation expense of exercised options (180) (145)
Weighted average common and common
equivalent shares 17,877 17,433
-------- --------
Diluted earnings per common share $ 0.45 $ 0.40
======== ========
Note 7 - Adoption of New Accounting Standards
------------------------------------
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which establishes standards for the way that public business
enterprises report financial and descriptive information about their reportable
operating segments. As required by SFAS No. 131, the Company will adopt the new
statement in the fiscal year ended March 31, 1999 and apply it to interim
financial statements in subsequent fiscal years.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities, " which establishes accounting and reporting
standards for derivative instruments and requires that an entity recognize all
derivatives as either assets or liabilities and measure those instruments at
face value. As required by SFAS No. 133, the Company expects to adopt the new
statement in the first quarter of Fiscal 2001. The effect of this statement on
the Company's financial statements has not been determined.
8
<PAGE> 9
BLACK BOX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except per-share amounts)
Note 8 - Year 2000 Costs
---------------
The Company has conducted a review of its computer systems to identify
the systems that could be affected by Year 2000 issues and, in some cases, has
made the required changes. The Company believes the remaining compliance work
will be completed in a timely manner and that the overall cost of such work will
not be material. The Company expenses such costs when incurred.
9
<PAGE> 10
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,
1998 1997
---- ----
<S> <C> <C>
Revenues $ 70,453 $65,032
========= =======
Revenues:
North America 56.7% 54.9%
International 43.3 45.1
--------- -------
Total 100.0 100.0
Cost of sales 50.0 48.7
--------- -------
Gross profit 50.0 51.3
Selling, general and
administrative expenses 29.6 30.2
--------- -------
Operating income
before amortization 20.5 21.0
Intangibles amortization 0.9 1.0
--------- -------
Operating income 19.1% 19.6%
========= =======
</TABLE>
10
<PAGE> 11
Revenues for the three months ended June 30, 1998 ("First Quarter
1999") were $70,453, an increase of $5,421, or 8.3%, over the three months ended
June 30, 1997 ("First Quarter 1998") revenues of $65,032. Revenues from
International operations were $30,479, an increase of $1,158, or 3.9%, over
First Quarter 1998 revenues of $29,321. If exchange rates had remained constant
from First Quarter 1998 to First Quarter 1999, revenues from International
operations would have increased $2,565, or 8.7%. Reported revenue dollar and
percentage growth of the Company's largest subsidiaries for the First Quarter
1999 were as follows: Japan decreased $1,080 or 16.2%, United Kingdom increased
$1,165 or 20.4%, France increased $752 or 18.4% and Brazil decreased $732 or
26.0%. The remaining international business units grew by $1,052 or 10.5% in the
aggregate for the First Quarter 1999.
Revenues from North America for the First Quarter 1999 were $39,974, an
increase of $4,263, or 11.9%, over First Quarter 1998 revenues of $35,711.
Revenue growth in North America was due to continued growth in the core business
combined with the growth due to the Company's merger with Associated Network
Solutions, Inc., a provider of network design and installation services, premise
cabling and related products.
Gross profit in First Quarter 1999 increased to $35,257, or 50.0% of
revenues, from 33,342, or 51.3% of revenues, in First Quarter 1998. The decrease
in the gross profit margin of 1.3% is primarily due to the impact of strong
sales growth of the Company's local area networking product line which provides
slightly lower gross margins. The revaluation of foreign denominated
intercompany receivables had little impact on gross profit margin. Excluding the
impact of revaluing the intercompany receivables, the gross profit margin was
50.3% for First Quarter 1999 compared to 51.2% for First Quarter 1998.
Selling, general and administrative ("SG&A") expenses in First Quarter
1999 were $20,823, or 29.6% of revenues, an increase of $1,167 over SG&A
expenses of $19,656, or 30.2% of revenues, in First Quarter 1998. 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 personnel costs.
Operating income before amortization in First Quarter 1999 was $14,434,
or 20.5% of revenues, compared to $13,686, or 21.0% of revenues, in First
Quarter 1998. Intangibles amortization for First Quarter 1999 was $948,
comparable to the First Quarter 1998 amount of $954.
Net interest expense in First Quarter 1999 declined to $210 from $807
in First Quarter 1998 as a result of lower average borrowings.
The estimated annual effective income tax rate of 40.4% for Fiscal 1999
is higher than the U.S. statutory rate of 35.0% primarily due to foreign
subsidiary income tax rates higher than the U.S. statutory rate, state income
taxes and the unfavorable impact of non-deductible intangibles amortization.
11
<PAGE> 12
Net income for First Quarter 1999 was $7,957 compared to $6,962 in
First Quarter 1998, an increase of 14.3%. This increase was the result of strong
revenue growth in North America and Europe combined with the company's ability
to leverage its existing cost structure.
LIQUIDITY AND CAPITAL RESOURCES
In the First Quarter 1999, the Company paid down $6,857 of borrowings
through cash flows from operations. As of June 30, 1998, the Company had $10,762
in cash and cash equivalents, working capital of $61,607 and total debt of
$9,623.
The Company's total debt at June 30, 1998 was comprised of $8,000
aggregate principal amount of 8.81% Senior Notes, and $1,623 of various other
loans. The weighted average interest rate on all indebtedness of the Company as
of June 30, 1998 was approximately 7.9% and equal to the rate as of June 30,
1997. In addition, at June 30, 1998, the Company had $1,000 of letters of credit
outstanding and $39,000 of additional funds available under the Mellon Credit
Agreement, dated as of May 6, 1994, among the Company and Mellon Bank, as
amended.
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 30,1998, the open foreign exchange contracts were exclusively
in Yen. These open contracts were valued at approximately $2,500, with contract
rates ranging from 138.42 to 139.42 Yen to U.S. dollars, and will expire over
the next two months. The effect of these contracts on net income for the three
month period ended June 30, 1998 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.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
12
<PAGE> 13
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.
13
<PAGE> 14
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,
Chief Financial Officer, Treasurer,
and principal accounting officer
August 10, 1998
14
<PAGE> 15
EXHIBIT INDEX
Exhibit No.
-----------
21.0 Subsidiaries of the Company
27.0 Financial Data Schedules
15
<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
Associated Network Solutions, Inc. St. Petersburg, Florida, USA Florida
ATIMCO Network Services, Inc. Pittsburgh, Pennsylvania, USA Pennsylvania
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. Croydon VIC, Australia
Black Box Catalog New Zealand Limited Wellington, New Zealand
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLACK BOX
CORPORATION'S FORM 10-Q FOR THE FISCAL QUARTER ENDED JUNE 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 10,762
<SECURITIES> 0
<RECEIVABLES> 45,270
<ALLOWANCES> 2,442
<INVENTORY> 32,535
<CURRENT-ASSETS> 94,073
<PP&E> 28,793
<DEPRECIATION> 15,278
<TOTAL-ASSETS> 179,258
<CURRENT-LIABILITIES> 32,466
<BONDS> 73
0
0
<COMMON> 17
<OTHER-SE> 135,895
<TOTAL-LIABILITY-AND-EQUITY> 179,258
<SALES> 70,453
<TOTAL-REVENUES> 70,453
<CGS> 35,196
<TOTAL-COSTS> 35,196
<OTHER-EXPENSES> (77)
<LOSS-PROVISION> 396
<INTEREST-EXPENSE> 210
<INCOME-PRETAX> 13,353
<INCOME-TAX> 5,396
<INCOME-CONTINUING> 7,957
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,957
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.45
</TABLE>
